2012 Tesla Model S Electric Sedan: Industry Analyst Weighs In

Fr23shjive · Mar 2, 2012

I thought this was really interesting...

(4) What can we learn?

The 2012 Tesla Model S is one of the most vertically integrated cars I've ever seen. I wasn't aware how much of the technology in the Model S was developed in-house.

Tesla makes nearly everything on the Model S itself. The exceptions are some of the trickier bits, like the pedal box and steering column, which it gets from Daimler. Tesla even makes its own molded plastic parts, using machinery left by Toyota at the Fremont, California, assembly plant.

I suspect some of that self-reliance stems from finding the existing base of automotive parts suppliers uninterested--or unwilling to work with Tesla for anything other than exorbitant fees. That may have forced Tesla to go it alone.

On the plus side, that means Tesla can make very rapid design changes. On the minus side, it means the company's costs are not terribly negotiable, as there isn't competition among suppliers for the needed components. In other words, the fixed cost of Component Z is whatever price Tesla itself can bring it to fruition for.

AnOutsider · Mar 2, 2012

Interesting, I didn't make it to the second page because the first page seemed like a bunch of fluff. In the end,I know that personally, I prefer to contract out as little work as possible so that we can better control the product in-house. I think, costs aside, doing most of development and fabrication in-house has probably helped Tesla make a better car.

Yggdrasill · Mar 2, 2012

I think the analyst fails to take into account the cost of gas and other factors. He compares the Model S to Porsche Panamera, when the Model S is actually a more capable and cheaper car. If you drive a Panamera around 200 000 km/125,000 miles, you'd spend around $46,000 on gas here in Norway. In the US it would be around $20,000. And if peak oil takes effect, this cost can increase drastically. For those consumers that don't need to drive 500+ miles every day, the Model S becomes a very cost effective luxury alternative.

tdelta1000 · Mar 3, 2012

AnOutsider said:
I think, costs aside, doing most of development and fabrication in-house has probably helped Tesla make a better car.

I totally agree AnOutsider.

vfx · Mar 3, 2012

He does raise a concern about numbers of cars that Tesla needs to sell every year when compared to equivalent luxury brands.

AnOutsider · Mar 3, 2012

vfx said:
He does raise a concern about numbers of cars that Tesla needs to sell every year when compared to equivalent luxury brands.

When I read the article, he said 30k cars/year. Either he is mistaken or is quoting with Model X included -- but even then, we'd be at 35k/year... *shrug*. Very good point though, and one sort of amplified by the relatively poor performance of the Volt and Leaf so far...

Grendal · Mar 3, 2012

AnOutsider said:
When I read the article, he said 30k cars/year. Either he is mistaken or is quoting with Model X included -- but even then, we'd be at 35k/year... *shrug*. Very good point though, and one sort of amplified by the relatively poor performance of the Volt and Leaf so far...

My impression was of an analyst that had a cursory understanding of Tesla which is why some of his numbers were off. Some of his points were excellent because he did have a good feel for the overall market but his Tesla impression was a little off due to incorrect numbers. He talks about thousands (implying a little over 2000) a year. He never talks about the 8000+ reservations and how that affects the outlook for Tesla. As for the Leaf and Volt, they are appealing to the lower end market which doesn't have the luxury of the extra income to buy an upfront more expensive vehicle.

vfx · Mar 3, 2012

I would think that Teslas will sell at about 3/4 the rate of it's luxury priced competitors. This is because they are unknown (I still find smart educated people who are car shopping and have never heard of Tesla (in California!)).
Also that the technology is untried for buyers.

Robert.Boston · Mar 3, 2012

Disagree. The 5-series/6-series, A6/A7, E-class, Infinti M, and Lexus G ranges all compete aggressively with each other; the Model S, while still in this range, has a unique value proposition and distinctive market segmentation. To conclude that the Model S couldn't outsell the A6 suggests that Tesla is "just one of the boys" -- and a new boy, to boot -- while I see the Model S as an outside-the-box competitor that can draw a significant swath of customers, some from cheaper options, some from luxury options. If Tesla can build them, I'm confident that they can sell 20k/year.

Kipernicus · Mar 3, 2012

I think it goes both ways, with those like myself who would not normally be shopping in this class of car drawn to the model S offset by those who normally are in this class but would never give Tesla a chance. Living in the Bay Area my perspective is skewed, and I was surprised to read

The most popular vehicles in that segment only sell a few tens of thousands themselves, with some models--Audi A6, Jaguar XF, Lexus GS--well below 10,000 sales a year.

EVNow · Mar 3, 2012

But the idea that Tesla could sell tens of thousands of Model S sedans in the U.S. is folly.

I agree - EVs require a leap of faith that most are not ready to make. Atleast we have no reliable way to predict the numbers. 2013 will be an interesting year.

Ardie · Mar 3, 2012

I will mildly disagree with the concept that it is cheaper to do everything in-house. Design and engineering, yes. But the actual fabrication has *got* to be punishingly costly to execute under the Federal and State of California unending lists of guidelines, rules and regulations, labor laws, and history of tort verdicts.

