Tesla Batteries and Climate Change

By Paolo von Schirach —

WASHINGTON – Notwithstanding solemn pledges issued by many governments, no country that really matters is taking the fight against climate change seriously. Headline grabbing global agreements detailing ambitious emission reduction goals mean almost nothing, as they are purely voluntary, and therefore non verifiable, and certainly not enforceable.

Policy-makers will not act

Do not expect more on this front. The truth is that all policy-makers live under the constraints and pressures of urgent matters that require immediate attention. Catastrophic climate change scenarios regarding what will materialize in our world years or even decades from now do not motivate anybody in a position of responsibility to engage –today– in serious and very costly policy changes.

Innovation will deliver results

That said, there is hope when it comes to drastically reducing dangerous emissions. And hope rests on coming up with cost-effective technological innovation. Man made global warming leading to climate change is largely due to the continuing use of dirty emission producing technologies and industrial processes, most of them developed quite a long time ago. The reason why we keep using them, with only some improvements here and there, is because any currently available alternatives would be far too expensive. However, innovation may change all this. Human ingenuity should not be discounted.

Tesla leading on new battery technologies

Take Tesla, for example. Under Elon Musk, its controversial founder, Tesla dared to think of commercially viable electric vehicles (EVs) many, many years ago, when nobody –literally nobody– in the automotive business believed that this might be possible.

Well, fast forward to today and we see how tiny Tesla has become an EVs sector leader. True, the jury is still out on Tesla’s long term commercial viability. However, a relentless effort to improve its battery technology and therefore reduce cost structure and increase both vehicle performance and company profitability may indicate that this maverick EV company may not just survive but actually lead a boom in EVs production.

We know that the main obstacle on the way to mass produced, affordable electric cars is relatively unsophisticated battery technology. While there has been progress, the batteries used to power most EVs are still expensive, very heavy, and not very efficient compared to the traditional internal combustion engines running on oil derived gasoline.

A game changer

Tesla, however, (and many others innovators around the world working on the same or similar issues), seem to have made very significant progress in improving battery performance on all fronts: life of the battery, cost and weight of the battery, amount of energy stored in the battery, and therefore distance that can be covered with a single charge, and shorter recharging time. Many of these battery technology breakthroughs have just been announced by Tesla, and it remains to be seen how the actual vehicles sold to real customers will perform. Still, assuming that most of what Tesla announced is true or close to becoming true, then we are getting to, or very close to a tipping point when it comes to the mass adoption of electric vehicles.

Cheap, high performance electric vehicles will generate mass markets

It is no secret that so far electric vehicles have had only limited appeal. They are still regarded by most consumers as too expensive. They are fancy gadgets for the rich who can afford to pay extra money for a high-tech car, so that they can brag about being green and cool.

Most budget conscious people considering buying a new car look at the price and then the operating cost of the car (mostly fuel) over the time in which they will use it. For these reasons, an expensive EV coming with the additional problems of limited range, limited numbers of charging stations and a long recharging time does not look appealing.

But a new generation of Tesla vehicles powered by a super efficient, low cost, lower weight, high performance battery that will essentially last for ever, would be a true game changer. It would signal a new era for EVs: from experimentation and tinkering to mass production based on proven superior technology and lower prices.

End of gasoline

When this happens, high performance and cheaper EVs will inevitably displace gasoline powered traditional cars. Assuming that these battery technology breakthroughs will work as expected, we can reasonably conclude that EVs will begin to dominate the global auto industry in just a few years. This will be the beginning of the end for traditional cars. And this will also be the end for many refiners currently producing the rivers of gasoline necessary to power hundreds of millions of traditional cars. Further upstream, the virtual end of gasoline will also mean significantly lower demand for crude oil.

Oil will survive, at least for a while

Of course, we do know that even if it all happens as planned regarding a new generation of batteries, with Tesla and many others inundating the global automotive market with affordable, state of the art, super efficient EVs, it will take years before the world automotive fleet will become totally electric. In the meantime, there will be still demand for gasoline and therefore oil.

