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Tesla Sales Blow Past Competitors, But With Success Comes Scrutiny

Jan 16 2014, 9:26am CST | by

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Tesla Sales Blow Past Competitors, But With Success Comes Scrutiny
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Tesla Sales Blow Past Competitors, But With Success Comes Scrutiny

To get a sense of how successful the Tesla Model S is, consider this: In 2012, the bestselling full-size luxury sedan nationwide was the Mercedes S-Class. It sold 11,794 units total. For 2013, the Tesla, essentially a brand new car was purchased by around 18,000 Americans. That makes it easily the category leader, even though we’re not sure yet by precisely how much since Tesla is the only volume automaker that won’t report sales on a monthly basis.

That quirkiness about sales data is one of many unique things about the company and its maverick CEO, Elon Musk, who should be basking in the glow of an extraordinary year for Tesla. Instead, he’s been spending the past few days debating whether the company’s recent decision to send out new adapters and a software update for its electric-vehicle chargers constitutes a recall. It was just the latest in a series of tangles Musk has had with the media, primarily over the safety of Tesla’s vehicles. Still, it couldn’t stop the Tesla juggernaut in 2013.

Competition? What competition?

Luxury car sales had a good year overall. The S-Class Mercedes reached 13,303, the BMW 7-Series chalked up 10,932, the Lexus LS managed 10.727. No other sedan in the Tesla’s class reached the five-figure mark, with the Audi A8 at 6,300 and the Porsche Panamera plummeting 29% to 5,421. We won’t know precisely how many of the 22,300 Teslas the company delivered wound up in the U.S. until the company’s earnings report in a couple of weeks. But conservatively it outsold the nearest competitor by more than 30%.

Tesla only began selling in Europe during summer and plans on commencing deliveries in Asia shortly, which has the company bullish on 2014 sales. Tesla VP Jerome Guillen said 2014 is about “reckless growth” and Musk has set a goal of reaching 800 cars per week before the end of 2014. With the company having delivered 6,900 cars in the just-ended quarter, that implies a production goal of about 35,000 for the coming year using a straight-line extrapolation — more than 50% above 2013.

Charging up

But the past year wasn’t just about building cars, it was about keeping them moving. The company’s Supercharger network is expanding so quickly, it feels like a new location opens almost every other day. With 65 chargers in the U.S., 14 in Europe, and plans to expand it to China, Tesla is doing what it can to make it possible to drive its cars long distances given the constraints of current battery technology. The network is especially strong in California and along the west coast, where Teslas have been especially popular.

It’s also gotten better in places like Texas, where the company can’t directly sell its car, due to the efforts of car dealers there to ensure the company’s direct-sales model remains illegal. That presents a continuing challenge for the company as Texas, Virginia and other states make it difficult to buy a Tesla. Conventional wisdom is that Musk won’t change his mind and work with car dealers, but eventually he hopes to sell a less expensive “third generation” Tesla starting at $35,000. Moving a car in much higher volumes without places to buy it easily might prove impossible.

Looking to 2014

That third-generation car, however, is still 3 years away, according to comments Musk made recently. In the meantime, the first deliveries of the Model X crossover are expected very near the end of this year. Featuring all-wheel drive and Model S-like pricing, the final version wasn’t shown at the Detroit Auto Show, but has been spotted on Southern California freeways.

The other no-show for Tesla so far has been its promised battery swap stations that were demoed with fanfare last summer. While the company didn’t commit to a 2013 rollout explicitly, it suggested the facilities would be available in California before the end of last year. (So far a request into Tesla for comment on a revised timetable hasn’t been returned.) With battery swapping, a “recharge” could occur faster than refilling a gas tank and might put to rest concerns about range anxiety once and for all.

Another big event to look for in the coming year is any announcement about the company’s “Giga Factory.” That’s a name Musk gave to a new battery factory he hopes to build to supply cells for the third-generation car. Current worldwide battery production of laptop cells — the kind Tesla uses — would be more than doubled to meet the company’s needs for the new vehicle and Tesla believes the best way to do it is a purpose-built factory. Any news about timing, location and how it will be paid for is a strong indication the third-generation project is on track. “That’s the car we’ve always wanted to make,” Musk told CNN the other day.

Safety pinned?

Which brings us back to the safety issue. Musk also admitted to CNN that by being so visible, he makes himself and the company something of a target. ”I do think there’s an excess amount of attention paid to Tesla,” he said. But he also exacerbates the situation when he quibbles over the specifics of legalese. ”The word ‘recall’ needs to be recalled,” he tweeted two days ago.

The issue there was that Tesla did not, in fact, recall any vehicles. It did, however, send out 29,000 new charger adapters. From a consumer-product safety standpoint, that’s a “recall,” whether Musk likes it or not. He was quick to point out in his conversations with CNN and CNBC that the Model S is incredibly safe. There has yet to be a fatality in one and the car apparently performed terrifically in cold weather, according to Tesla (see the photo above). “Due to the precision of its electric powertrain, the Model S has outstanding traction control relative to the much higher latency and inertia of a gasoline powertrain.”

After a series of events where three Teslas caught fire in 6 weeks, it’s fair to note that there hasn’t been a single Tesla fire in the 10 weeks since. Given that one of the three cars was in a truly horrendous high-speed collision, one might argue that incident could be dismissed. That leaves two fires in well over a year across 30,000 vehicles. The question is whether the reality that the Model S is far less likely to be involved in a vehicle fire than a gasoline car will replace the perception that something might be amiss with the car. So far the sales figures indicate that the media is far more interested in drumming up a firestorm than buyers are.

Follow me on Twitter and on FacebookFind the rest of my Forbes posts here.

Source: Forbes

 

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