Ford brought the Model T to the masses – Tesla plans to do the same…with the Model 3
Tesla. What’s the first thing you think of when you read or hear that word?
For me, it was a very expensive electric car that the Hollywood gang loved to be seen-in – so they could tell us how to live our life and save the environment from their ivory tower. For that reason alone, I completely ignored the car and everything about it.
But I was wrong – so very wrong. What changed my mind? Well, I happened to stumble upon an article on waitbutwhy.com written by Tim Urban called: “How Tesla Will Change The World” and was blown away by the vision of Elon Musk – the creator and CEO of Tesla cars. Incidentally, he fittingly chose the name Tesla after electrical pioneer/inventor Nikola Tesla, the man who actually invented electricity, not Thomas Edison.
Anyone can write a glowing article on whatever subject they have a passion about, but what makes this article have substance and not one with an agenda? Well for 1) he wasn’t commissioned by Musk/Tesla and 2) he was paid $0.00 for doing it.
When no money is changing hands, the writer is free to comment – good or bad on the subject without having to ‘offend’ the person paying for the article. Urban’s article is long – it took me 90+ minutes to read part 2 alone, but I enjoyed every minute of it and I implore you to take the time to read it – it’s well written and certainly not dull and full of bland statistics. Unfortunately, we live in a 140-character Twitter society where short and to the point is all people will tolerate.
Starting a car company from scratch is extremely expensive – the last successful start-up was Chrysler back in 1925. Tesla was also adding in new technology which drives the cost-of-entry higher, and let’s not even talk about Research & Development – crash tests and government interference didn’t exist back in the early 1900’s. The upfront costs associated with any new product is tremendous – remember the cost of mobile phones or personal computers back in the early 1990’s? The big difference however is they were the first of their kind so they could charge an arm-and-a-leg for the product – but the automobile has been around for well over 100 years, and they are relatively cheap to purchase.
So Tesla came up with a 3-point plan:
1) Build a high-priced, low-volume car for the super-rich. But it has to be good enough to justify the $100,000+ price tag. Use the profits from this car to fund the development for…
2) A mid-priced, mid-volume car for the more affluent customer – in the $75,000 range. Use the profits from this car to fund the development for…
3) A low-priced, high-volume car for the masses. Develop a car that would be around $35,000. Something regular people could get excited about and actually afford. The various government incentives would drive the cost down to the mid-to-high $20’s – making it VERY affordable to the middle class (various States offer additional incentives too). The original goal was $43,000 but Musk has reaffirmed throughout 2015 and 2016 that the goal is actually $35k.
This sounds like Henry Ford, only in the opposite direction. Ford built for the masses a cheap vehicle that then got more expensive over the years. Ford’s problem was actually quite similar to Elon Musk’s, as back then only 22% of the cars in America ran on gasoline – 40% of were powered by steam and 38% were electric. Electric?! Yep, electric and steam-powered cars were the norm, but Henry had to change people’s perception in order to be successful.
We’ve now gone full circle and Elon Musk is at the forefront, driving us to give up our gasoline and diesel cars for electric ones…
But there are several obstacles that have to be overcome in order for his plan to work. Here’s just a couple off the top of my head…
- Range – unless the vehicle can travel farther than 150-200 miles without stopping to recharge, it’s basically useless.
- Re-charging overnight is fine, but if it takes 6-10 hours to re-charge combined with a short-range, it’s basically useless
- Cold – everyone knows the cold climates kill batteries, so even if the car got 200 miles in the summer, you’d be lucky to get 100 in the winter – never mind the added strain of heaters and defrosters, Realistically – 75 miles at best.
- Where do you recharge the battery? Just ‘cause you’ve got the proper plug-in at home, doesn’t mean everyone else is going to have one for you at your destination.
- Performance – who wants to drive a car that goes as fast as a golf cart? Not me!
- Price – the cost of batteries alone makes electric cars very expensive compared to the equivalent gas version.
I’m sure there are more issues I’m overlooking, but these are BIG issues as it is. Well, Musk has a plan for these as well! But first, we have to go back in time to the 1990’s – to the very beginning.
The Birth Of Tesla Motors – the Twitter Version…
In the 1990’s California passed the “Zero Emissions Vehicle mandate” which unfortunately was later repealed, but it gave companies and people enough time to develop and experiment with electric vehicles for our future. One of those little technology companies was AC Propulsion, and while everyone else abandoned thoughts of an electric car, AC Propulsion were experimenting away, quietly making one giant EV breakthrough after another. In January of 1997 they launched a sports car called the TZero only three prototypes were built and plans for commercial production were dropped in mid-2003.
