Tesla: The Crown Jewel
- BizzNeeti
- Feb 5, 2020
- 9 min read
"We could definitely make a flying car – but that's not the hard part. The hard part is, how do you make a flying car that's super safe and quiet? Because if it's a howler, you're going to make people very unhappy."
Tesla might not have produced flying cars (YET!!), but it has surely changed the face of the automotive industry, and has also helped catapult Elon Musk to cult status.
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Can you really separate brilliant showmanship mixed with an air of superiority from Elon Musk? In this third part of the series, we take a look at Tesla, a brand that has become synonymous with and epitomises Elon Musk.
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It was, however, two Silicon Valley engineers who were the visionaries behind Tesla Motors, what we now know as Tesla Inc. Martin Eberhard and Marc Tarpenning felt there was an opportunity of disruption in the automotive sector through Electric Vehicles (EVs), especially after GM had to recall EV1 and had them destroyed. However, it was AC Propulsion's tzero that actually provided the inspiration behind this venture. When Eberhard first rode the car, he was amazed to see the acceleration in an electric car and became doubly sure of what he was planning.
Research showed that the electric motors have two great advantages:
generation of huge amounts of torque in short spans of time when the accelerator is pressed,
and regenerative braking, the process by which the car’s battery is recharged using the energy lost due to braking.
They believed that gasoline cars often turned in poor mileage numbers when the high BHP engine, essential for hard acceleration, is not driven fast and hard. Tesla would be different and that's how it would prove to be groundbreaking: Tesla’s research proved that doubling the horsepower from 100 HP to 200 HP added only about 25 lbs, and increases efficiency, thus leading to a fast but highly efficient and "greener" vehicle.
"At one end of the spectrum, the Tesla Roadster has higher efficiency and lower total emissions than the best of the most efficient cars. At the other end of the spectrum, the Tesla Roadster accelerates at least as well as the best sports car, but it's six times as efficient and produces one-tenth of the pollution."
With the body and the chassis being provided by Lotus (based on its famous Elise), Tesla Roadster was the first project that the duo undertook. Eberhard was the CEO and Tarpenning, the CFO. Musk came on board as the Chairman, being the majority investor in a USD 7.5 million funding round. They were ably guided by Straubel who was the CTO and Malcolm Powell, who was the VP of Vehicle Integration.
Things were not so smooth though. Roadster, which was supposed to be shipped by 2007, was behind schedule which led to a spat between Eberhard and Musk, as Musk wanted to capitalise on the early mover's advantage. A shuffle in leadership led to Eberhard being replaced by an interim CEO Michael Marks, who was given the duty to stabilise the structure of the firm. He was then replaced by a more permanent option, Ze'ev Dori, the former CEO of car-alarm maker Clifford Electronics, in Nov 2007. It was he who oversaw the Roadster transitioning to the shipping stage in the first quarter of 2008. Currently, Musk serves as the CEO of the firm.
Elon Musk's mantra has always been “Build sports car. Use that money to build an affordable car. Use that money to build an even more affordable car. While doing above, also provide zero emission electric power generation options. (sic)”
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The Tesla Roster
While Tesla is predominantly a vehicle manufacturing firm, it also offers products and services in a few other domains, notably, energy storage, solar panels, lifestyle products and even retail merchandise.
Let's take a peek into the popular products built by Tesla, and a few which are in the pipeline.
Roadster, as we have mentioned before, is the EV with which Tesla started its journey. Built on the Lotus Elise framework and chassis, it is the first all-electric production car to have used Lithium ion batteries and travel an impressive 320 km per charge. The base price was set to about USD 1,00,000. In fact, a Roadster 2020 is also in the pipeline. Originally unveiled as Model R in 2017, it is supposed to be the quickest car, with an acceleration of 0-60 mph in 1.9s and a top speed of +250 mph. Sales are scheduled to commence in the third or fourth quarter of 2020, with the base price estimated to be about USD 2,00,000, but the first thousand, part of the Founder's Series, might be priced USD 50,000 higher.
