Tesla Model S Makes Electric Car Interesting

Some are criticizing the US government subsidies to Tesla Motors for its Model S electric car, which sells for almost $100,000. Kevin Bullis argues that it's a smart investment.

tesla-model-s-electric-car

Some are criticizing the US government subsidies to Tesla Motors for its Model S electric car, which sells for almost $100,000. Kevin Bullis argues that it’s a smart investment.

MIT Technology Review (“Why It’s Okay that Tesla Makes Cars for Rich People“):

Tesla innovations might help make electric vehicles more competitive with gas powered ones, leading to the more widespread use of electric cars and lower oil consumption. More specifically, it’s lowering the cost of the battery, and it’s showing how, in some ways, electric vehicles are actually more valuable—and worth paying more for—than gas-powered ones.

Ford’s electric Focus is just a much more expensive, and much shorter range, version of its gas-powered focus.  The Nissan Leaf, Motor Trend declared feels “completely normal, not unlike any other four-cylinder hatchback on the road.” The Model S, on the other hand, will out-accelerate just about any other car you might encounter on the road because it takes advantage of the responsiveness of electric motors.

And the Model S takes full advantage of the design flexibility afforded by a compact electric motor and the ability to make a flat battery pack. The passenger compartment sits on top of this propulsion system, rather than being sandwiched between a bulky gas engine and a gas tank. As are result, it can seat 5 adults, plus two kids in rear facing seats-and you can store bags in what would be the front engine compartment in a conventional car. GM has considered a similar “skateboard” concept, but that hasn’t gone anywhere. Instead, the T-shaped battery in its electric Volt takes up one of the rear passenger seats, limiting the car’s capacity to 4 adults.

Tesla’s approach seems to be working—the Tesla Model S, in spite of the fact that it costs twice as much as the Nissan Leaf or the GM Volt—has been outselling both cars now that Tesla has ramped up production levels at its new factory.

Tesla is also taking an unusual approach to addressing the main problem with electric vehicles—the cost of the batteries. It’s using the cylindrical type of battery cells used in the power packs of many laptops and other portable electronics. The economies of scale made possible by these other applications help drive down costs. Other automakers are opting for more specialized battery cells that cost more to make. It’s not clear which approach will be better in the long run, but Tesla’s batteries seem to be much less expensive so far.

I’m skeptical of taxpayer subsidies to niche industries, especially those competing with perfectly viable existing industries. To the extent that Tesla shows the way to truly innovate the electric car, that’s a public good–one that will immediately be copied by auto makers around the world, thus depriving American industry any competitive advantage gained from their government’s investment.

On the other hand, the faster we can get Americans off of gasoline-powered cars, the faster we’ll achieve the vaunted “Independence from Middle East oil” and roll back the negative environmental impact of the exhaust.

At any rate, it’ll be a while before I’m in the market for something like this–certainly at $98,000. One presumes that the price will come down drastically in the next few years.

FILED UNDER: Economics and Business, Quick Takes, Science & Technology
James Joyner
About James Joyner
James Joyner is a Security Studies professor at Marine Corps University's Command and Staff College and a nonresident senior fellow at the Scowcroft Center for Strategy and Security at the Atlantic Council. He's a former Army officer and Desert Storm vet. Views expressed here are his own. Follow James on Twitter @DrJJoyner.

Comments

  1. ernieyeball says:

    On the other hand, the faster we can get Americans off of gasoline-powered cars, the faster we’ll achieve the vaunted “Independence from Middle East oil” and roll back the negative environmental impact of the exhaust.

    Well…maybe.
    See Green Cars Dirty Little Secret WSJ

    http://online.wsj.com/article/SB10001424127887324128504578346913994914472.html

  2. PJ says:

    @ernieyeball:
    Another hack opinion piece by Bjorn Lomberg…

  3. Rob in CT says:

    The article hinges on “A 2012 comprehensive life-cycle analysis in Journal of Industrial Ecology.” Assuming that study was done well (I don’t have the chops to evaluate it), then you have to drive an electric car quite a bit to hit breakeven in terms of environmental impact (~80,000 miles, apparently).

    There is another key assumption, which is that most electricity comes from fossil fuels, particularly coal. To the extent your electricity comes from other sources, the carbon emissions attributable to your electric car drops (or zeros out), making getting to breakeven easier.