BUT AC Propulsion had figured out two huge things:
First, it was fast (0-60 in 4.9 seconds) and;
Second, they had made big progress in range. EVs had always been limited to a 60 to 80-mile range because of the limitations of lead-acid batteries, which are also heavy. AC Propulsion looked to the laptop and mobile phone industry that had been spending a fortune developing small 18650 lithium-ion batteries (they look like AA batteries). Using lithium-ion (Li-On) batteries, the TZero could go 250 miles on a single charge!!
In 2003, a Californian engineer named JB Straubel met Musk to ask for funding for a car project he was working on and took him to AC Propulsion to see the TZero. Musk was blown away and convinced that EVs were the way of the future. He wanted the world to see the TZero because he was sure it would excite people and help to create a new wave of EV interest. Although he tried to convince the AC Propulsion guys to bring the TZero to market with his funding, they didn’t want to, but they introduced Musk to a group of entrepreneurs who had also recently approached them with a similar idea. The group had come up with the idea of licensing AC Propulsion’s technology and bringing it to market themselves as a new company called Tesla Motors – but they needed money. Since Musk had the money…it was a perfect match and so Tesla Motors was born.
Told you it would be short – now let’s continue….
AC Propulsion had made significant headway on performance and battery range – thanks to the laptop/mobile phone industry, and Tesla continued to improve on both. Performance was now the best in the world for a 4-door sedan (0-60 time of 3.2-seconds) and the battery range was between 208 and 270 miles per charge (depending on the model).
Two huge problems still need to be sorted:
- What about going on a longer trip? – Not everyone will be driving close to home… and
- With all this technology – what about cost to the consumer?
With a range of 208-270 miles, most people will never need more than that in everyday driving, but going on a road trip from city to city – that could be an issue. The solution was to build a world-wide network of Supercharger stations. You mean, like hundreds of gas stations?! Yep.
OK, but how long will it take to charge the Tesla? From your home it takes 5 – 10 hours to re-charge a Tesla S (depending on which type of in-car charging system you opted for). No one is going to sit around for 5-10 hours – that’s crazy. Well the Supercharger will re-charge at a rate of 10 minutes for every 60 miles of range. With that example, if you’re driving between Boston and New York (215 miles) you might make it without stopping, but if you did need to stop, you could just charge up for 5 or 10 minutes – about the same as stopping at a regular gas station.
Think about that – 99% of your driving will be done without any inconvenience other than plugging your car in every night. For longer trips you’ll have to stop for 30 minutes or so every 200-250 miles – who can drive that long without needing a break anyway?
Where are these Supercharger stations? Here’s a map of the locations in U.S. and Canada, including those actually built and ones planned to open in 2016:
For now, only Tesla’s can use the Supercharger stations, but down the road, Musk plans to partner with other EV car companies so any EV can stop at one. Tesla’s Supercharging network of around 600 stations world-wide is FREE to use. Other manufacturers are going down a similar path, but not announcing prices.
Although not as fast as the Tesla Superstations, BMW and Nissan have established 120 charging stations across 19 U.S. states. They are generally smaller and slower than the Tesla stations. Unlike Tesla’s proprietary system however, these will be open to most electric cars capable of fast charging – no word on the actual cost to “fill up” right now. Vehicle owners will be able to locate the stations either using their navigation system or special apps on their phone.
What are EV charging levels?
Level 1: Basic. Trickle charging using 110-120V AC (alternating current) Full charge: 10-20 hrs. The power level is equivalent to plugging into a household electrical outlet.
Level 2: Fast or “quick” charging using 208-240V AC. Full charge: 4-8 hrs. The power level is equivalent to plugging into a household electric clothes dryer socket. This is the most common public charging level.
Level 3: Very fast charging. Converts 3-phase AC to DC. Full charge: 20-30 minutes. Best-suited for fast turnaround locations.
The Ontario (Canada) government announced in December 2015 that they will be installing similar stations around the province in order to speed up the purchase of electric vehicles – thereby eliminating the chicken-egg situation. In February this year they announced incentives of up to $14,000 in rebates to anyone purchasing an electric vehicle and the good thing is, there aren’t a whole bunch of loopholes and obscure demands to get the rebate! Plus you are still eligible for 50% of the cost of installation and purchase of a home/office charging station. U.S. rebates and incentives can be found HERE.
