Tesla's Big Gamble: Can The Electric Car Go Mainstream?

Sep 24, 2012
Originally published on October 16, 2012 1:33 pm

Starting a new car company from scratch isn't tried often in the United States. The last time one was truly successful was about 100 years ago. And Tesla Motors, a startup from Silicon Valley, faces some unusual hurdles.

Still, despite the challenges Tesla faces, the electric car company and its CEO, Elon Musk, have gotten further than most automotive entrepreneurs.

The company is unveiling a new network of superchargers — refueling stations that can top off the batteries in its cars in under an hour.

So far, Tesla has built a small number of vehicles for the high-end market. Now, it wants to go mainstream.

The first step in starting a successful car company is building a car people want. Tesla has checked that box. Its new car, the Model S, is a thing of beauty.

It's a four-door Sedan; it has a hatchback; and it can seat five adults, plus two little kids in jump seats in the "way back."

It has a sleek front hood — a bonnet if you're British — but underneath, there is no engine; instead, it's a bonus trunk that they call a "frunk."

The reason it can have a frunk is that the engines that power this car are relatively tiny — and that means there is a lot more space inside.

On the outside, it looks a bit like a Jaguar — sleek but curvy. It inspires unseemly lust in middle-aged men.

"The car will absolutely blow people's minds. I think that's the handling more than anything else," says Dayo Gomih at Tesla.

The Model S with an 85-kilowatt-hours battery pack can go from Los Angeles to San Diego and back on a single charge — that's more than 250 miles. And Gomih says this car has the lowest center of gravity of any made — most of the weight in the car is in its batteries, and they're spread out under the floor; so it handles a lot more like a Porsche than a Ford Taurus

Actually, Tesla is designing a car for the minivan/SUV crowd. And it's going to have the same kind of power and a similar price tag as the Model S.

Musk says eventually the company will make another car that many more of us could afford.

"It's really been my goal from the beginning for Tesla to produce a mass-market car," Musk says.

An Affordable Future

Right now, the Model S sells for between $50,000 and $100,000. Tesla's first car sold for even more.

"At Tesla, we did, I think, receive some unfair criticism because we had the Tesla Roadster, and people would say, 'Well, why are you making this expensive sports car?' As though we somehow felt that there was a shortage of sports cars for rich people or something," Musk says. "But, in fact , even though I would try to take pains to say, look, our goal from the beginning has been to drive forward the electric car revolution, and we needed time to refine the technology — get to version two, get to version three. And really, with version three — the $30,000 car — that's where it becomes mass market."

To do that, Tesla has to become a real car company; the price of the batteries needs to plummet; and consumer tastes have to change.

Tesla has 10,000 orders for the Model S already. The company moved out of a little garage in Menlo Park, Calif. — where it made the roadster — into a giant factory in Fremont.

That's just step one. Now Tesla needs to start making 500 cars a week, which will mean it will need supplier networks, distribution networks, dealer networks and service networks.

Getting a new factory up and running is hard. Michelle Krebs, an auto analyst at Edmunds.com, told us how General Motors retooled a Detroit plant to make the Chevy Volt.

"It was a nightmare," she says. "There were robots dumping sealant on the floor because they weren't aiming in the right place, and these little automated guided vehicles going around the plant [were] taking parts but didn't know exactly where they were going. All of this is very complicated, difficult stuff."

A New Image

Getting manufacturing right is just the beginning. When millions of Americans think of electric cars, they still think of golf carts.

But that might be changing. Almost anyone who has seen a Tesla or driven one becomes a fan. In addition, a couple of years ago, Musk hired a guy named George Blankenship.

Blankeship's last gig was to build Apple's retail stores for Steve Jobs. When you walk into a Tesla store, you feel that.

A new store opened in Portland, Ore., a few weeks ago. It's little. It's in an upscale mall. There are touch-screen displays on the walls and just one car inside, but it was packed with people — looking not buying.

Mark Goodwin and his wife, Debbie, were walking through the store touching the car and peering inside the frunk. "Well, it's out of my price range, to be honest with you," says Mark Goodwin. "But I love the technology, and I love the direction it's going."

