Nikola Tesla

Car Dealers Should Fear the Tesla Model

I’ve written at length about the American Automobile Dealers Association’s displeasure with Tesla’s business model of selling direct to consumers on a dedicated page on my blog. At this point the reasons for the fight are old news just like the dealer network and way of doing business is from a long-gone era. The dealers are tone deaf to the way consumers shop for and ultimately purchase products. The dealers have a number of stated reasons that Tesla should not be allowed to sell their cars. These are the ones most often stated.

Consumers Won’t get the Best Price

Tim Doran, president of the Ohio Automobile Dealers Association recently said, “If you have a manufacturer that is selling vehicles direct to the public and they are the only source for that particular vehicle, there is no competition for the price.”*

As a sound byte that seems logical. We know from experience that single providers veer away from consumer good and toward corporate profits. However, that happens even when there are multiple makers and suppliers of products and services. For years we only had one telephone company. If you wanted dial tone there was only one place to go, Ma Bell. The Bell System monopoly was broken up by federal mandate in 1982 as part of a consent decree. Certainly it opened up competition by MCI and Sprint for long distance service and eventually to the cellular phone network. It accomplished the goal of offering the consumer choice. Pricing is an altogether other thing. The plans that were made available were impossible for the average consumer to understand. Local rates, long distance rates and my favorite, local-long distance. Then there was the slamming. Calling a consumer and promising low cost phone service and then switching them whether they agreed or not. This strategy is a time-tested one. Offer non-customers a low rate for a fixed period of them them raise the price and they won’t even notice. Built-in price increases without having to publish the price.

Certainly there is an acquisition expense for the company that must be recovered as they calculate their lifetime customer value (LCV), but it lacks transparency and is full of unexpected surprises for the customer. A lower price up front always means it will be made up in some fashion over time. It requires consumers to put considerable effort in understanding the total cost of being a customer for that company and their product or service. Very few of us practice this economy.

Tesla is fully transparent. They don’t make or sell a car. I argue it’s not a car at all. It’s personal transportation. The likes of which has never been seen before. Tesla doesn’t tell consumers they are the lowest cost provider. All options and pricing are right up there on their web site for anyone to see. Configure your Model S and you know exactly how much it will cost when you pick it up. Here’s the real difference. The pricing on car manufacture’s sites have almost no connection with what you will pay when you finally cut your deal. Missing from the car builders’s sites are all the things that dealers will try to sell you and charge you for over time. And it’s estimated that dealers add up to $1,500 to the cost of a vehicle.

My suspicion is the real reason dealers don’t like Tesla is they make a transportation choice that they are unable to compete with. There is very little difference between most internal combustion engine (ICE) cars. Certainly they have varied feature options, designs, technology, etc., but the concept is the same. Thousands of moving parts, burn fossil fuel and carve out your time and money to keep it on the road each year. Dealers have to create promotions and gimmicks to get attention because shopping at Ford is no different than shopping at Chevrolet or Toyota or Honda. It comes down to which car fits your driving preferences and fits within your lifestyle. Not only is the shopping no different, the driving isn’t either.

Dealers are dealers and the experience is essentially the same. Saturn made a run at breaking that paradigm with their fixed price, no negotiation approach. It was groundbreaking and in some ways it worked.

The Model S is an entirely new approach to what goes into a car. That means first cycle technology which always costs a bit more at first but will get better and chapter over time. Trying to win on price is largely for commodity items, like milk and gas-powered cars.

Safety Will Be Compromised

Another item cited as a reason to continue the ban on direct sales of cars to consumers is safety. I’ve read numerous news reports and claims by car dealers that say they make cars safer for consumers. So let’s look at the stats. 22 million cars were recalled in 2013. GM alone has recalled 30 million in 2014. In General Motor’s case the recalls represent a shift toward a more accountable culture. Decades of covering up problems in the name of profit are perhaps seeing at least a peak of sunlight these days, but not without federal action.

My question to the dealers would be, what action did you take to demand safer cars? When Toyota had their unexpected acceleration issue, did you threaten to stop your orders until it was fixed? When customers flocked to your service bays did you band together with your fellow dealers and forcefully demand more facts and change? I’ve not read anything even close to that.

