Musk's Exaggerations Will Catch Up With Him. Or Not.
by Jean-Louis Gassée
Elon Musk repeatedly promises the moon and repeatedly misses schedules with little impact on Tesla’s health. Will his words catch up with him someday, or did we give him permanent license to promise whatever he wants without consequences?
At Tesla’s September 22nd Battery Day, Elon Musk managed to outdo himself in a deluge of visionary technology statements mixed with revolutionary product plans and bold supply chain explorations (the Verge provides a nice synopsis of the two-and-a-half hour presentation). Tesla’s CEO promised breakthrough battery technology, a Nevada lithium mining operation, and a new $25K vehicle that will compete with entry-level vehicles offered by mass market incumbents. At the far end of the price range, Musk introduced a 1,100hp, 200 mph top speed Model S variant that reaches 60 mph in less than two seconds, offered at $140K — before options.
Of these promises, the 200 mph supercar may be the most realistic. A heavily modified Model S achieved a seven minute, 23 seconds lap time on the famed Nürburgring race track. Although the timing was unofficial, it beat the 7:42 clocked by Porsche’s electric Taycan in an unmodified, standard configuration. Tesla wants to move past the standard vs. tricked-up configuration controversy by selling a “factory-spec”, world-beating Model S variant. Several times in the past year Musk has mentioned a “Plaid” Model S version that uses three motors instead of the standard two.
While a supercar sounds very Musk-like, putting a 1,100 hp vehicle in the hands of non-professional drivers could be quite an adventure in shredded tires or worse. We’re supposed to see the final product by the end of next year. You can order a Plaid Model S now on Tesla’s site with a $1,000 fully refundable deposit — using Apple Pay…
Things get more complicated when we look at the new 4860 battery module that Musk disclosed on Battery Day:
Currently, Tesla vehicles use standard cylindric lithium-ion batteries that look like large AA cells. On Battery Day, Tesla disclosed a new 48x60 battery that stores 5x more energy and is capable of providing 6x the power output of today’s modules. (How does 5x become 6x? The first number is the battery’s capacity; the second is the amount of output. Think of the size of a bottle vs how much fluid flows through its neck.)
According to Tesla, the improved capacity is made possible by a series of innovations in electrode design and packaging that yields better power dissipation despite the denser package. In addition to halving the cost per KWh, the new battery module will also provide better integration with the vehicle’s structure, thus providing further weight and cost benefits.
(As a side and bizarre note — but consistent with his drive towards vertical integration — Musk said that Tesla will run its own lithium mine somewhere in the Nevada desert.)
Designing and producing its own battery technology might be Tesla’s boldest auto industry venture. If successful, it would put the cost of electric vehicles on parity with today’s internal combustion engine products, which explains the next announcement: In about three years Tesla will produce a $25K electric car. Today’s most affordable (and very successful) Model 3 starts around $40K, a price that prevents mass adoption. $25K for a fully-featured electric vehicle would completely change the playing field.
These bold announcements did little to impress Wall Street. Although it regained the loss a few days later, Tesla shares fell by more than 5% following the Battery Day announcements…
… and recovered nicely in a few days,
The key question here is this: Did Musk go too far in betting Tesla’s future on unproven battery technology and manufacturing process? The Nevada Gigafactory bet in 2016 was bold, but it boiled down to mass packaging of existing battery technology that was created in collaboration with industrial giant Panasonic. With his 4860 cell design, Musk ventures into the riskier domain of materials science where fortunes have been lost in the search for ground-breaking cost/weight/capacity combinations. Also, the Battery Day announcement might have been rich with graphs of new electrodes and packaging but we haven’t seen much in the way of real technical documentation for the bold claims made on stage.
In addition, we have to consider Tesla’s capricious product schedules. One can be forgiven for wondering when the new battery modules will become available in quantities that will support the million vehicles Tesla might produce two or three years from now.
Speaking of schedules, where is the Tesla Roadster announced three years ago? Or the CyberTruck announced last year? Or the Tesla Semi truck announced three years ago? They were all displayed at the Battery Day [photo courtesy of Electrek]:
Sadly, no one could drive away with a production unit.
What happens if the mass-market $25K vehicle never materializes because the company never manages to reliably produce the 4860 cell in volume? Would that be the end of Tesla?
To answer we can first consider the more immediate future. Tesla is building production in Texas, Berlin, and Shanghai. When all these units go on line, Tesla’s production capacity will more than triple, bringing the company above the million vehicles per year line.
Higher production capacity and superior design and manufacturing explain Wall Street’s counter-intuitive love affair with “tiny” Tesla. For close to a year, Tesla’s market capitalization of more than $400B is greater than the Ford, GM, and Fiat-Chrysler combined. This gives Tesla the opportunity to raise money in large amounts and attractive conditions to finance its growth. As a friend argues, rather than worry about Tesla failing to come up with groundbreaking battery technology, why not worry about what will finally happen to the US legacy automakers?
When thinking of the consequences on the competitive landscape, one is well-served by reading Philip Cain and Frederic Filloux’s series of Monday Notes ending with EV’s The Manufacturing Revolution. Among other interesting points made in the series is Tesla’s radical difference with legacy automakers: Vertical integration and, more specifically, in-house software development and continuous improvements flowing to users with Over The Air updates.
We grant Musk his inextinguishable imagination and energy, but is Tesla’s CEO going too far with his futuristic technology and price points promises? Let’s consider Musk’s previous flight of fancy regarding Autonomous Vehicles. By the end of 2020 — in other words right now, — Musk claimed there would be one million robo-taxis roaming our streets. Even better, said the visionary, your Tesla Autonomous Vehicle will make money for you while you sleep because you’ll be able to inject your own AV into the fleet.
What did the failed fantasy do to Tesla’s and Musk’s reputation? Nothing.
It’s obvious we have given Musk license to say (almost) whatever he wants without holding him to his word. Yeah, yeah, he exaggerates too much sometime, but he gets enough things done to move Tesla and the auto industry forward — and manages a Space company on the side.
Musk may fail to fulfill the grand battery vision and mass-market price point promises, but it might not matter. Three years is a long time, enough to make more bold and entertaining predictions.