Our own firm designs, tests, and creates the shop drawings, which are then sent out-of-country to be fabricated by shops that are not similarly burdened with CAL-OSHA and the like. The finished parts arrive here and assembled here, but 98% of all parts and subassemblies are built "off-site." This is what I suspect that Tesla must be doing, as I can't see them running a foundry for the wheels, or a glass works for the windows. Even the interior coachwork and seats may be subbed out. Yes, I understand that Tesla does make its own motor (kudos!) and chassis, exterior panels, battery pack, charger and controller, but there's soooo much more unseen stuff that is probably made by someone for Tesla.
And that's okay. That's business.

-- Ardie
Are the windshield wiper *and* window *and* door handle extender motors built by Tesla employees?

dsm363 · Mar 4, 2012

You're right. Not absolutely everything is built in-house but I think a much larger percentage of the car is compared to most. They don't make any of the actual computer chips or electronic parts in the car, the actual cells are from Panasonic, tires of course and others.

Maybe it's possible that at this point, it's cheaper for them to make many of the parts in-house since they can create such small orders, revise the design, and make them again without having to order parts in the tens of thousands of units.

Fr23shjive · Mar 4, 2012

Kipernicus said:
I think it goes both ways, with those like myself who would not normally be shopping in this class of car drawn to the model S offset by those who normally are in this class but would never give Tesla a chance. Living in the Bay Area my perspective is skewed, and I was surprised to read

Not to mention that the BMW 5-series sells over 100k units a year, which also has a starting price of about $50k. iirc those cars all start for more than $49k.

GSP · Mar 4, 2012

Robert.Boston said:
Disagree. The 5-series/6-series, A6/A7, E-class, Infinti M, and Lexus G ranges all compete aggressively with each other; the Model S, while still in this range, has a unique value proposition and distinctive market segmentation. To conclude that the Model S couldn't outsell the A6 suggests that Tesla is "just one of the boys" -- and a new boy, to boot -- while I see the Model S as an outside-the-box competitor that can draw a significant swath of customers, some from cheaper options, some from luxury options. If Tesla can build them, I'm confident that they can sell 20k/year.

Well said. I think Tesla has a chance to meet it's 20,000/year plan, due to the reasons above. However, the low number of stores, probably no ad budget, and the general public's lack of EV knowledge, will make 20,000/year a challenge.

GSP

Robert.Boston · Mar 4, 2012

EVNow said:
I agree - EVs require a leap of faith that most are not ready to make. Atleast we have no reliable way to predict the numbers. 2013 will be an interesting year.

I'm thinking that 2014 is going to be the interesting year. I'm fairly certain that there are 25,000 people on the planet who have a pent-up demand for a car like the Model S. 2014 will be the year where we see whether Tesla has created sustained demand for a premium EV sedan.

Cobos · Mar 4, 2012

Also keep in mind 20k is world sales. I beleive only about 10k of those should be sold in the US every year. My guesstimates for Norway is that with high pricing they'll sell about 1000-2000 cars a year here, but with more aggressive pricing they should be able to climb towards 5000 cars. When I say aggressive I mean only about 10% more than US prices.
As long as the Model S is unique in offering long range EV and a good looking big EV they will sell well. When BMW or other of the majors come with equivalent models things might change for Tesla.

Cobos

cinergi · Mar 4, 2012

Ardie said:
I will mildly disagree with the concept that it is cheaper to do everything in-house. Design and engineering, yes. But the actual fabrication has *got* to be punishingly costly to execute under the Federal and State of California unending lists of guidelines, rules and regulations, labor laws, and history of tort verdicts.

Our own firm designs, tests, and creates the shop drawings, which are then sent out-of-country to be fabricated by shops that are not similarly burdened with CAL-OSHA and the like. The finished parts arrive here and assembled here, but 98% of all parts and subassemblies are built "off-site." This is what I suspect that Tesla must be doing, as I can't see them running a foundry for the wheels, or a glass works for the windows. Even the interior coachwork and seats may be subbed out. Yes, I understand that Tesla does make its own motor (kudos!) and chassis, exterior panels, battery pack, charger and controller, but there's soooo much more unseen stuff that is probably made by someone for Tesla.
And that's okay. That's business.

-- Ardie
Are the windshield wiper *and* window *and* door handle extender motors built by Tesla employees?

The reasons Tesla gives for wanting in-house production where it makes sense isn't cost-reduction. It's for QA, catching & correcting problems faster, faster feedback into the system, etc., so they can be more nimble.

Yggdrasill · Mar 4, 2012

Cobos said:
Also keep in mind 20k is world sales. I beleive only about 10k of those should be sold in the US every year. My guesstimates for Norway is that with high pricing they'll sell about 1000-2000 cars a year here, but with more aggressive pricing they should be able to climb towards 5000 cars. When I say aggressive I mean only about 10% more than US prices.
As long as the Model S is unique in offering long range EV and a good looking big EV they will sell well. When BMW or other of the majors come with equivalent models things might change for Tesla.

Cobos

I agree 1-5k should be fairly easy to do. The pricing should be quite attractive - basically, the primary competitors (globally) are all taxed to death. They all cost more than twice as much, even compared to the version with the 85 kWh battery. The Model S will have the market segment all to itself. I think the Model S should be able to get up to 5% of the market, which would be about 6000 cars per year.

Also, the EV sales in general don't seem to be dropping off - as of February 2012, 2% of total car sales are Nissan Leafs, and growing.

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