Should Tesla Make Batteries Instead of Electric Cars?

cartechboy writes: "Tesla seems to be doing quite well these days, but one bond trader thinks the company should quit making electric cars and focus efforts on making batteries instead. Bond manager Jeffrey Gundlach says he's already tried to meet with Elon Musk to persuade him to take the battery-only route. Speaking to Bloomberg, he said Tesla could be 'wildly transformational' in the same way electricity and electromagnets were at the advent of their discovery. Enough people are interested in Tesla's vehicles that Musk probably won't take Gundlach's advice. Should he?"

Comments

He probably only needs 640K in his computer, too

[boristdog]

I mean, these electric car thingys are just a fad, right?

They've been pushing this angle for a while

[Anonymous Coward]

The analysts are pessimistic that a newbie can outperform the established automakers. I disagree. What better way to make a market for your battery factory than proving the technology that they will be used for? This is the type of thinking that kills companies traded on Wall Street.

Re:They've been pushing this angle for a while

[GameboyRMH]

They've also been doing a great job of building the cars themselves, making it even more baffling. It's not like they were putting good batteries in crappy cars.

Re:They've been pushing this angle for a while

[AndrewBuck]

Yeah, this is pretty laughable. I don't remember the exact figure but his battery factory (not built yet but planned) is estimated to be something like 25 to 50 percent of the current world output for these batteries; and it is expected that the battery factory will sell almost entirely, if not exclusively to his electric car operation. So this "genius" of a bond investor thinks to himself "gee, if there is such a big market for batteries he should just sell the batteries". Only problem with this line of thinking, if he quits making cars then the battery market dries up. With people like this running our economy it is little surpirse that we fell into an economic collapse, and are probably setting up the next one as we speak. Explain to me again why people like this deserve to be paid millions a year.

-AndrewBuck

Re:They've been pushing this angle for a while

[hsmith]

Or he could just do both, build cars and sell batteries. Plenty of car manufactures sell tech and parts to other car manufactures. So many car parts are outsourced in a vehicle it is absurd.

He is doing all right pushing his cars so far and advancing his tech, why stop doing something that is working?

Re:They've been pushing this angle for a while

[kurkosdr]

Because they fund the campaign of politicians and sometimes even their private lives. Search for "friends of angelo countrywide scandal".

Re:They've been pushing this angle for a while

[lagomorpha2]

It helped that initially Lotus made most of the car. Lotus has been making cars for some time.

Re:They've been pushing this angle for a while

[DarenN]

Well, the trader has one point - the Tesla batteries are serious tech. With the advent of many things that could use them (airliners, other electric cars, trains, etc), and the fact that current batteries are frankly shit, if Tesla batteries are that much better then they would need to build a vault to hold the piles of money that they would get. However, he has a market for the cars and they are driving the battery tech, so it would be nuts at this point. If the car making business starts to dry up, then they have a second core competency that they can keep building around.

Re:They've been pushing this angle for a while

[Grishnakh]

And it's not like there's many other electric cars to put them in. The only one I can think of is the Leaf. All the other EVs out there are just conversions from gas-driven vehicles, rather than purpose-built EVs, so they end up with very compromised designs. Many of them aren't even serious vehicles at all: the automakers are just slapping them together to satisfy government regulators, to say "look! we have EVs too! But no one wants to buy them!" Yeah, no one's buying them because they suck ass. The Tesla by contrast is actually really good, so they're selling like hotcakes, since it isn't a half-assed attempt like what the other automakers are spewing out.

There was another company that tried what this dumb bond manager suggests; it was called "Ovonics". It supplied batteries to GM's EV1 electric car, which was famously ill-fated. Ovonics has disappeared now after being bought up and then shut down. I guess that's what this bond manager wants to happen to Tesla.

Re:They've been pushing this angle for a while

[lagomorpha2]

Only problem with this line of thinking, if he quits making cars then the battery market dries up.

Except that VW, BMW, GM, and others are beginning to produce cars with these batteries. If Tesla expands battery production enough they could make money not only from their own vehicle sales, but also get a cut of the profit from each of their competitors cars sold because they made the batteries.

Think like how Microsoft gets a cut of each Android device sold. "If our products sell, we win! If our competitors products sell, we win!"

Re:They've been pushing this angle for a while

[khallow]

The bizarre thing is that the obvious better solution here is to spin off the battery manufacture business.

Personally, I think the best approach here is to keep the battery manufacture in house for now (since it provides a powerful advantage over competitors) and build up electric car market share to the point where you're triggering anti-trust. Then use the spin off of the battery business as a playing chip to keep the rest of the business together.

Finally, if Musk wishes to exit this job at some point, that would be a good time to do so. He could appoint a competent successor and gradually divest himself from the business.

Re:They've been pushing this angle for a while

[plover]

Absolutely. It's a mistake to assume that just because 99% of lawyers are corrupt scumbags, that all lawyers are corrupt scumbags. For example, some stopped taking bribes after their funerals.

Re:They've been pushing this angle for a while

[TWX]

More importantly even than the fact that the auto industry is full of sourcing parts from competitors is without being faced with serious competition they're unlikely to make any significant changes. If he wants electric cars to eventually become well and truly mainstream then he needs to give his thoroughly entrenched competitors a reason to manufacture them, which is to force them to build electric cars to compete.

If he goes to a batteries-only platform then he's sunk, as they'll simply not bother to buy his batteries because they just won't innovate to where they need them.

The only real danger that I see is if he's so sucessful at compelling his automaker competition to electricity that if he sells batteries to them, they push antitrust regulation against him for being a vertically-integrated monopoly that's bad for their purchasing power. That's an awful long time down the road though.

Re:They've been pushing this angle for a while

[Yebyen]

I know that Wikipedia is of course the one and only best primary source, but here goes anyway:

"Tesla produced the Roadster until January 2012, when its supply of Lotus Elise gliders ran out, as its contract with Lotus Cars for 2,500 gliders expired at the end of 2011."

So, if you're trying to say that Lotus never made parts for the Model S, fine. You're the first person to use the designation "Model S" anywhere in this thread. Tesla made other cars, before the Model S.

http://en.wikipedia.org/wiki/T...

Re:They've been pushing this angle for a while

[CastrTroy]

The thing is, nobody really builds cars anymore. They assemble them. Ford doesn't manufacture each individual piece. They take a bunch of pieces manufacturered by other firms and put them together. I think Ford still makes the engine, but other than that, a lot of the parts are made by other companies. Which was the whole reason they couldn't let GM die. It would have taken hundreds of other companies that supply the parts to them with it. Once you take out the complicated drive train of a gasoline car, and have Tesla making the batteries anyway, is it really that difficult for them to just make a car anyway? A car isn't really that complicated of a piece of machinery.

Re:They've been pushing this angle for a while

[rjstanford]

Interestingly Musk recently said that in retrospect that's one of the things that he'd do differently; they ended up changing so much of the chassis that they didn't really get a lot of benefit from it, but used enough of it that they were still bound to it.

Re:They've been pushing this angle for a while

[MozeeToby]

Yeah, but manufacturing is only one piece (admittedly a big piece once you start moving tens of thousands of cars per year). What doesn't make any sense is how Tesla has innovated in car design outside of the electric aspects. Anyone could have put a huge glass cockpit in their luxury car. They could have negotiated lifetime data plans with cellular carriers. They could have auto-retracting door handles. They could have done OTA updates to fix SW updatable components of the car. They could have designed gullwing doors for SUVs that take just a few inches to open.

No one ever did. The major automakers got lazy, they stopped even trying to innovate decades ago.

Re:They've been pushing this angle for a while

[AndrewBuck]

I get the point you were making, and to some degree you are correct. What you say is not entirely true though. Bond __investors__ make money as you suggest, but I think the article described this person as a bond __trader__, which is a very different thing. Traders often get a commision for the trade, whether the trade itself makes any money or not, even if they were the one who decided when to buy and sell, and what bonds to trade in. There are a lot of hedge funds that either lose money for their clients, or perform very poorly (many don't even beat the "index" funds which are basically "just buy one of everything"), yet these hedge funds themselves still do very well due to the fees they have hidden away in the fine print of the contracts you sign when you invest with them. This is actually a big part of why so many pension funds are in such bad shape. The underlying investments did alright, but the massive fees sucked out by the managers, traders, brokerage houses, and exchanges, eat up almost the entire profit on the trades leaving very little flowing back to the investor (in this case the pension fund). The funds list their "profits" in their prospectus which show how they make good trades and talk all about how much money you would make investing them, but when you actually dig through all the details, the fees are nearly as big as, or sometimes bigger than, the returns they quote up front. They sucker a lot of people this way, and even some (like pension fund managers) who should know better and either just don't catch the fees or don't care since it isn't their own money they are managing.

-AndrewBuck

Re:They've been pushing this angle for a while

[MozeeToby]

Not to mention he created the market for these batteries. Yes, electric car manufacturing probably has the momentum behind it that it would continue without Tesla's goading, but that's not a sure thing. If Tesla rolls out the Model X and Model E in the coming years, there will be no going back; but right now the industry is just starting to get rolling. Destroying the largest most disruptive player in that industry is a bad idea if you want to sell to that market.

Re:They've been pushing this angle for a while

[lgw]

They certainly could and should have let GM die, though. The biggest flaw in Americas take on capitalism is bailouts. Companies like GM need to die and be replaced by companies like Tesla. I've had quite enough "government propping up failed business models" for one lifetime, thanks.

Re:They've been pushing this angle for a while

[Big_Breaker]

Tesla is traded on Wall Street and they raised the money for the gigafactory from Wall Street through a convertible bond sale. Wall Street has been key to providing capital to Tesla.

Re:They've been pushing this angle for a while

[westlake]

The analysts are pessimistic that a newbie can outperform the established automakers.

It isn't a question of performance, it's a question of production.

Tesla doesn't have a "mass market car " in production --- and Tesla's definition of mass market is the $35 to $40,000 car.

Historically, automakers like Ford began with a truly affordable mass market car and absorbed bits and piece of the high end market, as their betters ran into financial trouble, as they always did, sooner or later.

Re:They've been pushing this angle for a while

[JimSadler]

A recent patent filing suggests that Japan may well own the battery market in the very near future. Tesla might want to license that battery technology or even buy their batteries from Japan. It seems to be a night and day breakthrough.

Re:They've been pushing this angle for a while

[vux984]

yet these hedge funds themselves still do very well due to the fees they have hidden away in the fine print of the contracts

Which is why you should always invest in hedge fund companies, but not the actual hedge funds. :p

Re:They've been pushing this angle for a while

[Firethorn]

The only real danger that I see is if he's so sucessful at compelling his automaker competition to electricity that if he sells batteries to them, they push antitrust regulation against him for being a vertically-integrated monopoly that's bad for their purchasing power. That's an awful long time down the road though.

I think it'd be a tough sell even a 'long time down the road' since most of the battery factory would actually be owned by Panasonic. Vertical integration isn't anything new for the major auto manufacturers - parts companies will often have manufacturing equipment across the street, sometimes even within the plant itself.

Re:They've been pushing this angle for a while

[drinkypoo]

Well, the trader has one point - the Tesla batteries are serious tech. With the advent of many things that could use them (airliners, other electric cars, trains, etc)

NOPE

Too heavy and not power-dense enough for airliners.

Good for other EVs, sure. But that's obvious.

Hybrid trains are so far an abject failure. Oh sure, series hybrid, fine. With no batteries. But so far, actually getting enough power in and out of batteries in a train to be meaningful is a pipe dream. I suspect you could do it by retrofitting all train cars with powered bogeys and battery storage. Good luck!

If the car making business starts to dry up, then they have a second core competency that they can keep building around.

Not really. All Tesla does is assemble cells into packs.

Re:They've been pushing this angle for a while

[LordLimecat]

Whats baffling is that Bond manager Jeffrey Gundlach thinks hes a better judge of investment than a many-times-over millionaire who has launched 3 wildly successful businesses-- paypal, Tesla, SpaceX.

Re: They've been pushing this angle for a while

[Scowler]

Agreed. Tesla's key technology is and has always been that electric drivetrain. It took years of work and many iterations to develop that. Everything around that drivetrain in the Model S is elegantly designed but still within reach of what other car companies can do. Batteries are certainly not a key technology for Tesla, as their stated goal for the Gigafactory is to build common batteries cheaper, not necessarily better.

Re:They've been pushing this angle for a while

[drinkypoo]

Companies like GM need to die and be replaced by companies like Tesla.

Companies like GM need to never exist. Companies should not be permitted to become too big to fail. Absent a guaranteed minimum income, when massive companies fold, there is massive negative impact of many kinds, both public and private.

Re: They've been pushing this angle for a while

[Scowler]

Automakers get kind of trapped in iterative design on established product lines. Any changes to a car line already selling in the hundreds of thousands obviously has to go through extensive reviews with suppliers, marketers, dealers, etc. Any big change requires Herculean effort (the recent change to all-aluminum body in the F150 is a good example.). But new products, often built on a new key technology, often quickly become engineering playgrounds. The first Prius was like this... Even though the new thing then was hybrid drivetrain, Toyota poured a whole lot of other unrelated ideas into that car, many of which succeeded and migrated to other Toyota product lines.

