Tesla's (NASDAQ: TSLA) Final Deathblow
The Ultimate Tesla Play
He may come off as arrogant, obnoxious, and a bit cocky...
But one thing you can't say about Elon Musk is that he falls short of his goals.
The highly charismatic CEO of Tesla Motors (NASDAQ: TSLA) is not just a brilliant businessman — he's also a slayer of mediocrity.
Before Musk came along, who was talking about re-usable rockets, high-end electric cars, and high-speed transportation systems that can take you from Los Angeles to San Francisco in just 30 minutes?
Aside from my crazy uncle who thinks the CIA is spying on him through his microwave, I can't think of anyone.
Moreover, regardless of how insane these ideas sounded just 10 years ago, two of the three currently exist, and a third will be ready for testing before the end of the decade.
Bottom line: When Elon Musk makes a bold statement, it's often mocked first and praised later.
This very thing is about to happen again.
Last month, Musk sat down with an interviewer in Denmark and made the following claim...
By 2020, Tesla should be able to deliver a vehicle with an all-electric range of 745 miles.
To put that in perspective, the Honda Accord Hybrid was rated number one by Forbes for offering the most range on a single tank of gas. That was for 743 miles.
Of course, the devil is in the details.
Much of this impressive range depends upon various driving variables, such as speed, terrain, and driving behavior.
The truth is, while I'd be more than happy to see a 745-mile electric car show up on the roads by 2020, I will set my sights a bit lower to something more realistic. After all, even as Musk made the 745-mile claim, he also noted that previous efforts that squeezed 452 miles out of a single charge on a Model S were only possible because the car was driven at low speeds and in a controlled environment.
So what's more realistic?
More Than You Need
The general consensus is that range should increase between 5% and 10% every year going forward. Right now, you can squeeze about 300 miles out of some Model S vehicles. So in four years, that would take us to between 360 and 420 miles on a single charge.
But here's the rub...
More than 70% of daily commuters in the United States drive 40 miles or less per day.
That means that even before all of these advances in range, nearly every electric car on the market today is capable of meeting the daily demands of most U.S. commuters.
The truth is, ratcheting up the range on these vehicles has more to do with psychology than necessity. But perhaps that's a good thing.
Look, consumer demand will dictate the success or failure of electric cars.
Today, most consumers want to know they can get the same range with an electric car that they can get with their internal combustion vehicles. They fear being stranded, despite the fact that it's just as easy to run out of gas as it is to run out of a charge.
Regardless, it's consumer demand — not mandates or lectures — that's going to force automakers to make better mousetraps. And the ability to squeeze more range out of a battery means your electric vehicle will continue to become more and more efficient.
The same, however, cannot be said for internal combustion.
40 Years Too Late
In 1975, the average fuel economy for cars and trucks was 13.1 miles per gallon. In 2014, it hit 24.1 miles per gallon.
Folks, it took almost 40 years for the average fuel economy of internal combustion vehicles to increase by 84%.
Now let's look at what we've seen with Tesla...
Its first vehicle, the Tesla Roadster, boasted 245 miles on a single charge. This was in 2008. Today, less than eight years later, a high-end Model S can deliver 300 miles. By 2020, at the low-end, we'll witness 360 miles.
So over the course of 12 years, Tesla will have increased the range of an electric car by a minimum of 47% and could get as high as 71%.
And here's the best part...
New advances in vehicle design, manufacturing, software, and battery chemistries will only expedite increases in all-electric driving ranges while drastically cutting production costs for these vehicles.
Folks, it's beyond ridiculous to me that a behemoth company like Volkswagen is going to lose about $50 billion because it didn't want to deliver a cleaner-driving vehicle. It could've taken that $50 billion and funneled it into an electric car — which wouldn't even need emissions testing, since there are no emissions to test — and come out ahead.
But instead, it just wanted to maintain that status quo. And look where that got it.
Over the long term, internal combustion is simply not economically viable. Those machines cannot keep pace with the rapid advances we're seeing in electric vehicles. And these advances aren't going to slow down.
Electric cars will continue to get faster, slicker, more efficient, and much, much cheaper. And carmakers that aren't embracing this reality today — and adapting to this reality — are going to be on the chopping block in 10 years.
Progress can be slowed, but it cannot be stopped. And as far as electric vehicles are concerned, the cat is out of the bag. Its name is Tesla, and it has officially dealt the first deathblow to the conventional auto industry.
To a new way of life and a new generation of wealth...
@JeffSiegel on Twitter
Jeff is the founder and managing editor of Green Chip Stocks, a private investment community that capitalizes on opportunities in alternative energy, organic food markets, legal cannabis, and socially responsible investing. He has been a featured guest on Fox, CNBC, and Bloomberg Asia, and is the author of the best-selling book, Investing in Renewable Energy: Making Money on Green Chip Stocks. For more on Jeff, go to his editor's page.
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