Business model of the NOT "free...forever" Tesla DC network

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edatoakrun

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Edit 11/19/16, thread title changed to Business model of the NOT "free...forever" Tesla DC network.

Thought it might be time for a thread on this topic, continuing from the off-topic discussion at:

http://www.mynissanleaf.com/viewtopic.php?f=26&t=11219&start=130" onclick="window.open(this.href);return false;

palmermd said:
...The current cars are paying for the charge stations...after the network is built out, the next car sales will pay for the solar and battery pack additions to the stations. Yes, sales of the Model S will pay for the build-out of the network and in return they will get charging for life. I don't believe that Model 3 will have the same offer. I expect that they will be charging for Model 3 owners to use the superchargers. $100k car gets prepaid charging, $50k car gets to pay for the energy consumed. Tesla has not stated any of this but this is just my own view of what they are doing and I think it makes perfect sense...

Tesla is charging the one group who is willing to pay for the infrastructure, and that is people who can afford a $100k car.
Well, this is an interesting theory, variations on which I've read many times before.

Can you try plugging in the anticipated costs for the network and the kWh (purchased or generated) and show how it could actually be profitable, or even recover the costs, for TSLA?

It seems to me that the only way it could work (and quite improbably, at that) is if the future purchasers of the "$50k car" (if and when they are sold) would be willing to subsidize the charging costs for those "people who can afford a $100k car" in the present.

Anyone else have a guess on how "free...forever" DC charging could be possible?
 
edatoakrun said:
It seems to me that the only way it could work (and quite improbably, at that) is if the future purchasers of the "$50k car" (if and when they are sold) would be willing to subsidize the charging costs for those "people who can afford a $100k car" in the present.

Boy you are negative. The $50k car would not even have a charger to plug into if it were not for the $100k car paying to have it installed. Why do you insist on making this about the everyman subsidizing the rich folks.
 
The commonly accepted number is each car pays in advance for $2000 worth of charging.

The average charge at a supercharger is about 50kWh which at $0.10 per would be $5.

The average Tesla car with supercharger port has to supercharge more than 400 times to exceed their prepaid usage. That's like supercharging once a week on average for the life of the car.

There are plenty of Model S users that don't supercharge at all. There are plenty that are selling their 2 year old car with low mileage like 16,000 miles.

Sure you'll get guys like islandbayy that supercharge several times a week and will use their allotment (well more than the average user) but I'm saying they are a minority.

Your average owner charges at home more than at a supercharger.

I don't see the problem with the model.
 
I did plug in some numbers in the linked thread, but I'll add something here. There is a time value to money. That is, $2k today is worth more than $10/month for the next 200 months. Why? Because of inflation for one thing, and because you can invest that money today and get a non-zero return on it.

So what is Tesla investing the money on? Supercharging, of course! And what is their return on investment? Sales of more cars!

By a show of hands, who here would prefer a Model III over a Bolt, Leaf 2.0, etc, if the only difference was access to the Supercharger network?
 
GetOffYourGas said:
By a show of hands, who here would prefer a Model III over a Bolt, Leaf 2.0, etc, if the only difference was access to the Supercharger network?
I still think it would depend.
If I get a car with a 150 or so mile range, then I really don't need to worry about charging for the commute.
In that case, the Supercharger network would be nice, but possibly something I wouldn't use much (there isn't a Supercharger close to me anyway currently).

Yes, it would make longer distance trips more possible, but we're a 2 car family so that might be interesting, but not a major point for me...

For someone who is looking for a single car / longer commutes tho, I can see it being a big deal.

The other issue is that "if" in there..
I have a feeling there will be some other big differences. Availability date and price come to mind. ;-)

desiv
 
Since Tesla intends for the Model 3 to sell an order of magnitude above Model S, I just wonder what their build-out plans are. It's not going to be enough to string a path; they're going to need a lot more active bays.
 
I think they'll market the base model 3 as a city car and omit supercharging. It's still going to be a pretty expensive car so they can easily add it on to the higher end trims. I also wouldn't be surprised if the model 3 with a PXXD version tops out at $85k +. They can also add Tesla 40 amp or 80 amp chargers at supercharger stations for dirt cheap. This will allow them to offer free charging to everyone, and people will feel that they won't get stuck, for people who aren't planning on doing road trips when they buy they will at least feel if the need comes up that they can do it. It will discourage local cheap people who don't need a charge for using it just to save a few bucks while they shop/eat.

Regardless of what happens with the 3 the S will keep growing and the X will be the real test of capacity. I think the only way they can make it work in the long run is speeding it up to 200 miles in 15 min and having a stay with your car policy during and or a fine/charge system if you leave your car longer than it needs to charge.
 
minispeed said:
I think they'll market the base model 3 as a city car and omit supercharging.
You may have missed that Musk has been saying for a over a year now that Model 3 will have free supercharging.

