Articles/megaposts by DaveT

[DaveT]

I'm not sure about this one. One of the main reason for Uber to expand this quickly is they subsidize the drivers. And this leads to less waittime AND cheaper cost to riders. Together they create and reinforce the network effect Uber enjoys now. This is also one of the main reason they lose hundreds of millions every month. I'm not sure if Uber would be as attractive to riders as now if they stop subsiding drivers. And if not, would the network collapse? I guess Uber's plan is to lean on the capital market until autonomous driving is reliable enough to replace all the drivers so they don't need to spend so much money on subsidies.

According to Uber's CEO, most of the U.S. markets Uber is in they are already profitable. It's only the new/developing markets where Uber is subsidizing drivers and it's costing them a lot of money. But they've seen once they get dominant market position, it squeezing everyone out and then they stop the subsidizes and they've got a profitable business in that market. And by using volume in that new profitable market, they're able to keep prices low (and even drop them).

I know most people here might not have the time or interest to watch every video or read everything on Uber, so here's a decent primer on Uber. It's a 18 minute interview of Uber's CEO by Charlie Rose.

 

[Fallenone]

According to Uber's CEO, most of the U.S. markets Uber is in they are already profitable. It's only the new/developing markets where Uber is subsidizing drivers and it's costing them a lot of money. But they've seen once they get dominant market position, it squeezing everyone out and then they stop the subsidizes and they've got a profitable business in that market. And by using volume in that new profitable market, they're able to keep prices low (and even drop them).

I know most people here might not have the time or interest to watch every video or read everything on Uber, so here's a decent primer on Uber. It's a 18 minute interview of Uber's CEO by Charlie Rose.

According to their recent Q2 report, US market was a net loss again.

BTW, love watching interviews done by Charlie Rose

 

[tlo]

Uber should not underestimated. People underestimate how difficult it is to catch a market leader. Uber also is well aware of what's going on and is basically executing as well as they can with the cards they have - which is to continuing growing as fast as they could, buy/develop autonomous tech in house, and roll out a hybrid driver-autonomous model to prepare for the future.

That said, I offer a couple points that differ/add to DaveT's view:

1. I don't think Tesla lets Uber use their cars on Uber's network. Just as Apple/Google place some restrictions on phones, Tesla will have control over their car OS. The car is a less open system than phones and it requires tight integration to work with car sharing, such as stopping at precise locations and opening doors to the correct passenger.

2. What Uber has is not necessarily the type of strong "network effects" that Facebook has. I rather call it economies of scale, as in the more riders/drivers they have, the cheaper it is for everyone in terms of time/cost and it's more efficient for all parties. However, as a rider, all I care about is time and cost. I don't care if my friends use Uber or not. There are no strong network effects preventing me from switching to Tesla as long as they can somehow (with the use of autonomous vehicles) compete on those two metrics. That is achievable if, for example, Tesla gets to L4 autonomy 1-2 years ahead and turns it on for all Model 3s.

 

[wdolson]

If batteries progress at around 10% per year then in 10-15 years a 500kw battery is easily possible.

Advancements in battery tech averages about 5% a year, but it comes in fits and starts. There have been some low hanging fruit improvements that can improve capacities by 10-20% in the short term, but major improvements require some breakthroughs to be possible. The theoretical limits of the Li-ion battery is about 4X current capacity, but nobody knows how to actually do it.

There is talk of air batteries that use oxygen for the cathode (the chemistry Tesla uses for the cathode in their batteries is cobaltic oxide) and uses either lithium or aluminum for the anode. These are being played with in the lab, but the tech hasn't advanced all that much in the last 5 years. The problem is than while oxygen makes a good cathode from an electro-chemistry point of view, being a gas at room temperature makes it bad from a Physics point of view as a cathode.

It's possible we may have a 500 KWh pack the size of the 90 pack at some point, but there is no clear path between here and there. Any major breakthrough is going to take at least 10 years to get from the lab into production.

The US has been blessed by its geography. Lots of natural resources and great waterways. The problem is that 70% of Americans haven't graduated from a 4 year college.

To answer your other question, if history is a good predictor, then war.

There are a large number of people who don't have the temperament or just the plain smarts to do the kind of work that needs to be done. We have a chronic shortage of people in the STEM professions, but there just aren't enough people who go that direction. There are some people who have the talent, but don't have the interest, but there are even more people who just don't have the talent to get the degree.

