Tesla

Tesla Model 3 – proof that it is still amateur hour

The press are already fawning over the new Model 3. Subscribing to the Tesla Owners Worldwide forum page I’ve learnt it is something more akin to a cognitive dissonance based cult. All of the mutual backslapping between owners trying to justify their purchase as if they know something we don’t. Despite this, Musk – for all of his rent seeking powers – is revealing his amateur status where it matters most – first in production and second in distribution. Yet the press is hailing this as the iPhone type game changer. According to automotive analysts Tesla hadn’t secured a production manager, after the Model 3 was green lighted over 1.5 years ago. Car production is a nightmare. It requires supreme coordination across the entire supply chain.

As the Tesla Model 3 is being rolled out to customers around two dozen of his staff are being given cars to iron out any bugs that haven’t been found before final fill out. Normally car makers go out of their way to iron out bugs or defects before release. Such is the emergency to keep to a schedule, Tesla reminds me of Michael Keaton (plays Hunt Stevenson) in Working Class Man (Gung Ho) where the Japanese are trying to fix the quality control issues of the poor work ethic of its American factory. Such is the sloppiness of manufacturing that the workers say “let the dealer worry about it”

Tesla has a small dealer footprint compared to major auto makers. This idea that dealers are a thing of the past is nonsense. If there is a funny clunk on an individual car or a major recall, dealers bring peace of mind and smooth out the process. Yet Tesla, which has well known quality problems has an underbaked dealer network as evidenced by the following complaint by a customer

“I was on my way to pick up my new Tesla today, when I got a call from the delivery specialist telling me that my car had mistakenly been given to another customer over the weekend. Now they want to deliver the car to me after it had been used by someone else. This diminishes the joy and experience of expecting your new car. Not a happy camper at all. Very unprofessional. After all, don’t they check VIN numbers before delivering cars?”

Wait for production nightmares to arise. Musk, who recently admitted efficient production was pretty much the whole ballgame,  has nothing in terms of experience or quality control of say a Toyota which has coined pretty much every global manufacturing efficiency jargon there is – JIT, Kansan and kaizen for starters. That didn’t come from pushing its luck – it has been decades of refinement not 1.5 years with crossed fingers.

The non motoring press can write whatever they please about how wonderful it is because it’s trendy to like Tesla. However Toyota says it is close to perfecting solid state Li-ion batteries which will be infinitely better than the antiquated things Tesla is using now. That aside, the Tesla Model 3 will be like every other Tesla venture – run in the hope nothing goes wrong. My bet is that this company that is still to turn a profit and relies on the taxpayer to fund its sales can’t compete with the incumbents when they flood the market with attractive product. By the way the centre control dashboard shows that form is being put over function.

Elon Musk may well be the modern day version of Hunt Stevenson. Got the gift of the gab but lives on endless promises that he knows is always a huge long shot. Never forget Toyota had a stake in Tesla but sold it. Be sure Toyota’s tech team went over its technology with a fine tooth comb. It found nothing it didn’t  have already and so let it go.

2040? Watch auto lobbyists water down the EV legislation

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It isn’t a big surprise. The UK is following French plans to ban the sale of petrol/diesel cars from 2040. However let’s get real. Why is it that SUVs remain one of the most popular vehicle classes around? Could it be that the guy who likes to sail needs a V8 Land Cruiser to haul his 7000lb boat that a Tesla 22” rim Tesla can’t manage even half that? Could it be that a mother with 3 kids who often takes her parents on trips to the beach needs a minivan? Have they considered the single bachelor who wants a BMW sports car? Or the DINKs who want a Range Rover because they love to ski in the winter.

What about emergency services vehicles? Have these governments considered the impact of having reliable heat exchangers (from combustion engines) to power life saving equipment in ambulances? From one of my high school mates who works as a paramedic tells me, “We have Webasto heaters in our cars in the colder areas. Running off the diesel they can run 24/7 if needed. If we don’t have them some of our equipment doesn’t work like our tympanic thermometers, the blood glucose reader and then there is the problem of having cold fluids in the car. This is a problem if we are giving these IV because we can make a patient hypothermic if it’s cold. Then there’s just the general environment inside the cab. It needs to be warm in winter.”

What about LCVs? Will light commercial vehicles be exempt? Just watch the auto makers classify their SUVs as LCVs and dodge the rules! The Hummer is a perfect example of this. It was so heavy that it managed to be excluded from the passenger vehicle qualifications on fuel economy.

