Tesla's electric cars caused domino effect in automotive industry

  • Teslas electric cars caused domino effect in automotive industry
  • SolarroofPowerWallandTeslaModel3

    Solar roof, Power Wall and Tesla Model 3

  • NewYorkyear1913CourtesyTonySeba

    New York, year 1913 / Courtesy Tony Seba

  • NewYorkyear1900CourtesyTonySeba

    New York, year 1900 / Courtesy Tony Seba

Palo Alto: Efforts of Tesla Motor Company and its founder Elon Musk for introduction of electric vehicles to the mass consumer market, along with technical progress and introduction of new technologies launched far-reaching changes in the automotive industry. With the beginning of mass production of Tesla Model 3 and competing models from world's top automakers, the displacement of diesel and gasoline cars from the market with electric vehicles is accelerating. Special analytical review by Front News International.

A new stage in the evolution of transport

The internal combustion engine car became a symbol of the twentieth century and one of the most important products of industrialization. In times of it's inception motorization radically increased economic productivity and radically transformed the economy. Today electric vehicles are entering the economic arena in similar way. And they are not just cars, but supercomputers on wheels with autopilot functions, as well as the ability to accumulate and store electricity.

Tesla Motors in less than 10 years managed to create a world market of electric vehicles almost from scratch and continue to hold leading role in its expansion. The sales of Model 3, the key product of Tesla, marks a new stage in the implementation of Elon Musk's strategy to expand the electric vehicle market. The first stage was creation of an attractive electric car image with the launch of the Tesla Roadster sports car, the second stage was the launch of a large-scale production of Model S and Model X luxury electric cars, which are in great demand but still too expensive for the mass consumer. Now, with its third model, the company plans to multiply its own production and ramp it up for major expansion.

The new brainchild of Elon Musk can become a modern analogue of the Ford Model T, the world's first mass-produced car with an internal combustion engine that in the 1920s flooded city streets around the world, making Henry Ford the most successful industrialist of the twentieth century. The consequences of commercialization of Model 3 promise to be no less ambitious and the global transportation may experience significant changes.

Elon Musk's conveyor

Model 3 will be the first mass market electric vehicle for Tesla, which makes launch of its production very important milestone for the company. Vehicle was first introduced to the public in March 2016, with assumed cost of about $ 35,000 and  a 215 mile (346 km)  single charge range.

In order to provide necessary industrial power for mass-production of Model 3, in July 2016, Musk launched the first stage of record-scale integrated mass production of lithium-ion batteries in Nevada - Gigafactory-1. On November 8, 2016 he announced intention to build such another enterprise of the same scale in Europe. It is expected, that the location for the European Gigafactory will be determined by the end of 2017.

Gigafactory-1 will be producing 500,000 lithium-ion batteries for electric vehicles per year, of which 400,000 will be supplied for Model 3. The project, which has total investment cost of around $ 5 billion, was designed to significantly increase world production of lithium-ion batteries and reduce their cost by 30%.

Consequently, Tesla intends to expand its electric vehicle production at the assembly plant in California to 500,000 cars per year by 2018.

Clean energy and transportation

Top business news in 2016 reported the merger of the two most ambitious business-endeavors of Elon Musk - Tesla Motors and Solar City - into a single holding company Tesla. The result was emergence of the first and, so far, the only vertically integrated company in the world that incorporates renewable energy, production of electric vehicles and batteries, combined with electronics and information technology. The final decision to merge the companies into a single concern was approved by their shareholders on November 17, 2016.

Gigafactory-2 built by Solar City in the state of New York, now the subsidiary of Tesla, should begin production until September. The launch of this "solar gigafactory" complex will also allow Elon Musk's business to compete successfully with the Chinese and European companies in the rapidly growing market of solar energy technologies, which has doubled in sales in less than three years. Now, Musk is up to take key positions at two major markets, which are beginning to develop exponentially - renewable energy and clean transportation.

