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Consumer Reports says that Tesla's Model S is tops in customer satisfaction. That's a nice win for Tesla, but it's also a caution flag for investors. Source: Tesla Motors.
It was another big win for Tesla Motors when Consumer Reports reportedlast week that Tesla's Model S had the highest customer-satisfaction ratings of any vehicle in its latest survey.
The venerable consumer magazine asked its subscribers whether they'd buy their current car again, taking into account "attributes such as styling, comfort, features, cargo space, fuel economy, maintenance and repair costs, overall value, and driving dynamics."
Ninety-eight percent of the Model S owners who responded to the survey said that they would "definitely" buy it again, 3 percentage points ahead of the next-highest-scoring model.
That's great for Tesla, right? Absolutely. It's a tribute not just to the company's design and manufacturing, but to the compelling power of Tesla's vision of an electrified automotive future.
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It's also a caution sign for investors who are convinced that Tesla's future growth is a slam dunk. Here's why.
The "chasm" that awaits Tesla
Among people who study these things, it's generally accepted that new ideas and technologies spread through cultures (or markets) in several stages, from innovators and early adopters to three or four separate stages of the mass market.
This follows the "diffusion of innovations" theory, first popularized by communications professor Everett Rogers in the early 1960s and since adopted as a useful framework by many modern-day, high-tech thinkers.
One of those thinkers, longtime Silicon Valley consultant Geoffrey Moore, argues that the leap from enthusiastic early adopters to the "pragmatists," the early adopting part of the mass market, is an especially hard one for rising tech companies to make. (In fact, he wrote an influential book about making the leap, aptly called Crossing the Chasm.)
Why is that leap hard to make? Moore and others argue that it's because early adopters and mainstream consumers have very different sets of expectations. In the case of a car, I would expect that enthusiastic early adopters will be more willing to forgive the new product's imperfections and disadvantages versus existing models, while mainstream consumers -- even those who might be inclined to give the new product a try -- will be a more critical audience.
I think that Tesla's strong showing in Consumer Reports'survey is a sign that Tesla's owners are still being drawn from the pool of technology fans, early adopters who strongly support Tesla's vision -- and that despite impressive-looking sales numbers, Tesla hasn't yet drawn significant numbers of the mainstream consumers it will eventually need to sustain its growth.
Why do I think that? For starters, let's look at the other top-scoring vehicles on Consumer Reports' list.
The other high-scoring models aren't mass market models, either
What was the next highest-ranked car on Consumer Reports' list, the one that had 95% of buyers saying that they'd definitely buy it again? Was it a paragon of practical reliability like Toyota'sCorolla? Was it a high-selling model like Ford'sF-150?
Nope. In fact, it was a car that sells in tiny numbers and scores just average on the magazine's reliability rating: the Chevrolet Corvette.
Niche products like the Chevrolet Corvette dominate the top tier of Consumer Reports' customer satisfaction rankings. Source: General Motors.
And the other eight? Four Porsches, diesel sedans from Mercedes-Benz and BMW, the Chevy Volt, and, as a group, the Hemi-powered versions of Dodge's brawny Challenger.
These are very different kinds of vehicles, but with one big thing in common: None of them are especially big sellers. That's because they're all niche products that sell to ardent fans, the kind of folks who will tell you that they'd hate to be driving anything else. Mainstream models don't score quite as high because their buyers aren't as emotionally invested in them. Sure, they bought a Toyota this time, and it's nice, but they might buy a Ford next time.
Enthusiast buyers are also the kind of folks who are willing to overlook imperfections; several of these models rate just average for reliability, but that doesn't seem to bother their fans.
Just as the Tesla Model S's average reliability rating doesn't bother its fans.
Why this could get messy for Tesla
It's not a bad thing that Tesla has found so many enthusiastic fans. In fact, it's great, a big tribute to the compelling vision of CEO Elon Musk and his team, as well as to the Model S itself.
But the ranking does strongly suggest that Tesla has yet to move beyond those fans into the broader mass market. That's a leap that Tesla needs to make to reach the kind of growth numbers that are baked into its stock price -- but it's a leap that could be quite challenging
What's more, it's a leap that Tesla is going to have to make over the next couple of years, just as mass-market automakers like Volkswagen Group, Nissan, and possibly others are expected to bring competitive battery-electric vehicles to market.
To meet its growth expectations, Tesla will have to win buyers who aren't ardent fans, buyers who might compare the Tesla back-to-back with an electric Audi and pick the Audi because they like its interior better, or because it's a better value.
That's when Tesla really will have to compete with the big automakers -- not just on vision, but on quality, fit and finish, reliability, and price. And for all of Tesla's success so far, the big guys are really good at all of those things. Stay tuned.
The article Why Tesla Motors' High Customer Satisfaction Rating Isn't All Good News originally appeared on Fool.com.
John Rosevear owns shares of Ford. The Motley Fool recommends and owns shares of Ford and Tesla Motors. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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