12 ms·
Tesla's ingenious strategy
- JumpCrisscross 14y agoIt is almost as if Tesla is travelling a familiar timeline at an accelerated pace, forced into the luxury market by the high costs of novelty and experimentation, waiting for production and brand uncertainty to drop low enough for mass production. In 1878 (t=0) Benz invented his first engine; by 1885 (t=7) he had built his first Motorwagen and in 1914 (t=36) the Model T lines started running [1]. Tesla was founded in 2003 and sent off its first Roadster in 2008 (t=5) [2]. Assuming exponential growth this means we should expect a mass produced Tesla vehicle (or equivalent) no later than 2029 (t=26). [1] http://en.wikipedia.org/wiki/Automobile http://en.wikipedia.org/wiki/Automobile [2] http://en.wikipedia.org/wiki/Tesla_Roadster http://en.wikipedia.org/wiki/Tesla_Roadster
- pdog 14y agoInteresting model, but I predict we'll see it way before 2029. We're not going from the first engine to the first mass-produced automobile, and manufacturing, technology, and operations improvements are orders of magnitude higher than a century ago.
- JumpCrisscross 14y agoAbsolutely correct, my crude estimate is an upper bound. The Ford Model T sold for $850 in 1909 ($2012 21,390), $550 in 1913 (12,580), and $440 in 1915 (9,640) [1]. Also, noting that the Ford Model T was on sale in 1909 (t=31) I revise my original estimate down to 2025 (t=22). Assuming 2% CPI inflation that means {$2025: 27,670; 16,270; 12,720}. [1] http://en.wikipedia.org/wiki/Ford_Model_T#Price http://en.wikipedia.org/wiki/Ford_Model_T#Price
- bufordtwain 14y agoThe affordable mass produced model called the blue star is supposed to be out in 2015.
- nextparadigms 14y agoI've noticed where they were going with their strategy a while ago. They're basically trying to cut the price in half or so for the next model, every 3 years. This worked perfectly considering they were a start-up and could only build a few one of them at first, and then as they become more demanded, they can build more. We'll see a $30,000 model from them in 2015, and then a sub $20,000 model by 2018, with reasonable mileage. By then the country should also be covered with their solar-powered superchargers, that charge the cars for free. All of these factors should help them, and EV's in general, to become mainstream by 2020. In regards to the author's last statement, when Tesla started pushing for Tesla Roadster I also thought they would eventually become the "GM of the new electric car industry". Tesla is the Apple of EV's, and GM is Nokia. And both incumbents were gigantic at first in their own markets, compared to the new entrants, but that quickly changed in a few years.
- lmkg 14y agoHow feasible is it for them to eventually reach sub-$20k pricing, given the significant cost of the batteries?
- lutusp 14y agoThis will only happen if battery technology improves -- see my other post.
- stephengillie 14y agoHow much will the cost of these batteries go down as more and more cars need them?
- jessriedel 14y agoWith current battery tech, not much at all.
- bathat 14y agoThe current pricing for the different size batteries that Tesla offers implies a cost of ~$500 per kWh (the cost differential between the 40 kWh, 60 kWh and 85 kWh packs is $10k). I read "somewhere" (random stranger on the Internet alert) that the cost of raw materials is in the ballpark of $80 per kWh. Now, I'd think that the current scale of battery production (certainly at least millions of units in the 18650 form factor that Tesla uses) doesn't leave much room to handwave the magic "scale effect" wand. On the other hand, it does seem like there is quite a bit of headroom between $80 (if that is realistic) and $500. If a large chunk of the delivered cost of a battery is attributable to fixed costs, like R&D, rather than the process of turning the raw materials into a finished battery, then maybe it isn't too implausible that the price could drop by a factor of two (or four). You might be able to glean some that information about that from carefully reading the SEC reports from public battery manufacturers.
- Flemlord 14y agoJust got my Model S on Friday and it has exceeded all expectations. IMHO, the center console is at least as revolutionary as the fact that it is electric. The software is world class and feels like it was written by Apple. In fact, it seems eerily similar to how Apple launching the iPhone reset the bar for the "right" way to do smart phone UI. I wonder if Tesla has considered licensing the center console software to other companies.
- DuskStar 14y agoI'd bet that Tesla licensing their center console to other car companies is about as likely as Samsung being able to make iOS devices would have been in 2010.
- deleted 14y ago[deleted]
- coob 14y agoIs it? They license battery and motor tech to Mercedes.
- mistercow 14y agoArguably, licensing that while not licensing look-and-feel elements would be a smart strategy. Licensing the under-the-hood tech gets them money to fund the really expensive and groundbreaking R&D, while keeping the UI out of competitor's hands lets them effectively differentiate.
