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If Tesla continues to follow this route it will have lasting implications for the automotive industry. Instead of replacing" your car every 5-10 years you can "

by kenrikm 12y ago

If Tesla continues to follow this route it will have lasting implications for the automotive industry. Instead of replacing" your car every 5-10 years you can "Upgrade" keeping existing chassis but replacing enough to make it "Like New" (Refurb vs Replace) Automakers sell a completely new car just to make a few thousand dollars every 5-10 years and that's only if the customer stays loyal (Also why some car companies have loyalty incentives) in this case Tesla can still make that income and the customer is locked in as a bonus this will help to keep resale values high since there will be less cars on the market because owners upgrade instead of selling. Now more then ever I wish I bought Tesla stock before it went through the roof.

chatmasta 12y ago
Automakers lock consumers into rebill programs via debt, i.e. a car loan. Tesla locks consumers into rebill via equity, i.e. a nice car, conveniently iteratively upgradeable. Thus Tesla gains capital advantage because it has no liability after disposing of a car asset, while automakers generate debt liability. For every car manufactured, automakers create a liability for themselves, while Tesla creates an automated income stream. Consequently cash flows better in Tesla than in its competitors. Relative to that of automakers, Tesla cash flow increases exponentially. Tesla is competing on a different level. The automakers will be lucky to earn a spot on Tesla's platform. At the very least, Tesla has a first-mover advantage in a surprisingly new market.
- ams6110 12y ago
  You're saying people don't debt-finance Teslas?
  - pinot 12y ago
    Sure they do, but someone who bought a Roaster in 2008 surely has it paid off by now. However unlike every other manufacturer that forgets about the vehicles it used to make (unless there's a recall), Tesla is improving existing products. I have a 2004 SUV with a 7" satnav in it and some god-awful software package. Does Acura offer an upgrade path for this? Other than a way to update the roads database, no. Buy a new SUV.
    - hnnewguy 12y ago
      >Does Acura offer an upgrade path for this? Neither does my iPhone 1. Lets hold off on this comparison until Tesla is still supporting 11 year old vehicles.
      - sjwright 12y ago
        The new-for-old replacement cost of an iPhone 1 is peanuts compared to an SUV. Pinot makes a legitimate point that some car components could be made upgradeable by their manufacturer -- like entertainment units -- but they don't, and they're missing out on those aftermarket dollars as a result. I've owned a number of cars for which I would have spent thousands of dollars with the brand upgrading them if options were available.
        hnnewguy 12y ago
        >some car components could be made upgradeable by their manufacturer -- like entertainment units -- but they don't Almost every single car part can be "upgraded", courtesy of the aftermarket. It's not necessarily a worse system.
- gaadd33 12y ago
  Do the automakers still finance car loans directly? I know GMAC turned into Ally and is no longer owned by GM. I'm not so familiar with the other automaker's financial arms.
  - zrail 12y ago
    In my experience buying a VW and a Mazda, the financing I've been offered has been through another company. I don't remember who the VW bank was (financed through my credit union at the time), but the Mazda financing is a co-branded Chase loan. According to Wikipedia[1] Ford is the only one of the big three Detroit manufacturers to still have it's own financing arm. As you noted, GMAC spun off into Ally, and Chrysler Financial was bought by TD Bank. [1]: http://en.wikipedia.org/wiki/Ford_Motor_Credit_Company http://en.wikipedia.org/wiki/Ford_Motor_Credit_Company
    - kylec 12y ago
      I bought a VW earlier this year and financed it through VW Credit, which is part of the Volkswagen Group.
  - maxerickson 12y ago
    The 'new' GM bought a bank. They do a bunch of financing: http://www.gmfinancial.com/ http://www.gmfinancial.com/
- threeseed 12y ago
  Is there any evidence what so ever that the financing arm of automakers is causing a systemic problem in their business ? Because I haven't seen it. And if it was a problem they would simply spin off a company like BMW does (BMW Financial Services). And it's a bit early to be taking about how fantastic Tesla's cash flow situation is when they have been losing so much money in recent years. And they have so much cash locked up in a Supercharger network that has a questionable future (proprietary standard, embrace/extend model, no interest from other automakers).
  - TwoBit 12y ago
    The interest from other automakers is irrelevant, because that's expected. No car maker is going to cooperate with any other in a way that makes the other look good. BMW electric car owners could desperately want to use the supercharger network, but there is no way in hell BMW would ever let them.
    - threeseed 12y ago
      They would if the basis for all of it were open standards. Many car components are standard sizes and can be used regardless of manufacturer. However because it is a proprietary standard and Tesla leads in adoption car manufacturers would be susceptible to the embrace and extend tactic. They would never stand for that.
ams6110 12y ago
