Oh, how people love a good bit of drama, no matter what direction it flies. First the internet exploded with excitement as Consumer Reports announced that the Model S P85D “performed better in [their] tests than any other car ever has, breaking the Consumer Reports Ratings system.” Meanwhile, Tesla’s stock exploded, too, hitting a high of 280 in July.
But today the internet is now losing its collective mind because Tesla’s stock appears to be crashing. Apparently Consumer Reports has just made an admittedly unexpected about-turn, announcing that it has rescinded its former stellar rating. Apparently Tesla is no longer the greatest car … in the world … in fact, its reliability is now considered “worse-than-average” due to “an array of detailed and complicated maladies.”
Thing is though, none of this really matters. Not even slightly.
The people who (can) buy Tesla, won’t care
For all intents and purposes, a Tesla Model S (or X) is going to cost you something in the $80,000 to $100,000 range, and, depending on options, even up to $130,000 or so. And while this is undoubtedly a massive amount of money, it’s actually right in the price range of other luxury cars by Mercedes, BMW, Audi, and so on; compared to Bentley, it’s a bargain.
People who can buy Tesla’s cars could just as soon buy an S Class, a 7 Series, or an A8.
The point is, people who can buy Tesla’s cars could just as soon buy an S Class, a 7 Series, or an A8. And why shouldn’t they? They offer profoundly more luxurious interiors, with far superior leathers and other soft touchy bits, and, though arguably due to Tesla’s otherwise silent drivetrain, tend to offer immensely quieter interiors.
Indeed, one could argue that, apart from Tesla’s techno-cool factor, environmental awesomeness, face-distorting acceleration, superlative safety, and admittedly good looks, there’s actually plenty of reasons not to get one: the standard front seats are woefully sub-par for a car of its class (an expensive upgrade option now seeks to rectify this with more supportive buckets); wind and road noise is not $100,000 silent; aforementioned interior materials, while fine, are not $100,000 fine; the windshield washer nozzles are bad to the point of being useless; and, contrary to popular belief, despite the efficient chassis design, including two trunks and an absence of any cabin volume-reducing drivetrain intrusions, it doesn’t really have that much leg-room, at least not for me, at 6’5″. And oh yeah, those doorhandles and leaky sunroofs.
Yet still, Teslas sell like hotcakes, pigs continue to fly out of Fremont, and nobody seems to care about these trifling issues.
Tesla buyers are not buying Teslas because they’re better cars to the S Classes, 7 Series, and A8s of the world; they’re buying Teslas because they’re Teslas.
Tesla buyers are not buying Teslas faster than they can be produced because they’re better cars to the S Classes, 7 Series, and A8s of the world; they’re buying Teslas because they’re Teslas. Because they’re different. And because, niggling problems aside, they’re simply awesome.
And besides, most people — especially those able to afford such luxurious cars — tend to lease rather than buy, if only so they can have the newest, greatest thing, especially for electric cars that owners want to upgrade every few years just like smartphones. By Consumer Reports’ own admission, the recent technical woes prompting their downgrade really only became apparent in “older vehicles … getting up on miles,” an issue rendered null and moot by virtue of leasing.
Tesla is still the best EV, by far
Not much to say here, really, but you get what you pay for. Sure there are plenty of alternatives to Tesla, but they’re really not substitutes. Pure-EV cars (as opposed to plugin-hybrids or range-extender EVs) typically max out at 80 miles of range; plugins aren’t really comparable; and range-extenders are little more than an interim hack.
Suffice to say, if someone has $100,000 to spend on a car, they do not think “hmm, I think I’d prefer to get a Nissan Leaf / BMW i3 / Fiat 500e / Prius Plugin and save some cash for my new wine cellar.”
Suffice to say, if someone has $100,000 to spend on a car, they do not think “hmm, I think I’d prefer to get a Nissan Leaf / BMW i3 / Fiat 500e / Prius Plugin / BMW ActiveHybrid 7 and save some cash for my new wine cellar.” No. It just doesn’t happen. Tesla buyers are not cross-shopping anything else today. Period.
To wit, in 2013, Tesla sold more Model S sedans than either the Mercedes S Class, BMW 7 Series, Porsche Panamera, Audi A8, or Lexus LS.
What doesn’t kill Tesla will just make it better
Elon Musk is not the sort of person to just stand by idly while things go wrong. This is the same guy who lead a team to some remote South Pacific island and actually poured their own concrete to get Space X launched (literally and figuratively).
It is impossible for any feat of engineering to be without its flaws for its first few iterations, let alone the first iteration.
Besides, it is impossible for any feat of engineering to be without its flaws for its first few iterations, let alone the first iteration. Boeing had problems with its first jets. Airbus had problems with its first fly-by-wire systems. This is par for the course. It’s what engineering is all about.
The issue then is not the technical problems surfaced by Consumer Reports’ seemingly damning downgrade, but whether Musk and his team can resolve them. Suffice to say, he has proven time and again that he will, and in so doing, will make Tesla better than ever.
Model 3, Autopilot, Gigafactory
In about 2017-2018, Tesla’s “mid-level” / “affordable” electric car offering will launch. Dubbed the Model 3, it will basically be a scaled down version of the Model S, and so we already know it will be great.
Meanwhile, as the decade rolls to a close, the Gigafactory will be slowly ramping up production to become the largest lithium-ion battery facility in the world. Coinciding with the Model 3, it is precisely this factory that will enable the Model 3’s existence (meaning, relative affordability) by virtue of bringing down the cost of lithium-ion battery production; never mind that Tesla will then be the largest Li-ion battery producer in the world.
Also during this time we’ll see Tesla upgrade its Autopilot functionality to 100% autonomy, subject of course, to much needed legislation on the issue.
Telsa isn’t just slightly ahead of all other car manufacturers, it is leaps and bounds, entire generational chasms beyond its competitors.
The point is, Telsa isn’t just slightly ahead of all other car manufacturers, conventional, electric, or otherwise, it is leaps and bounds, entire generational chasms beyond its competitors. Truly, this small stumble for Tesla is like scratching your pinky while rock climbing. It may sting like hell, but it’s not a big deal.
That said, Mashable is right: “Building problem-prone luxury EVs for wealthy early adopters is one thing. Once you open the door to non-enthusiasts, you’d better get it right.” They will.
TSLA stock has done this before, and was just fine
And finally, if only for all the foregoing reasons, TSLA stock will be just fine too. We’ve seen this happen before. It will be rebound. Nothing to see here, carry on.