Navigant Research Blog

Preparations Continue for Tesla Model 3 Launch

— November 21, 2016

Electric Vehicle 2For the hundreds of thousands who put down a deposit on the upcoming Tesla Model 3, the future can’t come soon enough. The much anticipated EV, which is scheduled to start shipping sometime between the end of 2017 and the beginning of 2018, is one of several vehicles due out in the next 18 months that are expected to push plug-in EVs (PEVs) into the mainstream.

A new book, Getting Ready for Model 3: A Guide for Future Tesla Model 3 Owners by Roger Pressman, details many of the expected technical details about the car’s performance as well as considerations for keeping it charged. For those who like the minutiae of how cars function, the chapters on performance and autonomous vehicles give digestible overviews of how EV and assisted driving technologies work in general, as well as Tesla’s likely implementation.

One aspect of PEVs that is often overlooked or misunderstood is the efficiency of electric motors in providing more torque at low to medium RPMs than conventional vehicles. Pressman does well in explaining the details about this feature, which alone should have prospective Model 3 owners excited. Tesla’s prior vehicles are admired for their speedy and nimble driving, and bringing that capability to the Model 3 helps explain the long reservation list.

Autonomous Driving

Tesla’s Autopilot feature has gained praise for its role in pushing the edges of driver assistance (as well as a fair amount of notoriety), and Pressman provides an overview of the levels of autonomy and underlying technologies. The Model 3 will include the hardware and software for Tesla’s self-driving technology, though customers of Tesla’s least expensive vehicle to date will have to pay to unlock the feature. A recent survey of Tesla owners indicates that while the vast majority understand the limits of the technology, the minority who believe Tesla cars can fully drive themselves can have serious consequences. With the Model 3 likely to outsell all previous Tesla cars combined, barring an expanded education push, the number of misinformed drivers putting too much faith in Autopilot could skyrocket.

For those who haven’t owned a PEV before, how to keep the 215-mile-range, all-electric car sufficiently charged is worth reading up on. As my colleague Sam Abuelsamid correctly anticipated, Model 3 owners (and all Tesla buyers who purchase a vehicle after January 1, 2017) won’t have unlimited use of the Supercharger network, but will be capped at around 400 kWh worth of free charging, with a pay-as-you-go model kicking in after that.

To supplement the Supercharger network, Tesla has been busy working with partners to build out its Destination Charging network. As pictured below, this network provides slightly above Level 2 (up to 16 kW) charging at hotels, parking garages, restaurants, and other locations across the United States.

Tesla’s Destination Charging Network

DestinationCharging

Source: Tesla Motors

Tesla will also be introducing a new type of glass in the Model 3 as the company continues to expand its research and development efforts to leverage the synergies with recently acquired SolarCity. There is justified enthusiasm surrounding the Model 3 and other more affordable PEVs coming out in the next 18 months. It will be interesting to see to what degree that excitement turns into growing sales.

 

Tesla’s Affordable EV Finally Sees the Light of Day

— April 1, 2016

EV RefuelingWho would have thought that a small, roofless, two-seat, self-propelled machine could inspire a revolution in the way humans move about? Strangely enough, it has happened twice now, first in 1886 when Karl Benz drove his Patent-Motorwagen for the first time, and again at the dawn of the 21st century when AC Propulsion founder Tom Gage built the tzero. In each case, the revolution wasn’t instant. It took 22 years before Henry Ford’s Model T moved the car from wealthy early adopters to the masses—the electric vehicle (EV) will need a similar timeframe to make a real dent in the marketplace. Tesla Motors hopes its freshly revealed Model 3 will be the Model T for a new century, but will it succeed?

Founded in 2003 after Martin Eberhard and Elon Musk drove the tzero but failed to convince Gage to put it in production, Tesla had a plan to change the world with electrons. The Tesla Roadster used a Lotus chassis as the starting point for an electric sports car inspired by the tzero. Tesla steadily increased its volume and revenue to fund subsequent more practical and affordable models. Despite failing to meet its self-imposed deadlines, the company has largely stuck to the plan, going from Roadster to Model S to Model X.

Increasing Production

Having successfully increased production by more than an order of magnitude from the Roadster to the Model S, Tesla now hopes to repeat that trend with the Model 3. To that end, the new model is priced starting at just $35,000 before tax incentives, which brings the brand into an entirely different marketplace. Where the Model S and X take on high-end models from Audi, BMW, and Mercedes-Benz, the Model 3 is priced almost directly opposite the Chevrolet Bolt, a 200-mile EV to be priced at about $37,000 when it goes on sale in late 2016.

Tesla Model 3

Tesla Model 3 Unveil

(Source: Tesla Motors)

Unfortunately, while Tesla was the first to market with battery EVs that could easily exceed 200 miles on a charge, this time around, Chevrolet has a head start of at least a year. When I first interviewed Martin Eberhard in 2007, the goal was to have an affordable mass-market EV in the 2012-13 timeframe. As Tesla now knows, building cars is a lot harder than building software, and the Model 3 is scheduled for a late 2017 launch. A base Model 3 may cost as little as $25,000 after federal and state tax credits. However, at its current sales pace, any further delay means that Tesla is likely to hit 200,000 total sales by mid-2018, triggering a phaseout of the federal incentives and raising the net price.

A Tougher Marketplace

In addition to the challenge presented by the Bolt, with gas prices under $2 per gallon, the Model 3 also faces a much tougher marketplace for fuel-efficient cars. New EVs must attract customers on their own performance, design, and reliability merits. Tesla has proven it can compete on the first two, but reliability remains an open question, especially as production volumes climb. Finally, there is the question of profitability, something Tesla has failed to achieve to this point. Without highly profitable gas-fueled trucks and SUVs, Tesla is at a disadvantage.