Not disagreeing (edit: well maybe I am, a bit) but with a Tesla the "upgrade" is pretty much mandatory as the battery packs have a limited life. So even if you don't need to upgrade to get the extended range, you still need to replace the battery pack every so often. Also other components on the car will wear: brakes, suspension, interior. A lot of people trade/replace cars even if the car is still running and reliable, just because they are tired of them, the interior is worn or falling part, the seat springs are flat, etc. Or they just want something different, bigger, or with different utility. You could take most cars of the last couple of decades, and a complete interior update, engine/transmission replacement, and suspension rebuild would still be cheaper than a new car. But few people do that.
- kenrikm 12y ago
  Keep in mind dealers are not the ones who offer the Update/Upgrade you are dependent on aftermarket services which tend to be more expensive (It's easily more expensive to restore a "normal" car then buy a new one) However in Tesla's case they can roll the restore into a easy to perform upgrade because of their limited number of models and prior engineering of things like battery swaps to be quick/easy. While it might take a hundred hours to do a restore of a normal car Tesla can swap a pack, some body panels, electronics and interior in a days labor.
  - ams6110 12y ago
    I do agree that if, as seems to be the case, Teslas are designed for upgradability, that is a key difference. However I still maintain that from a purely financial perspective it's cheaper to maintain an old car than buy a new one, especially when you account for depreciation. You can keep an old car going almost indefinitely if you do the maintenance. Most people don't WANT to keep their old car forever though, and I don't see any clear reason why Teslas will be any different in that regard.
  - hnnewguy 12y ago
    >While it might take a hundred hours to do a restore of a normal car Tesla can swap a pack, some body panels, electronics and interior in a days labor. Any source for this? I spend some time on the Tesla forums. There are threads of people get into minor collisions and receiving estimates of 100+ hours of labour to replace some front end parts and paint, along with bills over $20,000[1][2]. So, I don't think it's as simple to replace these parts as you suggest. [1]http://www.teslamotorsclub.com/showthread.php/26326-Cost-of-repair-crazy-high http://www.teslamotorsclub.com/showthread.php/26326-Cost-of-... [2]http://www.teslamotorsclub.com/showthread.php/39325-Owning-a-Tesla-is-awesome-until-you-get-into-an-accident http://www.teslamotorsclub.com/showthread.php/39325-Owning-a...
threeseed 12y ago
>If Tesla continues to follow this route it will have lasting implications for the automotive industry. No it won't. This upgrade concept has been tried in many consumer products over the years and it hasn't caused any ripples let alone waves. The fact is that people like buying new products. It's an opportunity for them to re-evalute their product choice. They like the experience of having something different. Many reasons that aren't simply financial/practical. And it especially doesn't work with cars. The interior of a car wears over time in a way that is impossible to make new unless you replace it. And many of the newer technologies e.g. autonomous require massive changes to the internal system. Add it all up and it becomes very cost prohibitive to upgrade rather than simply replace.
- pedalpete 12y ago
  Can you give an example of where the upgrade concept has been tried before? I can see it having difficulty operating on small or even medium sized purchases, but a car is a very different thing. Why make a large purchase when you don't have to. People already know new cars loose so much value the second they are driven off the lot, why would you subject yourself to that if you can upgrade your existing car. From an environmental standpoint, isn't upgrading an existing car much more friendly to the environment that digging up new metals. As far as things like the interior wear, why not be able to upgrade a new interior. Why trash an entire car just because part of the interior is worn. So you need a new headliner, get just that. You don't need to throw away the whole car. I'd agree that large scale changes like completely autonomous control may be difficult to retrofit, but probably not impossible as many cars are being built with park assist which means autonomous control could be mostly a software change rather than hardware. At the same time, how often do we see massive technology changes like that in the automotive space. More airbags could be tacked on to older cars, brakes upgraded to ABS could have happened. Basically, anything that has happened in the automobile in the last 50 years could probably have been a minor hardware upgrade. Even carburator to fuel injection could be an upgrade. I also think we're experiencing a cultural shift in why and how people buy. I think the idea of just buying something new, is becoming an outdated. I know I don't want to buy just to buy, I don't go "shopping", but I definitely did in my younger days. Lastly, can you please not state as fact what is clearly your opinion. To say "No it won't" is a very abrupt and I'd say rude response and seems to attempt to shut down discussion rather than saying "I don't believe it will have implications because..."
kin 12y ago
I completely agree with you. My car looks like it's going to last a little over 10 years and then eventually it won't be worth fixing. I wonder what the cost of this Tesla upgrade is going to be though.

