Now that Tesla CEO Elon Musk and the company’s research and development team have revealed the existence of upcoming ‘Plaid Powertrain’ …
Now that Tesla CEO Elon Musk and the company’s research and development team have revealed the existence of upcoming ‘Plaid Powertrain’ variants, a few more questions about their recently-announced competition come to mind. Will the Porsche Taycan’s engineering achievements be overshadowed before they’ve even been enjoyed by future customers? Will Taycan reservation holders decide to wait for Tesla’s newest Model S to come out before making their Porsche purchase?
Musk’s latest play to stop the competition looks like it may just be as effective as he’s hoping it will be. Brian from the YouTube channel i1Tesla summed the move up nicely in a message to Porsche: “Your car’s not even out yet, and Tesla’s diminishing what you’re going to be doing…With powertrain technology and battery technology…Tesla is so superior.” Brian further opined that what the Taycan has ultimately achieved is along the lines of what Tesla did with the Model S in 2012, or perhaps a step above it. The Plaid system then becomes an achievement that renders the question of whether the Taycan is a ‘Tesla killer’ completely moot.
As its flagship electric car, Porsche considers the Taycan is one of its most important vehicles since the 911. It’s priced in the same bracket as the iconic sports car, around $150,000, and claims a battery range in the neighborhood of 240 miles per charge with a 100 kWh battery pack. A current Model S Performance, which now includes Ludicrous Mode and Autopilot as a standard offering, has about 100 additional miles of range than the Taycan’s ratings and has a price tag around $50,000 less. Perhaps there are significant differences in the driving experience of both cars and the customers they are designed to appeal to have differences as well, but on paper there’s definitely a nod to Tesla’s current Model S. Once the new Roadster is on the market, of course, an entirely different comparison will be on the table.
Although the upcoming “refreshed” Model S and X are arguably exciting enough to depress future Taycan sales, there’s the other question of whether or not the latest plaid-centered announcement will impact Tesla’s sales as well. Musk has said that the newer versions will be more expensive than current offerings, but it’s not clear that the additional cost would deter buyers from investing in the superior battery and powertrains that would come with them. New Model S and X sales could suffer as a result if customers take the ‘wait and see’ approach.
Musk cited this particular concern when it came to the Model Y. If customers stopped purchasing the Model 3 in favor of waiting for the Model Y, Tesla would majorly suffer as a result, especially considering the annual sales expectations for the all-electric crossover are estimated to be around 1 million units per year. This was probably why the Model Y unveiling event was notably subdued compared to other unveilings. However, it was likely important for Tesla’s long-term investment worth to show the progress being made towards a vehicle that is hoped to be a game changer in the electric vehicle market (and greater auto market overall) despite this risk.
Elon Musk held a call with Tesla employees this week in which he emphasized that Tesla needs to move cars out of the factory faster in order to fix the …
Elon Musk held a call with Tesla employees this week in which he emphasized that Tesla needs to move cars out of the factory faster in order to fix the automaker’s logistic problems.
He made several comparisons to Amazon.
Tesla is not like other automakers in many ways.
One of those ways is that Tesla owns and operates all its own stores, service centers, and delivery centers without doing business with third-party franchise dealerships, like most other automakers.
This business model results in several obvious differences, but one of the least appreciated ones is that Tesla owns and is responsible for all its vehicles all the way until the customer takes delivery.
It creates more complex logistics problems for Tesla than other automakers who simply sell to dealerships who keep a lot of inventory on their lots.
Currently, Tesla’s custom-ordered vehicles often don’t move from the factory until they schedule a delivery date with the customer, which is not always as easy as you would think.
According to people on the call, Musk told employees this week that starting next quarter, Tesla will put the vehicles in transit right away and deliver them to local delivery centers for the customers to pick them up at their convenience.
Tesla is spending a lot of manhours trying to coordinate customer deliveries and it is backing up inventory at the Fremont factory.
Musk wants a constant flow of vehicles going to the end destinations and compare the logistics to Amazon.
The CEO said:
“Amazon would go bankrupt if they would have to wait for customers to be ready to take delivery before shipping.”
Interestingly, it’s also a financial problem since Tesla is investing all the money into building the vehicles and doesn’t get paid until the customer takes delivery.
