Filed under: EV/Plug-in, Tesla Motors
Tesla's co-founder says all other electric car companies are wrong, make "crap"
Recently, I wrote that Tesla's co-founder Martin Eberhard made a joke about the lack of quality in other electric car companies. Does Martin really feel that other electric car companies suck? YES! In a video interview (which you can watch below the fold) with the Wall Street Journal, Martin says all other electric car companies business approaches are "wrong" and they make "crap." Here is the full quote:"In general, it seemed to me that, the way all other people started electric car companies, got in the business, was wrong. They wanted to make a car that would save the world. So, they needed to make a car that everyone could afford and they tried to come in at the bottom end of the market. They try to go up against very, very mature companies in a very, very mature industry. Every single component they buy costs them double what Honda or Hyundai or somebody pays for that same part. So they wind up with a car that's a piece of crap. No one wants to buy it.
No other industry does that happen. No other industry do you start in the low end and work your way up. Think about cell phones and flat panel TVs and camcorders and refrigerators and air conditioners. All these things start off as an expensive product and are sold to people who can afford it that are buying it not to save a lot of money but to experience the luxury of this new thing. That allows the companies to develop their technologies, to develop their supply chains and to drive the costs down, step by step as they reach a broader and broader market every time."
Martin also explains Tesla was delayed a year (from the original schedule) because they added safety equipment to the battery to absorb the heat of a burning cell. The safety equipment added 15 percent to the size of the battery and hundreds of pounds to the car's weight. The interview ends with Martin talking about the mistakes of DeLorean and Tucker that, of course, Tesla is not repeating either. If Tesla fails, this interview will not seem ironic at all.
Editor's UPDATE: if you're going to comment on this post, which you're welcome to do, please read the comments that have already been posted. Mr. Eberhard himself contributed and said the WSJ took his "piece of crap" comment out of context. Just want to make sure we're all aware about the full story here. Thanks.
[Source: Wall Street Journal]
Reader Comments (Page 1 of 3)
why not the LS2LS7? 11:35AM (10/15/2007)
Despite what Mr. Eberhard says, in electronics especially, when companies enter a market, they sell their product at a lower cost than their competitors.
Look at myriad companies like Haier, Sceptre, etc. They come in and make what others are already making, but charge less.
Mr. Eberhard is instead describing what they're doing and ascribing it to others to lend credence to it.
I'm not sure why he needs to do this, their plan seems like a good one. He released his car after the success of a movie decrying the demise of previous efforts to make an electric car. He released it in the very city (Santa Monica) which was the hub for demand for electric cars and the disappointment of seeing them so, and perhaps more importantly where some people declared they would buy an electric car at any price if they were only allowed to.
Why he needs to sell us on his company again at this point I'm not sure. I can't imagine they're wanting for money, and if they are, they have plenty of .com milionaires and celebrities who will supply them with some more working capital.
Finally, I find Mr. Eberhard's attempt to explain away the latest 4 month delay by stating it's because of an extra year of work on the battery pack as difficult to understand. If so given that it's a 1 year delay, either they must have found out about it 8 months before telling anyone, or else they're just flat-out lying. Neither of these inspires confidence.
I appreciate Mr. Eberhards excellent strategy to make a niche market item that sells at a high profit markup and then take the money, knowledge and supplier contacts from that contract to apply to future cars and hopefully make more affordable and wider market ones. But I still think the deck is stacked against them. Even at the best possible prices, the battery pack for a tiny, 2200lb car is going to cost them over $30,000. For a more normal, family sized car, that means almost $50,000 in batteries. And Lion prices only drop per Joule about 10% a year at most.
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Mort 11:55AM (10/15/2007)
Arrogant son of a buck for someone who has yet to produce a thousand cars, isn't he?
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Kardax 12:14PM (10/15/2007)
Argh, I can't watch the video until I get home from work :(
why not the LS2/LS7?: Battery prices are a problem all EV makers need to figure out. Consider that at Tesla's target WhiteStar sales volumes, they'll be one of the world's largest consumers of Lithium Ion cells... that'll get the attention of every cell manufacturer on the planet, and they'll be bidding very aggressively to land a Tesla contract.
