European Vacation (Not)

As I fly back from Brussels and think about the last 9 days in Europe I am very encouraged by what we learned. One of the advantages of a startup operation is the ability to change direction and make decisions very quickly to adjust to the opportunities and risks that present themselves. The flip side of that is that you often need to lead with your chin and accept the fact that you aren’t always entering the battle with your plans all in place. You become a master of rapid prototyping.

I start with a general observation about Tesla customers. Our new customers in the EU are every bit as dynamic and engaging as those who we have come to know in the US. It is not an exaggeration to say that one of the most extraordinary aspects of this company is the people who have signed up to reserve a Roadster. Those people, with wide ranging backgrounds, interests and motivations, share a vision and passion with Tesla’s employees to be part of something extraordinary and meaningful.

Many of the people who I have been interacting with, in person, on this blog or by email, have been following Tesla with a passion for several years, and this is something which I should have anticipated better when we communicated our entry into the European market.

European Pricing

When I announced the special, limited edition 2009 Euro-spec Roadster, I had not yet announced US pricing for the 2009 Tesla Roadster, which had increased to a $109,000 base price. I also communicated the price of the “signature edition” euro Roadster as a fully loaded offering, which compares to the fully loaded price of the 2009 Tesla Roadster of $120,200. This caused many people to compare the 99,000 Euro price of the limited edition car to the commonly quoted $98,000 price for the US version, with predictable results.

Where sometimes people talk about apples and oranges comparisons, this situation is a bit of an apples to oranges to pears to watermelons comparison. For starters, the car we are currently offering is a special, limited edition series of only 250 across the entire EU (Plus Switzerland and Norway) and it is priced at a premium to reflect that. That being said, a proper comparison should be made to the fully loaded 2009 price of $120,200 in the US (excluding taxes), not the $98,000 base price of the 2008 Roadster.

An important thing for our customers, both US and European, to keep in mind is that much of the cost of the Roadster is paid in Euros and Pounds. For that reason, as the dollar has weakened against the Euro (and other European currencies), we adjusted pricing accordingly. Not surprisingly, European carmakers are doing the same: in the April 30 edition of the Wall Street Journal Europe it is reported that BMW has made the decision to divert volume from the United States to other markets because their gross margins are under pressure due to the weak dollar and a Euro based cost structure. A final note on European pricing strategy relates to service centers and infrastructure. In the early going, we will be relatively “sub-scale” in Europe, with a higher cost of service and marketing infrastructure relative to sales. This is also reflected in our pricing.

While I thought it was important to address pricing, it really comes down to this:

The first 250 EU customers will receive a specially badged car that will no doubt be a collector’s item in the future. They will also be able to be the first Europeans to drive this amazing, rule-breaking, extraordinary car. Beyond that, we plan to offer other customizations for the car that will make it unique, but that will be a topic for future discussion.

The Top Marques Monaco Show

I’ll start by thanking Kory Tarpenning, the cousin of Tesla co-founder Marc Tarpenning, for turning us on to this show. Thanks also to Marc for putting us in touch. The show was a fantastic opportunity for us. Kory, who lives in Monaco, was an excellent host (especially to Diarmuid and Zak, who went out for a night on the town with Kory, and looked the worse for the wear from it the next day.) We had extraordinary interest at the Tesla booth from people from all over Europe, some of whom had flown in just to see the Tesla in person. After the first day, we pulled VP12 from the floor and kept it outside so that we could offer test drives to potential customers. I’m very glad we did that, because the experience of driving a high performance electric car up the mountains of Monaco or around the Monaco Grand Prix course is extraordinary. VIN F004, a car that is reserved by someone close to Tesla, stayed on the show floor for people to look at. Some notable visitors to our booth were former F1 champion Damon Hill, Prince Albert of Monaco and Bono. All of them knew a fair bit about Tesla and showed a great interest in the car.

We ended the show with a much better understanding of how we should approach Europe and what we need to do differently. For starters, we will be revamping our website and offering country and/or language specific content. We will be updating portions of the website that are outdated along the way.

We also ended the show with a good number of new European customers and hopefully an even larger number of future customers or brand ambassadors (some of whom comment on this blog).

An Update on Production

Since I inevitably get these questions, I should offer the update that VIN F003 has been delivered to its owner. VIN F002, which is reserved by co-founder Martin Eberhard, is soon to be shipped to the states. It had to stick around for a while because our quality team replaced the roof panel to improve the fit and seal and since the custom paint job involves the roof we couldn’t send it over and then send the roof later.

I don’t plan to offer car by car updates to the public but rather plan to communicate periodic milestones. The early stage of production is slow paced by design so that we can ensure quality and deal with any process problems before we ramp up to a higher rate. This has been and continues to be the plan. The production rate will slowly increase over the summer but then accelerate in the fall.

Furthermore, we are performing a higher than usual amount of post-production testing on these first cars. If we find anything we don’t like, we re-work it until it is right. The process is designed to have most of the kinks worked out by the time we ramp up to higher rates of production but comprehensive quality checks of every car will always be part of the plan.

Some Final Random Musings

I don’t envy Europeans who work for California based companies – just as the work day is winding down everybody is just getting going in California and the emails start flying.

The cost of food in Monaco is sky high, although I don’t believe it has anything to do with bio-fuels. As a result, we ate a lot of pizza.

I think the Cote D’Azur is a fabulous place for Tesla Roadsters.

Aside from standing at the booth, the most exercise I have had in months is transferring flights at the Frankfurt Airport.

For the first time in my life, crying babies in airports didn’t irritate me, they just made me miss my baby girl more.