How Tesla Fumbled
Tesla has never been good at building cars. Even before deliveries began, forums sparked up with concerns over the Tesla roadster’s panel alignment. Since then, as the cars hit the road and the company shot skyward, complaints about Model S’s with windows that leak when it rains or mispositioned wire looms, and Model Xs with drooping window seals or mysterious rattles when reaching speed have become commonplace.
When the Model 3 started rolling off the lots, the feedback was more of the same—the car was exciting and mostly great, it just wasn’t built great. Condensation fogged headlights, interior paneling popped off, exterior pieces were misaligned, paint jobs weren’t consistent, and some seals failed to hold while others were drowned in adhesives. No matter the year, the model, or the factory of origin, buying a new Tesla has always been a roll of the dice where the bad rolls have been laid out on Twitter.
Of course, social media posts are inherently anecdotal in nature, but Tesla’s struggle to deliver a consistent product goes beyond outraged individuals. Scroll YouTube’s results for “Tesla Build Quality” and the search will populate far more videos offering negative feedback than positive. Or take this poll on Tesla’s subreddit, where a majority of all respondents reported at least minor or cosmetic issues with their vehicle. While Twitter, YouTube, and Reddit may all have a bias toward negativity, you can take it from the man himself, Elon Musk, who admitted that the company’s build quality waned when production ramped up. Or, for perhaps the most objective stance of all, there’s the Consumer Reports annual reliability rankings, where Tesla placed second to last in 2021 and 19th out of 24 manufacturers in 2022.
The company simply struggles to deliver consistent, reliable, well-assembled vehicles. It’s been a problem since the beginning, it’s been a problem the company has sought to address time and time again, and it’s been a problem that’s taken different forms over the years. But it’s not a problem Tesla’s tried to hide—it’s not a deep, dirty secret, but rather, something that comes with the territory.
Tesla has lacked the consistency of legacy car manufacturers. After all, they aren’t a legacy car manufacturer—they’re the plucky upstart, the company that’s been bent on changing the world, the company that’s moved fast and broke stuff. The side-effect’s been inconsistent products, but from the perspective of the consumer, what’s one minor rattle or subtle paint problem when you’re leading the charge toward a brighter, bolder, greener, gasless future, right? But even after building the car, Tesla struggles with a step that customers never even knew could go sideways. If Tesla’s bad at building cars, then they’re at best hit-or-miss when it comes to delivering them. At certain points, when favorable conditions exist, Tesla delivery has been more than punctual.
In the case of the Model Y at the end of 2022, slack in demand and increasing production capacity at Tesla’s Texas factory shrunk delivery times to a matter of weeks. But for every November of 2022, there’s been a September of 2018. By the middle of that year, long after Tesla announced the arrival of the Sedan-style Model 3, and after some 450,000 eager customers had put down deposits for the vehicle, the company was way behind, only having delivered around 10,000. By September, Musk described Tesla’s predicament as “delivery logistics hell.” But, to be at the bleeding edge of what feels like a revolutionary purchase, Tesla buyers are generally willing to wait.
In fact, as the delivery problems mounted, some of the brand’s most loyal offered to volunteer at delivery centers and help with customer service. What Tesla customers didn’t like, however, was being left to wait in the dark, or worse, feeling misled. Some of those who were once happy to wait showed up at delivery centers for their new Model 3 only to find that there wasn’t one waiting for them, or that it had been damaged in shipping, or that they had been mistaken for someone with the same first name. Others excitedly waited for their delivery deadline only to receive a call just days before that there would be another delay. Some of the scorned demanded refunds, others went to Twitter searching for answers when they couldn’t get through to anyone at Tesla. Many let the experience shape their opinion.
Now, ultimately, Tesla pulled itself out of the hole it dug, and the exasperated early adopters finally got their cars. But the problems persist—buyers still check in on their delivery date only to see that it’s been bumped back a month, customers save their “get ready for delivery in two weeks” notices only for them to start piling up in their inbox, and the frustrated still ask what’s going on over Twitter because that’s the easiest means of getting an answer. Frustrations have also expanded beyond the labyrinth-like buying process too. Not only are Teslas more numerous than ever, some of them are now a decade old. As it’s become common to see Teslas almost anywhere nation-wide, the company has only established 163 service centers spread across the US.
