Pragmatic 82: Tesla Part One

6 October, 2017


Elon Musk is considered by many to be a technological visionary. In this, the second in a series of shows about Elons projects, we look at Tesla, its history, its cars the practicalities of what Elon’s trying to achieve.

Transcript available
Because this episode goes for a significant period of time and I didn't want to edit out anything too significant, we'll be splitting this over two parts. So this is part one and part two will follow in subsequent weeks. Welcome to Pragmatic! Pragmatic is a discussion show contemplating the practical application of technology. By exploring the real-world trade-offs we look at how great ideas are transformed into products and services that can change our lives. Nothing is as simple as it seems. Pragmatic is part of the Engineer Network. To support our shows, including this one, head over to our Patreon page and for other great shows visit today. I'm your host John Chidjie and today I'm joined by a special guest Mr. Caleb Elston. How you doing Caleb? Hey John, I'm doing well. How about yourself? Very good, very good. Thank you. Thanks for coming on the show. I have been listening to your podcast, the Tesla show for quite some time now and I thought you would be the perfect man to get on the show to have a chat about Tesla. I'm doing a series of episodes about Elon Musk and his ventures and Tesla, I have to admit, is probably the one that excites me the most. And I know that you're- Same. Yeah. It's something that I hear the phrase bandied around sometimes in Silicon Valley that certain companies are changing the world. And when I look at Tesla, I think that Tesla is actually the company that is actually changing the world in a real tangible sense and everything they're doing. So I'm very excited to talk about them. So without further ado, I just want to start a little bit about the history of Tesla because I started out thinking a long time ago, "Oh, Elon Musk founded Tesla." Right. Technically not true, I don't think. Right. Yeah. Martin Eberhard and a guy named Mark Tarpenning were actually the two founders and then another fellow, Ian Wright, who's now working on electric trucks, was sort of the first employee. So sometimes he's grouped in as one of the early founders. But essentially, Martin and Mark knew each other from a previous venture they'd done together, called Nuvo Media, which was an ebook, early ebook company. And they actually ended up selling that company right before the crash in the 2000s for around 200 million bucks. And one of the reasons they talk about that they ended up getting into electric cars and wanted to start Tesla Motors was two big things. One, Martin had gone over to Saudi Arabia and seen some of the devastation of what it meant to have a whole economy built on oil and just feeling like as an engineer that clearly oil was not going to be a sustainable resource, that it is definitionally a finite resource. we would need to transition away from fossil fuels and oil and certainly transportation is one of the largest consumers of that. And then also the realization that in their e-book readers they had been using a new battery chemistry called lithium ion that was much higher energy density per kilogram and so essentially they were able to get a lot more power into these e-book readers at a lot smaller cost and weight and realizing that this technology might be applicable for other modes of usage. And so those two pieces really came together for them when they were really digging into transportation and saying, okay, what is the most efficient way to move something, ground-based transportation? What fuel source should you use? And as they were looking through gasoline and switchgrass and hydrogen and all these different methods And a battery electric vehicle really was just sort of off the charts, the most efficient and best sort of complete energy solution. And so that's sort of how they got started. And then Elon on the side was sort of coming into wanting to do an electric car as well, and was introduced to them by this guy, Alan Cacconi over at AC Propulsion, which was building a prototype, like high-end roadster style vehicle. And so those two guys got introduced and Elon instead of building it himself, decided to invest in Tesla Motors and be one of their first big investors. - Yeah, that's right. My understanding was that he actually led the first round of financing to the tune of about seven and a half mil when he was, I think he became chairman of the board around about, yeah, I think about five or six, Maybe seven months in, something like that. Yep. Yeah. And he actually led another round of financing a year later for about another 13 mil. And although it was still privately owned, I think Tesla raised about $40 million in a third round of funding between Musk and another company called Technology Partners. I think that was in 2007, I think. So, they're all sinking all this money into it. And the thing that was interesting, what Tesla was focusing on was that they weren't trying to build a complete car, every single nut and bolt from the beginning. They were just trying to, they're focusing on, I think, the key differentiator, which was the electric drivetrain technology. And they signed a contract with Lotus, I said Lotus, Lotus in July in 2005. And Lotus were going to build essentially a chassis, I think. and that let Tesla focus on what they thought