One HUGE feature about the Tesla Superchargers: they’re all free to use, and soon, they’ll all be entirely solar-powered!! Imagine being able to drive across the country and not having to pay for fuel!!
But wait! There’s more….
Tesla is continuing to make new innovations – the Roadster now has a 350-mile range battery and it’s just a matter of time before their cheaper cars have a similar range. They recently unveiled a new Supercharger feature – the battery swap. A Tesla owner will be able to pull up to a little rectangle and stop the car. The ground opens up and a machine comes out and takes the car’s battery off, brings up a fresh battery and puts it on, and you’re good to go – all in 90 seconds. This would cost about $60-80 (or as much as a regular tank of gas in Canada), so Tesla owner would now have the option of “fast or free.”
The last issue left remaining is still a doozy: How much are these cars and who can afford them?
This is kinda harder to nail down. Remember, travel is going to be essentially free. I can easily drop $70 going to visit my brother about 2 hours away. That prohibits me driving there more than a couple of times a year – if that.
What else do you eliminate? Oil changes. In my neck of the woods you can’t get one of those for under $40. M-B and BMW owners are looking at $150 x 4/year – $600.
Maintenance – there is none. Change the tires, brakes and wiper blades every few years and that’s pretty-much it.
Gas vs. Electricity
At the moment we’re paying around 90¢ – $1 per litre ($3.46 – 3.85/U.S. gallon) for regular gas ($1.20/premium). It’s recently come down from $1.35/litre thanks the latest oil war, which is supposed to last a year or so.
The cost of driving a gas car is harder to peg because of so many variations in gas prices and fuel efficiency. Let’s use a price of $4.00/gallon gas and a below-average mpg of 15 (not unrealistic) – in that case, a gas car costs 27¢ per mile. At a pretty typical 12,000 miles/year, that means it costs over $3,000/year more to use gas.
Using U.S. national average electricity rates, we’re looking at 12¢/kWh. With the average electric car operating at around 3 miles per kWh, that puts the price at 3¢ per mile. Hmmm 3¢ versus 27¢ in ‘fuel’ savings alone.
The biggest hurdle is the up-front cost of the car. The Tesla S starts at $69,900, but usually comes in north of $100,000. Even with the national $7,500 rebate (some states offer up to an additional $8,000) and the $3,000 per year fuel savings – it’s still a big chunk of change – way out of the reach of most people.
Tesla have recently released (September 2015) the Model X, an SUV on steroids with gull-winged rear doors – but it’s more expensive than the S with a starting price of $132,000, so that’s not going to get me into one. There’s a rule of thumb in the car world that every $5,000 decrease in car price approximately doubles the number of buyers who can afford the car, so if Tesla can come out with an EV for about $35,000 less than the Model S, it would double the buyer pool 7 times, or multiply it by 125-fold – which would now mean most people could afford it.
Enter the Tesla Model 3
THIS is where Tesla changes the world. The Model 3 is coming out in 2017, and its projected cost is $35,000 – after the tax credit (in the U.S.) – $27,500! Taking gas savings into the equation it’ll be under $20,000. BUT and you know there’s always a but…right now the Model 3 battery costs around $20,000 – so how can they realistically price it at $35,000? Even stripping the Model 3 bare, Tesla will never get the price down even close to $35,000.
Time for another BUT… Range! But, Tesla is already working on that issue. Of course they are!
To solve the range problem, Tesla is building a worldwide energy network of Superchargers, and to solve the price problem, they’re building this:
The Gigafactory. A $5 billion lithium-ion battery factory, currently being built in Nevada. The factory will be self-sufficient, powered entirely by on-site solar, wind, and geothermal energy, and it will employ 6,500 people.
*Faraday Future has recently announced they are also building a $1Billion battery plant in Nevada and Mercedes-Benz are building a €500 Million battery factory in Germany starting late this year.
Right now, the world’s combined annual output of lithium-ion batteries is 30GWh – mostly for use in laptops and mobile phones. The Gigafactory will produce more than that each year, which means it will more than double the total lithium-ion batteries produced each year globally.
There are two huge benefits to doing this:
First, Tesla is planning to ramp up production of their cars until they’re producing 500,000 of them a year, and they’re going to need a lot of lithium-ion batteries to do so. In order to make enough batteries for their planned 500,000 cars a year, Tesla will need about 30GWh of lithium-ion batteries a year – every single Li-On battery in the world!
