Maybe Elon Musk is not as smart as he thinks he is

[mnewsham]

Love the glass roof on the model X that would be great for 2 ppl to car camp in.

 

[Argo]

They are selling pretty well here (Seattle and suburbs). I regularly see 2-3 on my drive to and from work. And their stores are pretty packed.

Things are looking good for them IMO, they just need to execute now.

 

[Dari]

You do realize that Tesla has partnerships with Toyota and Mercedes, right? They build electric motors, controllers, and batteries for both companies.

And you have to realize, the big manufacturers don't really have an incentive to make a competitor to the Model S when gasoline-powered vehicles are their bread and butter. The Ford Focus Electric flopped, the Volt doesn't sell without thousands in incentives on the hood (in addition to the $7,500 tax credit) and Nissan dropped nearly $10k off the MSRP of the Leaf.

Tesla "gets it", hence why Toyota and Mercedes are partnering with them.

As for dealerships, why the hell would they partner with dealerships? Compared to your average car, the number of things mechanically that could go wrong compared to a gas car are minuscule. No oil changes, no tranny flushes, no brake jobs, no fuel filters -- do you realize that there are few moving parts in an EV motor?

This is exactly my point. They get help from the majors. Also, the batteries come from Panasonic. What's to stop Toyota or Mercedes or someone else from copying their tech now that Tesla has proven it works? Also, why battle it out with the dealerships? It does not make any sense to me. Finally, Musk is not stupid. But, sometimes, success breeds a lot of confidence. The fight with the dealerships just for the sake of doing things differently isn't worth it, IMHO.

 

[ChAoTiCpInOy]

This is exactly my point. They get help from the majors. Also, the batteries come from Panasonic. What's to stop Toyota or Mercedes or someone else from copying their tech now that Tesla has proven it works? Also, why battle it out with the dealerships? It does not make any sense to me. Finally, Musk is not stupid. But, sometimes, success breeds a lot of confidence. The fight with the dealerships just for the sake of doing things differently isn't worth it, IMHO.

Tesla is a battery company that uses those batteries to create cars. Those batteries that come from Panasonic? They were created in collaboration with Tesla, so I'm assuming either Tesla owns the patents on those batteries or both Panasonic and Tesla do and Panasonic wouldn't be able to take those batteries and sell them to other companies.

Tesla also provides the batteries and transmission for the Toyota Rav-4 EV.

 

[desura]

Someone works for (or maybe even owns) a car dealership.

Hey, more power to Elon is all I can say. Those laws are terrible and need to go. It is, in a Tea Party sense, an unnecessary government regulation which benefits a politically connected minority.

Anyways, car dealerships would be fine without those laws. Just look at Apple.

You can buy your ipod direct from Apple. You would get the color you want and a little engraving too.

But it's actually cheaper to get the ipod from a 3rd party reseller most of the time.

So basically, dealers would offer lower prices on cars, while those who really really care about car color can go direct to the manufacturers. Win-win, right?

 

[NFS4]

 

[Kaido]

If I was a betting man, I'd short Tesla's stock. The company's the darling of Wall Street. One reason is the company's leadership. Investors love confident men who deliver. Tesla has been doing that in spades recently. Musk and his company also have a devoted following that like to go to Tesla events, go on forums and write testimonials about the car and they're willing to defend it anytime anywhere. This cult following is not unlike Apple. You can even see it on the company's website, which reeks of simplicity. However, all is not well at Tesla. There's a dealership a couple of blocks from where I live. The place is not big and, when I visited last month, it was empty and there were only two people on duty, sitting behind Apple computers. While the company's flagship car, the Model S, is a technological wonder, its creature comforts leave you wanting. The premium leather in the Model S pales in comparison to the Nappa leather in my X5. The one in the Tesla is much thinner. Also, the car felt cheap inside. The people at the dealership were quite knowledgable but they were not as excited about their product as I expected them to be. I left disappointed.

