

Elon Musk admits Tesla's math was wrong - hornbaker
http://www.bizjournals.com/sanjose/news/2013/05/03/elon-musk-admits-teslas-math-was-wrong.html

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uvdiv
_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>

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ricardobeat
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.

~~~
baak
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.

~~~
ricardobeat
Have you been to the website? It's a calculator, you put in your mileage and
other costs and it gives you the TOC. $580/month is the best case scenario.

You'll see they actually do the opposite, discounting for _saved time_ , since
90% of the time you'll just plug it in at home and never worry about
recharging during the day, instead of a trip to the gas station every week.

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

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lolcraft
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.

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cantankerous
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.

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

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hnriot
Well, since Enron was an oil company, and since the model S is an electric
vehicle, I'd say the model s is just fine without Enron around...

~~~
makomk
Enron were also in the business of selling and trading electricity and owned a
number of large power plants. A lot of the fraud was actually in the
electricity part of their business.

~~~
cantankerous
Yeah I'd venture to guess if Enron still existed it'd be MORE expensive, not
less, to own a model S.

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revelation
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$?

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coloneltcb
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"

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robomartin
"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."

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

~~~
robomartin
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.

~~~
ricardobeat
Do you really believe that could happen? I bet that guy owns a lot of property
on the moon. A lease wouldn't even be approved with that salary in the first
place.

Different scenario: you get a job making $900/month and you jump on an offer
for a $400/month car. It never crosses your mind that you'll have to pay for
insurance, gas, maintenance and taxes and you end up spending your whole
salary on it. This actually happens all the time.

As stated on Tesla's page:

    
    
        This calculator is intended to give you an idea of how 
        much you can save by driving Model S compared to a gasoline sedan.
    
        We also encourage you to think about Model S ownership in terms of true
        out of pocket cost. When considering the savings from using electricity 
        instead of gasoline, depreciation benefits, and other factors, buyers 
        can save hundreds of dollars per month compared to owning a gasoline
        powered car.

~~~
robomartin
Oh please, it was a dumb example to highlight the reality of the deal.

I am buying a Tesla. I am tired of gasoline and I like the car. I am simply
not delusional as to the real cost of the thing.

Actually, I am buying two. The next one has to be an SUV though.

I just wish they didn't resort to cheap-car-salesman techniques. I had a
friend get excited about buying a Tesla because he thought it would cost him
$600 a month. He was not happy to learn that the real cost was closer to
$1,000. Now he thinks Tesla is a huge scam. I doubt he will ever consider
their cars again.

Based on that data point alone I have a feeling this creative financing
campaign could be damaging their image to some degree.

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arcatek
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.

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andrewtbham
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.

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Emanuel6009
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.

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

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

~~~
monsterix
> 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.

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

To you, maybe. To investors? Absolutely not.

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jacquesm
Are you a Tesla investor?

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toomuchtodo
I am. I don't own a lot of TSLA, but its definitely in the high five figures.
I'm extremely satisfied with out Musk has been handling all of this.

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nijk
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

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jsilence
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.