was the key differentiator. That, that, that sort of was my take on it anyway. Yeah, that's, that's, that's right. They, um, they originally didn't have the intention or business plan set up to build a car from scratch. Uh, they thought they would be able to do this for, you know, a couple dozen million dollars. And the way they were going to do it was take a, uh, the propulsion system, the motor system from this AC propulsion license that, So they've got the motor and battery system, and then go to Lotus and license the Lotus Elise chassis system. So Lotus could focus on the car building part. And then Tesla would combine them all, do some modifications as needed, and then they'd be able to sell an electric car and really start to make people excited about electric cars again. Unfortunately, as Elon has talked about in the past, both of those presumptions ended up being wrong. that actually AC propulsion system was useful as a demonstration vehicle, but from the motor controller was actually analog, which was kind of insane. So they had to rebuild the motor controller. It was built to use a transmission. So they were going to have a two gear transmission, but they had massive problems with their transmissions with the Roadster program, which we can get into. And then the other big sort of conceit was that they'd be able to use their battery packs. And what they realized again was that they couldn't do that because their battery packs for the AC propulsion system were air cooled. And so that had the downside of both causing degradation of the battery. So if you don't cool the batteries, you're going to get less range over time. And then also you have a higher risk of thermal runaway, which basically is a fancy way of saying the batteries will catch fire. And so they needed to redesign that with liquid cooling, so they basically had to come up with their own proprietary system for that. And then getting rid of the transmission, they ended up coming up with their own motor design, which could go at a much higher RPM and keep high torque so that you could get both fast acceleration, or quick acceleration rather, and high top speed. So in the end... Oh, and the other big thing, sorry, on the Lotus side is they thought, "Well, we'll just take a Lotus Elise and sort of modify it a little bit, what ended up happening was when you put the battery pack in the car is now 30% heavier. And so you need to adjust the suspension and the chassis. They needed to lengthen the chassis a bit. They had new brakes and essentially in the end, only 6% of the parts in the Tesla Roadster were shared, not just with the Elise, but with any vehicle on the road. And so sort of in the end, I think they probably wouldn't have approached it the same way. And it's sort of funny because I think a lot of folks just say, "Oh, well, the Roadster was just a Lotus Elise." And in actuality, when you dig into, you know, each of the parts and what went into it, it really was more of a custom vehicle. It just wasn't designed from a clean sheet of paper. So it was sort of like buying a house and renovating it, but you stripped it down to the studs and, you know, had all the challenges of a renovation instead of a fresh build. Yeah. It had that feeling of being a great, it was, it seemed like a good idea at the time. And when it came down to the practical nuts and bolts of the engineering, it just didn't work out the way I kind of got the feeling that the roadster, which we may as well just have a bit of a chat about, is kind of when they canned it, they were almost happy to stop making it, I think. I think it was a very frustrating car for them based on what the outside looking in. But in any case, so, so I guess we'll start a little bit with the roadster then. So the Roadster, you know, was a two seater, well, Roadster. And that started shipping in 2008, I think it was. Yep. Yep. They sold about 20, 2500, just under, I think, thereabouts, between 2008 and 2012, before they pulled it from production. Like I said, I kind of got the feeling they were happy to do that. But the last 15 that they built were a special edition. They only had styling differences, not actual performance changes, but in any way, there were three major versions of that Roadster. I think they called them, which is odd because the naming convention, which I'll talk about for the more recent cars is totally different. But I don't know how official it was, but they call like the 1.5, 2.0 and the 2.5. I don't think they ever actually badged the car that way, though, but maybe that's just what they called them. Not sure. - Yeah, it was more sort of an engineering version number. And since it was their only car, I'd say it's officially called the Tesla Roadster, which is quite different than the way they badge and name their other cards, as you mentioned, yeah. It was definitely a unplanned for sort of naming scheme. I think they didn't fully realize, as many startups don't, in the beginning, exactly how it's all gonna unfold. So it is definitely an oddity of a vehicle for Tesla. And a lot of folks, I don't think, don't even realize that the Roadster was a vehicle because you see so few of them. As you said, they only made a few thousand of them in total. So for most people who are buying Teslas now, I think it's very possible that they don't even know that the Roadster existed. - Yeah, well, that's exactly right. Every now and then I have a look up on car sales websites and I see a Tesla Roadster and I'm like, oh, cool, I could afford, oh, no, I can't. 