Roger Pressman

Long-term horizon, tech, software, carmakers
Roger Pressman
Long-term horizon, tech, software, carmakers
Contributor since: 2016
Company: Evannex
A number of commenters have suggested that I include PHEVs in my TK comparison and create radar diagrams for them. It's a worthwhile suggestion. I purposely focused on competitive BEVs because: (1) they provide an apples to apples comparison and (2) I do believe BEVs are the future.
In terms of range, a PHEV (or for that matter, an ICE vehicle) has unlimited range as long as there are gas stations along the route. But here's the thing—because a supercharging infrastructure does exist for the Model S, that BEV also has unlimited range as it moves from charger to charger, just as a PHEV or ICE vehicle moves from gas station to gas station. The BEV is a zero emission vehicle across its entire route -- the PHEV -- not so much.
At the risk of starting a flame war, the engineer in me likes simplicity. PHEVs have significant benefits, for sure, most associated with the ubiquitous nature of gas stations as range extenders. But PHEVs are relatively complex systems. A PHEV must integrate all of the elements of an ICE vehicle with all of the elements of a BEV, develop a transmission that will allow both to operate effectively and an appropriate control system to coordinate the resulting system elements. The weight of the ICE reduces the size of the battery that can be offered, hence the many PHEVs with 30 miles +/- of electric range. Complex systems require more maintenance because there are more system elements, more parts, and more things that can go wrong. I'm not arguing against PHEVs (my son owns a Volt, and it's a great car) but I believe they represent a transitional vehicle. As battery capacity improves and range becomes less of an issue, I suspect that simplicity will win out and that BEVs will slowly but surely take a greater market share.
From an investment perspective, the question is whether traditional ICE vehicle manufacturers will fight the transition or work enthusiastically to create real competition for the Model S/X/3. As some commenters have already noted, broad-based competition is good for Tesla Motors because it will broaden the audience for BEVs.
Somehow in the editing process, the source of the information, Benzinga Pro -- a news web feed -- got edited incorrectly and the source of quotes, Mary Barra -- GM CEO -- got edited out. I missed it -- my bad. No sarcasm was intended.
I disagree with your contention that I started out "with a conclusion and worked backward ..."
I started out with a look at the market, then examined claims made by real auto manufacturers (and a few wannabes) about BEVs they claim would be competitive with the Model S, then tried to quantify those claims, then compared a quantified assessment graphically against the Model S and each other. The "conclusion" one might draw in looking at the radar diagrams and the commentary I presented comes out of the claims made by competitive manufacturers-- not any preconceived notion of who might be best.
I also disagree with your claim that "dismissive swipes, not facts ..." formed the basis of my piece. The "facts" I used were the best available in the murky world of "Tesla Killers." I tried hard not to dismiss any contender unless their claims were impossible to believe.
As the author of this article, many thanks for all of the comments (so far) and the constructive suggestions, criticism, and sure, kind words.
A few general comments on the Comments:
My intent was not to draw broad-based conclusions about the future viability of any one "Tesla Killer", but rather, try to quantitatively assess each (given what little is known) against the Tesla Model S/X. It seems to me that at the very least, Tesla Motors has gotten the attention of major premium auto manufacturers. They may not want to kill it, but they most certainly need to compete or lose non-trivial share in some premium segments.
Those who suggest that recharging infrastructure should have been a assessment criterion raise a valid point. The Tesla supercharger infrastructure is a significant competitive advantage. None of the so-called Tesla Killers (including GM with the Bolt) have talked about recharging infrastructure. One can only wonder whether: (1) they'll make the investment to create one, (2) they'll partner with Tesla and use the existing Supercharger infrastructure, or (3) they'll create a third party company (or partner with one) that will create "electric stations" (the 21st century equivalent to "gas stations") to provide recharging capability.
A point that I didn't emphasize enough, I think, is the overall commitment of Big Auto and EuroAuto to BEVs. It almost seems that they're being dragged kicking and screaming to the BEV space.
For those commenters who suggest that Tesla Motors has NOT been a "disrupter" in the auto industry, I can only smile. If Tesla Motors has not disrupted the premium car market, I'm not sure anything can.