Add to that the recent Model S lineup change such that they no longer sell cars without the supercharging and I find it likely that they'll continue on with the Model X and Model 3.

I'll add one more point to ponder. Every single Model S even the 40 kwh and 60 kwh orderd without supercharging were delivered with the supercharging built in and a simple software update can enable supercharging.

If they wanted to the could have left hardware off those cars and save money. Tesla is betting that every Model S will have that enabled once the network is built out. I'm willing to believe that enough will get turned on that a non supercharging Tesla will someday be an oddity that is hidden in a garage somewhere hardly used.
 
It lets Tesla sell their cars for perhaps 50% more than they would sell them otherwise, and probably doubles Tesla's sales volumes.... sounds like a good business model to me ....
 
Tesla making the Model III a city car?! :lol:

Facts:
Elon Musk has clearly stated that 200 mile range is the practical minimum for an EV
Tesla have raised the entry level price of their Model S by releasing the 70D, opening a gap in price to $50K for Model III
You cannot buy a Tesla Model S new without supercharging enabled, all new cars have it
The supercharger build out will be practically covering the majority of their sales geography by 2016 for cars with 200 mile range

The Model III will be a 200 mile range car, end of story.
Don't dream or wish otherwise, you'll be mistaken. :p
 
SmartElectric said:
Tesla making the Model III a city car?! :lol:
Why can't it be a city car with a 200 mile range?
That's plenty for driving around the city and having enough so you can almost exclusively charge at home.

Hence, the Supercharger would be more an option.

desiv
 
desiv said:
The other issue is that "if" in there..
I have a feeling there will be some other big differences. Availability date and price come to mind. ;-)

Yes, you are right. I very intentionally put that "if" in there. I don't believe it will happen either, but my point was that supercharging access is a selling point. Therefore, if the Model III is $10k more than the Bolt, and the only significant difference is supercharging, there will be a market for both cars. Of course, both cars will have their pros and cons. Some will prefer the styling of the Model III, others will prefer to buy a Chevy out of concern that Tesla will not be around 10 years from now.

dhanson865 said:
You may have missed that Musk has been saying for a over a year now that Model 3 will have free supercharging.

Please point me to where Musk said that all Model III's will have free supercharger access. I have only seen where he said that 1) the Model S will always be free for life and 2) All Tesla cars will have the option for access. I feel like he has been intentionally vague to lead us to believe that Model III will have lifetime access without actually saying it. That way he isn't a liar if/when that doesn't happen.

dhanson865 said:
If they wanted to the could have left hardware off those cars and save money. Tesla is betting that every Model S will have that enabled once the network is built out. I'm willing to believe that enough will get turned on that a non supercharging Tesla will someday be an oddity that is hidden in a garage somewhere hardly used.

The other thing to consider is that the resale value of a non-activated Model S is much higher thanks to the hardware being on board. The original owner may never want access, but a second buyer can always add it fairly easily.
 
GetOffYourGas said:
...my point was that supercharging access is a selling point. Therefore, if the Model III is $10k more than the Bolt, and the only significant difference is supercharging, there will be a market for both cars.
Totally agree..
I think people who seem to be saying that "car X has feature Y which will blow all the other cars out of the water" are underestimating the market a bit.
I see lots of options for lots of different EVs at different price points..
If the Model III comes in about the same cost as the Bolt, I still see the option (I'm assuming it will be an option) for the Supercharger network will be a very nice selling point.
That being said, I see some people not needing (or not thinking they will need) it and preferring the Bolt.
I think there's enough of a market for both to do well, and in that case I don't care which one wins.. ;-)

I also (just a guess) see the Leaf coming in costing less than both of the above, possible with a bit less range, or a few range options? (Not sure about that one.. It makes sense, but from a marketing perspective, maybe not???)

That would be a market for the "lower end, but still nice" EV, which I see Nissan in the best position for. (Yes, I ended a sentence with a preposition, but I'm too lazy to fix it..)

I also wonder, as there are more EVs and people get more comfortable with the smaller range, if there might be a larger market for the true low-end EV?? Right now it's very niche, but as EV becomes more accepted, does that bring more acceptance of the true low end EVs????

I don't see much happening in the next year or so, but after that, it will be interesting to see what happens.. ;-)

Fun times..

desiv
p.s. To really bug people, I also think it's possible Tesla has major problems with the III and yet it won't be a problem. I could see Tesla splitting into 2 companies. A high end car company, and a battery company who supplies to the big car manufacturers (and themselves).. Just a crazy theory on my side, but.. ;-)
 
GetOffYourGas said:
dhanson865 said:
You may have missed that Musk has been saying for a over a year now that Model 3 will have free supercharging.

