Tesla will miss their Model 3 $35,000 target price, but not for *that* reason

Tesla will likely miss their $35,000 target price tag for the Model 3 due in 2017 or so. But not because the batteries cost too much, or production costs are too high.

Rather, demand will be what keeps prices higher.

It is my opinion that the demand for a 200+ mile range, well-designed, luxury Tesla EV will be so huge that Tesla simply raise the price to match demand with what they can supply. It might end up happening in a similar way to how Tesla cancelled the 40kWh version of the Model S. It might be bad PR, they might shrug their shoulders, but its smart business.

The initial roll out in 2017 or 2018 won’t feature vesicles at the $35,000 base price tag – in the pattern of the Model S and Model X launches, we’ll see the highest margin units go out first – signature, largest battery pack, AWD, supercharging, for around $50,000. It will be 6 months or more until they can start offering the lower priced cars (probably around 40K) that are the standard battery pack and trim levels.

Maybe after a year or so, they’ll get around to making the lowest margin units. But even then I don’t believe that Tesla will sell their base model for $35,000. Its likely that they wont get down to that point until about 2020 – after initial demand has been satiated and the Gigafactory is running full steam producing battery packs below $200/kWh.

Chevy’s 200 Mile EV

I’m quite happy to hear a mainstream automaker like GM will release a 200 mile EV that will be available for general sale (not limited to CARB states like CA, OR, NY) and it will be affordable. Its just their timing is bad. With gas around $2.75/gal around the country, people aren’t worried about switching to EVs. Its not until its back above $3.50 do people start to flinch and $4/gal is when they pitch a fit. We’ll see what gas prices are in early 2017 when the vehicle is released, and how that affects consumer behavior. I just don’t foresee a return to $4+/gal gasoline anytime soon.

I’ve been a proponent of raising the gas tax, and indexing it to inflation. I’d like to see the national gas tax raised 6c/gal, and then indexed to inflation. Boosting the current federal tax by 33% would allow the country to repair its deficient highway system, with the side effect of construction jobs.

Some notable pundits have suggested a “gas floor tax” of $3/gal, but that really wouldn’t work since oil companies, refiners and station owners would just keep the price at $3/gal and keep the profits for themselves, rather than sell it below $3/gal and turn the money over to the feds to bolster the highway fund. If you wanted to keep the price of gasoline elevated, you would need to create a supplemental gas tax that would index it to the price of a barrel of oil – an extra 25c the following month when the average oil price is below $60, 50c below $50, 75c below $40.

Ok, enough about infrastructure and gas taxes.

The other issue I have with this EV is that it’s built on the new Chevy Sonic platform. Which is pretty small. It’s almost as if GM is making a mistake putting 200 miles of range into a car that no one would be happy driving 200 miles/3 hours in. There is some amount of psychology built into that 200 mile number – people want to see a range number starting with a “2” before they feel comfortable buying an electric car, regardless of how far they drive it.

The concept has a little crossover style to it, which means it’s likely the batteries are going in the floor like Tesla and the car is sitting up on top of the batteries, 4-5″ higher than normal. This is a good design in that you still get trunk space and seating for 5. It might be that this car has a much narrower appeal in the US (where gas is relatively cheap and people like bigger cars), and higher appeal in Europe and Asia which is OK with smaller cars and higher fuel prices.

Another factor is fast-charging. Tesla has their supercharger network they’re constructing, but its proprietary (for now). The 90kW CCS charging standard needs to take off before people start feeling comfortable buying EVs. The recharge time on a 90kW station from a near-empty 200 mile EV battery is rather quick – the first 75 miles will recharge in under 15 minutes, allowing people to get around and finish their errands.

Finally, price. $30,000 after the federal rebate is still too much for a Sonic-sized car. Even factoring in a $3,000 premium for it being a crossover and $7,000 in first five years gasoline vs. electricity savings. The base model at $30,000 is going to need to be very well equipped (LT model) if it wants to attract buyers. I don’t think we’ll see a lot of price cuts until the $7,500 tax credit starts to expire for GM and Nissan, and they have to reduce the price of their smaller EVs to around $25K before people get interested.

Southern Nevada Transportation: 2015 Edition

This week, the southern Nevada RTC released their transportation projects list, one of which was a subway underneath the Las Vegas Strip. I’ll touch on a few of the options they’ve mentioned.

