Blog

Short blog posts, journal entries, and random thoughts. Topics include a mix of personal and the world at large.

The price is wrong

Honda has (finally?) launched a fully electric vehicle for the North American market: the Honda Prologue. As expected, the Prologue is a mid-size SUV thing - the most popular type of vehicle in the States - designed to haul people and stuff. The layman would not know that this all-electric Honda is co-developed with General Motors. Not quite a re-badge, but it’s definitely a GM car with Honda window dressing on top.

Not that in it of itself is a bad thing. What Toyota has done with the Supra - essentially a re-styled BMW Z4 roadster - seems to have worked (and continues to work) just fine. I see plenty of Supras on the road, driven by guys who look a bit too young to be able to afford a $60,000 sports car.

The main problem I see with the Honda Prologue is that it is too expensive. The poverty FWD trim level starts at $48,795. For the AWD trim with some bells and whistles that most people would want, you’re looking at well into the $50,000 mark. Worse: as of writing, the Honda Prologue does not quality for the Federal EV tax credit ($7,500). I would bet only the true die-hard Honda fans would buy one of these over a Tesla Model Y (low $40,000s after tax incentives). That, or Honda will have to heavily discount the Prologue.

The Model Y has another advantage: buyers don’t have to beg some asshole at a dealership to take their money.

To be competitive, I think the Honda Prologue needs to start the high $30,000s. Because that’s what a gas engine equivalent - the Honda Pilot - starts at. Honda can’t charge an EV premium for what is a mass-market product, because that would simply drive buyers towards Tesla. Ford found out about this with its electric Mach E SUV. The problem is that Honda - GM, really - cannot build the Prologue cheap enough to sell in the $30,000s. Meanwhile, Tesla can produce Model 3 sedans and sell profitably in the high $30,000s all day long. It’s a competitive advantage that’s evident in the sheer amount of Model 3s and Model Ys we see on the road.

The first legacy automaker to market with an all-electric mid-size SUV selling in the $30,000s will be the one to take a chunk out of Tesla.

Electric toy truck

Last week, the big hubbub in the automotive world is the Tesla Cybertruck commencing deliveries to eager customers. After four long years of (purportedly arduous) development gestation, the quirkiest pickup truck ever (surely Doug DeMuro would agree) is finally on sale. For a company that famously does not have a PR department, it was curious to see a select few journalist getting their hands on prototypes (provided by Tesla, obviously) for early review. Maybe you do have to market an electric toy truck costing $80,000 to $100,000 after all?

Judging from the few early reviews, I must say I am very impressed with what the engineering team at Tesla has accomplished. Elon Musk set out to create something cool and fantastical - from the radical design, the unusual stainless-steel body, and various performance metrics - and his team did its best to fulfill the dictum as much as possible. The project inevitably ran into constraints: be they federal regulations, or general laws of physics. (Example: the final product has side-mirrors, where the concept truck did not.) But overall I think the execution is hugely laudable.

The Cybertruck is now the halo product for Tesla: one that increases the prestige of the brand, and elevates every other model in the portfolio. Customers can feel good knowing the same engineering prowess that went into developing the Cybertruck is also present in the Model Y or Model 3. No doubt that some of the innovations in the Cybertruck will trickle-down to future iterations of other Tesla vehicles. Tesla-firsts such as the 800-volt architecture with a 48-volt base, pure steer-by-wire system, and reverse charging. Those are exciting stuff to look forward to in non-Cybertruck applications.

While I give Tesla credit for making a truck that doesn’t look like any other truck on the road, I reckon there’s a good reason that pickup trucks have looked the same for the past many decades. Until future reviews say otherwise, the Cybertruck looks to not have the same sort of utility of a “traditional” truck. Obviously, I don’t think potential buyers care. Honestly, plenty of people buy a truck for style points, rather than truly using any of the utility fully. The Cybertruck certainly has style points up the maximum.

Just hose it off!

