
Tesla's ingenious strategy - mixmax
http://www.maximise.dk/teslas-ingenious-strategy/
======
lutusp
Tesla -- 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
Or a paradigm shift? Rethink the battery? But where to start?

~~~
flatfilefan
right 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)

------
Flemlord
Just 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.

~~~
jim-greer
I 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
That's what I call a clever fall-back strategy!

------
DanielBMarkham
There'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
Tesla 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
(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.

------
JumpCrisscross
It 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>

[2] <http://en.wikipedia.org/wiki/Tesla_Roadster>

~~~
pdog
Interesting 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
Absolutely 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>

------
codex
Contrast 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
> 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?

~~~
notatoad
The Roadster's basic chassis engineering was lifted from the Elise, but I
believe most of the parts were custom. All the body panels certainly were.

------
nextparadigms
I'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.

~~~
pekk
Electric tech is clearly developing and generating buzz.

And yet oil probably won't get too much more expensive for decades, while
solar is ridiculously expensive without any clear prospect of becoming cheaper
(currently parts are only as cheap as they are because the Chinese government
is subsidizing their production, which can't last forever). Burning gasoline
is not going to stop being economical and reliable any time soon.

Also, given the expensive reality of solar and the way we generate
electricity, electric cars would still be getting their electricity from
plants which burn coal. Perhaps in 20 years we will be using more natural gas
than coal, which at least means we're not depending on the Saudis - but still
we'll be using hydrocarbons, fracking, etc.

The only way electric vehicles will become mainstream is if the government
mandates this. Seeing the way the Obama administration's "clean energy" agenda
has tanked (even among the liberal base preoccupied with drones and Manning),
there isn't going to be anybody to support this kind of action when it makes
all transportation more expensive and thus makes everything more expensive. In
a country which is physically very large, with an economy driven by domestic
spending.

~~~
PotatoEngineer
We're going to need _something_ as fossil fuels run low and coal becomes
increasingly stigmatized. Solar is an interesting field to explore, as is
wind, hydro, tides, and other non-fossil energy sources. Sooner or later, one
of those fields is going to generate electricity efficiently, even if only
because fossil fuels (very eventually) get more expensive. Researching these
things _now_ means that there will be more options later.

~~~
neutronicus
You don't want to hear it, but the answer is nuclear fission.

~~~
PotatoEngineer
I do want to hear it, actually. Thorium looks especially good in the long
term, though it's still in the research phase.

------
gizmo
Interesting 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
I 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.

~~~
gizmo
You certainly do seem to claim that. You say "the point [...] is to create a
brand", and a few sentences later you say "also [technical reasons]". That to
me looks like a clear distinction between primary and secondary reasons.

Secondly, you say that focusing on the brand like this is part of Tesla's
"ingenious strategy". However, as I pointed out in the previous post, all of
the strategy you covered follows directly from constraints Tesla had. So
Tesla's strategy of building a Roadster first is completely _straightforward_.

Tesla _does_ have an ingenious strategy, though. For instance they are working
on Free Charging Stations, they have unique showrooms and they are willing to
license their technology to some of their competitors. I don't think any of
those things are straightforward. So there is a lot to say about Tesla's
ingenious strategy, but their expensive-cars-first strategy is not the
ingenious part.

------
simonbarker87
Having 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
I 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-
rapid...](http://www.torquenews.com/1075/plug-hybrids-chevy-volt-rapidly-gain-
popularity-accoring-report)

------
postscapes1
I 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
good catch. Fixed it. Thanks.

------
graeham
One 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.

------
thewisedude
I 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!

------
smountcastle
So why doesn't a huge car company buy them and put Elon in charge of
everything? Or is this just too far fetched?

~~~
damoncali
Think about what you just said for a minute and it will be clear why this will
never happen.

~~~
Contero
I 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.

------
natronic
Hydrogen! 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-...](http://www.reuters.com/article/2013/02/04/us-autos-electric-
hydrogen-idUSBRE91304Z20130204)

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
> 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.

------
flatfilefan
nice 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?

~~~
ricardobeat
The Model S already uses space differently because of that, it can seat seven
and still have lots of room in the (front) trunk.

------
pedalpete
Though 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
Elon 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.

------
jakozaur
Thw whole strategy assumes that battery cost will drop significantly (more
than 2x):

[http://green.autoblog.com/2012/02/21/battery-cost-
dropping-b...](http://green.autoblog.com/2012/02/21/battery-cost-dropping-
below-200-per-kwh-soon-says-teslas-elon/)

Which may happen, but AFAIK Tesla isn't involved in that kind of research.

~~~
saraid216
I'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.

------
stiff
For 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.jp...](http://en.wikipedia.org/wiki/File:Tesla_colorado_adjusted.jpg)

:)

~~~
205guy
Looks 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.

------
arbuge
"If I was General Motors I would be afraid. Very afraid."

Or, I would be in talks to buy Tesla.

~~~
27182818284
Musk 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.

------
czzarr
tl;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-
ingenio...](http://tldr.io/tldrs/51115df9de23f156580000a8/teslas-ingenious-
strategy)

------
thoughtcriminal
One 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.

------
notdrunkatall
This is precisely why I purchased a large chunk of TSLA a month ago, and I
suggest that all of you do the same.