    [minor note: their assumptions about driving patterns and electricity are from Europe… as the study appears to be European in origin. I don’t know what would happen if you shifted that stuff over to the US, but I figure it’s likely to be minor and unlikely to help EVs]

    A quote from the study:

    The shift in emissions that EVs are poised to bring about—an elimination of tailpipe emissions at the expense of increased emissions in the vehicle and electricity production chains—brings new opportunities and risks for policy makers and stakeholders. On the one hand, EVs would aggregate emissions at a few point sources (power plants, mines, etc.) instead of millions of mobile sources, making it conceptually easier to control and optimize societies’ transportation systems (McKinsey & Company 2009). On the other hand, the indirect nature of these emissions—which are embodied in internationally traded commodities such as copper, nickel, and electricity—challenges us as a society. It poses the question of how serious are we about life cycle thinking, and how much control and oversight we, customers, and policy makers believe should be exerted across production chains.

  4. Rob in CT says:
  5. Rob in CT says:

    So the dream would be to generate more and more electricity from renewables + nukes, and use it to charge electric cars with ever more efficient battery packs.

    We’ll see how it goes. For now, I’m sticking with my 9-year old gas powered honda civic. I hope to get 200,000 or more miles out of it (now at 109). My hope is that by the time that car is dying, there will be an electric commuter car worth buying.

  6. john personna says:

    Remember, when CNW Marketing Research did their hit-piece on the Prius they claimed that they only last 100K miles and then you have to throw them away.

    I’m at 120K and the car is running as good as new. I get 46-54 mpg in my driving mix.

  7. john personna says:

    (Note: given the current cost of battery technology, I think that Prius-class (non-plug-in) vehicles are the sweet spot on price and efficiency. You can buy an unsubsidized Prius or Insight in the low 20’s. And you can build like 4 or 5 of them with the batteries you’d use in one “more electric” car.)

  8. Davebo says:

    James I hope you’re using the phrase “Independence from Middle East oil” with tongue firmly in cheek.

    I honestly can’t believe how many people cling to that fantasy.

  9. john personna says:

    @Davebo:

    Reduced dependence? Less need to maintain the Carter Doctrine?

  10. JoeL says:

    The original Tesla Roadster was 100K. The Model S starts around $65K (after federal tax subsidy) so the price is working its way down. If i recall they are planning for the next model (a small SUV) to be in $50 range.

  11. Craigo says:

    @Rob in CT: Most cars are will be driven close to 200,000 miles in their lifetime, so 80,000 is pretty much a layup.

    And to break even, which a traditional gas-combustion car will never do. In fact, its negative environmental impact will only get worse the longer you drive it.

  12. Tony W says:

    Tesla is interesting for many more reasons than just their work toward reducing US dependence upon foreign oil.

    They are actively working to breakdown the car dealership system – which has stifled creative use of the Internet and other technologies to optimize end-customer delivery of vehicles.

    Also, because car-service requirements are nominal with the Tesla, they have decided the service department should not be a profit center. Instead they leverage their loaner car program to drive interest in newer models, which in turn builds used-car inventory.

    This company is disruptive on so many levels. It will be fascinating to watch them over the next few years.

  13. Brett says:

    @James Joyner

    At any rate, it’ll be a while before I’m in the market for something like this–certainly at $98,000. One presumes that the price will come down drastically in the next few years.

    Elon Musk has explicitly said that that’s his ultimate goal with Tesla. He wants to make the business profitable with luxury cars, with the ultimate goal being mass production of cheaper versions of them.

  14. Gustopher says:

    I’m skeptical of taxpayer subsidies to niche industries, especially those competing with perfectly viable existing industries

    As opposed to the subsidies for oil companies? And other car companies?

    If the government is going to be getting involved with picking winners and losers (I think keeping the big 3 from going belly up during the economic crunch was a good thing, but routine meddling is not), then we should at least be picking winners that help us long term.

  15. john personna says:

    The uniform rules should be government money for R&D (with the result placed in the public domain) and no subsidy for production (of electric cars, batteries, oil, or corn).

    If a technology gets there, then sure, profit making companies can take it and go into production.

    The difficulty now is decoding the “readiness” of the technology. Witness this line from above:

    The original Tesla Roadster was 100K. The Model S starts around $65K (after federal tax subsidy) so the price is working its way down.

  16. JoeL says:

    @john personna: I generally agree but wanted to point out the applicable subsidy in this case is for the end user not Telsa. Basically the Feds knock $7500 off the final car price and this applies to any vehicles in this category (Volt, Electric Focus, etc). This is the same sort of end user incentive you would get if you bought a qualifying water heater.

    I agree in principle that industry help should be at the R&D side of things and the research public at the end, it should not be a business model.

  17. stonetools says:

    I’m skeptical of taxpayer subsidies to niche industries, especially those competing with perfectly viable existing industries. To the extent that Tesla shows the way to truly innovate the electric car, that’s a public good–.

