Electric Cars: Tesla Motors 4
Tesla Motors is a small automobile startup company incorporated in 2003 and located in California. Currently the sole end user product is the Roadster, a two seater all electric sports car with some very impressive performance numbers. Tesla CEO Elon Musk recently made an appearance on David Letterman’s Late Show to showcase the Model S, a sedan due out in 2011 to compete with luxury/performance sedans (i.g. BMW 5 series). And because this company is producing only electric cars environmentalists are lining up to give Tesla a hug, including Uncle Sam. The United States federal government is demonstrating its affection by way of a low-interest $465 million loan distributed by the Advanced Technology Manufacturing Loan Program. (While Tesla is still a private company, the list of investors is a who’s-who list of technology shakers and movers.)
Tesla’s founders set out to “build [an] electric car with zeros emissions [that] people would love to drive.” After years of development the Roadster arrived (slightly delayed) in customers hands in March of 2008. It’s an all electric car with an advertised range of 244 miles. Forget your Prius or Insight, this is the precursor to the real solution of America’s addiction to foreign oil.
Every American needs to know about Tesla Motors and what exactly they are trying to accomplish. This is not just about making a quick buck for hedge fund managers in Connecticut. A company like this is led by charismatic business leaders driven by the impetus of ideology. Tesla Motors has the potential to be a game changer. (And not in the technology world sense that a new operating system will make our lives more vivacious. Aside: I can’t wait for Windows 7… ) The electric motor is coming to personal transportation and I believe Tesla is the harbinger. In only six years this company has gone through some rough roads of bad decisions but the general trend of the business evolution is solid. In fact it has been exactly what it has needed to have been. Here are my three points on what Tesla Motors has done exactly right to best position itself for future automotive innovation and to become the icon of the personal transportation revolution:
One:
The Roadster was the product of ideology and passionate engineering. (The ideology stemming from environmental concerns and the implications of addiction to foreign oil.) At some point in the last decade lithium ion batteries (which power the vast majority of laptops) reached a certain critical level of development which made an electric car viable with a huge block of these batteries smartly wired together. (The anticipated charging times and driving ranges were deemed acceptable for everyday drivers.) This intersection of ideology and passion for technology was huge, I cannot think of a better way to motivate a product of such importance.
Two:
Developing the Roadster sport car first was paramount. When developing new technology, test and development needs to happen under the most harsh and demanding conditions. Normally the automotive industry does this with Formula 1, Nascar, or in northern Sweden and then adopts the proven technology to the consumer car. Tesla unleashed their engineers to research and develop capabilities for a sports car. The more moderate models to follow will be a piece of cake to engineer and in all likelihood cost considerably less. This top down approach to the market also solves the question of volume. As a new car company, it is smart to exclude yourself to all but the most wealthy of customers. It is then easy to leverage the demand to sell at premium prices.
Three:
Tesla outsourced a lot of conventional components including the chassis to Lotus Cars of England. Basically the Tesla Roadster is a Lotus Elise with the conventional engine swapped out for an electric motor. (The Elise frame is quite light at just over 2000 lbs and contributed towards performance numbers.) The Elise is a very cool looking frame but not a particularly well known car here in the U.S. After all the attention Tesla has been receiving the Roadster may have more brand awareness than the Elise and may eventually supplant the Lotus image.
What does the future hold for Tesla? The Roadster will remain out of financial reach ($101,500) for most consumers but will continue to stand as a solid proof of concept. The four door Model S is due out in 2011 with an estimated price of ($57,400) and a 300 mile range per charge. (Expect some generous tax credits for electric cars to bring the sticker shock down a bit.) Beyond that there is talk of a third model costing around $30,000 as Tesla Motors gradually wades into the market of the average consumer. Between then and now I am confident that the price of oil will be back into the triple digits, but this time pushed by demand and not a crazed speculation bubble. It will then be well apparent that this company has had the astute foresight to lead the personal transportation revolution… or let’s change that to the personal transportation metamorphosis because these cars look so damn sexy.
Mom, for Christmas I would like a Tesla Roadster.
