The past few weeks have seen a Wimbledon-worthy back and forth between EV advocates and detractors as they discussed the fairness of a disastrous road trip in a battery-powered Tesla Model S that was written about in the New York Times.  The dispute centers on the writer’s account, his charging behavior during the truncated journey, and the protestations of Tesla and angry EV enthusiasts that he should have taken more care in reaching his destination without depleting the batteries.  The Times’ public editor followed with a rather lame examination of the contretemps that did little to settle the basic dispute.  This whole debate, though, ignores a much larger point about Tesla’s product strategy.

As Chelsea Sexton astutely pointed out on Wired.com, the idea of a road trip up and down the East Coast in the dead of winter that solely relies on two fast Tesla Supercharger stations unnecessarily stretches the vehicle’s capabilities.  Most EV owners would know better than to even attempt the journey.  But the larger question is: why would Tesla want to limit drivers of its luxury vehicle to only a few charging spots when hundreds of easily accessible public charging stations are available?

Please Compromise

The Model S includes a proprietary cable for connecting with the Supercharger network.  Tesla’s stations have faster charge rates (90 kW) than the industry standard rate of 50 kW for fast DC charging, which, as the company points out, provides an exclusive benefit to Tesla drivers.

However, all along the eastern seaboard are hundreds of charging stations that feature the industry standard SAE J1772 plug.  Tesla requires that its customer pay $95 for an adapter to take advantage of this EV infrastructure, which personally I would want included if I’m paying $90,000 for a car.  There was no mention of the Times reviewer having this adapter in his test car, which can provide approximately 20 miles of range in an hour of charging.

The route taken along I-95 during the road trip also includes two fast DC charging stations using the CHAdeMO connector, used by the Nissan LEAF and Mitsubishi i (many of the more than 130 CHAdeMO chargers now in the United States were paid for by taxpayers as part of the DOE’s EV Project).  While these fast chargers are slower than Tesla’s Supercharger, they can provide about 150 miles of range in an hour, which is fast enough for most any EV road trip.  Tesla has committed to installing 100 of its Superchargers across the United States during the next few years, many of which will be thousands of miles from the majority of Model S owners.

Tesla announced recently that it will soon offer a CHAdeMO adapter for customers in Japan, and will eventually bring it to the United States, but when I recently spoke with the company, they would not commit to a date.  By the end of this year we’ll also likely see dozens of fast DC chargers scattered across the United States that use the SAE’s combo connector, which combines the slower J1772 technology with fast DC charging capability – but Tesla Model S owners won’t  be able to power up at these locations, either.

Tesla Motors’ slogan is “Zero Compromises,” but the company’s strategy of exclusivity for charging betrays that ethos.  Model S owners would be better served by greater charging flexibility than by the company’s spat with the New York Times.

The excitement surrounding Tesla Motors has once again spiked.  The delivery of the production Model S’s (Model Esses? Models S?) has begun – a milestone that many thought questionable.  Telsa Motors has pushed many in the traditional automotive world to reconsider Tesla’s future, as evidenced by significant investments from Toyota and Daimler and the surprisingly buoyant stock price.  Tesla has the well-deserved spotlight, and is gaining momentum.

All this gives further bravado to the deservedly proud Tesla founder Elon Musk, who never shies away from the media’s microphone.  During the Model S delivery event on June 22, Musk proclaimed: “In 20 years more than half of new cars manufactured will be fully electric,” Musk said. “I feel actually quite safe in that bet. That’s a bet I will put money on. … It’s probably going to be in the 12- to 15-year time frame”.  Well, Mr. Musk, I’ll take that bet (though admittedly, my cash reserves will likely dictate a smaller bet than you might be thinking).

Our most recent report on plug-in electric vehicles (PEVs) has the market for battery electric vehicles growing at a very rapid pace (32% compound annual growth rate between this year and 2020).  This pace of growth is likely unsustainable as the market becomes increasingly mature, but let’s for the sake of argument assume that this remains unchanged through 2032 (20 years from now).  This would put the BEV market at about one-third (5.0 million) of the total market in 2032.  But 32% growth for 20 years?  That’s pretty unrealistic.