The oil industry will survive. Let’s not forget that beyond gasoline oil is also used to make diesel fuel for trucks and other heavy vehicles, and powering ships’ engines, not to mention jet fuel, heating oil, and plastics, and what not. Therefore we can expect that there will still be an oil industry ten or even twenty years from now, (unless other technological disruptions will introduce alternatives to other oil-derived products). However, it will be a smaller, streamlined oil industry; and it will be dominated by the low cost producers, (think Saudi Arabia). In a world market characterized by lower and declining demand for oil, only those who can be and stay profitable with oil at $ 10 per barrel or less will be able to survive.

The end of shale?

This being the case, the future of the recently reborn US oil industry appears very uncertain at best. The economic sustainability of the US shale revolution, itself the fruit of American technological ingenuity, was and is predicated on fairly high oil prices. While the cost of fracking operations has come down significantly in the last few years, fracking is still a fairly expensive activity. It is hard to believe that companies struggling in 2019 to stay alive, let alone do well, with oil at around $ 50 per barrel or less, will be able to survive when crude will go down to $15 or less, on account of soft global demand.

Innovation spill over

Improved battery technologies will also transfer to other applications, such as efficient storage for electricity produced by renewable sources such as wind and solar, something that will most likely increase their appeal and marketability vis-a-vis traditional fossil fuel based electric power generation. Overtime, expect fewer (if any) coal fired power plants, and eventually fewer natural gas power plants that are now necessary given intermittent generation from renewables.

You see where we are going here. We are looking at the real possibility of cascading positive effects, affecting different sectors, all born out of technological innovation spurred by the goal of getting a better battery for Tesla’s EVs. And this is the magic of innovation. It spreads. Tesla was not born out of the need to address a well defined market need. True enough, American drivers were routinely complaining about the high cost of gasoline. But all they wanted was cheaper gas. They had not articulated this complaint into a demand for an alternative to the traditional car powered by an internal combustion engine.

And here is the beauty of innovative minds. Elon Musk launched into an industrial adventure that most analysts dismissed as silly, and therefore destined to failure. But now Tesla, the company he created, despite all its challenges, may be on the verge of deploying another generation of technological innovation that is likely to transform the EV sector, and consequently the entire automotive industry in the US and worldwide.

We need more than new batteries

Back to global warming, it is clear that even radical transformations in the automotive sector leading to sharply lower demand for gasoline and therefore crude oil will not be enough to cause dramatic emissions reductions. More innovation will be needed to radically transform industrial processes, from cement production to petrochemical plants and more, that currently produce harmful emissions.

Green and profitable can go together

However, the Tesla relentless quest for better and more efficient car batteries is a good illustration that it is possible to pursue at the same time profits, a more efficient propulsion technology, and drastically reduced greenhouse emissions. It is not true that trying to be green is a luxury that is simply not practical nor affordable for most industries.

Tesla’s innovation efforts may be driven in part by the desire to produce a perfectly green car. But we should keep in mind that Tesla is a business, not a charity. Ultimately Tesla has to serve its shareholders. They want to see a return on their investments. And this means more cars sold at a profit. By pursuing better batteries that will increase performance while reducing cost, the company is strengthening its competitiveness vis-a-vis conventional vehicles, with the hope that millions of consumers will prefer affordable EVs, not because they are green, but because they are better value for money.

By the same token, assuming that some new industrial technologies will be able to eliminate emissions and increase productivity and profits at the same time, you will have classic win-win propositions in which being green is also good for business.

A long shot, but the only one we have

While this innovation driven approach may be a long shot, this is the only practical way to cut down emissions, stay profitable, and avoid the dire effects of global warming. International agreements that cannot be enforced produce short-lived feel good moments, and not much else. Innovation will be the game changer.

Paolo von Schirach is the Editor of the Schirach Report He is also the President of the Global Policy Institute, a Washington DC think tank, and Chair of Political Sciencand International Relations at Bay Atlantic University, also in Washington, DC.




Oil Prices Will Stay Low

WASHINGTON – I am not at all surprised to see that the Doha oil talks aimed at finding an agreement about stabilizing output among major producers failed. Saudi Arabia would have liked to freeze production at current levels, which means at the Kingdom’s highest level in modern times, (more than 10 million barrels a day).

