I don't think it's much of a risk. They created a product that is way differentiated from every other car out there and people want to buy it. It's like seeing the iPhone for the first time, and all the other flip-phones out there is simply just not enough anymore. They will succeed. If I'm in the market for a new car, I would totally line up for this one.
This is where I disagree with most people who are bullish on Tesla. I think there's a huge risk for Tesla that most people don't factor in- that it's very possible that most car buyers simply don't want one. The interesting thing about that is that most people seem to assume that making them at enormous scale and meeting the overwhelming demand is the only risk. What a century of observing the auto industry has taught us is that car buyers in huge percentages have fierce brand-loyalty and that anytime a new model is brought to market there's a huge uphill battle to create demand.
That's not to say that lots of people won't want a Tesla, clearly there's evidence that there's a market. But it remains to be seen whether that's a niche market or the better part of the auto market. To justify the current valuation, you'd have to believe its the latter.
Comparisons to the iPhone seem oversimplified. The iPhone on pretty much every metric was demonstrably better than every other phone on the market, and by a huge margin.
Tesla is better on some metrics- doesn't rely on fossil fuels, has some cool technology, and is a novelty because there aren't that many of them on the road.
But on most other metrics, there are lots and lots of better options. Some have more power, some are much cheaper, some have more storage space, and some simply have better brand awareness and loyalty.
Again, not suggesting that they aren't developing a great product. But there are huge risks to the survival of this company beyond cash burn that I don't think people are taking into account.
They have half a million reservations for the Model 3, despite putting essentially no effort into signing people up, and spending the last year or so actively anti-selling it. They're currently adding 1,800 reservations a day, despite the fact that someone reserving today probably won't receive their car for 18 months or more.
I agree with your point as applied to a hypothetical generic car company launching an unknown model, but in this particular instance there's good reason to believe that Tesla will be able to sell every car they're capable of building.
You compare it to the iPhone saying that the iPhone was better on pretty much every metric. That wasn't the case at all. The original iPhone lacked 3G connectivity, support for more than one wireless carrier, support for CDMA networks, GPS, third-party apps, hardware keyboard, user-swappable battery, decent camera, FM radio tuner, multitasking, and removable storage.
The iPhone eventually gained many of these features, and most of the others turned out to be less important than people thought they were. But that was very much not obvious at the time.
one wireless carrier, support for CDMA networks, GPS, third-party apps, hardware keyboard, user-swappable battery, decent camera, FM radio tuner, multitasking, and removable storage
I don't know about you, but my clamshell Samsung flip phone didn't support any of that except a user-swappable batter and removable storage, both of which I would argue are not net positives, but negatives as they increase the form factor of the phone.
Also, what of the 65k or so of cancelled reservations for the Model 3?
Why are you comparing to your clamshell Samsung flip phone specifically? You said "The iPhone on pretty much every metric was demonstrably better than every other phone on the market" so I'm comparing to every other phone on the market, not one specific low-end model.
Every feature I mentioned there existed in contemporary smartphones. I even looked them up! The iPhone got a ton of criticism at the time for missing things like this.
65k cancelled reservations out of over half a million total, with net reservations increasing rapidly... what of them?
Right, on pretty much every metric. So do you think that the Motorola Razr was a better product than the iPhone because you could buy an extra battery and swap it out? I remember well when the first iPhone came out and people waited in line for hours to be able to buy one. It was just so different than any other phone available at the time. I don't really feel that applies to Tesla, and I think most consumers (not people who read and report for Bloomberg News, but the silent majority of people who are actually buying cars and keeping these companies in business) would agree. Yeah, it's cool and it's battery-powered. I get it. But pretty much every new car now is loaded with technology and can reliably get you from point A to point B. So the main differentiator is that it runs on a battery. Is that enough to get people to move en masse to Tesla?
65k cancelled reservations out of over half a million total, with net reservations increasing rapidly... what of them?
I think that's the question I posed to you. Doesn't seem like there's a good answer for it.
Why do you keep comparing to middling dumbphones? Compare the iPhone to contemporary high-end smartphones and you'll see that the iPhone was behind on pretty much every metric. The big exceptions were:
1. UI.
2. Web browser.
3. AT&T unlimited data plan.
It turned out that those three metrics were really important, and that being ahead on a few really important metrics is better than being ahead on a bunch of less important ones, but it's just not the case that the iPhone was ahead "on pretty much every metric."
> I think that's the question I posed to you.
Can you be more specific? I don't know what you're actually asking. Are you asking why anyone would cancel? That's because sometimes people change their minds, especially when it involves giving a $1,000 interest-free loan. Are you asking if the cancellations are a counterpoint to the idea that the Model 3 will sell well? The fact that the cancellations are a small proportion of the overall reservations, and net reservations are still rapidly increasing, suggests the answer is "no." Or something else?
