Posts Tagged ‘tesla’

Tesla is Over-Promising with the Model S

Tuesday, April 28th, 2009

Tesla Motors recently revealed their up and coming Model S. It’s beautiful, luxurious, and if it lives up to all of its promises it will be a certain hit. They received over 500 orders the first week. It seems to me, however, that some of their promises are a little too grandiose—the $49,000 price and the late 2011 delivery date just seem too optimistic.

To frame my opinion and argument correctly, it is important to note that I have nothing against Tesla. In fact, they are impressing me more than any other automotive start-up. They delivered their 250th car last month while most companies are still toying with prototypes. Last year I called Tesla an “American car company to be excited about” and I predicted that they would end up benefiting from the recession. I’m still excited about this company.

Tesla promises Model S will be an amazing car at an amazing price:

  • 4-door Electric Sedan (manufactured in-house)
  • Seats 7 (back 2 seats are for children and dwarfs only)
  • 0-60 in 5.9 seconds
  • 160, 230, or 300 mile range
  • Base price: $49,000 (after federal tax rebates)
  • Deliveries start in late 2011

Now compare those promises to what they are currently delivering in the Tesla Roadster:

  • 2-door Electric Coupe/Convertible (manufactured by Lotus)
  • Seats 2
  • 0-60 in 3.9 seconds
  • 244 mile range
  • Base price: $101,500

Delivery Date

To fulfill these promises Tesla has 2.5 years to raise the needed capital; build, buy, or lease a factory; set-up all its tooling; hire and train its workers; and start producing cars. Keep in mind that this all has to be done by a company that has never built a car from the ground up. Until now, they have only been building and installing electric power trains in specialized cars built off site by Lotus. In the meantime, this small company has to continue fulfilling orders for the roadsters (already well behind schedule). I predict that as 2011 approaches, Tesla will announce delays and push back delivery dates.

Price

I was shocked to see that Tesla is promising a price for the Model S that is half what they are charging for the Roadster. I knew that subsequent Tesla cars would become more and more affordable but I never anticipated such a quick dive in price. The batteries are by far the most expensive component of these cars. While time and technological advances will certainly bring the prices down, I can’t imagine that 2.5 years is enough time to see that type of reduction. I predict that Tesla will be forced to raise the price as they get closer to delivery.

I hope I’m wrong

Over promising seems to be in style with automotive start-ups. I hope they don’t do it on purpose, but it wouldn’t surprise me if they do; maybe it has become a necessary evil in order for the companies to generate hype in hopes of attracting investors. I think I speak for a lot of people when I say that I am ready to see an automotive start-up live up to its claims and promises. Will Tesla be the one?

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3 Keys of Survival for Tesla, Aptera, Fisker, Miles, Pheonix, and Other Automotive Start-Ups

Tuesday, January 6th, 2009

I recently blogged about how the recession will benefit automotive start-up companies. The basic jist is that the large companies are hit harder than small ones allowing the little guys to gain precious ground.

This doesn’t mean, however, that Tesla, Aptera, and the others will have it easy throughout the recession. They like everyone else will be scraping and clawing to survive. I’m no business expert (yet), but I want to point out a few key points that I think will determine whether or not these automotive companies sink or swim (or should I say stall or rev).

1. Be Niche (NOT Mainstream).

These companies are not in a position to compete with Camrys and Accords. They shouldn’t even attempt to reach those masses. Take for example some other successful vehicles that were limited to niche groups:

  • Hummer: Rolling-billboard Niche
  • Escalade: Bling Niche
  • Harley Davidson: Need-to-feel-more-manly Niche

Tesla, Aptera, and Fisker seem to have pretty clear niches:

  • Tesla: Green-alternative-to-a-Ferrari Niche
  • Aptera: Greenest-person-in-the-city Niche
  • Fisker: Green-alternative-to-a-Mercedes E Class Niche

Pheonix Motorcars and Miles Electric, on the other hand, seem to have products aimed more mainstream (as far as I can tell).

Pheonix Motorcars: Competing with Chevy Equinox?

Pheonix Motorcars: Competing with Chevy Equinox?

2. Be Luxury.

Luxury items like Rolex are affected very little by a slumping economy. Further, every tecnological advancement has to start out in expensive luxury products:

  • Computers
  • Cell-Phones
  • GPS
  • etc.

Luxury items allow for a good profit margin even at low volumes. Tesla, with their $109K Roadster, seems to grasp this concept well. Miles, on the other hand has a $40,000 highway sedan that looks like a 10-year-old Accord. I’m not sure how they are going to attract high-end buyers.

Miles Electric

3. Pre-Orders, Pre-Orders, Pre-Orders.

These companies have to shell out a lot of money to build their cars before they can sell them. Creditors and investors are very hesitant right now. Many young companies are crushed by such cash flow problems. There is no better way to gain the confidence of creditors and investors than to have a pile of customers shelling out cash before the final product even exists.

Let the customers pay a hefty fee to reserve their car. Send them home with a fancy plaque to hang on their wall: “John Doe: Owner of the 63rd Aptera.” Keep them posted on the status of their car. Let them bring their friends by company headquarters to go for a spin in one of the company cars.

Aptera charges only $500 for their reservation fee. It seems like anyone green enough to buy and drive an oversized sperm on wheels would be willing to shell out more to be an early adopter.

Prediction.