Re:They've been pushing this angle for a while

[ericloewe]

The Roadster is essentially irrelevant as anything other than a prototype for Tesla's propulsion system. Generally stating that Lotus is significantly responsible for Tesla's success (as was claimed, despite the fact that the hard part was not done by Lotus) is absurd.

Additionally, the Model S has literally sold more than 10 times as much as the Roadster, and it is the car that is viewed as truly significant.

Discussing the Roadster as if it were truly significant as anything more than a prototype is about the same as discussing the Ford Galaxy as proof that Ford typically rebadges other manufacturers' vehicles as their own.

Re:They've been pushing this angle for a while

[blackraven14250]

Tesla's pretty close to Ford's original vision if Wikipedia's math is correct. The Model T cost about 4 months of pay for an assembly line worker, who was paid above average wages for the time period. The Model S is 35-40k base, which is just under the year for an average worker in the US. An average worker on the line at Tesla probably makes a fair bit more than that - CareerBliss shows their average at 71k, which puts the S currently at around 6 months of pay. The "currently" is pretty important, since the Model T took about 5 years to halve in price from launch, potentially while salaries went up, which made that 4 month figure possible.

Re:They've been pushing this angle for a while

[tomkost]

MOD PARENT UP!!! My friend from the UK keeps saying to us Americans: Capitalism, you're doing it wrong. We have crony capitalism. Calling what we have in US capitalism is not just a misnomer, it's practically the antithesis of a free market.

Re:They've been pushing this angle for a while

[Anonymous Coward]

Most of the other car companies have started out targeting the lower end of the market, but wound up with overly expensive and underperforming offerings like the Leaf.

Meanwhile, Tesla has gone high-end. People buying high-end luxury sedans are less concerned about an extra 10-20 grand, and more concerned about what they're getting for it - Experience, but also (and possibly more importantly) a Status symbol.

Re:They've been pushing this angle for a while

[ericloewe]

Besides being open for debate (the real engineering work had to be done by Tesla), it's a profoundly bad argument. Tesla's real success is the Model S, not the Roadster.

Re:They've been pushing this angle for a while

[q4Fry]

I'm not trying to rain too hard on your parade (Tesla fan here), but it strikes me that Tesla needed a loan from the Feds to stay solvent as well. I know they paid the loan off early, and the terrifying "maybe we'll fail" period is behind them, but it seems a little odd that you'd hold up Tesla as the antithesis of GM with respect to government money.

Re:They've been pushing this angle for a while

[AmiMoJo]

Toyota plug-in hybrids use lithium cells, as do VW's all electric models. IIRC The Volt uses them too. The marked is expanding.

Re:They've been pushing this angle for a while

[Twinbee]

Neither was the word 'Roadster' used in the thread. His point is that Tesla is now doing a perfectly good job of making cars without any help from outside, so it doesn't make sense to go the battery-only route.

In actual fact, Tesla made most of the Roadster too. They found out the hard way and ended up changing most of what they had, so they wished they had built it from scratch as it would have saved them loads of time and money. In any case, they are doing that with the Model S now.

Re:They've been pushing this angle for a while

[rogoshen1]

Wouldn't the mere 40k EV vehicles on the road be a very very good thing for them -- compared to cell phones and tablets which are mature products and approaching saturation?

Basically if other manufacturers are going the EV route; wouldn't owning NA's major battery production plant basically let them have an easy time cornering the market for the key EV component?

Not to mention, being in control of batteries means they are setting the defacto standard for EV battery and charging technology?

Re:They've been pushing this angle for a while

[Twinbee]

Elon says they wished they had created the Roadster from scratch, as it would have saved them a lot of time and money, though perhaps it was a good learning experience...

Re:They've been pushing this angle for a while

[AmiMoJo]

Tesla use Panasonic cells, and the batteries (packs of multiple cells) were developed with their help. Even the battery management tech was developed with Panasonic's help. Tesla don't own all the technology and don't have all the skills, that's why they are building the new factory with Panasonic.

Since Panasonic already dominates the market for automotive grade lithium cells and Tesla needs their help I don't think striking out on their own would be a very good plan. Panasonic already sells to other manufacturers, essentially what this guy is saying Tesla should do.

Re:They've been pushing this angle for a while

[ByTor-2112]

Exactly right. The wall street people want instant gratification. They don't care that he's building these cars for more than just profits. If we don't have more people like Elon Musk, our economy will be based on crap like Snapchat and WhatsApp.

Re:They've been pushing this angle for a while

[TWX]

True, which is why I don't think that it's a realistic permanent ruling, but if the existing automakers decide that they want to make life difficult for an upstart they could attempt to make the claim, especially if it becomes difficult to source the batteries elsewhere due to demand created by Tesla.

Such tactics are underhanded and dirty, but certainly not beyond companies to try if they feel that there's any chance of getting more benefit than they cost. All that they'd hve to do is to sour the public on Tesla, not actually get a favorable ruling, and if they can soil Tesla's image by showing how their own hard working employees are suffering it could be effective, even if they're suffering because their employers failed to innovate.

Re:They've been pushing this angle for a while

[AK Marc]

At worst, they should sell off the car-making side and just make batteries. But until they have multiple buyers, it'll be like an ACDelco/GM separation. They functioned as one, but had the overhead of two. Worst of both worlds. Unless they get contracts from Nissan and Toyota for batteries, I'd never consider separation a good idea.

The car is doing fine, as are the batteries. Keep them both together for now.

Re:They've been pushing this angle for a while

[theskipper]

There are hundreds of thousands of jobs in the parts sector, mainly in poor red states. When the shit was hitting the fan, folks out here in the real world were experiencing a frozen banking system, and the prospect of 30%+ unemployment in states with a concentration of those parts suppliers. It would have taken many, many years to clean up the mess.

Balanced against a bunch of rich blowhards on AM radio/cable news screaming about the pure ideologies of capitalism just so they can increase viewership and charge higher ad rates...the choice was pretty clear back then.

Re:They've been pushing this angle for a while

[lgw]

Well, yeah, but it's so damn hard to find examples! "Taking government money" may not be the only failure mode of capitalism, but it's one we seem to love in America.

Re:They've been pushing this angle for a while

[lgw]

Whatever - there's always some excuse for shoveling tax dollars at companies. Turns out it would have been cheaper to pay every mortgage in the US for a few years than bail out the bank. I bet it would have been cheaper to pay the salaries of all those guys for a year or two than to bail out GM (not just this time, but all the future bailouts they'll need and get forever).

Re:They've been pushing this angle for a while

[docmordin]

The base Model S is $69,990 (USD) according to Tesla's website and Wikipedia, not $35,000 to $40,000 (USD). With federal tax credits, the base price comes down to $63,570 (USD). With state incentives, it becomes a bit more difficult to qualify the final price: essentially, you can either get a $2,500 (USD) rebate (California), a $6,000 (USD) income tax credit (Colorado), a $5,000 (USD) income tax credit (Georgia), or a $4,000 (USD) rebate for the car and a $3,000 (USD) rebate to offset the cost of electric vehicle charging stations (Illinois).

Considering what I paid for the Model S P85+, I do wish that the base price had been as low as what you originally claimed.

Re:They've been pushing this angle for a while

[DerekLyons]

Whats baffling is that Bond manager Jeffrey Gundlach thinks hes a better judge of investment than a many-times-over millionaire who has launched 3 wildly successful businesses-- paypal, Tesla, SpaceX.

You're either a time traveler from the future, or a drooling clueless fanboy - as Musk has built precisely one successful business, PayPal. Tesla is still deep in debt, with uncertain future prospects for getting out. (They're the iPhone of electric cars - they've got the luxury market, it's not clear they'll ever get into the mass market where the real money is.) SpaceX is on the thin edge, and without their government contracts would be on even thinner ice.

I don't know why Jeffrey Gundlach is, but see no a priori reason to assume he *isn't* as smart, or smarter, than Elon Musk.

Re:They've been pushing this angle for a while

[mattack2]

Tesla will be getting there with their next gen car:
https://en.wikipedia.org/wiki/...

(Though you can already buy electric cars at the price level of Accord & Civic... Though my electric drive smart car is probably way more barebones than most people like -- though IMHO it's closer to your "plain-Jane".. Though even it has some gimmicks too, like the back window being motorized to unlock.)

Re:They've been pushing this angle for a while

[mattack2]

Companies should be permitted to get as big as they can, and fail if they can't succeed.

Environmental and other safety limits should of course be placed on them, but simply limiting based on SIZE makes absolutely no sense... unless you're against capitalism.

Re:They've been pushing this angle for a while

[theskipper]

In that case, now would be a fine time for them to go under. But not when LIBOR is sitting at 7% and a lot of local munis would have defaulted due to the damaged tax base. My point was that it was mandatory from an economic perspective, not considering the politics.

Re:They've been pushing this angle for a while

[Grishnakh]

And how well do any of these cars actually sell? No one buys the Volt; it's overpriced and it's a Chevy. (It doesn't help that it's a hybrid, which drives up the price a lot since you now have to pay for a gas engine and all the stuff that goes along with it.) VW doesn't sell any all-electric models. I've certainly never seen one.

Re:They've been pushing this angle for a while

[RedWizzard]

I don't know why Jeffrey Gundlach is, but see no a priori reason to assume he *isn't* as smart, or smarter, than Elon Musk.

Well for a start he's a bond manager. The great minds of our world create, discover, invent. They don't manage bonds. The fact that he is not seeking out the sorts of intellectual challenges that Musk is, IMHO, evidence that he's not as smart as Musk. Regardless of the business success of Musk's companies, they've managed to solve engineering problems that no one else seems to have done. But, of course, that's irrelevant because he may well have more knowledge/experience/wisdom in the area he's giving advice. I think he could well be right in saying that the battery tech is the real point of difference for Tesla and that they should focus on that exclusively. But I suspect that Musk feels that if he doesn't prove there is a market then other car manufacturers will not take it seriously.

Re:They've been pushing this angle for a while

[lgw]

Doesn't mean the company should have continued to exist, though, nor all the parts companies that do nothing of value, etc. They all need to be gone. (And don't get me started on the need for an end to muni bailouts)

Re:They've been pushing this angle for a while

[deathguppie]

Elon Musk "will partner with several companies besides Panasonic". http://www.mercurynews.com/bus... I seriously doubt that Panasonic and the several other companies involved would want to invest heavily into a factory that produces batteries primarily for Tesla. It's a win/win for anyone involved in this endevour. If they can actually bring raw, newly mined materials into one end and then pump batteries out the other, they can cut out a huge amount of the cost of purchasing and re-working the pre-manufactured components and materials.

Re:They've been pushing this angle for a while

[virtualXTC]

I'd be more pissed about the auto bail out if that were really the case. However, the government wasn't actually propping up the failed business model of GM, they were propping up the failed business model of Goldman Sachs.

Re:They've been pushing this angle for a while

[j-beda]

(They're the iPhone of electric cars - they've got the luxury market, it's not clear they'll ever get into the mass market where the real money is.) .

I thought the iPhone was making something like 80%+ of the profit of the cell-phone industry?

OK it is not 80%: "Apple made more money than all of its competitors combined, taking in 56 percent of the profit in the mobile device market."
http://www.forbes.com/sites/to...

If you are making the majority of the profit from a market, you aren't doing too badly. Even if you only sell to the "luxury" segment of that market.

Re:They've been pushing this angle for a while

[AaronW]

Actually Tesla does own the IP to their batteries. Panasonic manufactures them and provided some IP, but Tesla has their own unique chemistry and cell design. Tesla's cells are automotive grade yet are much higher energy density than the LiFe cells other manufacturers use. They also developed their own battery management support. A quick search turns up a lot of battery related patents that Tesla owns. They do a lot of active battery research as well. You cannot buy the Tesla cells from Panasonic even though Panasonic manufactures them.

Re:They've been pushing this angle for a while

[LordLimecat]

Last I checked Musk paid his debt off, and was doing fine.

but see no a priori reason to assume he *isn't* as smart, or smarter, than Elon Musk.

Sure, but generally skill in a capitalist market is measured by "successful businesses built" and "amount of money you have", neither of which categories put Gundlach ahead of Musk.

If I had to choose someone to put my money with, it'd be with Musk, any day of the week.

Re:They've been pushing this angle for a while

[Teancum]

The original intention of Tesla was to simply buy the Lotus Elise without a drive train and to buy an electric propulsion unit from AC Propulsion. They were also supposed to make a production line of just 50 or so automobiles too. Elon Musk encouraged the other co-founders to think a bit bigger and to consider a full production automobile, which is where the Roadster came from.

While Lotus did make the bodies of the Roadster (hence the term "glider"), it was most definitely not the Elise but a completely custom design by Tesla done jointly with Lotus. About the only part in common was the headlights and a few other very minor parts. The factory for the Elise was remarkable because it could simultaneously manufacture multiple kinds of automobiles on the same production line even with different parts and different tools needed for assembly. This is some real credit to Lotus as well for coming up with those manufacturing techniques. They aren't the only company to do something like this, but Lotus definitely has done a good job with designing its production line and still remain profitable at lower production runs than some companies.

AC Propulsion was written out of the equation even earlier where Tesla built its own motors in-house, although the Achilles' Heel of the vehicle was the transmission system that pretty much should have bankrupted the company. That is what got Martin Eberhard fired as the CEO.