Because the middling dumbphones are what comprised the majority of the market, the market that Apple completely took over. How many people were using smart phones as a % of overall market in 2007? The only real players that I can remember were Palm and Blackberry, and both those were terribly executed in comparison to the iPhone.
And yeah, more than 10% of reservations were cancelled but that couldn't possibly be because people don't actually want the car at a large scale, could it? I tend to pay attention to what people do and not what they say, and the fact is that consumers purchase ICB autos at orders of magnitude higher numbers than EV. When push came to shove, 65k people who actually made the conscious decision to spend $1k to reserve a car suddenly decided they no longer wanted it. But your only reason is that "sometimes people change their minds." To me that's a nice way of saying a lot of people don't want to spend $35k on this car.
If you intended to say that the iPhone was far superior to the typical dumbphone of the day, then I can accept that. I was responding to what you wrote, though.
If 65,000 cancelled reservations translates to "a lot of people don't want to spend $35k on this car," then the nearly half a million remaining reservations must translate to "a shitload of people want to spend $35k on this car." No?
Not really. First of all, they are reservations, not purchases. And the outstanding orders represent everyone who follows this company the most closely and who are the most enthusiastic about these cars. Once that demand is exhausted, can we be certain that the demand will continue?
I'm not saying that it's certain that it won't, but it does remain to be seen. In the automotive industry, a half a million cars just isn't a lot. Certainly not enough to proclaim that "a shitload of people" will want one for many years to come. Ford sells 750k F150s each year. That's just one model. And those aren't reservations, they're sales.
I think you need to make up your mind here. If 65k cancelled reservations is a lot, then so is nearly half a million remaining reservations. If half a million remaining reservations aren't a lot, then 65k cancelled ones aren't relevant.
> it's very possible that most car buyers simply don't want [a Tesla/electric car].
Many surveys have shown that people want electric cars [1, 2]. While the car industry overall has declined [3], the EV segment has continued to grow [4]. While it's possible that people don't want to own an EV, the available evidence hints at future growth in the EV segment [5].
"What a century of observing the auto industry has taught us is that car buyers in huge percentages have fierce brand-loyalty and that anytime a new model is brought to market there's a huge uphill battle to create demand."
I think we could be at a point similar to laptop buyers in 2002/2003/2004.
Remember when there were multiple companies making laptops and you would comparison shop and read reviews and look ahead to some new line of Fujitsu vs. Sony vs. Panasonic laptops and maybe visit dynamism.com and see what was being sold in Japan and so on and so forth ?
And then 2-3 years later there was one laptop manufacturer: Apple. Everything else was irrelevant in the face of a solid block of metal with a glass screen that lasts 5-7 years and "just works". When was the last time you spec'd out different laptops - other than perhaps to read with mild interest about some Dell model built for Ubuntu that might possibly be an option but probably isn't.
I have mixed feelings about this ...
On the one hand, Apple laptops really are the best that has ever been and have largely "solved" the category.
On the other hand, without any competition we get strong-armed into certain design decisions that might not work for us ... glossy screens, no more full sized USB ports, maybe headphone jack goes away ...
Electric only drive, skateboard style battery platform (with dramatically lowered center of gravity) and AWD with multiple motors ... I want these innovations. But I would also like some choices in styling and design - especially since I dislike the Tesla interior design so much ...
> And then 2-3 years later there was one laptop manufacturer: Apple
Your view of Apple laptops seems to represent only a small segment of the market. While Apple was on the rise, they were still only 3rd behind Dell and HP in market share by 2007 [0] and are roughly 5th over the last few years [1]. They presumably look better on a revenue rather than units basis, but they were never the sort of singular force you described them as. They might have held that position among a certain segment of laptop buyers, but not the general market.
"Your view of Apple laptops seems to represent only a small segment of the market. While Apple was on the rise, they were still only 3rd behind Dell and HP in market share by 2007 [0] and are roughly 5th over the last few years [1]. They presumably look better on a revenue rather than units basis, but they were never the sort of singular force you described them as."
Yes, that's correct - which is exactly how we are looking at Tesla.
I have no idea what laptops low end, price constrained buyers bought (and continue to buy).
This is a good analogy to Tesla cars which are also priced out of that category.
I am in the market for a very high end, full sized luxury car and I am troubled that by some measures there is only one supplier of those, currently. This is coming from someone who owned two successive A8s over an 8 year period and has lost all interest in that, and any other market entrant, based on an ICE. My current interest level in new press releases for A8/7/S feels exactly like how I suddenly felt in 2004 or so when news of new laptop models suddenly failed to register even a blip.