'Cause they're rare, they're quite expensive and there were very few that were actually shipped to Australia. So when you see them, they are very, very rare. But it's still a very nice looking car. But originally, I mean, they weren't cheap, right? I think there were just under 100,000 US when they went up for sale and the later models were I think another 10,000 on top of that. So they weren't cheap by any stretch of the imagination. And the other thing that I found interesting was you'd think that the Roadster was small, light, and hence it should be the fastest in terms of acceleration. But actually, it really wasn't relative to the Model S, which is, we'll get to the speeds in it later on, but I was quite surprised when I checked. According to what I researched, it's the zero to 60 time in the original 2008 was 3.9 seconds, but it was 3.7 seconds in the Roadster Sport in 2010. That was the fastest that it ever went. All the improvements and everything like insane mode, ludicrous mode, and so on, which we'll get to, the Roadster missed out on all that. The very first Roadster was in the five seconds for the zero to 60. Primarily because it had a two speed transmission as we were talking about, but because the transmission was so faulty, they locked it in second gear from the factory so that it would be able to get the highway speed. And so, yeah, the Roadster in comparison to today's Teslas was not as quick as you might imagine because I think many people who look at cars, they see the Roadster type vehicles or their convertibles or sports cars. And those are always quicker than the manufacturer's comparable sedans. It's just sort of this built-in truth that a sedan can't go quicker than a little two seat coupe or Roadster. But I think what Tesla was really trying to do from the beginning was thread this needle of, well, we've seen these failed approaches to electric cars in the past of the EV1. And the challenge for electric cars it's almost funny and quaint to say now was that you could only go 50-60 miles on a charge and they had these big lead-acid batteries so they're really heavy which also doesn't help with with range. And so the general consensus amongst consumers and auto journalists and the automotive industry at large in the 2006-2000 even in 2004-2005 time frame was that electric cars are a novelty that maybe you can retrofit for fun but they're not for real use. You can't go more than 100 miles on them and if you could they're way too expensive and customers don't want them. Customers like gasoline cars. And so Tesla was really trying to figure out well how could we make a car that people actually would love and would have be better than a gasoline car in its class. And a lot of the attempts as you had seen in the past were trying to go after these commuter city cars but that that isn't really a class of car that most people own. Even small gasoline cars or petrol cars can go very far distances. And so you really have a challenge there if you make a vehicle that's only 50 or 60 miles of range. So that was sort of was a challenge that they wanted to eliminate. How do you get rid of this concern about range? So with the Roadster, they targeted 200 plus miles of range which is sort of a glass ceiling, I guess, for most people of wealth. They can go 200 miles or 300 kilometers about, then you'll be fine. So then the other big thing was that the batteries were quite expensive and continue to be quite expensive, but over 10 years ago, they were quite a lot more than they are today even. And so if you've got, you need 50 kilowatt hour pack and they're $300 per kilowatt hour, you've got 15, 20 grand of battery right there. And that's pretty expensive if you're trying to put that in a 25 or $30,000 car, it just doesn't work. So you can't sell a $20,000 car for $50,000 just because it's electric. So the only class of vehicle that really has that premium and has people buying sort of on emotions versus to pure practicality is the sports car segment. And so when they identified that the sports car segment might actually be the category where you can absorb the cost of the battery, and also de facto it's a smaller vehicle, you've got less weight to tote around anyways beyond just the battery pack. And you've got this sort of performance characteristic where people will pay a lot more for quicker performance that the advantages of an electric motor become really advantageous and sort of free essentially that having an instant torque permanent magnet or AC induction AC motor is really really powerful. And so you don't have to put a big beefy engine in to get really great performance out of of a small electric car. So those two things of the battery pack range and the dynamics of a sports car sort of persona really is what led them to start there. If they could have made the Model 3 which is coming out which I'm sure we'll get to in 2005, 2006, 2007, 2008 they would have but it just wasn't possible and so the Roadster was sort of the best combination of the constraints and the opportunities for what they could make at that time. And lastly like like you don't sell many roadsters at all. And so the advantages of scale that many manufacturers have in their main line, 100,000, 200,000, 300,000, you know, unit a year cars, don't apply to their sports cars. And so you can be