My wife and I are early adopters of new technology and we are both enamored of the electric car company, Tesla. The Tesla Motors, Inc. was founded in 2003 by Martin Eberhard, Marc Tarpenning, J.B. Straubel, Ian Wright, and Elon Musk—who is also the founder and CEO of SpaceX, the company that builds and launches the Falcon 9 and Dragon space ship. Tesla is named after Nikola Tesla, the inventor, mechanical engineer, and physicist best known for his contributions to the design of modern alternating current (AC) supply systems. When you switch on a lamp or your television, it’s thanks to Tesla’s work.
Tesla Motors’ cars are fully American designed and produced. It is the first American automobile company to go public since Ford offered stock in 1956. Tesla is now profitable and produces about 500 Tesla Model S cars each week in their factory in Palo Alto, California. They are on track to produce about 21,000 cars in 2013.
At this point I need to offer a full disclosure: I own a small amount of stock in Tesla Motors. The reason I own the stock is because I like the company and I believe that it will be successful. So far, I’m very happy with how the stock has performed over the last few months. In fact, my only regret is that I don’t own more of it since it tripled in price since the beginning of the year.
The Tesla Model S is a full-sized four door sedan. It has an EPA estimated range of 265 miles on a charge. Based on the cost of electricity in the average American home, the fuel cost of driving 30,000 miles in a Tesla is about 950 dollars. The equivalent cost for a gasoline powered car to travel the same distance is about 3800 dollars (assuming $3.80 per gallon and 30 miles per gallon). The Tesla Model S motor generates between 362 and 415 horsepower (depending on options) and can accelerate from zero to 60 MPH in between 4.2 to 5.9 seconds (also depending on options). The engine is about the size of a large watermelon and sits on the axel between the rear tires. There is no transmission and no radiator. One never needs to get a smog check or an oil change. The brakes are good for at least 100,000 miles. Tesla guarantees its resale value and the batteries are fully warrantied for 8 years (unless, as the company said, you take a blowtorch to them). It can carry 5 adults and 2 children and has two trunks, one in the front and one in the back.
The Tesla Model S is Motor Trend’s 2013 Car of the Year and Automobile Magazine’s 2013 Car of the Year. After testing the Tesla Model S, Consumer Reports gave it 99 points out of 100, tying for the highest number of points they have ever given to a car. They also wrote that it was the best car they had ever tested.
Tesla is currently installing what they call “Supercharger” Stations across the country. These are “filling stations” to recharge the batteries on a Tesla in about 20 minutes. How much does it cost to recharge the batteries at a Tesla Supercharger Station? Nothing at all. Charging the battery is completely free. Most of the Supercharger Stations run on solar energy and they generate more power than they need for recharging cars. So Tesla can send the excess power to the electric grid and actually gets paid by the electric company.
By the end of 2013 Tesla will have installed enough Superchargers around the United States that it will be possible to travel from Los Angeles to New York and pay exactly nothing in fuel costs. Elon Musk, Tesla’s CEO explained “pack some food, stay with friends or family along the way, and leave your wallet at home.” By 2015 ninety-eight percent of the U.S. and Canada will be covered with Supercharger Stations.
In 2010, Tesla was awarded a milestone-based loan, requiring matching private capital obtained via public offering, by the DOE as part of the Advanced Technology Vehicle Manufacturing program. This program was signed into law by President Bush in 2008 and then awarded under the Obama administration in the years that followed. This program is often confused with the financial bailouts provided to the then bankrupt GM and Chrysler, who were ineligible for the Advanced Technology Vehicle Manufacturing program, because a requirement of the ATVM program was good financial health. GM and Chrysler were far from being financially healthy.
Tesla was not the only automobile company to make use of the loan offer. Ford used the same program to take out a loan of 5.9 billion dollars. Nissan took out a loan for 1.6 billion dollars. But unlike Ford or Nissan, Tesla has already paid their loan off in full—with interest—and they did it nine years early.
The only down side to Tesla from my perspective is that I cannot afford to buy one. The base price of the vehicle is about 65 thousand dollars, with more reasonably equipped models going for closer to 90 thousand. If you are in the market for a high end car—such as some of the models offered by Audi, Mercedes, or Porsche, then the Tesla Model S is not out of line. For the rest of us, we will have to wait awhile. Tesla’s goal is to offer a more reasonably priced model in the 30 thousand dollar range within the next four years.
Another interesting thing about Tesla is that the company does not emphasize its environmental friendliness. Instead, they sell it on the basis of how it lowers the cost of car ownership: less maintenance and much, much lower fuel costs. And they emphasize that it is not just the best available electric car. It is simply the best available car, period—something that Consumer Reports and Motor Trend Magazine also emphasized. The fact that Tesla has no tailpipe or the emissions that come from one is just a happy bonus.