Tesla Motors Inc (NASDAQ:TSLA) Starts a Rift With the Germans

Tesla Motors will kill this Model X rival

Tesla Motors Inc is in for a serious challenge in the EV space as German automakers make inroads into the market. Fortune reports that Audi has released a teaser photo for a full EV SUV concept car. Mercedes Benz also seems to be focused on the EV space as firm plans to stop buying electric power train with 100 miles for its B-Class cars in the hopes of building a new electric powertrain with a range of about 300 miles.

Tesla Rival

Audi’s upcoming EV SUV (a member of the Audi e-tron Quattro) will be a direct rival for Tesla’s upcoming Model X at least based on what the teaser photo shows. Fortune reports that Audi’s “concept car was designed from the ground up as an electric car.

The underbody is completely closed—just like Tesla Motors’ Model S—which makes it more aerodynamic”. However, the Model X might have an edge over Audi’s SUV because the Model X can sit seven people while it appears that the Audi e-tron Quattro will seat only four people.

The EV race is on

Tesla Motors’ success in the EV space within three years is causing traditional automakers to looking at that market. Thilo Koslowski, vice president and automotive practice leader at Gartner Inc. says, “You are going to see some interesting stuff happening as the traditional automakers get into this”.

Last week rumors started to filter out that Audi was getting into the full version EV race. It was reported that Audi is already teaming up LG Chen and Samsung SDI to create an all-electric SUV. Audi’s foray into the full EV space contrasts sharply with the prior strategy of European carmakers who were content to make hybrid ICE-EV engines. Now, Audi has shown that it is serious with its EV SUV that will go into production in 2018.

Mercedes Benz is also in getting into the EV race as it plans to stop buying Tesla’s electric powertrain used in its B-Class. There are signs that Mercedes might be planning to build an electric car from the ground up instead of slamming electric capabilities on ICEs. The new extended range fully electric Mercedes Benz car will have a range of about 300 miles. Yet, there isn’t anything concrete yet from Mercedes on an EV.

Tesla Motors still has the lead

If traditional carmakers enter the business of making EVs fully, Tesla Motors might have a harder time competing with them on size, economies of scale and even price. At the point, an M&A move might be the smartest thing for Tesla Motors to do if it doesn’t want to be consumed by the sharks.

In the meantime, Tesla still has a three-year lead in the EV space and that lead provides Tesla with a unique chance to strengthen its position. Koslowski says, “Tesla still has a timing advantage, as much as three years… and that is pretty important.”

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Victor Alagbe is a seasoned business and finance writer with a specialty in writing about how to invest for the long-term in healthcare, pharmacology, energy and tech stocks. His long-term focus is on stocks that provide a nice mix of growth and income. For the short term, he passionately writes about trading stock options for the excitement and leverage that stock options offer.

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