Tesla Motors

The Used Car Lot, Tesla Style

Tesla has launched a pre-owned sales web site which gives consumers the first ever centralized hub to shop for a used Model S. Mine is closing in on two years and there have been a number of updates and new features added over that time. I would be lying if I said I didn’t think about upgrading. Some owners are trading for the D while others will be coming to the end of their three year lease. It’s a smart move for Tesla.

Their web site is beautiful as one would expect, with the cars neatly displayed in a grid with the key data including miles and price right up front. They are however, not photos of the actual cars. When you click in you see the exterior and interior choices that match the vehicle (presumably), but they are studio shots of new cars.

You don’t get to see the character that cars acquire over time. You get the marketing copy and feature set that is seen when one orders new, but nothing about the condition of that specific car. Clearly I wouldn’t expect Tesla to actually open a used car lot, but what happens if you are not satisfied with your choice?

Preowned Model S

Each car comes with a 4 year, 50,000 limited warranty and 24 hour roadside assistance, but also requires an immediate down payment that varies based on, well, something. Cars require a $1,500 transportation fee to get it to the nearest service center, and the prices are not a bargain.

I assume you won’t be able to apply for the Federal tax break of $7,500, or for your State rebate program if they have one. Most of the cars in the Chicago area which was nicely filtered when I arrived at the site, were 85kWh or P85kWh models. Only two 60kWh were available when I looked, which is what I have. One was listed at $66,950 plus the $1,500 transportation fee = $68,450. My Model S all in with almost exactly the same options (I don’t have supercharging) was $81,020. Subtract the $11,750 in breaks and rebates and you get $69,270. The listed car has 9,204 miles, mine now has 9,978. Not really a bargain for me, but the options and prices have significantly changed since I ordered mine in 2013.

This, along with the lack of PR at launch, tells me Tesla is testing the waters a bit, which is smart. A car manufacturer (also the dealer) is in a unique position. The owner typically wants to move on but the product is still very much viable. They should look to monetize this and I applaud this important step.

But if you are in the market for a Model S, I recommend you order a new one. It’s a keeper.

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Tesla Motors is More like NASA than GM

5, 4, 3, 2, 1, We Have Liftoff

I never get too excited or depressed about Tesla’s stock price. Stock analysts worry, and a lot. I can’t imagine how they ever sleep at night knowing that during those hours they are completely off the influence grid. Because Tesla went public it made a new bed and as a consequence, has at least two major challenges it must constantly consider.

  • Build a new kind of personal transportation that must compete with a 100+ year old industrial age vertical
  • Fund itself through a traditional stock market model while not making what that model values as part of their mission

Disclaimer: I own a modest number of Tesla shares and have for years, but it’s not my retirement plan and never will be. For me the primary investment is the Mission of Tesla, which for now means the Model S. I’ve owned one since June 2013.

The idea that someone would have the courage (and smarts) to start a car company from scratch and be able to differentiate it from all other automakers, as well as their products in every way, was extremely attractive to me. Others have tried, Tucker, DeLorean, but they were trying to compete with essentially the same formula. That rarely works out. In this case we have disruption and not the bullying kind which is what we often see in tech sector firms.

Car Guys are Wired that Way

I was nearly born in a car. My mother used to regal me with the story of how she just barely made it to the hospital. Five more minutes and I would have emerged while in the back seat of a 1954 Chevrolet Delray. Growing up I was surrounded by relatives who raced cars, worked on automobiles, both personal and commercial, and sold them to the public. I remember sitting in my Uncle’s Chevrolet sales room in Ohio while we were visiting one summer and seeing a sign that read, “A new Chevrolet is sold every minute.” Gasoline and oil ran through my veins and I inhaled more carbon monoxide helping my dad in the garage than was probably good for me. For the record, here’s a list of all the cars my father owned. I think it was all of them. The year column indicates when the car was manufactured, not when he purchased it.

Oscar's Car Life

Yes, there’s a very big gap between 1969 and 1982. Completely unexplained. Maybe we both failed to make entries in the diary. Never mind, it’s more fun to call “slacker.” We lost my father to cancer in 1992. He would have been proud to say he preceded his latest car in death by a full year. I frequently imagine what it would be like to pull up in his driveway with my Model S and take him for a ride.