BTW, I consider that Wikipedia article to be factually wrong in the first place to even call them a Lotus Elise glider. A "Lotus" glider, perhaps as Lotus made the "glider" (aka the vehicle without a drive train), but not an Elise. Lotus engineers did help with designing the basic chassis of the Roadster though even though Tesla did hire some pretty competent automotive engineers of their own that were involved with the design too, so there is definitely room to give some credit to Lotus.

Re:They've been pushing this angle for a while

[Teancum]

The UK is hardly one to be complaining about crony capitalism. Just starting with the Statutes of Queen Anne and you get all sorts of ugly copyright and patent laws including a copyright on the King James edition of the Bible that still stands even to this day.... a law that made it illegal to publish the Bible in America until after the American Revolutionary War. This was so some merchants in London could earn a bunch of money off of publishing the Bible themselves under royal decree.

If the USA has crony capitalism, it was put here by the UK originally. Thank you England!

Re:They've been pushing this angle for a while

[Anonymous Coward]

No one ever did. The major automakers got lazy, they stopped even trying to innovate decades ago.

I agree with most of what you said but not this. Ironically, the major automakers show off all that cool shit at car shows but for some reason almost none of it ever ends up in production cars. Maybe they think it anything too different from what is already selling won't sell. It wouldn't surprise me if some high-priced marketing consultants and their studies show that most consumers don't want their cars to look too different since they fear it will get keyed as soon as they park it or maybe they've identified that anything "toyish" makes women dislike a car (usually both spouses are involved in looking at cars even if they buy their own). And I'm not even saying that those marketing consultants are wrong - customers that end up buying electric cars probably have other preferences as well that make them different.

Re:They've been pushing this angle for a while

[Teancum]

This is a law that was originally intended to be used exclusively by General Motors (put forward by the "W" Bush administration) to help with the EV-1 and supposedly the next generation of GM electric automobiles too. So as to not make the law so blatant in pointing out a specific company, and because the members of congress didn't think anybody else would qualify (neither Ford nor Chrysler were interested), they wrote the language of the legislation in a more generic fashion so any serial production automobile manufacturer based in America could qualify for the same loan.

It turns out that Tesla qualified under the language of the law, so Telsa also submitted an application for this loan program that was otherwise unused (GM had quit production of the EV-1 by this point in time). It was mere coincidence that the loan program was invoked by Tesla at the same time a whole bunch of other stuff was going on with the TARP program and other massive federal subsidies even though the Tesla loan had no part of any of that.

You really should show some credit to a company that was able to cut into a program that should have gone exclusively to GM in the first place. Not only that, but that even after the loan was taken out, Telsa repaid the loan early and had the federal bureaucrats scrambling to figure out what to do with all of the returned money and how to calculate the interest owed by Tesla since they didn't have the money out for the full duration of the loan.

Re:They've been pushing this angle for a while

[Teancum]

Actually Tesla does own the IP to their batteries. Panasonic manufactures them and provided some IP, but Tesla has their own unique chemistry and cell design.

I'd like to learn more about this. Seriously.

I know for a fact that the Model S and definitely the Roadster battery packs used standard Lithium-ion batteries like are found inside of my laptop that I'm using for a response to this post and went out of their way to make sure they used "commodity" battery cells from multiple sources including Chinese manufacturing companies and many other places. They did sign a contract the Panasonic,but as far as I knew it was just for a steady supply of the standard cells.

I'm not dismissing that Tesla could be getting into the R&D side of cell manufacturing, but a unique chemistry for the cells was not one of the things they got into with at least their earlier automobiles. What Tesla accomplished was to make a really good large scale battery pack that could power an automobile as opposed to a mere laptop or R/C toy car. It definitely took a skilled electrical engineer to come up with a design for putting 10k cells together as a single unit and not have them all burn up at the same time.

The largest problem that Tesla is facing is simply trying to get enough of the battery cells as they are purchasing a sizable quantity of the global market. So many in fact that the idea of even purchasing "standard" cells from multiple suppliers isn't nearly enough to meet their demand nor that of other electric automobile manufacturers doing the same thing. If Tesla was using some sort of exotic new chemistry, their supply problems would be even more pronounced and problematic than it currently is at the moment.

Re:They've been pushing this angle for a while

[Tom]

Except that VW, BMW, GM, and others are beginning to produce cars with these batteries.

Yes, but why? Are you sure they would continue to do so, at the current pace, if Tesla were to stop making their electric cars?

There is some demand for electric cars. But there is a specific demand for Tesla cars, because it's a brand. Buying a Tesla car makes you part of the revolution. Buying some electric VW makes you the owner of a geeky e-car thingy.

Re:They've been pushing this angle for a while

[Teancum]

This isn't really true. The Li-ion batteries have been used by laptop manufacturers for years before Tesla even got started. Tesla wasn't even the first electric automobile designer to use them in electric automobiles.

What Tesla did was to make the first large scale mass production automobile that used Li-ion battery cells. They are also still being used for laptops, smoke detectors, toy R/C cars & airplanes, game controllers, flashlights, and a whole bunch of other things including storage devices for solar panels. The market for these batteries exists well beyond the application of energy storage for automobiles.

What is true though is that between Tesla, Nissan, and a couple other electric automobile manufacturers they are outstripping almost all other demand for these kind of battery cells where it seems like the only application is to put them into automobiles and that is definitely driving their current price. You might end up with a cheaper Oyua or completed Raspberry Pi as a result too.

Re:They've been pushing this angle for a while

[Teancum]

When you need billions of dollars, you choice is not to go to a nearby bank but rather raise the capital on Wall Street or from the U.S. Federal government.

I'm glad that Tesla chose Wall Street over Capitol Hill.

Re:They've been pushing this angle for a while

[Teancum]

Even if a Japanese cell manufacturer has been able to make a major breakthrough in storage technology, it will still take a couple of decades for that to work up to hundreds of billions of cells being produced each year to satisfy demand like is currently being done with Li-ion cells at the moment.

That is also why Telsa built their factory for batteries, as the rest of the manufacturers from around the world going at full production still couldn't keep up with the demand for them that Tesla and Nissan (also trying to get into using Li-ion cells) are needing for their respective automobiles.

Re:They've been pushing this angle for a while

[AaronW]

They are not standard lithium-ion batteries. For example, the cell design is different in order to cut cost. They do not have the normal dimple on top nor do they contain the protection circuit. The protection is provided by a low melting point wire that is bonded to the battery that doubles as a fuse. They are also not exclusive to Panasonic since they also work with Sanyo.

The chemistry is also a bit different. The batteries are automotive grade. They are designed to handle more temperature extremes and for rapid charging as well as for longer life than a laptop cell. As for Tesla owning the chemistry I heard that during one of the quarterly earnings conference calls. They did a lot of research and testing for their batteries. Arguably most of their technology lies in their battery management and pack designs but they also have a number of key patents in the actual cell design.

http://www.teslamotorsclub.com...
http://www.teslamotorsclub.com...

  I had a good talk with a friend of mine who works there in R&D. He was describing it all a compromise between three things: reliability, performance and capacity. Choose two of the three.

They have some interesting patents as well, such as a metal air battery design.

Re:They've been pushing this angle for a while

[blackraven14250]

Ah, yeah, I messed that up pretty badly. Then again, you can just move the comparison to a Ford Model F/B/K, where it's not so favorable for the worker, and consider the after-Model X car to be the equivalent comparison to the Model T. It's a different scenario since the luxury market is already developed and pretty well open for Tesla to grab market share, whereas Ford had serious problems breaking in against the larger luxury automakers of the time due to a cheap reputation.

Re:They've been pushing this angle for a while

[Jack Griffin]

$65k is Audi A4/BMW 3 money in my neck of the woods. I would gladly pay that today if I could get one. If Tesla were as good at distribution as car and battery design they'd probably be in the black already.

Re:They've been pushing this angle for a while

[Barsteward]

or you could drive this diesel car getting about the same economy as the BMW i8

Re:They've been pushing this angle for a while

[Barsteward]

oh bolox, i suppose i should put the link in as well. https://autos.yahoo.com/news/t...
it can do 2000 miles on a tank full on motorway driving, not bad for a 6 litre engine.....

Re:They've been pushing this angle for a while

[Barsteward]

"If I had to choose someone to put my money with, it'd be with Musk, any day of the week."

i'm with you there, i'd admire people more who put their own money and name to risk rather than some tit who plays with other peoples money and no risk to their own.

Re:They've been pushing this angle for a while

[Barsteward]

here's a better link to the car http://www.autocar.co.uk/car-n...

Re:They've been pushing this angle for a while

[AmiMoJo]

http://www.volkswagen.co.uk/ne...

They do an electric Golf as well. Learn to use Google.

Re:They've been pushing this angle for a while

[Alioth]

I suspect neither airliners nor trains will run off batteries in my lifetime.

The ease in handling liquid fuel and their energy density (and the fact that as you use up the fuel, the plane gets lighter) will be keeping airliners running off Jet-A for the foreseeable future.
For trains, it'll probably always be far cheaper just to put electric wires above the tracks. The wires will last longer and be able to deliver a lot more power. Outside of North America, every high speed railway network is electrified and has been for decades already. Those which aren't (predominantly the UK, which is rather behind on high speed rail compared to most of Europe) are currently being electrified by means of overhead wires.

Trains with stored electricity have niche uses, for example the tram system in the city of Zaragoza lacks overhead wires in the old part of the city. The trains run off super capacitors and charge at each stop while they are away from the wires. However, high speed and freight is far better done with overhead electrification. Cheaper and more efficient in the long run.

Re:They've been pushing this angle for a while

[drinkypoo]

Environmental and other safety limits should of course be placed on them, but simply limiting based on SIZE makes absolutely no sense... unless you're against capitalism.

That's a stupid thing to say. Capitalism doesn't have to be unbounded.

Re:They've been pushing this angle for a while

[JaredOfEuropa]

Musk appears to want to create innovative products, and turn seemingly established markets on their heads. While he appears to be happy enough to sell parts of his tech to other companies (E-drivetrains to Toyota), and even if making only the batteries would be the smart economic choice, I very much doubt that's where is heart wants him to go.

Re:They've been pushing this angle for a while

[Rising Ape]

Anyone could have put a huge glass cockpit in their luxury car. They could have negotiated lifetime data plans with cellular carriers. They could have auto-retracting door handles

That huge screen is fucking ugly, like an enormous TV in a small room. The other things sound like gimmicks. Maybe the other car companies didn't do all that because it was a bad idea.

Re:They've been pushing this angle for a while

[Grishnakh]

They're not sold in the US.

Re:They've been pushing this angle for a while

[Rising Ape]

Let it die in the middle of a big recession? Not the best idea to put countless people out of work, reducing tax revenue both directly and from less spending in the wider economy. The lower spending of these workers elsewhere would then have knock-on effects and the total damage could easily exceed the cost of the bailout.

Saying "just let them die" would needlessly destroy a lot of normally profitable and productive companies that struggle purely due to a recession that was outside their control, as well as make said recession a lot worse.

Re:They've been pushing this angle for a while

[Teancum]

Interesting. The above links seem a little underwhelming to me as it looks more like a simplification of the form factor where Tesla clearly doesn't need to swap out individual cells in their battery packs, so it definitely makes sense. I'll trust you so far as actual chemistry changes are happening too, although it sounds like Tesla could still make some money supplying standard "AA" cells for military applications if they have the extended temperature range and a few other improvements being claimed.

Just how ubiquitous these cells have become in our society is very hard to see until you start pulling some stuff apart and seeing them in far more places than you would have originally imagined. Still, it is nice to see that Tesla is not just sitting on their hands and instead really trying to improve every part of their vehicle. They've definitely come a long way since it was just a dozen guys in a random Silicon Valley garage with a blank sheet of paper trying to come up with the design of the Roadster.

Re:They've been pushing this angle for a while

[tchapin]

The BMW i3 is a purpose built electric car.

There was also Better Place which was working on standardized EV battery pack swapping infrastructure (batteries, mechanisms, equipment, etc).

Re:They've been pushing this angle for a while

[rpstrong]

And gullwing doors? That's like the Rolex of doors, isn't it -- all form and no function? Unless I get bonus points for every cyclist I decapitate with them, where's the benefit?

They (at least Tesla's) can be opened with only "inches" of clearance. That is, the jerk who did his best to box you in with his old Maverick is foiled - at least this time.

Also, they appear to be safer (when fully opened) for cyclists. Instead of hitting an unyielding door, they plow into the emerging driver.

Re:They've been pushing this angle for a while

[Shirley Marquez]

They have been doing a great job of building luxury cars. I see no reason for Tesla to exit that business.

Whether they can compete in the market for more affordable cars remains to be seen. They might well do better as a supplier of batteries for the next generation of Nissan Leaf, Chevy Volt and Spark, Smart Electric Drive, and so on.

Re:They've been pushing this angle for a while

[Shirley Marquez]

Just because other designs aren't purpose-built as EVs doesn't mean that they can't be successful designs. The Smart electric drive, for example, is well done, and it's really the car that the Smart should have been all along - for the typical use case of a Smart it makes a lot more sense than the gas powered version ever did, and it's a lot more fun to drive because it doesn't have that horribly clunky automatic manual transmission. The gas version isn't enough cheaper or enough cheaper to run than a low-end gasoline car such as a Honda Fit and it's a lot less versatile, so unless parking in urban areas is a big consideration or you're using it a form of mobile corporate advertising the original Smart isn't very smart. Speaking of the Fit, there is also an EV version of that car now.

