Tesla's Big Gamble: Can The Electric Car Go Mainstream?

http://www.npr.org/blogs/alltechconsidered/2012/09/24/161700525/teslas-big-gamble-can-the-electric-car-go-mainstream?ft=1&f=1001

by ganjianwei • 14 years ago

77 65 14 years ago

npr.org

ChuckMcM• 14 years ago

My parents used to joke that it took three owners to create a new ski resort, the first to do all the permitting paperwork and go bankrupt, the second to acquire that completed paperwork for free and then to go bankrupt removing trees and rocks and installing lifts, then the third to get the paperwork and the equipment for free and to start marketing it.

I really really really want Tesla to succeed. But I cannot convince myself to buy a Model-S, it is just past my pain threshold. And for that I am sad.

daeken• 14 years ago

> I really really really want Tesla to succeed. But I cannot convince myself to buy a Model-S, it is just past my pain threshold. And for that I am sad.

I'm largely in the same boat. I'm planning on buying a car in the next year and while I think the Model S is downright beautiful, I can't do it. The base model is right in the price range I'd be willing to pay, but the problem is the range; even under optimal driving circumstances, it's quite a bit short of what I'd need to make the trips I'd like to make. One of the higher end models has the range I'd need, but I can't justify the extra $20k or whatever it is.

Hopefully in a couple years there'll be a car from them priced at the perfect level with the things I need, but it's just not there yet.

sliverstorm6• 14 years ago

Depending on how compelled you are and how often you make those trips you'd like to make, you could potentially shore up your garage with a cheap beater from the 90's.

maguay• 14 years ago

I just purchased a new ~$20k Toyota in Thailand, and its my first vehicle purchase. I'm seriously hoping electric is in my price range here in, say, a decade when I plan to want a new car...

vm2• 14 years ago

Excellent analogy. Tesla has major challenges to lasting as a company.

It spends about $100M per quarter and it has $200M of cash [1]. So in the next 6 months, Tesla will need to bring margins way up (unlikely), dramatically cut expenses (opposite of the current plan), or raise lots more money.

The company already has $400M in debt. I hope it can raise more. Or that the public will pony up more investment. I also really really want Tesla to succeed.

[1] See "Cash Flows" tab: http://www.google.com/finance?q=NASDAQ%3ATSLA&fstype=ii&...

timdorr• 14 years ago

If they can build the 5000 cars they claimed for this year (honestly, its doubtful) then they have ~$75k (rough guess on avg car price) * 5000 = ~$375m coming their way this year. And they have a huge backlog of orders (~13.8k), so it's really just a question of if they can scale up their production fast enough to close the gap. It'll happen, possibly without any bridge financing.

niccl• 14 years ago

Is there another way of looking at this? Do you need to own the car? I hire a car when I need one, and use feet, push-bike and public transport the rest of the time. I _know_ I save money this way, compared with owning: I used to own a car, kept all the paper work and did the arithmetic.

If you didn't need to own the car, then things like a vehicular equivalent of the old livery stables and post horses might be viable.

TheMakeA2• 14 years ago

Probably not when their cars start at $50,000. I would really love for it to happen though.

But perhaps I am just poor.

loceng• 14 years ago

They are planning a $30k sedan.

ww5202• 14 years ago

50K is too much. That's in the luxury brand segments where car companies spent decades to build up brand awareness to justify the price. Put it in the 20K to 30K range and they will make a killing.

May be their production capacity can't handle the high volume so they price it to throttle demand.

bathat• 14 years ago

The problem is that batteries are expensive. High-end cars have high margins (it doesn't cost 2x as much to build a $50k car as it does to build a $25k car). When Toyota introduced the Prius, they added all sorts of (what were then) $30k car features. Why? Not because they wanted to make a luxury car, (a friend of mine remarked that if they just added leather seats he would buy one instead of an expensive Lexus) but because it costs next to nothing to add those convenience features. That way people compare the Prius to a $30k car and see only a $1000 hybrid premium instead of a $5000 premium. That's also why you don't see $15k hybrids: Taking all the "premium" features out don't make it cost any less.

The reason this is possible is that hybrids and EVs have the margins of much less expensive cars.

Edit: added a sentence

viraj_shah• 14 years ago

Yeah, I don't remember where I saw it but Elon Musk had mentioned that the main goal was to go from the Roadster to something affordable at a price range of $20k to $30k. Increase production and decrease price with each production run.