A number of commenters suggested footprint comparisons with other BEVs. Points well taken. In order to keep the size of this piece manageable, I selected those that we "closest" to the Model S based on specs that have been offered.
After dozens upon dozens of rave reviews, after getting Motor Trend's Car of the Year, after building one of the highest performing production sedans in the world, after achieving a five star safety rating in all categories, after selling EVs at 400 per week (full production capacity) and maintaining a 15,000 person waiting list at $5000 a pop, after moving rapidly toward profitability in 2Q13, and after indicating that DoE loans will be repaid in the coming two years, the shorts and naysayers have finally found one negative article and have latched on to it like a drowning man grabs a straw. The reporter pushed the Model S to fail so he'd have a story and he succeeded. The shorts and naysayers respond with glee. Tesla will have the last laugh.
Not selling?? You're comparing apples (Tesla Model S) with oranges (Volt & Leaf). The "average Joe" is not the demographic that Tesla is targeting with the Model S.
Tesla has pre-sold 13,000 of them BEFORE the car even hit the road. And you think it's only the "green" crowd? Again apples and oranges. Tesla competes directly with and in many ways beats BMW, Mercedes, Audi, Lexus, and other luxury brands. It's market is buyers of those cars and as an owner on one of them, I can tell you that Tesla competes in aesthetics, crushes most of them in performance, in handling, in interior storage, in crash safety, just about every category. Don't believe me—read Car & Driver, Motor Trend, Edmunds, R&T, and virtually every other Car mag.
And spare me the range and time to charge argument. Very few people drive more than 265 miles each day, and what about time to charge? You plug-in the Model S at your house at night and when you wake up, you've got the equivalent of a full tank. And even better, a "fill up" costs about $8.00, rather than $60 or more for an ICE car.
If you don't think those are compelling pluses for the model S, you really don't understand the automobile business.
An aside: I lean conservative politically and it astounds me that some on the right (in other posts, not yours) are so negative on an AMERICAN car company that has created over 1,000 jobs in the USA over the past two years. So they took a DoE loan? Not every loan is a bad investment and not every company is Solyndra.
"I believe the company will eventually join the ranks of Solyndra and the Chevy Volt from General Motors (GM) as testaments to the folly of government financed investments into the alternative energy space."
I note that you fail to mention that (1) the company has about 13,000 pre-orders (at $5K a pop) with the trend of pre-orders increasing month over month, (2) that it has begun delivering cars and that the rate of production and deliveries is increasing each week as the ramp-up smooths out (natural for a new production line and technology), (3) that the company has opted for an emphasis on early quality rather than production quantity (bad for stock price but the right thing to do to establish a brand), (4) that it has announced a supercharging network that should lead to reduced range anxiety and an increase in orders during 2013, (5) that "burning through cash" is what start-ups have to do to reach the market with a quality (potentially transformational) product, (6) that second round stock offerings are not exceedingly rare in the technology space, (7) that every (literally, every) major auto mag has raved about the Model S, and that that can only help sales in 2013, (8) that the Model S does not compete in or can be compared to commuter EVs (e.g., Leaf), but rather is competitive with and is compared to the more robust luxury car brands.
So ... Solyndra? Yeah, I sure a lot of shorts fantasize about that. Too bad it just won't happen.
My Tesla Model S will be delivered in about 2 weeks. The ramp up in production is real, deliveries are occurring every day in numbers, and new pre-orders are coming in at a very good rate. Once this car hits the streets in numbers across the USA and once people test drive it -- look out! TSLA is going to do VERY well long term.
BTW, the nay-sayers on this stock have become very quiet as of late. They're the ones who have said Tesla would never build the car and that it was vaporware, then, would never achieve good range (EPA 265 miles), then, would never deliver the car (already happening), then, would never sell more than a few (current pre-orders top 12,000), then, would not achieve the margins they claimed (will happen by mid-2013), then, would never sell their self imposed quota of 20,000 vehicles per year (easily accomplished in 2013). Wrong on every count.
Be careful when you use the word "moron," Galtmachine.
Only a "moron" would drive 600 miles in one day and not expect to rest at least once or twice. Within a year, there will be superchargers on almost every major interstate that will fully recharge a Model S in about 40 minutes, just enough time to grab a bite to eat, stretch and proceed. And if you regularly drive 600 miles in one sitting, you're among 0.01 percent of the driving public. In that case, buy an ICE car. Tesla won't miss you.
