Tesla Motors and the EV Revolution
Thanks to Rolton Group’s activity in the energy, renewables and automotive sectors, people outside the industry always ask the same three questions when I explain what I do for a living: Do wind turbines work? Should I put PV on my house? and; Is China doing all this “green stuff” too?
29th August 2014 | Tom Warwick: Renewables Engineer, Rolton Group
The answer to all three is a conditional yes. However, in most cases answering is irrelevant because people have decided upon an answer before they ask the question. Over the past year, thankfully these three non-questions have given way to a more relevant line of enquiry:
What is going on at Tesla?!
Everyone who asks this follows up immediately with a qualifying fragment of fact: “… I heard they were making super-batteries out of beetroot”, or “… Do you think Elon Musk is the new Steve Jobs?” and “… Haven’t they just released all their patents to their competitors?”
These qualifiers are never completely correct; however they always seem to be based on some element of truth. These half-facts typically arrive third-hand, sourced from a Buzzfeed article read on someone’s morning commute.
Before we discuss Tesla as a whole, it’s essential to bust a few of these myths.
First, nobody is currently producing batteries from beetroot. There is however some interesting organic flow-battery research being undertaken that uses Quinone, a similar molecule that can be found in rhubarb. The research aims to develop scalable organic batteries that require fewer minerals. While this research appears to have obvious applications for Tesla, due to the specific energy density of the anticipated end-product the battery is likely to suit utility scale applications rather than transport.
Second is this idea of Elon Musk (Tesla’s CEO) as the next Steve Jobs. There are a lot of American CEOs within the technology field who this gets applied to (Bezos, Page and Ellison to name a few) but never more pervasively than in the case of Elon Musk. This is strange because, unlike Bezos with Amazon, Page with Google, Ellison with Oracle and Jobs with Apple, Musk didn’t found Tesla. Tesla Motors was founded by two American engineers, Martin Eberhard and Marc Tarpenning. South African born Canadian, Musk led the first investment round into the firm in 2004, later becoming Tesla’s CEO and Chief Product Architect. The comparison to Steve Jobs is likely due to the fact that both Jobs and Musk are most renowned for developing hardware in addition to tech services.
Finally, the matter of patent release. In June, Tesla made an announcement that they would not initiate patent lawsuits against anyone who wants to use their technology in good faith. Musk said in a press release that “technology leadership is not defined by patents, which history has repeatedly shown to be small protection indeed against a determined competitor, but rather by the ability of a company to attract and motivate talented engineers.”
This strategy makes sense; global annual vehicle production is approximately 100 million and set to hockey stick. Tesla’s main competition isn’t yet electric vehicles produced by major manufacturers; their biggest competition is conventionally fuelled vehicles and the barriers created by their market dominance. Every time a consumer purchases any electric vehicle a virtuous circle is created within the EV industry, with an increased demand for charging stations, a decrease in range anxiety and additional sales revenue being channelled into further R&D to secure future EV sales.
The patent release harks back to the company’s namesake; Nikola Telsa, who sold his Alternating Current (AC) patents in the 1880s for 1% of their value, effectively releasing them to help the buyer compete with his rival Thomas Edison’s Direct Current (DC). Edison proceeded to launch a propaganda war against AC power, during which a variety of subjects were electrocuted with AC power to demonstrate its danger. All to no avail, the economics won and now the world runs on AC.
While the three topics mentioned above are easy to clear up, the future Tesla Motors as an entity is much less known. At time of writing Tesla has a market capitalisation of over $32bn, which makes it about 50% the size of Ford and 3 times the size of Fiat. In the year to date, Tesla’s share price has seen an increase of +75% compared with a two year rise of +825%. Despite this $TLSA spent a sizable proportion of 2013 as the most shorted stock on the NASDAQ. All parties predict a short-term bubble, with even Tesla admitting that their current valuation is “supercharged”, but nobody can know what will happen to both Tesla and the wider EV market beyond this point.
So, take with a pinch of salt any opinion people are willing to provide on the future of the EV market, in particular the future of Tesla. If they knew for sure they’d probably already be on Forbes list.
One thing that is certain though; if Tesla do manage to kick-start the EV revolution it will create new engineering challenges and opportunities across all sectors. An EV revolution will alter the engineering of everything, from individual housing and office developments to nation-wide electrical and telecom networks.
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