Prior to Tesla, the last serious effort to launch a new car company in The US was Kaiser-Frazer. That didn’t work out so well, despite the seemingly endless optimism, energy, enthusiasm and ego of its founder, Henry Kaiser (on right, with Joe Frazer). Those qualities certainly apply to Tesla’s Elon Musk. Tesla currently has a market capitalization of some $20 billion, more than double what Chrysler is likely worth. There are similarities, as well as major differences; Tesla is building only electric cars, while Kaiser-Frazer’s were fairly conventional. Is that enough to make a difference? Or is the comparison with the wrong company?
K-F was a bold attack on Detroit, the last time a new company took on the Big Three. Initially, Kaiser cars were to be quite radical too; revolutionary, even. Some of the earliest designs were tiny fiberglass open two-seaters. That evolved to a compact, with front wheel drive, like this fiberglass-bodied prototype from 1945. Compact, fiberglass, FWD; practically the technical equivalent of an EV today.
Once Joe Frazer came on board, the cars became more conventional. It was still going to be FWD, as the prototype show above. But even that had to be tossed for the practical reality of a mass-produced car at competitive prices. But of course, it didn’t pan out: costs were too high, and sales just never solidified at the level necessary to make K-F a profitable venture. And in 1953, Ford launched a sales blitz to buy market share that had a devastating effect on all the independents.
Tesla is taking a very different tack. Instead of attacking the Big Three, it has charted a truly independent course, but one that is clearly based on a key strategy: to become the object of four-wheel desire among the the influential affluent. And that seems to be working, what started out as the hot new thing among Silicon Valley million/billionaires, is spreading to many affluent regions of the country, as hot new status symbols have a way of doing.
According to a report released by Edmunds.com today, the Tesla S is the best-selling vehicle in 8 of 25 of the wealthiest zip codes in the US. Those eight are all in California, and in the top two, Atherton and Los Altos Hills, the Model S has a double-digit market share. And it takes the #1 spot in those 25 wealthy enclaves more than any other vehicle. Turn the clock back thirty-five years or so, it would have been Mercedes making inroads against Cadillac and Lincoln. Neither of which are even on this list.
While the effect is most pronounced in California, it is spreading to other wealthy regions of the country. Until the recent rise of Silicon Valley as America’s El Dorado, it was Hollywood. And the early embrace of Mercedes by the glitterati was a key step to that brand’s rise.
Mercedes was the car to be seen in, for way too long. Can Tesla repeat that? It’s certainly off to an electrifying start.
Undoubtedly, Tesla’s current market valuation is optimistic, if not absurd. And the naysayers will point out that Detroit and Japan can build EVs too. But that’s not really what it’s about. Tesla may not quite be a disruptive technology, but was it really superior technology that powered Apple to the top?
That may also not be a totally valid comparison, since the high tech market is madly competitive, and products change almost weekly. With cars, that’s not quite the case, and Tesla has staked out an image along with the technology. Whether it can satisfy the lofty expectations of its investors is a big question, but it’s already proven a lot of nay-sayers wrong so far. I seem to remember my son telling me that there was no way Tesla could ever afford to develop its own platform for the Model S.
So what’s the verdict? Is Tesla the next Kaiser-Frazer or Mercedes?
I really don’t think you can compare Tesla with any other automotive start-up. When they were selling a battery-powered Lotus I took no notice, but you can’t ignore the Tesla S. Surely nobody expected it to be so very very good at everything? If I had that kind of money to spend then I’d want a straight six or V8 in front of me, but other than that there is nothing to fault. Even BMW can’t match that range/performance package, and even high-end I.C. engined BMWs don’t look as good as the Tesla. Having read how good they are, I still got a shock when I rode in one, to see just how nicely the interior is done.
I just came back from a trip to Norway and one of the things that impressed me the most was the amount of Teslas around. I could easely see 10 or more of them in one day there. Then after a little research about their popularity I came across an article saying the Model S was the best selling car in Norway last September, and not only considering electric cars, but all cars! It was mainly due to accumulated undelivered cars, but still very impressive.
They are so popular in Norway because electric cars receive a 100% tax-break on new car taxes. This means when compared to a big-engined BMW 5 or 7 series offering similar performance and space, that the Tesla S buyer saves over $100,000 on his luxury car. It also means that as an electric car, the Tesla driver can use the public transit lane driving to work, gets free parking, free road tolls, and free electricity for recharging, and these government EV subsidies add another $30 to $50,000 in benefits over the life of the car. Another case of the poor subsidizing the green preferences of the wealthy.
Please check for facts instead of rhetoric. Norway is a rich oil state like Qatar. They subsidize EVs heavily so they can use their hydro power when the oil is gone.