As you can see, my father’s list is heavily weighted toward U.S. carmakers, especially General Motors.The recent stories about how GM covered up defective parts for decades was disturbing to me as someone who rode in, drove and owned them as an adult. The last time I owned a GM car was 1989. I switched because I couldn’t afford to pay the maintenance fees.

 Mission Control, We are Go for Launch

NASA_spacecraft_comparisonWhen President John F. Kennedy challenged America to “land a man on the moon and return him safely” in 1961, it was the catalyst for a series of missions meticulously planned and executed by NASA. Most had doubts we could do it successfully. The ones who believed worked at NASA. They developed a phased approach with three programs; Mercury, Gemini and Apollo. Mercury set out to successfully orbit the earth, study the ability to operate in space and recover both the astronaut and his craft. Gemini’s role was to study the effects of long term space missions on astronauts, perfect re-entry procedures and give astronauts extended practice time in a weightless environment. Once these were accomplished, the third program could begin. Apollo was about landing a man on the moon and returning him safely. I was enthralled with the space program growing up. I held my breath at every launch, was glued to the television for each mission and wondered what would come next.

Palo Alto, We May Have a Problem

Roadster S and XTesla is on a similar path. They started with the Roadster as a commercial prototype that would tell them lots about the viability of an electric car. From that came the Model S, an amazing form of Personal Transportation that won Motor Trend’s Car of the Year in 2013 and was rated the safest automobile ever built in tests conducted by the National Highway Traffic Safety Administration (NHTSA) in the same year. I view the forthcoming Model X, a SUV version of the Model S, together as a stepping stone to the third stage; the Model E. A smaller, much more affordable car within reach of a large number of U.S. households. Assuming they can progress, the Model E will bring them closer to accomplishing the Tesla mission:

To accelerate the advent of sustainable transport by bringing compelling mass market electric cars to market as soon as possible.

The cost of the three NASA programs is hard to pin down, but many sources say that Mercury cost about cost $277 million in 1965 dollars, Gemini cost $1.3 Billion in 1967 dollars and Apollo $20.4 Billion in 1970 dollars. Obviously these number increase greatly when you convert them to today’s dollars. These missions were a stunning achievement and brought innovative technology to the private sector in numerous ways. In other words, we all gained benefit from these programs.

The point of quoting the cost figures is to bring perspective into the discussion. Today’s dollars always appear small when we look back a decade or two. The difference in these programs is that NASA was appropriated the funds from Congress, Tesla must navigate the murky waters of being a public company.

Elon Musk’s release of all of Tesla’s patents was a courageous move. He realizes that no single car company can deliver enough electric vehicles to make a real difference in the planet’s climate. The intellectual property is out there. Others can choose to assist or ignore.

BMW and Chevrolet have purchased, taken apart and reassembled the Model S in their war rooms. Why? Most likely to see how they can defeat Tesla. It’s a competitive game after all, including how Tesla sells its cars. A combined mission here, like the one NASA mounted would be an amazing feat of American collaborative engineering on a level never before achieved, this time on ground vehicles. Automakers coming together, including Tesla, could bring about a change much faster than we could even imagine. I know I’m describing a fantasy in the world of stocks and profits.

Can Tesla really do it? Well, they landed the real estate for the Gigafactory. A great start. I believe it can be done and am pulling for them to succeed. Actually more than pulling for them. I drive the car and and am an ambassador for the brand everyday. I wish them success, not just to disrupt, but to innovate on a grand scale. To change history. A chance like that doesn’t come along all that often.

Image Credits: NASA and Tesla Motors

Is the Tesla P985 D Worth the Extra Cash?

The Need for Speed

Ever since the announcement of the P85D last year, I have been bombarded with questions? Is it really that much faster? Will the autopilot work? Is it worth the extra money?

In December I had a chance to ride (not drive) in a P85D at a special event held in the Tesla Highland Park Service Center. It was a very nice event. Hors d’oeuvres wine and craft beer was available as well as four P85 D’s constantly going for test rides.

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I really love the Highland Park facility. They continually make updates to the building inside and out and the people who work there are super nice. I’ve gotten to know them pretty well over the last 19 months as I stop in for events or to simply chat. But back to the topic.

