
Tesla says it lost “hundreds” of orders after New York Times controversy - protomyth
http://arstechnica.com/business/2013/02/tesla-says-it-lost-hundreds-of-orders-after-new-york-times-controversy/
======
martythemaniak
A lot of people are of the opinion that Musk should not have called out the
NYT and taken a much more laid-back line. But consider for a minute the Iraq
war - years after the start many people still believe that Saddam was directly
involved in 9/11. Once people form an impression, even if that impression is
completely, utterly and factually wrong, it will persist for a long time.

Right now is a very crucial time for EVs and Tesla in particular when this
popular impression is being formed. If nonsense like "Electric cars don't work
in the cold" gains traction, it will be very bad for the industry. And if you
think that quote sounds ridiculous, it is exactly the take-away a casual
reader would have gotten from that NYT review. Remember, to this day a
sizeable chunk of the population still believes Saddam was directly involved
in 9/11.

So I say, Musk did the right thing - if you don't defend yourself, you might
end up with nothing to defend.

~~~
lotso
>If nonsense like "Electric cars don't work in the cold" gains traction

Well, isn't that kind of true? Obviously, EVs work, but the cold weather has a
large impact on batteries.

~~~
gopalv
The drop in capacity of electric batteries are well tested (in airplanes, for
instance).

What came up was two other hidden factors which were usually ignored (at least
by one person - me).

The heater systems for the gasoline cars run on parasitic heating, so does the
power brake vacuum generation.

Both need to be artificially generated for EVs, which busts the "slow brake"
traffic MPG gain myth that the hybrids perpetuated.

~~~
sliverstorm
_The heater systems for the gasoline cars run on parasitic heating_

I think you mean waste heat

~~~
MertsA
The brake booster on the other hand is parasitic.

~~~
sliverstorm
Technically correct, however the brake booster only activates when you are
braking, in which case the engine is either spinning down to idle or idling. I
am not certain of this, but I think this means it is essentially "waste work",
because the engine would be idling anyway, and the power drain of the brake
booster is not significant enough to warrant feeding the engine extra
gasoline.

This is distinct from things like A/C, which place a non-trivial amount of
load on the engine even at idle, and often require things like a higher idle
speed while engaged.

------
tokenadult
I thought the reporting on the Q4 results that Tesla released last week
[checks story] showed that some of those order cancellations preceded the
publication of the New York Times story. Yep,

"Tesla expects to deliver 20,000 Model S cars this year. Right now, with its
production line just getting into gear, it takes time for Tesla to fulfill its
orders. As a result, there is a backlog of reservations.

"Tesla said 15,000 cars were reserved at the end of last year, below its
expectation that it will deliver 20,000 cars this year. The company added
6,000 new reservations in the fourth quarter, which makes the 20,000 target
look achievable.

"However, Tesla’s numbers suggest that a few thousand reservations were
canceled in the fourth quarter. (Update: The Tesla spokeswoman Shanna Hendriks
later said the company had 1,500 cancellations in the fourth quarter). Many
customers were in line but pulled out when it became time to make a
substantial down payment in cash."

[http://dealbook.nytimes.com/2013/02/20/teslas-earnings-
indic...](http://dealbook.nytimes.com/2013/02/20/teslas-earnings-indicate-
some-customer-cancellations/)

Investors looking at basic customer appeal issues like that seem to think that
Tesla Motors stock may not have as much upside as it appeared to have before
the fourth quarter financial results were announced.

<https://www.google.com/finance?q=NASDAQ:TSLA>

~~~
stephengillie
It's not immediately clear how much of the stock drop was caused by the Q4
numbers, and how much was caused by uncertainty from the NYT story. But while
the NYT story can affect the stock price drop, it can not have any effect on
the Q4 numbers.

I'm not sure from the article, but it sounds as though Tesla had 15,000 2013
orders by Q3 2012. Then, during Q4 2012, they added 6,000 orders for 2013, and
had 1500 people unable to pay their 2013 down payment, which would leave their
2013 orders at 19,500. This is 500 cars short of Tesla's projected 20,000. If
these 500 were all Roadsters, wouldn't the projected 2013 sales shortfall be
around $5 million?

