There's something that's been bothering me about this whole thing. Not the Tesla, but the rest of the market. Is that it? Is it that easy? A guy who made his money selling a phonebook and then an online payment processor can read a few books, hire a few people out of the same industry he's disrupting and build a goddamn amazing car (electric or not)?
Why can't the existing industry do this? Why all the mediocre product that's the tail end of pumping billions of dollars into R&D staffed by largely the same folks Tesla has been hiring?
edit to be clear I'm not just talking about electric cars, but cars in general. There's a few Model S's in my area, and they're beautiful.
> Why all the mediocre product that's the tail end of pumping billions of dollars into R&D staffed by largely the same folks Tesla has been hiring?
In an established firm, existing product lines pay the bills. No company is an island onto itself. Companies have partners, large clients, relationships, etc.
Bottom line? To keep existing product lines healthy, you must pay respect to your loyalties. You start seeing the behavior of purposefully undermining the new product to keep the old alive and kicking. You start using sub-standard parts, just to keep purchasing from the same suppliers. You keep on old hands that actively despise the new way of doing things. And that's just the tip of the iceberg.
Frequently, starting with a clean slate is a huge competitive advantage. No baggage.
I don't think this really speaks to his point though. It's not as if the Tesla is less expensive or disruptive in any way. It's a superior product in almost every way.
I don't think the innovator's dilemma applies here. I think the OP glosses over a lot of very complicated engineering and the fact the founder also happened to found a God damned space company.
So ... you're saying that Musk has disrupted disruption by turning the model on its head?
He took long-established product. And sold a _less_ capable, _more_ expensive version (the Roadster). And used that to sell a _slightly_ more expensive, but _more_ capable product (Model S). Aiming eventually for a comparably priced product with far better capabilities, but at mass-market marque.
That's actually somewhat like the Apple model, so it's not completely novel. But we're not used to thinking of cars as high-tech products (or at least haven't been for a century or so).
And in Virginia, where they were denied a dealer license despite the investigators recommendation that it was in the public interest, seemingly because of an existing relationship between the DMV head and the dealership association's directors:
Don't sweat it. It actually has less to do about NC's citizens and a lot more to do with how the auto industry has dug it's claws into the legislatures of every state in the union. Your state isn't the only one in this situation.
FYI this is a good podcast explaining how we got to this point:
The exact same fight is being waged in Texas by the established dealers there.
Here's a little known but closely related fact about Congress: its membership has long contained a disproportionate number of car dealers, which leads to "wins" for America like this: "Last summer...Congress approved a financial reform bill that specifically exempted auto dealers’ financing from regulation."
This raises the larger point about car finance in general, which has become the heart and soul of the business. Essentially, the major car companies have become banks with manufacturing wings attached. The interests, skills, and motivations of their senior ranks tend to reflect this non-automotive set of priorities, so it's no wonder that Musk was able to poach serious talent. People who have obsessed about cars their entire lives finally found an employer who wouldn't leave them to die on the vine.
Which brings us back to point #1 about business in general: it's not about what's on the table. It's what's in the chairs.
> Here's a little known but closely related fact about Congress: its membership has long contained a disproportionate number of car dealers, which leads to "wins" for America like this: "Last summer...Congress approved a financial reform bill that specifically exempted auto dealers’ financing from regulation."
I'd never heard that before, but somehow, that Congress is full of used car salesmen is the least surprising fact I've learned in a long time.
The article you linked mentioned that six Representatives either owned or had owned a car dealership. I don't think this qualifies as disproportionate by any stretch. With 435 Representatives, that's about 1.4%. Compare that with Reps (and Senators) who were lawyers.
I personally would rather have a Congressman who had some familiarity with business rather than being gentry for life in Congress.
"I don't think this qualifies as disproportionate by any stretch."
Here are the actual facts:
A) US Population per the 2010 Census (i.e. the survey that determines levels of representation) ~ 308,400,000.
B) 1.4% of this population = 4,317,600 (i.e. the number of car dealers that would need to exist for their current level of representation to be proportionate).
C) Actual number of car dealers in America < 20,000.
In other words, their level of representation is not only disproportionate, but wildly so. Like, by a factor of 215.
Today, the iPhone IS the Personal Computer. If that's not massive, category-changing, ecosystem-disrupting, change, then I don't know what is - especially since it reverberates across once-unrelated markets like GPS, photography, cartography, and...well, pretty much anything for which there's now an app.
Using language as proxy, this looks like the point when the smartphones began turning into the most personal of personal computers in a really big way.
"Cool," perhaps, but not even vaguely innovative. It doesn't change any business models, it doesn't bypass anything or make any real changes, it's just a big iPhone (or, really, an iPod Touch). It hasn't "changed the computing industry." It's introduced a new line of the same products we had before.
"Let's make a bigger one" was a really great idea, but it's not really in the same league.
The Model S is "Cool", perhaps, but not even vaguely innovative. It doesn't change any business models, it doesn't bypass anything or make any real changes, it's just a new kind of car that doesn't use gas (really, a big golf cart). It won't "change the automotive industry." It's introducing a new line of the same products we had before.
With the Model S you still have roads, parking, large upfront costs, a driver, and traffic. The only difference is fuel. Minor.
(I'm all for the Model S, but I think you're putting much too high a standard on "innovative".)
That's not true. Tesla is significantly disrupting the archaic dealership model. They sell their cars directly, over the internet, and from corporate-owned showrooms.
Sorry, not much of a purchaser using Apple's services. To me the store to buy hardware, the store to by music, and the store to buy apps have the same password and are from the same company, so I think of them as the same.
So what is actually considered innovative in your opinion. I don't know about you but building charging infrastructure in addition to producing top class electric cars seems like a pretty big shift to me.
Think about what happens if the car really catches on in China (somewhere that has a ton of vehicles and needs a more environmentally friendly solution).
I think you are significantly underestimating the removal of gasoline from the car equation.
Because it's rather inefficient moving two tons of stuff for (often enough) 80 kg of payload. I'd rather take well-functioning public transport than force everyone to own a car just to be able to go grocery shopping. It's wasteful, not only regarding the resources involved, but also for your own bank account.
(Also everything the parent of that comment said. Plenty of places are horrible to use without a car even where the distances involved are easily walkable or cycleable. We increasingly tend to plan for cars first, people second which I personally would consider a dead end and rather short-sighted.)
But this assumes "well-functioning public transport". In reality, this does not exist. Many, even most buses where I live are empty most of the time.
Energy efficiency issues aside, cars provide something even more valuable: isolation and privacy from the disgusting and invasive sensory overload that is public transport.
Replacing street cars with public buses is hardly eliminating public transportation. Honestly, buses have so many advantages over electric streetcars that I wouldn't be surprised if this move prevented a lot of cities from scrapping their public transportation all together. Even countries that don't share the US's unfortunate emphasis on automobile transportation don't use streetcars anymore.
The externalities (noise, pollution, horrendous city planning, ...) are carried by everyone, though. And while people may not be forced, there are certainly places where living without a car ranges from inconvenient over hard to impossible.
People use iPads all the time now in situations they previously wouldn't have used a computing device.
I know of plenty of companies that have bought one just to easily demo stuff or to be able to do stuff in the field that they wouldn't have done earlier.
The iPad came out to wide acclaim because they got it right and showed it was possible. So many nay sayers saying even 6 months after release that it wouldn't be popular, it was a tiny market. It's very easy to reinvent history but I remember the crunchpad/joojoo coming out before the iPad, and it got panned everywhere even though many of us wanted a big screen iPhone.
Let's make an electric car is on the same level of innovation as lets make a bigger iPhone. Both had already been thought of a decade before, both had already been tried before, both had already had failed entrants that made no money and it turns out they were actually both pretty large technical challenges to do it well enough that the consumers would actually buy the product.