- jim-greer 14y agoI almost bought one but it's really more car than we need - almost too wide for our San Francisco garage. Instead I bought $20K of their stock and am waiting for the smaller sedan.
- pefavre 14y agoThat's what I call a clever fall-back strategy!
- lutusp 14y agoTesla -- and Elon Musk -- have accomplished a lot with a combination of ingenuity and timing, but their future (and the future of viable electric cars) relies entirely on a single technological advance that's almost completely outside their control: the physics of storage batteries. In terms of value returned for investment, present storage batteries are almost the single worst modern technology. The storage battery on the Tesla Roadster weighs 990 pounds, stores 56 kWh (about 202 MJ) and discharges in 244 miles (393 km) in normal conditions (vehicle speed and environmental temperature). This is a stellar example of applied science and engineering (it's much better performance than that of similar batteries) but it still represents a big obstacle to wide adoption of electric vehicle technology. As a seasoned former NASA engineer who struggled with these same issues on spacecraft for years, I offer this advice: young people who are trying to decide what do with their lives should seriously consider a career in battery science and engineering. There is room for huge improvement -- huge.
- igravious 14y agoOr a paradigm shift? Rethink the battery? But where to start?
- flatfilefan 14y agoright now we rely on chemistry to engage particles small enough to achieve high energy density. Maybe some nanomechanics can play its role? this way we could have better control over the dynamics and maybe use explosives as fuel (only they will oxidize in a controlled way and not explode)
- jacoblyles 14y agoLightsail energy has an opinion on that.
- saraid216 14y agoI remember reading something recently about how we don't actually understand how lithium batteries work. I wonder what we'd start to understand once we do.
- jakozaur 14y agoThw whole strategy assumes that battery cost will drop significantly (more than 2x): http://green.autoblog.com/2012/02/21/battery-cost-dropping-below-200-per-kwh-soon-says-teslas-elon/ http://green.autoblog.com/2012/02/21/battery-cost-dropping-b... Which may happen, but AFAIK Tesla isn't involved in that kind of research.
- saraid216 14y agoI'd imagine it's only a matter of time before Tesla gets involved in it... but for now Musk is on record saying that the current state of battery technology is sufficient, so it doesn't make sense for them to invest in R&D on that front until they have some surplus.
- smountcastle 14y agoSo why doesn't a huge car company buy them and put Elon in charge of everything? Or is this just too far fetched?
- S_A_P 14y agoTesla is hardly a sure thing, and I think that many of the big car companies feel that they have sufficient engineering resources to tackle the problem on their own. You never know, maybe someone has made a bid to purchase Tesla and was turned down. It appears, however that if any electric auto upstart is going to make it, Tesla has a great chance. Fisker does not seem to be generating the press coverage of Tesla, and the only story I can recall is one where a Fisker Karma burned to a crisp and took half a house with it.
- damoncali 14y agoThink about what you just said for a minute and it will be clear why this will never happen.
- Contero 14y agoI don't get it. Nearly that exact scenario played out with John Lasseter and Disney/Pixar. I don't see why it would be unreasonable here.
- flatfilefan 14y agonice article. I wonder when the time comes for new form factors. When there is no motor, do we have to have front hood, even if it's a shock absorber?
- tadfisher 14y agoExtra storage space will never hurt car sales :)
- ricardobeat 14y agoThe Model S already uses space differently because of that, it can seat seven and still have lots of room in the (front) trunk.
- FrojoS 14y agoGood point. But you want a crush-collapsible zone, so they keep the hood.
- codex 14y agoContrast Tesla's from-scratch, top-down strategy with those of some existing car manufacturers, which is to add electric motors and batteries incrementally to existing car platforms, which leverage their huge economies of scale: existing plants and parts can be reused. The same plants which make a million gas-powered Honda Accords per year can be used to make an incremental 100,000 electrics, then 200,000 a year later, then 500,000, as sales grow and technology matures. Ford is using this strategy to great effect with their Focus and C-MAX EVs which are fairly affordable and accessible to the average consumer. The question is whether electric technology is so revolutionary as to require a complete redesign of the car, (e.g. body panels and frame) in which case Tesla's approach may win out. BMW, for example, is pursuing this route for at least one of their models; they're building a carbon fiber manufacturing facility in Washington State for their new i3 electric, which will use carbon fiber body panels for decreased mass.
- slurry 14y ago> The question is whether electric technology is so revolutionary as to require a complete redesign of the car, (e.g. body panels and frame) in which case Tesla's approach may win out. Aren't the body panels and frame of a Tesla basically just an off-the-shelf Lotus roadster?
- postscapes1 14y agoI also love how the strategy ties in so well with SolarCity. Sign me up for that 1-2 combination when the Bluestar is launched. Author: Missing a 0 in..."That’s more than 20.00 cars a year."