It's odd that they report so many people placing orders, then balking at the
down payment. It's an odd item to be reporting, I don't know if other auto
manufacturers report this. Maybe they should require the down payment at an
earlier point in their checkout process, to remove these superfluous tire-
kickers from the corporate statistics? It's got to be embarrassing to announce
that ~8% of your customers decided to cancel at the last moment.

~~~
lawnchair_larry
> It's got to be embarrassing to announce that ~8% of your customers decided
> to cancel at the last moment.

Isn't this normal in that business? People back out of car purchases all the
time. Cold feet, financing falls through, better deal elsewhere, etc. I don't
know what percentage is business as usual, but 8% doesn't seem high.

I do agree that it's an odd thing to report.

------
blhack
People must be pretty on the fence about the car if all it took was _one_
article to sway their opinion into not buying a car.

The NYT article _did_ highlight a major problem with electric vehicles: when
you get the batteries really cold, their reported charge can be non-reflective
of their actual range.

I never leave my Jeep overnight and wake up to seeing the gas gauge report
only half of what is actually in the tank. If this was a thing that was
possible, Jeep would be back to their drawing boards figuring out how to fix
it, not chiding a reporter for pointing it out.

I hope everybody following this read the NYT reporter's response:
[http://wheels.blogs.nytimes.com/2013/02/14/that-tesla-
data-w...](http://wheels.blogs.nytimes.com/2013/02/14/that-tesla-data-what-it-
says-and-what-it-doesnt/)

~~~
eksith
Except you're comparing apples to oranges.

Cold weather pilots never let their aircraft sit outside for too long if they
intend to fly within the hour since the fuel starts to gel. They plug in to
the hanger if a power source is available or keep the engines running
(although that's rather expensive these days). That doesn't mean those
aircraft are in any way inferior to their warm weather counterparts.

The system is fundamentally different. Different is not inferior. Different
means it can't be treated the same way as a fossil fueled vehicle.

FYI... The batteries do have heaters to improve efficiency, however that too
drains power so a glance at the manual (and some common sense) would have told
him to leave it plugged in. A bit like having to run a diesel engine a bit to
make sure the fuel won't turn to gel in the lines.

I'm not sure if deliberately sabotaged the test drive, but I do think there's
some driver naivety (negligence?) at play.

~~~
vacri
There is a huge difference though - when your engine is cold, an ICE still has
as much fuel in the tank as last night, but an EV has 'lost fuel'. That's
something new.

~~~
eksith
That's very true, but both ultimately have the same end effect: "Lost range".
But can be mitigated by caring for them differently.

In the case of the EV, it's leaving it plugged in and in the case of ice, it's
adding de-icer to the fuel. You just care for it differently. Arguably the EV
still is a slight advantage since traditional engines still need to be warmed
first whereas the EV can just start and go as long as it was plugged in
overnight since the heater pads on the batteries will make sure it won't drain
too quickly. Can't keep a fossile fuel engine running all night like that.

------
danso
For someone who used the "we have the data and the data proves we're right"
approach, something just feels off in what Musk is quoted as saying:

> _"We did actually get a lot of cancellations as a result of The New York
> Times article. It probably affected us to the tune of tens of millions, to
> the order of $100 million, so it's not trivial,” Elon Musk, the chief
> executive, said on Monday._

 _“I would say that refers more to the valuation of the company. It wasn't as
though there were 1,000 cancellations just due to The New York Times article.
There were probably a few hundred."_

"Probably" a few hundred? Can't he be certain how many car orders have been
canceled? And in what time period, and how long of time period, did these
cancellations take place? And how does this rate compare to other periods in
time? And if he's going to claim that the impact was non-trivial, then why
leave so much fuzziness in the interpretation of how much was lost in direct
car sales and how much through a loss of valuation?

The use of data, as it did in his rebuttal to the NYT, would help his case
here. But in this interview he sounds like someone just throwing out rumors he
heard from someone in the finance department.

~~~
stephengillie
Tesla currently only makes 2 cars: the Roadster, which sells for about
$100,000, and the Model S, which sells for around $50,000.

To reach $100 million in canceled sales, 1000 Roadster orders or 2000 Model S
orders would have to be cancelled.

If _a few hundred_ meant 300 cancelled orders, then their losses would be
limited to between $15-30 million.

So the 2 sentences reflect a disparity of at least 700 cars. I wonder if
someone is trying to confuse the 1500 cancellations in Q4 with the
cancellations caused by the NYT article. 1500 cancellations would represent
around $100 million in cancelled sales, and this was announced at about the
same time as the NYT article.