In March 2009, the prototype for the 518 HP Model S was introduced. This sedan is what helped Tesla rise to prominence. With the base model priced at around USD 80,000, by the second quarter of 2018, Model S had already crossed 250,000 units in sales, and was able to give stiff competition to Nissan Leaf when it came to the highest selling EV. It also provides a record breaking EPA range (which is linked to the Electric Car Range and Efficiency) of 373 miles. But Model S is just not about EV and efficiency - the Autopilot feature introduced in this vehicle has changed the driving experience forever and has brought about a disruption in Electromobility.
February 2012 saw Model X getting unveiled. It was however, in 2015, that Model X finally transitioned to the shipping stage. A crossover SUV based on the Model S framework, one of the main talking points of Model X is the falcon wing doors that are used, instead of the traditional ones. With the base model priced at about USD 80,000 - USD 85,000 (sometimes USD 1,00,000 with add-ons), ModelX crossed 1,00,000 units in cumulative sales in September 2018.
Model 3 is what Musk and Tesla had envisaged and targeted to achieve. They started with high-priced vehicles (Roadster and Model S and X), then started producing cheaper vehicles (Model 3) and then tried to improve the underlying battery and power train technologies with the revenues earned from the sales of these vehicles. Model 3 was finally introduced in March 2016, and Tesla had a whopping 325,000 reservations at a base price of USD 30,000 within a week. Cumulative deliveries totaled around 370,000 units by September 2019. It ended 2018 as the best selling EV, with a record 139,782 units being delivered in the US. Musk also predicted in 2018 that, moving forward, the global demand for Model 3 would be between 500,000 units-1 million units per year.
Model Y was unveiled in March 2019, and is a Compact Utility Vehicle (CUV), whose sales are expected to commence in the first half of 2020. Designed for a mass market price point, Tesla expects it to surpass Model 3 in sales.
Cybertruck, on the other hand, was unveiled on 21st November 2019, and this battery powered light commercial vehicle looks to be straight out of one of them dystopian movies! The base price of the rear wheel drive is expected to be around USD 40,000 dollars, while that of the all wheel drive is expected to be about USD 10,000 dollars more.
As we have mentioned before, Tesla is not just about cars! Tesla is also trying to bring about a change in the type of energy we use in our everyday life, as well. Tesla sells solar panels to residential and commercial customers. In 2015, Tesla also introduced its Powerall Home and Powerpack industrial battery packs. The packs are used to store the converted solar energy and are quite important for Tesla's solar roof venture. Tesla's acquisition of SolarCity has also helped in this pursuit to manufacture and sell solar roofs and Musk's ultimate aim to transition to renewable energy.
In November 2016, Tesla announced its taking over of the American Samoan Island of Ta'u. It converted this island, with a population of 600, to a solar and battery powered microgrid, as a beta to showcase its ability to provide 100% renewable energy.
In July 2017, it became known that Tesla has been able to procure a contract to install the world's biggest grid-scale battery in South Australia. On 1st December of the same year, Hornsdale Power Reserve, which has a total capacity of 100 megawatts, was connected to the grid. In November 2018, we saw Tesla's solar panels used for a noble pursuit, after 700 solar panels were used to power a hospital in Puerto Rico, providing essential services in the aftermath of Hurricane Maria.
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What sets Tesla apart, ofcourse, other than being all electric
Let's see how Tesla is differentiating itself from its competition and the rest of the market (we would mostly be focusing on the automotive products). The differentiating factors can be technological and technical, marketing and sales related, and operational. And fun.
Supercharger technology is something that has changed the game and tipped the scale in Tesla's favour. It is used to deliver energy rapidly to the battery, and then slows down once the battery starts getting filled. Now to leverage this, Tesla has also built a wide supercharger network and has used IoT so as to integrate the same with the Tesla app, thus ensuring a seamless experience for the users. It has been seen that adopting the supercharger technology has been much more beneficial, even economically, than using gasoline. Tesla is also trying to expand its supercharger network and is looking to build those in hotels, shopping malls, restaurants, etc.