I know my facts – I live in Norway and research the industry. Norway is wealthy, but you seem to think all the government’s money comes from oil and not from steep income and consumption taxes (25% VAT) that are levied on everyone. Thus the poorest Norwegians do pay for the EV subsidies that benefit the wealthiest citizens of Norway.
Yup Tesla is not in the same ballpark as K-F. There is nothing else that looks like the Tesla out there. In K-F’s day all the cars looked like what K-F was trying to hock
Except for a Jaguar XF, which I always confuse for a Tesla until I get up close.
A couple of weeks ago, when I stopped at my neighborhood sub shop, I parked next to a Tesla.
Coming out of the shop, I noticed that a current generation Ford Fusion had parked on the other side of the Tesla.
I may get laughed off of this post, but the number of design cues common to the Ford and the Tesla was amazing. I chalked it up to wind tunnel designing (the wind likes one shape.) Both were quite good looking, in the modern sense.
An XF with dash of Mazda-6…
I’ll give the Tesla Model-S kudos for a lot of things, even despite my general IC bias, but Styling is not one of those things. At best I’ll say that Tesla finally built a viable EV that doesn’t look like an EV. Otherwise the Model-S is about as stylistically original as the E-body ‘Cuda was.
Tesla recently opened an assembly plant in the “hi-tech region” in the south of the Netherlands.
(DAF Trucks, ASML, VDL Group, Tech University etc.)
I’ve read some tests and reviews of the Tesla S. It’s considered as a revolution, not just an evolution, like the latest high-end BMW 7-series or Mercedes S-class.
Tesla’s plan is not to forever remain a high-dollar car for the elites.
So I say neither.
Neither was Mercedes’.
Are we considering just the North American market here, or the global market?
It’s really not a good comparison I made to Mercedes, as way too many things are very different. I was really trying to make the point that Mercedes created a revolution in the US luxury-car market. And the question is whether Tesla will too.
But obviously Mercedes and the other German premium brands have been expanding downmarket aggressively in the US, and as such the attempt to compare becomes both more difficult as well as somewhat relevant in terms of Tesla’s future product plans in a similar direction.
I’m not an expert on the history of Mercedes, but I don’t recall them ever planning to take on the pedestrian brands in the 60s or 70s.
If Tesla does just remain a toy for the wealthy, then I personally will be considerably disappointed (and I’m sure it will crush Musk to not have my approval).
Tesla plans a third-generation car that will “be an Audi A4, BMW 3-series, Volkswagen Jetta type of vehicle that will offer everything: range, affordability, and performance. We’re confident we can do it at a starting price of $30,000, which is the break-in point, where we can bring all this excitement and technology to the average customer.”
(Link to Automobile Magazine, Jan. ’13)
I see tons of Teslas in DC now. They are exempt from the excise tax, which can be a lot for a 50K+ car. I am going to reckon they are the best selling vehicle in the District, given that the only other new car place I can name is a Volvo dealership.
One of my clients has a Tesla Model S. She is a wealthy Chinese lady, who could have had any car she wanted. She got the Tesla because it is cool. Now more than a few of her friends are on a waiting list to get one.
I have driven it and it is the most amazing car I have ever experienced. Touch the accelerator and BAM, off you go-no waiting for anything. The torque is HUGE and the silence eerie. Really well built, too. Very nice car that goes like a rocket ship.
A guy that works in the next building over from me has a black Model S, and there are a few more that I have seen out and about. There are also a few Leafs and a bunch of Volts that I see daily (university town). Electric cars are here to stay, no question.
I have seen interviews with Elon Musk, and he flat out states that they do not want to dominate the auto manufacturing industry. They want to be the leader in accelerating the conversion of the US/world fleet to electric vehicles, even if that means remaining a small (but trend-setting) manufacturer. They are really an infrastructure company with nice cars; hear me out:
The more Supercharger stations that get installed, the harder it will be to deny the practicality of EVs. If you could travel from Chicago to Denver in a Tesla, and the only tradeoff was stopping every 4 hours for a 20-30 minute charge, you will have a very low adoption threshold. When I drive 12+ hours to see family, I stop every few hours for the wife and kids anyway. Plus, stopping at a Tesla Supercharger is hardly a dark and scary truck stop… And that technology will only improve, shortening wait times and increasing range.
