Streetwise Professor

May 28, 2013

Elon Musk and Ben Bernanke. Separated at Birth?

Filed under: Economics,Energy,Regulation — The Professor @ 6:15 pm

My main issue with Elon Musk and Tesla is government subsidies.  (An issue the WSJ shares, apparently.  Though if commenter David Hoopes is right, they did not arrive at their opinion independently of me, given the echoes between my post and the WSJ’s subsequent oped.  There are definite echoes.)  If Tesla can make it on its own, all power to it.

But I do have my doubts about its ability to deliver, standing on its own two feet.  Though in expressing those doubts, I have to acknowledge that I am in conflict with Mr. Market, who is continuing to push TSLA on its hyperbolic path-up 13.65 freaking percent today.  On what news?  Got me.

My cognitive dissonance is intensified by the litany of bad news coming out about electric autos.  Today Bloomberg ran a long article about the total fail of electric cars in Germany, despite ambitious government targets.  Last Monday, Reuters ran a feature story on how the “road to a greener America is littered with road kill.” And perhaps the biggest news was the liquidation-not bankruptcy mind you, but liquidation-of battery swap innovator Better Place.  This despite $850 million in investment, the support of a major auto company (Renault), and a marketing strategy directed at the most favorable markets (e.g., Denmark, Israel, and Hawaii).

There is a litany of electric car failures.  Perhaps Musk/Tesla can be the exception that proves the rule, but color me skeptical.

Tesla has made waves with its high end Model S.  But Daimler and BMW are about to introduce high end models of their own, and they can certainly beat Tesla on manufacturing cost and quality (given their long history of building luxury vehicles and Tesla’s manufacturing teething problems).  Moreover, the technology is pretty standardized.  People rave about the acceleration of a Tesla, but that’s purely an artifact of electrical motors: the new Daimler vehicle (described in the Bloomberg piece linked above) also has stellar acceleration.

Tesla plans to launch more affordable vehicles, but no one-no one-has succeeded in that space.  The problems inhere in the technology:

“EVs are a really difficult sell today,” the CEO of Toyota’s North American business, Jim Lentz, said in an interview. “Until we see substantial change in battery technology it’s going to be difficult to see EVs really take off.”

Both articles-and many more, to boot-point to a fundamental issue: range and recharging capability.  Here, the failure of Better Place should be truly sobering to the Tesla fan boys.  It was specifically intended to address the range problem through battery switch technology, but sales of electric autos-even in the cherry-picked markets-were too small to make Better Place viable.

And this points out a fundamental chicken-and-egg aspect to electric cars, which in turn helps explain a good part of Musk’s strategy.

The demand for electric cars depends on the availability of charging facilities.  Or, more accurately, the expected availability of charging facilities.  It also depends on the expected speed of recharge, and the expected duration of a charge.

Charging stations seem to be a constant returns to scale technology.  It is easy to expand capacity to reflect demand, just as it was/is easy to expand filling station capacity to accommodate the number of gasoline-powered cars on the road.  Moreover, entry is relatively easy.  That suggests the following simple model.  The number of charging stations will adjust to accommodate the number of electric vehicles.  But this leads to an indeterminacy resulting from a self-fullilling prophecy effect: if a small number of vehicles are sold, there will be a small number of charging stations.  If a large number of vehicles are sold, there will be a large number of stations.  If potential buyers suspect there will be a small number of other buyers, they will anticipate a small number of charging stations, and they will be less likely to purchase (or, more precisely, their reservation price will be low).  If potential buyers think a lot of others will buy, they will anticipate a large number of charging stations, and they will be more likely to purchase (high reservation price).

Thus, there is a bandwagon effect in electric vehicles. The bandwagon works in part through the expected availability of charging services. This has a self-fullfilling element: if a lot of people jump on the electric car bandwagon, it will be profitable for people to invest in recharging facilities.

There are multiple equilibria in these circumstances.  You can have low sales equilibria and high sales equilibria.

This is the perfect situation for a Music Man.  A promoter who gets the bandwagon rolling.  And this is exactly what Musk is trying to do.

Using Twitter in particular, he is trying to convince potential consumers that there will be a huge infrastructure of charging stations, and that these stations will be highly efficient, permitting a recharge in less time than it takes you to fill your SUV with gas.

