Electric Vehicles

Published on December 18th, 2014 | by Christopher DeMorro

5 Changes That Could Make Tesla Even Better

December 18th, 2014 by  
 

tesla-model-s-lineup

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.

tesla-ad-4

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.

tesla-battery-swap

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.





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About the Author

A writer and gearhead who loves all things automotive, from hybrids to HEMIs, can be found wrenching or writing- or else, he's running, because he's one of those crazy people who gets enjoyment from running insane distances.



  • Oil4AsphaltOnly

    Sorry Chris, but I couldn’t have disagreed with you more. The most eggregious point is #3. “If tesla is unable to meet demand now, then advertising to stoke demand will only exacerbate the problem.” Regardless of whether or not the statement is true, the reasoning is sound. Can we agree on that?

    If so, then let’s determine if demand exceeds production capacity? You would have to think that demand has slowed down in order to advocate advertising, so ask yourself if you think demand has slowed? Based on the forum traffic on the p85d’s delivery I don’t think so, but I’m guessing you do?

    Many of the speculations are really baseless and self-contratictory, i.e. “If demand is low, you need to advertise to stoke it! People don’t know about your product, so you should advertise and get the word out!” How about getting the word out without advertising? Or how about not advertising until you can fill existing orders?

    • Chris DeMorro

      Advertising is about sales, true, but it’s also about creating a brand narrative. Right now Tesla does 0 marketing, and the only narrative generally involves Elon Musk.

      Musk won’t be CEO forever. He might not even be CEO in 5 years. Tesla needs to start crafting a brand image and narrative separate of Musk. Otherwise people fill the void with their own narrative, which isn’t always positive.

      • Oil4AsphaltOnly

        Okay, granted Musk does grab a substantial amount of Tesla limelight, but I think the image concern is premature. I’ve had conversations with people not-in-the-know who’ve heard of Tesla, but not necessarily elon musk … and vice versa. And JB Straubel (next-in-line Tesla CEO?) does have his own narrative that sets him apart from Musk and is widely recognized for his contributions to Tesla. Apple had less than a year for Tim Cook to step into the role of being CEO, and they’re doing fine.

        With production constraints still in play (and a huge handicap to demand stoking), and the model 3 years away, I think 2015 should be more of the same. Maybe in 2016 I’ll agree with some of your ideas … maybe.

      • jeffhre

        Is that bassackwards? Could it read: Tesla staffers spend all their time on marketing + public relations, and none on advertising?

      • Bob_Wallace

        The only narrative generally involves Elon Musk?

        I’ve yet to see an article about Elon Musk doing 0-60 in 3.2 seconds.

        Nor one about Elon Musk being the safest car ever made.

        Tesla’s got no name brand problems. And it built that name while spending zero money on ads. They built the name with quality and performance, as it should be.

        • Christopher DeMorro

          To you and me Bob, Tesla doesn’t have a brand problem.

          But to guys like my soon-to-be-uncle, Tesla doesn’t even compare to a Mercedes or Maserati (both of which he is considering).

      • PrezNixon

        Meh. Even when Musk steps down as CEO, he will still be on the Board of Directors. Musk holds 2 different positions. He will still be involved and make comments even when he hands off the CEO position to somebody else. He isn’t going to leave, just remove one of his two hats.

        http://ir.teslamotors.com/directors.cfm

        http://www.teslamotors.com/executives

  • Rowland Williams

    I do think movement has to be made on the Model X. There needs to be more than one horse in this show. Further, the Model S is starting to look a little long in the tooth. It doesn’t need an overhaul, but it does need some refreshing.

    Regarding the financials, Wall Street has a handle on the numbers, and that’s all that matters.

    I do agree, however, that Musk is spread too thin. He’s in deep water. The car business is constantly changing. He needs to focus on his core business (cars, batteries, charging stations).

    • Bob_Wallace

      The ‘D’ wasn’t refreshing for you?

      It refreshed the hell out of me.

      Tesla has become a dominate force in short years. They are building an enormous new battery plant in order to scale up overall production. (Doesn’t make much sense to sell cars with empty battery compartments.) Charging stations are being built. First battery swap station opens this coming week.