Please point me to where Musk said that all Model III's will have free supercharger access. I have only seen where he said that 1) the Model S will always be free for life and 2) All Tesla cars will have the option for access. I feel like he has been intentionally vague to lead us to believe that Model III will have lifetime access without actually saying it. That way he isn't a liar if/when that doesn't happen.

He has said it several times. First google result is http://insideevs.com/elon-musk-confirms-free-supercharging-for-tesla-gen-3-model-e/" onclick="window.open(this.href);return false;
 
dhanson865 said:
He has said it several times. First google result is http://insideevs.com/elon-musk-confirms-free-supercharging-for-tesla-gen-3-model-e/" onclick="window.open(this.href);return false;
Actually, it's still grey..
He's said several times that the Model 3 will get free access to the supercharger network. True.
But he hasn't specifically said that the "free access" won't be a charged option. :)

I know, it sounds silly...

But "free" can mean different things to different people.. ;-)

desiv
 
desiv said:
dhanson865 said:
He has said it several times. First google result is http://insideevs.com/elon-musk-confirms-free-supercharging-for-tesla-gen-3-model-e/" onclick="window.open(this.href);return false;
Actually, it's still grey..
He's said several times that the Model 3 will get free access to the supercharger network. True.
But he hasn't specifically said that the "free access" won't be a charged option. :)

I know, it sounds silly...

But "free" can mean different things to different people.. ;-)

desiv

Quote in the article cited seems to agree with your point:

We suspect that access to the Supercharger network will be an option for Gen 3 (so, some will undoubtedly say it isn’t free then).

From a business point of view the cost of the ongoing network should be maintenance and energy. I'm sure the actual energy cost is easy to mitigate (model actual lifetime average energy use/vehicle in each class and then add a small buffer and tag this onto new vehicle cost). I suspect that the Model III folks won't (as a whole) use the network nearly as much in total as many think - instead going about their daily life charging at home.

Now the thing that may be interesting would be on the big travel days (i.e. Thanksgiving holiday) which could stress the location availability.

The key here for long term success could hinge on managing the utilization. Given how well Tesla appears to be using actual data for decision support (i.e. placement of service centers where actual buyers are etc) I would be surprised if they are not monitoring this as well. "Might use" and "actual use" are so different for all of us - get enough numbers there and averages start to become viable for decision support.

Will be interesting to watch and see how it falls out. Would be even more fun to own a Tesla and participate in it :)
 
SmartElectric said:
Tesla making the Model III a city car?! :lol:

Facts:
Elon Musk has clearly stated that 200 mile range is the practical minimum for an EV
Tesla have raised the entry level price of their Model S by releasing the 70D, opening a gap in price to $50K for Model III
You cannot buy a Tesla Model S new without supercharging enabled, all new cars have it
The supercharger build out will be practically covering the majority of their sales geography by 2016 for cars with 200 mile range

The Model III will be a 200 mile range car, end of story.
Don't dream or wish otherwise, you'll be mistaken. :p

Maybe city car was the wrong term since it's often used to describe things like the smart marketed to people who have problems parking in a busy city. Maybe commute car is better. There are many BMW 3 series and other sporty compact sedans driven like that every day. IMHO to convince people to drive to work every day electric you need a real world range in the winter that will probably relate to a 200 mile range under the EPA. I wasn't trying to say that the model 3 would have less range when I used the term city car. As you stated as a fact, musk has clearly stated that 200 mile range is the practical minimum for an EV. A car for people who do nothing but drive to work, pick up groceries and take the kids around town is a huge market, and one that Tesla will eventually need to continue growth. They can pick if they want to take those types of sales from upper middle, middle, or lower income people by what they build.

Facts:
You said 2 things that are not facts, Musk made a statement that makes the making of the statement a fact, it does not mean him delivering it will be a fact. Also yes supercharging roll out will cover 200 mile ranges that doesn't mean there will be one for everyone who drives 100 miles to work and back. There will still be many people who never drive near them.
Facts about the model S, yes they are facts. They are not facts that support our theories of what it means for supercharging on the 3. I have my theories and you have yours, both are valid, I think both could happen. More about that below.

dhanson865 said:
minispeed said:
I think they'll market the base model 3 as a city car and omit supercharging.
You may have missed that Musk has been saying for a over a year now that Model 3 will have free supercharging.

Add to that the recent Model S lineup change such that they no longer sell cars without the supercharging and I find it likely that they'll continue on with the Model X and Model 3.

I'll add one more point to ponder. Every single Model S even the 40 kwh and 60 kwh orderd without supercharging were delivered with the supercharging built in and a simple software update can enable supercharging.

If they wanted to the could have left hardware off those cars and save money. Tesla is betting that every Model S will have that enabled once the network is built out. I'm willing to believe that enough will get turned on that a non supercharging Tesla will someday be an oddity that is hidden in a garage somewhere hardly used.

