Tesla sales 'misleading' says Audi blog post
audiusanews.comThey're right, of course, but I'm not sure this is a great marketing move, because it dignifies the metric Tesla has chosen as their strongest. The fact that Tesla can even mount an argument that they're in a horse race with Audi, let alone outselling them, is a gigantic coup for a car company that's just a few years old.
This was what I was thinking, which basically said this was a big mistake on Audi's part. Rather than instill doubt in me that Tesla is an untested company I came away feeling better about them as an actual competitor to the likes of Audi. Time will tell of course.
Yes. While I really hate the ignore/laugh/fight/win trope, this was Audi putting Tesla firmly in the fight slot, rather ahead of schedule.
The fact that Audi had to write this says that they feel threatened. And while Tesla does only sell one model at a time, they are able to produce cheaper models and sell more of them. As for the question posed by USA Today:
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.
Shorter Audi: Tesla may be outselling us at our flagship range, but since they don't sell cars that cost half as much, we're better, and we're not going to talk about what happens when they start selling cars that cost half as much...
> And while Tesla does only sell one model at a time, they are able to produce cheaper models and sell more of them.
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.
The fact that Audi had to write this says that they feel threatened.
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.
I love the false dichotomy in that USA Today quote.
For kicks, re-read the article as something written 4+ years ago substituting "Apple" for "Tesla" and any other cellphone manufacturer for "Audi."
“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.
They are in no way comparable.
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.
There are people who do buy $60k cars. It's a market that actually exists, just as there was a market for $500+ phones before the iPhone, which at it's introduction actually wasn't the most expensive phone on the market. Just because you're not part of the market for a car in that range is no more relevant than the fact there are plenty of people who would, or could never pay $500+ for a phone is to the success of Apple.
Another way to think about it is that if someone told me I would be paying $500 for a phone before the iPhone came out I probably would have laughed at them. In fact, before the iPhone I don't think anyone in my family ever bought a phone that was more expensive than the 1 cent models that came with contracts. Now we buy the $200 models that come with contracts.
It's one of the fascinating things about smart phones: the top of the line model is easily accessible to most middle-class people, and the rich can't really get anything better.
Now here's an interesting question, or maybe some interrelated questions. First, will Tesla be able to manufacture profitably in the sub-$50k range (competing with the Audi/BMW/MB low end), with a car that is range-comparable to the S? In other words, can they build a genuinely useful electric drivetrain for about the same price as an internal combustion drivetrain?
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?
1) I think Tesla will be able to manufacture cars with ranges comparable to the Model S in the near future at a price tag below $50k. I even believe that in the near future a car comparable in performance and luxury along with range will be in the sub 50K range.
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).
The answer to #1 is that Tesla's ability to do that is entirely dependent upon improvements in battery technology. Based on those projections of about 7% improvement/year in batteries, in a few years they will.
#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?)
> Based on those projections of about 7% improvement/year in batteries, in a few years they will.
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.
Whatever you might think, moving from the top of the market down has always been their plan.
See http://www.teslamotors.com/fr_CH/blog/secret-tesla-motors-ma... from 2006 to prove it.
> First, will Tesla be able to manufacture profitably in the sub-$50k range (competing with the Audi/BMW/MB low end), with a car that is range-comparable to the S?
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.
It would be really funny if the large automakers can comfortably compete with Tesla lower priced electric cars and a significant chunk of Tesla's revenues come from licensing the supercharger network out to said large automakers.
The supercharger network doesn't really help all that much if you don't have ranges like the S. Let's suppose you only have 100 mi range. If so, you have to stop for fairly long time (on the order of a lunch break) in order to recharge. And the numbers I've seen say 30 minutes for a "half charge". If that was also true of a 100 mile range car (or even 160), then 300 mile trips in one day become a huge hassle.
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.
And the big question as to whether a Tesla is a "trip" car or "commute/grocery grabber/fun" car.
