Elon Musk continues to make ambitious plans for Tesla Motors, some even call them “ludicrous.” Not content to make a niche product for electric vehicle enthusiasts, he now wants to conquer the mass market, competing in the major leagues against GM, BMW, Ford et al. Musk is promising an annual production of 1 million cars by 2020, a staggering increase from last year’s paltry: 76,000. Is he insane?
On a conference call with Musk and media colleagues this week, I learned that Musk is still calm and laser-focused on executing his “Tesla Master plan.” This year is crunch time for Tesla. The future of the company rests on the timely and efficient production of the Model 3, Tesla’s smaller, mass market car. Will demand stay strong, despite intense competition and reservation holders threatening to cancel due to his position on Trump’s economic advisory team? Musk seemed to flounder a bit on this question and refused to disclose the latest reservation numbers, for fear of analysts “reading too much into them.”
During the discussion of Tesla’s 2016 financial results, some anomalies arose. Despite continuing to make massive losses (due to capital investment in the Tesla Factory and the Gigafactories), its share price is still in the stratosphere. Tesla might produce a small fraction of GM and Ford’s output, but the company is valued on par with them. What gives?
“The recent run-up in Tesla stock has less to do, in our view, with anything around the near-term financials, and more to do with the nearly superhero status of Elon Musk,” Barclays analyst, Brian Johnson.
Superhero status? More ludicrousness…The superheroes Tesla is focused on are the mighty robots on the factory floor. Musk has named them after X-men superheroes, like Cyclops and Thunderbird (see photo above); and they’re the ones that’ll have to earn their superhero status as manufacturing goes into top gear in the next few month.
“Tesla is going to be hell-bent on becoming the best manufacturer on earth.” Elon Musk
The BBC’s Fergus Nicoll invited me on Business Matters to help explain more.
Listen to the full podcast on BBC World Service (starts at 37:30) or the 5 minute clip below:
Here’s a transcript of our conversation (edited for length and clarity):
BBC Host, Fergus Nicoll: Tesla stock has hit record highs, soaring 50% since December. With investor confidence growing that Tesla will deliver its Model 3 on time. Let’s explore this with Alison in Silicon Valley. Before we get into the nitty gritty of Model 3, and the other numbers, I know you watched Elon Musk do the webcast that go with the Q4 figures. What kind of presentation did he come up with?
Alison van Diggelen: I listened to the (live conference call) podcast. Elon Musk was on the podcast with his (retiring) CFO, answering questions from the media. They were generally upbeat. Elon Musk always over-promises how soon his vehicles will be delivered, but he is confident that they’re going to start deliveries of their Model 3 in July of this year, for employees first…beta testing for employees. He’s hoping for the mass rollout starting in September of this year. They’re pretty bullish about that.
Fergus Nicoll: Here’s the thing: Tesla has a valuation pretty close to Ford. But compared to Ford it makes about five cars! So what are we seeing? A massive future priced into that?
Alison van Diggelen: That’s right. Last year, Tesla delivered 76,000 vehicles (compared to Ford’s 2.5 million), but Elon Musk is very bullish. He’s aiming for the factory to produce 500,000 cars by the end of 2018, and one million a year by 2020. He’s ludicrously ambitious. Brian Johnson, who’s an analyst with Barclays, called this run up in the Tesla stock more “Elon Musk superhero status” than short term financials. What Elon Musk says, he often delivers….eventually.
Tesla merged with SolarCity, the rooftop solar provider, so that is also giving an upside. They’ll be able to cut costs: Tesla showrooms will also become showrooms for the SolarCity solar panels. They’re also doing the other side of the equation: energy storage….
Fergus Nicoll: The household and business batteries.
Alison van Diggelen: Exactly.
Fergus Nicoll: The thing is, Americans drive insane distances. Electric cars have to go a long way….the infrastructure has to catch up with the company?
Continue listening to the podcast clip above, or at BBC Business Matters for more about:
The ambitious supercharger network expansion
The fact that all cars will be equipped to be fully self-driving
Why the market continues to bet on Elon Musk
For Tesla to succeed in becoming “the best manufacturer on earth,” three big questions remain:
- Will the Tesla Model 3 be delivered on time and on budget this year?
- Will demand stay strong for Tesla, despite stiff competition from GM, Ford, BMW, Nissan, etc?
- Can Tesla make the huge capital investment required (for the Tesla Factory and Gigafactories expansion), without running out of money?
