Tesla — Disruptive or Not? (+ Clean Transport Link Drop)

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To start of this clean transport drop, I want to highlight a not-so-insightful Harvard Business Review article that argued that Tesla is actually “not as disruptive as you might think.” Not eager to give the article a ton of Google juice, I’ll link to the Tesla Motors Club forum post about it, where I found it.

There’s a comment on the article that is many times better than the article, imho. Actually, there are a handful of good comments. But this one from a Dr. Dean Dauger is superb, and is one of the best I’ve seen at explaining one key macro reason why Tesla has so much potential:

Bartman’s argument falls flat on the notion that “competition will be fierce”.

Since 2008 Tesla produced BEVs with more than 200 miles of range, starting with the Roadster. In those _seven years_ the “Competitive Response” from incumbent automakers is pathetic, offering less than 100 miles of EPA-rated electric range. (The Mercedes B-class and Toyota RAV4 are not competitive responses because they use licensed Tesla technology.) EV sales are slow because most people don’t want short-range EVs like those; those are demand-constrained. They want EVs like Tesla’s, which today are supply-constrained. Bartman seems blind to this vital difference.

Perhaps Bartman is confused too by vaporware, aspirations that do not yet exist from incumbent automakers, like Chevy and Audi, who are all talk right now about long-range BEVs. Their actual response to the Model S today is to increase the horsepower in their gas engines. Tesla responds with a 691-hp dual-motor P85D and autopilot, showing Tesla will keep making their product better than any comparable gas car.

The reason why gas car makers can’t respond is that the attempt exposes themselves to fiscal jeopardy. Bartman’s team needs to understand the Innovator’s Dilemma.

GM, Ford, MB, Toyota, etc., have billions of $ of assets invested in gas car tech in the form of intellectual property, tooling, manufacturing assets, ongoing R&D, and human resources. To fully engage in BEVs, these gas car automakers would have to write off these billions in assets immediately, which is _fiscal suicide_. They’d be killed in the stock market and that CEO would be kicked out that quarter. Add that no one gas car maker will go first. It’s the Prisoner’s Dilemma.

Instead these automakers must amortize these gas car assets over 20 years, moving only gradually away from gas car tech. Unable to “shift … quickly”, the incumbents’ “competitive response” will be lackluster at best and inadequate to close Tesla’s 7-year lead.

Therefore, for the current foreseeable investment timeframe, Tesla Motors, with no assets in gas car tech, can fully engage in BEVs facing very weak BEV competition, giving this young carmaker a very unique advantage and unique opportunity to disrupt.

Bartman also fails to recognize the advantage of Tesla’s 2.5-year-old Supercharger network, a major part of what makes Tesla cars practical. Except for Nissan with CHAdeMO, the competition gives no response to that infrastructure advantage. And CHAdeMO, only half the charging speed a Supercharger, is years behind both in deployment and effectiveness.

Look for these critical pieces of a sensible BEV business plan, which incumbent automakers are missing:

1. A compelling, production 200-mile BEV – Anything less than offering one to buy today is a distraction from their embarrassment.
2. A high-speed EV charging infrastructure – The offerings from Nissan and BMW are a half step. Where are the other makers?
3. An inexpensive battery supply requiring the economy of scale of a Gigafactory – The incumbents have nothing to show.

Tesla’s 1 & 2 are growing unimpeded and building of Tesla’s 3 is well underway. The incumbents might sandbag their 1, but 2 & 3 are far too big to keep secret and take years to design and build; if they exist we would have seen them. With incumbents’ inability to mount a “fierce” response to Tesla so abundantly clear, the opportunity for disruption is Tesla’s.


 

Couldn’t have said it better (which is why I quoted him). Full disclosure: I’m long TSLA.

On to the other clean transport stories from the week that I think are worth a view or two (other than our own):

More Tesla Stuff

tesla-model-s-p85d

  1. I Drove The Tesla P85D, And Now Nothing I Drive Will Feel The Same Way Again
  2. Bosch Automates The Tesla Model S
  3. Latest Morgan Stanley Prediction
  4. GM, Tesla Compromise in Maryland
  5. Bidness Etc. Gaffe Rivals 60 Minutes

Other Electric Vehicle Stuff

  1. China EV Sales In March 2015 (note that there are a number of estimates/guesses that go into this)
  2. Multi-Gear EVs Are Probably The Future
  3. Hanergy & AMR To Further Solar Car Development
  4. More Plug In Hybrids Than Electric Cars In Europe Soon
  5. Scotland’s Largest Electric Car Club Charges into St Andrews
  6. NASA Showcases Incredible Electric Modular Robotic Vehicle
  7. Porsche 918 Spyder Tops 200 MPH In The Australian Outback
  8. With Better Charging Network, Nissan LEAF Could Sell 50,000 Units Per Year