Several problems here.  The first is that the bandwagon effect may never kick in: it hasn’t so far, despite aggressive efforts by governments to get it started.  The second is that creating a bandwagon is a public good in this instance: even if Musk starts an electric car bandwagon going, given the ability of myriad other auto manufacturers to enter the market, Tesla will only be able to capture a fraction of the sales resulting from the bandwagon.

You might find this analogy a stretch, but I am convinced it is apt: Elon Musk faces the same challenge as Ben Bernanke, and is using the same strategy.  (And hey, the differences aren’t that great.  Without a hair transplant, or plugs, or whatever he did with his pate, by now Musk would be a chrome-dome like Ben!)  Bernanke wants to generate inflation.  His ability to do so depends on his ability to shape inflationary expectations.  There is a self-fulfilling prophecy aspect to this too, and as a result, there are multiple equilibria: you can have low inflation and high inflation equilibria, depending on whether people expect inflation to be low or high. So Bernanke and the Fed have resorted to various public statements to try to shape these expectations.

That is, there is a bandwagon effect in inflationary expectations, just as there is a bandwagon effect in the sales of electric vehicles.  One strategy to get a bandwagon going is the Tinker Bell Strategy: I believe! I believe!  Musk is attempting to get people to Believe! in electric cars through Twitter and other public pronouncements.  Bernanke and the Fed are attempting to get people to Believe! in increasing inflation through public announcements and guidance.

It is a rational strategy for both to follow, given their objectives.  I must say, though, that starting an inflation bandwagon is likely far easier than getting an electric car bandwagon going.  Addressing the recharging issue is a necessary, but not sufficient condition to overcoming consumer reservations about electric cars.  There are so many other limitations on performance that will make people reluctant to adopt.

But I get the strategy.  If you are long Tesla, or contemplating going long, you need to understand what that strategy is and what must happen for it to succeed.  If you buy Tesla, you are essentially buying an option on Musk being able to start a bandwagon, and get the self-fulfilling prophecy to work.

This also explains the need to build a cult of personality around Musk, all the better to enhance his oracle-like status: hence the employment of a Sock Puppet Army, the aggressive attacks on anyone who calls BS on the cars, or the company, etc.

It will either succeed wildly, or crash in humiliating failure.  I think the fundamentals favor the latter, but in a multiple equilibrium world, I can’t rule out the former.

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  1. Sigh, your just not understanding. That is the basic fault of your analyses. You are getting too much into politics and the whole green thing and are not understanding the basic fundamentals. This is why Mr.Market is not agreeing with you. This is also why many green companies fail and Tesla and other of Musk’s businesses are doing so well. Your falling into stereotyping the company rather then looking at the fine details.

    Elon Musk has the micro management skills of Bezos and visionary and charisma skills of Jobs. I will get more into that later but first I want to explain what the other guys are doing wrong and how Tesla is doing it right. I want you to forget your personal beliefs just for a few minutes and read all I have to say from a neutral standpoint. You will soon realize how the difference lies in the approach and how everything works out together.

    Let us start with Better Place vs Tesla:

    Better Place stations cost 500k per station.
    Tesla cost 250k per station.

    Better Place batteries have a range of 100 miles and below thus you need stations every 50-70 miles.
    Tesla batteries have a range of 240-300 miles thus you need stations every 150-200 miles.

    Better Place model requires that they purchase stations in advanced thus every station is a money sink.
    Tesla funds superchargers based on sales, part of model s proceeds goes to funding superchargers. Tesla then prioritizes superchargers in locations with the most model s sales. On top of that, superchargers generate revenue by selling electricity to the grid when not in use.

    So lets rehash, based on the data above, Better Place needs to pay 6x the amount of money to cover the same area Tesla does. Each station built for Better Place is a money sink while all Tesla stations are already paid for and generating revenue for Tesla. Since the superchargers are deployed in locations where the customers buy cars first, most customers will have access to superchargers.

    Now then, your asking, how much does Tesla charge for superchargers per car? The answer is 2,500$ per car goes to fund the supercharger network. So 100 cars fund 1 supercharger. Tesla has already sold over 8,000 Model S cars, that is enough to fund 80 supercharger stations.

    Tesla effectively planned for 100+ superchargers by 2015 and 200+ superchargers in long term. If Tesla continues to sell 21k cars this year. Tesla in just this year alone will have enough set aside for superchargers to cover their long term objective. Effectively, Tesla has all it needs to complete their entire infrastructure to cover the entire USA.

