Tesla was in a real bind. In late April, its stock was down as low as $232, which some analysts said was approaching “margin call” for the millions of shares CEO Elon Musk used to collateralize his prodigious personal debt. That would have triggered a disastrous–catastrophic even–series of events for the company. It was clear Tesla needed cash to fight another day.
Even with weak financial results, Musk recast his company from an advanced electric car maker, into a soon-to-be advanced self-driving car fleet operator. At the former, Tesla has proven itself, while at the latter, eyebrows are raised. But the pivot was enough to raise $2.7 billion in cash through a combination of convertible notes and the sale of more shares.
The money is supposed to get Tesla through its rough patch, as its solar business collapses, and production ramps up with two new gigafactories. But if Tesla spends its precious cash on autonomous self-driving vehicles, new battery production facilities, faster super chargers, and new vehicle production, it will fail as a company.
Instead, Musk should spend most of the money on a drab, mundane reality–that Tesla sells things to people. People who buy nice things like to be treated well, and Tesla doesn’t treat people well.
Tesla must fix its horrible, awful service provision and logistics. It must produce a large, well-vetted, well-distributed, continuously available, and meticulously supported body of spare parts, documentation, troubleshooting tools, and qualified service personnel.
A company like Tesla can’t both be the bleeding-edge of the electric frontier, for the iron-stomached early adoption crowd who can afford to stake cash for a vehicle that may end up in a garage for six months waiting for exotic parts; and simultaneously the white-gloved service company that showers its customers with benefits and love.
Yes, it could be both of those things when it sold 5,000 Model S cars per quarter in 2013. Those cars were practically hand-made. They were the Rolls Royce of electrics, and their owners bragged of technicians who came to them without being summoned, beckoned by the vehicle itself.
Now, we have real-life happening; scenes like this.
And repair experiences that have been described as “nightmarish.” Even a fender-bender is enough to take a Tesla out of service for half a year–in San Francisco(!).
“When my car got in an accident, it was somewhere in the thirties to be worked on and the last time I had a conversation with someone there a few weeks ago, there was well over 130 Teslas there to get fixed,” Hedges said.The thing about owning a Tesla no one talks about — nightmarish repair delays, SFGate, May 2, 2019
Anyone should quickly realize that service like this is totally unacceptable. Any company that doesn’t immediately take huge steps to fix this problem will soon fail. Insurers are hiking the premiums on Teslas because they are so expensive to fix. (Insurance is the primary reason I didn’t buy a Model 3.)
What good is it that Tesla can make a car that updates itself over the air, can practically drive itself for long stretches on the highway, and literally monitors every event, driver input, and 360 degree video around itself, 24 hours a day, if a fender bender takes the car out of action for months?
What good is going from 0-60 sub 5-seconds, a longer battery range than comparable electrics, and Easter eggs like “fart sounds” when service is struggling to keep up?
Every bit of the $2.7 billion, in my opinion, needs to go toward a massive buildup in spare parts, service manuals, trained personnel (training is the number one complaint I hear from Tesla owners), and service delivery centers. There should be a well-stocked service center with well-trained technicians and customer training rooms every 200 miles, covering the entire United States. I know that’s an ambitious goal, and not nearly as shiny or glittering as a fleet of self-driving Model 3s, but it’s the gritty reality of selling things to people.
If Tesla wants to continue selling things to people, this is where the cash needs to be spent.