Recall service is paid for by the manufacturer, which means dealers can make money on them. I’m not suggesting dealers want to see people hurt or killed, but for minor things that are not mission critical to safety, they probably don’t mind much. In fact they have changed the word recall to “product update.” When I bought an ICE car for my wife in January of this year, not a word was uttered about safety or taking me through the history of recalls and what was being done to ensure that was a thing of the past.

All Car Manufacturers will Start Selling Direct

Of all the reasons offered up, this one strikes me as the most lame. GM has so many self-made distractions these days, figuring out how to sell direct cannot possibly be high on their radar. First of all having a dealership is only mildly about selling cars, it’s really about selling service. It’s a system designed for customers to come back again and again to open their wallet to “maintain their vehicle in top working condition.” Why would Toyota or Honda or Ford even want to scale up for that? Perhaps I’m wrong and of course I don’t know the P&L implications, but this would likely require a huge investment.

Please remember ICE car makers build ICE cars. Tesla makes electric cars. They are on different planets. The Model S does not require anywhere near the service level that ICE cars require. Imaging having an ICE car and realizing that the only thing you had to remember to do was put gas in it and maybe replace the tires? No oil changes, tune-ups, timing belt replacements, transmission service, et… How many more new ICE cars would be purchased if that was true?

What you Don’t Have to Worry About with a Model S

Mr. Doran concedes that the Model S is “a pretty nice car,” but he says he wouldn’t buy one because there isn’t enough of an infrastructure for parts and service. So let’s make a list of some of the parts you find on an ICE car that you don’t have to worry about with a Model S because it doesn’t need them.*

Parts List

I can see how Mr. Doran is so concerned about needing easy and fast access to parts. With so many of them and that display of a lack of confidence in their reliability, he needs peace of mind. As far as “infrastructure” is concerned, the only one really needed is electricity which is already in ample supply across the country. Charging stations are numerous. ChargePoint, the service I use frequently has over 18,000 stations in the United States. As a quick comparison, there are 14,000 McDonald’s restaurants.

Let’s compare the power plants of an ICE car engine and a Tesla Model S motor.

Engine comparison

Tesla uses a brushless AC induction motor consisting of a rotor and a stator. The only points of contact in the motor are the bearings. It puts out 290 kilowatts and delivers 100% instant torque at any speed and does it using a single gear; drive.

Software as a Service

Tesla is a Silicon Valley company. True, there are issues with how these guys behave these days, but what you get is an entirely new experience and level of performance. When the first iPhone was released in 2007, it was either $499 or $599. Who would ever think that spending that much on a cell phone made any sense? After all, you got your new cell phone free from your provider (after signing a new subsidized 2 year contract of course). Apple sold 6.1 million of their first generation iphones in the first five quarters. It was groundbreaking.

Before I purchased my Model S I test drove a Mercedes Benz S Class. The salesman told me the navigation system was amazing and I could get map updates as well. I asked how that worked and he said I would schedule a service visit, bring in the car and they would update them for about $300. My Model S receives over the air updates and they push new versions of Google Maps to me free of charge. Another stark example why dealers don’t want Tesla’s model anywhere near them.

 

Ford was founded in 1903, General Motors in 1908, , Chrysler in 1925. Tesla was founded in 2003. They have taken the time to reimagine what transportation should be for consumers. Considered the environment while making them. Building in deep safety measures, and breaking the belief that along with car ownership comes the burden of parenting it with repeated maintenance and expense.

* Quote taken from The Columbus Post Dispatch, September 30, 2014

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Owning Model S – Book Review

UnknownThe Model S is in it’s infancy compared to global automotive standards. The Corvette is over 60 years old, this year the Mustang hits 50 and Rolls Royce was founded 110 years ago. In contrast, the Model S is less than two years old, so at that young age there’s not much history to report. We hear almost as much talk about Elon Musk, Tesla Motor’s CEO, and Tesla stock than the car; except that is, from the drivers.

