OP-ED: Tesla Increasing Already-Hefty Risks + Online Build Shows $72k Model S Is Tech Vanguard Bargain vs. Accord PHEV at $45k

As my Tweets previewed a few minutes ago:

“When you or I flip a coin, there are two possible total outcomes. When Tesla flips a coin, it lands as a still-spinning Rubik’s Cube.”

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PART 1: DEVILS ADVOCATE DISCLAIMER — OPINIONS ONLY

We have been pretty hard on Tesla recently for a variety of reasons that have little to do with the excellence of the firm’s main product: the Model S sedan.

Before you write this off as uninformed Tesla ‘hating,’ please note a few things about his article right at the top:

 

  • The Model S is ** by far** the best EV ever. It makes the Accord PHEV’s $44,000 price seem absurd. That is just $20,000 below the cheapest Tesla Model S. One is a credible Lexus rival, one is a $44,000 Honda Accord.

    • The Model S is extremely safe, fast, quiet, roomy, innovative and gorgeous on the move.

  • We love startups and, until recently, had deep admiration for Tesla founder Elon Musk’s achievements.

  • We saw some good and some bad startup strategies over the years as well. Since working for Pandora.com from 2007-2009 — I fell hard for small-company logic and reasoning. I thought this might apply at all tech startups! 

    • Little did I know… Pandora’s brilliant original product would make my subsequent employer’s ***actual, defensible*** Intellectual Property look like a crumpled napkin-sketch versus Pandora’s paper mill.

  • Logic and nimble reasoning are a tenant of successful startups only. And that is just one in perhaps 100.

Without a shred of doubt: Tesla is an extremely innovative company with a streamlined web experience that makes ordering a luxury car like a quick bite of a delicious cake.

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PART 2: RETAIL GAMESMANSHIP GONE AWRY

What is gamesmanship? In this Tesla retailing sense, it means blatant disregard for existing laws, under the hope that those laws will all disappear or be changed in your favor.

But, as any person under 40 will confirm, the core insights Tesla leverages with online showrooms and click-to-buy are 100-percent accurate and real.

The big Grand Canyon does not exist between Tesla’s web configurator and dealers — which is a huge relief for younger buyers who are comfortable making large purchases online.

Getting your car all configured on nearly all other manufacturer websites just shunts you back to the dealer locator at the end. Which sucks.

Solve for modern digital commerce and Gasoline(-free) Dreams in one silent and roomy sedan?

Yes. That is Tesla’s plan.

But… This amazing tech disruption is becoming untenable with Tesla’s vaguely-subversive growth strategies.

Aggressive marketing gamesmanship has turned this Eco-darling into an Eco-pitbull, battling and losing rough political battles already in New Jersey, Texas, Arizona and others.

High road only? Nope. Tesla appears to take all roads to meet its selfish ends. Ends that may or may not include Tesla in the car business, some analysts speculate. (Cough, Herbalife, Cough cough.)

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PART 3: PR SPIN-RINSE SEEMS NEVER_ENDING (and sometimes even dishonest)

Sidebar: my real critique of Tesla and company founder Elon Musk is this tri-chotomy in all moves lately.

Or, Maybe ‘quintuple-chotomy’ is more accurate. It is PR 101 that while “publics” are distinct, a consistent and accurate representation is required to all stakeholders.

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What Will Tesla Be Today?

  • ECO-GENIUS? — So brilliant we should all just bow in dumbfound honor and let the company do as it wishes every step of the way?

  • ECO-UNDERDOG? — bruised and under assault by big guys? When threatened by (existing, long-on-the-books) laws prohibiting and halting Tesla’s retail strategy, Tesla plays this card early and often.

    • Tesla operated in New Jersey until now against state-wide franchise laws. These laws protect the huge upfront investment need to franchise any business. It is most definitely not just car dealer franchises.

    • Any Jamba Juice owner will also stick up for Franchisee Rights. Scenario: Jamba corporate wants to start licensing ‘Jamba Lite Stores’ for 1/10th the price these existing guys paid, but offer the very same customers the very same Jamba Juice smoothies at a 50-percent discount.

  • ECO-ANGEL? — When seeking state grants or special status? Tesla dons the halo of Eco-Angel. Just just saving the world one silent car at a time.

  • ECO-THUG? — When feeling flush? Tesla is an Eco-Thug when pumping the stock market or NHTSA ratings.

    • or, in fact, the legal assault on Henrik Fisker who designed the Model S but was sued immediately when he quit at Tesla?

