Tesla’s resilience is forcing veteran automakers to draw the battle lines on diesel


There are probably very few companies in the market that have attracted the same amount of skepticism as Tesla. Since it started producing its first vehicle, the original Tesla Roadster, more than a decade ago, the “impending” death of the company has been foretold. Despite this, the small, disruptive electric car maker has stubbornly refused to die, and it continues to grow despite the noise. Today, Tesla is bigger than ever before, and the impending completion of a third Gigafactory 3 in China could signal yet another period of incredible growth for the company.

The inevitable electric age

The rise of Tesla did not only prove that electric cars need not be boring, glorified golf carts. The rise of Tesla also showed that consumers from various walks of life are willing to pay top dollar for well-designed electric vehicles, simply because they are superior to internal combustion cars. By proving these points, Tesla was able to force the hand of veteran automakers, pushing them to come up with their own battery-powered vehicles. Today, most of the world’s most notable carmakers are looking into electrification. Some brands such as Porsche have even decided to abandon diesel altogether, aiming instead to push the development of both all-electric and hybrid cars.

It’s not just Porsche either. Other automakers such as Jaguar even beat the German automaker’s Taycan to market with its I-PACE, which it started delivering last year. Daimler rushed to join the fray with the EQC, and Audi, not to be left behind in the emerging EV race, brought out the rather unfortunately-named e-tron, which was received warmly nonetheless. Even mass-market automakers such as Kia and Hyundai have come up with their own bang-for-your-buck electric cars in the form of the Niro EV and Kona Electric. Volkswagen recently made a splash with the debut of the ID.3 as well. Even British-bred MG, which has been reborn as a Chinese-owned hyper-budget brand, is preparing to attack the lower end of the market with the MG ZS EV.

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Learning from Tesla

Amidst this transition, it is starting to become evident which carmakers are dead serious about their transition to the electric age. This became notable in Germany, when Volkswagen, Daimler, and BMW came together last March to call for the widespread adoption of EVs. Volkswagen CEO Herbert Diess was at the helm of the radical stance, at one point practically butting heads with BMW CEO Harald Krüger and the industry lobby group Association of the Automotive Industry (VDA) due to his push for widespread electric car adoption. Audi boss Bran Schot, in a recent interview with Manager Magazin, reiterated this point, noting that “electric is the core” of the automaker’s “new strategy.”

Audi is currently attempting to ramp the production of the e-tron SUV, its first all-electric vehicle, but things have not exactly been easy. Due to factors such as reported battery constraints from supplier LG Chem, as well as other incidents such as a workers’ strike in one of its plants earlier this year, the e-tron has been delayed. Yet, Schot noted that the company remains focused on pushing more electric cars. During the interview, Schot candidly admitted that Audi is behind other automakers such as Tesla, not only “in the electric cars” themselves, “but also at the pace with which they solve some software issues.”

The Audi e-tron. (Photo: Audi)

Schot noted that he was recently “driven once again a Tesla,” and he came away impressed by the experience. “That was fun,” he said, later admitting that “No question, we are learning from Tesla.” Learning from the leader in electric mobility is an excellent strategy for Audi, as it would allow the company to develop vehicles that mix the best of veteran auto’s experience and Tesla’s tech mastery. In a way, Audi has already taken steps towards this goal with its e-tron GT sedan, a vehicle built on the same platform as the Porsche Taycan. The Taycan stands apart from other EVs from veteran auto in the way that it’s built from the ground up to be an electric car, making it the last thing from a compliance vehicle.

Commitments to diesel and a denial of EVs

While companies like Porsche have found it easy to commit to electrification and abandon things like diesel, other carmakers are not having such an easy time relinquishing their ties with oil. The most recent source of this shock was Jaguar Land Rover CEO Ralf Speth, who recently spoke with Automotive News Europe sister publication Automobilwoche’s publisher in an interview. When asked about the company’s powertrain strategy amid a decline in demand for diesels and V8 gasoline engines, the CEO was candid.

“According to industry forecasters, a global share of 20 percent to 30 percent for electrified vehicles is expected by 2025. When you turn this around, it means that 70 percent to 80 percent of all vehicles around the world will have conventional engines. Let me add that today’s diesels, (which) are absolutely CO2-efficient and clean,” he said.