Read more about Tesla and Elon Musk from Fresh Dialogues archives
I recently attended Silicon Valley’s Tech Awards, and despite the inspiring innovators from around the world, there was an underlying mood of disquiet (even alarm) as Silicon Valley adjusts to the imminent reality of a Donald Trump presidency. I asked Tim Ritchie, President of the Tech Museum, what his predictions are for Silicon Valley under a new administration whose leader who has frequently espoused anti-science rhetoric. Here’s his response:
“We need to become a community that values science, that trusts evidence, that’s not afraid of facts, that’s not afraid of the future. My hope is that people will say: we’re Americans, we do not fear the future; we believe we can solve problems. And so hopefully it’ll be a wakeup call to be who the world needs us to be.” Tim Ritchie, President of the Tech Museum of Innovation, and host of the Tech Awards.
Of course, Silicon Valley is not afraid of the future and is full of risk-taking innovators, but as Ritchie says, it has received a wakeup call, and a stark reminder of the political bubble it lives in. There is a thriving tech world beyond Silicon Valley and its sky-high cost of living, traffic congestion and their impact on our quality of life are forcing some residents and companies to look elsewhere.
Portland, Oregon attracted Intel back in the 1970’s and more recently, tech companies like Google, AirBnB, Salesforce, and eBay have moved some facilities to the Portland area. Today Portland is a hub for global sportswear companies and has a growing tech startup scene. I went there to investigate what Silicon Valley and other global tech hubs can learn from its success and filed this report for the BBC World Service program, Business Matters.
Listen to the podcast at BBC Business Matters (The show is titled: How will Castro’s Death Affect Cuba-US Relations?) The Portland segment starts at 29:00.
Listen to the Portland segment here:
Here’s an excerpt of Tuesday’s program and my original report transcript (edited for length and clarity):
BBC host, Fergus Nicoll: Move over Silicon Valley. Today, we take you up to Silicon Forest, zooming up the west coast to Portland, Oregon and its thriving tech scene. A growing number of companies have made that move north. So what are the ingredients that make it a fertile ecosystem for tech startups and what can other tech hubs learn? Over to Alison…
Alison van Diggelen: Thanks Fergus. I took the 90 minute flight north of Silicon Valley to Portland (aka Silicon Forest). It does have a thriving tech scene and I wondered if Silicon Valley has anything to fear from this growing startup scene. I met with Jonathan Evans, a Blackhawk pilot who’s now CEO of Skyward, a drone management startup. Here’s what he said:
Jonathan Evans: If you haven’t been to Portland, you have to come, it’s one of the most magnificent cities on earth. It’s a beautiful, culturally rich city, an urban patchwork of villages, pedestrian scaled and we sit right at the foot of the Cascade mountains and just inland of the Pacific Ocean. This culture is wonderful at supporting innovation, technology and big bold ideas…This is a pioneering place. We’re anchored by Intel’s largest campus here. Intel, the Moore’s-law-driving-machine that’s producing all the chips and there’s a whole constellation of hardware companies that have come out of that ecosystem.
Alison van Diggelen: Although Evans visits Silicon Valley twice a month to meet with clients and investors, he’s not tempted to relocate his business.
Jonathan Evans: I don’t think there’s ever a part of me that wants to stay…(laughter) It’s a personal choice….We live well. If you look at it tenaciously as a business man: it’s half to one-third the cost living here and that translates to the salaries that we have to pay and the rent we have to pay…everything that comes into building a lean venture-backed tech startup really comes to apply here nicely…It’s a very legitimate place to grow a company, and to be backed by San Francisco and Silicon Valley.
Alison van Diggelen: And that cheaper “cost of doing business” has caught the attention of high-priced, highly congested Silicon Valley. Tech companies like Google, AirBnB, Salesforce, and eBay have already moved some facilities to the Portland area. They tend, however to be the support and “backend” part of today’s tech ecosystem.
Polysync, a software startup in the autonomous driving sector recently relocated to Portland, from Idaho. I spoke with the CEO, Josh Hartung. Why did he choose Portland and not Silicon Valley?
Josh Hartung: Silicon Valley is always at the cutting edge, you have the best people in the world, hyper-new type stuff, where you’re seeing machine learning and autonomous driving really being pushed. For us, that wasn’t so important…We’re infrastructure builders, we want people who’re good at the plumbing… we want solid engineers that build backend.
Alison van Diggelen: For a big picture view, I crossed the river to talk with Skip Newberry, the President of the Technology Association of Oregon (pictured at top).
