Chang­ing the world as we know it

Driven - - Contents -

No other mo­tor man­u­fac­turer em­braces the idea of elec­tri­fi­ca­tion as com­pre­hen­sively as Tesla Mo­tors, and the Tesla Model 3 is set to take that idea to the masses be­cause it is they, not the elite, who bring about rev­o­lu­tion. And what bet­ter way to rally the masses – those mil­lions of car own­ers who go bur­dened un­der the weight of op­pres­sive fuel prices and high main­te­nance costs – than to pro­vide them with an av­er­age-priced elec­tric ve­hi­cle (EV) with equal or bet­ter per­for­mance and safety com­pared to sim­i­larly priced in­ter­nal com­bus­tion en­gine ve­hi­cles (ICE), while re­duc­ing the to­tal cost of own­er­ship with an or­der of mag­ni­tude.


De­signed and built as the world’s first truly mass-mar­ket EV and start­ing at $35,000, the new Model 3 makes its en­trance rid­ing on the coat tails of the rev­o­lu­tion­ary Model S – the fastest ac­cel­er­at­ing se­ries pro­duc­tion sedan in the world, which the au­thor­i­ta­tive Con­sumer Reports rated as the best car they ever tested, break­ing the Con­sumer Reports rat­ing sys­tem with a score of 103 out of 100. Like its more ex­pen­sive pre­de­ces­sor, the smaller, sim­pler, and more af­ford­able Model 3 com­bines range, per­for­mance, safety, and tech­nol­ogy in a beau­ti­fully de­signed car that of­fers zero-emis­sions driv­ing and ex­tremely low run­ning- and main­te­nance costs. The Model 3 takes the fight to its clos­est ICE ri­vals with equal or bet­ter per­for­mance, ar­guably the high­est lev­els of safety in its class, and avant-garde de­sign that in­cor­po­rates some truly fu­tur­is­tic fea­tures such as En­hanced




Au­topi­lot with full self-driv­ing ca­pa­bil­ity.

Fit­ted with a high-ef­fi­ciency elec­tric mo­tor and bat­tery pack, the Model 3 ac­cel­er­ates from 0-100 km/h in as lit­tle as 5.1 sec­onds and a top speed of up to 225 km/h. Add to this a max­i­mum EPA rated range of 537 km on the lon­grange model, the ease of skip­ping petrol sta­tions by just charg­ing your car at home dur­ing off-peak hours, or di­rectly charg­ing your Model 3 at one of the 951 Tesla Su­per­charger Sta­tions with 6,550 Su­per­charg­ers across the U.S., Europe, Mid­dle East, Aus­tralia and Asia, and you have your­self the em­bod­i­ment of an idea that is ready to change the world. And with more than 500,000 pre-or­ders for the Model 3 when it was re­leased on 7 July 2017, with­out any ad­ver­tis­ing, it would seem as if the masses are ready to em­brace the elec­tri­fi­ca­tion rev­o­lu­tion as much as they em­braced the smart­phone rev­o­lu­tion some ten years ago.


With the Model 3 now in pro­duc­tion, and Tesla hav­ing com­mit­ted to de­liv­er­ing more than 500,000 units by the end of 2018, the Model 3 se­ri­ously threat­ens to dis­rupt not just a se­lect few com­peti­tor mod­els, but en­tire seg­ments, es­pe­cially in the U.S. where about half of all Tesla mod­els are sold. The re­ally bad news for legacy au­tomak­ers is that, apart from Re­nault/Nis­san with its Nis­san Leaf and Re­nault Zoe, there are, as yet, no com­pelling elec­tric ve­hi­cles from other au­tomak­ers to chal­lenge the Tesla Model 3. The re­al­ity is that, de­spite the usual PR spin, most other man­u­fac­tur­ers are years away from even launch­ing a com­pelling com­peti­tor to the Model 3, which sim­ply gives Tesla more time and space to es­tab­lish it­self in a new and very dif­fer­ent in­ter­na­tional car mar­ket.

To make mat­ters worse for the legacy au­tomak­ers, none of them cur­rently have a so­lu­tion to source or pro­duce bat­ter­ies at the same scale as Tesla. With the Tesla Gi­gafac­tory now func­tion­ing at only 30% of its planned ca­pac­ity, it al­ready pro­vides more bat­ter­ies than any other fac­tory in the world.

