Published on March 1st, 2019 | by Kurt Lowder0
Tesla Says, “Where We Are Going, We Don’t Need Stores”
March 1st, 2019 by Kurt Lowder
82% of Tesla customers did not test drive a Model 3 before purchasing it. 82% of them! Why? First, the reputation and quality of Tesla precedes itself. Secondly, as I have written a few times before, Tesla is not just a company; it’s a movement. Some people are scoffing, “Who will buy a car without a test drive?” The answer: people who understand civilization could easily collapse if climate change is not addressed in a timely fashion, and people who want the best vehicle ever made by many accounts.
There is still more to the story. If Tesla had to go on selling personally owned vehicles into perpetuity, it might need stores. However, that is not the case. For the working class, the future is self-driving taxis and shuttles that cost a small fraction of owning, fueling, insuring, maintaining, parking, and repairing a car. Tesla only needs a few more years of early adopters to purchase individually owned cars to fund the future of transportation. In 3–5 years, many Tesla vehicles are going to be needed as self-driving taxis. At some point, it may be a long wait to get a Tesla car again, as an increasing amount of Tesla’s production will become devoted to taxi fleets (perhaps its own).
Thankfully, Tesla has continued to just bite the bullet and take the necessary risks to avert climate change. Tesla could stop, catch its breath, and save up a fat pile of cash before it starts building another factory. However, that just is not Tesla’s style. Tesla is ruthlessly pursuing the creation of a safe, sustainable transportation system ASAP.
Elon Musk recently stated Tesla could be producing 3 million EVs a year by 2023. Let’s go through a simple back-of-the-envelop exercise. A self-driving EV taxi can replace 7–15 personally owned vehicles, depending on how many rides are shared, so Tesla’s 2023 production could theoretically be the equivalent of replacing 21–45 million vehicles. Now, Tesla probably will not have the capital to do that. It will still need to sell some cars. I am just proposing this thought experiment to show how rapidly the world of transportation could change based upon technological innovation alone.
86 million new vehicles were sold globally in 2017. In 4 years, Tesla could be building enough self-driving taxis that are capable of wiping out (but not likely to wipe out) roughly ¼ to ½ of annual vehicle production. As such, buying any internal combustion engine vehicle makes very little sense. It is likely they will depreciate ahead of schedule, whereas a Model 3 should remain quite valuable. A Model 3 owner could sell/trade it back to Tesla, or the owner can add their vehicle to the Tesla taxi fleet and share the revenue with Tesla.
Every Tesla vehicle coming off the line today has the capability in the future to quickly become a self-driving taxi with very little marginal cost to Tesla. It will be interesting to see how many Model 3 owners trade in for a Model Y or a Tesla Pickup, and then to see their Model 3 become a self-driving taxi. Thinking this way explains why Tesla is willing to absorb the cost of installing full self-driving hardware in all Tesla vehicles, regardless of whether the purchaser buys autonomous driving options. A large percentage of Tesla cars being sold today could end up producing further profits for Tesla as self-driving taxis. Of course, owners can always upgrade their cars later on if they do not purchase autonomous features.
Another reason Tesla does not need stores long term: in the near future, most people who want to experience a Tesla vehicle can just go for a ride in a Tesla taxi. Imagine, if they want to see and experience a specific model, they could visit Tesla’s website to sign up for a test ride, conduct on an online tutorial about the car, and the car would drive itself to their home or another location.
On another note, it will be interesting to see if there is another wave of Tesla owner volunteers who start giving away test drives. To a degree, I imagine Tesla owners have been doing this for some time. I could easily imagine Tesla car shows/events where owners gather to take people for a quick spin or at least let them view the interior and play around with the center console screen. If anyone interested in organizing such as event, I would love to cover it.
To those who are members of the Tesla Movement, I share with you a song I played and danced to over and over again last night when I heard the news about the $35,000 Model 3.