I would say they were in exactly the same league.
And lets not forget that Apple had already single handedly created the portable computing market in the first place with the iPhone.
Compare their total market value to the post-iPhone smartphone market and try saying that again with a straight face.
And that's exactly the point I'm trying to make, perhaps badly! Before the iPhone or the iPad people knew there was a market there. But they claimed it was tiny and not worth entering or putting serious R&D into. So you ended up with hobbyist/yuppie toys.
Say tomorrow someone unveils a 3D printer that does some essential household task and every house has one in 5 years time because you'd be crazy to not have an Initech Megamaker 3000! Were Initech the the first into the market? No! But they were the ones that turned it from a hobbyist thing into a real powerhouse multi-billion $$$ market. They single handedly grew the market by orders of magnitude, they saw the actual potential market.
Whatever comparatively miniscule market there was before the iPhone is a reminder of how easy it is to think too small. Just look at the Android preview before the iPhone came out! It was utterly rubbish. Google were thinking small.
What do you mean "hasn't changed any business models"? It has thrown Microsoft for a complete loop. Microsoft has restructured their product development to combat this erosion. Windows 8, Metro, the App Store, etc. are all direct responses to the iPad shifting people away from Redmond's desktop platform.
These are plenty of business that exist solely be use of the iPad/iPhone market. Accessories and apps. And this is quite apart from those business that have been changed. I have watched a radiologist do a consult with someone using an iPad in a car park to view images. That is a change.
I would say the iPhone changed the industry. The iPad also changed the industry. A toddler might not be able to use and iPhone but they sure can use an iPad. That is a game changer not just a bigger iPhone.
If I described Tesla the way you described and iPad, I would say "another electric car with better styling".
A few reasons come to mind. Either they are planning to do something cool, though it's not public yet, or people who have the cool / life changing ideas will go off on their own to do them.
The way you keep people like Musk in companies performing is giving them a large portion of ownership of their particular endeavor, so they benefit based on how successful they are - however then they're really just becoming investors.
Apple's ability to keep Jony Ive around comes to mind. He has an incredible platform at Apple and the creative freedom to develop and release products that are used by millions all over the world. Of course given his popularity, he could probably go off on his own and still be successful, but it wouldn't be easy.
GM already had this, with the Chevy Volt (a very interesting concept in its own right). But the problem is, despite a highly sensible transition approach from gasoline to electric, it's still a CHEVY. It's built to Chevy construction standards, Chevy aesthetics.
It's built to Chevy construction standards, Chevy aesthetics.
Which vary greatly, I might add. The Corvette and Camaro are very nice cars. The HHR was a nice looking, if somewhat derivative car, and the SSR was pretty unique and a pretty cool ride in it's own right.
OTOH, you have the modern Malibu, which is an insult to the Malibu legacy, and all the other crappy/generic low-end stuff they are pushing out.
GM has really suffered from "brand confusion" the past few years. And even killing off a few brands (Oldsmobile, Saturn, Pontiac) didn't really help, because there's still little clear connection between any of the remaining brands and any specific positioning. Well, OK, I guess Cadillac is still the "luxury" brand. What what does Chevy represent? Performance cars (Corvette, Camaro), electric cars (Volt), entry level cars for first-time buyers (??? I don't even know what their model for that is these days), or something else?
This is probably going a bit off-topic, but when GM did the big brand re-org, I think they screwed the pooch. If they were going to kill what was supposed to be their "performance" brand (Pontiac), they should have repositioned Chevy into that role, and focused on the Corvette, Camaro and similar models. Saturn could have picked up all of the low-end, entry level stuff, and Buick would have made a fine home for generic mid-level sedans and family cars. Where electric cars fit into this is subject to debate, I suppose. I would think you could position one as either "luxury" and put in under the Cadillac brand, or "performance" and put it under the Chevy brand (in my re-imagined GM).
Anyway... sorry for rambling. I grew up a fan of GM products, Chevy in particular, and still own a 1968 Camaro, so I have some sentimental attachment to them. But GM management never seen to quit finding new and innovative ways to disappoint their loyal fans.
Is the Chevy standard a good or bad thing? I ask this because the cars they sell (or rebadge then sell) in New Zealand aren't really that well built compared to European and Japanese cars.
It's pretty classic "innovator's dilemma" material but a more interesting comparison here is Fisker (probably going out of business) vs Tesla (currently making a small bit of money).
Fisker did exactly what you suggest, they took a bunch of 'off the shelf' components and bolted them together into a nicely shaped car body. They 'designed' an electric car where "car" was the most significant bit and "electric" was the least significant bit. Since existing off the shelf electric gear couldn't get the range they wanted they added a gas powered generator.
Tesla (and I put all of this on Elon) appear to have ripped up history and started from how do we build something you can drive around based on electricity. They seem to have started with what properties do the batteries have to have, what capacity, what weight does that impose etc. They took that very expensive engineering and thinking about power trains and then slapped a Lotus brand body on it to appeal to the elite geek crowd. And they instrumented the hell out of it.
Then they took all of that knowledge and said, ok, given what we know about how this stuff worked, what did and didn't work? Now lets incorporate that into what comes next.
I found that engineering focused direction very appealing, work from zero, develop an expertise, test that understanding, iterate and improve. Now at rev 2.0 they have a much better product than rev 1.0. Their X series should be really something to behold.
Elon also bet big on being able to create an electric drive train with range. Had he started a couple of years earlier he might have missed out by building with Nickel based batteries rather than Lithium based ones. So there is a timing component as well. The larger companies have all put their toes into the water (the EV-1 for example) but hadn't yet committed to jumping. They don't have to commit since they have a working business, building the equivalent to the Roadster or the Model S would have been merely incremental to their business rather than whether they lived or died. So I expect they were waiting for a bit more clarity on this stuff. They always have the option of buying Tesla later and they take no risk in the meantime. Clearly that was on Toyota's mind when they invested.
You can see the same forces at work in SpaceX so it suggests to me it's a management style that Elon expresses.
I think this is an underlying strength of Elon's success and the success of innovators in general (there were a few pages on this in Salman Khan's The One World Schoolhouse) -- starting from first principles. When you have an old model, it's come about due to whatever the situation in the industry was like at the time, and it's evolved due to past forces acting on the old model. To take a basic idea that seems figured out and "fine" (education, or a car) and get rid of any preexisting notions or ideas of how it should work, and start from first principles and think from the very start how it should be given modern advancements, is a difficult and powerful thing.
> Now at rev 2.0 they have a much better product than rev 1.0.
But really, what's amazing to me is that rev 2.0 is better than most cars on the road today which are at rev double digits, having developed in one of the more competitive markets in the world.
I think it really is what your parent said, for any other large existing automotive company, each car is a small piece to their overall offerings. With Tesla, they have a single car that they push extremely hard to perfect, because they need to make this kind of impact to get some remote chance of a stake in the automobile industry.
Basically, rev 2.0 desperately needs to be this good, otherwise no one would pay attention.
It is the investment in existing factories and supply chain. They invest billions into these calculating the returns over long periods of time (think 15 to 30 years). This is also the reason why we are able to afford cars. If we want new, innovative cars every 3 years the manufacturers will have to ensure their ROI over 3 years which means the price tag will go up x10.
Our world view is a little skewed because of our ability to launch software products over a weekend or release a new build every afternoon.
> There's a few Model S's in my area, and they're beautiful.
They're also luxury (the base Model S is twice an Audi S4) and on limited runs (the yearly production of Tesla is the same as AMG. Not Mercedes, the subsidiary which takes standard Mercedes cars and refits them with custom hand-built engines)
I mean I could make the same complaint wondering why the rest of the industry can't be Ferrari (7000 cars/year[0]) or Bugatti, but basic thinking will help me note that the market for that kind of money is sort-of exclusive.
