Electric cars, hybrids, and related vehicles


#381

Yeah, that’s the key. They have to actually deliver the cars in volume.

Really the Chevy Volt is probably the best solution I’ve seen, given my own experience with a Nissan Leaf. The new 2019 Volt has 53 miles of range but has the hybrid gas engine that kicks in to charge the batteries. With a full tank of gas the range is now extended to 420 miles. The list is $33k.

The 53 electric range is good enough for most urban driving. If you can plug it into a three-prong outlet you can have a full charge every morning. That extra range with the gas means you can use it for vacations, etc.

It is a small car, though. Two parents and two teens would be a tight fit.


#382

Tesla also has to learn to actually manufacture cars. Their interiors are generally not assembled well enough for the price, and the overall construction quality is inconsistent. Combine that with the difficulty of getting parts and service out of warranty, and they may well be pushing themselves into a subscription model by default (which may well be what they want).

I really think and have always thought that Tesla’s big contribution would be to jump-start the EV market so that the big automakers would finally devote the resources to competing there. Which is exactly what is happening. The Audi EV SUV coming up, the stuff BMW is working on, as well as VW and Mercedes from Germans, and of course all the work Detroit is doing, plus the Japanese and Koreans…that’s where mainstream EV success is going to happen. Those companies already know how to make good cars, so electrification as a new thing is less difficult for them than actual car making is for Tesla, IMO.


#383

Yes, they do, but the traditional car manufacturers have to learn to innovate to the level Tesla does, which is no small feat. A tesla is an iPhone on wheels, the model 3 in particular. The software updates, coupled with the single ipad-like interface, give you that feeling of a brand new car every few months. That and the supercharger network, making an already long range car capable of cross country trips, are the reasons that tesla will succeed or fail, not faux leather interiors. I think they understand that people spend on luxury not so much for how it actually feels (e.g., the grain of the leather) but rather the way it makes you, and others, feel. Teslas succeed on that front in spades—they are viewed as luxury cars, rather than just being quirky.

Would Tesla be better off if they had better fit-and-finish? Of course. But to the extent resources are constrained (and when aren’t they?), I think they’re focusing on the right things, in the classic Silicon Valley way: innovate, seize market share, get the first-mover advantage in ways that stand out.


#384

Well, I’d argue that innovation is only valuable only to the extent it creates sustainable and profitable products or processes. So far, Tesla has indeed been very innovative and has created some desirable products. I seriously doubt how sustainable that is. Innovation can get you noticed and spark a surge of interest, but you eventually have to deliver the goods reliably over time in sufficient quantity and sufficient quality to satisfy a large enough market to keep the ball rolling. I don’t think Tesla has demonstrated their ability to do that.

True enough. My point would be that a phone is not a car. Musk is banking on their being essentially no difference between the two in terms of consumer behavior, and I think that is dead wrong. People don’t buy new cars every year, they don’t expect them to become obsolete in two years with software changes, and they don’t consider them relatively disposable.

Whether software updates are going to be a good thing or a bad thing remains to be seen. Given the mixed reactions people have to updates on their phones, I’m skeptical. And I’m also skeptical that software updates will make anyone feel they are getting a new car, but we’ll be able to tell over time I suppose. The whole charging situation has been a strength for Tesla, no doubt, but it’s also limited their market niche even more, as areas where there is not a real supercharger presence are probably not going to generate that much demand for the cars. More importantly, the whole e-vehicle infrastructure setup, for all companies, right now is skewed super heavy towards the upper end of the market, if only because you pretty much have to have your own house with a garage to reliably have access to charging. This freezes out, well, probably the bulk of the car buying public. And as Tesla has made no secret that the key to their profitability lies in going more mass market, this is a problem. [/quote]

This is debatable, or at least, open to interpretation. The reasons Tesla customers buy Teslas, I’d agree, has less to do with the interior fit and finish and more with the technology. But that’s a very narrow market niche, far narrower than the broader luxury car niche. I’d argue there are far, far more people with the money to buy a Tesla who won’t because they can get a Benz or an Audi that feels and looks better and makes them feel like they spent their money more wisely. Unless you are really into tech, for its own sake, or are solely interested in the physical dynamics of the cars when flogged hard, Teslas don’t offer much to the traditional luxury car buyer I’d argue, when you consider not only the price but dealer networks, service and parts, ease of ownership, leasing, trades, etc.

