Will the Tesla Model 3 turn Elon Musk into the next Henry Ford?

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http://www.theglobeandmail.com/globe-drive/adventure/red-line/will-the-tesla-model-3-turn-elon-musk-into-the-next-henry-ford/article29492889/

 

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For Tesla Motors, this is the either the end of the beginning, or the beginning of the end. Last night, the company unveiled the Model 3, a car that represents a make-or-break play in a billion-dollar industrial chess game.

If all goes well, the Model 3 will turn Tesla into a profitable company, and elevate CEO Elon Musk into the role of a latter-day Henry Ford. If all does not go well, this could be Tesla’s Waterloo.

The stakes are huge. Although it produced its first car just eight years ago, Tesla is now the most talked-about car company in the world, with major buzz and Apple-style brand cachet. But Tesla loses money on every car it sells.

The Model 3 is designed to change that by taking the company to the mass market. It’s been in the works for years, a critical piece in the company’s long-term industrial and financial plans. The key is price – the Model 3 will start at $35,000 (U.S.), a fraction of what Tesla’s current models sell for.

Musk had to do more than design a car – he also had to set up a “gigafactory” in Nevada to mass produce the battery that powers the Model 3. The vast infrastructure challenge is one reason why Musk has called the Model 3 “the most profound car that we make.”

Until now, Tesla has been a small company with outsized influence, noted for the coolness of its cars and the the over-the-top plans of its CEO. Tesla’s best-known car is the Model S, an electric-powered sedan with a laptop-size dash display and acceleration so ferocious that it has turned “Insane Mode” into a household term.

With the Model S, Tesla tapped into a market that major manufacturers had ignored – wealthy, environmentally conscious early-adopters who were willing to pay top dollar for a high-performance car that doesn’t run on gasoline. Although GM produced an all-electric car called the EV-1 between 1996 and 1999 as an experiment, the company killed the project and scrapped the cars.

The reasons behind the cancellation have been the subject of endless rumor and speculation. Some believed the oil industry had paid GM to kill the EV-1. GM executives believed the EV-1’s limited range and non-traditional drivetrain would curtail its appeal. GM also encountered pushback from its vast dealer network, which made the lion’s share of its profits servicing internal-combustion vehicles that needed regular service.

As a former mechanic, I could see why the dealers opposed the electric car. In the 1970s, I made my living attending to the endless service needs of gasoline-powered cars in a Vancouver garage that specialized in Porsche and VW – we paid the rent by threading on new oil filters, flushing out cooling systems, and tuning engines.

Driving through Vancouver 40 years later in an electric-powered Tesla Model S, I could see that this new machine would spell doom for the repair industry – the Tesla had no valves to adjust, no oil to replace, and no spark plugs to clean and gap. A gasoline-powered car is the wheeled equivalent of a Gillette razor handle, locking its owner into an endless series of parts purchases. With the Tesla, all that was gone. It was a driver’s dream, and a car-dealer’s nightmare.

If there is a single lesson to be drawn from the past two decades, it’s that disruption is the name of the game. Department stores are being crushed by Amazon. Google has gutted the Yellow Pages. But wholesale conversion to electric cars would make these changes look minor by comparison – and the new Model 3 is the first car with the potential to start a consumer stampede.

Price is only part of the formula. With the exception of Tesla’s own premium models, every electric car that has hit the market has offered extremely limited range. In my testing, none was capable of much more than 100 km on a full charge, and some would do only two-thirds of that. Tesla has promised that the Model 3 will do 200 miles (about 330 km) on a charge.) That may entice a lot of buyers.

If it succeeds in expanding Tesla’s market as much as Musk hopes, the Model 3 could transform the car business. How much demand there will actually be remains to be determined, but there’s clearly something there. Back in the late 1990s, electric car advocates began to divine some subtle social shifts that augured well for alternative power. Hollywood tastemakers who had traditionally gone for luxury rides or exotic sports cars were starting to gravitate to machines no one could have imagined: George Clooney, Leonardo DiCaprio and Cameron Diaz (among many others) had started buying the Toyota Prius, a slow, geeky hybrid.

And for those who cared to look, the demographic data of the aborted GM EV-1 project contained a telling figure: the average income of drivers who signed up for the electric car was $200,000.

If anyone could see the latent promise in that figure, it was Musk. He grew up in South Africa. As a child, he read 10 hours a day and theorized about sending a robotized botany laboratory to Mars. In the late 1980s, he moved to Canada. One of his first jobs was mucking out boilers at a Saskatchewan lumber mill, which required him to crawl through a narrow access pipe in a hazmat suit. The pay was good, but the conditions were brutal. Thirty workers signed up for the job. A week later, only Musk and two others were left.