When asked by the publication why electric mobility is still not important to consumers, the CEO noted that “On one hand, the products are still too expensive. On the other hand, the infrastructure is still too inconvenient and unreliable, so electric cars tend to be for people with deep pockets.” These are rather surprising to hear from the Speth, whose company produced the I-PACE, which has pretty much swept awards left and right since its debut last year.

The Jaguar I-PACE’s interior invokes the legacy carmaker’s luxury roots. [Credit: Jaguar]

Explaining his conservative stance on electric vehicles further, the Jaguar CEO argued that “When it comes to electric vehicles, the question isn’t how many cars I can build but rather how many batteries I can buy. The demand for batteries is so great that there will be a limited ability to deliver them over the next few years. And, unlike some others, I expect continually rising battery prices – at least for the next two to three years.”

Quite interestingly, the Jaguar Land Rover CEO’s concerns about electric cars have long been addressed by Tesla. When it came to charging infrastructure, the California-based carmaker developed and aggressively rolled out its Supercharger Network, which currently have over 12,000 stations across the globe. The company has also ironed out the supply of its vehicles’ batteries, thanks to a massive investment in facilities such as Gigafactory 1 in Nevada.

The transition to the electric age will be difficult for carmakers, and it would require massive investments just to get well-designed all-electric cars ready for the market. If these developments are any indication, it appears that in the next few years, the battle lines will be drawn between veteran automakers that are willing to go all-in on electric mobility, and veteran carmakers who will steadfastly hold on to oil and the internal combustion engine.

Tesla’s resilience is forcing veteran automakers to draw the battle lines on diesel


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Elon Musk’s ‘Monty Python’ tower knight keeps watch over Boring Co’s TBM preparations


Over five months since The Boring Company held an opening party for its test tunnel in Hawthorne, CA, Elon Musk’s Monty Python-style watchtower is standing strong, and so is its occupant. Based on recent photographs taken of the site, the cleverly-built watchtower’s resident knight is still present, a lone guard watching over the Boring Company’s nearby lot and SpaceX’s headquarters.

Teslarati photographer Pauline Acalin recently paid a visit to The Boring Company’s Hawthorne site, where she was able to get some detailed shots of the ironclad sentry on his post. Pauline’s images show that the watchtower is weathering the elements pretty well, and the pre-made Boring Brick-laid sections used in the structure appear almost the same as they did during the test tunnel’s opening party. This is quite impressive, considering that the Monty Python-style watchtower was constructed in an incredibly quick manner last December.

Elon Musk’s ‘Monty Python’ watchtower remains occupied. (Photo: Pauline Acalin/Teslarati)

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The Boring Company watchtower knight is a reference to one of Elon Musk’s favorite movies, Monty Python and the Holy Grail, which is widely regarded as one of the funniest movies ever made. During one of the film’s most memorable segments, a sharp-tongued French knight decided to give King Arthur and his knights a tongue-lashing for the ages. Played by actor John Cleese, the knight, as well as his creative insults, live on today, thanks to the prevalence of memes in the internet.

Apart from the watchtower knight’s continued guard duty, The Boring Company’s Hawthorne site is also seeing some notable activity. Teslarati photographer Tom Cross was able to capture several images of one of the tunneling startup’s lots in the area, which just happens to be a location where a tunnel boring machine (TBM) is being prepared.

The Boring Company works on a tunnel boring machine. (Photo: Tom Cross/Teslarati)

The new tunnel boring machine is particularly noticeable due to its striking white paint. Several workers could be seen working on different sections of the TBM, though some sections of the machine placed around the lot still require some painting work. It should be noted that the TBM being prepared on the site appears very similar to Godot, the same machine used by the company to build its test tunnel. Nevertheless, Elon Musk’s previous references to its next-generation TBM, Line-Storm, triggers some speculations about the nature of the tunneling machine that Tom photographed in The Boring Company’s lot.

Teslarati has reached out to The Boring Company about this, and will update this piece once a response from the tunneling startup is received.

The Boring Company recently received a contract from the Las Vegas Convention and Visitors Authority to build a Loop System for the LVCA’s campus. The project, which will be comprised of two tunnels that will each be less than a mile long, is expected to be completed quickly. In a statement on Twitter, Elon Musk noted that the Las Vegas Loop System would likely be operational by the end of the year.

Elon Musk’s ‘Monty Python’ tower knight keeps watch over Boring Co’s TBM preparations


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Tesla’s self-driving patent application hints at AI safety improvements


A recently published Tesla patent application titled “System and Method for Handling Errors in a Vehicle Neural Network Processor” describes a way to safely handle errors encountered in self-driving software. Rather than risking delays in driving responses that result from input data errors, a signal is sent to ignore the bad information and continue processing as usual. Tesla’s application was published May 23, 2019 as International Publication No. WO/2019/099941.

