What Does the Tesla 3 Mean?

The Tesla Model 3 debuted last Friday to generally positive reviews. The Motor Trend take was representative (even if some outlets tried to restrain their enthusiasm):

The Tesla Model 3 is here, and it is the most important vehicle of the century.

Yes, the hyperbole is necessary. The original Tesla Model S was a proof of concept—it was possible to make a long-range electric vehicle. The Model X showed that you could make an electric SUV. But neither was affordable to the masses. And although the Chevrolet Bolt has shown that 238 miles of electric range is possible for less than $40,000, GM’s volume aspirations are modest....

Tesla worked hard to increase interior space, and subjectively it succeeded. For a compact car, the Model 3 feels incredibly light and airy. The dash is pulled ahead and pressed down, but cleverly, the touchscreen is apart from that, close to your right hand....

And then the foot goes down. How does it drive? The gush of torque clearly indicates DNA shared with the Model S. Yet it’s a new motor specific to the 3; Franz is coy about its horsepower, but Tesla’s claim of 0-60 in 5.1 seconds seems right when paired with this car’s $9,000 long-range battery....

What’s blanching, though, is the car’s ride and handling. If anybody was expecting a typical boring electric sedan here, nope. The ride is Alfa Giulia (maybe even Quadrifoglio)–firm, and quickly, I’m carving Stunt Road like a Sochi Olympics giant slalomer, micrometering my swipes at the apexes. I glance at Franz—this OK? “Go for it,” he nods. The Model 3 is so unexpected scalpel-like, I’m sputtering for adjectives….

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image: tesla

The Beginning

Tesla has nearly a half million reservations for a car that as of this moment, only a few have actually seen and driven. For context, there are only slightly more than that number of EVs on the road in the US, and a bit more in China and Europe combined. If all of those reservations are filled, Tesla will increase the EV population by half.

The media coverage of Tesla is akin to what we normally see surrounding Apple product launches, and that is no accident. Smart, elegant design is certainly part of the phenomenon. High performance in a pretty package will always draw the crowds, but getting that package down to a reasonable price takes some serious engineering - which Tesla now seems on the verge of mastering.

Are we about to see the real breakthrough for electric vehicles?

Physical, Not IT, Ecosystem

One of the primary things setting Tesla apart from all of its competitors, both real and potential, is Musk’s insistence on building out the ecosystem. Like Apple, the Tesla Model 3 is part of a larger, cohesive whole. But Elon Musk is building a physical system, not an electronic one.

Superchargers

The most visible and immediate part of this physical, technological ecosystem is the network of supercharger stations. At nearly a thousand stations and rapidly growing, Tesla is creating the infrastructure whose absence would have been a fatal stumbling block.

How useful would your gasoline-fueled car be if there were no gas stations? Even if you could fuel it at home? Not very. By lining the highways with charging stations, most of the US is now accessible with only minimal range anxiety. And that will only improve over time.

Electric Car + Solar Roof + Powerwall

A bit further out - and with rather more upfront investment - Tesla envisions taking your car off the grid. Tesla, which now owns SolarCity, can provide you with solar tiles for your roof. And as capacity expands, costs will likely decrease for the consumer. Free energy from your otherwise useless roof (OK, it does provide shelter) is only partially useful though. Solar Energy is there while the sun shines - but unless you have a bucket for the soup that is raining down, you can’t make maximum use of it.

And Tesla, of course, has a bucket. The Powerwall 2 is a battery that can power the average two-bedroom home for a full day. And, it can charge your new Model 3. The solar panels charge up the battery during the day, and the battery charges your car at night.

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image: tesla
naturally, it looks nice

That alone is a game changer - a free-to-operate vehicle. The non-car benefits of a Powerwall are obvious as well - reduced dependence on the electric company, the ability to use power at non-peak periods, and even sell power back to the grid.

