A survey by German automotive magazine AutoBild finds that 2/3 of Germans who responded would consider purchasing a Tesla Model 3. The hype and hyperbole surrounding the launch of the Model 3 and the nearly 300,000 reservations Tesla booked for the new car in the first few days have Daimler investors worried.
Mercedes’ Electric Concepts Less Desirable Than Tesla Model 3
At the company’s annual stockholder’s meeting in Berlin this week, several people openly criticized Daimler management for not having an effective response to the Tesla challenge. Daimler stock is down about 20% so far this year. To add insult to injury, the Tesla Model S is outselling the mighty Mercedes S Class in most markets, even in Germany where people are usually fiercely loyal to German brands.
According to a report on the Financial Times, Ingo Speich, portfolio manager for Union Investment, told senior management the capital markets are concerned the “fat years” for premium German car makers are over. The automobile industry is looking at “a radical upheaval, driven by attacks from Silicon Valley,” he said.
More than one shareholder wanted to know what Daimler is doing to meet the challenge from Tesla. “We don’t really have a product for this competition from Tesla. In the long term we have some great vehicles . . . but they are virtual at this point,” one said. Another worried that the company had no answer to the Model 3. “What is the reason for that?” he asked.
Daimler CEO Dieter Zetsche assured the audience that his company will respond. It plans to have 10 plug-in hybrid vehicles in its product lineup in 2017. It also will have an electric car with at least 300 miles of range by the end of he decade. He went on to say that Daimler is in the forefront of new technologies, including autonomous driving systems. There are reports that Uber has placed an order for 100,000 self-driving Mercedes S Class sedans, although details about the deal are sketchy.
So far this year, Daimler’s share price has fallen 20%. BMW shares are off 25%. Clearly, investors are nervous about the future of luxury car sales. Zetsche did have some good news for investors, though. He announced that Mercedes sales were up 13% in the first quarter compared to the same period in 2014.
Manfred Bischoff, chairman of Daimler’s board of directors, admitted that the company needs to be bolder and more daring. He called it “a balancing act” for Daimler to innovate in technologies including self-driving cars, while also maintaining its strength as a leader in traditional, premium cars. The company’s latest autonomous concept car is called the Mercedes Vision, which was featured at the Tokyo auto show earlier this year.
The auto industry is facing a conundrum. No manufacturer can afford to turn its back on the cars that generate the most sales and the most profits. Tesla has no such concerns, since in doesn’t build any conventional cars at all. The tug of war between the traditional car companies and the future of transportation that Tesla represents will be fascinating to watch.
Photo credit: Daimler