I would guess that the move to make supercharging standard on the S does not mean it will be done on the 3. It is probably a way to increase the price of the S and have the memory of the option price of supercharging fade away. By the time it comes out on the model 3 none of the buyers will know what it use to be. That will allow them to package it however they want at whatever price they want.

As for including it in all S models even if they didn't pay for it, I doubt it costs them anything, it's not like it uses a different port like on the leaf. I would say it's a good guess that there is no extra equipment added on board that costs them more in those cars. It would probably cost them more to develop, build, order, stock and install a separate system for non supercharging cars. As Tesla has always said the economies of scale make things cheaper. Hence why for years many cars have been sent from the factor with things like cd changers and subwoofers pre wired on all models of the car. It saves them money when they source the wires from one place.

A reverse way to look at it, if you include it "free" then smart buyers will know it's built into the cost. Nothing is free. Someone who knows they don't want it may feel ripped off.

At the current model S price it's hard to say forcing a $2000 option on you is a thing that will turn buyers away. I bet a good chunk of those people have bought an ultra-luxury car before and been forced to buy a package at a few grand to get one option they really want.
 
minispeed said:
At the current model 3 price it's hard to say forcing a $2000 option on you is a thing that will turn buyers away. I bet a good chunk of those people have bought an ultra-luxury car before and been forced to buy a package at a few grand to get one option they really want.

Well - we don't yet know what the "model 3 price" will be - only the target price. I would imagine that having a model offered without the supercharge option may allow lowering the price on that model slightly which then could allow Tesla to claim $x base price for the model.

I have to admit that if/when I get a Model3 I'd give serious consideration to passing on the unlimited supercharger option (if available). IF they offered a per-use option I'm almost certain I'd save vs paying for unlimited given my likely usage pattern.

As to how to implement with minimal overhead - I have to believe that Tesla was smart enough to put communications on the superchargers to allow identification of the vehicle and/or supercharger station; a simple "enable/disable" setting on the car could be checked as part of the charging protocol and allow those without the option to be notified and turned away or possibly asked to authorize a payment method (even better) for the session. A lot can be done in software that has extremely low cost to implement in mass.

Alternatively it may be better long term for Tesla to simply continue to include it in the price realizing that usage is likely lower than many would expect and thus their relative costs are low. Being able to make the claim of 'free access' to the 'coast to coast' network could go a long way in reducing range anxiety and removing a barrier to closing the deal with customers. Simplify the conversation quite a bit when you can say "don't worry - you can use the SC network for free and the car will warn you before you stray too far from it." Tremendous marketing value in that I'm sure. I'd like to see the numbers on what % of the miles driven in the Model S have been powered by the supercharger network...
 
Slow1 said:
... I'd like to see the numbers on what % of the miles driven in the Model S have been powered by the supercharger network...

It has been about 10%.
They have a display at the Hawthorne Design center that displays statistics on the SC network. For quite some time it has been hovering right around 10%.
If you google "Hawthorne Supercharger Dashboard" you can see a few.

About 8 months ago it was at 36 Million miles.
Tesla just Tweeted today that the fleet has reached about 930 Million miles, and around February 10th they had passed 750 Million miles.
Very, very rough estimate, 8 months ago they were between 450 & 550 Million miles. So, a bit less than 10% in that case.

As for verifying each car, that is in place now. When you plug into a SC your VIN is verified as SC enabled.
 
Zythryn said:
Slow1 said:
... I'd like to see the numbers on what % of the miles driven in the Model S have been powered by the supercharger network...

It has been about 10%.
They have a display at the Hawthorne Design center that displays statistics on the SC network. For quite some time it has been hovering right around 10%.
If you google "Hawthorne Supercharger Dashboard" you can see a few.

About 8 months ago it was at 36 Million miles.
Tesla just Tweeted today that the fleet has reached about 930 Million miles, and around February 10th they had passed 750 Million miles.
Very, very rough estimate, 8 months ago they were between 450 & 550 Million miles. So, a bit less than 10% in that case.

As for verifying each car, that is in place now. When you plug into a SC your VIN is verified as SC enabled.

Ok so if we assume that fleet average holds with the Model3 (I would bet on lower number) then if we assume a 100K mile timeframe, then on average 10K miles would be from SC network - or at a poor 3miles/kwh about 3,333kWh of power. Assume a 25c/kWh and that is about $833 in power. Granted this doesn't consider maintenance of the network but it does put the marginal cost somewhat into focus. So, add in $1K/car and perhaps that would cover the marginal cost of the Model3's assuming the initial network (and most ongoing support) is covered by the premium Model S/Model X sales.... I think it is quite doable.
 
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