That means if you own a Tesla in Flagstaff, Arizona, you’re about 150 miles or 240 kilometers away from anyone certified to work on your vehicle. If you live in Wichita, Kansas, your nearest options are all a state border and a two-hour drive away. Making things more difficult, service centers are low on loaner vehicles, so getting from Phoenix back to Flagstaff or Kansas City to Wichita requires a creative application of Tesla-supplied Uber vouchers. Even as the company continues to expand its mobile service fleet, the growth of the service team is being outpaced by the total number of Teslas hitting American roads. So, whether stationary or mobile, Tesla’s service capabilities are being overwhelmed.
What were once appointment wait times numbered in days have become numbered in weeks that are increasingly liable to cancel. Tesla’s driving functions are reliable—an inherent plus of the electric drivetrain—but everything else is clearly not, so facing inconvenient service, Tesla owners just wait, listening to their rattles, error tones, and wind squeals for years, feeling increasingly fleeced by the company that demanded luxury-car prices for something that looks nice but feels cheap. So the company is burning through their existing customers—the group most likely to buy future Teslas—which is certainly a problem, but perhaps even more concerningly, it’s tough to understand what they’re doing to attract new ones. It hardly seems like it’s by offering them a deal: compare a Model Y Long Range to a Mustang Mach-E Premium and it has slightly better acceleration, slightly longer range, but a slightly higher price—as far as distinguishable differences go, there are few.
It’s a similar story upmarket with the Model S —the Lucid Air nearly matches on acceleration, beats it on range, and is close enough in price that few in this market segment would bat an eye. And then if you go all the way to the other side of the market, Tesla is bested by Chevrolet, whose base-model Bolt EV starts for some $15,000 less than the base Model 3, while coming close on many specs. So, it’s clear that Tesla is not trying to compete based on price, so it’s probably something else. Maybe it’s by offering something different—maybe they’re trying to entice the market by offering a vehicle that nobody else does, but everybody else wants. Well, while unique in their minimalistic design, the broad strokes of Tesla’s product line-up is uniquely basic: mid-market sedan, mid-market SUV, upmarket sedan, upmarket SUV—that’s it.
Bafflingly, Tesla had the opportunity to differentiate its product line-up, and it recognized how massive an opportunity doing so would be, but then just… didn’t. Year after year after year, it’s never a surprise who will top the list of American vehicle sales—it's the Ford F-series. It’s always the Ford F-series. In Kansas, or Texas, or Louisiana, the pickup represents about one of every twenty new car sales.
In Wyoming, it’s more like one in sixteen, while up in Montana, one in every thirteen new cars is a Ford F-150. These pickups are just so popular, and the only vehicles that even come close to their sales figures are close equivalents like the Chevy Silverado or Ram trucks. Americans just love their pickups, and the market is uniquely consolidated compared to other vehicle types so recognizing this, a decade ago, Musk announced Tesla would go after the F-150 with an EV equivalent—a prime opportunity to disrupt a vulnerable market. Six years after that, Ford announced they’d just build an electric version of the F-150, three years after that, it entered production, and today, there are thousands of F-150 Lightnings on the road and exactly zero Tesla pickups. Adding to the woes, the F-150 was merely joining a market already kicked-off by the Hummer EV and Rivian R1T, meaning there are three manufacturers already in production, working out the kinks, ramping up to massive scale in 2023.
Even the earliest possible Tesla Cybertruck production date will therefore compete against at least three major, entrenched, mature competitors. Plenty have criticized far more about the Tesla Cybertruck concept—speculating that consumers will shirk its audacious shape, that regulators will reject its innovative design, that component costs will make its purported price impossible. That could all be true—in fact, considering Musk himself admitted the company did zero market research for the vehicle, it more likely is—but perhaps the most crucial critique of the vehicle is the fact that it doesn’t yet exist.
