Model 3 Reservation Holder Survey Underlines Tesla’s Mass Market Challenge

 

They waited for reservations… will they also wait for service? (image courtesy Investors Business Daily)

Much of the critical coverage of Tesla Motors, both here at Daily Kanban and elsewhere, has focused on issues that Tesla is able to get away with as a small-volume manufacturer serving an affluent, early-adopter market segment. From manufacturing bottlenecks to quality control problems, from inconsistent, hype-happy communication to poor service, Tesla has been able to weather a storm of problems because its customers and fans are so patient with and passionate about the company. But as Tesla moves from expensive, low-volume cars to the mass market Model 3 these problems are taking on a new significance. In part this is because higher volumes increase the likelihood of quality and service problems, and in part it is because mass market customers who depend on a single car for their daily routine are more demanding than luxury car buyers who can always take the Lexus to work if their Tesla is broken.

Given Tesla’s pattern of releasing cars with insufficient testing as well as its chronic quality problems, it’s safe to assume that the Model 3 will face its fair share of issues. Thus, investing in service infrastructure that will allow Tesla to promptly and affordably repair and upgrade high volumes of Model 3 is extremely important. As Bertel has written about at Forbes, Tesla is behind the curve on those investments and it will cost billions to catch them up. Just yesterday a piece by former Tesla employee Evan Niu dramatically illustrated just how far Tesla has to go to improve its service time, which has dragged on for 8 long months in Niu’s case. Now an exclusive study of about 800 Tesla Model 3 reservation holders, EV owners and luxury brand car owners conducted last year on behalf of a major automaker and provided to Daily Kanban by an industry source, reveals why Tesla’s quality and service woes are so critical to the success or failure of the Model 3.

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Documents Show Tesla Expanding Annual Production To About Half Of 500K Goal

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The Daily Kanban has obtained Tesla’s application [PDF here] to the California Alternative Energy and Advanced Transportation Financing Authority (CAEATFA) for about $100m worth of Sales and Use Tax Exclusion (STE) on its purchase of about $1.2 billion worth of production equipment to be used to produce its affordable Model 3. An analysis of key unredacted portions of this CAEATFA application shows that this massive investment –along with CAEATFA documents related to Tesla’s expansion of Model S and Model X vehicle production— will only increase the electric automaker’s annual production to between 230,000 and 300,000 units per year, well short of the firm’s 500,000 unit per year goal for 2018.

Though Tesla could reach its much-discussed half-million per year production goal through other means, these CAEATFA documents appear to validate Daily Kanban‘s analysis of air quality permits at Tesla’s Fremont plant which indicates a current production limit of about 230,000 units per year.  Tesla has yet to publicize any plans to apply for the new permits or make the new investments required to bring its production rate beyond these limits and towards its planned 2018 rate of 500,000 units per year.

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Tesla Suspension Breakage: It’s Not The Crime, It’s The Coverup

TeslaBallJoint

For several months now, reports have circulated in comment sections and forum threads about a possible defect in Tesla’s vehicles that may cause suspension control arms to break. Many of those reports appeared to come from a single, highly-motivated and potentially unreliable source, a fact which led many to dismiss them as crankery. But as more reports of suspension failure in Teslas have come in, Daily Kanban has investigated the matter and can now report on this deeply troubling issue.

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Tesla Battery Swap Unused Over Busy Holiday Weekend

In response to a wide range of questions about Tesla’s battery swap program, raised primarily by Alberto Zaragoza Comendador of the blog Doubting Is Thinking, Daily Kanban has conducted an online and on-the-ground inquiry into Tesla’s battery swap program that failed to alleviate our concerns that the electric car maker’s battery swap capability exist largely as a way to maximize California ZEV credit revenue.  A four-day investigation of Tesla’s only battery swap station over the Memorial Day weekend revealed no evidence that the station is actually being used to swap customer batteries. Though our investigation did not conclusively prove that the station is not being used at all, it is yet another data point in a large and growing body of evidence indicating that Tesla is not serious about deploying battery swap as a viable option for customers.

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Tesla And Its Customers Find It’s Not Easy Being Green

Tesla Motors and its customers are famously proud of their environmentally friendly image, but their anti-carbon and anti-oil sentiments are apparently not as absolute as their public statements and vanity license plates might suggest. In the course of investigating Tesla’s Harris Ranch, CA battery swap station, Daily Kanban found that Tesla’s solution to peak demand for grid-powered Superchargers that are also on-site does not involve stationary battery storage or customer battery-swapping at its only swap station. Instead, the company relies upon  backup Superchargers powered by diesel generators. Moreover, several Tesla customers were observed charging from the noisy, carbon-emitting backup generator even when the standard Supercharging station had numerous plugs available. This oddly un-green charging option, foisted on customers as a result of Tesla’s lack of desire to make its battery swap capabilities widely available, in turn raises unanswered questions about the environmental claims Tesla has made about its entire charging network.