As we approach the 20-year mark from the birth of the tzero, Navigant Research’s Electric Vehicles Market Forecasts report projects sales of nearly 2.9 million plug-in vehicles globally by 2024. The zero emissions revolution is almost upon us—Tesla has certainly worked hard to bring the transformation to the world, but whether the timing works in favor of the Model 3 or the Bolt to be the new Model T remains to be seen.

 

Powerwall Takes Tesla Into the Energy Cloud

— May 8, 2015

Elon Musk has announced that Tesla’s Powerwall, the company’s residential energy storage product, is already oversubscribed—38,000 residential systems have been reserved. The company’s PowerPack offering has an even more impressive backlog: 2500 reservations averaging an estimated 10 Powerpacks at 100 kWh, representing 7.1% of the Gigafactory’s planned capacity. Executing these orders will carry the company into 2016. In total, the reservations amount to between 2.9 GWh and 3.6 GWh. While this is an impressive feat, Tesla’s contribution to the market will not be based on technology—at least not at the battery cell level. Although the company’s battery pack offers benefits that integrators may not receive from products from LG Chem, NEC, Saft, or Samsung SDI, Tesla’s effect on the market is likely to reach far beyond hardware deployments.

Specifically, that influence will come in building economies of scale, popularizing the home storage concept with the general public, and, ultimately, developing viable financing schemes. Tesla’s move will also certainly spawn imitators in the residential space, encouraging competition and differentiation in the marketplace. Tesla can bring its sales and installation machine to bear in a portion of the market plagued by fuzzy margins, fickle business cases, and inconsistent interconnection fees. In a similar fashion, SolarCity and its peers can change the residential PV market simply by deciding to establish a market offer in a particular territory.

The Full Ecosystem

The broader play for Tesla is not to sell battery hardware into the residential market. Rather, Tesla has an opportunity to use the Powerwall as an anchor for a Tesla home energy ecosystem. The company is transforming itself into an energy provider, but not in the traditional sense. Interested in reducing your energy bills? Join the Tesla family. Purchase a vehicle, solar PV, electric vehicle charging, battery storage, and perhaps even energy-related services. Customers are buying into a platform, the same way that Mac users bought into the Apple ecosystem.

In 3 to 5 years, once market penetration nears saturation in early-adopter markets, Tesla could parlay these assets into a virtual power plant (VPP), bidding into deregulated markets or even selling directly to vertically integrated utilities. In order to expand its VPP market share, Tesla may decide to license the software and controls—the brains of the system—to other firms so that even competitors’ units can opt into a VPP in the future.

What does this mean? It signals that Tesla Energy is the newest player in the Energy Cloud.

 

2018: When EVs Will Change Everything

— February 11, 2015

Disruptive technologies don’t appear overnight. They come in gradual iterations until refinements and related technologies evolve to a point when they become so overwhelmingly useful that they are viewed as a necessary replacement for what came before.

While plug-in electric vehicles (PEVs) have come a long way since their introduction in the 1990s, they are not viewed by the general public as must-haves today, due to their higher prices and driving range limitations.  However, the next generation of PEVs, due to arrive in 3 years, will likely have a combination of features and prices that will convince most car buyers that driving a car with an internal combustion engine is a habit worth breaking.

Compare the development of PEVs to that of the smartphone. GM’s EV1 was the first significant PEV available in the 1990s, and its limitations in driving range and overall comfort prevented it and other PEVs of that era from catching on with consumers.

The evolution of smartphones can also be traced back to the early 1990s, when handheld personal digital assistants included an operating system with personal productivity features, and the first mobile phones that enabled talking (almost) anywhere became available. While these innovations quickly became popular with geeks and aficionados, they didn’t exactly capture a mass market.

10 Years After

Flash forward to 2009, and along came the Nissan LEAF and Chevrolet Volt, which took advantage of advances in battery technology, electric drive, display screens, navigation, and faster wireless communications to provide a driving experience that in most respects is superior to your father’s gas car. Most people have at least heard of a PEV by now, though PEV sales in the United States in 2014 were still less than 1% of all new light duty vehicles.

It similarly took more than a decade for personal digital assistants and mobile phones to converge, and for the then rudimentary technologies to be enhanced with better display screens and wireless connectivity, and new applications including texting, navigation, data sharing, and voice commands. For smart phones, the Blackberry, Windows smart phones, and then the iPhone became must-have devices that initially came with a high premium, but within a few years other manufacturers prompted competition that put this combination of features within reach of most consumers.

Tipping Point

That hasn’t happened yet with PEVs. But by 2018 we’ll have the Tesla Model 3 and the Chevrolet Bolt, which will package new technologies and driving enhancements to further separate PEVs from the pack. Anticipation for the Model 3’s extended range and Model S-like performance has been building since it was first announced, in 2013. The Chevrolet Bolt concept, which was announced at the International Consumer Electronics Show (CES) in January 2015, promises similar or better range for a lower price.

GM has said that owners will be able to start the Bolt with a smartphone application, and that ride-sharing and self-parking features will be included with the vehicles. Some of these features may be available in conventional cars by that time, but with the Bolt (and likely other PEVs), you’ll get them all under one roof for around $30,000, along with  superior electric drive performance and the savings and convenience of driving on electricity.

As with Apple and Samsung in the mobile device sector, Tesla and GM aspire to be the agents of change, and for now we can only guess at the electric alternatives that Nissan, Ford, Volkswagen/Audi, BMW, and Daimler will have at dealerships in 2018. Like smartphones, PEVs have certainly had their shares of missteps in their march toward ubiquity, but as Albert Einstein said, “Failure is success in progress.”

 

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