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.
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…
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)
Last night, I joined the BBC’s Business Matters to discuss the launch of Tesla’s Model 3 and the remarkable 325,000 deposits it garnered in just seven days. Reports suggest that even Tesla CEO, Elon Musk was surprised by the number of people prepared to pay $1000 to get in line for this mass market electric car. It appears that his “Tesla secret masterplan” had been intentionally leaked. Does this mean that the Model 3 represents an iPhone moment for the auto industry?
Here is a transcript of our conversation and a longer version of the report which aired on the BBC World Service. The transcript has been edited for length and clarity. Listen to the podcast here: Tesla discussion starts at 26:46
Roger Hearing: The Tesla 3…is that the way forward for electric cars? Now Alison, you’ve been having a look at the new Tesla…can you enlighten us on that?
Alison van Diggelen: Last Thursday, Tesla finally unveiled its “affordable” mass market car, the Model 3. Hours before it was actually unveiled, thousands of Tesla fans stood in line, sight unseen, to reserve one. This was a phenomenon, especially here in Silicon Valley where Tesla is headquartered and where they actually build the cars. I talked with several people who waited in line, and one Tesla fan who drives a Tesla (Roadster) but is just not interested in the Model 3…The key question now is: can Tesla deliver?
Small business owner, Tom Poppitz was one of thousands in Silicon Valley, to line up at one of Tesla’s six showrooms here. Each customer was prepared to put down a $1000 deposit for a car they’d never seen.
Poppitz:There was a lot of very well educated people in that line…they were going to buy this thing, no matter what it looked like…they were excited about it changing the world, changing the auto industry…
He likened it to an Apple product release, only better because it was sight unseen.
But what motivated Poppitz to get in line?
Poppitz: I’m not generally excited about cars…I’m a self-professed tightwad. The value proposition for this car is so completely different: frees you from buying gas… but my primary motivation: It changes macroeconomics in a major scale. Transitioning to electric cars can cure our trade deficits, it can have a quantum effect on our economy….
But not everyone is so optimistic that Tesla can actually deliver a world-changing product. I spoke with Anton Wahlman, a tech analyst.
He says Tesla’s two greatest challenges will be achieving profitability at $35,000 – where margins are razor thin – and beating some tough competition.
Wahlman: The unsexy factor in the whole equation…the product can be beautiful and all, but getting to an acceptable level of profitability is an extremely significant challenge.
He points to the brutal competition Tesla will face by the time it delivers its first Model 3’s in late 2017/and 2018. The Chevy Bolt hits showrooms later this year, and BMW, Audi, Jaguar, and others are in fast pursuit.
Walhman predicts that Tesla may face the same fate that Nissan did in 2010, when its all-electric Leaf started shipping …Many reservation holders demanded their deposits back.
Wahlman: (Nissan) They had zero competition… Tesla already has some competition …that will intensify greatly in ‘17 and by 2018, it’ll be in full bloom.
He acknowledges Tesla has a more attractive product than Nissan and its charging network is a moat-like barrier to competitors. But the Model 3 is not for every Tesla fan.
Silicon Valley techie, Carlos Morales drives a Roadster, Tesla’s limited edition sports car. He loves the quiet acceleration, and speed of his Roadster, but wasn’t prepared to reserve a Model 3. Why not?
Morals: I see a Roadster once a month… 300,000 Model 3’s have been reserved. There’s going to be a lot of them, that’s wonderful for the planet and Tesla. But it’s not going to be as exclusive.
There’s always going to be a class, a group of people who are looking at that.
Despite questions of reliability and servicing challenges pouring cold water on last week’s euphoria, Tesla true believers feel they were part of automotive history. Will this be an iPhone moment for the auto industry? At least 270,000 people hope so.
[Report ends]
Alison van Diggelen: Carlos speaks for probably a small segment of people who won’t be attracted by the Model 3. But as of this morning they’ve now had over 325,000 willing to put down a $1000 deposit…that level of interest is unprecedented in the auto industry. A lot of people are drawing analogies with the iPhone. There’s a euphoria about this new product…the difference is: people are going to have to wait about two years before the car is actually delivered.
Roger Hearing: That’s a very long time, isn’t it? Isn’t that a lack of attraction in itself?
