UB Insider #6: Utah, Tesla Motors & Electric Cars
About this episode:
In this episode of UB Insider, Utah Business’ online editor Lisa Christensen delves into the world of Tesla. Electric vehicles are becoming more and more common, and the Tesla has taken the cake with its growing reputation as a luxury status symbol.
Daniel Witt, manager of business development and policy for Tesla Motors spoke with Lisa at the Utah Economic Summit earlier this month to talk about the popularity of Tesla vehicles, what that means for the electric vehicle industry as a whole, and what’s happening with Utah’s law that doesn’t favor Tesla Motors’ unique marketing strategy. Subscribe or download this episode on iTunes and Stitcher.
Lisa Christensen: Hello and welcome to UB Insider, sponsored by 30 Women to Watch, Utah Business’ annual awards program honoring the who’s who among female leaders in the Beehive State, this year on May 11th. I’m Lisa Christensen, online editor at Utah Business magazine. At the Utah Economic Summit earlier this month I had the chance to sit down with Daniel Witt, senior manager of business development and policy for Tesla Motors. How are you?
Daniel Witt: Very good. Thank you for having me.
Lisa Christensen: Good. So I have seen so many more Teslas on the road lately. It seems like everywhere I go there’s that flash and that T on the hood. And it seems like Teslas are just really cool cars. And I think a lot of people think of them just as cool cars before they think of them as eco-friendly cars. What do you think Teslas have done for the image of electric cars on the road, and what do you think that means for the future of the car industry?
Daniel Witt: Yeah. It’s a great question. I think when Tesla first started, the founders really tried to set the mark, not only for the best electric car, but the best car overall. So as we’ve gone through our admittedly short history, we’ve continually tried to emphasize that is not just an electric vehicle, it’s a leader in performance. It’s a leader in safety. It’s a leader in many of the factors that you would normally consider when you’re buying any car. So we actually don’t tend to think of our competitors as the other electric vehicles that are on the market, despite the fact that they carry the same powertrain. We compete with the same vehicles that are in our existing price point – the Audi’s, the Lexus’. Those vehicles which tend to have consumers which focus on a variety of different traits when they’re purchasing. So yeah, it’s a great question. You framed it exactly right. We really do try and emphasize the fact that this is the best car you can buy for a number of factors regardless of the powertrain.
Lisa Christensen: And do you think in the future more auto makers will focus on the car overall rather than just saying this is our normal car, this is our electric car, they are vastly different?
Daniel Witt: Tesla is in a pretty unique position in that we only sell electric vehicles. We sell vehicles without a tailpipe at that. And so the challenge that I think other auto makers may have is that they have to sell different kinds of technologies now. It will be interesting to see how that develops over time. For us, part of the impetus behind Tesla was to push the rest of the auto industry to value this technology for a real replacement for the technology that consumers have embraced for the last 100 years. The internal combustion engine has had a very long lifespan, and so any time you introduce an alternative, you need to introduce it in a very compelling way. We think the Model S, the Model X and most recently the Model 3, those are all compelling products that have been valued by consumers as well as the press alike. We got the Motor Trend Car of the Year award the year that the Model S first came out. It was the first time that that vote was ever unanimous. It was the first time it was ever an electric vehicle.
We’ve set a lot of really interesting marks for being first, kind of along the way in a very short time. And it has all been around stimulating growth amongst the whole industry. So, yeah. It will be interesting to see what we can do to influence them to come along.
Lisa Christensen: Well, yeah. The announcement of the Model 3, that kind of reminded me of the traditional Apple announcement, like here’s the new iPhone, here’s the new Tesla.
Daniel Witt: Yeah, it was very exciting.
Lisa Christensen: Yeah, and lots of really great responses out of the box even though that car has yet to hit the road.
Daniel Witt: That’s right, yeah. We have a history of previewing our cars before they actually go to market. It’s part of encouraging an environment of education rather than just doing the hard sell. People have a chance to learn about the vehicle months, if not years before they actually take delivery of the car. And, you know, it’s all available via a fully refundable deposit which essentially just secures your place in line. And for the case of the Model 3, so much of what this company has been built on is coming to fruition via the Model 3.
When I started with the company four and a half years ago, there were about 1,300 employees worldwide. We’re now about 10,000. And most of those people came to the company with the idea that they were joining a mission. And the mission of Tesla Motors has always been to produce a mass market vehicle, we’ve just been in this higher price bracket for a number of years. So having a vehicle, being able to display the Model 3, and display all the efforts that the Tesla team has made over the last several years to bring down the cost of that technology, it’s a really fulfilling moment for us. And it’s a really fulfilling moment for, I think, consumers who have been waiting, aspiring to own that Tesla vehicle that has been flying by and now see the real opportunity to do so.
Lisa Christensen: So, Tesla dealerships, do you prefer to call them dealerships or showrooms?
Daniel Witt: We call them stores, actually. Much like an Apple store. It’s a Tesla store or a Tesla showroom.
Lisa Christensen: So the Tesla stores are a little bit different than a traditional car dealership. Most car dealerships are owned by third parties who get their cars from the dealer and then sell them to the customer. But Tesla has preferred a more direct approach. Why is that so important?
Daniel Witt: It’s based on a number of factors, but the primary one is the relationship with the customer. It’s that direct relationship with the customer which has allowed us to, again, foster that educational environment. Again, when you’re talking about a wholesale changeover to a new technology there are a lot of basic questions that get asked. How do I charge at home? How do I go on a road trip? What does this graph mean, and what does it mean about my energy consumption? How many people can I fit in the car? Is the car safe? There are a myriad of things which, frankly, because we have embraced the technology at such an early stage, we’ve helped bring this technology to market that we feel we’re better accustomed to and in a better position to communicate to the customer. So that’s really the basic reason for it.