sort of a boutique small manufacturer and make a living doing sports cars. I mean, Ferrari and Lamborghini are great examples of that. And so they were actually able to compete without massive factories and massive supplier relations. So it actually is a really interesting engineering and sort of business challenge and solve they came up with. And I think a lot of that was Martin and Mark doing that research and then Elon just wanting an electric sports car. And when they sort of met realizing that we could do it together. - Yeah, exactly. And I feel very much like the Roadster was Essentially, it was the prototype for everything that came later. And it's the sort of thing that once you've passed that prototyping stage, you never want to look at the prototype again, because it's like you can see all the wrinkles, everything wrong with it. And as I say, I feel like they were happy to get rid of it. And I don't know whether or not they're ever going to bring it back or re-engineer it. Some people have suggested that they may bring it back someday. But I don't know. Like when I say bring it back, I mean, like completely redo it properly. But I don't know. - Yeah, they are actually. And Elon's teased it in the past. So that's sort of what started those rumors. But now actually as part of one of the ways that Tesla gets fans engaged and gets fans to refer friends to buy cars is this referral program. And one of the reward levels at this point is for every person you refer, I think you get around 2% off the purchase price of the new next generation Roadster. So they haven't announced what the Roadster is gonna be, they haven't shown photos of it or anything, but they're already starting to give discounts for people who are existing Tesla owners who were for others. So it's definitely gonna happen, it's just we don't know when, what, how much or anything like that. - Oh dear, all right, fair enough. Wow. Well-- - It's a doom three of cars. (laughing) - Yes. Cool, all right, awesome. Well, that's probably enough about the Roadster just for the minute. I just wanted to just quickly jump back and talk a little bit more about the transition of leadership at Tesla. And then we'll get to the Model S, which is where it gets set really interesting. So I think during that about 2006, so thereabouts around about when the Tesla Roadster was actually unveiled, I think Martin Eberhard actually unveiled it, wasn't it, Alan? The Tesla just at that point, weren't making a profit far from it. And the board decided that probably a new CEO might be able to do better. And they got a guy that I actually was aware of from AMD. And I didn't realize till I dug into this that he actually originally made his money from a company called Monolithic Memories in the '70s and '80s, which I've never heard of. But I had come across his name previously from AMD. But anyway, so his name is Zev Driori. And I think I'm pronouncing that correctly. Yeah, and he took over in late 2007. And looking at what happened after that, like a downsizing, it feels very much like he was the hatchet man. And basically I think he laid off about a 10th of the workforce at that point, to try and sort of cut costs a bit and get things under control and get the roads to market. Which he did, or arguably he did, or Tesla did after that, but in any case. But the middle of that year then, they said, "Elon Musk, we love you." And I'm not actually sure exactly what happened, But Elon Musk became CEO at that point. And Dreori kind of like shuffled across to being a vice chairman, I think it was in October 2008. And then a few months later, just, you know, disappeared. Um, and by the end of 2008, I think Musk had ended up sinking in $70 million of his own cash into the company. That's how strongly Elon Musk believed. And that's what I want to bring up. The point is that Musk, he went all in and has gone all in on Tesla. There's no question. Yeah, absolutely. And I think that a few things of note. So Martin Eberhard and Mark Tarpenning had never run a car company. Elon Musk had never run a car company. And I think most of the retailings now and some of the former employees, what they talk about is that the Roadster program just started to get really out of control from a cost point of view. So they had taken reservations for the vehicles and had a price, but the actual production costs coming in many tens of thousands of dollars above what they were going to sell it for. And so that's a losing proposition when you have to sell something for a lot less than you made it for, you're going to go bankrupt. So it started to become clear, and Elon was the chairman of the board, right? And so he's hearing this every couple months, what's going on with the program, and Elon being Elon, not quite impressed with how things were being managed and run. But he's also busy over at SpaceX as the CEO of SpaceX, trying to get rockets into space. And so he's clearly involved, but and very financially vested in one of the largest shareholders in the company. But the idea of becoming CEO is not something that you would take on lightly to be dual CEO. So he yeah, he brought in the other fellow from AMD to try and get things sorted so that they could actually get the program going and get the cars out there. But eventually I think he just sort of got to the point where he felt like if he didn't take action, the likelihood of Tesla surviving was going to be lower. And