Tesla focusing on cutting price of cars, executive says in Houston

By Mike D. Smith
Houston Chronicle

Tesla Motors innovations proved electrified vehicles are viable, changed the auto industry’s mindset and forced efficiencies in the battery industry.

But the biggest barrier to the company’s vision of an electric vehicle that can be adapted by millions of drivers is cost, and Tesla is sharpening its focus on lowering component costs and boosting volume, company co-founder and chief technology officer JB Straubel said during a Thursday night talk at IHS Energy CERAWeek in Houston.

“We don’t really need more performance, we don’t really need much more range, we need to focus on cost,” Straubel said.

Tesla’s Model 3, which the company will unveil on March 31, features the “next generation” of its existing technology, Straubel said. With a starting price of about $35,000, the car moves the company into mass market appeal.

Straubel didn’t give many details about the vehicle ahead of the unveiling but said it is comparable in size to an Audi A4. “I think it will surprise people with the level of features it includes,” he said.

Production is scheduled to begin in late 2017.

Constant innovation, which is deeply embedded in Tesla’s core culture, always will continue, Straubel said. As the company innovates, a bright market is ahead for Tesla’s vehicles, he said.

“We’re selling tens of thousands of cars per year,” Straubel said. “If you add up all the other ones, it’s still less than 1 percent of all vehicles sold.”

The company already has bested industry sales projections with its existing Model S. About 100,000 have been sold, he said, when industry forecasts called for 3,000. The company launched its Model X last September.

While other automakers have invested in hydrogen fuel cell technology, Straubel said he doesn’t see hydrogen as a threat.

There remain “fundamental problems” with hydrogen as a fuel source, he said, as limited infrastructure inhibits it from being sustainable and cost-efficient.

Lithium, which he said only makes up a small percentage of the lithium ion battery packs that power Tesla’s vehicles, is abundant and could even be extracted from sea water in the future, he said.

Costs of batteries also continue to decline by improving how batteries are built to enhance their storage capacity and by building batteries on a larger scale.

To support the number of vehicles Tesla envisions it will sell, the company’s Gigafactory – under construction in Nevada and scheduled to begin production later this year in a partnership with Panasonic – will be the biggest battery factory in the world, Straubel said. Electric motor costs also are declining.

“Basically every single part of that electric vehicle ecosystem is dropping substantially, he said.