Tesla CEO Musk: “Biggest Single Challenge for Electric Vehicles is Affordability”

4 years ago by Eric Loveday 13

Musk on stage at the Model S batter swap demo

Musk on stage at the Model S batter swap demo

Ever so often, Tesla Motors CEO Elon Musk slings a statement that seems to be an off-the-cuff remark.  We can assure you it’s not.  Musk is well rehearsed.  Perhaps so well that he can make a rehearsed statement seem to be off-the-cuff.

Model S Sells Well, But It's Not What We'd Consider Affordable

Model S Sells Well, But It’s Not What We’d Consider Affordable

Thta’s not really the case here as Musk is trying to be as straightforward as possible, while at the same time revealing that he’s not 100% satisfied with where Tesla sits at the moment.

Yes, Tesla is striving right now, but a seemingly insurmountable challenge still lies ahead: building an affordable Tesla.

There lies two parts to that equation, both of which will be difficult to achieve simultaneously.

1)  It has to be a Tesla, meaning it’ll be a no-compromise electric vehicle (range of 200-ish miles) with performance befitting of a Tesla and it must slot into at least the near-luxury class.

2) It then has to be affordable.

Can it be done?  It’s never been done before.

There exists zero pure electric vehicles that meet all of the criteria outlined above.

It seems even Elon Musk understands the difficulty in making a vehicle that meets the criteria

“The biggest single challenge for electric vehicles is affordability.  If we could build the Model S for half the price that it currently costs, and solve the long-distance travel problem, then we’d see widespread adoption.  That’s what’s needed for there to be a huge tipping point for electric cars.  We’re trying to advance that as fast as we can.  I’m hopeful that we’ll be there in three to four years.”

That was Musk’s statement, which he made at the recent annual shareholders meeting.

If it didn’t have a Tesla badge, then perhaps affordability would be more easily achieved.  This merely implies that Tesla’s luxury-oriented ways make affordability difficult to achieve.  Does there exist an affordable BMW or Mercedes-Benz?

But if there’s an automaker who can achieve the unthinkable, it’s Tesla.  We fully believe Tesla can do it.  Do you?

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13 responses to "Tesla CEO Musk: “Biggest Single Challenge for Electric Vehicles is Affordability”"

  1. Schmeltz says:

    I just think if someone in Musk’s position is forecasting publically that he is confident in a more affordable all electric vehicle in 3-4 years, then he has likely thought hard about it. He’s done some intelligent guessing. He’s made some calculations and ran through some scenarios. According to numerous executives, developement time for a new platform from back of napkin sketch to sitting in a dealership showroom is 3-4 years. Therefore, that tells me Tesla is working on this car right now. I’m guessing unless they hit some major unforeseen snag, they will be able to deliver on this.

  2. kdawg says:

    Tesla will have to learn to be like other auto companies and beat up on their vendors. The best design doesn’t mean anything if your material costs are still high.

    I’m wondering about the labor rates in CA as well, Will he have to build a plant in Mexico for the Bluestar? Can he control quality if he does?

    Will he have to drop the lifetime warranty, or even drop down to say a 6 year warranty to reduce costs?

  3. David Stone says:

    I don’t see why it the Tesla badge would make affordability difficult. Just because the company started with high end does not mean it has to operate exclusively in the luxury class.
    Of its three products, the model s and x are luxury; the roadster was not and there is no reason the next car has to be.

    Tesla deliveres what is expected in the class and price range of the vehicle:
    – the roadster is a pure sports car, with performance and reliability, a hard suspension and high sports car price tag – no luxury expected or needed.
    – the s and x are in a class of vehicle where luxury is expected, and it is there.
    – the affordable car will be in a price range where certain amenities are expected, but would not be considered luxury – this means luxury is completely unexpected and therefore unnecessary and no need to be there to push up the price.

    So far the common denominator of Tesla vehicles, besides being electric of course, is quality.
    So it is only quality that the company has to maintain, and that is achievable.

  4. David Murray says:

    I don’t see it as being that difficult coming from what they already have. All they need is a slightly smaller car with smaller battery pack. Now, when I use the word “smaller” I mean give the consumer an option for a 125 mile battery pack on the low end model or a 200 mile battery pack for the high end. The 125 would still be nearly double the range of the Leaf and its competitors. Then they need to remove a lot of the luxury features of the model-S. Maybe instead of a 17 inch screen, make it a 12 inch screen. Use cheaper tires and wheels. That that approach all around the car. Just make sure that the drivetrain is as reliable as a Model-S. I believe taking that approach could easily get a base line price of around $35,000.

    1. Josh says:

      The range is something Musk is not willing to compromise on. He stated that 200 miles (not sure if that is EPA or ideal) would be the minimum when they cancelled the 40 kWh. He has specifically mentioned a 500 mile pack multiple times. He also said just this past weekend, expect a step change in battery technology every 4 – 5 years (3 years from now).

      That lines up perfectly for Gen III. I would expect Model S and Model X to retain their price but get new battery options of “400” and “500”. The Gen III would get “200” and “300” mile battery options. This would differentiate the product lines on size and performance. It would also make sense from the standpoint that S and X are better vehicles for a road trip with their space and comfort. As an analogy, as the cost of hard drives came down, they just gave more storage space and kept the cost the same. I see a similar pattern with Tesla, but at a drastically slower pace.

    2. kdawg says:

      I don’t think Elon will go below 200 miles. That was one of his criteria. I would like to know the other targets. What is “1/2 the price of the Model S”? Is he talking under $30K, or over $40K? What size are we talking about, seating for 4, for 5? Hatchback? How many doors? Will it have quick charging (maybe just optional)? Will it be able to use the Super chargers for free? Will you be able to get a larger battery if desired (60kWh & 85kWh)? Will a larger battery even fit if the wheel base isn’t as big as the Model S?