    See Musk has all these stuff figured out and he takes things even farther. The superchargers are built by solar city, the twin chargers are also installed by solarcity and the batteries in the model s are the same batteries used in the Space X Dragon thus even the money spent goes back to funding his other projects. So effectively Musk is not just building a car but an entire ecosystem between his companies. When developing the Model S, it is quoted that Tesla engineers often brainstorm with Space X engineers to solve common problems. They can also bring the costs of R&D down in that way.

    This all stems back to the original plan mustered for Tesla. Instead of trying to build just an EV, Tesla’s goal was to build the best mass produced car in the world. And they have spent 10 years reinventing the entire car from scratch. This is why Tesla Model S is winning so many awards, scoring 99/100 in consumer reports, selling 1 car for every 4 test drives. Even people who hated EVs(and for good reasons) have made complete turn of faith after driving the Tesla Model S. So instead of starting out with a budget EV that is junk like the other guys. Tesla pushed the limits to make a no compromise car. Even if the sticker price was high, it didn’t matter because what Tesla wanted to show that EVs not only can match what people drive but surpass them. This is why there is so much excitement about Tesla. Because they made something people actually want to drive. Not a crappy looking golf cart that can only move 70 miles or so.

    Now let us get to the caveats of the Model S starting with range and infrastructure.

    The biggest problem people face when evaluating EVs is thinking how to drive their EVs as a gasoline car. So they get into things like complaining about charging infrastructure and the likes. And while these things do pose some issues. In reality these issues are virtually insignificant. Even with no charging network, the Model S is just fine. The charging network is just an added bonus. The problem is a simple one. Imagine someone told you today that smartphones will never succeed because they don’t have an Ethernet port to connect to the internet to send emails. You would probably raise and eyebrow and think the person is crazy right? That is exactly the same thing when people argue about charging networks in face of a Tesla Model S. The reason why people who do not drive EVs do not understand is simple, they are used to gasoline cars and are thinking from the wrong perspective. It is like a person who drove a horse all their life thinking how to feed a car hay.

    Let me explain why this is the case. Based on statistics an average american drives a little under 40 miles a day on average(average commute to work is 12 miles). That means that if they charge their car once, it will generally last them the entire week without recharging. Even more, even the fast charging and all is just for the convenience factor. Take a Tesla Model S, plug it into a standard 120v outlet rated at 12A and it will charge back those 40 miles in 7 hours. Effectively, even without fast charging, using a standard outlet your car is fully charged every single day.

    Now the first thing that comes to people’s mind to argue against that is “What if I want to travel over 265 miles?”. To answer that people need to look at statistics. According to the NHTS, 100+ mile trips account for 5.1% of travel, of that 85% of the trips were by car and around 15% were by airplane/train/bus. Which means 4.335% of the trips are done by car are over 100 miles. As for 200 miles driven in cars, those account for about 0.1% of travel. That means the likely hood of an average person traveling over 200 miles is about once every 3 years. That means considering the electricity cost vs fuel cost. It would be cheaper for you to use a Tesla Model S then rent a Ferrari for that 1 road trip every 3 years then use a comparably priced gasoline car (hey, you only live once). And when Tesla releases their 500 miles Model S in 3-4 years with 200+ superchargers in place that can recharge 100 miles in 12 minutes, it will be even less of an issue.

    As far as competition goes, let just put it this way. The new EVs revealed by Daimler, the Mercedes B class were built using Tesla’s technology. The BMWs revealed are hybrids, once the exclusivity contract with Daimler expires on July 2013, it would not be too surprising if BMW jumps on the Tesla technology as well. This is one of the uniqueness of the Tesla technology that has been built from scratch. It allows to cut down on development costs of EVs vs traditional gasoline cars.

    I can probably write a 10 page essay with more details and information. But it is getting late so I am going to have to end this here. Though it is pretty clear here on how Tesla differs from the others and why Tesla is getting so much hype.

    Comment by WeaponZero — May 29, 2013 @ 1:40 am

  2. The car industry is mature and built on incestuous marketing channels and zombie engineers. They spend more dollars on refining shades of silver, or grill patterns, and certainly more on government lobbyists than they do on drivetrain innovation. Color me skeptical, but absolutely no successful electric car is going to come from GM, Nissan or Mercedes… It will come from a startup (like Tesla), a new entrant with the balls to attack to the established order. Daring and bravado are required. The “Innovator’s Dilemma” makes it very clear that the incumbent manufacturers will fail to deliver an electric car.

