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Is Tesla falling victim to its own success?

The darling child

Tesla is very good at what it does. The man who founded them, Elon Musk, has proven that intelligence, boldness and heavy doses of confidence goes very far in creating success. His confidence has found its way into his companies, where Tesla is no exception. It takes real guts, with a dash of ignorant confidence, to be an industry disruptor as they have.

Tesla is no stranger to criticism. In fact, even still, they’re a favorite of media to love to hate. People have been cheering for their failure for years. But, after more than a decade, Tesla has proven it’s here to stay. Maybe. And, with the Model 3 now rolling off the production line, they want to be a big player in the game. Thanks to Tesla, fully electric cars are now a thing. Manufacturers are spending billions to develop and bring to market their own variation. Entire industries have been created, bolstered and solidified thanks to the EV market. Thanks to Tesla.

In a move which can be attributed to survival, the folks at Tesla seem to have developed thick calluses when it comes to dealing with issues. As the company has grown, it has not been without blemish. There have been batteries that caught fire, missed delivery dates, manufacturing defects, and disagreements with suppliers. All this doesn’t mention the scads of negative reviews the Model S has received, albeit unfairly. Through it all, Tesla PR and Elon have blindly defended the company, the cars and their processes. They are quick to reply with facts, or to minimize and outright dismiss controversy.

Their defense and confidence may be begging to show signs of being detrimental, however. Tesla is still the darling child of the automotive world. One could be forgiven for calling them the Apple of the car world. Demand for their cars is outrageous, and consumers seem poised to forgive Tesla, and by extension Elon, for all manner of mistakes. At least for now. Their owners will defend the cars passionately whenever they can. This is despite many of ongoing reliability issues they face. Tesla has worked hard to keep their customers happy. Customer ratings put them top year after year, despite all their shortcomings.

But keeping customers happy is not cheap work.

Tesla needs money

Nor is funding new vehicles. Very recently, the cracks are starting to appear in Tesla’s armor. While generating revenue, Tesla’s 2017 Q2 financial reports reveal a company which is struggling to pay its bills. While media have been focused on the fiasco that is Faraday Future, Tesla has quietly been running out of money, too. In order to keep paying their bills, and fund the lifesaving Model 3, Tesla needs to raise $1.5 billion USD. Since the company has already gone public, they plan to use junk bonds. While not an uncommon practice, these bonds are usually high risk, quick cash for companies. However, these bonds are not tied to anything other than Tesla’s word of repayment. Worse still, ratings agency Standard and Poor gave the bonds a B- rating, and Moody’s put them at B3.

Despite their mass appeal, can a company that hasn’t actually made money yet find that many investors? Probably, but certainly the hype is fading, and concerns are beginning to mount. Even with this bond driven injection, Tesla is only funded through mid 2018. This means the risk of Tesla having no money to repay bond owners is very real.

Safety second

Let’s go back to the Tesla automatic defense mechanism: their PR department. Their corporate, knee-jerk, auto dismissal of negative press may be making Tesla a dangerous car company. Common sense suggests that even your worst critics may have something of value. Tesla, and Elon, refuse to accept anything critical, in many cases arguing bluntly against it. Where this gets really dangerous is crash tests. Tesla has long touted the safety of their cars; however, the Model S has received moderate crash results from the IIHS. The Model S, however, aced the NHTSA crash tests. And Tesla is very happy to point that out. Why is this a problem?

Not all crash tests are created equal, and IIHS is more than just tossing vehicles at concrete walls. The IIHS tests frontal collisions in a small and medium overlap tests, while the NHS does one full frontal. IIHS tests have been a huge challenge for automotive engineers over the years, with the recent small overlap proving to be a frustration for all companies. Tesla model S did not get IIHS top safety picks due to “acceptable”, not “good”, small overlap results. A small overlap crash simulates a common crash type, and shouldn’t be ignored. You also shouldn’t attack the agency doing the tests.

Which is exactly what Tesla’s PR team did.

By saying this, Tesla is essentially stating that they only consider the crash tests from one, the most positive, source as valid. That’s a dangerous statement, and people who drive Tesla cars should feel the hairs stand on the back of their necks. The overwhelming NHTSA praise is worth more than correctly engineering a safety structure for all crash types. Every other car manufacturer has struggled with the IIHS small overlap, and every other one is changing to improve their scores. Not Tesla. They have their positive press.

Lessons to learn

Tesla is responsible for the biggest and best change the automobile industry has seen since the Lohner-Porchse. But, like a huge, Waterloo Ontario based technology company before them, perhaps they have become blinded by their own successes. It seems Tesla has wasted no time in adapting the same immovable, bordering on ignorant, attitude the same automakers they claim to be different from have. And when the government’s grants run out, the consumer attitude wanes, and investors look elsewhere, Tesla may scramble to correct all these attitudes. Hopefully, though, they will before then, and Tesla will become more than a catalyst in automotive change, but a long-lasting innovator.

About Dan Croutch

Dan is a freelance automotive writer and YouTuber (DanDrives). He enjoys all things pickup trucks, classic cars and minivans (really). Fascinated by technology and cars. EV hopeful, but slightly skeptic. He blogs at http://dan.croutch.ca occasionally, tweets @dcroutch obsessively.

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