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40's Need a Fix

Lots of folks who've waited faithfully for a long time, and committed to an MVPA for a 40kWh car, and now are justifiably hurt to hear production is delayed again, while noob 85's get their cars quickly.

This gripe is legitimate - TM has made business decisions that have the effect of stringing along 40KW reservation holders. (Even if that wasn't the intent).

I think TM needs to mend fences with them. Here is my suggestion:

If you have a 40KW reservation and signed an MVPA, TM will refund your money on request, but grandfather in your option to purchase at the original price when the 40 starts production.

This would be a good faith gesture to credit supporters who've loaned them money. I think it would fix the problem and reaffirm folks' faith in the company's decency.

What do all of you think?

(Please note your res type in your post).

Here's my idea for Tesla:

If there are really so few reservations for 40s, go ahead and ship cars to those people with the 60kWh battery, but flip a switch in the firmware that only lets those cars charge up the capacity of a 40kWh battery. That way, the 60kWh car owners don't feel like they paid extra for something that the 40s got for free, and the 40s get the performance (but not capacity) of of 60kWh battery in exchange for their patience.

Then Tesla could just stop allowing any new reservations for 40s since it's probably not worth the trouble to make that battery anyway.

As an added bonus for the 40s, Tesla could allow the option for them to "upgrade" to the 60kWh battery at any time for 10K. My guess is that the majority of the 40s would exercise that option within the first two years of owning the car.

There is a simple solution to the 40 kWh Tesla problem. The next several cars on the assembly line should go to the long suffering 40 kWh reservation holders no matter what; whether they are 60 kWh or even 85 kWh, and at the original agreed to 40 kWH price. An alternate of reducing the price by a measurable amount ($10,000) only makes sense if they actually build the car. Challenging the faithful Tesla buyers to just walk away is the worst thing to do. The difference in cost is trivial chump change but the damage to Tesla's credibility is enormous.
A reputable manufacturer will replace a discontinued item, or one that is severely delayed in production, with the next closest version that was of at least the same grade.

Guys, these folks are not whiners, they are the faithful who feel mistreated.

The company is being smart about financial strategy but insensitive about unintended consequences.

As with the supercharger resolution:

1. Acknowledge the issue

2. Make a good faith material change to fix it.

3. Be definite, be quick, and move on.

Remember that the affected parties are price-sensitive buyers so do something that makes a meaningful difference for them.

The longer you delay communicating your plan, the less you will like what you hear, and their escalating demands.

You've been through this before, and you know what worked. It wasnt a big deal, and it ended up building rather than bleeding trust. Doing right has never failed you.

All problems are opportunities.

Mark K +1. Tesla needs to communication directly to the 40kWh reservation holders, not hide bad news in an investor letter.

sftesla: +1

Mark K ++1

If the 40 is not selling, drop it and offer a heavy discount to us 40 reservation holders that we could not possibly refuse to move up to the 60. As Mark K stated we are picking the 40 due to $ constraints so due us right but please stop punting us.

Tesla you have a chance to really shine here.

I really dont think giving huge discounts to people who have waited "longer" than others is the right answer. Im sure there is a better way to resolve the issue, but putting losing Tesla money isnt an option IMO.

I cant even imagine how you guys feel, to have reserved something 2-3 years ago, and the release keeps getting pushed back. I would be dissapointed as well.

I just think a more "realistic" solution is in order.

Elon said that 40kwh account for only 10% of all sales to date. It would not hurt Tesla's bottom line to make and deliver these cars on the timeline they gave. If Tesla is going to be so hurt by making and delivering the 40kwh cars then they need to do away with it and just have the 2 battery options.

I have my Model S, but I understand the pain and frustration of 40 kWh reservationists. Tesla should do something, starting with better communication about the cause of the delay, and a realistic time frame for deliveries. Better communication coupled with some concrete gesture is necessary.

