Here come Tesla’s challengers with all-electric SUVs
Audi held elaborate launch event for e-tron, while Jaguar’s I-Pace hits the market soon
Customers like Tom Richmond could become a problem for Elon Musk and the future of Tesla Inc.
The Florida consultant is selling his Tesla Model 3 and replacing it with a Jaguar I-Pace, a new all-electric sport-utility vehicle arriving in a few weeks that, he said, has a romantic British sports-car heritage, luxurious interior and runs on electricity.
“I mean a Jag—how could you not?” said the 60-year-old from St. Petersburg, Fla. “You sit in any one of them—it is just the lap of luxury.”
The I-Pace, which starts at about $70,000 and arrives in U.S. showrooms this fall, represents the first of a long-promised assault by European luxury auto makers to challenge Tesla with their own high-end, long-range electric vehicles. They are gunning for one of America’s most popular vehicle categories: SUVs.
On Monday night near San Francisco, German auto maker Audi AG revealed the production version of its electric SUV called the e-tron. It aims to begin selling the spacious, five-seater in the U.S. next spring starting at about $75,000, slightly less than the $80,000 base price of Tesla’s Model X SUV.
Earlier this month, Daimler AG’s Mercedes-Benz revealed its own electric SUV, the EQC, that will begin production late next year, ahead of BMW AG’s plans for an electric version of the X3 SUV in 2020.
Mr. Musk, Tesla’s chief executive, is widely credited for proving that electric cars can be sexy, creating a global luxury brand with a devoted following beyond environmentalists. But Tesla’s yearslong head start is ending as a wave of auto makers plan to push out electric offerings over the coming months, spurred in
part by regulatory standards calling for reduced tailpipe emissions.
Tesla rolled out the Model X three years ago and it doesn’t plan to start production of its next SUV until at least the second half of 2020. That vehicle, the Model Y, will be a compact SUV, smaller than the roomy, midsize versions from the European companies.
The new competitors will be greeted in the U.S. with $7,500 federal tax credits for customers that Tesla buyers have enjoyed but will begin to be phased out next year after the Silicon Valley auto maker reached the milestone of selling 200,000 vehicles.
All of which could weigh on Tesla’s gross margins and future profitability, wrote David Tamberrino, an analyst for Goldman Sachs Group Inc., in a note to clients this month.
Some analysts, however, expect the competition to help Tesla. Toni Sacconaghi, an analyst for Stanford C. Bernstein & Co., said the new arrivals will “validate and expand” the electric car market. “Rather than competition,
we believe Tesla’s greatest threat is its own execution,” he told investors in a note on Monday.
Tesla declined to comment.
The challengers are arriving as Tesla struggles to boost production of the Model 3 sedan, fueling doubts it will have the manufacturing prowess to churn out tens of thousands of cars a week as the incumbent auto makers do. At the same time, Tesla has weathered a storm of negative publicity including high-level departures, crashes involving its vehicles using a semiautonomous driving system, and erratic behavior by Mr. Musk.
The controversies offer an opportunity for traditional auto makers to lure potential buyers who are curious about electric vehicles but unsure about the Silicon Valley company, said Karl Brauer, executive publisher of Kelley Blue Book and Autotrader.
“They’re very familiar with a Mercedes badge, or an Audi badge or a Jaguar badge or a BMW badge,” he said. “It will be a very interesting test case.”
The European auto makers are seeking to stir excitement in Tesla’s backyard. Audi on Monday held an elaborate launch event in an old Ford assembly plant about an hour’s drive from Tesla’s factory. With the backdrop of San Francisco’s skyline, and after a drone light-show revealing Audi’s four-ringed logo, the company took the wraps off the long-touted e-tron in front of hundreds of people
The five-seat midsize SUV boasts Audi’s latest tech features such as two touch screens in the dash and an infotainment system featuring Amazon Inc.’s Alexa voice assistant, and it can go from zero to 60 miles an hour in 5.5 seconds, slightly less than the Model X’s base model.
Audi on Monday touted its franchise dealership network— something Tesla doesn’t have— as an advantage, enabling customers to get their cars fixed, receive next-day delivery of parts or a service loaner. “There are systems and processes that we know how to do,” said Scott Keogh, president of Audi of America.
Mr. Musk on Sunday pledged to speed up repairs by bringing the service in-house, acknowledging in a tweet that it was taking weeks or months for Tesla owners to get their cars fixed at repair shops.
Next month in San Francisco, Jaguar Land Rover, the British unit of India’s Tata Motors Ltd., begins a marketing tour in four U.S. cities it believes have the most potential early buyers.
“We are targeting current
Tesla owners” as well as others interested in luxury electric vehicles, said Kim McCullough, vice president of marketing for Jaguar Land Rover’s North America operations. “These buyers have options, they are affluent and they want to feel like they’re not making sacrifices.”
Previous attempts by established competitors to target Tesla have come up short. General Motors Co.’s plug-in Cadillac ELR, a $75,000 coupe, failed to garner a following and was shut down in 2016.
Its Chevy Bolt, once considered a Tesla fighter, hasn’t received the same kind of attention as Tesla’s higher-end cars.
The German luxury brands, however, appear to be catching the eye of potential Tesla buyers.
Those brands are among the most analyzed by people who are also researching Model Ss and Model Xs, according to automotive shopping website Edmunds.
Mr. Richmond bought a Model X a few years ago and said he likes some of the SUV’s features, such as its quick acceleration.
But he said he experienced quality issues like rattling, air leaks and misaligned doors that shouldn’t be in a car priced over $100,000.
“The value proposition I think has waned a little bit,” he said, adding, “they’ve kind milked this cow for a while and now they need to do something” new.