Steven Addis on the Tesla Model S: Worth fighting for?

“Tesla CEO Elon Musk is right to battle bad review of the Model S, experts say”

by John Boudreau

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It’s often a bad idea to pick a fight with big media. But experts say Tesla CEO Elon Musk, whose Palo Alto-based electric car startup is at a critical crossroads, was right to come out swinging against a negative New York Times review of the Model S sedan.

Times writer John Broder, in a review published Sunday, wrote about a troubled trip from Washington, D.C., to Connecticut that ended with the Model S he was driving running out of power and being carted away on a flatbed truck. The article stood in stark contrast to numerous glowing reviews the vehicle had garnered from other writers. The Model S is Motor Trend magazine’s 2013 Car of the Year.

While analysts and others say Musk’s blistering rebuttal — in a Twitter post, he accused Broder of writing a “fake” review — may have been too aggressive, they nonetheless believe it was a smart marketing maneuver. Tesla, which rolled out its Model S sedan last summer, is working to build its brand and consumer loyalty for the vehicle, which ranges in price from $52,400 to $105,400.

“He is out there trying to sell cars, and he has buyers who have made reservations who could pull out,” said Ben Kallo, a Robert W. Baird analyst who covers Tesla. “His coming out and fighting is the right move.”

Musk, citing data collected from the car’s computer, said the vehicle’s electric battery did not run out of juice. He said data also contradicted Broder’s statement that he set the cruise control at 54 mph but often drove slower and lowered the heat to save energy. Musk said the car’s cruise control was never set to 54 and the average cabin temperature was 72 degrees. He did not address Broder’s claim that the car’s battery lost “the electrical equivalent of more than two-thirds of the fuel” in the tank when he left it parked overnight. Broder has denied Musk’s charge that he “consciously set out to sabotage the test.”

Next week, Tesla will release fourth-quarter financial results, which should give an indication of how well the car is selling. Kallo believes the company will report 16,000 new reservations and that it is on track to make 20,000 Model S models at its Fremont assembly line in 2013.

The bad review from one of the nation’s most prestigious news organizations, though, threatened to cast a shadow over the earnings call with analysts.

“Investors will certainly be watching to see if the NYT article disrupted Model S reservation activity,” Pacific Crest Securities analyst Ben Schuman said in an email.

Because Tesla is just beginning to ramp up production of the Model S, it was critical that Musk personally respond to The New York Times review, said Steven Addis, chief executive of Addis Creson, a brand strategy and design firm in Berkeley who owns a Model S.

“Making this a war with The New York Times isn’t the most diplomatic way to go about it,” he said. “But it shows passion. It shows confidence in his product.”

Musk’s reputation as a visionary leader in the mold of late Apple co-founder Steve Jobs — he is also co-founder of space vehicle maker SpaceX and PayPal — should help to stem some of the fallout from the review, Kallo said.

“This is his baby,” he said of the Model S. “You are starting to see the cars on the road. The last thing you want is this negative press to destroy the moment or to reduce that momentum.”

Musk’s kerfuffle with the Times may not be over. The news organization’s public editor, Margaret Sullivan, is expected to weigh in with an article soon.

Jesse Toprak, an analyst with automobile research and pricing website Truecar.com, said Musk’s fight with the Times could even boost Model S sales by bringing the car to the attention of potential buyers.

Those who would use the car for urban driving — and cover far fewer miles a day than Broder did on his long-distance trip — would find “all of the negatives mentioned in the article irrelevant,” he said.

Tesla may be feeling some vindication after CNN reporter Peter Valdes-Dapena, who covers the automotive industry, reported Friday that he retraced Broder’s route this week with no problems. “As I drove into Connecticut, I realized something amazing. Not only did I have enough battery range left, I had plenty,” he wrote.

CNN’s test drive took place during warmer weather conditions, which could have improved the battery’s performance.

The lesson for consumers is to not rely on a single review of a car, particularly an electric one, said John O’Dell, a senior editor at auto information site Edmunds.com. Issues such as battery range depend on road conditions, weather, traffic, topography and a reviewer’s driving style, he said.

“You need to look at dozens of reviews from reputable sources,” O’Dell said.

He thinks the Musk-New York Times controversy will neither help nor hinder Tesla much.

“People who don’t like electric vehicles will point to this as more justification for not liking electric vehicles,” O’Dell said. “People who like electric vehicles a lot will say it’s another example of mainstream media having a bias against electric vehicles.”

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Original article can be found here.