Why Tesla Model S and X have NOT reached peak demand.

It’s been a painful week for Tesla long investors.  Contrary to the lies told by the Goldman Sachs analyst David Tamberrino (for which his close friends and family likely profited to the tune of millions of dollars), Tesla Model S and X have NOT reached peak demand.  Here are 12 reasons why Model S and X demand will continue to increase short and long term:

1) Tesla isn’t allowed to sell cars in many states.  In Alabama, Michigan, New Jersey, Texas, Utah, Virginia, West Virginia, Indiana, Arizona, and Connecticut, Tesla either can’t operate a store or has severe restrictions on the number or function of their facilities.  These are just archaic legal hurdles that will be eventually defeated in court especially as states start to realize the amount of jobs and tax revenue they are losing.  Once Tesla can sell its cars in all states, demand will increase.

2) A large majority of Tesla’s target market still don’t know that electric cars are available, or they have severe misconceptions about the price, performance, range, charging, battery longevity, and environmental impact of a Tesla.  The Koch brothers and big establishment spend millions of dollars a year on a campaign of misinformation against electric cars in general and Tesla specifically.  It’s a war against fake news, one that facts and truth will eventually win.

3) Tesla doesn’t advertise.  There are no Tesla advertisements in magazines, or on billboards, television, or the web.  Most sales are still due to word of mouth, media coverage, or tech savvy consumers researching Tesla on their own.  Once Tesla actually starts to advertise, demand will only increase.

4) While Model 3 may cannibalize some Model S sales, the lack of availability of Model 3 to the general public (for new reservations) until 2019 will drive sales towards Model S.  It’s a win-win situation for Tesla.  Enthusiasm and media coverage for Model 3 will bring people to the Tesla stores where they will see the ready-to-bring-home-today Model S.  A fully optioned Model 3 will likely be priced between $50,000 and $60,000.  A lot of prospective buyers might just splurge $10,000 more and get a very well equipped base Model S rather than wait 1-2 years for their Model 3. http://teslaspeculation.com/2017/07/01/buy-a-new-2017-tesla-model-s-for-69500-and-get-32400-in-free-upgrades/

5) There is strong brand loyalty for Tesla.  Current Model S and X owners (and future Model 3 owners) have a high likelihood of buying another Model S or X rather than buying another car (especially a gas car).  As long as Tesla continues to expand and support the Supercharger network and as long as there are continuing software and hardware improvements to Model S and X, there is a growing base of existing owners who will most likely buy another Model S or X.

6) The Model S and X are both due for an interior refresh.  Once that refresh occurs, there will be another spike in demand, due to owners of older Model S and X waiting for a significant interior update, and new customers who felt the relatively sparse interior of the current Model S and X was their one deal breaker. http://teslaspeculation.com/2017/06/23/whats-next-for-the-model-s-and-x-interiors/

7) In recent years, Tesla has made significant performance improvements to their base Model S and X and to their top spec Model S and X.  The new base Model S 75 is significantly quicker than any competitor in the base Grand Coupe segment. And the Model S P100D Ludicrious is so quick it’s only real competitors are multi-million dollar exotics.  This has created a performance gap for their midrange.  Specifically, there is currently no Model S or X with a 0-60mph time in the 3.5 second range.  We know from dynamometer testing that the Model S and X 100D performance is currently software limited so at some point Tesla should and probably will remove the limiter, thus creating a 3.5 second sub-$100k car that directly competes with the $110k-$150k Audi RS 7 Performance, BMW Alpina B6, Mercedes AMG CLS63 S Coupe, and Porsche Panamera Turbo.  This will result in a nice bump in demand amongst owners of higher end competitor cars.

8) Once the Level 5 self driving software and the Tesla car-sharing network are deployed, there will be another spike in demand for Model S and X as functionality dramatically increase and cost of ownership dramatically decreases.  If someone were to rent out their car several hours a day, they could offset most of their monthly payment if not make a profit.