Therefore, every day that the car is built and not in the hands of the customer, it’s a day that Tesla is several tens of thousands of dollars in the hole.
Musk has been emphasizing that delivering the vehicles faster to customers would greatly improve Tesla’s financials.
On a bigger scale, Tesla having production facilities closer to its customers basez would also have a big impact on reducing transit times.
According to people on the call, Elon was adamant about fixing Tesla’s logistics issues and he talked about Amazon as a good example of solid logistics.
It was a bold move for Tesla to build its sales, service, and distribution network around company-owned locations instead of franchise dealerships.
I think it paid off in many ways despite the fact that there are still some issues, including some sale bans in a few states, but I like that Tesla is still finding ways to optimize the business model like this and make selling electric vehicles a better and more profitable business in the long run.
Ultimately, it should be easier for customers who will have more availability to just go pick up their cars at Tesla delivery centers.
Amazon is an interesting comparison. It’s definitely an efficient company when it comes to logistics, but it is especially interesting with the context that Amazon has been itself looking into selling cars.
The two biggest names in the electric car realm are Tesla CEO Elon Musk (obviously) and a guy you probably haven’t heard of, RJ Scaringe, who …
Regular Business Insider readers know that every weekend, I write a take on something Tesla-related. This time around, I’m going to ask for patience as I preface the effort with a short auto-industry history lesson.
The development of the car business in the 20th century followed a predictable pattern: daring innovators gave way to savvy managers. The early days were the Wild West — or Wild Midwest, and the burgeoning industry was located mostly in the middle of the US, with Detroit as its capital — but after World War II and the emergence of a vast American consumer culture, automotive startups morphed into multinational corporations.
The two most important men in this story were Henry Ford, who needs no introduction, and Alfred Sloan, who does. It was Ford who laid the groundwork for the modern auto industry and pioneered both the effective moving assembly line and the idea of mass-market motorized transport with the Model T. The company that bears his name and that’s still run in part by his great-grandson, board chairman Bill Ford, remains the No. 2 US car company.
Sloan, a more obscure personality, created the modern corporation in General Motors. At its peak in the 1950s, GM controlled half the US car market; it still controls about 20%. (The Germans and Japanese weren’t really selling vehicles in the US during the Eisenhower administration.)
The Utopian Ford vs. the pragmatic Sloan
The key distinction between Henry Ford and Alfred Sloan was that Ford was something of a utopian (and, more troublingly, given to anti-Semitic propaganda) who harbored visionary, paternalistic attitudes toward his workforce and his customers. He believed that his workers should be paid enough to buy the cars they produced, and thereby created a virtuous circle, but he disliked credit and figured that there was no reason to sell Model T’s that weren’t black.
Sloan, by contrast, thought that the buyer was always right — or at least that the consumer should enjoy abundant choice, and that GM as a corporation should provide it. Some of this was expeditious: GM was created by combining brands — Chevrolet, Buick, Cadillac — so Sloan was simply managing reality as GM’s president. But GM has always concentrated on the pull of consumers, rather than Ford’s push to deliver singularly great products.
The symbols of the two American giants capture this distinction. Henry Ford’s great achievement was the mighty River Rouge factory, where train cars loaded with iron ore pulled up to one end of the plant and finished cars rolled out the other. Sloan’s work of genius was GM’s organizational chart, the blueprint for American managerial capitalism.
OK, history lesson over. Now let’s see how history repeats itself
The two biggest names in the electric car realm are Tesla CEO Elon Musk (obviously) and a guy you probably haven’t heard of, RJ Scaringe, who leads Rivian, a startup electric SUV and pickup-truck maker. In my cycles-of-history framework, Musk is Ford and Scaringe is Sloan. (There’s some irony here, by the way, as Ford has invested $500 million in Rivian, while Tesla hasn’t seen a major automaker take a stake since Daimler and Toyota bought equity prior to Tesla’s 2010 IPO.)
The big difference between Musk and Scaringe is that Musk, the visionary, wants nothing to do with the legacy auto industry anymore, while Scaringe is running Rivian sort of like a junior OEM. When I saw the photo below, of Scaringe and Bill Ford after the Ford investment was announced, I speculated that I was looking at Ford’s next CEO.