    • or the State of New Mexico and many others who have signed on to all this triple-talk, only to be left behind?

    • or often-misleading tax incentive promises to owners and media, or wildly-fictional business plans for the recent $2B bond issue,

    • or, in fact, actual Model S sales and/or reliability

Part 4: HIGH_VOLTAGE ARROGANCE

There are some huge, huge leaps of faith that come from online ordering — but a totally online experience with this luxury brand. Yes, Tesla may be different in how it approaches retailing — and it may be right, ultimately.

But it also may need to help its finances via Licensing its tech solution to other manufacturers — something Tesla Motors has yet to tap as a revenue stream.

Tesla does not share.

Not even with Daimler, who bought a ten-percent stake only to face pretty aggressive rebuffs on every visit.

General Motors seems to like some of Tesla’s latest moves online — with the Shop/Click/Drive program outlined here and trialed in an upcoming article. But there is a big caveat: The S/C/D Chevrolet’s or Cadillac’s are still generally picked up at the dealer.

This might seem like a trivial distinction, but it is not. State laws protecting franchised dealers were hard-earned by each of these individual business owners over the previous 50 years. Cutting them from the business model is not in anyone’s interest.

A delivered Tesla right at your door sounds great. Until the theoretical problem or maintenance issue that nearly every car eventually suffers. Having your car inoperable and a dealer six hours away is a problem for anyone.

But for a car with a finite range and unproven technology? This might not be Tesla’s biggest problem yet, but we predict it will be. — sooner or later. After all, the first cars are only just approaching their fourth birthdays. At year five, many cars start needing much more than a vacuum and tire rotation. It is no coincidence that manufacturer warranties are largely expired by then.

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This is where franchised car dealers make at least 50% of their operating revenue.

Without any franchised dealers, Tesla might keep a short leash on brand control and/or quell any safety myths, but it also:

A:  Leaves owners without any knowledge or experience having their Tesla serviced (whatsoever in many rural areas)

  • B: Leads to…: Seriously compromised value propositions. A Tesla is then not a Durable, but a throw-away piece of consumer electronics.

  • If a car is not a “Durable Good” like any major household purchase, no one would buy one. Washer/Dryers are only worthwhile to purchase if they last consumers 10,000 laundry loads before failing (for example).

    • C: Leads to…: Failing cars. Without any servicing, this is the reason all of our phones and laptops are on their last legs at their fourth birthday.

      • D: Is Reckless as a Company Because: Disposable electronics are one thing — but few phones retail for $70,000-plus. (In a more-grim scenario: Few phone glitches could ever injure a family’s health.)

My point of all this? The Tesla Model S sedan is a fantastic car. Tesla makes by far the best 100-percent EV ever, and a great value at just $20,000 or so more than the PHEV Accord or a Toyota Rav4EV.

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PART 5: PRICE MATTERS, BUT NOT MORE THAN PRODUCT


Out-the-door pricing with options matters almost more to car companies than to consumers. Consumers like being able to finance nav systems they otherwise would not buy, and car companies like Porsche make billions offering $1000 red seatbelts and such.

Try as they might with dealer accessories, firms like Scion and Toyota have not yet found a successful way of nearly doubling a car’s initial cost with options. For Porsche and Tesla, this is a critical part of everyday business.

Here are two versions of my Model S, with one coming in at about a $72,000 with almost no options. This is before the promised $7500 tax credit that consumers themselves must apply for after the sale closes.

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The other is the super-rapid and longer-distance P85 model, which certainly discredits the old The Simpsons ‘Ed Begley’s Electric Car’ joke, which goes something like:

“I’m an electric car. I cant go very fast — or very far.”

But the real tech bargain of the new eco age? Whisper it — but for at least my needs, would have to be a pre-owned Fisker Karma.

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With a standard sprint of 5.9-seconds to 60-mph, even the base model is 1000-years beyond any current EV.

Time will tell if the Tesla Motors company can keep the EV performance dream alive like Pandora.com for intelligent, web-delivered entertainment.

Or just another Yahoo Music! or Rhapsody. or MySpace. Or LastFM. or Imeem.

The list of good-ideas-gone-bad goes on. And On. And On.

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In closing, the Model S is a fantastic car. But good ideas or products are sometimes not enough. Fingers crossed. 

Now, call the coin toss in the air: Heads!

Further information on Tesla Model S features, specs and ordering information is available here on the Teslamotors.com site.

http://www.teslamotors.com/models/design

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