And as far as the tax credit, I agree that all should be eliminated, but with a name like Galt, I'm surprised you're playing the class warfare card ("the poorest among us") when in fact, the poorest among us pay virtually no income taxes at all -- but that's an entirely different subject.
"The bull case would have you believe people will be trading in their BMW's and Porsches for an S model. AS a 3 series driver,....well I don't think so."
I know this is OT, but have you driven a Model S? If you have, you'd realize that the Model S blows the doors off BMW 3, and 5 series (except M5) and that it is a viable alternative to a Panamera. Drive it first, then comment. Every first look review (there are now well over 30) is positive and many are raves—every one! And all of those reviewers can't be in Elon Musk's pocket.
So it's "bad news" that a company has an 11 month backlog of orders on a product that has received uniformly rave reviews on its introduction? I suspect that most companies would welcome that kind of "bad news."
Tesla's revenue stream will begin in earnest in about one month and will accelerate through the remainder of this year. By year's end the company will book about a half a billion dollars in revenue on 5,000 delivered vehicles. Next year $1.5 billion or more in sales based on the existing order backlog and very conservative projections for follow-on orders to 20,000 vehicles sold in 2013. And that's "bad news" how, exactly?
This from a Motor Trend review (http://bit.ly/MDCqmq) that raves about the car's performance, styling, and overall capabilities:
"So is it the best car in the world? This fourth production example built may not be, but I'd rank it among the top few percentile, and at the rate these automotive greenhorns [Tesla] are improving things, it might well be the best car in the solar system by version 2.0."
Virtually every early review is positive, and some are raves. The Model S is being favorably compared to BMW 5 series, MBs, and Audis at similar price points.
Tesla is a worthwhile investment.
What exactly are the "production problems" that Capstone (whoever they are) foresee? Is their assessment based on hard data or pure speculation?
Tesla has met virtually every production date and every promise associated with the Model S. They have a state of the art factory, they're projecting 25% margins. They're on track to sell 5,000 cars this year and 20,000 next year (achieving profitability in 2013). They already have close to 12,000 pre-orders at $5,000 deposit each, and that's before the cars have hit the road and before any advertising. Why on earth "exit" the stock?
Yeah, gee, let's think about that for a moment. There are 33 car fires every day among ICE cars -- every day!! There have been exactly 2 car fires over the entire first year of EV use and one occurred three weeks after a crash test when the car sat in a wrecking lot. If anyone needs fire extinguishers, it's owners of ICE cars.
There are legitimate reasons why you might choose not to buy an EV, but car fires? Seriously?
Back in the mid-20th century, music was delivered on something called "records." These were plastic disks that recorded music in analog grooves that were cut into them. When the plastic cracked and the record broke, the music would skip, repeating itself over and over again.
John Peteren is a perfect example of a broken record. He repeats the same tired arguments denigrating Tesla over, and over, and over again. Week after week, we read Petersen's broken record rants about how poorly Tesla will perform, even as the company meets every milestone, has 10,000+ pre-orders, projects margins of 25%, is American made, and will deliver cars ahead of schedule in an industry that rarely, if ever, accomplishes that.
Somehow, Petersen's broken record performance seems appropriate, because in his world, he can't seem to process that new technologies evolve and are not always financially defensible in their early stages.
Petersen's motives are suspect. Why? Because no disinterested party would spend as much time as he does bashing one relatively small company. He's a broken record, an artifact of the 20th century, and the music he plays is dissonant.
Most of us who believe that Tesla will succeed do NOT suggest that EVs win the economic argument today. On a pure dollars and cents basis, ICE vehicles still win.
But (to use your example), no one can justify a Porsche on purely economic grounds, yet the car and the company thrive. You and I both know why that is. Porsche buyers "... like it [and] ... want it, period." The same will hold true for model S buyers.
The Tesla Model S and the X that will follow are premium or luxury cars that focus on a demographic that generally does not use economic justification as its primary buying criterion.