No deal with Iran 

However, it was obvious that Iran could not possibly have agreed to freeze its own production at current levels. Tehran wants to ramp production up to its pre-sanctions peak. And how could anybody have assumed anything else? Of course the Iranians want to increase their oil production and regain lost market share.

Therefore, no deal. As a consequence, oil prices are once again headed lower. There was a time in which low prices were really good news in the West. But now it is a mixed bag, especially in the U.S.A.

Oil was good news in America 

And how so? Well, because “unconventional oil” exploration and recovery –we are talking about shale oil– has been one of the brightest spots in the otherwise timid U.S. post 2008 economic recovery. Tens of thousands of new, high paying jobs made things better in many oil-producing states, from North Dakota to Texas.

U.S. oil in recession 

But now, lower prices are bad news for a sector composed primarily of small to medium-sized companies, many of them under capitalized and highly indebted.

For small U.S. energy companies it was easy to get bank loans when oil was at $ 100 a barrel, and therefore future profitability was not in question. But now it is at $ 40, possibly headed even lower. And therefore the U.S. oil patch is in a recession. Moody’s just downgraded many U.S. energy companies. Tens of thousands of good jobs have already been lost, with more losses to come. This will have a nasty effect in the affected regions, and some negative impact on the overall American economy.

Resilience 

Things are not awful across the board. In fact, the shale oil sector has proven to be much more resilient than most analysts had predicted. A combination of aggressive cost cutting and vastly improved production technologies allows at least some shale oil companies to stay profitable even with oil at $ 40. But this is only about some companies.

The other good news is that shale oil production is relatively flexible. It is not too complicated to shut down wells and then start production again in better times, when prices have recovered. Still, idled wells do not generate any income. Weak producers close down, or go bankrupt. Some may be bought by bigger competitors with deeper pockets.

Sure, at some point this cycle will end. Saudi Arabia cannot afford huge budget deficits for ever. Its bizarre policy of keeping production at these levels, (this way depressing prices), while the Kingdom needs to get into debt in order to fund current government operations (and that includes almost the entire country getting some money from the Royal Family) will end. But it will take a while. In the meantime, hard for U.S. oil workers to find other jobs that will pay so well.

Good news for consumers 

That said, depressed oil prices, while they hurt an important sector of the U.S. economy, on balance are positive. America is still a major net oil importer. Lower prices translate into a smaller balance of trade deficit. And for the average consumer cheap oil must be good news. Who can complain when finding lower prices at the pump? For tens of millions of American drivers low gasoline prices are equivalent to a tax cut. More money in their pockets.

The future of oil

That said, going forward, the real challenge for the U.S. oil sector is not Saudi Arabia flooding the global market. The real challenge will be new, non oil-based technologies.

Despite its uncertain beginnings, the electric car sooner or later will become economically viable. Elon Musk of Tesla has bet everything on making affordable, mid-sized electric vehicles, EVs. We are not there yet. Money losing Tesla may be will fail. But even if it does, others will follow. And when someone will hit the sweet spot with easy to recharge, attractive EVs with a good range that the average consumer can afford, it is good-bye to oil.

Saying good-bye 

And that will be a real good-bye. It will not be about temporary sector recessions, or fluctuating prices due to Saudi shenanigans. It will be the end of the oil era.

Here in the U.S. at least someone will be prepared for this gigantic transformation. But economies such as Russia, Venezuela and Saudi Arabia which depend entirely on oil revenues to fund “everything” will be in deep, deep trouble.

All told, better to be in America. This society, with all its problems, is still capable of promoting change while embracing it when it comes.




Will Tesla Be The Electric Car Maker of The Future?

WASHINGTON – Thank God, US IT tech companies are still in the lead. It is hard to match the combined strength of Apple, Google, Intel, Facebook, Cisco, Microsoft, Oracle, and so many others.

A high-tech car company

But now we also have Tesla, the high-tech electric vehicle (EV) manufacturer, aspiring to be part of the super high-tech, high valuation technology companies club.

