For the last decade, Tesla hasn’t had to worry about any type of high-performing luxury competitor.
That changed last night with the unveiling of the Audi e-tron, Audi’s EV crossover vehicle that was announced just days after Mercedes and BMW both revealed their own EV crossovers. As Tesla works to try and sort out “delivery logistics hell“, it now has to also start facing the reality that competition from high-end and well-established automakers is becoming a reality.
The e-tron is reportedly going to be manufactured in Brussels and is expected to make its arrival in the United States during the second quarter of 2019. It starts at $74,800 and will also qualify for the $7,500 federal tax credit. Audi chose to reveal the vehicle at a plant formerly used by Ford that was only about 35 miles north of Tesla’s Fremont factory.
Scott Keogh, president of Audi of America, told Bloomberg: “Audi is going electric and this is our our first major step. We feel we have an extremely compelling product.”
And choosing California for the reveal wasn’t a coincidence. The company decided to host the debut there because California is not only the biggest luxury auto market, but is also notorious for being environmentally conscious. The event was attended by about 1,600 people, including car enthusiasts, employees and journalists. The reveal event included a boat ride, strobe lights “pounding music” and people excitedly taking “hundreds of photographs” of the new vehicle.
Audi sees the e-tron as an opportunity to help parent company Volkswagen put its diesel scandal behind it. With its suspended Chief Executive Officer Rupert Stadler arrested recently, the e-tron event was hosted by its interim CEO, Bram Schot. Since the scandal, Audi has lost ground to rivals like Mercedes and BMW, but hopes that the shift to electric can also help change perception of its brand.
Schot stated: “We are merging the new world of electric mobility with 100 years of experience in manufacturing.”
The e-tron has an anticipated range of about 225 miles per charge and Audi has plans to add two more battery powered vehicles to its lineup by 2020. Going forward, VW has also been pushing for “cooperation” with Porsche for its electric car development, in order to help mitigate costs.
The e-tron is all part of the manufacturer’s larger plans to introduce 12 electric vehicles by 2025. They anticipate that these models, combined with hybrids, will account for about a third of global deliveries by that time.
Chelsea Sexton, an electric vehicle marketing consultant stated at the show: “Dealers were the target audience of this event. The idea is to get Audi dealers enthusiastic about the product.”
A variation of the e-tron, with a different back body style, will follow next year. Before that, a new design concept will be revealed at the Los Angeles auto show in November.
Still, Wall Street wasn’t exactly convinced that the competitive push on Tesla was imminent.
Tony Sacconaghi at Bernstein wrote on Monday that Tesla will face little direct competition before 2020. He stated: “Let’s make this clear: There is no actual flood of competition coming.”
Additionally, UBS analyst Patrick Hummel released a note on Tuesday morning stating that he believed catching up with Tesla is going to be “more difficult than expected”. He stated the e-tron’s range is 30 to 50 miles less than the Model X and that the acceleration pace was “significantly slower”.
He also made the point that Audi is going to have to scale up more to be profitable and that because of this, Tesla “might be able to sustain its lead for longer”. However, Tesla isn’t exactly setting an example as to how scaling up can lead to consistent profitability. At least the conventional automakers have their conventional cash generating businesses to fall back on as they take their first steps into the electric vehicle market. Tesla has no such luxury.
UBS ultimately kept their sell rating on Tesla based on Model 3’s sales and pricing issues.
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