Intensifying competition in the electric vehicle space is threatening to displace Tesla’s stranglehold on the steadily growing global EV market. But thanks to Model 3’s current price and battery range, Tesla is already sitting in the sweet spot of the US auto market.
Tesla is facing two-pronged competition, one from luxury automakers in the $30,000 to more than $100,000 price range, and one from automakers operating in the sub-$45,000 market.
Tesla wants to slot its Model 3 Standard Battery version at $35,000 not because they thought it’s a good looking number but because the average selling price of new vehicles in the United States was $34,670 in 2017.
$35k is the point where the tradeoff between volume and price balances out, and that’s why Tesla wants Model 3 pricing to start there.
As you can see from the chart above, Model 3 is sitting farthest to the right because no other car in production has the ability to offer more than 300 miles range in a single charge. Volkswagen group’s Audi eTron and Porsche Taycan are targeting the 310-mile range, but it still remains to be seen if they can really achieve that feat.
“When the first concept version of the e-tron debuted at the 2015 Frankfurt Motor Show, Audi discussed a range of 500 kilometers, or about 310 miles. The automaker now says the production version will have a range of 400 km, or about 248 miles.” – The Drive
Even if Audi eTron gets above the 300-mile range mark, the first all-electric luxury passenger car from Audi will be a competitor to Model S and not Model 3. Audi eTron starts at €80,000 in Germany and by the time it crosses the Atlantic Ocean it might end up costing $100,000. VW has slotted Brand Porsche above Brand Audi, so Taycan’s pricing is highly likely to stay well above Audi eTron.
Mercedes EQC is expected to be priced very close to the Jaguar I-Pace, which costs around $69,500, which makes them both a competitor to the Model S/X. Again, not Model 3.
Though we still don’t know how much BMW will ask for the iX3, which is expected to be launched from China in 2020, it will be very difficult for the Bavarian automaker to price it lower than $50,000. The current range-extended 33 kWh-180 mile range i3 starts at $48,850 in the United States.
The new BMW iX3 will feature a battery pack with over 70 kWh of capacity and 249 miles of range, which should push the price a lot higher than the $55,000 BMW asks for the X3 M40i.
From a pricing perspective, the upcoming electric vehicles from Porsche, Audi, Mercedes-Benz, Jaguar and BMW from now through 2020 are all positioned to compete with Model S and Model X. Not with Model 3.
The Chevrolet Bolt and the 2019 Nissan Leaf are the only two models that offer a +200 mile range and are in a position to compete with the Tesla Standard Range Battery Model 3, whenever it arrives.
So, who will be competing against the Tesla All-Wheel-Drive Long Range Model 3 that starts at $55K and Rear-Wheel-Drive Model 3 that starts at $49k? As of now, there is no one, and there aren’t many candidates for 2019 either. Model 3 AWD and RWD will be competing with ICE rivals, not all-electric models, which will certainly work in Tesla’s favor.
Two Things that Work against the Competition: Price and Range
Tesla’s competition, in order to compete against Tesla EVs, needs to offer a comparable or at least respectable range. Tesla has already pushed that number way past 250 miles; and for automakers, building batteries that can offer such range is going to be a costly affair because they are just starting off.
“The burden for our company, such as the cost of bringing to market electric cars, will be higher than expected,” Diess said in a joint interview with labor head Bernd Osterloh in VW’s internal newsletter. “This is particularly so since some of our competitors have been making more progress.”
The Jaguar I-Pace is a great example. The I-Pace offers 240 miles range thanks to the 90kWh battery pack, but the base model starts at $69,500 and there is a limited edition that will set you back by $85,900. According to several reports, manufacturing issues have delayed I-Pace deliveries.
If the competition pushes the battery range closer to 300 miles, the cost of the battery will go up, dragging up the price of the car along with it.
Resale Market Sentiment: Favorable to Tesla
Though the competition is heating up, they still have plenty to prove. Tesla EVs hold their value much better than other all-electric models, and this increases the value of the brand in the eyes of the customer.
According to Blackbook, the Tesla Model S retains 62 percent of its value after three years, which is better than comparable gasoline cars. Tesla trounces other EVs when it comes to resale value.
When all other things are equal, an electric vehicle with more battery capacity will be worth more in the resale market. It must also be noted that Tesla’s battery packs have proven themselves over the years, while the competition is yet to earn such credibility.
Data from a group of Tesla owners in the European Tesla Forum shows that Tesla battery packs degrade by less than 10% after crossing 250,000 miles. Nissan estimates its battery to degrade by 20% after five years. GM expects its Chevy Bolt battery to degrade by 10% to 40% over the eight year/100K miles warranty period.
Tesla and Nissan are the only two companies in the world to have more than 300,000 all-electric vehicles on the road. If things vary so much between the two top players, no one can really guess how it will be for players who are yet to start their EV sales accounts.
Tesla’s Model 3 Lead: Not unbreakable, but gives the company a lot of time
Real-world tested battery pack with the lowest degradation, the only production car to have 300+ miles range, a price point ($45K to $60K) where there is no immediate competition and higher resale value; all these factors give Tesla at least another two to three years’ lead with the Model 3.