I don’t usually “talk shop” on here, but something came across my desk the other day that annoyed me.
By now, most everybody has heard of Tesla Motors. They were a start up company that made a huge splash by announcing a souped up electric car that can go 0-60 in 3.9 seconds and looks like it. Of course it cost $92,000 and you had to pay to be on the waiting list, but what’s a few thousands between friends.
Now here is the problem with it: it’s all a pipe dream. And now, because of all of the hype, everybody knows about it and says, “See, Tesla can make an electric sports car, so the technology is there! Why don’t I have a good electric vehicle? It’s the man trying to keep me down! Sure, theirs cost $92 grand, but that’s a sports car. So a regular car should cost like $10,000 right?”
But as ridiculous as that statement is already, the Tesla Roadster isn’t even profitable at $92,000 per car. It turns out that it was costing them $140,000 per car to produce. So they were losing $48,000 for every car they sold. Now obviously as they produced more cars, the manufacturing costs would come down. The company says they have now reduced the cost per unit to “a little more than $90,000”, although they didn’t specify how much more. Assuming it costs exactly $90k to make one car, there is $2,000 left. How much of that is actually profit? Not very much if any, once you take out the sales commissions, labor costs, etc. And keep in mind they still have to make up the $48k per car hole they dug before the manufacturing price came down. So in order for the company to become profitable, they have to make enough cars that the price comes down enough that they can increase their profit margin to the point that they can dig their way out of the hole they are starting in and then start making some money. But is the market segment even big enough for them to make that many cars? How many $92k electric sports cars can the world support? Well I don’t know for sure, but I do know that 400 were pre-ordered and they’ve already shipped over 100. So, they’ve shipped over 1/4 of their guaranteed orders.
And while we’re on the topic, electric car enthusiasts will tell you people are falling all over themselves to get a hold of electric cars. That’s true…until you ask them to put their money down. But only 400 people were actually willing to put money down to get on the waiting list. To a big company like GM, 400 people isn’t worth your time. And that is assuming you are actually making money, not hemorrhaging it.
Now, the people in charge at Tesla aren’t complete dummies. They see the writing on the wall that this business plan is a losing proposition. So they told the people on the waiting list that they will still sell them the car for the promised price of $92k, but this will be a stripped down version. To get the full featured version you will now have to pay $128,500. Makes $92k look downright affordable.
But what features are missing from the $92k version you ask? Well at least one feature, but it’s a doozy. The “cheep” version comes without the “fast charge” capability, meaning it will take 37 hours to fully charge the car. Let that one sink in for a minute. It will take more than one full day to charge your car.
Now again, this is a sports car, not an every day commuter car. And a luxury one at that. So taking it out cruising every other day probably isn’t an issue. But if the biggest, best, most highly publicized company out there can only make an electric vehicle that is neither profitable for the company, cheap for the buyer, nor usable in any real sense of the word, then you are crazy if you think GM could have made one almost 20 years ago. And we haven’t even gotten into issues of reliability, since these cars are all brand new. I know nobody will cry for these millionaires if they have to put down another $20,000 for a new battery pack in 5 to 10 years, but it is something to think about. (Note, I’m not saying that this is true, just that this is new technology and we don’t know for sure what the shelf life of this sort of thing is going to be)
But, alas, the damage is done and everybody thinks the oil companies and big business are conspiring against them. And at the end of the day, people’s misconceptions of what is possible will cause them to miss out on things that people are doing right now to help with fuel economy, because they will be brushed off as inconsequential.