    It is disgusting that Elon is at the government tit, but that does not change the ripeness of the automobile market to be turned upside down by a daring entrepreneur. On average the auto manufacturers have a 3 year design runway (even APPL is faster), a fat $5000/car sales channel, and pension/union liabilities up the wazoo. The cost gap between an effectively same car in China $5000 and the US $25,000 is simply too great to be ignored by profit-motivated entrepreneur.

    SWP- no argument that Tesla is a lottery ticket with a binary outcome. But if the electric car lottery is not won by Tesla, it will be won by another startup. A big change in car technology is coming (electric, fuel cells or something) and the graveyard of young auto companies is a testament to the inevitability of a disruptive event, rather than the status quo you advocate.

    Comment by scott — May 29, 2013 @ 4:43 am

  3. Apparently, idiot WeaponZero is going to re engineer humanity.

    What you’re missing, dumb ass, is that when and IF the tech is ever there, we’re going to drive our BMW and Porsche EVs not some piece of crap Tesla. Get a clue.

    Comment by Q — May 29, 2013 @ 10:04 am

  4. People really don’t think BMW, Audi or Porsche can make a great EV if they saw a market and/or need for one? I can only assume people who say such things drive Pontiac Grand Ams. Sorry- But I drive 280 often (and a Porsche) and tech money loves German cars even more than they love their toy box Teslas. Look up Porsche sales for Bay Area…

    This is about making Elon rich. It has nothing to do with cars. That’s it. Enjoy your fantasies about your magical boy with hair plugs.

    Oh- and you might want to know what kind of habitual liar he (Elon Musk) is:

    Comment by Q — May 29, 2013 @ 10:13 am

  5. Such a quality guy. So glad everyone wants to make him so rich.

    Comment by Q — May 29, 2013 @ 10:27 am

  6. @Q – It is nice to see that people these days are able to make a point without resorting to personal insults /s

    Re-engineer humanity? There is nothing in the human genome that make people want BMWs/Porsche over a Tesla. Even if the tech is there BMW and Porsche have too much money invested in what they do to just start from scratch. It would be cheaper and easier for BMW/Porsche to license Tesla’s technology like Mercedes did and call it a day.

    As someone who has spent 20 years in the market research field, statements like “I do this, my friends do this thus everyone does this” is 99.9% of the time wrong. This is why when doing any research you have to isolate demographics then look at the big picture. Based on your habits you make up a tiny niche demographic and you buying BMW and Porsche makes no difference to the success of Tesla.

    As far as Musk’s habits or personal affairs are irrelevant to the success of Tesla.

    The problem is your getting too emotional about the whole thing. Emotion leads to poor analyses. You may never buy a Tesla and that is fine, but like it or not the future is heading in that direction.

    Comment by WeaponZero — May 29, 2013 @ 11:55 am

  7. @WeaponZero. Let me say that I totally get the zero part. Totally. Obviously a charter member of the MSPA.

    Your sophistry regarding Better Place vs. Tesla is truly a sight to behold. Spare us the 10 page article. This comment is enough to see right through you. Or through the sock, as it were.

    The cost/unit area is really irrelevant, given that Better Place focused on small, dense markets, as opposed to the US, which is neither. To the contrary.

    200 superchargers? Are you f*cking kidding me? How many gas stations are there in any major metropolitan area in the US? There are about 110,000 filling stations in the US. About 1 for every 3000 people. You are talking orders of magnitude difference.

    And average driving stats mean little. The utility of a vehicle depends not just on your average use, but on the optionality it presents. Sometimes you want to use it to drive 250 miles, or 500. If you don’t have the option, that reduces the value of the vehicle to you.

    And insofar as “mass produced” is concerned, I hardly consider 2500 vehicles, or even 10000/year “mass produced.” The current Tesla is a high end vehicle oriented to the poser rich. The “affordable” Tesla is vaporware. And trying to enter a market where successful producers of affordable cars have failed miserably. But if you believe in Tinkerbell, don’t let me burst your bubble.

    Go ahead and deny reality. Go right ahead. No skin off my a**. Electric cars have been a crashing failure, despite major government support. And they have been an even bigger crashing failure where the support has been lacking-as in Germany. Your meticulous calculations crash and burn on one fundamental fact: despite massive government support, people don’t buy electric cars. Period.

    In economics this is called “revealed preference.”

    Liars figure, but the real figures don’t lie.

