by Mark Charmer
A muffled cheer can be heard across Europe right now, as both environmentalists and gearheads get the news they’ve been hoping for since June 2006: Tesla Motors is going to sell cars in Europe.
With US business reeling from the fallout of hedging markets against eachother, it's interesting to see Tesla bringing forward these plans - taking advantage of the weak dollar, burgeoning consumer demand for clean vehicles, and a European market increasingly geared to financially incentivise consumers to “buy green”.
In an interview this week with the FT, the Silicon Valley-based electric sportscar maker says it plans to begin selling electric cars in Europe next year, taking advantage of the weak dollar." It will sell at "just under 100,000 Euros ($156,000)". Today's US base price is $98,950.
Computer geeks out there will chuckle to see Tesla showing Silicon Valley roots from the start, by using 'parity pricing'. For years Brits got to buy IT gear for £1000 that cost $1000 in the states, even though the rates were nothing like 1:1. If rates stick where they are now, at $1.56 to the Euro, in 2009 Germans will get to spend 100,000 Euros buying a $100,000 car. Which strikes us as opportunistic – and indeed optimistic.
The FT continues, citing the marvelously named CEO Ze'ev (ZEro-Emission-Vehicle?) Drori as saying:
"there are many compelling reasons for us to be in Europe". He points to the weakening dollar, shorter average European journey distances and "favourable tax treatment for electric or zero-emission vehicles in several countries."
So where is Tesla selling first? According to the FT:
"Tesla would target 'obvious' big markets such as Germany, France and the Netherlands, as well as countries such as Norway and Denmark, which offer generous tax incentives for low-emission cars. Tesla will not sell in the UK initially because it produces no right-hand-drive vehicles."
Back in 2006, when Tesla was heads-down designing its car, markets were opening up across the Atlantic as Europe's cities reined back the use of cars through congestion pricing and high parking charges and other tactics. Cracks opened through legislation that were perfect for Tesla. Indeed, London of 2006 had Reva G-Wiz drivers tearing around in a $16,000 electric (and alas hideous) car that they could park free anywhere in key parts of the city and save, over three years, almost $50,000 US dollars of congestion charge, parking and road tax. Before even the price of fuel was factored in.
The G-wiz is now a common site on the streets of London
Fast forward two years and from a practical everyday perspective, London's context has shot ahead of California's. The city's congestion charge has extended west to affluent residential areas like Chelsea and Kensington and a new high emission rate will, bar a change in mayor or Porsche's angry lobbying, almost certainly apply from October affecting sports cars, SUVs and other vehicles that push out more than 225 grams of CO2 per kilometre, as well as those registered before March 2001 that have engines larger than 3,000c. Crucially the move will remove any discount for residents, meaning a rise for such people from 80 pence ($1.50) per day to £25 ($50). Ouch.
A year ago countries such as France seemed to be moving slowly but that has all changed. We spoke with a top sales boss at one manufacturer in Monaco last week to hear that new taxation rules across France are having dramatic effects on sales patterns in the first quarter of 2008. Buying a low emission car can bag the buyer a 5,000 Euro rebate but register the wrong car and you have to pay out an extra 2,500 Euros. So manufacturers can't persuade dealers to pre-register fleets of high emission cars that are sitting waiting for buyers, because the dealers have to shell out serious money if they do so.
When we first sat in Tesla's modest Californian HQ in August 2006, we talked with the then marketing boss Mike Harrigan about the opportunity to become a global poster child for a really cool, aspirational, clean vehicle that city leaders in the US, Europe and Asia could encourage rather than shoot at. With figures like London Mayor Ken Livingstone characterized as the grim reaper of performance cars, the opportunity to work with local politicians to present Tesla as a star brand and reassure voters that expensive, fast and cool private cars have a (clean) future in cities seemed to have political, and financial potential. Our discussion closed with a muted Silicon Valley cubicle culture response - let's build a product and get it right, and then work out how to sell it later.
The reality is that Tesla's core market could be in Europe if it wanted it to be. Tesla's sister firm, Project Better Place has used the region to dazzling effect, following the big opportunities to sell something with long term lock in, country-by-country, to leading politicians. It rightly recognised that electric vehicle networks are likely to take off in Europe before the United States (OK so Eurovision Song Contest Europe - its two big deals are to drive major new infrastructure for electric cars in Israel and now Denmark).
Right now I wonder if Tesla has the mettle to seize the big moment. I hope it does. An electric sportscar is a lovely thing to sell, albeit full of risk. But using electric sportscars to help politicians present a more positive future for cars, city-by-city, is an even better sell. Its something firms like Porsche should consider when they stop paying lawyers to protect markets, and start creating new ones. Tesla is ahead and has some unique advantages through family synergies in its investment network - a pathway that integrates Teslas with Better Place's charging systems would be a start. Selling to cities, rather than selling to dealers, should be the plan. Tesla needs to think big.
Mark Charmer is founder of The Movement Design Bureau, a global think tank.
Updated at 17:00 on 3 April with some tweaks from Joe and Mark.
Update on 9 April: Tesla Blog – Tesla Launches European Sales
The Porsche Judicial Review is pretty funny. When companies bring out the lawyers to protect their market share, then you know the curve is pointing downwards.
Posted by: Thomas Bjelkeman-Pettersson | April 03, 2008 at 03:45 PM