Is Elon Musk A Mad Man Or A Genius?

My wife and I had just finished attending a fundraiser, and we found ourselves talking to two of my friends out in the parking lot. Steve had parked his car a few parking spaces from my Tesla. Evan had parked his car next to mine. I pulled out my phone to unlock the trunk of my new Tesla.

Steve did not know I just bought a Tesla, and he asked me, “ So what do you think, do you love your new Tesla?”

I answered, ‘Yes. I love it. It’s a great car.”

Steve grabbed his glasses, placed one of the temples to the corner of his mouth for a second, then removed it and asked, “ Did you buy the Full Self-Driving package?”

I quickly responded, “Yeah.”

“So, were you disappointed?”

I knew what he was implying. Was the Full Self Driving Software package worth $15,000? Before I could answer him, Steve said, “ They say that Full Self Driving is great for the highway, but in the inner city, the full self-driving can’t handle it.”

I replied to him, “Don’t be so sure.”

I had Steve’s and Evans’s attention despite the fact I began to feel a raindrop hitting my head. “ Listen, I agree with you, Steve. Full Self Driving is great for the highway, but the full self-driving software alerts you to take over the driving in the city, especially at weird intersections. So, there is a complicated intersection near my house right after I exit the highway. I have to make two consecutive left turns, drive on the outer Highway and make an immediate right turn onto the street that leads to our subdivision. The problem with the two left turns is that there are two lanes for left turns at each stoplight. I have to be on the far left turning lane for the first stoplight and the inner left lane for the second stoplight. The first time I used the full self-driving program at the first stoplight, it alarmed, and the full self-driving turned itself off. The second time, I crossed the intersection a little further, and it started to weave between the two left lanes until it finally chose the correct left-turning lane. I had a red light, and it executed the turn, and the thing alarmed and alerted me to take over. I began to think that the full self-driving was a scam, and I wasted my $15000.”

Evan interrupted and said, “Elon Musk expects to make his money on the Full self-driving package…. That’s why he lowered the prices.”

Steve interrupted, “Don’t forget the network of superchargers.”

Evan raised both hands with his palms facing out, “Stop right there, what supercharging network. This isn’t California. There are about three supercharging stations in the county…..Mind you, in the county!” Evan made it clear he was emphasizing that very point. “There are none in the city. Fat chance I will use a Tesla on long trips to another city. I just returned from Florida and saw hundreds of gas stations, not one Tesla Supercharger.”

“Evan, The Tesla navigation App will plan your trip with Tesla Charging stations marked off for your route. That isn’t an issue. Besides, Tesla is expanding its Supercharging network across the country. Many major hotel chains are adding charging stations to some of their hotels. Many Tesla owners prefer hotels with charging stations. Let’s face it: I have to stop for twenty or thirty minutes while driving across the country for hours on end. That’s all the time you need to charge up and get an extra 200 miles. I don’t know about you, but I must take a twenty or thirty-minute break on long road trips.”

Sam looked at me, “So, How do you feel about the price cuts that Elon made?”

I looked at Sam and Evan and let out a big Sigh. “I’m not happy with it. The least he could have done is make up for it with supercharger credits.” I was expecting another price jump after January 1st. Instead, he cut the prices. I missed out on the Tax credit. I waited three months for my car. I got $3500 knocked off when I purchased my Tesla in early December. Then Elon knocked off another $3500 on the price five days later. That burned me up inside.”

Steve tried to cheer me up, “What matters is that you love your car. I’m happy for you. As long as you enjoy driving it, that’s all that matters.”

Evan smiled and agreed with Steve’s last comment, “I just don’t understand one thing, how is Elon Musk going to make any money on electric cars if he constantly lowering the price.”

Sam shrugged and said, “I don’t know; I can’t see a Full Self Driving package being a money maker.”

“Listen, guys, let me finish my story about the Full Self-Driving and that intersection by my house. The other day, I activated the Full Self-Driving mode in my Tesla. It took care of it. It handled the intersection. I learned how to drive through those two intersections in about a month. People forget that full self-driving is cruise control on steroids. Full Self-driving uses artificial intelligence. That is crazy. My Tesla learned to drive through that intersection after I used the full Self Driving Software, I don’t know, four or five times. As more Tesla cars drive around and gather data, the faster the Full Self Driving software will become a reality. Everyone has exalted ChatPT and Bing as the start of the AI revolution. I have news for you; Tesla is in there with Open AI in the AI revolution. The software codes, learning algorithms, and the mega servers under Tesla’s control are easily convertible to other areas, for example, Optimus Robot.”