However, the aforementioned problems pale in comparison to Tesla's major problem: it's insistence that it run its own shops. This may create a larger margin (Tesla does not even offer discounts) and better customer service (maybe not, but at least they'd have more control over the narrative) but it leaves a lot of money on the table. Dealerships may not have the best reputations but what they do have is proximity to customers. Given the inherent limitation in Tesla vehicles, no one wants to drive hundreds of miles just to have the pleasure of being in a Tesla-owned dealership. What people do want is convenience and dealerships provide that. Third party dealerships also take part of the risk of expansion. This is great for a startup that cannot spend the capital in unfamiliar territories and it leaves headquarters to concentrate on how to make a great product. Finally, dealerships allow more people to test drive the vehicles. This is not possible when there are only like 3-4 Tesla-owned stores in New York state. The insistence on having your own stores limits Tesla's reach (there's an EV joke in there). In spite of what Elon Musk may think, third party dealerships are partners he should be embracing instead of demonizing.

Without him even realizing it, Tesla is letting himself be the guinea pig of the major auto manufacturers. EV have been around for over 100 years but, finally, someone has found a way to sell them. Enthusiasts aside, do you really think anyone will care whether this product is sold by GM or Toyota? No. Fact is, all the OEMs have to do now is just make a serious competitor to Tesla's flagship and the company may not be able to survive the competition. The distracting fight with dealerships can also only help the auto OEMs. If Tesla win, they can do the same. If Tesla loses, then it's business as usual. Either way, once the auto OEMs start taking the company seriously, Tesla will be done. They have the engineering and experience that Tesla simply lacks. Finally, like Apple, Tesla may have its own stores. But Musk needs to remember that Apple products can be purchased everywhere else. Tesla would be wise to rethink it's approach towards dealerships...

Funny, I've heard that the interior isn't as nice as it should be for the price. I think the exterior looks nice, but not as nice as it could look - it just looks like a wider Ford Focus to me. Although all cars pretty much look the same these days:

http://imgur.com/a/CyrK1

The only downside I see to not having dealerships is that you can't take it on a test drive. But if you want an all-electric sports car, it's not like you have a lot of options to choose from anyway Personally, I like the idea of ordering directly from the manufacturer with no middleman games. I hate going to dealerships. I don't think I've ever really had a good experience at one. They're in the business to make money and they will tack on fees, charges, and upsell you wherever they can. Versus Tesla - hop on their website, choose what options you want, wait 2 months, boom, you have a car. Reminds me of the Saturn days - I could go in, pick out a car, and pay the advertised price with no negotiating. I'd still prefer for Amazon to deliver it to my doorstep, but that may be a ways away

I also think the Tesla X is pretty cool - Delorean doors + AWD sounds good to me! Musk said there will also be a third car that will be in the $30-$40k range within 5 years, so that's pretty cool, especially if they have 500-mile battery packs out by then. The Model S seems to be selling pretty well (2-month wait and there are already 2 in towns near me). I'm interested to see how the X sells, since at least the S looks like a normal car - the X is a pretty weird design and if it's going to be the rich soccer mom EV, well, I don't know if the design will fly with women. My wife had mixed feelings about the design (I'm a huge Delorean fan, so she's already used to weird cars haha).

It will also be interesting to see how the service centers work out. The Model S has a $600/yr annual service fee, and the nearest Tesla shop is an hour away from me. I'm curious how that would work out if there isn't a service center in your state (does it need to be a dedicated Tesla shop?) or if the shop is out of your Tesla's range.

I think a lot of the big manufacturers will jump onboard once Tesla's third car starts selling well. I think the lack of infrastructure is a big part of what's stopping them from producing more EV's - they can probably foresee the average non-EV-enthusiast consumer running out of juice on the side of the road and having to get towed, whereas the current early adopters are fairly conscientious because they understand what owning an EV right now entails. Although I kind of wonder if that instead of an oil embargo in the Middle East, if we'll see a battery embargo from China & Bolivia in the future

I like it. I hope Tesla can continue selling direct.

 

[zinfamous]

Their product's scarcity and thus exclusiveness can work for them - not against them - if the product lives up to the hype. Part of the appeal of a Mercedes is that it is a Mercedes, not a Ford or GM car, even if some Ford or GM cars come close or are equal to a Mercedes product.