Disruption

So we can see how this is going. Smart, sharp design creates interest, and then sales. Building out the infrastructure first makes buying Tesla a reasonable proposition for more than technology enthusiasts, and then supports and encourages buying within the ecosystem. Use of more than one part of the ecosystem increases the value to the consumer of all the parts he’s chosen to acquire. Increased production reduces costs.

And once the slightly-above-average income Joe can see that spending $6000 on a powerwall and re-doing his roof in solar panel tiles has real benefits (like never paying for gas again - saving hundreds of dollars a month forever) then the world tips over and never looks the same again.

Autonomy + Ridesharing

What happens after the number of Tesla vehicles hits critical mass is even more interesting.

From Nextbigfuture:

A Columbia University study suggested that with a fleet of just 9,000 autonomous cars, Uber could replace every taxi cab in New York City – passengers would wait an average of 36 seconds for a ride that costs about $0.50 per mile. Such convenience and low cost will make car ownership inconceivable, and autonomous, on-demand taxis – the ‘transportation cloud’ – will quickly become dominant form of transportation – displacing far more than just car ownership, it will take the majority of users away from public transportation as well. With their $41 billion valuation, replacing all 171,000 taxis in the United States is well within the realm of feasibility – at a cost of $25,000 per car, the rollout would cost a mere $4.3 billion.

Just 5% of cars being electric, ridesharing and self driving could see 90% of passenger miles in electric vehicles by 2025.

For the Tesla owner, an autonomous, self-driving car that goes out and earns money while you’re at the office, or in the evening while you’re at home - yet is available to you when you need it is pretty straightforward. Rather than being a cost (though reduced from standard automobiles thanks to solar panels and powerwalls) your vehicle is now a profit center.

For those employed as drivers, and in related positions - nearly 10 million in the US - the benefits are also clear. Almost entirely negative, as it happens. The more self-driving cars on the road, the faster the ramp up to the skill set needed to make them fully autonomous. And once that is reached, regulatory obstacles won’t just fall, they’ll almost immediately push toward the elimination of manual driving due to safety concerns.

The Transportation Cloud

With a large enough fleet-in-being of autonomous vehicles, the transportation cloud becomes a reality. The old, the young, the infirm - all will have much greater and more flexible access to transportation. Throughput on the nation’s roads will likely greatly increase, as will safety.

And those who own the cars will have additional income. For the average person, enough to subsidize ownership and a bit more - but for those who own the fleets of cars, vast opportunity for profit.

Master Plan Part 2

Last year, Musk released his Master Plan, Part Deux. Part One, he says, is mostly in the bag:

Create a low volume car, which would necessarily be expensive
Use that money to develop a medium volume car at a lower price
Use that money to create an affordable, high volume car
Provide solar power. No kidding, this has literally been on our website for 10 years.

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image: tesla

The short version of phase 2 is this:

Create stunning solar roofs with seamlessly integrated battery storage
Expand the electric vehicle product line to address all major segments
Develop a self-driving capability that is 10X safer than manual via massive fleet learning
Enable your car to make money for you when you aren't using it

A new, moderately-priced SUV and a pickup are both items that Musk has said that Tesla wants to build, which along with current models covers the consumer market. Buses, semis, and heavy duty trucks would cover the commercial market.

These new models, and the factories that will build them, and the factories that will build ever more solar tiles and battery packs - this is the future of transportation.

With the products that Tesla is already shipping, we can see the outlines of what is coming next. Musk has already stated what his plans are - and though he is often over-optimistic about when something will arrive, he has so far not been wrong that they do arrive.

All the companies that currently produce cars, trucks, buses are going to have to face the reality of autonomous driving, hyper-efficient factories, and complete transportation/power ecosystems. Tesla - like Apple with the first iPhone - has a huge lead in thinking about and building this larger system. It’s not just the single phone, not just the single car or truck. It’s how you pay for, power, drive, and even profit from the vehicle.

No other company is thinking as big as Musk. He won’t get the entire market for autonomous electric vehicles any more than Jobs and Apple got all of the smartphone market. But like Apple, Musk will change it utterly, and probably have a tight grip on the most profitable segment.

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