During self-driving operations in Tesla’s program, streams of real-time input data are received and used to both train its neural network and initiate a vehicle response to what’s being processed. If something in the data is erroneous or causes a delay in processing, the real-world impact can be disastrous if not handled properly. For example, in a fast-moving vehicle, sensor data can become stale very quickly and cause the self-driving software to respond to an environment that no longer exists. This can result in accidents, property damage, injury, and/or death. The solution presented in Tesla’s patent application attempts to avoid such processing delays altogether and thus improves the safety of the self-driving software overall.

Tesla’s patent application describes the issue as follows:

“Some types of errors may cause neural network processor to hang or time out. That is, one or more portions of neural network processor may freeze or otherwise remain inactive for more than a predetermined amount of time. When a timeout error is encountered, [the] neural network processor may cease to provide output data and/or respond to input data. Other types of errors, such as program errors and/or data errors, may cause the output data generated by [the] neural network processor to be corrupted. When such errors are encountered, [the] neural network processor may continue to provide output data, but the result may be incorrect, meaningless, and/or otherwise unusable.”

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On its face, the concept behind invention may seem somewhat simple, but likely due to the complexity of neural networks and the field of autonomous driving still being fairly new, Tesla’s solution is unique and innovative. At the international review stage in the patent application process, the Examiner found that Tesla’s patent was novel (new) compared to similar neural network inventions already in the field. Specifically, the following was commented in a Written Opinion:

“Although neural network processors are well known in the art, including in the operation of a vehicle, the addition of having the controller signal that a pending data result is tainted, or incorrect, without terminating the execution of the network, improves upon prior art processors by ensuring the computations of the processor in the vehicle continue while ignoring data determined to be in error, and would require a complexity beyond the ordinary skill, and therefore…meets the…criteria for patentability.”

Concerns about Tesla’s Autopilot software were recently hit by a report published by Consumer Reports wherein the consumer advocacy group concluded that Navigate on Autopilot with autonomic lane changes was more of a liability than an asset. The report stated that, since the feature requires drivers to be one step ahead of the system while it is engaged, it still needs improvement, although the same group found Tesla’s autonomous driving software to be more capable than the competition. However, the report was only focused on how Navigate on Autopilot operates when changing lanes confirmation and warnings are disabled, contrary to scathing headlines which lumped all of Autopilot’s features together with the review.

This most recent patent application shows that Tesla is continuously improving its self-driving features, if that wasn’t already obvious from the company’s frequent over-the-air software releases.

At Tesla’s Autonomy Day for investors last month, CEO Elon Musk declared that the company’s Full Self-Driving computer was objectively the “best in the world”. As more information becomes available, such as presentations on Tesla’s technology and in patent applications, Musk’s confidence expressed in his statement becomes more clear. Full Self-Driving is expected to be feature-complete this year and will become publicly available as regulatory hurdles are overcome.

Tesla’s self-driving patent application hints at AI safety improvements


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SpaceX’s deploys 60-satellite Starlink blob, all spacecraft successfully phone home


SpaceX’s first 60 “production-design” Starlink satellites have been successfully placed in orbit, kicking off a constellation beta test at an unprecedented scale. According to CEO Elon Musk, all spacecraft also managed to successfully ‘phone home’ after separation.

The company’s Redmond satellite operators still need to verify that all spacecraft are functional and healthy after a Falcon 9 launch and chaotic deployment from the rocket’s upper stage, but the riskiest part of the mission is now arguably behind SpaceX. What remains is essentially a massive, hardware-rich test of SpaceX’s Starlink satellite constellation, ranging from granular flight testing of individual components to an effective simulation of a full constellation’s operations.

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In support of those tests, SpaceX has already received permission from the FCC to begin setting up a number of ground stations and user terminals across the US. Testing will begin on a relatively small scale but will rapidly expand as FCC permissions roll in and the basics of the first 60 Starlink satellites’ operational capabilities are verified.

According to sources familiar with the matter who spoke under the condition of anonymity, SpaceX will most likely begin commercial testing of its Starlink constellation much like Tesla, using its significant workforce (~6000 people) as beta testers. The sources didn’t know how many launches it would take before that internal testing kicks off, but it’s safe to say that SpaceX will need at least a few hundred satellites in orbit to provide uninterrupted broadband service over a few swaths of the US.

