Why Tesla’s Mass-Market Car Should Scare Mercedes and BMW

Audi, BMW, Mercedes-Benz, and Porsche have long dominated the world’s premium automotive ranks, making Germany home to some of the industry’s most profitable car brands. But Tesla Motors, whose Model 3 electric car enticed 325,000 would-be buyers to put down $1,000 deposits during the week of its debut in April, threatens them in a way that Toyota’s Lexus never did. While the Model 3’s stats—200 miles on a single charge, $35,000 starting price—align it with General Motors’ midmarket Chevrolet Bolt, Tesla Chief Executive Officer Elon Musk has said his most affordable car to date should be thought of as competing with luxury mainstays such as BMW’s 3 Series or the Audi A4.

Car shopping data suggest there’s more to Musk’s claim than just bravado. Tesla buyers shop German luxury brands more than any other car lines before making purchase decisions, according to automotive researcher Edmunds.com. Almost 30 percent consider BMW, and about 20 percent look at Audi and Mercedes models, while 12 percent shop Porsche, says Edmunds. Compare that with the fewer than 6 percent of Tesla buyers who consider a Dodge, and it’s clear German brands are most vulnerable to customer defections as Tesla grows.