Tag Archives: matt taibbi

The 1-2-3’s of EV market share in the US

My article on the 1-2-3’s of electric vehicle adoption in the U.S. went up on GreenCarReports on the weekend. The commentary went through a title change – a procedure familiar to many famous writers, and many more of us unknown mediocrities. :)

About fifteen years after a publisher’s first impression of Jane Austen’s First Impressions was as negative as its heroine Elizabeth Bennet’s first impression of Mr. Darcy, she rewrote the title (and, oh yeah, parts of the book) in the trochaic verse style, giving us Pride and Prejudice. Which is not to be confused with the similarly-titled literary masterpiece, Pride and Prejudice and Zombies.  :)

The article involved breaking U.S. vehicle sales in 2013 by make and model, done by Tim Cain at GoodCarBadCar.net, then looking up manufacturer’s suggested retail price for each and every one – done by me. After that, it was a straight-forward (albeit time-consuming) matter of making macros to do my bidding – in this case, slicing up the sales statistics by price point and vehicle type.

The 1-2-3 in my original title referred to the fact that, if one excluded trucks and crossovers/SUV’s (since the Toyota RAV4 EV is the only electric vehicle offered in those categories, and then only in California) then electric vehicle market share turned out to be:

– about 1% of passenger cars (again, excluding trucks and x-overs/SUV’s)

– about 2% of passenger cars with a base MSRP of $20,000 or more

– about 3% of passenger cars with a base MSRP of $25,000 or more

And way up in the nosebleed section of the luxury car market – where “high” might not just refer to the prices* – Tesla got about 17% of the passenger car market among vehicles costing $62,400 and up. (Tesla’s Model S costs $62,400 after U.S. federal incentives.)

Name-dropping Edwards Deming

One fun aspect of the article was that I was able to weave in references to W. Edwards Deming, the Godfather of statistical quality control. It’s the latest addition to my list of occasionally-Canadian cross-references, including:

– the Innovator’s Dilemma and Kleiber’s Law (both from this article)

– GM’s old philosophy of “a car for every purse and purpose” (here)

– Canada’s on-again/off-again aspirations to annex Turks and Caicos (here)

– and Wayne Gretzky getting traded to the Los Angeles Kings (here)

And the writer’s cut

Verbose babbler that I am – Scrabble players and spelling bee champions alike might say I verge on “logorrhea” — I came in a couple hundred words over target. Or, as I like to think of it, “overachieved”. :)

As a result, the following was originally present just before the Slimming Down U.S. Sales heading.

– – – – – –

As is so often the case for plug-ins, hybrid vehicles offer an apt comparison. In 2012, hybrids claimed about 3.1 percent of the U.S. auto market, and 1.5 percent of the worldwide auto market. (1.2 million of 81.8 million vehicles.)

On the surface, this looks grim – fifteen years after the Prius premiered, hybrids remain in the low single-digit percentages. But better context comes when we focus on Toyota: in 2012, their third-generation hybrid technology was in a full 16 percent of their sales – almost one in every six cars they sold!

This added context helps us understand that bureaucracy, not technology, kept hybrid vehicles marginal: if corporate priorities had been different, there’d be far more hybrids on the roads today.

– – – – –

Fortunately, content is highly recyclable (as many a plagiarist and plagiarism victim is aware) so hopefully I’ll have a chance to deploy the above when I wind up 122 or so words short on an article. :)

– – – – – –

* being a lefty, I’m predictably happy about the fact that the U.S. seems to be easing up on its War on Drugs, which as Matt Taibbi recently noted, is a war waged mainly against the non-wealthy and the non-white.

But it was probably predictable that this would happen, because the winners of the past four Presidential elections were the candidates who’d done cocaine in their youth. (Obama wrote about it in his autobiography, and GWB has avoided making outright denials and was allegedly arrested for possession in 1972.)

The last time someone who’d never used the drug was elected President, Microsoft was king of the world, and Apple was almost bankrupt. Oh, how things change…

If Republicans and Democrats alike have been willing to fund-raise, campaign and vote for candidates who’d done hard drugs, it’s hard to imagine their attitudes towards drugs and drug users wouldn’t soften. And maybe, just maybe, that can lead to legal priorities more focused on prevention/rehabilitation, than on punishment.

