Comment by josefresco | Hacker News Reader

Comment by josefresco | Hacker News Reader

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I don't think the average consumer understands or appreciate how Tesla is different. I often talk with family members about Musk and Tesla and most don't really get what's so different than say another all-electric car. For example this:

"During a chat with Musk at the P85D's introduction, he mentioned that on average, Tesla implements about 20 modifications to the car per week. Not software, mind you, but actual hard parts. Per week."

I'm sure traditional car makers tweak hardware as well, but it seems Tesla's focus on software-esque hardware iteration is unique. Their willingness to push updates constantly breaks from the "mid-cycle" refresh and small year-over-year iterations commonplace amongst all established automakers.

And this:

"Lift the front trunk's lid (the frunk, they call it), and you're struck by how much all of this was anticipated back when the Model S was penned. What was a recessed cavity near the firewall becomes the new forward engine room with enough left to swallow a duffle bag and retain its terrific 5-star frontal crash performance."

This is not just a scrappy startup car maker just getting by with an acceptable but not brilliant first generation product. You get the feeling that Tesla is always three steps ahead yet are confident enough to reveal them one-at-a-time.

Well, I certainly appreciate it, but like a lot of people dismiss it, at least currently, as toys for rich people. I can't afford a 90k car, no matter how awesome it is. All these breathless Tesla testimonials are great, but in my head its like listening to some guy talk about how wonderful the leather is in his Maserati. It is so far outside my economic world that it might as well not exist.

I know there's this mythology that Elon will magically deliver a 25k electric that changes the world, but if anything, they've double-downed on the luxury market with that giant non-city friendly SUV and, more complexity and cost, with their driver assist stuff.

Meanwhile, the Leaf and Volt keep dropping in price. VW has moved into the market, as well as BMW. Oh, low price leaders like Kia haved move in as well. 2015 EVs are still pricey, but no where in the same league as Tesla.

At this point I'm finding it very hard to believe Musk will ever leave the profitable premium car market. A 25-30k Tesla would hurt the brand and he'd be competing with larger companies with the scale and know-how to get Joe Everyman on-board, and worse, coming to the low-end game very late.

Tesla is using the luxury market to finance the rollout to the mass market. It was the only way they could do it, because to achieve the economics needed for the mass market, you need a lot of money. It would have been essentially impossible for them to do it from the start, because they're not Nissan and they didn't have the ability to invest billions pre-revenue.

Witness, for example, the $5 billion gigafactory they're building, of which Tesla is contributing $2 billion. This only could happen because they now have access too good financing (their recent convertible bond issuance) which could only happen because of the success of the Model S. And the other $3 billion being contributed by partners? That wouldn't have happened if they didn't have the credibility coming from making the Model S a success. And in any case, the gigafactory would make no sense to build if they truly intended to keep to the "luxury EV's for rich people" market because it's too much capacity for that segment.

I don't know that Tesla will ever compete in the $25-30k market as you state, or at least not for a while -- their stated goal is a $35k car for the Model 3, and I wouldn't be surprised if that goes up to $40k at release, but that's still worlds apart from an $80k car in terms of affordability. Especially factoring in consumers' savings from gas (NPV of $10 - 15k), that gets to the point where they can sell serious volume, even if it's on the high end of the "everyman's car" that a $20 - 25k car would be.

Due to toughening CO2 standards, ICE automakers are going to see their costs rise over the next decade. Meanwhile Tesla's gigafatory will reduce the cost of batteries ~30%, which will significantly increase the gross margin on the Tesla S & X, while simultaneously enabling a high-margin mid-market auto offering; the Tesla 3 or whatever it'll be called.

Also, does buying cars have a future at all, or are we going to lease them or even just use them JIT via proxies like Uber? The depreciation of an electric car is very different from an ICE car, and so I think there's a need to reboot our perspective about what car-ownership means back to to first principles, just as Tesla has done.

> Tesla implements about 20 modifications to the car per week

Traditional car makers do slipstream changes into their cars, but this is just crazy. Think of the service challenges, and the parts catalog challenges. Not to mention the cost of all those different parts.

"Oh, your's was made the fifth week of August, so you need a different bracket. We don't keep those in stock because they're all different. Here's a service loaner and we'll call you when it's done."

It's a bit misleading of a conclusion to make, because most of those changes likely aren't non-compatible changes.

For instance, maybe a chip goes out of manufacturing, and they can no longer get it supplied, but a successor product from the same supplier meets all the same requirements.

