It’s looking to be a great week for Tesla Motors, who previewed its Q1 results yesterday and promises more good news today. In a nutshell, the company sold more cars than expected and is now even more confident about its profitability this term. All good stuff, and Tesla deserves kudos for the achievement.
A much smaller bit of news is that only 4% of Model S buyers have chosen the smallest (40kWh) battery pack option, so it will effectively be cancelled. Technically, you can still buy a “40kWh” version; you’ll simply get a 60kWh version that has the extra 20kWh software-sequestered unless and until you choose to pay for the additional capacity. (While you’re at it, Tesla’s hoping you’ll also choose to pay to enable the Supercharging capability that will also be installed on every car from now on.) Clever moves by Tesla, helping to streamline production and “encourage” buyers into cars with higher profit margin. Makes total sense from a corporate perspective, and only Tesla has a fan base who will embrace the choice without the cynicism that would be lobbed at other automakers.
However, some perspective is needed for those who are already drawing broader conclusions about EV consumer range demands based on the seemingly low choice of the 40kWh model (in which most folks can easily get 120-160 miles of range). It’s artificial data at best, and not at all indicative of range preferences of even Tesla’s own buyer category, and certainly not the broader EV market.
- Tesla started with a “top-down” production approach for the Model S, meaning that the 85kWh cars were built first, then the 60kWh version, then the 40kWh version. Combined with a well-publicized backlog of reservations, some buyers who were comfortable with the 40kWh range felt compelled to step up in order to get their cars sooner.
- Tesla’s proprietary Supercharging option was not available on the 40kWh version, but an option on the 60 and standard on the 85. Again, fast-charging seekers moved into a higher capacity version than they might have otherwise picked.
- As with other plug-in cars, the earliest Model S adopters tend to be at the higher demographic end even of Tesla’s own market, and those for whom the $10k difference between each version of the Model S isn’t as impactful as it will be for later Model S buyers, let alone those of later models. Some are choosing the longer range simply because they can, not because they truly need – or even think they need – more than 160 miles of range on a daily basis.
Bottom line: Tesla made the right choice given the company’s current priorities. But today’s market will not be tomorrow’s, and not every company is Tesla. What works for Tesla is not inherently the right move for others. And as always, any single statistic at this stage should be taken with a grain of salt.
evchels 
I know that’s what you’ve long believed Chelsea, but I think the market is different. The market you knew were EV enthusiasts and were looking at the practicalities of EVs at the time and, in many ways, justifying the limited range. The fact of the matter is, in the US at least, people like to drive and take road trips…sometimes on a moment’s notice. I drive 225 miles to St.Louis and back, in the same day, 5 times a year. And I want to be able to do that in my newest most comfortable car.
While many are willing to compromise range for the other benefits of an EV, many simply will not, under any circumstances, do so. I think Tesla will look for a sweet spot, but I’m fairly confident that 200 miles will likely become the new ‘floor’ for range…in a smaller BMW 300 series size car that may mean a 40kWh battery, but if anything, we’ll see the capacity increasing. That’s my opinion/guess on the matter. I’ll be taking my Tesla to Kansas City (205 miles each way) and back on Saturday…No EV1, Nissan Leaf, or other short range EV will allow that. And I’m gonna enjoy the heck out of that drive.
Evan, I totally agree that as batteries get better and cheaper, range will get longer even in “economical” EVs, and yes, prob ultimately settle around 200 miles some years from now. Reaction was more for those pointing to the cancellation that there’s no market for anything below that today, if “even Tesla” can’t make it work. There are simply other factors involved in that 4% statistic- still the right choice for Tesla to cancel it, but that stat alone doesn’t say much about minimum range demands in the overall market is all.
Evan, I won’t argue your point, but Chelsea is also correct. The market for plugins is massive, depending on the specific technology. For many, the LEAF or Mitsu iMiEV is more than enough range. But for folks like you, 200 miles is a minimum. Considering that over 15 million vehicles were sold in the U.S. the past 12 months, there is clearly room for everyone.
This is similar (albeit on a much larger scale) to Brammo’s decision to produce the longest range Empulse motorcycle and to can the option for the 6.0 and 8.0 cycles. Something like 90 percent of their pre-orders were for the longest range model and it made economic sense to focus on that.
Really good stuff! I have been having a protracted discussion with Elon who has a one-track mind about absolute reliance on batteries. He apparently can’t look upstream from his rapid charger at the lousy thermal efficiency of grid power and it’s preponderant reliance on high-carbon fossil fuels for many years to come.
Stay honest and you will reap a rich harvest.
Maybe, but the ‘lousy’ thermal efficiency of the grid is still better than that of an ICE vechicle, despite the Kook, er, Koch-backed ‘studies’ to the contrary. And we can change how grid power is produced, as well as how to power your personal EV. For most, it is this ‘preponderant reliance on high-carbon fuels’ that has us worried;-)
If the base price goes up another $10K, that makes the Model S more of a niche within a niche. While the Nissan Leaf has gone down in price, the Models S seems to be going up.
