TMC is an independent, primarily volunteer organization that relies on ad revenue to cover its operating costs. Please consider whitelisting TMC on your ad blocker or making a Paypal contribution here: paypal.me/SupportTMC

Thought of a interesting business model involving Teslas

Discussion in 'Hong Kong' started by gubes, Sep 18, 2015.

  1. gubes

    gubes Member

    Joined:
    Mar 26, 2014
    Messages:
    123
    Location:
    Hong Kong
    Hi guys,

    I think if anyone is running a fleet of vehicles that do a lot of km every year, EVs start making financial sense compared to ICE vehicles. Most personal Tesla owners probably do less than 15k or 10k km per year. However, if you are running a fleet of premium vehicles, the cars could be doing anywhere between 60k km to 100k km per year. Compared to similar luxury vehicles doing those kms, I have calculated that the yearly average running cost differential to be US$11,000 to US$18,000 per year for 60k km and 100k km respectively.

    Running EVs that do so much mileage on a daily basis may require an investment in battery swap infrastructure - which should be relatively easy to organize in a place like HK as you may only need a handfull of locations to do the swaps.

    But consider this:

    Imagine a leasing company purchases a fleet of Tesla vehicles. You then calculate the cost of running each vehicle each year and add on a suitable margin on top. Then you figure out how much it would cost someone to take a lease on an hourly basis (you can very the base cost depending on time of day for peak and off peak). You then approach Uber and come up with a scheme whereby the Uber driver does not need to take out his/her own insurance on a permanent vehicle or purchase one outright and bear the upfront fixed costs. You then charge the Uber driver a fixed amount per hour of usage + a %age of the Uber fare. Say for instance, US$8/hr + 10% of the Uber fare. I am not sure if that is the right number as it would depend on assumptions relating to overall utilization of the vehicle and I am not sure what the average hourly revenue per trip would be.

    It would entice drivers to join Uber because they are not taking much financial risk in that they do not need to bear a lot of up-front fixed costs. Also the service would be well standardized as all of the vehicles would basically be basic spec Teslas.

    You could start by offering the service to a chain of 4 and 5 star hotels or go direct on the uber app.

    The more and more drivers you have on the platform and the more and more Teslas you have on the fleet, the more and more the cost will go down for using the service. It would be hard for a ride to be cheaper than a HK taxi (as they are already fairly inexpensive) - however, I think the costs start making sense for premium uses. If at the end of the day you can catch a ride for a 20-30% premium over a regular taxi, I think there could be a market for that in HK. Of course, it would take time to get there as you need scale and critical mass for it to work. But I can see them replacing those S class Mercedes or Aphards (once the Model X arrives)

    I would love it if someone could go ahead and do it.
     
  2. 3fiftynine

    3fiftynine Member

    Joined:
    Oct 19, 2014
    Messages:
    256
    Location:
    Hong Kong
    Someone could be doing that already. W hotel has a fleet of Teslas someone said the hotel doesn't own the fleet instead it's outsourced. There could be other hotels having the same arrangement.
     
  3. AppleFan

    AppleFan Member

    Joined:
    Mar 1, 2014
    Messages:
    233
    Location:
    Hong Kong
    The problem with the above business plan is exactly what Uber into trouble. It's almost impossible to get a hire car permit from the Transport Department.
     
  4. Titus

    Titus Member

    Joined:
    Sep 22, 2015
    Messages:
    206
    Location:
    Hong Kong SAR
  5. mchk

    mchk Member

    Joined:
    May 19, 2014
    Messages:
    125
    Location:
    Hong Kong

    I have been thinking about this for almost a year. I want to do this but I've been worried if its financially feasible.

    I can probably get 2-3 teslas (or maybe 2 teslas and an i3 BMW), and I have access to possibly 2 or maybe 3 parking spots. So besides the initial car purchase my costs are OK if I can workout the parking spots.

    But what about salary? 3 drivers is expensive and probably need 2-3 shifts so more like 6 to 9 drivers? Sounds expensive.

    The other way to do it, like you mentioned is to find drivers who will pay some fee to drive the cars. Basically almost like renting the teslas (now you are more in the taxi model?).

    And of course how to avoid becoming a taxi service that becomes illegal. I'd prefer this is a "Luxury limo service for electric vehicles" maybe that's enough to avoid being a taxi model. Because it is truly NOT a taxi, but rather a niche service to people looking for a green luxury transportation.

    And then the other question is, is someone doing this already at a big level that a small guy like me gets crushed if they see me offering a similar service.
     
  6. miimura

    miimura Active Member

    Joined:
    Aug 21, 2013
    Messages:
    1,251
    Location:
    Los Altos, CA
    You also have to consider the warranty implications of operating a Tesla as a commercial vehicle.
     
