NHTSA Is Not Investigating Tesla At Musks' Request

NHTSA does not initiate investigations on CEO request.  NHTSA says they chose to investigate Tesla battery fires independently.  Which means, in my view, that Musk was trying to spin in some damage control.

Detroit News: 

But NHTSA Administrator David Strickland told a House panel Tuesday that Tesla didn't request an investigation and that the agency had made an independent decision to open an investigation into 13,100 Model S vehicles after two battery fires were reported since early October in the United States.

 

"Investigations are independent," Strickland told The Detroit News in an interview after the hearing. "We have never — in my recollection, before I got to NHTSA (as a Senate staffer) or as administrator — have actually had an automaker ask for a formal investigation, but it causes a couple of implications: If a manufacturer asks me or asks the agency for a formal investigation, you've already made a determination that you may have a defect that imposes an unreasonable risk to safety. ... I don't think that would ever happen."

From The Detroit News: http://www.detroitnews.com/article/20131119/AUTO01/311190095#ixzz2lJ4MOIFP

Tesla's Fire Problem

I think Tesla has a problem.

There are only about 17,000 Tesla Model S on the roads right now, but there have been 3 fires due to damage to the battery.  In two of these cases, it looks like the damage was mostly to the underbelly, and not due to a severe impact to the frame of the car.

In the third case, in Tennessee, the car apparently hit some debris, which caused a fire to start in the front area of the vehicle.  If you look at the photos, which I scraped off of the web, there does not appear to be frame damage.  In other words, the guy didn't hit another car, or a large stationary object.  He hit something small, but it destroyed his Tesla.

By comparison, a gasoline vehicle can run over pretty severe piece of road debris without catching fire.

I wish I had statistics for vehicle fires, caused by driving (not arson, forest fires, etc.), in vehicles less than 2 years old.  That would really put the probabilities in focus.  I am not sure where to get such data, it is possible that IIHS has it.

In each of these cases, the vehicle is basically destroyed.  Even if driver safety is not necessarily an issue, the cost to insure against a battery fire is going to drive up Tesla owner's insurance costs.

If these incidents continue to mount, Tesla is going to have to do several things to protect their business and consumer confidence.  They will likely have to add additional shielding to the underside of the car, adding cost and weight, and possibly reducing range.  They may also have to increase ride height.

Tesla Valuation

I don't understand Tesla's stock price and valuation.  TSLA is trading at about $175/share right now, with a market cap of $21 billion. 

So the market is valuing Tesla at about half the value of GM ($52B), and 1.5x the value of Porsche ($13B)

Based on what?

Tesla is emphatically not Apple.  Apple rose to become a top 3 player in mobile phones, the top player in tablet computers, and the top player in MP3 gadgets.  Apple sells millions of units, and makes money on hardware, software, service, and content.

Tesla has to make money selling cars--a very highly regulated, capital intensive business.  Tesla isn't able to sell direct to consumers in all states of the U.S. 

Let's compare Tesla to Porsche.

2013 Sales (1st 2 quarters)

Porsche 81,000

Tesla: ~10,000

2013 Revenue:

Porsche: ~$10 billion

Tesla: ~$1 billion

The stock buyers apparently think that Tesla is a growth company, and are pricing in the expectation that it will grow to something quite a bit more profitable than Porsche.  In 2012, Porsche recorded a profit of $2.7 billion.  To reach those kinds of results, Tesla has to sell approximately 125,000 cars a year (at $80,000 each) if they are making a similar margin to Porsche.  If Tesla goes down to an average price of $50,000/car, they have to sell about 200,000 cars/year.

That's about 8x their current capacity of 500 cars / week (25,000/year).

So, the market seems to think that within a few years, Tesla will be able to open several new plants, and successfully increase their sales and distribution network to rival Porsche, while moving downmarket enough to drive higher volumes.

I am doubtful.