A wild satellite ride

A little over one hour after launch, SpaceX deployed all 60 Starlink satellites simultaneously, producing a bizarre blob of spacecraft that appeared to slowly begin to separate, almost like a zipper unzipping. CEO Elon Musk noted on May 15th that there was “a chance” that satellites would bump into each other during deployment. After watching the actual act, it’s safe to say that many of the 60 satellites almost certainly bumped into each other after separating from Falcon 9, albeit very slowly.

60 Starlink satellites deployed from Falcon 9’s upper stage in a truly bizarre fashion, moving away from the rocket like an 18 ton blob of spacecraft. (SpaceX)

Starlink’s deployment mechanism is easily the most SpaceX-reminiscent thing SpaceX has ever done. It certainly isn’t pretty and your author would love nothing more than to immediately head to orbit to evenly distribute the satellites (oh, the asymmetry 😭). And yet, it seems likely that the chaotic blob deployment will ultimately be a success, getting rid of the wasted mass of a dispenser, speeding up deployment, and offloading the need for accuracy from Falcon 9 S2 to the satellites themselves.

Starlink satellites are propelled by krypton-fueled electric thrusters, also known as ion or Hall Effect thrusters. (SpaceX)
A render of a full stack of Starlink satellites. (SpaceX)

By designing the satellites from the ground up to handle minor bumps and more significant mechanical loads during launch and deployment, SpaceX can forgo the hassle of treating each spacecraft as if they’re made out of fine china, fairly routine for most modern satellites.

By using krypton instead of xenon, SpaceX can cut the cost of fueling its electric Starlink thrusters by a factor of 5-10, potentially saving ~$50,000 or more per satellite. By building four large phased-array antennas directly into the body of each satellite, the potential failure of antenna actuators and precision pointing mechanisms can be entirely removed as a possibility. In general, SpaceX has taken almost every single industry-standard process and flipped them entirely on their heads, systematically ignoring many unwritten rules (or written, for that matter) and forging their own unique style of satellite development.

By forgoing a great many proven methods and rules of satellite design and production, failure is certainly a possibility. However, the potential benefits of success are vast. Only time will tell which direction SpaceX’s radical Starlink satellite design ends up going.

Check out Teslarati’s newsletters for prompt updates, on-the-ground perspectives, and unique glimpses of SpaceX’s rocket launch and recovery processes

SpaceX’s deploys 60-satellite Starlink blob, all spacecraft successfully phone home


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Tesla’s Lane Departure Avoidance is an incredibly underrated safety feature


Tesla recently released two new safety features earlier this month. Dubbed as Lane Departure Avoidance and Emergency Lane Departure Avoidance, the active safety systems are designed to help prevent drivers from unintentionally leaving their driving lanes. These new features seem pretty understated on paper, but as some members of the Tesla community are now finding out, Lane Departure Avoidance and Emergency Lane Departure Avoidance could very well be among the best active safety systems Tesla has introduced to date.

Lane Departure Avoidance and Emergency Lane Departure Avoidance are essentially extensions of Lane Departure Warning, a safety feature that has long been enabled on Tesla’s vehicles and other popular cars from veteran carmakers. The new features work by monitoring and sending a series of alerts if a vehicle is about to leave its driving lane. In the event that an unintended lane departure is imminent (such as a car moving to change lanes without its blinkers on), the active safety feature will engage and steer the car back into its original driving lane.

The reception from Tesla owners, as indicated by activity in social media and in online forums, suggest that the two new safety features are being received positively by the community. Owners have given particular praise to the features’ capability to immediately bring a vehicle back into the middle of its lane since it greatly reduces drivers’ chances of meeting an accident. These were demonstrated by several Tesla owners, some of whom provided video accounts of the active safety features in action.

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What’s particularly great about Tesla’s Lane Departure Avoidance and Emergency Lane Departure Avoidance is that they could be enabled on vehicles even if Autopilot is not in use. Statistics gathered by the electric car maker point to fewer accidents happening on the road when Autopilot is engaged, and part of that is due to the driver-assist system’s capability to stay in a driving lane. These new features all but ensure that Tesla drivers get the same safety benefits even when Autopilot is disabled.