There is a large market for electrics that don't meet all the needs an ICE can do - many many families have more than one car. Especially the ones that can afford a luxury vehicle like a Tesla/Audi.
Or, how long until one of them buys Tesla and combines its expertise with their existing infrastructure for mass production?
The NUMMI factory is designed for an output of 300000 cars per year. And thats the number for a GM and Toyota venture producing very complex gasoline cars, not Tesla using robots to produce relatively simple electric cars.
I'm pretty smart finance folks have learned from GOOG stock structuring and the like to prevent LBOs/corporate takeover threats. I'm reasonably sure some of them work for Tesla.
Why would you assume it would be hostile? Ultimately either someone's going to buy Tesla, or Tesla's going to buy a legacy automaker that's in trouble. Setting aside dealership issues in the US, it doesn't make sense to rebuild an entire worldwide distribution system from scratch when the innovation is the car, primarily. Either that, or license the Tesla tech to a major car manufacturer and let them serve the downmarket while protecting the Tesla brand as high-end and innovative. I don't think Tesla wants to become Honda.
Being acquired would definately be a hindrance with the goal of bringing an affordable EV to the masses. I don't think it's about the money from there on.
I wonder if that "expertise" could be more negative than positive. As with software there is certainly a good deal of benefit to having a fresh company, without legacy baggage.
The CNN headline is definitely misleading:
“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!
"No one would guess"
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.
But they did not say "Model S vs A8", they had said "Tesla vs Audi" - which does not mean "Model S vs A8".
they actually did say it. there was a whole article, including a clearly labeled graph, underneath that headline. They didn't say it in the headline, but that's the reason articles exists instead of just headlines - sometimes they have stuff in them.
http://money.cnn.com/2013/05/13/autos/tesla-sales-bmw-merced...
So because the article exists it is now OK to lie in the headlines?
I like Tesla, but another consideration is that this is a brand new model splash. The 2014 results numbers will be more telling, given that the newness will have worn off a little.
This is the old guard problem. You need a new company to come along once in a while and push through a new industry or new industry focus with real effort.
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.
Its interesting to see how they try to cover it up. Especially BMW has researched alternative fuels, mainly hydrogen, but stopped its test fleet in 2009 [0]. Only one super expensive image car, a BMW 7, remains [1]. Audi and VW also dabbled in alternative energies, but none of them really got into it. Hopefully, Tesla can breath some new live into this area. We live in the 21st century, I demand vehicles fueled by anything other than oil.
[0] http://www.spiegel.de/auto/aktuell/alternative-antriebe-bmw-... (german, Google Translate here: http://translate.google.de/translate?hl=de&sl=de&tl=...)
> We live in the 21st century, I demand vehicles fueled by anything other than oil.
Why? (Of course there are many valid reasons, just want to get an idea of which ones people are interested in.)
I am a fan of electric cars because electricity is a buffer against volatile (no pun intended) gas prices. A gallon of gas cost $1.20 just a decade ago, compared to $4 today, a jump of over 200%, compared to a maybe 20% increase in electricity costs. As various fuel sources experience price fluctuations, it will be easier to change the mix of power plants than to change which fuel cars use.
BMW bets heavily on electric cars and plans to launch their first production car, the i3 in a few months.
Wow, defensive. And I say that as a certified Audi fanboy (I'm on my 2nd S4...)
No S5 for you?
Audi's blog post said the headline was misleading, not "Tesla sales". Could someone edit HN's headline?
I thought it was implied in the original article that Tesla was beating the other car makers for their specific high-end models only.
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.
Well at this point I would much rather own a Tesla car than an Audi car so suck it Audi. Then again it's hard to envision making those kinds of purchasing decisions with the depressing state of my bank account.
They're grasping at straws
Wow. Already 3/4 of the way down the "first they ignore you..." continuum. Go Tesla.
First they ignore you, then they laugh at you, then they fight you, then you win.
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.
Wow, I can't believe Audi is actually scared of Tesla and practically admits it on their blog...