However, I think everyone jumping to the conclusion that the delay is only because of the need to maximize short term revenue may be wrong. My bet is that there is a different reason for the latest delay. If so, it makes better communication all the more necessary.

All this talk sounds like a repeat from the delayed Sigs owners last Oct - November (I was one of the complainers). Now it's a distant memory and I am glad that I didn't back out. Waiting is the hardest part.

+1 Mark K.!!!!!

Crow - very true. They will love the car after they get it.

But a year is a tad longer than the 8 week hit Sigs took, and a business decision about delivery order is not equal to the unavoidable heavy lifting of launching production. TM worked very hard, flat-out to overcome bugs and make a great car. Everyone knew that they had to be patient and let them finish.

This is not the same. Trying to convince folks that the rocket scientists couldn't figure out how to make a pack that was half what they're already shipping is a fool's game. They will mistrust you if you offer up a technical excuse. (Despite the reality that cost engineering does take time).

TM made a choice, likely a smart and necessary one financially, but these folks got roughed up as a consequence. It reads as not just insensitivity, but outright indifference to their interests.

Morally, that's what bothers them. They feel their faith is being brushed aside for a business calculus. This thing is a festering PR hairball that is giving a needless black eye to a great company.

Keep it simple George, but please get on with it, and communicate your plan quickly.

Response latency is a defining dimension for turning this around. An unfortunate and unintended problem can and should be turned into an opportunity to affirm who Tesla is.

G-Man;
Please disclose where, besides your hindquarters, you acquired the certain knowledge that TM can make the 40kWh batteries right now, without further development work.

Appreciate your efforts, Mark K., but please don't presume to speak for all the 40's as to what we believe, why we are pissed off, or why we opted for the 40 in the first place. In my case, you are wrong on every count.

Thanks Mark K. You are pretty spot on wrt my feelings and ideals. Even though the financial aspect was more of a value decision for me, it is a financial constraint just the same.

Mbergman - of course no one can speak for you but you. Clearly though, what remains true is that you too have expressed unhappiness, and you have asked for action to resolve it.

My purpose is to see that 40 buyers also end up as happy ambassadors for TM's mission, and TM is spared the brand hit from the misstep.

BTW - There are certainly many buyers for 40's that can afford a P85, but whose lifestyle makes the 40 a right-sized fit.

This is disappointing news. Back-loading the delivery of 40's to make margin numbers look good is a bad idea. You may look great for one quarter, but if all of sudden Tesla makes 1500 40Kw's in a quarter it's going to skew the margin numbers down.

If anything Tesla needs to produce a steady stream of 40's to minimize its impact on margin.

They make the RAV4 battery which is was advertised as 40kw, but I read it's actually closer to 50kw. It's not like they haven't done any testing on a sub 60kw pack.

@Mark K - I understand but my point was that the emotional reaction is the same. You see others with their cars, having fun. Anxiety, envy, impatience, and imaginations running wild. It's a rollercoaster. The only solution is the settle in and be patient.

@Crow - Nope. That is not the only solution. That's not the solution the 60's settled on when they felt wronged with the supercharger HW "enabler fee" debacle.
Regardless of the emotions involved, this is in no way a fair situation. Me and my fellow early adopters got in early at risk with the promise of, at the very least, the reward of being one of the first guys on the block with a car that very few people have ever seen. Regardless of how petty that may sound, it is real in that it was supposed to have been a perk (and an enjoyable one) of being the spotlight for a brief moment. Now we are at risk of being robbed of even that. I can't speak for everyone else here, but I need some justice and I won't stop until there is at least an acknowledgement of our sacrifice.

Chasf points to the essence.

TM took their money with a promise of getting it early. The way things worked out, they did not perform.

Usually, when you screw up, you feel an obligation to mitigate the harm done.

Especially when it was because of a choice, rather than a calamity.

I don't think it will be practical for TM to continually change their production plans, but there are certainly things TM can do to acknowledge their mistake, and make the wait more palatable.

