Electric cars, hybrids, and related vehicles

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.

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

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.

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.

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.

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.

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.

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.

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.

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.

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 :).

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.

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.

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

There’s a pun in there. Somewhere.

Bela Lugosi is Dead?

That’s too bad. Seemed like a really nice car. I talked to a few owners who loved it.

The Volt is/was a great car. It has an electric range that covers the vast majority of commutes and around-town driving, and a gas engine for extra performance, safety, range. It had a great interior and was quiet.

I think GM screwed it up from the beginning by calling it a Chevrolet when it could have been called a Cadillac. As a Chevrolet people refused to consider it anything but a fancy Cruze for upwards of $30-40K. It was a no-go from day one. The marketing fell from that too, they insisted it was an “everyman’s car, an EV with a range extender for joe shmoe”, but that argument fell flat at a $40K price which can get you a basic Lexus SUV.

But as a Cadillac it would have had the mental separation from the Chevrolet brand, and it would be easier to argue that it’s a technology-driven higher-end platform for a select demographic. In my mind they should have marketed it as a platform without limitations, EV or gas, say as an executive car with a conscience, and technology that you can’t get in any other brand.

Trying to compete with the Honda Civic won’t go anywhere, because it’s an ultra refined product in its own. Tesla is taking a much more logical approach of trying to price, and market, from the top down instead of the bottom up.

I could write a paper :).

These changes are gonna kill GM. As soon as gas skyrockets, which it will do as soon as the Arabs feel they’ve totally destroyed any competition, people will be dumping gas guzzlers and wanting small vehicles or electrics. Wiping out entire divisions within the company with no thought for the actual future is stupid. But then again, GM has been in the stupid boat more times than I can count.

They have factories in China and Korea that can produce American-spec Cruze and Spark as a backup plan.

These plants are unprofitable. Car sales of all brands are down, down down. Everyone is buying SUVs. They basically don’t have much choice.