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
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.