There are questions, too, about whether it can keep its order books full, or whether the number of people who crave electric cars is limited.
With the new financing offer, a Tesla is within reach for many people, but I think we'll see a tipping point once they can get below $50k.
Never thought about it till now, but that is reminiscent of Apple's product strategy. It'll be interesting to see if it remains this way in the future even after Tesla grows significantly.
That's the way I have felt about several of Elon Musk's responses to the press. It remains to be seen what consumers will do with their hard-earned money to bring about sustained profit for which automobile manufacturer.
“Tesla has to show it can be consistently profitable with a single product that is priced so high that most buyers can’t afford it,”
Indeed.
I make a pretty damn good living and can easily afford a $400-$500 phone, but there is no way I'll be buying a $60,000 car from either Tesla or Audi.
Next, as they start spinning up long-term reliability figures (real people driving real Teslas in real conditions for the 100k+ miles we expect today), will costs remain comparable?
Third, how long will it take Audi/BMW/Lexus/etc to develop fully electric cars of their own that are performance-comparable and compatible with whatever public charging systems start to develop?
I mostly believe this because of how early in the era of electric car technology we are in right now compared to the internal combustion engine era. Many technologies follow an exponential curve in performance, quality, lowering of cost etc. over time. However, at a certain point the curve flattens out. As an example, look at how much the top speed of travel by humans increased from the creation of the steam engine all the way to the launch of the space shuttle. Humans managed to perfect the technology and it grew at an exponential speed. (think of small improvements of train technology over time for a hundred year, then rapidly followed up by the introduction of cars, planes, jets, then space travel in a much shorter period of time).
When you compare this to internal combustion engines, they are much later in their evolution than electric cars. This suggests electric cars are in for a long period of exponential growth, while internal combustion engines are closer to the flattening of the curve (which may still be a long way off anyways.)
Additionally, you have to look at the fuel costs. Oil is expected to continue increasing in cost. It's in higher demand than ever before, it's becoming harder and more expensive to extract etc. Meanwhile, electricity can come from many sources, including solar which is developing at an exponential rate and could start to bring the cost of electricity down in the near future.
Now, your question concerned the price tag of the car, not the ownership costs. However, this is actually relevant to the ownership costs. The rising cost of the fuel can inject uncertainty into the market about cars that run on fossil fuels if the price of those fuels get too high. This can do two things 1) it can increase the cost of capital for traditional car companies because banks are unwilling to lend to a manufacturer of cars with high operating costs, and 2) it could create investor doubt and bring down the stock's price. If either of these things happen for a sustained period of time then it could create an ugly feedback loop for a manufacturer. If 1 or 2 happens and they have to raise the price of their product, then the market may begin to doubt the manufacturer more (especially if Tesla continues bringing down its price tag).
If the traditional manufacturers get caught in a spiral with their traditional engines then they may have to quickly develop electric alternatives. This will likely be fairly tricky. First, they lose part of the brand they have invested in for their traditional line cars (and their trademarks are some of their most valuable assets). Second, they will likely have to abandon traditional internal combustion drivetrain technology that they have already invested in but not recouped the profits of (although they shouldn't fret too much about sunk costs and focus on moving forward). And third, most importantly, if they want to make a quick transition that can at least restore faith from the market, they will likely have to license technology from companies like Tesla (bringing Tesla's cost down while increasing the costs of the traditional competitors)
Finally, one of the biggest costs in a Tesla is the battery. I haven't read about the cost of the battery for a couple years, but I remember reading that the Roadster's battery cost about $40K, and that the S uses the same battery (or at least battery technology). I assume the cost has come down a bit since then, but regardless, the party is likely the most expensive single part of the car. This is extremely relevant because many actors have an interest in producing more efficient batteries (Cell phone companies, Energy Companies, The Military etc.). All these mean that more companies will be putting pressure on the market to develop more efficient battery technology and to bring the cost down.
2) Can't speak as confidently about this because I haven't heard about Tesla's racking up that many miles yet.
However the two things I would consider are 1) operating costs, and 2) legacy costs. As I mentioned before, the price of oil is going up, while the price of electricity is more promising. This means that the cost to the consumer of operating a combustion engine increases, and could offset the increased operating expenses from failure of Teslas in real conditions. As for legacy costs, just look at the history of American auto manufacturers vs. Asian manufacturers. One of the reasons the Asian manufacturers were able to undercut their American rivals was because they did not have retired workers living off pensions. They had lower legacy costs. This is true for Tesla, just as it was true for the previous Asian manufacturers. Of course pensions and unions are no longer anywhere near as important as they were 30 years ago, this could still bring down the lifetime cost of a vehicle from a manufacturers perspective. This means that fuel costs can offset reliability costs from the consume perspective, and legacy costs can offset the reliability costs from the manufacturer perspective.