so he decided to be CEO. And then in 2008, when the financial crisis came, he really had to invest the remainder of all of his money he'd made from PayPal in both SpaceX and Tesla. And so he kind of went all in on both of them. And so when you've got almost $150 million of your net worth invested in two companies, you kind of want to be in charge of them. And so there's, you know, folks who claim that he sort of tried to seize power. And I'm sure Martin Eberhard would have a different opinion. But I think just pretty clearly, when you've invested that much money into a company, and it's looking like it might go out of business, you probably want to take some more control of it. And being CEO is one very powerful way to do that. Yeah and I think that on the whole it's he's brought I mean he was always there but as CEO he has a little just that little bit of extra influence than he would have had because I think boards tend to be you know we're aware that the board of directors exists but you know name the people on it generally most people couldn't but you name the CEO of a company you know who the CEO is so I think that Elon is also well based on what I've seen different videos of him and Eberhard and different other people that have been involved over the years, he's by far and away the most inspirational. And I think that he brings that to the table as well, more so than the others did. And I guess that's just an opinion. But in the end, I am glad that he took over. And it was actually around about the time, well, just prior to him taking over in June of 2008, they unveiled the Model S. And when I think of Musk, I think of the Model S as sort of being his, essentially his baby from birth to completion, right? So, I love the Model S, I think it's a beautiful car and in some countries it's sold only as a five-seater, unfortunately, like in Australia, because our design rules state that you can't do the cool boot thing. So, in the boot, there was a seven-seater option, so you can have have the two seats rearward foldaway seats in the boot, which I thought was insane. First time I saw photos and then video of it, I'm like, that can't be serious. Because I had kids that would easily fit in that. And then I'm like, oh, I'll get one of these when they come out in Australia. And I had to look and they're like, oh no, you can't get that option. So, yes, nevermind Australian design rules. Anyway, we had that as a kid in a station wagon, and that was my favorite place to sit in these little jump seats in the trunk of a station wagon. So, it just looks so cool. I mean if you're a kid you're like hey I'm sitting in the back I'm looking at the back at all the cars waving at the cars behind you or something I think that sounds like so much fun actually It definitely was fun I still question the safety of it but I guess maybe other governments have more stringent for children in the back but yeah in the US it is kind of crazy but hey Have you actually seen any in the wild out there in the states? The rear seats? Yeah with kids sitting in them I haven't seen any children in them, but I've seen the rear seats. I live in Palo Alto, California, and so I think we have one of the highest densities of Model S. I can walk about one block from my house and I could find five Model S's parked. It's ridiculous. That is kind of cool, I will say. But in Brisbane, for example, where I live, we've only just got our first Tesla dealership, and it opened about a month ago. And because I just couldn't help myself, I decided, oh, I shall go and visit the Tesla store today. I took my boys with me. And when we pulled into the garage underneath, because it's in a part of town called Fortitude Valley, and real estate is scarce. So, they have all the parking for all the vehicles underneath the dealership. So, when you go down to the car park, it's a shared car park with a couple of dealerships. And I'm walking down there, and I had never seen so many Teslas, almost entirely Model Ss, there were a few Xs. I would have counted about 40 of them in this car park and my eyeballs almost you know came out of my head it was quite beautiful actually so but yeah because ordinarily I'll see like one on the road if I'm lucky once a week going to and from work so I drive in and out of the city every day weekdays for work so you guys have that massive luxury car tax though - yes doesn't seem to help the Tesla. No, it really doesn't. Model S in particular. Yeah, it really doesn't help. But in any case, it's an expensive vehicle, but for you guys, it's extremely expensive. Yeah, it is. And this is the this is a this is a problem. So, well, it's a it's more of a problem for for me where I'm currently living. So, alas, but that's OK. I'll get one someday. But never mind. So the Model S, for the record, is a large sedan. And it started out, I think, about fifty thousand US. and it started shipping in mid 2012 and I believe that there was a version that was a 40kWh version yeah and it was discontinued pretty quickly yeah didn't stick to that $50,000 price point that they'd promised yes and it yes it didn't last yeah no so yeah the um the Model S as you were saying was really the idea of how do we create an electric sedan from scratch now that we have learned a lot from the Roadster program. The company is now over five years old and they have some stability and know they can at least make a car. But a lot of people were really down