Electric-only designs: besides the Leaf there is also the Mitsubishi i-MiEV, a car that almost nobody has heard of because of Mitsubishi's inept marketing in the US. It's bigger than the Smart - about the size of a Mini Cooper or Fiat 500 - and ridiculously cheap for an EV right now (around $16,000 after the tax credit). But its 62 mile range (as estimated by the EPA; other methods yield a larger number) means it's also pretty much strictly an urban car.

As for the fate of Ovonics, no generalizations can be made from the fate of those companies. Stanford Ovshinsky was something of a lone wolf inventor who came up with ideas long before their time. Way back in the 70s and 80s his Ovonics company tried to commercialize phase change memory; the semiconductor fabrication technology of the day was not up to the task. (This was long before flash memory became a thing, let alone the current attempts to commercialize phase change memory.) His next company, Energy Conversion Devices, was a maker of both flexible solar panels and NiMh batteries; Ovonics batteries were used in the GM EV-1. Both product lines fell victim to larger economies of scale and lower manufacturing costs in Asia (the battery line was also hurt by the technology transition to LiIon) and the fact that Ovshinsky was far more talented as an inventor than as a manager.

Re:They've been pushing this angle for a while

[rjstanford]

An engine isn't that complicated a piece of machinery, especially compared to the rest of the vehicle. Any moderately handy high school kid can disassemble and reassemble one with a little help or a decent book.

Re:They've been pushing this angle for a while

[AmiMoJo]

Why should I give a shit?

Re:They've been pushing this angle for a while

[lgw]

Wow, so no matter how many times I say "bail out the people, not the companies", you just want to give the money to the 1%?

Re:They've been pushing this angle for a while

[Grishnakh]

Are those things really innovations? They seem more like expensive gimmicks prone to maintenance headaches.

>Anyone could have put a huge glass cockpit in their luxury car

How is this a maintenance problem? LCD screens do not need maintenance and are generally extremely reliable.

>They could have negotiated lifetime data plans with cellular carriers.

This doesn't require maintenance. Other cars require a monthly fee for data connections so your GPS et al works.

>They could have auto-retracting door handles.

Yes, this is more complex than regular door handles.

>They could have done OTA updates to fix SW updatable components of the car.

How is this a maintenance headache? Other cars require you to take the car to the dealership, and then spend hundreds of dollars for them to just plug in a cable and do a SW update.

>They could have designed gullwing doors for SUVs that take just a few inches to open.

DeLoreans had gullwing doors back in the early 80s, and they work just fine.

Re:They've been pushing this angle for a while

[rev0lt]

I live in one of the few countries that actually has a fueling grid for electric cars. It was the country chosen for Leaf's initial presentation. Lexus hybrids are quite common (high-end cars), as well as Honda Civic and other hybrids. Way more than Leaf. Electric scooters are also quite popular. And Segways in tourist areas. All of these would benefit from better battery tech. And if you think manufacturers want combustion engines. you're dead wrong. Electric cars have bigger margins and require periodic maintenance (battery maintenance), so there is a better chance of frequent income from a customer. Some high-end manufacturers have put a deadline in combustion engines a long time ago (eg. mercedes), and I forsee that in a 10 year timeframe, upto 50% of new cars will be electric or hybrid. So, its the difference between profit from a specific subset of vehicles, or profit from your own competition.

Re:They've been pushing this angle for a while

[rev0lt]

Meanwhile, Tesla has gone high-end.

No, it has hone middle-age hipster. Its a nice niche.

People buying high-end luxury sedans are less concerned about an extra 10-20 grand

Tesla S is hardly a high-end sedan, let alone a luxury one. And 200Km/h top speed combined with a 500Km range is, frankly, unappealing as a sedan. Its more of a city vehicle/short commute vehicle for the family. Check Audi A8, Volvo S80 or BMW 7 for *actual* luxury sedans. And these are somewhat affordable cars.

Re:They've been pushing this angle for a while

[rev0lt]

'Murica. That's why. The world exists there or some shit. And aliens love it. As well as huge creatures and whatnot. Seen it on tv, really!

Re:They've been pushing this angle for a while

[lgw]

At some point you need to clean house. The poorly managed companies don't go away in the good times - it's precisely in the bad times when they need to fail. Of course, we would have then needed to bail out a bunch of unemployed workers for a while, but we wouldn't be here again with GM next time around!

Re:They've been pushing this angle for a while

[drinkypoo]

GE did actually build, test and operated a Hybrid locomotive (actually demonstrated in 2007 to Arnold "The Governator".)

They're not the only ones. But they never carried out a long-term test. All the hybrid locomotives which have done long-term tests have failed.

Re:They've been pushing this angle for a while

[jwhitener]

It is healthy to let a company die when the economy is doing fine. But letting a huge company, that is integrated into thousands of other companies' lives, die in the middle of a huge recession would just be adding fire onto the flames.

Re:They've been pushing this angle for a while

[dave420]

I hope you were joking :) Blaming the UK for the current state of the US's runaway capitalism insanity is a bit weird.

I think not...

[AdamColley]

Many companies make batteries, they're all more or less the same other than the obvious size/capacity differences.

Not so many make cars like that, I'd respectfully suggest the bond manager has flipped his lid!

Re:I think not...

[Grishnakh]

Sounds like he's in league with the automakers.

Re:I think not...

[viperidaenz]

Sounds like he's in league with the autodealers.

Re:I think not...

[Overzeetop]

Kind of depends on whether you think this year or this decade for your horizon. I see more brands/models of electric and hybrid cars, not fewer, in the coming years.

That's not to say that you should abandon a promising car business, though. Making a product which challenges others to compete with you, and then mastering the underlying components which give you the edge makes your cars more competitive AND a second revenue stream which is funded by your competitors.

Re:I think not...

[lgw]

Automakers like Tesla? Tesla is a US auto company. Such cognitive dissonance in that thought, isn't there?

Re:I think not...

[AmiMoJo]

Many companies make batteries, they're all more or less the same other than the obvious size/capacity differences.

Not at all, not by a long way. Panasonic (Sanyo) batteries are in a league of their own. There are some other Japanese manufacturers who can match them for quality, but not for volume.

Everything else is crap. Varta, GP Cell, Duracell*, Tadiran, Uniross etc. I tested them all at work. Some even live up to their claimed capacity the first couple of times you use them. Only Japanese cells are consistent, and the only ones widely available in quantity are Panasonic.

For a car quality batteries are essential. Most manufacturers offer at least 8 years warranty with 100,000+ miles on the pack, so need something that won't degrade quickly or just fail completely. This is cutting edge chemistry and manufacturing, and it is hard to get right consistently. Panasonic cells cost a bit more, but they are cheaper over their lifetime.

Why can't it be both?

[ArcadeMan]

Even if Tesla becomes the best and largest car battery manufacturer in the world doesn't mean they can't make cars as well.

IMHO somebody's being paid by the other car manufacturers to steer Tesla away from making cars.

Then again, the "low-cost" electric cars sure aren't coming from Tesla any time soon, so I don't really care.

Re:Why can't it be both?

[olsmeister]

For the same reason existing car companies don't refine oil.

Re:Why can't it be both?

[Fulminata]

I actually understand his point. If Tesla just makes batteries for other companies, then they don't see Tesla as competition. If Tesla's also producing cars, then they are far less likely to do business with them regardless of how good their batteries are.

It's still a terrible idea. For the most part, the other car companies won't innovate unless they have competition. Tesla is far more likely to create real change by existing as a car company than they are by existing as a parts company.

Re:Why can't it be both?

[profplump]

Tesla doesn't produce the consumable fuel (electricity), just the durable storage device. And while car manufacturers certainly might outsource a fuel tank, no one would consider it unusual for them to make their own either.

Re:Why can't it be both?

[profplump]

If they make good batteries and sell them at a reasonable price, other will buy them. Take a look at say, projector LCD panels -- Epson makes essentially all of them, but you can buy projectors with a wide variety of designs from a number of manufacturers. And that's hardly the only example.

Re:Why can't it be both?

[i kan reed]

The natural reason it can't be both is that there is only so much invest-able time and capital on the CEO's part.

Re:Why can't it be both?

[michelcolman]

I actually understand his point. If Tesla just makes batteries for other companies, then they don't see Tesla as competition. If Tesla's also producing cars, then they are far less likely to do business with them regardless of how good their batteries are.

Yeah, that would be like Apple buying chips from, say, Samsung. Ain't gonna happen.

Re:Why can't it be both?

[Ranbot]

Bingo. Last time I heard, he also owns a company that makes rockets too.

Clearly, SpaceX should stop building rockets and just sell rocket fuel.

Re:Why can't it be both?

[Grishnakh]

Who's going to buy batteries to make electric cars? There aren't any serious competitors to the Tesla right now, except maybe (and that's a big maybe) the Nissan Leaf. The other automakers are strongly resisting making any serious electric cars; they're only making "compliance cars", crappy half-hearted attempts to appease government regulators and show they're making an effort to make zero-emissions vehicles. The automakers do NOT want to sell EVs to the general public; they make a lot more money with the status quo, since gas cars require lots of expensive ongoing maintenance at overpriced dealerships, and wear out after a while. The auto dealerships are even worse, as their entire business model rests on expensive maintenance and parts.

Also, we already had a company that specialized in making batteries for EVs. It was called Ovonics, and supplied the batteries for the GM EV1. It was bought out and shut down. Making batteries for EVs, without a popular automaker that's going to buy from you, is a stupid business move.

Besides that, there's a lot more profit in making cars than in making batteries. Who do you think is more profitable, mobile phone makers like Apple and Samsung, or the companies that supply batteries to them. Can you even name those suppliers? You can get Li-ion phone batteries all over Ebay for next to nothing.

Re:Why can't it be both?

[Firethorn]

If Tesla's also producing cars, then they are far less likely to do business with them regardless of how good their batteries are.

Arguably just the opposite. Car companies share parts and technologies all the time, if anything also being a car maker gives them higher status/more legitimacy than simply attempting to sell parts.

Re: Why can't it be both?

[CaptainLard]

Regarding the competition and working together, there are probably millions of mazdas with Ford engines and chevys with Toyota engines. I'm pretty sure theres a vw minivan that's just a rebadged dodge caravan. so far the only ones upset about competition are the dealers. A Tesla battery in a Chevy wouldn't surprise me at all. consider that apple just recently tried getting rid of all the Samsung chips in the iPhone after several years of patent warfare!

Re:Why can't it be both?

[drinkypoo]

If Tesla's also producing cars, then they are far less likely to do business with them regardless of how good their batteries are.

Automakers do business with one another all the time. Several licensed hybrid tech from Toyota, for example.

Re: Why can't it be both?

[sir-gold]

Stuff like this happens from single-pair partnerships, not widespread technology sharing
Ford frequently partners with Mazda, Chevy with Toyota, and Chrysler with Mitsubishi. But you won't see chrysler/toyota or ford/mitsubishi mixes.

If Tesla keeps making cars, and starts selling batteries, you will only get one or two other (probably foreign) car makers using Tesla batteries. Chevy is unlikely to use them, as they already have their own battery technology, and view Tesla as a direct US competitor.

Re:Why can't it be both?

[rogoshen1]

that makes no sense.. the auto makers want to sell cars. They don't care much about what kind of car: SUV, sedan, it doesn't matter (though the more expensive, the better -- obviously). If they can get people paying for a new car every few years, they're happy.

If they could get 40k for a fred flintstone drive-train powered car, they would try.

The EV/hybrid price premium actually helps them, since they can soak more profit margin out of a 40k car vs a 20k econobox. Plus, pushing LEV/ZEV requirements means more new car sales. I think the hesitation comes from not wanting to invest large sums of capital into a less than mature product line (which makes sense to a point -- but as Tesla is showing, the technology is definitely approaching mainstream).

As for the reliability, even the low end econoboxes from kia or hyundai are reliable enough to go 100k miles without a ton of maintenance -- given the choice between refreshing a large number of cars on the road with more expensive EV vehicles, or losing out on a bit of repair/maintenance income -- i think they'd prefer to sell the EV's.

Re:Why can't it be both?

[AK Marc]

Yeah, it's not like I've driven a Chrysler with a Mitsubishi engine in it, or a Ford with a Mazda engine in it, or a Mazda with a Ford engine in it. And there were Mitsubishis with Chrysler engines, but I never drove that one. And nearly everyone has hired Lotus for help with something, at some point or another. And Lotus makes cars.

Re:Why can't it be both?

[Hamsterdan]

Great, so they can use the batteries in electric rockets...

Re:Why can't it be both?

[Grishnakh]

that makes no sense.. the auto makers want to sell cars. They don't care much about what kind of car: SUV, sedan, it doesn't matter (though the more expensive, the better -- obviously). If they can get people paying for a new car every few years, they're happy.

