QOTD: Could Tesla Still Go Under?
The world is abuzz this week with news of the all-new Tesla Model X, which is a minivan that looks like it may at any moment take flight and get tangled up in some power lines.
Yes, ladies and gentlemen, that’s right: Tesla has brought the first gullwing minivan to market, and people are excited. And not just slightly excited. Elon Musk is giving press conferences to delighted admirers. Tesla fans are running up and down the streets in Palo Alto screaming “THE TESLA IS COMING! THE TESLA IS COMING!” And Pacific Gas & Electric engineers are currently on the job trying to figure out how to get the first Model X down from some high-voltage wires near Tarzana.
Essentially, it is Tesla pandemonium.
But there are a few, shall we say, problems with the Model X. One of them is that these doors — which undoubtedly are at the heart of massive delays that have pushed back Model X production considerably — are so unconventional that they may end up turning people off.
Yes, they make it easier to get out of the car in tight spaces. But they open so high that I wouldn’t be able to fully release them in my tight garage. They also ensure you won’t be able to mount roof racks on your Model X: instead, you’ll have to use an enormous carrier that sticks out well past the rear bumper. And then there are the potential reliability concerns that come from buying a new piece of technology from a relatively new company.
Those aren’t the only issues. Maybe the biggest problem with the Model X is its price tag, which starts at a rather steep $130,000. You may have thought the Model S was a car solely confined to the wealthy, but the Model X brings things to a whole new level: there isn’t even some “entry level” $70,000 model to make it seem like it’s available to normal folk who want to own a cool new electric minivan.
Tesla’s problems go beyond the Model X. Remember when the Model S came out, and it was the coolest thing on earth, and you stopped to watch it go by whenever you saw one on the street? Well, that was several years ago, and it isn’t quite as cool anymore. These days, you probably don’t give the Model S a second look — and why would you? They’ve become totally ubiquitous, just like the Mercedes S-Class or BMW 7 Series.
Unlike the S-Class or 7 Series, though, the Model S probably won’t be getting a redesign anytime soon. While it should be slated for one next year, Tesla has certainly devoted all of its engineering effort to the Model X — proven by the fact that no Model S development mules have been spotted and Tesla hasn’t said a word about a Model S replacement.
Now, I don’t want to make it seem like I think things are all doom and gloom for Tesla. On the contrary, this automaker has done what nobody could fathom merely 20 years ago: create a totally new car company, with a totally new product, and get people to buy it. It’s amazing — and it has one of the most excited, energized fan bases around.
And the cars are excellent. The Model S is fun to drive and full of technology that makes even today’s most cutting-edge cars seem like they aren’t quite there yet. Let’s be honest: The gullwing doors, while potentially cumbersome, are pretty damn cool.
But I’m wondering if Tesla is “safe” just yet.
With only one new product and one (aging) product that may not find a replacement soon, Tesla doesn’t have much to hang its hat on. Combine this with the fact that Tesla has yet to turn a profit — and likely won’t until 2020, according to Elon himself — and you have to wonder whether Tesla really will survive.
Some people may call me crazy, considering that Tesla has already sold so many cars and created such a fiercely loyal owner and fan base. But what if there’s some widespread problem with the gullwing minivan? A GM ignition defect, or a Takata airbag recall, or a VW emissions scandal, perhaps? What if people don’t buy it in the numbers they’re hoping for? What if the idea of a $130,000 family SUV just doesn’t sit well with consumers, no matter how cool the doors are?
Could Tesla still fail, even this far into the game?
Or with its reputation so strong and brand loyalty so cemented, have they finally reached a safe harbor where we can now accept them as the fourth American car company?
More by Doug DeMuro
Comments
Join the conversation
Here are a couple o' fun facts about government subsidies. * Your government's tax policy subsidizes oil and gas companies, even though they're in the most profitable business on Earth (ask ExxonMobil). * The inflated military budget of the USA (equal to that of China, Russia, Saudi Arabia, France, United Kingdom, India and Germany combined) and associated foreign policy, are dedicated largely to ensuring the plentiful supply of oil and gas. Whether it's propping up a Saudi monarchy indistinguishable from ISIS, guarding Oxy's Columbian oil pipeline, sacrificing American soldiers and Iraqi civilians to regime change, or just refusing to rescind GW Bush-era handouts to the "ohl bidness", the costs are socialized onto you the taxpayer, and the profits are privatized to Royal Dutch Shell, ExxonMobil, etc. Subsidies to Tesla could increase beyond imagination and still be a tiny speck compared to the direct and indirect subsidies to oil and gas. And subsidies to BEV efforts actually prevent death and injury due to war and pollution, whereas direct and indirect subsidies to the fossil fuel industry do the opposite. Maybe those who oppose subsidies should take aim at the big ones that kill people, not the small ones that can save lives.
RE: "Simply put, PCH, the car makes more money than it costs to build. If that's not profit, what is? The fact that the company is SPENDING more than it makes in order to grow does not mean the car itself is not profitable." It costs less to build than it makes ONLY if you don't add in all of its costs. There is a difference between margin (gross profit) and net. When a car is sold in a dealerships and makes $2K gross profit, it loses money after subtracting the overhead and selling costs. Tesla needs a lot more margin than it currently makes to be viable. That's why they need economies of scale that will be difficult for them to achieve before their competitors do.