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I got into the front passenger seat and Dave, my driver, pointed to the settings on the screen and asked, “Do you want sport acceleration or insane?” Really? You’re asking me that question? Okay, how about insane.

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Dave smiled. It was one of those smiles you get when you’ve asked for something without knowing what you’ve asked for and the result will not be what you imagine, at all. He navigated to the on ramp, slowed to a stop and then pressed the accelerator all the way to the floor.

Insane is a very good description. I wouldn’t call it acceleration. It’s more like escape velocity. You are pressed back against the seat and your stomach rises up into your throat. Telephone poles go by like they were part of a picket fence. It is truly a feeling of an “other world” car. My first reaction was wow, my second was, I could really get into trouble with this car.

A Short Test Drive in a P85D. Yes it does bring a tear to your eye.

Of course one can almost never use this type of power because we drive on roads where mere mortal cars roam and of course those pesky rules of the road. If having it for bragging rights is what you’re after, then you will always win that bar bet.

The autopilot sensors were working, reading and displaying the speed limit signs on the center console; as if that mattered. The firmware for autopilot was not yet ready for production, so no deal on seeing how that worked.

One of the most attractive things about the D announcement for me was the 4 wheel drive feature. I’m doing fine in the snow here, but all wheel drive would be a much more useful add on for me and many others as well I’m guessing. When Tesla announce the D they updated their Design Studio section on their site and offered the 60kWh battery with a 4 wheel drive option for $4,000 more. If that was available when I ordered my in early 2013, I would have jumped at it. Soon after they pulled that option for the 60kWh and now offer it only on the 85kWh and PkWh models.

One other downside about the 4 wheel drive option is that it virtually eliminates the Frunk as a storage compartment. The new motor and all the technology and mechanics required to deliver it means you can probably put your brief case or backpack in the Frunk and that’s about all. I assume that will also be the deal when the Model X comes out with all wheel drive. No one will be popping out of the Frunk on any demonstrations on cars with this options.

For me, I can’t justify the extra money for a D. Tesla rates the D with a 253 mile battery range and the 85 at 270 miles. Early reports indicated that the D would be able to make adjustments in how the battery powers the car, and actually deliver more miles. This doesn’t seem to be the supported very strongly based on how Tesla specs out the cars. I would rather have more range with 4 wheel drive as a close second.

It’s so hard to answer a question like “Is it worth it?” It’s always a personal choice. If it’s important to have speed and acceleration and you have the means, then go for it. It also might just might put some 85kWh and P85’s on the used market sooner, allowing new buyers to enjoy the experience.

American Automakers: A Cautionary Tale

The American Automobile

America has done so many things well for dozens of decades. Farming, industrial, health, manufacturing and technology are but a few of the practices that have flourished in our fledgling democracy. You name it we have been leaders. It has been said, “They make airplanes in Everett (Boeing’s primary assembly point), every one else is still working on it.” But as is always case, people, cultures and politics eventually catch up, and indeed in many cases we have been surpassed. The idea of the horseless carriage was truly a global desire. Countries across the world came up with early designs and prototypes, trying to solve the same problem of getting someplace faster and easier.

Henry Ford founded his company in 1903 and once he invented the assembly line, the automotive industry was born. After an amazing head start, American car manufacturers lost their way in the late 1990’s into the 21st century, and are just now clawing back the public trust and loyalty.

Growing up I had two uncles who were mechanics plus one who drove race cars on the midwest super modified circuit. I watched these open-wheeled cars dash around a high-banked, dirt quarter mile oval track every Sunday night. When a back injury forced my race driving uncle to retire, guess what he did. He sold cars. First Chevrolet where he would say that Ford meant “found on road dead.” Then he got a better offer from the Ford dealership and suddenly it stood for “first on race day.” Cars are most definitely part of my heritage. As soon as the new car models were in the showroom, my dad would drive me from dealership to dealership looking under the hood, in the trunk, inspecting the interiors. It was sacred annual pilgrimage.

GM Then and Now

General Motors headquarters buildings, then and now

GM was the only way to go in our family. Once my dad bought an MG Roadster for fun and it literally fell apart before our eyes. Needless to say I was influenced by him and was a charter member of the GM fan club when it came time for me to choose a car. He did all the maintenance himself. Oil changes, brakes, timing, tune-ups, mufflers. Whatever it needed he did and I was right there learning from him.