Bicycles & Transit

  1. #BikeChat: Roads Were Not Built for Cars
  2. Planning Better Bike Infrastructure with Wikimaps
  3. 10 Tips for Cities Ready to Replace Car Parking With Safe Space for Biking
  4. Getting More Out of Transit By Making It Easy to Walk or Bike to Stations
  5. FHWA Will Help Cities Get Serious About Measuring Biking and Walking
  6. San Francisco: A World-Class Transit Map Unveiled
  7. New Seattle Streetcars Begin Tests
  8. Dallas Streetcar Opens Today

Other

  1. NRDC Action Fund Launches Ad Marking Mitch McConnell’s First 100 Days, Unveils Website Showing Congressional Villains and Heroes on Climate & Clean Air
  2. Congress Has Made Undermining Energy And Environmental Laws The Focus Of Its First 100 Days
  3. This Was The Hottest 3-Month Start Of Any Year On Record

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48 thoughts on “Tesla — Disruptive or Not? (+ Clean Transport Link Drop)

  • What is much left behind in articles and comments is the fact that Gigafactory is supplied with clean Solar and Wind next to it. it is a production chaine of clean car and clean energy to produce, and I suppose clean energy agreements for charging.
    Other carmakers have none of this.

    • 1) The Gigafactory doesn’t exist yet and even when it is built, it probably won’t get solar & wind for a while.
      2) Most of Tesla’s chargers don’t have solar either.
      3) This really doesn’t matter for now. Eventually they’ll do that stuff but for now, they need to spend their capital on superchargers, Model X tooling, Model 3 development, and, most importantly, the gigafactory.

      • I’d bet the solar panels are on the roof and hooked up when the first portion of the GigaFactory opens. And I wouldn’t be surprised to see the wind turbines as well.

        There’s no reason to stand the turbines until the main power line is in place. And no reason why not to stand them when it is.

        Many of the SuperChargers don’t have panels, but Tesla is plugged into SolarCity and I would expect that’s where the Tesla panels are. There’s not enough room on top of SCs to power them.

        • I’d take that bet. I doubt they’ll have them up for a few years. But again, I don’t blame them at all for not doing so. They need to save their capital for the superchargers, Model X tooling, Model 3 development, and the gigafactory.

    • ***Gigafactory is supplied with clean Solar and Wind next to it***
      How is that going to improve battery costs down?

      • Wind is our cheapest way to generate electricity and solar is pretty much tied for second cheapest.

        Once the turbines and panels have paid for themselves Tesla will be using almost free electricity.

  • I agree with much of Bartman’s post. Of course it is possible (not saying likely) that one of the big boy could “spin off” a new company (think the failed Saturn approach). The you put in a bunch off cash and whatever EV IP they had and own the stock. The company then would follow the TESLA model and sell directly. You can’t can’t can’t sell EV thru your ICE dealer. In software the idea is to obsolete your current product with a new one, before someone else does. But this is so against the thought process of big ICE producers. But not likely to happen. My guess is we will see cars from BYD, or other Asian producer; before big US/EU producers get their act together. But I hope, hope, hope, I’m wrong.

    • Chinese companies are a joke at this point. There is not a single Chinese company that does very well outside of the rigged joke that is the Chinese economy.

      The only reason US companies haven’t dominated that entire country yet is because their government cheats for domestic companies….

    • I’d give GM more credit though.
      GM has researched and Licensed any and all new chemistry that has shown promise.

      The “problem” is GM and Europe are designing PHEV’s, and Toyota with it’s hybrid, on the expectation of a slow incremental improvement in batteries. But, things are going to be shaken up in the next two years, which may make Tesla’s direction apparent to them.

      PHEV’s, like the Volt and the German offerings, and Toyota, are built on the expectation of a low supply of batteries.

      As for Toyota and fool cells, NOTHING justifies Hydrogen at this point.

  • Tesla is hugely disruptive. They have lots of innovations that are great . . . but that post points out two rather low-tech HUGE advantages that Tesla has:
    1) A deployed high-speed recharging network (the Supercharger network). Tesla is the only company that provides a widely distributed fast-charging network able to recharge cars in under an hour. Nothing high-tech about this . . . it is just first-mover advantage. If the GM Bolt and Tesla Model 3 both came out at the same time with similar specs and the Tesla cost a little more . . . I’d still go with the Tesla Model 3 due to the supercharger network.
    2) The Tesla Gigafactory – This is old-fashioned industrialist mass market advantage. If Tesla is able to successfully cut 30+% off the cost of batteries, they’ll have a HUGE advantage over every other EV maker in being able to offer affordable 200 mile range EVs.