Like Henry Ford, Musk is preoccupied with the manufacturing process — Tesla’s Gigafactories, in Musk’s view, are more important than Tesla’s cars. They’re the “machine that builds the machine,” and Musk would like them to become radically automated.
Why Rivian is more like a traditional automaker than Tesla
Scaringe — like Sloan, an MIT engineering grad — is creating an electric automaker that’s designed to reach the consumer; he’s not trying to reinvent manufacturing. To achieve that, he wants everything to do with the legacy auto industry. Where Sloan had his org chart, Scaringe has partnerships and deals, all intended to make Rivian vehicles easier to manufacture, sell, and service. His most recent investment, of $350 million from Cox Automotive, is representative. (Ford and Amazon have also kicked in, giving Rivian a $2 billion total.)
Cox owns Kelley Blue Book and Autotrader, among other properties. These entities are designed to facilitate the car buying and leasing process and are heavily organized around the consumer. By investing in Rivian, they’re getting a piece of the future, the chance to integrate sales not just of EVs, but of SUVs and pickups, the most popular vehicles in the lucrative US market. Rivian is getting a huge pipeline to buyers from the deal.
In the history of the car business, Ford is seen as stubborn and idealistic while Sloan is considered adaptable and pragmatic. Of course, both Ford and GM are still around, so it’s not clear that Ford’s vision lost out to Sloan’s technocracy. Musk likes to note that Ford and Tesla are the only two American car makers that haven’t gone bankrupt.
But Ford did have to recruit a cadre of number-crunching efficiency experts after World War II — the so-called “Whiz Kids” who had brought statistical analysis to the war effort — to modernize its business. Nonetheless, Ford has often been home to outside-the-box thinkers, from the brash Lee Iacocca to the former Boeing exec Alan Mulally, who rescued Ford from insolvency before the financial crisis. GM continues to embrace the skilled manager, although in current CEO Mary Barra the company has been making tough call after tough call on issues that the pre-bankruptcy GM had endlessly postponed, such as selling the perennially money-losing European division, Opel.
Interestingly, with Musk and Scaringe we also have a contest of engineers. Or more accurately, technologists, as Musk’s background is in physics while Scaringe has a PhD in mechanical engineering. Don’t interpret that as meaning Scaringe is a superior engineer; Musk likely knows more about electric-vehicle design than most people in the business. But while the auto industry is full of engineers in leadership roles, Musk likes to express engineering in a way that’s wonky and unique (as well as sort of irritatingly didactic at times). Scaringe is more low-key. But in Scaringe, Musk has a potential rival who can actually out-engineer him, something he hasn’t really had to deal with up to this point.
What we don’t have with Musk and Scaringe is a contest of celebrities. Musk is world-famous, the basis for the “Iron Man” Tony Stark character — a real-life billionaire and occasional playboy (Musk gets around, but he also has five kids). Scaringe is unknown outside the car business, and not even that well-known in it. I’ve been covering cars for over a decade and I’d never heard of him prior to about a year ago.
But obviously, even if you know nothing about cars, you’re probably familiar with Henry Ford, while Alfred Sloan might ring a bell only if you live in the New York area and are aware of the Sloan Kettering medical centers or the Sloan Foundation’s philanthropy.
The historical comparisons aren’t perfect. Musk is a creature of Silicon Valley and its embrace of risk-taking, rapid-iteration, launch-now-and-debug-later ethos. He’s been compared with Steve Jobs. The business dynamics of the tech industry in the early 21st century are not the same as the car business in the early 20th. Scaringe, meanwhile, has just begun to hit his stride, after almost a decade of developing and pivoting Rivian. He seems fresher because Rivian missed out on the EV-startup surge of the 2010s — a fortunate thing, as most of those startups, save for Tesla, have vanished. Scaringe is a creature of the next wave, which entails a lot more cooperation with Detroit and recognizes that building vehicles at scale is extremely difficult.