TheMakeA2• 14 years ago

The article does mention a $30k car (and loceng kindly pointed it out as well). I look forward to hearing more about it.

lisper3• 14 years ago

I hope someone from Tesla is reading this. I really, really wanted to buy a Tesla. But the Roadster was too small, and the Model S is too big. At 196 inches long, it's almost as big as a BMW 7 series. The Right Size for an electric car is ~170-180 inches, about the size of a Prius (or a Lexus IS or an Infiniti G). I was a little dismayed to see that the next car in the pipeline, the Model X, bills itself as a blend of SUV and minivan. That is totally the wrong direction IMHO. You already have one very big car and one very small one. You need a compact-to-midsize to fill out the lineup, not a second huge car.

eduardordm3• 14 years ago

I think their rationale is: Their cars are very expensive. People would buy a 196 inches-long expensive car, they also would buy an expensive sports cars. They wouldn't buy an expensive Prius easily. Maybe they are using their high margins on those cars to have some chance against Asian makers in the future. But, sad truth is, they will develop the very tech that nissan, toyota, hyundai, et al, will use to kill them.

jlgreco• 14 years ago

Tesla is licensing some of their tech to Toyota iirc. I think they are of the attitude that in the current market more electric cars from everyone is good for business.

felipemnoa• 14 years ago

>>But, sad truth is, they will develop the very tech that nissan, toyota, hyundai, et al, will use to kill them.

Could you expand on this? How exactly will Tesla bring about its own demise?

kemiller• 14 years ago

I think their rationale is that they need to fit a lot of battery somewhere. The Model S is not just long, it's wide for a sedan. That's all about fitting the massive battery pack under the passenger compartment.

MikeCapone2• 14 years ago

Tesla is in 'sniper' mode right now; few bullets, and they have to hit with them or the company goes down.

Selling a 50-100k sedan almost requires it to aim at the BMW 7 market, IMO. But don't despair, over time they'll expand the lineup and I'm sure they'll make one that fits your needs.

The next model should be 30-50k and I would expect it to be about the size that you describe.

lisper3• 14 years ago

I understand they're in sniper mode, and I understand why the Model S is the size it is. What I don't understand is why the Model X (http://www.teslamotors.com/modelx) is the size it is. They're going to have two seven-passenger vehicles and zero four-passenger vehicles. That doesn't seem like the right way to diversify.

bryanlarsen• 14 years ago

For a 7 passenger vehicle, the Model S is tiny. I hate SUV's and my wife hates minivans, but a 7 passenger vehicle would be really quite convenient. Nobody makes 7 passenger wagons any more, so we're quite likely to end up with a Model S simply because of the form factor. Not this year, though. Our youngest daughter is still too young for the rear-facing seats on this car. Maybe next year, though.

krupan• 14 years ago

any numbers on cost per mile just to get from point a to point b as compared to a gas-powered car?

revelation• 14 years ago

Does it matter? Producing electricity is almost trivial to scale up when compared to oil, especially if the political weather forecast for your region is nuclear-friendly.

Wolfram has the estimate for you: http://www.wolframalpha.com/input/?i=%2885*kW*h%29%2F%28300*...

Thats half of what you pay per mile with a Prius: http://www.wolframalpha.com/input/?i=%28gas+price%29+*+%281%...

Not included in these calculations is the wear and tear of a standard gasoline engine, which are still running on pretty much the design of the original 1885 Daimler Reitwagen.

danielweber• 14 years ago

The electricity cost is noise compared to the depreciation and wear on the battery.

On that front, Better Place says they can make money leasing batteries to you at 10 cents a mile.

ck2• 14 years ago

Note that Toyota declared today they are getting out of the plug-in (no gas engine) business entirely.

It's interesting it that it likely means they cannot make the margins they want.

eduardordm3• 14 years ago

"Toyota Prius Plug-In adds electric-only mode"

http://www.abqjournal.com/main/2012/08/11/living/automotive/...

protomyth• 14 years ago

http://www.reuters.com/article/2012/09/24/us-toyota-electric...

From today: "The current capabilities of electric vehicles do not meet society's needs, whether it may be the distance the cars can run, or the costs, or how it takes a long time to charge," said, Uchiyamada, who spearheaded Toyota's development of the Prius hybrid in the 1990s.

illumin8• 14 years ago

The problem with all of the plug-in hybrids is that they can only run about 12 miles on full electric power. I don't know about you, but I need an electric car that can run at least 50 miles to get to work and back.

i2oc2• 14 years ago

I'm very excited for mine to arrive in the next 90 days. I know I will be an early adopter in the EV world but I look at it as less of a splurge and more of an investment that could move the industry forward. This will be my fifth car owned and I am tired of two faced dealers, incremental improvements, design without vision and an industry that can but won't improve because of the lucrative parts & service aftermarket. Radio and television is littered with people giving away cars with 0% financing (baking in the profit elsewhere I suspect). It's only a matter of time before we have to bail the auto makers out again.

