I was so outraged at the lack of fact-checking in Car & Driver’s December 2013 article on Tesla Motors that it spurred me to write this post. Having an opinion is absolutely fine; presenting facts that are quite literally opposite of what is known to be true, however, is not fine – especially in print. The majority of this post isn’t about that article, it’s about various concerns I’ve heard and seen elsewhere; only the first section addresses Car & Driver’s article.
I’ll write an opinion piece on Tesla later – how I see their strategy, where they are going, etc. I do own some Tesla shares and feel it would lack integrity for me to mix facts with my (supposedly biased) opinion.
The company lives off of government subsidies
Car & Driver’s Aaron Robinson stated that “…the company is going to have to earn more dollars making cars that currently don’t generate profits on their own [without government credits]” and “Tesla will soon have to swim on its own” (again implying it’s only afloat with government’s help).
Facts: Mr. Robinson is referring to ZEV (aka, “clean air”) credits, which Tesla receives for each EV sold and then re-sells to gasoline car companies, and the $7,500 federal + various state discounts per EV. In their latest quarterly earnings report, Tesla indicated a profit margin of 21% per car excluding ZEV credits, and 22% with the credits (so only 1% of the margin is now attributable to any government credits). In a few months, by the end of 2013, Tesla expects to achieve 25% profit margin per vehicle even with no profit from ZEV credits. As far as the federal $7,500 credit, and the related state credits, Tesla Motors does not receive any money from those – the money goes directly to the consumer. And, of course, Tesla paid off all debt it owed the government back in May, nine years ahead of schedule. In comparison, GM’s gross profit margin is 13.3%, and Ford’s – 16.5%.
Commentary: I’m no expert at finding things – for instance, I couldn’t find any sense of journalistic integrity in that Car & Driver article no matter how hard I looked – but I was able to find the facts above with just three quick Google queries.
Tesla Motors’ low profits are worrisome
Facts: Tesla Motors has about $745 million cash on hand and, according to its senior leadership, isn’t worried about running out of money. So the profits are being heavily re-invested, which is to be expected for a young company. (10 years is very young in the car industry.) Much of the money is going toward ramping up production from 21,500 cars this year to 500,000 cars in 3-4 years, maybe more. A great deal of money is also going toward their Supercharger network, additional stores in the US and Europe as well as expansion into Asia, and service centers – unlike conventional car companies, Tesla operates the entire vertical chain.
The batteries will stop holding charge in a few years
Facts: Model S comes with an 8-year battery warranty, even if you recharge it at a Supercharger every single time you charge it. While the amount of capacity per unit of battery weight has seen slow improvements in the past decade, the ability to hold that charge after numerous re-charges improved dramatically. Six or seven years ago, for example, it would be reasonable to expect a laptop battery to only hold 80% of its charge after 300 recharge cycles. I just checked my 2012 Macbook Pro’s battery – after 289 recharge cycles, it can still hold 99.7% of its original capacity. Tesla’s battery tech is similarly top-notch, as evidenced by the fact that both Daimler and Toyota are buying Tesla’s tech for their own EVs.
You can’t go from NY to LA in a Model S
Facts: True, currently that requires some planning and a few extra days. Until the end of 2013: at that time, you’ll be able to make the trip with no planning and using Superchargers only, according to Elon Musk. Bonus: you’ll pay $0 in fuel costs on that trip. Notably, you can already travel along the Western seaboard (San Diego to Vancouver) and by the end of 2013 or early 2014 you will be able to go from Miami to NY as well, says Tesla.
Model S’ range drops significantly in cold climate
Facts: False. The Netherlands is Tesla’s highest per capita sales country and it’s quite cold over there. You should expect a range drop of maybe 10% for cold weather. And by cold I’m referring to around -20 Fahrenheit and below, not Florida-standards cold (which I hear is around 65 degrees?).
Teslas are too expensive!