In 1989, he arrived at Queen’s University in Kingston, where he was noted for his relentless study habits and his way of breaking down the resistance of others. When Justine Wilson turned Musk down for a date, he sent her a copy of Kahlil Gibran’s The Prophet, and interleaved the pages with his own handwritten romantic musings. Wilson married Musk in 2000, and divorced him in 2008.

In a Musk biography written by author Ashlee Vance, Wilson reflected on her ex-husband’s force of personality:

“You always knew it was Elon because the phone would never stop ringing,” she said. “The man does not take no for an answer. You can’t blow him off. I do think of him as the Terminator. He locks his gaze on something and says, ‘It shall be mine.’ ”

Even in his university days, there were intimations of the grand technical themes that would later inform Musk’s complex industrial empire. He wrote papers on ultra-capacitors (tiny electrical storage devices that could hold many times more power than batteries), and envisioned giant, space-based solar arrays that would beam power down to earth via microwaves.

After university, Musk made his way to Silicon Valley, where his career became the stuff of legend. In 1995, he and his brother started a web software company with $28,000 they borrowed from their father. Musk walked away with $22-million when Compaq acquired his company.

Later came his involvement with PayPal, which made him a billionaire, and a series of ambitious startups: Solar City (a power company) SpaceX (a rocket manufacturer, and of course Tesla, the company he is now synonymous with.

Most of Tesla’s serious design work takes place in a complex that is metaphor for company itself – a set of white buildings in Hawthorne, an LA industrial suburb that was once an epicentre of internal combustion. The streets outside the Hawthorne complex are dusty artifacts of a passing age, lined with lube and oil joints, carburetor overhaul shops, and scrapyards where you can pick up anything from a camshaft to a V8 engine, still dripping grease after being hauled out of a crashed Buick.

Inside the Hawthorne complex, rockets are being assembled for space flight, and designers are working out the details of the futuristic components of Tesla cars – glowing screens, milled suspension arms, and tiny servomotors that make hidden door handles glide out into position when a driver reaches for them.

The rise of Tesla has become a modern industrial parable. Its roots reach back to the 1990’s, when a pair of Silicon Valley engineers named Martin Eberhard and Marc Tarpenning began experimenting with electric cars. They bought an electric sports car called the tZero, explored its capabilities, and began thinking about an improved design. In 2003, they named their fledgling company Tesla, and started looking for investors, only to be rebuffed by most of Silicon Valley’s venture capitalists, who were put off by the tZero’s crude, science-fair appearance.

Then the Tesla founders met Elon Musk, who saw electric cars as part of a grand vision that could save the planet. The company started by creating a car called the Roadster, which was based on a Lotus Elise that was gutted to make way for an electric power train and a massive battery pack. The Roadster hit the market in 2008, and was anything but a commercial success – Tesla lost money on every car it sold.

I test drove the Roadster in 2009, and found it intriguing but deeply flawed. Its acceleration was incredible but after that, the Roadster had little to offer – it weighed about 35 per cent more than the Lotus, it had less range, and it cost considerably more. It also had a kit-car feel to it. I knew that a few celebrities had bought Roadsters, but that meant nothing , and I wrote off Tesla as a builder of gimmicky toys for rich people.

Then came the Model S. Until I drove one, I was prepared to write this Tesla off as well. Automotive manufacturing is a complex, demanding business, and great cars are typically the result of a long, evolutionary process. Companies like BMW and Porsche have developed hundreds of cars. The Model S was Tesla’s second car. How good could it be?

A test drive opened my eyes. In the summer of 2014, I took a Model S from Southern California to Whistler, B.C. I drive a lot of cars, but the Model S was something else again. It was incredibly fast, silken smooth, and eerily silent. The Model S had no transmission – it didn’t need one. When I coasted down a hill or decelerated, the electric motor turned into a generator, feeding power back into the battery pack and recapturing energy that would have been otherwise lost. Brilliant.

I drove nearly 3,000 kilometres without using a drop of gasoline. Most of the electricity I poured into the Tesla’s battery came from the sun – many of the company’s California Supercharger stations are connected to a solar grid owned by Musk.

Last fall, I took a serious look at buying a Tesla Model S for myself. I loved the way it drove. I loved its greenness, and its efficiency. Even if I charged the Model S at home, paying Ontario’s steep electricity rates, I would still save thousands per year on energy.

But something stopped me. This would be our only car. My wife and I often travel to remote areas where there are no Tesla Superchargers. We are also contemplating a time when we sell our expensive Toronto home and downsize to a condo. Would there be a place to plug in our Tesla?

Then there was the cost: with options, the total cost of the Model S we wanted would be well over $130,000. That was a lot of money. The Model S, along with the newly-available Model X electric SUV, are not rides for the common man.

But we now have the Model 3, the democratic Tesla, the car that could convert millions to electric power and save the company that makes it. Will it work? We’ll know soon enough.

 

[nucklehead]

no

[otherwise]

unless the range goes waaay up or charging is as fast as putting gas in your tank, I don't think it will entice me.