We’ve actually seen some really remarkable things come from this. In our earliest days, with the roadster, it was by virtue of that direct communication with the customer that we learned about a specific problem with the cars. We ultimately were able to connect the service technician to the service manager, the service manager to headquarters, headquarters to the manufacturing area all within a period of 24 hours and ultimately do a recall extremely quickly. And again, because of that direct relationship to the customers, we were able to get 100% of the vehicles recalled which is pretty unheard of in the industry as a whole.
Lisa Christensen: So that in turn elevates Tesla’s image for consumer safety.
Daniel Witt: That’s right. Yeah. And we do really value, as any brand would as it’s growing up, its relationship to the public and consumers at large.
Lisa Christensen: Because Tesla’s stores are not dealerships in the traditional sense, it has kind of run into problems in some areas. Here in Utah, the legislature heard a bill that would allow Tesla to sell cars directly to consumers, but it failed. And so the law still favors traditional dealerships.
Daniel Witt: Yeah, it’s even a little more complicated than that. We actually believe that under current Utah state law, we have the ability to sell right now. The issue has resulted in the dealer body opposing that, and ultimately it’s been held up from the normal licensing committee as a result. The issue is now in the courts and the Utah Supreme Court is going to hear that case in the next few months I believe. But the basic principle from our argument is that Utah doesn’t need to change its laws. We should be able to expand and sell directly to consumers right now. It’s an alternative which we think most consumers would want to have. No one likes to be dictated to in terms of how they purchase anything – how they purchase any kind of consumer electronics, how they purchase their groceries, things of that nature. So we’re really just trying to offer an alternative that we think is within legal bounds.
Where it’s gotten a little complicated is that within the legislature, we had a very sympathetic individual in the legislature, representative Coleman who sponsored a bill after we’d had some issues, again, with getting our license. We worked very closely with her on the legislation, and she tried to foster an environment for all stakeholders where she could hear all of the opinions. Ultimately where she settled was, and produced a bill to match those sentiments, did not allow us very much room to expand. It was actually very restrictive. So although we’ve actually had a lot of welcoming comments from members of the legislature, members of the public certainly, members of the Utah state government. If that bill had been enacted, it would have been the most restrictive law to have been enacted while trying to encourage our sales. So we actually ended up having to oppose that in light of that. It would have changed things for the worse, again, based on what we think the legal interpretation is of current law. It’s a tricky issue, and one which we hope will be resolved in our favor later this year. Ultimately we’re keeping a close eye on that.
Lisa Christensen: Right. And I’ll be keeping a close eye on that too. So what, ideally, do you think is the best case scenario for a compromise between, you know, the radical bill and…
Daniel Witt: She had her best intentions there. So really, we appreciate representative Coleman’s efforts to try and bring some consensus. Ultimately, we don’t believe that we run in opposition to the dealers. As far as I know, not a single dealership has gone out of business in a state where Tesla is allowed to sell freely. And in fact, vehicle sales have grown in every state annually. Even with Tesla being a part of the state. The most interesting thing is that the interest in Tesla vehicles makes them aspirational vehicles for a lot of people given the price point. But that doesn’t mean that they sit on their hands and have been waiting for the Model 3. They’ve been buying the Chevy Volt, they’ve been buying the Nissan Leaf and other vehicles. So actually by having us in the state, we’ve been encouraging the adoption of other electric vehicles. And so, these points don’t tend to carry a lot of weight with the dealers themselves. But we have tried to make this case to the people at large that we are a net benefit to the state. We contribute sales tax to the state as well as job growth and these other factors that I’ve mentioned.
Lisa Christensen: So while you’re waiting for this to make its way through the court, how have you adapted your strategy in Utah?
Daniel Witt: Well, so right now we have one location in the Salt Lake area. We would obviously like to have more. We’ll have to kind of wait and see what the courts say before we make any specific judgments on that front. But right now, at that one location, we have a license to sell pre-owned vehicles. So we do. We sell pre-owned Model S’ and probably sooner or later, Model X’s as well. Additionally, we have the ability to offer people an experience in the vehicle where they can take the car out on a drive and ultimately understand all of the features and availability. Where it falls short is we can’t execute a sale. If somebody wants a car there, we have to direct them to the website. We have to tell them to go back home, take your time, investigate all your options and ultimately customize your car there. It’s a fine process particularly for a lot of people who do a lot of research from home now.
Car buying in general is a much more extensive process. People spend hours doing deliberations and a lot of research. So we’re perfectly happy to have people doing their research and ultimately executing at their home. But the inconvenience, and frankly, the improperness of us not being able to offer the customer an opportunity to put down their deposit at that point, to select their color, to go through the experience that every other customer is able to go through is what we’re seeking to be able to do.
Lisa Christensen: Alright. Well thank you so much Daniel. I appreciate you taking the time to talk with us.
Daniel Witt: Yeah, absolutely.
Lisa Christensen: UB Insider is produced by Pat Parkinson, with help today from Heather Stewart. Have any thoughts about today’s episode? Let us know at firstname.lastname@example.org or on our Facebook, Twitter or Instagram pages. You can now find us on iTunes and Stitcher so you can download episodes and take us with you on the go. Thanks for listening and have a great day.