Heck, if the U.S. can close enough jails currently crowded with non-violent drug offenders, that might give them a good excuse for that perennially popular bipartisan American activity, lowering taxes! :)

The witless wisdom of Shai Agassi

dunning_kruger_effect by AddAttack

Dunning-Kruger effect graphed by AddAttack on DeviantArt.

LinkedIn has an “opinion leader” piece from Shai Agassi, founder of bankrupt car-battery-switcher Better Place, telling carmakers how they need to respond to Tesla’s success. Who better to give them advice than a guy who raised $850 million for an ignorant, impractical, impossible business model, then drove his company into the ground?

Inviting Agassi to share his clearly-witless wisdom about the auto sector, would have been like inviting André Maginot — architect of the not-so-great wall of France — onto the post-World War II lecture circuit to talk about the future of warfare.

Pre-fisking preface: about Agassi

Before we get to the meatless bones of his commentary, we’ll start with a bit of background about Agassi. From Wiki, he seems to’ve been a very successful software entrepreneur. He may even have been the Michael Jordan of enterprise software — the thing is, Michael Jordan knows that no one wants to hear him talk baseball.

Unfortunately, being so impatient that he didn’t want to wait two more years to become the CEO of SAP, Agassi resigned. Alas, power bends judgment as surely as gravity bends light, and he decided he was destined to remake the auto industry.

Agassi’s clueless enthusiasm — let’s treat Smart cars like smartphones! — makes him a textbook case of the Dunning-Kruger effect, which basically states that:
– people who’re experts at something, know they’re experts;
– people who’re non-experts, know they’re non-experts;
– and people who lack the faintest clue, are so ignorant of their very ignorance that they think they’re experts too.

It boggles the mind that LinkedIn would list a guy who proved himself so catastrophically wrong, as a “thought leader” — what’s next, NPI (new product introduction) advice from Sergio Zyman and Brian Dyson, the men who brought you New Coke?

Pre-fisking preface: the business world’s Kim Kardashians

Of course, LinkedIn brought Agassi in not because of insight, but eyeballs. Or as the TV world calls it, ratings. LinkedIn’s “thought leaders” don’t need to have a track record of success, they just need to draw traffic to the site. And while LinkedIn might have snagged some deep thinkers, one rather imagines that most successful businesspeople are too busy, you know, running successful businesses, to pen puff pieces.

Which means the content providers will inevitably be attention-hungry, less-successful entrepreneurs: the business world’s equivalent of reality-TV stars. Except that reality-TV stars know they’re not A-list actors, while these entrepreneurial remoras seem to think they’re sharks. Again, Agassi might well be a software shark; but when it comes to cars, he’s chum.

Pre-fisking preface: channelling Tom Friedman

Agassi’s piece is so breathlessly definitive in its vacuousness that it looks to’ve been ghostwritten by Thomas Friedman, the New York Times’ opinion columnist most famous for the book The World Is Flat, written in his signature algorithmically-reproducible writing style.

To his credit, Friedman isn’t just a billionaire’s daughter’s kept husband: he has a unit of time named after him, the six-month-long Friedman unit — “F.U.” for short — for the fact that for two-and-a-half years he insisted Iraq would turn the corner in the “next six months”.

People wanting a cortex cleanse from Friedmanisms (e.g. “suck on this“, “hyperconnected“) are well-advised to read lots and lots of Matt Taibbi of Rolling Stone, whose signature anti-Friedman diatribes are the epic essays Flathead, and Flat N All That, the former of which is the source of the cartoon “The Moustache of Understanding” below. (click to embiggen)

friedman

That done, let’s turn back to Mr. Agassi’s titular wisdom from this LinkedIn post.

Three lessons from a highly ineffective founder

“Some of the most serious reporters concluded that Mr. Musk should throw his doors open and share all his secrets with the current carmaker. Tesla had already partnered with both Toyota and Daimler, so one should assume they shared some secrets with those market leaders.”

