Tesla gains new admirers as it heads towards the mass market – The Economist
IF COMFORTABLY outpacing your rivals is the main measure of automotive achievement, Tesla’s electric car is a resounding success. The Model S last year outsold its nearest luxury rival, Mercedes’s petrol-engined S-class, by 30% in America. And in its top specification the Tesla will also beat the German car in the race from 0-60mph. As a battery-maker Tesla is also moving fast. This week it announced plans to build a “gigafactory” in America to make lithium-ion power-packs, that it hopes will propel its vehicles to the mainstream.
Tesla’s acceleration has been rapid. Launched a decade ago by Elon Musk (pictured), a founder of PayPal and serial tech entrepreneur, last year it sold around 22,000 cars and by the end of 2014 hopes to be making 1,000 a week. In early 2015 Tesla will add the Model X, a medium-sized SUV, to its range. However, Tesla’s impressive growth has not yet translated into significant profits. A series of battery fires also briefly dented sales growth last year.
Nevertheless, Tesla’s shares surged on February 25th, to value the company at over $30 billion (GM is worth only twice as much) after Morgan Stanley, a bank, joined its adoring fans. It reckons that the battery factory will not only propel it along the road to mass manufacturing but also make it a leading competitor in low-cost energy storage, the key to making renewable energy more practical. The bank is also confident that Tesla’s Silicon Valley location will put it in the driverless front seat of autonomous motoring. A recent meeting with Apple, and the iPad-like control panel of the Model S, have convinced some observers that a takeover and an iCar are around the corner, although Mr Musk insists that his firm is not for sale.
Tesla has defied its doubters (especially among petrolheads) with the success of the Model S, a smartly styled luxury saloon. It may not share the outrageous looks of a supercar like the Lamborghini Aventador, but it has the performance without the $400,000-plus price tag. The most basic Model S costs $64,000 in America (after subsidies). This has won it rave reviews in the motoring press, often sniffy about other electric cars with limited ranges and duff looks. By designing a large car with a big battery pack, Tesla has diminished “range anxiety”—one version can do 310 miles (500km) between charges.
But Tesla is so far in a niche, albeit with an incredibly loyal base of wealthy buyers. A Tesla is a more stylish way of displaying environmentalist credentials than a lumpen Toyota Prius and more practical than a Ferrari—putting two child seats in the back boosts the capacity to seven passengers. Mr Musk is a convincing salesman, at least to rich Californians.
The prospects for electric cars have taken a turn for the better. China, a market that Tesla is eyeing for a third of its sales, last month announced strict new fuel-efficiency standards that may make life hard, if not impossible, for importers of big petrol-engined cars. The European Union this week confirmed new curbs on tailpipe emissions, to be imposed from 2021.
Even so, becoming a mass-market “General Electric Motors” will not be easy. In about three years Tesla will launch the Model E, a small saloon with a range of perhaps 400 miles, costing just $35,000 or so—if its new factory can make batteries that are good and cheap enough. It will have to, because its buyers will be using it as an everyday set of wheels, not an indulgence. And it will have rivals: BMW’s i3, launched last year, is aimed at the same market. Other carmakers will follow suit.
For buyers who just want the cheapest means of getting from A to B, regardless of the vehicle’s looks or performance, the lowest-cost petrol cars will be hard to beat for some time to come. Traditional carmakers talk of one day serving such customers with “mobility as a service”—fleets of self-driving taxis. Tesla, which is also investing in autonomous driving technology, could be a strong contender in such a new market: unlike its older rivals, it would have no legacy business, of factories churning out petrol models, to be disrupted.