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Analysis: Understanding Tesla’s Potemkin Swap Station

Where are the customers?

Where are the customers?

The return of battery electric vehicles (BEVs) to the US market nearly a century after internal combustion technology swept them aside is one of the most compelling automotive stories of the last decade, bringing a much-needed injection of fresh ideas and enthusiasm to an increasingly mature and commodified industry. Though BEVs remain less than 1% of global auto sales, they have become immensely important to automakers by aiding compliance with various emissions regulations, as well as creating an aura of environmental responsibility and technological innovation. The immense power of these incentives is made manifest in Tesla, the Silicon Valley-based BEV maker that has defied the industry’s immense challenges to startups and become the hottest automotive brand in the world. Despite selling just 31,655 vehicles in 2014, a tiny fraction of the industry’s global volume, Tesla and its CEO Elon Musk receive huge amounts of (largely favorable) media coverage and enjoy a market capitalization that exceeds far larger competitors like Fiat Chrysler Automobiles.

Sales of BEVs continue to grow in the face of lower gas prices, but nearly every model still sells far below initial estimates. Even President Obama’s goal of putting a million plug-in vehicles (BEVs and plug-in hybrids [PHEVs]) on US roads by 2015 has turned out to be wildly optimistic. The high cost of lithium-ion batteries is widely considered a key limiting factor on the growth of BEVs, but just as important is the issue of range and recharging; in a market long accustomed to the convenience of gasoline, the limited range and long recharging time of BEVs remains a major barrier to consumer acceptance. Though rapid charging infrastructure has grown as more BEVs have been brought to market, they still require at least 30 minutes to deliver a meaningful amount of power, speed battery degradation, use competing charging standards, and remain far less common than gas stations.

These shortcomings have pushed some automakers, like Toyota and Hyundai, to avoid BEVs altogether in favor of hydrogen fuel cell electric vehicles (FCEVs) that generate zero tailpipe emissions but can be recharged as rapidly as gasoline cars. The only other way to provide rapid refueling of zero-emissions vehicles (ZEVs) involves swapping batteries rather than recharging them. This strategy was attempted by Project Better Place, a now-defunct firm that deployed battery swap stations and an innovative pricing structure in Israel and Denmark between 2008 and its 2013 bankruptcy, as well as several pilot projects elsewhere. When Better Place failed, the battery swap concept was widely seen as having been discredited. But by then, another startup had taken up the mantle of the promising-yet-challenging swap strategy: Tesla.

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Optimistic Musk sees 10,000 Teslas per year in Germany. Let’s look a little closer

Musk in Germany - Picture courtesy siliconbeat.com

Beginning in 2015, Tesla wants to “sell some 10,000 cars per year” in Germany, Elon Musk told Germany’s Welt. And they will be powered by sunlight. “By end of March 2014, half of Germany will be covered by Superchargers,” Musk promised. “By the end of 2014, the whole country will be covered. That’s 40 to 50 stations.”

The stations will be powered by solar panels. “A Tesla driver should need no more than sunlight,” Musk told the paper. He is a very optimistic man.

Germany is a 3 million unit car market, give or take a few. 10,000 Teslas would mean a market share of 0.3 percent. To assist Tesla in its projections, here some data on the German car market. [Continue Reading]

Blind Spot: The Coming Of The “Digital Car”

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A good friend of mine, a brilliant dev/ops guy with several successful startups under his belt, option-trades Tesla’s stock when he’s not developing cloud systems and social platforms. Like many successful tech workers, this friend has an unshakeable faith in technological progress which underpins his support for Tesla. “Look,” he tells me when I suggest that Tesla’s stock valuation is wholly unmoored from its fundamentals, “new technology takes over and transforms everything. We see it again and again in other sectors, why wouldn’t it be the case for cars?”

His favorite example: the transition from film to digital photography. “Sure, it was crazily expensive to develop… but it matured rapidly, took over the market and nobody looked back. Why wouldn’t electric cars be the same?” Attempting to answer his question got me thinking: what would it take to fundamentally revolutionize the auto industry to the extent that digital revolutionized film? More specifically, what would the “digital” car look like?

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