Tesla Executive Presses Auto Makers on Electrification – Wall Street Journal

Posted: Tuesday, August 04, 2015

A Tesla Motors Inc. Model S P85D vehicle sits plugged in at a charging station near a Texaco Inc. gas station in Nephi, Utah, on April 7.
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TRAVERSE CITY, Mich.— Tesla Motors Inc.
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came to a conference here with a tough message for other auto makers: stop building compliance cars.

An executive at the Silicon Valley electric-car maker on Tuesday bemoaned the inability of General Motors Co.
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and other manufacturers to have better success selling their own battery-powered vehicles.

Instead, most other auto makers are producing electric cars to meet minimum regulatory standards while continuing to build and sell less-efficient gas-engine vehicles in droves, said Diarmuid O’Connell, Tesla’s vice president of business development.


Mr. O’Connell said in an interview with The Wall Street Journal the problem for other companies is a lack of “compelling product” in showrooms. Other electric cars tend to be more utilitarian with uninspiring designs and a focus on low cost, he said.

“For the most part, everyone else is producing compliance vehicles,” Mr. O’Connell said. “I look at some of the vehicles and think of toasters.” He said cars are aspirational and electric vehicles should be designed accordingly to attract shoppers.

GM and other auto makers contend selling electric vehicles, hybrids and other cleaner cars is challenging as low gasoline prices send consumers flocking to less-efficient—but more profitable—pickup trucks and sport-utility vehicles.

Sales of trucks currently make up more than half the U.S. market. “Is that a bad thing? No, it’s a representation of the market,” said John Bozzella, head of the Association of Global Automakers, a Washington advocacy group representing Toyota Motor Corp.
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, Honda Motor Co.
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and others, in a presentation Tuesday.

“It’s a big country out there,” Mr. Bozzella said. “Right now, customers are choosing light-truck segments.”

Tesla, founded in 2003, gained success selling electric cars starting around $70,000 and able to travel more than twice as far on a single battery charge than other vehicles. Tesla has a market capitalization surpassing $33 billion, more than half the value of GM, despite founder Elon Musk’s guidance earlier this year that the company likely won’t be profitable until 2020.

A Tesla Motors Model S is seen at a parking lot of the Tesla Motors Headquarters in Palo Alto, Calif., on April 30.
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Other auto makers are investing in electric vehicles. GM is readying the Chevrolet Bolt, a 200-mile range electric car due out in 2017. Germany’s Audi
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and Nissan Motor Co.
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of Japan also have promised electric vehicles with ranges similar to Tesla’s models.

But they point to significant challenges getting customers to buy electric vehicles or other cleaner cars. The 15 fully electric vehicles on sale last year registered 0.4% of overall auto purchases in the U.S., according to the Alliance of Automobile Manufacturers, an industry lobbying group in Washington that represents nearly a dozen auto makers including GM, Ford Motor Co.
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and Toyota.

Hybrids, plug-in hybrids, electric vehicles and clean-diesel vehicles represented about 5.6% of sales in 2014, according to the Alliance.

Tesla’s Mr. O’Connell said he nevertheless “absolutely” advocates toughening federal fuel-economy standards that require auto makers sell vehicles averaging 54.5 miles a gallon by 2025. The mileage target suggests manufacturers should jump to develop electric vehicles, he said.

Other auto makers are more cautious, looking forward to a review of the standards in 2017.

Mr. O’Connell said other manufacturers in coming years can meet the federal standards and separate regulations for zero-emission vehicles in California.

Fuel prices, he said, will rebound. “The inexorable trend of gasoline prices is ever higher,” he said. “We are going to see a return to higher gas prices.”

Tesla benefits from earning money trading credits for exceeding regulatory targets. Mr. O’Connell acknowledged the benefit but emphasized Tesla’s goal of producing mass-market electric vehicles. “We didn’t set up the company to make money on credits,” he said.

Mr. O’Connell said the adoption of electric plug-in vehicles has been more rapid during a similar time frame than for hybrids.

He pointed to 480 charging stations across the U.S. providing necessary infrastructure to charge electric cars to 170 miles of traveling range in a half-hour.

Write to Mike Spector at mike.spector@wsj.com

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