German car giants are on their way to get on Tesla
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Aug. 17, 2016
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Next month's Paris Auto Show will host the stage for Mercedes-Benz and Volkswagen to unveil the concept models of their new electric cars that are said to shake the market previously solely dominated by Tesla.

Mercedes (XETRA: Daimler [DAI]) is aiming for the market of luxury electric cars whereas Volkswagen (XETRA: Volkswagen [VOW3]) plans to produce a compact vehicle the size of a Golf hatchback that would be available for mass-market audience.

Mercedes has big plans for their new electric car. The company has been working on this project since 2014 and expect their new vehicle to be different from everything they have produced before. The car manufacturer has announced to put at least 4 vehicles on the market in the near future, including two sedans and two SUVs. The price of the new model will be comparable to that of Tesla's S model.

The concept model is expected to be the star of the upcoming Paris Auto Show. But is Mercedes trying to beat Tesla (NASDAQ: Tesla Motors [TSLA])?

“We’re in business to make money, and is our EV a Tesla killer? I don’t know, I haven’t seen it yet. But we wouldn’t be doing it unless we thought we could sell it," said David McCarthy, Mercedes-Benz Australia’s Senior Manager of Corporate Communications.

McCarthy referred to Daimler's CEO Dieter Zetsche saying that Tesla managed to popularize electric cars and make them "sexy", inviting many interested consumers to the market.

"It’ll be in a price bracket similar to Tesla model S, have a similar cruising range, but it’ll be a Mercedes, so I think Tesla probably have good reason to be concerned about it,” said McCarthy.

Will electric cars go mass market?

Volkswagen, in turn, is not aiming to produce a premium class competitor to Tesla's S model but rather to popularize mass market electric vehicles for the bigger audience. The company is planning to produce 5 different electric models that will have a range of approximately 400 kilometers, which is less than that of Tesla and Mercedes.

German car giants are on their way to get on Tesla
VW's Electric Budd-e concept model. Source: Volkswagen

Herbert Diess, member of VW's Management Board, said that they expect to market the new electric vehicles at the same price with the similarly-sized current diesel VW models. This promises to make the cars affordable for the mass market audience.

Interestingly, last month, the German government launched a grant that is intended to pay part of the price of an electric car, says Zeit. German citizens will receive 4,000 euro grant discount from the price of pure electric cars and 3,000 euros for those buying plug-in hybrids. The size of the grant should be enough for 300,000 to 400,000 cars. German government has planned to invest more than one billion euros to boost electric vehicles adoption in the country.

Handelsblatt reported that VW is considering to build an $11 billion battery-manufacturing facility in Germany in order not to rely on foreign battery supply. The plan for VW's $11 billion battery factory is way bigger than that of Tesla's Gigafactory in Nevada with an expected output of $5 billion.

This big move goes in line with VW's announcement to sell one million battery-electric vehicles by 2025.

Right now, Germany is not so big on adopting electric vehicles and is still not an easy market for Tesla. But it looks like both the government and the biggest car manufacturers are very serious about making electric cars part of Germans' everyday normality.

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