AutoblogGreen Q&A: Tesla Motors CEO Martin Eberhard pt.2

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This is part 2 of the AutoblogGreen interview with Tesla CEO Martin Eberhard that was in ABG Podcast #1. You can find part 1 here.

ABG: What's the timing for WhiteStar? When would you expect to see that in production?

ME: Target production is mid to late 2009.

ABG: And what about production volumes? How many a year would you expect to to see?

ME: We would like to step up by a factor of ten of what we're doing now roughly. So the initial year of production we would like to build in the neighborhood of 10,000 cars.

ABG: And how about price? What's going to be the price target for the WhiteStar?

ME: There will be of course versions of this product, but we'd like to bring the price point down significantly and we right now have been saying that the target price for the low end version of the car is going to be under $50,000.

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Read the conclusion of the ABG discussion with Martin Eberhard after the jump, including some discussion of the EV business and other manufacturers.

ABG: Under $50,000?

ME: I don't have an exact price yet, because we're not done yet. I guess a little bit more on WhiteStar, this is a big step up in terms of technology to the company and this is not based on somebody else's chassis or chassis technology or anything like that. It's a car that's designed from scratch as a Tesla first car. That means a significantly higher percent of our engineers now are automotive engineers with experience in chassis design, body design, suspension design and the like. And this, this is the primary reason why we opened our office in Michigan.

ABG: So WhiteStar is a four-door sedan as I understand. And is it going to be a fairly convention layout, will it be a front wheel drive, rear wheel drive or has that even been decided at this point?

ME: If you want to have quick acceleration you have to be rear wheel drive. It's just the thing. But the reason that the car were designed with front wheel drive, is because it's a cheaper drive train with a gasoline engine. So if you've got to design an engine then you need to get it in the front of the car plus or minus the Volkswagen Beetle and that's the main reason why most cars are front wheel drive.

ABG: For smaller cars packaging front wheel drive makes a lot more sense.

ME: Right, it makes a lot more sense if you have a gasoline engine. But remember the size of our motor. I mean, the size of our motor it's about 10 or 12 inches in diameter and 12 to 14 inches in length and that's it. So you know, we can package it anywhere in the car front or back without it being a packaging issue. It's a different problem. The neat thing about WhiteStar not being based on somebody else's chassis is we can architect the vehicle to optimize it as an electric car instead of trying to cram batteries into an architectural designed for gasoline-powered car.

ABG: Can you tell us a little bit about what the structure of the car is going to be like or is that something you don't want to get into right now? What I'm asking is it going to be a metal chassis with plastic body or all metal, or is that something else?

ME: We're not yet ready to talk about that yet. I mean, we do know pretty well what we're going to do, but we're not ready to talk about that publicly.

ABG: Okay, no problem. Can you elaborate a little bit on how the construction of WhiteStar is going to happen as far as dealing with suppliers and subassemblies and that sort of thing? systems coming in from suppliers, how are you going to be doing that? Because, from what's been described so far of the factory that you guys are going to build in Albuquerque it sounds like it's going to be fairly small. Your volumes still aren't that huge. But obviously you're not going to be doing as much in-house as most bigger car-makers would be doing at this point.

ME: Don't be too sure that we won't be doing more or less than other car companies. Remember, the suppliers that we're using to provide us components to use for our cars, also supply to all the other car companies. When we're buying, for example, suspension components, we're buying them from a company that sells suspension components to American car companies. When we buy interior components, they're from suppliers that supply the other guys. So it is a smaller factory and we produce fewer cars per year, although substantially more than we're producing for the Roadster. Substantially more cars than the Lotus factory is capable of producing at full volume. But it's certainly less than let's say a Ford Focus factory. Somewhere in between and what that means inside the factory is that the factory tends to be more mechanized, than automated. So we're not going to have giant robot assemblers. We're going to have humans doing assemblies with mechanization helping them and requiring a higher skill level on the part of our employees than is required in a highly automated factory.