    And this part I just love: ” The reason why people who do not drive EVs do not understand is simple, they are used to gasoline cars and are thinking from the wrong perspective. It is like a person who drove a horse all their life thinking how to feed a car hay.” LOL. Drivers just need to get their minds right! Idiot drivers! They don’t know what’s good for them! Got it!

    You remind me of those who claim that socialism has never failed, because true socialism has never been tried.

    Whatever gets you through the day, man.

    @scott. The odds on anyone winning this lottery are damned near zero, unless and until there is a major revolution in battery technology, those odds are going to stay low. There has been tremendous work on this technology for decades, including a lot by the military. The technology has proven enormously stubborn to change. And even if there is a technological innovation, unless that is developed by Tesla and patented, Tesla is not going to reap the benefit.

    The ProfessorComment by The Professor — May 29, 2013 @ 4:20 pm

  8. Mystery Shopping Providers Association? The WeaponZero name comes from a very very old arcade game not that it really matters to this conversation.

    The cost/unit area is revelant because all the superchargers are already paid for, in Better Place’s situation, every station is a money sink.
    Also, I don’t know if you are aware but Better Place restricted that you use only their chargers. This means that charging opportunity is much more limited in general. As Tesla can charge from any charger or socket. (Yes, you could not even charge at home without using Better Place’s system)

    At end of 2012 there was 156,065 (down 1,328 gas stations since end of 2011 and down over 14,000 since 2002 due to many gas stations business is worth less then the land they are on). Would you like to tell me how many outlets there are in the USA, a few billion? Again, in an EV world, most charging will be done at home or at work. The entire concept of a gas station is an outdated model.

    While optionality is important it is a give and take. Buying on the internet you lose the optionality of getting an item on the spot but gain the optionality of having the item conveniently delivered to your home without stepping out of your house, you also gain access to larger inventory. With a smartphone you lose the optionality of having your phone work a week on 1 charge but you gain the optionality of using wide array of apps and the internet. With a touch only smartphone you lose the optionality of a keyboard but gain the optionality of a better fit in your pocket. It is a give and take. Most people tend to prefer to have the every day convenience rather then once in a blue moon convenience. I mean wuld you lease a car if you only use public transportation every single day and only go on a car trip once a year? or will you just rent one when you go that one time?

    Tesla is set to sell over 21k cars a year this year, that constitutes mass production. To be honest even 10k cars a year is considered mass produced. Referencing back to smartphones, most smartphones prior to the iphone were considered vaporware, the iphone was also considered a toy for the rich. Your not getting anywhere with those statements. Even if we forget about the GEN III for a second and Tesla remains to be a toy for the rich as you call it, there is still enough rich people to keep buying Tesla. Again, let us not have our emotions get in the way of the reality at hand.

    I am not denying anything. I was pretty clear in my original post that all the other EVs are junk. The reason why the other EVs did so badly is linked to them being junk. Just because a bunch of guys release junk as afterthought because they are mandated to by the government does not mean that those companies that actually put in the effort to make a real EV will suffer the same fate. If you want to talk about government support, our entire USA car industry has been a failure and has been in the need of bail outs and money. Name me 1 USA car manufacturer that did not take government money. Again, your just making a personal case but have not really evaluated Tesla. Your evaluating your personal beliefs about EVs in general and pushing those negative feelings at Tesla.

    Also, I never called drivers idiots. Ignorance does not signify stupidity. Just because a rocket scientist is not capable of performing a heart transplant does not mean he is stupid, just ignorant on the subject. Luckily this isn’t rocket science or a medical transplant, once you own a Tesla Model S, this information becomes apparent. It is like using a smartphone, once you get it, you never want to go back. (of course I am not speaking for everyone as some people don’t like smartphones)

    You meant to say “communism has never failed, because true communism has never been tried”? Communism and socialism are not the same thing. Communism is the shrinking of federal government to eventually eliminate government, taxes, currency and personal property. Effectively your left in a society where everything is public property and you take what you need. While true communism has never been tried, it is a Utopian concept that does not factor in human greed, for a true communism to exist and work, we would have to be robots. Socialism on the other hand is a by product of capitalism that raises taxes to create safety nets. Thus it prevent citizens from being ejected from the economy. This in turn creates economic stability but like all things there are consequences. Since there is really no such thing as “true socialism” I am guessing you have the statements confused? Anyways lets not get off topic.