They've not going to get people to pay for a new electric car every few years. Electric motors don't wear out like gas engines do; they don't have complicated systems that support them, like radiators, turbochargers, emissions controls, etc. On an EV, there just isn't that much that needs regular maintenance or which will go bad within a few hundred thousand miles, or which isn't easily and cheaply replaced (brake pads, for instance). The biggest problem would probably be the A/C system, since it's just like a normal one, and probably would need recharging after 10+ years, or could have a compressor failure after that much time.

And without lots of regular maintenance (oil changes, coolant changes, timing belt changes, etc.), how are dealerships going to survive? That's why they hate electric cars.

Re:Why can't it be both?

[j-beda]

AC travels long distances, DC doesn't without large power losses. AC you have centralized Power Stations, DC you would have Power Generating Station every where. Why would DC be better, or do you like having DC Power Generator every BLOCK?

AC and DC have the same resistive losses at the same voltages. No differences.

It has historically been much easier to transform AC to different voltages, thus has been generally easier to get AC up to the high voltages that make it economical to use it over long distances. In modern times, I think this trend has reversed and DC is now being used preferentially for long distance transmission:

https://en.wikipedia.org/wiki/...

For underwater power cables, HVDC avoids the heavy currents required to charge and discharge the cable capacitance each cycle.

Re:Why can't it be both?

[AaronW]

The dealers don't like EVs because it gets rid of one of their biggest sources of revenue, service. EVs don't need oil changes or belt changes. The complexity of the drive train is significantly reduced. Even the brakes will last a lot longer due to regenerative braking. About the only thing dealers will have to still do is rotate the tires and do the basic inspections. There's no spark plugs, air filters, fuel filters, fuel pump, belts or the myriad of other mechanical parts that wear down over time. There's no transmission even. There's no fuel injectors, exhaust system or anything else.

There are only about a dozen moving parts in the drive train on my Tesla model S. The electric motor drives a 9.71:1 gear reduction and a differential that goes to the wheels. That's it. At the factory I was told that the electric motor is lubricated for 12 years.

The AC and power steering are electric so they will wear much better than the belt-driven pumps and compressors that have clutches.

The parts that can break are also much easier to get to without an engine in the way. If the motor does need to be worked on it's relatively simple to pull out the entire drive train. The National Geographic special on the Tesla factory shows them installing it in under 5 minutes. See https://www.youtube.com/watch?...
The power steering, AC compressor and coolant pumps and whatnot can be easily reached by just removing a panel and/or pulling out the plastic frunk module.

Re:Why can't it be both?

[AaronW]

Actually the AC system should last a lot longer too. The compressor is electric and fully sealed and since there's nothing mounted to the engine with flexible hoses the chance of it leaking is reduced significantly. There's no compressor clutch either. You also get rid of the power steering pump since that is now electric. The factory told me the electric motor in my Model S is lubricated for 12 years and it's easy to remove by just undoing some bolts.

While I haven't seen the compressor on my MS the one on my Prius was totally sealed, though for some inexplicable reason they still mounted the electric AC compressor to the engine block and used flexible hoses for the AC.

Re:Why can't it be both?

[Jack Griffin]

Is it possible to make a low cost electric car? By that I mean, how much cost is in the car and how much in the batteries/charger/motor? The Nissan Leaf is an electric version of a Corolla for twice the price, so not really viable. But the Tesla S is the same as other Euro luxury cars for the same price. So it would seem that the luxury segment is the only space and electric car can compete on price (at least for the next few years).

Re:Why can't it be both?

[Alioth]

AC is better in some instances, but for long distance power transmission DC is much better. AC suffers reactive losses that DC doesn't. In the past we didn't use HV DC for long distance because of the losses associated with the inverter at the transmitting end and rectifier at the other end, however, we have very efficient solid state inverters and rectifiers today which makes it more efficient. HV DC also allows you to tie two grids much more easily, for example between two countries since you no longer need to synchronise the AC grids of each country.

Re:Why can't it be both?

[Grishnakh]

It probably also helps some that the compressor is likely single-speed, since it's run with a built-in electric motor, and doesn't have to be designed to handle a huge range of operating speeds like an engine-mounted compressor does.

Re:Why can't it be both?

[ormondotvos]

Q: "Why would DC be better, or do you like having DC Power Generator every BLOCK?"

A: Solar panels.

Re:Why can't it be both?

[Grishnakh]

Are those things really innovations? They seem more like expensive gimmicks prone to maintenance headaches.

Actually, there is a cabin air filter. Almost every new car these days has one, to keep the interior air clean. It probably needs to be replaced every year or two.

There's no transmission even.

IIRC, there's a single-speed gearbox. Obviously that's a lot simpler than a normal transmission with clutch or torque converter, but it's not nothing. There's also a differential. Of course, when was the last time you had problems with a differential on a gas car? Basically, you just change the gear oil every 50 or 100k and that's it.

The AC and power steering are electric so they will wear much better than the belt-driven pumps and compressors that have clutches.

You're right about the A/C, but most new cars these days have electric power steering, or electro-hydraulic PS (the latter seems to be dying out in favor of all-electric PS).

You're right that the service and maintenance required on an EV is far, far less than a gas car, but it isn't completely gone. But it's definitely a gigantic improvement.

Re:Why can't it be both?

[Grishnakh]

This is likely because the profit margin on high-end Euro luxury cars is very high, far more than high-volume cars. So Tesla can afford to sell a similarly-appointed car for a similar price, simply by having a smaller profit margin.

Much of the cost of an electric car is probably in the battery.

Make batteries?

[jonnythan]

I was under the impression that Tesla vehicles used banks of off-the-shelf 18650 Li-ion batteries. Panasonic is their current supplier if I recall. Even their proposed battery plant in the southwest is really a place for Panasonic to manufacture batteries for Tesla. Yes, they package them well and I'm sure they have some great controls and associated hardware and software, but is there really something groundbreaking about their batteries specifically? They already make a powertrain for Toyota - a move that hasn't produced a fraction of the buzz and money as their own vehicles. Not sure I understand this suggestion.

Re:Make batteries?

[Carnivore]

They use 18560s.
LMGTFY

Re:Make batteries?

[viperidaenz]

If there's a bad enough crash, don't the batteries catch fire?

Re:Make batteries?

[Carnivore]

The Toyota contract is dying a quiet death; Toyota never wanted an electric car but their fuel cell vehicles weren't ready in time to satisfy California's ZEV requirements.

Re:Make batteries?

[Anonymous Coward]

Um... they have, and they are the 18650's.

Tesla went this route so as to not be locked into a specific or custom battery form factor.

Re:Make batteries?

[netsavior]

please ask the same question about gasoline. Then laugh to yourself.

Re:Make batteries?

[AmiMoJo]

They are not quite off-the-shelf parts, they are automotive grade. That means extended temperature range (down to -40C) and a somewhat different chemistry that prioritizes recharge cycles and long life over capacity.

Re:Make batteries?

[AaronW]

They use a custom 18650. The cells are not normal 18650 cells. They use that format for cost reasons. Elon has said that ideally they would prefer a slightly larger format.

The reason they use so many small cells has to do with safety. The battery packs are designed so that a few cells dying won't have a noticeable impact on the pack. It also adds to the safety.

As it is, their energy density is much higher than their competitors who use LiFo prismatic cells.

Re:Make batteries?

[viperidaenz]

But no one wants to do a tear down on a gasoline tank...

Bad idea

[Animats]

Manufacturing auto batteries should be a low-margin business. They're a commodity. Others can enter the business. Over time, margins will decrease. There's not much brand value. (Who made the battery in your phone?)

Re:Bad idea

[LWATCDR]

Exactly. The closer you are to the end user typically the higher the profit. Microsoft being the exception.

Re:Bad idea

[khallow]

Manufacturing auto batteries should be a low-margin business.

Just like ink cartridges should be a low-margin business? I think you need to reexamine that statement.

Re:Bad idea

[msauve]

"The closer you are to the end user typically the higher the profit. Microsoft being the exception."

...and pimps.

Re:Bad idea

[Jeremi]

Just like ink cartridges should be a low-margin business? I think you need to reexamine that statement.

The difference between ink cartridges and car batteries is that ink cartridges are not (designed to be) rechargeable -- a very critical difference, since it is the difference between convincing a customer to buy a high-quality product once, and convincing a customer to buy a low-cost disposable product every month for as long as possible. I think you need to re-examine your analogy.

Re:Bad idea

[khallow]

The difference between ink cartridges and car batteries is that ink cartridges are not (designed to be) rechargeable

It's less of a difference than you think. I think of them like other car parts which are a traditional high margin business for auto manufacturers despite being for the most part, intended to last as long as possible.

The problem is that car batteries aren't at the present time rechargeable indefinitely. They degrade over time and large numbers of chargings. And when they do need to be replaced, Tesla will have the supply locked up.

Re:Bad idea

[sir-gold]

Ink carts are low margin, unless you are the company that also made the printer, and designed it to ONLY accept DRM-enabled ink carts that only your company can make.

Also, real printing ink (unlike the water and food coloring found in some cheap brands) is actually quite expensive to make, even when it comes in a 5 gallon drum and not a tiny little cartridge.

Re:Bad idea

[khallow]

unless you are the company that also made the printer,

Like Tesla Motors is the company that makes the car?

I worked at Hewlett Packard back around 2000. At that time, a large part of their overall profits came from ink cartridge sales. That was even though there were plenty of third party cartridges available. People will pay a substantial premium for brand-name replacement parts.

Re:Bad idea

[cbhacking]

If you do it as a commodity? Yes. Of course, the various printer manufacturers don't accept commodity in cartridges, so the whole point of your post is irrelevant. In fact, it's even *more* irrelevant because making electric car batters is a business-to-business deal, and making ink cartridges is a business-to-consumer one. B2B usually has very different markets than B2C. Ink cartridges are high-margin because they're made by the company that makes the printers, and sold to that company's existing customers who can't get the cartridges anywhere else. *IF* Tesla cars became commoditized but the batteries were still proprietary (and didn't last 10 years each...) there would be a lot more market for selling the batteries. On the other hand, if electric car batteries themselves become commodities, it'll be hard to sell them for much profit at all, or a competitor will undercut you.

Re:Bad idea

[DerekLyons]

Manufacturing auto batteries should be a low-margin business. They're a commodity. Others can enter the business. Over time, margins will decrease. There's not much brand value. (Who made the battery in your phone?)

Just because you don't know who makes the battery in your phone doesn't mean the brand is recognized by the folks who specced the battery and wrote the contracts. Brand matters at all levels.

Re:Bad idea

[sir-gold]

That would be a good financial reason to stay in the car business then. If they are into that whole "gouging the customer for every last cent" kinda thing.

Re:Bad idea

[khallow]

because making electric car batters is a business-to-business deal, and making ink cartridges is a business-to-consumer one

When Tesla makes batteries for their cars as opposed to other manufacturers, it is a business-to-consumer deal.

Re:Bad idea

[khallow]

I think it's not productive to view the providing of such services as "gouging" because it isn't. This is what the customer wants and they demonstrate it by paying that premium for the product.

Re:Bad idea

[LWATCDR]

Not really. The pimp is the salesperson while the workers are the product.

No, But Someone Should

[CanHasDIY]

Why would Tesla stop making cars? They're doing a great job of it, not to mention challenging the status quo when it comes to how Americans buy their cars; heck, if anything we need more companies doing what Tesla is doing, so they stand a better chance in the fight against the heavily entrenched *ADA organizations.

That said, someone should be working on building better batteries, just not them. Maybe a subsidiary.

Re:No, But Someone Should

[bluefoxlucid]

You nailed it. Tesla is not operating at a comparative disadvantage: they can produce cars more effectively than anyone. A $90k top-end Cadillac won't have the features of a $90k top-end Model S. They're comparable, but edged out by trim and safety features (what Cadillac warns you that it's on fire, and then doesn't burn the driver's compartment?).

The auto manufacturers are competing with each other; Tesla, a new entrant, clearly has gotten a step ahead. Detroit can catch up readily, but they're already in competition with Japan and Germany: it's unlikely they can just leave Tesla in the dust and build much better cars for the same price. That means Tesla is at worst a highly competent auto manufacturer, and possibly the top-tier American auto manufacturer.

It means GM and Chrysler should get out of the auto manufacturing business more than Tesla. If the big three keep trying to squeeze Tesla out, they might get kicked out themselves: a $20k Tesla offering could easily send the Ford Focus and Chevrolet Cobalt packing.

No

[Fulminata]

This is an example of why listening to "investors" is a terrible idea. It's like listening to a gambler advise you on how to coach a sports team.

Short term thinking

[jandrese]

This guy is looking at the market and going "Electric cars are scary, batteries are a sure thing. Ditch the cars and take the safer investment." It's investor thinking, but Musk isn't an investor, he's an inventor. The battery route would probably be good for long slow growth, but it wouldn't revolutionize the world the way he intends to with the cars. It's a riskier position, but one with much bigger potential payoffs. One where he crashes through the stodgy old boys club that is the existing automakers with his disruptive technology and becomes a dominant automaker in the world.

Re:Short term thinking

[bluefoxlucid]

No, they're trying to eat his lunch. You can't tell if bullies are winning until they escape without getting their nuts kicked. Besides, some of us got utterly thrashed in school and just shrugged it off to laugh in their faces, not a single bruise; so far Elon has done pretty much that.