Tesla ups the ante on that brand label exclusivity x 10. Their cars are a more rare sight than the established luxury brands. In an age where (at least pretending to be) environmentally aware/friendly is a social boon, their product excels. And they're a discussion-worthy subject ("Where do you charge up? How fast is it? Have you met Musk?") whereas a BMW is just another BMW. Those are all powerful advantages.

It all falls apart though if the product isn't truly luxurious. I've never touched a Tesla car so I've no idea, but I've read good things. I hope for their sake most people think they're worth the money and risk.

They are all over the place here. Go figure. I see about 1 or 2 Tesla S's each day, just driving anywhere in town.

It is the new Mac Air or iPad for this part of the country. Audi? Porsche? Mercedes? Pshhh, get that shit outta here. You ain't nothing in this part of the country unless you're driving around in a Tesla S or a Roadster (yes, those aren't all that uncommon, either).

 

[BurnItDwn]

He is very driven and very ambitious. I do think he is quite intelligent, however, I do not think intelligence is the primary "statistic" for him. I think he takes lots of big risks with huge potential upsides, and has had more good luck than bad luck over the years. Though I know with tesla he has had some VERY rough times. I do hope Tesla manages to turn a decent profit.

 

[GagHalfrunt]

As for dealerships, why the hell would they partner with dealerships? Compared to your average car, the number of things mechanically that could go wrong compared to a gas car are minuscule. No oil changes, no tranny flushes, no brake jobs, no fuel filters -- do you realize that there are few moving parts in an EV motor?

Unless you stop your Tesla by intentionally ramming things you'll need brake jobs.

 

[1prophet]

The distracting fight with dealerships can also only help the auto OEMs. If Tesla win, they can do the same. If Tesla loses, then it's business as usual. Either way, once the auto OEMs start taking the company seriously, Tesla will be done. They have the engineering and experience that Tesla simply lacks. Finally, like Apple, Tesla may have its own stores. But Musk needs to remember that Apple products can be purchased everywhere else. Tesla would be wise to rethink it's approach towards dealerships...

Sorry but no, the reason the big automotive manufacturers can't compete with Tesla is the entrenched management and their mentality not their engineering, it was management that killed the EV1 not the engineers or the consumer.


Dealerships are one of the greatest subsides to the auto manufacturers, because they pay for all the operating costs, employees, infrastructure, and buy the vehicles which allows the auto manufacturer to write them off its books as sold even though it sits at the dealers lot.

The last thing a company a company like GM for example would want is factory owned stores making the mechanics, sales people, etc. GM unionized employees with the liability and associated costs that go with them.

 

[sunzt]

Sorry but no, the reason the big automotive manufacturers can't compete with Tesla is the entrenched management and their mentality not their engineering, it was management that killed the EV1 not the engineers or the consumer.


Dealerships are one of the greatest subsides to the auto manufacturers, because they pay for all the operating costs, employees, infrastructure, and buy the vehicles which allows the auto manufacturer to write them off its books as sold even though it sits at the dealers lot.

The last thing a company a company like GM for example would want is factory owned stores making the mechanics, sales people, etc. GM unionized employees with the liability and associated costs that go with them.

Eventually, the end game will force Tesla to use dealerships when volumes get high enough.

 

[zinfamous]

He is very driven and very ambitious. I do think he is quite intelligent, however, I do not think intelligence is the primary "statistic" for him. I think he takes lots of big risks with huge potential upsides, and has had more good luck than bad luck over the years. Though I know with tesla he has had some VERY rough times. I do hope Tesla manages to turn a decent profit.

In more ways than you can imagine.

http://www.businessinsider.com/tesla-executives-die-in-palo-alto-plane-crash-2010-2

Not sure how many people remember this--it was big news here when it happened, and it was during one of Tesla's more fragile moments.

 

[Dari]

Sorry but no, the reason the big automotive manufacturers can't compete with Tesla is the entrenched management and their mentality not their engineering, it was management that killed the EV1 not the engineers or the consumer.


Dealerships are one of the greatest subsides to the auto manufacturers, because they pay for all the operating costs, employees, infrastructure, and buy the vehicles which allows the auto manufacturer to write them off its books as sold even though it sits at the dealers lot.