Let’s not forget the actions of VW (and all of its sub brands) who use the same technology blatantly lied about emissions and found a way to cheat the system. That isn’t to condone their behaviour for corporate malfeasance but certainly shows their true colours on what they feel about climate change. Now they will be forced to sell plenty of brands to pay for the penalties imposed on it.

Take California’s new $3bn plan to support EV sales – effectively a deeply Democrat state fritting away tax dollars to subsidise the wealthy. The poor guy who has to drive a 20-yo petrol pick-up truck because he can’t afford a new one is probably paying taxes to subsidise the guy who pays him to mow his lawn to buy a Tesla.

Have these governments consulted the auto industry? It wouldn’t seem so. Automakers are dead against full EV because it ruins the most fundamental part of their DNA – the drivetrain. When you read all the blurb on the pamphlets what is the one area car makers can milk consumers for? Power and performance. Mercedes can sell you a C180 for a little bit of profit and absolutely gouge out your eyeballs for the high performance C63 and basically vaporize your wallet with the options. Auto makers don’t want to go full EV.

What is it with these governments getting involved in every aspect of our lives? Have they considered the huge hole in the budget to come from a reduction in petrol excise taxes? Fuel duties in the UK are expected to fetch around $35bn in 2017 or c.4% of total tax receipts.

Have they considered that consumers are already clearly showing their belief in ‘climate change abatement’ by the cars they buy? When the subsidies were torn from Tesla in HK, sales went to ZERO while in Denmark Tesla registrations fell 94%. Isn’t that evidence enough of how these vehicles are only tax avoidance devices, not the action of deep seated ecologists?

So before running for more mad green schemes to save the planet perhaps they should look at the evidence and listen to their constituents. Moreover when governments get heavily involved in subsidizing industries it generally results in disaster by creating massive oversupply like we saw in solar and wind industries. Spain perhaps provides the strongest evidence of this. Around 2004 it wanted to get 1GW of solar under its feed in tariff over 4 years. Instead it got 4GW in 1 year meaning its budget exploded 16x and it had $100bn in tax liabilities over the course of the promise. In the end the government reneged. So much for the assurance of government programs.

The German authorities went big for bio-fuels in 2008 forcing gas stands to install E-10 pumps to cut CO2. However as many as 3 million cars at the time weren’t equipped to run on it and as a result consumers abandoned it leaving many gas stands with shortages of the petrol and gluts of E-10 which left the petrol companies liable to huge fines (around $630mn) for not hitting government targets. Claude Termes, a member of European Parliament from the Green Party in Luxembourg said in 2008 that “legally mandated biofuels were a dead end…the sooner It disappears, the better…my preference is zero…policymakers cannot close their eyes in front of the facts. The European Parliament is increasingly skeptical of biofuels.” Even ADAC told German drivers to avoid using E10 when traveling in other parts of continental Europe.

So for all of the grandstanding of governments this push for mandated EVs will not be a plus, much less achievable. I remember as an auto analyst in Europe in 2000 when law makers were saying EVs would be 10% of the market by 2010. It is 2017 and they’re 1%. Once again governments are clueless as ever. They’ve achieved only 10% of their goal in effectively twice the time. Then again what do we expect of governments who do their math on the back of an envelope and never let we, the tax payer, properly evaluate how they got there? Then when targets aren’t reached and costs associated with their incompetence end up a double whammy for taxpayers. Anyway by 2040 most of the current crop of politicians won’t be there in parliament to defend their legacy, or what is left of it.

The reality is that the automakers will skillfully lobby these bureaucrats to water down the laws which will allow hybrids and all other types of loopholes to exist making the “ban” more like a “request”. Appeal to industry wide job losses and technical hurdles (which are immense by the way) and it will be bumped. Even in the US, Corporate Average Fuel Economy laws continually got pushed out, reclassified and adjusted to suit the industry.

The $50mn+ taxpayer funded selfie with Elon Musk

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South Australia’s Premier Jay Weatherill is looking to get a $50mn+ selfie with Elon Musk as Tesla’s battery storage packs will be selected to keep the lights on the state for c.90 seconds in the event of (the state’s frequent) blackouts. Not withstanding the blithering incompetence in adopting a power policy which will end up costing SA taxpayers a further $560mn+ to cover up the green madness which got them into this mess in the first place, Weatherill gets to turn a massive failure into a virtue by maximizing exposure with the world’s most successful rent seeker (that is a compliment) to appeal to the state’s contributions to renewable energy in full knowledge of it creating the least reliable yet most expensive electricity prices, the highest unemployment rate and slowest growth in the nation. Even companies like Coca -Cola have packed up after more than 50 years operation because of the untrustworthy grid and usury plug prices.

