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Tesla Motors Inc (TSLA) Strong as Volkwagen AG Prepares EV “Fuller Package”

Tesla Motors Inc NASDAQ:TSLA

Tesla Motors Inc  is the king of a new industry. All electric vehicles are grabbing more and more attention as a result of CEO Elon Musk’s success, but the stronghold his firm has over the luxury car market in some geographies has not gone unnoticed. Audi, the Volwagen AG luxury brand, admits that Tesla Motors has won the first round, but the firm reckons that could change going forward.

Tesla Motors Inc NASDAQ:TSLA

Filip Brabec, director of product management for Audi of America, presented his firm’s vision of the future at the Los Angeles car show last week. Speaking of Tesla Motors’ progress so far, Brabec said “I think they’ve done a good job of looking at the full package. I think we have some resources and the network and everything else that we can put a fuller package together.”

Audi aims for the Tesla Motors cake

Sebastian Blanco over at Autoblog reported Mr. Brabec’s comments. It’s clear that any effort to attack Tesla Motors Inc  is, however, a long way off. Volkswagen AG  is one of the European leaders in EV sales, but it offers nothing that directly competes with the Tesla Motors Model S, and the rest of its EV line isn’t exactly selling en masse.

Audi unveiled its first EV mass market car at the Frankfurt Auto show this year. The EV SUV, billed as a direct competitor to the Tesla Motors Model X, is called the e-Tron Quattro, but it’s not going to hit the road until 2018 at the earliest. It has a 300 mile range, but many other disadvantages when compared to the Tesla Motors car. For now, however, the car is just a concept.

Audi of America President Scott Keogh seemed confident about Audi’s future in EVs, and he reckons the most important thing is simply to get buyers used to the new tech.  “I think exposing consumers to EVs, letting them experience EVs is another big aspect, and probably different than we have today, because test driving a car today is a very conventional thing. It’s probably not going to be as conventional with EVs, particularly if you’ve never been in one before,” he said. That may be easier said than done, given the other obstacles Volkswagen faces.

Volkswagen AG struggles with the EV

Volkswagen AG has been putting a whole lot more effort into the EV side of its business in recent years, and the firm now offers the e-Golf, its all electric compact, across the globe. The 2016 VW e-Golf will go on sale in the US at a price of $29,815, less than half that of the lowest price Model S. The car has a range of about 83 miles, also less than half that of the lowest priced Model S.

Through August the firm had only sold 1,831 units of the car in the US. Part of the problem is, clearly, a lack of commitment on the part of Volkswagen AG. The low priced e-Golf may be an ideal entry-level car, but it’s only going to go on sale in 10 states. The firm sold fewer than 4,000 units of the car in Europe in 2014, including massive boons from countries with generous subsidies.

New York Times piece published on Tuesday, November 24 recorded the massive obstacle that the entrenched dealership networks can be to the sale of pure EVs. Eric Cahill, a researcher at the Institute of Transportation Studies at the University of California, told the paper that dealers “may have very good reasons for steering a potential buyer away from an E.V.”

Those include the lack of regular maintenance that needs to be done, and the fact that EVs compete directly with ICE cars sold by the firm. A salesman can’t point to the environmental benefits of an EV without also informing a buyer that the ICE cars on sale aren’t very friendly.

The paper also details the experience of Robert Kast who leased an e-Golf. The man selling him  the car offered a service package that included things like oil changes, and water pump maintenance. Mr. Kast had to inform the salesman that an EV simply didn’t have any of those things. The salesman talked to his manager for confirmation.

Audi sees those problems, and it knows it’s going to have to change going forward. Mr. Brabec said “I think, to bring that into a classical dealership and sort of treat is as another car and off we go. I think there needs to be some differences in how we go in the future.”

Tesla Motors Inc stands alone

Despite the calls for further focus on EVs, Volkswagen simply doesn’t have a product that can compete with the Tesla Motors Inc Model S, and it has many other problems to contend with. The firm won’t have anything like a Tesla on the road for years, and its lack of commitment to selling the EVs is makes right now is a strong sign of the way things might head in the future.

Lux Research reckons that the firm’s recent run ins with regulators due to dishonesty with emissions could put it in a great position to mold the EV market.  “VW is actually in a strong position to innovate their way out of this mess,” the firm said in a report. “They have been spending the most on R&D of any OEM (about $11 billion in 2013), and they are the largest automaker by volume. Arguably, no major OEM is better positioned than they are to decisively accelerate the push towards plug-in hybrids and electric vehicles, putting the shine back on their tarnished image.”

That’s a lot to ask of a firm that has made very little apparent headway in EVs in recent years. The firm does offer the e-Golf, however, and Audi is working on upping its game when it comes to competing with Tesla. 

For now, despite the PR work of the Audi execs, Tesla Motors stands alone. The firm has no competition in the market it created, and it’s on its way to shipping 50,000 EVs this year. Other firm’s are circling and competition is an issue that Tesla will have to deal with in the decade ahead. For the time being, shareholders shouldn’t take the promises of Audi execs any more seriously than the firm’s emissions data.

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