Let’s assume the average growth is still a strong 10% (what automaker wouldn’t love 10% growth every year for the next 20 years?).  At 10% growth, the market for BEVs would be about 574,000 vehicles in 2032.  However, our forecast for the growth rate between 2019 and 2020 is 8%, which would translate into 480,000 vehicles when extrapolated out to 2032.  Even if the current vehicle market has seen its peak and is now on a downward slide, a one to two million vehicle market by 2032?  This also seems unrealistic.

Annual BEV Light Duty Consumer Vehicle Sales Forecasts, United States: 2012-2032

(Source: Pike Research)

Finally, for purposes of comparison, hybrids have been sold in the U.S. since 1999.  The hybrid market share 12 years later (2011) is 2.1%, or 268,807 vehicles.  Granted hybrids and BEVs are different animals with different lifetime costs and limitations, but one would expect that if BEVs will reach 50% market share in the next 15 years, hybrids would at a minimum have broken the 5% mark (they haven’t).

What would it take for Musk to be correct?  I would speculate that the U.S. market would have to see the confluence of three forces sometime early next decade:  First, automakers will have to diversify their product offerings rapidly, particularly into pickup trucks (which are 14% of the total vehicle market) and SUVs (which are on the way), increasing the appeal of BEVs in middle America and smaller cities.  Second, we would likely have to see an oil shock that makes any gasoline fueled vehicles extremely expensive to operate (gas prices reaching perhaps $8 to $10/gallon in current dollars).  Finally, battery recharging will have to have less impact on consumers, including higher powered wireless charging, improved DC fast charge times, and even fuel cell range extenders (on their way in the next decade).

While clearly some of these market forces are coming and we are seeing wider proliferation of BEVs, I think it’s a safe bet that we won’t hit that 50% market share by 2032, let alone by the middle of the next decade.  But I would be very interested to get some more details on why he’s so optimistic (and hopefully it’s for reasons other than pandering to shareholders).

Though many startup companies in the electric vehicle (EV) industry have either struggled to survive produce a profit, or insure investors of their products’ worth (or all three), one company has consistently bucked the trend of disappointing news: Tesla Motors.  In 2008, the company first began selling its first-generation all electric Tesla Roadster and since then has placed more than 2,000 of the high end EVs worldwide.  The Roadster is largely credited for restarting the EV revolution, and since its debut, no other manufacturer has been able to replicate a model with similar electric range and style.

The company struggled to make its first deliveries, but has largely overcome its early production troubles.  By all accounts, it is not just surviving; it’s thriving.  Recent news items include preorders of next year’s Model X all-electric crossover, netting the company more than $40 million overnight.  In other company news, Tesla will begin repaying $465 million to the U.S. Department of Energy (DOE) in December and has decided to begin deliveries of its more than 10,000 reserved Model S sedans one month earlier than previously forecasted.

Amid this good news, don’t forget that Tesla has never made a profit and by some current estimates, its 2Q 2012 will be its most unprofitable quarter since it went public in 2010.  However, starting a car company from scratch requires an enormous investment, and Tesla is not anticipated to earn a profit until 2Q 2013.

Having an estimated date for profitability is more than quite a few upstart EV makers and their upstart suppliers can boast.  No doubt, the promise of profitability is making Tesla attractive to investors.  Bursting Tesla’s balloon a bit, John Petersen, in a guest post on Greentech Media, describes the company’s growing popularity in the last 2 years as part of a “hype cycle,” in which interest in a company grows before an event and recedes afterwards.  For Tesla, the Model S may be that event.

Or, it may not be for two important reasons: 1) Tesla is the darling first child of the EV revolution and 2) the company continues to push the EV envelope.  People like the underdog, and despite being the first child, Tesla has kept the underdog image as the big auto makers, GM, Nissan, and Toyota, have crept into the company’s EV space.  The Model S may also be considered the company’s equivalent of Apple’s iPhone 4s, and the Model X (due out in 2013) would be the iPhone 5; meaning the hype is not going away with the Model S.

Tesla’s Model S deliveries begin on June 22.  As is customary with Tesla, a great deal of publicity has surrounded the event and the company has even put a ticker on its website, counting down the seconds to the moment that CEO Elon Musk will hand deliver the keys to the first owners.  The magnitude of this fanfare and its fan following is not uncommon among new PEVs, but it isn’t the end of the Tesla hype machine.  Let’s hope the Model S delivers on all its grand expectations, but let’s also be mindful that this is only one of potentially many new models to be delivered by the darling first child.