Tesla is what happens when you run a car company like a tech company

Photo by Mario Tama/Getty Images

The problem with running a car company like a software company is that people expect a car company to run like a car company!

Last Friday, when Tesla updated its pricing on the Model 3 Performance to include the Performance Upgrades Package for free, some Tesla owners were miffed. They’d previously paid $5,000 for a feature that was now… free. “In hindsight, it looks like Tesla solely created that $5,000 package to upcharge early buyers knowing that there will be plenty of demand for the vehicle at the launch due to the reservation holders waiting for the performance version,” Fred Lambert wrote on Electrek.

Lambert is among those who’d paid $5,000 for the package, and he was pissed. “This is a shitty thing to do to a bunch of people who have been waiting for their cars for years — just to now to be devalued by $5,000 a month into ownership,” Lambert tweeted at Musk. (Musk replied, “If you want $5k refund & free Supercharging turned off, we will do that.”)

Software companies pull shit like this pretty routinely. You purchased a product, and suddenly it’s discounted or free. You get used to a user interface, and it changes on you abruptly without your input. And it’s not just software companies, either. If you aren’t savvy enough to know that Apple introduces new phones in September (which means discounts on the old phones), and you buy one of those old phones in August, that’s the boat you’re in. Now, an iPhone is marginally less expensive than a car, but it’s basically the same phenomenon.

Obviously, mores between car companies and tech companies differ, and as car companies start to behave more like tech companies, people like Lambert — the early adopters — are likely to find themselves in situations they didn’t anticipate. Something similar happened with over-the-air updates earlier this year: the update to the braking system that improved its distance by 19 feet genuinely freaked people out. What else could the car update? We’re pretty used to a car being, you know, a car, and nothing really changing unless we bring it into the shop (or tinker with it ourselves). Over-the-air updates totally upend this relationship.

Similarly, with CEOs: most of us expect car company CEOs in the mode of Alfred Sloan, who invented the modern corporation as we understand it. Musk very clearly isn’t that; his flamboyant style and tendency to shoot from the hip is more in line with the crop of entrepreneurs that Silicon Valley spit out in the 1990s: the Boy Kings. Generation X in action: you called them slackers, and they never forgave you.

Watching those cultures collide is part of the fun of Tesla, for my money. Traditional automakers are golf-ball stodgy; Tesla is kind of bananas at least in part because it’s aiming to create a future. And the traditional automakers have to compete. The thing that they have to offer people like Lambert is that their pricing models are likely to be slightly more predictable than what’s going on right now with Tesla. Their CEOs are less likely to wild out on Twitter. In some respects, it becomes a question of personal orientation: do you want the thing where you know what to expect, or do you want the thing that’s so cutting-edge you’re going to have your expectations violated at basically every turn?

This is a long-winded way of noticing that Musk deleted his title from his biography on Tesla basically just to troll. As Matt Levine noted in his newsletter, Musk is not the nothing of Tesla, no matter what jokes he’s making on Twitter: “You can be chairman and CEO without having your website say ‘Chairman and CEO.’ There’s no, like, legally binding effect of the website. It’s a website.”

Also, Musk’s compensation plan doesn’t require him to remain CEO; the only other roles he can take, though, are executive chairman or chief product officer. In those roles, any CEO would have to report to him, or he doesn’t get his money.

Musk doesn’t seem like he super cares about money qua money, but he does seem to care a lot about the businesses he’s built with that money. Removing himself from the CEO role to be… nothing, a role that isn’t specified in his compensation plan, is a little beyond the pale, even for Musk. He tends to use his money to boost his own companies; after all, he just spent $10 million on Tesla shares on Tuesday, and he plans to buy $20 million more. Arguably he’d want his compensation if only to keep Tesla moving forward. So, yeah: still CEO.

But it’s been sort of a relief to watch Musk return to harmless goofiness after his performance earlier this year. No, he’s not exactly normal, but he’s normal-er-by-Elon-Musk-standards. (Whether that’s normal enough for shareholders is a different question.)

Anyway, I chatted with Kara Swisher about Musk’s better mood — he’s working fewer hours, and that helps! — and the other products he’s planning. He’s very jazzed about trucks, which suggests that the car industry is rubbing off on him. But there’s one hip mode of transportation Musk finds undignified — tune in to find out what it is.

Comments

I know the feeling about being pissed at Tesla. I ordered a Model 3/LR/AWD on Oct. 19, 2018 and was scheduled to pick it up on Oct. 24, 2018. I got an email on the Oct 23, 2018 confirming my vehicle will be ready for pick up on the 24th. I replied to the email say if the vehicle is ready today (23rd) I can pick it up. So I as able to pick up my Model 3 a day early. On Oct 24, 2018 the price of my Model 3 dropped $1000. I have reached out to Tesla and my service center but haven’t heard anything back. I feel like I have been screwed! And the fact on Oct 25, 2018 I was locked out of my car because it was accidentally registered to some else. Which made me late to work and I had to email purchase agreement back to Tesla to prove I was the actually the owner. Still love my car, but what the hell!