To il­lus­trate the scale of what is re­quired, Tesla in­di­cates that, to achieve its planned pro­duc­tion rate of 500,000 cars per year by 2018, Tesla alone will need today’s en­tire world­wide sup­ply of lithium-ion bat­ter­ies. Ac­cord­ing to Elon Musk, CEO of Tesla, when in full pro­duc­tion the Tesla Gi­gafac­tory will have the pro­duc­tion ca­pac­ity to sup­ply 1.5 mil­lion cars. Now, con­sid­er­ing that Toy­ota and Volk­swa­gen each pro­duce about 10 mil­lion cars per year, th­ese giants each will re­quire at least six or seven Gi­gafac­to­ries to con­vert their cur­rent pro­duc­tion vol­ume from ICE to EV. That’s a lot of Gi­gafac­to­ries that will re­quire mas­sive in­vest­ment.

And yet, fol­low­ing a raft of con­cept elec­tric ve­hi­cles un­veiled at the re­cent Frankfurt Mo­tor Show, apart from Daim­ler, none of the other au­tomak­ers have an­nounced any plans to build even one Gi­gafac­tory. Daim­ler, who un­veiled its own new Gi­gafac­tory in Ger­many in June this year, also an­nounced a new $740 mil­lion bat­tery fac­tory in China. How­ever, while Daim­ler is mak­ing sig­nif­i­cant in­vest­ments in bat­tery pro­duc­tion, they do not pro­duce bat­tery cells, and the new plant in China, like the one in Ger­many, will pro­duce bat­tery mod­ules and packs only, with bat­tery cells out­sourced to an undis­closed party. Un­less the other au­tomak­ers have a se­cret bat­tery sup­ply chain on standby, the re­al­ity is that it will take them years, if not decades, to es­tab­lish the nec­es­sary bat­tery pro­duc­tion ca­pac­ity to re­alise mass elec­tric ve­hi­cle pro­duc­tion. Ad­van­tage Tesla and Daim­ler.


The ge­nius of Elon Musk goes be­yond build­ing com­pelling elec­tric ve­hi­cles and next-gen­er­a­tion rock­ets, as is ev­i­dent in the way he has trans­formed Tesla from an elec­tric ve­hi­cle man­u­fac­turer into a sus­tain­able en­ergy man­u­fac­turer. Tesla is no longer an EV com­pany. Today Tesla is the world’s biggest sup­plier of the most ef­fi­cient lithium-ion bat­ter­ies, man­u­fac­tured at the Tesla Gi­gafac­tory in Reno Ne­vada, which also man­u­fac­tures So­lar Tiles, Pow­er­packs, and Pow­er­walls for ap­pli­ca­tions that are

scal­able across all sec­tors, from homes to elec­tric util­i­ties, and ev­ery­thing in­be­tween. In a move rem­i­nis­cent of Ap­ple’s di­ver­si­fi­ca­tion into smart­phones, mu­sic, movies and apps, Musk has cre­ated an end-to-end con­sumer prod­uct line for the gen­er­a­tion, dis­tri­bu­tion and con­sump­tion of sus­tain­able en­ergy and, as in­di­cated in the Tesla Mas­ter Plan (Part Deux), to au­ton­o­mous car-hail­ing/shar­ing.

Theodore Le­vitt, in his ground-break­ing ar­ti­cle “Mar­ket­ing My­opia”, orig­i­nally pub­lished in the Har­vard Busi­ness Re­view, 38 (July/Au­gust 1960), warned cor­po­rate giants (like the legacy au­tomak­ers) against defin­ing their in­dus­try, or a prod­uct, or a clus­ter of know-how so nar­rowly as to guar­an­tee its pre­ma­ture demise. Le­vitt used the rail­road com­pa­nies in the U.S. as an ex­am­ple to il­lus­trate that th­ese once great com­pa­nies de­clined “not be­cause the need was filled by oth­ers (cars, trucks, aero­planes), but be­cause it was not filled by the rail­roads them­selves.” They lost the ad­van­tage be­cause they de­fined them­selves to be in the rail­road busi­ness rather than in the trans­porta­tion busi­ness, and the rea­son they de­fined their in­dus­try wrong was be­cause they were pro­duc­to­ri­ented in­stead of cus­tomer-ori­ented.