As a culture we need to consider what happens to the people who can't get in demand degrees when there is nothing left for them to do? It's a question fraught with philosophical and political land mines and few people want to even think about it, but I think it's a critical issue facing us.

Guys, clearly the solution to high speed travel between city-pairs hundreds of miles apart is Hyperloop

Hyperloops may be built in some places to cover heavily traveled routes, in the US I could see a hyoerloop covering the east coast corridor, another stretching across the Midwest to Chicago, as well as one running up the I-5 corridor.. Air travel is still more flexible for lower density routes as well as over water.

 

[lolachampcar]

The whole thing with MobileEye teaming with Delphi to generate a generic put it in any car autonomous driving system by 2019 explains for me why Tesla and MobileEye parted company. I can not imagine Tesla wanted ME using their 1mm miles per ten hours of data to refine a product that would be distributed to every manufacturer in a drag and drop fashion.

Still betting Tesla on this one.

 

[bh1783]

Uber Loses at Least $1.2 Billion in First Half of 2016
Uber lost 1.2 billion so far this year. 4 billion total. They have an app and no physical assets to speak of. Company is valued at more than double TSLA.

 

[DaveT]

Uber Loses at Least $1.2 Billion in First Half of 2016
Uber lost 1.2 billion so far this year. 4 billion total. They have an app and no physical assets to speak of. Company is valued at more than double TSLA.

Another way to look at it is that they've reached a run rate of $20 billion/year in booking revenue in a market that is still in its childhood stages with massive room for growth. As in almost all high-growth companies, they're re-investing their revenue into profit as well as investor's money (that's what investor's money is for). And they're on path to probably $100+ billion/year booking revenue, with $20b/year in gross margin within 5 years.

Show me one publicly-traded company valued over a $10 billion dollars that's growing revenue at least 2x per year. Things like this are extremely difficult to find. Uber is far from perfect, but I give respect to where it's due.

 

[bh1783]

Another way to look at it is that they've reached a run rate of $20 billion/year in booking revenue in a market that is still in its childhood stages with massive room for growth. As in almost all high-growth companies, they're re-investing their revenue into profit as well as investor's money (that's what investor's money is for). And they're on path to probably $100+ billion/year booking revenue, with $20b/year in gross margin within 5 years.

Show me one publicly-traded company valued over a $10 billion dollars that's growing revenue at least 2x per year. Things like this are extremely difficult to find. Uber is far from perfect, but I give respect to where it's due.

Uber isn't publicly traded. Airbnb is growing revenue 2x per year. When Uber has faced real competition in other countries it has folded. Look at China, Uber already left the market. Look at South Korea, Uber got blocked by the government and then got destroyed by a competing app that put an Uber clone into 200,000 taxis in 6 months.

Uber's market power could easily be lost after the passage of one law or if a country decides they don't want Uber operating there.

Uber's size is not really an advantage because they have to start from 0 in every single market. They can't organically grow in a new market, they have to flood the market with subsidies to survive. As Uber grows they are going to face growing litigation and anti-trust issues. Not to mention the fact that as an American tech company, they won't be received well in foreign countries(ex: fb, googl, amzn in China).

Compared to TSLA, Uber has many competitors who are already hurting the company. Uber has already lost China (1.3 billion) it's lost South Korea (50 million). Uber doesn't have a technological advantage over any of their competitors and many of their services they offer have already been done in other markets.

The problem with Uber is that it's app is a one trick pony that doesn't yet integrate other services into it Competing apps in other countries do the following:
peer to peer banking
chat and messenger services
map and navigation integration
bus, subway, taxi integration
facebook and photo sharing
phone call services
Uber is already behind in technology to competing apps(that's why it has failed in other countries)
It's kind of a hassle to message a driver on a separate uber app when you can have a single messenger service to message your friends and the driver at the same time.

 

[DaveT]

Uber should not underestimated. People underestimate how difficult it is to catch a market leader. Uber also is well aware of what's going on and is basically executing as well as they can with the cards they have - which is to continuing growing as fast as they could, buy/develop autonomous tech in house, and roll out a hybrid driver-autonomous model to prepare for the future.

