Tesla just changed the way you will drive, and put a huge nail in the coffin of the oil industry.
The future of transportation reached a turning point on March 31, when Tesla Motors CEO Elon Musk unveiled the much-anticipated Model 3. With a base price of US$35,000 and a range of 320 km, the all electric Model 3 has hit a sweet spot in the minds and wallets of electric car enthusiasts, thousands of whom lined up for hours at Tesla dealerships all over the world for the privilege of paying a $1000 deposit to reserve a Model 3, which is not yet in production and will not be delivered until late 2017 at the earliest. The majority of these enthusiasts even made the deposit before the car was unveiled. Within the following 24 hours a total of 198,000 cars had been reserved, and the last reported total was 325,000.
We don’t know how these reservations are distributed globally, but to put the figure in perspective, the total number of electric vehicles sold worldwide in 2015 was 565,000, including 115,000 in the US, so it is quite possible that Tesla has surpassed last year’s US sales in one day, with one car, that isn’t in production yet.
Such enthusiasm and hype is unprecedented in the automotive industry and is a strong signal that something has changed. The fact that thousands of people were willing to put a deposit on a car that they had never even seen, let alone driven, is indeed a testament to Tesla’s master branding and marketing strategy, but would not have occurred without a change in mind frame among the general public regarding the viability and future of electric cars.
This is all part of Musk’s master plan. When he founded the company, his strategy was to first produce a high-end status symbol (the Tesla Roadster, sold from 2008-12), and sell enough to start production of a full-size luxury sedan (the Model S, introduced in 2012), then repeat the process to raise enough money to produce an affordable midsize vehicle for the mainstream market, which is the Model 3. In the middle of that, he added the Model X SUV. His original plan was to have the models named S, E, and X, but Ford Motor Company owns the rights to the Model E name, so Musk changed the E to 3. That way he could use the same logo; three horizontal bars.
Musk’s goal is to make electric vehicles mainstream, and gas powered vehicles obsolete. This includes forcing the current major automotive manufacturers into the electric vehicle market, which appears to be succeeding. In response to Tesla’s success with its model S, companies like General Motors, Ford and BMW are responding with their own versions of high and midrange electric vehicles. Currently, the most popular electric vehicle is the Nissan Leaf, with over 200,000 sales globally, including about 91,000 in the US. With only an 80 km range, the Leaf is not a direct competitor to the Model 3, but has played the role of entry vehicle for electric car enthusiasts worldwide.
A more direct competitor will be the Chevy Bolt, which will be introduced in 2017, before the Model 3 hits the streets. The Bolt is not to be confused with the Chevy Volt, which has been available since 2011 (Why the marketers decided on such a confusing name is anyone’s guess). The Volt offers an 80 km range in full electric mode but also has a gas motor which extends the range to that of a regular vehicle. The issue with the Volt, as with all hybrid vehicles is that they are really two vehicles in one. While they provide superior fuel mileage, the sophisticated technology of two complementary power sources makes the vehicles expensive and maintenance and repairs more complex.
The Bolt eliminates the gas engine and like the Model 3, is completely electric. A crossover design with seating for five, it has the same 320 km range as the Tesla but will sell for US $5000 less. GM also has an advantage in its extensive network of dealerships for service and repair while Tesla’s network is miniscule in comparison.
Many jurisdictions have strong incentive programs for purchasing hybrid and electric vehicles. For example, Ontario, Canada, (where I live) has a rebate program based on the vehicle’s battery size and suggested retail price. Currently, both the Tesla and Bolt can be eligible for rebates up to cdn $13,000 or maximum 30% of the manufacturers suggested retail price (MSRP).
