Tesla arguably makes the best electric cars on the planet right now. They're reliable, loaded with technology, have excellent performance and safety ratings and are downright sexy.
Mercedes has some positives, too. It makes some of the highest-quality production cars on earth -- "the best or nothing" -- and has a strong brand, sales channel and production facilities. It's also not hurting for money.
So how does that tie into Mercedes' new plans for its EQ S all-electric vehicle?
Because the company is aiming to have 10 all-electric models by 2022, just four years from now. Audi, BMW, General Motors Co. (GM - Get Report) and Ford Motors Co. (F - Get Report) are all working to catch Tesla when it comes to electric vehicles, too.
While Tesla may lead in innovation, it lacks when it comes to production and access to capital compared to the "big dogs" in the auto industry. In fact, Tesla has struggled mightily in getting its Model 3 production running smoothly.
Just this week we've seen the automaker go from a multi-day production halt to an internal email saying the goal is no longer 5,000 Model 3 units per week, but 6,000 units per week by the end of the second quarter.
Tesla CEO Elon Musk acknowledged that the automaker relied too heavily on automation, adding that humans are "underrated."
Tesla vs. the Competition
There are a million worries about Tesla, mostly on the financial side. There's obvious demand for its vehicles, ranging from the high-end Model S to the entry level Model 3.
Will competition change that, though?
Mercedes is aiming to, as the EQ S could be here in 2020. That still gives Tesla some time to crank out its current fleet of vehicles and possibly introduce the Model Y as well.
Cost would be one factor, though. Considering that a standard S-Class already starts at $89,000, just how much will the EQ S ring in at? I'd imagine quite a bit more, considering that the C-Class starts at $40,250 and jumps up to $47,900 when selecting the hybrid option.
That would more than likely make it more expensive than Tesla's Model S, which would be its direct competition. Mercedes' EQ C, its electric SUV, is expected to go on sale in late-2019. That would compete directly with Tesla's Model X.
So in effect, Tesla could be going head-to-head with Mercedes in just a few short years. This comes back to the pro-con debate from earlier.
Tesla may in fact beat Mercedes in style, performance and believe it or not, price when it comes solely to Mercedes' first two electric vehicle offerings. However, Mercedes is unlikely to encounter the production issues plaguing the Model 3 or the financial pressures weighing on Tesla's balance sheet.
BMW's efforts with the i8 and i3 haven't seemed to put a dent in demand for Tesla, despite both being available for purchase. Can Tesla's high-end offerings hold off Mercedes, BMW and Audi, while its entry level vehicles hold off GM, Ford, Nissan, Toyota Motors (TM - Get Report) and others?
That's the big question. But as adoption of electric vehicles continues to grow, Tesla seems primed to grow with it. That's not to say that the others won't too, but only that Tesla is unlikely to be washed away from its competitors. Of course, this trend comes as no surprise really, as both the Mercedes Benz US CEO and the CEO of Bentley told me that demand for electric and hybrid cars will continue to rise in the coming years.
Tesla also has a prime opportunity to take advantage of the strong electric-vehicle demand in China now that the country is lifting its joint venture requirements that other automakers have had to play by for years.
And although competition is growing, so is the addressable market. Given that Mercedes, Audi and others are several years away from having multiple electric vehicles in the market, Tesla still has time to figure out its production issues and get another model or two launched.
Tesla might have issues, but they are Tesla-based problems. For now, competition isn't one of them and in a way, increased competition can actually help Tesla if consumer awareness grows with it.
Plus, Tesla has the Supercharger network, another advantage over its foes.