I gravitated to Chevrolet. My first car was a 1969 Nova that I drove to high school before I was properly licensed. Times were different then. This was followed by two Monte Carlos, then a Buick. Ownership of these cars was annoying. Each car had its own peculiar issue. Some place along the way GM changed the trunk mechanism from a simple mechanical hinge to hydraulic mechanism which was bound to fail. Why make that change? The old design worked fine and never needed attention no matter how long you kept the car. I was young and didn’t have the money to repair all these things, so I just bumped my head every time I put something in the trunk. There were many other problems with seals, transmissions, air conditioning, starting in cold or wet weather, flooding, starters and overheating. It was a part time job to keep these contraptions working.

Losing their Way

In the early 1990’s I was on a business trip to Philadelphia and rented a Pontiac. I don’t recall which model. As I approached the car I couldn’t believe what I saw. Where had the styling gone? No stance, no statement at all. It got worse once I sat down behind the wheel. This was the same brand that gave us the GTO? Everything reeked of cheap, cutting corners, absolute bare minimum. Driving it was the absolute worst. Shaky, no power. It did not feel safe.

A few weeks later I was traveling westward, but this time the rental choice was a Toyota Camry. My reaction was just the opposite. Substantial car. Nice interior, lots of features, clean design. Oh yeah, it was a pleasure to drive. That rental (call it a test drive) didn’t necessarily convert me to buy a Japanese car as much as it made it clear I did not want a Pontiac. Within weeks I was driving a brand new 1993 Toyota Camry.

It’s my belief that you can boil down American’s car problems in the early 2000’s to the following:

  • Arrogance
  • Inertia
  • Lack of consumer understanding
  • Ivory tower syndrome

Arrogance is the easiest to understand, ”We make the best cars in the world.” Like the Boeing quote. End of conversation. One of the worst things that can happen to corporate America is success. It fuels a conservative perspective and stifles real innovation. When I say innovation I don’t mean trying nylon seats on a low end model.

Inertia is more subtle. The assembly line to showroom chain was a finely honed process for American car makers. One of my uncles lived in Lansing, Michigan where there was an Oldsmobile plant. As a child he took me on a plant tour and I marveled at how all the parts came together like a well choreographed production number. They got them off the line and onto the dealer lots efficiently. In 2008 GM alone produced 8.35 million cars with 5.37 million of them sold outside the United States. Worldwide today over 165,000 cars are produced everyday. A well oiled machine to say the least.

Even though cars were a significant expense for the average family, they were still relatively affordable for many years. My father didn’t make a lot of money as an electrical engineer, but he paid cash for every car he ever bought, trading up to a new GM model every couple of years. He was a Pontiac man and loved the sedans. Here’s the bill of sale from his purchase of a 1961 Pontiac Tempest Safari station wagon (the first SUV). Total price $3,249.35.

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The boomers were coming of driving age in the late 1970’s and the Eisenhower Interstate Highway system was in place connecting the vast country. The family car was how you saw America, it was the “vacation transportation.” Women began to enter the workforce and so a second family car was needed. The price of gas was under .50 per gallon. American car barons were riding a very tall wave. All these factors that led to meteoric growth also conspired against them as they pushed the supply chain thinking to the max. This has made it very difficult to rethink or re-imagine a complicated business.

America definitely made cars safer and more comfortable, but it’s hard to see how they thought beyond the next model. It’s as if some guy said, “Let’s try this.” And everyone did it at the same time. There was a brief attempt by Preston Tucker of Ypsilanti, Michigan in the late 1940′s to create “The Car of Tomorrow.” It was successfully stopped on trumped up Securities and Exchange Commission charges.

The Japanese were successful in creating electronics. Sony with the walkman and perched to take over the premium television market from Philco and Zenith. The next frontier would be automobiles.