In addition, a growing number of those in the 30 - 60 age group (Tesla's target demographic) are environmentally conscious, and EVs give them something that ICE vehicles don't -- green cred. I'm not very impressed by that, but no matter, it's a strong sales point and marketing angle within the target demographic.
To date Tesla is unknown to most car buyers, when the car hits the streets over the next 6 months and advertising begins in late 2013, I suspect the company will easily exceed their 20,000 sales target.
I've been a project manager for major tech projects, so I have a little experience with Murphy's Law and all of it's corollaries. I can state unequivocally that what Tesla has accomplished is noteworthy at the least, and extraordinary for most observers.
For the past three years, the company has kept all of its promises -- product functionality, product price, and product production and delivery -- and that doesn't happen very often. Few other companies even commit to those promises until a few months before delivery. Think AAPL as an example of a "no promises" approach to new products.
It seems to me, King Edward, that you're lawyering this in an effort to find failings or obfuscation on the part of Tesla where none exists. Sure, there's hype as there would be with any new product. Sure, there are areas where reasonable people can disagree about approach, design, or anything else associated with a product. But to suggest that Tesla hasn't accomplished something important and to denigrate the potential for this company is wrongheaded, IMO.
I'll admit that I'm long on TSLA. I'm curious, what's your position?
Wow, if what you say is true, Tesla is doomed!
It's interesting, though, that what another poster called "rookie engineers" have beaten their own projected delivery dates without pre-production problems. It's interesting that the same people who "ignored" engineering best practices have produced a vehicle with a 5-star crash rating (announced this morning). It's interesting that the people who have "painted themselves into countless corners" haven't yet experienced any significant project schedule problems (you'd think some of you "corners" would have crept in by now) and have kept virtually all of their technology promises to date.
Normally, when a company is a sloppy as you claim Tesla is, problems surface from the beginning. The fact that they haven't doesn't mean they won't, but it sure does make me a bit skeptical about all of your claims.
King Edward: You read an awful lot into a simple historical analogy. The "similarities" I was referring to were the attitudes of the nay-sayers who argued against the Model T simply because it was different. The nay-sayers invented objections to the Model T in much the same way that modern nay-sayers (a few of them commenters here) are inventing tenuous objections to the Model S and Tesla. I would argue that they do not have the foresight to see a whole new industry emerging.
I never suggested that the Model S and the Model T are equivalent (in intent, in history, or in anything else). The Model S is targeted at a high end demographic, not everyman. It is intended for relatively small production runs, not millions of units. It is a premium automobile at a premium price, not a car for the masses. If anything, your use of Henry Ford's quote is interesting but irrelevant, because Tesla has no intention of making the Model S a mass market car. Tesla does, however, have plans for a "Gen III" car that will focus on the mass market in the second half of this decade.
When the model T was first introduced by Ford in 1908, it was as radical a technology as the EV. Early adopters worried about the availability of gasoline (gas stations were few and very far between) as they traveled. Nay-sayers (pessimists) argued that the automobile would NEVER replace the horse and buggy—just too complicated, too restrictive, too ... different.
Less than 20 years later, Ford sold its 15 millionth vehicle!
See any similarities?
How often do most people "continue for another 300 to 400 miles." Once a year? Twice a year? Sure, there are folks who drive massive distances regularly, but they are exceedingly rare in the overall population of automobile owners. And they shouldn't buy an EV.
But for the other 80% (or more) of drivers, unlimited mileage simple doesn't matter. You plug-in your EV at home every night -- a "fill-up" costs about $7 or $8 (as opposed to $60 or more), and you're good to go.
The range issue is grossly overblown for the vast majority of drivers. It's used as a scare tactic to dissuade people from moving to an important new technology.
It's interesting that range always seems to be an issue when EVs and TSLA are discussed. In my view, it's a strawman. Most families will not have an EV as their only car, at least not for the next decade or so. If they need to take a very long trip (i.e., >200 miles) it's likely that they'll use their ICE vehicle. But for daily driving, for longer commutes, and for trips under 150 miles, the EV is so far superior (in operating cost, in convenience, in capability, in maintainability, in environmental impact) to an equivalent ICE car. For some, the purchase will become a no-brainer. And for city driving under say, 40 mph, the EPA figure for the Model S closes in on a 400 mile range.