    Also to your response to scott, Tesla’s technology is patented. This is why Mercedes and others are licensing their technology. And as I mentioned they use the same batteries in the Space X Dragon spacecraft as they do on the Model S.

    Comment by WeaponZero — May 29, 2013 @ 5:52 pm

  9. Not a wizard at all but I have moved a bunch of metal. Resale value. People like changing cars every few years. How are these vehicles going to book in a couple of years, especially when the new battery model comes out? Spread between new and pre loved very important factor after you get done creaming the market.

    Comment by Michael — May 29, 2013 @ 7:44 pm

  10. @WeaponZero. Musk Sock Puppet Army. Come on. Get with the program.

    Nobody doubts that there are large numbers of outlets, but even Musk acknowledges that charges from standard outlets are too slow, and they aren’t practical for road trips. Which is why he is hyping (does he do anything else?) the superchargers.

    You people should give the smartphone thing a rest. The analogy between the technologies is nonexistent. Smartphones, etc., have ridden the wave of Moore’s Law. There is nothing even remotely comparable in autos, electric or otherwise. Battery technology is the issue, and it is a mature technology that has exhibited a much slower rate of efficiency improvement as compared to microprocessors.

    So your bet is that Tesla will be able to manufacture non-junk cars at an affordable price, and compete with manufacturers with that have huge scale economies, production experience, supplier chains, etc. Design superiority plus manufacturing expertise. This from a company that by its own admission had serious production issues. If that’s your bet, go right ahead and make it.

    Your blathering about communism/socialism misses my point.

    You still fail to address the revealed preference point in a serious way. Take Europe. More environmentally oriented, shorter driving distances, higher gas prices, and subsidies in many countries. Yet EVs don’t sell for squat in Europe. You say it’s the quality of the available cars, but this just gets us back to your bet that Tesla is transformative in terms of technology and performance, and that no other auto company in the world is apparently able to recognize a market opportunity and seize on it. And further, that if Tesla does what no one else has been able to do, it will not be displaced by imitators who can produce and market more efficiently.

    You have done us all a service by pointing out, totally inadvertently of course, the nature of the bet you are making. I’d say you’re better off betting on filling 5 inside straights in a row.

    The ProfessorComment by The Professor — May 30, 2013 @ 8:29 am

  11. @The Professor –

    Right, Musk says that you need supercharger to make road trips. So effectively considering the Model S range and people’s driving habits in the USA, the Tesla Model S has enough range to fill 99.9% of trips without any superchargers. The superchargers exist for that 0.1% that do need them. (Also did you hear the announcement on 100 superchargers will be up next year and that they cut down the time needed to charge?) And this is to add that 58% of households have 2 or more cars.

    That said, most of people’s driving is under 40 miles range per day. Even with a standard 120v outlet you will fully recharge that mileage over night.

    The benefit that the Tesla Model S gives is that is is a better car for 99.9% of the driving needs. Be honest with me, what would you chose, something that makes your life easier 99.9% of the time or something that makes it easier 0.1% of the time?

    Actually lithium batteries have something comparable to Moore’s law. It is not as ambitious but pretty grand on its own. Lithium batteries have been following a trend of 2x capacity and half the cost every 10 years.

    So how is Tesla going to manufacture a non-junk car? It has to do with their patented platform the lets them scale their technology to any car. That is how the Mercedes B class become possible using Tesla’s technology. Tesla right now is testing a new Model S battery that has 500 miles range that will be in the 2016/2017 Model S. If they take 1/3rd of that 500 mile battery and put it in a smaller sedan, a 200 mile Gen III for 35k or less becomes easily possible.

    Now then in terms of competition, at this point the competition is using Tesla technology! The ones who aren’t are making junk cars. To add to it they have to sell through dealers here in the US which causes a conflict of interest as dealers make most of their money on servicing the car. EVs which have virtually no maintenance are unlikely to be pushed by dealers. And those that are will still have to pay the dealer their commissions. To add to that, designing an non-junk EV requires remaking the car from scratch. This is a lengthy and expensive process. It also doesn’t help that the dealers have invested a lot of money into ICE vehicles and like to make back their returns on investments. So in the foreseeable future, I see most of them saving themselves the hassle and just licensing Tesla’s technology. Also Tesla’s factories do not have unions, unlike their competition.