    It is still risky though. If the gigafactory fails to push down the cost of batteries, then Tesla may find itself in trouble. But other than that, Tesla will fundamentally change the auto industry. Right now they are just a niche luxury automaker.

  • Tesla has already proven how disruptive they have been, in several aspects.

    From Bob Lutz and the Chevy Volt.
    Supercharging Infrastructure.
    Direct Sales model
    Significant automotive updates for existing customers
    Gigafactory
    … etc.

    • Tesla is disruptive: 35,000 vehicles last year at $100,000+ average price. When you OUTSELL the BMW 5 and 7 series, your disruptive.

      That’s 35,000 vehicles that will not GULP gallons of fuel for the 15 year lifetimes, and these replace/display high performance high fuel consumption luxury vehicles.

      That alone could have dropped California gas prices by 10 cent a gallon last year, by lowering demand! At least in LA.

      • 15-year lifetimes? Half these cars will still be roadworthy and going for a premium in collectors’ markets 60 years from now.

  • Tesla is doing fine, but to really stick the pedal too the metal it will have to team up with one of the major players, and conversely one of the major players are going to have to “bite the bullet” and dump years of ICE R&D
    Be interesting to watch who embraces the future ( and reality;)

    • Why could Tesla not grow into one of the major car manufacturers?

      If they continue to do things right why could they not continue to expand?

      Tesla has talked about building 500,000 cars per year. That would put them in the top 30. Mazda does 1.3 million. Mitsubishi, 1.2 million.

      http://en.wikipedia.org/wiki/Automotive_industry#By_manufacturer

      (Not saying they will. But not seeing the need for someone outside to help them up.)

      • Perhaps not in the US but a European partner would speed up their entry into EU markets.

  • Another point, while I enjoy reading about Musk and Tesla in general, I would like to see more articles on the Leaf and other models more readily available to the general public.
    Sometimes I confuse Zachary with Clarkson!?;)

  • Multi gear EVs? Doubt it. Nit for mass market. Go the other way. Gearless. Hub motors.

    • One guess would be a small high torque low speed motor in the back to get the car started and a super efficient medium-high speed motor in the front. you get four wheel drive and even better efficiency. Hub motors are even better as you remove all of the drive-train.

      • You are thinking a la Tesla P85D. True and it works. The same thing done in that car could be done with hub motors. I vote for that on the next gen Roadster. Lower weight, higher efficiency and better aerodynamics on the next gen Roadster would be a real winner. After all, a roadster would have to be faster than a P85D. If they did all that, they would also need a very high C rate battery pack to maintain, not just meet high speeds. At that point, it would be in a rarified area of true race cars. The Wrighspeed X1 comes to mind. Not actually race, but up there.

        https://www.youtube.com/watch?v=Hc94QvJc5VA#t=212

    • Hub motors or one motor per wheel with the motors mounted on the frame and connected with a short shaft? Significant energy loss with the shaft and joints?

      • Take a look at a typical EV. There is a reduction gear, half shafts, and differential. Thats a loss, weight, and space. All increasing cost and reducing efficiency. Hub motors are shunned because of unsprung weight and because they are not off the shelf. There are some issues of balance and air gap as well. However, there are clear advantages. Take the P85D. It has four half shafts, two motors, and two differentials. Thats a lot of hardware and weight, not to mention cost.

        Its easier to have a motor and gears, but not necessarily optimal.

        Tesal started out with a conventional gearbox and tossed it when it found the torque was difficult for a normal gearbox to handle.

        Good move.

        They then stopped short, and probably wisely, because hub motors would be adding another technical problem. Hub motors might not have achieved the highest power motors, but it would not matter as much if all four wheels had them.

        Hub motors are appearing in small motorcycles and bicycles.

        Protean has been working on hub motors for cars for some time.

