Thursday, August 7, 2014

BMW & Tesla Taking Different Approaches But Will Ultimately Face Off

Horatiu Boeriu of BMWBLOG recently did a piece titled "BMW vs. Tesla - Which Company Is A Bigger Innovator?" in which he mentions that while both companies are competing in the premium automobile segment and are committed to electric mobility, they are taking different paths to achieve success.

I'm not going to try to analyze who has it right or who is a bigger innovator, but it's clear that both companies have chosen to focus on different aspects of their respective vehicles. With Tesla, it's all about the batteries. Unlike every other automobile manufacturer, BMW included, Tesla's approach isn't for their electric cars to complement their lineup of gasoline and diesel offerings since they don't have any. Instead, it is to render gasoline vehicles from their competitors obsolete. In order to do so, their cars have to be at least as good or better than most features of competing gas cars; and that includes range, performance and utility. BMW on the other hand doesn't need to necessarily worry about making everything better. They can focus on specific needs of certain customers and make a vehicle that is better than any other at a specific set of tasks, without cannibalizing sales of other vehicles in their lineup. If you accept that premise, it's not difficult to understand why we have the Model S and the BMW i3.
Tesla knew they had to knock it out of the park with their first high volume vehicle offering. They knew they had to offer a car that could stand its ground against all of the top luxury sedans while offering a range long enough to allow for road trips enabled by the Supercharger network. Even though that was an enormous task, and one that few automotive analysts really believed they would pull off, they did just that and the Model S is a smashing success. No disrespect to the sexy styling or the fabulous performance of Model S, but the heart and soul of what the car is can be attributed to the enormous battery pack it uses, filled with industry leading, high energy-density batteries. Tesla is all about the batteries. Even though the Model S uses batteries that have a higher energy density than any other EV manufacturer, they still aren't satisfied. They aren't waiting for the market to bring them better, cheaper cells for their future cars. Instead they are in the process of building what will be the first of many Gigafactories, which will be the largest lithium ion battery manufacturing plants in the world. This will drive down costs, guarantee that they have the supply that they need, and allow them to constantly upgrade to better cells without needing to wait for battery manufacturers to retool production facilities to produce them. The key to Tesla's success is having the best batteries available, and to manufacture them for less than what their competitors are paying for comparable cells. It's the only way to offer large battery, long range electric vehicles and be able to price them competitively.  It's Tesla's edge, and perhaps their only hope to compete and actually beat the large, established automakers.

BMW's not in the battery business and is unlikely to follow Tesla's path as such. As mentioned above, since they didn't need the i3 to do everything better than any other gas offering as the Model S had to, BMW could focus on a specific set of goals with their first electric vehicle. The i3's code name was the Megacity Vehicle and the goal was to develop a car that would be the perfect electric vehicle for the increasing populations within the megacities of the world. They also wanted this car to represent a departure from traditional manufacturing processes with an emphasis on sustainability.  They set out to make the most efficient production car available today and they achieved that goal. The extensive use of carbon fiber reinforced plastic and aluminum allowed BMW to shave 400 to 500 lbs off the car which played a primary role in its efficiency.

Will BMW leave Tesla in their rear view camera? That doesn't look very likely at present.
I believe the i3 is as much of a learning experience for BMW as it is their first electric vehicle. Every step of the manufacturing process was rethought and redesigned for the i3. In fact, the i3 uses 70% less water and 50% less electricity to manufacture than a comparable-sized conventional BMW would. In addition, the Leipzig manufacturing plant where the i3 is made is now completely powered by wind-generated energy. So as much as the i3 is an important vehicle to BMW today, the lessons learned bringing it to market today will pay dividends when future i cars are made. The i3 indeed paved the way for the rumored i5 and other models from the i brand. You can expect larger battery, longer range electric cars from BMW i in the not-so-distant future. I suspect by the time Tesla releases the Model III, BMW will have an electric offering which is comparable size, range and price, and that will be good news for the consumer.
My i3 had a visit by its big brother. I'm one of the few lucky people outside of some select journalists who have driven an i8 on public roads. The future is definitely looking electric!
BMW knows that by focusing on a specific set of needs (efficiency, performance, sustainability) rather than long range, the i3 isn't as well suited for road trips as the Model S. They knew that every kWh of battery that they added would sacrifice efficiency and increase the cost of the car. I still maintain that if BMW had indeed used a slightly larger battery and delivered a true 100-mile EV, it would have been much better received, but that's a pointless argument now. While it does have a shorter range, the i3 does have features that are not even available in the Model S, such as adaptive cruise control, collision avoidance with automatic braking and self parking. As you would expect from BMW, the i3 is an extremely fun car to drive, and a great addition to the current lineup of EV offerings. I think it fits in well situated directly between the Model S and the LEAF in price.
My i3 at home
BMW did realize some customers would want a longer range so they offered the range extender as an option. It's really a great option to have and while I personally like how well it works, it isn't for everybody. Many have argued that the REx ruins the purity of an EV, and while I can agree with that, I can't agree that it shouldn't be an option. If such a feature allows more people to buy a plug in car, then I think that's great. I see the range extender as a temporary fix until batteries get better, lighter and cheaper, but a necessary evil at present. Obviously BMW agrees with that and unlike Tesla, they will wait for the market to bring them improved battery tech while Tesla has decided to bring improved battery tech to the market. Different approaches, different cars and I don't think either is right or wrong. They are both working on bringing cutting edge technology to market today with the promise of even better things to come. BMW and Tesla aren't going head to head in the EV space right now, but they certainly will. Competition is good because it forces innovation. Maybe Horatiu was onto something after all.

