Will Audi Put Tesla Out Of Business?

Edward Niedermeyer
by Edward Niedermeyer
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will audi put tesla out of business

It’s no fun knocking Tesla. Having spent my most formative years growing up just South of the Silicon Valley, and as a lifelong resident of the West Coast of the United States, Tesla’s the closest thing I’ve got to a home team in the auto industry. In fact, as I write this, a Tesla-branded coffee mug, sits due East of my keyboard, a thoughtful housewarming gift from a kind family friend. This unexpected gift, and the frisson around Tesla’s newly-public stock price prove that there’s a lot of excitement around the California upstart. Unfortunately, Tesla is but a small, inexperienced fish swimming in the global shark tank of the auto industry. Now, one of the big sharks, Volkswagen, is beginning to circle for the kill.

In May, Audi’s Rupert Stadler declared to the preeminent German car magazine Auto Motor und Sport that “Our goal is the complete victory.” Buoyed by strong sales momentum in China and elsewhere, Audi has been mouthing off about its ambitions for some time now. But Stadler spent as much time talking about electric cars as he did growth in the US and China, talking up VW’s relationship with BYD and Sanyo, and promising electric city cars. Only the Stadler’s bombastic headline hinted that Audi’s gain might come at Tesla’s expense, as well as Mercedes’ and BMW’s.

But in June’s AM und S, Audi once again stole the headlines, proclaiming production plans for an electric version of its mid-engine R4, itself based on VW’s BlueSport Concept. At six seconds to 60 mph, it would be considerably slower than the Tesla, but its 250 km range would be similar. And considering that gas and diesel VW and Audi (and possibly Porsche and Seat) versions could start under $25k, it seems fair to say that Audi will be able to price EV versions south of the Tesla

Roadster’s $101k base price. That, along with the $120k-ish R8 E-tron are the two jaws of Audi’s Tesla-munching jaws.

And then there’s one of the biggest challenges for Tesla: sales and service. Audi has plenty of dealerships and service employees… Tesla has boutiques in several jet-set shopping districts. Where would you buy an electric sportscar? Besides, if you don’t want a silly “e-tron” but you like the car, they’ll probably sell you a 335 hp five-cylinder turbo version for less money. And then talk you into an electric A2 for guilt-free commuting. Or talk you up to a crazed R8-based E-tron sportscar, which will start $10k-$20k higher than the Tesla.

The R8 E-tron is supposed to be available in 2012, when Tesla’s Model S is planned for launch. The R4 E-tron is scheduled for launch one year later, alongside the A2 EV city car. Tesla had planned on ending Roadster production in 2012, but has backed away from any end date for the Roadster allowing it to drive on into this EV sportscar pincer attack. And if Audi is going to attack Tesla’s Roadster from above and below, you know more Germans won’t be far behind. Sure enough, Mercedes has already announced a super-expensive EV version of its SLS AMG, likely heralding more EV sportscars to come. Given the behind-the-scenes politics at Volkswagen, Porsche will probably launch a BlueSport-based EV sometime around the same time as the R4 E-tron as well, if only to keep the upper management feuding.

Which leaves Tesla’s Model S to carry the firm until and unless a joint vehicle with Toyota materializes. And the Model S won’t even be the first luxury four-door EV on the market… unless the Fisker Karma misses another production deadline. The less-affluent (though not much less) early-adopters will already be happily buzzing around in their Leafs, Volts and EV Focii by then, unmoved by the inevitable lease offers tempting them to stretch for a Tesla. And after that, there’s not much market for high-end EVs. Every argument that Tesla might make about the unique abilities of its EV “sports sedan” is countered by

the fact that the estimated range for a base price $50k Model S is 160 miles. Plus the Fisker looks better.

I’ve long thought that Tesla could have stayed focused and carved out a unique niche as the 21st Century’s first EV sportcar specialist marque, riding AC Propulsion’s good idea to the status of a new Porsche if they were lucky. Not content with such a marvelous goal, Tesla has now officially lost its chance to establish its brand with (say) a GT and supercar, by letting Audi steal the EV sportscar momentum. And for what? In order to sell twice as many cars at half the price every time it comes out with a new product? To leverage one revolutionary but hardly mass-assembled sportscar into a global business to challenge the OEMs?

Audi gets it. Stadler tells AM und S that “the E-tron label will become as important to us as the Quattro label was to us 30 years ago.” This is exactly the kind of lesson of history that tend to escape start-ups. Audi has had its boots dirty building one of the most successful luxury brands over the past 30 years, and that institutional experience is worth every bit as much as the brand itself.

With its stock public, and its hopes attached to a 2012 EV sports sedan and a tenuous relationship with Toyota, Tesla is shooting the moon. If it doesn’t sell 20,000 Model S sedans by 2013 (for roughly $1b in revenue), Tesla will be toast. After two years of likely losses, Tesla’s stock will be battered down from its frothy precipice by the time the Model S arrives. Which will also be about the time Audi’s two electric E-trons start sinking their teeth into the remains of Tesla’s sportscar business. Sure, the Model S could be a stunning success, but even if it is, Audi will already have small premium EVs ready to go by the time it launches, meaning Tesla has nowhere to run downmarket (where the Leaf, Volt and Focus will already be established).

As much as EVs and California seem to go hand-in-hand, the Golden State’s homegrown hero does not have a happy road ahead of it. Along the way the brand will almost certainly prove a point that the auto industry seems to have to prove at least several times in every generation: ambition doesn’t change the world, focus does.

Edward Niedermeyer
Edward Niedermeyer

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  • David Dennis David Dennis on Aug 13, 2010

    The big push for electric cars was started by Martin Eberhard, co-founder of Tesla. Martin had as a stated goal the advancement of the electric car idea. I don't think electric cars would be anywhere near where they are today without his brilliant PR push as public head of Tesla. He and Elon Musk got into a fight, and with what I know of the character of the two men, I would stand by Martin as having the better argument. Now Martin is working for a prosperous company on exactly what he is most qualified to do, with excellent job security and probably significantly more money than he ever could have made at Tesla. Seems to me he couldn't have done better if he planned it all out in advance. Or did he? I'm very happy for him, you understand. And amused. It's nice to see a good man finishing first, for a change. D

  • Boohooyoohoo Boohooyoohoo on Jul 03, 2021

    These comments made 10 years ago did not age well at all :D A complete reversal of the truth nowadays

  • MaintenanceCosts So there is no Sonata trim without some type of Theta engine.It seems like they've been doing a bit better when attached to a hybrid system, so that's probably the one to get, but they're going to have to go several years without further engine troubles before I'd trust a H/K ICE product again.
  • Lou_BC Full sized sort of autonomous RC's. Cute.
  • Art_Vandelay Autonomous capabilities are being deployed (or planned anyway) in multiple combat vehicles. Should be fun from my perspective
  • Drew8MR Interior is trivial now you can get repro everything in various levels of quality. Getting the top sorted will be a couple grand, but I'd drive it as it. I drove a $1500 67 GTO convertible for 20 years, not every old car needs to be like new.
  • John Not everyone pays that much for power. Mine is 10 cents per kw…..