And here is a problem. Undoubtedly, Tesla is a tech company. But it makes cars, not software. Can Elon Musk, its founder, keep saying that because he is creating a technology revolution about to transform the automotive sector the metrics about unit costs and profitability that would apply to traditional car makers do not apply to Tesla?

You buy into the revolution 

Who knows really. As Philip Delves Broughton notes in a well crafted FT op-ed piece, (To be rational about Tesla is to miss the point, August 27, 2015), if you are buying Tesla’s stock you are buying into a huge bet. And the bet is that this particular EV technology will indeed disrupt the entire car industry, soon enough displacing the old, established players.

If this is indeed so, then forget about the traditional metrics. Forget about the fact that Tesla’s stock is absurdly over valued. Indeed, as Broughton notes, the entire company is worth about half as much as BMW, a competitor that makes 35 times as many cars.

You buy Tesla stock simply because you believe what Musk says about massive future sales based on the guaranteed success of new, affordable EV models that have yet to be produced.

Well, if Musk is right, then he is the man who will transform the world automotive industry. Again, if this is so, then Tesla stock at $ 200 or even $ 300 a share is a bargain.

If Musk is wrong 

But if Musk is just a clever marketer, your investment most likely will be worth nothing in just a few years. Indeed, what if Tesla EVs cannot deliver any real profits? What if there are other companies out there that will come up with a more efficient electric engine and/or a new generation of truly revolutionary low-cost, high charge, low weight batteries?

Well, then it is good-bye Tesla, the trail-blazer that got it only half right.

Subsidies 

And just one more thing. Tesla current lousy numbers would be a lot worse without the subsidies that Tesla and other EV manufactures receive from the federal and state governments.

Policy-makers love anything that replaces the internal combustion engine. Therefore Tesla buyers benefit from a tax rebate, while the company gets carbon credits that it can sell to others, this way making extra profits.

Look, nobody denies that Tesla already makes a great car. The Model S gets fantastic reviews. But it is not a cost-effective product.

The Concorde was great, but it kept losing money 

By the same token, when a French-British consortium launched the Concorde, back in the late 70s, many thought that we had entered a brand new era of cost-effective supersonic air travel.

Well, it was not so. Nobody said that flying the Concorde was a bad experience. On the contrary, it was wonderful. But it was a commercial disaster. Therefore, after a long agony, the Concorde was finally pulled out of service in 2003. This does not mean that supersonic commercial jets will never be made. It simply means that it will have to be something other than Concorde.

Now, are Tesla vehicles the real thing, or just the automotive versions of the old Concorde?




Tesla’s New Battery Is Not A Breakthrough

WASHINGTON – A fancy press release and a well-advertised CEO press conference are not good  substitutes for introducing real innovation. Tesla’s founder Elon Musk announced that his electric cars company will soon start selling batteries that can store renewable energy for home use and beyond.

Batteries will store power

According to Musk, these state of the art batteries will allow people who have solar panels at home to safely store the excess energy they produce, this way diminishing and potentially eliminating their reliance on the grid when there is no sun light, or when power outages may occur.

Game changer?

For a moment, I thought this was a breakthrough, a real game changer. Well, it is not. Quite possibly it is an advancement in the ongoing efforts, pursued by Tesla and others, to come up with integrated renewable energy systems that will make users totally energy self-sufficient, at a reasonable cost.

This is worthwhile goal. But Tesla’s new batteries do not get us there. The main reason is that they are still rather expensive. The price tag is $ 3,500 per item, to which you have to add converters and other parts, plus the cost of installation. And why would you buy this package? The reason is that when there is no sun, or in case of power failures, you will be fine, because you will no longer depend on electricity supplied by your local utility through the grid.

Why buy these batteries?

This is interesting, but I seriously doubt that it will motivate many average consumers. The fact is that the cost of this total autonomy is still relatively high. Besides, the grid, whatever its many imperfections, is usually reliable. Why spend all this money to protect yourself from the inconvenience of a power cut due to bad weather?