ABG: Aside from the environmental aspects of EVs, one of the other selling points people tout for EVs is the simplicity and the reliability of the electric power train. And that's undoubtedly true. Obviously you have to do essentially no maintenance over the lifespan of the vehicle. No oil changes and that sort of thing. No filters to deal with. But once you move beyond that to the rest of the car, all the other systems in the car, that's an area where, where many cars tend to have problems. When people have problems with their cars, it's things like heating and ventilation systems having problems, or window mechanisms and all the other assorted subsystems of the vehicle.

ME: Well obviously we're doing our best to design the subsystems of the car to be as reliable as possible. We're not going out on engineering limbs so to speak to design wacky systems that will be unreliable. But I mean the larger answer to your question is that we are building customer centers in cities across America so that we can service vehicles and will be providing a high quality level of service to our customers directly.

ABG: That's where I was going, How are you going to be handling service and sales of your vehicles moving forward?

ME: Moving forward, we will continue to sell our cars directly through our own customer centers where we will provide a very high quality level of service. At this point we think it's very important for us to make a direct relationship with our customers rather than putting a dealership in between us and the customers because our cars are frankly different than the kind of cars that dealerships are used to dealing with and we want to make sure our customers get the absolute best service. So for, for that reason we're building our own customer centers across the country.

ABG: So, I take it for now, your sales are going to be strictly in the U.S. market or are you going to be making your vehicles, once you get onto WhiteStar, are they going to be available overseas as well or...

ME: That's a very good question. Every single country has its own rules about the vehicles it sells in terms of safety, in terms of labeling, in terms of insurance requirements and also has its own requirements on how you can sell vehicles. Do you have to sell through a dealership, do you have to offer this or that service and so on. So it's a big job to get into each market. Our plan is to initially begin selling in the United States and we'll expand internationally as we can basically. Obviously there's a great big market for our cars outside the United States and we very much would like to sell to that market. But at this point we're still in the one-thing-at-a-time phase.

ABG: Beyond the current generation of lithium ion technology, that you're using in, in the Roadster and presumably in WhiteStar are you looking at other battery technologies or other, other types of energy storage systems for your vehicles?

ME: Yeah, absolutely. Tesla of course is battery chemistry agnostic. We are not called Lithium Ion Cars, Inc. for a reason. Our, strategy is to use the very best batteries that are actually available for purchase and for installation in a car. And today that absolutely is lithium ion batteries. My feeling is, that that's probably going to be true for a good long time. Lithium ion batteries have been improving in capacity at a very good rate. Something like 8 percent a year for a long time and there's every indication that that will continue for a long time going forward. We looked at some of the other chemistries of batteries around and they're either not available actually, you couldn't actually buy some, which is a drawback to putting them in a car, or they have substantially lower energy density. Energy density translates to shorter driving range, and for us driving range is one of the most important factors for an electric car to be successful

ABG: When you mention some of the other chemistries, are you referring to the older things like the nickel metal hydrides or are, are you referring to some of the other newer types that have come along in the last year or so, like for example the AltairNano batteries?

ME: Well, for example, the AltairNano batteries from what I've seen of them they have less than half the energy density. That means in the same space, the same weight, the car drives half the distance.

ABG: Compared to your current lithium ion?

ME: Compared to our lithium ion battery pack, exactly. Yes, exactly. And then additionally for that same battery pack the thing would cost triple or maybe quadruple what our battery pack costs. So what you get is for an increase in price of let's factor three or four, you get half the driving range. It's solving a problem that we don't have.

ABG: So where does, Tesla go beyond WhiteStar and what do you see as the competitive landscape for the electric vehicle market in the next year or so and moving forward in the next five to ten years?

ME: Tesla's goal is to grow into a full-blown full-service car company. We are growing as quickly as we can to make make high quality and good looking vehicles for sale to everybody who wants one. Obviously, our strategy was to come in at the top of the market and make a, make a truly excellent electric car to develop our technology, to demonstrate that electric cars don't have to be dork mobiles and to begin to build the company. WhiteStar is our next step. It's a lower priced, higher volume car, but still carries Tesla DNA but it makes electric cars more available and more accessible. And a note, by the way, somewhere in the second year of production of WhiteStar if we're successful at all what we plan on doing, we will have sold more electric cars than the sum total of what's been sold in the history of the United States. There's only tens of thousands of electric cars that have ever been sold from 100 years ago to now. And in fact, just to toss in another number. If we're successful, in 2008 we will sell more Roadsters than GM leased EV1s.