Why can't you do both?

[Karmashock]

I don't see why the car business gets in the way of the battery business. There's no shortage of investment capital.

Re:Why can't you do both?

[bigpat]

The point is probably because car competitors don't want to buy batteries from a competitor... which is just a fact of life in many areas of industry. Apple probably doesn't want to buy parts from Samsung, etc. But if the product is better than other competitor products, then companies will choose to to buy from Tesla in self interest, if not and someone comes along with a better battery then the battery business was probably a bad exclusive bet anyway.

Re:Why can't you do both?

[Karmashock]

What if they were separate corporations?

They could start a battery company that sells batteries to Tesla. So buying batteries from that company wouldn't be added to Tesla's profits.

Companies spin off portions of themselves all the time.

That said, I'm hesitant to push Tesla around or suggest what they should or shouldn't do. The pressure for batteries has been strong for over a decade and yet we have yet to see improved batteries hit the market. Even Tesla's batteries are little better then laptop batteries. If the many battery companies the world over can't come up with something better I don't see why we think Tesla's battery factory is suddenly going to a world better.

So far as I've seen, Tesla's batteries are nothing special. Its the same stuff. They're saving some money by doing it in house. That's all.

Re:Why can't you do both?

[seebs]

Where do you get this idea? Do you have any idea how many Samsung parts are in pretty much every Apple product? Hint: Lots.

Re: Why can't you do both?

[bigpat]

That was my point. I guess it was not fleshed out properly. That the suggestion that Tesla just become a battery company was motivated as a response to Toyota dropping Tesla as a supplier. But the example of Samsung/Apple and many others is that competitors often buy products and parts from one another when they need to. Even in the extreme case of Samsung and Apple where they are engaged in a very public Global legal battle Apple is still buying key components from Samsung. So if Tesla builds the best car batteries at the lowest price, then car companies will either buy them or not be able to compete in the plug in electric car market.

No

[Anonymous Coward]

Enough people are interested in Tesla's vehicles that Musk probably won't take Gundlach's advice. Should he?

A car can be a great premium product. People pay not just for objective functionality but for style and image, and they form loyalties that can be milked for cash. Batteries are a commodity. Someone comes out with a better battery tomorrow and all your customers switch (your customers being cold calculating businessmen wanting an edge for their product that the battery slots into). If someone come out with a better car tomorrow then a whole bunch of people stick with what they know / love and you have time to adapt. Tesla have done the hard work of creating an image. It would be insane to ditch it to move into a commodity market.

What if Ford were to make a 100MPH Engine?

[Anonymous Coward]

When you are a leader in a broad field like Automotive, you have a competitive edge because of your technology. If Ford was to make a 100MPG engine that still had 150HP, everyone would want it. But, Ford would likely just want to sell their own cars because the car is a technology platform. The engine is important, but, it only works when combined with the final product.

Tesla is building a battery factory. Can/Will they sell them to others? Who knows. $5k after market upgrade to your Leaf to get you 200 miles on a charge? Sounds like a cool post-market, but, who needs to sell the batteries to Nissan when you are making less than your own demand.

I hate it when Bond and Hedge fund guys try to say what a company should do. All they are doing is trying to hedge their own funds by ensuring their other holding benefit.

Yo Gillette

[rolfwind]

Stop making those stupid low margin shaving handles and FOCUS SOLELY on cartridges!!!!

Re:Yo Gillette

[khallow]

I bet they could sell a "Terminator" or "Cylon" shaver for a bit of a premium. This sucker will fly.

When someone is exceptionally stupid.....

[tommyatomic]

You should always ask what else do they do a complete shite job on.

Jeffrey Gundlach has a god give right to be a complete uninformed tool and has every right to loudly make proclamations that reveal this fact to all that hear him.

Just as I have every right to take his outburst of stupid as a warning.

I need to contact my portfolio manager ASAP and make sure Bond manager Jeffrey Gundlach isnt closely associated with anything in my portfolio.

Hasn't he seen the documentary?

[damn_registrars]

In Who Killed The Electric Car? (why, btw, is not a Michale Moore documentary, nor is it particularly political), the only group that blame was not assigned to was the battery industry. The producers found plenty of blame to go around with pretty well everyone else you can imagine. If Musk were to switch Tesla to making only batteries, the industry could fall out from underneath him - and then he would have nobody to sell his batteries to.

Sounds like a suicidally bad idea.

Re:Hasn't he seen the documentary?

[Grishnakh]

Not only that, but they talked a fair amount about the Ovonics company that was formed to make advanced-tech batteries for EVs, and supplied the battery for the GM EV1. Ovonics is history now. This should serve as a lesson for anyone wanting to make EV batteries, without a really good customer in place.

Let's run the same story every 3 weeks

[clonecone]

Just change the words around a little and repost.

The prob with Bond Managers and analysts/pundits

[jeffmflanagan]

Being crazy isn't a handicap. If you make insane predictions that don't come true, people forget. If an insane, unsupported claim turns out to be true, they look like geniuses.

Batteries have no "moat".

[Maxo-Texas]

Just earlier this weak, they invented a new battery technology in japan that is believed to allow at least 3000 charge/recharge cycles with under 1% degradation-- i.e. a battery that will last longer than the car it's in.

As a battery company, tesla could be wiped out over night.

As a car maker- they have a "moat". It's a weak moat-- other car makers could come out with electric cars in the same slot. But Tesla's styling is pretty cool. It's likely to retain it's customers going forward unless newer electric cars were significantly better looking or had markedly superior battery life (aka lower cost of ownership).

Re:Batteries have no "moat".

[Grishnakh]

It's not just the styling, it's the entire car. No one else makes a serious electric car that comes close to competing with the Tesla. All the other EVs are ultra low-volume "compliance vehicles" that are just made to appease regulators; they're not serious, purpose-built electric cars, and are generally crappy and slow but with a big price tag. Teslas have an even bigger price tag, but they're really nice and very fast, and drive extremely well. At this point, there is zero indication that any of the other automakers really want to produce serious EVs, rather than these half-hearted POSes.

Re:Batteries have no "moat".

[Loki_1929]

As a car maker- they have a "moat". It's a weak moat-- other car makers could come out with electric cars in the same slot.

A guy in Mexico drove his Tesla Model S at over 110mph through a concrete wall and into a tree. He stepped out of the vehicle and walked away. A guy in Florida was driving a Tesla Model S on a highway when he got into a head-on collision with a Honda. Both people in the Honda were killed instantly, the Tesla driver pulled over, got out, and called the police.

They don't have a moat. They have a titanium fortress built on a cloud a mile above the ocean. Unless something drastic changes in the next few years, people will be buying Teslas as much for the safety aspect as anything else. Stick your family in a Tesla and suddenly it doesn't matter if some drunk crosses the median and slams into you full speed. Their safety is assured.

What's that piece of mind worth?

Re:Batteries have no "moat".

[AaronW]

Here's one where a Tesla was rear-ended by a semi. The Tesla was able to drive away, despite being knocked forward around 100'. The semi wasn't going anywhere.

http://www.teslamotorsclub.com...

Re:Batteries have no "moat".

[AaronW]

It all depends on the battery. Tesla claims that rapid charging has no impact on the life of their battery and they are rated for at least 3000 full charge/discharge cycles, which for an 85KWh battery pack is over 600,000 miles. Also, typically on the Tesla owners don't need to charge to 100% or drain it close to 0% since it has a decent range.

The Leaf, by comparison, is another story. The Leaf lacks active battery cooling and in hot climates the batteries have been dying. In Arizona people are reporting 40% range loss in two years and rapid charging does impact the life of the batteries.

Re:Batteries have no "moat".

[Teancum]

The Baker Electric cells are still being used a century after their original manufacturing was done and the factory which built them has since been bulldozed down. I think you would be hard pressed to find a cell that was easier to service although most companies would be wary of such longevity for cell chemistry like that.

Dumbest advice ever

[illestov]

Elon , let me tell you how to be successful, you see these batteries, they are like in everything, forget your hopeless idea with electric cars and spaceships and solar panels, join the crowd and make batteries! sigh what a fool

Or....

[viperidaenz]

This Jeffrey guy is being told by the car deals who hate Tesla to try and convince him to get out of their market because he's fighting their laws.

Short term: No. Long term: yes

[larry bagina]

Here's the thing... Tesla doesn't sell cars, they sell California ZEV credits to other car companies. (Kind of like how GM wasn't a car company, they were a health care company for retired auto workers that made money by flipping auto loans and sometimes made cars). If the ZEV credits dry up (changes in the law or other companies producing a popular ZEV vehicle), they're fucked and will need to find another line of business, ie manufacture batteries and operate charging stations.

Re:Short term: No. Long term: yes

[AaronW]

Tesla has stated that they don't make all that much any more from ZEV credits. They're doing fairly well. They had a bit of a loss this last quarter due to their rapid expansion (which is what they should be doing). The GAAP accounting penalizes them quite a bit for the way it deals with leases which is totally unrealistic. It prevents them from recording any income from the leases for quite some time which is why the big investors look at the non-GAAP numbers.

Re:Short term: No. Long term: yes

[Teancum]

That was the business model of Fisker. I guess that worked out real well.

I wonder what this bond trader's portfolio has...

[amosh]

Let me guess - he invests heavily in more traditional auto manufacturers.

Qualcomm is an interesting evolutionary example

[davef1999]

Qualcomm's initial strategy was to make complete systems, analogous to Tesla's decision to design, manufacture and sell cars. Qualcomm started out making complete mobile network systems (based on cdma technology), and then slowly, step-by-step exited those other businesses to become the semiconductor supplier that it is today. Qualcomm once sold handsets and cellular network gear. Now it just designs and sells chips. I suspect that Tesla's path may be similar: it makes both cars and components today, because the toughest function is to engineer the entire system. Once the system design settles down in a few years Tesla may decide to sell batteries, or more likely batteries + power system controllers + engines, to lots of other carmakers. And in turn decide that the component business is better than the 'car' business. Gundlach may ultimately be right, but he is most certainly way, way too early for that strategy change.

Re:Qualcomm is an interesting evolutionary example

[Firethorn]

Once the system design settles down in a few years Tesla may decide to sell batteries, or more likely batteries + power system controllers + engines, to lots of other carmakers. And in turn decide that the component business is better than the 'car' business. Gundlach may ultimately be right, but he is most certainly way, way too early for that strategy change.

I think that a major difference is that right now the 'Tesla' brand name is seen as hot/premium. It's cool to be in a Tesla, much less driving one. As long as the company can keep that up it can enjoy a price premium even over it's performance and safety advantages.

Time it right Tesla could be bought out by one of the other auto manufacturers for tens of billions. But I don't think that Musk is ready to sell yet...

Batteries are *HARD*.

[Slartibartfast]

I think Elon Musk is awesome, but I haven't seen him do anything, battery-wise, that makes me think he's got anything revolutionary up his sleeve. If he does, I completely agree with her -- or at least make it a separate company to do "battery stuff." But otherwise, getting rid of the "Motors" in Tesla to go and try to be Yet Another Company Trying To Make Batteries Better is probably a fruitless endeavor.

No.

[Anonymous Coward]

Betteridge's Law at it's finest.

WELL THANK GOODNESS...

[Anonymous Coward]

.. finally, some fucking "bond manager" had to come out and tell Elon Musk what HAS to happen.

It's not always all about the money.

[unimacs]

Hmmm. Which is more fun? Making spaceships and awesome cars or making batteries for somebody else's ho-hum cars.

Terrible Idea

[bmajik]

Nothing drives engineering like a tangible end goal that is big and easy to understand. Want to make batteries better? Have an engineering target that says what size car they have to fit in...

Tesla makes a better car than a "normal" car. It is faster than almost every sport sedan. It has excellent styling, excellent practicality (seating for 7!), very good handling.

Even if it weren't a pure EV, it would be an interesting contender.

But hey! It's also an EV. It is completely quiet. It doesn't need oil changes, or coolant flushes, or gasoline. You don't have to use the brake pedal anywhere near as much.

Tesla was the first company to make an electric car in my lifetime that wasn't a total piece of shit garbage joke. Not only did they instead make a _credible_ car, they made a car that kicks the ass of nearly other car. Their car is quieter than a Mercedes, out accelerates most BMWs, and handles better any other American sedan.

Why in the world should they stop making cars? The car they've made is better than most of the competition, AND is a game changer.

And, they're selling more of them than they can build. The model S is around 2 month lead time. The Model X already has 6 months of deposits.

I don't want Tesla to make batteries. I want everyone else to figure out how to make Telsas.

Re:Terrible Idea

[ericloewe]

To be fair, it's quite easy to build a car that handles better than an American sedan.

Who would need all those batteries?

[Agent0013]

They want to build the gigafactory to supply batteries for their own cars as well as have extra production to sell to other car manufacturers. If they stop making electric cars, then it would seem the need of a gigafactory would be reduced and a regular old factory would be enough. Besides, the other car manufacturers already have their battery suppliers, so who is to say that the new Tesla battery factory would succeed in the market if they had to rely on taking business away from the other battery suppliers to stay in business. Sometimes I don't understand how some people think or fail to think.

