Tempting Expeditiously Stupid Legal Action

Would any auto OEM CEO actively look to introduce such a function?

Take a look at the picture above. Isn’t looking at something in psychedelic colours distracting? I could go on for the entire report but your eyes probably took longer to read this far. This text at the very least is static not rolling. OK it is starting to annoy me. Sorry.

Back to the picture. First, the driver is speeding at 70mph in a 65mph zone. Second, the ‘psychedelic cowbell (rainbow) road’ is constantly moving so it could be distracting. Third, the driver (one of many to post videos on YouTube) is using a smartphone behind the wheel to take a video of his/her supposedly Mario Kart function. So two laws have been broken on the back of a CEO actively promoting owners to try it. It should be of concern to shareholders that Musk is letting the potential success of the Model 3 go to his head and is using the current media spotlight to aggressively promote the Tesla brand in any way. Promotion is not a bad thing unless that advocacy potentially leads to danger. Now whether the Tesla’s built in radar guided autopilot system could potentially prevent an accident is beside the point. These auto-braking functions are not 100% fool proof and were an accident to occur (especially one resulting in death) a driver could quickly point to the cowbell function as distracting him/her and put the blame back on Tesla and there is no right of reply if the CEO himself is promoting such optionality of his vehicle. To me it suggests that Musk is grossly underestimating potential legal pitfalls of the automotive industry and the dangers of class action lawsuits that have impacted brand image of major OEMs. Is Musk’s team of legal experts somehow lost on the psychedelic cowbell road themselves to advise that such a mindless function which carries no perceivable benefit to safety, moreover putting owners in harm’s way is somehow smart?

Getting real with orders folks

We would also like to correct our statement of $1,000 deposits in our previous Tesla report. It turns out that deposits are fully refundable which only makes the ability to forecast ‘real demand’ that much trickier. People can order up to two cars. It is unclear how many of the c.400,000 orders made to date have been multiple reservations. Many who have placed orders early on for the Model 3 that may be looking to trade them will find the reservations are non-transferrable except on the prior written approval of Tesla. However there would be nothing stopping early reservation holders from selling their cars immediately after they bought from the dealer to desperate buyers wishing to get their hands on a Model 3 for a premium.  

So much of today’s world is narcissistic. To say one has a Tesla Model 3 on order exudes a certain hip image. I am sure some will laud their early-adopter intelligence. However I’m guessing that if one has to wait 3 years until his/her Tesla Model 3 arrives (by which time multiple reviews will have been written and reliability will be open to all) cancellations could accelerate intentionally. It puts the shoe back on the other foot to what levels Tesla intends to produce at, which we ran through in detail in our previous report. For industries with high fixed costs, finessing production rates to be sustainable and profitable is both an art and a science. If Tesla produces too few, it risks order cancellations from impatient reservation holders and if it produces too many then it risks excess capacity should orders dry up or long term demand fails to grow much beyond 400,000 units.

Ultimately the consumer will be the judge of Tesla’s success or failure. However by trying to appeal to the inner-geek of its owners Tesla may end up kicking an own-goal if they are not careful. It is doubtful that Musk will be able to retreat from championing the customisation of his vehicles by pulling the video gaming functionality without wearing ‘Easter’ egg on his face. Much like the social media frenzy that fuels Tesla, should the tables turn, the company could be dropped like a bad habit. The group think that drives it could well put the brakes on it as well. 

Full report available here

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