The last thing a company a company like GM for example would want is factory owned stores making the mechanics, sales people, etc. GM unionized employees with the liability and associated costs that go with them.

Or they could do both. Either way, the large OEMs are just waiting to see what the outcome for Tesla is regarding this. They can wait it out. As far as they're concerned Tesla is not much of a threat.

Truth be told, I was really interested in a Model S until I made that trip to 25th Street and 10th Avenue. But after being inside the car I knew it was not up to par with BMW or Audi or even Acura. But, man, do you get a lot of space for your junk. Space in the back. Space in the front...

 

[yottabit]

The OP's entire argument would only be worth consideration if for some reason Tesla had a shortage of sales. IIRC that is not the case at all and I believe they are still running at full production capacity.

Once they grow their production capacity or lose demand I would expect to see their sales efforts pick up (more dealerships, more active sales folk as more pressure comes down on them), but what is the need for that if they are already getting plenty of orders? To create a sales backlog and have a lot of pissed off customers?

As a counter-argument to the OP, this (the Tesla sales model) could upset the whole car selling business model and if it actually succeeded did we could all get more value for our dollar by taking 3rd party dealerships out of the equation. Lots of eyes are on this. I'm sure the other major auto manufacturers would probably love to have some of these laws changed.

I also think it's funny so many people are making the "any other car company could do what Tesla does" argument so much. A few years ago before this reboot of the American car companies I doubt anyone would have made that argument with all the shoddy engineering and parts bin cars that came out of the US.

I have a lot of faith in Tesla mostly because they actually managed to START a NEW car company, which is insane in itself, but also put out one of the best cars around, and it happens to be a groundbreaking electric. Each one of those things is a huge accomplishment. IMO they have done the hard part and now they just need to keep putting out good quality product, and grow their production capability so that when they release their lower cost model they will be able to meet the demand.

 

[Dari]

The OP's entire argument would only be worth consideration if for some reason Tesla had a shortage of sales. IIRC that is not the case at all and I believe they are still running at full production capacity.

Once they grow their production capacity or lose demand I would expect to see their sales efforts pick up (more dealerships, more active sales folk as more pressure comes down on them), but what is the need for that if they are already getting plenty of orders? To create a sales backlog and have a lot of pissed off customers?

As a counter-argument to the OP, this (the Tesla sales model) could upset the whole car selling business model and if it actually succeeded did we could all get more value for our dollar by taking 3rd party dealerships out of the equation. Lots of eyes are on this. I'm sure the other major auto manufacturers would probably love to have some of these laws changed.

I also think it's funny so many people are making the "any other car company could do what Tesla does" argument so much. A few years ago before this reboot of the American car companies I doubt anyone would have made that argument with all the shoddy engineering and parts bin cars that came out of the US.

I have a lot of faith in Tesla mostly because they actually managed to START a NEW car company, which is insane in itself, but also put out one of the best cars around, and it happens to be a groundbreaking electric. Each one of those things is a huge accomplishment. IMO they have done the hard part and now they just need to keep putting out good quality product, and grow their production capability so that when they release their lower cost model they will be able to meet the demand.

You missed my point entirely. This endeavor is a long term engagement and their philosophy is what I am arguing against. If they win, so do the OEMs. If they lose, it's business as usual for the OEMs. Also, other OEMs will not sit around forever. Should they get serious, Tesla will have a real fight on its hands.

 

[yottabit]

You missed my point entirely. This endeavor is a long term engagement and their philosophy is what I am arguing against. If they win, so do the OEMs. If they lose, it's business as usual for the OEMs. Also, other OEMs will not sit around forever. Should they get serious, Tesla will have a real fight on its hands.

I see what you are saying, but Tesla will have the head start and they are already establishing a strong brand presence. I think it's very likely the mainstream automakers will come out with a better offering for a cheap electric- but I don't think that's the market Tesla wants go after and I think Tesla will continue to be better at making luxury electrics. It's a popular theory floating around the internet that the big auto companies will step in and "crush" Tesla, but how exactly will they crush them? I've yet to see anyone explain that part of it. In order to crush them they need to beat them severely in one or more areas. Big car companies are going to have a challenge to make a car that's better quality and value to what Tesla is churning out. Perhaps they can offer better services and a more familiar brand, but those are things Tesla can improve as they scale.

