When Tesla's CEO Elon Musk says there’s enormous demand for his powerful electric cars, he may not be exaggerating.
We called a Tesla sales center in New York City for a Model S for Christmas. After some hesitation, the salesperson said he might be able "to dig one up.” There were two Model S sedans in inventory for the entire New York metropolitan area, a red one and a sporty black one. Maybe Santa would like the red one to match his suit, but we wanted the black one equipped with a 85 kilowatt-hour battery.
Despite sticker shock at the $104,000 price, we liked the idea of the added umph. The high-performance version of the Model S has a steep price premium over the standard version with a 60 kWh battery and price tag of $70,000. We called back few days later and learned the black one was already gone. Sigh. Maybe we’ll join the wait list for the all-weather Model X sports utility vehicle coming out next year as we could use the all-wheel drive in the Northeast for navigating the Polar Vortex.
Musk plans to ramp production from the current level of 1,000 cars a week to 2,000 cars a week near the end of 2015. Even with the extra output, Tesla is sold out -- it has booked commitments for custom builds of 70,000 cars. Musk promises about 50,000 new cars in 2015, though the factory output and order book would indicate a number substantially higher. Tesla upgraded its Fremont California plant in August, adding a new line for skeletal assemblies to expand volume and improve precision. "It was like changing the tire on a bus while it was rolling down the freeway," Musk explained. Despite revenue forecasts of $6 billion for 2015, Musk is still not satisfied…and he’s growing increasingly impatient.
Musk has even bigger ambitions. He wants all the cars in the world to switch from gas combustion to electric. To that end, he needs to goad his competitors to develop electrical models and generate the momentum – and funds -- for building an electrical infrastructure to support the transition from fossil fuels to renewable energy. The world’s car makers may produce some 65,000,000 vehicles this year versus Tesla's 33,000, so it’s not possible for Tesla to move the needle on the world’s carbon crisis alone, other manufacturers have to step up.
Musk open-sourced the company’s patents this year in an effort to encourage other car manufacturers to leverage his R&D and catch up technologically. It may be mistake to allow competitors under the hood, but it advances the case for Telsa’s technology to become a de facto industry standard. Also, Telsa's patents may not be enforceable against governments, and many control much of the world's auto production. The esprit de corps for a green revolution may encourage more players, who may develop battery technology, build supercharging stations and force legislators to take notice.
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According to the company website, Tesla has built a network of 272 charging stations (132 in the U.S., 102 in Europe and 38 in Asia) and charging is free for Tesla owners, though most will charge from home (20 million in the US). Musk may need thousands of charging stations to compete with the convenience of a gas station on every corner -- the U.S. has 122,000 gas stations alone. The world’s electrical grid needs a jolt to handle the additional load and could use a boost from solar energy. Musk has that base covered too.
Musk is the Chairman of
In yet another high-stakes gamble, Musk aims to bring down the costs for expensive batteries to power his rocket-fast electric cars. Musk partnered with
Musk says he can reduce battery costs by at least 30 percent on scale economics alone, before factoring in improvements from technological innovation. Our sources agree and believe the retail cost of batteries, currently about $500 per kWh could fall to $70-80 kWh in the decade as batteries slide down the cost curve. The Gigafactory’s production is scheduled to begin in 2017.
Notes From Musk's Competitors [Fans]
Radical change on a scale as vast as the one envisioned by Musk calls for massive funding, worldwide coordination and fast footwork. Even facing incredible odds, Musk has made breath-taking strides to bring renewable energy to consumers. Surprisingly, his competitors are his most enthusiastic fans.
“No other car manufacturer has achieved a global brand so quickly, it’s a huge accomplishment for this hard-charging executive,” said Dan Akerson, former CEO of General Motors and Vice Chairman of the Carlyle Group. “Teslas are beautifully designed with great pick up and first class engineering.”
“Musk has challenged the industry and it has to respond. He’s running between the legs of elephants and has a temporal advantage. Competitors are behind technologically, but have advantages in scale and scope. By 2018, you’ll see game-changing competitive responses globally. The auto industry is notoriously Darwinian and may consolidate into a few worldwide giants from a hundred small car makers,” and that will set the stage for a new world order, according to Akerson.
Musk agrees that he has to climb a steep cliff to get to massive volumes. “Scaling with high volumes requires testing and validation. It’s hard to manufacture large volumes of complex objects – the Model S has thousands of parts and the battery has seven thousand cells," Musk said.
It’s complicated to make the machines that make the machines, that is, perfect the robotics. There are random problems in high volumes, perhaps one in a hundred. Telsa has to scale to be able to even see these statistically rare defects and figure out how to fix them.
Musk may want to add even more sharp lieutenants to his army to revolutionize the world before beaming up to colonize Mars.
