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Bloomberg News
The plug-in i8, shown at a trade fair in Germany last month, is BMW’s bid to keep its cutting-edge image as Tesla Motors invades the luxury car market.

BMW plugs into electric car market

– Bayerische Motoren Werke is rolling out the plug-in i8, its first sports car in more than three decades, in a bid to keep its cutting-edge image as Tesla Motors shakes up the luxury auto market.

The world’s largest maker of upscale vehicles starts deliveries this week of the $135,700 hybrid hot rod to show it can do more than make conventionally powered sedans and sport utility vehicles.

BMW’s most expensive model combines an electric motor and a lightweight carbon-fiber frame to get better gas mileage than the Toyota Prius and accelerate faster than a Porsche 911, demonstrating the breadth of its technology at a time when Tesla is set to outsell BMW in emission-free cars.

“Germany’s premium automakers feel Tesla’s rise more keenly, because they’re expected to be the biggest innovators,” said Juergen Pieper, a Frankfurt analyst at Bankhaus Metzler.

“Tesla will be able to win over people who’d normally buy a BMW. Even in Germany, people are lining up to test-drive” the U.S. carmaker’s Model S sedan, the brand’s only car.

For BMW, which claims to make the “ultimate driving machine,” Tesla’s emergence threatens to make the German brand’s refined muscle cars appear antiquated, putting at risk a business model that depends on its ability to command premium prices.

BMW is particularly vulnerable to Tesla’s inroads because it’s a stand-alone luxury-car maker, in contrast to Volkswagen’s Audi and Daimler’s Mercedes-Benz.

“The i8 is a brand shaper,” said Ian Robertson, head of sales and marketing for BMW. “Today, sustainability is another important element of premium cars, and it may very quickly become a must-have.”

While Tesla sells about one vehicle for every 60 sold by BMW, the Palo Alto, California, manufacturer led by Elon Musk has become a sought-after brand for trendy consumers because it offers clean motoring and a maverick image.

The $63,570 Model S can drive as far as 265 miles before needing to recharge, and Tesla operates fast-charging stations in North America and Europe that are free for its customers to enable long-distance driving.

“It represents the right direction, a paradigm change,” said Michael Willberg, chief executive officer of German headphones maker Ultrasone AG. He got a Tesla Model S in February after driving Mercedes and Audi cars for 20 years and has driven from the Munich area to Berlin, Cologne and Dresden. “Tesla is the car of our times.”

In a bid to counter that, the i8 can drive emission-free for 23 miles and offers flourishes such as distinctive wing doors and optional laser headlights. The rollout this week near BMW’s Munich headquarters caps a development effort that started about a year before Tesla’s first car – a discontinued roadster – hit the road in 2008.

After decades of relying on performance-oriented sedans and SUVs, the i8 marks BMW’s first purebred sports car since the M1, which was halted in 1981.

The 362-horsepower i8 accelerates to 60 miles per hour in 4.4 seconds, compared with 4.6 seconds for the Porsche 911 Carrera. Combining a three-cylinder gasoline engine with an electric motor that can propel the car for 37 kilometers emission-free, the i8 gets the equivalent of about 135 miles per gallon, compared with 51 mpg for the Prius.

Tesla is unfazed by the new competition.

“For buyers looking for an all-electric premium sedan that seats up to seven, there is a choice of one – the Model S,” said Tesla spokesman Simon Sproule. “For buyers still wanting to put gas in a tank, the choices have never been broader.”

The BMW sports car, which has already made a cameo alongside Tom Cruise in a “Mission: Impossible” movie, is part of a broader effort by BMW to polish its image as an innovator with the eco-friendly “i” sub-brand. The plug-in sports car is the second model after the i3 city car, introduced in 2013.

The compact all-electric i3 has an order book stretching for the next six months and is helping win over new customers, with 80 percent of the buyers fresh to the brand, Robertson said. BMW is committed to pushing the technology.

“Zero emissions is going to play a role in our industry,” Robertson said. “There is currently no other viable option” to making the car sustainable.

Aside from the ability to drive on electric power, both i models feature frames made with carbon fiber, which is about 50 percent lighter than steel, to reduce the cost of the batteries and improve performance. (Tesla’s Model S is built on an aluminum frame.)

IHS Automotive forecasts that BMW will sell 23,000 i models this year, trailing Tesla’s 31,200 sales of the Model S. BMW’s namesake brand in total is set to deliver 1.78 million cars in 2014.

Even with demand for the i3 and i8 modest, the company is committed.

“You don’t develop a brand like ‘BMW i’ if you don’t think about the road ahead,” Robertson said. “We spent a lot of money on this and are definitely thinking long term. There are going to be others in the BMW i lineup.”

Early response to the i8 shows it is doing what BMW hoped – turning heads. During recent testing in California, the car had enough star power to gain paparazzi-like attention from passers-by on Beverly Hills’ Rodeo Drive, where exotic cars are commonplace.

“People were jumping into the street with their smartphones to get a picture,” Carsten Breitfeld, project manager for the i8, said in an interview. “It’s not easy to get that kind of attention on Rodeo Drive.”