Unintended lane departures account for a notable number of fatalities on the road, according to researchers from the Unfallforschung der Versicherer (German Insurers Accident Research). In a study, the results of which were published in 2015, the German researchers noted that up to 10% of deaths in car accidents involve inadvertent lane departures. The researchers further concluded that while a significant number of these incidents were due to distracted driving, over 30% of crashes involving unintentional lane changes could be attributed to drivers’ health issues.

Lane Departure Warning systems have been hailed as among the most notable active safety features introduced for vehicles, ranking up there with the seatbelt as a system that has the potential to genuinely save lives on the road. Tesla’s recently added features combined classic Lane Departure Warning with a flourish of Autopilot, and the result is an active safety system that would likely prevent a significant number of crashes involving unintended lane changes. What’s even better is that these features were rolled out to the company’s vehicles through an over-the-air update, which is completely free for Tesla owners.

Here’s a Tesla Model 3 owner’s demo of Lane Departure Avoidance and Emergency Lane Departure Avoidance in action.

https://youtu.be/4mvpSIzZzDg?t=475

Tesla’s Lane Departure Avoidance is an incredibly underrated safety feature


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Tesla on track to beat Q4 2018’s record deliveries, claims leaked Elon Musk email


An email reportedly sent by Elon Musk to Tesla employees has started making the rounds online. Initially shared on a Chinese social media forum, the alleged Elon Musk email hinted at what could very well be a record-breaking quarter for Tesla, with the electric car maker potentially exceeding its impressive figures in Q4 2018, a period when the company delivered over 90,000 vehicles to customers.

The leaked email suggests that Model 3 production is at a steady 900/day at its current rate, resulting in a run rate of 6,300 vehicles per week. The message also noted that almost all parts of the Model 3 production system had exceeded 1,000 units on multiple days, further opening the doors to a production rate of 7,000 units per week.

A screenshot of the leaked Elon Musk email. (Credit: 橄榄猫的主人/Xueqiu)
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Following is the text of the leaked email reportedly sent by Elon Musk to Tesla employees.

From: Elon Musk

Date: Wed 5/22/2019 10:45 PM

To: Everybody

As of yesterday, we had over 50,000 net new orders for this quarter. Based on current trends, we have a good chance of exceeding the record 90,700 deliveries of Q4 last year and making this the highest deliveries/sales quarter in Tesla history!

In order to achieve this, we need sustained output of 1,000 Model 3’s per day. Almost all parts of the Model 3 production system have exceeded 1000 units on multiple days (congratulations!!) and we’ve averaged about 900/day this week, so we’re only about 10% away from 7000/week.

If we rally hard, we can do it!

Thanks for your great work,

Elon

Tesla’s Fremont factory, where all Model 3 are produced. (Credit: Tesla)

Several commenters in the original Xueqiu post also claimed to have confirmed the email’s authenticity with Tesla employees in China. As noted by Tesla Motors Club member KarenRei, other aspects of the leaked message, including the MS Outlook web client that was used, the red “EM” at the sender field, and the email being addressed to “Everyone,” matches other internal messages that have been previously leaked. (Update: u/RecordSlayer, a member of the r/TeslaMotors subreddit and a Tesla employee, has noted that he received the same message.)

Update: As of 6:40 am PT, there are four independent confirmations that the leaked email from Elon Musk is legitimate. Another screenshot featuring the same message in a mobile device has been shared on the Tesla Motors Club as well.

It would be wise to take the information in this leaked email with a grain of salt. Nevertheless, the scenario presented in the message is not too farfetched, considering that Tesla has already accomplished over 90,000 deliveries in the past. Augmented by the over 10,000 vehicles in transit at the end of Q1 2019, attaining these numbers should be quite feasible for the electric car maker.

Tesla stock has taken a severe beating in recent weeks in a perfect storm involving multiple bearish takes from Wall St analysts, the ongoing US-China trade war, a general decline in the auto industry as seen in the numbers of other carmakers such as BMW and Jaguar Land Rover, and the aftermath of the company’s lower-than-expected production and delivery figures in the first quarter. There’s little doubt that the Tesla narrative has turned predominantly negative recently, but if the company can exceed expectations this second quarter, there is a good chance that the electric car maker could still see a recovery in the near future.

Tesla on track to beat Q4 2018’s record deliveries, claims leaked Elon Musk email


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Tesla to cap battery at 80% charge in high-usage Supercharger stations to increase site throughput


Tesla has recently announced that it is rolling out an update to improve the throughput of its busiest Superchargers stations in North America by up to 34%. With the new optimizations in place, the electric car maker’s expansive charging network would be capable of serving significantly more vehicles that are taking long trips.