[0] note: Tesla has ~250 more employees than Ferrari, expects to produce ~3 times as many cars in 2013 and has roughly 20% the revenue. The comparison turns out to makes way more sense than between Tesla and Audi or BMW, let alone Tesla and Ford or VW group.
They're just ramping up mass manufacturing. They have an enormous factory, and they're currently occupying a small corner of it.
They're not hand-building the cars, so I wouldn't compare them to the small run hand-build manufacturers. They're building the company for scale. Hand-building is much easier to ramp up and change, but then you get no economies of scale.
Mercedes-Benz has unveiled a new electric car developed in partnership
with California-based Tesla Motors (TSLA). The car is a version of
Mercedes' B-class hatchback which has not, until now, been available in
the United States.
This car, the 2014 Mercedes B-class Electric Drive, will be available
first in the states before reaching other markets, according to
Mercedes-Benz. It will go on sale early next year, first in just a few
states, but will become more widely available later on.
My theory: it all comes down to the maturation of the underlying technology. Tesla has been around for ten years. Why is their mainstream car only coming to market now, after all that time? Part of it is that creating a new car company takes a lot of time, but most of it is that the battery and other technologies have only recently matured enough to make EVs practical. Tesla has been waiting and waiting until this occurred and has a small jump on the other manufacturers. If this is true, I expect other manufacturers to ramp up pretty quickly. Both GM and Nissan both have electric cars that outsell the Model S (at least for now).
Another aspect of the Model S worth mentioning is that EVs are heavily subsidized with a $7.5K federal tax credit a huge pile of cash from California--so Tesla has extra money to apply to the fit and finish of the car vis a vis non-electric luxury cars. In fact, as of last quarter all of Tesla's profits came from selling ZEV credits to other auto manufacturers, not from the actual car itself. Take out the $70M from selling ZEV credits and Tesla's gross margin is only 6%--much less than other luxury manufacturers. In fact they'd be running at a $50M quarterly loss without them. So it's easier to make a great car if you don't have to make as much money at it. If Tesla manages to get their gross margin to 25% without these incentives, however, it will be a different story, and a remarkable feat.
You're only focusing on the "electric car" part. By all accounts, the rest of the car is an amazing package, even without the electric motor. I think the question is why was Tesla able to push the Model S so far ahead of the current industry in those other respects?
It's because Tesla makes an extra $7.5K from each car via the federal tax credit and an extra $70M each quarter selling ZEV credits. Without these they would not be profitable. So they have more money to apply to the fit and finish of the car than luxury manufacturers which don't make an electric.
It's because Tesla makes an extra $7.5K from each car via the federal tax credit and an extra $70M each quarter selling ZEV credits. Without these they would not be profitable. So they have more money to apply to the fit and finish of the car than luxury manufacturers which don't make an electric. They also benefit from an enormous, low interest DOE loan.
To date Tesla has lost more than billion dollars which has not been recouped; that's roughly -$50K per car sold in 2013 ($1B / 20K). In contrast, BMW only makes a profit of +$5K on each of their 1.5M cars sold yearly.
But a luxury manufacturer like e.g. Audi gets to reuse engineering work from parent VW and sibling Lamborghini to improve their $100k car. Much of the comparative advantage of the Model S is due directly to the engineering differences of building an electric powertrain; they get to make different tradeoffs than BMW does in, say, an M5.
The real nutcutting time will come when an established brand decides to build a high-end electric (the BMW i8, for instance), where they get to combine their much more significant economies of scale with the advantages of an electric drivetrain.
EDIT: The i8 is a plug-in hybrid, actually, so it's really a worst of both worlds sort of deal. The point still stands as made, however.
I wonder how the marginal cost of an ICE compares with the marginal cost of one or two electric motors + regen + batteries + charger, and how those change over time. I suspect the electric drive train isn't cheaper now, but will be cheaper in a few years.
I suspect aside from the batteries, electric drive train is already cheaper. Modern ICE are ridiculously sophisticated and require advanced manufacturing capabilities.
Not to mention, I bet the electric drivetrain is much simpler than existing internal combustion engines. Modern gasoline engines are nothing less than engineering marvels; Tesla, on the other hand, probably gets to devote proportionally more money and effort to other aspects of the car.
If the other manufacturers opened a plant in california, or bought an existing one like Tesla, wouldn't they also get the same ZEV credits which they could sell or use for themselves?
> To date Tesla has lost more than billion dollars
Are you including liquid assets, like the California plant, as losses? (not accusing you, I haven't looked at their numbers)
$1B is roughly the GAAP losses for TSLA since they went public.
I think that in order to resell ZEV credits more than 13% of a manufacturer's cars must be electric, which is not true of any other luxury manufacturer.
And then select 'Annual', 'Balance Sheet', and then look at the line item for "Retained Earnings (Accumulated Deficit)"
Or alternatively, from TSLA's 2012 10-K:
"We incurred a net loss of $396.2 million for the year ended December 31, 2012. In addition, we have accumulated net losses of $1,065.6 million from our inception through December 31, 2012. We have had net losses in each quarter since our inception."
Well then, that's because I was looking at "since going public", since that is what the guy I replied to said. But you and the original poster are right since you are talking about 'since inception'.
I went by the average it gives weighted to the time range of the IPO (because the parent said since the IPO). But one-billion is correct if you count before the IPO (which the guy who first brought up the one-billion number was talking about).
"You're only focusing on the "electric car" part. By all accounts, the rest of the car is an amazing package, even without the electric motor. I think the question is why was Tesla able to push the Model S so far ahead of the current industry in those other respects?"
This cannot be overstated.
I don't like a lot of the Tesla S design - both interior and exterior. Further, my use case(s) don't necessarily lend themselves perfectly to an electric car.
But the Tesla has a third row with five-point child harness seats built fucking in[1]. This feature alone changes my life. The existing auto industry answer to carseats and children in general ranges from "makes me want to kill myself to insert/remove carseat" to "merely makes me want to kill others".
How much of the rest of a Model S is like this ? Apparently the shocks/suspension are[2].
It's worth nothing that the only reason they're able to add that feature is because they don't need space for a gas engine and the associated tanks and parts.
1) [X] no radiator
2) [X] grill-less front end (see also (1))
3) [X] smooth underbody
4) [X] "frunk" (front trunk)
5) [X] storage in rear, in addition to frunk.
I guess the point is, in some ways, we've been "living in the future" for a long time; it's just that we haven't been marketed-to enough to realize it. Tesla is interesting to me, and I'm not trying to diminish what they've accomplished, but at least some of the little things that "fell out" of the design that people seem to impressed by are 50 years old.
Give it a few years and a few lawsuits and Tesla will have a solution that makes you want to "kill yourself" as well.
This is a bit like PayPal versus other payment vendors (what an appropriate example!) -- it's easy for other payment vendors to talk big when they're at a small scale or dealing only in a niche, but once they're generalists those ideals tend to fall apart.
Rear-facing seats are illegal in many areas, for one, leading to export issues. The second is that anything dealing with children is a legal nightmare in general, and faces by far the most regulatory scrutiny: Having four young children, I've gone through probably half-a-dozen child-seat recall issues for various relatively minor things. Integrate that in the vehicle and you suddenly have a major corporate liability.
Tesla is an amazing company, but as they grow they will get the layers of protection that every other company eventually gains (e.g. "the most we'll do are some frame-anchored LATCH anchors that we are forced to install by the government...").
BMW has a full range of electric cars that will start coming to market this year, in particular the small carbon fibre i3 looks particularly interesting:
> Take out the $70M from selling ZEV credits and Tesla's gross margin is only 6%--much less than other luxury manufacturers.
