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Tesla Motors Aims To Be The Future of Automobiles

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On: Tue, Jul 23, 2013 at 10:37AM | By: Bill Wilson

Tesla Motors Aims To Be The Future of Automobiles

If you haven’t heard of Tesla Motors, chances are you soon will. The upstart auto company is barely 10 years old and is already one-quarter the size of GM. Motor Trend magazine named the manufacturer’s latest vehicle, the Model S, 2013’s Car of the Year. Its developments in battery technology have set it far ahead of its competitors, including global giants like Nissan, and its stock price has gone through the roof, from $32 in early 2013 to over $120 at the time of this writing. Yet, whether the company will be able to continue its momentum depends on how successful it is with middle-class car buyers.

Tesla Motors was founded in 2003 by Martin Eberhard and Marc Tarpenning, but Elon Musk has been its de facto head since 2004. Musk, originally from South Africa, taught himself computer programming as a child. After earning degrees in business, economics, and physics, he immigrated to the United States. Settling in Silicon Valley in the early 1990s, he became a millionaire by age 25 from selling software applications to Fortune 500 firms.

In 1999 he helped create a system for conducting business transactions over the Internet. The program was originally known as x.com, but in 2001 its backers changed its name to PayPal. eBay bought the company for a cool $1.5 billion, and Musk’s money worries (if he ever had any) were behind him. He began to pursue interests he had held since his college days, one of which was to make all-electric cars practical for every use. To this end he became Tesla’s primary investor in 2004 and took the position of CEO in 2008.

The first years for the fledgling venture were tumultuous, with Wall Street insiders taking bets on how long it would take for Musk and his small band of visionaries to fail. Despite these dire projections, so far Tesla has proven the naysayers wrong. In 2008 the firm released its first model: the Roadster, the first completely electric vehicle to travel more than 200 miles on a single charge. In 2009 the company achieved a small profit, and, perhaps more significant, established a strategic partnership with the Daimler auto company of Germany.

The Roadster is aimed at customers with high levels of discretionary income who want a cutting-edge sports car. To date it has done comparatively well, with some 2,400 units sold worldwide at a hefty price of between $109,000 and $125,000 each, depending on options. The Model S, on the other hand, is aimed more at those wanting a top-of-the-line luxury vehicle with every possible bell and whistle. Its official range on a full charge is 265 miles for the 85 kHz version.

Asking price starts at $62,400, much less than the Roadster but still significantly more than most of the public can pay for a car, even if it does free them from gas pumps forever. Therein lies Tesla’s next goal: to build an auto that Joe and Jane Citizen can afford without choosing between transportation and such basics as food and clothing.

Musk is well aware that meeting this challenge is vital if Tesla is ever to be more than a manufacturer of pricey toys for millionaires. He has announced plans to release a series of vehicles in the next few years that will start at around $30,000, within the range of middle-class buyers and actually less than competing hybrids like the Chevy Volt. To accomplish this, the company will have to find ways to further reduce production costs, use standardized parts, and rely more on existing battery technology.

The rewards, should Musk and his company succeed, could be immense. Tesla may be the next Apple Computers—a tiny start-up run by industry outsiders that showed the powers-that-be what can be done with daring, innovation, and a little seed money. Then again, it may remain a small firm serving a small niche market, or, even worse, prove the skeptics on Wall Street correct by taking its obscure place in history as just another failed dream.

That fate is unlikely, however, given the level of commitment demonstrated by Tesla’s workers and backers. When all is said and done, chances are that Elon Musk’s teenage dream of an auto industry driven by electricity will become reality, with gas-powered vehicles taking their place in history alongside horse-drawn wagons and the milk man. As with all things, time will tell.

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