That said, I offer a couple points that differ/add to DaveT's view:

1. I don't think Tesla lets Uber use their cars on Uber's network. Just as Apple/Google place some restrictions on phones, Tesla will have control over their car OS. The car is a less open system than phones and it requires tight integration to work with car sharing, such as stopping at precise locations and opening doors to the correct passenger.

2. What Uber has is not necessarily the type of strong "network effects" that Facebook has. I rather call it economies of scale, as in the more riders/drivers they have, the cheaper it is for everyone in terms of time/cost and it's more efficient for all parties. However, as a rider, all I care about is time and cost. I don't care if my friends use Uber or not. There are no strong network effects preventing me from switching to Tesla as long as they can somehow (with the use of autonomous vehicles) compete on those two metrics. That is achievable if, for example, Tesla gets to L4 autonomy 1-2 years ahead and turns it on for all Model 3s.

On point #1, I think that might be Tesla's only realistic option (ie., limit their autonomous cars to work only on their own ride-sharing network) if they want to compete with the Ubers and Didis of the world, who'll be 10x-20x bigger by the time a truly autonomous Model 3 is approved by regulators. The only thing is it would turn me (and probably lots of people) off. It's like if Apple restricted which websites you could visit with your iPhone. That would be crazy. In the same way, that would be Tesla restricting where and who you could pick up with your own car. In that case, it would be more like Tesla's car.

On point #2, I think whether or not the ride-sharing market is truly a "network effects" market and a "winner-takes-all" market will be determined very soon, maybe within the next 1-2 years. China is already a done deal with Didi Kuaidi (w/Uber merger) basically owning the entire market. We'll see if Lyft can really survive. My guess is it's going to be difficult for them. India will be interesting (Uber vs Ola). And there's a lot of countries where the battles are getting intense and consolidation will happen soon.

On the point regarding volume, if you look at Craigslist... volume is what gives network effects to them. It's why thousands of startups/companies have failed to beat Craigslist. And Craigslist has ancient technology and is a super simple site. Hundreds of companies have released much better and advanced sites, but they all were missing the volume of Craigslist. And it's a chicken-egg problem. You can have a site with much more advanced tech/features, but without the volume of Craigslist you don't have the sellers and buyers in masse. So, Craigslist can use inferior tech and features but as long as they have the volume, it keeps the sellers and buyers happy. Sellers can get the best price. Buyers can get the best selection.

In a similar way, volume in the ride-sharing market as a competitive advantage shouldn't be underestimated. Volume provides the means to attract the most providers (cars/drivers) and the most users (passengers), thus giving the pieces to provide the best time and price. But also, it allows Uber to provide other services that wouldn't be possible without volume. For example, UberPool needs massive volume to be effective. Unless you have massive volume it's really difficult to do. There are also other ancillary services they can and will be providing that's being enabled by their volume.

Again, if Uber keeps growing they'll be a hugely different and more mature/stronger company in 4-6 years time when Tesla's got the autonomous Model 3 approved by regulators. I'm not saying Tesla doesn't have a chance. But Uber (and Didi, etc) is clearly the favorite in the ride-sharing wars over Tesla.

 

[bh1783]

On point #1, I think that might be Tesla's only realistic option (ie., limit their autonomous cars to work only on their own ride-sharing network) if they want to compete with the Ubers and Didis of the world, who'll be 10x-20x bigger by the time a truly autonomous Model 3 is approved by regulators. The only thing is it would turn me (and probably lots of people) off. It's like if Apple restricted which websites you could visit with your iPhone. That would be crazy. In the same way, that would be Tesla restricting where and who you could pick up with your own car. In that case, it would be more like Tesla's car.

On point #2, I think whether or not the ride-sharing market is truly a "network effects" market and a "winner-takes-all" market will be determined very soon, maybe within the next 1-2 years. China is already a done deal with Didi Kuaidi (w/Uber merger) basically owning the entire market. We'll see if Lyft can really survive. My guess is it's going to be difficult for them. India will be interesting (Uber vs Ola). And there's a lot of countries where the battles are getting intense and consolidation will happen soon.

