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This is where I disagree with most people who are bullish on Tesla. I think there's a huge risk for Tesla that most people don't factor in- that it's very possi

by dkrich 9y ago

This is where I disagree with most people who are bullish on Tesla. I think there's a huge risk for Tesla that most people don't factor in- that it's very possible that most car buyers simply don't want one. The interesting thing about that is that most people seem to assume that making them at enormous scale and meeting the overwhelming demand is the only risk. What a century of observing the auto industry has taught us is that car buyers in huge percentages have fierce brand-loyalty and that anytime a new model is brought to market there's a huge uphill battle to create demand. That's not to say that lots of people won't want a Tesla, clearly there's evidence that there's a market. But it remains to be seen whether that's a niche market or the better part of the auto market. To justify the current valuation, you'd have to believe its the latter. Comparisons to the iPhone seem oversimplified. The iPhone on pretty much every metric was demonstrably better than every other phone on the market, and by a huge margin. Tesla is better on some metrics- doesn't rely on fossil fuels, has some cool technology, and is a novelty because there aren't that many of them on the road. But on most other metrics, there are lots and lots of better options. Some have more power, some are much cheaper, some have more storage space, and some simply have better brand awareness and loyalty. Again, not suggesting that they aren't developing a great product. But there are huge risks to the survival of this company beyond cash burn that I don't think people are taking into account.

toomuchtodo 9y ago
The Gigafactory is specifically designed to balance vehicle and stationary storage cell production. Not enough cars selling? More batteries for utility scale energy storage. And the demand for energy storage isn't going away.
smokeyj 9y ago
Tesla is the Apple equivalent for cars. Consumers see the Tesla brand as innovative and high quality regardless if it's true. Even if other manufacturers make a Tesla equivalent, that's like iPhone vs Android. It's a status thing for many, and for that alone I'd bet on the Tesla brand.
- dkrich 9y ago
  This seems like an availability bias. Are you saying that consumers don't regard Porsche, Audi, BMW, Lexus, Mercedes and Infiniti as innovative and high quality?
rsync 9y ago
"What a century of observing the auto industry has taught us is that car buyers in huge percentages have fierce brand-loyalty and that anytime a new model is brought to market there's a huge uphill battle to create demand." I think we could be at a point similar to laptop buyers in 2002/2003/2004. Remember when there were multiple companies making laptops and you would comparison shop and read reviews and look ahead to some new line of Fujitsu vs. Sony vs. Panasonic laptops and maybe visit dynamism.com and see what was being sold in Japan and so on and so forth ? And then 2-3 years later there was one laptop manufacturer: Apple. Everything else was irrelevant in the face of a solid block of metal with a glass screen that lasts 5-7 years and "just works". When was the last time you spec'd out different laptops - other than perhaps to read with mild interest about some Dell model built for Ubuntu that might possibly be an option but probably isn't. I have mixed feelings about this ... On the one hand, Apple laptops really are the best that has ever been and have largely "solved" the category. On the other hand, without any competition we get strong-armed into certain design decisions that might not work for us ... glossy screens, no more full sized USB ports, maybe headphone jack goes away ... Electric only drive, skateboard style battery platform (with dramatically lowered center of gravity) and AWD with multiple motors ... I want these innovations. But I would also like some choices in styling and design - especially since I dislike the Tesla interior design so much ...
- smeyer 9y ago
  > And then 2-3 years later there was one laptop manufacturer: Apple Your view of Apple laptops seems to represent only a small segment of the market. While Apple was on the rise, they were still only 3rd behind Dell and HP in market share by 2007 [0] and are roughly 5th over the last few years [1]. They presumably look better on a revenue rather than units basis, but they were never the sort of singular force you described them as. They might have held that position among a certain segment of laptop buyers, but not the general market. [0] http://www.macworld.com/article/1059616/appleshare.html http://www.macworld.com/article/1059616/appleshare.html [1] https://www.digitaltrends.com/computing/apple-2015-notebook-market-share/ https://www.digitaltrends.com/computing/apple-2015-notebook-...
  - rsync 9y ago
mikeash 9y ago
They have half a million reservations for the Model 3, despite putting essentially no effort into signing people up, and spending the last year or so actively anti-selling it. They're currently adding 1,800 reservations a day, despite the fact that someone reserving today probably won't receive their car for 18 months or more. I agree with your point as applied to a hypothetical generic car company launching an unknown model, but in this particular instance there's good reason to believe that Tesla will be able to sell every car they're capable of building. You compare it to the iPhone saying that the iPhone was better on pretty much every metric. That wasn't the case at all. The original iPhone lacked 3G connectivity, support for more than one wireless carrier, support for CDMA networks, GPS, third-party apps, hardware keyboard, user-swappable battery, decent camera, FM radio tuner, multitasking, and removable storage. The iPhone eventually gained many of these features, and most of the others turned out to be less important than people thought they were. But that was very much not obvious at the time.
- dkrich 9y ago
  one wireless carrier, support for CDMA networks, GPS, third-party apps, hardware keyboard, user-swappable battery, decent camera, FM radio tuner, multitasking, and removable storage I don't know about you, but my clamshell Samsung flip phone didn't support any of that except a user-swappable batter and removable storage, both of which I would argue are not net positives, but negatives as they increase the form factor of the phone. Also, what of the 65k or so of cancelled reservations for the Model 3?
  - mikeash 9y ago
    Why are you comparing to your clamshell Samsung flip phone specifically? You said "The iPhone on pretty much every metric was demonstrably better than every other phone on the market" so I'm comparing to every other phone on the market, not one specific low-end model. Every feature I mentioned there existed in contemporary smartphones. I even looked them up! The iPhone got a ton of criticism at the time for missing things like this. 65k cancelled reservations out of over half a million total, with net reservations increasing rapidly... what of them?
tokipin 9y ago
> I think there's a huge risk for Tesla that most people don't factor in- that it's very possible that most car buyers simply don't want one. This is a legit worry, but well-designed electric cars are better than gas cars by a large margin, without question. Ultimately this is the only requirement, and it's one of the reasons Tesla is so extreme in its design aspirations. So this risk is not a risk at all in the case of Tesla. It is certainly a risk for other companies (see Chevy Bolt).
- dkrich 9y ago
  Why is it not a risk for Tesla but a risk for Chevrolet?
  - tokipin 9y ago
    Because Tesla is good at design, and Chevrolet is not.
heygrady 9y ago
> it's very possible that most car buyers simply don't want [a Tesla/electric car]. Many surveys have shown that people want electric cars [1, 2]. While the car industry overall has declined [3], the EV segment has continued to grow [4]. While it's possible that people don't want to own an EV, the available evidence hints at future growth in the EV segment [5]. [1] https://www.fool.com/investing/2016/09/20/consumers-are-more-willing-to-buy-an-electric-vehi.aspx https://www.fool.com/investing/2016/09/20/consumers-are-more... [2] https://arstechnica.com/cars/2017/02/30-of-us-buyers-consider-electric-cars-only-3-buy-can-this-change/ https://arstechnica.com/cars/2017/02/30-of-us-buyers-conside... [3] http://money.cnn.com/2017/08/01/news/july-car-sales/index.html http://money.cnn.com/2017/08/01/news/july-car-sales/index.ht... [4] http://blog.ucsusa.org/peter-oconnor/electric-car-rolling-sales-numbers http://blog.ucsusa.org/peter-oconnor/electric-car-rolling-sa... [5] https://www.bloomberg.com/news/articles/2017-04-25/electric-car-boom-seen-triggering-peak-oil-demand-in-2030s https://www.bloomberg.com/news/articles/2017-04-25/electric-...

