Nicholas Pell
Feb 21, 2012
Featured

Tesla Motors and Elon Musk: Costly innovation

Elon Musk, South African engineer and entrepreneur, is no stranger to innovation; he co-founded iconic tech firm PayPal. More recent projects include SpaceX, one of the handful of attempts to bring the private sector into outer space, as well as Tesla Motors, the company that brought us the first fully electric sports car. Now, Tesla Motors is creating buzz on the Internet with its Model X. Due in 2013, the Model X is a small, fully electric sport utility vehicle. Just to reserve the car costs $5,000, while the final cost will be somewhere between $60,000 and $100,000.

While PayPal was a rousing success, eventually acquired by eBay for $1.5 billion and now headquartered in eBay's San Jose satellite office campus. The same wild success cannot be said of Tesla Motors. Not even moderately. Despite having all the right components -- an innovative and stylish product that anticipates the future with no small amount of buzz -- Tesla has hemorrhaged money. In 2011 alone it lost over $250 million, losing around $150 million in 2010. Still, the Model X might be just what the doctor ordered for this innovative company named after Nikola Tesla, the patron saint of future science and strange innovation.

Tesla Motors is different than other car companies. Perhaps most obviously, they only make fully electric cars; no hybrids. Rather than coming out of Detroit, Tesla operates out of Silicon Valley, the center of innovation in the United States. But most importantly, the cars are designed for driver experience and performance. Compare this to most hybrids coming out of Detroit and Japan where making a car seems like an afterthought to having a hybrid in the brand.

Still, Tesla’s commitment to quality comes with a high price tag. The first vehicle produced by Tesla, the Roadster, cost over $100,000. Its sedan (the Model S) retails at about half that price, but is still more costly than the average roadster. While this might account for the massive money loss at the corporate level, it’s all part of the master plan for Tesla Motors. The company has plans to debut a more modestly priced vehicle, codenamed BlueStar. The BlueStar would retail at between $20,000 and $30,000. In the meantime, the company is content to focus its energies on early adopters and trendsetters in Silicon Valley. This allows the company to perfect its technology without worrying about price point and to cultivate a brand identity. However, it hasn’t been too helpful for Tesla’s bottom line.

The company hopes the Model X will turn this around. Not only is it already the best-selling product in the history of Tesla Motors by “a wide margin,” according to CEO Elon Musk, it’s also spurred interest in the company’s other vehicles. The Model X might just be what puts Tesla Motors into the black.

The name of the company itself carries immense amounts of cache. As mentioned above, Nikola Tesla is a sort of standard bearer for 'lunatic fringe' type innovations. His inventions included crude radar devices and the groundwork for wireless communication. Tesla spent much of the end of his life working on more speculative designs for directed energy weapons (commonly known as 'death rays,' and currently being rolled out in both southwest Asia, central Asia and the United States for crowd control) and ion-propelled aircrafts that would operate without wings, rudders or an on-board fuel source.

It’s impossible to know with any certainty what Tesla would have thought about the vehicles that bear his name. Still, it seems safe to say that luxury automobiles for a small social and technological elite aren’t exactly what the man who wanted to bring free electricity to the world had in mind.

Still, if Tesla Motors can get the public interested in fully electric cars, it will be a fitting heir to his legacy. If Tesla stood for one thing it was the idea that paradigm shifts aren’t only possible, they’re necessary for the continued existence of the human species. In an era where global climate instability is an increasing concern, the need to dramatically reduce humankind’s carbon footprint couldn’t be clearer.