> My current interest level in new press releases for A8/7/S feels exactly like how I suddenly felt in 2004 or so when news of new laptop models suddenly failed to register even a blip.
If you think a Model S is way better overall than the high-end German fullsize cars, you were never actually in the target population for those cars in the first place. The things e.g. an S-class is renowned for - the attention to detail and quality of the interior, the ride quality, the ridiculous level of soundproofing, the rear legroom, the discrete rumble of the V8 - are on a level far beyond what Tesla delivers. Model S interior quality is on par with a VW Golf. And yes, I've ridden in both.
But of course the Model S has features that appeal very much to the tech crowd, like a big touchscreen and OTA updates and a CEO that can be worshipped.
It sounds a bit like someone who really enjoys off-roading complaining about how crappy the Model X SUV is because of the poor ground clearance and shitty tires.
Tesla is the Apple equivalent for cars. Consumers see the Tesla brand as innovative and high quality regardless if it's true. Even if other manufacturers make a Tesla equivalent, that's like iPhone vs Android. It's a status thing for many, and for that alone I'd bet on the Tesla brand.
This seems like an availability bias. Are you saying that consumers don't regard Porsche, Audi, BMW, Lexus, Mercedes and Infiniti as innovative and high quality?
The Gigafactory is specifically designed to balance vehicle and stationary storage cell production. Not enough cars selling? More batteries for utility scale energy storage. And the demand for energy storage isn't going away.
> I think there's a huge risk for Tesla that most people don't factor in- that it's very possible that most car buyers simply don't want one.
This is a legit worry, but well-designed electric cars are better than gas cars by a large margin, without question. Ultimately this is the only requirement, and it's one of the reasons Tesla is so extreme in its design aspirations.
So this risk is not a risk at all in the case of Tesla. It is certainly a risk for other companies (see Chevy Bolt).
I really like the Bolt and agree as an electric vehicle it is super competitive.
But can I buy a Bolt today and get self driving capabilities on the same car in a few years? That's a pretty massive pull towards the Tesla even if you consider everything else equal.
You don't even have to pay for it now, you can wait it out and pay for the self driving to be activated later once you are sold, but not having to buy an entirely new car to do so is crazy.
I'm hugely bullish on Tesla because they just have so many different angles to win. They have the most experience with electric, they have a massive (and fast) charging network that continues to grow, their electric cars are the priority not a hedge and as mentioned above, they are moving fast into self driving.
I'm not sure if I'd buy a vehicle with promised "self-driving capabilities" (especially if we are talking about full replace-human-pilot watch-movies-instead-of-driving capabilities) in mind until the manufacturer has positively demonstrated that yes, they are able to create that kind of capability with the sensors and hardware vehicles are equipped with.
For example, turning on a self-driving feature that still requires constant vigilance and treating it like it does not ... sounds accident-prone.
There is a long list of companies that are planning to go all electric or to significantly electrify their offerings in the next few years [1, 2, 3]. Chevy/GM is an early entrant into the market because they -- much like Nissan -- need to gain a competitive advantage over VW and Toyota [4].
You get a lot more car with the Model 3 than with the Bolt. Not only do you save $2,000, but you get somewhat better performance, better looks[1], access to Tesla's excellent fast-charging network[2], and excellent active safety systems. If you're willing to pay the extra $5,000 to activate it, you can get Autopilot, which is a game-changer for long highway drives.
Chevy seems to agree with this assessment, planning for an annual production of around 50,000 units.
[1] Subjective, I know, but I think I've yet to see anyone say the Bolt looks better.
[2] You have to pay an extra $750 just to get fast charging enabled in a Bolt, and it only gives you access to CCS chargers, which suck pretty hard as a network currently and are significantly slower.
I'm a huge Elon Musk/Tesla/SpaceX fanboy, but I make it a point to reinforce this.
Especially with Tesla, the hype is way, way overboard. It's not connected to reality.
I say that as someone who reserved a Model 3 on the first day, and will be buying one hopefully in a few months. And I also believe the Tesla Motors will very likely become a global, major auto-maker, not based on stock price, but based on how many cars they make.
I do think Teslas are either the best cars in their class or close to it. But the alternatives aren't that far behind, and there's no reason to believe they won't catch up or even surpass the Teslas.
I will end by noting that I believe Elon Musk when he states his goal for Tesla: to 'push the ball forward' regarding the production and use of sustainable energy. He fully expected Tesla Motors to fail, and it nearly did.
So Musk's primary goal isn't to become the largest auto maker in the world. His goal is see the vast majority of new cars being electric, whoever sells them.
I think that kind of straightforward, honest and pragmatic perspective is a big piece of what drives the often rabid fanboyism, and the irrational stock price.
