What
Tesla has clearly done is produce a viable electric vehicle that the
well heeled customer accepts as good enough. That positions the
company for the next decades in which the massive ongoing investment
in battery technology and self driving technology will converge to
meet performance needs, while operating outside the traditional
business model of the automobile industry.
This
company is completely ready for the oncoming automobile battery that
provides a range of several hundred miles. When that happens its
competitors will have to face accepting the complete reworking of
their whole supply chain. The hard fact is that an electric simply
has far less service demands. In most cases, the motors and
batteries will never fail at all and are easily replaced or repaired.
At most it will be all about regular brake jobs.
Right
now a viable battery could be delivered almost anytime as the work is
well advanced on several working protocols with even better ones in
the wings been explored. It is going to happen and when it does, the
market could absorb a billion such cars if the price is then
competitive or better.
What Everybody Got
Wrong About Tesla
Tesla reported its
first-ever profitable quarter last week, and its stock continues to
go bonkers.
May 15, 2013
robert wile
It's an incredible
feat.
Business Insider's
Henry Blodget summed it up thusly: "What Tesla has accomplished
over the past decade is extraordinary... So far, anyway, Tesla is a
great American success story, and everyone should be rooting for it."
Just a few weeks ago,
we were calling out CEO Elon Musk for misconstruing its pricing
scheme. And in February, we had concurred with the New York Times'
pessimistic take on electric cars.
Now we know better.
Deutsche Bank's Dan
Galves told us the trick to Tesla surmounting the critics was its
ability to turn an ostensibly startup product to look like all the
other guys' vehicles:
We think versus
comparable vehicles — the BMW 5 series, the Mercedes E
class...buying the Model S, you don't really have to compromise
versus those types of vehicles developed over decades. It's been very
impressive in terms of engineering this car, and making it something
that people are really demanding right now.
We're not the only
ones who are eating crow. Lots of people banked on Tesla failing.
The rips have come in
four basic flavors:
- The cars are more science experiment than automobile.
- Elon Musk is too quirky to create a mass-produced product.
- The company is overly reliant on subsidies.
- Teslas are too expensive.
Tesla has basically
beat back each.
Let's look at the idea
that Tesla couldn't design a car that felt like a car. The vanguard
of that charge came from Dan Neil, who while still with the LA
Times called the Model S "a glorified golf cart":
"The windows are
fixed in their frames," Neil wrote. "The power-steering
motor groans. The seating position and outward visibility make a
Lamborghini feel spacious. The car's signature design flourish -- a
17-inch, touch-screen control panel with haptic feedback in the
center console -- may not even make it to production, concedes Tesla
designer Franz von Holzhausen."
Tesla basically
responded by saying that as long as you get the technology right, the
style doesn't really matter. Musk leveled this exact charge at
rival Henrik Fisker:
...he is a designer or
stylist… he thinks the reason we don’t have electric cars is for
lack of styling. This is not the reason. It’s fundamentally a
technology problem. At the same time, you need to make it look good
and feel good, because otherwise you’re going to have an impaired
product. But just making something look like an electric car does not
make it an electric car.
Another issue
preventing many from seeing Tesla's potential was Musk himself, who's
proved to be a bit of an oddball over the years. At one point, for
instance, he went on a bizarre Twitter rant about Catherine the
Great's death. Also, he evidently loves the band Linkin Park.
"Musk, put
simply, is a little bit weird and always has been," author
Carl Hoffman wrote in Smithsonian a few years ago. "What appears
brash self-confidence is simply precocious intelligence and a
strangely literal mind mixed with a deep urge to change the world."
But for everyone who
saw awkward arrogance, there were those who recognized the hallmarks
of a genius. Here's Steve Milunovich, a tech analyst now
with UBS, comparing Musk to the most famous technologist of
the latter 20th century:
The auto industry
might change more in the next 10 years than the last 100. Electric
vehicles represent a new category that Tesla could lead given that
new entrants tend to win when disruptive technologies emerge. In our
view, CEO Elon Musk may be similar to Steve Jobs in being a
technology visionary also able to manage and create shareholder
value.
Many also believed
Tesla could not survive without public financing — Slate's
Matt Yglesias just wrote this the other day.
But Tesla never denied
how dependent they remain on subsidies for electric vehicles. And
they've pretty much received every loan or tax rebate that they said
they would — check out Tesla's exhaustive list here; even the
unlikeliest states have rebates.
Also, the video below
proves the state of California will be highly tolerant of Tesla speed
bumps:
Finally lots and lots of people believed Musk's cars simply wouldn't sell. This wasn't going to be unique to Tesla — the future of electric cars in general seemed dicey. It's just too easy to get gas, and the market would remain limited to, as we said in February, "tooling around their neighborhoods or cities — or, with uber-rich drivers, for impressing their friends with a gorgeous, unusual, and sexy rich person's toy."
But the Wall Street
Journal's Justin Lahart nicely reframes what the actual expectations
were on this — build a car to prove it works, sell it to high-end
buyers, and finally produce a model for the masses. The result:
"Tesla has
completed the first step, and looks likely to accomplish the second,"
said Lahart. "It now expects to sell 21,000 cars this
year, more than the 20,000 it has said it needs to be profitable."
The third step does
remain a hurdle.
Googling "Tesla"
and "too expensive" shoots out 209,000 responses. As
Reuters' Deepa Seetharaman notes, everyone's waiting to see if Tesla
willhave its Model X crossover next year.
And a third-generation
car that will cost between $30,000 and $35,000 won't be ready until
2017. "They have to continue to grow by orders of magnitude
before they become a real car company," Tom Gage, the former CEO
of AC Propulsion, told Seetharaman.
But the growth is
there.
In its earnings
report, Tesla said it notched record sales of $562 million, up 83%
from last quarter. It now expects U.S. demand to exceed 15,000
units for 2013, and global demand to surpass 30,000.
We are not suggesting
there won't be further bumps.
But it's clear Elon
Musk has the drive and resources to make Tesla part of the
establishment.
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