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As Consumer Reports suggests, this is totally understandable. Straight from CR: > The Tesla wasn’t the only high-performance vehicle that fell below average in

As Consumer Reports suggests, this is totally understandable. Straight from CR: > The Tesla wasn’t the only high-performance vehicle that fell below average in reliability. Others include the BMW X5 and 5 Series, and the Chevrolet Corvette. > When automakers roll out new technology, be it infotainment, transmissions, or engine variations, it often has a deleterious effect on vehicle reliability. Tesla is not only the poster child for a new type of high-performance, high-mileage EV, but it also has been adding complex new variations as assembly-line updates, such as all-wheel drive this year. So it’s not surprising to see problems continue to crop up. > Despite the problems, our data show that Tesla owner satisfaction is still very high: Ninety-seven percent of owners said they would definitely buy their car again. It appears that Tesla has been responsive to replacing faulty motors, differentials, brakes, and infotainment systems, all with a minimum of fuss to owners. The CR article is here: http://www.consumerreports.org/cars/tesla-reliability-doesnt-match-its-high-performance http://www.consumerreports.org/cars/tesla-reliability-doesnt... It's not easy to accidentally slip on a banana peel and buy a Tesla, so I think most owners would understand the risks of buying a brand-new car company's product loaded with brand-new tech. For some that's part of the appeal. I suspect the market is over-reacting a little.