Skip Newberry: We’re still relatively immature… as a true technology hub. We don’t have the deep bench that exists in a place like Silicon Valley.
Alison van Diggelen: And yet, he’s bullish about Portland’s growth potential. A recent report showed that Portland’s tech talent pool grew 28% from 2010 to 2013, even faster than Silicon Valley’s (in percentage terms). Newberry says a focus on talent, access to capital and the regulatory environment is helping. He’s convinced that public-private partnerships in education and the “Internet of Things” will help create the right ecosystem for startups. He cites projects to improve air quality and transportation.
Skip Newberry: One area that we’ve been really active in has been “Smart Cities”– leveraging Portland’s reputation internationally as a global hub for urban planning and transportation systems. We’ve been trying to focus on the biggest challenges cities face, because if we can solve those, it’s something that will allow us to remain competitive in attracting top tech talent, because our quality of life will continue to be good. We’ve got a network of cities around US and globally who’re doing the same thing.
Alison van Diggelen: So does Silicon Valley have anything to fear from Portland? Not for now. Silicon Valley has more established tech hubs like Boston and Austin; New York, and Seattle to worry about. In any case, it’s too busy forging ahead, “inventing the future” with artificial intelligence, autonomous driving, drones and who knows what else?
Fergus Nicoll: Nice piece, Alison. Thanks. That was Skip Newberry, one of the people that believes Portland has the vision and I guess there has got to be an environment that fosters this: state authorities, maybe federal interest in making sure the good news is spread across the states…not just Silicon Valley?
Alison van Diggelen: Absolutely. I think the ecosystem of Silicon Valley is second to none and that was something that I came across when I talked with startup founders in Portland. There isn’t that deep bench of experienced people, the venture capital…
Fergus Nicoll: Explain that phrase “deep bench.”
Alison van Diggelen: I think it’s a baseball term. It means experienced business people: angel investors, venture capitalists, people who have started companies and have scaled them up: from a startup to the size of Facebook, Google etc. Portland is a relatively young tech hub and so they’re still establishing that talent base. What Silicon Valley has is a self perpetuating cycle: you’ve got the innovators, the risk-takers, the early adopters and it all reinforces. There’s a cycle going on: the people who’re successful become angel investors, venture capitalists…they’re all focused on Silicon Valley, because they’re here in Silicon Valley. Despite our connected world, doing business with eye to eye contact is still important.
Fergus Nicoll: Parag Khanna, is there endless room for such hubs or should it be focused?
Parag Khanna: It was a great piece. I have been to Portland and the geography does matter as well as the cost of living. It’s very close to the Vancouver/Seattle corridor, a wealthy, high quality infrastructure, diversified businesses, also a lot of talent spilling over from there and obviously sales opportunities for Portland based companies. And as the story reflected: talent spilling over from Silicon Valley. The geography is wonderful for this and people can live in between these two great, very deep bench economic zones and yet have a very high quality of life and affordable cost of living.
Continue listening to the podcast for these discussions:
Tech Clusters in Asia: Parag Khanna offers some excellent insights.
A “Masterclass” in public speaking (featuring the fearless Lucy Kellaway of the Financial Times)
The future of Cuba/US relations, post Fidel Castro: I’m predicting the business opportunity will be irresistible for President Trump and we’ll soon see a tech hub in Havana, as well as a brand new Trump tower.
To explore other interviews and reports for the BBC, check out the BBC Archives at Fresh Dialogues.
NB: This report and other BBC Reports and BBC Dialogues at Fresh Dialogues are shown here for demonstration purposes. The copyright of this radio report remains with the BBC.
Photo: Skyward CEO Jonathan Evans is convinced we’ll see “Jetsons” human-moving drones in 5 to 10 years
“It’s harder to move from A to B and when you look at the sky, you have a blank slate. Within 5-10 years you will see human-moving aero robots that will be moving programmatically in space. It’s a lot like the vision we have of the Jetsons. It’s going to be much more on-demand, much cheaper, empowering all of us to be able to access the sky for whatever we want to,” Jonathan Evans, CEO Skyward
“That’s the problem with autonomous driving: each one of these sensing modalities has their limitations: some don’t see well in rain, in fog, at dusk. The Mobile Eye, what Tesla was using to detect lanes, some objects…that does very poorly at dusk….when the sun is head on. You really want backup, systems that are all corroborating its perception of the environment. In my opinion, the more sensing, the better,” Evan Livingston, Polysync Test Engineer
Here’s a transcript of my report (edited for length and clarity).
