Tesla’s digital car risks

Telsa Motors is on a roll. The company will produce about 21,000 vehicles this year, with over 12,000 Model S luxury sedans delivered already in 2013. Tesla’s Model S receives excellent car performance reviews and seems to have solved the range and time-to-charge issues of electric vehicles with their advanced lithium ion batteries and growing network of supercharging stations.

TeslaModelSIn National Highway Traffic Safety Administration crash tests, Model S received a five-star rating in each of three categories and overall. Tesla’s direct-to-consumer sales model is working, even in states like Massachusetts, where it’s been attacked by car dealers. And Tesla has focused on technology, with over 500 applied for patents, many for battery-related engineering. Tesla already licenses technology and sells components to other car companies, such as Toyota.

With new models on the way and with the recent good news,Tesla Motors stock (TSLA)—reached $20 Billion in market value this week, on par with many established car companies.

Tesla’s Model S may be the most digitally advanced car ever produced. Model S can be controlled by a smart phone for example, to turn on air conditioning or unlock the car or schedule charging of batteries. These features sound wonderful….if the software is bug free, if there is no interference from other phones (the reason cell phones are turned off for airplane takeoff and landing), and if the system is secure. George Reese, the director of cloud management for Dell (NASDAQ: DELL  ) recently wrote in an article that the Model S has a security flaw that leaves it exposed to hackers.

Privacy could also be an issue. Tesla employs comprehensive data gathering on its cars to aid diagnosis of problems, to deliver car system software improvements, and to proactively recommend service, all potentially great features. But if insurance companies and governments have access to the same data, you might be in for an insurance premium surprise, or worse.

Tesla’s business model also puts them at risk for breakdowns and security breaches of today’s electrical grid. Any power outage of more than a few hours would strand travelers and commuters who depend on their Tesla.

Tesla has opened an exciting chapter in the automotive industry. We’ll see how the digital technology challenges unique to Tesla play out.

Electric Vehicle Makers should be dancing

Enterprise this week announced it is moving into hourly car rentals this year, joining Hertz in persuing the business created by Zipcar Inc.. Enterprise last month acquired Mint Cars On-Demand, an hourly car-rental firm with locations in New York and Boston, will join the new Enterprise Car Share brand. Zipcar, the segment leader, has about 500,000 US members and about 9,000 vehicles.

Makers and developers of electric vehicles should be dancing in the streets. For most people, an electric vehicle is desireable, but its not a complete solution to a person or family’s transportation needs. Car renting and sharing tie ins are a key tie in to overcome the problems of charging time, distance limits, and size restrictions of electric vehicles.

Take your EV on a ski trip? Why not rent an SUV for a few days. Headed to Grandma’s for Thanksgiving, but its 400 miles? Enterprise is usually just down the street with vehicles that get you there on one tank of gas.  Need to take a client to lunch, but the EV is charging? Zip Car is waiting and ready.

EV makers will need lots more creative solutions for their customers, if they hope to make a dent in the car market. More flexible car renting options makes a whole lot of sense.