On the point regarding volume, if you look at Craigslist... volume is what gives network effects to them. It's why thousands of startups/companies have failed to beat Craigslist. And Craigslist has ancient technology and is a super simple site. Hundreds of companies have released much better and advanced sites, but they all were missing the volume of Craigslist. And it's a chicken-egg problem. You can have a site with much more advanced tech/features, but without the volume of Craigslist you don't have the sellers and buyers in masse. So, Craigslist can use inferior tech and features but as long as they have the volume, it keeps the sellers and buyers happy. Sellers can get the best price. Buyers can get the best selection.

In a similar way, volume in the ride-sharing market as a competitive advantage shouldn't be underestimated. Volume provides the means to attract the most providers (cars/drivers) and the most users (passengers), thus giving the pieces to provide the best time and price. But also, it allows Uber to provide other services that wouldn't be possible without volume. For example, UberPool needs massive volume to be effective. Unless you have massive volume it's really difficult to do. There are also other ancillary services they can and will be providing that's being enabled by their volume.

Again, if Uber keeps growing they'll be a hugely different and more mature/stronger company in 4-6 years time when Tesla's got the autonomous Model 3 approved by regulators. I'm not saying Tesla doesn't have a chance. But Uber (and Didi, etc) is clearly the favorite in the ride-sharing wars over Tesla.

In what non-English speaking countries is craigslist dominant? Uber's volume in one country doesn't necessarily translate to a market advantage in another. Uber's success in America is partially a product of the poor public transportation system and archaic taxi industry. It hasn't had the same success in other countries with better public transportation and more robust taxi networks.

Uber is already playing catch up to other transportation services in other countries. In a place like Seoul, the delivery and transportation network is such that:
you can have any package, food product, legal document,etc, delivered to any area of the city (population 25 million) guaranteed within 1 hour or less 24/7 365 days a year. How will Uber compete with companies that have already been doing this for years?

 

[DaveT]

Uber isn't publicly traded. Airbnb is growing revenue 2x per year.

Actually I was thinking about Airbnb so that's why I said "publicly traded" (even though Uber isn't publicly traded). I just wanted to emphasize how rare it is for a company to be 2-3x revenue annually when they're revenue is already in the billions of dollars per year. It doesn't happen very often. And when it does it's something to pay attention to.

By the way I think Airbnb's revenue is not growing 2x per year... it was about 90% annual increase between 2013-2015. But I really like Airbnb and I've been following them and other high-growth startups for years.

When Uber has faced real competition in other countries it has folded. Look at China, Uber already left the market. Look at South Korea, Uber got blocked by the government and then got destroyed by a competing app that put an Uber clone into 200,000 taxis in 6 months.

Actually in China I think they fought well. They were a bit late and China just had too strong of a company, Didi Kuaidi (after they merged), that was backed by basically unlimited money and also some of the biggest tech companies in China. They did well enough to be a strong 2nd place. But in Uber's case, they didn't see a future in being 2nd in what Uber is viewing a "winner-takes-all" market... thus they sold.

If Uber would have been able to become the dominant China player, then Uber's valuation would probably be $100 billion right now or so. But they failed.

Also in South Korea, if they didn't get banned they probably would have become the dominant player in the ride-sharing business. I don't necessarily agree with it, but Uber tends to break the law (which they view as archaic and not serving the consumers), then try to fix the law. But in South Korea that approach backfired. They lost South Korea due to this.

But in the 70+ countries that Uber operates in, I'm not sure how countries they're in 2nd place. It would be interesting to find out. My guess is the vast majority, they are 1st.

Uber's market power could easily be lost after the passage of one law or if a country decides they don't want Uber operating there.

Uber's size is not really an advantage because they have to start from 0 in every single market. They can't organically grow in a new market, they have to flood the market with subsidies to survive. As Uber grows they are going to face growing litigation and anti-trust issues. Not to mention the fact that as an American tech company, they won't be received well in foreign countries(ex: fb, googl, amzn in China).

Actually, I think it's the reverse... typically Uber faces it's most litigation and resistant in the beginning. However, after they saturate a market, they usually get the laws changed/revised and they're able to operate in those countries much more freely.

But I do agree that each market is independent. Thus, Uber can win one market, and lose another. This does give an opening to Tesla if they can focus on one market (ie., one location, or one segment) and beat Uber in that segment (ie., kind of like how Tesla started with the Roadster)... then Tesla might have a chance, but it's an uphill battle.