History and modernity

According to the forecasts of Tony Seba, an internationally recognized innovation expert, who has worked in the Silicon Valley for last two decades, within 10-15 years the internal combustion engine will be completely obsolete. According to Seba, who has spent many hours in 2016 by delivering speeches for big investors in Europe and the USA, gasoline cars will become an obsolete before 2030 and will be completely displaced in the 2030s. Comprehensive vision and forecasts for currently emerging transformation of economy and industry are outlined in his books "Clean Breakthrough in Energy and Transport", "Solar trillions" and "Winners get everything".

As Seba points out, introduction of innovations and the development of markets are subject to a common general pattern: at the beginning new technologies have very limited application and hardly affect mass markets, but as they develop, they become more accessible and at some point a breakthrough occurs, when in a relatively short period of time they profoundly transform society and economy. This pattern was common for commercialization of all mass products - refrigerators, TV-sets, PCs and mobile phones.

The most striking example is the one he gave in his speech at the Nordic Energy Summit in Oslo in March 2016: in 1900 in New York on 5th Avenue, stagecoaches and horses were the dominant mode of transportation, one could hardly see a lonely car in in the traffic stream. In one decade the situation has changed radically. By 1913, 5-Avenue was completely filled with cars, while stagecoaches and horses became obsolete.

According to Seba's predictions, cars with an internal combustion engine, that pollute the atmosphere and poison the air in cities with toxic fumes, are entitled for the same fate as horse-drawn carts. A historical fact that New York has not drowned in horse dung, which the city authorities feared at that time, adds much needed optimism at the times of the environmental crisis, as more than 7 million people die from air pollution in the world every year, and climate change is taking an alarming rate.

World trend

Taking into account the fact that the annual production of gasoline vehicles is around 100 million units a year and the global fleet is approaching 2 billion units, efforts of sole Tesla Company are not adequate in scale to drive out the internal combustion engine from the world market. Nevertheless, achievements of Elon Musk in promotion of electric vehicles has already caused a domino effect in the automotive industry.

World's largest automakers are joining Tesla to compete for customers of electric vehicles, most actively in Europe. On July 5, the Swedish automaker Volvo declared phase-out of internal combustion engine cars from production and complete transition to production of all-electric and hybrid cars. During 2019-2021, Volvo plans to bring five new models of electric vehicles to the market.

Another big thing is that leading German automobile brands - Mercedes, BMW, Audi and Volkswagen are launching large-scale production of electric vehicles. In particular, Audi is preparing to launch of sales of it's new all-electric SUV e-tron Quattro in 2018. The company expects that in five years electric vehicles will constitute a significant part of their total sales.

BMW launched its first electric vehicle i3 and hybrid sport sedan i8 already in 2013-2014. The volume of production of the i3 model is planned to significantly increase, as it received significant demand in Europe. In 2014 Mercedes-Benz also initiated sales of it's first electric vehicle: B-Class Electric Drive.

The Japanese carmaker Nissan, which was the first to enter the mass market of electric cars with Nissan Leaf, has already sold around 300,000 of these cars worldwide since 2010. In 2018, the production of the second generation Nissan Leaf with an updated design and increased single charge range.

Electric cars have also entered model series of American Ford and Chevrolet automobile brands, as well as such Asian giants like KIA, Hyundai and Mitsubishi.

The beginning of a new era

According to the International Energy Agency, in 2016 more than 2 million electric vehicles were sold in the world. The market of electric vehicles is growing faster than previously anticipated, since lithium-ion batteries have become cheaper and more affordable. Moreover, they continue to fall in price due to investments in development of battery technologies and msiive increase of production volumes.

At the same time, sales of electric vehicles are growing very rapidly in China and India, where their mass adoption is promoted state level as in effort to reduce extreme levels of air pollution. In particular, according to the governmental strategy, India plans to stop selling diesel and gasoline cars until 2030 and completely switch to electric transportation. On the other hand, China in 2016 became the largest market for electric vehicles with sales of 400,000 all-electric cars and almost 100,000 hybrids.

Major changes are also happening in Europe. In July France and Britain announced their intention to ban any new diesel and gasoline cars by 2040. Germany has decided to completely remove internal combustion engine cars from production by 2030. In Norway, electric vehicles already occupy more than a third of market of new cars, and a ban on internal combustion engines is set for 2025.


Oleg Savitsky, Front News International

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