Of course Musk has said he’ll install in 100 days or it is free. As mentioned several months ago when the plans were on the table this will only be enforceable after his lawyers have added every contingency to ensure it is just an optical illusion of insurance. Still that won’t matter to Weatherill. He wants the pride of saying he has the world’s largest battery storage plant even though it is pointless in practice. Perhaps a bronze bust and keys to the City of Adelaide will be given to Musk for his humanitarian efforts.

Still one has to hand it to Musk. His ability to get governments to turn over cash subsidies on EVs and unproven technologies shows his guile as a salesman extraordinaire. I’m green with envy, literally!

Tesla – when the plug is pulled on subsidies

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It seems that the removal of generous electric vehicle (EV) subsidies in Denmark shows the true colours of those willing to buy a car in order to signal their willingness to save the planet. While Musk has been one of the most effective rent seekers around, it seems that if consumers aren’t given massive tax breaks they aren’t as committed to ostentatious gestures of climate abatement. In Q1 2017 alone it seems that Danish sales of EVs plummeted 60%YoY. In 2015 Danish Prime Minister Lars Lokke Rasmussen announced the gradual phasing out of subsidies on electric cars, citing government austerity and evening up the market. Tesla’s sales fell from 2,738 units in 2015 to just 176 in 2016. The irony of the Tesla is that it is priced in luxury car territory meaning that taxes from the less fortunate end up subsidizing the wealthy who can afford it!

Naturally if internal combustion engines (which by the way are becoming more efficient by the years as new standards are introduced) are taxed the same as EVs then it is clear they’d sell many more. Do not be fooled – car makers have not heavily committed to EVs for a very good reason – brand DNA. That is why we see so many ‘hybrids’ which allows the benefits of battery power linked to the drivetrain, which outside of design is the biggest differentiator between brands.

While many automakers missed the luxury EV bus, Tesla has opened their eyes. The three things the major auto makers possess which Tesla doesn’t are

1) Production skill – much of the battle is won on efficiency grounds. Companies like Toyota have had decades to perfect production efficiency and have coined almost every manufacturing technique used today – Just in Time, kanban and kaizen to name three.

2) Distribution – the existing automakers have been well ahead of the curve when it comes to sales points. Of course some argue that there is no real need for dealers anymore, although recalls, services (consumables such as brakes) and showrooms are none-the-less a necessity.

3) Technology – The idea that incumbent auto makers have not been investing in EV is ridiculous. Recall Toyota took a sizable stake in Tesla many years ago. Presumably the Toyota tech boffins were sent in to evaluate the technology at Tesla and returned with a prognosis negative. Toyota sold Tesla because the technology curve was too low. Toyota invests around $8bn in just hybrid technology alone per annum. Tesla spent $830mn last year as a group across all products. A ten fold budget on top of decades of investment in all available avenues of planet saving technology gives a substantial advantage.

Tesla is a wonderful tale of hope but it rings of all the hype that surrounded Ballard Power in fuel cells in the early 2000s. Ballard is worth 1% of its peak. As governments around the world address overbloated budgets, trimming incentives for EVs makes for easy savings. Now we have a good indicator one of the electric shock that happens when the plug is pulled on subsidies.

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Tesla recall – Tempting Extremely Serious Legal Action

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Exactly 1 year and 2 days ago I concluded that Tesla was tempting too much fate with its auto pilot function. I wrote along the lines that it’s Mario Kart type rainbow road auto pilot function was distracting so much so that owners were taking cellphone screenshots and videos while they were breaking the speed limit. Even worse Tesla CEO Elon Musk was encouraging its use and talking of its infallibility. I wondered whether his legal team had been consulted before he tweeted there were more such gimmicks on their way.

It now appears that Tesla has a 53,000 car recall on its hands and as predicted a class action lawsuit against it. While Tesla’s market cap may have exceeded the likes of Ford and GM it still doesn’t generate a profit. Car makers are the target of ambulance chasers. Toyota know a thing or two about that. How many traffic accidents in Toyota’s spiked after it was revealed they had a sticky accelerator when so few incidents occurred before.

