The huge changes Tesla needs to make to achieve its mission
In a recent blog memo to the Teslarati, and also in his live conference call with analysts after the release of the Q3 financials, Elon Musk elaborated on the Mission of Tesla. Musk is a very, very smart man, but we are starting to wonder if he is suffering from tunnel vision. Most of the press already has this problem. In short, Musk and the general media seem to be assuming that the main goal that Tesla has isn’t already being met by other companies. We will argue below that it is, and will continue to be. Furthermore, we will explain why if Tesla wants to build a mass-market car, in this case an electric car, the current design it uses will not work. However, Tesla can meet its objectives. We will explain how.
Tesla’s Stated Mission
In our words, Tesla’s goal is to build an enjoyable electric vehicle that sells for entry level luxury car prices (about $35,000) in huge numbers. Musk and Tesla also seem to have limited themselves to the design of this EV. They want a “pure electric car.” That means they cannot copy the Volt and the Fisker Karma, and some BMW i3s and use an on-board power generator that uses a fuel like gasoline, or natural gas. That last part is a shame, because it is one way to bridge the gap now to zero emissions vehicles in huge numbers.
If you want to read an update in Musk’s own words you can read his November 18th update on the Mission of Tesla. In the beginning he states the mission is “to accelerate the advent of sustainable transport by bringing compelling mass market electric cars to market as soon as possible.” Breaking that down into sections, we can focus on two things. Let’s first address the part about the Tesla being ‘compelling.”
“Compelling” means not at all awful and not at all boring. In fact, according my dictionary it means “very interesting; Able to capture and hold one’s attention.” Is a Toyota Corolla “compelling?” It is the leading seller in its segment and it is the world leader in history in terms of unit sales for any vehicle nameplate. Is the Toyota Camry “compelling?” It is the number one selling car in the United States today by fully 10% at about 400,000 per year sold. How about the Toyota Prius? The Prius sells about 240,000 per year (just in the USA), and it is the number one selling green car on Earth, and also has saved more gasoline than all the EVs ever built. The Prius line outsells the entire EV market by about three to one. Here’s the thing; many people don’t think any of these three cars, the leaders on the planet in what cars do, are “compelling.” In fact, auto-writers, auto-readers (as recently as this week on our TN Facebook page) frequently, loudly, and sometimes insultingly call all these cars boring, dull, soul-less and swear they hate them. So Tesla’s mission is not to build a car that the general public will find boring or lackluster. Rather, it wants to build a car people find very interesting that will hold their attention.
Now let’s consider Tesla’s phrase “mass-market.” Here at TorqueNews we know what a mass-market car is. We just listed them above. Now, you might be thinking that Elon Musk isn’t seriously thinking he will sell cars in those kind of number, right? Sort of. Actually, he thinks that in a few years that Tesla might be building more than that. In the conference call he said “If we were to produce 500,000 [cars], we need cell capacity commensurate with that.” So what Elon Musk thinks is that the Gen III car, as it’s called will cost about $35,000 and that it will sell in numbers as large, or larger, than the Camry, which is the highest selling car in the USA. In fact, he thinks Tesla will outsell all of Volkswagen in America in a few years.
Given that goal, an exciting to drive electric car that outsells every other single car in the US, at a price of around $35,000 Tesla has nothing in its current lineup that will get them there. A smaller Model S cannot be scaled down to a size small enough (figure Corolla size) to cost under $35,000. The reason is that the aluminum space-frame construction is simply too expensive. The only vehicles in the world that are made in the fashion the Model S are cars like the new Chevrolet Corvette (about $60K), the Audi R8 (About $90K and up), and some similar supercar designs. Space-frame refers to the style of the chassis, not outer-space by the way. Space frame cars are old-school vehicles that are made with new style materials to achieve extremely low weight, but at a higher cost than conventional “mass-market” cars and crossovers. Nobody, not even the largest and most sophisticated automakers in the world, can build a low-weight, aluminum space frame based car and meet the cost goal Tesla has set.
This all means that if Tesla wants to build a medium sized, low weight, mass-market vehicle it will need to move to high strength steel construction, or perhaps a new aluminum chassis that uses most of the elements of “unit-body” (also called unibody) construction. This is a technique whereby flat, inexpensive sheets of metal are compression formed into the main floor pan, engine supports, suspension mounting points, cabin and front and rear structures. It is fast and it is affordable. And it is the only way cars are made in the world in big numbers. Tesla does not have any experience doing this. Nor does it have an existing chassis it can adopt, or adapt. When Chevy built the Volt it looked to its existing line-up and selected the Cruze as the “donor car”. By using a car it already makes in huge numbers Chevy kept costs down and is able to use a lot of its already existing capacity. This is just one part of Tesla’s problem.
The next part is, well, parts. Tesla does not have a supplier network it can leverage that will enable it to pay the prices that Toyota, Nissan, Ford, and General Motors do for parts. It does already source parts designed and made by other automakers (Mercedes Benz for example), and they might even give Tesla a deal at their own cost for 10,00 or 20,000 vehicles worth of parts as part of a partnership. However, no automaker will do that for 500,000 vehicles worth of parts. They simply can’t afford to. Plus, at that point Tesla is a direct competitor.
At this point we have not even talked about Tesla’s difficulty making a half million batteries per year, or the fact that the drivetrain will cost more than practical for its $35,000 vehicle. If you want to read stories about Tesla’s possible “giga factory” there are many out there. I’m not an expert regarding giga factories. I do know that Tesla has a drivetrain plan and that it is possibly the world’s leading automaker when it comes to electric drivetrains, so let’s assume Tesla can handle the volume. Tesla has never demonstrated an affordable design, so we will have to wait for that breakthrough.
Has Tesla’s Goal Already Been Met By GM and Nissan?
We would argue that if you take the “compelling” and mass market terms loosely they have. GM and Nissan have both sold more EVs than Tesla and they cost less than the target price Tesla has set as its benchmark. If they have not met the standards of compelling and mass market yet, it would seem they have the edge on the next generation of cars. They have the manufacturing technology and they have the parts commonality. Both also have equal experience with regard to the electric motor and every other drivetrain part needed by an EV. The only edge Tesla has is battery technology – sort of. Tesla does not actually make batteries. It uses Panasonic cells. LG makes GM’s. Imagine a technology breakthrough. Battery costs come down, miles per cubic inch of battery goes up and reliability is assured. Who does this help most? Certainly not Tesla. In fact, a development like that could put Tesla out of business. GM and Nissan would immediately have a huge advantage over Tesla. They might also be able to adapt cars like the Cadillac CTS to electric and run Tesla out of the premium EV market.
Tesla can overcome all of these obstacles and it can achieve its mission. All it needs is a partnership with someone like Toyota. Using a Toyota-build chassis and a Tesla-designed drivetrain these two in partnership could take on GM and Nissan. Here’s a pop quiz; Who co-produced mass-market, unibody vehicles in the factory that Tesla now occupies in Freemont California (the NUMMI plant)?
Photo at head of story by John Goreham