BMW launches i8 plug-in hybrid as Tesla shakes up green supercar segment

MUNICH (Bloomberg) -- BMW has begun rolling out the plug-in i8 as rival Tesla Motors Inc. shakes up the market for luxury cars with alternative powertrains.

BMW started deliveries on Thursday of the 126,000 euro ($135,700) sports car to show it can do more than make conventionally powered sedans and SUVs.

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

BMW's most expensive model combines an electric motor and a lightweight carbon-fiber frame and is more fuel efficient than the Toyota Prius and can accelerate faster than a Porsche 911.

But it will face stiff competition from Tesla’s model S which starts from 65,740 euros in Germany.

"Germany's premium automakers feel Tesla's rise more keenly because they're expected to be the biggest innovators," said Juergen Pieper, a Frankfurt-based 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.

Tesla is a 'car of our times'

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

The Model S can drive as far as 426kms (265 miles) before needing to recharge, and Tesla operates fast-charging stations in North America and Europe that are free for its customers to facilitate long-distance driving.

"It represents the right direction, a paradigm change," said Michael Willberg, CEO of German headphones maker Ultrasone. 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."

M1 successor

In a bid to counter that, the i8 can drive emission-free for 37kms and offers flourishes like distinctive wing doors and is the first production car to offer laser headlights as an option.

The rollout of the first i8s at a ceremony 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 pure-bred sports car since the M1, which was halted in 1981.

The 362-hp i8 accelerates to 100 kilometers (62 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, the i8 gets the equivalent of about roughly 2.1 liters/100km (112 mpg U.S. /135 mpg UK).

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."

Tom Cruise

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 "i" subbrand. The plug-in sports car is the second model after introducing the i3 compact car in 2013.

The hatchback 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," said Robertson. "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.

Road ahead

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, up from 1.66 million in 2013.

Even with demand for the i3 and i8 modest, the company is committed to the marque. "You don't develop a brand like 'BMW i' if you don't think about the road ahead," said Robertson. "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 that it is doing what BMW hoped for: that is, turning heads. During recent testing in California, the car had enough star power to gain paparazzi-like attention from passersby 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."