Please Note: Blog posts are not selected, edited or screened by Seeking Alpha editors.

High Anxiety At Tesla?

|Includes: Tesla, Inc. (TSLA)

Much has been published about consumer "range anxiety" regarding electric vehicles. Tesla (NASDAQ:TSLA) seems to have done a good job of easing fears with claims of a 300 mile range. But this weeks NY Times article by John Broder is bringing that range anxiety back into question.

The passionate arguments seem to be flying everywhere. There is little discussion about the engineering matter being argued (EV range) or the business implications for the EV industry, just name calling and much religious fervor.

There is a reason that consumers and producers alike are very concerned about the range of their vehicles. Consumers buy a vehicle to perform a loose set of transportation objectives. None of those objectives include refueling, and definitely not waiting an hour for refueling. Miles driven per person continues to increase and commuting distances continue to increase.[1] So it stands to reason that consumers will continue to look at driving range as an important factor. The Tesla S model, with a $20,000 optional battery (upgrade from 40 kW to 85 kW), claims to get about 300 miles driving range,[2] yet that is still at the low end of the spectrum gasoline and/or hybrid cars (540 mile range for Buick LaCrosse eAssist).[3]

To use the much-vaunted Tesla Supercharger you have to pony up at least $12,000 for a battery pack upgrade (40 kW to 60 kW) plus $2,000 for the fast charger that takes advantage of "free" charging. Even if you subtract several hundred dollars for the charger, that amounts to prepaying for 60,000 miles worth of charging.[4] So it turns out Tesla is not giving away free electricity. To put it in perspective, that $14,000 premium alone will allow you to drive the Buick LaCrosse 144,000 miles.[5] The LaCrosse is exceptionally close in physical dimensions to the Tesla S, except the Buick is about 500 pounds lighter. The Buick has EPA mileage of 36 mpg highway with the mild hybrid eAssist, not the 22 mpg used for comparison on the Tesla web site.

So we have proven that the Tesla buyer is willing to ignore economics, but how much convenience are they willing to give up? Just how market limiting is a range-limited vehicle? At least one study by the Federal government determined that a daily driving range of 80 miles would be adequate for 90% of the vehicles and a range of 120 miles would satisfy 95% of vehicle usage.[6] Much of the Tesla anecdotal evidence on the web states how the Model S is great for commuting.[7] The problem with the National Household Travel Survey is that it is concerned with traffic congestion and overall fleet efficiency. Those are both admirable and appropriate goals for the Department of Transportation. When individuals make buying decisions they generally do not have the governments needs in mind.

One deal breaker in buying a new (or used) car can be a minor but important requirement. Take for instance the requirement that the vehicle must take the family of four to grandma's for Christmas and to Florida for spring break. While this would at most be two weeks out of the year (<4% by time) for some it would be a mandatory vehicle requirement to accommodate these annual trips. So the range of the vehicle would be important to support those trips.

If taking a vacation trip is an important requirement for a vehicle, how might a consumer weigh a traditional car vs. an electric vehicle like the Tesla. Tesla is singled out here because they are the clear leaders in EV driving range. The recent NY Times article by John Broder was derided by CEO Elon Musk when his Tesla needed towing, but no one is talking about the engineering issues that are at the root of Broder's complaint. The bottom line is that all chemical batteries perform very poorly in cold weather. Many believe that clever Tesla engineers will solve this problem, but this is chemistry folks and there is no easy way around it.

You cannot drive a Tesla from Minneapolis to Chicago to visit grandma for Christmas. That is the simple fact. Even with Superchargers at 1/3 of the 400 mile distance (133 miles) you would add two to three hours minimum to a 6 hour trip. The Tesla web site has a range calculator with slide controls ( If you set the speed at 65 mph and the outside temperature at 32 degrees (the lowest the calculator goes) the 60 kWh battery (the $14,000 option with Supercharger) will give you 167 mile range. Consider that the average low temperature in Minneapolis in December is 11 degrees and you will likely have the same problems getting to Chicago that John Broder had getting to Connecticut.

Elon Musk has argued that the Times article was planted by short sellers, but the facts are on his own web site. Electric vehicles will probably never be adequate for out-of-town driving in the northern US and Canada. Well-heeled commuters with second cars and Hollywood types with a need to present a "green" image will make a nice niche market for Tesla.

The seven Midwest states, where cold temperatures are routine, account for over 55 million people (17 % of the US).[8] Add in New England, although they often have milder temperatures, and you have perhaps 1/3 of the US and 100% of Canada that will be significantly inconvenienced by owning a Tesla. For the foreseeable future hybrid cars will solve much of our nations fuel problems. Intelligent people can discuss what the long term might look like, but Tesla does not have the cash to last that long.

There are good business reasons so many people are shorting Tesla right now. Tesla has requested the court allow certain business information to be withheld in the now delayed annual report. There have been no meaningful statements from the company regarding their production ramp up. If they are at capacity, how much overtime is being used? Before Christmas Mr. Musk admitted that Tesla employees were working long hours and giving up Holidays. If that is true, then the plant production rate has essentially been reduced and will have limited upside to fill the order backlog. Why has Tesla delayed releasing year-end results?

Too many issues here for me to go long. Yet, Mr. Musk is a great fundraiser and might stretch this out longer than many think so going short might also prove hazardous. Better to sit back and watch this one unfold.

[1] National Highway and Saftey Transportation Board


[3] 2013_LaCrosse_catalog.pdf

[4] Tesla web site, Savings page lists $467 charging cost for 15,000 mile at $0.11/ kWh

[5] $14,000/$3.50/gallon*36 miles/gallon=144,000 miles

[6] SAE International Paper #2012-01-0489, p. 3, John Krumm, April 16, 2012

[7] , John Mason comment.

[8], 2010 Population of Michigan, Indiana, Ohio, Illinois, Wisconsin, Iowa, Minnesota.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.