Second, by doubling the world supply of lithium-ion batteries and by continuing to innovate with battery technology, Tesla’s work at the Gigafactory will make batteries a lot cheaper – the price of the battery should go down by at least 30%. Right now, Musk says Tesla could make their cars with a 500-mile range but they don’t do it because it would increase the cost of the car. However, as battery prices go down, EV ranges will inevitably go up.
The Model 3 will be formally unveiled at the end of March 2016, whereupon the company will begin taking pre-orders. Price-wise, Musk insists the base price on the Model 3 will check in at $35,000. Production will begin in the third quarter of 2017 – Tesla has to wait until the Gigafactory is fully operational before starting production of the Model 3.
Change doesn’t happen overnight, but change is happening. Henry Ford built an empire by focusing on what the customer needed, even when the customer didn’t know what they needed or wanted. Musk and Tesla are doing the same thing right now. There weren’t enough charging stations for long-trips, so they built an energy network of Superchargers in America, Canada, Europe and Asia. When scalability is held back by the high price of lithium-ion batteries, they just build a factory that doubles the world supply of them to bring the price down. The automotive landscape is changing and Tesla is leading the charge.
By solving so many EV problems for its own cars, Tesla is forging the path to an EV-dominated world for all the other manufacturers too. Toyota and Mercedes are buying the Tesla powertrain for their own EV’s, BMW and Nissan are teaming up and other manufacturers are getting on board too. Any company trying to rise to the top by creating new and innovative ways of doing things would hold their secrets close – but because Tesla’s goal is to transform the industry, Tesla made all of their patents available to whomever wanted them in 2014.
So other than saving the environment, gas and oil – what other benefits are there for buying an EV?
- Re-Fuel: Gas cars have to go to the gas station – EV owners plug their car in every night.
- Maintenance: Gas engines need oil, radiator and fluid – EV’s don’t.
- Simplicity: A gas engine has over 200 parts – an electric motor has fewer than 10.
- Extras: A gas engine requires a transmission, an exhaust system – an EV has none of those.
- Storage: Open the hood or a regular vehicle – it’s full of engine, for an EV its more storage space – a Frunk (front trunk)
- Noise: there is none because EVs are silent
- Speed and Torque: Without gears there’s no lag time, and torque (low-end grunt) is instantaneous
- Safety: Without an engine, the entire front of the car becomes a crumple zone – with nothing big and heavy that’s going to be pushed into the cabin to potentially crush driver and passenger. The Tesla has the highest NHTSA safety rating of any car ever tested by the US government, 5.4 stars – before Tesla came along, the maximum was 5 stars!!
- Pollution: No smog – there are no tailpipe emissions
Winners and Losers
The biggest losers in all of this are the car dealerships and oil companies. The dealerships make most of their profit in the service department, but with something that rarely, if ever breaks down – where will they make their money? The other big losers are the oil companies, but that will take until sometime around 2030 before they’re irrelevant.
Saudi Arabia has been planning for a world without oil for a couple of decades now, so they aren’t worried, but the gasoline and refining companies should be getting worried because the projected date when EV’s will start to dominate the landscape is somewhere between 2025 and 2030… not that far away when you think about it. If you remember how fast mobile phones went from being big bricks inside a suitcase to tiny little phones in your pocket, what will happen to EV’s once the ball really starts rolling?! We could see the time frame cut in half with just a few new developments.
Who will be the main winners in this? Well you and I of course when it comes to maintenance and purchasing a vehicle. However, electricity will always be expensive in some areas, such as Ontario where the base cost is 17.5¢ k/Wh during the day – add in the other gouging that comes along with the bill and it’ll be closer to 21-24¢ k/Wh. Getting around that is easy for those of us with a house – we just add a solar panel or fill up at night where the base price drops to 8.3¢ k/Wh (for now). For the majority of people living in an apartment …well, that’s the subject of another article – THIS .
Henry Ford didn’t convert the world to gasoline-powered cars overnight, but once he started the momentum everything fell into place. Elon Musk is doing the same thing today and others are joining him quickly in this revolution – fortunately it appears right now that there is very little resistance from outside sources, and it’s just a matter of time before we’re all driving silently around saving the environment. That’s a win-win!
Henry Ford’s Model T took over America…By 1914 – 99% of new American cars ran on gasoline. By 1920 electric cars dropped entirely out of commercial production.
Copyright © 2016 by Iain Shankland. All rights reserved.
Text: Iain Shankland