Nick J. Howe is not really an unusual Model S driver, he has just taken it to an entirely new level. He’s been focused on Tesla and the concept of the Model S years before it hit the production line. He and I are in the same camp because we own and drive a Model S, but that’s where the similarity ends. Mr. Howe has been cataloging data, making observations and connecting with other Tesla enthusiasts on forums since the very early days. He has taken all that knowledge and insight and written it down in a book, Owning Model S: The Definitive Guide to Buying and Owning the Tesla Model S. That’s a mouthful. I prefer shorter titles.

The book is modest looking as trade paperbacks go. Glossy but sturdy paper stock covers the shiny pages on the interior. It has that self-published look and feel throughout. Not a bad thing, but I am looking forward to the day when someone will publish a rich, large volume dedicated to this innovation. I’m talking coffee table style. Hardcover, printed in Italy on acid free paper in 12 color. There’s a challenge.

We have all heard the idiom, “Never judge a book by it’s cover.” Here’s a prime example. This volume is jam-packed with details, tips, personal anecdotes and resources that validates the author’s claim as the “definitive guide.”

I was hard pressed to come up with many things not covered in some manner by Mr. Howe. He goes from the dawning of Tesla Motors, to his excitement of the experience of configuring and ordering the car to the excruciating wait (downplayed in the book) until delivery day. This is only the beginning. He goes on to cover every feature, detail and how it impacts everyday use. It’s actually more of a deconstruction of the entire concept than a guide to the car. He’s giddy  over the car’s obvious performance elements but doesn’t shy away from reporting the glitches uncovered early on as well as what he feels is missing inside the cabin. He wants interior brace handles, clothes hooks, cup holders, etc. Personally I love the minimalist expression of the car and am happy the creature comforts of the past were rejected by Tesla designers. The Model S looks like a sexy gas car at first glance, but when you look more closely you see something entirely different. The cool thing is no one really expects it to be an EV.

His writing approach strikes a smart balance between practical and scientific. I use scientific purposely. The technology age would not officially emerge for decades beyond Nikola Tesla and his magical experiments. Tesla was more of a sorcerer and was convinced he could bend the laws of nature to his liking. The Model S is a technology device embedded in a mode of personal transportation and to leave out discussion on these things would be a mistake. Howe breaks down the power train, regenerative braking and the battery into simple English so we can all understand and appreciate what went into designing the car and why it handles like no other.

I learned a lot of little things about the car that I’m now incorporating into my routine or cataloging away for a day when it will be very useful. The getting ready for delivery section might seem trivial, but this is not your normal car and you need to be ready or you will be somewhat frustrated. The writing style is short sentences. Lots of breaks, bullets, illustrations, diagrams and emphasis boxes. It’s feels like a PowerPoint presentation at times, but you can easily find what you’re looking for thanks to an exhaustive table of contents and a good index. I hate it when authors don’t include an index.

One of my favorite items in the book is Decoding Your VIN. It’s the geek in me.

VIN Decoded

One Thing Bothers Me

I do have to say that I would like people to stop referring to supercharging as “free for life.” If you have an 85Kw battery then your Model S is activated for supercharging at the factory. The $10,000 premium paid for the additional electricity storage likely has a predicted supercharger usage factored in. Today’s price to activate supercharging on a 60Kw battery is $2,500. True enough there is no additional cost for plugging-in once you make that one time payment, but if we use Mr. Howe’s formula of 8,000 miles driven equals $300 in electricity cost, then a 60Kw driver would need to plug exclusively into a supercharger over the course of driving 66,000 miles to break even. Unlikely, if not impossible.

I found myself referring back to this book several times to remind me of something or add clarity to what I thought I already knew. Thank you Mr. Howe for doing all the hard work. If you own are will be soon owning a Model S, this book is worth the investment. For me it goes right into the glove box of my Model S. Or should we really call it the J1772 adaptor box?

Roger Pressman, founder of teslaaccessories.com and very early Model S adaptor is to be thanked for recognizing the value in this material and working to get it published.

Get your copy of Owning Model S here.

