Tesla Up In Arms Against the New York Times

Tesla Motors
Tesla Motors

Elon Musk, the chief executive of Tesla Motors, has called the recent New York Times Review on the Tesla Model S as ‘fake’.

The Tesla boss went on Twitter denouncing the review and defending the carmaker’s highly touted family super saloon all electric car. The review said that the electric car ran out of power sooner than expected when it was driven on one cold winter day. Musk tweeted, “NYTimes article about Tesla range in cold is fake.” He added that Tesla is preparing a blog to detail what actually occurred in the test driver and is now “lining up other journalists to do the same drive”.

For its part, the New York Times defended its review, claiming Musk’s assertions as ‘flatly untrue’. The review was done by John Broder, who test drove the Model S from Washington DC to Connecticut. He said that during the trip the battery charge drained sooner than touted, which then forced him to turn down heating and drive beyond the speed limit. Ultimately, the car did not reach its destination and had to be towed to a charging station.

As for the tweet by Musk, the New York Times in a statement said that the review was ‘completely factual, describing the trip as it occurred. Any suggestion that the account was fake is of course, flatly untrue.” It further added that there was no unreported detour that occurred during the test drive.

Tesla has repeatedly stated that the Model S has a range of 265 miles or 426 km on a single full charge. In some instances, the car firm said that the Model S can run up to 300 miles.

Many industry experts has observed that the range of electric cars lower because of cold weather.

In another move, even Model S owners are organizing to set the record straight regarding the review John Broder did for the New York Times on the Tesla Model S. These concerned Tesla owners would be replicating the travel done from Maryland to Connecticut to show that the vehicles are more than able to complete the trip he couldn’t complete. The counter-review trip would start from Tesla Service Center in Rockville, Maryland and they would pick up several other Tesla Model S owners at the Delaware Supercharger, stopping over at Milford Connecticut SuperCharger to recharge their vehicles to full. The drivers would even be staying at the Groton, Connecticut hotel that Broder was billeted during his trip. The crowdsource trip is replicating the Broder trip as closely as possible.

A Twitter account has been set up so that team members can update one another during the trip. The car’s data logs would also be provided to support Musk’s rebuttal to the New York Times review.

The New York Times review has caused a ripple in the share prices for Tesla, falling two percent since the review came out last February 8. Overall though, the last twelve months have shown that Tesla share prices rise by 23.5%.

The Success and Glitches of the Model S


According to the New York Times, the Tesla Model S is a ‘game-changer, comparable to the Model T Ford.’ The vehicle from the Silicon Valley start up has won every 2012 ‘Car of the Year’ award from every conceivable award giving entity, including a unanimous vote from Motor Trend, the first of its kind in the car magazine’s history.

For its part, Tesla is not resting on its laurels, with its new brand spanking facility in California working at full capacity, the company is set to complete its 20,000 order backlog sooner than expected.

It has not been smooth sailing though for the company. There are a still a number of growing pains for a start-up building a car from the ground up using a refurbished production line. While, for a normal internal combustion car glitches can be overlooked, the Model S is not your ordinary vehicle, with much of its design and building under the microscope from start to finish.

Here are just some of the technical issues reported on the Model S:

  • Self-opening locked doors. Some Model S owners reported that they had incidents wherein locked cars suddenly opening, with one even reporting the door ajar. Oftentimes, this occurs after manual remote locking with the FOB key and in the ‘walkaway’ automatic lock mode. In this mode, the car automatically locks itself when it senses the key FOB is away at a distance.
  • Sticking Sunroof. Some Model S owners have reported that the sunroof was difficult in opening, especially when it is controlled remotely with the touch screen. This may either be a mechanical issue.
  • Software Glitches. There is a Model S software update version 4.1 providing for a ‘sleep mode’ to reduce power consumption during non-use or at shut down. There have been a number of reports regarding bugs and glitches, such as panoramic roof, door handles, locking, displays and controls that operate when powering up the Model S. While rebooting the software does away with the glitches, there are some owners reporting daily need for rebooting to address these glitches. Tesla is addressing the issue with a 4.2 software version.
  • Fogged Windshields. Many Model S owners reported poor defroster/defogger functionality during cold or humid conditions. This has been addressed though with a new vent design and retrofit kits are being made available and installation takes an hour.
  • Charge Port Door Malfunction. The charge port door is part of the taillight and in some instances, it does not open properly or close correctly. In some instances, there have been malfunctions on its locking and even jamming of the charge cord. Tesla is addressing the issue.