Facts: They may end up so, but the sticker prices aren’t the prices you’re looking for… EVs cost more upfront, yet require substantially less maintenance and save money on fuel. With Model S specifically, Supercharger use is free for life so if there’s one next to you, you’ll almost never have to pay to recharge the car. Once you add up all the savings, and compare the final figure to the cost of a gasoline car plus gas/maintenance expenses, a Tesla may still be too expensive for you right now, but you’ll be surprised at how much closer the final numbers are.
Aren’t we just shifting the pollution to coal-burning plants?
Facts: Yes, but only a third of it. A power plant is about 3 times as efficient as a small internal combustion engine in a car – it wastes ~25% of energy vs car’s ~75%. There’s just not enough space in a car to capture the energy lost through engine heat and use it to heat up steam to turn a turbine that would generate more energy. There’s plenty of space for that in a plant, though. Gasoline cars also don’t recover energy from braking and slowing down like hybrids and EVs do. That 1/3 of emissions will be reduced even further once Tesla builds out solar arrays for the Superchargers – the company promised to offset all energy needed for the Superchargers with renewable sources.
The grid won’t be able to handle that much demand for electricity
Fact: This is a valid concern and another reason for Tesla to power Superchargers from renewable energy sources. Grid capacity is a macro issue not specific to Tesla, however, and many big players from utility companies to governments to a host of best universities are working on this problem. We’re not using the existing capacity as efficiently as we could have, either, so there’s some room to grow. For right now, we can accommodate the Teslas being produced.
I heard about the fires – Model S doesn’t seem safe
Facts: Model S is, without any hyperbole, the safest car the US Government had ever tested – that’s according to the government itself. If one checks the statistics, there were 1.27 fatalities and 80 injuries (at least half of which had consequences) per 100 million vehicle miles traveled (VMT) in 2008. Tesla’s Q3 2013 earnings revealed that Tesla owners have traveled over 100 million miles now, and a few days ago Elon Musk reported that there have been 0 fatalities and 0 permanent injuries so far. So apples to apples, that’s 0 and 0 for Tesla cars vs 1.27 and 40 for an average car. As far as car fires go, over 150,000 of them occur in the US annually, resulting in about 800 people injured and 200 dead. As of today, Nov 13 2013, Tesla has a much better record than an average car on both the amount of fires per vehicle miles driven and the number of injuries from said fires (none). Notably, all 3 owners whose cars caught on fire already bought or want to buy another Tesla car. If I thought a car was at fault, I wouldn’t buy the same one again – would you?
EVs take forever to charge, which makes them too inconvenient
Facts: True. However, a Model S has the best range of all EVs: 208 real miles on the smaller battery and 265 miles on the bigger one, according to the government. If your commute is under 100 miles one way, you don’t need to worry about recharging during the day, and the car gets a complete charge off a wall outlet overnight. Tesla’s Supercharger network is free to use for life, too. A Supercharger can recharge a Model S to half the capacity in 22-25 minutes, and to full capacity – in about 45. This is down from 30 and 60 minutes respectively earlier this year, and the time may be reduced further in the near future (Tesla will reportedly be testing faster charging times in Germany soon). Finally, if you’re in a hurry, Musk says you’ll be able to swap the battery pack in half the time it takes to put gas in your car for about the same price as you’d pay for a full tank of gas – just pick up your original battery on your way home (fully recharged). If you did a double take on that – yes, that technology is real and, currently, Model S is the only EV in the world with a swappable battery pack.
GM/Ford/XYZ will crush Tesla Motors
Well, that’s an opinion. Time will tell. What we do know is that Musk’s PayPal started an online payment revolution from a tiny office and defeated eBay, forcing them to buy PayPal; Tesla’s cars have the longest range and the best safety and performance characteristics of all EV competition; and SpaceX manages to fly missions using 1/10th the money NASA needed. Being big isn’t always an advantage; sometimes, it’s what holds you down.
Did I miss any? Let me know on Twitter! @AlexDaUkrainian