Read a prior post on another book about the Model S. Tesla Model S: Best Car Ever

My calculations on the Total cost of ownership of a Model S

Tesla: Inventor of the Electrical Age – Book Review

j9941A search on Amazon of “Nikola Tesla in books” will repaint your browser with 1,872 choices. A Viemo search on Nikola Tesla will yield 552 videos across 56 pages. That’s too much content for me to absorb with my busy schedule so I did what I always do when faced with so many choices. I chose carefully.

My choice was Tesla: Inventor of the Electrical Age by W. Bernard Carlson. I selected this book because the author is a professor of science, technology and society and has a long history of being published and well  in the technology field. It was a bonus that his three areas of interest, science, technology and society are closely connected to my interests of society, media and technology, which I write about on my blog Expedient MEANS.

Mr. Carlson is an academic with a strong research ethic and that seemed most appropriate to unpack some of the mysteries of Tesla. I wanted to read through the eyes of a historian who understands technology. I got that in this book.

The book is big at 500 pages including a thorough index. A good index is always a sign of a serious writer. If there is no index in a work of non-fiction we can with great confidence,  proclaim the author is lazy.

I’ve come to realize through the reading of this book and the sampling many others, that Tesla had a magician’s flair trapped inside a brilliant, visionary mind of a meta-physical scientist. I’ll stop short of sorcerer, but part of me thinks he would have liked being placed in that category.

Tesla worked very hard his entire life, tirelessly pursuing his dream to bring wireless power to the world. He was his biggest fan, always looking for just a one more round of funding that would finally close the very narrow gap between his desire and reality. It’s been said that he was ahead of his time. Perhaps he even felt that way.

The scientific man does not aim at an immediate result. He does not expect that his advanced ideas will be readily taken up. His work is like that of the planter – for the future. His duty is to lay the foundation for those who are to come, and point the way.

Tesla worked very hard his entire life, tirelessly pursuing his dream to bring wireless power to the world. He was his biggest fan, always looking for just a one more round of funding that would finally close the very narrow gap between his desire and reality.

He had a rare condition known as Synesthesia. Synesthesia is a perceptual condition of mixed sensations: a stimulus in one sensory modality (hearing) involuntarily elicits a sensation/experience in another sense (vision). Likewise, perception of a shape (number or letter) may cause an unusual perception in the same sense (color). This allowed him to completely design all the details of an invention in his mind and actually run the test or experiment. Since he was completely clear in his mind it often did not fully document his designs and so the Tesla archive is not as it might otherwise be.

It was an amazing life for sure, but not one any of us would likely want to lead. He made perhaps the biggest contributions to the world we share today with our indispensable soul mate, electricity. As I read through the book I jotted down a list of Tesla’s major accomplishments.

  • Mastering Alternating Current (AC). Tesla’s inventions drew interest from the likes of George Westinghouse and J.P. Morgan toward him for investment purposes. Edison was not a fan of AC after seeing men electrocuted by its power. Today’s world is electrified by alternating current.
  • Tesla’s input into the Niagara Falls power project led to that team adopting AC as their power choice to send large amounts of power over long distances.
  • Invented the photographic process for producing X-rays (X for unknown) weeks ahead of Wilhelm Roentgen who is officially credited with the invention. Tesla discovered X-ray photography, but failed to realize it at the time.
  • Tesla was the first investigator of electromagnetic waves which was then furthered by Marconi and resulted in the invention of the Radio. Tesla devised circuits using capacitors and coils that improved Marconi’s invention.
  • Other inventions: Induction motor, rotary transformers, high frequency alternators, the Tesla coil, the Tesla oscillator.

The writing of this book is thorough, but dense. The material is very well organized and written in a consistent style throughout, which for a book of this length and a life this diverse is quite an accomplishment. It’s not an breezy read. One must be determined to learn about Tesla to make it through to the end.

Tesla in France

Tesla lecturing at the French Physical Society and International Society of Electricians (Paris, March 1892)

Mr. Carlson takes us back to Tesla’s earliest years. He recounts a difficult childhood that included the tragic loss of a brother and a challenging sickness. Later Tesla began to blossom while attending Joanneum Polytechnic School in Graz, and his first introduction to electricity and motors. One of his professors said of Tesla.

