Audi Plans Electric Crossover for U.S. to Challenge Tesla
Comment of the Day

December 03 2014

Commentary by Eoin Treacy

Audi Plans Electric Crossover for U.S. to Challenge Tesla

This article by Christoph Rauwald for Bloomberg may be of interest to subscribers. Here is a section: 

Rauwald for Bloomberg may be of interest to subscribers. Here is a section: 
The new model will mark Audi’s first mainstream all- electric vehicle and is part of a push to roll out greener cars.

?Next year, Audi will introduce a battery-powered variant of the $115,900 R8 sports car, which will follow the start of deliveries of the plug-in hybrid A3 E-Tron hatchback this year.

“Our engineers are working” on an electric car that will meet U.S. regulations for a zero-emission vehicle, Chief Executive Officer Rupert Stadler said to Bloomberg at a meeting in Berlin. “It’s probably going to be a crossover, but development work is still ongoing.”

Tesla has emerged as a viable competitor to German auto manufacturers in the luxury-car space. The electric-vehicle maker, led by billionaire Elon Musk, plans to start deliveries of the Model X sport-utility vehicle in 2015. The brand had the top score in this year’s Consumer Reports owner-satisfaction survey. Audi ranked third after Porsche, while Mercedes-Benz was fourth.

Audi, the world’s second-largest maker of luxury vehicles, expects to sell more than 1.7 million cars this year for the first time. The Volkswagen AG unit aims to surpass No. 1 BMW in sales by the end of the decade and expanding in the U.S. is a key part of that.

Eoin Treacy's view

As the self-professed first US car start-up in almost a century Tesla has a lot to be proud of. However such has been the success of its all-electric luxury sedan that it is attracting copycats which will ultimately represent competition. The success of Tesla’s gigafactory in producing cheaper battery packs will likely be integral to its success in competing with well capitalised rivals.  

Tesla trades at an aggressive multiple so sales growth will need to continue to come in at least on target if investors are to remain as enthusiastic about its upside potential as they have been. The problem with building a massive factory, albeit in conjunction with Panasonic, is that it is expensive. The share has lost momentum somewhat over the last few months and is now testing the region of the 200-day MA. It will need to find support in this area if the medium-term uptrend is to remain consistent. 

Audi isn’t particularly liquid but the abrupt rally from the October lows broke a yearlong progression of lower rally highs and a sustained move below the 200-day MA would now be required to question medium-term scope for additional higher to lateral ranging. 

 

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