Cover Story: The Transformative Tesla

by Diccon Hyatt
When you talk to Tesla owners, and people who are familiar with the electric cars, the word “cult” tends to come up. It’s not meant as an insult, but it is an accurate description of the level of devotion that Tesla owners have to their roadsters and sedans.
“When the iPhone first came out, there was a cult of technology around it,” says Alok Jain, co-founder of the Carnegie Center-based IPCelerate, and owner of a $110,000 Model S four-door sedan. “Geek people took the product and promoted it. This thing is a car, but it’s a piece of technology that people have not seen before. It’s a combination of hardware, software, and driving experience. I haven’t seen many other car owners who have shown this kind of passion.”

Tesla has all the makings of a new techno pseudo-religion along the lines of Apple: the technology is potentially revolutionary, it appeals to an elite group, and perhaps most importantly to the formation of a new faith, it is under attack.
Tesla Motors, based in Palo Alto, California, is an electric car company named after alternating current inventor Nikola Tesla. The company was founded in 2003 by Martin Eberhard and Marc Tarpenning. Elon Musk, the current CEO, first became involved in the company in 2004 when he led a round of venture capital investment in Tesla. The first Tesla Roadster sports cars were sold to the public in 2006.
What inspires such levels of Apple-like devotion in motorists is that Tesla is positioning itself as the first practical all-electric car to hit the market. Tesla’s battery factory in Japan, built in conjunction with Panasonic, cranks out 300 million lithium-ion battery cells per year, the same kind used in laptops and other consumer electronics. Each Tesla vehicle is powered by these electric cells. Unlike in a hybrid car, there is no gasoline-powered motor for backup.
Unlike most electric cars, the Tesla has pop. The Roadster goes from 0 to 60 in under 4 seconds, while the base Model S does it in 5.6. In comparison, the 2013 Prius takes 10.7 seconds to go 0 to 60. The 2011 Volt takes 8.9 seconds. Lexus’ hybrid sedan, the 2011 HS, takes 8.3 seconds.
Teslas boast a range of up to 300 miles on a charge (at 55 mph) and goes down with faster driving or using the heater, lights, or other accessories. To recharge, owners can plug their cars in at any electrical outlet. The more powerful the outlet, the quicker the battery is replenished. The fastest charges available are at Tesla-owned Supercharger stations, which can top up a Model S in about half an hour. Recharging with a regular home outlet can take several hours.
Teslas are becoming a common sight on the streets of central New Jersey, even though they only make up a tiny percentage of the overall car market. Tesla’s California factory makes about 20,000 Model S sedans per year. The cheapest new Tesla costs about $71,000, putting it in competition with high-end luxury cars made by Mercedes and BMW. The company hopes to improve its battery production techniques to the point where the cars can be sold to an average consumer. Until then, however, Teslas are only for the well-off, though those who buy electric cars are eligible for a $7,500 federal tax credit.
Tesla’s iconoclasm and its challenge to the established auto industry have invited comparisons between Tesla and Apple. If Tesla is the new Apple, Musk is its Steve Jobs.
Musk has a history of shaking up established industries. He was born in South Africa and moved to Canada in 1988 at age 17. He studied at Stanford, but dropped out after two days to pursue his business career. He became an American citizen in 2002. His first company, Zip2, published an Internet “city guide” for newspapers. Compaq bought Zip2 for $307 million, and Musk walked away with $22 million from the sale.
Musk went on to develop the online payment company PayPal, and was a co-founder of SpaceX, a private space exploration company that has a contract to deliver supplies to the International Space Station using the spacecraft it has developed and built privately.
Musk has been the charismatic face of the company since becoming CEO and chief product architect in 2008. In interviews, Musk has said he wants to build Teslas for under $30,000, and also to sell power train components to other manufacturers.
A key part of this plan is the construction of a $5 billion battery factory that he hopes will revolutionize the battery industry and provide the cheap power that Tesla will need to make consumer-priced Teslas.
Tesla owners have given the vehicles rave reviews. Jain, a true road warrior, has put his Tesla to the test. His company, IPCelerate, is headquartered in Carnegie Center and has a data center at 1 Farr View Drive in Cranbury and another location in Dallas. Jain is often on the road, visiting clients in Boston or Washington. He used to take the train for those trips, but now he just hops in his Tesla, stopping at a supercharger station on I-95 to refuel.
He also drives it around Princeton, where he lives, and is often stopped by people who want to know more about it. He says his wife also loves to drive the Tesla, and though she is not interested in cars, she often jumps in to answer questions about it.
Cost is not a major concern for Jain, who has two Lexuses at home, but he nevertheless appreciates the savings over a standard car. He drives the Tesla 3,000 miles a month, spending nothing on gas, and Jain estimates his total traveling bills are about $125, versus $900 or more for a conventional car.
