Throughout much of the last several years the Los Angeles Times has been enthusiastic about Tesla. The paper enthused about the gigafactory, the Model 3, the powerwall and the solar shingles. It was a surprise, therefore, to read the following headline on Saturday in the Times business section: “Tesla enters survial mode as layoffs loom, stock sinks.” The fact is that not much has changed at Tesla from a fundamental standpoint. It still faces the same issue of competing in the hotly competitive and capital intensive automotive market. It still has problems trying to make money while honoring its promise of a $35,000 Model 3. But now sentiment seems to be switching. And sentiment can move much faster than fundamentals. The stock was down over 12% on Friday. It will be interesting to see what happens when trading reopens on Tuesday.
Hidden within a previous post on “How Green is Your Tesla” was a discussion of fuel costs. But with gas pricing falling, I thought fuel costs deserved another look. Attached is a handy spreadsheet that calculates how many miles per gallon your gas powered car has to get for fuel costs to be less than for a Tesla Model S 85. The calculation is done assuming that electricity costs either 25 cents or 35 cents per kilowatt hour. Those are the second and third tier rates charged by Southern California Edison in the Los Angeles area. You can plug in your own rate, but remember you want a marginal rate after taking account of your normal home usage. The marginal rate is more likely priced at a higher tier. The spreadsheet also takes account of the fact that the actual Tesla range is on the order of 67% of the stated range as documented in the previous post.
As the spreadsheet shows, given a cost for gas of $4.15 per gallon (the currrent mid-grade rate in Los Angeles) , the breakeven mileage is 34.0 mpg at the 25 cent electric rate and 24.3 mpg at the 35 cent rate. The bottom line is there may be a lot of reason for choosing an electric car but saving on fuel costs is not likely to be one of them, at least at current prices.
Service hell. Though it might be more hell for owners than for Tesla. Tesla reported a 3rd quarter profit ather the market closed today and the stock has sky-rocketed again. The company showed that it can produce the Model 3 in meaningful volume at margins of 20% (as long as the cars are sold for a minimu of $46,000). The problem is that as all these added cars roll out, they will all have to be serviced. In fact, the new Model 3s may need more service than the S or X given the race to produce them. As the owner of an S (in fact I have owned three of them), I am dreading service hell. Recently a light came on in my car saying that my suspension needed service. My initial call to Tesla went unanswered. Fortunately, the light went out. Next time I may not be so lucky. With limited servicen centers, no third party service outlets, and a lot of new Model 3s on the road, customers may be about to enter service hell. What it means for the stock price is another question.
Recently, my son and I updated our effort to compare the efficiency and “greeness” of a Tesla Model S and a standard, non-plugin Prius. Our latest writeup follows along with the underlying data.
In closing, it should be noted that there are several factors the comparison has ignored. For instance, the analysis does not take account of the impact of transporting the gas or electricity. In the case of electricity, high voltage lines are a convenient and efficient way of moving power. However, the energy loss in charging a Tesla’s batteries can be 10% or more depending on the voltage used at the charger. The analysis also ignores the energy requirements and environmental impact of building the cars and disposing of the waste at the end of the car’s life. Battery powered cars require a good deal more energy to build and disposal of the batteries is an environmental challenge.