There is an article on the CNN website with the headline that T. Boone Pickens thinks Tesla cars are too expensive. The article really isn’t about that, and T. Boone (man, I really hope people call him T. Boone) only says that he thinks the next thing Elon Musk should do is make them cheaper, so that isn’t really the most on point of headlines, but it probably draws in more clicks.
Tesla Pricing
There are a couple of things about the article that are interesting. First, and foremost, T. Boone is an oil school oil man. Frankly, he’s probably the old schoolest of all oil men. He’s rich because of what he, himself, did in oil, not as a money guy or CEO, or anything else. He found it, drilled it and sold it.
You would think the old school oil guy would have some sort of cheap shot about electric cars then. That isn’t true. He just thinks they are a little pricey. Otherwise, I think he knows they are the future, just not right now.
The thing about the pricing of Teslas is that they are luxury, sport automobiles. They are that on purpose. You see, before Tesla, electric cars were considered slow, plastic, wimpy cars for tree huggers. Everyone else turned their noses up at them. Musk knew that in order to really break into the American car market, you had to kill the notion that electric cars were only for environmentalists making a statement on its head. There is no way to make your car more serious in America than making it fast, and luxurious.
Enter the Tesla Model S. The Model S has acceleration and top speed numbers to rival any sports car, and the features are in line with sporty version of BMW, Mercedes, or Lexus. In other words, this isn’t a car for poor liberals who think oil is bad, this is a car for suit wearing power players who think gas is beneath them. There is a very big difference.
If you compare the price of a Tesla to those cars, it isn’t expensive at all. While you are at it, you also get a tax incentive, and you don’t have to pay for gas, or oil changes, or …
Of course, it helps that a higher end car has more room to hide the cost of things like the batteries the car needs. In addition, these cars aren’t made out of parts shipped from China. The cars are tweaked and updated such that they really can’t afford to have thousands of them sitting around waiting to be sold. The high price keeps demand down where Tesla can actually meet it.
Now, Tesla is building a new factory to make its batteries, dubbed the Gigafactory. It is also selling some of that battery technology to home owners with its new wall-mounted battery called the Powerwall.
The truth is that oil has always been dirty and messy, but it was so darn cheap that no one bothered to come up with anything better. Now, with Musk paving the way, the gas-powered engine is entering its last decades. Soon, the oil people buying gas will be doing to for the novelty of running a classic car. By then, Musk probably still won’t be selling tons of cars to the mass market. After all, he wants to push the technology forward at the edge, not cater to the everyone market.