Jain was born in New Delhi, where his father worked for a government office of telecommunications and engineering. He graduated from Delhi University with a computer science degree before moving to France to work for a small startup company as a consultant. Through it all, he was a fan of Formula 1 racing and had an infatuation with American muscle cars.
“I always had posters of Mustangs and Camaros on my walls even though we didn’t have access to those kinds of cars,” he says.
When he moved to the United States in 1996, he bought a Pontiac Trans Am. As his career advanced, so too did his taste in cars. He was the first employee of Netcom Systems, working as a programming analyst, which grew to a staff of 220 by 1999.
He became an expert in Internet-connected phone systems and developed some of the first enterprise software applications for desktop smartphones while working for Selsius, a division of Cisco. Together with another Selsius employee, he founded IPCelerate in 2003 to develop enterprise software for mobile devices.
Today IPCelerate has 49 employees, and Jain’s taste in cars runs toward luxury rather than speed and cheapness. “I don’t want to call myself a car collector, but I know what a fine machine and real technology looks like,” he says. He got married in 2010 and bought a Mercedes S-Class hybrid car for himself and his new wife, Neenah Kay Jain. Today they both drive Teslas. Neenah sometimes drives hers to Manhattan, where she works as a CFO at Radius, a venture capital firm.
Jain may not be a collector, but he does consider himself a car enthusiast, and gives high marks to the ride and performance of the Model S versus luxury rivals. He gives even higher marks to the service, which is provided directly from the manufacturer instead of a dealership.
“One day I got a call from Tesla saying they are replacing the 12-volt batteries [used to power auxiliary electronics and “wake the car up” to drive] in my car, and they asked if I could bring it in for service. I told them I was traveling, and they said not to worry about it. They actually brought a loaner to my house on a flatbed truck, took my car to the showroom, replaced the battery, and brought it back on a flatbed the next day. That’s incredible. I have had many cars, but I haven’t seen that kind of service. It’s a different experience and a different breed of company.”
Jain does not exactly baby his Tesla. He relished the chance to test his electric vehicle in the snow this winter and drove it around over un-plowed roads just to see how well it worked. (It did well, Jain says.)
All this has convinced Jain that electric cars are the way to go. He is planning a road trip to his in-laws’ farm in Ohio and believes the trip will be no problem, given the proliferation of superchargers along the nation’s highways. “It will be another hour to supercharge it in Pennsylvania, but we should be able to get to their place without any issues,” he says.
Other high-tech features of the Model S include its all-glass panoramic roof, which opens with a touchscreen. It starts automatically when you buckle your seatbelt, as long as you have the key in your pocket. The car is controlled by a 17-inch touch screen.
But the main selling point of the car is not all of the bells and whistles, many of which are matched or exceeded by other luxury cars, but its unique all-electric operation. Jain loves the car so much, he recently bought his second Tesla. “We are not going to buy a gas-powered car again,” he says.
Downsides. Electric cars are still just a blip on the overall car market. Chevy sold almost as many Cruze sedans during the month of August as Tesla had sold of its Model S over its entire history up to that point. There are several reasons why buyers might be hesitant to purchase an electric car.
In addition to cost there is the limited range of the vehicle. Gas-powered cars can effectively go anywhere, thanks to the ubiquity of gas stations. Teslas can only go as far as their batteries will take them without stopping to re-charge. This drawback is mitigated by the fact that you can charge one up anywhere there is an electrical outlet. But the system is not foolproof.
“I don’t care what anybody says: you have a little bit of range anxiety,” says Tesla owner and Trenton resident Dan Dodson (see sidebar.) Dodson says that early in March, he left his Tesla plugged in at Newark Airport while he took a business trip, thinking it would charge up while he was gone. But when he returned to his car, he found the battery was almost empty — for some reason, the cord had gone dead during the week. “I barely had enough power to get home,” he says. “I don’t know what happened.”
Tesla is building a network of superchargers that mitigates this risk somewhat, including one in Hamilton Marketplace on Route 130 in Hamilton Square. However, using a supercharger takes significantly longer than fueling up at a gas station. Tesla owners use websites, including www.plugshare.com, to share locations where they can juice up their cars. Locations include the Palmer Square garage on Chambers Street, wall outlets at the Element Hotel in Ewing, and outlets in the parking garage at the Hamilton Station park-and-ride.
Politically charged. There is no such thing as a Tesla dealership. In fact, the entire company is a challenge to the traditional business models of auto-makers. Every other car manufacturer sells its products through independent dealerships, who operate franchises with defined territories. These franchise agreements are protected by New Jersey law (see sidebar, page 37).