Alison van Diggelen: The analyst, Anton Wahlman emphasized that it’s not that these hardcore fans aren’t prepared to wait…but in the two year period, they may be tempted off their deposits. Wahlman pointed out all the competition. Jaguar is even coming out with an electric vehicle, Audi…the Chevy Bolt will actually be in dealerships this Christmas. I did speak with one big Tesla fan – Washington Post columnist, Vivek Wadhwa – and asked him if he’d be tempted by the Bolt. He said it was like comparing a rotary phone with the iPhone. That’s the level of fanboy-ism there is in Silicon Valley.
Madhavan Narayanan: We’re not discussing cars anymore. We’re discussing new patented technologies. If Tesla has patented technology that makes it distinguishable and superior to other electric cars, we’re talking about a paradigm shift, not simply a better car.
Roger Hearing: The big thing here in Britain is where you can actually get the charge? It’s fine in big urban areas… and for short journeys. Would that be true in America where there are a lot of very long journeys and presumably not a lot of electrical stopping places along the way?
Alison van Diggelen: Yes, that is a big issue. Anton Wahlman pointed out that Tesla has this (proprietary) network for these long distance drives. They have hundreds of superchargers, (fast chargers) all over the U.S. They’ve introduced them in Europe too for people doing long journeys in their Tesla Model S. Wahlman described this like as a moat around Tesla’s business model and no other electric vehicle has something similar. So that could actually be an advantage (for Tesla). These other companies will have to catch up. With mass market, compared to a luxury car, there is a point: most luxury car buyers own homes and they can charge at home. If you’re living in an apartment, then that’s a whole different thing. That’s definitely a challenge, but Elon Musk is quite the visionary and he is aware of this and they are planning to double or triple their Tesla charging network.
Roger Hearing: That must be a problem in India, Madhavan, where do you charge these electric cars?
Madhavan Narayanan: Let’s look at what happened with cellphones. The paradigm of Tesla is strikingly similar. You have cell towers everywhere and they carry the signals. Why not set up a charging station network? To use Silicon Valley’s favorite expression:I see an electric vehicle ecosystem emerging. There will be new winners and losers in the game.
Roger Hearing: An electric car ecosystem? That’s a concept to carry around, as we go into what does seem to be the electric car era.
Last night, Elon Musk’s SpaceX achieved a spectacular milestone in the history of space travel: its Falcon 9 rocket launched 11 satellites into orbit, performed a spin and landed back on earth, six miles from where it launched. Why is this ultimate recycling feat so consequential?
Quite simply, this could revolutionize space travel as we know it today.
During our in-depth 2013 interview, an emotional Elon Musk told me of his disappointment at the progress of space exploration and his ultimate goal: to make human life multi-planetary. He explained that if he could “show the way” by making rockets as reusable as airplanes, this would:
1. dramatically reduce the cost of space travel
2. re-energize support for NASA’s mission
3. increase NASA’s budget
and “then we could resume the journey”…to Mars and beyond. Watch the interview, starting at 35:00
.
The back story of SpaceX
“I always thought that we’d make much more progress in space…and it just didn’t happen…it was really disappointing, so I was really quite bothered by it. So when we went to the moon, we were supposed to have a base on the moon, we were supposed to send people to Mars and that stuff just didn’t happen. We went backwards. I thought, well maybe it’s a question of there not being enough intention or ‘will’ to do this. This was a wrong assumption. That’s the reason for the greenhouse idea…if there could be a small philanthropic mission to Mars…a small greenhouse with seeds and dehydrated nutrients, you’d have this great shot of a little greenhouse with little green plants on a red background. I thought that would get people excited…you have to imagine the money shot. I thought this would result in a bigger budget for NASA and then we could resume the journey…”
On negotiations with the Russian military to buy two ICBMs
“They just thought I was crazy…I had three quite interesting trips to Russia to try to negotiate purchase of two Russian ICBMs…minus the nukes…I slightly got the feeling that was on the table, which was very alarming. Those were very weird meetings with the Russian military…’remarkably capitalist’ was my impression (of the Russians).”
Why he chose to create his own rocket company, SpaceX
“I came to the conclusion that my initial premise was wrong that in fact that there’s a great deal of will, there’s not such a shortage. But people don’t think there’s a way. And if people thought there was a way or something that wouldn’t break the federal budget, then people would support it. The United States is a distillation of the human spirit of exploration. People came here from other places…people need to believe that it’s possible, so I thought it’s a question of showing people that there’s a way…There wasn’t really a good reason for rockets to be so expensive. If one could make them reusable, like airplanes then the cost of rocketry (and space travel) would drop dramatically.”