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why not the LS2LS7? 12:41PM (10/15/2007)
Kardax:
There's no way WhiteStar is a LIon vehicle. Not at the prices they state. If it is, they have a surprise coming. The prices is listed are ballparks for getting batteries in huge quantities, not the prices Tesla is currently paying.
LIon batteries are already in wide use and at near commodity prices. There is a limit to how cheaply you can get cells, just ask Sony and Nokia. Battery makers are not going to lose significant money just to get a bit more volume.
Batteries are the most expensive item in Tesla vehicles, and they are also the most mature technology in the vehicles. This is a bad one-two punch, it means the amount of money to be saved through volume is limited. And limiting your savings on your most expensive part limits your savings overall.
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dv 12:43PM (10/15/2007)
Obviously a couple people are always place a shadow over anything that is not certain. Its those same people that will likely take spoken words and restate them out of or without any context.
This blog is leading toward contributing less and less input outside of borderline plagiarized quotes from articles it references. You might as well just put the video up and say please comment. The title to this "article" along with the video say everything you need to being good trolling thread.
If you weren't so good on staying on top of all the "green" auto sources of information I would not bother coming here.
I just hope others are able to take the articles and the respective replies (including this one) with a grain of salt. I just hope the average reader can see through all this crap and appreciate the real underlying story fro what it is.
Respectfully.
(me)
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Mort 12:50PM (10/15/2007)
reading dv's comment is two minutes of my life I'll never get back. LMAO!
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Martin Eberhard 1:01PM (10/15/2007)
It's kind of annoying to have my words quoted out of context like this. This is a small slice of a wide-ranging interview - part of which the reporter chose to publish as video.
Like so many other reporters before him, this reporter asked me why it was that we are making a $98K sports car instead of a more affordable car, if our goal is to reduce gasoline consumption. Everybody knows that we cannot sell enough $98K sports cars to make even a slight dent in gasoline consumption.
My point here - as I have said so many times before - is that you cannot successfully enter a market ( any market) at the low end. Successful companies start by selling high-end products that compete on attributes other than price. They use success in a higher-end market to build experience, production capability, purchasing volume, supplier relationships, etc., allowing them later to create lower priced products with wider appeal, eventually moving into mainstream markets.
My point here is that most electric car companies since the '60s have attempted to make a low-priced car as their first model. They did this for the very best of reasons: they wanted to make a difference with their very first car; they wanted to offer everyone an alternative to a gasoline-powered car.
But as I point out in this interview, every single component that a startup car company buys cost lots more than the same part purchased by Honda or Hyundai or Ford: wheels, windshield wiper motors, paint, carpeting, airbags, brakes, etc. Add to that the plain fact that an electric drive train (including its battery) costs more than the highly-evolved gasoline drive trains from the OEMs.
The result is that by any objective measure, for the same money, a low-cost electric car is crummy when compared to a gasoline car for the same price. The fit and finish, the creature comforts, the plain usability of a low-cost Hyundai are clearly a whole lot better than that of a ZENN, a TH!NK, or a ZAP!. Better also than an Electra King, a Stuart, an Elctro Master, Spook, a Vanguard, a Marathon, a Voltra, a Comuta-Car, and an Amerigon, too, looking back at EVs past.
This is not a slam against these EV companies, but it is an honest assessment of their cars. If we expect most people to give up their gasoline cars, we must be honest about the cars, and we must be honest about what motivates most car buyers. The plain fact is that most car buyers will not accept a significant downgrade in creature comforts in order to "do the right thing." This is why so many EV companies have failed in the past, and why I chose a different path for Tesla Motors.
Martin Eberhard
Founder & President of Technology
Tesla Motors
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Kardax 1:36PM (10/15/2007)
Thanks for stopping by, Martin :)
A controversial car like the Tesla Roadster is certainly drawing opinions of all kinds. It's not really going to subside until your plan is fully realized.
