Though 2013 may have been a breakout year for Tesla Motors, 2014 has proven to be a much rougher ride. Quality concerns, another delay for the Model X, falling stock prices, and the sense that Musk is spread thing are legitimate reasons to be concerned for Tesla’s future. What steps should Tesla take to get back on track and make sure its going to be around in the long term?
Naturally, everyone is going to have their own opinions, but for me the answer to Tesla’s success is as simple as stepping back and finding its focus again. To wit, I’ve laid out five simple steps that would solidify Tesla’s foundation going forward.
1) Focus on Launching The Model X
Depending on what you count as a delay, the Tesla Model X launch date has been pushed back at least two times, and maybe even three since its debut in early 2012. Although Musk hasn’t been specific, he’s hinted at production and quality issues relating to the falcon-wing doors, though adding towing capacity to what should be a 5,000 pound EV could also be holding things up.
Suffice to say, the 20,000+ Model X reservation holders are likely growing antsy, though that hasn’t stopped them from developing a 691 horsepower all-wheel drive system, new Autopilot features, a battery-swap station, as well as promising an upgrade for owners of the Tesla Roadster.
Keep in mind Tesla is also rapidly expanding its Supercharger network all across the world, is building a $6 billion battery Gigafactory, and trying to bring solar grid storage to homes en masse via Solar City.
Stop. Just stop. I get that Tesla wants to stay abreast with the latest and greatest features from other luxury automakers, and some things (like Autopilot and all-wheel drive) were already in the works regardless. But with all these projects going on simultaneously, Tesla’s talent pool and resources have got to be spread pretty thin, and nevermind how much debt they’re taking on to make it all happen. If the Model X hadn’t been delayed two (or three) times already, this wouldn’t be a problem.
But despite Musk’s ambitions, Tesla is very much so a small fish in a big pond, and some things (like the Gigafactory) are far more important than others (battery swapping). The Model X is also a strong indicator of whether Tesla can follow-up on its initial success, or if it just got lucky with the right product at the right time.
2) Adhere To Stand Accounting And Sales Numbers
For whatever reason, Elon Musk decided that every quarter Tesla would give two revenue numbers to reporters; one using Generally Accepted Accounting Practices (GAAP) and one not using GAAP methods. What we end up with are two drastically different numbers that are simply confusing, and are generally cited independently of each other depending on the perspective you want to push.
Take the 3rd quarter of 2014 for example; using non-GAAP methods Tesla made a profit of $3 million. Using the GAAP standard though, Tesla actually lost $75 million, and that isn’t a bad thing. It means Tesla is investing heavily into research and development, rather than padding the pockets of investors. But I don’t see the point in pushing two numbers onto investors and analysts.
On the same token, Tesla really needs to start releasing accurate sales data broken down by region. Musk has said that the reason Tesla doesn’t do that is because the automakers too-long supply chain means there are often thousands of cars that are “in transit” but don’t count technically as “sold” yet. This has allowed analysts to speculate that Tesla is actually sitting on thousands of unsold vehicles, when in fact the only way to get a Model S is to either order it online (or in store) or purchase a used loaner car.
It also means we don’t know where cars are actually going, instead relying on registration numbers to put it all together. It adds far too much mystery and makes Musk’s comments about trying to tamp down speculation moot, as the speculation is happening regardless. Just give us the hard numbers, broken down by region, like just about every other automaker does.
3) Buy A Super Bowl Ad
To date, Tesla has not spent any money marketing its vehicles besides renting floor space to display the Model S in malls where its galleries are located. Instead it has relied on enthusiastic fans to publish wonderful videos and homemade advertisements that often hit the mark about what makes Tesla a different kind of automaker, but that can’t last forever.
Though a lot of people have heard of Tesla, there’s a lot of bad information out there too. And if you’re not a person who follows the car world, you’ve probably only heard about Tesla in passing. Even though Tesla owners are also its biggest advocates, they are still too concentrated and few in number to reach a whole class of people who know very little about the Model S.