9) Many people that buy a Tesla Model S or X are buying their most expensive car ever, often by a significant margin.   It’s not uncommon for one’s Model S or X to be priced $10,000, $20,000, or even $30,000 above the premium gas or hybrid they previously owned, or the one they would have bought otherwise.  In fact, many Tesla owners’ immediate prior car is the Toyota Prius.  People buy a Model S or X for many reasons.  Some like the technology or are early adopters. Some buy a Tesla for political, patriotic, or environmental reasons.   Others buy a Tesla because of the significant gas savings.  Regardless, demand for the Model S and X aren’t limited to the “traditional” buyers of $70k-$160k cars.

10) Tesla controls a lot of demand levers, many of which we aren’t even aware of.  Without having to spend a dime on advertisement, Tesla can instantly increase demand through various low cost promotions (free and expanded supercharging, owner referral discount, project Loveday), hardware and software updates (new Autopilot hardware or software, performance improvements, new batteries), and media coverage (coast to coast self driving demo, unveiling events, awards, Elon Musk interviews).  Despite recent price increases for the base Model S, the 100D, and P100D, orders and deliveries for Model S and X in the month of June have been one of the best in Tesla history.

11) China and India.

12) It’s hard to ignore the quadruple wow factor of experiencing Model S for the first time, either a friend’s car or one at the Tesla store.  The first thing people notice is the elegance and modern styling of the Model S.  Then when they enter the car they notice the large instrument cluster screen and the ginormous 17″ main touchscreen.  Next they experience the Tesla grin when accelerating 0-60mph in 2.5 seconds (or even 4.3 seconds in the base Model S which is quicker than any other car in the Grand Coupe segment).  Then comes the autopilot demonstration where for several minutes the car is literally driving itself, safely staying in lane, breaking, and accelerating while the dash shows awareness of the surrounding traffic environment.  After some explanation about continuous software updates, buck-a-gallon equivalent home charging, free Supercharging for road trips, no required maintenance, various incentives (including tax credit, rebates, and HOV lane access) comes the zinger where the prospective buyer learns that a well-equipped base Model S is significantly less expensive than any other Grand Coupe on the market (Audi 7 series, BMW 6 GC series, Mercedes CLS, Porsche Panamera, Jaguar XJ, and Maserati Ghibli). These individual experiences, which occur daily around the world, increase demand in an immeasurable but personal, visceral, and significant way. http://teslaspeculation.com/2017/07/05/battle-of-the-grand-coupes/



How soon before Tesla updates Model S to address the IIHS SORB test results?

All eyes are on Tesla.  Today the IIHS announced that the Model S didn’t do very well on the Small Offset Rigid Barrier crash test.  This was actually Tesla’s second try.  They had made adjustments to the seatbelt after an earlier test but the outcome was no better (slightly worse actually due to increased intrusion).  Of course, Tesla’s unique ability to iterate their cars on a weekly basis means they’re probably having around-the-clock meetings of their top engineers and will have new designs ready in a few days and new prototypes ready for testing in just a few weeks.  There might even be some options for firmware updates to better control airbag deployment in such crashes.

Battle of the Grand Coupes: Tesla vs Audi vs BMW vs Mercedes vs Porsche vs Jaguar vs Maserati

With the recent performance upgrades for the Model S 75, Tesla now takes a comfortable lead in price and performance in the Grand Coupe segment.  Here’s how the base trims compare:

Tesla Model S 75 Audi A7 BMW 640i GC Mercedes CLS400 Coupe Porsche Panamera Jaguar XJ R-Sport Maserati Ghibli
0-60 MPH 4.3s 5.2s 5.4s 5.3s 5.2s 5.7s 5.5s
Fuel Economy (City/Highway/Combined) 97/100/98 MPGe 21/29/24 MPG 20/29/23 MPG 20/29/24 MPG 21/28/24 MPG 18/27/21 MPG 17/24/19 MPG
Price $69,500 $68,800 $81,400 $67,500 $85,000 $74,400 $73,500

Standard Features Include:

  • Satellite Navigation
  • Active Driver Safety
  • Rear View Camera
  • Parking Sensors
  • Power Heated Front Seats
  • Sunroof or Moonroof

Note: The Mercedes does not include Navigation which is part of a $7000 option package.