Kind of like buying two $1000 Galaxy Note 9s and finding out that there was a BOGO deal plus a free $300 AKG noise cancelling headphone set for each phone.

Life on the bleeding edge.

I understand that’s frustrating, but you agreed on the price when you ordered the car, and sales and price changes don’t typically apply retrospectively. If the price had gone up by $1,000, would you still feel like you had been screwed?

You are forgetting in many cases there is price protection so you don’t get penalized like that. It’s called good customer service.

Rich guy screws over not as rich people, what a concept. If Fred Lambert used his rational brain when considering buying his car, he would have chilled and waited for things to work out. This is how Tesla operates. How can anyone actually be surprised? I am a former reservation holder, day two, who got my money back a year ago, for a whole bunch of reasons.

On top of that Fred is getting a free Tesla Roadster for his many referrals to Tesla.

A lot of people give sites like The Verge hell for questionable reporting, but Fred Lambert is practically just pushing Tesla propaganda. And then gets rewarded for it. It’s really disturbing and I wish he’d get called out more often.

I don’t think he’s screwing over people as much as ultimately he has to leverage that value prop of owning a Model 3 earlier and owning the high end model earlier. Cars depreciates much like electronics, just at different speeds. All of these things, other car companies do. Maybe in this instance there’s a rich guy being the spokesperson, but MB/BMW/Audi all do the same if you preorder their hottest cars.

I actually applaud Lambert for calling Tesla out on this, because $5000 back is better than lifetime supercharging and all M3P owners have this option now, and he’s already gonna get a lot of love from Tesla. Easier for him to just shut up towards his biggest benefactor.

All car companies do this. If you walk on to a lot just before the new model year arrives they’ll throw stuff in for free and/or give you a discount. Even in no-haggle dealerships. Is Tesla’s behaviour substantially different?

In addition, when cars change to a new model year, some features often go from paid to free or part of a package.

True, but traditional car companies do that on a yearly model basis. Every now and then a company may add features to a model (2017.5 Mazda6), but Tesla can do it tomorrow if they want and then maybe do it again two months later. I think that’s what irks some buyers. That’s the cost of being a Tesla buyer.

What’s wrong with potentially getting more than what you paid for?

Worst case, you get exactly what you knew you were paying for (unless Tesla is falsely advertising features their cars don’t have).

Verge loves talking about Tesla.

Gets them clicks.

Verge readers love clicking on stories about Tesla. Myself included.

You clicked, admit it.

But there’s one hip mode of transportation Musk finds undignified — tune in to find out what it is.

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<> Spoiler Alert <>
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Electric Scooters…
I would say i’m that guy, but the Verge already spilled the beans on it’s own site. I literally read about the scooters before I read this.

Sorry, delete the comment if you hate ‘spoilers’

Running a car company like a software company means releasing a shitty product and trying to fix it in post. Tesla is know for poor fit and finish. There was a time when door panels did not align properly and there were obvious paint drips even on the Model X. I don’t know if that is still the case but I wouldn’t doubt it. Screwing people you’ve already trapped is par for the course as well, but that doesn’t mean it should be acceptable.

Musk personally is an arrogant, high handed know-it-all who is personally off putting and sees nothing wrong with violating securities law and insulting his customers. In keeping with his software roots, the "affordable" Model 3 appears to have been vaporware from the beginning.

What is to admire in all this? Nothing at all. Chevrolet may be "stodgy" but the Bolt is a far better car and a far better deal than the Model 3, and apparently it always will be. GM executed while Tesla continues to flounder.

I used to admire Musk’s goals and Tesla as a company. I still think he has good goals, but he is personally despicable and I have no confidence in the future of Tesla as a company. I was thinking about buying a SolarCity roof next year but the lifetime guarantee is worthless if there is a significant chance the company won’t be there.

You’ll have a hard time convincing people that the Bolt is better than the Model 3. Tesla is executing and is selling at a much higher volume.

The only way to reasonably find the Model 3 poorer than the Bolt is to be an armchair critic. Go test drive those cars and find out for real.

Truth is, American made cars are still overall lagging European and Asian brands in fit and finish. Model 3’s quality issues are largely overblown due to most of the press coming from 2017 cars which were notoriously bad. And there’s a fair amount of legit, short-fueled fake news on this. It’s not an issue now. You can’t even buy one of those bad cars today from Tesla. Also, it’s not like the Bolt is the Accord or Camry of EVs either.

Which is also to say, Musk is right: where are all his competitors? Stuck in China? Tesla will continue to get this limelight free PR treatment until someone steps up as a real competitor on the same scale.

Model 3’s quality issues are largely overblown due to most of the press coming from 2017 cars which were notoriously bad.

How is it overblown if you acknowledge that those were notoriously bad?

Because those cars were in small volumes and the issues are no longer issues. Most people can’t buy those cars even if they tried (400k people did I guess? LOL).

Running a car company like a software company means releasing a shitty product and trying to fix it in post.

ding ding ding

As compared to releasing a shitty product and never fixing it.

"Now, an iPhone is marginally less expensive than a car…" — still chuckling over that line, and will be all day. Thank you!

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