Thursday 26 February 2015

The Real Reasons They Buy Teslas

EVWorld.com: Yesterday afternoon, a panel of investment analysts on CNBC were discussing the potential impact of falling gasoline prices in the USA on Tesla Motors electric car sales. All but one agreed that it would hurt sales of the luxury electric car maker. 'Americans will be buying more SUVs,' they concluded. The one dissenting voice pointed out that if you can afford a $100K automobile, you aren't that worried about what the price of gasoline is. He was only partly right.

A couple weeks back, Jim Schulte, a local Omaha businessman (pictured above with his Model S P85 at the Strategic Air and Space Museum between Omaha and Lincoln) invited several other Model S owners over to his house for drinks and snacks. While not a Tesla owner, I got invited too. Several of the owners are medical professionals associated with the University of Nebraska Medical Center (UNMC). Jim's a successful entrepreneur and business owner.

As we sat comfortably around the fire in Jim's great room, snow blanketing the golf course outside, he asked each present why they bought their cars. Styling topped the list, followed by performance (0-60 in under 5 seconds) and freedom from petroleum monopolies. None of them bought their cars to 'save money at the pump' or even necessarily to 'save the planet.' This is in contrast to the assumptions of CNBC's guest panelists, none of whom, I suspect, have ever ridden in or driven a Model S. In fact, it was the lone dissenter who, in the midst of a heated argument with the lady moderator, expressed a desire to someday own a Tesla.

Tesla buyers are 'early adopters.' Everyone recognizes that. And they all bought the car for different reasons and rationalizations, likely a whole host of them, but the price of gasoline doesn't seem high on that list. The price at the pump would have to drop below $1 a gallon to equal the price of 'filling up' a Model S on electricity. Do you see that happening anytime soon?

What Tesla buyers are getting is freedom from these wild fluctuations, largely driven by greed and fear, typically resulting in ever greater economic disparity and environmental degradation. Look at what's happening in the Bakken shale play and Alberta tar sands. Sure some people are getting rich, but look at what it's doing to those communities. OPEC can play all the games they want to crush the wildcat drilling companies in North Dakota and punish the banks that backed them. Tesla owners are largely immune, unlike the rest of us.

In contrast, the growing network of Supercharger stations means Tesla owners don't have to pay a dime for the energy to power their cars when they drive out of town. When they charge at home, it's usually under a $10 'fill-up' depending on local utility rates. Do the math. 200-miles driving range for $10 works out to 5¢ per mile.

On top of this, they get to drive a beautiful and amazing automobile with performance rivaling luxury cars that cost even more.

When it came my turn to share my buying experience, I had to admit that I didn't own a Tesla - we own an early Prius plug-in conversion and I ride an electric bike. If I had the money to buy one, I explained to the group, I would prefer to spend it on other things. Jim nodded and said that I'd be a good candidate for the Model 3. Maybe. $30,000 is still a lot of money for a car and as a baby boomer who just started receiving social security, it's not high on my personal list of priorities. I'd much rather invest that money building a business that helps get more of us out of our cars and onto bicycles - electric ones, especially - at least for local travel in our immediate neighborhood, which constitutes about 40% of all the trips we make anyway. As for the other 60% of trips further than 3 miles (5km), a pre-owned LEAF or BMW i3 might be an affordable option I'd consider. I seldom buy new cars, preferring someone else to take that heavy depreciation hit. As for those longer trips, that's what rental cars are for and maybe by then Budget or Hertz will have the Model S or X in their rental fleet and the I-80 Supercharger network will be up and running. So, I may or may not ever own a Tesla, but I am delighted that others can and I hope more will.

In the meantime, my advice to CNBC is get your analysts up to speed on why people buy Teslas, because your panelist clearly don't know what they're talking about.