Tesla Flashbacks, Take 5
I recently had some fun digging up old Tesla news and putting it in the context of the company’s progress to date, which can make it fascinating. I’ve also elaborated on 11 years of hyped up FUD about Tesla and claims of its imminent demise for the past decade. And I’ve explored 8 “impossible” goals the company has achieved. I forgot, though, that a reader sent along a list of his own favorite reminders back in October. It’s a great list as well, so I’m writing about it here for another round of “Tesla Flashbacks.”
In 2012, an IHS analyst seemed to kick off FUD (fear, uncertainty, and doubt) connected to the idea of Tesla killers before anyone I know of threw around the idea. He said, “several factors remain that work against the company, not the least of which is a major competitive disadvantage against efforts being made by major automakers, despite the massive influx of cash that Tesla has enjoyed.
“The $57,400-and-up $64,900-and-up 2012 Tesla Model S will be a curious proposition for a luxury-car buyer. It enters a segment (mid-size luxury sport sedans) that doesn’t see huge volumes–and one in which brand loyalty tends to be strong.
“Tesla likes to suggest that the Model S is unique and will set itself apart from competition that includes stalwarts like the BMW 5-Series, Mercedes-Benz E Class, and a dozen other models.
“Perhaps it will—if Tesla’s sales goals are not terribly ambitious, they could be met. It’s possible to sell a few thousand of anything in this country, on novelty value alone. IHS Automotive forecasts that if Tesla can get the car to market, it will likely sell at least a few thousand.
“But the idea that Tesla could sell tens of thousands of Model S sedans in the U.S. is folly. The most popular vehicles in that segment only sell a few tens of thousands themselves, with some models–Audi A6, Jaguar XF, Lexus GS–well below 10,000 sales a year.
“Remember that hybrid vehicles themselves, which are far easier to own and operate than pure electric cars, are still just 2 to 3 percent of the total U.S. market. And a recent Deloitte & Touche research note suggests that whether car buyers actually want electrified vehicles is still a matter of some debate.”
Folly indeed. Was that guy really getting paid for his analysis? Well, of course he was, as were countless other analysts saying the same thing.
I have to admit — I’ve been on a number of conference calls with industry analysts in which I was clearly in an “extreme” corner and basically there to be the “pro-Tesla” voice of the debate. As it turns out, my points bore much more fruit than the others I’ve heard over the years.
In the same interview, though, the analyst highlighted Tesla’s impressive level of vertical integration and in-house part production as well. “I wasn’t aware how much of the technology in the Model S was developed in-house.
“Tesla makes nearly everything on the Model S itself. The exceptions are some of the trickier bits, like the pedal box and steering column, which it gets from Daimler. Tesla even makes its own molded plastic parts, using machinery left by Toyota at the Fremont, California, assembly plant.”
That in-housing and ingenuity led the analyst to believe that Tesla had a better chance of survival than he once thought.
“I still think that as an automaker, Tesla needs to have a partner to survive long-term. But it has actually demonstrated that it can find partners who are interested in further tie-ups, and also that selling its own cars is not the only avenue to making money.
“I remain skeptical, however, about the market chances for the Model S and the actual demand for a $57,400-plus $65,000-plus all-electric sedan from a relatively unknown brand, when compared to the modern and future competition.”
In 2014, CNN Business/CNN Money (is there a difference?) came to the brilliant conclusion that Tesla sales were cooling off. “Tesla forecast that it would sell 35,000 of the Model S worldwide in 2014, but sales tracker Autodata estimates that U.S. sales in the first quarter rose less than 1%. … Investors are increasingly concerned about a decline in 2014 North American deliveries, according to Adam Jonas, auto analyst with Morgan Stanley.” Global sales of the Model S are now ~50,000 a year, as are sales of the Model X, and sales of the Model 3 are much higher. Those nail-biting analysts seem to have been worried about nothing.
In April 2015, one tech journalist offered a rather hilarious take on the Model S compared to new plug-in offerings from BMW. He drove a BMW i8 for a week and got a lot of attention for it. He didn’t seem to get any attention from Tesla drivers, and then came to some odd conclusions about that. “There was, however, a curious exception to all of this techno-worship: drivers of the Tesla Model S. Others rolled down a window, snapped a photo, or simply asked what it was. I shared a few fist bumps with owners of the BMW i3 and even the Chevy Volt, two other electric cars. But the Tesla drivers studiously avoided eye contact. I encountered two or three dozen over the course of a week, but no Model S driver ever acknowledged my car’s existence—a gnawing insecurity was inescapable. Tesla Motors practically invented the concept of the eco-supercar—at least at a consumer level—and it has dominated the sector for three years. But next to BMW’s i8, Tesla bore the patina of age.”
Haha. Did the writer really think Model S drivers didn’t look at him or the i8 out of insecurity? They most likely didn’t acknowledge the i8 because it doesn’t compare to a Model S in numerous key ways. That helps to explain why historical i8 sales look like a spec of dirt next to the hill of Model S sales to date. I honestly wonder if the writer ever drove a Tesla Model S before writing that.
