After Elon Musk let filmmaker Jon Favreau use his rocket factory to shoot some scenes for “Iron Man 2,” Favreau figured he owed his friend a favor. So he bought one of Musk’s cars.
What Favreau didn’t expect is that he’d like his Tesla Model S so much he’d end up ditching his Mercedes.
“It’s amazing,” said Favreau. “I sold my other car.”
With Tesla Motors Inc.’s all-electric sedan, which starts at $71,000, buoyed by driver testimonials and strong reviews, established car companies are responding with their own versions of battery-powered luxury. They’re taking aim at the Model S, the car from Musk’s upstart company that is redefining what makes — to borrow the parlance of Bayerische Motoren Werke AG’s marketing machine — an “ultimate driving machine.”
BMW itself is among the automakers bringing electric motors to high-end cars. Its $135,700 i8 coupe, which has a hybrid powertrain and faster acceleration than a Porsche 911, went on sale in Europe on June 5. Other recent introductions include Porsche’s $99,000 plug-in Panamera sedan and General Motors Co.’s $75,000 Cadillac ELR coupe.
Tesla clearly influenced this wave of vehicles, said Ed Kim, an analyst for AutoPacific Inc., an industry consultant in Tustin, California. “Model S has been the big ‘it’ car of the last year and half,” he said.
The sedan’s success has helped send the automaker’s shares up more than 50 percent this year after they quadrupled in 2013. Morgan Stanley analysts last week deemed Tesla “arguably the most important car company in the world.” They added: “We are not joking.”
According to lead author Adam Jonas, suppliers are eager to do business with Tesla, established automakers see it as a force for reinvigorating innovation across the industry and states are “scrambling” to woo Tesla projects, making the company a force in fostering high-tech job growth in the U.S.
While the Model S can travel 265 miles on battery power alone, competitors’ models pair gasoline engines with shorter-range electric systems. The BMW, with its weight- saving carbon-fiber body, can travel about 23 miles on battery power before a three-cylinder turbocharged gas engine kicks in.
“We are starting to see some appealing premium plug-ins, particularly the i8, yet they still have modest battery range,” said John Krafcik, president of TrueCar Inc., an auto-buying website, and a former top executive of Hyundai Motor Co. “It’s kind of remarkable no one has entered the space with a competing long-range electric product.”
The ability of BMW’s coupe to grab sales from Model S and gas-powered luxury cars isn’t yet tested. BMW officials have said early orders are better than they expected. The maker “welcomes” competition from Tesla as it invigorates demand and progress in the development of all electric cars, it said an in email.
Brian Corbett, a spokesman for GM’s Cadillac brand, said the Model S wasn’t an inspiration for the ELR, and the two are “unique enough to appeal to different kinds of customers.” Porsche said by email that plug-ins combining electric and conventional motors appealingly combine high-performance driving and low emissions.
Tesla’s growth has been powered in part by superlative reviews. Motor Trend named Model S 2013’s Car of the Year, the first time the car-buff bible gave the honor to a vehicle that wasn’t hydrocarbon-powered. BMW last captured a top honor from Motor Trend with its 1997 5-Series, named Import Car of the Year shortly before that award was discontinued.
The Model S is “one of the quickest American four-doors ever built,” editor-at-large Angus MacKenzie wrote. “It’s also as smoothly effortless as a Rolls-Royce, can carry almost as much stuff as a Chevy Equinox and is more efficient than a Toyota Prius.”
Consumer Reports, meanwhile, gave the Model S its highest-ever mark in May 2013, a 99 out of a possible 100, matching the score attained by Toyota’s Lexus LS sedan in 2007. BMW received its highest rating to date from Consumer Reports just yesterday, when the reviewer awarded 98 points to a $50,400 BMW M235i coupe.
Tesla has come a long way since 2006, when Musk wrote a manifesto committing his company to making no-compromise electric cars to spur a societal shift away from a “mine and burn hydrocarbon economy.”
Tesla introduced its $109,000 Roadster, a two-seater with a modified Lotus chassis, in 2008. About 2,500 were sold. Getting the car to market amid a global recession amplified the Roadster’s cost overruns and production delays, nearly tipping the Palo Alto, California-based company into bankruptcy.
It developed the Model S and opened its Fremont, California, plant with the help of Silicon Valley backers, supply deals with Daimler AG and Toyota Motor Corp., a $465 million U.S. Energy Department loan and a successful initial public offering. The first Model S sedans emerged in June 2012.
Ramping up production was slower and costlier than planned. Early snags included a February 2013 New York Times review alleging that a Model S lost its charge in the middle of a test drive, which Tesla contested. Tesla also recalled its charging system and, after reports of fires prompted a U.S. safety review, upgraded the Model S’s battery-pack casing.
The rally in Tesla’s shares has made it more expensive than 99 percent of the companies in the Standard & Poor’s 500 index. Tesla trades at more than 200 times estimated earnings, compared with 12 times for GM and 13 for Ford Motor Co., according to data compiled by Bloomberg. Tesla is also about twice as expensive as LinkedIn Corp. and Netflix Inc., the data show.
Still, in a cash-intensive industry with few successful startups, Tesla has continued to increase sales. The company began deliveries to continental Europe last year. Customers in China started getting cars in April. U.K. drivers began getting right-hand-drive Teslas this month, and shipments to Hong Kong, Japan and Australia are next. Tesla plans to deliver 35,000 Model S’s this year.
This isn’t the first market disrupted by Tesla’s 42-year- old chief executive. Musk helped remake online commerce as a co- founder of PayPal Inc. and has more recently shaken up the aerospace and solar-power industries.
Musk said this month that the 160-plus patents related to Tesla’s Model S will be available free to those using them in good faith. The move has the potential to spark an open-source innovation boom in an industry known for guarding its tradecraft.
For its part, Tesla had hoped that its sedan would spur activity in electric vehicles, rather than those that pair electric and internal-combustion drive, said Chief Technical Officer JB Straubel, who along with Musk is company co-founder. “If there’s any disappointment, I think it’s just that people are not committed to pure electric vehicles,” he said.
The Model S breaks the mold in many ways. The car’s operating system receives automatic wireless updates. Drivers never insert a key or push an ignition button. Model S unlocks itself when sensing the owner’s fob is near and shuts down when the driver walks away.
In place of an engine block under the hood, the Model S has a front trunk, or “frunk,” that gives the car more cargo space than other luxury sedans. Tesla’s flat battery pack gives the car a low center of gravity for tight cornering.
Its electric motor pulls the Model S to 60 miles per hour in as little as 4.2 seconds — the same as BMW lists for its i8, and behind the fastest current BMWs, the automatic-transmission M3s and M4s, with a 0-60 time of 3.9 seconds.
Musk is far from his stated goal of selling half a million cars or more annually.
“Model S is being taken seriously, but it is not yet a car that can be viewed as a real competitor in the luxury space,” said Maryann Keller, an auto-industry consultant who has served as a director at Dollar Thrifty Automotive Group Inc. and Lithia Motors Inc. “It is still a niche vehicle.”
Favreau said he got his Model S in 2012, after Musk opened up his SpaceX factory to Favreau’s film crew.
“I said ‘Aww, he’s making a car. Let me sign up for his little car. Let me make the guy feel good,’” Favreau told Bloomberg Television this month.
That he and others have found the car more appealing than expected is “changing the industry in a good way,” Favreau said.
“Even if Tesla went away tomorrow, it’s just the fact that he made the impact — to show that electric cars with less impact on the environment can be cool and can compete on the same level as an internal-combustion-engine car,” he said.