First moves matter. Consumers can read a review about the Lightning, take a Rivian on a test drive, even walk up to a dealer and buy a Hummer EV today, while the Cybertruck is relegated to the “more” tab of Tesla’s website, featuring absolutely zero specifications or even prices—merely the option to leave a $100 refundable deposit for the chance to get in line to buy the vehicle once it finally exists. While the devoted few will maintain that the Cybertruck will change the game, it would have been far easier for Tesla to define the game—years ago, when it first recognized the opportunity that it later squandered.
But maybe they’re not trying to compete on cost, and maybe they’re not trying to compete on differentiation. Maybe China is the answer. Tesla believed that enough to cozy-up with the CCP and open a factory in Shanghai, largely to produce cars for the Chinese market itself, and this has gone decently. They sell tens of thousands of vehicles to the country each month, accounting for about 40% of the company’s total sales, but in the largest EV market in the world, Tesla is not the largest EV manufacturer. That’s BYD.
No company globally produces more EVs, they are now bigger than Tesla from a volume perspective, but that’s not the most staggering part—this is. Their growth rate is ferocious… and here’s Tesla’s. It is famously difficult for western companies to sustainably compete in the Chinese market—Amazon failed, Uber failed, AirBnB failed, Google, Best Buy, Home Depot, Macy’s, eBay, Yahoo. It’s harder to find one that did work than didn’t. China is just such an immense market that there are equivalent-quality alternatives to western products that are better suited to the needs and wants of Chinese consumers, which leave western managers dumbfounded. They don’t understand why they’re getting beat, and that’s the point: they don’t understand.
Chinese companies are able to fulfill the tiny, unique, nuanced preferences of Chinese consumers better than foreigners, so in Tesla’s case, inevitably, their vehicles are going to be worse for Chinese consumers than the homegrown alternatives, and unless they succeed where almost all their equivalents have failed, they just won’t be able to understand why. Foreign-made vehicles do sell in China, but primarily as luxury goods—selling Americanness or Germaneness or Britishness as a brand, rather than competing on the merits of the vehicles themselves. That means that China can be a massive market for Tesla, but they’ll struggle to go mass-market. They’ll always be a secondary player, meaning it might not be a market worth betting on.
So maybe it’s not price, not differentiation, not market, not any of the traditional ways that companies gain an edge—maybe it’s innovation. In 2016, after being dropped by its previous autonomous partner over safety concerns, Tesla charted a new vision for full self-driving, and quickly started selling a software package referred to as “full self-driving” for $3,000 soon after. But “full self-driving” didn’t exactly mean full self-driving—rather, it meant adaptive cruise control, auto steer, auto lane change, auto park, traffic light recognition, and a few other driver assist features depending on street type, each requiring driver intervention to manage and monitor, but not full self-driving… not yet. Musk said that would probably come in 2017, when the vehicle would be able to drive coast to coast, from LA to New York, without a single human touch—not even for charging.
That didn’t happen. It also didn’t happen in 2018, or 2019, or 2020, or 2021 either and all the while, Musk and Tesla salespeople, following orders, pressured consumers into paying for the software upgrade, telling them to get it now before the price would rise, which it did, all the way to $15,000, despite the fact that, still today, Teslas are not capable of full self-driving. There is now an open beta for something closer to true full self-driving, but far away from that vision of touchless trips from LA to New York—it’s erratic and imperfect, in a way that requires a significant degree of human oversight and intervention to avoid becoming a liability on the road. Arguably, right now, it’s more trouble than it’s worth, but the issue, for Tesla, is less about whether its full self-driving works.
