As you can tell, I’m a fan of Tesla and Elon Musk’s approach towards his mission of speeding up the adoption of the electronic car, and moving us off dependence (both from an energy perspective as well as from a political one) oil reserves as a fuel source… Recently Telsa announced a massive factory located in the USA to produce and assemble Lithium-Ion batteries. Currently, there are at least 4 states battling to be the location of this gigantic factory, estimated to hire 6500 employees, to secure supplies for an estimated 500,000 / year in vehicle production in 2020 (up from 20,000 / year in 2014).
While this may look like a savvy move to secure important supplies of critical resources, it’s also a political one… There are a lot of naysayers about Tesla… they don’t like change, they don’t like the future, and they don’t seem to understand that electric vehicles are good for the environment, good for the USA and good for humanity. Tesla’s manufacturing plant in California is already bringing back auto jobs to the USA, given GM and Ford’s lack of innovation.
In reality, announcing this plan so early is about capitalizing on the fact that this is really about demand generation. In order to sell 500,000 cars / year, Musk knows that he must provide a good reason to buy an electronic car… Another way of looking at this same issue, is that Musk must REMOVE any good reason NOT to buy an electronic car… remove the friction.
#1 – He’s already produced the very best rated car in the last 10 years (safest car, and by consumer report’s standards, the best car, in 2013)
#2 – He’s building out the super charger network, which will only get better, to allow for long distance travel
#3 – He’s making the super charger network free to use.. Musk is smart. The vast majority of people will still charge their vehicles for travel between work and home using their home power (so they’ll pay for it) but it’s still an appealing emotional rationale – similar to the difference between capped data vs “unlimited” data
#4 – He’s released the Model S, with a 25% gross margin… with plans to release the Model X and then after that, a 3rd generation platform targeting a $35,000 price point (bringing the car to mainstream buyers given government incentives)
So, let’s add another reason to that list of good reasons to buy a Tesla car…
#5 – Tesla is bringing jobs back to the USA from overseas
And a good reason for Tesla to gain political favors (not favors per se, but favorable policy directions)
#6 – Tesla is bringing jobs back to the USA from overseas (and perhaps, your state!)
Tesla’s being blocked in numerous states from being able to pursue it’s direct to consumer business model, which customers want, and is better for Tesla, but that the status quo “dealerships” DON’T want to happen… So whichever state gets the “Gigafactory” would need to change the laws in order to allow Tesla to sell their vehicles in that state from showrooms and bypass dealers.
– That’s demand generation
Secondly, who is going to argue that Tesla deserves to fail for taking the risk to change the status quo on gasoline cars and gasoline engines when they have a friend who is working at a Tesla manufacturing plant and their job depends on Tesla doing well… In fact, if you want more manufacturing jobs in the USA, if you want more assembly jobs in the USA, then buy a Tesla car.
– That’s demand generation
So while on the surface this looks like Tesla securing supplies of important component parts for their cars, it’s also about removing friction (laws preventing Tesla from selling direct to consumers in certain states) and it’s about demand generation (buy a car from the company that’s bringing jobs to the USA) – both benefits that Tesla can achieve BEFORE they have even laid the first brick at the new plant, which is why it’s beneficial to announce such a plan early.
1) Tesla’s first choice is Texas, due to it’s large population, which will open up a huge market for direct to consumer sales of Tesla vehicles
2) Second is that Apple may also pitch in the additional 2 billion needed – $5 billion estimated cost, $2 billion from Tesla, $1 billion from Panasonic – in order to also get the benefit of “bringing jobs to America” and to also see prices of battery packs fall by around the estimated 30% by increasing volume…