“These hotcakes sell like Mustangs!” Was the wild card in 1964. When the eagerly anticipated Ford Mustang was officially introduced to a car-hungry American audience, thousands had pre-ordered the “Chick Magnet” months in advance. There has been no such hysteria about a car in 50 years. That is of course until now.
Elon Musk may be on the verge of transforming the automotive industry for the 21st century, and the public seems to be feeling it. Since Tesla unveiled the first prototype of the Model 3 to the world last month – an affordable electric car designed for the masses and expected to retail at around $ 35,000 – the company has already sold more than 325,000 deposits (and more) for the vehicle. Most of these reservations were made within the first week that it was announced that Tesla would be accepting pre-orders.
Demand doesn’t seem to be a problem. However, it can be very good to hit.
Much depends on the successful completion of Gigafactory 1, a mega-manufacturing facility currently under construction in Nevada and designed solely to achieve the economies of scale required to make affordable lithium-ion batteries. A risky venture indeed, but these days a bet against Elon Musk is likely to offer even worse odds.
One of Tesla’s goals as a company has always been to promote a global transition to sustainable transportation. The nature of the tectonic culture shift required to transform the hearts and minds of consumers, not to mention undermining the influence of the existing auto industry sufficiently, is forcing Tesla to have enough electric vehicles near to oversaturation.
The company plans to produce around 500,000 electric cars annually by the second half of this decade. However, this will only succeed if a reliable and inexpensive supply of the rechargeable lithium-ion batteries required for their engines is ensured.
Battery production is slated to begin in 2017 and Tesla hopes to reach full capacity by 2020.
The Gigafactory 1 system itself is operated with renewable energy sources and should achieve net zero energy. In addition, it is designed so that almost all aspects of production can be done on site, potentially reducing costs and waste, and increasing opportunities for innovation in the longer term.
With the efficient manufacturing of lithium-ion batteries on the move, several media reports have indicated that Musk is currently stepping up its efforts to secure new sources of lithium beyond existing Tesla supplier Panasonic.
Mining companies such as Pure Energy Minerals Ltd and Bacanora Minerals Ltd as well as Albemarle Corporation, SQM and FMC Corp are due to compete for the contract, some of which have no prior experience in mining the silver-white alkali metal. But with global demand for the lightest alkali metal known to be expected to double by 2020, investing in some Lithium Mining 101 crash courses is likely money well spent.
“Gigafactory 1 is the third and final stage in Tesla’s long-term strategy to reduce battery costs – the biggest cost of electric vehicles,” said Dave Tuttle, Research Fellow at the Energy Institute at the University of Texas at Austin.
“There were three key steps in Tesla’s strategy to bring affordable electric transportation to the world: The first was to build a high-performance, long-range car (the Tesla Roadster) that demonstrated the potential of the technology. Stage 2 was the 4-door performance sedan of the Model S. The recently available SUV derivative Model X of the Model S is sometimes referred to as “Stage 2.5”. The third stage is the successful launch of the Model 3 in 2017 or 2018, a car starting at $ 35,000 (in the US market) that can go from 0 to 100 mph in less than 6 seconds and has a range of Has charging 215 miles on one battery. “
The Model 3 may be Tesla’s attempt to reach a wider audience, but still in a class slightly higher than, say, the Volkswagen Beetle in Germany in the 1930s. “They are trying to make the Model 3 into a vehicle roughly equivalent to a BMW 3 Series,” says Tuttle.
The Ford Muskang
While a BMW 3 Series may still be viewed as a luxury car to some, there are a number of interesting parallels between Musk’s previous business model and Henry Ford’s approach to the Model T, the car that first opened travel for mid-range Americans. When Ford launched the Model T in 1909, nearly 11,000 units were sold for $ 825 each. By the time he completed construction of the Ford River Rouge manufacturing complex in Michigan – the largest integrated factory in the world at the time – it was selling nearly two million units a year for $ 350.
“Though Elon Musk is constantly redefining what’s possible, the strategy for the Gigafactory is too similar to Ford’s Rouge Factory to be pure coincidence,” says Tuttle.
“Starting with an inexpensive car, Ford continued to refine its model – largely made possible by the economies of scale it achieved by building the Rouge factory – then cut costs, refined them even further, and cut costs even further. In the end, he put the whole world on four wheels. “
So Gigafactory 1 is not a new idea. But with Musk in the lead, his vision for the 21st century electric car will likely extend well beyond his current manufacturing base in Nevada. The addition of the number ‘1’ after the name ‘Gigafactory’ is also relatively new and clearly indicates that this is only just beginning. At a Tesla corporate event last year, Musk said that more gigafactories would be built elsewhere at some point, but not necessarily by Tesla.
His commitment to an open source philosophy for Tesla Motors technology means anyone who wants to open their own gigafactory can access the blueprints for the original design. Just recently, Bloomberg Business reported that there had already been talks on the subject between Musk and the German government. Perhaps the introduction of some German engineering practices could result in even more efficiency and lower costs in future Model 3 designs. A Tesla Beetle could be closer than we think.