Meh. If they avoid the volatility of other luxury manufacturers that's an accomplishment in and of itself and something that makes them an interesting investment, even if their margins aren't phenomenal.
Who owns Jaguar or Lotus right now? Or Aston Martin, or whoever? These aren't stable companies we're talking about.
Overall, I think Musk is just a really fucking smart guy. He happened to get a lot of money, and that doesn't usually happen to the smart people; it usually happens to the people who know how to grab at money, which as it turns out is not a remarkable skill and doesn't correlate too highly with future success. Whether you like the guy or not, Elon Musk is a dreamer, and has big ideas, and the capital to realize them. That's a damn rare thing, and we're lucky for it.
If you're one of those people, for pete's sake go do something big. Everyone else is pretty stupid, and nearly everything can be done better.
"Why all the mediocre product that's the tail end of pumping billions of dollars into R&D staffed by largely the same folks Tesla has been hiring?"
Because they have hundreds of billions already invested in factories. That's why.
You want to drive an electric car?
Great, this means that the kilometer assembly line making gears, piston and other stuff is now completely useless. The investment goes down the drain.
In R&D department you have 50 something years old specialized in fluids, internal combustion engines and moving parts wear.
How they are going to feel when you remove ALL the internal fluids but refrigeration, remove the combustion engine and minimize moving parts and wear?.
Now you need experts on electric motors, and power electronics. What are you going to do with the old staff?
So how does the Prius fit into this? How could Toyota have spent any money at all on electric technology when they had billions invested in gasoline combustion? How did GM spend any money on their EV-1 when they were similarly rooted? There is a difference here with Tesla, but what you're saying amounts to a sunk cost fallacy.
The classic "Innovator's Dilemma" attempts to address this - the idea here would be that electric cars are disruptive technology, one which otherwise good management practices more or less prevent market encumbents successfully exploiting.
Read the book, I highly recommend it if you're interested by these kinds of questions!
But electric cars aren't a disruptive technology. The only thing that might qualify as disruptive about Tesla is their direct to customer sales model, and I have a hard time seeing how they'll get around the entrenched interests there.
The Model S is by all accounts an excellent car, and I want one, but I am bearish on Tesla the company.
Considering that electric cars were held up in Christensen's books as an example of a disruptive technology that would disrupt a major market in coming decades, they qualify.
The definition of a disruptive technology is one that starts off objectively inferior but which, on projected technology trends, will meet the market need at some future date. The existing market can recognize these facts well in advance, but when the time comes to switch technologies finds upstart incumbents using the new technology with a cost structure the established companies cannot match.
Electric cars qualify because they do not at the same price have the same range, acceleration, or refuel time as gasoline cars. But all three aspects are improving exponentially over time. On current trends, electric cars will be comparable to or better than gasoline cars on all three metrics within 20 years.
What Elon has done is realized that the cost difference between building a top end car and a bottom end car is not that great, and at the price of a top end car he can deliver equivalent to better acceleration and range, with recharge time that is acceptable to many. This is very unusual - normally the upstarts in a disruptive market start at the bottom of the market and move up. (Indeed that was the pattern that Christensen predicted for electric cars.) But the mechanics work the same way. By the time Tesla can deliver a mass market car at a mass market price, the incumbents won't have the technology or business structure to deliver a competitive car at a competitive price.
For all of the reasons why existing companies will not be able to modify their technology and business structure to what is needed to compete with Tesla, I highly recommend Clayton's followup book, The Innovator's Solution.
This is well put. People have rightly complained about imprecise use of the term "disruptive" -- this term does not mean "any company that has novel products compared to incumbents". You've used the more precise meaning of the term.
>>But electric cars aren't a disruptive technology.
Of course they are. They work completely differently from ICE cars and even hybrids to solve the same problem (transportation). That's the definition of a disruptive technology.
Disruptive technologies serve customers that are unprofitable ornindesirable for incumbents to serve. Tesla is a direct competitor to luxury sedans, and is beating them at their own game.
A disruptive electric car would be if a golf cart maker made a $7500 car with a top speed of 60mph and a range of 50 miles. No current car customer would want that, but people that couldn't afford a new reliable car, or teenagers whose parents only sort-of trusted them, etc would love to buy it.
Wrong. By that logic, you wouldn't have considered cell phones as disruptive because they initially cost around $9,000 (inflation adjusted). The same for PCs, and pretty much any disruptive technology.
That's one of the central points in the aforementioned book Innovator's Dilemma. Disruptive technologies often start out as expensive products that only attract a small segment of early adopters. This leads established players to ignore them. But new technology often holds greater potential for improvement (easy gains in existing technology have already been tapped). With time, cost is reduced while performance is increased, and it wins over the market.
Tesla may or may not end up being disruptive. But price certainly doesn't rule it out.
Yeah, the $100k is a red herring. The issue is not how much it costs, but what it does, and I don't see the Model S as doing anything that incumbents already don't.
Yeah, the $100k is a red herring. The issue is not how much it costs, but what it does, and I don't see the Model S as doing anything that incumbents already don't.
You don't skate toward the puck, you skate where the puck is going. This kind of thinking is why, for example, Toyota was able to build the Prius and GM wasn't.
Japanese manufacturers started earlier, building up the necessary experience, technology, and culture at a time when nobody could sell hybrids without heavy subsidies. They took losses for years, learned the hard lessons early, and kept the disasters small. Then, when the market was finally ready, they were, too.
That's what Tesla is doing... but despite countless historical examples of market disruption, the incumbents will react with great surprise when they get their asses kicked. Today the car costs $100K. Tomorrow they will know how to build one that costs $10K.
The more interesting part of the Tesla is how it changes maintenance habits for owners. I don't know the full scope of what normal maintenance is like, but it seems like there's a lot less to think about.
If you consider the change in routine fueling habits, too, that's pretty amazing. Plugging in at night vs weekly trips to a gas station is a big deal.
I think you are confused. Disruptive technologies can either start at the bottom of the market, or the top of the market. What makes them disruptive is that they serve the needs of a market segment that is currently not served very well by the incumbents.
Oh, no doubt I'm confused. But what market isn't being served that the Model S can waltz in on? It's an M5 with a linear torque curve that you can't take on long trips.
I think you might be underestimating the technological sophistication of a twin-turbo V8 that develops 550bhp at 7000rpm, in a cabin so quiet that they have to pipe artificial engine noise in -- but set that aside. The Model S doesn't do anything that an M5 can't, save charge from the mains. That's not insignificant, by any stretch, but it also seems to me less like a different class of thing than a serious, big-time but incremental improvement.
I think this is pretty much correct, but Tesla only has to carve out a niche in each market it enters to be successful. They will enter a high volume market soon. Also, the EV feature comes with side benefits of decreased weight and size. For smaller cars this will be a bigger win as comparable gas powered cars have less space to use on passenger satisfaction. So you're missing that in your comparison. How much interior+trunk space does the model S have over the M5?
I'm not underestimating the technology used in the M5. If anything, though, the M5's technology is the one that I would describe as "incremental." They took an internal combustion engine, the mechanics of which have been well-understood for over a century now, and improved it incrementally until it became a twin-turbo V8 that has a ton of horsepower.
Contrast that to the Tesla, which has been engineered from the ground up to use batteries to power it. The car is a technological marvel, even compared to cars like the M5. And this translates to a driving experience that is different enough from ICE cars* that it makes it a disruptive tech.
*instant acceleration, no engine noise, real-time graphical feedback about the car's systems, etc.
That's how many disruptive technologies start. Then their price falls until it reaches parity with the old technology, and the choice becomes a no-brainer.
Of course they are disruptive. They achieve the same capability as an internal combustion engine, but they do it in a different way.
ICE automakers can't retool their supply chains overnight (or even over several years) to make an equivelent product.
