I'd like to say something here.
If one were to look across the things I have written here and on Seeking Alpha it would be easy to assume at a first glance that I was some kind of unhinged Tesla fan boy without a balanced word to say.
It has been a bit difficult to avoid giving that impression when most of the conversation has revolved around dismantling endless erroneous attacks on the Tesla business.
Examples:
No, Tesla is not going to go bust nor will it struggle for working capital, ever again
No, Tesla is not making dirty cars that are more polluting that gasoline
No, Tesla will not be wiped out by the very industry it is disrupting
No, Hydrogen Fuel Cells and NG are not valid environmental alternatives
No, Exponential increases in atmospheric CO2 are neither acceptable nor a hoax
No, Musk is not facing the SEC on charges of insider trading
No, GM's battery cost data does not prevent Tesla making a $35K Gen III
No, Tesla will not fail to make 25% gross margins
No, Tesla is not constrained to a market niche be that luxury or any other geodemographic
No, Tesla does not lack automotive experience considering it can hire the best in any field
No, Tesla is not limited to becoming the size of any other existing automotive point of reference
No, Tesla is not dependent upon subsidies, tax breaks and emissions credits (although it substantially broadens first-mover advantage to use and abuse these to the max until they are cancelled in the face of follow-on competition).
No, There is nothing to stop Tesla growing exponentially on internally generated revenues (that is what cash up front direct sales from a reservation list is all about).
No, There is nothing to stop Tesla selling and making 200,000 cars at huge profits in 2017 and 400~500,000 cars in 2018. More likely than not it will.
No, BMW i3 will not hinder Tesla one jot (nor will the i8), with a 7 year development cycle, until further notice BMW is out of the race to become a meaningful part of the future of automotive.
All of the above is true to the best of my knowledge and belief, and the reason I believe all that is because I made a disruptive business that works like this one and I recognize literally everything in and around it. Sadly I know something that Tesla does not know. I also know first hand how businesses like this can be destroyed. I will come to that later.
Despite general appearances I have not been an unhinged cheerleader, it is simply that there was an overwhelming majority of things to truthfully defend the business from compared to the precisely two things I have noticed that Tesla in my opinion could have done better.
The second (chronologically) one was the battery swap announcement - I wrote on Seeking Alpha prior to the 20th that it would indeed be battery swap that would be demonstrated, I also wrote that the stock would go up if it was presented with a business case, and I wrote that the stock would slide into the $90s as a buying opportunity and then recover if it was announced as a gimmick without a compelling business case. The latter occurred, the stock slid significantly into the $90s and rebounded 7+%. As it turned out the real rationale for demonstrating (not just announcing) battery swap was to qualify Tesla for an enhancement to the ZEV credit program. As it happens I believe that there is in fact a huge additional-revenue-stream business case for battery swap (a rental/vending machine for 85KWh and 160KWh 500 mile range batteries for example that serves also to enable the reintroduction of a low-cost 40KWh Model S with an ever-present upgrade path and massive road-trip optionality as part of the customer value proposition. I also suspect quite a few P85 owners would take the opportunity to upgrade to a 500 mile range P160 given the chance even if it did cost a fortune).
While my (chronologically) second highlighted concern is not really a criticism (because there is arguably a benefit in not confusing the market with the battery swap business case when that could be rolled out at any time in the future) my first concern: The announcement surrounding Tesla Finance was, and is both a concern and a criticism to this day. To a large extent that concern was brushed over and never fully resolved.
The true cost of ownership of a 60Kwh base Model S net of $7500 credit while that remains in force is $916 / mo. plus energy costs of $45.25/ mo. (using Tesla's 15,000 miles p/a, 20mpg @ $4.90 figures and net of $261 saved) plus insurance and road tax. That is $961.25 plus insurance and road tax.
It is not $579 / mo.
I have thought it through many times, and I have to say I cannot think of a more effective way of getting the fuel savings front and center of the customer's mind set. None the less, financially $579 / mo. still is not true. It is true to say that an equivalently priced and financed ICE vehicle (after EV tax credits) will cost $916 per month PLUS $306.25 / mo. (using Tesla's 15,000 miles /a, 20mpg @ $4.90 figures) coming to an even more expensive $1,222.25
In reality we are comparing
$916+ $45.25 = $961.25 (Tesla base 60 literally true cost of ownership with electricity priced at $11 cts per KWh)
with
$916+ $306.25 = $1222.25 for an equivalently priced ICE vehicle pulling 20mpg @ $4.90.