Word on the street is Tesla will begin offering vehicle wraps from its service locations. The stock Tesla color palette isn’t to your exquisite tastes? Then fork over $8,000 for the privilege of having a (presumably) factory-backed vinyl wrap. (Customers can also opt for clear protection film at a more affordable $5,000.) My poor maths says that’s over 20% of the purchase price of a Tesla Model 3. I suspect there won’t be much takers in that price category. A Tesla Model S Plaid optioned out into the six-figures? That’s far more reasonable.

I once had paint protection film done to the entire front half of my Subaru Impreza WRX STI. The not-even-the-whole-car wrap cost $2,300 in 2013 money (That’s $3,000 in today’s money). I kind of immediately regret getting that done. My WRX STI was white, and that color really shows a subtle yet noticeable difference between the wrapped surface and virgin paint. The car never looked cohesive front to rear. For a light-colored car, the ideal way to do paint protection film is to wrap the entire car. I didn’t - and still do not - have that kind of money.

What truly is worth the money - in the world of paint preserving products - is ceramic coating. For those unfamiliar: think of it as paint wax that lasts for many years. Road grime and droppings from the sky (be they avian or industrial) have a difficult time sticking to ceramic-coated paint surfaces. Therefore it drastically reduces car washing labor. My BMW M2 has ceramic coating done, and after a 900 mile road trip, I simply hosed off the grime at a local self-serve car wash. Afterwards the car looked as if it never left on a lengthy journey.

Obviously, the money be damned thing to do is to wrap the entire car in protective film, then ceramic coat on top of that. If I had that done to the M2, I would never hand-wash it again. Taking it to the spray wash periodically will be more than enough to keep it clean and shiny. But, if you’re like me and can only afford one of those options, I highly suggest going with ceramic coating. Time is money, friends.

An electric road trip

Turns out, road-tripping in a Tesla electric vehicle is eminently doable. At least in California.

During my recent trip from San Francisco to Los Angeles - driving my very not electric BMW M2 (God bless the dinosaur juice!) - a friend drove down with me in his Tesla Model 3. It gave me the opportunity to see what it is like to drive hundreds of miles, in a single day, in an electric-vehicle. What is the charging infrastructure like? Do charging times dramatically affect progress towards our destination?

It’s important to keep in mind that we are talking about Tesla. Tesla famously have its own supercharging network. Your non-Tesla EV obviously may have a wholly different experience going down the length of California in a single day.

The supercharging network is fabulous. The ones we went to were situated in malls, offering a far better bathroom experience than the dank ones in gas stations. We even did some last-minute road-trip essentials shopping at the Target next to the first supercharger we stopped at. It makes sense that superchargers are in areas of higher quality than the typical highway-side rest stops. Purveyors of six-figure Tesla cars aren’t wont to slum it with the peasants.

Improved amenities aside, the best thing about the superchargers is the charging speed. My friend charged his Model 3 Long Range from 20% battery to 80% in less than 20 minutes. Just enough time for a bathroom break and stretch of the legs. For sure that charging time is considerably longer than a simple gas fill-up, but if you coincide the charging with the need for humans to take a break as well, then 20 minutes did not feel burdensome at all.

One of the major concerns folks have with electric vehicles is taking them on long trips. I can affirm that if you have a Tesla and you’re in California, that concern is nonexistent. You can comfortably traverse the State and be confident that a supercharger station is always within reach. And once at a supercharger, the refilling experience is quick and seamless. Tesla have done a fantastic job building out the infrastructure, one that I’m sure is a huge competitive advantage.

Beg some asshole

On a recent perusing of Reddit, I encountered a discussion about how difficult it still is to buy a new car these days. Inventories remain low, therefore dealership markups are still a thing to contend with. Basic supply and demand: whichever party has the power can dictate the terms.

Of course, that doesn’t mean people can’t complain about it. Especially those who want to buy a new car, but not exactly in a hurry to do so. These buyers can wait it out and try different dealerships to get the best price possible. But that in itself can be a time consuming, frustrating process. You’re begging people to shut up and take your money, yet they won’t do it. One Reddit commenter summed it up perfectly: “I just fundamentally can't bring my self to go beg some asshole to take my 60K.”