by kenrikm 12y ago

chatmasta 12y ago

Automakers lock consumers into rebill programs via debt, i.e. a car loan. Tesla locks consumers into rebill via equity, i.e. a nice car, conveniently iteratively upgradeable. Thus Tesla gains capital advantage because it has no liability after disposing of a car asset, while automakers generate debt liability. For every car manufactured, automakers create a liability for themselves, while Tesla creates an automated income stream. Consequently cash flows better in Tesla than in its competitors. Relative to that of automakers, Tesla cash flow increases exponentially. Tesla is competing on a different level. The automakers will be lucky to earn a spot on Tesla's platform. At the very least, Tesla has a first-mover advantage in a surprisingly new market.

ams6110 12y ago
You're saying people don't debt-finance Teslas?
- pinot 12y ago
  Sure they do, but someone who bought a Roaster in 2008 surely has it paid off by now. However unlike every other manufacturer that forgets about the vehicles it used to make (unless there's a recall), Tesla is improving existing products. I have a 2004 SUV with a 7" satnav in it and some god-awful software package. Does Acura offer an upgrade path for this? Other than a way to update the roads database, no. Buy a new SUV.
  - hnnewguy 12y ago
    >Does Acura offer an upgrade path for this? Neither does my iPhone 1. Lets hold off on this comparison until Tesla is still supporting 11 year old vehicles.
    - sjwright 12y ago
      The new-for-old replacement cost of an iPhone 1 is peanuts compared to an SUV. Pinot makes a legitimate point that some car components could be made upgradeable by their manufacturer -- like entertainment units -- but they don't, and they're missing out on those aftermarket dollars as a result. I've owned a number of cars for which I would have spent thousands of dollars with the brand upgrading them if options were available.
      - hnnewguy 12y ago
        >some car components could be made upgradeable by their manufacturer -- like entertainment units -- but they don't Almost every single car part can be "upgraded", courtesy of the aftermarket. It's not necessarily a worse system.
gaadd33 12y ago
Do the automakers still finance car loans directly? I know GMAC turned into Ally and is no longer owned by GM. I'm not so familiar with the other automaker's financial arms.
- zrail 12y ago
  In my experience buying a VW and a Mazda, the financing I've been offered has been through another company. I don't remember who the VW bank was (financed through my credit union at the time), but the Mazda financing is a co-branded Chase loan. According to Wikipedia[1] Ford is the only one of the big three Detroit manufacturers to still have it's own financing arm. As you noted, GMAC spun off into Ally, and Chrysler Financial was bought by TD Bank. [1]: http://en.wikipedia.org/wiki/Ford_Motor_Credit_Company http://en.wikipedia.org/wiki/Ford_Motor_Credit_Company
  - kylec 12y ago
    I bought a VW earlier this year and financed it through VW Credit, which is part of the Volkswagen Group.
- maxerickson 12y ago
  The 'new' GM bought a bank. They do a bunch of financing: http://www.gmfinancial.com/ http://www.gmfinancial.com/
threeseed 12y ago
Is there any evidence what so ever that the financing arm of automakers is causing a systemic problem in their business ? Because I haven't seen it. And if it was a problem they would simply spin off a company like BMW does (BMW Financial Services). And it's a bit early to be taking about how fantastic Tesla's cash flow situation is when they have been losing so much money in recent years. And they have so much cash locked up in a Supercharger network that has a questionable future (proprietary standard, embrace/extend model, no interest from other automakers).
- TwoBit 12y ago
  The interest from other automakers is irrelevant, because that's expected. No car maker is going to cooperate with any other in a way that makes the other look good. BMW electric car owners could desperately want to use the supercharger network, but there is no way in hell BMW would ever let them.
  - threeseed 12y ago
    They would if the basis for all of it were open standards. Many car components are standard sizes and can be used regardless of manufacturer. However because it is a proprietary standard and Tesla leads in adoption car manufacturers would be susceptible to the embrace and extend tactic. They would never stand for that.