Another factor that's been important in the scheme of things is the high miles per charge, i.e, mileage for an EV, which has led to Tesla cars being embraced widely. Even Roadster provided 320 miles per charge. The firm has, however, upped the ante with the newer models, which can give upto 370 miles per charge. This, slowly, is helping Musk's promise, that the cars would be able to run for 1 million miles over their lifespan, come to fruition. This can be attributed to the highly sophisticated Lithium ion batteries that Teslas use.
Talking about batteries, Tesla is also trying to manufacture them on its own, and a lot of R&D is going into it. This would help Tesla, in the long run, to reduce the margins and share a minimal amount of data with Panasonic, who currently are producing the batteries. In fact, Tesla has also shown an interest in building a battery plant in India! This, if found to be feasible, would aid Elon Musk's aim to achieve Vertical Integration in the company.
Tesla’s referral program through which the referee and the referred are compensated, has also helped increase the popularity of the cars and solar products. This incentivises more people to refer the products to their friends, relatives and acquaintances, thus increasing the potential user base as well as furthering goodwill and trust in their user base.
The Autopilot feature that Tesla has come up with is something revolutionary. It is used to assist the drivers with taxing activities, and helps them to steer, park, optimise routes through Navigate feature and accelerate and brake automatically within its lane. While the hardware is capable of providing the cars with the Autopilot features now, in the future, it can provide full self-driving or autonomous features too. Software updates would be required though.
Tesla's integration with technology is also something that's worth mentioning. Right from the time you book a test drive session to purchasing the car and then to servicing, the entire lifecycle is accessed using the app.
For example: to upgrade/buy a new feature, we would have to use the Tesla app, which offers free software updates, as and when they come in. This epitomises Tesla and Musk's vision of having an integrated interface in which operations, marketing, managed services, etc work in tandem.
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What's next?
Tesla is currently valued at around USD $100 billion, which is more than the market cap of GM and Ford combined, in spite of the fact that Tesla produces a mere fraction of vehicles produced by its competitors.
Musk won't be perturbed with the latter stat though. With Tesla just about crossing the 360,000 mark for deliveries that he had promised at the beginning of the year, he deserves to bask in the new found glory.
The road hasn't really been that easy for Tesla and Musk, right from the beginning, and there were rumours that Musk even thought about selling Tesla to Google back in early 2013 when the stocks had nosedived, but later changed his decision after Tesla's stock prices started picking up.
Musk and Tesla have also been hit by several lawsuits and complaints, even from the SEC. Mishaps due to technical reasons, such as fires in Model S, autopilot accidents have also happened, and the company have had to refine their systems so as to prevent further occurrence of these mishaps.
The company, led by Musk, has persisted. They have entered China, which is the largest vehicle market, and this has actually helped them increase their sales in this short period of time. The Gigafactory in China is where Tesla is producing their cars, taking advantage of China's comparatively cheaper labour market. With two consecutive quarters of profits this year, Tesla can be considered to be in a much more stable position than before.
What would also be encouraging for Musk is that investors are slowly starting to believe in the Tesla story and in Musk. This is important as Musk has been, more often than not, berated for his eccentricities and for being a little over-the-top, especially in his predictions and expectations. The belief in Tesla stems from the unlimited potential Tesla has to still grow and actually be a market leader in the future. The future is EV, something that the original founders of Tesla had predicted and to give due credit to Musk, something that he too fervently believes in.
With Tesla being the prime innovator when it comes to EVs, it's not surprising that its stocks are now bullish.
The entry into the Chinese market and an expected increase in margins owing to decrease in battery prices are also factors that might help Tesla, moving forward, and so, people are betting on Tesla to be the company that takes us forward in manufacturing high range EVs and keep the ecology and environment in mind, while doing so, especially at a time when it's expected that government all around the world would incentivise people to adopt EVs.
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