This is new tech, and the ramp up will be slow, but steady. Once the car hits the streets this summer, once word of mouth and then advertising begins, it's likely (based on existing ordering trends) that the entire 2013 production run of 20,000 vehicles (at ~25% gross margin) will be sold out before the end of 1Q13. That gives Telsa $1.2 billion in gross revenue for 2013, not even considering the deals with Toyota and Daimler.
Sure, TSLA is a speculative start-up, but to dismiss it as a bad bet is short-sighted (pun intended).
Would you consider running your ICE car with no motor oil and/or no coolant? The motor would seize and be irreparable—big expense. That's the equivalent of allowing an EV to remain unplugged to a power source for months on end. If an EV "bricks," it has been abused.
Ryan -- Neither of us has any idea how much a new battery will cost in 8 - 10 years. It may be $20K, but it might also be $5K as new tech and economies of scale kick in. In fact, historic technology trends support a significant reduction in battery cost. At $5K for a battery, things look a lot different, and a $13.3K gas savings more than offsets replacement cost.
Slightly OT, but to put things into perspective, if the ICE average driver travels 230 mi. per week and gets, say 24 mpg, he spends about $40 per week on gas (at current prices). The EV driver spends about $6 per week for 230 miles worth of electricity. That's a differential of, say, $32 dollars per week. Over 8 years and assuming oil prices don't go down much (a reasonable assumption, I think), the differential cost savings is about $13,300. That's a sales advantage, not a disadvantage.
Most buyers recognize that 8-year old cars are worth very much regardless of type, and they will happily take the saving every week and worry about resale when it happens.
One additional point—the "bricking" issue was grossly overstated in the media, and with proper care, bricking is no more likely at 8 years than it is at 1 year. It's a non-issue.
Your comments about battery life have some merit, but you're overstating the level of concern. At the end of eight years under normal to heavy usage, battery capacity may degrade by as much as 30 percent. the implication is that a 300-mile battery (Tesla Model S top of the line) will then have a range of 210 miles—still completely acceptable for most drivers. In addition, there is little wear and tear associated with the drive train of an EV—electric motors are far more reliable than ICE. Over 8 - 10 years, the cost of ownership of an EV is considerably less than equivalent cost of ownership of an ICE car, and that includes battery depreciation. Finally, all cars depreciate the minute they leave the show room. I think your comments about the impact of L-I batteries on the resale of EVs are a bit overblown and will not have any significant negative impact on sales.
Ignorance is a frightening thing, particularly when it masquerades and a self-righteous critique of a solid and innovative company. Stated simply, Mark Bruns demonstrates that: (1) he doesn't understand the topic or the technology, (2) he doesn't understand the Tesla warranty or its handling of the matter, and (3) he hasn't done the research necessary to separate fact from fancy. His comments are as bogus as the original blogger's claim that "bricking" is anything but a black swan issue. Bricking an EV is about as likely as the author of this article writing a balanced and informative piece for Seeking Alpha. That is -- it's very, very unlikely indeed.
You states: Risk #3: "Tesla Roadsters have a major design flaw"
Your statement is absolutely incorrect. The only way an EV can "brick" is if the owner egregiously violates normal maintenance procedures (i.e., refuses to keep the car plugged in when not in use for long periods). This is akin to the owner of an ICE vehicle refusing to replace coolant or oil after a leak—the ICE engine will seize requiring costly replacement. Tesla explicitly specifies proper maintenance for its vehicles. Articles that folowed the initial claim of bricking have debunked it. In addition, the blogger raising the issue has an apparent conflict of interest. In summary, there's no merit to the claim that bricking is a "design flaw."
There seems to be a concerted effort by some to denigrate EVs. They talk about limited range (even though the average person drives far less than 100 miles per day), battery fires (a bogus claim that conveniently disregards the fact that there are 33 internal combustion engine car fires in the USA every day!) and a limited market (even though the Prius and other hybrids ramped up very slowly, they now sell in significant quantities. The nay-sayers also conveniently forget to mention the volatility of gas prices, our need for energy independence as a national security issue, the utter convenience of "filling up" in your garage or driveway, zero emissions, no fuel consumption whatsoever when "idling" in traffic, and a dozen other benefits. TSLA is an excellent investment for all of the reasons you note.