A Good Day for Tesla, Bad Day for Cadillac

By Rob Enderle November 19, 2013

Tesla had a good day this week when their founder Elon Musk, stepped up to their bad PR problem with the Tesla S battery and effectively hit it out of the park and Chevrolet’s Cadillac division announced the ELR at a similar price point making the Tesla S look like even a better value. Let’s talk about both moves this week.

Tesla’s Battery Problem

Their battery problem is mostly perception with only three cars catching fire and all three only after abuse that likely would have done in a gasoline powered car as well.  The first and third fires were from road debris that penetrated the ¼” steel plate (and in the first case where the Fire department drilled through it), and the 2nd fire was because the driver was drunk and drove through a tree and wall rather than around them.  In all cases the driver walked away and, in a gas car, that wall and tree incident would have likely been far more painful.  

But the fires were hurting Tesla’s image largely because Tesla doesn’t yet have in place a strong marketing or PR team.  This is not uncommon with technology companies as engineers tend to think that the technology speaks for itself and Tesla was taking a beating as a result. 

Well Elon Musk, who often speaks first and thinks later (and kind of did here a little bit), did right by the car company this time proposing to adjust the car’s height at drive speeds (a software patch) so fewer things would penetrate the battery and to cover such accidents with the warranty.   Basically he embraced the problem and put his company behind making people care less about it.  And, in his discussion, he shifted focus from talking about fires to talking about fatalities where Tesla clearly leads with zero of them related to fires.   This all helps reinstate Tesla in potential buyers’ minds as the safest car in the Market.

Cadillac’s ELR

Cadillac decided to make a lot of noise about their ELR electric hybrid which gets more range than the Tesla S, only issue is that it is based on the Chevy Volt which has sold very poorly.   The ELR is a very pretty car but the beauty is unfortunately only skin deep.  This is largely because the cost and performance of the Volt are out of line with competitive offerings.    There is some support for moving up market into the Tesla S’s range because, as a premium car, people are often more interested in appearance and the cost isn’t as big a problem    The issue comes back to hybrids with an electric bias.   It is an ugly combination because the batteries are both costly and heavy and the combined performance of the result lags a pure gas or pure electric car badly.    We saw this with the Fisker as well, it looked wonderful but at nearly $100K folks just couldn’t get over the fact that a mid-range Toyota sedan would out-perform it.  

But by releasing a car in the Tesla’s range Cadillac validates the range for electrics cars and will get more people looking at the class.  Since the Cadillac isn’t competitive and Tesla under markets this GM marketing should fuel Tesla S sales given that is the natural car that everyone will want to compare to the Cadillac. If you drive both cars it will be hard to walk away with the ELR because the S is just so much more powerful. Granted the ELR uses gas too which improves its utility but anyone living where electrics aren’t useable would find a regular gas car to be both cheaper and better performing anyway. So I see the ELR providing a huge boost to Tesla.

Wrapping Up

However, both incidents still point to the fact that Tesla is light on marketing and PR and that the right set of circumstances could turn them into Tucker or Corvair as a result.  Someone will eventually die in a Tesla and/or there will be a catastrophic problem with one of the cars. When you build millions the odds suggest someone will eventually screw up. The company needs a better way to deal with this kind of image problem than an outspoken CEO.  If you are going to play like, and be valued similar to, Ford and GM you need to have the same level of protection. Tesla needs to finish growing up but this week was a very good week for the firm. Nice move by Musk and, what the hell is GM thinking?   

Edited by Cassandra Tucker

President and Principal Analyst, Enderle Group

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