Is Tesla A Take-Over Target ?

Is Tesla A Take-Over Target ?

We know it's the best electric, but is it " the best car in the world " ? Does Tesla's infrastructure, design and customer service compete? Is Tesla A Takeover Target? Elon Musk is an extremely bright individual by any standard, and may eventually be recalled by history as the Leonardo daVinci of our times. His success in seemingly unrelated endeavours - Paypal, Space-X, Tesla and possibly The HyperLoop put him on a podium that possibly could only be shared in recent times by Steve Jobs. Although Tesla manufactured their Roadster for years, The Model S is its' real foray into the real world of luxury automobile marketing. The guardrails and soft shoulders are filled with the debris of good intentions of automobile company start-ups. When one considers that in the last 40 years, only Audi has been able to survive and prosper, that Tesla has made it this far is an extraordinary achievement in itself. Oddly, this achievement is not the result of " alien technology " nor is it even proprietary. FOUR times the KW capacity of any rival.

Mr. Musk has taken the old adage - " There's no substitute for cubic inches " and electrified it. So Far So Good: 55 Sales Per Day. Tesla Owns Its Retail Distribution. This arrangement, in which the manufacturer also owns the distribution channel is unique in modern automobile marketing, as all other manufacturers SELL their vehicles to authorized franchised privately-owned dealers. Tesla must wait until a retail buyer takes delivery to rack up a sale. Tesla does not account for the extreme likelihood that most of the "financed" sales it reports may be erased within three years; no " 50% buy back reserves " are noted in their quarterly reports for this contingency. With Tesla's buyback in place, no other manufacturer's dealer is likely to take a Tesla in trade for more than 50% - and will instruct their customers to turn the car back to Mr. Musk. Big Fish: Little Pond. Tesla has made a very big deal about the Model S outselling the luxo-barge offerings of Mercedes, BMW and Audi. These headlines may impress investors and the casual public, but is the comparison really meaningful?

The S-Class and A8 are being refreshed in 2014; the new BMW 7 Series follows in 2015 - so sales for these premium cars is typically low given the product life cycle. Second - sales of the S-Class, 7 Series and A8 account for a mere 3% of Mercedes, BMW and Audi totals - roughly 10,000 units each annually. The bread and butter comes from the compact and mid-sized offerings. Take a look at the websites for Jaguar, Audi, Mercedes or BMW and you will find a page that clearly outlines lease terms for each and every model. 105 per month if factored over the term of the lease. Tesla MORE Competitive Than It Realizes: The Excel Spreadsheet. The Classic Car Factory decided to run some actual purchase and lease comparison with other 2013 vehicles one might consider competitive with the base 65kw Model S: all information was taken directly from the manufacturer's websites.

Comparison: Cost of ownership over 36 months driving a total of 45,000 miles. PURCHASE loan at 3% is amortized over 72 mo, traded at 36 mo. LEASE is based upon 36 mo/10,000 miles per year with a .25 per mile surcharge for an additional 15000 miles. 7500 Federal Tax credit is applied to the Tesla as a down payment / cap reduction - however no down payment from the customer is required. Assuming 20 MPG AVERAGE; 36 mo. The beauty of Tesla owning its entire distribution channel is that it not only captures all of the profits between cost and MSRP, it never finds itself under pressure to discount for fear of a nearby franchised dealer undercutting them. Unfortunately, Tesla also owns its service centers. Traditional dealerships make their real money in the service bays and parts dept, charging parts and labor back to the manufacturer when repairs occur under warranty. Repairs that are done out of warranty afford substantial labor rates and parts margins.

Tesla - being the manufacturer - has little opportunity to generate profits from service or parts as almost everything they've produced so far will be "under warranty" for years to come. Mall Stores vs. Dealerships. The mall store concept may be a low-cost alternative to building stand-alone stores, but the disadvantages are obscured when the product you offer has more customers than you need. It is anticipated, however, that Tesla may produce more vehicles than are already spoken for by the 1st quarter of 2014. The problem this presents is that inventory cannot be showcased at a Mall Store. Though each Tesla store has several assigned spaces for a demonstrator or two, there is no "lot" for a consumer to be swayed by a specific vehicles color or options. Should a customer be " ready to buy today" the store has no capability to deliver a vehicle on the spot. These type of sales - to customers who are " in the ether "- presents a real opportunity for a dealership to sell out of stock and "get the car across the curb". Tesla is unable to take advantage of these sales.