EU Proposes Satellite Based Speed Limiters

A great demonstration of how the Europeans are not necessarily worth emulating.  The EU has proposed ISA (intelligent speed adaptation) based on GPS or sign reading cameras, which would first warn a driver and then automatically slow a vehicle down, if they were exceeding local speed limits. 

The scheme would work either using satellites, which would communicate limits to cars automatically, or using cameras to read road signs. Drivers can be given a warning of the speed limit, or their speed could be controlled automatically under the new measures.

Something like this would simply be laughed out of Congress in the States.  But in Europe, the EU central regulatory agencies have a lot of power, and top-down regulation is a way of life.

Source: Telegraph

Diesels: Good MPG, Less So Carbon

I have heard man advocates of small diesels moan that we "just don't get it" here in the U.S. and we need to be more European, and somehow encourage light duty diesels.

What the compression ignition lovers don't realize is that the U.S. policy is very much now based around global warming and carbon reduction, whereas it used to be about reducing oil consumption for geopolitical reasons (OPEC etc.)

So, let's look at carbon emissions:

1 gallon of gasoline when burned will emit approximately 19.64 pounds of CO2.

1 gallon of diesel will emit approximately 22.38 pounds of CO2.

Diesel is about 14% more carbon emitting than gasoline.

But, a diesel engine is about 30% more fuel efficient than a similarly sized gasoline engine.  So if we do the math, a similarly sized diesel powered car will emit about 14% less CO2 than a similar diesel car.   Not bad, but not huge.

Meanwhile, diesel fuel offers no advantage in the U.S. in cost (it is more expensive than gasoline by about 30%), and the vehicles cost more due to the diesel hardware premium.

Tesla's Extra 0.4 Star

Tesla is trumpeting the Model S' excellent performance in NHTSA's safety tests.  Tesla says that the model S has achieved a combined rating of "5.4 stars":

Palo Alto, CA — Independent testing by the National Highway Traffic Safety Administration (NHTSA) has awarded the Tesla Model S a 5-star safety rating, not just overall, but in every subcategory without exception. Approximately one percent of all cars tested by the federal government achieve 5 stars across the board. NHTSA does not publish a star rating above 5, however safety levels better than 5 stars are captured in the overall Vehicle Safety Score (VSS) provided to manufacturers, where the Model S achieved a new combined record of 5.4 stars.

This is very odd publicity, to me.  NHTSA awards star ratings as integers, and 5 stars is the most you can get.   A 5 star rating means that you have less than a 10% chance of serious injury in a serious accident, according to NHTSA's statistical model. 

You can't get more than 5 stars, awarded by NHTSA.

Tesla is just trying too hard, here, I think.   A 5-star result is excellent, and they should proudly publicize it.  

Ford's C-Max Debacle Explained

Ford yesterday announced that it was re-stating the fuel economy label of the C-Max hybrid, from 47 city / 47 highway /47 combined to a still very good but not as impressive 45city / 40highway / 43combined.  Note the large decline in the highway number.

So what happened?  Did Ford cheat the test?  Not really. 

What happened was that Ford used the Fusion Hybrid test results to certify the C-Max, which they are allowed to do according to EPA regulations.  The EPA regs allow manufacturers to certify vehicles as a group if they are in the same weight class and share powertrains.

Here is the EPA's short report on the matter.  An excerpt: 

Ford based the 2013 Ford C-Max label on testing of the related Ford Fusion hybrid, which has the same engine, transmission and test weight as allowed under EPA regulations. For the vast majority of vehicles this approach would have yielded an appropriate label value for the car, but these new vehicles are more sensitive to small design differences than conventional vehicles because advanced highly efficient vehicles use so little fuel.

In this case, EPA's evaluation found that the C-Max's aerodynamic characteristics resulted in a significant difference in fuel economy from the Fusion hybrid.

Was this intentional, a case of Ford using the higher number for marketing purposes?  Or was it a case of simply not knowing that the C-Max would test out so much differently?  I have no idea.  But I think in the future, Ford and other carmakers are going to be more careful about publishing fuel economy numbers based on assumptions, after this PR disaster.