Delivering high-quality Tesla Roadsters to customers will go a very long way towards quieting the nay-sayers. I'm not saying you need to hurry up, I'm just saying you're going to have to put up with this until then :)
Once that's accomplished, the new question that you'll have to face again and again over the next several years is this: is it possible to build a quality EV sedan for $50,000?
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dv 1:45PM (10/15/2007)
Thank you Mr. Eberhard, that felt good. I'm glad you found this thread and I'm glad you are able to illustrate some of the basic economic facts that were previous glazed over like fresh Krispy Kreme donut.
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OhmExcited 1:52PM (10/15/2007)
Those in the auto industry typically bite their tongue before criticizing other companies. Martin OTOH has not hesitated to slam competitors. For example, after viewing the Volt concept in Detroit, he sort of made of it for having a D/C brushless motor, when in fact the production version is going to have A/C, and suggested the Cobasys connection was an arm of the oil industry with cloaked, ill intent. This may stem from the Silicon Valley culture -- e.g. Steve Jobs always makes fun of Bill Gates and earlier had a history of slamming IBM. On the face of it this looks like immaturity, but is the result of ultra competitive, cut throat and rapidly changing industry. But let's hope with all that arrogance the Tesla Roadster does not become the Apple Lisa of the auto industry.
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kert 2:01PM (10/15/2007)
Once again. Theres Mitubishi MiEV, theres Subaru R1E and Nissan Mixim.
They all suck ?? Thats way arrogant. None of the cars, including Tesla is yet shipping to consumers, they are all at the well advanced prototype stage.
However, all of the car companies above have the history of putting out acceptable quality ( well, with some goofs of course ) cars for all market segments.
Tesla is crap for not producing SUVs ?
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why not the LS2LS7? 2:02PM (10/15/2007)
In addition to being high profit margin, a sports car has the added advantage of attention. A new electric sports car gets a lot more attention than another TH!NK-style golf cart EV. They garner more attention before release, and in the few places (like the Bay Area) which will have a noticeable number on the road, they'll garner more attention when being driven too.
The key for the industry but perhaps not so much for Tesla itself (that I've stated before under the name "it's doable") is how the industry can turn the excitement over this excellent but specialized vehicle into widespread acceptance of affordable electric vehicles despite their significant reductions in capability due to range, charging time/locations and other things. The key is to help people understand that a significant reduction in capability doesn't necessarily mean a significant negative impact on utility or day to day usage. As Ed Begley, Jr. (the patron saint of electric cars) put it tersely and accurately (and entirely unconvincingly) "It's true these cars cannot meet the needs of everyone. They can only meet the needs of 98% of the population."
Getting people exciting about something that isn't quite as capable as what you had before is a monstrous task. Tesla has wisely avoided it for now, but for the EV to reach widespread acceptance, someone will have to tackle it.
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Mr. Guiyotinne 2:06PM (10/15/2007)
I think Martin is right in oh, so many senses! By catering the high market first they are getting the money from people with a lot of patience (usually) while creating the contacts and specially the supply. This is the most important part!
Look at RED, the dream 4k camera from Jim Jannard; he and his team created a great camera from scratch but they had delays because of unreliable supply sources (Sony, Panasonic, GM or Ford don´t have this problem). If they explain the reason for that delay, people wait because they get the best camera possible, from a company they trust and, anyway, the other companies DON´T HAVE ANYTHING LIKE THIS, and won´t have in a couple of years, if ever.
If they do this with a cheap car, and I can say it: ZAP! The millions of customers waiting for a cheap electric car will be very upset, won´t trust them, think they are hoax and the big ones will play this card against them too if needed.
Tesla is doing the right thing.
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susan.kraemer 2:20PM (10/15/2007)
It's a sensible approach. I think you are right and it will work, so I'm putting on extra solar capacity on my roof for when you bring out the Whitestar II.
Don't worry about out of context quotes.
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BlackbirdHighway 2:34PM (10/15/2007)
Kert, Martin was clearly talking about past, and mostly failed, EV efforts, and trying to explain why they failed.
And that Subaru R1E only has a 50 mile range. Most American consumers would indeed call that crap, when they can simply buy an ICE car that goes 300 miles on a tank, and costs far less.