by dkrich 9y ago

toomuchtodo 9y ago

The Gigafactory is specifically designed to balance vehicle and stationary storage cell production. Not enough cars selling? More batteries for utility scale energy storage. And the demand for energy storage isn't going away.

smokeyj 9y ago

Tesla is the Apple equivalent for cars. Consumers see the Tesla brand as innovative and high quality regardless if it's true. Even if other manufacturers make a Tesla equivalent, that's like iPhone vs Android. It's a status thing for many, and for that alone I'd bet on the Tesla brand.

dkrich 9y ago
This seems like an availability bias. Are you saying that consumers don't regard Porsche, Audi, BMW, Lexus, Mercedes and Infiniti as innovative and high quality?

rsync 9y ago

"What a century of observing the auto industry has taught us is that car buyers in huge percentages have fierce brand-loyalty and that anytime a new model is brought to market there's a huge uphill battle to create demand." I think we could be at a point similar to laptop buyers in 2002/2003/2004. Remember when there were multiple companies making laptops and you would comparison shop and read reviews and look ahead to some new line of Fujitsu vs. Sony vs. Panasonic laptops and maybe visit dynamism.com and see what was being sold in Japan and so on and so forth ? And then 2-3 years later there was one laptop manufacturer: Apple. Everything else was irrelevant in the face of a solid block of metal with a glass screen that lasts 5-7 years and "just works". When was the last time you spec'd out different laptops - other than perhaps to read with mild interest about some Dell model built for Ubuntu that might possibly be an option but probably isn't. I have mixed feelings about this ... On the one hand, Apple laptops really are the best that has ever been and have largely "solved" the category. On the other hand, without any competition we get strong-armed into certain design decisions that might not work for us ... glossy screens, no more full sized USB ports, maybe headphone jack goes away ... Electric only drive, skateboard style battery platform (with dramatically lowered center of gravity) and AWD with multiple motors ... I want these innovations. But I would also like some choices in styling and design - especially since I dislike the Tesla interior design so much ...