ams6110 12y ago

Not disagreeing (edit: well maybe I am, a bit) but with a Tesla the "upgrade" is pretty much mandatory as the battery packs have a limited life. So even if you don't need to upgrade to get the extended range, you still need to replace the battery pack every so often. Also other components on the car will wear: brakes, suspension, interior. A lot of people trade/replace cars even if the car is still running and reliable, just because they are tired of them, the interior is worn or falling part, the seat springs are flat, etc. Or they just want something different, bigger, or with different utility. You could take most cars of the last couple of decades, and a complete interior update, engine/transmission replacement, and suspension rebuild would still be cheaper than a new car. But few people do that.

kenrikm 12y ago
Keep in mind dealers are not the ones who offer the Update/Upgrade you are dependent on aftermarket services which tend to be more expensive (It's easily more expensive to restore a "normal" car then buy a new one) However in Tesla's case they can roll the restore into a easy to perform upgrade because of their limited number of models and prior engineering of things like battery swaps to be quick/easy. While it might take a hundred hours to do a restore of a normal car Tesla can swap a pack, some body panels, electronics and interior in a days labor.
- ams6110 12y ago
  I do agree that if, as seems to be the case, Teslas are designed for upgradability, that is a key difference. However I still maintain that from a purely financial perspective it's cheaper to maintain an old car than buy a new one, especially when you account for depreciation. You can keep an old car going almost indefinitely if you do the maintenance. Most people don't WANT to keep their old car forever though, and I don't see any clear reason why Teslas will be any different in that regard.
- hnnewguy 12y ago
  >While it might take a hundred hours to do a restore of a normal car Tesla can swap a pack, some body panels, electronics and interior in a days labor. Any source for this? I spend some time on the Tesla forums. There are threads of people get into minor collisions and receiving estimates of 100+ hours of labour to replace some front end parts and paint, along with bills over $20,000[1][2]. So, I don't think it's as simple to replace these parts as you suggest. [1]http://www.teslamotorsclub.com/showthread.php/26326-Cost-of-repair-crazy-high http://www.teslamotorsclub.com/showthread.php/26326-Cost-of-... [2]http://www.teslamotorsclub.com/showthread.php/39325-Owning-a-Tesla-is-awesome-until-you-get-into-an-accident http://www.teslamotorsclub.com/showthread.php/39325-Owning-a...

threeseed 12y ago

>If Tesla continues to follow this route it will have lasting implications for the automotive industry. No it won't. This upgrade concept has been tried in many consumer products over the years and it hasn't caused any ripples let alone waves. The fact is that people like buying new products. It's an opportunity for them to re-evalute their product choice. They like the experience of having something different. Many reasons that aren't simply financial/practical. And it especially doesn't work with cars. The interior of a car wears over time in a way that is impossible to make new unless you replace it. And many of the newer technologies e.g. autonomous require massive changes to the internal system. Add it all up and it becomes very cost prohibitive to upgrade rather than simply replace.

pedalpete 12y ago
Can you give an example of where the upgrade concept has been tried before? I can see it having difficulty operating on small or even medium sized purchases, but a car is a very different thing. Why make a large purchase when you don't have to. People already know new cars loose so much value the second they are driven off the lot, why would you subject yourself to that if you can upgrade your existing car. From an environmental standpoint, isn't upgrading an existing car much more friendly to the environment that digging up new metals. As far as things like the interior wear, why not be able to upgrade a new interior. Why trash an entire car just because part of the interior is worn. So you need a new headliner, get just that. You don't need to throw away the whole car. I'd agree that large scale changes like completely autonomous control may be difficult to retrofit, but probably not impossible as many cars are being built with park assist which means autonomous control could be mostly a software change rather than hardware. At the same time, how often do we see massive technology changes like that in the automotive space. More airbags could be tacked on to older cars, brakes upgraded to ABS could have happened. Basically, anything that has happened in the automobile in the last 50 years could probably have been a minor hardware upgrade. Even carburator to fuel injection could be an upgrade. I also think we're experiencing a cultural shift in why and how people buy. I think the idea of just buying something new, is becoming an outdated. I know I don't want to buy just to buy, I don't go "shopping", but I definitely did in my younger days. Lastly, can you please not state as fact what is clearly your opinion. To say "No it won't" is a very abrupt and I'd say rude response and seems to attempt to shut down discussion rather than saying "I don't believe it will have implications because..."

kin 12y ago

I completely agree with you. My car looks like it's going to last a little over 10 years and then eventually it won't be worth fixing. I wonder what the cost of this Tesla upgrade is going to be though.