Can Tesla pave the way for electric vehicles?

Well, it’s official. Tesla Motors will be setting up shop just outside Reno to build its Gigafactory, the $5 billion battery manufacturing facility that will be one of the most ambitious industrial projects of the era.

In a joint statement last Friday, Tesla CEO Elon Musk and Nevada Gov. Brian Sandoval said the project will bring huge economic benefits to the state and to the company, which is trying to break through the price barrier and make electric vehicles accessible to the masses.

The Gigafactory will occupy 10 million square feet of an industrial park and is scheduled to employ 6,500 people, with a target completion date of 2017. Gov. Sandoval said the plant could eventually bestow $100 billion in economic benefits on the state, and while the benefits won’t come free, the price seems to be a small one. Estimates are that the state will offer Tesla $1.5 billion in tax benefits plus it may loosen some workplace rules.

As for other advantages for Nevada, there are many. The site is near a source of lithium, which will be the essential ingredient in the new batteries. Nevada places the factory practically adjacent to California’s huge potential market although without the disadvantages of the Golden State’s difficult business climate. At one point, Musk said California officials were talking about a regulatory review of more than a year before the state could clear a site the company was considering. With Tesla’s efforts to open the facility by 2017, this was unacceptable.

Tesla’s plans are to ramp up to an incredible 500,000 vehicles by 2020 at a price between $30,000 and $40,000. This year, the auto company plans to produce 35,000 Model S’, which sell for $70,000 each. In 2013 it produced just over 20,000. The key will be the mass production of relatively small lithium-ion batteries which will be assembled in serial packets. Panasonic, the world’s expert in lithium-ion, will be contracting to do the actual manufacturing.

All this is intended to try to overcome the obstacles that seem to be hindering electric cars. The Model X will have a range of 300 miles, which will put it in the neighborhood of gasoline engines and relieve driver anxiety about recharging. Tesla is also building a series of charging stations that will make them more accessible. The new “superchargers” can give an 80 percent recharge in twenty minutes, which isn’t yet like stopping at the gas station, but it’s getting close.

Most interesting are the plans by NV Energy, Nevada’s leading utility, to build its own recharging stations in the hope of increasing the demand for its electricity. The utility has already installed half of the state’s 108 recharging stations. “NV Energy seems to recognize that it is their own best interest to develop this new market and advance the adoption of EVs,” said Mike Salisbury, transportation coordinator at the Southwest Energy Efficiency Project (SWEEP). “We’re encouraging other utilities to follow their lead and proactively support electric vehicles.”

NV Energy generates 5,800 MW of power on the hottest summer afternoons, but customers require less than half that at night or during the middle of winter. The utility sees overnight charging of EVs as a perfect way to level its demand curve and cut down on inefficiencies.

All this is happening, surprisingly enough, at a time when the sale of both electric vehicles and popular electric hybrids appears to be losing steam. Sales of EVs will be only 3.6 percent of the new car market, according to a report released recently by Edmunds.com, an online automotive research company. That’s down slightly from 3.7 percent in 2013. “The whole automobile market has grown,” said Jessica Caldwell, a senior analyst at Edmunds, “but we’re not seeing electric vehicles as part of that growth. The numbers are surprising. Five years ago everyone thought that electric-vehicle sales would continue to expand as more manufacturers put more electric vehicles on the road and as costs came down. That hasn’t happened.” Caldwell attributes the trend to stable gas prices and improvements in fuel efficiency that have taken some of the price pressure off motorists.

The only model that has surprisingly avoided this trend is the Nissan Leaf, which is, surprisingly, the all-electric with a driving range of only 70 miles. Sales of the Leaf are up 34 percent through August. U.S. sales chief Fred Diaz attributes this to increasing brand awareness. Leaf owners seem to have two cars and use their EV only for short trips driving around town.

So Tesla has its work cut out for it in trying to convince Americans that an electric vehicle can be more than an errand machine but can substitute in all respects for a gasoline-powered vehicle. Out in the desert of Nevada, Elon Musk will be trying to do just that over the next three years.

 

Photo credit: Raysonho @ Open Grid Scheduler / Grid Engine

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