Wednesday, November 20, 2013

Tesla vs Detroit

Car of the future?  Oops, it's here now.                         [WikiMedia]

Click here for related story [Washington Post]

Once again, the attack against electric vehicles has ramped up, specifically, against the Tesla automobile.  It's a combined effort by Detroit and NADA [National Automobile Dealers Association] to dislodge competition and block direct manufacturer sales to consumers.

The latest attacks are based on three Tesla cars which have experienced fires resulting from road debris puncturing lithium batteries.  No injuries; but the fires did damage the vehicles.  For the 50,000 vehicles Tesla has sold to date, the issue of three car fires tied directly to damage from road debris, reflects quite well on the product safety aspect of these cars.

Now, these fires are not similar to the explosions which engulfed Ford Pintos in years past; and they are not included in the range of the 194,000 highway vehicle fires occurring in the US each year.  Hmm:

Tesla -                3 fires
      [cause: road debris, including a steel trailer hitch]

Car Industry - 194,000 fires per year
      [cause: mechanical failure, wiring, engine fluid leaks, running gear friction, wheel malfunctions]

General Motors -- Recall of 1.6 MILLION GM vehicles because of an ignition switch which
       shuts off at high speeds, causing the driver to lose control; so far, 13 deaths attributed to this.
       GM is now under federal criminal investigation; Congress is also investigating.

Looks like Tesla is very safe in comparison;
Three Tesla car fires in three years vs 194,000 internal combustion vehicle fires per year?

So, let's take a look at the basis for this propaganda assault against the Tesla.

Who's behind it, and why!

1.   Detroit; especially General Motors.
      a)  GM's former CEO, Rick Wagoner  - a financial guy with zip knowledge of cars and what the
           public wanted, cut costs in all directions, driving the company into bankruptcy, requiring a
           bail-out of $80 billion for both GM and Chrysler.
      b)  Chrysler repaid its loan, while GM gave up the bulk of its stock -- leading to a derisive
           interpretation of GM as "Government Motors".
      c)  After being fired, he moved to Washington, DC to join the Washington Post Board of Directors
           -- from which he continued to attack the electric vehicle in general.
      d)  Wagoner is best known for recalling the wildly popular EV1 and EV2 leased vehicles and
            demolishing them all, even the one promised to the Smithsonian.

2.   Detroit hates the electric vehicle.  Why?
      a)  The internal combustion engine vehicle is composed of thousands [as many as 30,000] of
           parts, all manufactured and delivered from thousands of subsidiary companies, each with
           profitability which feeds back to the corporate headquarters of the Big Three.
      b)  Now, let's take it one step further; the engine and drive train in a Chrysler include more than
           14,000 moving parts, any one of which can fail -- but all of which will need some form of
           servicing by the dealer. 
      c)  Detroit hates design change; but the Tesla keeps putting out beautifully designed cars.
           It's first Roadster used a Lotus design, but has now moved into a much larger frame
           with extraordinary features.

3.   Dealerships fear the Electric Vehicle. 
The National Automobile Dealership Association [NADA] views the electric car as a death knell since the Tesla [like all electric vehicles] requires minimal maintenance -- thus the end of dealerships and their Service Departments.
    a) Generally speaking, the standard visit for routine maintenance on a vehicle with an internal
        combustion engine will cost the client between $100 - $500 -- even under warranty. 
    b) An out-of-warranty service call will likely run the client between $500 - $2,000, depending on
        the part and how difficult it is to access.
    c) Assume the average dealership services 1,000 cars a month; multiply that by an average
        service cost of $500 per car, and the dealership pulls in $500,000 per month on its Service
        Department alone.
    d) Dealers, recognizing Tesla as a threat, have lobbied state legislatures to prevent Tesla from
        opening dealerships, limiting Tesla to dealerships in only 16 states.  The rationale vaguely
        relates to the anti-monopoly principle in that manufacturers should not own the retail stores
        and service outlets.  Virginia, for example blocked Tesla stores, while Washington, DC,
        just across the Potomac, had a Tesla store.  [Recently, Tesla has opened showrooms and
        takes orders from customers with home delivery.

4.  The Government:
The federal and state governments derive tens of billions of dollars each year from the taxes on gasoline and diesel fuel.  Electric vehicles use neither, so the governments stand to lose tons of revenue as electric vehicles become commonplace.  Taxing the vehicles themselves has limits since citizens will rebel after a certain point.  We're likely to see more toll roads, which in today's world, produce far more revenue than fuel taxes.  Some states are now charging "mileage tax", i.e., a tax on the miles registered on your car between inspections, or as reported by your dealer.