Prior to Scaringe, Musk’s main rival was often seen as Henrik Fisker, a car designer who founded Fisker Automotive, which went out of business in 2013 (Fisker himself had resigned by then, and the automaker’s decline was due to bottlenecks with its battery supplier and the unfortunate destruction of a load of cars in Hurricane Sandy). If anything, Fisker was a more flamboyant and compelling personality that Musk; I’ve talked to him on several occassions, and his talents as a raconteur are formidable. He’s currently engaged in a wide range of projects, from building a supercar to resuscitating electric mobility with a new company, Fisker, Inc.
To borrow a famous analysis from the philosopher Isaiah Berlin, Fisker is a fox to Scaringe’s hedgehog (according to Berlin, referencing from an early distinction in ancient Greek literature, the fox knows many things, while the hedgehog concentrates on one). Musk, too, is a fox, engaged with space exploration, tunneling, and artificial intelligence.
At first glance, Henry Ford might seem hedgehog-like, but in my view, he was probably a fox, or perhaps a fox-hedgehog hybrid (as was the novelist Leo Tolstoy, by Berlin’s reading). Foxes function well as entrepreneurs, even though they might be single-mindedly devoted to their companies and their missions; Ford started two failed enterprises before the Ford Motor Company — and maybe even three, depending on how you assess his fortunes.
Sloan, meanwhile, found his glory in melding GM with the American consumer, and in a larger sense, postwar life. The definite GM quote didn’t come from Sloan, but he enabled the automaker’s World War II-era president, Charles Erwin Wilson, to tell Congress during his confirmation hearings to become Eisenhower’s Secretary of Defense, that he could make a decision that would place GM and the US in conflict because “I thought what was good for our country was good for General Motors, and vice versa.”
We’re now watching this business narrative of the 20th century repeated in the 21st. Ultimately, this is important because the gestational electric-vehicle industry needs big personalities to sustain and grow it. The first decade has been a mixed bag, with Tesla stumbling through a decade of infrequent profits and serial controversies while the major automakers approach a market that’s still quite weak, with halting steps.
Ford and GM are both producing electric cars, but we really need the new Ford and new GM. In Tesla and Rivian we could have not just that, but the leaders who can do for EVs what Henry Ford and Alfred Sloan did for internal combustion.
In a video uploaded by TALEA Media, several high-performance vehicles are seen running laps on the Nürburgring, a 13-mile long German track, including both the Porsche Taycan and the Tesla Model S P100D+.
The Tesla, which can be seen at 2:28 into the video, speeds along the track almost quietly. The wheels are the loudest thing there, and this simply reflects just how quiet Tesla are in general. This scarlet beauty zooms along the track, twisting and turning from left turns into right turns, then gliding effortlessly down a straight path before easing into another left and eventually disappearing from the angle of the camera with barely a whisper of sound from the tires.
Tesla Model S P100D+ on Nürburgring Industry-Pool Prototype
The Tesla seems to be preparing for its ultimate race against the Porsche Taycan, which made its appearance at 5 minutes into the video. The American Tesla and German Porsche weren’t the only electric vehicles representing on the track at that time. A Mercedes EQC was also on the track at just over a minute into the video.
It’s great to have more electric vehicles on the track. Many people perceive electric cars as cute little things that don’t go fast (unless they’re from Tesla), so the idea of racing them is oddly refreshing and revives the auto industry as well as the market. It’s like bringing new life to an old room, so to speak.
While many people are hyped up about the coming race, let’s take a quick moment and reflect on why Tesla doesn’t need to buy ad space. This upcoming race on the Nürburgring track is highly publicized and provides the perfect opportunity to talk about future upgrade package options. While many companies pay for ad space on their products, Elon Musk simply sends a few tweets and the media does it for him.
Tesla is already winning. In challenging Tesla, both Audi and Porsche are actively promoting Tesla while referencing Tesla because the media is eating up the competition like it’s hot, fresh bread pudding with a side of homemade vanilla ice cream. (And when I say the media, I am using this term to include small blogs as well as car review sites such as Edmunds, which, in the tweet below, you can see is actually buying Twitter ads to promote Porsche while also mentioning — or taking shots at — Tesla.)
The upgrades mentioned in Elon’s tweets include the fact that the Model S on the Nürburgring track has 3 motors and Plaid Mode, which will soon be applied to the Model S and Model X, and will also reach the coming Roadster, but not the 3 or the Y.