3) I honestly have no clue how far into development any of these companies are for their own electric vehicles. Honestly though, how much of their capital can they devote to developing electric cars? They probably won't throw the kitchen sink at the problem. Thus, if they are only directing a percentage of their resources to electric cars, then their electric car divisions may only have the same amount of resources as Tesla does. Thus, the only advantage they have over Tesla is brand, but right now given the Tesla hype, it seems brand is in Tesla's favor anyways.
Also, other autos getting into electric can help Tesla by bringing the cost of batteries down, and by spurring the development of a national charging network (And hopefully better cafes along the highway for us to wait at while our cars charge).
#2 will be of interest, but I think it mostly comes down to battery technology.
As for #3, the history of other disruptive innovations says that by the time it is possible to sell cars that meet the mass market need, the cost structure that Audi/BMW/Lexus etc have will keep them from developing competitively priced cars. (What did you think the whole "avoid the dealer overhead" step is about for Tesla?)
Take this with a grain of salt, but it might not be in their best interest to move to the lower end market.
If they can make a cheap EV car then so can another producer somewhere else in the world.
Just recently I read Ferrari actually dropped the number of cars they produced per year.
Why did they do that? The wanted to make their cars more exclusive by making it harder to buy a Ferrari, increasing the length of the waiting list and allowing them to charge more for the car.
Strange things seem to happen at the top end of the market.
I can tell you what Musk is betting: that the supercharger network will eventually make this a moot point. Of course, advancing better batteries will result in the lowest Model S range (160mi) likely becoming Tesla's "baseline", I imagine.
And 200 miles trips also become very difficult if you can't be sure of a charger at your destination. So I think a 200 mile range is pretty important.
“Tesla sales beating Mercedes, BMW and Audi.”
No one would guess they are talking about "per model sales" vs "per manufacturer sales", since they are naming manufacturers. It's just linkbait. Tesla really is the new Apple!
really? because my first assumption was that they were comparing sales of Tesla's only model to sales of Mercedes, BMW, and Audi's equivalent models. that is, comparing the sales of one high-end luxury car with the sales of other high-end luxury cars. it seems blindingly obvious that the Model S isn't selling more units than Mercedes' entire range.
Current car companies, to protect their current products, they didn't put the full force behind electric, that is why they saw less demand and their looks and cars weren't pretty. Audi could benefit if they would have had the same focus and get news that tips in their favor like Tesla, people rooting for them. It costs money to start new product lines, eventually they won't be as expensive when the technology is refined and then other car companies will be behind. It wouldn't be surprising to me if Tesla was later the tech that helps other car companies succeed. If Tesla does succeed the others will be caught on their heels.
This is why older companies can't innovate as much, protecting the main source/bottom line. The only company that has really attacked their own product lines with new innovative products is Apple with the iPad (which directly hit their other models, but also hit their competitors bottom line harder). Other companies follow or start too late when they are comfy on their big bottom line cushion.
All that money Audi has and they are essentially losing the PR battle. Maybe make an investment in Tesla or compete with it then, stop crying that they'll get more focus. People want electric cars to succeed and will be more forgiving when it is done right. Audi your PR just backfired, you look threatened.
[0] http://www.spiegel.de/auto/aktuell/alternative-antriebe-bmw-... (german, Google Translate here: http://translate.google.de/translate?hl=de&sl=de&tl=...)
Why? (Of course there are many valid reasons, just want to get an idea of which ones people are interested in.)
It's pretty obvious that Tesla cannot beat Mercedes, BMW, and Audi in ALL models.
Still, its funny to see a car company write a blog post like this. They are all scurrying about trying to make sure Tesla can't operate in all states because they want to sell directly instead of through dealerships.
The car industry is being disrupted.
There are a lot of interesting aspects to electric-only cars, especially from a manufacturing aspect. There are lots of parts that you just don't need in an electric car, which can lead to efficiencies of mass production. Now that electric cars are no longer either improbably futuristic nor merely the butt of jokes a lot of people are finding it easier to have an electric car be a part of their lives, and that's a pretty big deal. I don't know how things will go, but it'll be nice to get a lot more R&D into electric vehicles for a while.