Tesla was peculiar; it was said of him that he wore the same coat for twenty years. But what he lacked in personal magnetism he made up in the perfection of his exposition. I never saw him miss a word or gesture, and his demonstrations and experiments came off with clocklike precision.

From there Tesla never stopped studying and experimenting. It was the age of the dawning of the magician and he fit right in. He would organize elaborate stage productions to showcase his latest inventions, captivating the crowd with his prestidigitation skills and the magic of electricity. He was viewed as a showman. People didn’t fear him but they did consider him a genius which carries with it a certain amount of eccentricity.

Tesla Receiver

Receiver used by Tesla to detect electromagnetic waves (1890)

To the end, Tesla always believed that wireless power was possible. His work at a Colorado Springs laboratory brought him as close as he would ever be to achieving his dream. But he was not a particularly good businessman and despite his abilities for showmanship, it did not translate well into a cogent story or proposal. His genius just wasn’t taken serious.

He was never rich, but his inventions over the years meant he had ongoing but modest royalties that kept him going through the last decade of his life. Sadly he died nearly penniless in room 3327 of The New Yorker Hotel at the age of 86 in 1943. He never married and there is almost no record of his being involved with a woman at any point in his life.

It’s fitting that Tesla Motors, maker of the pre-eminent electric sedan is named for Nikola Tesla. Elon Musk, CEO of Tesla Motors, is following in the footsteps of Tesla, but doing so with business smarts and Silicon Valley speed. If you want to know more about Nikola Tesla and have some time. I would recommend Mr. Carlson’s book.

The Journey to Model S

I took delivery of my Model S on June 14, 2013 at the Chicago Grand Avenue service center. There has been so much written and said on both sides of the fence about the Model S. Much of the discussion surrounds the stock and it’s meteoric rise since the company went public. The company is under a microscope everyday and each move or stumble is deconstructed and debated. Here’s my Model S. Why is it called a Model S? It’s a nod to Henry Ford’s Model T, but ahead of that invention. S is for spaceship, or my favorite, S is for Steve. Officially, the S is for Sedan. The Model X is crossover.

Model S 2

My last car was a 2003 Acura TL. It was a terrific automobile and I loved driving it. Very reliable, but as with all internal combustion engine cars it required a lot of care and feeding. Weekly stops at the gas station accompanied by an outlay of $60. Oil changes, belts, hoses, catalytic converters, brake linings, transmission and on and on.

I grew up in a family of car guys. One uncle was a racer of sprint cars in the midwest who retired to a career of selling cars. Two others were mechanics, one professional the other amateur. My father did almost everthing on his car and taught me. He owned 37 cars and trucks over his lifetime. So you see gasoline, oil and grease run deep.

I’m the kind of guy that keeps his cars quite a while. I owned a 1993 Toyota Camray for seven years and the Acura for ten. I know what it means to stay in a car and I knew I was going to be driving my next car for ten or more years. I wanted a big upgrade. Early on in my search I considered Mercedes Benz, Jaguar and Porsche. Loved all of them, but they are very expensive once you add on all the options.

The more I read about Tesla the more I became interested. My neighbor received his in March of 2013 and he let me drive it. That was all it took. Well, not exactly. I had to convince my analytical wife. So I dove into the analysis.

Comparing Total Cost of Ownership: Model S vs. an Acura TL

I ran the numbers. I went to the Acura web site and built a 2013 TL with the options I would have included had I purchased that car. I am using the actual price of my 2013 Model S. I feel it’s fair to use the 2013 TL price and not my 2003 TL’s price because I’m buying in 2013. I drove my 2003 Acura TL for ten years and so all of the maintenance, insurance, license renewals and insurance are actuals  Keep in mind I am a stickler for details and kept track of every visit to the dealer as well as kept all itemized receipts. These numbers are dead on. I had to estimate the gas costs so it’s not perfect, but I believe I’m close. Here are the high level results of the analysis.

Ownership Compairson Chart

If you stay in the Tesla for ten years the numbers show that the Model S is less than 1% more costly to own than an Acura TL. That sounds pretty hard to believe, but I have double and even tripled checked the numbers and run my methodology past a couple of PhD’s. They did not find any significant flaws.

