#cars

David Undercoffler on Tesla’s plans to debut a cheaper model in early 2015:

The newest model debuting in 2015 will be the third step, as its platform will differ significantly from anything else Tesla has built so far.

The plan for a mainstream model follows a strategy that Tesla Chief Executive Elon Musk laid out in a 2006 blog post.

“The strategy of Tesla is to enter at the high end of the market, where customers are prepared to pay a premium,” Musk wrote in a post titled “The Secret Tesla Motors Master Plan (just between you and me).” “Then drive down market as fast as possible to higher unit volume and lower prices with each successive model.”

That post, written nearly eight years ago, laid out exactly what Tesla aimed to do.

In the world of startups, eight years seems like an eternity. It’s hard enough to think one year out, let alone a decade. Yet in the automotive industry, eight years seems like nothing. Very little used to change in that span. 

It’s amazing not only how far Tesla has come in the past eight years, but just how well they’ve been able to execute on that original plan. 

Elon Musk on the ruling that you cannot buy a car directly from a manufacturer in the state of New Jersey:

It is worth examining the history of these laws to understand why they exist, as the auto dealer franchise laws were originally put in place for a just cause and are now being twisted to an unjust purpose. Many decades ago, the incumbent auto manufacturers sold franchises to generate capital and gain a salesforce. The franchisees then further invested a lot of their money and time in building up the dealerships. That’s a fair deal and it should not be broken. However, some of the big auto companies later engaged in pressure tactics to get the franchisees to sell their dealerships back at a low price. The franchisees rightly sought protection from their state legislatures, which resulted in the laws on the books today throughout the United States (these laws are not present anywhere else in the world).

The intent was simply to prevent a fair and longstanding deal between an existing auto company and its dealers from being broken, not to prevent a new company that has no franchisees from selling directly to consumers. In most states, the laws are reasonable and clear. In a handful of states, the laws were written in an overzealous or ambiguous manner. When all auto companies sold through franchises, this didn’t really matter. However, when Tesla came along as a new company with no existing franchisees, the auto dealers, who possess vastly more resources and influence than Tesla, nonetheless sought to force us to sell through them.

The reason that we did not choose to do this is that the auto dealers have a fundamental conflict of interest between promoting gasoline cars, which constitute virtually all of their revenue, and electric cars, which constitute virtually none. Moreover, it is much harder to sell a new technology car from a new company when people are so used to the old. Inevitably, they revert to selling what’s easy and it is game over for the new company.

Stop me if you’ve heard this one before: an outdated law being twisted to impede progress and maintain the status quo. Even better:

An even bigger conflict of interest with auto dealers is that they make most of their profit from service, but electric cars require much less service than gasoline cars. There are no oil, spark plug or fuel filter changes, no tune-ups and no smog checks needed for an electric car. Also, all Tesla Model S vehicles are capable of over-the-air updates to upgrade the software, just like your phone or computer, so no visit to the service center is required for that either.

This is so clearly the future of the automotive industry, so this is ultimately just delaying the inevitable. But consumers have every right to be outraged and New Jersey should be ashamed of itself.

ericmortensen asked:

Do you think Apple is providing the touch screens, wiring harnesses, etc. for CarPlay? I can't imagine they'd leave something like the touch experience or screen resolution to a car manufacturer. I have a hard time believing this is just a software solution.

It’s a good question — it seems that no, they’re not. As you can see here, companies like Mercedes are not only leaving these screens open for use with their own systems, they’re also leaving them open to Android in the future (though details aren’t clear there).

All of this sort of led to my reference to the Rokr. We’ll see how well Apple likes playing on other’s hardware. They do it a bit with the Apple TV, but as you note, this is someone else’s touchscreen. 

Mark Rogowsky:

Well consider this: The number of “zero-car families” has been growing since 2007, after shrinking nearly every year since 1960; it’s approaching 10%. While the recession has doubtless played a role, it’s less than you might think. First, there has been an increasing move back toward the cities, where transit is more readily available. Second, millennials seem especially uninterested in owning their own cars. Third, the trend away from driving actually dates back to 2004, when the economy was still thriving. A government measure called “per capita vehicle miles traveled,” which had gone up steadily for decades began trending down that year and has fallen ever since. After 8 consecutive years of declines, on average we’re driving as much as we did in 1996.

The trend is clear.