Obviously Tesla is largely unchallenged in their sector right now, and I think everyone knows that eventually they will be challenged my mainstream automakers. That doesn't imply they are going to fail, which seems to be what you are insinuating. The only one I can see really challenging them anytime soon in the luxury electric category could be Lexus, but I think there's also going to be a large number of people who will buy the Tesla simply because it's a Tesla, much like Apple products

Reasonable people don't expect Tesla to be the one and only electric car company of the future, and I don't think their stock price reflects that either. I do however expect them to remain the leader in the luxury electric car category for a long time to come, and I've seen no evidence to the contrary.

I guess in cliffnotes what I'm trying to say is what is there inherently about the big car companies that would allow them to "Crush" Tesla? Tesla has already overcome the major hurdles which are creating their own manufacturing, establishing a brand and sales force. Bigger companies have more capital but Tesla seems to be good at raising that too, and I don't think lack of capital has been a problem for them lately. And with all their billions of dollars big companies can definitely fail to execute. As much as they will challenge Tesla, if Tesla is left unchecked for the next few years (which seems to be what is going to happen) the tables could easily turn and it could be as much of a challenge for a big automaker to make a competitive EV.

 

[BurnItDwn]

In more ways than you can imagine.

http://www.businessinsider.com/tesla-executives-die-in-palo-alto-plane-crash-2010-2

Not sure how many people remember this--it was big news here when it happened, and it was during one of Tesla's more fragile moments.

I think people are still bitter that he sold paypal, so they take it out on Tesla.

After all, Paypal was fvcking awesome before Ebay got their grubby mits on it.

 

[Albatross]

I think people are still bitter that he sold paypal, so they take it out on Tesla.

After all, Paypal was fvcking awesome before Ebay got their grubby mits on it.

Nevermind that Elon was against the sale.

http://www.youtube.com/watch?v=O-5YiCUBMuk

 

[makken]

Unless you stop your Tesla by intentionally ramming things you'll need brake jobs.

As I understand it, the motor in regen mode is the main brake. The actual brakes only engage (ie. Pads to rotors) if an emergency stop is needed.

I've heard of roaster drivers never having to replace their pads for the as long as they've owned the car.

 

[Dari]

I see what you are saying, but Tesla will have the head start and they are already establishing a strong brand presence. I think it's very likely the mainstream automakers will come out with a better offering for a cheap electric- but I don't think that's the market Tesla wants go after and I think Tesla will continue to be better at making luxury electrics. It's a popular theory floating around the internet that the big auto companies will step in and "crush" Tesla, but how exactly will they crush them? I've yet to see anyone explain that part of it. In order to crush them they need to beat them severely in one or more areas. Big car companies are going to have a challenge to make a car that's better quality and value to what Tesla is churning out. Perhaps they can offer better services and a more familiar brand, but those are things Tesla can improve as they scale.

Obviously Tesla is largely unchallenged in their sector right now, and I think everyone knows that eventually they will be challenged my mainstream automakers. That doesn't imply they are going to fail, which seems to be what you are insinuating. The only one I can see really challenging them anytime soon in the luxury electric category could be Lexus, but I think there's also going to be a large number of people who will buy the Tesla simply because it's a Tesla, much like Apple products

Reasonable people don't expect Tesla to be the one and only electric car company of the future, and I don't think their stock price reflects that either. I do however expect them to remain the leader in the luxury electric car category for a long time to come, and I've seen no evidence to the contrary.

I guess in cliffnotes what I'm trying to say is what is there inherently about the big car companies that would allow them to "Crush" Tesla? Tesla has already overcome the major hurdles which are creating their own manufacturing, establishing a brand and sales force. Bigger companies have more capital but Tesla seems to be good at raising that too, and I don't think lack of capital has been a problem for them lately. And with all their billions of dollars big companies can definitely fail to execute. As much as they will challenge Tesla, if Tesla is left unchecked for the next few years (which seems to be what is going to happen) the tables could easily turn and it could be as much of a challenge for a big automaker to make a competitive EV.