Blankenship doesn't hesitate to predict when Tesla will convert people like Mark Goodwin into real customers.

"I believe that everyone who comes in this weekend is going to buy a car from us in the next 10 years," Blankenship says.

But to finance Tesla's future, the Model S needs to be a hit: A whole lot of plastic surgeons and venture capitalists are going to have to buy it before Tesla will have the cash it needs to make the next car — a truly affordable Tesla. Just turning a profit won't be enough.

But in many ways, Tesla has already turned the car industry on its head. Ten years ago, none of the big carmakers were building electric; now, most do.

Tesla made electric cars cool, and while that might not guarantee success, it probably has already changed history.

But the question remains: Does Tesla have a future?

Copyright 2012 National Public Radio. To see more, visit http://www.npr.org/.

Transcript

MELISSA BLOCK, HOST:

But we want to go back to your original game plan today, Steve, and that was to talk about cars.

STEVE HENN, BYLINE: You know, I wanted to talk about a high-tech product that's actually made in the U.S., here, Tesla. Tesla, as you may know, makes high-end electric cars. They have a big plant near me in Freemont, California. And tonight, in Los Angeles, Tesla is rolling out a network of superchargers. Basically, these are filling stations that can top off car battery packs completely in just 45 minutes.

Many of these stations will be solar powered. And executive at Tesla said they were hoping to make these fill-ups free forever for anyone who buys one of their cars. Yeah, free is not bad. But...

BLOCK: Yeah.

(LAUGHTER)

HENN: ...even if Tesla owners have to pay for electric fill-ups, a network of supercharging stations across the country could make long-distance electric powered road trips possible.

BLOCK: And what do you think, Steve? Does Tesla really have a chance to become an important player in this market?

HENN: Well, you know, living in Silicon Valley, it's easy to believe anything is possible, right? But when it comes to cars and the automotive industry, I thought we needed a little gritty realism. So I called Sonari Glinton - Sonari covers Detroit and the auto industry for NPR - and asked him to help me report this story. Here he is.

SONARI GLINTON, BYLINE: Starting a car company isn't easy. The first step is building a car people want.

HENN: Sonari, I think Tesla has actually checked that box. Its new car, the Model S, is a thing of beauty. It's a four-door Sedan. It has hatchback. It can seat five adults and two little kids in jump seats in the way back. It has a sleek front hood, bonnet, if you're British, but underneath, there's nothing. No engine. Instead, it's a bonus trunk. They call it a frunk.

(SOUNDBITE OF A VEHICLE)

GLINTON: All right. Frunk. Let's just dwell for a second on that word. OK, Steve, frunks aside.

HENN: Frunks aside, the reason it can have a frunk is that the engines that power this car are relatively tiny. And that means there's a lot more space inside.

GLINTON: On the outside, it's a bit like a Jaguar, sleek but curvy.

HENN: It's gorgeous. It inspires unseemly lust in middle-aged men.

GLINTON: All right, speak for yourself.

HENN: All right. Absolutely. You know, I spent a lot of time behind the wheel of a minivan, but this car got me in touch with my inner teenager. Dayo Gomih at Tesla took me out for a test drive.

(SOUNDBITE OF A VEHICLE)

DAYO GOMIH: The car will absolutely blow people's minds. And I think that's the handling, more than anything else

HENN: The model I was driving can go from Los Angeles to San Diego and back on a single charge. That's more than 250 miles. And Dayo Gomih says this car has the lowest center of gravity of any made. Most of the weight in the car is in its batteries, and they're spread out underneath the floor. So it handles a lot more like a Porsche than a Ford Taurus.

GOMIH: If you want, you know, give it a little bit, yeah, yeah.

HENN: I'll give it more gas. All right. So we're going into the cloverleaf. I'm just going to accelerate through this.

(SOUNDBITE OF A VEHICLE)

HENN: Wow. Holy cow.

(SOUNDBITE OF A VEHICLE)

HENN: Oh. Oh. Oops.

GLINTON: Oops is right.

(LAUGHTER)

HENN: Yeah, I know. Actually, the car was OK. I scratched the rims, and the tires needed to be replaced. But the suspension was fine.

