The IT Nerd

When I posted this story on yesterday on Tesla cutting prices significantly, I was wondering if I should post the story or wait as I was thinking that there would be blow back from this move. So, why was I expecting blow back? Tesla had some really significant incentives coming into the New Year to move cars. So if you were one of those people who took advantage of that, and then found out that Tesla cut prices by 10% or 20%, you’d be mad.

In the end I decided to push “Publish” on the story. But I really didn’t have to wait very long to see the blow back from this as a simple browse of Twitter showed examples of owners not happy with Tesla and Elon Musk:

Now I get why people are ticked off. If you just leased a Tesla, you won’t care. But if you just bought a Tesla, it’s just dropped the value by a significant degree overnight. And you will never, ever see that price recover. And if you’re trying to sell a Tesla right now, you’re going to have to sell it for less because used Tesla prices are now going to drop as a result of this price cut.

But at the same time, and to be clear I am not defending Tesla, but what are they supposed to do? Anytime there’s a price cut of some sort regardless of what the product is, people who bought the product at a higher price not to long before the price drop are not going to be happy. Having said that, Elon’s current situation and personal “liabilities” are going to make this situation worse than it would be for pretty much any other company on the planet.

If I were to give Elon some free advice, I would give anyone who bought a Tesla in December when their aggressive incentive program was in place some free Supercharging credits to take away the sting for really recent buyers. Like say $5000 – $7500 worth or Supercharging credits. Because that’s the group that are most likely going to be very upset. Everyone else would unfortunately have to take it on the chin. It sounds harsh, but the reality is that Elon has created a situation where there is no possible way for him or Tesla to make everyone happy. Thus Elon has to take a very targeted approach and hope for the best. Because I suspect that given the situation with Tesla and Elon Musk, some of these people won’t be buying an EV from Tesla ever again because of this price cut.

Tesla for years has tried to position itself as not like every other car company out there. But that’s clearly changing as news has come out that prices for many of their cars have been slashed:

This follows similar price cuts in China. The question is why are they doing this? I think the answer has many aspects to it:

• Inventory: Tesla is likely sitting on a lot of inventory. They didn’t ship as many cars in 2022 as they had hoped. Thus they need to get rid of those cars. And fast.
• A Slowing Economy: People are less likely to splash out the cash to by a big ticket item when the economy is slowing. Thus Tesla needs to give people an incentive to buy now rather than wait and see if the economy improves. Especially since this pricing change makes some of their cars eligible for tax credits which might make someone spring for a Tesla.
• Elon Musk: The behaviour of Elon Musk has to be a factor here as there were stories of people cancelling their orders of Tesla vehicles because of the stuff he’s said and done over the last few months. That has to have cost Tesla a number of sales.
• Competition: Tesla is no longer the only game in town when it comes to EV’s. GM, Audi, VW, Hyundai, Kia to name a few companies are all in this game. Which means that EV shoppers have options and Tesla won’t come out on top by default.

In short, Tesla has just become a car company who has to cut prices and offer incentives to get people to buy. And that’s a habit that’s hard to kick if you’re a car company because consumers just get used to incentives on new cars. Which is why I don’t know if they can get past this. I’m personally thinking that Tesla is in deep trouble here, and these price cuts are just the tip of the iceberg as they really don’t have a whole lot of cards that they can play here. But as always, I am free to be proven wrong.

Elon Musk really doesn’t have a clue about how to keep his thoughts to himself. I say that because his habit of saying anything that pops to mind has gotten him into trouble again. On New Years Eve, he said this in response to a Tweet regarding Tesla’s Full Self Driving:

To be clear, what they’re talking about is the requirement by Tesla’s Full Self Driving software to keep your hands on the steering wheel at all times as that serves as proof that you are still in control of the car should you need to take control. Well, that one Tweet has gotten the attention of the NHTSA according to The Verge:

An NHTSA spokesperson confirmed that the agency has reached out to Tesla to gather information about the Musk tweet, in which the controversial billionaire suggested he would eliminate a driver monitoring function that warns users to keep their hands on the steering wheel while using FSD. 

The information gathering by NHTSA is part of a broader investigation into Tesla’s Autopilot, which has been linked to over a dozen crashes involving stationary emergency vehicles.

Seriously Elon. You’re already under investigation because of issues with Tesla’s Full Self Driving, and you’re really going to poke a stick in the cage so to speak? You may be a billionaire, but you’re clearly not that smart as that Tweet was a dumb thing to do. That’s on top of the fact that this feature is years late and is still in beta. As it should be given what YouTubers like MKBHD, Along For The Ride, and Snazzy Labs have found. Which is that it’s not that good.