Ever since Elon Musk released a white paper outlining the sci-fi Hyperloop, excitement among the tech community has been immense. This futurist ultra-high speed form of transport has inspired hundreds of university teams and two fiercely competitive LA companies: Hyperloop Technologies, and Hyperloop Transportation Technologies (HTT). I went to LA to find out what progress has been made.
HTT’s CEO, Dirk Ahlborn wasn’t ready to open the doors to the HTT studio to reveal the sights and sounds of progress. He and his small team were only available for phone interviews. One of his crew told me that all I could record, anyway, was the sound of fingers on keyboards at this point. A crowdsourcing experiment harnessing a reported 400 part-time global contributors, the HTT effort has produced some fancy looking Hyperloop station and capsule scale models, but the hard engineering appears to be happening only at Hyperloop Technologies. It was there I arrived September 16th with my trusty audio recorder to capture the sound of the Hyperloop potentially becoming a reality.
I’m at the Hyperloop Technologies Headquarters in downtown LA to find out if this sci-fi project is for real. In 2013 Tesla’s Elon Musk published a white paper, describing what he called a “5th Mode of Transport.” He describes it like:
“A cross between a concorde and a railgun and an air hockey table.” Elon Musk
A “hyperloop” comprises passenger or freight pods that are shot down a near-vacuum tube from one city to another, at over 700mph.
The prospect of traveling on land between SF and LA in 30 minutes has some people salivating, and skeptics shaking their heads in disbelief.
“Elon absolutely inspired us…his fingerprints are all over this. The system architecture that Elon came up with is what inspired this whole team to get together and go after this bold project.” BamBrogan
BamBrogan and his cofounder, Shervin Pishevar, have assembled over $10M in funding, and a 50-strong team of expert engineers. They’re creating what they call an “energy elegant” transport solution, with a potential freight market of 150 Trillion dollars over the next 20 years.
Here’s venture capitalist, Pishevar:
“The idea itself can have a deeply transformative effect on our planet, and on our lives. It brings the world closer together. Think about the impact of the Wright Brothers’ invention of flight, and their Kitty Hawk moment, what a pivotal moment that was.” Pishevar
Hyperbole for the Hyperloop? Maybe. But like Elon Musk, Pishevar has a record of proving naysayers wrong.
Hyperloop’s test engineer Cassandra Mercury explains:
Ambi – atmos of air whooshing, rotor spinning.
Cassandra Mercury: We have this rotor moving….running at 10,000 rpm, it’s a linear speed of about 750 miles an hour. We’re testing the levitation possibilities at the speed we’d be using on the actual hyperloop.
van Diggelen: Elon Musk described it as like an air hockey table. Is that accurate?
Mercury: That’s a really good analogy. It’s just some air and a light gap between the air bearing and the track.
van Diggelen: So the idea is: the pods of people and freight will levitate like a puck on an air hockey table?
Mercury: Exactly!
The team is targeting global freight as well as passenger transport. Numerous opportunities exist to connect high-traffic city pairs like LA and SF, that are less than 900 miles apart.
Here’s Hyperloop Technologies’ Director of Operations, Erin Kearns:
“We definitely see the benefits of transporting cargo…ports being too small…ships are sitting offshore 5 miles…we want to streamline the process, make it a lot more elegant, a lot cleaner for the environment.” Erin Kearns
I ask Mark Jacobson: what could derail the Hyperloop? He’s a professor of civil and environmental engineering at Stanford University.
He starts with comparisons to California’s High Speed Rail project, which has already broken ground…
Jacobson: I’m sure the Hyperloop is much more expensive… Like any large construction project, issues of zoning, trying to get rights of way… There’s always going to be a political fight for trying to site something like this…
And then he lists the technical challenges…heat build up, leakage from the vacuum tube, keeping a uniform distance between the pods and the tube.
“You’re gliding along at 700 mph and hit the bottom of the tube…I wouldn’t want to be the first person to ride in the train!” Jacobson
BamBrogan has this response to naysayers:
Brogan: I say: Wait a year, we’ll have a working prototype.
I ask him how they’re going to avoid the political nightmares that’ve slowed California’s high speed rail. Brogan smiles and says they’ll route their LA to SF hyperloop in the ocean.
BamBrogan is channeling Elon Musk in driving his Hyperloop team forward and he’s bullish about securing $80M more in venture capital, and overseas commercial contracts very soon.