There is nothing at all that serves to reduce the true cost to a family budget further than these numbers when owning a Tesla Model S unless the cost of electricity is reduced from 11 cents / KWh.
While there is nothing wrong with paying $961.25 /mo to drive a fantastic car one really wants (instead of the straight choice of shelling out $71070K up front while waiting for a $7500 tax rebate), especially if one were previously budgeting for $1222.25 / mo. Nevertheless I cannot see any way at all of resolving these numbers to $579 as a true rather than a false impression of the cost of ownership, and yet this figure persists alongside the Order button on the website.
The reason I don't think this was solved by the second finance announcement is that all it did was to ameliorate the even more misleading figure of $500 without changing policy with respect to financial transparency and in fact did more to overpower the real issue (of transparency) with an upgrade of the residual guarantee from 43% to 50% for the base Model S 60. To this day I am in awe of the fact that Tesla got away with this distraction tactic without being hung in the court of public opinion, particularly for omitting to mention that the 50% did not apply to the balance of "upgrades", for example the balance of a Model S P85 or anything above the cost of the base Model S 60KWh. Additionally the fact that the whole Tesla Finance package only applies to a small number of US States somehow got lost in the fine print too.
I do believe the Tesla mission to electrify transport is valid and that it is fundamentally vital that it succeeds on a grand scale and I am entirely confident that it is on track to do that. I also believe that the opposition that Tesla faces to establish itself as a tranformative force in the auto industry is by contrast morally repugnant: Those who have failed to experience "issues" with auto dealership sharp practice I suspect are in the minority or simply were not aware of it. Watching the public being blatantly duped by big-money-backed disinformation campaigns and pseudo-official looking organizations claiming that Hydrogen and NG are clean energy sources aimed at tackling CO2 emissions induces a sense of injustice that I can barely describe (I think the latter should be hunted down and charged with defrauding both customers and shareholders alike and with respect to future generations: Conspiracy to commit genocide).
Tesla in my view is an important opposing force against some pretty horrible business practices, and as such would do well to contrast itself entirely from any possible hint of misconduct and also to guard especially against unresolved resentments. In that light I can see a red thread running through the business that appeared on the surface with respect to Tesla Finance and again in these discussions about Sig Angst. I think it should pay attention to tucking that thread back in.
The most extraordinary thing about Tesla is not the technology. There is nothing in the Model S that could not be created or even exceeded by any visionary leader who knew what he was aiming for and why and had the money to hire the engineering expertise to make it happen. I would be happy for the opportunity to prove it. No, the truly extraordinary thing (and the most disruptive thing) about Tesla is the business and its financing. Tesla represents one of the most risky gambles ever undertaken with other people's money (with their knowledge) to such a degree that it effectively breaks a number of the standing paradigms of capitalism. (It is far from surprising to me in any case that the shorts are repeatedly drawn in and routed by TSLA). If for example the first Roadsters, or the first Model S vehicles for that matter had not been delivered to pre-paid reservation holders and instead the company had gone bust (which without the reservation holder's money it may well have done), then the entire business model could be considered entirely indistinguishable from a confidence trick, literally. To this day, the business maintains a book of thousands of deposits for vehicles it cannot afford to build without customer pre-payment, certainly if the company had to build the cars and take cash on delivery or worse still, deliver to dealers on credit in the normal mode of an auto manufacturer, none of the forward looking metrics of the business would be valid.
But Tesla does get pre-payment, it does build and deliver the cars and the cars are superlative. In that process the customer willingness to trust the company with money, be it in the form of Sig deposits or payment on confirming the configuration prior to delivery for each and every production vehicle, this trust is absolutely beyond any and all doubt the single greatest asset of this business comparable only to Mr Musk's own history of willingness to risk his own money in a similar manner. Risking that trust with $500s and $579s, and failing to resolve "Sig Angst" resentment issues (or anything like it) is to my mind the single greatest real danger that Tesla faces. (The other one is opening up a side-door to cash-flow-negative sales in the form of an unlimited replenishment of sold-off loaners - they need to cap loaner sales to one or even three months of age at the earliest or risk breaking the spell that is the Tesla business model).
Without a doubt, Tesla is on track to a roaring financial success across the globle. In that process I would suggest that it is of paramount importance that the power of the emotion: "hold on a minute, you could not have done it without me" is not allowed to erupt into a brand-level issue. The emotional bank account with Sig customers and supporters must not be allowed to go into the red in inverse proportion to the financial account or there will be trouble. Trust me on this point.