No, Tesla didn’t share secrets with Toyota and Daimler; they negotiated contracts to develop the battery systems for the California-only RAV4 EV compliance car, and the Smart Electric Drive. This is readily-available information; it’s taken me longer to type this paragraph, than to look it up!  Can a software guru be Google-illiterate?

“Imagine for a second that car companies are like yachts racing in the ocean. While the entire industry represent yachts jostling for position along a similar course, Tesla’s catamaran diverged from the pack, and all of a sudden seems to be gaining tremendous speed.”

Here’s a perfect Friedmanism – first off, a catamaran is not a yacht. If it’s in the race, then the opening sentence should say “boats racing in the ocean”. Next, the writer tries to express the idea that the Tesla catamaran has “raced ahead of” or “broken from” the pack. But “diverged” implies a detour; a wrong turn; it implies Elon Musk’s ship is accelerating in the wrong direction. What began as a promising simile has crashed on the rocks of impaired grammar. Editor…! — is there an editor in the house??

1. An electric car is an object of desire

All cars are objects of desire! That’s why companies invest so heavily in advertising and branding – to make them into objects of desire! The only person in the auto industry who ever treated cars as commodity products, was the guy who thought he could the manufacturers to build all their vehicles off a generic-enough design template to make it easy for him to switch the batteries!

Instead of deciding on “what environmentalists will be willing to give up to drive electric”— such as having only two seats in the back of an odd shaped car — Tesla decided to build a car that supersedes all buyer’s expectations.

First off, Tesla doesn’t target environmentalists, who frankly aren’t wealthy enough to afford luxury sedans. And “two seats in the back of an odd-shaped car” ? This is a throw-back to the EV1, which was fifteen years ago. That’s so long ago, they didn’t just release a movie about how it got killed, they released a sequel! Two years ago!

There is one (1) two-seater plug-in car available in the US today: the Smart Electric Drive, which looks exactly the same as a regular Smart. Why, it’s the very vehicle that Tesla used to work on with Daimler. (The current Smart Electric Drive is a 100% Daimler product.)

And there are at least nine plug-in cars on the market today that seat four or more people, and all of them look like normal vehicles. Well, except the Mitsubishi i-MiEV, which looks normal in Mitsu’s home market of Japan. One of these normal-looking electric vehicles, the Chevy Volt, has won Consumer Reports’ award for highest customer satisfaction two years in a row, implying that yes, Shai, Olde Economy carmakers know how to meet buyers’ expectations with electric vehicles.

Seriously, claiming that Tesla is the first carmaker to discover that the secret to EV’s is to exceed customer expectations, is as ludicrous Italian Renaissance doctor Realdo Colombo claiming to be the first person to have “discovered” the clitoris in the 16th century — as if it was a faraway continent! How much of a bubble would Agassi have to live in, to think that after a hundred years featuring such iconic zillion-selling vehicles as the Model T, the VW Beetle, and the Toyota Corolla, it took until Tesla for anyone actually, finally get it right?  It’s a statement so stunning in its Valley-centric, navel-gazing ignorance, as to be mockworthy.

Oh, and one last thing – “supersede” means “to take the place or position of”. Tesla did not build a car that “took the place” of buyer’s expectations. It built a car to “sur-pass” or “ex-ceed” buyers’ expectations. Presumably, the spell-checker caught that sur-ceed wasn’t an actual word and suggested “supersede” instead. Furthermore, all carmakers already exceed their customers’ expectations, though most of them aim for lower price points than Tesla did with the Model S. It’s one of the reasons why they manage to sell so many more vehicles than Tesla does.

The lesson: Design a car that provides car buyers with the possibility of upgrading both battery and software, while retaining the car [over twenty years]. Such a possibility will enhance the resell value of cars, and in doing so could drastically reduce the monthly lease new buyers will face at the dealership.

I’m going to go out on a limb and say that Shai Agassi probably doesn’t drive the same car he’s owned since the first World Trade Center terrorist attack (1993). It’s hard to imagine that someone who tried to be part of the auto industry would be so blissfully oblivious to the fact that people’s car needs change over time. (How many university students buy minivans because they plan to drive their future tween-aged kids around town, twenty years hence??) But then, this is a guy who thought it wouldn’t be a big deal to convince the world’s major automakers to all change their designs, for his benefit.