Some might argue that I should throw out the personal time investment because it’s not a hard cost. I argue it is the hardest cost because it’s your life, not money. This calculation includes time you will spend waiting at the gas station to fuel your car, time you waste sitting in a dealership for oil changes, regular and unexpected maintenance. I used $50 per hour for one’s time, which is very low in my book. Time is one of our most important assets. We have a fixed amount of it. Once it’s gone you can never recapture it. My father used to say, “Kill time and you murder success.” Why not spend that extra week (yes, 7 days) with your family or vacationing, or working on a project you’re passionate about? Maybe even volunteering.

Here are a couple more things to consider. My 2003 Acura TL cost me $29,480, the 2013 TL is $43,310. Not the base price, but including my personal preferred options. So the Acura has gone up in price 47% in ten years. The Model S will likely become less expensive over time as battery technology improves. It is unlikely gas prices will go lower  but highly likely they will rise.

If we think about a potential “Moore’s Law of Batteries,” they will improve in range and performance and become cheaper to make. The 60kW battery I have costs roughly $10,000. It’s not officially published by Tesla, but insiders say this is a good number. After ten years of driving the TL, I will likely trade it in. If I were to buy another gas car I’d likely pay $65,000 for a comparable automobile. In eight years, when my Model S battery is no longer under warranty, I might visit a service center and have it replaced with a new battery pack. If the cost of Tesla batteries went down in cost 10% per year, that means I could replace my current battery size with a new one for $4,305. And if the range went up 10% each year I spend that money for a 125kW battery pack that could exceed 400 miles in range. I’d have new car, from an energy perspective.

But why would I trade in the TL and not the Model S? One big advantage the Model S has over other cars is the software nature of the design. Tesla has promised at least four software enhancements per year. These upgrades are done over the internet, no need to visit a service center. They add new features and capabilities, improve battery life and make existing features better. All at no cost to me. The reason I may not trade in my Model S is because it becomes a new car 40 times over the ten years. I took delivery of the car in June and I’ve had three upgrades so far.

The next obvious elephant in the room is range. Range anxiety is apparantly running rampant across the country, perhaps the world. The pharmcutical companies have a big business opportunity here. I frequently get this question these days, “What happens when the battery runs down?” I reply with, “The same thing that happens when you run out of gas. My guess is you don’t often run out of gas.”

My commute is very short. Let’s call it a 10 mile round trip. My 60kW battery has a range of 205 miles. That makes me the poster boy for an electric car. However, I know many other Tesla owners that commute 75 miles each day and have been doing it for a year in their Model S. They seem to be just as mentally stable as your typical gas car owner.

It takes my home electrical grid 20 minutes and will use 3.3 kW to recharge that 10 miles. I pay .04999¢ per killowatt hour. So it costs me .16¢ per night to recharge the battery. If I were to make that same commute over ten years, accounting for weekends and days off, it add up to a grand total of $387 for the entire decade of commuting!

Mission Statement

Tesla has a mission. Elon Musk, Tesla’s CEO re-stated it in a recent email.

“Our goal when we created Tesla a decade ago was the same as it is today: to accelerate the advent of sustainable transport by bringing compelling mass market electric cars to market as soon as possible.”

Of course other car companies have a vision or mission statements as well.

  • General Motors: To design, build and sell the world’s best vehicles.
  • Ford: People working together as a lean, global enterprise for automotive leadership.
  • Chrysler: Build cars and trucks people will want to buy, enjoy driving and will want to buy again.To create the type of exciting, efficient, reliable, safe vehicles you expect and deserve.

Ford, GM and Chrysler all sound the same. Tesla is different. It’s a Silicon Valley software firm, which means it moves fast and focuses on innovation.

I will decline to comment on climate change. That debate plays out on many other, much larger stages. What I do believe is that the supply of fossil fuels is not unlimited. Internal combustion engings create pollution. Neither of those points are inaccurate. There’s something very satisfying about driving a vehicle that does not burn fossil fuel and has exactly zero emissions.