Le­vitt’s the­ory on the de­cline of big cor­po­ra­tions is well il­lus­trated in the more re­cent demise of Ko­dak and Nokia, which should sound the alarm bells for the legacy au­tomak­ers, most of whom have ex­pended more en­ergy and money to op­pose elec­tri­fi­ca­tion than to em­brace it.

While it would be pru­dent for the legacy au­tomak­ers to heed Le­vitt’s ad­vice, the re­al­ity is that they are faced with the in­cred­i­bly dif­fi­cult and al­most in­sur­mount­able task of tran­si­tion­ing from a tried and trusted tech­nol­ogy (in­ter­nal com­bus­tion en­gine) to an en­tirely dif­fer­ent tech­nol­ogy (elec­tric mo­tors and bat­ter­ies), which will af­fect nearly ev­ery as­pect of their cur­rent busi­ness struc­ture. With bil­lions of dol­lars of cap­i­tal in­vested in ICE man­u­fac­tur­ing plants, body and chas­sis man­u­fac­tur­ing plants that are op­ti­mised to fit only th­ese en­gines (which dif­fer al­most en­tirely from elec­tric ve­hi­cles), staff that will be­come re­dun­dant, and dealer net­works will be­come re­dun­dant, th­ese au­tomak­ers will have to in­vest bil­lions, and in some cases re­cap­i­talise the en­tire busi­ness in or­der to at­tempt a suc­cess­ful tran­si­tion to elec­tri­fi­ca­tion.

Since the tran­si­tion from ICE to EV will have to be a grad­ual process, a fur­ther prob­lem down the line, when say half of in­ven­tory is made up of cheaper, more ef­fi­cient and more com­pelling elec­tric

ve­hi­cles, how do au­tomak­ers then still sell the other half of ve­hi­cles fit­ted with out­dated ICE tech­nol­ogy. In 15 years from now, try­ing to sell an ICE ve­hi­cle may well be akin to try­ing to sell an old Nokia in an iS­tore. And all along, there is that pesky thing called share­hold­ers, who de­mand prof­its. As one pun­dit aptly de­scribed the sit­u­a­tion, legacy au­tomak­ers have two op­tions: jump­ing off a cliff now, or wait and pos­si­bly be thrown into a vol­cano later.



Although Elon Musk was born and raised in South Africa, there is still no ev­i­dence of Tesla mak­ing a move into South Africa to get a foothold on the con­ti­nent. Given Tesla’s cur­rent foot­print, it is clear that they have their fo­cus squarely on the de­vel­oped world for the fore­see­able fu­ture. Re­nault and Nis­san seem to be fol­low­ing a sim­i­lar ap­proach to its cur­rent EV roll­out, which is bi­ased to­wards North Amer­ica and Europe.

With sta­ble elec­tric­ity sup­ply al­ready a ma­jor chal­lenge in most of the devel­op­ing world, there is a real chance that devel­op­ing na­tions will be left be­hind even fur­ther in the EV rev­o­lu­tion, and even more so with ve­hi­cle au­ton­omy. So while the de­vel­oped world may em­brace the grad­ual shift to­wards the adop­tion of EVs over the next two decades, the devel­op­ing coun­tries could well re­main de­pen­dent on ICE for a much longer pe­riod. Such a sce­nario would play into the hands of the legacy au­tomak­ers, who will need the shift to EVs to be as grad­ual as pos­si­ble.

China re­mains the ex­cep­tion, and given its ag­gres­sive leg­is­la­tion to pro­mote faster EV adop­tion, most au­tomak­ers cur­rently have some pres­ence in what prom­ises to be­come the sin­gle biggest EV mar­ket in the world.


The his­tory books are lit­tered with sto­ries of once-great com­pa­nies that were washed away by the floods of change but, if any­thing, over more than a 100 years and some of the most tu­mul­tuous times in mod­ern his­tory, the great car com­pa­nies have shown ex­cep­tional re­silience to over­come, among many other chal­lenges, two world wars and two mas­sive stock mar­ket crashes that wiped out most other com­pa­nies. The smart money would be on th­ese same busi­nesses to safely ne­go­ti­ate their way through the rapids of change as the world tran­si­tions from fos­sil fu­els to sus­tain­able en­ergy. We wish them God­speed.

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