Regarding driver subsidies, typically Uber only subsidizes because the competition is subsidizing. Supposedly Uber claims they learned the subsidy model from their experience in China where the competition was subsidizing like crazy.

But that just goes to show that these companies are clamoring over market share because they think that once they get dominant market share, they can then enjoy the fruits of that position (ie., volume and the competitive advantage that brings).

Compared to TSLA, Uber has many competitors who are already hurting the company. Uber has already lost China (1.3 billion) it's lost South Korea (50 million). Uber doesn't have a technological advantage over any of their competitors and many of their services they offer have already been done in other markets.

The problem with Uber is that it's app is a one trick pony that doesn't yet integrate other services into it Competing apps in other countries do the following:
peer to peer banking
chat and messenger services
map and navigation integration
bus, subway, taxi integration
facebook and photo sharing
phone call services
Uber is already behind in technology to competing apps(that's why it has failed in other countries)
It's kind of a hassle to message a driver on a separate uber app when you can have a single messenger service to message your friends and the driver at the same time.

I don't think Uber lost China or South Korea because they didn't have a messaging app or peer-to-peer banking. For China, they were late and got out-subsidized by bigger pockets. In South Korea, they were banned/sued.

But I think you're general point being can be applied to Tesla as well. In markets like China and South Korea, how is Tesla going to successfully launch and grow a ride-sharing service with such strong existing dominant players?

 

[DaveT]

In what non-English speaking countries is craigslist dominant? Uber's volume in one country doesn't necessarily translate to a market advantage in another. Uber's success in America is partially a product of the poor public transportation system and archaic taxi industry. It hasn't had the same success in other countries with better public transportation and more robust taxi networks.

Uber is already playing catch up to other transportation services in other countries. In a place like Seoul, the delivery and transportation network is such that:
you can have any package, food product, legal document,etc, delivered to any area of the city (population 25 million) guaranteed within 1 hour or less 24/7 365 days a year. How will Uber compete with companies that have already been doing this for years?

I think the point you're making, namely that markets are independent, actually speaks to Uber's success. They aren't just successful in the U.S. They are successful in most markets/countries that they've entered. And so somehow they've been able to replicate success when each country/market is unique and different. I'd be much more bullish on Uber if they didn't lose in China. South Korea... it's a much smaller market compared to China, so it's not as concerning.

The next big test, in my opinion, will be how Uber does in India. They are in a neck-to-neck race with Ola. If Uber can win India, they'll have the U.S., Europe, India, and a bunch of other areas. If they lose India, things won't look as good for Uber.

But overall, my point isn't necessarily to defend Uber. Rather, it's to start a discussion on Tesla's prospects in the worldwide ride-sharing business. For example, how is Tesla going to compete against Didi Kauidi in China, KakoaTaxi in Korea, Uber in the U.S./Europe/etc?

And my point is that I don't think it's going to be as easy as some assume it'll be. The competition is very stiff. And the worldwide ride-sharing market is becoming the fastest growing and one of the most valuable markets in the world. And the dominant players are likely only going to be getting stronger. And Tesla is needing to wait till they have the tech needed, ie., autonomous cars. But they more they wait, the stronger the existing players become. And if they existing players, whatever the country they're in, can have a choice in between which autonomous cars to add to their network (ie., meaning if there are more than one autonomous car maker), then the existing ride-sharing companies will likely still be very formidable and difficult for Tesla to beat.

 

[bh1783]

Actually I was thinking about Airbnb so that's why I said "publicly traded" (even though Uber isn't publicly traded). I just wanted to emphasize how rare it is for a company to be 2-3x revenue annually when they're revenue is already in the billions of dollars per year. It doesn't happen very often. And when it does it's something to pay attention to.

By the way I think Airbnb's revenue is not growing 2x per year... it was about 90% annual increase between 2013-2015. But I really like Airbnb and I've been following them and other high-growth startups for years.



Actually in China I think they fought well. They were a bit late and China just had too strong of a company, Didi Kuaidi (after they merged), that was backed by basically unlimited money and also some of the biggest tech companies in China. They did well enough to be a strong 2nd place. But in Uber's case, they didn't see a future in being 2nd in what Uber is viewing a "winner-takes-all" market... thus they sold.

If Uber would have been able to become the dominant China player, then Uber's valuation would probably be $100 billion right now or so. But they failed.