It’s that, for the better part of a decade now, it’s sold consumers on the promise, failed to deliver, made new promises, failed to deliver, and repeat and repeat and repeat. The type of autonomous that was promised will be game-changing, so the sales pitch worked, but once again, the company has burned through its most promising customer-base: existing owners. Tesla is facing class action lawsuits and Department of Justice investigations over its autonomous program, but even if those lead to nothing, even if it’s navigated strategic ambiguity properly to legally mislead, the reputation Tesla has earned as a company whose word means nothing has to have an impact. Ok, so, not price, not differentiation, not market, not innovation—maybe it’s Musk? Maybe his cult of personality is so strong that consumers will buy the vehicle specifically because it’s his? Maybe he’s the brand? In fact, maybe he’s deliberately calibrating his public image to appeal to a demographic less likely to buy an EV, strengthening that fledgling consumer segment for the company? Well, if that is what’s happening, it’s not working. According to a Morning Consult survey, Tesla’s net favorability among Democrats plummeted 20.3% between October and November 2022, when Musk purchased Twitter and started making a series of controversial changes and statements.
Among Republicans, the favorability actually increased, but only by 3.9%. That’s not nearly enough to make the move worth it for Tesla, because Republicans don’t buy EVs—only 25% of them said they would even consider them in the next year, while 44% of Democrats did. So, if you make the very simple assumption that a company’s favorability correlates to its sales, Elon Musk’s actions, objectively, reduced Tesla’s sales, and took money out of its shareholders pockets. While Musk might have been the visionary behind the disruptive behemoth, today he’s a liability—an increasingly unlikable loose canon who can’t seem to separate his image from the company’s.
There’s not a whole lot left to set Tesla apart. This isn’t an existential threat. It’s not like Tesla is going to suddenly start fading away. It’s still a tremendously large, profitable company with an incredibly passionate fanbase that will find ways to defend any and all accusations of weakness, and there are clearly hoards of people that love their vehicles. But people are learning to love other EVs too.
Rife with quality issues, poor customer service, broken promises, and a generally amateur feeling, consumers are taking the safe route and increasingly opting for the options put forward by the incumbent manufacturers. Meanwhile, startups like Rivian are looking at Tesla’s shortcomings and addressing them—offering better quality, better customer support, and better communication. So, Tesla’s just sitting there, praying on their downfall, letting market share just march out the front door. Tesla's competitive advantage was built on scarcity—for most of their history, they were the only legitimate horse in the EV race.
Consumers were willing to deal with bad quality and service and communication because it’s the price you had to pay to get something groundbreaking. But Tesla is no longer a startup—it’s one of the largest companies in the world—yet it still operates like a startup. Meanwhile, Ford, GM, Volkswagen, Rivian, and others are acting as the adults in the room. Company culture is notoriously difficult to change, and that difficulty mounts the larger a company becomes, so when you have something as massive as Tesla that is still in start-up mentality, it is really hard to understand how that will change. Tesla’s fumble is what could have been.
They had a decade head start on a burgeoning industry that, within decades, will just be known as the auto industry. They could have been the auto manufacturer. They could have been a giant. They could have been Ford, GM, and Chrystler, but instead, the other EVs are here. They’re popular, they’re competitive, and while Tesla keeps making excuses, breaking promises, burning bridges, and swinging wildly for the fences to keep the hope alive, everyone else is slowly and methodically chipping away. Maybe Tesla succeeds.
Maybe it's able to use its dominant market position to maintain its dominant market position, but what’s sure is that it’s going to be a whole lot harder than it had to be. This day, of mature, mainstream EV market competition, was always going to come, and yet Tesla did little to prepare, and did lots to open up pathways for their competitors to eat into their market share. So if, in ten years, Tesla is anything but the biggest car manufacturer in America, the explanation will likely be less about what it does over the next decade, and more about what it didn’t do in the years it squandered leading up to today. This video’s sponsor is Wren, and some of you may be surprised by that because Wren is a carbon-offsetting provider. Last year, I made a video about how the carbon offsetting market is a scam because it incentivizes ineffective offsets that can actually increase overall carbon output—that video got a ton of attention, even making it onto Last Week Tonight with John Oliver, meaning it made it all the way to the people behind Wren. Their whole idea is to be a carbon offsetting provider that has the greatest chance of actually working.
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2023-02-25 21:44
