Luxury automakers to Tesla: We're coming for you

CNBC
Updated
Mercedes, BMW, Audi and practically every other luxury automaker is gunning for Tesla with a slew of high-end electric vehicles.

The message from Dieter Zetsche was clear.

Shortly after the Daimler (DAI-DE) chairman unveiled Mercedes-Benz's concept electric SUV at the Paris Motor Show Thursday, CNBC asked if the German automaker was fighting back against Tesla (TSLA) and its growing hold on the luxury electric car market.

"If you want to interpret it that way it's fine," Zetsche told CNBC. "Tesla is a successful electric automotive company...[but] we want to be No. 1 by latest 2025 in the electric premium segment."

Make no mistake: Mercedes, BMW (BMW-DE), Audi and practically every other luxury automaker is gunning for Tesla with a slew of high-end electric vehicles scheduled to come out over the next several years.

Mercedes, for instance, plans to release 10 new electric models. BMW says it will introduce an electric version of every model it sells. And Audi plans for 25 percent of its sales by 2025 to come from electric vehicles.

"Tesla is highly likely to lose its dominant position," UBS told investors last week, describing the coming wave of electric cars from established luxury brands as a "tsunami."

Stephanie Brinley, senior auto analyst for IHS Markit, agrees Tesla will feel some pressure.

"The mainstream luxury brands can really reach beyond the early adopters in a way Tesla cannot," he said. "They have the dealer network, strong brand recognition and strong customer loyalty."

While Brinley and others make a reasonable case for why consumers would want an electric Mercedes or BMW, Tesla has so far shown it's the only automaker to win over wealthy buyers who want an electric car.

Tesla doesn't release sales by country, but last year in the U.S. it sold almost 26,000 Model S and Model X vehicles, according to Inside EVs. The next closest luxury brand was BMW, which sold just over 13,000 i3 and i8 electric cars, according to the research firm Autodata.

"Tesla found a niche and they've accomplished more than what many people expected," Brinley said.

But does Tesla have what it takes to fend off the established luxury brands over time? That depends on whether Mercedes, Audi, Lexus and other automakers can roll out electric models that connect with buyers, and generate the type of buzz Tesla enjoys with the Model S and the Model X.

Think back to the Cadillac ELR. Shortly after General Motors (GM) introduced the $75,000 luxury electric sedan in 2013, it had to offer thousands of dollars in discounts as it attempted to find buyers. GM eventually cut the suggested retail price by more than $16,000, but interest never picked up. Earlier this year, after selling just over 2,700, the automaker killed the Cadillac ELR.

As for whether or not Tesla CEO Elon Musk is worried about the growing competition, don't bet on it. Over the years, Musk has repeatedly said he wants other automakers to build more electric cars, so it spurs more people to migrate from gasoline- and diesel-powered vehicles to electric cars and SUVs.

Questions? Comments? BehindTheWheel@cnbc.com .