    This may surprise you, Doug, but the computer you typed that post on and the Internet you transmitted that post to are both products of “government investment”.
    I’m not sure that Tesla is the true path to a realistically marketable electric car, but sometimes you just need government help in getting technological innovation off the ground.

    one that will immediately be copied by auto makers around the world, thus depriving American industry any competitive advantage gained from their government’s investment

    Not sure about that-there is this other government aid to technological innovation called patent law. Tesla’s concept may be patentable.

  18. anjin-san says:

    As opposed to the subsidies for oil companies?

    Dude, you are treading on holy ground…

  19. anjin-san says:

    This may surprise you, Doug, but the computer you typed that post on and the Internet you transmitted that post to are both products of “government investment”.

    Not true. They were invented by Hank Rearden, in spite of liberal attempts to stop him.

  20. James Joyner says:

    @Davebo: @john personna: My understanding–granted, as a non-STEM sort–is that we’re rapidly on the verge of being a net energy exporter.

    @Gustopher: I’m generically against business subsidies, but willing to make exceptions based on the public good. As noted in the rest of the post, I think it’s possible this is such a case.

    @JoeL: But, because it’s such an expensive car, the critique is that it’s yet another subsidy to the 1 percent.

    @stonetools: I wrote the post, not Doug. But the Internet and the World Wide Web are different things. The government built an internal communications platform for the Defense Department that eventually sprung loose and became commercialized. I would have been a hard sell on government giving Mozilla a lot of money to build a browser in hopes of getting some commercially viable platform; I don’t have a problem with a net public good coming out of a defense project.

    @anjin-san: Not here, he isn’t. I don’t have a deep knowledge of the oil business, so don’t have firm positions on what sort of business expenses and whatnot should be allowable for exploration, R&D, and the like—which are of course a form of subsidy but one available to any enterprise. But I would be hard pressed to support a case for direct subsidy.

  21. stonetools says:

    @James Joyner:

    Sorry to mistake you for Doug.
    I would also be skeptical of direct subsidy too. But Republicans tend to interpret ” skeptical of” as “never”-except for their pet industries of oil and defense, of course.
    It’s possible here to interpret the subsidy to Tesla as “defense-related”, in that it’s supporting “energy independence” but it is really kind of a stretch.

  22. john personna says:

    @James Joyner:

    @Davebo: @john personna: My understanding–granted, as a non-STEM sort–is that we’re rapidly on the verge of being a net energy exporter.

    A scientist might normalize it all, calculating in Joules or something, and including everything from hydroelectric to “embedded energy” in imported manufactured products … but that wouldn’t have direct impact on the Carter Doctrine.

    We want a much simpler answer, like “block the Straights of Hormuz, we don’t care!”

    We are a long way from there.

  23. Rob in CT says:

    @Craigo:

    I basically was trying to write a post that granted the key underpinning of Lomborg’s piece is reliable (which it may or may not be). 80k miles is the number he presents as roughly when the EV gets even with a gas car (due to the EV being more carbon-intensive to build, according to the study, so it starts at a disadvantage). I agree that cars are typically driven more than that, and so the EV wins in the end. Though I don’t know if 200k miles is accurate as an average… sounds high.

    Thing is, I: a) suspect Lomborg’s article plays a little fast & loose with what the underlying report he cites really says; b) believe that EVs will continue to improve; and c) have to hope more progess will be made on switching off of coal (if not, we’re screwed whether we drive EVs or Hummers).

  24. Tyrell says:

    One great thing about electric is that you do not have to pay those ridiculous and absurd gas .

  25. Tyrell says:

    That is ridiculous and absurd gas taxes.

  26. john personna says:

    @Tyrell:

    Sorry, you understand that gas taxes do not even pay for roads, right?

    The general fund, income taxes, have to fill the gap.

    (Conservatives are supposed to be all about “use taxes” and no free riding “takers.”)

  27. john personna says:
  28. Tyrell says:

    @john personna: In our state they have robbed the highway fund several times to balance the budget. The highway fund always had more than enough to keep up the roads.

  29. grumpy realist says:

    The problems for all the free-market libertarians is that if you don’t allow your government to grant subsidies in attempts to get new technology out there–you are basically a sitting duck for any country whose government DOES do that.

    The major idea is: great new technology, not enough market yet to get the efficiencies of scale cracking. Gov’t provides subsidies to allow for much larger market penetration, gets to efficiency of scale–>no more need for subsidies any more.

    I watched the Japanese government do this for biochemical and food engineering, where in some areas they remain the best in the world.

    Libertarian purity may be great for the cockles of your heart, but it may make you roadkill when competing with other countries.