BMW joins Cadillac wooing Silicon Valley to combat Tesla

BMW has two stand-alone showrooms selling i3s and i8s (pictured) -- one in Southern California and the other in Silicon Valley.
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SAN FRANCISCO (Bloomberg) -- BMW scored a coup this month when former Apple Inc. executive Tony Fadell became one of the first U.S. owners of the new $136,000 i8 plug-in sports car.

Fadell, who worked with Steve Jobs to develop the iPod and later co-founded smart-thermostat maker Nest Labs Inc., lends some much needed cred to Bayerische Motoren Werke AG in Silicon Valley, where Tesla Motors Inc.’s Model S is the preferred luxury vehicle for many tech elites.

Apple co-founder Steve Wozniak often tweets about his visits to Tesla charging stations while Google Inc. co-founder Sergey Brin grabbed headlines when his staff turned his Model S pink for an April’s Fools prank last year. The Model S was the best-selling vehicle in 2013 in the wealthy Bay Area towns of Atherton and Los Altos Hills, according to Edmunds.com, which tracks auto sales.

Car companies covet Californians, who are seen as trendsetters for the rest of the country. All the better if they can win adherents among executives at companies striving to stay at the cutting edge of technology.

“It becomes almost your second business card to drive a Model S because it demonstrates you’re at the leading edge of technology sophistication,” said Thilo Koslowski, an auto- industry analyst for Gartner Inc. “Silicon Valley is just the forerunner for a lot of this stuff because eventually it will penetrate everywhere.”

Not to get left behind by Tesla, brands such as BMW and Cadillac are putting electric-drive models into car-sharing programs and showing them off on tech campuses. They’re also sprucing up dealerships to match modernized lineups.

‘Next Generation’

While Tesla sales in its home Bay Area -- the Palo Alto-based automaker has its only assembly plant in nearby Fremont -- have slowed this year as inventory has been directed to Asia and Europe, it was the fastest-growing auto brand in California last year when it overtook Cadillac in San Francisco, according to Edmunds.com, which tracks auto sales around the country.

“New York and LA are the biggest luxury markets, but they are relatively conservative luxury markets. But San Francisco may be the next generation of luxury buyers,” Uwe Ellinghaus, head of Cadillac marketing for General Motors Co., said in an interview this month. “They are far more interested in progressive brand statements then necessarily the quickest car on earth.”

Oakland resident Patrick Wang, 29, is paying attention to the battle for his business. A vice president at a digital marketing company that started up seven years ago, he picked a Cadillac ELR over the Model S earlier this year, he said, in part because of its uniqueness.

“I probably see a Tesla every day around here,” Wang said. “Part of buying into a luxury brand is the distinction -- in both style and whatever.”

The ELR may have been too different. GM has sold fewer than 600 nationwide through July, according to researcher Autodata Corp. Tesla sold 939 vehicles in the Bay Area through the first half, according to Edmunds.

Friends and strangers “don’t identify it as being EV or future or that sort of stuff,” Wang said. “They just think it looks cool.”

To combat Tesla’s emergence, Cadillac and BMW are among automakers playing a quiet ground game in Tesla’s own backyard. The California automaker declined to comment on the matter.

Campus visits

Cadillac has been staging ride-and-drives around Silicon Valley since April at tech campuses including Google’s and at Walt Disney Co.’s Pixar, getting as many geeks as possible behind the wheel of its ELR electric-drive coupe.

It’s also pushing dealers to upgrade their showrooms. Just down the road from Tesla’s factory, the Dosanjh family invested $15 million on a Cadillac dealership that opened last year. The store has a towering 40-foot-wide solar array that automatically adjusts with a soft whirring sound to best catch the sun’s rays for charging electric cars parked below.

“As far as we’re concerned, this is where we’re starting the battle against Tesla -- in Fremont,” Inder Dosanjh, the dealership’s owner, said in an interview earlier this year. He promised a grass-roots effort aimed at building awareness for the Cadillac brand among local tech company executives and community leaders.

Eight Cadillac stores in the San Francisco area have undergone or are undergoing upgrades, Adam Ritter, district sales manager, said in an interview. The push comes as the brand has been building awareness with the introduction of new models including the redesigned Escalade SUV and the ATS coupe that reached showrooms this quarter.

Those new models and improvements to dealerships have helped Cadillac begin to overcome historical challenges.

“A lot of the Cadillac stores were located in the wrong part of the town,” Dosanjh said. “You’re not going to buy an $80,000 Escalade” from “an old store.”

BMW building

While GM is fighting just to get people in Cadillac showrooms, BMW is already the top-selling luxury brand in the area, according to Edmunds. Its challenge is working to win over a future generation so it can remain on top.

BMW, which began an electric-car share program in San Francisco in 2012, more than doubled the number of vehicles in May. The program uses BMW’s ActiveE cars, which are essentially electric versions of the 1-series, and it plans to replace them with the new i3 electric car.

“We’ve put thousands and thousands of people behind the wheel of an electric BMW,” Richard Steinberg, chief executive of the program, called DriveNow USA, said in an interview. “It gets people behind the wheel of a BMW-developed and -manufactured vehicle that they probably wouldn’t ordinarily have a chance to sample.”

Long play

While the program is targeted at young people who aren’t interested in owning a car in the city, where they may ride to work in corporate shuttles, such as at Google, the aim is to seed an interest in BMW for when they grow older, move to the suburbs and begin shopping for a luxury car, Steinberg said.

“They’re influencers and trendsetters and you’ll see what’s happening in San Francisco spread around the country with time,” he said.

At the other end of the market, the more expensive i8 hybrid, BMW’s first new sports-car model in more than three decades, represents a halo push to move into cars that not only use a new kind of powertrain but also rely on other innovations, including carbon fiber and sustainable production. BMW has two stand-alone showrooms selling i3s and i8s, one in Southern California and the other in Silicon Valley.

Premium handoff

The success of the i8, which was featured prominently in the Tom Cruise movie “Mission Impossible: Ghost Protocol,” depends on more than just San Francisco, of course.

But it’s no coincidence that the first U.S. customers received their keys to the i8 at an event tied to the annual Pebble Beach Concours d’Elegance or that Fadell is among them. Eight customers arrived at a private villa in the cloistered resort community to be greeted by senior executives who wished them well on their introductory drive.

After 1 1/2 hours of winding through the roads south of San Francisco, they returned for a dinner prepared by fellow i8 driver Thomas Keller, the famed California chef with restaurants in Napa Valley and Manhattan, that included caviar and champagne. At the end of the night, Barry Klarberg, who represents celebrities including Justin Timberlake, had a large smile on his face as he talked about his new i8’s sports-car feel, futuristic styling and Silicon Valley influence.

“This is not your typical New York car,” said Klarberg, who live in Greenwich, Conn. “It will have an amazing effect on the hybrid models out there.”

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