How are they disruptive? They achieve identical (performance wise, superior) capability with reduced maintenance and reduced fuel cost due to electricity being cheaper than gasoline.
In the short term, the increased cost makes them disruptive only in the high-end sedan market. As the production scales up, this will move into the lower-tier markets. I think you are intelligent enough to get this.
They're not competing against non-consumption. Tesla may well end up successful, and an electric car company could be disruptive, but I don't see their product strategy as disruptive. Sales, however, is a different kettle of fish, and I expect it to be what brings Tesla down. Car dealers are way, way, way too powerful for a boutique to take on. Look at how much was clawed back from GM by their dealer network when they were trying to kill their terrible brands.
Then, all Tesla would have to do would be to sell in Europe. Car dealerships are a lot less powerful, and the market is not regulated like it is in the States.
I believe they are/will soon be selling in the UK.
Maybe I'm just hung up on a definitional thing here. I was using "disruptive" in the sense of a market entrant picking up non-consumption and solving a problem that the incumbents are rationally unwilling to address. I don't see Tesla doing this. I see them as making a superior version of what is already for sale.
My other mistake was in saying "electric car" and not "Tesla's electric cars". Thanks to all for the interesting discussion.
PS: I still want one.
PPS: I'm still pretty sure that trying to get to scale without a dealer network is what's going to break Tesla's back. Never underestimate the power of the local car dealer.
What about gas stations and oil infrastructure? Why fill up at a store when you do it over night at home? Also, Service stations will be disrupted. Electric cars require much less maintenance, no oil changes, timing belts, or transmissions.
Those things alone have a hell of a broad impact on American life.
There's something to be said about a driven leader pursuing a vision. The other good example would be Apple + Steve Jobs.
For example, I know that with Ford Motor Company, as an example, the Ford family has a heavy hand in the top-level management (i.e. previous CEOs have been kicked out 'unofficially' because they didn't follow what the Ford family wanted or didn't live up to their expectations). That kind of stuff puts a drag on innovation.
They have the official power to back that up, since the Ford family holds stock with a 10x voting preference. It looks like they had about half of the votes at the shareholder meeting this year. There was a shareholder resolution to abolish that this year that failed with something like 66% of the voting shares against it.
It's interesting that you bring up Ford. Of the big American auto companies, the only ones who have been putting out product I'm not just remotely interested in, but actually interested in, is Ford.
IMHO, decent looking product, good value, mileage ratings look good, interior design is decent, etc.
I agree, and there's another interesting parallel: Ford has their own version of Jony Ive in J Mays. I've often wondered why GM doesn't back a tractor-trailer full of money in Mays's driveway to switch sides; in my opinion, GM never found the magic again after Harley Earl died.
Henry Ford almost destroyed the Ford Motor Company because he believed the Model T to not need improvement. So the Ford family doing things that don't benefit the company has some history :).
You ought to watch "Revenge of the Electric Car" (it was available on Netflix streaming last I checked). Even for a documentary that's as ra-ra about EVs as it is, it shows how much blood, sweat and tears Musk has gone through just to get this far. It's been no cakewalk.
A small part of it is right place at the right time. (California, 21st century, oligopoly in auto industry, government loans)
Part of it is being a well-known billionaire and engineer who partners with the right people to get the job done.
Part of it was determination and long-nights in the office.
Part of it was being able to avoid the red-tape (and stakeholder interests) that the market leaders have in their companies.
Tesla, SpaceX and SolarCity would make good case studies about how to take a finite (but large) amount of capital and develop it into companies that can change the world.
They are, but at a snail's pace. The Mercedes SLS Electric Drive came out a few months ago, I believe, and it's a work of engineering and art.
But Ford isn't Mercedes, and they can't afford to switch up their assembly processes because then it would drive up the prices of the cars they sell, which defeats the point of Ford -- affordable, reliable transportation. Remove the affordable, because the cost of manufacture goes up immensely, and the reliability goes down. Electric automobiles are still experimental technology, albeit very mature experimental technology. Imagine them as Debian testing installs that are very stable, but still aren't as stable as Debian stable installs (the gasoline-powered vehicles).
It will take time, but it will also take game-changers like Tesla for electric cars to go mainstream.
First of all, Tesla was not created by Musk alone. He owns a large portion of the company, but he had co-founders with more experience in the automobile industry.
Second of all, there's a reason that Tesla started with a high-end sports car and that's because bringing a sports car to market is easier than bringing an economy or mid-priced sedan. Most mass-market cars have small (or even negative) profit margins. In order to make financial sense, the development costs need to be spread over a large production run, preferably world-wide. The size of the big auto companies is so that they can take advantage of economies of scale to make a cost-competitive car. Building decent cars at a competitive price is a different market than the one Tesla is engaged in.
> Why can't the existing industry do this? Why all the mediocre product that's the tail end of pumping billions of dollars into R&D staffed by largely the same folks Tesla has been hiring?
Innovator's dilemma: at which point it's OK for a new product to cannibalize market of your established products? Think iPhone vs. iPod.
In a large enterprise, it also is matter of inter-departamental power struggles.
Don't they cannibalize themselves every year then by coming out with the same model, year after year? I think the latter point may hold some sway, but I disagree with your first.
Every car company has been chasing Lexus the past 10 years in this price range and they could have done something similar.
The issue here is that if they put all of these features into a luxury car, the $100K price-tag would prevent it from cannibalizing a lot of their other product lines.
Right. Tesla going bankrupt would have been the least surprising thing to ever happen. This is news exactly because it is unexpected.
I would also suggest that, like the Wright brothers, Tesla had no choice but to make a number of long term focused decisions because doing anything else would obviously fail.
There are a lot of reasons, as other commenters have pointed out, including all the existing capital that would have to be retooled or scraped.
However, I don't think you can overlook the damage the bailouts did. The Chrystler bailout in 1980 and the more recent GM bailout preserved the existing Detroit power structure. All of that talented labor pool and capital that would have been set free via liquidation instead was allowed to stay together. These companies didn't innovate because they didn't have to.
I'm not saying that I agree with bailing out car companies, nor the 1980 bailout particularly, but the notion of "setting free" talented labor pool is a little absurd in the case of the 2008 financial meltdown. It wasn't GMs fault that the entire financial sector that customers require to purchase their products was detonated by AAA rated products that were not at all safe. It was the government's fault for not regulating the banks, as well as the rating firms for not evaluating them.
The engineers would have been let go into a horrifically bad labor market where demand for mechanical engineers is zero due to expensive and unavailable credit.
It's like any other business that's been extremely successful for so long. It's very difficult to change course unless you are built that way.
We may be talking about electric cars but one of the best things that Tesla has done compared to everyone else is making the interior joyful.
I don't think we've even seen everything of what Tesla can do yet. If they are really interested in giving away refueling for free then that can that speed up the transition away from oil.
Why do all disruptive companies end up making much better products than the incumbents, changing the game, and revolutionizing the market?
Because big incumbents have little interest in changing anything. They're happy selling the same thing, slightly improved year after year, decade after decade, and only myopically competing against their "direct competitors" (i.e. all the other companies cloning each other's products).
You need new thinking, new ways of doing things and new business models to change the game and the market - something the incumbents have very little interest in pursuing.
Also, who said it was easy? You should watch some Elon Musk documentaries, to see how many times he was close to bankruptcy, not just of the business, but personal, too - all while running a rocket company, too. He might make it look easy, but it certainly wasn't, and I'm sure most still believe he'll never beat established car companies like GM and Ford (I'm quite certain he will, and make Tesla the "Apple" of the car industry).
It's pretty dumb that upstarts have such large advantages against incumbents merely because incumbents choose not to disrupt their legacies.
You see the same thing in airlines. You'd think there'd be little harder than starting an airline and yet southwest, JetBlue and virgin come in and have great success.