~~~
rsuttongee
There's several different models and prices of the S:

<http://www.teslamotors.com/models/options>

There's also tons of up sell items and tesla is discounting all the listed
prices by the $7500 tax credit you are entitled to for buying an EV.

------
ChuckMcM
Interesting strategy.

Like tokenadult comments, some cancellations occurred before the NYT article.

In any sort of 'high dollar' purchase like this there is a certain percentage
of buyers who, after time, get cold feet. There are also people who clearly
speculated that having a spot in line with a reservation could be arbitraged
for a quick gain.

People who run businesses are quite careful to distinguish between the 'sales
funnel' and 'sale commitments' and 'booked sales.'

As more and more cars get out there, there will be a more likely chance of
'knowing' someone who has one (within a degree or two of separation) and so a
more durable 'consensus' of whether or not they are worth the expense will
surface. I wouldn't panic as long as their book to bill ratio is > 1.0 but
once they catch up, things will get interesting.

------
drucken
Head of Edmunds car review site reports that the Model S's on-board
touchscreen failed:

<https://twitter.com/edmunds_test/status/306067589589774336>

The Twitter conversation is ... interesting!

BSOD in an electric car, what will Musk say this time?

~~~
kamaal
Whoa!!!

The thread says that pressing both the steering buttons reboots the
software(Read: The whole car).

This is purely WTF!

------
Shivetya
Well regardless of the facts of the NYT article the facts Tesla revealed don't
make me want one. I read nearly every article I can on this car and similar. I
want to know where the industry is going and what is working and what is not.

I think like motorcycles of yesterday electric vehicles need a reserve,
something that does not register in range calculations. Something that lets
you heat or cool the cabin, something that gets you by that oops moment,
detour, or just bad luck. That and better software for representing range and
to top that off, forcing the car's dynamics to always favor range and make
people choose otherwise.

The current breed of cars favors the enthusiast, the problem is that they
aren't the only ones with money to buy.

~~~
DanBC
> electric vehicles need a reserve, something that does not register in range
> calculations. Something that lets you heat or cool the cabin, something that
> gets you by that oops moment, detour, or just bad luck.

They do have a reserve. The reserve doesn't figure into range calculations.
You can heat or cool the cabin. You can have an oops moment, you can have a
detour.

What you can't do is allow the car to discharge, then give it much less charge
than is needed for your journey, and then ignore the obvious warnings ("You
want to drive over 60 miles. You only have enough charge for 30 miles. A good
idea to keep charging.") and drive away knowing that you don't have enough
energy to get to your destination.

------
cube13
How does the loss of a few "hundred" orders translate to a net loss of $100
million? Assuming that all of the orders are the top-end Model S or Roadsters,
a few hundred loss sales would translate to lost revenue in the low tens of
millions of dollars.

~~~
lukevdp
Maybe he thinks it will affect future sales as well

~~~
cube13
Possible, but it seems really dangerous to make statements like that outside
of normal disclosure routes. They're a publicly traded company, and the SEC
really doesn't like that kind of stuff.

------
jrochkind1
“I would say that refers more to the valuation of the company. It wasn't as
though there were 1,000 cancellations just due to The New York Times article.
There were probably a few hundred."

Huh, he's talking about HIS OWN QUOTE about "hundreds of millions lost", he
has to GUESS what he himself meant? He doesn't know _exactly_ what he meant
when he said they were "affected" "to the tune of tens of millions, to the
order of $100 million." He has to hazard a guess "I would say that refers
mostly" about his own quote?

I guess he did say "probably" in the first place. Yes, he's just making shit
up.

The more he goes, the less trustworthy he seems.

------
robomartin
I am not taking sides in terms of the Tesla vs. NYT issue.

I will say that anyone who cancels an order for a bleeding-edge car based on
an article like this is a moron. You, more than likely, don't want such a
person as a customer. They'll bitch and complain about anything and everything
and be nothing but collective pains in the ass.