(LAUGHTER)

GLINTON: Actually, Tesla is designing a car, Steve, that you could probably handle, one for the minivan SUV crowd. It's going to have the same kind of power and the similar price tag as the car you almost wrecked.

HENN: Yeah. But, you know, Elon Musk, Tesla's CEO, says eventually the company will make another car that many more of us can afford.

ELON MUSK: It's really been my goal from the beginning for Tesla to produce a mass-market car.

HENN: Right now, the Model S sells for between 50 and $100,000. Tesla's first car sold for even more.

MUSK: You know, at Tesla, we did, I think, receive some unfair criticism of - because of we had the Tesla Roadster. And people were saying, well, why are you making this expensive sports car, as though we somehow felt that there was a shortage of sports cars for rich people or something.

But, in fact, even though I try to take pains to say, look, our goal is - from the beginning has been to drive forward the electric car revolution, and we needed time to refine the technology, get to version two, get to version three. And, really, with version three, the $30,000 car, that's were it becomes mass market.

GLINTON: To do that, become mass market, Tesla has to become a real car company. The price of the batteries need to plummet and consumers' tastes have to change.

HENN: You know, they have 10,000 orders for the Model S already, and they moved out of this little garage in Menlo Park, where they made the Roadster, into a giant factory in Freemont, California.

GLINTON: That's just step one. Now, Tesla needs to start making 500 cars a week, which will mean they'll need supplier networks, distribution networks, dealer networks, service networks. Getting a factory up and running is hard.

Michelle Krebs is an auto analyst at edmunds.com, and she was telling us both about how General Motors retooled a Detroit plant to make the Chevy Volt.

MICHELLE KREBS: It was a nightmare. I mean, I was there. I - there were robots dumping sealant on the floor because they weren't aiming in the right place, and these little automated guided vehicles going around the plant taking parts but didn't know exactly where they were going. All of this is very complicated, difficult stuff.

GLINTON: And getting manufacturing right is just the beginning. When millions of Americans think of electric cars, they still think of golf carts.

HENN: Yeah, I don't know. Maybe that's changing. Almost anyone who has seen a Tesla or driven one becomes a fan. And a couple years ago years ago, Elon Musk hired a guy named George Blankenship. Blankenship's last gig was to build Apple's retail stores for Steve Jobs. And when you walk into a Tesla store today, you feel that.

I swung by the opening of one in Portland, Oregon, a few weeks ago. It was little. It was in an upscale mall. There were touch screen displays on the walls and just one car inside. But it was packed with people who were looking but not buying.

I was curious what brought you in today.

MARK GOODWIN: It wasn't this. We just saw it when we walked by.

HENN: Mark Goodwin and his wife, Debbie, were walking through the store, touching the car, peering inside the frunk.

Have you ever thought about buying an electric car before?

GOODWIN: Well, it's out of my price range, to be honest with you. But, yeah, I love the technology, and I love the direction it's going. Yeah.

HENN: I asked George Blankenship when Tesla would convert people like Goodwin into real customers, and he didn't hesitate.

GEORGE BLANKENSHIP: I believe that everybody who comes through the door this weekend is going to buy a car from us in the next 10 years. And so that's...

HENN: You really believe that, 10 years?

BLANKENSHIP: Firmly believe that. I firmly believe because what's going to happen...

HENN: A friend of mine once described Silicon Valley as the epicenter of optimism, and George Blankenship believes. But to finance Tesla's future and George Blankenship's belief, that Model S needs to be a hit. A whole lot of plastic surgeons and venture capitalists are going to have to buy this thing before Tesla will have the cash it needs to make the next car, a truly affordable Tesla. Just turning a profit won't be enough.

But in many ways, Tesla has already turned the car industry on its head. Ten years ago, none of the big car makers were building electric. Now, most do. Tesla made electric cars cool. And while that might not guarantee its success, it's probably already changed history.

GLINTON: But the question is does Tesla have a future? In Detroit, I'm Sonari Glinton.

HENN: And I'm Steve Henn, NPR News, Silicon Valley. Transcript provided by NPR, Copyright National Public Radio.