ABG: I think there were only about 600 or 700 of those.

ME: I think it was 900, but something like that yeah. At any rate our goal is to grow into a full-service, full-fledged car company that competes with the rest of the car companies out there, not just some of the electric car companies that are out there. If you look around at the landscape right now there's a lot of press now about pretty much every little electric car company that's been around and I think part of what's going on is that newspaper reporters and magazine reporters like to have a category. So they hear that Tesla Motors has got this car, that they've raised a bunch of money, but they're producing this great car. And they look around and find anybody that's got a web site and a prototype and think well, that's Tesla's competition. And it's important to look to see that there are companies that are trying to build full-on electric cars and have the right funding and the right business model to do so and others that are basically a couple of people and an idea and a very small amount of funding and a very small vision of where they'll go with that car. And then there's others that are mainly producing press releases. And I think it's important to keep those apart.

ABG: Well, Tesla definitely seems to be on the right track, as far as you seem to have the resources necessary to get up and running and produce some real cars and from all I've seen, you seem to be very serious about it and you're not producing backyard specials like many of the vehicles that have been shown in the past. I think you are definitely on the right track.

ME: I was listening to the radio this morning and I heard an article about another electric car company whose business model basically depends on selling California zero emissions credits for a total of $200,000.00 per car they sell, thus allowing them to sell a car for $45,000.00. That's the kind of thing that I think is a crazy business model. And when somebody is doing that, basically first of all, their business model can be destroyed with the stroke of a pen in Sacramento. You can bet that there's a massive amount of encouragement from the big car companies to change the rules so that they're not in that situation.

ABG: That's certainly not a sustainable model.

ME: Of course. And Tesla Motors is of course generating zero emissions credits as well by producing electric cars. But our business model don't have to depend on those at all. If you look at my business plan you would not see aside from a footnote any mention at all about zero emissions credits. They would not show up in the financials at all. The idea of the zero emissions credits is that there will be a free market and companies such as Tesla or C&H or whoever could produce electric cars and produce zero emissions credits and then companies such as Ford or General Motors or whoever could purchase those credits to offset their needs and meet the requirements of the California zero emissions mandate. Of course it is a free market. So if one company thinks that they can sell their credits for let's say $200,000.00 each and another company says well, we're selling our credits for $1,000.00 each that sort of torpedoes your business model, doesn't it?

ABG: Right. From all what I've seen of the Roadster and what's planned for WhiteStar and what you've said today, it seems like your model is definitely premised on actually being able to build and sell cars profitably from an operational standpoint.

ME: Exactly.

ABG: As opposed to relying on some intangible thing that may or may not exist a year or two from now.

ME: Yeah, that's right.

ABG: Well, that sounds great. Is there anything else that you'd like to share with us before we finish this up?

ME: Well, I encourage people to to come and have a look at our website regularly. There's all kinds of interesting things that get posted there, and we tend to be pretty open with what we're doing on our blog. So for example, today or maybe late last night we posted a new blog that goes into some details about how we chose to locate our factory in Albuquerque, which I think you'll find interesting. And, and every week it's some other rather interesting subject like that.

ABG: I read that last night. In fact I've got your blog subscribed in my RSS list. So I definitely encourage anybody out there that's listening to this to go over to and go to the blog link, subscribe to that and, and then also check out the other information that's on your site. There's definitely a lot of interesting stuff there.

ME: We're, we're trying to have a fairly open relationship with our customers and with the public.

ABG: Well, I wish you the best of luck, Martin, and thank you very much for joining us on the first AutoblogGreen podcast.

ME: Well, thank you, Sam. Well, good luck with your podcast.

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