Evan raised his hand, making a slow-down gesture, and said,” I know you are a Tesla fanboy, but does it make sense for Tesla to be cutting their EV prices? Is Elon mad or what?

“I think Elon Musk is a genius,” I replied.

Evan looked at me and said sarcastically, “I think you’re crazy. Tell me why Elon Musk is so smart to lower EV prices.”

Steve was curious, also. He still had the temple of his glasses in the corner of his mouth. It reminded me of the hefty Walleye I caught on my last fishing trip with the boys in Minnesota. The fish fought against me as I tried to remove my fishing hook from its enormous jowl. Steve was a retired corporate executive that missed developing corporate strategies and targeting specific market niches. He leaned in, eager to learn why this was a great business move.

“First of all, we can agree that Tesla is leaps and bound ahead of all legacy automaker. By legacy automakers, I mean your traditional gasoline-powered automaker. Second, building an EV is cheaper and faster than building a gasoline car—no oil reservoir and changing the oil every three to six months. Forget about transmission fluids, exhaust pipes, and catalytic converters. Now if the electric vehicle is simpler and cheaper to make, the factory line is cheaper and simpler to build. Trying to retrofit a traditional car manufacturing plant to an electric vehicle plant is cumbersome and, in the end, inefficient. Inefficient means more expensive to make.” So Tesla can build an electric car at a lower expense and build a factory that is efficient at a lower cost. The legacy automakers have dragged their feet and are trying to save a few pennies by retrofitting their factories to build EVs alongside gasoline-powered cars. The production of EVs by legacy automakers is substantially higher and more inefficient when compared to Tesla. Now tell me who is going to win the EV revolution.

Now remember, electric costs are far lower than gasoline prices. Imagine if gasoline spikes again. In my gasoline-powered SUV, I pay fifty dollars on average to fill it up at the gas stations. My Model Y, which is an SUV, costs me twelve bucks. If electricity doubles in price, I’m still ahead.

“But getting to the root of your questions; Is Elon smart for lowering Tesla car prices so many times in the past four months? My answer is Yes.” My wife was subtly tugging my arm, warning me not to let myself get into an overheated discussion with our friends.

I continued by saying, “Evan, you bought how many cars in the last ten years?”

“Oh, I bought three; I replaced one, and my two kids started driving, so I needed two more cars.”

“What did you buy?” I asked.

“All of them were Hondas; what’s your point? Where are you going with this?” Evan scrunched up one eyebrow looking more annoyed than confused.

“Evan, be patient with me and hear me out.” I quickly looked at Steve and bluntly asked, “What kind of car have you bought in the last ten years?”

Steve replied, “ Two BMWs and an Audi. I’m with Evan. Where are you going with this discussion? What is your point?”

“Just humor me with this last question? What car are you likely to buy next?”

Evan answered immediately, “That’s easy, Honda.”

I looked straight at Steve and stared him down with his answer. He replied That’s easy; my last two cars were BMWs. I'll probably get A BMW.”

“Gentlemen, that IS my point. The average car buyer often tends to buy the same brand when in the market for a new car. Call it the brand's familiarity or the satisfaction of prior ownership of their recent automobile purchase; the average car owner will repeat a car purchase from the same automobile maker. In other words, if you buy a Tesla and you are happy with it, more than likely, your next car purchase will be a Tesla. One of my friends from work was a big BMW guy, he has purchased three Teslas, and Tesla is the only brand he is buying in the future from here on out. No BMWs, No Mercedes, No Audis. He is committed to buying Teslas in the future. Like the Apple iPhone, people rarely switch to an Android phone once they buy an iPhone. And once you buy an iPhone, you are buying an iPhone every two or three years.

Once a car buyer purchases a Tesla, they will love that car forever and become repeat Tesla customers. I see myself as I see other Tesla owners buying a Tesla for their wives and a Tesla for their children going off to college. You get the picture. I hope you see the grand plan; Repeat customers with strong brand loyalty. But the next Tesla car two years from now won't be cheap; it will probably be more expensive. Remember, the iPhone progressively became more expensive with each newly updated iPhone. Oh, don’t forget that iPhone dethroned Blackberry. Tesla is dethroning everybody, GM, Ford, Toyota, Volkswagen, BMW, Mercedes, and Audi. And the legacy automakers didn’t see it coming until its too late. Ask Blackberry how it felt like.”

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