Here's but one data point, albeit, a big one: Airline Quality Rating, the premier statistical study of major airline performance in the United States, ranked it #1 in 2012.
Southwest was incredibly successful and disruptive to the airline industry (to the point where today's legacy carriers look much more like Southwest than like the flagship carriers of the 70s and 80s). Virgin America has yet to do anything that significant, and there's a good chance it never will.
Well, it turned a profit it's most recently reported quarter and has indicated expectations for a profitable 2013. It arguably is defining the customer experience for low/mid-cost airline travel.
History is littered with failed auto companies, so no, it's not that easy. Tesla very nearly didn't make it too (IIRC Musk had to sink a lot of personal money into it to keep it afloat).
For the very same reasons why a start up can do things so quickly, and a big company can't.
Most of the big companies you see out there car makers or otherwise are only at their best good maintaining status quo and doing the incremental revenue push. Reasons, everyone knows already: Layers and Layers of hopelessly useless middle management, Politics, Bureaucracy- Your usual large company BS.
There is total lack of urgency, there is no sense of higher purpose. No clear vision, goal or even a path many big companies want to take. Its all about fixing the most immediate short term things which prevent them dieing, and maintain the stock prices to a acceptable value. The management at all levels is simply designing most ingenious ways to take back big checks while sleeping on their jobs. And then blame the actual workers for all their company problems.
No wonder small unknown start ups with a few folks severely underfunded and under clocked for resources screw these companies left, right and center. And not just that, also in ways these large companies can't even defend themselves.
But examples like Tesla and Microsoft and Google and Facebook and so on are all testaments to the power of startups. It's quite possible to disrupt large businesses (and become one) with a small foundation, I just wouldn't call it easy. I think Musk himself has said on occasion that Tesla has been very close to failure at least a few times.
Don't forget he had his own money to put into it and the confidence / belief he could do it. Try finding someone to give you enough capital to start a big holistic undertaking as this ... I don't think it'll happen.
Because being excellent doesn't come easy? Elon Musk is not just 'some guy' - At Tesla he's "Head of Product Design", not just some businessman who hired a few engineers.
Tesla hit the market with very fortuitous timing. "Green" is very trendy right now, and electric cars are seen as being "green" (though if you consider complete manufacturing impact from sourcing the raw materials, I'm not sure I'm convinced). And in most parts of the USA, a Tesla is a coal-powered car.
Is it really that good or does it just have a huge benefit because its electric ?
As a car, i dont believe its better than a similar specced 5 Series BMW or E class Merc. Yes its electric and has amazing performance, but it will also not take you very far which imo is a big issue for a GT class car.
As with most projects, there are a large number of people involved, but only one in the news. I believe Musk started out just funding the startup and got more involved later. Much of the impact comes from attracting some of the best people in the industry by heavily promoting an exciting goal.
I can't really agree with you that every other car in this price range (a huge $90k for the performance edition) is mediocre. There are a lot of simply amazing cars available if you are willing to spend that kind of money on one. Hell, there are amazing cars available for way less than that.
Because they can make massive profits with the way things are now. The existing industry is the last place you should be looking for change. Their job is to get a position and embed themselves in that position, not innovate.
Why can't the existing industry do this? Why all the mediocre product that's the tail end of pumping billions of dollars into R&D staffed by largely the same folks Tesla has been hiring?
The car being reviewed is $90,000. Are competitively priced vehicles really "mediocre"?
The Tesla was not built independently. Most of its components come from the auto industry. Most of its innovations are auto-industry innovations. When you make a $90K car, you have the capacity of really optimizing the entirety of it.
"This car performs better than anything we've ever tested before. Let me repeat that: not just the best electric car, but the best car. It does just about everything really really well."
That statement is a far cry from saying that every other car in this price range is mediocre. Generally, $90k cars are pretty great. The Model S might just be slightly better due to, say, the battery pack helping weight distribution.
This is also just one review. It's not like this is suddenly the world's universal judgment of the Model S.
I tried to avoid going there, but there's there is the issue that Consumer Reports have generally terrible subjective reviews.
They're great at objectively layout basic facts. Poor at subjective measures.
Worse, over the past few years they've become rather attention crazed, so it's an endless sea of "iPhone not recommended"-type attention eliciting narratives.
They specifically state that their love of the vehicle is because it's an electric car -- that side effects of being an electric car yield a result that they enjoy (e.g. low battery packs helping weight distribution, etc). Does that really make every other car "mediocre"?
If electric cars allow producing things that are so much better, why haven't we seen them from other car companies? What's that R&D going to?
In general, I got the feeling that "mediocre" was referring to all the shitty interfaces on cars, and general lack of polish that Tesla seems to be doing correctly. This is something that car companies could / should be doing for minimal effort since they employ so many and spend so much money, but they're not.
Again, this car is $90,000, which is a market that the major automakers aren't traditionally interested in (aside from very small-run flagship vehicles). I would expect the Tesla to be very polished at that price point.
You hear similar things for their other cars (still high-end though, yes) - basically everything they've demoed has had reviews saying "wow" to the electric, and "even more wow" to the execution of everything else. Why is Tesla doing so well, with the same people, unless the existing industry has been lazy?
Aside from the many vendors that Tesla engages, do you really thing the in-house components were invented "from scratch"? Of course they weren't. Like every other automaker, they look at what everyone else is doing and individualize. Outside of being electric, there is nothing about the Tesla that is truly revolutionary -- most of its components are minor variations on what everyone else is doing.
I can attest to this. Initially, I was extremely skeptical that the Tesla was anything great (electric cars haven't been the highlight of the automotive industry despite repeated attempts by established manufacturers). A few weeks ago, however, I had the chance to drive a family friend's Tesla and I was stunned.
The Model S seems like a car from the future. Forget the fact that it's completely electric and charges via an alien-like, glowing plug. The interior with the large, beautiful touch screen, a voice-activated system (that, contrary to Siri, actually works) coupled with access to the internet, and the gorgeous trim and accents really make the Tesla a standout.
Moreover, it's every geek's dream. You can remotely control the car with a smartphone app, monitor the car's efficiency and performance via beautiful graphs, and even have presets for charging cycles.
Best of all, the pickup is like none other (as one would imagine). Flooring it in a Tesla has a completely different meaning. Pure acceleration and no roaring engine noise.
I think it goes without saying that I'm very excited about this company.
After test driving a Tesla, I agree with much of what you said and one is the engine noise. I prefer sports cars and especially the sound of a V8/12. To me it's better than listening to music.
I do understand that those purchasing a luxury vehicle have different expectations. Those in sedans appreciate cabin silence more than others.
I personally believe that the importance lies in awareness more than anything else. I generally don't run the radio in my car (even though its a piddly 1.8t GTI) because listening to the engine is important. There are all sorts of audible clues to the state of your car that get completely drowned out with the radio blaring.
I have a feeling that this is part of the source of some of the ridiculous "I've been driving my car and the brakes are magically broken" stories involving people who have run their pads and rotors down to bare metal and wonder why they didn't realize this was happening. Same goes for oil leaks, knocking, worn belts, etc.
We have a huge number of drivers in the US, and the 99% have absolutely no clue what the hell is going on with an item they use on a daily basis, hurtling down the freeway with 3000 pounds of steel at 70 mph.
My dad (working in automative industry) told me that tire pressure sensors were invented solely for the US market, because people in every other nation manage to check their tires every once in a while, while Americans drive until their tires "implode".
I think that's pretty unfair. You shouldn't have to care passionately for every object you use on a daily basis.
How often have you checked the quality of your drinking water? By your standard, you have no clue what the hell is going on with a substance you use on a daily basis and put into your body.
How much do you know about the supply chain of the food you eat? Do you ever use commercial rail or air travel?