encoderer 11y ago
Tesla's PE in 2016 is forecasted over 130. For comparison bmw is under 10. Tesla is priced for perfection.
- ceejayoz 11y ago
  Comparing Tesla to BMW like that probably isn't very reasonable. No one has any expectations that BMW will suddenly decide to start selling 10x or 100x the number of cars, while that's Tesla's explicit goal.
  - 6stringmerc 11y ago
    That's an interesting point. If Quality Control issues persist (at a rate statistically significant vs. the 'competition'), and there's a larger number of vehicles purchased / in use, then I wonder if the repair and maintenance services by Telsa will be negatively affected? I mean, it's one thing to schedule an appointment when there are XX shops that can work on a brand where the local population is in the thousands (like BMW), but if there are many more cars with issues than there are shops to fix them...that sounds like a choke point to me, and one rather unique to Tesla in this regard.
- beat 11y ago
  Tesla is a growth company that could be a giant. BMW is a stable old blue chip. Different market values entirely. At the individual car level, Tesla S is priced to match mid/high end sedans from BMW, Mercedes, and Audi, so that's the quality level they need to hit. And such quality isn't about reliability so much as fit and finish. Tesla is doing extremely well against very established competition in that regard.
  - encoderer 11y ago
    Check out the PEG ratio, which factors in growth. Rapid and sustained growth is not guaranteed and bad press can inhibit it. But you need that growth to justify the valuation. Priced for perfection.
    - toomuchtodo 11y ago
      Priced to be the supplier for every other vehicle company that needs batteries, every utility that needs utility scale battery storage, and possibly even an Uber competitor. Properly priced.
      - encoderer 11y ago
        Right. So when tesla appears to stumble on this path, that is going to impact the share price more severely than it would a company whose value is more inline with its peers.
        toomuchtodo 11y ago
        But Tesla hasn't stumbled on this path, its stumbled on its vehicles. The vehicles have simply been a method to bootstrap their Supercharger network and Gigafactory, which are both on schedule. Arguably, once enough vehicle manufacturers were producing electric cars, Tesla could close up their vehicle manufacturing business if they were so inclined (and exist solely to provide battery packs).
        11y ago
- ssharp 11y ago
  I think Tesla is less priced for perfection and more priced for the future. Investors expect Tesla to eventually surpass companies like BMW, across the board for each model. By betting on Tesla, they're betting on Tesla being the dominating player in electric vehicles as well as electric vehicles dominating ICE vehicles in passenger categories. I also think the price includes things like their rapidly improving battery technology that could be used for things other than cars, like storing energy from sources that can't provide a steady stream of energy, like solar. So, there's certainly a lot going on with Tesla that isn't going on with a company like BMW.
  - hugh4 11y ago
    How rational is it to bet on Tesla continuing to dominate the electric car market once the electric car market becomes mainstream? There are much, much bigger players waiting on the sidelines for market conditions to change.
    - adventured 11y ago
      They do have a significant head-start over most competitors. When companies like Porsche talk about launching their 'Tesla killer' - it's set for years into the future. It's definitely not rational to think Tesla will dominate, as no company actually dominates the auto industry. Toyota arguably comes closest and they don't dominate, they have a modest market share compared to what traditionally dominate companies have. Can they one day do $20 billion in sales and ~$1.5 billion in profit? Probably. That would justify their present valuation (they will very likely carry a higher valuation than most car companies, for the same reason companies like Google carry a higher valuation than IBM). The real problem for investors, is it may take eight to ten years to justify their present valuation.
    - marvin 11y ago
      They'll have to build some billion-dollar battery factories first. (Or someone else must). This will take some 5 years per factory, so that's a clear leading indicator. Also, most new cars will be electric in 20 years, and that's a lot of cars.
- MichaelGG 11y ago
  Perfection or just some growth? Their volume is really small, isn't it? If they just manage to sell, I dunno, 10x more cars then that P/E would drop right down no?
  - bradleyjg 11y ago
    Assuming margins hold up (or improve).
- weinzierl 11y ago
  Probably not everyone knows what PE is (I didn't): The price to earnings ratio (PE Ratio) is the measure of the share price relative to the annual net income earned by the firm per share. PE ratio shows current investor demand for a company share. A high PE ratio generally indicates increased demand because investors anticipate earnings growth in the future. The PE ratio has units of years, which can be interpreted as the number of years of earnings to pay back purchase price.[1] According to [1] GE is 12, Ford 17, Nissan 10. Possible source for the P/E 130 [2]. [1] https://ycharts.com/companies/TSLA/pe_ratio https://ycharts.com/companies/TSLA/pe_ratio [2] http://www.nasdaq.com/symbol/tsla/pe-ratio http://www.nasdaq.com/symbol/tsla/pe-ratio
  - repsilat 11y ago
    The fact that it's net income is very important here -- Tesla are rapidly scaling up production, which means lots of capital investment with a view to increasing future revenues (and profits.)
pkorzeniewski 11y ago
I wouldn't take the owner satisfaction ratings too seriously, people who buy Tesla cars are mostly rich enthusiasts of new technologies and will quietly deal with a lot of issues before starting to criticize the car. If someone doesn't care about the electric engine, there's really no reason to buy a Tesla - for the same price you can get a much more luxurious german car with proven technology. It's similar to people buying exotic sports cars - they know the reliability is worse than in "normal" cars and they're much more expensive to maintain, but that's not the reason why they bought the car, so they won't complain about it.
- vhold 11y ago
  Also when you spend over $100,000 on a car you're less likely to want to diminish its status value and other peoples' perceptions of your choices by complaining about it.
  - pinkrooftop 11y ago
    Jaguar owners have been an exception before recent quality improvements
    - stan_rogers 11y ago
      The forearm burn you got from manually lashing your valves was a point of pride. And when you complained about the Lucas electrics, you weren't really complaining about your Jaguar, were you?
- bri3d 11y ago
  From watching a few friends own Teslas, it seems that they offer a superior repair and maintenance experience to many German car dealers, which helps with owner satisfaction in the face of reliability issues. It certainly doesn't bode well for Tesla's attempt to move to high-volume, lower-margin production, though.
  - pkorzeniewski 11y ago
blisterpeanuts 11y ago
The Tesla's getting AWD? That's cool. If they can get the range up over 400 miles, I would be very interested (albeit still unable to afford one). Hoping actually that I do slip on a banana peel at some point :)
- tghw 11y ago
  They announced AWD over a year ago.
  - blisterpeanuts 11y ago
    Interesting; I just went there (http://www.teslamotors.com/models http://www.teslamotors.com/models) and it looks as though the AWD actually increases range. I would have thought that it would require more energy. Two separate motors, one for front and one for rear; I guess their engineers found a way to divide the work pretty equally, versus one larger motor on just the front axle.
    - scott_karana 11y ago
      > versus one larger motor on just the front axle. I think you mean rear ;)
nickbauman 11y ago
Harley Davidson has a rabid fan base that defies logic far more than Tesla's. Most Harleys price 40% higher than better, faster and safer motorcycles out there, they use stamped steel parts where other makers use aircraft-grade aluminum, their engines haven't meaningfully changed since WWII (their first liquid cooled engines were just hitting the market a few years ago). It's branding. Tesla is much closer to delivering the "real thing". They will succeed, I think.
guelo 11y ago
That's fine for today's Tesla customer but the analyst's point is that when they go up against the Leaf those customers are going to be a lot less forgiving.