Tesla’s autopilot has killed people who trusted it to save them. It so happens that the lawyers smell blood with a class action being launched as follows:

“The lawsuit, filed by law firm Hagens Berman on Wednesday in California’s Northern district court, said Tesla’s partial autopilot technology was advertised as safe and “stress-free,” but instead “is essentially unusable and demonstrably dangerous.”

“Unwittingly, buyers of the affected vehicles have become beta testers of half-baked software that renders Tesla vehicles dangerous if engaged,” the lawsuit says.”

Tesla cars with the Autopilot 2 features were first sold in October 2016. The first generation of the system was first unveiled in 2014. The Autopilot 2, or Enhanced Autopilot, feature costs consumers $5,000.

That is the problem with Tesla. It is a victim of its own self created bubble. It promises everything but delivers realities far removed from those dreams. Quality control is still an issue and the endless stream of subsidies has to  have an end date.

Tesla  is valued at 18x more than Mercedes Benz. Musk mentioned how he recently discovered how important production efficiency was. That is much of his battle. Even if he irons out his product glitches the incumbent makers have decades of experience in mass production, distribution and a swathe of new product lining up to challenge the space  Tesla has opened. Don’t forget Toyota sold its stake in Tesla. After  lifting the hood on its technology Toyota realized it was an empty shell. Let that sink in.

Tesla proves autonomous vehicles have a LONG way to go

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I’m not a believer in autonomously driven vehicles. This idea that a computer, if pre programmed, can outsmart a human. Sure, the raft of new safety features (auto brake assist) and lane assist control etc can help in situations when people cruising at brain dead slow speeds are busy texting and checking FB. Yet, there is a point where these systems are dangerous. I have driven cars with them and there have been times where the car outputs are the exact opposite of my inputs. It is unsettling and downright dangerous so I tend to switch these aids off. This excerpt from the Tesla Owners forum on FB shows how the latest and greatest auto-pilot function is flummoxed by such a simple situation. Read on.

Found a bug in 8.1 the hard way. Ruined two rims after 15 minutes of use.
That’s what happened yesterday: I started the AP on a smaller street with a sidewalk with a curb on the right. There was no line on the street next to the curb, but a line for bicycles on the sidewalk. The AP then suddenly pulled right, as it was irritated by the line on the sidewalk and ignored the curb. The rims touched the curb before I was able to react, even though I had my hands at the steering wheel…I already posted this in a German group yesterday and some people told me they had the same situation, but were able to react before it was too late.”

The idea that people put complete faith in auto-pilot systems is a worry. By the same token more advanced systems are supposed to use inbuilt algorithms to determine whether to swerve away from the kid on a BMX bike doing skids on the sidewalks toward the edge of the kerb braking as late as he dares and an old lady on a crossing 5 meters further on. The system may choose to sacrifice you the driver, err sorry passenger. While there is no doubt autonomous systems will continue to get better, would you prefer your airline pilot to be limited to a computer software program only or would you prefer a human in the cockpit who can assess the situation in real time?

Maybe I’m too analog. A fuddy-duddy that refuses to accept the future. I don’t think I’m alone but one day more people will grow tired of an app-driven existence. Life will become too boring and they’ll soul search for more tactile experiences. I was tinkering in the garage on my bikes fitting new parts, tyres, cleaning chains and doing oil changes. There is a something to be said about zen and the art of motorcycle maintenance. I was completely at peace after completing these analog tasks because it requires a focus that can’t be found in a 15 second swipe of an app.

“Made in Australia”Tesla – gimme a break

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Apparently some automotive expert is suggesting Elon Musk will look to produce Tesla’s in Australia as he seeks to diversify production away from a Ginga-factory yet to be completed. I am wondering if the story isn’t a plant to incentivise Premier Jay Weatherill to select Tesla as the battery back up supplier of choice in his panic-fueled rush to cover up South Australia’s self-inflicted energy crisis. Perhaps Musk will promise to put a car plant in Port Augusta. To turn the argument on its head, Nissan, GM, Ford, Mitsubishi and Toyota have given up car production in Australia with good reason. It is too expensive. For Toyota, the company that has coined almost every manufacturing efficiency byword (JIT, Kanban etc) and been seconded by Porsche and Lockheed Martin (to improve F-35 production), to say they can’t do it guarantees that Musk will never consider it without massive long term subsidies. Musk is the master of squeezing a subsidy dollar. Go in front of him entering a revolving door and you’ll be behind him when you exit. Put it this way, South Australians stumping up $550m for an experiment gone wrong might be the least of their worries.