When Tesla announced the Supercharger V3 network back in March, the company mentioned that “with thousands of new Superchargers coming online in 2019, the launch of V3, and other changes we’re making to improve throughput, the Supercharger network will be able to serve more than 2x more vehicles per day at the end of 2019 compared with today – easily keeping pace with our 2019 fleet growth.”

(Photo: Tesla)
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Among the ways for Tesla to improve the throughput of its Superchargers is to cap the charging sessions of the company’s electric cars at 80%. According to a Tesla spokesperson, the updated Superchargers will charge a vehicle’s battery very quickly until 80%, after which the charging session ends. Provided that owners utilize Tesla’s Trip Planner, electric car owners would still be able to charge up to 100%, though charging from 80-100% will be at a slower rate.

Tesla is actively integrating this system on the Trip Planner feature of its vehicles, allowing drivers to follow an efficient route to their destinations without unnecessary delays. A Tesla spokesperson noted that these changes would be affecting around 8% of North American Supercharging sites full time, as well as another 9% of sites during the holidays when long trips among Tesla owners are common.

With the continued growth of the Model 3 and the upcoming arrival of the Model Y, Tesla would need a charging network that can accommodate its fleet on a constant basis. With thousands of Teslas on the road, it is pertinent for vehicles to only stop by the company’s Superchargers for short breaks. Supercharger V3, which features the electric car maker’s fastest charging system at 250 kW, could open the doors to charging stops that are only about 15 minutes. 

Just like its electric cars, Tesla’s Superchargers are also in a constant state of improvement. Last month alone, Tesla began rolling out updates to its existing Supercharger V2 network, such as unlocking a 150 kW peak charge rate from charging infrastructure. Tesla has also introduced systems that optimize the heat of its vehicles’ batteries such as On Route Battery Warmup for the Model S and X, which helps vehicles charge at an optimal rate as soon as they are plugged into a Supercharger.

Tesla to cap battery at 80% charge in high-usage Supercharger stations to increase site throughput


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Concerns about Tesla’s (TSLA) alleged ‘demand problem’ are likely overblown


The past few months have not been kind to Tesla stock (NASDAQ:TSLA). Following the company’s lower-than-expected production and delivery figures from the first quarter, the negative narrative surrounding Tesla has gone on overdrive. At the forefront of this is a thesis that the electric car maker’s critics have been pushing: Tesla has a demand problem.

This particular point has spread like wildfire, particularly over the past few weeks. Analysts that recently downgraded TSLA stock would reference weak demand for the Model 3, and bears would echo the same assumption during segments in mainstream media. While this narrative is compelling in the way that it appears to be a foreshadowing of Tesla’s eventual demise, the demand problem thesis is at best inaccurate and at worst flat-out wrong, simply because one can’t base a thesis in one data point.

TSLA investor @Incentives101, an economist with a background in macro research, notes that there is a considerable misconception surrounding Tesla’s Q1 results and how it relates to the demand for the company’s electric cars. In a conversation with Teslarati, the investor explained that while it is easy to make assumptions based on Tesla’s Q1 2019 figures, there is simply not enough data to accurately and responsibly forecast Model 3 (and in extension, Model S and X) demand. Tesla’s Q1 2019 data is nevertheless useful, as it reveals a series of factors that could shed light on what is happening to the electric car maker.

Tesla Gigafactory 1, where Model 3 battery cells are produced. (Photo: Tesla)
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Shocks, Backlogs, and Demand

The economist notes that demand shocks could be transitory or permanent. Taxes, for example, normally have a permanent effect and natural disasters have a transitory one. But these shocks have different effects over time depending on whether a shock is sudden or expected. Understanding how demand normally reacts to these shocks is very important, as it provides clues at what could be expected to make informed assumptions about Q1. When a shock such as a federal tax credit reduction comes, for example, its effect happens in three stages — given that consumers knew it was coming. Before the shock hits, demand generally increases (pulling demand), followed by a period where demand decreases by more than what could be considered a new equilibrium. Following these is another period where demand increases to reach a new equilibrium. Q1 most likely was the worst part of the second stage.

