BMW and Mercedes launch their biggest electric car push yet to catch up to Tesla

Munich, Germany – BMW and Mercedes are making their biggest efforts yet in electric vehicles in a bid to fend off growing competition from Chinese players and catch up with US giant Tesla.

In the past few days, as part of the IAA Mobility Motor Show in Munich, Germany, the auto giants have unveiled concept electric cars and new platforms for their future battery-powered vehicles.

European automakers, which are seen as standing behind Chinese firms such as Warren Buffett-backed BYD and Elon Musk’s Tesla, have had to move quickly to show the market they are ready to be major players in the electrification age.

On Sunday, Mercedes-Benz unveiled its CLA Class concept car, an electric car based on a new architecture that will support future battery-powered cars from the German auto giant. The company said the concept vehicle has a range of 750 km (466 miles) as well as the ability to reach a range of up to 400 km with just 15 minutes of charging.

Ola Källenius, CEO of Mercedes, spoke about the car and described it as a “revolutionary development” for the German company.

“With those efficiency numbers, that kind of range, that kind of fast charging, I’m not aware of any vehicle in that class that can match that,” Kalinius told CNBC’s Annette Weisbach on Sunday.

On Saturday, rival BMW showed off the Vision Neue Klasse, another electric car that highlights the company’s electric vehicle ambitions. Neue Klasse is BMW’s new design for its electric vehicles. The first vehicles based on this platform are scheduled to enter production in 2025.

“In just two years, these cars will hit the road, and with that, overall, we’re driving BMW into a new era of innovation and sustainability. That’s the purpose of our show here at the IAA,” BMW CEO Oliver Zips told CNBC. Arabel Gumed.

Zipse said BMW will double its sales of electric cars this year. He added that by the end of 2023, 15% of BMW’s global sales will be battery electric vehicles.

Mercedes and BMW’s dedicated electric vehicle platforms are a departure from previous architectures as they adapt combustion engine or hybrid models and add batteries. This is the company’s biggest push yet towards a new platform for the electric vehicle era.

Analysts said the Mercedes and BMW announcements are big steps but could make them lag behind Tesla.

“The new platforms at Mercedes and BMW show, for the first time, what European OEMs are doing [original equipment manufacturers] would be able to. “These cars are probably a year away, but their specifications show that European OEMs will be able to create compelling products,” Daniel Ruesca, senior research analyst at Bernstein Research, told CNBC via email.

These new platforms will “bridge a large part of the gap” for Tesla and Chinese players, Ruesca said, “but not all the way.”

BMW and Mercedes are venturing further into the increasingly competitive electric vehicle market, which is widely dominated by Tesla and several Chinese players.

Tesla captured 20% of the global electric vehicle market in the second quarter, followed by BYD’s 15%, according to Counterpoint Research.

Competition has become fiercer, thanks in large part to a price war sparked by Tesla. The US automaker began cutting prices in 2023, pledging to sacrifice margins in the short term to gain market share.

Mercedes and BMW both play in the premium segment of the market, with cars like Tesla’s Model S and Model X competing. As it prepares to launch more electric cars in the coming years, Mercedes stresses that its focus is not on pushing big.

“We don’t press on volume, we focus more on value than volume,” Kallenius said.

Meanwhile, Volkswagen’s strategy appears to be to launch cars at different price points to capture different segments of the market.

The company announced Sunday that it will launch eleven new all-electric models by 2027, underlining its drive towards electric vehicles. And in 2026, Volkswagen said it plans to launch the ID. 2all, an electric car that will retail for less than 25,000 euros ($26,942).

And the German auto giant showed identity. electric car GTI Concept at the IAA show, and said that a production version of the car is scheduled to hit the road in 2027.

In a world where cars are powered by batteries, it won’t be just the car’s design or engine that will appeal to consumers. Technology is increasingly important.

“Premium electric vehicles now need to feel more like smartphones than traditional cars to deliver an experience similar to Tesla — the gold standard in electric vehicles through its vertically integrated platform,” Counterpoint said in a note last week.

Indeed, Tesla has built its business on controlling the hardware – the car itself – as well as the software that goes into it. Musk often talks about the company’s autopilot features that allow the car to perform certain driving features autonomously. Tesla’s large internal screen and apps make it akin to using a smartphone.

Several Chinese automakers including startups Xpeng and Nio are also marketing their own semi-autonomous driving features.

At the IAA conference, incumbents also talked about their technological prowess in a bid to show that they too can match Tesla and Chinese start-ups.

For example, BMW said its Vision Neue Klasse EV has a head-up display that projects information onto the driver’s windshield.

BMW Zipse CEO said the Vision Neue Klass represents the “largest investment” in a car on the “digital side” which includes semiconductors.

“This is a completely digital feel for the car,” Zipes said.