How would a large OEM beat them? Simple, 1) better marketing (muscle) 2) much better economies of scale and 3) better quality materials. Right now they are no different from any other boutique car company with their small factory. There are many of those around the globe. But being small means paying more per part. Also, from what I've read about Tesla, they are a software company first and a car company second. The secret sauce in their products is in the software that goes to managing the batteries. If that is it then they better prepare for the day when others are able to offer something similar or better.

 

[desura]

I think people are still bitter that he sold paypal, so they take it out on Tesla.

After all, Paypal was fvcking awesome before Ebay got their grubby mits on it.

Uh, I like using paypal right now. How was it different?

Interestingly, Musk wrote some of the fundamental code that powers paypal transactions and knows like the little intricacies of it all.

 

[AustinInDallas]

Tesla will explode once trickle down tech makes it to a economy car. If I recall thats the next phase. sports car > luxury car > car people can afford

 

[yottabit]

How would a large OEM beat them? Simple, 1) better marketing (muscle) 2) much better economies of scale and 3) better quality materials. Right now they are no different from any other boutique car company with their small factory. There are many of those around the globe. But being small means paying more per part. Also, from what I've read about Tesla, they are a software company first and a car company second. The secret sauce in their products is in the software that goes to managing the batteries. If that is it then they better prepare for the day when others are able to offer something similar or better.

If you what you say about Tesla being a software company were true, I would expect the Model S to be an incoherent car that maybe looks good on paper but is a flop overall. However that's far from the case, it's been car of the year and received all these accolades, it's generally overall a great car. That argument sounds like a pre-Model S argument to me.

1) A large OEM will likely have MORE marketing but more != better inherently. Personally I think the Tesla stores are an awesome and unique marketing vehicle and of the couple I've been to they get a great turnout.

2&3) Better economies of scale and better quality materials I think is debatable. I believe Tesla negates a lot of the economies of scale problem by doing so much in house (and automated). I think you'll find that small "botique" car factories do not feature the heavy automation focus Tesla does. The danger is that they could become production capped if demand surges, which is a very real concern. It wouldn't result in the death of the company, but just a lot of missed market opportunity.

The quality of the materials in the Model S have been considered subpar compared to their gasoline luxury rivals, but I don't think that's because Tesla can't get the better quality materials, but they probably chose to use lesser quality materials to help hide the cost of the battery, motor, etc. We haven't seen a competitive ELECTRIC car yet so it's a little early to say a competitor could do better IMO.

I'm not sure how much stock Tesla has left, but I assume they will do a stock selloff before they launch their "mainstream" electric car to raise the capital so they will be able to meet the higher demand.

Don't get me wrong- scaling up to compete with the big boys is going to be a challenge for Tesla. There are many ways they could go wrong. I just don't think they are so much at an inherent disadvantage anymore, as I would have said they were at 2-3 years ago. I feel like with the position they are in now dominating the electric car segment (at least midrange and above) is theirs to lose

If Ford or Toyota had announced plans for a legitimate EV someone actually wants to drive soon that could sway my opinion. However they still seem to be considering EVs as an afterthought like the Focus EV, etc. Every year they continue this practice it's going to be harder and harder for them to compete with Tesla. Especially as more and more supercharging stations go up around the country, and people begin to associate the brand with quality electric cars.

 

[yottabit]

Think of the iPod launch. When Apple announced the iPod, I'm sure there were people saying "Well Microsoft is going to crush them once they enter the MP3 player market. They have so much more capital, marketing, infrastructure, etc."

Years later, we got the Zune.

The point is Apple had ENOUGH capital, and their product was a great example of disruptive innovation

"Generally, disruptive innovations were technologically straightforward, consisting of off-the-shelf components put together in a product architecture that was often simpler than prior approaches. They offered less of what customers in established markets wanted and so could rarely be initially employed there. They offered a different package of attributes valued only in emerging markets remote from, and unimportant to, the mainstream." Clayton M. Christensen

That being said Tesla can definitely screw it all up if they are not careful. Quality problems that tarnish their brand are probably the worst thing that could happen, followed by being production capped and not being able to meet demand. But the people buying their stock are probably rolling the dice and/or putting their faith in Elon Musk, and recognize the potential for Tesla.