encoderer 11y ago

Tesla's PE in 2016 is forecasted over 130. For comparison bmw is under 10. Tesla is priced for perfection.

ceejayoz 11y ago
Comparing Tesla to BMW like that probably isn't very reasonable. No one has any expectations that BMW will suddenly decide to start selling 10x or 100x the number of cars, while that's Tesla's explicit goal.
- 6stringmerc 11y ago
  That's an interesting point. If Quality Control issues persist (at a rate statistically significant vs. the 'competition'), and there's a larger number of vehicles purchased / in use, then I wonder if the repair and maintenance services by Telsa will be negatively affected? I mean, it's one thing to schedule an appointment when there are XX shops that can work on a brand where the local population is in the thousands (like BMW), but if there are many more cars with issues than there are shops to fix them...that sounds like a choke point to me, and one rather unique to Tesla in this regard.
beat 11y ago
Tesla is a growth company that could be a giant. BMW is a stable old blue chip. Different market values entirely. At the individual car level, Tesla S is priced to match mid/high end sedans from BMW, Mercedes, and Audi, so that's the quality level they need to hit. And such quality isn't about reliability so much as fit and finish. Tesla is doing extremely well against very established competition in that regard.
- encoderer 11y ago
  Check out the PEG ratio, which factors in growth. Rapid and sustained growth is not guaranteed and bad press can inhibit it. But you need that growth to justify the valuation. Priced for perfection.
  - toomuchtodo 11y ago
    Priced to be the supplier for every other vehicle company that needs batteries, every utility that needs utility scale battery storage, and possibly even an Uber competitor. Properly priced.
    - encoderer 11y ago
      Right. So when tesla appears to stumble on this path, that is going to impact the share price more severely than it would a company whose value is more inline with its peers.
      - toomuchtodo 11y ago
        But Tesla hasn't stumbled on this path, its stumbled on its vehicles. The vehicles have simply been a method to bootstrap their Supercharger network and Gigafactory, which are both on schedule. Arguably, once enough vehicle manufacturers were producing electric cars, Tesla could close up their vehicle manufacturing business if they were so inclined (and exist solely to provide battery packs).
        11y ago
ssharp 11y ago
I think Tesla is less priced for perfection and more priced for the future. Investors expect Tesla to eventually surpass companies like BMW, across the board for each model. By betting on Tesla, they're betting on Tesla being the dominating player in electric vehicles as well as electric vehicles dominating ICE vehicles in passenger categories. I also think the price includes things like their rapidly improving battery technology that could be used for things other than cars, like storing energy from sources that can't provide a steady stream of energy, like solar. So, there's certainly a lot going on with Tesla that isn't going on with a company like BMW.
- hugh4 11y ago
  How rational is it to bet on Tesla continuing to dominate the electric car market once the electric car market becomes mainstream? There are much, much bigger players waiting on the sidelines for market conditions to change.
  - adventured 11y ago
    They do have a significant head-start over most competitors. When companies like Porsche talk about launching their 'Tesla killer' - it's set for years into the future. It's definitely not rational to think Tesla will dominate, as no company actually dominates the auto industry. Toyota arguably comes closest and they don't dominate, they have a modest market share compared to what traditionally dominate companies have. Can they one day do $20 billion in sales and ~$1.5 billion in profit? Probably. That would justify their present valuation (they will very likely carry a higher valuation than most car companies, for the same reason companies like Google carry a higher valuation than IBM). The real problem for investors, is it may take eight to ten years to justify their present valuation.
  - marvin 11y ago
    They'll have to build some billion-dollar battery factories first. (Or someone else must). This will take some 5 years per factory, so that's a clear leading indicator. Also, most new cars will be electric in 20 years, and that's a lot of cars.
MichaelGG 11y ago
Perfection or just some growth? Their volume is really small, isn't it? If they just manage to sell, I dunno, 10x more cars then that P/E would drop right down no?
- bradleyjg 11y ago
  Assuming margins hold up (or improve).
weinzierl 11y ago
Probably not everyone knows what PE is (I didn't): The price to earnings ratio (PE Ratio) is the measure of the share price relative to the annual net income earned by the firm per share. PE ratio shows current investor demand for a company share. A high PE ratio generally indicates increased demand because investors anticipate earnings growth in the future. The PE ratio has units of years, which can be interpreted as the number of years of earnings to pay back purchase price.[1] According to [1] GE is 12, Ford 17, Nissan 10. Possible source for the P/E 130 [2]. [1] https://ycharts.com/companies/TSLA/pe_ratio https://ycharts.com/companies/TSLA/pe_ratio [2] http://www.nasdaq.com/symbol/tsla/pe-ratio http://www.nasdaq.com/symbol/tsla/pe-ratio
- repsilat 11y ago
  The fact that it's net income is very important here -- Tesla are rapidly scaling up production, which means lots of capital investment with a view to increasing future revenues (and profits.)