While these are issues that affect only a few, a greater majority is not suffering any issues or probably some are just accepting the vehicle’s idiosyncrasies.

Tesla at Turning Point

Tesla Motors
Tesla Motors

The company said in its quarterly earnings announcement that it has achieved a “fundamental turning point” as it transitions itself from a small volume maker of niche electric cars to a company with mass production capacity, able to build and sell 20,000 or more vehicles each year.

This is very optimistic and it remains as a company production target of the company. This is a great jump, as it would be two orders larger than the whole third quarter production of the company. In that same period, the company was able to build just 350 Model S and sell just 250 as well as sell 68 of its Roadsters. All these resulted in gross revenues totaling U.S.$50 million.

The numbers remain small with the production compacted in the last two weeks of the quarter. Tesla in its defense says it is able to build 200 cars per week and at that rate, it would be able to build 10,000 cars in a year. This is the number to make the company cash flow positive and it assumes it sells all those sedans at the projected price of U.S.$57,400. The current price of the Model S is pegged at U.S.$95,400.

The company has spent a great deal of last year upgrading its main factory located in Fremont, California. The former Toyota plant’s retooling is a slow and arduous process and is funded in part by a U.S.$465 million loan from the US Department of Energy and another U.S.$222 million on its follow on offering after the company initially went public.  Another major issue is the multiple suits it is facing claiming that its manufacturer owned showrooms are violative of current U.S. law.

These suits were filed by the auto dealers of America and their respective state associations. Tesla is currently selling its electric cars online and not through franchised independent business dealers. Once bought, the factory delivers the cars directly to the buyer.

In undertaking this practice, two deigned aspects of car purchases are removed, mainly haggling and the buying. The Tesla Stores are educational showrooms where no cars are sold. The dealer groups do not believe this and have lobbied to change state laws as well as prevent the company from opening its stores. The Tesla Stores are viewed as dire threats and the movement has grown to suits filed in four different states.

A different view is being taken by Tesla CEO Elon Musk. He wrote on the Tesla website, “In many respects, it would be easier to pursue the traditional franchise dealership model.” This he said would save the company money and thus broaden its distribution coverage. There is a fundamental problem though, he observed, as the dealers would explain the advantages of battery electric cars while relying on conventional vehicles for their profits and sales.

The purpose of the Tesla stores is to let the public learn about the Model S from product specialists no on commission and learn about electric cars in general. The Model S is very different from any other vehicle that it requires a great amount of education before considering a purchase.  Musk added, “Their goal and the sole metric of their success is to have you enjoy the experience of visiting so much that you look forward to returning again. “

As for laws, Musk adds, “We do not seek to change those rules and we have taken great care not to act in a manner contrary to those rules. “ He views the lawsuits filed as ‘starkly contrary to the spirit and the letter of the law.” One case was filed by a Fisker dealer while the other suit is “an auto group that has repeatedly demanded that it be granted a Tesla franchise.”

Creative Marketing for Electric Vehicles


In the film Paranoia, Harrison Ford’s character gives the character of Liam Hemsworth a new range extended luxury sedan. This is one of the novel ways that the automaker is marketing its vehicles. It also helps that known celebrities such as Leonardo di Caprio and Justin Bieber own one and top rated sitcom Two and a Half Men, specifically Ashton Kutcher’s character, drives around in one.

There is a well known business transaction in the car industry called the trade in. This involves giving the dealer the old car and the equity value which would then be used as down payment on a newer model vehicle. This route is being utilized by electric automaker Tesla Motors. The difference is, only those individuals that own the first model vehicle from the company would be able to trade in for a newer model Tesla. This involves selling the two-seater Tesla Roadster and a substantial discount would be received on the brand new Tesla Model S.