        Eric Wright of Wrightspeed, a co founder of Tesla, hints at hub motors for his next X1 variant by saying four motors will be used.

        http://www.proteanelectric.com/en/

        Theres a technical discussion at the end of this

        http://www.electric-vehiclenews.com/2010/08/wrightspeed-hints-at-1000-hp-all-wheel.html

        “If Wrightspeed add reduction gears then all the above numbers get thrown out the window, but the trade off is 20 – 30% power loss through the mechanical transmissions, in both acceleration and more importantly in regeneration, resulting in a reduction of the vehicles potential range by 20 – 30%. A gearbox also adds approx 20 kg to each motor which in this case means a 50% increase in weight and resultant reduction in power density.
        There are direct drive in-wheel motor designs being developed at the moment that are specifically designed to work to a maximum of 1500 rpm. These fall within the US Department of Energy’s realistic targets for 2015 and 2020 (1.3 and 1.6 kW/kg, respectively), and not hyperbole figures like 5 kW/kg peak power density as quoted by Evo.”

        • With four smaller motors (same number as hub motors) mounted inboard there would be no differentials, just halfshafts.

          That would deal with the unsprung weight and flexing problem. The tradeoff would be some energy loss in the (short and simple) drive trains.

          • Good point. But the real issue is the reduction gear. Its all about how electric motors like to operate at high rpm, at least off the shelf. Mechanical efficiency is more of an issue than weight. The added weight of the half shafts reduces efficiency much less than the reduction gear. So if the inboard motors were designed to operate at lower rpm, (that adds weight, too) the result would be good efficiency and lower unsprung weight. It uses up more space, but I agree this might be the most desirable situation.

          • Inboard motors might need to be a bit (5%?) larger in order to even out the energy lost in the halfshaft system but other than that wouldn’t they be identical in RPM to hub motors?

          • Yes. Motors are larger and heavier operated at lower rpms. This can be compensated somewhat by having more poles and increasing voltage, but there are limits.
            Thats why I am thinking about the half shaft idea. Now I slept on it, I see some things tilting in favor of the hub motor. EVs can use motors for braking. Brakes can be reduced or eliminated. Front only brakes could work, for example. The half shafts also include universal joints. That adds to the weight and expense.
            It gets down to cost and simplicity factors rather than efficiency.
            Another interesting option is chain drive. Very light and efficient. No need to drop the reduction gearing, the efficiency is still high.
            That is probably the cheapest and lightest of all, provided its rear wheel drive only.
            That option was a favorite at Automotive X prize.

      • The shafts and joints should have almost no energy loss, negligible, just weight and space. Only the reduction gear has loss.

  • Is Tesla disruptive? I don’t know. I’d have to be given a clear definition of what that actually means to answer in any sort of reasonable way. But I will mention that us foreign types find it pretty amazing that the United States has a world leading electric car company. We didn’t think you had it in you.

    • The Muricans are a diverse bunch. Lotsa Greens and Red-necks north of the Rio Grande. GE is a top wind turbine producer and fossil fuel turbine producer.

    • Disruptive meaning that they are fundamentally changing an industry. And I believe that is true. You would not have seen BMW, Audi, and Mercedes making so many plug-in vehicles if it were not for Tesla eating their lunch.

      • But now we have to define what fundamentally changing an industry means. Otherwise someone could just say, “Electric cars still have four wheels and travel on roads. They don’t fly or go under water, so no fundamental change.” Without clear definitions people who just want to spread fud will be able to do so. This is important because there are always people out there who enjoy spreading fud much more than you enjoy cleaning it up.

  • IMO, Tesla is most disruptive to the energy sector, in particular transportation. I fail to see what it is that they are doing that established car makers can’t replicate (including the fast charger network), though they seem to have an impact on the high end market. I’m sure that has the attention of some German executives.

    I also object to Chevy or Nisan being pooh-poohed for their EV offering. My Volt is a terrific, affordable car that has helped me cut more than 90% of my gas usage. Rabid Tesla fanboyism – and the BEV purism that underlies it – reminds me that often “the best is the enemy of the good”. Let’s keep in mind that Tesla’s are not without compromises either: the Model S is a big, expensive car, whose long-range usage is not quite as flexible as that of a gas car (yet). Performance-wise, it lacks stamina too. The PHEV alternative, while not completely cutting the ties to fossil fuels, goes a long way towards addressing climate change (in the end, THE big issue).

    • Oh . . . the existing car makers certainly COULD make EVs and chargers . . . but they didn’t. And they were not going to do. Tesla did. And now the other car makers are following. That is disruptive to the transportation sector.

      • At the very least Tesla has greatly sped up the transition away from oil. I really doubt that GM would be talking about a medium priced, 200 mile EV in 2016/17 without the pressure Tesla has introduced.

        More likely they would have gone a lot slower and only come out with their longer range EV when they could no longer meet their CAFE minimum via tweaking their ICEs.

  • Tesla was disruptive and still is, as the article says.

