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Tesla’s going to kill the Toyota Prius

We sometimes forget that some technology companies have been around for a while, especially when they suddenly make waves in the media.  Take Facebook, for example.  Can you believe that they are ten years old this year?  Another company that’s celebrating its first decade in business is Tesla, the company famous for making really cool – but expensive – all electric cars.  No stranger to pushing the envelope, Tesla has demonstrated that an all-electric car company can be successful, although we have to be honest and say that success is relative since Tesla has only sold tens of thousands of cars over its history instead of the millions of cars sold by traditional car companies like Ford and Toyota. Yet the company is profitable and paid back a multimillion dollar loan from the federal government early and with interest.

The reason that Tesla has found success with building electric vehicles is two-fold: first, they understood early on the lessons that Steve Jobs of Apple taught us – style matters – and Tesla’s cars look like nothing else on the road, evoking a look the makes the owners of the car feel like it’s okay to pay $100 thousand for a car.  The second thing is probably more important: the vehicle’s technology is revolutionary, especially when it comes to the innovations in battery technology.  You see, unlike other car manufatcturers who make electric or hybrid vehicles, Tesla decided not to design and engineer a special battery for their cars, instead choosing to create a battery pack that uses hundreds of small lithium ion batteries bundles together, essentially the same batteries that laptops and tablets use.  That lowered the cost of production by a factor of ten and makes the Tesla car the most efficient electric vehicle on the road.

Elon Musk, the CEO of the company, isn’t done yet.  He’s embarking on the biggest gamble Tesla has made yet: a promise to build a new electric sedan in the prices range of $35,000, which will make it competitive in the middle market and which is half the price of any current model.  Some industry insiders predict that the new Model 3, as it’s called, could do significant damage to other hybrid and electric vehicles from other car manufacturers, like the Toyota Prius.  In order to manufacture the new car at that price point, Tesla plans to build a huge new plant to manufacture lithium ion battery packs for a dramatically cheaper price point so that by 2020 the so-called Gigafactory will produce more lithium ion batteries than were produced world wide in 2013.

If Musk and Tesla are successful, their venture will not only change the face and future of the electric car, it will also reverberate across many  industries, lowering the cost of power and changing the landscape for transportation.  Tesla also plans on building a whole host of other electric vehicles, including SUVs and special purpose vehicles for government agencies.  If they achieve their dream, Tesla will have profoundly changed not just the car business, but the energy markets as well.

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