To be fair, we should add the following options to the Tesla Model S for feature parity:

  • Color (other than black) – $1000
  • Leather – $3300
  • Premium Sound – $2500

Total = $6,800

However, these extras are more than offset by various incentives (California shown as an example; other states may have more or less):

  • Federal Tax Credit – $7500
  • California Clean Vehicle Rebate – $2500 (subject to income limits)
  • Utility Rebate – $500
  • Tesla Referral Discount – $1000

Total = $11,500

In conclusion, the Tesla Model S 75 offers the best performance, highest efficiency, and most advanced technology of any base trim Grand Coupe. Even when factoring in paid options (Color, Leather, and Premium Sound) for feature parity, the Tesla is still the most affordable car in the segment.

How many nVidia Drive PX2 GPUs are needed for Level 5 autonomy?

There has been some criticism of Tesla’s decision to only have one nVidia Drive PX 2 GPU in their Autopilot Hardware 2 system as opposed to the 2 or 4 GPUs recommended by nVidia.  While one theory is that Tesla will simply swap out the current 1 GPU board for a 2 or 4 GPU board as Level 5 autonomy gets closer to release, a more likely possibility is that the Tesla Level 5 system will actually be an internet-connected, cloud-based solution.

Imagine a scenario where a car is traveling down an interstate with minimal traffic.  A single GPU is more than enough to keep the car safely in lane.  In fact, some of the idle GPU cycles can actually be used by other cars on the network.  On the other hand, imagine the most challenging scenario for an autonomous car, where the unexpected is most likely to happen and where the stakes are highest: elementary school pickup and drop off.

In a setting like this, each car might need 4, 8, or even 16 GPUs to safely navigate in and around the school.  A cloud-based solution would allow dynamic scaling of the GPUs as well as data sharing among cars that are in the area or recently passed through the area.  Even the cameras, radars, and ultrasonics of parked cars would be contributing to the network.  Of course the internet isn’t 100% reliable so Tesla could install solar-powered, battery-backed auxiliary control towers at schools, hospitals, stadiums, major intersections, and other critical locations.  These control towers would include cameras, radar, and other sensors.  Maybe in the early days of Level 5, there would even be a human or two supervising these towers. Cars passing into the auxiliary control zone would connect to a local network and have access to the additional GPUs of the control tower plus the GPUs of nearby cars, even if the internet were to be unavailable.

Another advantage of a cloud based Level 5 solution is that all GPUs don’t have to be the same.  At some point there will be an nVidia Drive PX3.  Or maybe another company (Tesla itself?) will create a compelling next generation GPU.  While Tesla designed the motherboard to be swappable, whole fleet performance would improve even with new GPUs just at the server level or just in the newest cars.

So the answer to the question of how many GPUs are needed for Level 5 autonomy is… “as many as it takes”.

There is no Tesla-killer and there never will be.

It seems like everyday a news article declares a new EV from an EV startup or a legacy automaker as the Tesla-killer.  While certainly attention grabbing, it’s important to keep in mind that these new EVs are years from production and both startups and legacy automakers face an uphill battle.

It takes time to raise capital (or convince the board of directors allocate capital) towards building or reconfiguring a factory for EV production.  It takes time to secure a supply of batteries.  It takes time to build or secure access to a fast charging network (if they even bother to do that).  It takes time to build a brand.  It takes time to build the right leadership. It takes time to train dealerships and salespeople to actually sell EVs (and this is made more difficult when the same dealerships and salespeople continue to sell gas cars).  Each of these steps takes years.

We’ve seen Coda and Fisker 1.0 fail.  We’re watching Faraday Future fail.   There’s a high probability Fisker 2.0 and Lucid Motors will fail too, not because they don’t have great concepts, but because Tesla is so far ahead on so many fronts. By the time the Fisker Emotion and Lucid Air actually reach production, Tesla will have deployed their 3rd generation Supercharger network across the country, will have Level 5 self-driving available on all cars, and will have the lowest $/kWh and highest density batteries of any battery manufacturer.   While Fisker and Lucid fight hard for a small share of the $100k+ EV market in 2019-2020, Tesla owns that market now and will have captured the $35k EV market and everything in between.  By 2019-2020, Fisker and Lucid will be lucky to have built a few thousand cars.  Tesla on the other hand will have over a million cars on the road.