Going on: “But BMW’s i-series, which launched in Germany at the end of 2013, has obliterated any doubt as to whether Germany will be a contender in what I call the Great Race for electrification. Indeed, although Porsche sells plug-in versions of its Panamera and Cayenne SUV, the i8 is arguably the first real challenger to Tesla’s eco-chic Model S.” I could create a sales chart to demonstrate how laughable that idea was, but honestly, it’s not even worth the time. The i8 is a pretty car and is fun in its own way, but it’s no Model S competitor and never had a chance of being one. (For the record, I own a BMW i3 and love it, and do love the styling of the i8, but the reason I have an i3 is that its selling price on the used market was so far below its original MSRP that it felt like a steal for such a fun car.)
In a 2015 article on BMWBlog (which, admittedly, is inherently going to be pro BMW), the writer was enthusiastically covering an experimental BMW plug-in hybrid with oodles of power. He wrote, “Now if/when Elon Musk hears about this, he will inevitably point to the fact that not only is ‘The Thing’ experimental and he has experimental projects as well, but that ‘The Thing’ uses a gasoline engine in tandem with electricity while the Model S does not. However, I think that’s a selling point for BMW’s technology as over the Model S. Plug-in hybrids offer more flexibility as they can be filled with gasoline as needed, so range anxiety no longer exists. Although, Mr. Musk claims to be eliminating range anxiety, there’s simply no scenario where a pure electric car has the range of a plug-in hybrid.”
If you read CleanTechnica regularly, a certain story I published last weekend might have popped into your mind reading that. It turns out that Tesla sold more Model 3s in 2018 in the USA than all other automakers sold all of their plug-in hybrids. The Model 3 didn’t just crush BMW’s plug-in hybrid models. It crushed BMW’s + GM’s + Ford’s + Daimler’s + Toyota’s + Honda’s + Chrysler’s + Mitsubishi’s + Hyundai’s + Kia’s + Volkswagen’s + Audi’s. Tell me again, how does a plug-in hybrid powertrain compete against a well designed fully electric powertrain?
In August 2015, Reuters hyped that, “The Silicon Valley automaker is losing more than $4,000 on every Model S electric sedan it sells, using its reckoning of operating losses, and it burned $359 million in cash last quarter in a bull market for luxury vehicles.” Of course, that was a misrepresentation of the story, or a misleading way to communicate what the company was doing. Tesla was selling thousands of Model Ss per month, each of which was making the company money. (In fact, Tesla has long had fairly high gross margins on the Model S.) At the same time, Tesla was investing a ton of money into rapid growth, continuous development that would lead to where it is today — selling tens of thousands of cars a month and profitable.
Going back no further than February 2016, we have to end with one of our favorites. That would be Bob Lutz, the former vice chairman of GM (among other things), claiming that the Tesla Model X would be impossible to build and that Tesla’s whole business model didn’t make sense. “Tesla’s business model is upside down…their costs have always been higher than their revenue,” Lutz told CNBC. “They always have to get more capital, then they burn through it.
“While [Tesla’s] car is excellent, the business has always been lousy. Now, it’s super lousy because the generic demand for electric vehicles is down. And here’s why this is going to kill Tesla: whether there’s consumer demand for electric vehicles out there or not, the major OEMs like Ford, GM, Toyota, Volkswagen … they have to build electric cars — a certain number — in order to satisfy the requirements in about half of the states. Those have to be jammed into the marketplace, otherwise they can no longer sell SUVs and full-size pickups and the stuff they really make money on. That is going to generically depress the prices of electric vehicles. …
“The Model X appears to be unbuildable with those automatic gull-wing doors, which everyone in the industry always said were not going to work.”
The year before, Lutz said that Tesla faced “[the] trifecta of doom … bleeding cash, securitized assets, and mounting inventory.”
Shhh, nobody tell Bob that Tesla now mass produces the Model X (selling ~50,000 per year), the doom dissipated and profitability took its place, other automakers still aren’t competing with Tesla, demand for electric cars has risen rather than dropped, and Tesla’s business model seems to be very right-side up. Oh yeah, also, Tesla [TSLA] is now worth more than GM on the stock market.
Okay, let’s be fair for a moment — it was easy to not understand Tesla’s advantage and inherent prowess back in the day, or even a few years ago. How could everyone know what Tesla was capable of and why its vehicles were and would be so much more competitive than those of other automakers? Well, actually, many followers did understand all of that. They were often called brainless, Kool-Aid drinking, cultish fanboys. They were discounted by analysts and “auto experts.” They were pushed into a dark corner by most of the media. (Actually, it’s hard to think of any major media outlet that didn’t assume we belonged in a dark corner.) We explained the advantages in the specs, in a well designed electric powertrain, in a fully electric corporate focus, in constant hardware and software innovation in rapid development cycles, in Tesla’s in-housing of core components, and so on. But we were just fanboys. What else would we say?
Perhaps with this next round of Tesla targets it’s time for the major media to spend time learning from those people who know the most about Tesla, and can provide an independent voice on the company without throwing in unwarranted pessimism. Or just keep on doing what you’ve been doing.
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