I'm putting my money into Tesla because I believe that if they can make it to the Model E (Bluestar - $30-40k sedan) then we'll have a whole new ballgame on our hands in the automotive space. The Model S is the testing ground for volume manufacturing, the Model X will test platform re-use, then we reach the Model E which will drive down costs.

In the mean time I encourage you all to test drive one - even if you are not going to purchase - it's quite the experience. The Tesla stores around North America are now getting their in-store models for test drives. With leasing opening up next summer (rumour has it) it should also make it a tad more accessible to the general public.

nasmorn• 14 years ago

Does the car come with stock? If not it is investing your money for somebody else's benefit, aka charity. Not that there is anything wrong with that.

i2oc2• 14 years ago

If your focus in pure money ROI then I supposed you would be right. At some point, however, we need to vote with our wallets to influence larger investment decisions. At the early stages of adoption per-unit costs will be higher than volume manufacturing. This is where Tesla is at this point (and the EV segment as a whole). If I continued to buy internal combustion vehicles because they were cheaper then I would continue to prop up a segment that needs to either be deprecated or pivot.

At this price point I am willing to vote with my wallet in hopes that it will spur on further investment to broaden the market in turn driving down prices through better technology and higher volume sales. This is no different than the PC market in the 1980s - very expensive to buy a PC, but if none of us did then we would have had a different outcome.

What is different about this investment than, say, buying a Ferrari is that this feels like something that is moving us forward rather than burning cash on a cool car that the ladies will dig (although you do hope for that as well - it's cool being green after all, right? :)).

syousif• 14 years ago

One of the big downsides I see in owning a Tesla is the need to also own a house with a garage. The Model S has the range to handle my daily commuting needs, but I have no place to charge it.

confluence6• 14 years ago

I'm sorry but we're past the "can" stage.

Electric propulsion just is better for any type of friction based transport within our atmosphere (trains/buses/planes/cars/bikes). The only problem was battery density per dollar. However, thanks to the incredible - and I mean incredible - success of laptops, phones and tablets over the last decade that problem is just about solved (due to astonishing volume/economies of scale/incremental li-on research/massive factory investment).

High battery density at low cost (key) + 92% efficient electric motors (already done) = cheap, efficient transport for all - everywhere (think the electrification of trains - but throughout suburbia). Hook up this electrified network and make it fully autonomous (cars/trains/buses/planes) - and we've just turned the physical world into the Internet. No more oil shocks, no more traffic jams, no more pollution (in city centres), no more time wasted, fully networked, no more car ownership, no more driver deaths - for more see Google car discussions elsewhere.

We will utilise fully electric transportation systems within the decade for the same reason that gasoline/diesel based transport dominated electric back in 1900 - it's just better, faster and cheaper.

It also has the benefit of allowing us stop giving a shit about the hell hole that is the Middle East (I went there).

With the introduction of electric cars, the astonishing growth and dramatic lowering in cost of solar PV (thanks to China) and the development of nuclear fusion with the ITER plant - you'll soon wonder why you cared about the price of oil at all.

The electric car will send everyone in the Middle East back to Africa level care and development levels - a.k.a. We will no longer give a shit and brutal poverty.

sliverstorm6• 14 years ago

Electric motors are awesome, but you're underestimating how far behind battery technology is as a automotive power source compared to gasoline.

confluence6• 14 years ago

Perhaps - I'm willing to concede.

However the facts of the matter are such:

Gasoline is only ~15% efficient. Gasoline is assumed to be past peak oil - hence prices must rise with time (look at your local petrol station). Battery tech on the other hand falls in cost by 5% per year. Electric engines are 92% efficient - batteries fall in cost 4x over next decade - EV cost/range parity will occur by 2018.

Give it 5 years and they'll be electric Toyota Corolla's rolling around with middle class drivers behind the wheel.

bane2• 14 years ago

Tesla, here's what I want.

- $30k base (I buy around $20k, but can justify the delta because of the fuel savings), could care less what the top end is, but probably no more than $45k.

- Accord or Sonata size. I'd even settle for a BMW 3-series or C class size.

- For the base price I want 300 mile range.

- Seats 4-5 adults

- don't need leather seats or other fancy stuff, just a/c am/fm/hd/xm radio with an Aux in. Don't care about touch screen nonsense, GPS nav, maybe just give me a place to put my phone and it'll fill in for all that stuff. I don't even care about a CD player, the phone will handle it all through aux.

- Cruise control is cool, but I won't pay a dollar more for it

- 0-60 in under 6 seconds.

