BMW AG, already struggling to root a slide in sedan sales, will soon have another trouble on its hands: Elon Musk.

The German automaker has been ceding ground in the U.S. luxury market this year to rivals Mercedes-Benz and Audi, hamstrung by plunging demand for its top-selling model, the 3 Series. That entry-level luxury sedan segment is about to be challenged further by the long-awaited Model 3 that Tesla Inc. began handing over to employees last week.

While Musk has touted the Model 3 as more of a mass-market electric vehicle, the cost of the $35,000 base model is similar to the 3 Series, the Mercedes C-Class or the Audi A3. Adding options like the autopilot driver-assistance system and an extended battery scope can stretch the cost to $59,500, positioning the sedan securely in the luxury-car segment.

Tesla is” bringing people who could render enter luxury into the market ,” said Jessica Caldwell, an analyst with car-shopping website Edmunds.” Especially persons living in urban areas and perhaps don’t drive just as much or take modes of public transport, this is a automobile for even those people to be swayed into the auto marketplace, where perhaps the C-Class wasn’t really speaking to them .”

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BMW’s 3 Series U.S. deliveries plummeted 40 percentage in July, make contributions to the brand’s 15 percent sales decline. Daimler AG’s Mercedes C-Class, which has significantly defied the trend of weak passenger-car marketings this year, succumbed to the demand stray in July, falling 22 percent. Total deliveries for Mercedes cars and light trucks slipped 9.2 percent.

Volkswagen AG’s Audi continued to gain on its larger luxury contenders last month. Deliveries rose 2.5 percent, bolstered by the Q7 sport utility vehicle and A5 sedan.

Toyota Motor Corp.’s Lexus, which has been the worst performer among the top four luxury brands this year, rebounded in July with a 3.6 percent gain. Marketings of its ES sedan jump-start 21 percent.