  • JeremyD

    I am disappointed how this article is written according to lobbyist manuscript and sounds so copy of a SeekingAlpha article. I could even point the same list and contents from there and this article does not mention that contents have been previously published elsewhere.

    Presented points do not make any sense as corporate strategy for Tesla. For example battery swapping should wait until there is sufficient source of batteries. Before that it is wiser to sell a car with the battery than reserve the battery to enable few drivers for battery swap.

    And spending money on the most expensive advertising instead of increasing production when being production limited. How stupid and brand destroying would that be. Where is better return on investment? Model X is sold out until 2016.

    And keeping sales number secret prevents competitors knowing where you are heading and where your markets are.

    • Christopher DeMorro

      A lobbyist manuscript? I wish someone was paying me to lobby for anything.

      I’ve just been around the auto industry for awhile, and while a lot of what Tesla is doing makes sense, in my opinion there is a lot of room for improvement…liking keeping sales numbers secret. It makes 0 sense and at this point seems to be doing more harm than good.

  • Jim Smith

    How could they do a 150 mile range model? it would not be able to use the supercharger network.

  • What qualifies you to give Elon Musk advice?

    • Christopher DeMorro

      Nothing.

      And yet half a million people come to this website each month to read what I write. So that’s worth something I guess.

  • BulkZerker

    I hugely disagree with putting the hotswap stations on the back burner. This is huge. Standardized hotswap batteries solves so much for EVs and needs to he spearheaded, the patents are now “open source”, but someone needs to force the standard on the other automakers. That done then the gigafactory kicks out batteries and since its the biggest player for EV batts in the continental US suddenly Tesla will always be around. If not a car maker, always. But be doing something so much more important. Making the infastructure for supporting EV s.

  • corkyciv

    Point 3: No sense advertising a product that is still 3 years away (Model III)

  • Pingback: Tesla Leaves Lamborghini In The Dust (+ Other EV News)()

  • PrezNixon

    1) Big companies have these things called “departments”. The department in charge of the Model X and those departments in charge of solar panels and the giga-factory are completely separate. Delays in one department have nothing to do with others. Don’t be silly.

    2) Large corporations commonly report both GAAP and non-GAAP numbers. Only people who don’t understand finance are bothered by Tesla following this very common practice. Just up the way from Tesla’s headquarters is a big company called “Oracle” that you might have heard of. They also report GAAP and non-GAAP numbers. Nobody is silly enough to complain about them. The reality is that GAAP and non-GAAP numbers measure two different things, and neither is wrong or right. Publishing both (like Tesla does) actually gives sophisticated investors MORE information and insight into Tesla’s operations than just publishing one. Only haters and those who are not well informed with finance are bothered by getting more information. Reducing how much financial information Tesla reports is not going to improve how well the company operates.

    3) Tesla sells every car they build at the price they ask. There is no need for ads. What do you think they could accomplish with ad spending? Sell more cars than they build, at prices higher than they are asking? They should save their ad dollars until the Model III.

    4) Tesla sells every car they can build. They don’t need more Model S versions to attract more customers when they are selling all the 60’s and 85’s they can build. 40’s also don’t play well with the supercharger system, and Tesla moving forward with superchargers. Having odd-duck cars that can’t supercharge is going the wrong direction for Tesla. The less expensive car for future sales is the Model III, not a Model S 40. It is like you haven’t even read Tesla’s business plan at all.

    5) If you don’t like the Hype Train, stop acting as the Conductor. EV sites like yours (and every other green car site) publish every mumbling of Elon Musk as if they were actual official press releases. They often aren’t. They are off-hand comments often taken out of context and speculated wildly upon, reading even more into his words than exist. Elon mumbles something about the Roadster going to happen in the future, and you guys run a whole series of super-hype stories speculating and re-speculating about all the possible things he could be talking about. You ARE the hype train. You take a vague tweet and blow it up. If you don’t like the hype train, limit your own stories about future releases to what appears in actual official press releases, or actual news worthy events (instead of what shows up on twitter). But at an average of only 1 a month, what would EV websites do for clicks/hits if they didn’t resort to hyping every offhand comment that Musk utters instead of reporting just official press releases found here: http://www.teslamotors.com/about/press/releases

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