How does Tesla stack up?
      a)  Beauty.  The first ones used
           Lotus bodies, while
           subsequent models were
           designed from the bottom up
           to include the most advanced
     b)  Performance:  The single
          gear electric motor cranks out
          between 300 and 400
          horsepower, enabling
          acceleration from 0-60 in
          5.2 seconds, or less, somewhat    
          faster than the much more expensive BMW M5.
     c)  Price.  Still pricey, but getting more affordable.
           1) For now, Tesla models are priced in the BMW, Mercedes, Infiniti, Lexus, and
               Jaguar range, and are ranked Number 2 in both the Super Luxury and Hybrid Luxury Car
           2) Pricing ranges from $62,400 to over $100,000.  Critics claim the Tesla is beyond
               the price range of the average citizen; then again, so is the BMW, the Mercedes,
               the Jaguar, and the Lexus.  
          3) Total production so far is still below 50,000, with a three month waiting list.  Of course,
              workmanship is probably superior to that of the US-manufactured BMWs and Mercedes,
              so the pricing is appropriate.  [Mechanics hate US made BMWs and Mercedes]
         4) The CEO, Evon Musk, anticipates that with economies of scale, the price can be brought
              down to affordable levels for the average Middle Class car buyers.  If you recall, Henry
              Ford's early cars were affordable only to the wealthiest Americans, until he achieved the
              economy of scale using his assembly line operations.
      d)   Maintenance.  Virtually none.
            1)  The Tesla drive train and motor consists of five [5] moving parts.  Servicing consists of
                  an occasional squirt of oil, and perhaps cleaning road tar off the body.
             2)  No oil or filter changes.
             3)  No transmission adjustments/repairs.
             4)  No tune-ups, no spark plugs, no radiators.
             5)  No emissions inspections.
             6)  No gasoline.
             7)  Savings:  About $7,000 per year
       e)   Safety.  Much safer than vehicles with internal combustion engines
             1)  No flammable fluids
             2)  Low center of gravity
             3)  No fuel emissions
             4)  Sensor array display keeps you aware of all vehicular functions
             5)  Battery pack protected by reinforced under-body shield; each battery unit is separated
                  from the others with a firewall.  The entire battery pack is separated from the vehicle
                  cabin by a firewall.  [None of the three referenced fires entered the vehicle cabin.]
State of the art cabin features
f)   Quality.
       1) Tesla has teamed with top automotive
            manufacturers, to include Mercedes and
            Toyota to produce key chassis
       2)  It has total quality control over its
            battery systems, and motors, and its
            assembly plant is state of the art.
       3) The overall luxury quotient of the Tesla
            is comparable or superior to the most
            expensive vehicles on the road today.

g)  Range on a battery charge.
           1) Batteries last from 200 - 270 miles,
                far more than the average round-trip commute.
           2) Home chargers can fully charge a battery pack overnight, or in as little as two hours
           3) Tesla roadside "superchargers" can recharge the battery pack in 30 minutes.
           4) Electric recharging stations are appearing in garages, parking lots, and even in city
               parking spaces.  They are not commonplace, yet; then again, gasoline stations were rare
               in the early days of the automobile.

So, what's the bottom line here?
As always, we have to follow the money.

1)  Detroit will fight the electric vehicle because it can't afford to lose its high profit margin on
     the vehicle components and the margin on the car sales. 
     a) Electric vehicles only have five moving parts in the drive train, and the supply chain for
         electric vehicles is fairly small, compared to Detroit's thousands of suppliers - and profit
     b) Component suppliers will gradually go out of business for lack of demand; or, they will adapt
         and supply different components to support electrical systems.  Most manufacturers are based
         overseas, so there will be little or no impact on US employment.

2)  Dealers will fight the electric vehicles because they don't want to give up the enormous
     profitability of their Service Departments. Car sales are profitable, but they can't compare to the
     profits from performing "service and repairs".

3)  States are uncomfortable because they fear their revenue from gasoline taxes will plummet once
     the electric vehicle becomes commonplace.  In 20 years, the gas station will be a rarity, and
     gasoline tax revenues will be virtually non-existent.

4)  Oil companies will complain that their gasoline revenues will decline; but gasoline ceased to
     derive from petroleum long ago.  Petroleum products will continue to be in high demand for the
     plastics and carbon industries, for which demand is increasing exponentially.

Is there a future for the electric vehicle?

European and Asian companies are putting together manufacturing plants to be sure of playing in this game.  Detroit's offerings, at this point, are meager and not competitive.  They're hedging their bets with the hybrids, but that is only a stopgap measures. 

In five years, electric vehicles will likely dominate the automobile market.
In 20 years, the electric vehicles will be driver-less, and humans will merely be passengers.

And Detroit?
It will occupy a chapter in American history books, titled
"How America lost its place in the car industry"