The good news and bad news from Tesla

[BlueStreak]

See http://www.detroitnews.com/article/20130526/AUTO01/305260005/1148/auto01/Tesla-CEO-sets-affordability-his-electric-car-goal

The good news is that Tesla is in a position to make money -- although their stock is probably going to end up as over-valued as Facebook (in other words, over-estimated by a factor of 10). The article points out that they make 5000 cars a quarter, but have higher market cap than Fiat. That is unsustainable in the long term, but it happens when people place their bets on emerging industries. And notice who some of the betters are: Toyota and Daimler-Benz.

Other good news is that they have a sensible road map that may eventually approach the mainstream.

The bad news is that this will remain an exotic niche market for at least another 4 years. 200 mile range for $40K is at the outer fringes of the mainstream market, assuming a sustained build-up of the charging network. This isn't particularly bad news, I don't think, unless somebody is invested in the notion that it is here and ready to kick ass today. That clearly is not the case, but 4 years is not a terribly long time.

Of all the Internet billionaires out there, I'd say that Musk is one of the smarter ones. Many of the others were mostly the beneficiaries of being at the right place at the right time. (There is a great book, somewhat dated now, called "Accidental Empires".) Musk has made enough smart moves to prove it isn't dumb luck.

[Promethean]

1. 4 years is unreasonable

for it to even be possible for electric to become mainstream. The charging stations are an obvious improvement. They need to pretty much become as ubiquitous as gas stations.

Plus I've looked at the Tesla website. None of their vehicles are as cheap as 40k. Those quotes are part of theoretical adjustments based on assumed fuel costs (they assume you are buying premium fuel) and assumed mileage (somewhat more accurate) as well as other assumptions that are obviously skewed in favor of making the vehicles appear cheaper.

I agree with your assessment that Musk is a smart businessman and Tesla is riding at the front of the wave of the future but 4 years isn't even a pipe dream without some hardcore government subsidies.

[Socialistlemur]

2. Tesla cost analysis

The vehicle costs $62000. The fuel costs depend on how it is driven and the electricity charges where it is being charged. In California de tiered pricing scheme used by Pacific Gas and Electric yields a cost of electricity per mile roughly equal to the cost of gasoline. I own a high efficiency diesel (German engine) with a 6 speed manual transmission. Over the last 4 months or so I get 39 miles per gallon. I considered a Prius but the mileage was roughly the same and the diesel will last much longer. I think the electric cars are not really a mass technology because the batteries will become an environmental disposal problem, and the marginal electricity generated for vehicles is using coal, the worst fuel by far. Conclusion the tesla is a gimmick for the rich.

[Mopar151]

3. Thank you for stating the case well.

The whole concept that energy becomes "clean" by passing through the power grid is ludicrous.

[BlueStreak]

4. I agree with you in the short term

and in the grid, "short term" should probably be defied as 10-15 years.

It is really unbelievable how many people writing articles in this area are either too ignorant or too disingenuous to state the truth.

However ... I don't think the same argument necessarily applies to the longer term. Electric cars will have to make economic sense, which is to say, they probably need a 200 mile range, a 20-minute recharge to 85% of capacity, and a purchase price no more than 20% higher than gas cars (realizing that there will be considerable savings in fuel and maintenance over the live of the car).

If you will permit a hypothetical that all these conditions can be met at some future date (4 years, 6 years, 8 years? doesn't really matter), then we have a fundamentally different proposition on the grid. A lot of the grid capacity will go to recharging vehicles, and much of that can be done overnight. That very nicely fits a grid that has a combination of solar and wind power (plus geothermal and hydro power, supplemented by natural gas as needed). In other words, wind power can continue to flow at night without a huge storage problem because vehicles can take that. If you know you are going to need an extra 100 miles this afternoon, then you'll pay the higher rates, but if you aren't taking any long trips, why not wait until the cheap rates kick in?

And with a 200 mile range, many people would be willing to defer their charging until the overnight period if the utility will offer lower rates. The smart grid will not be widespread in 4 years, but this is clearly a direction that has promise.

[BlueStreak]

5. I don't know that Musk's projections are too outrageous

Today (with the extra $20K option) he is claiming a 300 mile range already, although that translates to more like a 150 mile dependable range. To meet his projection, there needs to be a 50% reduction in cost in 4 years. There is certainly some economy of scale available. When he started, he was literally using notebook computer batteries. We are approaching diminishing returns on energy density of Li-Ion, but should get some cost efficiencies from volume ramp. I'd say 25% of the cost savings will come from energy density improvements and 75% will come from production efficiencies.

The other side of that coin is that this may be the end of the line for Li-Ion. A comparable, full-featured all-electric passenger car may always have an initial cost higher than a gas powered car. But it is easier to scale DOWN an EV. So during the next 4 years, I believe we will definitely see low priced urban EVs, as small or smaller than the Fiat 500 or Elio Motors prototype.