Optimization Mode, or a Going Concern?

Is it optimization mode, or an admission of failure?

This blog talks a lot about Product Planning, and one of the main tasks of the job is picking the colors that will be offered for sale. While PPG, AkzoNobel and other paint suppliers do their own studies on what colors are expected to be popular within the next few years, consumer tastes are notoriously fickle. A celebrity paparazzi photo or product placement featuring a certain car in a specific hue can cause an instant spike in demand for one shade, causing previously popular choices to sit on the dealer lots collecting dust.

Furthermore, as manufacturers have taken steps to streamline ordering combinations, the color choices offered in North America have become increasingly limited. Again, this is driven by the fact that the customer is really the dealer, who must buy the cars using bank financing (known as “floorplan”) and then pay interest on any unsold vehicles. Small wonder that most BMWs you see on the road today are some combination of black, white or silver. Only the M models can be sold in far-out shades of the rainbow, and even then, they often require a multi-month wait time. In Europe, where dealer inventory is less of a concern (and what we consider to be luxury brands are often used as taxis), you’ll find a more vibrant assortment of paint options for your cloth upholstered 320i.

This makes Tesla’s decision to cut their color palette from 7 choices to 5 even more curious. Tesla has famously eschewed the dealer model, and will tell any and all interested parties that their order book stretches to over 400,000 interested parties. So why are they cutting one shade each of silver and black, two of the mainstay colors of *any* nameplate?

Two theories abound

1) These colors are coming out of the paint shop in a very bad way. This requires a second go-round, costing time, materials etc. 

2) They are not selling well. This obviously presents a much bigger issue for the auto maker. One that calls into question their ability to function as “a going concern”.

Both of these call into question whether Tesla is able to execute on their core business of automotive manufacturing at scale, and whether their supposed mass-market product is even viable. To the outsider, it may seem to be a minor detail. To anyone who has worked at an auto maker, the inability to go-to-market with your volume product in two of the staple colour choices is a very good reason to panic.

Advertisement