I guess that Elon must be bored and he needs some more problems to deal with. Because clearly the ones that he currently has with the implosion that is Twitter and the crash of Tesla’s stock price aren’t enough to keep him occupied.

Earlier today I wrote a story about Tesla and what they needed to do to get out of the apparent death spiral that they’re currently in. One of the bullet points that I had was that they had to stay out of legal trouble. But that’s not happening according to Reuters:

South Korea’s antitrust regulator said it would impose a 2.85 billion won ($2.2 million) fine on Tesla Inc for failing to tell its customers about the shorter driving range of its electric vehicles (EVs) in low temperatures.

The Korea Fair Trade Commission (KFTC) said that Tesla had exaggerated the “driving ranges of its cars on a single charge, their fuel cost-effectiveness compared to gasoline vehicles as well as the performance of its Superchargers” on its official local website since August 2019 until recently.

The driving range of the U.S. EV manufacturer’s cars plunge in cold weather by up to 50.5% versus how they are advertised online, the KFTC said in a statement on Tuesday.

The fine is a rounding error to Elon. Let’s get that out of the way. But the fact that more and more regulators are taking a good hard look at Tesla has got to be a concern. After all, any company needs to make sure it’s on the right side of the law or bad things will happen to said company. And given that Tesla has other organizations conducting investigations into them at the moment, not to mention numerous lawsuits, this is perhaps a sign that Tesla’s problems might be deepening.

For the last few weeks, Tesla stock has been in free fall closing at $108.045 USD a share as of yesterday. The company that effectively invented the electric vehicle market has lost over 70% of its value over the last year and faces severe headwinds. Plus there’s a significant amount of people who are cheering for the stock to go lower. To be honest, I’m in that camp because of Elon Musk and everything that he’s done in the last few months. But I’m here to say that Tesla isn’t on it’s deathbed. At least not yet. There is a path for them to recover if the company chooses to take that path. But before I explain what that path looks like, let me explain what headwinds they face so that you can understand the gravity of their situation:

• Competition: When Tesla were the only EV in town, they could do pretty much anything. Including having customers wait for months or years for vehicles. Not to mention build vehicles that have questionable build quality. Simply put, they could do that because there were no other options out there in terms of EVs. But those days are over for Tesla. Companies like Mercedes Benz, General Motors, Hyundai, Volkswagen Group, and BMW to name a few have gotten really serious about electric vehicles. And Tesla isn’t equipped to take those companies on. I say that because Tesla just announced that they shipped 1.31 million cars. Volkswagen Group is estimated to have shipped 65 million cars in 2022. If even 5% of them are EV’s then they will crush Tesla. The thing is any of the established car brands aren’t going into the EV market to just ship 3 or 4 million cars. They’re in it to ship orders of magnitude above that. And when you add other car companies to the mix, then this becomes a problem for Tesla. Things like brand loyalty come into play as well as the ability to compare the quality of a Tesla vehicle against another brand. And these are the things that Tesla will have problems dealing with.
• China: Tesla just had to shut down its plant in China because of rising COVID cases in the country. But that isn’t the main problem that Tesla has in China. Domestic competition is their main problem. Numerous home grown EV companies are taking market share from Tesla in China which has led the company to cut prices. And when you cut prices, it’s hard to bring those prices back up. The reason why this matters is that Tesla has bet big on China. And it seems that at this point that bet is not paying off. Which means that this will hurt Tesla.
• Elon: This one is pretty obvious. Elon Musk is not only a major distraction for Tesla, but he’s a drag on the brands perception. Stories surfaced of people cancelling orders for Tesla vehicles in the dying days of 2022 because of Elon. That’s not a good place to be when you’re trying to make Tesla a competitor to established car brands. And him selling stock to fund his obsession with Twitter isn’t helping matters.
• Lawsuits and other legal trouble: Whether it is a lawsuit over not delivering full self driving on time, or issues with their self driving software that have led to investigations, it’s stuff like this that send consumers as well as investors running to the exits. The more of these investigations that are floating around the company, the worse it is for the company.
• Lack of “new” product: Tesla is a company that is iterative. Meaning that they continuously evolve the models that it has out there. The problem is that in the car space, consumers are used to a new car coming out ever few years. For example, a new model appears. Then a refresh of said model appears about three years after that. Followed by a brand new version about two years after that. While it is true that a Model S produced today is a substantially different product versus the one that Tesla started shipping in 2012, consumers don’t see it that way. And products like the Cybertruck or Roadster are MIA. That means that there’s less incentive for people to enter a Tesla dealership because they’re conditioned to always want “the new hotness.” And Tesla currently has no “new hotness.”