Also in South Korea, if they didn't get banned they probably would have become the dominant player in the ride-sharing business. I don't necessarily agree with it, but Uber tends to break the law (which they view as archaic and not serving the consumers), then try to fix the law. But in South Korea that approach backfired. They lost South Korea due to this.

But in the 70+ countries that Uber operates in, I'm not sure how countries they're in 2nd place. It would be interesting to find out. My guess is the vast majority, they are 1st.



Actually, I think it's the reverse... typically Uber faces it's most litigation and resistant in the beginning. However, after they saturate a market, they usually get the laws changed/revised and they're able to operate in those countries much more freely.

But I do agree that each market is independent. Thus, Uber can win one market, and lose another. This does give an opening to Tesla if they can focus on one market (ie., one location, or one segment) and beat Uber in that segment (ie., kind of like how Tesla started with the Roadster)... then Tesla might have a chance, but it's an uphill battle.

Regarding driver subsidies, typically Uber only subsidizes because the competition is subsidizing. Supposedly Uber claims they learned the subsidy model from their experience in China where the competition was subsidizing like crazy.

But that just goes to show that these companies are clamoring over market share because they think that once they get dominant market share, they can then enjoy the fruits of that position (ie., volume and the competitive advantage that brings).



I don't think Uber lost China or South Korea because they didn't have a messaging app or peer-to-peer banking. For China, they were late and got out-subsidized by bigger pockets. In South Korea, they were banned/sued.

But I think you're general point being can be applied to Tesla as well. In markets like China and South Korea, how is Tesla going to successfully launch and grow a ride-sharing service with such strong existing dominant players?

If Tesla has the best product then they will be successful in those markets.
I get emails from Uber in Korea giving out free vouchers all the time. The problem is that there are no drivers and cars in the entire city. The difference with American tech companies is that each app serves a single purpose. In other countries like China and Korea a single app does everything. Uber lacks the technology to operate in the South Korean market. Due to privacy laws Google Maps is banned in South Korea, so the domestic map making companies control navigation and in the future ride-sharing/autonomous driving. The theme is this: American tech companies are increasingly being shut out of foreign markets(it took apple years to gain clearance to sell their phones in Korea). This gave Samsung time to catch up and now surpass Apple in technology. Tesla faces no such limitations in Korea. They have the support of Samsung SDI, LG and SK, all of which are future potential battery suppliers to Tesla(LG already provides cells for the roadster 3.0)

To succeed in Korea, Tesla will have to make a lot of investments in charging, service centers and marketing. Seoul, is a crazy market for cars. Mercedes has something like 25 dealerships in the city and Seoul alone accounts for 1,000 S-Class sales a month(a single city).

South Korea is a really tough market BUT if companies operate well they succeed. For example, the #1 Ikea store in the world is in Seoul, they did 250 million in sales last year and had 10 million visitors to a single store(20% of the country's entire population), but they spent $350 million buying land and building their store in the country. IKEA had to rent more land just for parking.

The #1,2,3 and 5 COSTCO's based on global sales volume are all located in Seoul. If a company has a solid product it will thrive in the market. Companies like Wal-Mart already failed in China and Korea(you can see how poorly they are doing in the states now).

Tesla's entry into South Korea is ideal right now because VW and Audi are banned from selling cars in the country, gas is $8/gallon and there are 15k EV incentives for electric vehicles. If Tesla maintains good relationships with Samsung (their first store will likely be in a Samsung owned mall) they will thrive in Korea.

 

[DaveT]

If Tesla has the best product then they will be successful in those markets.
I get emails from Uber in Korea giving out free vouchers all the time. The problem is that there are no drivers and cars in the entire city. The difference with American tech companies is that each app serves a single purpose. In other countries like China and Korea a single app does everything. Uber lacks the technology to operate in the South Korean market. Due to privacy laws Google Maps is banned in South Korea, so the domestic map making companies control navigation and in the future ride-sharing/autonomous driving. The theme is this: American tech companies are increasingly being shut out of foreign markets(it took apple years to gain clearance to sell their phones in Korea). This gave Samsung time to catch up and now surpass Apple in technology. Tesla faces no such limitations in Korea. They have the support of Samsung SDI, LG and SK, all of which are future potential battery suppliers to Tesla(LG already provides cells for the roadster 3.0)

To succeed in Korea, Tesla will have to make a lot of investments in charging, service centers and marketing. Seoul, is a crazy market for cars. Mercedes has something like 25 dealerships in the city and Seoul alone accounts for 1,000 S-Class sales a month(a single city).