Globalized civilization makes life too complex for anyone to know what the hell is going on with each thing they use on a daily basis.
The difference here is that all of your examples do not leave me directly responsible for other peoples lives.
I'm talking about awareness of an object with which you can end someones life with a mistake/ poor upkeep, and be 100% directly responsible. It is, at this point, ones duty to do everything rational to prevent that possibility.
Just like your travel example: The pilot should (and does hopefully) know exactly what the state of the plane is. There is a reason that pre-flight checklist exists.
It's a generational thing, I think. Two thoughts come to mind when I hear a V8/12 roaring down the street: "out-of-touch boomer" and "sea level rise". Literally nobody I know my age wants anything to do with those fossil burners. Electric (or something better, I hope) is the future.
I don't think it's a "generational" thing. I'd be more inclined to call it an upbringing/environment difference, in addition to a preference based on how you actually want a car to drive (which is very different than just "how powerful is it").
The "out-of-touch boomer" judgment is just petty. credibility--;
Well it was a secondary underlying theme to the lousy movie "The Dilemma".
I'm sure it can be done but the question is whether someone wants it. Many in that class would probably adjust quicker to the silence of EV's than a lie.
Do keep in mind that engine noise is not only beneficial to the driver but cyclists, other motorists and at crosswalks as well.
It's not a problem that is easily solved and satisfied by all parties.
> Do keep in mind that engine noise is not only beneficial to the driver but cyclists, other motorists and at crosswalks as well.
As a pedestrian, I disagree. Cars make far too much noise. People will adapt to them being quieter by using their eyes and looking both ways. I look forward to the day when living in a city doesn't mean hearing a constant drone of traffic.
In Dublin, the operators of our light tram system (the Luas) were forced to add bells after several collisions and near misses with drivers and pedestrians.
Here in the SF Bay Area, we routinely have collisions between our (loud, and belled) train and drivers and pedestrians. It turns out, sometimes people run into trains. Even noisy ones.
You can only see cars when you're facing in the right direction and have a direct line of sight. Sure, if we redesigned every street on the planet to have perfect visibility with no blind corners, there'd be little need to worry. This may involve demolishing a few million towns and cities though.
So are knives, a clearly dangerous object! Knives should be regulated to emit constant noise.
No, seriously, I think you do the blind a disservice. I don't think that blind people rely on, "Hey, did I hear something" to mean, "I can blithely cross the street without danger."
May I present the sounds of a Ferrari Formula 1 V12 from 1994. Turn up your speakers. Get a hair brush ready. All of your body hair will stand up as the wonderful sound of God's engine crawls up under your skin and makes your essence tingle in pleasure. You might want to smoke a cigarette afterwards.
I lived a stone's throw from the Singapore GP for several years. The racket was godawful and basically made the neighborhood unlivable for the three days the circus lasted.
I've completely flipped my thinking on this. Once you start to look at some cars and motorcycles not as vehicles, but as musical instruments, the emotional response and the economics start to make more sense.
> Moreover, it's every geek's dream. You can remotely control the car with a smartphone app, monitor the car's efficiency and performance via beautiful graphs, and even have presets for charging cycles.
Yuck. If that's a geek dream, I'll take the nightmare. Smartphone app? Beautiful graphs? I want raw data over RS-232, csv, text/plain, not opaque layers of App Stores and flashy (unreusable) charts.
I just drove a Tesla Model S last weekend. Here are my perceptions, as I was SUPER curious about the car before I drove it:
Pros:
1) The drive is AMAZING. The car is quiet, it accelerates amazingly, and the regenerative braking is really cool.
2) It feels like the future. The huge computer screen is cool (but distracting, you can go on the internet at anytime).
3) The ability to get software updates all the time is cool when thinking about cars.
Cons:
1) It is impractical for an urban dweller in a condo building: you have to pay for an electrician to come install a special outlet, then pay for the electricity (which is fine if you own a house, getting this through a condo association is a nightmare).
2) The whole time you are thinking about the battery charge. What if you forget to plug in your car at night?
3) For the cost, it lacks feature a luxury car should have: park assist is one feature. The model i drove was around 90k and the more "luxury" features felt like a standard sedan (the leather, the wood, etc). You are definitely paying for the tech.
4) What if someone hits you? How much compared to other cars does it cost to get repaired? The salesperson couldn't answer this.
5) The car is connected to 3G for maps (unless you upgrade) and at some point, you will be paying for this service.
6) You have to plan out where you power up for a trip longer than 200 miles...so annoying.
If you have the capacity or need for a fun, toy car at this price point...check out the Model S. I don't find it practical as a main car in the city.
In California, 1353.9 pretty much requires condo management and similar authorities to accommodate electric vehicles. IANAL, but I have served on an HOA board for my sins. You will usually have to get approval, supply proof of insurance coverage, and pay any associated costs - but it can be done.
Good points, especially the condo thing! The range thing confuses me: How often do you drive more than 200 miles in the city? I live in DC which has lots of far-flung suburbs, and can still take a day-trip to Baltimore (an hour away) and back for around 100mi total.
I see this as a really attractive second car for wealthy commuters. If my spouse had a normal gasoline car we could use for long trips and hauling things, this would be a great daily driver, especially if I lived in suburbia and commuted for 30min a day where having a nice car would make a big difference in my life.
That's not a con for the car, that's a con for living in a condo. The list of things that are impractical for someone living in a condo building could fill a warehouse.
As the population of the world increases housing density will also increase. Hence it is important that Tesla find a way to accommodate people like condos as well as people who rent.
As electric cars become more popular, it will become less of a special request and more of a foregone conclusion that parking will have electric charging capability. It's not terribly expensive to add, as long as the building's wiring is capable of serving it.
The points about charging apply to any electric vehicle, though, and that's where I have trouble seeing electric cars really taking off. The Tesla approach seems great if your only use case is up to 100 mile drives from home to somewhere else and back again the same day to a home where you can easily plug the car in (essentially the typical car commuter). That's got to be a reasonable market now, but I remember seeing a recent article about a strong trend (in younger generations) towards living close to work and not driving or at least driving much less. I definitely fall into that category, and while I do have a car, I only use it on weekends to take trips out of town -- generally to places out in the woods where there will never be charging stations and often far enough that I wouldn't trust a 200 mile range. Unless battery technology gets way better, I just don't see electric-only working for that kind of use case. The Volt makes a lot more sense to me since you always have a backup plan.
Regarding charging stations for urban dwellers, my building (like many new projects in the Seattle area, as I understand it) has a few parking spots that are with charging stations. I don't see them in use now, but if electric cars actually do take off, people are going to be fighting over those few spots.
According to NHTS data, the mean Vehicle Miles Traveled (VMT) per day for Americans is 33 miles. The median is 22 miles. With numbers this low, and steadily decreasing, electric vehicles are viable for nearly all drivers. When small electric cars are comparable priced (taking into account lower cost of ownership) to their gas-burning competitors, things will really start to change.
> With numbers this low, and steadily decreasing, electric vehicles are viable for nearly all drivers.
I guess I should go look at the actual NHTS data, but mean and median might not actually support this assertion. They're way too generalized. As an example: over the past few years, I've driven 4000-5000 miles per year. You could express that as 11-14 miles per day, but that's pretty misleading. I might only drive 40 or 50 days a year, so in reality I'm driving an average of 80-125 miles per day. Not a good fit at all for today's electrics.
I have learned cynicism and skepticism about a lot of media, but Consumer Reports remains one of the few sources -- the only one I can think of offhand -- that I trust without a second thought.
I like their business plan and focus on doing what they do well.
Their reviews mean something (even to someone like me who lives in Manhattan and doesn't drive).