on Tesla at this point because as we were talking about, the Roadster had a lot of challenges, a lot of delays, a lot of missteps. And so to say we're gonna go from making a Roadster to now showing off a sedan that you want to produce in some volume and go against the Mercedes and the BMWs and the Infinities and folks like that, most auto journalists thought Tesla was crazy and they would never be able to actually make this sedan. And the specs they had for it were also insane, that it was gonna hold seven people with those two children in the back in the US, that it was gonna be the quickest accelerating four-door sedan, that it was gonna have more storage than any sedan, that it was going to be able to go further distance than any electric car ever. It's going to have this massive touch screen in the middle. It's going to have auto software updates that it's basically going to be a car, you know, five or 10 years from the future available today. And yeah, it would start at $50,000. So it was really an incredible spec. And they had to do a lot of work to actually get there from hiring new designers to hiring lots and lots of new engineers to buying a factory for $40 million, which was one of the best deals ever because it's a 5 million square foot factory, the Fremont factory. So a lot of pieces had to come together to make the model S and I think it's pretty incredible that the model S when you glint glint at it from 2008 still looks like the model S of today and yet it is a totally better car now. And I think that's sort of a really great example of what Tesla does very differently than most other automakers is investing in improvements in a model over time versus lots and lots of diversification of different cars. Very similar to an Apple versus a lot of the Android phone makers, if you wanna take that analogy of making a new phone every couple months versus one phone that we iterate on year after year after year. - Yeah, it's a good point actually. And one of the things that I also really like is that the Model S from the different versions that you can get, the different models of the Model S that you can get, it looks almost identical, well, it does look identical on the outside except for the badge on the back. And yet the performance is this very, very wide spread of performance and in terms of acceleration, as well as in terms of the range. And you can't tell from the outside, it looks identical. Whereas other manufacturers would not do that. They'd say, well, this is our performance model and it's a completely different model. It's something that is a different, completely different model. It looks totally different and it looks sportier or whatever else, but you can get the slowest Model S or the fastest Model S and externally they look identical. So I kind of like that actually. I think it's a nice way of doing it. - Yeah, I tend to agree. I definitely like the idea of a single car that can span lots of different capabilities and you don't get penalized socially for buying the less expensive version, right? I think there's a bit of the halo of, if you know that Tesla's can go really quick, but you didn't buy the crazy ludicrous version, you still get to feel kind of cool that you're in a car that could go that quick, even though yours can't. And when you break it up with different models, it's very clear that you've got just a regular BMW 3 Series versus an M3 or something like that. And perhaps part of it as well is Tesla not wanting to have different versions and different models and deal with the complexity of that, where many of these manufacturers that they're competing with have been doing this for over 100 years. And so they have many, many years of diversification and optimization of the market that they've been doing. But one of the big challenges of that, as you were pointing out, is that it makes it difficult for BMW, for instance, to make the 5 Series or 7 Series that much better than the M5 or the M7, because they'd be competing with their own model where Tesla is not competing with any of their other models really. We'll talk about that with the Model 3 'cause it's a really interesting new challenge for them. But with the Model S, they just make it better and better and they're adding more value which makes it more appealing to more people and it's more and more competitive and they're not cannibalizing any other product. And I think that's a unique position they're in that they won't always be able to have but when you have very distinctive product categories allows you to invest all your energy in making that product better and not worry about cannibalizing a higher margin product that you are selling to other people who care about that particular characteristic. Yeah, I actually do, I really do like their approach and I do think longer term it's not going to be quite that simple but I'm hoping that they try and stay as true to that as they can. I do think that one of the interesting things about the Model S is looking at its progression and its development as well in terms of performance and just to quickly cover that off by the 0 to 60 times. I like to make 0 to 60 times because it's you know acceleration is good. I always had this belief that with a vehicle there's a speed limit there is no acceleration limit therefore I can enjoy going from 0 to 60 or 0 to 100 kilometers now depending upon you know which country you're in but I can do that