Might Help Broader EV Industry, More Secure Future

[Koreantoast]

Lot of people are dismissing this, but I think there is sound logic to what they're saying for two reasons. One, by becoming a purely focused battery manufacturer, Musk becomes platform agnostic and will have a much better chance of licensing his tech and selling his batteries to all auto manufacturers. This could benefit the broader electric vehicle industry as the technology is now available to dozens of well established manufacturers who can produce vehicles on multiple orders of magnitude greater than Tesla could possibly reach in a decade or more. If they do it right, they could make a huge amount of money this route, dominating a key control point in the electric vehicle.

The second thing is that they will continue to be highly constrained in their manufacturing capabilities for a while. I love Tesla and would love to own one of their vehicles, but the company's production system will take at least a decade or two to even get anywhere close to the order of magnitude that more mainstream auto manufacturers are able to make. This may not matter much if you want your Tesla to be unique, but if your goal is to see the mass deployment of electric vehicles in the near future, organically scaling up Tesla may not necessarily be the way to go.

All that being said, I HIGHLY doubt Musk will go in this direction. His MO at other companies has always been platform oriented with tight vertical integration, and I don't see that changing anytime in the near future, not with him at the helm.

Someone wants to short TSLA?

[rsborg]

Seriosly this is the same kind of trollish bullshit rhetoric I expect from Wall Street - just like "Apple should license OSX so non-Macs can run OSX".

How do you think Tesla makes money? Where are the margins (not just current, but future)? Why should a company divest itself of a technical leadership role in a key and profitable market?

More to the point, why do I care what this clown Gundlach says? and why is this drivel posted on Slashdot?

Bond Manglers...

[technical_maven]

Never forget that a good portion of "Bond Managers" are idiots when ti comes to the real world...

Wrong.

[Slartibartfast]

Who said "car batteries"? If someone came up with a truly revolutionary battery -- say, one that stored 10x what batteries do now -- you could sell them, at great margin, to *everyone*. Cell phones. Tablets. Computers. Cars (a battery 1/5 the size that's more powerful than the old one, and costs the same? Damn straight I'd buy it). Etc.

THAT BEING SAID... I don't see anyone coming up with a revolutionary battery technology. Not even Elon. So I agree with you, but think your rationale was incorrect.

Re:Wrong.

[CauseBy]

Yeah. You could do that... for fifteen years. And then your patent would expire and you'd be just another company making all the same batteries.

Re:Wrong.

[Lab Rat Jason]

15 years is a long time to kick ass... I'm not sure why Elon WOULDN'T want to own EV batteries for 15 years.

Who the fuck cares?

[sootman]

I've met with Jeffrey Gundlach to tell him how I think he should run his business. I suggested he quit trading bonds and become the guy who takes a highlighter to your receipt at Walmart.

Elong Musk is doing just fine without your help, thankyouverymuch.

Re:Who the fuck cares?

[Snufu]

Dear Mr. Musk,

I have graciously decided to bestow upon you my brilliant advice gleaned from years of research in the area of banking:

"If you make yourself big enough, the government will bail out any bankruptcy regardless of the level of fraud, malfeasance, or incompetence."

No need to thank me. But if you want to name one of your car lines after me, that'd be cool.

Sincerely,

Jeffrey Gundlach.

Bad idea especially...

[MoFoQ]

agreed.

Especially since then Tesla would be putting all of it's eggs in one basket and in the investing world...that's a big no-no (I'm more amazed that this "bond manager" is even a manager...let alone a bond one).

Plus recent history with A123 Systems should also say "no" to the battery-only route.

Figures

[DriveDog]

Sounds about like what kind of boxed-in thinking I'd expect from a bond manager. Maybe he could stretch himself a little and suggest golf carts.

Tesla's success in making very good cars surprised me, given how many failed to build cars in the past. But there's an important difference—most of those who failed were originally from the automaking industry. Looks like having that experience is more of a negative than a positive.

Great Idea

[russotto]

This is like going to Volvo and saying... hey, your cars use a lot of ball bearings, why don't you give up cars and make ball bearings instead?

Re:Great Idea

[Anonymous Coward]

Brilliant! You need a catchy name. How about SKF?

http://en.wikipedia.org/wiki/Volvo

Re:The prob with Bond Managers and analysts/pundit

[CauseBy]

cf. pseudoscience

Betteridge says No.

[PPH]

Tesla creates demand for batteries. Until recently, they have been only consumers of battery production. But they have been the largest. If they stop making electric cars, what happens to the demand? And who would invest in battery R&D and production if demand drops?

Its simple economics. Who is this Gundlach guy anyway? I want to short his portfolio. I'll be rich.

Re:Betteridge says No.

[WillAffleckUW]

I'll tell Fiat, Hyundai, Kia, BMW, Ford, and a whole host of other car manufacturers to stop selling electric cars based on your say so, then.

Or ... NOT.

Re:Betteridge says No.

[PPH]

Tell them what you want. Tesla is a larger consumer of batteries.

Serioiusly?

[Lab Rat Jason]

Obvious troll is obvious.

Re:Serioiusly?

[Twinbee]

murdered several Prius owners

Yeah you might want a source for that.

Somebody needs to

[RogueWarrior65]

Progress in battery tech is so far behind the rest of technology. You really need a battery that exceeds that of gasoline in terms of energy density. Then you need one that can go from empty to fully charged in 5 minutes without needing exotic infrastructure to do so. It needs to have a really low self-discharge rate, again, exceeding the decay rate of gasoline. And it's got to survive a few thousand charge-discharge cycles.

Re:Somebody needs to

[AaronW]

You don't need to exceed gasoline in terms of energy density since the efficiency of an electric motor is much higher.

Notice something about that article?

[Weaselmancer]

Some quotes from the article:

According to Bloomberg, Gundlach has suggested the Tesla Motors [NSDQ:TSLA] CEO get out of the car-making business, and concentrate fully on developing batteries for use in other vehicles.

In contrast to those traders though, Gundlach says he'd much rather buy Tesla shares than invest in a company like Twitter--and is much more concerned about the "killer" return speculative investors could get from Tesla becoming a battery-only business.

He sees Tesla as a better investment than technology companies like Twitter, whose shares recently dropped to their lowest point yet, less than a sixth the price of Tesla shares.

This article has nothing to do with technology and everything to do with maximizing third party investments. This is exactly what's wrong with the world right here, in a nutshell. Here we have an honest-to-goodness NEW thing. The Tesla car company. Finally a viable alternative to gasoline cars. The future. Less carbon emissions. Something to help the world. It's a beautiful vision.

So of course some day trading jackass wants to strip the future of that vision so he can get a better return on his stocks. To hell with the future, money is involved!

Makes me sick.

Smart fella, this one...

[Loki_1929]

Bond trader: "Oh, I see you're making two very good products that work together, have solid demand, and have intellectual property potential. Why not just make one of them instead?"

Yet Another MBA Sabotage Attempt

[Frightened_Turtle]

Sure. A bond trader trying to tell a real businessman how to run his company and tell him what a better product line would be.

Every company I worked for that put an MBA at the helm, failed. Those MBAs didn't understand what it took to create a product. They didn't understand production. One CEO got put in place didn't even know what products the company made (that company only lasted six months after he took over). And here we have a financial moron trying to tell an engineer how to run his company and what products to make. That's laughable. That would be like me trying to tell Einstein that the formula should be E=mc^3.

Tesla Battery Packs.

[Firethorn]

Is CNET good enough for you?

Similar to the Roadster, the Model S battery pack is filled with cylindrical lithium ion cells dubbed 18650s. Tesla does extensive testing of these cells at its headquarters, cycling them at different temperatures, trying different discharge rates, and even crushing them. The data Tesla collects gets used to refine the specifications sent to its suppliers, among them Panasonic and Samsung.

How about SAE International?

Despite Tesla Motors’ proven success with 18650-type Li-ion cells in its Model S, the industry’s best-known EV battery analyst isn’t betting that other automakers will adopt that form factor, which describes the cylindrical battery case’s 18 x 65 mm dimensions.

It's not a 'zillion cylinders', it's just over 7k, and 'wasted space' is instead used for the liquid coolant used to keep the batteries under temperature.

Around 7000 individual cells, coded NCR18650A by their supplier Panasonic, are used in each Model S pack. Rated at 3100 mAh, the cells are based on lithium nickel-cobalt aluminum (NCA) chemistry and feature a proprietary cathode geometry developed by Panasonic and Tesla. Last October the two companies announced a battery-cell supply agreement through December 2017 (Panasonic also owns shares of Tesla Motors) which will cover the launch of the Model X in late 2014 and subsequent Model E vehicles.

Yeah, Elon...

[Loki_1929]

the [Tesla Model S] impacted a roundabout at 110 mph, shearing off 15 feet of concrete curbwall and tearing off the left front wheel, then smashing through an eight foot tall buttressed concrete wall on the other side of the road and tearing off the right front wheel, before crashing into a tree. The driver stepped out and walked away with no permanent injuries

Yeah, Elon, quit making cars. Leave that to the people who know what they're doing!

Bond Traders know even less than Stock Traders

[WillAffleckUW]

As a long-time investor, I can attest that bond traders know even less than stock traders.

That said, what is this false Either Or choice we are presented with?

It's not Batteries or Electric Cars.

It's lots of batteries and lots of electric cars.

Economy of scale, baby!

Why can't Elon Musk/Tesla Motors do both?

[kheldan]

This guy seems to be pretty damned successful at whatever he puts his mind to, so why couldn't he spin off the battery-making business into another company that still supplies Tesla for their vehicle production, and sell batteries to everyone else as well?

Wall street opinions

[Snufu]

News for no one. Stuff that doesn't matter.
 

Re:He probably only needs 640K in his computer, to

[mellon]

Exactly. Basically, what he's saying is "leave making cars to the big car companies." That would be... unfortunate.

Bingo.

[Radical Moderate]

Nice piece by The Oatmeal about why he loves his Tesla. It's a lot more than the battery. "think outside the box" is a trite meme, but Tesla has done it, with impressive results.

Manufacturers need to be big...

[Radical Moderate]

for economy of scale, particularly manufacturers of complex machines, such as cars. Banks, on the other hand...how big do you have to be to push paper?

Re:Manufacturers need to be big...

[aNonnyMouseCowered]

That's the obvious way to solve it. Another is to have the industry standardize on the parts. So instead of one company manufacturing 1M units of component X, you can have 100 companies each manufacturing 10,000 units of component X.

Beyond the basic manufacturing, product assembly is another thing. For example it should be trivial for a small shop to "build" a desktop computer out of parts sourced from "brand name" manufacturers. Here you achieve the same benefits that come from economies of scale.

For a more real life example, look at the "white box" manufacturers of China (https://en.wikipedia.org/wiki/Shanzhai). These are mostly small companies with employees numbering in the hundreds rather than thousands. They get their components from the bigger Chinese and foreign companies. Their "manufacturing" process basically involves the manual assembly of these components into the finished gadget like tablets and generic game console controllers.

Re:Manufacturers need to be big...

[ultranova]

Banks, on the other hand...how big do you have to be to push paper?

Very big. Otherwise, why would anyone care about your paper-pushing? A bank needs to be so much bigger than anyone indebted to them that should they go bankrupt, they can eat the loss and not notice it - in other words, the utility of money is linear to the bank in the range of the debt.

The problem is that the same institution handles three different function: facilitating economic exchanges (bill paying), saving, and providing funding. The end result is that them crashing gives the economy a nice one-two followed by a crotch kick.

Re:He probably only needs 640K in his computer, to

[spazdor]

Well, it makes sense to specialize in whatever you're best at. Tesla has innovated in some areas of automotive design, and simply followed the pack in other areas; i see no reason why Tesla Motors couldn't become an OEM parts supplier for other car makers, if they decide that batteries and all-electric power trains are interesting and reinventing the rearview mirror is boring.

Comment removed

[account_deleted]

Comment removed based on user account deletion

Re:He probably only needs 640K in his computer, to

[Anonymous Coward]

That's not what he's saying. Traders like streamlined, focused companies. Big mergers usually end up with a net stock price decrease, while big spin-offs often end up with a net stock price increase for both companies (even if one is a crappy investment).

The argument is that while both his battery business and car business will be stellar performers, his comparative advantage will be batteries (that what he does _most_ best at), so why not focus on that? With comparative advantage, even if you do better at both things than everybody else, the world derives more benefit if you do most of what you're absolutely best at, even if you're better at everything compared to everybody else.

The flaw in the logic is that he forgets that Musk is some kind of super human (perhaps chemically assisted), and I'm sure he can maximize the battery aspects of the business while making a killing selling cars. Also, Musk isn't interested in profits for the sake of profits; he has bigger plans.

Uh, no. They are the Apple of cars.

[trawg]

This is dumb. They have made the a car that is a tech status symbol like nothing else. Ferraris are unaffordable to all but the super rich, but a Tesla ticks off so many boxes it's not even funny:

- super cool? tick
- eco-friendly? tick
- high tech? tick
- way more expensive than average? tick
- genuinely, actually not a piece of shit? tick

I can't justify buying one at the moment (Australian living in the USA temporarily) but every time I see one here I am struck with lust, and I don't even give a shit about cars. I just /want/ one.

Re:I think notw/o IP ownership/licenses

[BoRegardless]

Anyone can make a battery, and indeed a good or great battery.