Taxi stands: Taxi staging areas at casinos and the two airport terminals will need to be expanded as we build more casinos and more convention space. Also, with Uber coming to the state, how people bypass the standard taxi line and take an Uber instead needs to be figured out. You cant have Ubers in the taxi line, and most hotel porte-cochères don’t have lots of space for pickup and drop off needed to accommodate a massive amount of Uber vehicles, nor do they have waiting space for people in Uber cars to park and wait for their passengers to walk out of the casino and to the car (I’ve been yelled at before by hotel security waiting to pick up people in a drop-off area). You can’t walk out to Las Vegas Blvd and hail an Uber, that will be a disaster for traffic, nevermind that it’s illegal to hail a cab on the strip – you have to go to a casino taxi stand. So where do the Uber cars go? The parking garages at the casinos? The passenger pickup lanes at the airport? I can’t think of a good answer to this.

Pedestrian Overpasses: More of these are needed along the stip in the areas away from the major intersections. This one is a big “duh”, the most difficult is the massive amount of right-of-way needed on the sidewalks to land these immense structures and allow for elevators to be ADA compliant.

Las Vegas Monorail: The RTC suggests linking the recently expanded Mandalay Bay Convention Center with the monorail, and adding a stop at the Sands Convention & Expo Center. First and foremost, the monorail should go to the airport (notwithstanding the subway idea below). Thats job one, and if the taxi industry was defeated by Uber, then surely the Las Vegas Monorail group can stand up to the taxi lobby this time. Next, good luck trying to get Shelly to buy into the idea of putting a monorail stop near the Sands Expo – he rejected it the first time and I’m sure he hasn’t changed his mind. Until there is a new CEO of Venetian/Sands, there won’t be a monorail stop there. I love the idea of the monorail being upgraded to 1) support more passengers at peak times, 2) connect to the airport, and 3) connect all three major convention spaces in town. I just don’t think it will happen for reasons that aren’t related to funding and business plans.

Las Vegas Strip Subway: I like this idea. There are two major geotechnical issues with building a strip subway – the water table below the strip is shallow, so there will have to be a lot of effort into making sure that the tunnels don’t leak, and don’t fill up with water during construction. Geotechnical work will be the single largest factor in the pre-construction phase of this project. However, a few casinos have built underground structures (the Palazzo parking garage, for example) so its not unreasonable to think this can be done. The second is caliche, which is a concrete-like substance found in the soil in the Las Vegas area. Its expensive to go through, and I don’t know how deep it runs – it could be a foot or six feet thick. If you build the subway at a sufficient depth (below the water, sewer, gas and power lines underground) then you can get under the caliche and be ok, only needing to penetrate it at access points and passenger stops. Phase one should go up and down the strip from the old Saraha (now SLS) to the Mandalay Bay, which could do a better job connecting all three major convention spaces because the Rivera will become an extension of the LVCC, and a people mover system on LVCC property could move people from the strip to the main hall located a half mile away. Phase 2 would link it to the airport east from Mandalay Bay underneath the two north/south runways at McCarran Airport to terminals 1 and 3. Phase 3 extends north to the Arts District and Downtown Las Vegas.

I’ve taken light rail from SeaTac Airport to Downtown Seattle and I loved it. It was way better and cheaper than dealing with a taxi. Then I took the monorail from Downtown Seattle to the Space Needle. That was neat. I only had to rent a car to go north to the Boeing factory in Everett.

Express Exit Ramps and HOV/HOT Lanes: NO, BAD RTC! NO! The HOV lanes that are in place now don’t get used much (they already have pretty limited hours of operation for HOV use only), and building more ramps between highways or side streets isn’t going to get people in Vegas to carpool. This isn’t a business town where everyone works 8-5, this is a service industry town where everyone works different hours, can be let off their shift early if it’s dead or be asked to stay late if it’s busy. People just can’t carpool here without substantial risk. What they can do however, is setup a park-and-ride system that allows strip casino workers from all over town to park in their neighborhood in a parking lot, and then take a bus for the area they work in (downtown/north strip, mid-strip, south strip/airport) and be taken to work on mass transit, and be returned to their car when their shift is over (the busses would run 24/7).