I honestly know very little about any of the companies I’ve mentioned, and there are certainly more critical factors than the three I mentioned. But if I had to guess which companies are heading for trouble I would say Pheonix and Miles. They are too main stream and not luxury. I don’t see how that could be a recipe for success in the early stages of a new product.

Tesla, Aptera, and Fisker; on the other hand; appear to be positioning themselves well. That’s why I listed them as the 3 American Car Companies to be Excited About. It will be fun to see how it plays out.

Thoughts?

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Tesla and Aptera Will Benefit from the Recession

Tuesday, December 16th, 2008

There are bright spots hidden amongst the economic woes. Tesla, Aptera, and any start-up that can stay afloat will reap huge rewards that would otherwise be impossible during times of economic plenty.

A Bit of Background

In the early 1900s, all automotive companies were start-ups. There were hundreds. Over time, though, a few companies pulled ahead of the rest of the pack (think Ford with the Model-T). Because of Ford’s high volumes they could under-cut the smaller companies. They acquired other companies that showed promise or innovation (that’s why Ford owns Mercury, Lincoln, and others). Most of the small start-ups that didn’t get acquired by a large company were eventually forced out of business. Since then, it has become increasingly difficult for a start-up company to break into the automotive industry.

The past 15 years have shown us a similar phenomenon with internet companies. Google, Yahoo, and Amazon were all once small start-ups. They pulled ahead of the pack and have since been acquiring other promising or innovative companies while forcing others out of business. It is becoming increasingly difficult to break into any space occupied by one of the internet giants.

A Recession Hits the Big Boys Hardest

Jumping back to the automotive industry, the large companies are being forced to scale back heavily. They are laying off talented workers, they are less aggressive in their marketing, and they are certainly not in the market to acquire promising start-ups. In fact, a few of them are on the verge of bankruptcy. Large companies rarely gain market share during a recession.

The Little Guys Can Reap the Benefits

For Tesla, Aptera, and the other little guys; they can push forward without worry that the big boys are going to swoop down and stamp them out. The large companies are so caught up in their own bleeding that Tesla and Aptera’s progress is of almost no concern. Tesla and Aptera can hire all the great talent being laid-off by the big boys. They can get top notch designers, testers, engineers, and marketers at a steeply discounted rate. Their advertising, in all its forms, is becoming drastically more affordable. Start-ups can fill niche spaces in the marketing world that larger companies have been forced to vacate.

In short, if Tesla and Aptera use this recession as an opportunity to gain talent and market share, they will be positioned perfectly to ride a wave of growth as soon as things start to look up.

What do they have to do, not just to survive, but to thrive? I will be posting my thoughts on this soon. Leave a comment and let me know what you think.

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3 American Car Companies to Be Excited About

Friday, December 12th, 2008

Despite all the difficult things happening today, there is still a lot to be excited about. There are 3 electric car manufacturers that stir my blood. All three make limited, expensive, niche products (they understand that new products don’t start out in the mainstream). All three have a maxed out waiting-lists of eager customers who already put their money where their mouth is (pre-orders).

1. Tesla Motors

Tesla Motors is named after Nikola Tesla, a man who’s inventions are considered by many to be on the same level as Thomas Edison’s. In particular, he pioneered the electric motor. It’s a fitting name for the bay area company producing all electric vehicles.

The Tesla Roadster is a two seat sports car built in Europe by Lotus. It’s imported without a drivetrain so that Tesla can install their all electric drivetrain powered by a state of the art lithium-ion battery pack. It does 0-60 in about 4 seconds and has a range of more than 200 miles per charge.

Despite its hefty $109,000 price tag, it has a long list of people who pre-ordered and are now waiting to receive their cars. Included on that list are a bunch of high-profile celebrities. Tesla delivered its 100th car last week and expects production to speed up significantly.

Tesla has the confidence and backing of powerful investors including Google’s co-founder Larry Page. They plan to let their current roadster pave the way for more affordable cars including an all electric 4-door sedan, the Tesla S.

2. Fisker Automotive

Fisker Automotive is a joint venture partnership between Fisker Coachbuild LLC and Quantum Technologies. The former provides their cars with delicious styling while the latter provides an advanced plug-in hybrid drive train.

The Fisker Karma is a large, 4-door, luxury, sport sedan priced in the $80,000 range. It will be assembled in Finland, but there have been talks of Fisker taking over one of GM’s plants in Detroit.

Like Tesla, Fisker Automotive has the confidence of a lot of investors—they have raised around $100 million. Their pre-order page currently says “Sold Out”. They expect to start delivering cars to that list of people in late 2009.

3. Aptera

Aptera is making a three-wheeled, giant sperm car that claims the lowest wind resistance of any production vehicle ever made. They claim the entire car has about the same amount of wind resistance as a normal car’s windshield wipers!

I can’t envision our roads full of these hideous Apteras, but I’m confident there is a large niche market that will eat this thing up. It’s only $30,000. I personally think they should start out with a higher price, but I have to remind myself that its main competition will be from Vespa scooters—what else do die hard environmentalists buy to make a statement like this?

The Aptera will easily be the most efficient production car in the world, and it’s supposedly not half-bad to live with. It has decent performance and comfortable amenities for two. It is available in either all electric or plug-in hybrid.

Automotive X Prize

Progressive Insurance is offering $10 million to the winner of the Automotive X Prize, a contest to see who can build the most viable 100+ mpg car. There are over 100 registered teams, some more promising than others. Here is a list of teams who have some progress to show.

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