    The problem for the future is scale and the time Tesla takes to launch new products, the Model X is seriously delayed and therefore the 3 is also behind schedule, while the Big Boys (GM, Toyota, VW, Renault-Nissan…) have the advantage of scale and deep R&D pockets, if they really set minds into it, they have the ability to put a competitive plug-in faster than Tesla, but luckily for the startup, the technoly gap is still significant.

    But what about in two or three years time?

    BYD has an ambitious EV program (Qin, Tang, etc), that might catch Tesla in sales this year and they have proved that they can make a car that goes beyond the 100-mile average (e6).

    GM is preparing the Bolt and Nissan is also developing a 2nd Gen Leaf, both to be on sale in 2016/17, if Tesla launches the similarly-specced Model 3 by that timeline, they can still have the edge, but if they delay it further than the launch of those two, it will be hard to recover from that.

    As for the german brands, they are going to have a multitude of PHEV choices by the end of this year, diversifying and extending the market to new customers, and the VW Group is preparing cars with Tesla-like performance by the next couple of years, so Tesla advantage is shrinking and needs to improve their game (New cars, improve range, etc) in the next couple of years if it wants to be a step above the competition in 2018.

  • Harvard is just jealous of Stanford.

    Learn to play Harvard.

    • Harvard are slow learners, they’re still backing big oil.

      Look at their defensive stand on divestment from coal, a global phenomena.

      They don’t see the geometric curves.

      Stanford has better math, economic majors it seems.

  • ***and building of Tesla’s 3 is well underway***
    I see no evidence of this

    • GigaFactory.

      • I wish Tesla well. I was a sceptic regarding the Model S. I didn’t think that a newish car company would produce an awesome product like that. Also, I underestimated their ability to roll out the supercharging network. So maybe they can produce a mass market car that is cheap enough to garner 100s of thousands of sales a year and has a 200 mile range. Tesla has cajones. They are taking a huge risk on the Model 3. Musk says that it won’t look like other cars. That amplifies the risk. The Model S looks elegant but quite conventional. I hope they succeed.

        • As to the looks of the Model3, Musk did make some clarification this past winter.
          Saying something to the affect of they have some really different ideas for the looks and specifications, but those are going to be saved for a version 2 of that model. When it first comes out it will be more similar to what people are used to cars looking like.
          So I think that they have already considered the acceptance risk you mention, and will aim more for mainstream adoption before implementing the more radical ideas for those that would want them.

  • That bit about the “Innovator’s dilemma” is genius. I really think that is a huge issue that the traditional car makers have right now. I think one of the reason we have not yet seen a PHEV SUV, truck, or minivan is that the car companies make big profits on their gas versions of those cars. If they start shipping PHEVs of those types of vehicles then their profit margins will significantly shrink. So they haven’t done it yet and they’ve been dragging their feet. I think there has been a ‘gentlemen’s agreement’ not to ship those PHEVs. But Mitsubishi has broken the agreement with the Outlander PHEV and more will soon follow.

    Make a profit by building and selling PHEVs and pure EVs is much harder than making a profit with traditional ICE vehicles. So they are reluctant to move into that difficult space. But if Tesla succeeds in bringing battery prices down with the Gigafactory then there will be a tipping point wherein they will have no choice.

    • Mitsu has NOT broken that agreement in the US.
      Still waiting…

  • Here’s the important point:

    It’s a classic “sustaining innovation”—a product that, according to Christensen’s definition, offers incrementally better performance at a higher price.

    – At a higher price than a standard car, but not at the market segment it competes in. In that segment it’s actually a better price/performance ratio.
    – Secondly, it’s the only car in even the luxury segment that offers air-suspension.
    – Third, you get a premium stereo that’s more effective in a quieter EV.

    It can’t be a disruptive force, yet, because it’s not yet targeting the median price point. BUT, the future will bring EV costs down to below ICE vehicles, so Disruption is only a few years away.

    – Not disruptive because Volt sales still exceed Tesla sales. But this is purely a number to number comparison without any price consideration. It’s incrementally harder to sell more expensive vehicles. The fact that Tesla sales numbers are so close to the Volt is ShOcKiNg!

    Bartman thinks a neighborhood electric will be disruptive. Good Luck With That.

    • BMW is responding, by adding self parking to the 7 series. Wow.
      But you have to admit the i3 is one very efficient car, and BMW is talking about offering battery upgrades. That is something that would help unblock a sales dam for those waiting for those longer range EV’s.

    • Thanks this provided some good material for thought and hadn’t run across it before.

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