Pretty much- you can still get the base version, but I’m curious to see how many people do. I agree that the net effect will be to raise the MSRP on the S. What will be really interesting to watch, now, is how Infiniti fares with the LE landing between LEAF and now well below Model S.
Here in LA, there are at least 250,000 people who can afford the Model S. That’s a huge market.
Wouldnt surprise me to find out the real volume of S 40 orders was more like 20% but either way, Tesla is not really competing with the LEAF. they are really going against Mercedes, BMW and Lexus. They should be the ones who are worried!
The extra 20kWh of “software-sequestered” battery power won’t lie dormant of course; they’ll be swapping cells in and out of use regularly.
If Tesla are feeling generous and don’t see the need to introduce software-based battery degradation then these folk could theoretically have 100% charge capacity for years to come.
Upgrading to 60kWh after a few years might not feel so good if they get less than the 50% range improvement they were hoping for though, so welcome to the brave new world of virtual battery degradation…
The 40 kW reservarion numbers (from surveys) were reported ~7% in Dec 2012. Larger battery orders have always had eariler delivery dates. By Feb 20th Earnings Call the 40 kW reservations had dropped to 4%. At this time 40 kW became U.S.-Only & was further delayed in US. (Expect a few 40 kW reservations were upgraded to 60 kW in the weeks following)
IMO Tesla’s Super Charger EVSE lifetime access was a major turning point causing people to reconsideration between upfront saving & long-term value. Tesla’s total package is currently without competition. A lot of this is related to precieve experience (of EV + EVSE) vs. pure economics.
If people were concerned with economics, they’d be focusing more on total operational costs – per mile – over the ownership of the vehicle. $10000 number gets less significant if taken over 10 years, or 200,000 miles. Particularly if compared to other similar vehicles (and operational expenses) in the Luxery vehicle category.
Of note: Tesla partners have ~40 kWh vehicles at similar price points to the 40 kWh S. Toyota RAV4 EV is already available, and Mercedes-Benz B-class EV will be in next year. Given low volume, the decision may have been more strategic by Tesla to sidestep competition with partners, for now.
More interesting will be the price point(s) for Infiniti LE EV (2014) and Cadilac ELR. Both EVs will have smaller than 30 kWh batteries, but will be aimed at luxury category of buyers.
Finally, time will tell how all EVs will hold (resale) value based on “useable battery capacity”. e.g. A 60 kWh S can be expected to have more than 30-40kWh (50%-70%) capacity after 10 years. Smaller packs will have less capacity unless upgraded at some added cost.
While you make good points, Chelsea, I have to say I agree with Evan: While some people are willing to make trade-offs in terms of range in order to gain in terms of other things (flipping the bird at Big Oil, acquiring fueling independence, driving an emissions free vehicle, being at the leading edge of technological change, saving on fueling costs across the long term, etc.), most people are not willing to make huge compromises on vehicle range.
In fact, asking them to do so, as pure EVs do, including even the Model S 85 kWh does, albeit at much higher threshold than pure EVs such as the LEAF, runs counter to what most people expect from a new, “better” technology. People expect that a newer, “better” technology will surpass the previous technology in terms of all of key new technology adoption criteria, most notably convenience and versatility. A pure EV with the most range, aka the Model S with the 85 kWh pack, gets people closer than any other pure EV in terms of these crucial new technology adoption criteria.
Tesla is doing what OEM usually do and is called “creaming”. And some customers (and lease systems?) may also think of residual value and ease of resale after a few years.
“software-sequestered” battery power, wow what a cheesy move. Is Tesla grooming itself to be bought by Apple. A high dollar iCar with software hobbling and licensing just like Apple does. How long before someone comes up with a jailbreak and unlock, just like the iPhone’s.
The Model S is a great car, the new standard in EV’s. Why muck it up with any type of software-sequestering. It make Tesla look like shysters.
Tesla should sell the 40kwh with Super Charging, and quit playing the annoying Apple style up-selling game by hobbling. 160 mile range will work for most people, and on those occasions when you need to travel farther you could Super Charge.
I think its dirty pool. Tesla is acting like the good guy by allowing S 40 customers to get the car at the promised price but bearing the weight of a 60 Kwh battery which means carrying 20 Kwh of dead weight which means an associated drop in range. They need to either allow S 40 customers ALL of the battery pack or put in the right pack.
Now some might spin it as the “poor” Tesla owner getting in at the S 40 price and then later realizing his “$600 a month” EV driving benefit and being able to afford that extra $12,000 down the road but…
Their latest numbers show Tesla is on track and even selling $100 cars to China. They also reduce pollution and the $1 Billion a day of imported OIL each day . They should get an award for helping the economy and environment =D————–Plug IN