BBC Click Host, Gareth Mitchell: Flying cars are part of the subject for our final item. We’re off to Portland, Oregon to its famous “Silicon Forest”, their counterpart to Silicon Valley in California. There’s a startup there working on flying cars, another is working on autonomous vehicles and we have this report from Alison van Diggelen, who’s been there.
Alison van Diggelen: My first stop was the Technology Association of Oregon. Its President, Skip Newberry is bullish about Portland’s growth prospects: in data, software development, and the Internet of Things.
Skip Newberry: I refer to Portland as having this Goldilocks phenomenon: we’re not too big, not too small, not too expensive and yet we also have some interesting amenities and international connections. We have a great quality of life.
Alison van Diggelen: He sent me to Polysync, a software startup that helps speed up the development of autonomous cars.
Polysync just earned a top 10 startup ranking at this year’s L.A. Auto Show.
Evan Livingston: On the right trigger we have acceleration, on the left trigger we have breaking. [Ambi: car accelerating and breaking]
Alison van Diggelen: In a converted warehouse, Polysync’s engineers test the software of autonomous cars to make sure all the sensors are communicating. Field engineer, Evan Livingston gave me a demo.
Evan Livingston: On this car, we have about 15 different sensors…we have 4 cameras that give us 360 degree views of the environment, we have six radars. We have 2 different LIDAR systems, and then we have a GPS inertial movement unit…so it gives us a very accurate location of the vehicle.
Alison van Diggelen: We discuss the recent fatal crash involving Tesla’s autopilot feature.
Evan Livingston: That’s the problem with autonomous driving: each one of these sensing modalities has their limitations: some don’t see well in rain, in fog, at dusk. The Mobile Eye, what Tesla was using to detect lanes, some objects…that does very poorly at dusk….when the sun is head on. You really want backup, systems that are all corroborating its perception of the environment. In my opinion, the more sensing, the better.
Evan Livingston sets up a demo of the Polysync software that connects the car’s 15 sensors.
Alison van Diggelen: Polysync’s team has doubled in size in this year, driven by partnerships with over 50 major car manufacturers and their suppliers. The company uses a 32-acre “mock city” campus near Detroit for testing. It’s called M-City. Here’s Polysync’s CEO, Josh Hartung.
Josh Hartung says MCity’s physical test track allows them to test near collisions and real world simulations.
Josh Hartung: They have cute fake buildings, and intersections, a small section of highway, little stop lights…. They have different ways they can trick an algorithm to think that it’s a real person with cardboard cutouts or inflatable targets. It’s one of the first in the world.
Polysync demo shows the car sensors in action
Alison van Diggelen: Across the Willamette River, I meet with Jonathan Evans, a former Blackhawk pilot in the army. He leads Skyward, an operations platform for commercial drones. He’s excited about how our perception of drones is changing as they touch our lives ever more closely…from fun toys to aerial surveys to even delivering breaking news.
Jonathan Evans: They look at this really beautiful piece of technology that is really like a flying cellphone. It’s gyro-stabilized, grid-oriented, information-oriented robot that can move ubiquitously in space… We take the pilots and the aircraft and we put them into the global airspace and help them conform to whatever the rules of the road are there. We were in the era of the Wild West… but now we have regulators that have provided us the channels to flow into responsibly. You can see a dramatic shift into civilization in the sky.
Alison van Diggelen: Evans thinks that drones will soon make (package) deliveries –even Internet delivery – and anticipates a paradigm shift in transportation.
Jonathan Evans: On the ground, things are getting much more clogged and it’s harder to move from A to B and when you look at the sky, you have a blank slate. Within 5-10 years you will see human-moving aero robots that will be moving programmatically in space. It’s a lot like the vision we have of the Jetsons. It’s going to be much more on-demand, much cheaper, empowering all of us to be able to access the sky for whatever we want to.
Alison van Diggelen: Silicon Valley companies may steal the limelight but behind the scenes, Portland’s “Silicon Forest” is making its mark on the evolution and impact of technology around the world. [Ambi: Skyward flight ops team, DJI Phantom 3 Professional drone]
Jonathan Natiuk: “That’s kinda cool, man!”
Gareth Mitchell: Are we really heading for the Jetsons in our lives, do you think Bill Thompson?
