New SUVs From BMW, Mercedes Target Tesla

 

 

“Tesla's Model Y was a game-changer, blowing away fusty old manufacturers to become the bestselling vehicle globally. Now the top luxury brands are fighting back.

 

In recent days, BMW and Mercedes-Benz have revealed new electric sport-utility vehicles -- a category dominated by the Model Y -- that will test car buyers' appetite for expensive European brands.

 

The fruits of billions of dollars of investment, the SUVs will travel farther and charge faster than most of today's electric vehicles. They also will put smartphone-inspired technology at the heart of the vehicle, allowing drivers to connect to cutting-edge artificial intelligence on the go and manufacturers to send more software updates remotely.

 

Mercedes took the wraps off its electric GLC on Sunday, ahead of IAA Mobility, Europe's most important car show. Two days earlier, BMW Chief Executive Oliver Zipse had showed off the new iX3 at an event he called a "once-in-a-lifetime moment" for his team.

 

"When else do you get to reimagine a brand like BMW from the ground up?" Zipse asked the crowd.

 

Tesla developed much of its technology in-house, but the German companies are relying on partnerships with Silicon Valley to turn their vehicles into giant smartphones.

 

Chip designers Nvidia and Qualcomm are helping Mercedes and BMW, respectively, to achieve a higher level of autonomous driving. The so-called virtual assistant in the new Mercedes GLC can do everything from find nearby restaurants to open the windows, thanks to AI from Alphabet's Google and OpenAI's ChatGPT.

 

The Model Y upended the auto industry when deliveries started in 2020. It raced past the Toyota Corolla to become the world's top-selling nameplate in 2023.

 

To compete, legacy automakers rushed out rivals such as Ford's Mustang Mach-E and Volkswagen's ID.4. But early imitators typically failed to match the Model Y on range, cost or software smarts, leading to slow sales, particularly as EV mania faded in 2024.

 

Set to reach U.S. showrooms next year, the new iX3 and electric GLC are among the most-comprehensive efforts yet by old-school automakers to design around software.

 

Tesla is showing weakness, particularly in Europe, where its sales have fallen by roughly one-third this year, following CEO Elon Musk's embrace of right-wing politics and the retooling of its Berlin factory for an upgraded Model Y. The face-lift has yet to show signs of reigniting growth.

 

The German SUVs will be more expensive than the Model Y, which starts at roughly $60,000 for a long-range version. The BMW iX3 will go for roughly the equivalent of $80,000 in Germany; Mercedes hasn't yet announced a price.

 

Musk has lowered prices in recent years to hit aggressive sales targets. But the companies still compete for more-affluent, tech-forward consumers. In the U.S., BMW is already attracting the most "Tesla defectors," the company told investors in July.

 

The new iX3 and electric GLC will run for 497 and 457 miles on a charge, respectively, based on European testing. That compares with 387 miles for the long-range Model Y, upgraded earlier this year. The German models' higher-voltage powertrains, given the right infrastructure, should allow faster charging than the Tesla SUV.

 

The digital technology that makes them "smart" will gradually be rolled out to the rest of the companies' products.

 

A recent "digital automaker index" by consulting firm Gartner put Mercedes and BMW in 13th and 14th, respectively. The latest EVs should improve that, said Pedro Pacheco, the report's author. The index tracks the digital capabilities of cars on the road, not those in development.

 

Tesla topped the list.

 

The iX3 debuts a family of vehicles that BMW calls its Neue Klasse, or new class, echoing a previous Neue Klasse that saved BMW from near-bankruptcy in the 1960s. Zipse has described the project as the biggest single investment in company history.

 

A similar project has been under way at Mercedes. Together with a small sedan launched in May, the GLC SUV marks a fresh start for Mercedes EVs after a series of flops under the "EQ" badge.

 

Volkswagen Group, which owns Porsche and Audi, is lagging behind Mercedes and BMW. Last year it tried to accelerate by forming a joint venture with U.S. EV maker Rivian, following a similar deal with XPeng in China.

 

In China, the world's largest car market and a crucial source of profit for German automakers, the new iX3 and GLC will feature digital assistants powered by local tech champions Alibaba and ByteDance, respectively. German brands have lost market share to technologically sophisticated Chinese EV makers in recent years, prompting them to adapt to local tastes.

 

"They grew up faster than everyone thought," BMW's Zipse said in an interview.

 

Increasingly, Chinese makers are bringing their high-tech and low prices to Europe, too.

 

"Have I seen anything in the Neue Klasse or the new Mercedes models that will make the Chinese scared? No," said Steve Fowler, an industry consultant and car reviewer.

 

The German players remain more cautious on vehicle autonomy than Tesla or their tech-forward Chinese competitors. Zipse said BMW would "rather have the impression that we're lagging something and not one casualty."

 

When it starts shipping to the U.S., the new iX3 will drive itself under supervision on highways, but automated urban driving will only be rolled out gradually.

 

"I have my doubts about whether German brands can regain the advantage they had in the diesel and gasoline era," said veteran analyst Jurgen Pieper. "It was a phenomenal position they had, and I don't see it coming back."” [1]

 

“Considering autonomous driving, Zipse said BMW would "rather have the impression that we're lagging something and not one casualty."” Zipse will have only one casualty soon – dead BMW. Just look at the Chinese, Tesla and Waymo. Nobody will buy your electric horse carriage, Mr. Zipse.

 

1. New SUVs From BMW, Mercedes Target Tesla. Wilmot, Stephen.  Wall Street Journal, Eastern edition; New York, N.Y.. 09 Sep 2025: B1.