Of no use in developing countries

More broadly, for the moment at least these incremental innovations do not even begin to address, let alone solve, the massive problem of lack of power in large parts of the developing world.

Consider this. In sub-Saharan Africa about 585 million people do not have any electricity whatsoever. Even in Kenya, a country that is doing relatively well compared to others in Africa, only 23% of the population has electricity. In neighboring Tanzania the percentage goes down to 14.8%.

Lack of power means that hundreds of millions of Africans are also cut off from real economic growth opportunities. I cannot think of anything valuable that can be done without any electricity.

It would be nice if Tesla had come up with innovation that could help solve this gigantic problem –lack of power– that represents the single largest obstacle to development. But we are not there.

Way too expensive

I do not believe that a subsistence farmer in rural Kenya will be able to pay around $ 5,000 for a battery, and all the other parts that go with it, in order to get full cycle solar electricity, (assuming that he already has solar panels). The idea is good. The prices are still astronomically high for developing countries users who need affordable power the most.

I would imagine that at some point there will be breakthroughs. At some point someone will come up with solar panels that people making a few hundred dollars a year can afford. This is not impossible. But we are not there yet.

Tesla’s announcement made me dream for a moment. But then I realized that this is mostly hype. This innovation will have little use in mature economies, and it is totally out of reach for emerging markets users.

 




Tesla Motors Stock Is Incredibly Overvalued

WASHINGTON – I have written before that Elon Musk, the founder of Tesla Motors, is a real pioneer. With dogged determination, he proved that it is possible to make an attractive, high performance, highly desirable electric vehicle. Now Musk is trying to go to the next level, by creating new, lower priced models that will be affordable for the general buyer.

Overvalued stock

All this is good. What is not good, however, is the incredible ascendance of Tesla’s stock. It grew more than 70% in 2014. It retreated a bit more recently, but it is still fantastically high.

Consider this. Right now, the market capitalization of Tesla is about $ 26 billion. And yet Tesla makes only 33,000 vehicles a year. Fiat Chrysler is worth about $ 20 billion, considerably less. And yet Chrysler made 1,8 million vehicles in the US in 2012. The group’s worldwide production was 2.37 million.

Ford is worth about $ 60 billion, a bit more than double Tesla’s value. But Tesla’s total annual production is the equivalent of the number of cars Ford makes in just one day. Got that? A full year production versus just one day.

How about another interesting comparison? As a recent WSJ article put it: “Tesla sells about 90 cars a day. GM sells 90 every five minutes. But Tesla is worth nearly half as much as GM”.

And, by the way, Tesla is not profitable. In the first 9 months of 2014 it lost $ 186 million.

What’s going on?

So, what is going on here? I am not sure. But, whatever it is, as a minimum it is not healthy. Worse case scenario, those who buy Tesla’s stock at these prices are certifiable.

Look, we understand that stock valuations are a reflection of what investors believe to be not so much today’s value of a company, but tomorrow’s. A high stock price is a vote of confidence on future prospects.

And it may very well be true that Elon Musk is onto something really big. It may very well be that Tesla’s new, lower priced electric vehicle models will engineer a major revolution in the automotive world. Hence the vote of confidence that yielded this fantastic stock valuation.

Think again

And yet, think again. Tesla’s total production is the equivalent of what Ford makes in just one day. But Tesla’s market capitalization is about half Ford’s.

This is absolutely crazy.




Elon Musk’s SpaceX About To Expand With Major Texas Launch Facility

WASHINGTON – Until not too long ago any American project that had to do with space exploration had to have the NASA logo on it. NASA was space. Therefore, it was inconceivable to think of any meaningful space project that could be successfully hatched without NASA’s direct involvement.

No need for NASA

Well, that era is over. While NASA looks for a new identity and mission in a much more fiscally constrained environment, (translation: there is no more money), here comes SpaceX, a private venture created years ago by South African-born entrepreneur Elon Musk.

Musk is known primarily as the creator of Tesla Motors, the first maker of all-electric vehicles in the USA. Tesla has the ambition to redefine the auto business. At the moment it makes only super expensive high performance electric cars in California. But it is planning to make cheaper models that will appeal to the average consumers.

