Ex-Tesla Spinmeister Darryl Siry: China Key To EV Success
A post at the former Tesla PR chief’s personal blog recounts the debate inside Tesla over where to manufacturer the firm’s WhiteStar sedan. Siry describes grappling with the tradeoffs between a reasonable price and skeptical public perceptions of Chinese cars. “The part causing the most conflict,” writes Siry, “was that it was clear in the world of consumer electronics and chip manufacturing that low cost manufacturing had been achieved while also maintaining the highest standards in quality. Why couldn’t this be the same case for automobiles?” After all, he argues, your iPhone is designed in California but built in China—and nobody confuses it with a purely Chinese product. Pointing to the Volt’s projected $40K price point for a Cruze-based compact/mid, Siry argues that cost is too important to phasing EVs into the market to be ignored. And that firms like his former employer will pay the price for not taking advantage of China’s opportunities.
“Tesla Motors and Fisker Automotive, both aspirants to the xEV sedan market are targeting price points that are even higher (than the Volt). This is the right business strategy to cover vehicle costs, overhead and distribution, but the total volume of cars at the price points they will compete at is small and dwindling. (Fisker has announced a target price of $87,000 for the Karma, which is to be contract manufactured in Finland by Valmet. Tesla has boldly communicated $57,000 as the price for the Model S as they try to position themselves as a mainstream manufacturer, but in reality I expect that price to be close to where Fisker is when all is said and done. Tesla plans to manufacture the car in the US.)”
The upshot: firms that plan and engineer their products well, carefully manage production and effectively communicate these brand values can take advantage of China’s opportunities without incurring the perception and quality downsides. In short, do everything that allowed Apple to manufacture the iPhone in China for about $173 and sell them for as much as $600.
“The car industry is just a few decades behind in taking advantage of this opportunity. While the business environment might drive some innovation in this direction to reduce costs, the political environment may prevent any real progress. Outsourcing car manufacturing will translate into less domestic manufacturing jobs, which will be a very sensitive issue for incumbent automakers being bailed out by US taxpayer dollars. Even the startups have heavy incentives through the DOE ATVM loan program to manufacture domestically. Regardless, the significantly lower cost of Chinese manufacturing is too important a factor to prevent an inevitable shift in that direction. With the added cost pressures of [EVs] and their batteries, perhaps we will see this shift come first in the market for [EVs].”
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