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BMW Suffers Big Setback Against Tesla in California

Stocks in this article: TSLA GM F TM



This "range extender" gas engine increases the range of the car substantially.

The idea behind this new class of car was that you could always feel safe in driving down the battery level to zero and not worry about getting stuck. On the other hand, it was still relatively inconvenient to refuel the tiny tank (2.4 gallon), so you would be driving on electric power the vast majority of the time anyway, perhaps 99% for many people.

The idea was brilliant. It would greatly enhance the attractiveness of driving an electric car. BMW essentially co-developed this law with California's bureaucrats in a decision formalized two years ago, in January 2012.

This new law would then enable BMW to compete effectively against Tesla, because BMW could sell the i3 with range-extender as eligible for the carpool lane. Plus the car would have long range (around 180 miles) with the ability to refuel in one minute for another 90 miles of range. In addition, the BMW i3 would be eligible for a $2,500 tax rebate in California, on top of the Federal $7,500 tax credit.

In the last week of 2013, BMW started taking orders for the i3. For the relevant version of the i3 -- the one with the range extender (or REx in industry parlance) -- the price would begin around $45,000 and top at $56,000 for a fully loaded version. In other words, around $20,000 to $30,000 less than the starting prices for Tesla's two main models.

The first California delivery of the BMW i3 would take place in May 2014. It would be one of Tesla's first major competitors, aside from the Cadillac ELR, which just like its sister car the Chevrolet Volt would only be available for the green sticker anyway.

Those in California who are placing orders for the BMW i3 with the range-extender functionality -- and they are estimated to be the majority -- were of course expecting to get the white sticker. That's the key reason for getting the car, in the eyes of many consumers. It would have been the only car that you could refuel with gasoline and still be eligible for the white sticker.

Those BMW customers are now going to get hit with a double-whammy. First, the i3 with range-extender won't be eligible for the California white sticker, period. Second, by the time you get your i3 with range-extender in California, the 40,000 green stickers may have already run out, unless you are both lucky with the timing of the 40,000 quota and among the very first people to take delivery.

This is an absolute catastrophe for some BMW i3 buyers in California. It's like having paid for a five-star hotel suite, but when you show up at the hotel, first you get downgraded to a bunk-bed in the basement, and then you get downgraded from there to the trash chute, all in two swift steps.

Ouch.

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