The Germans are coming for Tesla, or so it would seem

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The top German car manufacturers, who have been slow to embrace the EV market, showcased the newest additions to their upcoming catalogs at the recent Paris Motor Show. Shall we say that the atmosphere was “electric?”

• Audi Q6 e-Tron, an all-electric SUV with a range of 500 kilometers, to be in showrooms in early 2018;
• Volkswagen I.D., pitched as having a powerful 168-horsepower engine, offering double the distance of a Tesla Model 3, yet costing about the same as a Golf, with delivery by 2020;
• Mercedes-Benz EQ, a plug-in electric, with a 2025 release date.

German newspaper, Handlesblatt, described these car maker entries into the EV market as “the Germans are coming for Tesla” due to their “unprecedented flurry of new e-car models, battery upgrades, and concept cars.”

That’s one way to look at it.

But there is another, and more pragmatic, point of view to consider about the Tesla/ German car maker competition. As traditional car companies, the major German car manufacturers have made money by selling traditional cars. While they purport to now embrace luxury electric vehicles, they are literally being dragged forward by Tesla’s successes, which few in the industry, particularly the German car manufacturers, ever thought would happen. Let’s look to 2016 alone to see Tesla’s dominant luxury car market trajectory.

• In early 2016, Bloomberg forecast that the Tesla Model 3 would outsell its competitors in the luxury market.
• Already, the Tesla Model X has captured 6% of the luxury market in the U.S., insulating the Tesla 2016 Q3 earnings report.
• And, probably most significantly, Peter Hochholdinger, Vice President of Vehicle Production for Tesla Motors and former Senior Director of Production at Audi for the A4, A5, and Q5 vehicles, says, “The cars we build are about seven years beyond everything I’ve seen before.”

The German car markers had little interest in electric cars until the Tesla Model S launched. That’s when they were able to examine the Tesla luxury four-door firsthand: they tore it apart. According to the Christian Science Monitor, the Tesla Model S was a huge shock to Audi, BMW, Mercedes-Benz, and especially Porsche, which was still preening with the success of its own four-door, speedy, and sporty Panamera. “The Porsche product team had to grapple with the appearance of an electric car, from a highly unlikely company, that was as fast, smoother, and equally as desirable as their prime offering.”

Up until recently, the U.S. has been the German luxury car makers’ strongest foreign market.  However, the newer Tesla Model S has outsold every German luxury sedan, including the BMW 7 series and Mercedes-Benz’ venerable S-Class. Handlesblatt admits that “lately, sleek Teslas are even showing up on the autobahn and on the streets of Berlin. Worst of all, the established brands, once known for their market savvy and technological leadership, are starting to look old, grey and slow.”

It seems that Audi’s legendary advertising motto, Vorsprung durch Technik (advancement through technology) now refers to Silicon Valley, Tesla’s home base.

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