Tesla Motors Inc: History, Cars, Elon Musk and Facts

Tesla Motors Inc

This paragraph is aimed at displaying briefly Tesla’s history, in order to have an idea of the background of the company. Tesla Motors Inc has been founded in 2003 in California, in the United States of America, by Elon Musk, a South African entrepreneur who provided capital and assumed the roles of chairman of the board of directors and head of production design. As already said, cars are a very complex product that needs much capital and specific engineers. Tesla’s team was made of people who did not have any previous experience in the car industry. Elon Musk himself has degrees in engineering and economics, founded and co-founded respectively Zip2 Inc and PayPal Inc, but did not have a direct knowledge of the car market. However, Tesla started assembling a team of experts and specialist in the car industry.

Moreover, it should be noted that the location of the company’s headquarters in the Silicon Valley in California, where are situated the offices of many of the main high-tech companies in the world, was relevant for Tesla in order to innovate, creating a proper technology for its electric cars. In fact, in that area are present many experts that helped the company to achieve its objectives. For instance, many Tesla cars have a wide touch screen on the instrument panel of the vehicle, and in that area there are many companies and people having the know how to develop this kind of components.

The first car that Tesla has produced has been the Roadster, in collaboration with Lotus, a company based in the United Kingdom. It was a fully electric high-end sport car capable of accelerating from 0 kmh to 100 kmh in less than four seconds, with an autonomy range of 400 km. It cost USD 109,000 and was faster than the Ferrari models of that time. Batteries were certainly one of the most important and expensive components of an electric vehicle. Many manufacturers of cars decided to develop their own specific batteries for their cars. This entailed high engineering and manufacturing costs.

Tesla decided to follow a different path: they used Lithium-Ion batteries provided by Matsushita Electric Industrial Co. (now called Panasonic Corporation). These batteries had the same form factor of those used for laptops. Moreover, Tesla and Panasonic cooperated to increase safety about batteries, in particular reducing the risk of overheating and fire. For this reason, Tesla invented a liquid cooling system. In 2012 the contract of collaboration with Lotus ran out and Tesla had produced 2500 Roadsters. Then, the company focused on a new car: Model S. It is an electric luxury car that aimed at competing with the high-end models proposed by Audi, BMW and Mercedes-Benz. It got very good reviews and it has been Car of the Year in 2013, receiving the best customer reports ever. It has been completely designed and produced in-house by Tesla, costing about USD 500 million.

As said before, Tesla is advantaged from being in the Silicon Valley, under a technological point of view. This is clearly visible in the Model S, that is controlled by a software and that can drive itself without the intervention of a person. Moreover, it has a 17 inches touchscreen on the instrument panel and many components were not standard but designed and customised for the Model S. Indeed, Tesla has surprised its competitors and is considered a benchmark in the industry for electronic integration. Model S has been the first car completely produced by Tesla. The company has been lucky, because it was the time of the crisis in the automotive sector and it acquired a factory in California and made it operational spending less than a third of USD 1 Billion, that is what it would have cost in a normal situation. Tesla made a peculiar decision also about dealerships. It built a network of store directly owned by the company and hired salespeople on salary and not on commission.

The company now offers four different models of electric vehicles: Roadster, Model X, Model S and Model 3. The last one is now being delivered only in the United States of America, while in the rest of the world it can only be pre-ordered. It is the most interesting of Tesla’s models, because the firm is willing to become a mass manufacturer of electric vehicles. Indeed, even if the sales and production of Model S and Model X are absolutely satisfying, given the fact that 500,000 units of the former are produced each year, at the moment Tesla makes only high-end electric vehicles, characterised by high prices. Instead, the company has the mission to spread electric vehicles through the world and to do so Model 3 is fundamental. Indeed, it is a premium electric car that costs around USD 35,000, so much less than the other models. Being this car more affordable, Tesla expects to become a mass producer and to seriously hit the industry, but are the company and the market ready?

In particular, it is interesting to analyse if there is a proper infrastructure that can allow Tesla Motors to expand internationally, becoming the first mass producer of electric vehicles in the world. 2.2 Forecasts about electric vehicles The car market is rapidly changing all over the world and that is because of electric vehicles, that is why it is interesting to study how will it be in the near future. Indeed, their sales are about to reach USD 1.6 billion in 2018 and it is clear that they are increasing at a very high pace considering that in 2014 they were only about USD 289 Million (Bloomberg New Energy Finance, 2018). Also, the increasing attention of national and local governments to air quality is pushing sales of electric vehicles, because many restrictions are being established against usage, and sometimes also buying, of internal combustion engines. That is why many manufacturers prepared aggressive plans to electrify their vehicles over the next ten years. Indeed, in 2017 there were 155 available models of electric vehicles in the world, but it is expected that they will be 289 until 2022.

In fact, it is probable that the initial prices of electric vehicles, and also hydrogen ones, are going to decrease in the next years and that economic models will be presented. However, electric, hybrid and hydrogen engines will have the opportunity to substitute oil in the future, when their price-performance trade off will be more attractive. For the same reason, hydrogen may become a substitute of electricity and it represents a threat. Then, predictions show that by 2040 there will be 559 million electric vehicles on the roads, that will be the 33% of the total, and that electric vehicles will represent the 55% of the new car sales Moreover, also data about the main components has to be considered, in particular Li-Ion batteries, that are one of the most specific components of electric vehicles.

It is interesting to notice that their prices have dropped of the 79% in the last seven years and they are even improving under technical aspects (Bloomberg New Energy Finance, 2018). In general, it seems that the initial cost of electric vehicles will become competitive without subsidies from 2024 (Bloomberg New Energy Finance, 2018). It is probable that the initial prices of electric and hydrogen vehicles are going to decrease in the next years and that economic models will be presented. Therefore, these technologies will have the opportunity to substitute oil in the future, when their price-performance trade off will be more attractive. For the same reason, hydrogen may become a substitute of electricity.