The legacy players have been betting that EVs will only appeal to those who want to scoot around town in a green status machine. But Tesla is betting that green status machines will enable the construction of the type of infrastructure that legitimately competes with traditional gasoline cars. In 5-10 years, “range anxiety” will be a laughable footnote, mark my words. Once that happens, the playing field opens for entry-level EVs to drive down costs, and the game becomes the same as the current car business (volume), enabling GM/Ford/Toyota/etc to gain market share (at low margins). Future EV development will revolve around Tesla’s infrastructure paradigm, not the current gasoline-centric one, and will enable broader adoption. Imagine if GM didn’t have their own range anxiety fears with the Volt; it could have been transcendent with their engineering budget… Meanwhile, Tesla has set the outlines of “luxury EV” and will use the first-mover advantage to control the pace of whiz-bang advancements.
So to answer the original post question, Tesla is the next AT&T/Bell Labs.
I agree with all but your last line. By showing and delivering new possibilities that really matter to real customers, Tesla is the next Apple. Once the Apple II, Macintosh, iPod, iPhone and iPad came out, in each case the whole industry eventually had to follow in their footsteps.
Speaking of infrastructure, this week Tesla’s completing the I-5 Corridor with Superchargers in Springfield and Grants Pass, Oregon, and Mt. Shasta and Corning, California. “The Tesla Supercharger Network now allows owners to drive from San Diego, California to Vancouver, British Columbia for free, for life.”
“The Tesla Supercharger Network now allows owners to drive from San Diego, California to Vancouver, British Columbia for free, for life.”
Last time I checked $2000, or $2500 if you opt to have the feature enabled after purchase is far from free.
When they build RHD ones maybe, but until then they’re forbidden fruit for Kiwis, so by default they rank as the next K-F down here (we never got K-F either).
That aside however, I find the Model S to be very interesting from a technical and design point-of-view, not to mention rather attractive inside and out. I think it’s too early to call its future though. For me the decider will come with where they go next. It’s comparatively easier to produce a one-hit-wonder than to produce a better sequel. But I await the sequel with interest.
In fact, Elon Musk just announced the RHD Tesla S will be available in March, for UK and Ireland. (link)
With no engine up front it’s probably a relatively easy change to make.
Interesting, thanks for posting the link Mike! Elon makes some interesting comments therein re a Tesla – iPhone comparison. I’m leaning towards Tesla being the next Merc, the next few years shall be ivery nteresting…!
I see it as a novelty for rich folks that are bored with S-classes and 7-series. The company has made no money from selling any cars, its makes it from trading carbon credits or whatever la-la land makebelive stuff that is, its massively over valued.
The car is interesting, I don’t like the iPad glued to the middle of the dash look of the interior, and an $80K car should have a rear seat armrest, just saying, even “Stupid Motors” puts an armrest back there. There is both merit and hype in Tesla, they have done some interesting things.
The Tesla S is a great car from all reports, while the K-F was mediocre. The common element is that neither of them makes money selling cars, and I see little likelihood that Tesla will ever make enough profit to fund new platforms for new models or S updates in the future, which is ultimately what did in K-F as well. If the electric car niche somehow starts to grab significant market share, two things will happen. First, the government will start to tax them and take away the subsidies, and second the big boys will come in with their own EVs. Somehow I think Toyota, GM, BMW, Mercedes, etc. will be able to offer a superior electric vehicles if they think there is money in it, and if there is not money in it they will let Tesla continue to have a dominant share of the losses.
I was surprised at how well the Model S turned out; it could easily have been an awkward compromise like the Karma, any of the Kaisers, or the Pacer for that matter. The Tesla guys possess the courage of their convictions AND seem to know what they are doing.
At least so far. As a number of historians have emphasized, the auto industry is a war of attrition. At one point Auburn was the up-and-coming brand.
Did you see the opinion piece by the Dutch Mandel? An interesting diss of Tesla’s long-term prospects (“The great Tesla bubble of 2013”). He could end up being right, but his snarky trumpeting of industry groupthink sounds rather small-minded.
There’s also the question of whether technology used for the Tesla can be used by other brands – even on those vehicles with a more conventional drivetrain. So even if the Tesla marque does disappear, it may still have a long-term impact. Same with the Chevrolet Volt.
Check out the collaborations section of Tesla Motors in the Wikipedia. Mercedes, Smart, Toyota and Freightliner collaborations are ongoing. In fact Daimler owns a slice of Tesla, so maybe the answer to Paul’s question is, Tesla already is Mercedes, at least a little.
Tesla has an innovative product that’s beautifully made, and perhaps one could go so far as to say that it redefines its segment (said segment being electric vehicles, not vehicles in general).
But then again, so did the Palm Pilot and the BlackBerry, either of which I carried from mid-2000 until a couple of months ago, when I moved all of my smartphone usage to a single iPhone (I’ve been using an iPhone for personal use since 2007). And I’m not so sure I won’t be using something else in a few years, depending upon what the next big thing will be in the world of such devices.