That brings us to lack of consumer understanding. Remember my trunk story? When Japanese automakers found a part or design that worked well, they kept it. As a result the quality of their products improved over the years. They mastered manufacturing excellence and incorporated cumulative learning into the process. This allowed them to focus more on the consumer driving their cars. Honda and Toyota pulled off an amazing marketing feat. They used their management and production methods to raise quality, and their vision and research to gain an amazingly strong foothold in the U.S. They gave boomers the Honda Civic and Toyota Corolla as they entered their 20′s. Reliable, efficient, affordable, low maintenance and long lasting cars. Once the boomers became established in careers and began to accumulate disposable income, they gave us Lexus, Acura and Infiniti, just as we were looking for more luxury and prestige. Brilliant.

Meanwhile American car companies knew they were in trouble and trying to manage brand strategy and find the quality recipe. The boomer’s parents (at least the dads) pretty much stuck to a few brands, but everyone of them ended up in the repair shop with all those annoying problems. Oh by the way, they cost more and didn’t last as long. American car companies were on an internal corporate hamster wheel and it was out of synch with consumer need states. When you give consumers similar choice they will freeze because they can’t see differentiation between them. Offer them distinct choices and you will reshape how they think and widen their consideration set. It didn’t hurt a bit to see all those Japanese cars on the road. It took a while for Toyota, Honda and Nissan to be taken seriously, but once U.S. consumers saw that this different was better, it was all over.

The “Buy American” anthem was hatched to try and hold off the outsiders. How dare you buy a car made outside the good ole U S of A? So the Japanese opened state of the art factories in the states. Buying American is great and people would love to, but it would have been much better if it was “Buy American because it’s better,” and actually true.

Now the oldie, but goodie, the ivory tower syndrome. American car execs drove their own car brands and models to work each day and never had any problems with them. “What are all these people complaining about? These cars are fantastic.” Well first of all they always drive new cars. American cars will get you down the road pretty pain free for the first year (12 month or 12,000 mile are the mystical numbers). Second, when they parked in the headquarters garage a team of mechanics would swarm their vehicles and make sure all was in perfect working order. Hmmm, maybe that had something to do with why the cars were in tip top shape. The execs should have given themselves 3-5 year old models to drive and forced to maintain them the way everyone else had to, by making an appointment with a dealer and finding an alternate means of getting to work.

Consumer Reports Auto RankingsDespite the positive changes by American carmakers over the last several years, a 2013 Consumer Reports survey shows that there is a ways to go. Ford in particular has struggled to satisfy their customers and the culprit seems to be the “synch” technology which has been a cornerstone of recent advertising. Microsoft was hired to do the programming and the interface has baffled a lot of consumers. Ford is searching for a new software platform. GM, Chrysler, Chevrolet, Cadillac and Dodge all faired poorly in the recent rankings. Lexus, Acura and Audi held the top spots among the established manufacturers. The recent troubles with GM’s ignition problems in the Colbalt and other air bag issues will be a challenge for their new CEO Mary T. Barra. Personally I was thrilled that Ms. Barra is the first woman to be elevated to CEO status of a major car maker. Perhaps the most storied one at that. I wish her nothing but good fortune.

I don’t believe that any carmaker is purposefully putting safety aside. The larger problems my lie in the communication and culture of GM to quickly identify and begin to correct problems, even if they seem inconclusive or could pose a risk to profit. For the record, Tesla scored a 99 on this Consumer Reports ranking.

Making a Change

I had my 1993 Toyota Camry for seven years, drove it 118,000 miles and never once opened the hood myself to check the oil or troubleshoot a problem. It never saw the inside of the shop for anything except normal maintenance. It never, ever failed to start, even in the harsh Chicago winters. This experience showed me that car ownership can be better.

The 1970’s oil embargo and eventual energy crisis forced firms to downsize cars and improve mileage. But America quickly forgot about that; longing for bigger and faster. So on came the SUV, the rebirth of the V8 engine and the era of monster cars and trucks. Remember the Hummer? When looking at profit margins on those vehicles vs. other models, it made great business sense to U.S. carmakers to continue to build and promote them. Wall Street liked it too. The quality and styling of American made cars has come up nicely as of late. The dealer experience has also improved as a formal customer satisfaction scorecard has come into play.

I traded my Camry for a new 2003 Acura TL. I would have been happy to trade for another Toyota, but their designs at that time were so boring and not at all fun to drive. The experience I had with my Acura was similar to the Camry. Reliable at a relatively high level. I did have to replace the transmission, but Acura subsidized that repair at an acceptable level. Bottom line, it never failed me.