This is a novel approach, as these kinds of trade in deals provide a convenient way that a buyer can dispose of their old cars. The drawback would be the trade in value is much lower compared to sales prices of these vehicles. Once the old car is traded in, the vehicle is then sold at a used car auction for a sure profit.

Tesla has also modified this age old transaction. There is no dealer as Tesla facilitates the exchange. The valuation is very accurate because of the detailed service records and diagnostics undertaken on the vehicle. Furthermore, Tesla does not intend to dump the Roadsters to a used car lot but instead would offer the traded in Roadsters in its stores.

Since the Tesla Roadster numbers just 2,600 throughout the world, the value of the electric vehicle remains high. It is estimated that a four year old Tesla Roadster with just 31,000 miles would sell at about US$73,300.

With this on hand, former Tesla Roadster owners can end up purchasing the Model S at about US$100,000 plus plus, depending on the options included. The base price though is at US$57,400 and with the value of the 2010 Roadster at an all time high, Tesla may end up paying the car owner the difference.

Upgrades are available as an option for the Roadster, allowing Tesla owners many more options, such as the trade in, the upgrade or the outright purchase. Novel ways to extend the life of these iconic vehicles.

Tesla Seeking More Funding

Tesla Motors
Tesla Motors

The trailblazer of the Renaissance of the electric car, Tesla Motors, is now undergoing issues both on the financial and the technical aspects of its work. As production rolls on, it is spending more money that it has and still production targets remain unmet. To assuage the issue, the former start up is now turning to its investors and taxpayers for financial assistance.

Tesla formally announced its plans to sell five million company shares last Tuesday for public offering. In a related move, Tesla was able to eke out a waiver of some of the government requirements in fulfilling its commitment under a previous U.S. $465 million loan package. The two moves are viewed to ease the financial pressure on the company, at least for the next few quarters, but it certainly raised issues about the long term future viability of the company.

The recent months have seen the company increasing its production of its main vehicle, the Model S. This vehicle is a high performance sedan able to get from zero to sixty miles per hour in just 4.4 seconds. While there have been deliveries made initially, the current delivery backlog stands at between four and five weeks. With this complication, the company is using up much of its cash liquidity at an increased rate, forcing the company to revise its revenue forecasts.

Carter Driscoll, an analyst at CapStone Investments observed, “Tesla’s story is starting to show some serious cracks. This shows that capital raising is a necessity, not a luxury, as the company had maintained.” This shows that cash flow was getting tight at Tesla.

The recent moves are also expected to accumulate another horde of criticisms of the Obama administration’s energy loan program. The previous flak came when Solyndra, a solar panel maker, declared bankruptcy back in 2011, defaulting on a government loan worth U.S. $535 million.

The Department of Energy was able to obtain a concession from Tesla, requiring the carmaker to submit a plan for the repayment of the loan. In response, Deepak Ahuja, CFO of Tesla, said that the changes to the loan were ‘purely a normal course of events’ as Tesla’s business model was steadily evolving.

To many analysts, Tesla is now on its critical phase of growth. The company has fully obtained the government loan and shareholders, with the new stock offering, may feel their worth would be diluted. Major concerns had been raised as share prices fell to U.S. $3.00 or a reduction of ten percent. The previous high was U.S. $38.01 and is now valued at U.S. $27.66.

As expected, many investors would be searching for signs that the Model S would lead the company out of its current doldrums. The company expects that the Model S sales would produce positive cash flows as the first two quarters of 2012 reported a net loss of U.S. $111 million.

The current issues are also expected to test the loyalty of its customer base. Those who have received their Model S vehicles are extremely pleased with its performance, many saying it has exceeded expectations. Many would be buyers are plunking down hefty sums to place reservations on the Model S. The vehicle costs about U.S. $54,700 before tax credits with the deposit at U.S. $5,000. More inclusions onto the basic model would require a higher deposit.

The deposit amounts have been a great cash reserve for the company, with the company as of June 2012, holding about U.S. $133.4 million. Should production delays continue, many question the wisdom of putting down such a large amount with no definite promise of date of delivery. In the end, the fortunes of Tesla would rely on the market size after the first adopters.