- mixmax 14y agogood catch. Fixed it. Thanks.
- gizmo 14y agoInteresting article, but mostly wrong. The article claims: > The point isn’t to sell a lot of roadsters, it’s creating a brand. > The low production volume also gives the company a chance to learn how to run a car factory on a small scale. So the article claims that the primary reason to start with an expensive sports car is to build a brand, and that technical and practical concerns are less important. This is absolutely 100% wrong. There's absolutely no way Tesla could have started with a mass production car for the general consumer, exactly for the reasons everybody already knows. You have to build a factory. You have to learn from mistakes. You have work out the kinks in the design, and so on. This takes time. The first Tesla model was mostly hand-assembled because that was the only option. As a consequence of that the car model is very expensive and low volume. And as a consequence of that the car has to be a sports car, because the high price low volume model doesn't make sense otherwise. Creating a sports car also makes building a brand easier -- but that's just a nice side benefit. Nothing more. So the article gets the causality wrong.
- mixmax 14y agoI don't claim in the blogpost that technical and practical concerns are less important, on the contrary. I even write that in the article, but maybe it isn't clear enough. My argument is, condensed, that in order to build a mass produced car you need a brand and a factory that will churn out cheap working cars. Since you can't realistically go from 0 to fully working mass production you need to take it in steps. So you start on a small scale with the roadster, step it up with the model S. and so on. Of course the first models were hand assembled, but that's the first step on the long road to mass production. Also, I think you severely underestimate brand value. There's noway Joe average would choose a car he's never heard of instead of a brand he knows. If you look at the statistics it's amazing how many people stick to one brand in cars, without even considering the viable alternatives.
- nickff 14y agoIf you haven't read "The Innovator's Dilemma" and "The Innovator's Solution", you really should, because the Tesla strategy is straight out of those books.
- 14y ago
- czzarr 14y agotl;dr version: Tesla's huge ambitions are to sell electric cars to the mass market. Becoming a new car manufacturer from the ground up is unbelievably hard. They are using the classic Silicon Valley approach: start with early adopters that just want a cool new toy, then cross the chasm to mainstream customers... http://tldr.io/tldrs/51115df9de23f156580000a8/teslas-ingenious-strategy http://tldr.io/tldrs/51115df9de23f156580000a8/teslas-ingenio...
- stiff 14y agoFor all those thinking like I did this would be something about Nikola, I raise you some real Tesla's ingenious strategy: http://en.wikipedia.org/wiki/File:Tesla_colorado_adjusted.jpg http://en.wikipedia.org/wiki/File:Tesla_colorado_adjusted.jp... :)
- 205guy 14y agoLooks like you got downvoted, but I was confused as well. After reading the article, I conclude that Tesla could've used some of Tesla's ingenious strategies.
- simonbarker87 14y agoHaving driven an electric car (not Tesla, Nissan Leaf) I can say that they are pretty awesome and this article is spot on with my thoughts about how you get people to switch to electric, make it normal and everywhere and people will begin to buy. I disagree with the article with regards to people not caring about the fact it's electric, they will because of the finite, hard stop, don't get it wrong range limitation. Although the claims of 300 miles for the Model S is far greater than the LEAF that I drove (18 months old, 80 miles with climate control on as it was -5 outside)
- johncarpinelli 14y agoI enjoy driving electric too. Electric motors are quiet, clean and responsive. There are 18 models of plug-in hybrid coming to the market by 2018. I think the hybrids will sell better than the pure battery vehicles as they don't cause range anxiety. http://www.torquenews.com/1075/plug-hybrids-chevy-volt-rapidly-gain-popularity-accoring-report http://www.torquenews.com/1075/plug-hybrids-chevy-volt-rapid...
- pedalpete 14y agoThough I agree with most of the article, the statement "you need a finely tuned, automated and hugely expensive factory". I've always seen that as a moderate flaw in Tesla's plan. With the Roadster, they had essentially outsourced much of the 'car' engineering to Lotus which built the frames and many of the components for Tesla. Just like computer companies don't manufacture computers anymore, I believe outsourcing the manufacturing of Tesla cars would have taken a large part of the financial risk off the table.
- cdash 14y agoElon seems to be really big on vertical integration. He does the same thing with SpaceX which allows him to have much lower costs by only outsourcing stuff if he absolutely has to with plans of bringing it in house in the future. You can see this also in his desire to sell these cars directly instead of working through dealerships that is currently causing some legal battles.
- secabeen 14y agoThe risk of outsourcing is that there aren't a lot of suppliers who can build the parts they need. If they outsource key components, they can get into a situation where the supplier can name a punitive price for parts.