Tesla and SpaceX

Well, just as Tesla Motors may soon transform the US (and global) automotive industry, SpaceX may soon displace all our assumptions about what it takes to have a serious and robust space program.

We used to believe that space was too risky, too complicated and  too expensive for the private sector. Hence the essential role of NASA. Therefore, many prognostications now indicate that an underfunded, diminished NASA also means the end of American leadership in space exploration.

Space is also a business

Well, not necessarily. SpaceX is the result of Musk’s realization that, while space is still about adventure and open-ended exploration, it is also a money-making business. All sorts of companies around the world need to launch satellites into space, (think telecoms, weather services, and more). And so they need to rely on the services of those who have the rockets and the related launch capabilities. Well, SpaceX has already demonstrated that it can provide state of the art launch services in a cost-effective manner.

Launching rockets from Brownsville

And now Musk is looking at the next phase. SpaceX is planning to set a major new launch facility in Brownsville, a rather poor, mostly Hispanic Texas town sitting right at the border with Mexico. Needless to say, for Brownsville the coming of SpaceX is a golden opportunity to transform the local economy.

Now a backwater with the stigma of being a transit point for Mexican drugs into the USA, Brownsville can soon become a high-tech enclave. Assuming final approval for the construction of this SpaceX launch facility, beyond the new jobs directly tied to it, one can expect all sorts of subcontractors, vendors and suppliers to set up shop in the vicinity. Not to mention the tourism draw that such a brand new high-tech facility would create.

Others will follow

Sure enough, NASA was the US space program. But now it seems that daring entrepreneurs can take a lead role, even without US government backing. Elon Musk is clearly a trail blazer. But there is no doubt that if SpaceX does well by launching more and more satellites from its new Brownsville facility, many other private sector groups will follow.




Elon Musk, Tesla Motors’ Founder, Came to America Because He Believed That This Country Would Offer Opportunity

By Paolo von Schirach

Related story:

http://schirachreport.com/index.php/2013/08/07/electric-cars-are-not-selling-well-but-quality-will-improve-for-heavy-trucks-though-the-future-fuel-is-natural-gas-not-electricity/

August 12, 2013

WASHINGTON – I wrote recently that it is going to be a while before electric vehicle (EV) maker Tesla Motors and others like it will be able to radically transform the US automotive industry. (See link above to related story). Indeed, while Tesla’s model S is doing very well, it is on track to sell at most 21,000 vehicles this year. This is obviously very good for a company that sells very expensive, high performance EVs; but it is hardly transformative.

The value of new ideas

Still, having said that, it is really important to reflect on the incredible value of entrepreneurs like Elon Musk, Tesla’s founder. What needs to be stressed here is that Musk is a true, modern trail blazer. Musk ventured into practically virgin territory with what appeared to most analysts a really crazy idea: making a high performance, high price, sporty EV. Remember that many years ago when Musk got started people thought that EVs should be designed for young or middle aged tree-huggers, people focused on saving the planet. Whereas Musk focused on an entirely different market: quality conscious wealthy people interested in a brand new experience: a high performance (and consequently high price) EV.

Well, this is beginning to work. Of course, when it comes to market expansion, much will depend on Tesla’s ability to roll out equally interesting but much more affordable electric cars. We shall see.

Enterprise is our future

But this is not the point today. The point today is to celebrate Elon Musk and many others like him. These are the people willing to take huge chances in order to see if they can indeed push the envelope. It is obvious that when it comes to innovation many “Grand Ideas” are destined to fail. But some will not. And the record shows how, failures notwithstanding, many determined entrepreneurs will keep going at it. May be on their second or third try they will come up with something really important.

Focus on stagnant sectors

And we should be grateful for all these efforts. Indeed, it is mostly because of people like Musk that America can keep its position as technology leader. In a recent TV appearance Musk  indicated that innovators should really focus on sectors that have been stagnant, sectors that no longer deliver any special value. Real entrepreneurs should really look at ways in which they can introduce disruptive innovation that will cause a real paradigm shift. He talked for instance about the “Hyperloop”. This is really science fiction stuff. A totally new idea for an ultra fast inter city transportation system that is light years ahead of even the best super fast trains that still rely on tracks and locomotives, however advanced.

