Tesla Model 3 Will Destroy The Auto Industry -- Here's Why −


100% Electric Vehicles

Published on June 28th, 2016 | by Zach

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Tesla Model 3 Will Destroy The Auto Industry — Here’s Why

I think we could call Julian Cox’s main presentation (he gave a couple) during our Berlin Cleantech Revolution Tour conference the keynote presentation of the conference. It was an eye-opening presentation (even for me) on why the Tesla Model 3 could be the key electric car that upends the global auto industry — and, no, this is not just about the ~400,000 reservations that have been placed for the car. You can watch most of it below, or you can skip the video and read on, where I will give you a hint of what he said but further encourage you to watch this video.


 

Julian started off his talk highlighting some fun facts regarding and defining technology disruptions, which he notes have always happened within the lifetime of one person and almost always happened with 20–30 years. Julian touched on the story of Kodak as one of many famous examples of a large company shooting itself in the foot by inventing the technology that went on to kill the company — with forward-looking implications for the GM EV1 and the Exxon invention of the lithium battery.

Regarding electric vehicles, Julian notes that Chevron bought the patents for the nickel-metal-hydride battery used in the GM EV1 and then stuck it on a dusty shelf to prevent progress. But something less well known is that ExxonMobil invented the lithium battery, in the 1970s. The exact chemistry for ExxonMobil’s battery was not really suited for production, but the company patented the lithium battery anyway … and that patent didn’t expire until the year 2000. After the patent expired, of course, is when commercial lithium-ion batteries enabled lower-cost and more-practical portable electronics like cell phones and laptops to take off. Julian also talked about other developments in the battery space, such as research that discovered how to make them rechargable, that was also critical.

That essentially led into a discussion of whether the Tesla Model 3 was a better and cheaper vehicle than any ICE car. For that, Julian compared the base Model 3 to the similarly priced and performing BMW 328i in numerous ways. For this segment of the presentation, I think you should just watch, starting at 12:10 in. (Though, really, I think you should set aside time to watch the entire presentation anyhow, since it includes numerous fascinating points.) As part of the Model 3 vs BMW 328i comparison, he also explains why it’s relatively pointless to make autonomous self-driving cars using internal combustion engines (non-electric cars), which includes an interesting tangent on Uber that has seemed obvious for a long time but is widely unacknowledged. Other brief tangents Julian goes on concern the convenience of home charging, the transition from horses to cars, the Chevy Bolt, and the mechanism of sub-prime leasing by which the disruption of the auto industry via EVs will most likely destroy incumbent auto companies (rather than incorporate them in an industry in transition). He discusses these matters in unique and I think useful ways that should be eye-opening to many people — especially the tangent on that last point, which was pretty eye-opening for me because of the details presented.

At 41:30 in, Julian examines total cost of ownership for the Tesla Model 3 vs the BMW 328i vs the Toyota Corolla. Yes, the Toyota Corolla! This segment, again, is really worth a watch. Check it out if you haven’t yet done so!

Footnote: Julian, while unapologetic for systematically dismantling the fabric of society, has asked me to say sorry on his behalf to the great John B. Goodenough for getting tongue tied and calling his LiCoO6 Cathode an Anode and referring to him as James. Other than that, Julian assures me everything appears to make sense as intended.

Via CleanTechnica


 

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About the Author

is the director of CleanTechnica, the most popular cleantech-focused website in the world, and Planetsave, a world-leading green and science news site. He has been covering green news of various sorts since 2008, and he has been especially focused on solar energy, electric vehicles, and wind energy since 2009.

Aside from his work on CleanTechnica and Planetsave, he’s the founder and director of Solar Love, EV Obsession, and Bikocity.

Zach has long-term investments in TSLA, SCTY, FSLR, SPWR, SEDG, & ABB. After years of covering solar and EVs, he simply had a lot of faith in these companies and felt like they were good companies to invest in as a portion of his retirement strategy.

To connect with Zach on some of your favorite social networks, go to ZacharyShahan.com and click on the relevant buttons.



  • beardedman

    Well, the guy may be smart and may have eye-opening material to present, but I don’t have time to watch an hour-long unedited video of someone who doesn’t speak particularly clearly or succinctly. He seemed to ramble a bit and the sound quality made it all worse. This is why an edited transcript of such things is best. I got as far as trying to decipher what he was saying about why gas cars don’t make sense to be autonomous and couldn’t follow it.

    • maxholland

      @hirsute beardedman

      The autonomous vehicles aspect is crucial to understand for the future of the whole private vehicles market. I agree with you that Julian is not the most polished presenter, but his thinking is sound on this and on several other points in his presentation.

      I totally agree with Julian that it autonomy favours EVs much more than ICEVs. Further, I think that the impact of full vehicle autonomy is grossly underestimated and will take many people by surprise with its disruptive force.

      Why?