“The team is trying to operate on a timescale that is of Elon Musk ilk…By 2017/18, we’ll have shovels in the ground in a couple of locations,” BamBrogan
Meanwhile, rival company Hyperloop Transportation Technologies (or HTT) boasts it will start work on a 5-mile demo track in California next year. Despite partnerships with UCLA and key industry partners; this rival team of 400 –mostly part timers – is not yet funded.
Back with BamBrogan’s team, they’re hiring aggressively.
“We’re aiming for the end of 2016 to have our Kitty Hawk moment: a full scale, full speed system that’s operating,” Bambrogan
Coming soon at Fresh Dialogues: an interview with HTT’s Dirk Ahlborn. Why does he insist that crowdsourcing the Hyperloop is the better approach?
The VW Scandal is growing in intensity and its repercussions are rippling across the globe. It’s widely predicted that the electric vehicle market will get a boost from this diesel disaster. Prius drivers may be feeling smug, but what of electric car makers like Tesla?
Yesterday, the BBC invited me to join the World Service’s Business Matters to discuss the scandal and its implications on the auto industry. Having attended last week’s launch of Tesla’s Model X all-electric SUV – where CEO, Elon Musk emphasized the company’s focus on air quality – I shared my perspective and that of George Blankenship, former Tesla VP, whom I interviewed at the launch.
Host of the BBC’s Business Matters, Fergus Nicoll, asked me:
“Is there schaudenfraude in the U.S. auto industry as VW scrambles?” BBC’s Fergus Nicoll
Here’s a transcript of our interview, edited for length and clarity.
Fergus Nicoll: Thursday is likely to be another painful day for the carmaker, VW. On Capital Hill, its US president and CEO, Michael Horn is scheduled to testify…he’s not the only one in the hot seat. His counterpart in South Korea, local VW boss, Johannes Thammer is due to attend a parliamentary audit in Seoul in about an hour from now. It’s all about the emissions scandal of course…
Let’s get Alison van Diggelen with us from Silicon Valley. Is there schadenfreude in the US auto industry as VW scrambles or is it: there but for the grace of the EPA go we?
Alison van Diggelen: Good to join you Fergus. I think the former. I was at the Model X launch last week in Silicon Valley and Elon Musk referred to it obliquely – about their work on a new air filter and how “air quality is very important” to them. So there is definitely a bit of schadenfreude.
I spoke with George Blankenship, former Tesla VP…he actually addressed the issue of (VW) cheating straight on. We have a clip here:
George Blankenship: I think his (Elon Musk’s) message has always been: the reason he’s doing this is to save the planet. Everything he does rolls up to that. Everything for him, whether you look at SolarCity, Tesla, SpaceX…it’s all about the survival of this planet and the atmosphere is what’s going to make it possible to live here for a long time, or not.
Alison van Diggelen: Any comment…on the VW scandal and their attitude to emissions?
George Blankenship: It’s unfortunate that others feel that they have to do things like that to try to compete. It’s the absolute opposite of what Tesla does…. Tesla comes up with a problem: we can’t get the falcon wing doors to work…we need sonar that goes through metal. They find a solution. It’s unfortunate when another company feels like they have to do something like that, as opposed to taking that same energy that they used to come up with that kind of a solution and put it into a solution that could have done something ground breaking in the car.
Poppitz: There was a lot of very well educated people in that line…they were going to buy this thing, no matter what it looked like…they were excited about it changing the world, changing the auto industry…
Morals: I see a Roadster once a month… 300,000 Model 3’s have been reserved. There’s going to be a lot of them, that’s wonderful for the planet and Tesla. But it’s not going to be as exclusive.
Madhavan Narayanan: We’re not discussing cars anymore. We’re discussing new patented technologies. If Tesla has patented technology that makes it distinguishable and superior to other electric cars, we’re talking about a paradigm shift, not simply a better car.
I’m at the 
BamBrogan and his cofounder, Shervin Pishevar, have assembled over $10M in funding, and a 50-strong team of expert engineers. They’re creating what they call an “energy elegant” transport solution, with a potential freight market of 150 Trillion dollars over the next 20 years. 
Hyperloop’s test engineer Cassandra Mercury explains:
Mercury: That’s a really good analogy. It’s just some air and a light gap between the air bearing and the track.
I ask Mark Jacobson: what could derail the Hyperloop? He’s a professor of civil and environmental engineering at Stanford University.
I ask him how they’re going to avoid the political nightmares that’ve slowed California’s high speed rail. Brogan smiles and says they’ll route their LA to SF hyperloop in the ocean.