I guess what I’m saying is that it’s often not advantageous to be the innovator, particularly when it comes to technology. Some better, faster, less expensive technology always seems to be waiting in the wings.
Just as the Hummer was a result of the Bush years, the Tesla is a result of the Obama years. Eventually the nation’s mood changed, and noone wanted a vehicle that looked like a military vehicle, but was really just an expensive Tahoe. Once the fad amongst the rich to appear “green” ( and how exactly do they think the electricity that charges them up is generated?) slows as the nation’s mood changes again, the market will dry up. Unless someone invents a cold fusion power plant, hybrid/electric cars will remain something that is bought to make a statement rather than for practical reasons. You don’t recoup the cost of the purchase til well over 100k. The only role where hybrids appear practical is taxi use, as the miles will be racked up before the car disintegrates.
Enjoyable video of the Tesla assembly line –
http://www.youtube.com/embed/8_lfxPI5ObM?rel=0
Yes, nice. Amazing how car assembly lines have progressed, and this is certainly as modern of one as it gets.
Wow, that is one impressive factory. Thanks for the link!
There’s another question to ponder who came to my mind: Tesla-another Tucker? 😉
I would think Tesla is well past the Tucker stage at this point. Tucker only built 50-60 cars before the whole operation collapsed, Tesla has built many more than that and continues to do research and development. For me any comparison with Kaiser-Fraser is somewhat off the mark until/unless Tesla abandons electric cars and starts building them with IC engines.
The product is well executed for what it is, but the buzz and certainly the stock price are both being driven by hype.
The company isn’t profitable, and it doesn’t seem likely that it can be profitable due to the lack of scale and high battery prices. Musk’s play is to flip it and cash out, but a conventional automaker wouldn’t pay anything close to the current stock price, so he would need to convince a non-automaker such as Google or Apple to acquire it if he is to have any hope of selling it at around the current market cap.
The fact remains that Tesla has not solved the essential problem of EVs — achieving the right balance of range, recharge time and battery cost — and has opted instead to install a really large and costly battery that he then overtaxes. That isn’t a sustainable business model over the long haul, but that makes little difference to a guy who would like to sell out within five years or so.
Tesla’s battery pack is not overtaxed at all. It turns out a large battery pack for long range can deliver so much current safely, that it can easily drive a supercar motor/controller.
In the latest Consumer Reports, they got enough reliability reports from enough owners to give the Model S their “Recommended” rating. They remarked that not a single owner reported any problems with the electric drivetrain. Just the sort of little things with the body and interior you might expect in an all-new low-production luxury car.
Battery costs continue to drop as volume goes up and technology improves. Let’s see how EVs look in ten years.
A thought provoking piece. Thanks.
It doesn’t look to me as if the Tesla story will turn out anything like that of Kaiser. K-F was an ill-fated attept to compete head on with the Big 3. Head on – that was the killer. They were peddling the same basic product as the Big 3 but doing it with less capital, lower operating margins and a much smaller and weaker distribution system. The results were inevitable…if not readily apparent in the frenzied post-war auto market.
Tesla is not competing with other volume automakers. They are not even really selling a luxury car. Tesla is a technology, a gadget, that so brilliantly caters to the needs and desires of its target market – those who can write a check for 100 large. (I only know 2 people like that. One is a German and he thinks the Tesla is a piece of s**t …something about door panal tolerances The other bought one.)
I’d say Tesla has some similarities to Mercedes Benz in the 60s/70s. It’s certainly a prestigious car.The Model S lets its buyers feel special by owning something all their friends are talking about. It makes them feel smart by providing them with the highest tech auto gadget out there. And the 6 month waiting list makes them feel like their buying a valuable and prestigious scarcity.
But there’s more to Tesla than that.
Driving a Tesla makes its owners feel privileged, as they drive alone in the carpool lane, whizzing by the unwashed masses. It gives them validation for their choice when they can check the appropriate boxes on their tax returns and save thousands of dollars. Most importantly, a Tesla allow its owner the warm fuzzy feeling of believing that he is personally saving the world from climate change. And that feeling is made even fuzzier by the fact that he can save the world while giving up nothing in terms of style, luxury or performance.
Brilliant! I think Tesla will be with us for a while.
PS: The folks at Mercedes seem to agree. Daimler owns a substantail minority stake in Tesla…and probably the reason M-B isn’t attacking the electric market with anything like the gusto of Audi or BMW.
It will be interesting to see what Tesla does in the next 5-10 years. The Model S is quite attractive. I have only seen one in the metal, last summer in downtown Iowa City. It was black and looked quite exotic!
First, Elon Musk led the way and the Model S, as “good” as it is, it’s actually a Model T. So maybe it’s not so much like Kaiser, maybe more like Ford.