For the legacy automaker, the road to significant EV market share is just as bumpy.  Nissan and BMW arguably have the most experience selling EVs and could most easily adapt to an expanding EV portfolio.   VW group has less experience selling EVs but seem to be making an all-hands-on-deck push. But it is doubtful there will be enough culture change in any traditional automaker to actually sell significant volumes of EVs to the public. That is because the culture change has to occur throughout an entire network of independent, unrelated, self-interested parties.  Dealerships continue to consolidate into larger and larger multi-brand, multi-city groups.  Prospective car buyers are becoming more internet savvy.  In the face of a growing portfolio of cars, financial pressures, and price shopping buyers, selling a new EV just won’t be a priority for the on-the-ground salesperson.

Legacy automakers might eventually reach some parity with Tesla in terms of range, new car price, and (maybe) styling, but Tesla still wins on all the critical tiebreakers including the charging network, self-driving technology, direct sales model, and brand. But perhaps the biggest obstacle of any startup or legacy automaker’s EV effort is not a new Tesla, but a used Tesla.   By 2019-2020 timeframe, used Tesla’s will have flooded the market at just about every price point.  You’ll be able to buy a used 2017 Model 3 for less than $12,500.  A used, high mileage but fully functional 2012 Model S will be as low as $10,000.  Even a top-of-the-line 3 year old used 2016 Model S or X P100D Ludicrous will sell for less than $65,000. Tesla’s commitment to ongoing software updates, extended warranties, and the Supercharger network is game changing with respect to the overall value and functionality of their used cars.  Whatever price point an EV startup or legacy automaker tries to enter the market at, there will be better performing, better looking, fully warrantied used Tesla’s available for 1/3rd the price.

Secrets of the Tesla Semi.

The Tesla Semi is unlike anything we’ve ever seen before. In thinking about the potential of such a vehicle, it’s important to avoid using a fossil fuel/internal combustion engine “frame of reference”.  It’s also important to keep in mind Tesla’s track record for creating competitive vehicles in other segments.  The arguments about range, performance, utility, and price made against the Tesla Roadster, Model S, Model X, and Model 3 have generally been proven wrong, to market disrupting effect.

By the time the Tesla Semi actually hits production, it will benefit from 2-3 more years of battery density and pricing advances.  Besides having batteries in the Tesla Semi itself (the cab), there are likely going to be batteries in the trailer. Batteries within the floor of the trailer would provide key structural support (as they do in Model S and X) and room for over 1000 kWh.  Additional batteries could be integrated into the walls or roof of the trailer as well.

Tesla motors are so small that there could one motor for each wheel such that the cab is likely to have 6 motor all wheel drive. Another innovation is that the trailer would also have motors, perhaps an additional 1-6 depending on length and weight.    With 6-12 total motors, there is very strong regenerative braking, probably so strong that traditional brakes would only be needed in panic situations.  And with so many motors, some will be optimized for acceleration and some optimized for highway cruising.  As in the Model S and Model X, torque sleep engages on any motors that are not needed at any given moment. The Tesla Semi system will have a level of acceleration, handling, and efficiency far beyond all currently available tractor trailer systems.

No gas engine means no air or noise pollution. In urban settings where tractor trailers are restricted due to pollution or noise, the Tesla Semi would have a unique advantage.

Level 5 self-driving capability will be a game changer for the trucking industry. But even if Level 5 isn’t ready from a legal or regulatory point of view, currently available Level 3 self-driving with “touch-the-steering-wheel-every-5-minutes” driver engagement still makes for a significantly improved driving experience as it decreases fatigue and increases safety.

The only remaining “hurdle” to the Tesla Semi completely replacing diesel tractor trailers is long distance refueling.  Tesla would need to build a network of higher powered (300-500kW) Superchargers exclusively for the Tesla Semi.  But with Tesla Powerpacks and solar panels suited for low cost, off-grid, middle-of-nowhere deployment, Tesla will easily deploy this network ahead of Tesla Semi mass production.