Both the Model 3 and the Bolt have 60 kWh batteries. That means that a person in Ontario who charges their car during off-peak hours at the current rate of 8.3 cents per kilowatt hour would pay less than five dollars for about 300 km of driving, or roughly $1.70 per hundred kilometres. A comparable size gas car would likely burn at least 6 litres per hundred kilometres. With gas in Ontario now about a dollar per litre, that’s six dollars, so the savings is $4.30 per 100km, making the electric vehicle 70% cheaper to operate. The average annual driving distance in Canada is about 15,000 kilometres, so the savings would be $645 per year. (I have a friend who commutes 100 km each way to work. That’s not unheard of in the Toronto area. Accounting for taxes and rebates, it would take just over 13 years for the fuel savings to be more than the net cost and he would have a “free” car!)
This assumes that electricity and gas prices rise and fall in unison, which is unlikely. As the world sells off the cheap oil, gas prices may be subject to a significant increase in the next few years (Saudi Arabia is going bankrupt by keeping global oil prices low to protect its market share). Meanwhile, solar power prices are plummeting worldwide, thanks mostly to China and India, and will soon be the cheapest form of electricity in most places, including much of Canada. In the next few years, we could very well see electricity prices drop while gas prices increase.
In addition to fuel savings, electric vehicles are cheaper in other ways. They have a small fraction of the number of moving parts of a conventional gas vehicle. They don’t require oil changes, tune-ups, or fuel and air filters. There are no fan belts to break or radiator hoses to leak. Over the life of the vehicle the maintenance and repair costs are likely to be many thousands of dollars less.
All of this means that in many cases the total cost of ownership of an electric car is already lower than a comparable gas car, but the low range of most current electric vehicles still creates “range anxiety”. The Model 3 and Bolt will change that. It is much easier to find an electrical outlet than a gas station, and electric charging stations are proliferating throughout the world, including Canada. The first one I saw was in 2013 and already there are almost 400 public chargers in Ontario, and over 1800 across Canada.
Unfortunately, not all cars can use the same charging stations. Manufacturers including Tesla have come up with three distinct and largely incompatible designs. Tesla has its own proprietary design which it claims is superior to the other two. The other two being the Society of Automotive Engineers (SAE) standard used by North American and European brands, and the CHAdeMO standard used by Asian manufacturers. Some chargers will accommodate all three types, but some may only have one, so you can’t always charge your Nissan leaf and your Chevy Bolt with the same charger. You can charge either one with a regular household outlet if you can afford to wait the eight or so hours it takes for a full charge, but if you’re going to the shopping mall and want to charge the car while you’re inside, the chargers will have to be specific to the type your car has. As electric cars become more popular, commercial and rental properties will be pressured to install charging stations as their customers and tenants increasingly demand charging ability.
Wireless charging is also available for the most popular models. There are third-party companies that sell “induction” chargers that use magnetism to charge batteries wirelessly. An adapter is installed on the car’s battery that enables you to charge by parking over a pad on the floor in your garage and you never have to worry about plugging in your car. The logical extension of this concept is to have wireless charging in public places and even in the streets. Nissan has a promo video that shows future self-driving electric cars being charged on the street and then rearranging themselves so they can take turns while their owners sleep. There is already a pilot project in New York City to place induction chargers under manholes in some street parking spots.
Streetcar maker Bombardier and others are also experimenting with putting induction charging under the road surface. It is currently being tested just for streetcar use but it is logical that this would extend to public use on major roadways. Sections of major roads and highways could be fitted with induction chargers so that as you drive down the road your car is being recharged. The chargers in the road would recognize your vehicle and apply fees to your account for the electricity you use, similar to an automated toll road. The only time you would run down your battery would be on side roads, so in most situations your range would be virtually unlimited.
Imagine never having to find a gas station, never having to plug in your car, and never having to get an oil change, or a tune-up, all at much less than the cost of current vehicles. It is difficult to imagine why anyone would still use a gasoline vehicle for daily driving in that scenario. Hopefully the press that Tesla is getting will encourage dialogue and cause people to take a closer look at the mathematics of owning an electric vehicle.
I love my current car, but I sincerely hope it is the last internal combustion engine I will ever own.