Yes. To be clear, Plaid powertrain is about a year away from production & applies to S,X & Roadster, but not 3 or Y. Will cost more than our current offerings, but less than competitors.
Johnna Crider Johnna Crider is a Baton Rouge artist, gem and mineral collector, and Tesla shareholder who believes in Elon Musk and Tesla. Elon Musk advised her in 2018 to “Believe in Good.” Tesla is one of many good things to believe in. You can find Johnna on Twitter
Markets like calm and that is particularly true when it comes to Tesla (NASDAQ:). Tesla stock often is volatile to in large part to CEO Elon Musk having …
Markets like calm and that is particularly true when it comes to Tesla (NASDAQ:). Tesla stock often is volatile to in large part to CEO Elon Musk having a penchant for the controversial and flamboyant.
Source: Sheila Fitzgerald / Shutterstock.com
At one point on Wednesday, Sept. 11, Tesla stock was higher by about 5% as the shares paced for their best intraday performance in seven weeks, extending the stock’s September gain to 8%.
That after Tesla stock dipped 7% in August. A simple tweet from Musk noting that Tesla’s flagship Model S recently set the record for seemed to be the catalyst for Tesla stock on Wednesday.
Of course, there’s much more to the story than that and investors should not caught up in something as superficial as an automotive test. Much of the story, meaning can the company produce cars at a rapid enough rate to meet current demand and lure more luxury car buyers away from internal combustion engines (ICE) to electric vehicles.
There are signs electric vehicle demand is growing, as expected. For example, Chilean lithium producer SQM recently said it plans to invest $2.1 billion over the next to bolster production of the material that is a vital ingredient in the production of the ion batteries that power electric vehicles.
Additionally, a recent permit application with the city of Fremont, Calif., Tesla’s headquarters, indicates the company is looking to build another assembly line, which could be used to manufacture the Model Y crossover vehicle slated to debut in 2020.
Reasons to Cheer and Be Skeptical
Few companies divide investors the way Tesla does. the only source of investment decisions for investors, but in the so-called “FinTwit” space, the segment of the social media platform where money managers and pundits dwell, an investor is just as likely to find some noted folks saying Tesla stock is a four-digit name in the future as they are to find someone referring to the stock by the ticker “TSLAQ” with the “Q” referencing a bankrupt company.
Tesla management has previously been prone to bombastic claims regarding cash flow and production targets, so some skepticism is warranted.
“2019 delivery guidance remains 360,000-400,000 vehicles and management said it feels the company is self-funding and able to generate free cash flow except possibly during product launches such as the Model Y crossover next fall,” said Morningstar . “We have heard this assertion on self-sufficiency as recently as late last year and then Tesla raised capital in 2019 so we are somewhat skeptical.”
Conversely, the company has its supporters, including JMP analyst Joseph Osha, who rates Tesla stock “outperform” with a price target of $337, about 40% above the Wednesday, Sept. 11 close. The analyst likes and views rival offerings as “weak.”
Speaking of market position, integral to the Tesla stock thesis is understanding what market the company operates. This is a luxury car company with comps being Lexus, BMW or Mercedes, not a mass-market maker like Chevy, Honda or Toyota.
“Tesla has a chance to be the dominant electric vehicle firm and is a leader in autonomous vehicle technology, but we do not see it having mass-market volume for at least another decade,” said Morningstar. “Tesla’s product plans for now do not mean an electric vehicle for every consumer who wants one, because the prices are too high.”
Bottom Line Tesla Stock
At 42.37x forward earnings, Tesla stock is certainly and that would be a hurdle unto itself if value stocks continue rebounding.
More specific to the Tesla stock thesis is what investors’ tolerance level will be for the company’s spending plans, which could require capital raises. The company is building a gigafactory in Nevada, as noted above is planning a Fremont, Calif. expansion and must effectively integrate SolarCity into its fold. None of those efforts will come cheap and they don’t include new vehicle launches, such as the Tesla pickup truck.
Tesla’s room for growth is compelling, but the company’s ability to manage the cost of that growth is something investors must be aware of going forward.
Todd Shriber does not own any of the aforementioned securities.