The “Hyperloop” is on the drawing boards, and most likely it will not happen any time soon. Still, this is just an example of Musk’s ability to think big and think boldly, even when some of his ideas may invite jokes.

Once again, many “Bold Ideas” that promise huge technological transformation will be failures. Sometimes costly failures. But it does not matter. Hopefully, those who tried and failed will not be discouraged. They will learn from their  lessons and try something else.

Policy makers have to keep America’s unique pro-business environment

That said, US policy makers must realize that they need to put in place every possible incentive for innovators. Indeed, for America to keep its coveted position as the world’s premiere “Innovation Hub”, it needs to attract people like Elon Musk who are willing to think big and take big chances. To this end, we need to do our best to reaffirm America’s credentials as the best place for true innovators. Do keep in mind that Tesla’s Elon Musk was born in South Africa. He came to America because he thought that the US would be an ideal home base. If people around the world stop believing this, if we lose this edge, the smart innovators will go somewhere else. 

 




The Tesla Model S Is A Great Electric Vehicle That Performs Better Than Most Luxury Cars

WASHINGTON – The recently launched Tesla Model S is the first, and most impressive, US made all electric sedan. This Electric Vehicle, (EV), is produced by Tesla Motors, the company that is already producing a smaller roadster. All of them are part of (South African born) entrepreneur Elon Musk’s effort to demonstrate that electric vehicles are commercially viable in America.

Innovators are welcome

I am all in favor of innovation and of all original dreamers who have the courage and the drive to push the envelope trying something new.

For these reasons I admire Elon Musk; who by the way is also behind SpaceX, the company that just managed to send an unmanned space vehicle full of supplies to link up with the International Space Station. A first for any private business.

Great car…

The Tesla Model S just had a glowing review in The Wall Street Journal Off Duty Section, (July 7-8, 2012). A huge, enticing headline, (I Am Silent Hear Me Roar), plus a nice big picture and a long piece. That said, and with full recognition that this is a beautiful piece of engineering, that this is a car that proves that it is possible to have an EV that drives like a Ferrari, minus the engine noise, (yes, electric engines are silent), this is not a game changer.

…But too expensive

This is another fancy, if sophisticated, toy that goes just a bit beyond “proof of concept”. The problem is that the car is too expensive. The model used by the WSJ reviewer costs almost $ 100,000. The rock bottom version of the same Model S goes for $ 50,000 minimum, (after a tax rebate). While not prohibitively expensive, a motor vehicle in the $ 50,000 to 100,000 range has a limited market.

Gas savings not enough

And, most certainly, the people who will buy it are not driven by the desire to save on the cost of gasoline. Somehow I don’t think that anybody who can shell 70,000 for a new car is that concerned about the price of fuel.

And yet the main selling point for even thinking about EVs as an alternative to internal combustion cars is that an electric charge is much cheaper than gasoline.

However, if the EV is too expensive to begin with, all your fuel savings are offset by the higher price of the car, a cost difference that the average EV driver will never recover through lower operating costs, assuming current or even higher gasoline prices.

From “cute” to transformative

I think that it is Bill Gates who said that solar panels are mostly “cute”. Indeed, at this stage of the technology, while they may make the rich people who install them on their roofs feel good about their green credentials, they are not game changers, because they are still too expensive.

By the same token, a souped up, beautiful electric sedan may be a sensation among California millionaires who want to be green and trendy, but it is not a game changer.

Waiting for affordable EVs

This does not mean that Tesla or may be other companies will not come up at some point with an affordable all electric car that costs only $ 20,000 to $25,000.

That would be a game changer.

However, until then, most of us will continue to think that fuel efficient cars are vehicles that have improved internal combustion engines, so that they can give us more miles per gallon of gasoline.

Yes, it sounds so yesterday compared to the futuristic wonders of a high performance EV. But, alas, most of us cannot get one.