Techs appeal: Tesla.

 This blog is a 5 minute read.

This blog is a 5 minute read.

Everyone seems to want a Tesla, they make really cool cars! And that's exactly the point.

They’ve succeeded at making a new and expensive technology, in a very well established market, a truly aspirational product for us consumers. Most importantly it’s a product aimed at solving an environmental challenge, and often these don’t have that level of appeal.

In terms of road transport, private car use is very inefficient and damaging, so shared mobility services should always be prioritised and made attractive for customers first. Any private vehicles left on the road then need to be as low impact as possible to reduce the damage they do.

That's where electric cars come in, still an inefficient use of road space but at least lower emissions than petrol or diesel cars. However, until recently they haven't been too popular.

Tesla however, commands the cool mystique and unwavering support of fans the way a technology company does, not a car maker. It’s exactly this kind of appeal we need for sustainable products if we want to do anything about climate change.

Tesla's mission is to accelerate a transition to sustainable energy, by providing increasingly affordable electric cars and energy products. With a Silicon Valley HQ, some of its neighbours create social media platforms while Tesla builds physical things to solve environmental problems.

As far as car makers go Tesla is a new kid on the block, having been founded in 2003. However for a spell during 2017 it overtook General Motors, 95 years it’s senior, as the most valuable car maker by market cap (the total value of its shares). This despite only ever having two profitable quarters.

Sure, electric cars have been around for ages, about the 1830’s in-fact. Way before Henry Ford transformed the world of manufacturing by mass producing the Model T in the early 1900’s.

However, Tesla is certainly the first ‘household name’ due to its brand appeal. Funnily enough it’s probably going to be mass production that will be its success or failure too, the same way it made the model T’s combustion engine the technology of choice for the mass market.

Musk’s ‘master plan’ for Tesla was really quite inspired. Start with the low volume but expensive Roadster (2008). Bring in cash to develop a medium volume car, the Model S (2012), an executive car to grow brand awareness among wealthy earlier adopters.  It worked, the Model S was the top selling electric car in 2015 and 2016.

Enter the Model X (2015). An SUV to grow the brand in a different market segment. Then use cash from the Model S and X to fund the final vision; an affordable, high volume electric car - the Model 3.

Even before delivering the first Model 3, Tesla had something like 450,000 pre-orders. Not bad for a new car maker selling a ‘new’ technology for the mass market, among well-established competitors, that has yet to prove it can profitably build cars at high volumes.

There was reason to believe the hype. Tesla had production goals of 1,600 Model 3’s in Q3 2017, followed by 10,000 per week in 2018.  It’s investing billions in its ‘gigafactory’ in Nevada to produce batteries in huge numbers. Again, inspired - batteries are a key cost driver for electric cars, so economies of scale really count.

So, prepare for Tesla’s transformational potential to become a reality. The end.

Not quite yet. Tesla is yet to make a profit in 2017, it’s burning through cash at a rate of probably over $4bn this year, and it’s raising more debt funding to the tune of about $1.8bn. Big numbers.

While its gigafactory has begun pumping out batteries, production of the Model 3 isn’t quite going to plan yet. Tesla missed its 1,600 unit production target in Q3, churning out only 260 Model 3’s.

Maybe it's just in an investment phase - its a new carmaker remember. If Model 3 bottlenecks are quickly resolved, and when its gigafactory is complete, this could give it huge competitive advantage. Driving down vehicle production costs with automation, and battery costs with scale.

Its vertically integrated energy storage solution (Powerwall), Solar PV company (SolarCity), and growing charger network could also be big differentiators in a world of smart grid technology and renewable energy. Further evidence of its broader goals and vision around sustainable energy.

Plus, investor confidence in the sector is being bolstered by big moves from governments to promote electric cars over diesel/petrol ones. Other car makers have started to take notice of this, with a swathe of announcements of innovation and promises of big investment in electric cars.

Nissan has announced a new model of its ‘Leaf’, the bestselling plug-in car ever, and trials of supporting ‘smart grid’ technology. BMW is in the market with the i3, sporty i8 and hybrid 330e.

Jaguar, Audi, Hyundai, Ford and Mercedes are all launching electric models, and VW following ‘dieselgate’ has pledged a €20bn investment in 80 electric models across its group by 2025. Good old General Motors will also produce 20 all-electric models by 2023. This is to name but a few.

Even Dyson, yes, as in the vacuum cleaners, is getting in the game with a ‘radically different’ electric car to be unveiled in 2020. Will it be based around a rollerball? Who knows.

Private cars are inefficient regardless of fuel type, always coming second on efficiency and impact to shared mobility services, which should be prioritised in planning and policy . However increasing electrification of cars is good news for the environment, at least reducing the damage they do.

All this increased competition from these big players may also be good news for Tesla...

While it certainly has ‘first mover advantage’ in brand awareness, there isn’t a true mass-market yet for electric cars. All of these new models will popularise the tech, drive down costs and increase  charging networks. Hey presto a big market to win a share of before the ‘first mover’ window closes.

I certainly hope Tesla succeeds in ironing out its teething problems, but not just because they make cool products that will help reduce the impacts of highly damaging private vehicles.

I think the world needs more companies on a mission to overcome environmental and social challenges, and in a way which doesn’t make consumers choose between a ‘cool’ product OR a ‘green’ one. We haven’t got time to play at the margins.

Thanks, but I’ve got enough digital platforms to share a picture of what I’m having for lunch. Lets focus on some real problems!

This blog is intended to share opinion for informational purposes only, not to provide advice or represent any organisation. Facts and figures are accurate to the best of my knowledge but should not be relied upon.