Autos

6 Reasons to Respect Tesla as a Company, Model S Aside

Tesla Motors (NASDAQ:TSLA) is, without a doubt, one of the greatest movers and shakers in the last several decades not just in the auto industry, but in engineering and technology as well. Its first car, the Roadster, proved that not all electric cars were golf-cart slow and absurd looking. Its second car, the Model S, has proven that electric cars can indeed be fairly matched against their gasoline counterparts. But we’ve only seen half of the Tesla show; there’s two more cars in the pipeline, and any number beyond those.

But at about $207 per share, Tesla is also among one of the most over-valued companies on the public exchanges, trading with a market cap of $25.7 billion — practically bubble-like given that it has churned out, at most, just over 22,000 units per year. Investors are instead betting on Tesla’s future, its products not yet released, and its ability to shape an industry cast aside by the auto making giants that have so left electric vehicles neglected for so long.

The Model S — currently Tesla’s only product on the market — is an amazing feat of engineering. It’s among the safest cars on the road, requires no oil changes or timing belts, and is a technological tour de force in virtually every way. Also, it can seat seven people, travel about double the range of other mass-market electric cars, and is among the most beautiful cars on the road.

However, the Model S is only one aspect of a company that has done more to change the business landscape in America virtually any other company in the last several years. No other company has shown such potential to shake up its respective industry like Tesla has, and putting the Model S aside, there are a number of reasons to love the company itself — not just the car. Here are some of them.

Tesla Model S

1. Customers come first

There are many aspects of Tesla that one can argue and complain about, but it’s hard to give it a hard time about its customer service. Take for example, if you will, the fires that plagued the media for weeks and sent the company’s stock into a nosedive late last year. In a time where safety concerns and potential recall risks are being buried for years before something is done, Tesla grabbed the issue by the horns and took charge of making things right.

It immediately reached out to the affected owners and launched its own investigation into the occurrences — the most concerning of which involved the cars hitting some substantial road debris that caused the battery packs to ignite — and, before the NHTSA could barely get a word in, it had issued some fixes (like an adjusted ride height) to minimize the risk of it happening again. Now, six months or so on, every new Model S that one buys comes with some extra titanium shielding to make the car even safer.

The situation was repeated — sort of, in the sense that a fire and Tesla were in the same space at the same time – when a garage where a Tesla was housed went  up in flames in November. Naturally, everyone pointed to the car or its charging unit, and the local fire department ruled the cause inconclusive. Despite denying that it had anything to do with the car, Tesla sent out another over-the-air update, and even sent out replacement chargers with a new thermal fuse. Just in case.

TeslaSupercharger

2. It’s not afraid of a challenge

How do you deal with the near-complete and inherent lack of a fueling station network when you’re trying to sell electric cars? If you’re Tesla, you build them. And you don’t ask your owners to pay for the charge, making free cross-country travel a thing. It’ll take a bit longer, but it’s definitely a thing.

There are few greater challenges in the business world than building a nationwide physical infrastructure to enable your customers free travel. Can you imagine another automaker single-handedly building out a national gas station network? We can’t either. More impressively, Tesla is also building them out in Europe and Asia, just so electric car potential owners don’t have that excuse. Love Tesla or hate them, you kind of have to appreciate that kind of tenacity.

If that wasn’t ambitious enough, Tesla has been meeting challenges constantly, from facing off with local legislatures over its sales model to designing and building its own $5 billion battery factory to bring lithium ion cell production in-house. Remember, this company has just one car on the market, and it’s its first attempt at a passenger car.

source: http://www.flickr.com/photos/supertsai/

3. It’s not afraid to admit when it’s wrong

This is an increasingly rare but refreshing approach for a company to take: Given Tesla’s standing as a largely experimental company (it’s blazing its own trail, you could say), it’s going to make mistakes that established companies might not.