South Korea is a really tough market BUT if companies operate well they succeed. For example, the #1 Ikea store in the world is in Seoul, they did 250 million in sales last year and had 10 million visitors to a single store(20% of the country's entire population), but they spent $500 million buying land and building their store in the country.
The #1,2,3 and 5 COSTCO's based on global sales volume are all located in Seoul. If a company has a solid product it will thrive in the market. Companies like Wal-Mart already failed in China and Korea(you can see how poorly they are doing in the states now).

Tesla's entry into South Korea is ideal right now because VW and Audi are banned from selling cars in the country, gas is $8/gallon and there are 15k EV incentives for electric vehicles. If Tesla maintains good relationships with Samsung (their first store will likely be in a Samsung owned mall) they will thrive in Korea.

@bh1783 It seems like you're familiar with the South Korea market, so I'd love to take the opportunity to learn more from you about the South Korea market.

Regarding Mercedes S-Class sales, are they selling these cars to people that are actually going to be driving them or are they mostly selling as chauffeured cars? I'm asking this because I know South Korea used to have a lot of "drivers" who'd drive the owner who would sit in the back seat and the front seat would have a part that could become a hole that they could fully stretch their legs through from the back. Is this still the case, or has it changed? I guess more specifically, what % of the Mercedes S-Class cars are being driven by the owners vs the owners are being driven?

Can you share more about the $15k EV incentives in South Korea. Are they for all electric vehicles?

What's the price of a Model S base entry car in South Korea? And how does that compete with the local luxury cars in price? Also how does it compare to the price of a BMW 5 series there or a Mercedes E class and S class?

I know a lot of South Korea lives in apartments, and often those apartments don't have electric chargers. Will this be a challenge for large scale electric vehicle adoption in South Korea?

 

[bh1783]

Uber is already years behind Kakao Taxi. This is the integration in Kakao Taxi. Seamless integration of bus schedules, subway, taxi, navigation and everything else. I don't really see how Uber has any chance to compete against this type of integration and market penetration.

 

[DaveT]

If Tesla has the best product then they will be successful in those markets.
I get emails from Uber in Korea giving out free vouchers all the time. The problem is that there are no drivers and cars in the entire city. The difference with American tech companies is that each app serves a single purpose. In other countries like China and Korea a single app does everything. Uber lacks the technology to operate in the South Korean market. Due to privacy laws Google Maps is banned in South Korea, so the domestic map making companies control navigation and in the future ride-sharing/autonomous driving. The theme is this: American tech companies are increasingly being shut out of foreign markets(it took apple years to gain clearance to sell their phones in Korea). This gave Samsung time to catch up and now surpass Apple in technology. Tesla faces no such limitations in Korea. They have the support of Samsung SDI, LG and SK, all of which are future potential battery suppliers to Tesla(LG already provides cells for the roadster 3.0)

I'm having a difficult time why you'd think Tesla would face no limitations in Korea. With their cars, I understand since South Korea needs to appear like they're being fair to foreign car makers to satisfy free trade agreements. However, if Tesla in the future tries to launch an autonomous ride-sharing network in South Korea... and the jobs of 250k taxi cab drivers in the country are threatened to extinction, I can imagine it'll rile up things and Tesla could face the same resistance that Uber faced, maybe even more.

 

[bh1783]

@bh1783 It seems like you're familiar with the South Korea market, so I'd love to take the opportunity to learn more from you about the South Korea market.

Regarding Mercedes S-Class sales, are they selling these cars to people that are actually going to be driving them or are they mostly selling as chauffeured cars? I'm asking this because I know South Korea used to have a lot of "drivers" who'd drive the owner who would sit in the back seat and the front seat would have a part that could become a hole that they could fully stretch their legs through from the back. Is this still the case, or has it changed? I guess more specifically, what % of the Mercedes S-Class cars are being driven by the owners vs the owners are being driven?

Can you share more about the $15k EV incentives in South Korea. Are they for all electric vehicles?