Batteries are “Exponential Technology” – they benefit from reduced cost, improved storage and longer life with every generation, all of which are compounding year over year. Exponential technology is the most disruptive force that hits incumbent industries.

Every technology improves exponentially, because of a little phenomenon called the experience curve that applies in almost every manufacturing endeavour. Including internal combustion engines. There’s also the fact that batteries improving at 8% per year (at best) are far less disruptive than microprocessors doubling in speed every eighteen months. More broadly, rules from the world of software don’t always apply to the world of stuff. Our author should know this, given that his great success at SAP prepared him for … even greater failure with Better Place.

More broadly still, if he believed batteries were doubling in speed every eight years, what the hell was he doing trying to set up a battery-switching based business model??  The improvements in battery technology would have been a “disruptive force” that would’ve soon torpedoed Better Place, if he hadn’t sunk it himself, first. More likely, he started Better Place because he didn’t believe batteries would progress very fast — and rather than admit he was wrong, he glosses over that point. The reader’s ignorance is his bliss.

So average your future cost estimated down heavily and plan for profits to come after volume goes up the s-curve instead of focusing all your calculations on the first batch of cars.

They already do this!!  Development costs for new vehicles run in the hundred of millions — the Volt topped a billion dollars — so the fact that new product launches don’t bankrupt “Olde Economy” automakers kind of implies they know how to amortize development costs over years’ worth of vehicle sales. It’s the height of arrogance for a man who didn’t know how to price his own auto industry product, to lecture established car manufacturers on how to price theirs. He’s a naked, failed courtier raving about his clothes. (I’d’ve called him an emperor, but he hasn’t enjoyed a modicum of auto-industry success.)

The lesson: If you launch a new category, consider very seriously launching it under a new brand with a whole new experience. Direct sales will allow incumbent carmakers not only to control its brand experience; it also translates into a lower per-unit cost of sales once volume starts to pick up. Ask Apple…when you have a differentiated product, you want a differentiated destination store for people to come and experience it. If you do it right, the retail value per square foot beats the rest of the industry – by a mile!

One wonders if Agassi was using a team of ghostwriters and there was a shift change, because earlier in the article it’s (correctly) noted that “mass-market carmakers should probably never try to repeat Tesla’s model – in making cars or in business model. What works for Tesla will not work for GM, and most likely be value destructive for any mass-market incumbent.”

And yet several paragraphs later, it’s recommended that mass-market carmakers repeat Tesla’s model of direct sales because, “if you do it right, the retail value per square foot beats the rest of the industry – by a mile!”. Did he not proof-read his own article? Does he care? Is this a secret homage to Harry Frankfurt’s classic, On Bullshit?

Mass-market incumbent automakers have a massive advantage over Tesla in their omnipresent bricks-and-mortar stores, which give them direct reach and presence in tens of thousands of locations around the world. No one in their right mind would give this up — but then, no one in their right mind would champion or fund a battery-swapping company for cars. (Tesla’s situation is different, as their proposed swapping stations can be run at a loss – they aren’t a company profit centre. Better Place’s swapping stations were intended to be profit centers.)

The analogy with Apple fails as well; before the Apple Store, there were Apple “store-in-store” locations at Best Buy and other retailers. The automobile analogy would be to have a separate part of a showroom dedicated to a manufacturer’s electric vehicles. Dealers already dedicate different areas of their showrooms to various vehicles, and the sales person’s job is to help people find the vehicles they want. Besides, the showroom model is working pretty damn well for electric cars — Nissan is having trouble maintaining Leaf inventory at dealers, because it’s selling so fast!

In brief…

While LinkedIn may have thought Shai Agassi would make a great auto-sector “thought leader” — he’ll draw readers as surely as Kim Kardashian (somehow still) draws viewers — they would do well to recognize that they didn’t land themselves an automotive Steve Jobs; they got themselves a Steve Ballmer instead.