Remember when the leasing for the Model S was announced, which promised buyers or leasees could finance the $70,000 car for under $500 per month? It was a bold claim, and Tesla notably took some unusual liberties in reaching such a figure (like valuing one’s time at $50 per hour, that was a tad generous in most cases). After some public unrest and criticisms from media, Tesla revised the system to offer a more realistic projection.

Tesla is still young enough that it hasn’t had the opportunity to be spectacularly wrong yet, but if the way that the company handles this sort of situation now stays with it, Tesla’s corporate culture will be one that case studies for business students in the future will be based off of.

TeslaModelSChassisBattery

4. Driving innovation

Few companies have managed to shift industry thinking in recent years more than Tesla Motors. Virtually every aspect of the company is innovative to some degree, from its sales channel, to its product, to how the company maintains its products once they’re out in the real world. No other company has achieved performance from a road-going electric car like Tesla has, and on top of it, it’s among the safest on the road. The Model S isn’t just a great electric car — it’s a great car that happens to be electric.

However, the car aside, Tesla itself has raised the standard of innovation in just about every way. Its factory uses robotic carriages autonomously following magnetic strips in the floor to move the chassis around for production. The way people buy a Tesla — online, or in Tesla’s retail locations — is a unique model in today’s auto industry (but more on that in a second). Tesla’s guaranteed resale value means that the lease for the car is more like a rent-to-own situation. There’s no money down, and when the lease is up, the company will buy the car back for a guaranteed amount. Tesla has even innovated the way we lease our cars.

Finally, the Supercharing network. A major gripe against electric cars is there’s no supporting infrastructure to encourage long-distance travel — a hallmark American pastime. Tesla remedied this by not just developing a fast-charging network, but by deploying it as well — in three different continents. It’s also aiming to become one of the world’s largest producers of lithium ion battery cells, showing that it can innovate in its supply chain as well.

Tesla Model S Roadster parking

5. Its direct-to-consumer model

Virtually every aspect of Tesla’s business is different from the norm, and that includes how it sells its vehicles. It’s well known now that Tesla’s direct-to-consumer model hasn’t exactly gone over well with the dealers, many of which are concerned that Tesla’s efforts will lead to their parent companies pulling the plug on the dealer model in favor of a more direct approach. To combat this possibility, dealer associations have spent millions on ensuring legislation passes that bans the direct-to-consumer model.

This understandably has not gone over well at Tesla HQ, and the company has mounted legal appeals to these new laws. Tesla argues — and correctly, we might add — that dealers make much of their money on services that electric cars don’t need, and a Tesla dealer wouldn’t be able to stay in business on tire-swaps and brakes alone. Further, the general public — which seems rather fed up the traditional dealer model — has voiced overwhelming support for Tesla’s new tactic, as a way of removing the middleman between company and consumer.

That’s not to say that the dealer concerns aren’t entirely unwarranted. It’s true that without that added layer, companies would gain full control of the auto market, and price collusion is always a possibility. However, many dealers have a substantial amount of goodwill to build back up before consumers are convinced they’re in it for them.

TeslaModelSInterior

6. It has the big automakers on their toes

For all the aforementioned reasons, major established automakers are naturally — and understandably — keeping a very close eye on the company and what it means for their business. General Motors went as far as to establish a committee specifically tasked with keeping an eye on Tesla, and for good reason — Tesla continues to defy the established notions that electric cars are not competitive with their gasoline counterparts.

But Tesla has yet to sell more than 30,000 cars in a year; why would large companies be concerned with that? Primarily because Tesla was able to do something that the large companies didn’t — it built an impressive car, found that there is indeed a demand for it, and continues to grow as major players remain reluctant to commit to an electric vehicle that can outperform as the Model S can. Their inaction in the area has only allowed Tesla to progress further with its plans for a mass-market car, and take steps — like the Superchargers and the gigafactory — that large corporations haven’t been willing to take.

On top of it all, Tesla’s innovative edge is producing battery and electric car technology that is unrivaled on a mass scale, and its ownership of the intellectual property associated with it is only adding increasingly growing road-blocks that companies will have to dodge when they do choose to pursue the electric car market.