Oh, they got the innovator’s advantage, no doubt. But the question is whether they can convert that to something sustainable over the long haul. Apple started with niche, then discovered they could go mainstream by leveraging not just tech but style, performance, and quality. While they’ve sometimes fallen short in one or more areas, they’ve been able to both deliver products that have a lot of appeal that transcends their actual function, and deliver solid, reliable, well-built and attractive products that actually do what they are supposed to do. They also do this with really good margins. Tesla’s margins, as far as I can tell, are not good. The products satisfy in terms of cachet and image, but for anyone just as interested in prosaic function and a standard of quality commensurate with the price, they often fall short. What’s more, there’s nothing I see that indicates they can really address the margins issue. They might need to partner with someone in the way Porsche does by being part of VAG; they are that behemoth’s most profitable units AFAIK, with amazing margins. Tesla doesn’t have the sort of profit adding options structure that the Germans are able to field, and over time their technical, innovative advantage will erode as other big players jump in. I am very curious to see what they do, though.


#385

The future is, of course, vastly unknown and Tesla will need to, as all successful companies do, transform itself over time to sustain success .

But when you view Tesla’s past, I think Musk has largely made brilliant moves, such as going for the high-end of the market from the get-go and saying cost isn’t the main reason to buy a Tesla (a lot of companies have been tempted to tout the gas savings as the main advantage of electric) to focusing on the software as what makes them special. Tesla has shifted the conversation away from the issues of high cost of early adoption and their objective lack of manufacturing prowess to those things where people see value, even in their very expensive purchase, manufacturing warts and all. I think Musk has implemented as well as humanly possible, all his craziness aside.

On the future, Musk clearly doesn’t have a goal of staying niche. My understanding is that the model 3 was always the plan—the bridging car that takes them out of the early adopter niche to the mass market. If they can deliver a reasonable number of 35K-ish model 3s next year, I don’t see any other electric vehicle currently on the market for 2019 coming even close to them. While they’re public, they’re investors are, largely because of faith in Musk, not looking for big profits in the next couple of years—they’re looking for proof of concept on mass market implementation.

Maybe its because I’m too much of a Bay Area guy, but I’m more confident in a company’s ability to learn to manufacture well over learning how to innovate consistently, which Tesla has demonstrated. The second is much, much more unpredictable.


#386

So why are they so much better than the Bolt or even the newer Nissan Leafs which get much better range?


#387

I hear you, and yeah, the future is not something I will predict with any degree of confidence!

I don’t share your optimism about Tesla, however. I do not think they can translate a car that appeals to affluent techies and that lacks a lot of the things mainstream buyers want and need into a mainstream success. Among other things, Tesla lacks a dealer network, reliable parts suppliers for repairs and post-warranty work, a viable secondary market, and really from what I’ve seen any ability to communicate or market cars to anyone other than Silicon Valley aficionados and their ilk. The folks who buy Bolts and Volts and Leafs need and want that robust dealer network, readily available parts, the ability to sell the car easily or trade it in or, if they want, keep it after the warranty runs out and get work done at local non-dealer shops. Tesla has not demonstrated they have the vaguest idea how to sell to the mainstream. It isn’t just cost, it’s all the other stuff, and even on cost, they can’t sell a stripped-down version for $35k when you can get a very well equipped family sedan with good performance and economy for that price.

They’ve been able to do what they’ve done so far because they have an innovative and sexy product that is very appealing to a very narrow niche of buyers (relatively speaking), and a niche that is willing to overlook a lot of things the mainstream is not. From what I have heard, they do not actually make a profit yet. Finally, I don’t see Teslas as luxury cars. I see them as expensive cars. There is a difference.


#388

The performance, in terms of speed and handling, are really extraordinary, so they appeal to the folks with enough money to buy one who also like high-performance vehicles and high-tech stuff and are willing to put up with (or don’t care about) a lot of basic car stuff. For the vast majority of buyers, the Chevy or Nissan electrics are a lot better option for people who just want an economical and nice e-vehicle.