What's the price of a Model S base entry car in South Korea? And how does that compete with the local luxury cars in price? Also how does it compare to the price of a BMW 5 series there or a Mercedes E class and S class?

I know a lot of South Korea lives in apartments, and often those apartments don't have electric chargers. Will this be a challenge for large scale electric vehicle adoption in South Korea?

In Korea, large executives for domestic companies have an unwritten rule that they drive Korean cars. So Hyundai sells the EQUUS (sells for 60k in the states) for 120k in Korea. The people that buy S-Classes are usually entrepreneurs or regular individuals. They will drive the car on their own although some will have a driver (driver's are cheap, something like 2k a month)
I would say that 80% of S-Classes are being driven by their owners.

Yes the 15k incentive is for all EVs in South Korea. However Tesla might have a problem because the law states that you must be able to fully charge the battery from a 7kw source in less than 10 hours. A 100kw battery might not match that.

What BMW did with the incentive is they were greedy and jacked up the price of the i3 to 70k. So no one bought it. BMW did sell several hundred of the BMW i8s here. I'm not sure the price of the Model S in Korea, they started preorders but didn't release the price(I am assuming that they are trying to qualify for the ev incentive)

S-Classes start at 130k here in Korea. I would assume the Model S would be slightly more expensive in Korea than in the states (land, rent, and selling costs are generally higher).

There are a bunch of i8s in the building I live in. People just slow charge them by plugging into outlets in the wall. Electric charging won't really be a problem. BMW provides free chargers and installs for the i3 in Korea and Samsung has installed EV chargers in many of their properties.

If Tesla qualifies for the EV incentive and works out the same charging as bmw did they will sell thousands of Model S and Xs.

 

[DaveT]

@bh1783 thanks for your replies. Interesting stuff.

Yes the 15k incentive is for all EVs in South Korea. However Tesla might have a problem because the law states that you must be able to fully charge the battery from a 7kw source in less than 10 hours. A 100kw battery might not match that.

That's a wacky requirement to require the battery to be fully charged for a 7kW in less than 10 hours. Hopefully the Model S/X 60kWh will satisfy those requirements.

 

[bh1783]

@bh1783 thanks for your replies. Interesting stuff.



That's a wacky requirement to require the battery to be fully charged for a 7kW in less than 10 hours. Hopefully the Model S/X 60kWh will satisfy those requirements.

Dave this is how people charge EV's in the building I live in:

Charging won't be an issue for early buyers in Korea. Most people will have the car as a 2nd or 3rd vehicle and they won't drive it very far. People in my building just charge their car for free and the building pays for it. Pretty much everyone lives in apartment buildings with underground parking. A lot of the newer apartment buildings are huge complexes with 4,000 apartments and 10,000 parking spaces all connected underground. Charging a couple of EV's in buildings with thousands of apartments is a trival issue. The bigger issues in these buildings are car exhaust fumes. The buildings spend a ton of money on ventilation and fans to get rid of exhaust fumes. EV's make so much sense in Korea because people often spend 10-15 min a day driving indoors.

Most places have valet parking, so in the future you just need a couple of chargers in a building and the valets can rotate the EV's. There are already a lot of car wash services that come to your apartment and wash your car while it's parked. In addition, a lot of the parking garages use elevator systems so they are already wired for heavy duty power consumption. Adding chargers will be a relatively simple process.

Not much street parking. For the first few thousand buyers in Korea, the Tesla will be a weekend toy so charging will be an irrelevant issue.

 

[bh1783]

I'm having a difficult time why you'd think Tesla would face no limitations in Korea. With their cars, I understand since South Korea needs to appear like they're being fair to foreign car makers to satisfy free trade agreements. However, if Tesla in the future tries to launch an autonomous ride-sharing network in South Korea... and the jobs of 250k taxi cab drivers in the country are threatened to extinction, I can imagine it'll rile up things and Tesla could face the same resistance that Uber faced, maybe even more.

You are right that Tesla needs to be careful with autopilot/autonomous driving in South Korea. Up until a few years ago domestic cars were banned from having cruise control(too many accidents on the highway) Korea has the highest fatality rate per miles driven in the OECD (partially because people don't drive long distances) but mainly because the roads are so crowded, and there is no highway patrol, only speed cameras. So on the highways people are constantly speeding up and then slamming on their brakes in front of the cameras.