      1. Josh says:

        From the statements so far, it will look like a smaller wheelbase Model S. They are waiting on the next gen batteries from Panasonic with higher energy density to get the range out of a physically smaller pack. 200 miles (50 kWh?) will be the minimal range, but most people think there will be a higher range, more expensive battery option (70 kWh?) like Model S. Seating for 5 and hatchback like Model S without the third row is assumed at this point. Tesla will need to keep the car wide for the large battery pack, so a 4-seater is pretty much out of the question.

        Musk has said both $30k and $35k and at one point referred to 2011 (or 2012?) dollars. So adjust the starting price for inflation. No specific mention has been made if it includes the $7500 tax credit or not, but Tesla will be hitting the 200k vehicles produced soon after it goes into production. That is the point at which the tax credit starts going down (to 50%? until 500k? produced).

        All Tesla vehicles will be SuperCharger capable, per Musk. He also stated (when asked about partners, Toyota/Mercedes, using SuperChargers) that he prefers SuperChargers remain free for all users. That is no guarantee, but no payment system is currently implemented which is a good sign.

        My expectation is that pricing will be $35k for a base model and more like $45k $50k once you have options that most people would want. All of these prices will be after tax credit by looking at how Tesla current lists pricing.

  5. Bonaire says:

    For it to be mainstream, it basically needs to be a Camry but have 150-180 mile range and acceptable performance. Doesn’t need to be a rocket. 0-60 in 7 seconds would beat a volt and leaf and the range would be acceptable. They shouldn’t try to build an affordable model S but rather a good inexpensive sedan with an acceptable look and good range. Give it an MSRP of $34k and they’ll sell thousands per month. Not much profit per vehicle and a real challenge for delivery using the current delivery model. And, their goal is 25% or higher gross margin, hard to make really affordable. They need to consider their margin goals before proceeding.

  6. Dan Frederiksen says:

    As I’ve said a billion times Elon, it’s the 2.1 stupid tons weighing you down.
    The simple solution to EV viability is low weight and aerodynamics. With blitz charge into a small agile battery. Low weight means lower power consumption and lower battery needs. Ligt begets light.
    And you don’t need 200 mile range if you can blitz charge. Building a battery barge is stupid.
    Even at average sale price of 100k$ and 20000 car production rate Tesla Motors is still losing big money. The car is too heavy Elon!! how can that be hard to understand.

    Why is every so damned vacuous.

    1. Dan Frederiksen says:

      everyone*

  7. Priusmaniac says:

    If one wants to make an affordable car, for the moment, the way to go is to make a 100 miles EV with an on board microgenerator. A car the size of a Camry but equipped with a similar system as the Audi A1 e-tron with a Wankel generator or the soon to come BMW i3 with a two cylinder Rex.

    For sure that is not pure EV, but it is 90% of the time and can be made affordably available right now, leaving all the time the future as to bring to improve further on autonomy and perhaps leave the Rex out. In the mean time it would allow everybody to enjoy EV driving most of the time.

    After all, even in life, we are only happy most of the time as well.

    This doesn’t mean that almost pure EV Tesla would be boring, no. It would give a decent 10 sec and the generator would be a Swiss marvel of some kind. I think about a better Wankel able to run on biofuel or a Free Piston Direct Generator. Perhaps also a thermo photovoltaic generator with no piston at all. These generators could be made in house or simple bought on the market from an external supplier like the video screens.

    All the rest of the vehicle can be copied from the Model S as long as it goes along with affordability. So aluminum may be ok, but not leather seats or exotic wood. Make a Tesla but still keep Camry price in the back of the mind. Keep to the essential as well, that is what Henry Ford did to get success with his model T. So no 18” wheels and color choice as long as its black…

  8. Dave K. says:

    I believe Tesla will make a ~$40K small to midsize very sporty sedan and stop there, there is no point in moving all the way down market and competing with Nissan and the others, they just can’t muster the resources an established OEM can(yet). Nor should they, if you think about it they have succeded by building cars no one else would, and to everyone’s suprise people bought them! Elon’s genius is that he sees what’s needed before others do, and then executes brilliantly! I would never bet against this guy, his track record is stunning.

  9. Ocean Railroader says:

    I think Eon Musk can do it in that he’s already built space X and he plans launch a fully capable moon rocket that could take people back to the moon which is something the US has been missing for almost 40 to 50 years now. He’s also planning to restore manned missions for the US. Which is something the space shuttle killed off when they stopped flying it. He’s also planning on having self landing rockets like in the 1960’s science fiction movies. What these things have in common is that this guy trying to make up for lost time in that we should have had these things 30 years ago and now he’s having to catch up for 40 years of lost time.

    As for cars I really think a 200 mile range mass marketed electric car for $30,000 is quite possible now. In that the first generation of EV 1’s could go according to legend 75 miles on a charge and there where photo types supposedly out that could go 120 miles on a charge with different sets of battery set ups in the cars. It really sounds like the big car makers are not wild about electric cars and seems more like with most of them California and some other states are telling them you sell them or else. If they where really that happy about them the Nissan Leaf would be gaining ten to 20 miles of range every new model year or at least have 120 miles of range starting out and not the 75 mile range it has now.

    Tesla on the other hand seems really charged up about electric cars in that Elon Musk is like OK we are going to have a cool looking car that can go 300 miles on a charge and can charge up in 20 minutes. And I’m still not done with that I want it to go 500 miles a charge and fuel up in ten minutes or five minutes. I really think that if the big car makers wanted to push themselves we could have 200 mile range EV’s come out next year. But Tesla on the other hand sounds quite realistic compared to Elon Musk’s track record with Tesla as of now and Space X.