The success of outsider car manufacturers sharpened the short sightedness of U.S. carmakers. I still think they were in denial and felt no real harm could come to them. The price of oil continued to rise which began to spur more conversation about alternative fuel cars. American car companies have tinkered with alternative fuel cars. The Chevy Volt became the first serious contender to the Toyota Prius. Sill these are hybrid cars that have gasoline engines and need to be maintained with oil changes, tune-ups and other items. the full gain of electric power is not realized.

The Electric Vehicle

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General Motors EV1

From 1996 to 1999 General Motors built 1,117 of an all electric car called the EV1. You couldn’t buy one, you had to lease it. For the 800 or so who did they became instant lovers of the car. Alas, that love did not last as GM put an end to production and repossessed them, eventually crushing them for recycle scrap. Many felt it was borderline conspiracy to keep oil and the current system in place. GM always said it was an experiment. The EV1 was a concept car and no promise was ever made to mass produce it. They built it because of toughening emission laws, especially in California.

The Toyota Prius, a hybrid, has sold over 3 million units and the Nissan Leaf is the bestselling highway capable vehicle of all electric cars to date with over 100,000 of them on the road as of January 2014. There are no less than 18 EV models available globally with more on the drawing board.

The Invention of Tesla Motors

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The Model S

Along came Tesla Motors in the early 2000’s with a mission to advance the adoption of all electric vehicles. It was named for Nikola Tesla, a mad professor of electricity who was Thomas Edison’s contemporary and very much underrated. They built the Roadster, an expensive two seat sports car as their first production model. They needed to start somewhere and so this was their choice. I personally know three people who own them, one for over eight years, and they absolutely love it. But this was not the car for me. I love sports cars, but I wanted something more in the luxury family, larger, but just as fast.

The Model S was announced and I was all over it. After watching the company and car development closely I was beginning to feel this might be the one for me. I drove my neighbor’s last spring and that was it. I configured it online and 32 days later I was driving one home from the Chicago service center. A grey 60kw Model S with tech package and panoramic roof. I have been all smiles ever since.

Imagine a car where you have no engine, no oil, no radiator or starter. No fan blade or belt. No tailpipe, catalytic converter, muffler and therefore no exhaust. No gas tank or fuel line. No drive train, transmission, spark plugs or any scheduled maintenance. All those burdens that come with gas car ownership are absent from the Model S. All that space and expense can be given back to the engineers to start from the ground up. It’s a marvel. The Model S is German elegant, Japanese sleek and American powerful.

The car was designed and is manufactured in Fremont, California. All American. It is clearly the dawning of a new era of car making in the U.S. There was no way GM or Ford or Chrysler could have made this car. That’s like saying Sears could have been Amazon. Not possible to disrupt that much from inside a long standing company with so much owed to the past.

It is an expensive car and not in most people’s price range, but sticker price is no longer how we should measure the cost of a car. When assessing the price of a car it’s important to remember all those things you have to do along the way. Take at look at my post on the total cost of ownership between an Acura TL and a Model S. You will be surprised.

Personal Transportation is the Future

In many ways early adopters of EV’s are funding the research and development needed to take the required steps to cracking the code on new car technology. As I look back on my father’s car ownership record, he owned 41 cars. I prefer to support further EV development. If it comes from GM or Ford or Chrysler then great. But Tesla is pioneering the new way forward. It’s no longer an automobile. It’s now Personal Transportation. Brilliant software integrated into superior hardware, both working together to make the experience the highest level it can be.

It’s the best car I’ve ever driven.

Made in the United States

Tesla Motors is an American company. The Model S is designed and assembled in the United States. Fremont, California to be exact. The factory was originally called New United Motor Manufacturing, Inc. (NUMMI). A joint venture between General Motors and Toyota that did not succeed. Tesla Motors was able to secure this massive plant at a significantly reduced price. One of the things that helped make the Model S a reality.

National Geographic has made a series of megafactories documentaries and covered the Tesla story.

Supplier Business posted this PDF of the suppliers to Tesla in order to build the Model S. I’m sure it was a point in time and this will evolve.

Model S Suppliers

Tesla Motors is a Silicon Valley software firm that makes hardware and it happens to be a car. Sorry. It’s not made in Detroit.