smeyer 9y ago
> And then 2-3 years later there was one laptop manufacturer: Apple Your view of Apple laptops seems to represent only a small segment of the market. While Apple was on the rise, they were still only 3rd behind Dell and HP in market share by 2007 [0] and are roughly 5th over the last few years [1]. They presumably look better on a revenue rather than units basis, but they were never the sort of singular force you described them as. They might have held that position among a certain segment of laptop buyers, but not the general market. [0] http://www.macworld.com/article/1059616/appleshare.html http://www.macworld.com/article/1059616/appleshare.html [1] https://www.digitaltrends.com/computing/apple-2015-notebook-market-share/ https://www.digitaltrends.com/computing/apple-2015-notebook-...
- rsync 9y ago

mikeash 9y ago

They have half a million reservations for the Model 3, despite putting essentially no effort into signing people up, and spending the last year or so actively anti-selling it. They're currently adding 1,800 reservations a day, despite the fact that someone reserving today probably won't receive their car for 18 months or more. I agree with your point as applied to a hypothetical generic car company launching an unknown model, but in this particular instance there's good reason to believe that Tesla will be able to sell every car they're capable of building. You compare it to the iPhone saying that the iPhone was better on pretty much every metric. That wasn't the case at all. The original iPhone lacked 3G connectivity, support for more than one wireless carrier, support for CDMA networks, GPS, third-party apps, hardware keyboard, user-swappable battery, decent camera, FM radio tuner, multitasking, and removable storage. The iPhone eventually gained many of these features, and most of the others turned out to be less important than people thought they were. But that was very much not obvious at the time.

dkrich 9y ago
one wireless carrier, support for CDMA networks, GPS, third-party apps, hardware keyboard, user-swappable battery, decent camera, FM radio tuner, multitasking, and removable storage I don't know about you, but my clamshell Samsung flip phone didn't support any of that except a user-swappable batter and removable storage, both of which I would argue are not net positives, but negatives as they increase the form factor of the phone. Also, what of the 65k or so of cancelled reservations for the Model 3?
- mikeash 9y ago
  Why are you comparing to your clamshell Samsung flip phone specifically? You said "The iPhone on pretty much every metric was demonstrably better than every other phone on the market" so I'm comparing to every other phone on the market, not one specific low-end model. Every feature I mentioned there existed in contemporary smartphones. I even looked them up! The iPhone got a ton of criticism at the time for missing things like this. 65k cancelled reservations out of over half a million total, with net reservations increasing rapidly... what of them?

tokipin 9y ago

> I think there's a huge risk for Tesla that most people don't factor in- that it's very possible that most car buyers simply don't want one. This is a legit worry, but well-designed electric cars are better than gas cars by a large margin, without question. Ultimately this is the only requirement, and it's one of the reasons Tesla is so extreme in its design aspirations. So this risk is not a risk at all in the case of Tesla. It is certainly a risk for other companies (see Chevy Bolt).

dkrich 9y ago
Why is it not a risk for Tesla but a risk for Chevrolet?
- tokipin 9y ago
  Because Tesla is good at design, and Chevrolet is not.

heygrady 9y ago

> it's very possible that most car buyers simply don't want [a Tesla/electric car]. Many surveys have shown that people want electric cars [1, 2]. While the car industry overall has declined [3], the EV segment has continued to grow [4]. While it's possible that people don't want to own an EV, the available evidence hints at future growth in the EV segment [5]. [1] https://www.fool.com/investing/2016/09/20/consumers-are-more-willing-to-buy-an-electric-vehi.aspx https://www.fool.com/investing/2016/09/20/consumers-are-more... [2] https://arstechnica.com/cars/2017/02/30-of-us-buyers-consider-electric-cars-only-3-buy-can-this-change/ https://arstechnica.com/cars/2017/02/30-of-us-buyers-conside... [3] http://money.cnn.com/2017/08/01/news/july-car-sales/index.html http://money.cnn.com/2017/08/01/news/july-car-sales/index.ht... [4] http://blog.ucsusa.org/peter-oconnor/electric-car-rolling-sales-numbers http://blog.ucsusa.org/peter-oconnor/electric-car-rolling-sa... [5] https://www.bloomberg.com/news/articles/2017-04-25/electric-car-boom-seen-triggering-peak-oil-demand-in-2030s https://www.bloomberg.com/news/articles/2017-04-25/electric-...