    As far as Europe goes, the answer is again back to the cars being junk. Also, Europe has much better public transportation then we do by average. Like say bullet trains. But overall the market opportunity is relative, by the time the opportunity is big enough for such large companies to seriously react, Tesla will be big enough to play with the big boys. Nobody is saying Tesla is going to own 90% of the entire car market, but Tesla has pretty good potential of catching this transition to EVs to become a major car manufacturer. And best of all, it will be an American Car Manufacturer.

    Comment by WeaponZero — May 30, 2013 @ 3:40 pm

  12. Zero- You are an idiot. Give your Musk propaganda a rest. No one here buying your bullshit or your sock puppetry.

    Comment by Q — May 30, 2013 @ 3:42 pm

  13. @zero. You doth protest too much. Your argument is that range doesn’t matter. So why aren’t people buying electronic vehicles? And spare me the “junk car” bullshit. There are a lot of junk gasoline-powered vehicles that sell in large quantity.

    100 superchargers? Yeah. I heard. I laughed. I moved on. Too few to make any fricking difference, too costly for Tesla to afford-especially given Musk’s promise of free! Free! FREE! electricity. (And before you yammer about the use of solar power, I have two words for you: opportunity cost. Look it up.)

    And re Europe and public transport. Um, yeah. But I go there a lot, and trust me on this-they have a lot of cars. A lot. Virtually none of which are EVs. So even if Tesla has a large share of EVs, 90% of a very small number is still a small number.

    The ProfessorComment by The Professor — May 30, 2013 @ 3:54 pm

  14. @The Professor – I am not saying range doesn’t matter. I am saying that there is a sweet spot for range that is very important. That sweet spot is around 200 miles. This is why Tesla had so little orders for their 40kwh version despite you would think the cheapest one would get the most sales. 200 miles gives you a good balance to go about. And I think I know why(not putting this as a fact, just speculation), As I mentioned before, the average american drive a bit under 40 miles per day. In a 5 day work week you can go a whole week without charging at all with 200 miles. This is very significant because unlike say a Nissan Leaf which gets what? 80 miles? Even as a city car, you forget to charge 1 night and your already at the limit the next day. Even looks aside, that is one of the big things that makes competition “junk”.

    Why would you laugh at 100 superchargers? it would effectively allow you to travel from 1 side of the US to the other on only superchargers, that is significant in its own sense, mostly considering that Tesla promised 100 by 2015 and they are delivering them this year, that is 2 years ahead of schedule. But I think the biggest part of the announcement was that the superchargers now charge FASTER.

    And sorry, I am going to have to yammer about solar power. And I am well aware of what opportunity cost is. First of all, remember that for EVs supercharges are not like gas stations, they exist for the sole reason of long distance travel. Which means most of the charging will be done at home. As far as solar goes, solar has dropped down in price tremendously. If I remember correctly as of 2013 the price of solar panels is $1 per watt and around $4 per watt for installation. Since Musk also owns Solar City, they can install solar panels for reduced prices. Not only that, the solar panels sell the electricity back to the grid. To add to it, the solar powered superchargers are all fully paid for by the model s owners. (supercharger upgrade costs 2500$ for 60kwh and included in price of the 85kwh)

    As far as Europe goes, I don’t disagree they have a lot of cars there. But as I said it does not change the fact that the other EVs are junk. Once Tesla starts fully shipping there, we will see the results. With a Gen III, Tesla will easily be able to sell over 500k cars a year.

    Gasoline cars are not going to disappear overnight by any means. But EVs will steadily grow every year and eventually replace gasoline cars for most consumer uses. Based on current trends in improvement of battery technology, it would probably be around 8 – 10 years before we have a 500 mile EV that has a sticker price of under 35k (assuming we have no breakthroughs). And I think at that point is when most cars sold will be EVs. But the 200 mile EV that is under 35k will serve as a major tilting point.

    Comment by WeaponZero — May 30, 2013 @ 5:41 pm

  15. It’s interesting how a random, negative review of Tesla attracts such a comprehensive rebuttal out of nowhere.

    Comment by Howard Roark — May 30, 2013 @ 7:06 pm

  16. @Howard-Isn’t it? Very reminiscent of how a random, negative review of Russia gets comprehensive rebuttals out of nowhere. And about as persuasive.

    The ProfessorComment by The Professor — May 30, 2013 @ 8:17 pm

  17. @Howard and The Professor – I can not comment how others get here as it may differ for everyone. But I personally got here because these pages were republished on content aggregators. I don’t remember which one exactly, maybe SA?

    Comment by WeaponZero — May 30, 2013 @ 9:43 pm

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