- 5 star crash ratings all around

- sell it with civic/accord like reliability for 5 years

- then I'll buy it

everything else is cool, hell I'd love to plunk down on a top of the line model-S, I drool when I watch Veyron top speed runs, I love this stuff, but honestly when I get down to it, I think of cars like rapidly depreciating transport appliances. They have to be cheap and reliable, utilitarian and just reasonably comfortable (not luxurious). I don't care if the car is 50/50 weight balanced, or the car can park itself, or the cup holders retract into the dash. I don't give a shit about this. It's not that I can't afford it, it's just that I'd rather do other things with my money. This is not a value judgement on those that do spend on cars, but it's not what I spend my money on.

I'm the type of car buyer that buys 1 car every 10-12 years and drives them for over 250k miles or till the wheels fall off. I buy in the segment of cars that sells something like a quarter million cars a month in the U.S. alone. There are a lot of us.

(and yes, the model-S and X are probably among the most beautiful production cars in the world today)

sliverstorm6• 14 years ago

I think that was about as useful a list of demands as mine:

- $30k base price

- Be a Ferrari

You're basically asking for the performance and size of an M3, the reliability of a Civic, the range of a Japanese gasoline car, all for the price of... well, a Civic. Presumably all while maintaining electric's 200mpgE+. Of course it would sell; it would be the biggest bargain in automotive history.

*mpgE = miles per gallon equivalent

Me1000• 14 years ago

I won't pretend to be an expert on internal combustion engines, but I don't think the demands are that bad. Electric engines have 100% torque all the time, which isn't true of gas engines. I believe that essentially implies a fast take off speed isn't that difficult for an electric car, and would have very little affect on it's overall distance per charge.

bane2• 14 years ago

I don't think so. I'm basically asking for them to sell me an all electric replacement for a V-6 accord with the absolute minimum trim level (which runs around $25-27k) But with the inconvenience of having to spend several hours charging it instead of a few minutes refueling it.

engin21• 14 years ago

Any light weight electric vehicle could be a Ferrari.

And I believe Shai Agassi said his goal is to get a car down below $10,000 (without the battery). If safety wasn't a concern, it'd be easy to build such a car.

patrickk2• 14 years ago

Look at the technology adoption lifecycle: http://en.wikipedia.org/wiki/File:Technology-Adoption-Lifecy...

The reason Tesla aimed upmarket first is to sell a somewhat mass-market, high-quality product (Roadster and Model S), when the underlying tech is still somewhat expensive - meaning the early products will be relatively expensive (think of early laptops, iPods, solid state drives, anything really). So you're getting a great product, just not cheap. Other electric car manufacturers try to make cheap, small, slow electric cars that are a joke and no one takes seriously:

http://en.wikipedia.org/wiki/REVA

Elon Musk is using rich dentists to finance the R&D of the mass-market, affordable electric car that regular middle class people could buy.

It's a very smart plan, in my opinion. Ensures high-quality products throughout the adoption curve, meaning that investors, future customers and even competitors will take Tesla seriously. Having rival car companies sit up and take notice is great, meaning competition. Look at the rash of MP3 players on the market after the iPod launched - this forces prices down, for both the raw materials and the finished products. We're at a tipping point.

simonsarris• 14 years ago

> Musk says eventually the company will make another car that many more of us could afford.

> "It's really been my goal from the beginning for Tesla to produce a mass-market car," Musk says.

It blows my mind that the article and comments here have yet to mention the Nissan Leaf.

http://www.nissanusa.com/leaf-electric-car/index

Isn't that more mainstream already? By miles? I see them in New Hampshire for chrissake. You can get them for 27K after rebate.

Does nobody care because it doesn't look fast?

confluence6• 14 years ago

It is a mainstream car - but it isn't mainstream because their range is atrocious (good for some - not for most).

We need ~250-300 mile range cars going at 30K for mainstream adoption.

sksksk• 14 years ago

I think in order to make the electric car go mainstream, we need to move past the idea of car ownership.

For a lot of people, car sharing provides people with the benefits they need from a car without the hassle of owning it.

In the case of electric cars, where a huge barrier to using one is the charging time, car sharing nearly completely solves the problem. Because cars are returned to the same locations in between reservations, they will be constantly charging during the time they're not being driven. Plus all the infrastructure cost is shared over the members (if, for example, you live in a city, you might not be able to install a charging station because you have on street parking)

Zenst• 14 years ago

I believe for cities and dense populated area's were charge points easily viable that electric cars have there real niche if the price and incentives to migrate are there. Offset against cleaner air in dense populated area's/cities and its a win win. But until some extra leaps in power storage are made then we still have a little way to go until things truely pick up.

Though a car that could act as a pod that could attach onto a transport train line would truely open up interesting options in personal transport and charging alternatives.

Tesla's Big Gamble: Can The Electric Car Go Mainstream?

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