Posted on January 06, 2020 by Charles Morris
Tesla is an ominous presence lurking at the edges of auto (and oil) executives’ nightmares. The company’s domination of the luxury sedan segment has affected most of the global automakers, but some brands are far more vulnerable than others to the gathering storm of disruption.
Above: BMW tries to catch up to Tesla (Image: InsideEVs)
The automaker with the most to lose is BMW. As Carscoops recently pointed out, Tesla sold more Model 3s in the US in 2019 than BMW sold sedans from its 2, 3, 4, 5, 7 and 8 Series combined. Tesla delivered 127,836 Model 3s between January and November (as estimated by CleanTechnica), while BMW delivered 116,073 units of its popular sedans (according to BMW North America). And, while BMW and most other brands are seeing declining demand for sedans, Tesla just keeps going and going - it hopes to deliver between 360,000 and 400,000 vehicles worldwide in 2020.
A recent Bloomberg article contains even more worrying news for Beemer fans. Based on a survey of 5,000 Model 3 buyers, Bloomberg concluded that BMW is more vulnerable to competition from Tesla than any other automaker: “No one has been hurt more by Tesla’s success than BMW.”
The list of models that survey respondents traded in for their Teslas was a bit surprising: some of the most common trade-ins were economy cars such as the Honda Accord and Civic, the Toyota Camry, and the Mazda 3. The Model 3 commands a higher average price ($50,528) than any of the top 10 vehicles that buyers traded in. “No other sedan in America is generating more revenue,” wrote Bloomberg.
The BMW 3 Series was second only to the Toyota Prius on the list of trade-ins. However, Bloomberg points out that Tesla is much more of a clear and present danger for BMW than it is for Toyota. The Japanese automaker has a huge market share in the US - over seven times greater than that of BMW.
Above: BMW appears to be 'most vulnerable' to Tesla according to research conducted by Bloomberg (Source: Bloomberg)
To illustrate the varying threat levels, Bloomberg calculated a “vulnerability index” - the ratio of cars traded for a Model 3 to total brand sales. BMW was at the top of the list with a 100.0 ratio, followed by MINI (owned by BMW), with a ratio of 86.8, and Audi, at 58.2.
These numbers are as cold as a Bavarian winter, but there are also more subjective reasons for BMW execs to feel uneasy. Whereas Toyota, Honda and Mazda are known for reliable, reasonably priced vehicles, BMW’s fame rests on its driving performance, and in this category, Tesla is tops.
A couple of 2019 head-to-head comparisons make the point. Motor Trend compared the Model 3 to the BMW 3 Series, and wrote, “Model 3 wins this competition because it has thoroughly rewritten the rules of what a compact sports sedan can be.” BBC’s Top Gear pitted the Model 3 against BMW’s flagship M3 on the track, and the result was the following headline: “Electric Beats Petrol! Tesla Model 3 Outguns BMW M3.”
Not everyone is convinced. “BMW doesn’t have a Tesla problem,” wrote Business Insider’s Matthew DeBord in a recent column. He points out that BMW’s total sales are still larger than Tesla’s, both in the US and globally, and so are its profit margins. The German brand’s US market share has been stable, and it offers a wide variety of vehicles. Sedans may represent a fading star, but BMW’s X series of crossovers are riding the current trend.
Above: Along with increased competition from Tesla, Mercedes is also adding pressure (YouTube: CNBC)
Of course, this segues neatly into what may prove to be one of the most interesting questions for the auto market in 2020: will Model Y’s impact on the crossover crowd look anything like Model 3’s success in the sedan segment?
Written by: Charles Morris
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