Tesla sells its cars directly to consumers. Instead of going to a dealership, Tesla buyers can head to one of two showrooms in the state, in Short Hills in Millburn or Garden State Plaza in Paramus, where cars are on display and information about them is available. There is no gigantic lot of cars, nor are there high-pressure salesmen. Customers order their cars online.
The future of this business model is currently being debated in the New Jersey legislature, and in the bureaucracy that governs the sale of cars in the state. The first blow was struck March 10, when the Motor Vehicle Commission ruled that Tesla was violating the law by selling its cars online. The commission ordered the manufacturer to stop direct sales in the state.
Tesla owners were not content to sit on the sidelines.
“Within four hours of when we found out the Motor Vehicle Department was going to have a public meeting to finalize the ban of direct sales in New Jersey, it got posted on a Tesla forum,” Jain says. “Once the link got posted, about 75 of us showed up there. Here were all these people who are high net worth, who have responsible jobs, showing up to this meeting. People with their kids came out to that meeting to support Tesla.”
Dodson and about 30 other Tesla owners went so far as to drive to Washington, D.C., to rally to press their case.
It’s hard to imagine people who bought Fords or Toyotas holding rallies and showing up at public hearings to support the company that made their cars.
Lee Berbs, who owns a tinting and detailing shop in Hillsborough, believes Tesla owners are a different breed. His shop, which offers free high-voltage charging to anyone with an electric car, has serviced about 30 or 45 Teslas in the last year and a half.
“They are all super-passionate about the brand. More so than any other car community,” he says. There are several Tesla owners clubs throughout the state.
Greg Gellas, who handles the detailing end of the operation, says the shop draws a crowd of people who are very concerned about the appearance of their cars. They pay to have protective coatings put on over the paint jobs and to repair minor dings and scratches.
Just as Steve Jobs made people who never cared about phones into Apple fanboys, Musk has made daily drivers into car enthusiasts.
“One thing I have noticed is that people who bought the car that weren’t necessarily car people before. This car has made them into car people, without a doubt,” Gellas says.

Seeking Simplicity, a Commuter Picks Tesla
Dan Dodson, a Trenton resident and business consultant who commutes to Philadelphia, says he will never buy a gas-powered car again. Dodson bought his Model S in 2010 for $70,000, after more than two years on a waiting list.
Owning an electric car is a long-time dream of Dodson’s. Five years ago, he set out to buy a used EV1, which was a prototype electric car made by General Motors in the 1990s. “The main reason I wanted one was that it was so simple. I figured, five years ago, that an electric car would be more practical and would have better pickup and have less maintenance than a gas-powered car.”
One of the potential benefits of an electric car is the lack of a complex engine. As any car owner knows, the engine and transmission are liable to break down, meaning costly repairs. Without either of those components, an electric car could, in theory, cost much less to maintain. And, of course, there is the benefit of never having to go to a gas station again.
Dodson soon learned that GM had destroyed most of the EV1 prototypes it had leased to consumers between 1996 and 1999. (The demise of the EV1 is the subject of the documentary, “Who Killed the Electric Car?”)
“After I saw that movie, I invested in an early electric car company, and I started reading a lot about the Tesla Roadster,” Dodson says. The roadster, Tesla’s first car, is a two-door sports car. “I wasn’t going to get a roadster because I need a family car,” Dodson says.
Dodson says the Tesla Model S is a great family car because it has a second trunk where the engine would go on a normal passenger car. He also likes the electronically controlled suspension, which can be tuned from “land yacht” to “sports car” depending on his mood, using the car’s computer.
Dodson, who was a BMW enthusiast before buying his Tesla, says the Model S is “by far the smoothest ride I’ve ever owned.”

Tesla to New Jersey: No Need for Dealers
by Elon Musk
On March 10, under pressure from the New Jersey auto dealer lobby to protect its monopoly, the New Jersey Motor Vehicle Commission, composed of political appointees of the governor, ended your right to purchase vehicles at a manufacturer store within the state. Governor Christie had promised that this would be put to a vote of the elected state legislature, which is the appropriate way to change the law. When it became apparent to the auto dealer lobby that this approach would not succeed, they cut a backroom deal with the governor to circumvent the legislative process and pass a regulation that is fundamentally contrary to the intent of the law.
The intent was simply to prevent a fair and long-standing deal between an existing auto company and its dealers from being broken, not to prevent a new company that has no franchisees from selling directly to consumers. In most states, the laws are reasonable and clear. In a handful of states, the laws were written in an overzealous or ambiguous manner. When all auto companies sold through franchises, this didn’t really matter. However, when Tesla came along as a new company with no existing franchisees, the auto dealers, who possess vastly more resources and influence than Tesla, nonetheless sought to force us to sell through them.