US 95 (I-11) Interchange at Maryland Parkway: This is great idea, the downtown Las Vegas area needs more access from the highway, the one-and-a-half exists from the US 95 and one from I-15 isn’t enough to handle the large spikes in traffic from AAA baseball games and nights at the Smith Center, plus all the normal traffic from the very large outlet mall downtown.

Electric Jets?

I’ve been thinking a lot lately about electric jets. With all the purported battery breakthroughs, and a discussion of what aviation might be like in 2030, 2040 or 2050.

For the battery baseline, we’ll go with Solid State Lithium metal batteries. These batteries are completely solid, they don’t have a liquid electrolyte that can oxidize and catch fire. They are currently under development, and are expected to go to smaller scale commercial production in the 2016-18 timeframe. Dyson has invested in one of the leaders in the space, Sakti3, with the hope that Sakti3 can produce cells above and beyond current Li-Ion cells. The experimental values for the weight and volume that have been developed so far are about 800Wh/kg and 1500Wh/l, compared to 250Wh/kg and 700Wh/l for the top of the line batteries today. I would expect these batteries to be widely available and inexpensive by the mid-2020s.

I first looked at a Boeing 737, and whether you could build a similar size and weight, but replace the fuel tanks with batteries, and the engines with ducted fans, and see what that would give you.

Boeing 737-800 weight of max fuel: 24,025 kg
Boeing 737-800 volume of max fuel: 29,660 liters

Replace 24,025 kg of fuel with 24,025 kg of batteries: 12,813 liters of batteries (43% of original fuel volume)
Energy storage: 19.2 MWh

Replace 29,660 liters of fuel with 29,660 liters of batteries: 48,198 kg of batteries (200% of original fuel weight)
Energy storage: 38.5 MWh

You can only realistically use the smallest value of the two, since both volume and weight are limiting factors, its about which one you hit first. In this case, its weight limited. So our new aircraft has 19.2MWh of batteries weighing 24,025kg and taking up 12,813 liters of volume (less than half of the volume the fuel used up, so there may be opportunities to redesign the aircraft and reduce its overall weight). The power these batteries could generate based on the cell weight is a maximum power of 12MW, estimating 500W/kg of cells. This estimate is in line with what today’s batteries can produce on a sustained basis.

So what kind of demands are going to be put on the battery to propel the aircraft from ground to flight? Initial take-off thrust required will be high. The Airbus E-Fan demonstrator had hub-motors in the landing gear to help get the aircraft up to speed. This reduced the load on the engines to propel the aircraft up to take-off speed. If the aircraft is running maximum throttle, then the two engines are producing about 242kN of total force. Based on the E-Fan’s substitution of ducted fans, they have 30kW = 0.75kN, or 40kW = 1kN, which means the engines would need about 10MW of power over the course of about 45 minutes to get up to cruising altitude (using 7,500 kWh of energy). Cruise thrust is about 40% of max thrust (depending on altitude, air density, etc.), so energy usage per hour of flight is 4,000 kWh, and energy usage during descent is 25% for about 30 minutes (1,250 kWh). To have a three hour flight (plus 45 minutes of reserves per FAA FAR 121), you’d need about 18,750 kWh of energy, just under our estimated capacity of 19.2 MWh.

Turns out no matter how you run the numbers on any sized airplane, you really only get about 2-3 hours of operating the aircraft, which is bad for aircraft that tend to fly 2-5 hours (think B737 and A320). But, its good for regional jets where the longest flights are only 2-3 hour. It would seem logical to have Regional Jets be the first type of aircraft using batteries for propulsion. In order to have electric aircraft fly longer routes, you’d need to improve engine efficiency (use less kW to generate 1kN in thrust), increase battery weight and volume characteristics (store more energy per unit mass or per unit volume), or figure out a way to put a highly efficient generator on the plane along with a fuel source (e.g. a 5MW turbine and natural gas to provide power during take-off and in case of emergencies).

There are other side effects to running an aircraft on electricity – you’ll end up redesigning the aircraft since you can ditch the fuel tanks; you’ll be flying slower, probably M0.7 instead of M0.78 or M0.8 that current jets fly at, which means that three hour flight wont go as far as it used to; better protection against lightning; more efficient interior use of energy; and more. The ranges from various airport hubs (700mi) show that it’s range wont be a big deal (map from Great Circle Mapper).