I think that is a big reason why the Tesla Model Y is the best selling vehicle - in the world - for the first quarter of 2023. Tesla sells cars directly to the customer, one price (that can change periodically), no markups or discounts. You can do the entire transaction on your smartphone, never needing to talk to a dealership salesperson. There isn’t a finance manager to upsell you on extended warranties either. In a time when when finding a car at MSRP is akin to hitting the lottery, the Tesla method of selling is highly attractive.

The pendulum will eventually swing back in the customer’s favor. Unless the traditional automaker constrain supply intentionally. That would be too cynical. I don’t think the automakers can sell (especially) electric vehicles while still relying on the dealership/markups method. Tesla’s direct-sale model will simply continue to eat their proverbial lunch. Those with the money and patience want low hassle above all else.

New flex in town

For the rich one percent, the vehicle to buy right now is no longer the most expensive Tesla Model S or X. No, it’s a high-priced product from another electric-vehicle maker: Rivian. Those things are absolutely everywhere. I literally see at least one Rivian R1T or R1S (all-electric truck and SUV, respectively) every day driving through the neighborhood. Rivian is the new symbol of cool car flex. Teslas are too common, so is the Mercedes-Benz G-Wagon (the unofficial rich-person vehicle of Southern California).

Granted, I live in arguably the center of EV adoption in America: San Francisco Bay Area. So it’s not really surprising to see this many Rivian trucks rolling around. It’s so easy to buy one, too (provided you have the money). Like Tesla, Rivian sells directly to the customer. A few clicks on the website and it’s done. No haggling, no need to visit a dingy dealership with douchebag sales and finance persons. Sure, you’ll have to wait a few months for the thing to arrive, but at least you can get on a list. And you can be sure there won’t be additional shenanigans upon delivery.

Meanwhile, I can’t even get on a list for a Honda Civic Type R without agreeing to pay a hefty sum over MSRP. And the finance manager is going to insist I get financing with Honda, because they get a kickback. Paying cash? The price just went up.

As the automotive industry transition to electric, traditional automakers really need to figure out a way to efficiently sell online. Millennials and younger don’t want to visit a dealership and talk to a guy. We want a set price and simple buying. Do the entire transaction over smartphone, and just let us know when the car is ready for pick up. The additional friction of having to work with a dealership is going to drive people to the likes of Tesla and Rivian.

Only the most compelling of products can make people willingly go the dealership route. Like the aforementioned Civic Type R…

A more affordable Tesla

Late last week, Tesla announced price cuts to its entire model lineup, ranging from 15% to 20% - effective immediately. This is the power of direct-sale to customers: you the company can dictate the price at anytime. Don’t forget that Tesla actually raised pricing multiple times in 2022. This latest price cut is not so much a discount but rather a revert to the before times.

Still, if you just bought a Tesla vehicle in December 2022, you must be rightfully pissed off. Had you waited just that bit longer, you could have saved tens of thousands of dollars, plus be eligible (on certain variants of the Model 3 and Model Y) for the federal EV tax credit. $20,000 is a considerable amount of money, even for those who can otherwise afford a Tesla car before the price cut. This is like buying a TV for a certain price, only to find the same unit on sale the following week. On a larger scale.

Even those who purchased a Tesla car earlier in 2022 now have cars that are suddenly worth 15% less overnight. That would include dealerships who bought Tesla models on trade in: they are now upside-down on practically their entire Tesla fleet. I sure hope you’ve diversified! If your entire business is trading on used Tesla vehicles, you are effectively done.

It may be extremely salty for owners of recently-bought Tesla cars right now. I think if you’re in that situation, you have to suck it up and keep owning and driving the cars. That’s the only way to make back that money, so to speak: to get the most utility out of the original purchase price. Unlike the TV, you can’t simply return the Tesla or ask for a price match.

If you’re looking to buy a Tesla model, now is obviously a great time! The next day after the price-cut news, a friend of mine immediately sorted out financing and ordered a Model Y long range. He’s been pining to buy one for the longest time. The latest price reduction, plus the tax credit eligibility, was finally incentive enough for him to make the move. Now comes the hard part: the waiting game. As someone who have ordered a few cars, I can relate to that anxiety and agony.