I don't see the issue going away, and the longer it goes with official silence, the more damage control TM will ultimately have to do.

A deal's a deal. Everyone is watching to see if TM lives by this.

I don't think this has anything to do with profits or margins. It is a technology and product development problem. Those of you who think this is intentional and related to meeting margin targets have no evidence to back up that speculation.

Reposting my comments from the other "spurned 40" thread:

I think that TM is trying to figure out how to get out of building the 40 kw cars. They don't want to be embarrassed but may have concluded that a 40 kw battery just isn't enough. The S turns out to be way too big and heavy to get the hoped range in normal use. It turns out the 60 is more like the original range hopes for the 40, and the 85 is behaving like they had hoped the 60 would.

We are all learning how these cars function in real life, including TM. It would be nice if TM communicated better, but they are in a tight spot with the 40 kw pre-orders. Elon Musk has made clear comments in recent interviews that he would not order a car without (1) air suspension, and (2) a battery bigger than 40 kw. He appears to believe these are inferior cars and below his high personal standards, using words like "it is really worth the upgrade." On the one hand, this seems unfair and capricious treatment to the 40 kw reservation holders. On the other hand, TM doesn't want to disappoint or alienate anyone at this sensitive point in their public relations history.

TM and the 40 kw reservation holders need a graceful way out of this bind, and the best result is probably to offer the 60 kw upgrade at a substantial discount, and abandon the commuter car version of the S. As an alternative, TM could offer deferral to Gen III. This may seem like rough treatment to people with longstanding deposits, but isn't intentional, so mitigation is the way to go.

Just so I'm clear, I'm not pissed just that production has been delayed because of business decisions, I'm pissed that it's only impacting the smallest segment of customers. I feel like I'm being picked on and overlooked because I'm one of the minority. If the 85's were up in arms over an issue, they yield enough financial clout to force Tesla to respond, but the 40's are apparently small potatoes and have no leverage. That's what's infuriating.

I think Tesla will step up, at least with some communication to those who have been waiting all this time. I don't think shipping the 40's is a 'no brainier' as it may seem. Fresh off this NYT story, how eager do you think they are to start shipping the car with the least range? I think they are being careful before they ship the first one. It's not just a matter of just putting fewer cells in the car. There are likely any number of additional factors that pose technical risks.

@P_D

Exactly how do you justify upgrading to 60 with a substantial discount? I just dont see how that is an applicable resolution.

Actually, offering a discounted upgrade to the 60 with the discount on a sliding scale relative to the number of months/years the reservation has been held seems to be a fair mitigation to me.

and how do you come to that conclusion? In business terms, how does that help Tesla in the long run?

I think a more realistic solution would be for Tesla to offer either:

1. Allow an upgrade to 60 or 85kwh battery and allow IMMEDIATE queue into production line

2. Allow them to continue waiting for Tesla to manufacture the 40kwh

3. Allow a switch to Model X 60kwh and take first spot(s) in the queue for production

4. Flip money already paid into reservation into Tesla stock and cancel the 40kwh Model S

or they can always just cancel.

I think any of those are more sufficient than screwing current 60kwh reservations/owners that paid full price and cutting Tesla profits. Just my opinion though.

Are 60's being delivered without superchargers? A 60 without supercharger would also be a commuter car. It seems to me that Tesla must have a lot of margin in the $2500 supercharger option. I have a red 40 on order and I would like to know it Tesla really wants to build it. I would have no big problem upgrading. I just wanted to pay for a car that satisfies 98 per cent of my needs. I am patient at this time,but I do not want to wait for ever.

@ ChasF

Eventually the 40kw crowd will have the upper hand "so to speak". Remember there are many more potential 40kw or GenIII buyers sitting out there than there are $75-100k car buyers. All they need to come on board is 85kw type range in a 40kw price point.

