Elon Musk admits Tesla's math was wrong

http://www.bizjournals.com/sanjose/news/2013/05/03/elon-musk-admits-teslas-math-was-wrong.html

by hornbaker • 13 years ago

67 64 13 years ago

lolcraft• 13 years ago

You know, there's a possibility that it would suck if investors got itchy and pulled out of TSLA after these news.

I mean, it would be very understandable, but from a game-theoretical point of view, there's the question of what you want to signal as an investor. If it's too costly to make mistakes, or worse, if you inadvertently signal it's fine to err given the company doesn't ever admit it publicly, then there's a variety of possible outcomes. The least worst is you end up with glorified, electrified, GM stock. The worst is, you end up with Enron. Which, incidentally, Wikipedia says was too "one of the most innovative companies" back then.

Of course, you probably already know that.

cantankerous2• 13 years ago

Tesla actually has gotten to the point of making real things. Enron at its height, was, erm, uh. Yeah. I think given what we know about Enron now it's pretty easy to draw up a direct comparison. Tesla might be doing a bit of a shell game with the pricing, but as far as comparing it to Enron, I think that's a bit overboard.

mkhpalm2• 13 years ago

You're insinuating that Enron did nothing? What would you do with a Model S if companies just like Enron didn't exist?

drivebyacct2• 13 years ago

Some marketing math makes Tesla as bad as Enron? o_0 I feel like I'm missing a piece of the story or something.

barista• 13 years ago

First they did it with the roadtrip range calculations and now this one. Credibility is hard earned easily lost you know.

monsterix2• 13 years ago

> Credibility is hard earned easily lost you know.

That said, an accomplished CEO admitting to a mistake earns 'em more karma and credibility than not.

Times have changed no? Traditional mantras need a revisit. Internet.

niggler• 13 years ago

"an accomplished CEO admitting to a mistake earns 'em more karma and credibility than not."

To you, maybe. To investors? Absolutely not.

uvdiv3• 13 years ago

Under the new deal, Tesla owners should be able to get their payments down to about $580 a month just factoring in gasoline savings alone, Tesla said.

Is he subtracting fuel savings from the car price? I recall there was an HN thread complaining about this but I can't find it...

Here's the calculator. They claim an "effective cost" of $579/month (default choices), which it seems means $917/month in actual payments, plus negative $261/month in fuel savings:

http://www.teslamotors.com/true-cost-of-ownership

ricardobeat7• 13 years ago

It makes perfect sense. You can either add the gasoline to the others or subtract from the Tesla.

Ex: A Mercedes C300 might cost $420/month, but the effective price is $800/month considering fuel & maintenance. Is that also problematic?

Most people will initially compare the Model S'$60k price tag vs $40k for a Mercedes, but the total ownership cost figures tell a different story.

kirk21• 13 years ago

It is weird that they don't stress the reduced maintenance costs. When something breaks down it is always extremely expensive (or they are overcharging you). Consider the life cycle of a car and there is something expensive that will break down.

baak• 13 years ago

I don't spend $261 in fuel every month. Actually, closer to $70.

A friend of mine makes a road trip every week for business. Do they also add the cost of the time you spend waiting for a charge at charging stations vs a quicker gas pump for road trips? A full charge is about an hour. Should the price be higher for him?

Look, I'm not saying it's still not a decent bargain when all is said and done, I'm just saying you can't roll it into your 'cost' and advertise that as the price you want me to pay. I am not paying that. I'm paying 190 bucks more a month based on my current fuel usage. My friend would be paying for it in an extra hour a week at least. These things count too.

eli2• 13 years ago

Adding the cost of gasoline to gas-powered car makes sense in making a buying decision. So does adding the cost of electricity to a Tesla. But subtracting the gas costs that you aren't paying from the Tesla does not make sense. The cost of owning a Tesla should not vary based on what you're comparing it to.

If I decide to get a Tesla instead of bike to work does the Tesla now cost more than $900?

gamblor956• 13 years ago

It's still bad math. The fuel savings are relevant only where you are directly comparing monthly costs of the Tesla to other cars. Gasoline is not a cost of the Tesla; not paying for gas doesn't change your monthly Tesla costs. You'll always pay at least $X. The fact that you're not paying $Y because you didn't buy Z is not relevant to calculating $X.

It's disappointing to see that Tesla still relying on misrepresentations to sell its cars.

jwegan• 13 years ago

I think it is fair for Tesla to put that in. Many people start off car shopping by comparing monthly lease amounts for a range of cars to figure out what is in their price range. However, at this high level overview, it can be easy to forget to factor in items such as gas into the monthly cost.

Tesla marketing is simply doing their job and making sure consumers don't forget to add the price of gas to gasoline cars, by making a point of subtracting it from their car.

PakG12• 13 years ago

It always seemed to me that they're comparing total cost of ownership of cars, not direct costs of purchasing cars. If it's total cost of ownership, it's an absolutely fair comparison.

nineteenturtles• 13 years ago

My biggest question is with the -$95 a month they attribute to the guaranteed resale value. I can't immediately tell how they came up with that.

andrewtbham2• 13 years ago

This is a plan to effectively lease the car for 3 years (with the tax credit benefits of buying). At the end of 3 years, you will get back the $95/month, when you trade it in. (so it's the resale value minus what you still owe on the car)

Zoepfli3• 13 years ago

What about battery replacement cost? AFAIK, Tesla buyers are looking at a $20k line item 5-10 years down the line here. Something gasoline cars don't need.

