Shalom Better Place, Shalom Tesla
More bad news on the EV front as unfortunately Project Better Place pulls the plug.
We are sure the decision by Project Better Place to file for liquidation, which was announced on Sunday, wasn’t an easy one. We loved the ideals, mantra, and people at Better Place – although we always doubted the business acumen surrounding the concept. We guess Israel just wasn’t the promised land for Better Place.
Revolutionary ideas take hold if they are simple. Better Place sold a business model more than a car; moreover, the car it offered was unenthusiastically reviewed by the automotive press and consumers. Customers were being asked to buy a mediocre car with uncertain resale value, a nascent network of swap stations, and an unfamiliar contract for battery power. Customers said – no thanks.
The vision of a pioneering electric vehicle infrastructure with a system of quick-service battery swapping stations was ambitious. Regrettably Better Place was hobbled by problems and delays, and the company’s idea failed to gain traction, with fewer than 1,000 cars on the road in Israel and another few hundred in Denmark. It’s a humbling end for a bold project.
Financial difficulties had left the company no option but to file for liquidation in a district court and to request the appointment of a provisional receiver to find the best way to minimize the damage to its employees, customers and creditors. Some 200 employees will be dismissed immediately. Some 100 employees will stay on to continue operating the existing service system, but are to be laid off at a later period.
To all of them we wish the best of luck in future endeavours.
It’s not all coming up green in the electric car industry. Sure, Tesla is making money, for now! If you have invested in Tesla Motors, you can stay in bed today. The Silicon Valley electric carmaker’s shares zoomed past $100 this morning for the first time as Tesla rides a good wave. With a market cap of $12 billion, the company is worth about one-quarter of General Motors. A bit superficial for a decade-old company that sells just one model.
But what goes up can (will) come down, and Tesla’s stock has been volatile since the company’s 2010 initial public offering. Those wild swings have attracted short investors. We are still hesitant to believe the full Tesla hype. We agree that Tesla accomplishments aren’t just plain luck. Tesla has managed to convince part of the market. Competency in technology is migrating to engineering, manufacturing and marketing. However Tesla has to develop a second generation business model to convince us. With only its current goals and business strategies Tesla will face a very doubtful future. Tesla bull investors should at least consider the following simple business questions:
– Is long-term demand sustainable for Tesla?
– How real are presented profit margins when credits are taken out of the equation?
– How will warranty costs be absorbed in future?
– Will Tesla be able to afford residual value guarantees on leased cars going forward?
– Will economies of scale ever be achieved?
– Will Tesla continue a premium business model even on lower vehicle segmentations?
Now add the old journalistic cliché that questions should always contain answers to these six questions – Who, What, Where, Why, When, How – mix in a generous amount of automotive industry know-how to the recipe and the very talented Elon Musk might have to dig deep for some answers. Elon Musk is an inspiring pure-bred 3.0 entrepreneur that created a benchmark product/service, obviously with the support of a very gifted team, which sparked a sense of astonishment upon the old-guard competition. Although at CARNORAMA we still have a little hint of anxiety towards Tesla’s business model.