#389

I believe the 35K model 3 is supposed to be 215 miles. Looking at the website, the Bolt is 238 miles, which isn’t a huge difference. Seems like the Leaf extended range is 220 miles, but I don’t see an MSRP for that model, yet.

Performance, looks, proven battery technology, supercharger network, the Tesla name, and the software put the Tesla well ahead of those cars if the price is the same, if Tesla can deliver. Everyone has different opinions, of course, but highly suspect demand for a 35K model 3 would greatly outstrip the demand for those cars. Supply is a whole other issue.

Any EV buyer in 2019 has at least a bit of early adopter in them, still. I think Tesla has the advantage there, big time.


#390

I think a lot of this comes down to how we define “mainstream success”. Will they even come close to outselling camrys and accords in the near future? No. Will they continue to dominate the EV market? Yes, I think they will, at least with respect to demand. I think they will sell every single model 3 they can make in 2019 and probably 2020. How many they can make, and whether they leave too much money on the table due to manufacturing issues is yet to be seen.


#391

I was a bit unclear. When I said the Leaf gets much better range, I meant compared to the older Leafs. The new Leaf has, I believe, a standard 150 mile range but can be upgraded to a longer range.

The Tesla model 3 with 215 is great, but it’s still mostly for urban driving. You’re not taking that car on a 1000 mile driving vacation unless you carefully plan your stops to recharge. So the difference between 215 and 150 for urban driving isn’t that huge. Both get you a couple of days without recharging, maybe more. If I had 150 range in my Leaf I’d be charging once a week only.

The thing about the Tesla 3 is Musk said it would be $35k, which is in the ballpark with the Volt and Leaf. It’s a bit more expensive, but you get a Tesla, which is a bit sexier than a Chevy or a Nissan. But from what I’ve read it’s actually $45k and hard to get because they can’t produce enough.


#392

Oh, yeah, I’m not basing “success” on matching Camry numbers. But I do think they have to actually make a profit on the cars they sell, and so far, they have not demonstrated they can.


#393

45K is the mid-range battery, which delivers at the end of this year. Supposedly, the 35K short range battery will become available in the first half of next year.


#394

I saw an article describing how Tesla does make a profit from the vehicles they’re selling - Munrod & Associates teardown report.

According to the report, the Tesla can get the cost down to $28k per vehicle - it’s not there now due to (what I understand are) inefficiencies related to ramping up production. Which explains why they don’t even offer the $35k car yet. But the plan to offer that “low cost” version is still there. It makes sense for them to figure things out with a higher priced vehicle and then when they can take advantage of economies of scale, to add lower-cost vehicles.

So I guess the bottom line on profits is that they do make a profit on what they’re currently selling.


#395

Maybe. The article you linked also included some skepticism about the report’s accuracy. It would be good news certainly if they could both get the cost down and ramp up production, though it won’t make that much difference unless they can get a handle on QA at the same time. But yeah, if they can start selling cars for under forty large and make money on them, my skepticism would definitely take a hit :).


#396

FWIW, Tesla the company turned a profit last quarter, against expectations, and said it had a gross margin on the Model 3s of “more than 20%”, though plenty of people are skeptical about the meaningfulness of Tesla’s margin numbers.


#397

For the model 3, a lot of their margin is going to be based on how many people ultimately pony up for autopilot, which is purely a software switch on the Tesla side that makes them ~5K of almost pure profit per purchaser. Unlike a traditional car, that purchase can be made at any time by a buyer. So, someone might be in for a 35K model 3, but a year later, they make 5K.

Again, while the market is looking for Tesla to show feasibility of the mass market profit model, they don’t need to make a substantial profit. They’re still largely in proof of concept and development mode and the market understands this. 2019 isn’t about making gobs of money from sales of EVs. I highly suspect that all the other EV car makers are also losing tons of money on their EVs, once you factor in development costs.


#398

Well, the Chevy Volt is dead. https://electrek.co/2018/11/26/gm-chevy-volt-factory-shutdown-electric-investmet/


#399

There’s a pun in there. Somewhere.


#400

Bela Lugosi is Dead?