Bill Thompson: Well, I started off being really skeptical about this…but then I discovered a human carrying drone is being tested in Nevada, the eHang drone…the actual hardware is being built. It can go 100 km/hour. The hardware is there and what we hear from Skyward is that the regulation is starting to be there. That’s the crucial thing. It’s about making sure if we have the technology that can deliver these things. It fits into a broader regulatory environment, so it becomes both legal and as safe as it can be to do them. It took a long time for the automobile, for the car, to go from being something strange and mysterious to dominating our cities. I do think we will get to the stage where we’re using the skies in these new ways, so actually, yeah: it is coming.
Find out more about electric and autonomous vehicles, from Tesla to Hyperloop at Fresh Dialogues EV archives
This week, I listened live to Tesla’s latest earnings call and was gobsmacked at Elon Musk’s audacious new goal to build half a million cars per year by 2018.
“This is based off the tremendous demand received for the Model 3, which I think is actually a fraction of the ultimate demand, when people fully understand what the car’s capable of….Tesla is going to be hell-bent on becoming the best manufacturer on earth.” Elon Musk
But how on earth is Tesla going to perform this ambitious ramp up in production? It’s a 1000% increase in Tesla’s 2015 production level (approx. 50,000 Model S and Xs). Here’s one more clue from Elon Musk, at the end of the conference call:
“We believe that there’s more potential for innovation in manufacturing, than there is in the design of the car by a long shot.” Elon Musk
Tesla’s Alexis Georgeson took me inside the Tesla factory last week to share some insights as to how this “mission impossible” just might be done.
Here’s a transcript of my report on Tech Tent:
BBC Host, Rory Cellan-Jones: This week, the entrepreneur behind the Tesla cars made an extraordinary promise to his investors. He said his company would manufacture half a million cars a year by 2018. Given the fact that Tesla has missed much smaller production targets in the past this seemed, well, brave. But as Alison van Diggelen reports from Silicon Valley, Elon Musk is confident that this time, things will be different.
Alison van Diggelen: Tesla Motors astounded the auto industry last month when it received over 400,000 reservations (325,000 in the first week) for its new Model 3, an “affordable” all-electric car. In response, CEO Elon Musk just announced a production goal of half a million cars by 2018.
Elon Musk: My desk is at the end of the production line…I have a sleeping bag in the conference room… which I use quite frequently. The whole team is super focused on achieving rate and quality at the target cost, so I feel very confident in us achieving that goal.
Alison van Diggelen: I visited the Tesla factory in Silicon Valley to find out how they can deliver on time and in such huge numbers. Though beloved by fans, Tesla is also notorious for production delays.
Last year, the company spent over 1.5 Billion dollars in capital. Its cash burn-rate looks unsustainable. With General Motors coming out with a longer range electric car later this year and other competitors hot on their wheels, Tesla is under pressure to deliver, and fast.
Alexis Georgeson: There’s already been one major reorg since Model S production started in 2012. The original end of line used to be right here… we straightened out the line so we could expand and increase production.
Alison van Diggelen: That’s Alexis Georgeson, a Tesla spokesperson who explains in great detail the 7-day process that transforms a roll of aluminium into a shiny electric car. The two-week reorg and retooling in 2014 means that Tesla now has over 1000 state of the art robots, which helped ramp-up production by over 100% last year.
A separate production line for the Model 3 is planned and hard lessons from earlier models will help speed up their manufacture, especially more in-house capabilities and more thorough supplier validation. Musk says the new Model 3 will be designed to be easy to make.
Alexis Georgeson: We’re constantly learning and innovating. The great thing about Tesla is that so much is in-house and that we are so nimble.
Alison van Diggelen: I asked about the long delays in the Model X, largely caused by the flashy Falcon Wing doors.
What’s the trade off between hubris and caution at Tesla?
Alexis Georgeson: Our mission is not just to accelerate sustainable energy and transportation …You’re creating new features that haven’t been done before in the auto industry. With that comes natural growing pains…
Alison van Diggelen: So what about the cash flow issues?
Georgeson: The thing that’s missed there is the capital-intensive nature of the auto industry. Especially for a company like Tesla that’s ramping production so quickly…
Alison van Diggelen: Here’s Elon Musk…
Elon Musk: Tesla is hellbent on being the best in manufacturing… We believe that there is more potential for innovation in manufacturing than in design of the car, by a long shot.
Alison van Diggelen: Musk says the first Model 3 deliveries will start in late 2017. If he can prove naysayers wrong again, the majority of Model 3 reservation holders might see their cars coming off the production line in Silicon Valley within the next two years…
Read more Fresh Dialogues reports on Tesla here (scroll down for archives back to 2012)