I've been in complex hardware manufacturing before and I can say that, almost
without fail, the customers who would flip on you based on forum posts,
hearsay or such articles/reviews are a total waste of your time. They were
just looking for a reason not to buy and found it. Good riddance.

How can an article that is NOT the result of a rigorous scientific evaluation
process be used for anything other than entertainment is beyond me. At best
one could call it a potentially interesting "unverified data point" and move
on.

------
confluence
I'm a TSLA stockholder and the article and this entire brohaha don't
particularly bother me. The Model S is the best luxury sedan on the market,
orders are backed up for most of this year's capacity, and 100s of orders are
coming in every month.

Furthermore, the factory they run to build the entire thing is just incredible
(<http://www.youtube.com/watch?v=qvPosSzUGVI>).

I used the recent 10% drop to significantly add to my TSLA position. Please -
continue doubting TSLA, shorting it and selling the stock - you're doing me,
and other TSLA investors a great favour.

I always hate it when prices on stocks I want go up - it means I can't buy
anymore :(

------
crazygringo
> _"And lots of people said that it does not matter if you're right or wrong,
> you do not battle the New York Times. To hell with that. I would rather tell
> the truth and suffer the consequences even if they are negative."_

Well, only if it's good PR. Because if a CEO would rather tell the truth and
suffer negative consequences because of it... they're not really qualified to
be CEO then.

When you're running a company with investors' money, you'd better be more
mature and intelligent about things than worrying about who's "right" and
"suffer the consequences". Because you don't come across as professional, you
risk coming across as unhinged.

~~~
hvs
And, as you intimated, a CEO has a fiduciary responsibility to the board and
stockholders. Doing something that you _know_ is going to have negative
consequences for your company could be seen as failing to do honor that
responsibility.

~~~
_delirium
The fiduciary duty is taken pretty broadly and with a long-term perspective,
however; courts don't generally second-guess strategic decisions. For example,
Musk could plausibly argue that the company's long-term reputation with its
target audience depends on being seen as brusquely honest. A court is
typically not going to get into trying to determine if that's true or not.

------
migrantgeek
Instead of attacking the NYT, why not just let another paper do the same test
with the same car?

There may be an issue with that particular car, the journalist could be bias
or the battery may just not perform well in cold weather. It’s hard to tell
without additional testing.

I don’t see why all the focus is on who said what. Just re-run the test a few
times to try to repro. That’s what I’d do if someone had an issue with a piece
of code I’d written.

------
greggman
He just needs to invest in this and outfit the next Tesla with Super
Supercapacitors.

<http://vimeo.com/51873011#﻿>

Charge your car faster than you can fill it with gas? Yes please ;-)

------
cafard
Is a long drive in cold weather really the general use case for Tesla? It
seems to me to be a commuting car for the well-off early adopter.

~~~
base698
Given how many people in California go to Tahoe and Mammoth for a weekend, I
think cold weather driving is a must. That would stop me from buying one.

~~~
DanBC
Wouldn't you want a bigger car for Tahoe, to fit the skis, snowboards, etc?
(Also, Californian roads, snow chains, etc)

But, as for cold, Tesla apparently have lots of Scandinavian customers who
live in very cold places and they seem to do okay. I have no idea how to say
"My car died in the cold" in any of the Scandinavian languages, so I can't
search for reviews.

~~~
taligent
Scandinavian countries are also quiet small in size so you aren't likely to be
too far from a charger in the event something does go wrong.

------
jmpeax
How embarrassing for NYT. My goofy cousin ran out of gas on the highway, maybe
NYT can publish his story too.

------
OGinparadise
If had to base a decision on Musk's behavior I, too, would have cancelled.

This also backfired on Musk, IMO, as more potential buyers learned about
Tesla's weak points.

~~~
gutnor
That is what I was thinking during this whole affair - if I buy a Tesla I sure
hope I will not make the front page of a website like Reddit with a negative
opinion of my car. ( I have posted in the past a humoristic picture of my
broken down car on my way to an interview )

Tesla goes straight for the jugular, and considering I'm a nobody I don't know
what they would do to my reputation online, because of my 5 min of unwanted
fame.