The backlog of Model 3 reservations was primarily used as a point against Tesla by critics, with an assumption suggesting that there will be no demand for the vehicle after the company clears out its initial batch of reservations. The economist argued that while Tesla’s backlog is widely believed to be a factor impacting demand, such a factor would likely not be relevant in the bigger picture. “Given the characteristics of auto demand (it recycles constantly, consumers preferences are well understood, and trends are clear) a ‘backlog’ has the same effect as a natural disaster if you really want to compare it to something. If the backlog happens at the same time as a tax shock or other shocks, it just exacerbates the move. The duration of the shock could be discussed, but in the end, the effect of the backlog is just irrelevant,” the investor said.

Tesla faced a number of shocks in the US auto market in recent months, and these could be translated into inaccurate assumptions. Among these are negative shocks such as the reduced federal tax credit, the “end” of the Model 3 reservation backlog, seasonality, and supply; as well as positive shocks like price reductions on the company’s vehicle lineup.

“There are some main conclusions that one can infer from the data: 1) There isn’t information available to know what the initial equilibrium was. The exponential shape of the curve gives no reference whatsoever to know this. Comparing Model S/X vs. Model 3, is easy to see that S/X had a stable path which would make it easier to measure the impact of these type of shocks; 2) Over time, the shock will be (almost) totally explained by the reduction in supply; 3) Shocks were expected, and price adjustments should more than cancel any negative permanent shock that taxes would have; and 4) Tesla had really bad luck with all these things happening at the same time,” the economist remarked.

The Tesla Model 3 production line. (Photo: Tesla)

Consumer Preferences

Based on these data, one can infer that the primary constraint that Tesla is facing is not demand, but supply. Demand for the company’s vehicles is not exclusive to the United States auto market. It is global, and in this sense, there is simply no indication that global supply for Tesla’s electric cars is already meeting global demand. The investor noted that the effect of the “backlog” argument in global markets would likely be marginal and transitory, and just as demand is not static, supply and prices have not been either.

Ultimately, the most significant factor that would affect the demand for Tesla’s vehicles is consumer preferences. In recent years, consumer preferences are changing in favor of smart devices, and this cascades into the auto industry. Tesla’s electric cars, which are arguably the most tech-focused consumer vehicles on the road today, are a perfect fit for this changing landscape.

According to the economist, “Consumer preferences and regulation actually affect demand. Prices technically don’t affect demand — just the quantity demanded — and the trend shows that it will have a multiplier effect. It’s always important to ask the correct questions, and the question today is not what are they doing to ‘fix’ a transitory shock? Or where’s demand? The question is, how will you increase supply?”

Alleged ‘Cannibalization’ of the Model S and X by the Model 3

In terms of the alleged cannibalization of Model S and X sales by the Model 3, the investor notes that there is no reason, at least at present, to believe that cannibalization is actually happening. Tesla Model 3 sales increased while Model S and X remained in their path, and as sales of the flagship sedan and SUV decreased, Model 3 sales in the US decreased as well.

“Even if you disaggregate data to try to find signs of cannibalization, there’s still no proof. There’s only one market — Norway — that is big enough, that has reliable data and didn’t face any distortions (tax or subsidy), that could give us any insight about cannibalization. Without further information, it would seem that there was significant cannibalization. The only problem is that Tesla distorted the market by eliminating the most popular Model S and X variant (75kWh), which was, on average 70%+ of sales. It is simply impossible to know which effect (the Model 3’s introduction or the 75kWh variant’s elimination) had the biggest impact, or even measure them in any way. And even then, one market may not be enough to prove it,” the investor stated.

Ultimately, the continuing phase-out period of the federal tax credit in the US would likely affect Model S and X sales in the country. But similar to the Model 3, these effects will likely be transitory and not permanent, especially given that prices have changed accordingly, given that the vehicles have better value per dollar. As with the Model 3, the sharp decrease in Model S and X sales in Q1 2019 could be explained by supply changes in its totality. Thus, demand should return to its previous path after a short period of time.

Disclosure: I have no ownership in shares of TSLA and have no plans to initiate any positions within 72 hours.

Concerns about Tesla’s (TSLA) alleged ‘demand problem’ are likely overblown


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Tesla Model 3 showcases its handling and stability by acing the ‘Moose Test’


The Tesla Model 3 recently took on the Moose Test, a challenging test that simulates what happens to a vehicle when it swerves sharply to avoid an obstacle in the middle of the road. According to auto publication Km77.com, which conducted the test, the Model 3 not only passed the evasive maneuver test; it did so in a very impressive, commanding manner.