By talking about gasoline cost in their car price calculator, Tesla is going for a "total cost of ownership" thing, so why is battery replacement cost not included?

It looks to me as if Tesla is eager to talk loudly about the unique costs of their competitors, while keeping quiet about the unique costs of themselves.

jacquesm2• 13 years ago

That will be reflected in the resale value of the vehicle. Very few first time buyers will own a car longer than 5 years (even if that would be the most effective way of using their money). Likely the car will be traded at least once in those 5 to 10 years.

Retric• 13 years ago

I believe the calculator was for a 3 year lease making 5+ year matinace costs irrelevant.

ricardobeat7• 13 years ago

Tesla is offering a 8-year unlimited warranty on the battery pack. Even if it fails after that, technology will have improved enough that the cost is likely to be a tenth of what it is now.

paul_f• 13 years ago

I'd be more willing to accept his apology if he didn't then drop this absurdity. How much actual money do I pay for the dang car? I have my checkbook out, what do I put in this box?

emp_zealoth• 13 years ago

Bit of a tongue in cheek question. Is the math for Falcon done in the same fashion? Yes, I'm a Skylon fan.

arcatek• 13 years ago

I hate that someone called an enterprise "Tesla".

Knowing nothing about Elon Musk (well, at least now I know), my first thought when I saw that title was that Tesla (the man)'s math were wrong.

revelation• 13 years ago

This is a bizarre article. Are we going to see "Verizon/AT&Ts math is wrong" articles because they are marketing smartphones at a price tag of 0$?

jsilence• 13 years ago

My first thought reading the headline was: "No way! Nikola Tesla can't have been wrong. He was a genius!"

Then, reading the article, I realized it was about a car manufacturer.

Emanuel6009• 13 years ago

It doesn't matter really, he admitted his mistake and the price is still within the price range I would pay to take this world another step in what I consider to be the right direction.

robomartin3• 13 years ago

"Honey, look, a Tesla is only going to cost us $580 per month"

"No dear, the actual payment is closer to $900"

"No. Look here, it says the effective payment is $580."

"Sure, sure. You still have to send them a check for $900."

"What? How do we get to $580 then."

"Well, they are saying an electric car is going to save you over $300 a month in fuel and proposing you take that into account."

"Wait a minute. I don't get it. That can't be true. Can I put the $300 per month in the bank and save-up for a nice vacation?"

"Nope. That money goes to Tesla. The real payment is about $900."

"That can't be right."

"Look, go to that neat cost-of-ownership calculator and set the annual mileage to zero. Let's pretend you are going to buy the car and put it in a museum, never to be driven. What's the monthly payment? About 900 right?"

"Let me see... Crap! That's bullshit."

"Yup."

nijk2• 13 years ago

Fuel is part of TCO. The problem in the ad was in claiming the business deduction and the hourly wage for not gas pumping

ricardobeat7• 13 years ago

No one factors in gas costs to their monthly payments. Tesla is trying to get you to do just that, which is totally fair.

bradleyland• 13 years ago

That's a fair enough argument, but the fuel expense figures Tesla uses are far too generous. This is the kind of disingenuous marketing that turns people off. If I go to their True Cost of Ownership page right now, the "Electricity vs Gasoline" section defaults to a savings of $261/month.

According to Mint, I spend $116.75/month (average) on gasoline. The little graph shows the national average is somewhere between $165 and $220. The graph is small, but the bar is about halfway between. Being generous, that'd put the national average at around $200/month on gas. So Tesla is giving themselves a benefit of around $60 above the national average.

It seems like a minor point, but "fudging the numbers" doesn't seem consistent with the character that Tesla is trying to build for itself.

robomartin3• 13 years ago

No it isn't. It's creative math to get the mathematically challenged to jump in. Since math illiteracy in the US is common this is a very smart way to get idiots with money to buy in.

OK, say I have never owned a car and just got a job making $900 per month. No other expenses in my life. I jump on this deal. I then send 100% of what I earn to Tesla. Not $500. I have to send them all of it. I don't get to magically deduct fuel I will never purchase and pretend I am spending less. My bank account would be empty every month.

coloneltcb• 13 years ago

Horrible mea culpa.

"We appreciate the feedback from a number of journalists and customers that the first version of our financing product wasn’t quite right,”

It wasn't that they were doing really complex calculations that they made an error on, they were being intentionally misleading. That is what they should be sorry for, not that the math was not "quite right"

andrewtbham2• 13 years ago

There has not been a very big media backlash like there was to the first $500/month story. The lack of media backlash may seem to validate the second announcement to consumers. Tesla is proving skilled at neutralizing bad press.

nijk2• 13 years ago

And their solution is to extend the loan term so you pay the monthly payment longer than you possess the car!

I don't see what they hope to gain by lying about price to wealthy customers who presumably got their wealth through the application of something exceeding5th grade arithmetic

Elon Musk admits Tesla's math was wrong

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