The reason that we did not choose to do this is that the auto dealers have a fundamental conflict of interest between promoting gasoline cars, which constitute virtually all of their revenue, and electric cars, which constitute virtually none. Moreover, it is much harder to sell a new technology car from a new company when people are so used to the old. Inevitably, they revert to selling what’s easy and it is game over for the new company.
The evidence is clear: when has an American startup auto company ever succeeded by selling through auto dealers? The last successful American car company was Chrysler, which was founded almost a century ago, and even they went bankrupt a few years ago, along with General Motors. Since the founding of Chrysler, there have been dozens of failures, Tucker and DeLorean being simply the most well-known. In recent years, electric car startups, such as Fisker, Coda, and many others, attempted to use auto dealers and all failed.
An even bigger conflict of interest with auto dealers is that they make most of their profit from service, but electric cars require much less service than gasoline cars. There are no oil, spark plug or fuel filter changes, no tune-ups and no smog checks needed for an electric car. Also, all Tesla Model S vehicles are capable of over-the-air updates to upgrade the software, just like your phone or computer, so no visit to the service center is required for that either.
Going a step further, I have made it a principle within Tesla that we should never attempt to make servicing a profit center. It does not seem right to me that companies try to make a profit off customers when their product breaks. Overcharging people for unneeded servicing (often not even fixing the original problem) is rampant within the industry and happened to me personally on several occasions when I drove gasoline cars.
The rationale given for the regulation change that requires auto companies to sell through dealers is that it ensures “consumer protection.” If you believe this, Gov. Christie has a bridge closure he wants to sell you! Unless they are referring to the mafia version of “protection,” this is obviously untrue. As anyone who has been through the conventional auto dealer purchase process knows, consumer protection is pretty much the furthest thing from the typical car dealer’s mind.
Consumers across the country have also voiced their opinion on the sales model they prefer. In North Carolina, a Triangle Business Journal poll found that 97 percent of people polled said Tesla should be allowed to sell cars directly. A poll by the Austin Business Journal showed that 86 percent of respondents were in favor of direct sales, and in a Los Angeles Times poll 99 percent of respondents came to the same conclusion. These aren’t polls that we commissioned and there are many more like them. We have not seen a single poll that didn’t result in an overwhelming majority saying they preferred the direct model to the traditional dealer model. Democracy is supposed to reflect the will of the people. When a politician acts in a manner so radically opposed to the will of the people who elected him, the only explanation is that there are other factors at play.
Some reassurances are also in order. Until at least April 15, everything is business as usual for Tesla in New Jersey. It should also be noted that this regulation deals only with sales, so our service centers will not be affected. Our stores will transition to being galleries, where you can see the car and ask questions of our staff, but we will not be able to discuss price or complete a sale in the store. However, that can still be done at our stores in Manhattan just over the river in Chelsea or King of Prussia near Philadelphia.
Most importantly, even after April 15, you will still be able to order vehicles from New Jersey for delivery in New Jersey on our TeslaMotors.com website.
We are evaluating judicial remedies to correct the situation. If you believe that your right to buy direct at a Tesla store should be restored, please contact your state senator and assemblyman: www.njleg.state.nj.us/districts/districtnumbers.asp.

Dealers to Tesla: Obey the Law
by James B. Appleton
We are confident that the courts will recognize the compelling state interest in regulating the sale and distribution of new motor vehicles and that Tesla’s legal challenge of the NJMVC rules will fail.
Tesla’s attack on the franchise system fails to recognize that it has been mandated by law in New Jersey — and at least 32 other states across the nation — because this extensive network of independent franchisees promotes vigorous price competition and protects the public interest in highway safety. The Tesla business model, on the other hand, eliminates price competition and limits consumer access to warranty and safety recall services, which has a detrimental impact on public and highway safety.
Clearly, Tesla is not happy with the law in the state of New Jersey and, initially, they simply ignored it by starting up operations here without appointing franchisees. When the issue was raised by the regulators, Tesla asked the administration to ignore the law. When the administration refused to ignore the law and acted to enforce the prohibition on direct factory sales, Tesla asked the legislature to change it. Now they are petitioning the courts for relief. This is America. Everyone has a right to petition their government for redress of grievances.
No one wants to see Tesla out of business in New Jersey. But the NJMVC must fairly and equitably enforce the law and Tesla should be required to play by the same rules as everyone else.
NJ CAR is committed to working with members of the legislature who are seriously exploring options that would allow a startup electric carmaker, like Tesla, a reasonable period of time to ramp up operations before they conform their operations to the franchise model.
Jim Appleton is president of the New Jersey Coalition of Automotive Retailers. www.njcar.org.