The Moose Test is performed on a dry road surface, with traffic cones set up in an S-shape to simulate an obstacle. Vehicles drive on the track, then quickly swerve into the “oncoming lane” to avoid the “obstacle,” before swerving back to avoid oncoming traffic.

The test is conducted at several speeds, in order to determine how well a vehicle would evade a potential collision on the road. The test is repeated in increasing speeds until the vehicle skids, knocks down cones, or spins out. On average, these usually happen at speeds of about 70-80 kph (45-50 mph).

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The Tesla Model 3 performed incredibly well in the auto publication’s evasive maneuver tests. Multiple drivers went behind the wheel of the electric sedan, and each one came away impressed at the way the Model 3 handled itself on the course. The Model 3 actually ended up setting a record among the numerous vehicles that have been tested by Km77.com, achieving an entrance speed record of 83 km/h (51.5 mph). Footage of the vehicle show the Model 3 performing incredibly well despite the higher speed.

A key factor that played a significant role in the Tesla Model 3’s stellar Moose Test results was the electric sedan’s regenerative braking system. The auto publication’s drivers noted that it was quite easy to decelerate and control the Model 3’s speed due to regenerative braking. This feature played a role in the Model 3’s record-setting 83 km/h Moose Test, which involved the publication setting regen to Standard. Km77.com‘s test drivers noted that a Low regenerative braking setting still allowed the Model 3 to perform fairly, though the vehicle did not react as well as it did when the feature was set to Standard.

Another factor that contributed to the Model 3’s stellar Moose Test results was the vehicle’s all-electric design. Steering was quick and responsive, especially for a rather heavy sedan, and thanks to its floor-mounted battery pack, the Model 3’s center of gravity is quite very low, giving almost no body roll to the vehicle. This allowed the Model 3 to be in control during the Moose Test’s sharp maneuvers.

Watch the Tesla Model 3 take on the Moose Test in the video below (subtitles are available).

Tesla Model 3 showcases its handling and stability by acing the ‘Moose Test’


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Elon Musk’s Boring Company updates loop system using Teslas on Autopilot


A new teaser video released by The Boring Company has provided a glimpse of the tunneling startup’s updated concept for its loop system, which is designed to carry commuters from one point to another. The Boring Company’s new teaser showed a Tesla Model 3 simply traversing the length of a transport tunnel using Autopilot, reaching speeds of up to 127 mph.

The Boring Company’s new teaser featured a comparison between two Model 3s traveling from what appeared to be the corner of Prairie & 120th Street to the corner of Crenshaw & 12259 Rocket Rd in Hawthorne, CA. The results of the comparison were notable, with the Model 3 using the tunnel completing the journey in 1:36:02 and the vehicle traveling above ground completing the route in 4:44:98.

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In later comments, Elon Musk noted that the Model 3 which utilized the tunnel was not using the electric skates present in the Model X units that were demonstrated last December during the Hawthorne test tunnel’s opening party. Instead, the vehicle in the new teaser simply had Autopilot enabled as it traveled through the tunnel. With this setup, the electric sedan was able to reach a maximum speed of 127 mph. Compared to the rather bumpy tunnel rides in the Hawthorne test tunnel’s opening party, the Model 3’s journey in the recent teaser appeared to be far smoother.

When asked why The Boring Company opted to use Teslas on Autopilot for its transport tunnel, Musk noted that the solution was “simple and just works.” This bodes well for The Boring Company’s other upcoming projects such as the LVCC Loop in Las Vegas, which is less than a mile long and expected to be completed by the end of the year. By using Teslas on Autopilot, The Boring Company’s projects will likely become much quicker to complete, considering that transport tunnels will no longer require rails.

The Boring Company’s loop system, which is intended to transport multiple passengers, has undergone several iterations over the years. Initial concepts from the tunneling startup show vehicles riding on sleds that traveled at speeds of up to 124 mph. During the Boring Company’s unveiling party for its Hawthorne test tunnel last December, the company showcased a concept that utilized electric skates which are directly attached to vehicles that traveled in the transport tunnel. The startup’s most recent iteration of its loop system concept removes skates altogether.

The changes in The Boring Company’s concepts for the loop system all but show the tunneling startup’s tendency to continually innovate. With this in mind, it would not be surprising if Elon Musk’s tunneling startup comes up with yet more updates to its transport tunnels and its loop system in the near future.

Here’s a look at the evolution of The Boring Company’s transport tunnel concepts.

Elon Musk’s Boring Company updates loop system using Teslas on Autopilot


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