If Tesla wants to expand upon their market share they will have to move down market or they will be forced to be merely a niche car company building playthings for the wealthy. That said being a niche car maker catering to high end crowds can be a successful business model if sized to your market, but Elon seems to want more than that at least "for now".

Things should indeed be getting more interesting later this summer when the fecal matter hits the fan and the 40kw rez holders (for which they are still accepting more of) are still waiting for their cars or answers as to why not.

Until they speak, we won't know for sure why they're delaying it.

Here is my rationale for believing that it's not technical troubles:

1. They solidly hit their predictions on the 60. The EPA numbers scaled perfectly.

2. These guys are conservative engineers. They didn't hip-shoot the 40's projected performance. They did detailed analysis, and would have built and characterized test mules long ago.

3. The Leaf, while no beauty, is a workable city car with a 23kWh pack. The S 40 is nearly twice that.

4. Their S architecture is designed for scalability. The 40 is one of the configurations for their platform contemplated from the very beginning.

The 40 won't be a road trip car, but it will be a very serviceable daily driver. Some folks want that at a lower price.

I haven't read the DOE loan docs, but I believe part of the covenants related to price point. The 40 is part of meeting that. (Fisker blew their milestones and their loan was pulled).

The marketing dynamic with each successive model of this car is complicated. They are trying to navigate the transition intelligently, and I think they are succeeding. But some people will get affected in the process, and they need to find ways to accommodate them.

The road to new technology is "bumpy", as Steve Jobs put it. But if you do right, it works out.

The mvpa that I signed specified delivery of my car in December 2012/January 2013 barring circumstances beyond Tesla's control, etc. etc. I am aware of others that specified a November/December delivery.

This agreement was signed by two parties - the reservation holder and Tesla. To suggest, as some have, that Tesla can or should just refund deposits and walk away from their committments is absurd. At the minimum, some reservation holders have already invested in upgrading their home's electrical system and they should be reimbursed for that as well. In my case, and I'm sure in others, I've spent money to upgrade two homes.

For Tesla to say we changed our mind and are not going to fulfill our part of the agreement, but we'll return your non-refundable deposit is no more reasonable than a 60 or 85 reservation holder with a signed mvpa asking for the return of their non-refundable deposit in exchange for Tesla not having to build a car for them.

Seems to me Tesla is not starting production of 40wkw cars in March, as last promised, for one of two reasons. (Note that their specs page still has Spring 2013 as production start date, and I'm willing to bet that you can still make a reservation and give them a deposit based on that apparently inaccurate information.)

One reason would be financial, and I can't imagine that any reasonable person thinks that not meeting their committments because it would be more profitable for them not to would be acceptable.

The other reason is technical. Either Tesla did not know that they could produce a 40kwh car with the specified ideal range of 160 miles, or they were convinced that they could but were wrong.

If they did sign those agreements without knowing that they could fulfill them, that would be inexcusable.

If they erred and really believed they could produce the cars, but later determined that they couldn't within the time frame they committed to, then it is still their responsibility to provide a car of equal or greater value to those with whom they have a signed agreement.

Among reservation holders, I am sure there is a range of opinions as to what would be acceptable, from waiting patiently until the Tesla gods deem it appropriate for them to get their car to demanding a car in March at the price agreed upon. I personally would probably find something between those two extremes acceptable, but that's just me.

I do know that the more time that goes by without an official statement from Tesla, the less acommodating I will feel.

For those who say that it is a great car and we should be patient, well, it is not a great car for us because we don't have it. And Tesla is, as of now, at least two months late in delivering cars to some reservation holders. If "later this summer" indeed means "late this summer", which I think is a reasonable assumption, then those reservation holders will have waited at least nine months after the agreed upon date. (Remember summer doesn't end until late September.) At what point would you say the delay becomes unreasonable? One year? Two?

There is another thread in which somebody is unhappy because production of his car has been delayed 2 weeks. Funny stuff.


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