My intention was to distinguish between their product reviews, which are very useful, and their consumer protection initiatives. Many of these will cost a lot and may not justify the benefits. I don't think I've ever seen them make an argument which includes the cost of a government mandate that they favor.
You really shouldn't trust them, especially on cars. They gave different reliability ratings to brand engineered cars built in the same plant with the same parts.
Because too much money makes a company stupid. Look at Paul Graham's essay about what went wrong at Yahoo ( http://www.paulgraham.com/yahoo.html). Same thing happened at GM, too much money for too long turned the culture from creating the future to protecting sacred cows.
What's worse is these big stagnant companies often have access to very large pools of money from the public markets to buy up scrappy competitors and sap their innovativeness.
As a Model S owner I can attest to the awesomeness of the car. Will hit 20,000km in the next few weeks.
Moreover I'm hoping that Tesla will challenge others in the industry to rethink their business model from the ground up. In 2013 why are we still replacing mufflers, why are using timing belts and not timing chains, and why is it that every time I walk into the dealership for a regular service I end up walking out with an even bigger bill than I expected? I get there is always wear and tear on a mechanical component but how many components are there in a typical car that are designed to fail to support an after market industry? I want a car built right and will pay more for that to avoid getting hooked into an industry that has become addicted to model year turnover revenue.
I think the Tesla is amazing, but Consumer Reports is bizarre. I've never been able to grok Consumer Reports car reviews... I remember one year (2003-2004 i think) where they punished Hyundai for some minor cosmetic issue, but white-washed an issue where plastic body panels were falling off a Honda, and gave that car their highest rating.
You could literally buy a similar BMW or Audi and all of the gas that you would ever consume for a price much less than that of the Tesla. And without the limitations of an electric car. Is the driving experience that much better than the other high end luxury cars?
I don't know where to ask this, but does anyone know why they bothered with the front trunk? Was it just to keep the Model S looking like a typical car, so people would be less averse to considering it? Crumple zone for accidents? Seems like it would be unnecessary weight on a car where that would effect range.
Looks to me like they've gone out of their way to make it look similar-but-slightly-different to other cars. I'm sure they did their market research. People expect cars to look a certain way.
I'd expect aerodynamics come into play here as well. They wouldn't just chop the front of the car off, car design has evolved to make them more aerodynamic for a reason.
No offense, at these price points the car better damn well be perfect. When they deliver a car at an every man's price point and score very high then I will be impressed. A year to two down the road and maintain that level of performance I will be impressed. Until then, cars are these price points have large enough margins that extra time and detail can be baked into the process.
The Model S is a full-size high performance luxury sedan, and very price-competitive at ~$100k decked out. It's competitors aren't the Honda accords of the world, but these: http://www.motortrend.com/roadtests/sedans/1301_2013_bmw_m5_.... The BMW M5 is comparably priced at just over $100k "as tested" and the Porsche Panamera GTS is around $150k. None of these are "perfect" cars.
The Model S goes toe-to-toe with those cars that get 14-20 miles per gallon. It's quarter mile time is right between the M5 and the Panamera.
Maybe it's stupid, but measures of how quickly you can haul 4,500+ pounds of luxury car from 0-60 are the coin of the realm in this segment, and the Model S is enormously impressive in this regard. It's a brilliant play by Tesla, actually, competing with high-margin cars that can justify high-budget R&D before working down the line.
Tesla is hard at work taking the knowledge they've gained developing the Model S and applying it to create a ~$30k car, which will be meant for the every man.
Until then, though, I think they deserve some recognition for beating out every car Consumer Reports has tested in their very first attempt at a sedan.
Investors don't work that way. They only care about making money(I know I don't care if tesla succeeds or not, but I'm certainly bearish on it). People are shorting it because it's an impractical car from an ROI perspective. Albeit a very sexy and cool one. Like others have said, you can get a BMW with more features and all the gas you want for less than a tesla(minus the wizbang PC interface) It's yet to be seen if a tesla for the masses will catch on. Maybe it will, but a lot of investors still think this is a fad due to the impracticality.
Remember, sometimes the market does funny things and it takes a long time for fads to die(nintento wii). That doesn't mean that the investors were wrong. It just means the public reacted in irrational ways, which happens with fads.
The gasoline powered car was impractical once, before there were gasoline stations everywhere. That didn't stop the automobile revolution.
Electricity is everywhere. It just has to get into the car. This is not a hard problem to solve if people are willing to pay to get it. And the cost of electricity substantially favors this business model.
Right, so investors have perfect judgement based on rational economic evaulations and if anything funny happens its because of fads and the public being irrational coughcough2008CDOscough
In all cases? no. I thought we were talking about Tesla's and EVs here. The business case doesn't make sense for these when you consider the numbers. It's more expensive and it's less convenient. Tesla is succeeding right now, because a few early adopters who can afford to plop down 60k on a car simply due to it's wizbang features want it to do well. The concern is what will happen when Tesla trys to market this anywhere outside the valley and new york. I'm bearish on this working in places like OK, GA, or TX. Most of us drive a lot more than our counterparts in CA.
That said, I hear Tesla is planning a truck geared towards contract work. Now, that could be a game changer.
Donations, subscriptions, and endowments. There's frequently an ad in Consumer Reports that you can get an annuity through them, so I'm sure some people take them up on that offer.
I'm also assuming they sell the cars after they buy them and test them.
It's definitely a nice car, but it will interesting how much they will adjust the score (if at all) when they revisit it for their long-term use review.
This is my thought: this car has no history, period. I'm unclear as to how Consumer Reports can reliably put out a report on a vehicle that's so new to market with such (relatively) few examples on the road.
I think people really really really want the Tesla to be for real. And I hope it is. But that judgement can't be made until a few years down the road.
Ten thousand vehicles is a very small run. It's a lot for a small company but _relative_ (that being the keyword) to most production runs it's tiny.
It's very similar to what Toyota did with the Prius in the US, but minus the three years of overseas sales where they had the opportunity to work out the kinks of the first generation Prius.
The other thing is that the Model S isn't going to get miled up like a normal car: it doesn't have the range. So a guy like me who never ever buys new cars looks at the S a bit askance: it's cool as hell, I want one, but I'm not going to touch one with a 10 foot pole on the used market for a few years.
FWIW I've been buying options on Tesla, I really want them to succeed and think that they will. I'm betting on it. :)
It's more than any other electric vehicle and they are actually leading sales in their segment of cars.
The market for a 70k+ vehicle might not be as big as you think.
The miles a car racks up is most certainly not a function of its range, but of the people driving it. Research suggests that if you have a more efficient car (higher MPG), you will drive more.
>> It's more than any other electric vehicle and they are actually leading sales in their segment of cars.
More than the Nissan Leaf?
A quick search of the Nissan Leaf's sales resulted in 9,819 in 2012. For this year, YTD in April was 5,550. This is US sales only.
--edit--
Worldwide sales of Nissan Leaf hit 50K in February 2013.
Granted the Tesla is in a different stratosphere as it relates to price, and in that market it's really doing well, considering the market that can afford a $90K car is much smaller.
Most big SUVs are not around that price point. 100k is the price point for high end luxury cars. BMW 7, Mercedes S, Porsche 911, Jaguar XJ are all around that price.
Consumer Reports is part of Ralph Nader's Consumer Union, an extremely left-wing operation. It is inconceivable that a $89k car with a top range of just 200 miles gets their top rating without a bias.
Consumers Union was founded in 1936, when Ralph Nader was not yet two years old. Ralph Nader was on the board for a while but resigned in 1975 because it focused on product testing rather than advocacy.
Why can't the existing industry do this? Why all the mediocre product that's the tail end of pumping billions of dollars into R&D staffed by largely the same folks Tesla has been hiring?
edit to be clear I'm not just talking about electric cars, but cars in general. There's a few Model S's in my area, and they're beautiful.