pkorzeniewski 11y ago

I wouldn't take the owner satisfaction ratings too seriously, people who buy Tesla cars are mostly rich enthusiasts of new technologies and will quietly deal with a lot of issues before starting to criticize the car. If someone doesn't care about the electric engine, there's really no reason to buy a Tesla - for the same price you can get a much more luxurious german car with proven technology. It's similar to people buying exotic sports cars - they know the reliability is worse than in "normal" cars and they're much more expensive to maintain, but that's not the reason why they bought the car, so they won't complain about it.

vhold 11y ago
Also when you spend over $100,000 on a car you're less likely to want to diminish its status value and other peoples' perceptions of your choices by complaining about it.
- pinkrooftop 11y ago
  Jaguar owners have been an exception before recent quality improvements
  - stan_rogers 11y ago
    The forearm burn you got from manually lashing your valves was a point of pride. And when you complained about the Lucas electrics, you weren't really complaining about your Jaguar, were you?
bri3d 11y ago
From watching a few friends own Teslas, it seems that they offer a superior repair and maintenance experience to many German car dealers, which helps with owner satisfaction in the face of reliability issues. It certainly doesn't bode well for Tesla's attempt to move to high-volume, lower-margin production, though.
- pkorzeniewski 11y ago

blisterpeanuts 11y ago

The Tesla's getting AWD? That's cool. If they can get the range up over 400 miles, I would be very interested (albeit still unable to afford one). Hoping actually that I do slip on a banana peel at some point :)

tghw 11y ago
They announced AWD over a year ago.
- blisterpeanuts 11y ago
  Interesting; I just went there (http://www.teslamotors.com/models http://www.teslamotors.com/models) and it looks as though the AWD actually increases range. I would have thought that it would require more energy. Two separate motors, one for front and one for rear; I guess their engineers found a way to divide the work pretty equally, versus one larger motor on just the front axle.
  - scott_karana 11y ago
    > versus one larger motor on just the front axle. I think you mean rear ;)

nickbauman 11y ago

Harley Davidson has a rabid fan base that defies logic far more than Tesla's. Most Harleys price 40% higher than better, faster and safer motorcycles out there, they use stamped steel parts where other makers use aircraft-grade aluminum, their engines haven't meaningfully changed since WWII (their first liquid cooled engines were just hitting the market a few years ago). It's branding. Tesla is much closer to delivering the "real thing". They will succeed, I think.

guelo 11y ago

That's fine for today's Tesla customer but the analyst's point is that when they go up against the Leaf those customers are going to be a lot less forgiving.