Tesla vs. Detroit, a.k.a. Apples vs. Oranges

On July 14, 2012 by WMac

Adam Hartung, contributor to Forbes magazine, recently made a splash by writing this article, entitled “Why Tesla is Beating GM, Ford, and Toyota — Electric Cars.”  He contends that Tesla’s product is in fact so superior, it will vault Tesla into a leading role in the automobile business, just as Amazon is now a retail leader, Craigslist now a classified ad leader, etc.  I disagreed and responded in the comments section, but I’m not sure if my comment will see the light of day, so I thought I’d present it here as well:

Adam, here’s the root problem with your comparisons to the net-savvy start-ups that the established brick-and-mortars laughed at: Craigslist, Amazon, Apple, etc., all offer services that just about everyone can use.  Anyone who can walk to a library can use Craigslist or Amazon.  Anyone with a job can (pay a premium to) buy and use an Apple product.

However, to use a Tesla product, your earnings had best be well into the six-figure range.  And you’d best live in an urban area.  Make that an urban area in the American southwest, close to Tesla HQ for service and where winter won’t increase your range anxiety.

What I think Bob Lutz is getting at in his reply to you is that Ford, GM, and Chrysler offer affordable, reliable, usable transportation for everyone.  The average new car sale price is just below $31k.  No manufacturer can (yet) do electric, reliable, and usable for the masses from New York to Portland to Fargo to Seattle to San Diego to Dallas to Miami at $31k.

The Volt gets close.  The only problem with proud papa Lutz’s Volt—the problem that caused a five-week production hiatus earlier this year— is that it retails (per Chevrolet.com) for $39,145 minimum, which doesn’t make sense to the average consumer in the market for a small sedan.  Realize that a) the buyer has to be eligible for the tax credit—they may not be able to get all $7500 of it—and b) the buyer’s up-front cost is still $39,145, so that’s the number that drives the financing decisions.  Believe me, I’ve been trying to finagle a way to get a Volt for myself because I love the idea of actively controlling how much I spend on gas, but the cost/benefit just doesn’t add up in my case.

If price is a problem for the Volt, then it’s going to be a bigger problem for the Model S.  The base price of the least-expensive Model S is $58,570.  If the Volt has trouble making a case for itself at $39k, how well can the Model S be expected to do once all of the well-heeled, “green” early adopters in LA, Phoenix, and Vegas are satiated?

A Model S is not a car that anyone NEEDS.  The big automakers are the pros at what they do because they can crank out millions of Cruzes, Fusions, Camrys, Civics, F-150s, and Silverados—cars that the average buyer needs—at prices the average buyer can afford.   When Tesla Motors does that, I’ll be first in line.  And I expect that line to be a lengthy one.

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