Those are significant headwinds. But there is a reason why Tesla is still around. And that’s the Supercharger Network. Nobody else in the EV game has the charging network. And that is enough to drive sales until an established brand matches them on that front. And that could take years for a General Motors or Hyundai to do that. Meaning that Tesla has some time. But not much of it. Which is why Tesla needs to take this path to put them back on top in the EV game. On top of addressing all of the above issues, I’m going to highlight four things that they need to do immediately:

• The quality has to improve ASAP: If you read reviews of Tesla online, or watch video review of Tesla on YouTube, quality in the forms of excessive squeaks and rattles along with the fit and finish of their vehicles keep coming up as issues. They need to deal with that in order to be a player against established car companies.
• Tesla needs a PR department: When Elon Musk is your chief spokesman, that’s something that will work until it doesn’t. And right now it’s not working. Tesla needs a real PR department. They need to interact with automotive journalists which will allow them to get their message out about the cars and steer the message away from Elon. They also need a press fleet because most reviews that I’ve ever read or seen rely on the journalist borrowing a Tesla from a friend. Consumers look at that and see that as a bit suspect. As in Tesla has something to hide.
• They need to bring in automotive types to run manufacturing: The only way to compete against established car brands is to get people who have been there, done that and got the t-shirt. Because Tesla needs to scale to making millions of cars quickly. Otherwise they’ll be only producing a couple of million cars a year or less against competition that makes cars in orders of magnitude above what Tesla can do.
• Elon needs to go: Tesla needs to dump Elon immediately. The longer he hangs around, the more damage he does to the company. And he’s unlikely to leave Twitter and have the discipline to focus on running Tesla. Now it’s safe to say that he won’t leave willingly, so the board of directors have no choice but to fire him. I question if they have the will to do so, but I am free to be surprised.

If Tesla does the above, then I believe will put them back into the game. If they have the courage to take that path. But what do you think? Do you think Tesla has a path back from the brink or should everyone start giving the company its last rites? Please leave a comment below and share your thoughts.

Remember the days when Tesla was the default choice for EV buyers? Those days seem to be over according to U.K.-based research firm YouGov. The firm conducts regular consumer perception studies which Tesla has always come out on the positive side of said studies. But as of November 7th, which isn’t long after Elon bought Twitter, that changed:

The electric-car maker started 2022 with a net-positive score of 5.9%, then peaked in May at 6.7%. In early November, it fell to a negative-1.4% reading.

YouGov found a political divide in the numbers. As the Wall Street Journal explains, “self-described liberals now view Tesla more negatively than conservatives, though conservatives also have a negative view of the brand on average.”

What changed to influence opinions so radically? Tesla CEO Elon Musk famously bought the social network Twitter at the end of October and has been a prominent figure in the news for reshaping its operations.

The company has also come under criminal investigation over a series of accidents that may have involved its driver assistance software, according to Reuters.

And this sentiment has confirmation from another research firm:

Morning Consult, a U.S.-based polling firm, also finds that negative perceptions of Tesla are increasing. The company surveys about 200 Americans daily to test their attitudes about several prominent brands. At the start of 2022, it said, 43% of Americans viewed Tesla positively, while 15% had a negative opinion of the company. As of Nov. 27, 38% saw the company positively, while 22% viewed it negatively.

Morning Consult’s numbers also reinforce the political divide. Among self-described Democrats, 24.8% saw Tesla positively in October. Just 10.4% said the same at the end of November. Self-described Republicans saw their opinion of the company rise, from a favorable 20% to 26.5%, over the same period.

“It seems like Tesla is on its way to becoming a partisan brand,” Morning Consult’s Jordan Marlatt told the Wall Street Journal.

None of that is good for business. And that’s likely part of the reason why Tesla’s stock has fallen by 50% this year. Which hits Elon’s bank account negatively. For this sentiment to turn around, Elon would have to do a complete 180 in terms of how he behaves. Something that I do not see happening given his recent behaviour.

At the end of the day, the only person to blame for Tesla’s brand perception issues is Elon Musk.