- graeham 14y agoOne key advantage that is often overlooked and undermarketed for electric cars is they have a superior preformance and experiance than internal combustion (IC) cars. The Model S has a 0-60 time comparable to a Porche 911 Carrera or a BMW M3, is quite a bit faster accelerating than the (non-AMG) Mercedes S-Class, and knocks the socks off a BMW 5xx. The problem is I don't think the value translates into the $25-35,000 car market.
- arbuge 14y ago"If I was General Motors I would be afraid. Very afraid." Or, I would be in talks to buy Tesla.
- 27182818284 14y agoMusk has no reason to sell. He's already a billionaire. He is part of what is referred to as the "PayPal Mafia". They're not in it for the money anymore, they're in it for the "flying cars"—the things they were promised as children but the future didn't provide. This is also why he founded SpaceX and why there are so many rumors about a high-speed hyper-tube for mass transport.
- thoughtcriminal 14y agoOne suggestion to the author of the article. Let the reader decide if Tesla's strategy is ingenious. It may seem like a small thing, but I don't like being told what to think. Make your points and leave it up to the reader.
- DanielBMarkham 14y agoThere's one piece that's missing: production support. Now Tesla is entering a phase where they will have perhaps tens of thousands of heavy, battery-powered pieces of transportation hardware deployed, and user support might be a bitch. Nobody's done this before. Ever. Don't get me wrong. They have done a tremendously fine job so far, but they are nowhere near out of the woods yet, as I'm sure Musk knows. Here's wishing them the best of luck through the hump over the next five years or so. (Interesting how with startups you do one impossible thing only to be given another, and another. Each time it's like "And now comes the really tough part...")
- danboarder 14y agoTesla needs to empower a network of traditional mechanics and service stations who can run diagnostics and do basic maintenance on these cars. Imagine a sign on auto service centers that says "TESLA Serviced Here" or something similar. This would build public awareness and confidence and create an entire new class of Tesla advocates.
- Shivetya 14y ago(disclosure : I work for a major aftermarket parts distributor) by law Tesla won't be able to exclude them but from what I have read they seem to think they can change all facets of current automobile marketing and support. However laws prevent traditional auto manufacturers from requiring buyers to only obtain service from the dealers. I do not see how Tesla is going to circumvent that nor do I believe they should. As for the article's premise, I don't see the genius. I simply see it as a requirement to break into the market. I also do not think battery powered cars will be the end all, the major automakers are going down many different paths, Tesla is betting the farm on one. Plus, 400 hundred cars a day? Its going to be a long long time at that pace before they have any noticeable effect. Before then someone is going to craft an environmental impact law to make these battery powered cars more expensive.
- deleted 14y ago[deleted]
- notdrunkatall 14y agoThis is precisely why I purchased a large chunk of TSLA a month ago, and I suggest that all of you do the same.
- natronic 14y agoHydrogen! The auto industry is already looking past electric. Look at market signals and the faltering focus on electric, despite massive efforts to sell electric cars by the industry. Nissan, who has taken the biggest stab at electric, is already (publicly) licking its wounds from its $5B gamble. That's just one example from “Electric cars head toward another dead end”: http://www.reuters.com/article/2013/02/04/us-autos-electric-hydrogen-idUSBRE91304Z20130204 http://www.reuters.com/article/2013/02/04/us-autos-electric-... Tesla’s making a brave and extremely innovative foray, I will certainly give them that. But with the lack of electric traction amidst $4+ gas (2x since 2008) and the promise of hydrogen...I’d say the odds are against them. Hybrids will probably be the bridge to something else. Tesla could end up being Betamax.
- lutusp 14y ago> Hydrogen! The auto industry is already looking past electric. At the moment the practical problems with hydrogen are worse than those involving electricity storage. There are many problems with the electric vehicle scheme, but on the plus side, there's already an electric infrastructure that can be used to charge the vehicles. There's no hydrogen infrastructure, it would have to be built. This may all change in the long term, and hydrogen might end up being a much better solution, but the immediate problems are severe.
- thewisedude 14y agoI dont want to discredit the whole article based on a few things. There were some things that he says either didn't impress me or seemed inaccurate <Quote>These are huge obstacles, and is probably why there hasn’t been a new major auto maker in the United States for 90 years </Quote> Kia - Founded in 1940s. Also its not clear why US is the only country that is being considered? <Quote> Tesla’s strategy for overcoming these obstacles is ingenious; Start at the top and work our way down. </Quote> Thats how its been for many businesses. Cars in general had a similar history. It was only available for rich people initially! <Quote> If I was General Motors I would be afraid. Very afraid. </Quote> Statements like this are too generic. What time frame? No quantification? General Motors was about to be bankrupt a few years back. Their business is already being threatened by many things, I dont know if Telsa is their biggest concern!