But do you own or have a license to ALL the technology and then the new technology just announced in Japan last week?

Without the IP, becoming a battery maker is super risky.

Pixar

[mattack2]

Even if they make batteries better than they make cars, making their cars is a way to get their batteries noticed.

After all, Pixar was a software/hardware company, and originally made shorts to show off their hardware & software. (By the time they made movies, I think you could argue they were as much a media-creation company.)

Re:Pixar

[Dynedain]

And Pixar still sells their software, Renderman, which is the leading 3D rendering engine in the movie industry.

From the right perspective, I agree with the guy.

[tlambert]

Here's my comment on the article:

I can understand the idea, even if he's done an incredibly poor job of explaining his position as to why he recommends it.

Tesla is moving towards leased battery pack exchange as a quick long range refueling strategy, and as a mechanism for dealing with battery life expectancy based on number of charge cycles.

This model would be helpful to the adoption of electric vehicles from both Tesla, other vendors, as viable alternatives to hydrocarbon fuel vehicles, but that assumes that there is wide adoption of their "razor blade" design, and that in turn is dependent on them not having a monopoly, or design-favored market advantage by being in competition with their customers.

The problem is that Tesla has invented the sealed battery rechargeable flashlight already, and now that they've firmly pointed out that a market exists for flashlights, they are in the process of inventing flashlights with replaceable batteries, at the same time they are inventing "D" batteries.

The market for "D" batteries is going to be *much* larger than the market for Tesla brand flashlights.

The risk on the battery side is that someone else might come in and build a better "D" battery, while the risk on the car side is that someone might come in and build a commodity flashlight that takes "D" batteries, and vastly undercut the price of a Tesla manufactured one.

I think that the range/recharge issue is very real, particularly in dense urban areas where you have street parking for the most part (San Francisco, Seattle, etc.), where the range is less of an issue -- IFF you are able to charge when you need to, instead of trying to run an extension cord from your apartment, down sig stories, and two blocks away to the curb where you were able to find a parking spot.

Part of the value in a battery position, however, is based on establishing the "service station" company owned vertical market integration model up front, which is likely something that would need to be funded by something like bonds, given the extreme costs involved in making such things ubiquitous, even on a franchise basis.

But overall, it's like going back in time and asking Apple if they want to sell software or hardware, when Apple sold computers - the integrated aggregate of both - and I think this would be a hard case to make to Musk, who doesn't sell batteries or cars, he sells transportation.

Re:He probably only needs 640K in his computer, to

[sumdumass]

I know it's easier said than done, but what I would like to see is Tesla develop some drop in replacement power trains for existing models as a dealer option or something.

I know weight is a big issue though so it likely wouldn't be anything happening unless the big manufacturers design it into the models they sell.

But I don't really see anything wrong with Tesla selling cars. They should probably move their location to a cheaper one though.

Apple used to be hot/premium - where did they go?

[rsborg]

I think that a major difference is that right now the 'Tesla' brand name is seen as hot/premium

Yeah, it's like just a brand, right? I mean, if GM really thought it was worthwhile, they'd make cars as sexy and high-rated as the Model S! No engineering or innovation involved, really.

Don't forget Solar City

[GPS Pilot]

It's successful, if not wildly successful. And it diversifies his track record even further; he has majorly shaken up four industries: financial services, automobiles, space launch, and energy.

Second-order consideration

[GPS Pilot]

Far less likely? No.

If Tesla offers the best value on batteries sold to other automakers, that's the first-order consideration. The fact that they are helping the bottom line of a fellow automaker is a much weaker, second-order consideration. No smart automaker would reject Tesla as a battery vendor on that basis.

other car companies won't innovate unless they have competition. Tesla is far more likely to create real change by existing as a car company

Tesla has already created spurred scads of real change despite its tiny market share. I can't wait to see the additional change it will spur over the next, say, 15 years.

I don't believe any such conversation took place.

[Harvey Manfrenjenson]

A bond manager met with Elon Musk to convince him to abandon a successful car company and devote his talents to building better batteries? No, he didn't. This is an exceptionally clever piece of public-relations bullshit.

The bond manager's advice would ONLY make sense if Musk were sitting on some really wonderful technology-- some new science, engineering or manufacturing process that enabled him to create better/cheaper/lighter batteries than the other seven billion people on the planet. Of course everyone knows that if someone makes a breakthrough in battery technology, it'll be a game changer for EVs. A truly radical breakthrough in battery technology would be a game changer for EVERYTHING-- it would give us a path forward to dozens of alternative energy sources.

So if you read the story casually and uncritically, it generates a lot of warm fuzzy feelings about Tesla Motors. The problem is that I'm not aware that Musk has anything special or proprietary up his sleeve in the way of battery technology. He'll achieve some economies of scale with his new factories, I guess, but that's it.

Re:He probably only needs 640K in his computer, to

[colinrichardday]

With comparative advantage, even if you do better at both things than everybody else, the world derives more benefit if you do most of what you're absolutely best at, even if you're better at everything compared to everybody else

Also, what would be the demand for such batteries if Tesla stopped manufacturing cars?

Re:He probably only needs 640K in his computer, to

[buddyglass]

Not sure you get his point. He's not saying "make batteries because the electric car thing is never going to be huge". He's saying "make batteries because the electric car thing is definitely going to be huge". Putting aside the merits of his argument re: the profitability of being a car company vs. a battery company, he's not predicating that argument on the notion that electric cars are just a fad.

Re:Apple used to be hot/premium - where did they g

[Firethorn]

Apple is certainly still around, it's just not crazy hot anymore. You could say it's reached saturation.

As for 'just a brand', not really. There's more to a brand than 'sexy'. Heck, even 'sexy' requires engineering and innovation.

And GM isn't going to be able to get a car as 'sexy and high rated' without lots and lots of engineering and innovation. The Tesla model S currently enjoys a HUGE advantage in performance and safety, as I said before. That's part of what's driving it's popularity. But it's currently a touch more popular than just those would dictate based on it's price, thus the brand premium.

Re:He probably only needs 640K in his computer, to

[Teancum]

The funny thing is that Telsa was originally founded on the idea they would purchase drop-in replacement power trains from AC Propulsion and put them into Lotus bodies as an integrator. That was their original goal, but it didn't quite work out the way they intended and it turned out they needed to get their hands dirty on a whole bunch of other manufacturing just to get even that to work out.

One thing I admire about Elon Musk is that he is able to see some inefficiencies in his companies and root out a way to make them much more efficient. That is definitely how Tesla has been able to turn a profit from a company that simply should have gone bankrupt a couple of times in the past. His way of rooting out inefficiencies is usually by not cutting corners with employees or feeding them shit in a mushroom management system, but rather by looking for components that are costing far too much compared to the raw materials price and taking over the manufacturing of those components in a vertical integration of manufacturing. Every one of his companies that he is currently running is now making much more stuff in-house than was the case even a year ago.

Mr. Musk once started to complain about the cost of raw Aluminum and IMHO Alcoa ought to be concerned he might just start a Bauxite mining & processing operation.

Re:He probably only needs 640K in his computer, to

[Teancum]

Also, what would be the demand for such batteries if Tesla stopped manufacturing cars?

The presumption is that with the way Tesla has already shown to be a viable business model, other companies will follow the current lead and make electric automobiles, airplanes, ships, and other vehicles with these batteries that Tesla will be manufacturing. There has been a global demand for these batteries to the point they are in and of themselves considered a commodity even before Tesla was formed. Instead you will also get really cheap laptop computers and perhaps other even more exotic markets that will really soak up the production like storage systems for solar panels that would dwarf battery demand even from automobiles as well.

There really is far more demand for these batteries than the market can supply, and a highly elastic demand so far as a minor price reduction from improved manufacturing techniques will also result in a huge increase in demand and more products that could use these energy storage cells.

Re:He probably only needs 640K in his computer, to

[Immerman]

The question is - what would be the benefit of *not* selling cars? So long as the car-making business is paying for itself, and the battery-making business has sufficient capital, it seems to me they are essentially independent of each other. Except that they offer a great synergy: the car-making company has a great source of batteries that will be responsive to their specific needs, and the battery-making company has a guaranteed customer that's not going to duck out of a contract at the last minute and screw them over.

Now if they want to make 10x or 100x as many batteries as the car company needs and sell them to others, then great. But they don't lose anything by making cars too, not unless they can find a buyer offering a competitive price for their specialized automotive assembly facilities. Plus I imagine the close collaboration between the engineers making the batteries and the engineers using the batteries will only be beneficial to the quality of the batteries.

Think of it like id Software - their primary product is a FPS game engine that they sell to other game companies, but they also make good money on the side selling tech demos (a.k.a. mediocre games) based on those engines to consumers.

Re:Tesla makes money on carbon credits not cars

[AaronW]

Actually they don't make much on carbon credits any more and haven't for a while. Their margins are already over 25% on their cars so they are making money on their cars.

maybe its true or not

[yilmazlar]

maybe its true or not we will see

really

[yilmazlar]

its great if its true?

Re:He probably only needs 640K in his computer, to

[macpacheco]

Impossible. The reason the Tesla Model S and Roadster were such great cars is their extreme Cx (aerodynamic coefficient) and in the case of the Model S its design tailored to being an electric car.
This is just another smokescreen, of people trying to tell Musk to stop messing with a trillion dollar industry.
This guys idea is soo stupid it isn't even funny.
Go Musk ! Go Tesla ! Go SpaceX. Continue making ULA/Ford/GM/Toyota look stupid ! I don't care, I love it !

Re:He probably only needs 640K in his computer, to

[macpacheco]

Elon wants to change the Car industry. Just making batteries won't guarantee that outcome. I'm sure he would much rather not be making batteries, but even Panasonic isn't good enough.

Should Tesla Make Batteries Instead of Electric Ca

[PaulMorley1683]

Elon Musk is an innovator. If he gets out of any market it will slow down. Without the competition he brings the fat in the system will clog it up. He is a leader they have to follow. Where is it that you want to go ?

Yep, just a fad...

[servant]

There were more on the road in 1900 than today. So yes, this 'fad' will be over soon. :P

Re:He probably only needs 640K in his computer, to

[rpstrong]

What, no ".../NASA" ?

I attended SpaceShipOne' first successful space flight. SS1 was being towed up and down past the crowd after the flight. A spectator nearby was holding up a sign that I couldn't quite see. Burt Rutan (who was riding on the tailgate of the pickup towing SS1) saw it, and ran over to grab it. He handed it up to test pilot/astronaut Mike Melvill to display for all. It simply read:

          SpaceShipOne
          GovernmentZero

(Photo at http://tinyurl.com/l3rrkdj)

Nope.

[urgelt2]

No, Musk should not refocus on batteries. Here's the thing. The cars he is building are battery-agnostic. If someone produces a breakthrough in battery durability, power density, etc., he doesn't have to change his vehicle designs. With a little engineering, he can plop the new, better batteries right into his cars and keep on producing them. Whereas battery tech is risky. Musk is on top of lithium-ion batteries, but if (or rather, when) someone patents something better and brings it to market, he'll be out of luck if his business is built around lithium-ion batteries. If Musk hopes to keep Tesla going as a long-term proposition, he's much safer sticking with well-engineered cars, and keeping batteries as a sideline that he can jettison later on.

Re:He probably only needs 640K in his computer, to

[rev0lt]

On the other hand, new tech in batteries is what will distinguish car manufacturers in the foreseeable future. Limiting the tech to his own niche production is a shot in the foot - sooner or later, someone will beat him. On the other hand, producing OEM components for its own line of cars as well as competitors would yield way bigger profits. See it as Samsung producing Apple's ARM cores. Samsung probably makes more money from CPUs and displays for 3rd party than from their own best-seller phones.

huh?

[gzuckier]

Isn't the whole point of Tesla to use cheap off the shelf batteries and manage their performance optimally via software?

Re:He probably only needs 640K in his computer, to

[macpacheco]

ARM cpus are cheap, extremely cheap, since any company can license ARM designs and produce them, the critical item being the foundry.
Plus even if you could get 20% profit margin out of a product worth 5% of the tablet instead of making 10% out of 100% of the product, what is better ?
Even better, making the CPU, RAM, Flash modules and the tablet...
So I think you are mistaken my friend.

Re:He probably only needs 640K in his computer, to

[rev0lt]

Plus even if you could get 20% profit margin out of a product worth 5% of the tablet instead of making 10% out of 100% of the product, what is better ?

I do get your point, but you're assuming they are able to captivate the relevant market share. If the difference is having 3% of the total market selling product, or supplying 60% of the total OEM parts, while simplifying both and time to market, plus deterring competition from investing on this area by providing availability of the parts, the argument falls apart. Using your math, the turnover for the whole car only makes sense if the battery approach would captivate less than 10x their total market of vehicles (eg. for 3% total market for cars vs 31% of total market for parts, parts are more profitable in absolute values). And batteries are not like semiconductors, they have way bigger profit margins than the car as a whole.

Totally different innards... MTV Show ?

[DrYak]

The problem is that this absolutely doesn't look like the innards of a classic internal combustion engine car.

It would require quite some work to retro-fit it into a classical car... Which could probably be a nice additional for MTV: next to "pimp my ride" and "trick my truck", let's begin the "spark my suv" TV series !!