That can all change with a single Super Bowl advertisement, as Maserati proved last year. I can think of no better way to launch an advertising campaign for an American-built slice of cutting-edge technology. With an average audience in the tens of millions, Super Bowl ad time isn’t cheap, but it can also be incredibly effective at getting people to talk about your brand for months and months.
2014 is looking like it might end on a down note for Tesla, but I can’t think of a better way to ramp up enthusiasm for the Model S and upcoming Model X though an exciting and innovative ad campaign, followed by a nationwide test drive event (something they already do with zero advertising).
4) Bring Back The 40 kWh Model S
When Tesla launched the Model S, it offered three battery sizes, not two, though the 48 kWh version was quickly killed off. I’ve always been suspicious of this ploy, as it allowed Musk to claim Tesla was selling a $50,000 electric vehicle as he promised (though only with the $7,500 tax credit) but perhaps just wasn’t profitable enough. If that’s the case, then what I’m about to say doesn’t matter, and should be ignored and mocked relentlessly.
If, however, a 40 kWh Model S could be profitable, then it should absolutely be built again, and for one big reason; fleet sales. Tesla limo and taxi services are starting to take off, and with an EPA-rated range of 150 miles, the 48 kWh Model S would still have about twice the range of many average electric cars currently on the market. That’s enough range of a lot of livery services, and for a company car as well.
Even if the 48 kWh Model S was only available for fleet sales (though I don’t know why it would be), it would help Tesla increase its sales while its product is still the hottest thing on the market, and without requiring a serious investment of time or resources. It would also tide over people who are waiting for the Model III, but are realizing that the 2017 timeline is looking increasingly optimistic. While I understand Tesla may not want to undercut the Model III, with 3+ years between now and the launch of its lower-priced vehicle, Tesla could be missing out on a lot of low-end sales. Which brings me to my final point…
5) Disembark the Hype Train
Last night Jalopnik accused Elon Musk on over-promising to deliver a number of cutting-edge features, which he sorta kinda does but often doesn’t follow-up on. The post is spot-on and rightly critical of Musk’s tendency to get people excited for something shiny and new, and then to not follow-up. The battery-swapping station is a perfect example, as it was supposed to go online at the end of 2013.
That didn’t happen, and then we heard the same thing again, only this time the first battery swap station would be online at the end of 2014. But with 13 days left in December though, there still hasn’t been an official announcement. On a similar note, it’s been 6 months since Musk first mentioned an upgrade for Tesla Roadster owners, and again, not a peep since.
The problem is that Tesla and Musk have been riding high on a wave of hype perhaps not seen since the iPhone basically created the smartphone market. Musk is a media and Wall Street darling, and every word he says is parsed out, disassembled, and speculated upon. It’s been great for stock prices and to a certain extent sales, but it just can’t last forever. I can’t help but wonder if Musk doesn’t just say things at times just to make sure the media has something to write about.
But what happens when Musk inevitably retires from Tesla? Will the company still be able to meet its heady goals? Tesla and Elon Musk are inseparable entities at this point, but once he’s out of the picture, there still needs to be a solid core business that can generate its own headlines at the forefront. But it’s much easier to forgive Elon Musk, who has been endlessly compared to Ironman/Tony Stark, than it is to forgive a faceless corporate entity for over-promising and under-delivering. This is especially important with the impending Tesla Model III, the “Tesla for the masses” that Musk hopes takes electric cars mainstream. All the hype won’t mean much if the reality falls too far short.
This is why it’s important to start marketing Tesla in a more traditional manner. It takes the onus off of Musk and other executives to get Tesla into the news, and ensures that when he’s gone, the electric automaker can still make headlines.
Tesla has come so far in such a short while, but that’s no guarantee it will be around forever. I think these five relatively simple changes could make Tesla’s business a lot better in the long run, but then again, who the hell am I? Just a guy with a blog and an opinion, like so many others out there.