  7. AppleFan

    AppleFan Member

    Joined:
    Mar 1, 2014
    Messages:
    233
    Location:
    Hong Kong
    It's not just a matter of differentiating against the taxi. To operate commercially, you need a hire car permit (from Transport Department, I think). This is almost impossible to get. That's what got some Uber drivers arrested this year. From the Government's perspective, a person can't just take his/her own car and drive it around for a fee.

    You would also need commercial insurance, which is higher than what we pay.
     
  8. mchk

    mchk Member

    Joined:
    May 19, 2014
    Messages:
    125
    Location:
    Hong Kong

    do those limo companies have the permits?
     
  9. AppleFan

    AppleFan Member

    Joined:
    Mar 1, 2014
    Messages:
    233
    Location:
    Hong Kong
    Please see here:
    Transport Department - Hire Car Permits

    Limo is one type of permit, so yes, the cars under limo service do (or shall I say, they SHOULD have the permits).

    InvestHK supported Uber's launch in Hong Kong because the original idea was that the Uber cars would be those with the hire car permits. As Uber expanded, more and more cars/drivers joining Uber were "personal" cars without the hire car permit. That prompted the police to arrest the drivers. As I said in my original post, there is also an issue of insurance: "personal" insurance does not cover situations where a car is used commercially, so those cars would also be driving without third-party insurance.
     
  10. spentan

    spentan Active Member

    Joined:
    Dec 26, 2012
    Messages:
    1,256
    Location:
    SoCal
    I own a limo service in San Diego. We already have two Model Ses in our fleet. Soon to have two model Xes as well! american-corporate

    Ask me anything
     
  11. gubes

    gubes Member

    Joined:
    Mar 26, 2014
    Messages:
    123
    Location:
    Hong Kong
    #11 gubes, Dec 30, 2015
    Last edited: Dec 30, 2015
    This is an old article: Investors Turn Hong Kong’s Red Taxis Into New Bubble Market - Bloomberg Business

    But it shows that Taxi drivers pay a daily rental of HK$700-800 to use the taxi and liscence. If they work 6 day weeks, That is costing them ~HK$20,000 a month. Add HK$5,000 for fuel, and their costs are HK$25,000 per month. If you think they on average make HK$17,000 after expenses, they must be doing HK$42,000 per month in fare revenue or HK$1,600 per day or HK$135 per hour assuming they are pulling 12 hour shifts.

    So imagine this:

    Buy a Tesla worth say HK$700,000

    Finance it at 80%. Assume 50% depreciation over 3 years, assuming high insurance of HK$15,000pa (for hire car - total guess) and interest cost total of around HK$35 over the 3 years. I estimate that the per annum cost of the Tesla is ~HK$150,000 with servicing. That works out to be around HK$410 per day - with charging at superchargers.

    Now consider, you approach a driver and say - Pay me HK$400 per day to use the car and pay me 20% of the revenue you generate.

    Now a hire car, would be do less trips but generate higher fares. So lets say for the sake of the argument that the driver generates gross revenue similar to what a taxi driver generates. That is, HK$1,600 for a 12 hour shift.

    Economics for the driver:
    Daily Revenue = HK$1,600
    Flat Fee = -HK$400
    Revenue Share = -HK$320 (20% x 1,600)
    Net Daily take = HK$880

    If the driver was a taxi driver, I am guessing he is pulling HK$17k a month after expenses or around HK$650 per day.

    Economics for the fleet owner:

    Flat fee from the driver = HK$400
    Revenue share from the driver = HK$320
    Cost of running the Tesla = -HK$410
    Net daily margin = HK$310

    Unlike the driver, you would try to operate the car EVERY day of the year. So annual pre-tax earnings = HK$113,000

    Capital investment is deposit on the Tesla = HK$140,000 + start up costs in coming up with the app software and booking system.

    The economics could very well work. Although assumptions are extremely rough at this stage.

    Oh and by the way, in case you are wondering about downtime for charging. Even if you assumed that the fares are the same as a taxi, the HK$133 per hour means you are doing 11km paid trips per hour. Assuming you need to travel the same distance to get to the next trip - that is around 22km every hour. That means in a 12 hour shift you are travelling 265km at most. Should be no problem for an 85kwh rear drive model to handle in a day.
     
  12. AppleFan

    AppleFan Member

    Joined:
    Mar 1, 2014
    Messages:
    233
    Location:
    Hong Kong
    I don't think anyone doubts the economics and, sorry to burst your bubble, you aren't the first person to think of this business model.

    All I'm pointing out is that your business can't get off the ground LEGALLY because of regulatory restrictions, i.e. the pre-requisite of a hire car permit from the Transport Department.
     

Share This Page