Burkhard Bilger:

The Google car has now driven more than half a million miles without causing an accident—about twice as far as the average American driver goes before crashing. Of course, the computer has always had a human driver to take over in tight spots. Left to its own devices, Thrun says, it could go only about fifty thousand miles on freeways without a major mistake. Google calls this the dog-food stage: not quite fit for human consumption. “The risk is too high,” Thrun says. “You would never accept it.” The car has trouble in the rain, for instance, when its lasers bounce off shiny surfaces. (The first drops call forth a small icon of a cloud onscreen and a voice warning that auto-drive will soon disengage.) It can’t tell wet concrete from dry or fresh asphalt from firm. It can’t hear a traffic cop’s whistle or follow hand signals.

And yet, for each of its failings, the car has a corresponding strength. It never gets drowsy or distracted, never wonders who has the right-of-way. It knows every turn, tree, and streetlight ahead in precise, three-dimensional detail. Dolgov was riding through a wooded area one night when the car suddenly slowed to a crawl. “I was thinking, What the hell? It must be a bug,” he told me. “Then we noticed the deer walking along the shoulder.” The car, unlike its riders, could see in the dark. Within a year, Thrun added, it should be safe for a hundred thousand miles.

I’ll repeat: “The car, unlike its rider, could see in the dark.”

Andy Serwer interviewing Marc Andreessen:

Serwer: But people love their cars. They have their stuff in their cars, the car seats for their baby, their Frisbees, their golf clubs—it’s their second home. People aren’t going to give that up, are they?

Andreessen: Ask a kid. Take teenagers 20 years ago and ask them would they rather have a car or a computer? And the answer would have been 100% of the time they’d rather have a car, because a car represents freedom, right?

Today, ask kids if they’d rather have a smartphone or a car if they had to pick and 100% would say smartphones. Because smartphones represent freedom. There’s a huge social behavior reorientation that’s already happening. And you can see it through that. And I’m not saying nobody can own cars. If people want to own cars, they can own cars. But there is a new generation coming where freedom is defined by “I can do anything I want, whenever I want. If I want a ride, I get a ride, but I don’t have to worry. I don’t have to make car payments. I don’t have to worry about insurance. I have complete flexibility.” That is freedom too.

Even for me, with each passing year, owning a car seems to be far more of a hassle than it’s worth — quite literally. Yeah, yeah, Silicon Valley bubble talk for now, perhaps. But I think this mentality will spread rather quickly in many areas of the country.

Schumpeter:

A third route to charging more is to manage customers’ expectations better. In the early 2000s executives at General Motors were told to wear badges with “29” on their lapels, as part of a disastrous plan to get back to a 29% market share in America. This merely reinforced car-buyers’ assumption that GM would offer them whatever discounts it took to shift its metal off the forecourts, putting the firm on the road to bankruptcy. (Last year its market share fell to 17.5%, its lowest since the 1920s.) Once customers know that a firm’s price list is a work of fiction and that it will resort to discounts as soon as sales dip, it will be a long haul to get them used to paying full price, let alone accepting increases. Simon-Kucher’s consultants praise DHL, a logistics firm, which spent years drilling into its customers that whatever the economic conditions there will be a rate rise each year.

Two thoughts:

1) The “29” badge was clearly a disaster waiting to happen.

2) As someone who spent the early 2000s in the Detroit-metro area, I remember thinking the massive price cuts were a huge mistake. Why would I ever buy one of their cars at the regular price when I now knew that regular price was a work of fiction that evaporated when times were tough? Why not just postpone buying until times got tough again? Especially since my lack of purchase was directly related to the return of tough times.

Scott Woolley chose an awful title, but makes an interesting point about the government’s 2009 loan to Tesla:

Personal loans made in 2008 by Elon Musk, Tesla’s co-founder and CEO, provide a telling contrast. Musk received a much higher interest rate (10 percent) from Tesla and, more importantly, the option to convert his $38 million of debt into shares of Tesla stock. That’s exactly what he ended up doing, and the resulting shares are now worth a whopping $1.4 billion—a 3,500 percent return on his investment. By contrast, the Department of Energy earned only $12 million in interest on its $465 million loan—a 2.6 percent return.

The government had huge leeway to demand similar terms as part of its loan, given the yawning gap between its interest rate and the cost of Tesla’s next-best source of capital. The government was ponying up more capital than all of Tesla’s previous investors combined. At a bare minimum, the Department of Energy could have demanded a share of the company equal to the 11 percent Musk received for his $38 million loan the year before. Such an 11 percent share would be worth $1.4 billion to taxpayers today.

Of coures, the government is not an investment firm — BUT they did take large ownership stakes in some of the banks during the bailouts.

Also, the government had the option on up to 3 million Tesla shares as a part of the loan — BUT those options evaporated when Tesla paid back the loan early (which was part of the incentive to do so).