Raw am­bi­tion or pure fan­tasy: Musk sets sights on an e-ve­hi­cle for all

The Tesla boss has made cheaper cars and 20m sales a year his goal, some­thing that an­a­lysts say is wish­ful think­ing, finds Michael Cog­ley

The Daily Telegraph - Business - - Business -

Mak­ing an af­ford­able elec­tric car “has al­ways been our dream from the be­gin­ning of the com­pany”, ac­cord­ing to Tesla founder Elon Musk. The bil­lion­aire took a step for­ward in that am­bi­tion on Tues­day when he un­veiled his plans to build a $25,000 (£19,600) elec­tric car, while cut­ting bat­tery costs in half over the next three years.

Musk un­veiled a series of in­no­va­tions, in­clud­ing mak­ing the bat­tery a struc­tural el­e­ment of the car and cre­at­ing larger cylin­dri­cal cells that will pro­vide five times more en­ergy and six times more power.

Musk said Tesla would even­tu­ally pro­duce 20 mil­lion cars a year. If all goes to plan, he be­lieves costs can de­crease by 56pc, ve­hi­cle range can in­crease by 54pc and in­vest­ment in gi­gafac­to­ries can come down by 6pc.

The Tesla chief gave his speech in front of an au­di­ence of parked Tes­las against a back­drop of smog from the fires that have rav­aged Cal­i­for­nia. The dystopian set­ting could not have worked bet­ter for a man spell­ing out his ver­sion of a re­new­able fu­ture for the au­to­mo­tive in­dus­try.

But the news failed to in­spire in­vestors with $50bn wiped off its stock mar­ket value. Shares closed down 5.6pc and dropped another 6.9pc af­ter hours.

“Nothing Musk dis­cussed about bat­ter­ies is a done deal,” said Roth Cap­i­tal Part­ners an­a­lyst Craig Ir­win. “There was nothing tan­gi­ble.”

For in­stance, the en­tre­pre­neur said that he wanted to re­duce the use of cobalt, of­ten re­ferred to as the “blood di­a­mond” of bat­ter­ies, to al­most zero.

“The is­sue is sep­a­rat­ing what’s com­mer­cially real and achiev­able and what’s a dream,” says Bench­mark Min­er­als’ Si­mon Moores, who de­scribes the plans as “fan­tasy”.

“Tesla has put out a lot of big state­ments to do with zero cobalt in the bat­ter­ies, and they make it sound like they can do it now. They make it sound like it’s easy but the real­ity is it’s far more dif­fi­cult than that.” Moores says

‘Tesla has put out a lot of big state­ments to do with zero cobalt in the bat­ter­ies. They make it sound easy but the real­ity is it’s far from easy’

hav­ing zero cobalt in the bat­tery puts the “en­tire ve­hi­cle at risk from fire”.

There is also the is­sue of man­u­fac­tur­ing the cells. Musk tweeted on Mon­day that Tesla would have to make its own bat­tery cells in Ber­lin and Fre­mont to meet its am­bi­tious goals, along­side in­creas­ing cell pur­chases from the likes of Pana­sonic and LG.

It is a move other car­mak­ers have shied away from given their lack of ex­per­tise and the high in­vest­ment costs. Musk’s am­bi­tions did im­press some how­ever. Founder of re­search group Ra­dio Free Mo­bile, Richard Wind­sor, says: “Tesla is con­tin­u­ing to push the bound­aries of e-ve­hi­cle tech, which com­bined with a sub­stan­tial turn­around in its fi­nan­cial per­for­mance en­sures that it will be a ma­jor player in the next gen­er­a­tion of ve­hi­cles.”

De­spite the pos­i­tiv­ity, Wind­sor ad­mits that Tesla’s stock is at a “lu­di­crous val­u­a­tion”. He says the com­pany’s share price had been driven by “sen­ti­ment and hype and has no con­nec­tion with real­ity what­so­ever”.

The com­pany’s val­u­a­tion has soared through­out 2020, plac­ing Musk as the third wealth­i­est man in the world with a $75.2bn in­crease in his worth.

But the lag be­tween the an­nounce­ments made at Bat­tery Day and their ul­ti­mate ef­fect could lead to in­vestors pour­ing out of Tesla.

Tesla’s fu­ture is un­doubt­edly bright, but many be­lieve lean times are on the hori­zon for the com­pany’s stock.

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