ISLANDOn Tuesday, Hertz, the car rental company that recently came out of bankruptcy, announced that it had entered into an agreement to buy 100,000 cars from Tesla for what knowledgeable sources estimate to be $ 4 billion. worth. When I learned this, my first thought was that if this is what insolvency is like, please refer me to the nearest bankruptcy court. My second thought, however, was that this could be a significant moment on the road to a wider use of electric vehicles (EVs).
The reason is, as anyone who has rented conventional cars knows, the best way to get a realistic test drive of a vehicle is to rent one for a week or two on vacation. As Teslas become available through Hertz, many more people will have a chance to experience what an EV is like. This is important because generally only nerds and masochists (like this columnist) are early users of new technology, and normal cautious consumers consider electric cars to be rather exotic and quaint, not something one would trust for commuting or school driving.
Anecdotal evidence suggests that a key factor in changing people’s opinions about electric cars is word of mouth: someone you know has taken the plunge and given you a ride in theirs. This was the driving force behind the widespread introduction of the Toyota Prius hybrid in the last decade, and it seems to be happening now with electric cars, which may explain why the Tesla Model 3 was the best-selling new car in the UK in September, despite, that the company uses zilch on overt marketing or advertising.
The biggest concern people seem to have around electric cars is “range anxiety”, something that conventional car owners also experienced recently when the pumps ran dry. In that respect, Tesla’s masterpiece was to begin building a network of “superchargers” almost from the moment it began manufacturing cars. These high-speed chargers are only available to Tesla owners, many of whom cite their availability as a reason to buy the car. Other concerns are that electric cars are more expensive than conventional ones and difficulties with charging, especially for city dwellers who do not have a driveway.
Tesla owners, of which I am one, have a few more mysterious issues, first and foremost the fact that everyone holds you accountable to Elon Musk, the Tesla founder who is widely perceived as a flag of Cadbury proportions due of his tendency to tweet apparently without engaging his brain in advance. Many of his clients also have a nauseating habit of constantly referring to him as “Elon”, as if he were a friend. (Apple fanboys used to have the same tendency as “Steve” Jobs, suggesting it may be a nerdy disorder.)
Another source of skepticism is the company’s share price, which, like God’s peace in the Bible, transcends all understanding. The news of the Hertz deal pushed the company’s valuation above $ 1 tn, which may be further confirmation that the stock market and the real world are parallel universes.
But perhaps the most misleading view of Tesla is that it is not a “proper” automaker, as e.g. VW or Renault. This reminds me of the widespread perception in 2007 when Apple launched the iPhone that it was not a pukka phone company like e.g. Nokia or Blackberry. (Does anyone here remember Nokia?) This contempt is undermined by some of Tesla’s third-quarter results published yesterday, which reveal that it managed to produce 237,823 cars (for a period allegedly plagued by supply chain problems), had revenues of 13.74 mia. , net income of $ 1.6 billion. and a gross margin of 30.5%.
The iPhone comparison may well be relevant in the long run – when electric cars are ubiquitous. Apple is not the dominant smartphone maker, but the iPhone takes up the bulk of the sector’s profits. Tesla’s position in the car market is likely to end up as BMW’s in the current combustion market, as a manufacturer of enjoyable and relatively expensive products with higher profit margins than those enjoyed by more worldly manufacturers.
However, when the ubiquitous EV arrives, the world will discover that electron-powered vehicles are not a magic bullet for our environmental crisis. Electric cars may be cheaper to drive than conventional cars and require less maintenance, but they are only “greener” if they are charged by electricity from renewable sources. There are still terrible CO2 emissions in their production and the production of the huge batteries they need involves massive environmental damage, water pollution, mountains of waste and perhaps also human rights violations and displacement of indigenous peoples.
Hertz’s monumental deal with Tesla is a remarkable step on the road to the EV ubiquitous. It will do wonders for Mr Musk’s net worth, but how much good it does for the planet is still unknown. In the meantime, we need a plan for the disposal of all the smart VW, BMW, Jaguar and Mercedes diesel engines that we will no longer allow. I wonder who is working on it?
What I have read
One of the most gruesome ripoffs in the history of science is an interesting essay by Kevin Berger in Nautilus about a new story about the race to decipher DNA, which rather removes the brilliance from conventional history.
Trump’s new media will go the way of his steaks and mattresses is a clever comment by Jack Shafer on the Politico page about the ex-prez’s recent foray.
It will not stick together
False positivism is a thought-provoking essay by Peter Polack on reallifemag.com on the implications of using data-driven arguments to navigate ideologically-driven disagreements.