      A private vehicle is the best model we currently have for quick, reasonably reliable and convenient customized point-to-point transport of individuals, families, small groups. Having lived in many parts of the world in my experience most (not all) people in Europe, Asia and S. America who own cars are mainly interested in this function, and don’t necessarily have an emotional attachment to cars if more convenient / reliable / cheaper options are available. I think this might be a bit different in the US where there is quite a lot of cultural and emotional attachment to car ownership. Many people seem to think of autonomy simply as a neat party trick that ‘my car’ will be able to do, and will allow ‘me the owner’ to do other things during the journey.

      But that’s not it at all!

      A fully autonomous vehicle is a way for anyone (urbanites initially, but quickly almost anywhere) who needs this kind of customized point-to-point transport (individuals, families, small groups) that is currently only available to car owners (or people with enough money for expensive taxis/chauffeur) to suddenly have a cheaper and better alternative. We will have access to an ultra-inexpensive and much more convenient taxi/chauffeur service for every journey, without having to pay the cost of a driver. This will be a far lower cost and hassle than owning your own vehicle. No time and hassle finding parking spaces, no vehicle maintenance, no reliability concerns, no annual tax or insurance, even no driving license!!!

      Who would bother to own a private car when you can get a taxi anytime for (in my calculation below) 20 cents per mile (that includes the taxi operator’s profit). Autonomous vehicles are a tsunami for the entire industry and car-owning lifestyle. I like to call them ‘robotaxis’.

      Why does autonomy favour EVs over ICEVs?

      This is not about the lack of technical ability to make ICEVs autonomous – both they and EVs can be made autonomous for similar cost (most modern car systems are already highly electronically controlled; think steering, transmission, brakes). The EV advantage is due to the comparative costs of fuel and maintenance once you have removed the overwhelmingly high cost of the wages of the taxi-driver / ‘chauffeur’. More than half the cost of current taxis is the driver’s compensation, let’s say $25K per year. Once you remove that from the equation, the relative cost of fuel and maintenance between EVs and ICEVs are extremely stark, and not at all good for ICEVs.

      A taxi-type vehicle of say $35K gets amortized over 10 years at $3.5k per year. Let’s assume ICEV and EV robotaxis are roughly even on this (even though Julian wants to claim EVs have 1 million mile life, and ICEVs only 300k mile). The vehicle amortization cost is anyway MUCH LESS THAN THE FUEL COST for the ICEV! In several US cities, an average taxi vehicle drives between 50k and 90k miles per year. So the fuel and maintenance advantage to EVs is by far the most important economic consideration (and the vehicle amortisation costs become a small fraction). So for the operator or such a robotaxi service the annual cost figures should be more like:

      $3.5k amortization + $10-15k fuel + $4-6k maintenance = $21K per year to put an ICEV robotaxi out there. An EV robotaxi costs $3.5k amortization + $2.5k electricity + $2-3k maintenance = $8.5k per year to put out there. So an even more dire situation for ICEVs once full autonomy comes online.

      If an EV robotaxi can do 75k miles a year (205 miles per day) for $8.5k, and effectively replace 5 (x15k annual miles) private cars (including their fuel, maintenance and all other costs), for an equivalent of $1.7k each (plus some profit markup)… there’s not much of an incentive for private car ownership for folks whose main interest is getting from A to B in a cheap hassle-free way. That’s the tsumani I think most folks are not seeing.

      15k miles for $1.7k cost – that’s 11.3 cents per mile. The operator may mark it up to 20cents per mile (to cover insurance and a decent profit margin). At $3k per year for a heavy (15k annual mile) service user, that’s still very compelling as an alternative to owning and covering all the costs of a private vehicle. For the operator – charging at 20 cents per mile, each EV robotaxi is generating around $5k per year in profit (after paying for itself). That’s about 14% p.a. return on a $35K investment. Good for the service providers, good for the service users. Less pollution, CO2 emissions, traffic, accidents, wasted parking space, etc. Smiles all round (except for the traditional car makers).

      Does this make Julian’s argument any clearer?

      • Julian Cox

        I think your clarification is at no material odds with the original – excepting that there is no good reason for an AI-EV operator to undercut the Uber or taxi business model down from dollars per mile to $0.20 cents and no way for several years at a minimum for any AI-EV competitor to saturate demand for mileage at $1 Per mile even though the net cost of that mile is less than $0.12 Cents.

        The greater good is actually served by charging $0.88 Cents profit on that $0.12 of cost or 733% net profit and putting that huge profit margin into making more AI-EVs.

        To go one step further, in my opinion (mathematically true) there is an economic positive feedback loop available by sharing a percentage of that 733% profit with vehicle customers. Then the customers get to buy profitable cars and hence will be more than willing to reserve cars and obtain loans or advance their own money to buy then – thereby cash flowing the factory to grow rapidly along with factory profits on the cars and its part of the 733% profit windfall.