Perhaps a bracket goes out of manufacture, but an almost identical bracket is sourced from a different supplier.

This would qualify as a hardware modification, but is a non-breaking change.

They still have to track all those changes - NHTSA requires it for recall & safety purposes -- cars & highway gear are highly regulated.

A good example is the company that changed the design of their guard-rail endcaps. They reduced the size by an inch, which allegedly resulted in 5 deaths (court cases are ongoing). They (again, allegedly) failed to test the change, and failed to report the design change to NHTSA and the various state highway departments that specified it's use.

Another example is the ignition switch in GM cars. The engineer changed the design, but did not issue a new part number for it. Externally, same shape & mounting points & connector pinouts. Internally, very different.

So while a design change in a part might be "like for like", it requires a full lifecycle of testing and documentation. And that's expensive, so auto makers try very hard to get their designs correct up front.

I wonder if this is a place where being young hand having lots of automation really helps out. Organizations invariably grow organically, GM had no way of knowing what would be required of them 50 years ago, so the processes are likely weird.

Tesla's processes will be weird in 50 years - if they're even around. but today, I'd imagine that kind of complexity is way way easier to manage if you're aware of it from the start. Rather than getting it right the first time, build the whole organization around coping with those little variations.

OTOH, i have no evidence they actually do that... Just seems possible for Tesla and very hard for GM.

I have a feeling that while they implement 20 modifications per week, they will not roll out differently speced cars from week to week. It just doesn't seem possible with the regulation and testing that is mandatory.

A sense of proportion is important here.

So far as I've been able to determine data total sales of Model S cars seem hard to come by. You'd think Tesla would be a bit more open. I'll go ahead and throw in my own estimate of about 30K to 40K Model S cars sold since the beginning of time. I could be wrong, but I doubt I am wrong by an order of magnitude.

In sharp contrast to this, once you are selling millions of cars per year ([1]Ford, 2013, 2.5MM; [2]Others) this idea of making twenty changes per week that actually make it out to the production line is simply impossible.

At volume supply pipelines have huge inertia. You can't make changes on a whim. Doing very simplistic math and assuming a JIT process, Ford receives 50,000 parts per week. Tesla, assuming 20K cars per year, receives 370. I am not trying to be dismissive, but that's the difference between a garage operation and a real industrial operation at scale. A constant flow of 50,000 parts per week needs to be planned months in advance with all sorts of tests and controls during the process. Changes require the same planning and effort. Imagine making a change that does not work well (for whatever reasons) and you have 50,000 parts per week descending on you. By the time you make a change tons (literally) of raw materials are being processed at some factory, container cargo ships are in the middle of the ocean on their way to your port and trucks are en-route to deliver your parts for the coming wees.

At a few hundred parts per week you can pretty much afford to experiment and throw out whole shipments if something goes wrong. Your supply pipeline is much shorter. You don't have dealers to feed and contractual obligations in terms of delivery. You don't have the same kind of output pipeline. Add to this perhaps having a lot of the small-scale manufacturing done in-house and, yes, it's a garage operation, an expensive one, but the scale simply doesn't compare to that of a high volume manufacturer.

I am not saying any of this to diminish Tesla. It's a neat company. Their cars are not for the masses. And that's OK. However, I really don't subscribe to the idea of Musk walking on water. Is he a great CEO? It sure looks that way. Nobody could dispute that for a minute. I am simply proposing that we do not ascribe supernatural powers to an organization that operates at a scale and within a framework that allows it to behave in a manner very different from that of larger volume producers.

[1] http://en.wikipedia.org/wiki/Ford_Motor_Company [2] http://www.ibtimes.com/here-are-december-2013-big-eight-us-a...

This is a really thoughtful counter-point and I appreciate the response.

The problem with it is that I don't see Tesla changing, or morphing into a "traditional" car company as it scales.

Yes Ford and the like are constrained by old business models and huge scale, but that's kind of the point. Tesla is not, and has the chance to scale and do things differently along the way.

I'm amazed at how they continue to grow (from roadster to model S), and consistently reveal products and technologies that seem genuinely very progressive and well though out. I'm also struck by their ability to address issues and controversies that like landmines, stand in the way of anyone trying to break into this very established marketplace.

I would love to have two horses in this game, Tesla and another to see how contrasting methodologies in the modern car market would play out.

Tesla is now at over 50k Model S vehicles sold.

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