Tags: Tesla | battery | solar | cars

The Folly of Tesla and Battery Technology

Monday, 27 April 2015 07:49 AM Current | Bio | Archive

A friend asked me why I looked so puzzled when he told me he had just bought a Tesla.

I was wondering what it was that compelled him to buy a Tesla when he was already leasing for himself and his wife a Mercedes and a BMW.

Before I could reply, he started to extol all the virtues of owning such an advanced technology and blah, blah, blah. He sounded like he was reading bullet points off a PowerPoint sales presentation.

I asked, "What did you pay for this marvelous toy?"

In a snap, the enthusiastic answer was (as I best recall), "Well, they are going to buy the car back at 50 percent of sales price in 39 months."

That led me to reply, "So, you didn't really buy the car, but leased it. At the end of the 39 months you either give the car back for a refund or you then pay for the car as if the used car residual value is 50 percent of the original sales price."

This is a pretty cute deal for Tesla. They get to claim that they are selling a lot of cars. And take depreciation on the sales as if they were operating leases.

Basically, if the car cost $80,000, then the 39 month lease runs something like $1,250 a month plus the loss of whatever interest on the $40,000 guarantee buyback.

Not much of a cost if someone wants to be seen as having the latest in technology gadgets.

But the reality is that the used car market for electric cars is pretty much in the toilet. The big problem with used battery-operated cars is that the batteries must be replaced.

Only Tesla batteries are not for sale at Home Depot, Wal-Mart, Costco, auto repair shops or any other car dealers. They are for sale only from Tesla.

At the end of 39 months whatever the projected best guess resale of a used Tesla may be, it certainly is going to be discounted by the cost of a new battery pack.

I do understand that Tesla is building a $5 billion lithium ion battery plant. But is that a good thing?

To me it says that the existing battery technology is all they have and that there is not going to be any so-called breakthrough battery technology.

Yes, there is a lot of hype about using these batteries as the storage for electricity generated by residential solar power panels. But the combination of solar and batteries have another whole host of problems.

The batteries will have to be replaced periodically, the sale of solar (like Tesla's) depends on the largesse of government in continuing federal and state tax credits and the leasing of solar panels for 20 years to bring the cost into competition means the house likely loses its resale value. Just like the Tesla car.

Then there are the problems of fire and liability insurance.

To compound the dilemma, both Tesla automobiles and solar power systems have significant problems of unfunded warranty liabilities.

My friend can well-afford to pay the $80,000 and junk the car in three years. In fact, there are a lot of people who can afford to buy the latest stuff, and then later on, as George Carlin would have said, buy more stuff.

But that market is a limited one. And fickle at that.

However, it sure seems to me that any investment involving Tesla and its current battery technology is just financial folly.

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A friend asked me why I looked so puzzled when he told me he had just bought a Tesla.
Tesla, battery, solar, cars
Monday, 27 April 2015 07:49 AM
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