One last point: If Nissan does deliver on the rumors that the next generation, 2016 LEAF will have a 150+ mile range, and they can deliver it for a reasonable price, then both Tesla and BMW should be concerned, very concerned...

BMW and Tesla going nose to nose in the premium electric vehicle market is inevitable.


  1. It's funny how big the i3 looks compared to the Tesla, I'm sure it's the hight of the i3, and the fact that you have bigger wheels. Great article though, it gives you a better feel of what's going on in the market right now, and why a little car maker from California is building a great sport sedan, and why a company know for sport sedans isn't.

  2. I was a little surprised by the side by side picture also. Didn't realize the i3 was that big although I should have realized since you frequently have commented about how spacious it is inside.

    Couldn't agree more about neither being right or wrong. Different cars for different needs. Why should I pay $30,000 extra for a large battery if I only use it once a month at most? My brother on the other hand drives 200 miles from Modesto to Bakersfield once a week so he needs the extra range.

  3. All I will say is that betting against Elon has proven to be a bad bet so far....

  4. Agree with everything, Tom. The bright future for EVs has already started; the pipeline has never looked better. Now, if only Toyota and Honda would open their eyes :-)

  5. Thanks a lot Tom - great write! As a former employee of BMW, at their plant in Leipzig, where the i3 is coming from, I am very closely following the developments.

    Back in 2003 when I started at BMW at their plant in Regensburg I drove a Toyota PRIUS which reached at that time just the German market. It was already amazing to go electric, even though only up to 50km/h and restricted range.

    Three years back I took seat in a TESLA Roadster at a conference here in Dresden, and thought, "Wow, this is a small car!".

    Tesla has quite changed since, and honestly BMW has taken into account that users of their cars are definitely not as small as sometimes the interior lets you experience.

    What is currently setting apart the i3 and the Model S (despite the model class at its own) is the driving range (roughly 130km against 500km). Even in a small city like Dresden (we did a test drive some months ago) you constantly have you eyes on the instruments to be sure to make it home or to the next electric pole (which you have not yet many choices to go).

    The Model S clearly outcompetes the i3, and it will to be seen whether the i5 (full electric I hope) will come up at same level with the Model S.

    Elon Musk and his team have done a more than amazing job so far: opening the gate to make electric driving not just smooth, and environment-friendly but SEXY (at the same time). All the big car companies, even the German ones, who often seem to move rather slow on new turfs (but when they are forced to do so, as laws are changing, and markets like China clearly setting limits to CO2 emissions, they can do, but always have the burden of fixed infrastructure that is mainly focused on gasoline driven cars).

  6. I looked at the Tesla model S at the same time as the i3. I am happy to say that I am a new and very happy owner of the i3. Tesla makes a great car, but it wasn't for me. I like the roomy cabin of the i3. I felt cramped in the Tesla. The seating in the i3 is chair-like--firm and upright. By contrast, you sink down into the Tesla seats. The i3's seats and the spacious, open cabin with a great view of the road weighed heavily in my decision for the i3. Tom pointed out the great strengths of the Tesla, but at my age and with various orthopedic issues, the i3 was the clear choice for my needs. Funny how these seemingly incidental things are decisive in car buying. Tesla model S and the BMW i3, two great cars for two different buyers. Tom, as an advocate of the i3, I'm glad you made this point.

  7. Great article and contains one of the best reasons (for me) to buy an i3: "the i3 uses 70% less water and 50% less electricity to manufacture than a comparable-sized conventional BMW would. In addition, the Leipzig manufacturing plant where the i3 is made is now completely powered by wind-generated energy". Sure, I want a Tesla but I prefer BMW's i3 and I'll use the $40k saved to rent a car the few times I need high range. That works, because I live in the megacity of L.A.

  8. The BMW i3 not only falls between the Model S and LEAF in price, but in performance. I don’t need and can’t afford the 4 second 0-60 performance of the Model S, but I was willing to pay for the i3’s capabilities beyond other less expensive EVs. Cars are definitely not one size fits all. The more choices there are on the spectrum the more likely that a buyer can find one to fit their needs and desires. Now if only EV manufacturers would realize that one battery size doesn’t fit all. A chart of that would have everyone besides Tesla grouped together. At least BMW offers the Rex option, which is obviously popular (I went for one too).

    While a big improvement in batteries may well make range extenders obsolete, I’m not sure it will happen as soon as many think. For the i3 the REX is cheaper and lighter than doubling the battery size. Even if they have a 200 mile battery available in a couple years, a range extender would likely still be a cheaper and lighter option to double the range to 400 miles (just use a larger gas tank). Range extender technology won’t necessarily stand still either. Reciprocal generators or some other technology could make them lighter and more efficient. Possibly even a lower power generator would still be useful as long as it was used before the battery was nearly dead. A generator half the power of the i3 REX could double your battery range if it was run for the entire trip. So range extenders might not be dead end technology.

  9. Nicely done and great pictures. I haven't seen any Model S and i3 side by side pictures like that especially with similar colours.