        This way the “capital intensive” nature of growing a global giant auto business is no object. No additional money is necessary besides customer cash and the lion’s share of that 733% profit margin to grow extremely rapidly towards saturating global demand at any scale. Bear in mind that there will always be demand for transport exceeding the number of car owners necessary to serve that demand.

        • maxholland

          Yes Julian, I agree that supply and demand will keep the $/mile somewhere marginally under uberprice initially as the initial supply of robocabs will be limited. My point is only that in the fullness of time, the $/mile will eventually fall to a point well below the cost of private car ownership for most people, and thus the market for private cars will reduce substantially (by 80%+) in the long run. Whether this takes 5 years from full autonomy becoming available, or 20 years, I can’t predict. Either way it’s a relatively quick demise for private ICE cars.
          My guess is that in Europe and perhaps Asia many of the robocab services will be run by local governments as a form of public transport (since their existing public transport services will also be rebalanced by this new technology).

          • Martin Lacey

            Interesting commentary, worthy of consideration.

            Simple question… If the profit is in the hiring of the vehicle – why would the manufacturer give the profit to the local government or private driver?

            Another question… If the cost per mile drops so low as to replace public transport, cabs and Uber – won’t private ownership cease all together??

            If so, you are supporting the case of Faraday Future, which has yet to produce a car, but has hinted at a new model of ownership/use.

          • Julian Cox

            Faraday I suspect imagines it has hit on a brilliant idea before Tesla, one that Tesla has been working on long before Faraday existed.

            On your previous question, profit isn’t everything. Capital, cash flow and profits are separate concepts.

            By sharing a small part of the profits, Teska will attract the capital to cash flow truly enormously rapidly growth – from its customers – and hence do so without taking on any debt or suffering any dilution of shareholders snd with it any dilution of management control.

            This is mindblowingly significant to outcomes. This makes doubling a company the size of Ford or Toyota easy and just about financially risk free instead of unimaginably dificult and unimaginably risky.

          • Carl Raymond S

            I hope somebody is working on automated car wash and internal cleaning stations.

          • Julian Cox

            Exactly. I have been calling it valeting.

        • Martin Lacey

          Thanks Julian for a thought provoking article. You really need the use of a tablet (pc), I’m sure you could get one on expenses!

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    To Mr. Bernard Soriano

    Deputy Director in California Dep. E-Vehicles

    Re: Self Driving Vehicles

    These types of vehicles will never work and will not be possibly function on the normal city/any streets. They show a vehicle driving on a parking lot, and on a sunny day. Nobody is mentioning these types of problems.

    Let’s say the vehicle is driving on city streets the traffic lights are not working, heavy rain day or night, heavy snow that covers the whole vehicle and electronics, overnight parking and the vehicle is covered with ice and snow, mud, than the vehicles outside electronics have no way of knowing what to do. Does the vehicle will not function and is totally useless.

    Everybody who likes to drive a vehicle must have a driver’s license in all states where the person lives.

    Must have vehicle insurance.

    If a vehicle company wants to sell a self driving vehicle the company must supply the vehicle insurance at the time of the sale to the consumer’s.

    The vehicle company must apply and have a driver’s license for every state in the USA.

    Why all this?

    As of today the owner of a vehicle does not need a driver’s license only insurance.

    Once the vehicle company is electronically driving the vehicle from where ever, all liabilities are with the vehicle manufacturer. I very strongly believe the vehicle companies will and cannot do this.

    Please see all my additional documents enclosed in this envelope.

    T

    • Martin Lacey

      I bet you’re a Nigerian Prince as well 🙂

      Or at least a campaigner for ICEV’s.

      I’m sure legislators are considering all the ramifications of autonomous driving.

      Human error, multi-tasking, lack of concentration all lead accidents and fatalities every single day. Autonomy – even in it’s infancy is reducing those risks. For example Volvo has adaptive cruise control which keeps a safe distance from the vehicle in front. Tesla autopilot has a great suite of safety features, despite the recent announcement of a fatality. Google has spent $billions on self driving tech and under California state law – the AI is classed as a legal identity, meaning it is liable to prosecution in the event of error and accidents.

  • jstack6

    Very good facts on the held up battery tech before the year 2000. Another big key was AC Propulsion with the AC controllers and lithium laptop batteries in packs to make a full traction battery. They inspired Tesla and the best is coming each year .

  • Martin Lacey

    One point not considered is the lack of human interaction when replacing the cab/Uber driver with a “robot”. All this technology can be isolating.

    Don’t get me wrong – I love my tech, but I do wonder where it’s leading us.

    I appreciate and agree with Julian’s insight and comment and am in the first 100k who reserved a model 3. A car to be desired and a car which makes real economical sense! I am looking at a ten year model of ownership, by which time a 500 mile range, 10 minute recharge, self driving car will be available to drive for me in my dotage.

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