That's exactly what Martin was trying to say. On it's own, the R1E may be a fine example of an electric car, but up against competition with ICEs, it simply won't sell.
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fnc 3:16PM (10/15/2007)
I think it's a sound strategy, working in a market segment where the difficulties in bringing immature technologies up to speed (yes, that's a sports car related pun) will be tolerated out of anticipation for the product. Also, a high quality vehicle will make more people sit up and take notice that electric cars can be useful as vehicles, and not just golf carts running around the neighborhood. If Tesla can raise the average person's perception of electric cars I'd say they've done a valuable service to a fledgling industry.
The next vehicle will obviously meet numerous high hurdles, but as far as reaching the current goal of producing an electric sports car Tesla certainly looks to be on track and I hope it meets with success that can be leveraged in the future.
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kert 3:18PM (10/15/2007)
"And that Subaru R1E only has a 50 mile range"
Umm, you are off by a factor of two, at least. And the others ? Mitsu just announced they have upped the i MiEV range to past 100 miles per charge.
Thats well into "entirely practical" for most city commuters.
I think mr. Eberhard and a lot of american press hasnt kept very much up to date on whats going on in other parts of the world.
There are electric Fiat Pandas and some Renault model on sale in some parts of Europe with Zebra batteries, that also pull 100+ miles a charge, and Panda is a very well received model in general. Certainly not crap.
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Phil L. 3:33PM (10/15/2007)
My frustration with Mr. Eberhards's realization that a succesful EV must start at the "top" of the market and work its way down:
I likely won't have an EV anytime soon.
Just being realistic. I don't have a cell phone or a flat-panel TV, either (hoping to save that money for an EV). I've been shopping eBay for an EV project - among them are the names mentioned in the "failed" list above. But most won't work for me for the same reasons they didn't succeed in the first place.
Ed B's EV quote:
"It's true these cars cannot meet the needs of everyone. They can only meet the needs of 98% of the population."
...doesn't ring true as soon as you include one important factor: Affordability. Sure, he already has his RAV4EV. Recent examples on eBay (and there aren't many out there) go for about $50K. Well out of my price range for any vehicle, let alone a used one with a problematic future when it comes to parts and service. Can you afford one?
Still, I wish the Tesla well - and hope its success helps create a vibrant, competitive and affordable EV market.
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kert 3:39PM (10/15/2007)
by the way. Tesla hasnt shipped as much as an alloy rim to their customers.
A thousand not-so-good, but earning solid miles on their clocks every day in london, G-Wizes, are better for the environment than gazillion webhits on a site full of roadster pictures. Yes, public awareness of t he EVs is good, and Tesla has done that with their PR, but GoinGreen in London does that every day in London by putting over a thousand cars on the streets, and they are upgrading and improving their product lines, and also getting some healthy competition from Nice Mega City and other new entrants.
For a company that hasnt shipped a single bolt yet, mr. Eberhard might want to tone down his comments a bit.
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Ernie 4:24PM (10/15/2007)
Kert said:
"Once again. Theres Mitubishi MiEV, theres Subaru R1E and Nissan Mixim.
They all suck ??"
Yes, because like every other totally awesome concept car built by every big car company in existance today, it's "Five years away". The cars you listed have no actual release date, have no factories to build them, dealerships aren't taking orders for them (even preorders), and for all intents and purposes, they don't exist.
Tesla has a release date and a factory for their cars, at the very least. And the prototypes most certainly Do Not Suck, by *anyone's* measure. You won't see Top Gear making a parody video of a Tesla car anytime soon, that's for sure.
Martin Eberhard set out to make an electric car that's *better* than gasoline cars, because he knew that he could. Zenn set out to make an electric car that was *adequate*, and not even for everything that anyone wants to buy a car for. And that's why Zenn's cars suck, and Tesla's don't.
I think that Tesla will beat Mitsubishi to market for a mass-market electric car, even though they don't have a prototype yet, like Mitsubishi does. It has more to do with how so many other manufacturers have built concept cars just like the iMeiv that never made it to market due to will power within the company.
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