[aGENT]

6 minutes ago, nucklehead said:

no

They've apparently got 190,000-something pre-orders for the things in 24 hours.

 

If they can deliver, this could be a pretty big game changer.

[trek]

Nope. With the CAD/USD it's $45000 for the base model. Probably like a $60000 car after all the options are added in. Much nicer cars available for that price range. Plus the front bumper area without the grille looks hideous.

 

I'll keep burning the dead dino juice.

[DJSkingz]

There will come a day when we will need an alternate form of fuel other than gasoline or diesel. Until that day Big Oil will continue to try and bury any competing forms of fuel until they can extract every cent from oil, or until they can find a way to profit from the alternate forms of fuel.

 

I am almost certain that something has already been invented that can run on water but it will never hit the mainstream so long as 1% of the population holds all of the power.

[taxi]

Definitely has potential.

 

As others mentioned, the combination of long recharge time (longer than filling up with gas) and short range, really limit the versatility of this. Most people will not need more range day to day, but need the option. So it might make a good 2nd car for a family, but probably not a good only option for most.  

 

Overall, this is a pretty great move. Won't replace gas powered cars entirely, but should take a few million off the road.

[Ghostsof1915]

I go about 100 km per day that would be including a side trip to my usual 70km per day to/from work. The model T had 10 or 16 gallons US depending on your tank. Top speed 45 mph. 13-23 mpg US. So what 200 miles on average?  Considering Electric cars are what, not even a decade old in mass production. Just think in the next two decades where we will be. 

[Kragar]

There's potential all right, but it's still a lot of money to put out for a car.  Granted a huge improvement over previous models, and likely more cost improvements to come in future models, as long as they can start making money sometime soon.  Unless Musk is willing to continue to take hits in his quest (which is entirely possible).

 

I worry about the battery performance with using Supercharger sites.  Doesn't fast-charging of batteries hurt their lifespan?  I get that there are huge maintenance cost savings with electric cars, but if you burn out your battery too soon, that will hurt the long-term savings.  

 

He's an interesting guy.  Best of luck.

[aGENT]

21 minutes ago, taxi said:

Definitely has potential.

 

As others mentioned, the combination of long recharge time (longer than filling up with gas) and short range, really limit the versatility of this. Most people will not need more range day to day, but need the option. So it might make a good 2nd car for a family, but probably not a good only option for most.  

 

Overall, this is a pretty great move. Won't replace gas powered cars entirely, but should take a few million off the road.

Yeah I don't think they're targeting the long distance touring market 

 

As you say, as a likely 2nd car that largely acts as the around town commuter/errand car it's a pretty stellar choice. It's fast even in base form, fun to drive, stylish, seats a family of 5 comfortably, above average cargo space (though the trunk opening could be an issue).

 

As I said, if they can deliver this on time and at the projected price... game changer.

[MJDDawg]

I hope he pulls this off. 

[Armada]

I strongly believe this will be the best car in the market. 

 

After seeing how good the Tesla Model S has been. This affordable electric car will surpass that of the Model S. Even the base model is incredible. 

[Grapefruits]

Little too early for that kind of prediction.  Have they even turned a profit yet?

[surtur]

Until they release a viable full size pickup that can compete with the current offerings with gas or diesel I am not interested.

But when/if that happens I will be front of the line.

[CaptainCanuck001]

Just reserved one. After driving a friends Model S I knew I wanted a Tesla as my next car but I could never afford one. 

[falcon45ca]

Considering how few models Tesla has made, and the huge response those have already received, I don't think Tesla becoming a big player in the auto industry is very far off.

 

The Model S is not very old, and they've already produced another vehicle but at a much lower price point? It's not a question of if, but when.

[Violator]

52 minutes ago, Grapefruits said:

Little too early for that kind of prediction.  Have they even turned a profit yet?

Something like sixteen straight quarters of losses they only way they are in business is because nevada is pretty much building the facility for tesla.

 

Was thinking of buying one but will need a gas vehicle in order to drive to Langley from calgary or go traveling in my own area plus i don't own a house so i have no charging capabilities.

[etsen3]

If I could afford a new car right now I'd be looking at this for sure.  The thought of never having to pay for gas again makes me incredibly happy.  Hopefully they would have interchangeable batteries that could be upgraded as technology improves.  If you live in Chilliwack it may be useless.  If you live in the city however, this will become more and more ideal as more charging stations pop up and technology improves.  Don't really know that it's worth it to pay an extra $150 a month for gas on the off chance that I MIGHT take a road trip once or twice a year.

[taxi]

1 hour ago, surtur said:

Until they release a viable full size pickup that can compete with the current offerings with gas or diesel I am not interested.

But when/if that happens I will be front of the line.

Something tells me you aren't their target market.

[surtur]

46 minutes ago, taxi said:

Something tells me you aren't their target market.

Nope