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Why BMW Will Leave Tesla in the Dust (BAMXF, TSLA)

The rapid rise of electric vehicles has been good to Tesla(NASDAQ: TSLA ) shareholders during the last year. While companies like Nissan stake out the lower-end market, Elon Musk seems to have sewn up the luxury segment.

But that’s changing. BMW’s (NASDAQOTH: BAMXF ) electric city car, called the i3, has been gaining traction. The company received more than 8,000 pre-orders for the car before it hit European showrooms in November, and by mid-January, when U.S. dealers began taking orders, this number had risen to 11,000 — more than the company expected to sell during all of 2014.

i3. Source: BMW.

The hatchback might not seem like a direct competitor to Musk’s super sedan, but it’s likely just the first jab in what’s poised to be an all-out war for the luxury electric-car market. This year, BMW will launch the i8, a hybrid electric supercar that, with a $135,000 price tag and top-shelf performance, takes direct aim at the Model S. Longer term, BMW plans to launch a full i-series lineup of electric cars, in the first credible threat to Tesla’s burgeoning EV dynasty.

Home-field advantage
Right now, Tesla is the de facto electric luxury brand, but I’m betting this will change. BMW is the first brand with legitimate luxury cachet to enter the electric market. Both companies target drivers who are younger, more affluent, more educated, and more liberal than average. BMW has owned this market for a long time, and research shows that its ample brand power should translate well to the EV market.



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