as fast as I like but you know the speed limit is you know, it's 100 kilometers an hour, the speed limit is 65 and I shall observe the speed limit, but not the acceleration limit because there isn't one. Anyway, so the original version of the Model S, the 40 kilowatt hour version, which you pointed out was canned very quickly. It did 0 to 60 in 6.5 seconds. There was a dual motor 60d and that started about 5.2 seconds. But then, of course, there's a whole bunch in between, which I won't go and list every single one of them, but It gets really impressive when they look at the most recent one and I'll talk into the talk about the speeds a little bit further on but just just quickly the 100 kilowatt hour model for the P100D in 2016 model S I think it was early 2017 0 to 60 in 2.275 seconds in ludicrous mode. Which is insane but amazing and anyway. And 315 miles of range. Yeah, that's right. Mind you, if you're out dragging a bunch of people to traffic lights, I do wonder if you'd get the same amount of range out of that, I'm not sure. Right, yeah, that's normal driving, not the craziness. But I think the point is definitely well taken that you've got this car that, when it started, was six and a half seconds, and now it's progressed to being capable of 2.3-ish in the same car, same weight. And going from a single motor to then introducing dual motor, to all these other improvements from better, more and more dense packs. So the biggest density pack at the beginning was 85 kilowatt hours. And in the same physical space, they now have a hundred kilowatt hour battery pack. So just continual refinement and improvement in just five years, really. - Yeah, not long. - That's, for some car makers, that's one and a half generations of vehicle improvements. then it's not even a whole platform improvement, right? Where you've got, you know, platforms in the last 10 years. So you don't usually see engine improvements to this degree in five years. And I think that's the other just really incredible thing for Tesla and any car company that really takes electric vehicles seriously is that electric motors and batteries just have so many inherent benefits for performance that road-based vehicles will take advantage of and acceleration is one of the big ones. Now they certainly can't do sustained high speed like race cars can, but to your point, unless you're really in a few select countries that allow you to cruise at 150 or 200 miles an hour, that's not very important to most car buyers. And with more and more traffic in cities, you're even less, the average speed of cars is continuing to go down, not up. So acceleration is really something people can feel can sense and is how cars have been performance cars have been sold and Tesla is definitely playing into that very well and you don't have to have this huge engine and throaty roar which we could talk about but I think some people are concerned about getting rid of the sound of performance cars but for me I love the idea of a silent accelerating vehicle I think it's the new luxury, I think, is this high-end, super quiet, super fast, stealthy vehicle versus the big, beefy American muscle car that young people today are not that interested in. I think the problem I've got is with the whole combustion engine is, well, I've got two problems with it. The first one is the exhaust in terms of the air that it pollutes, and that's sort of, I just did an episode of Causality about air pollution, about the fog that killed lots of people in London many years ago, and how air pollution in China is a problem. And it just occurs to me that a large amount of our air pollution does come from vehicles. And it was a big contributor to the fog in London that killed people back in the 50s. But the truth is that that's a big problem. I don't like that. And the second thing is the noise. And I don't know if it's because I'm getting older and I'm becoming a cranky old man. It's quite possible. So, trying to be aware of my own biases. But, you know, I hate the sound. I've reached that point where I actually hate the sound of loud engines. It just it hurts my ears when I'm driving along. To me, a perfect, a perfect world driving along. And I say perfect, I don't know, as perfect as it could be. And when you're stuck in a traffic jam would be there would be no noise because in a traffic jam, the wheels aren't turning. There's no road noise. There would be no exhaust from the vehicle. so you're not breathing in diesel fumes or petrol fumes or gasoline fumes. And it would be silent. You'd hear maybe the wind rustling in the trees just by the side of the road. And you'd be able to listen to the music on your stereo in the car at a quite low level. It doesn't need to be very loud. And to me, that's wonderful. That would be beautiful actually. And we're so far from that, but we'll start with a couple of cars and we'll get there in the end. Sorry. Yeah. And I think the other thing too is that the trend with traditional vehicles due to increasing emission standards and efficiency gains is that they are already driving towards this. They are putting smaller and smaller displacement engines in vehicles that produce less noise and less vibration. They're putting start-stop systems in the vehicles so they actually turn off the engine when you come to a full stop. So regular cars are already driving towards this quiet environment, not just not from necessarily a, we think it's a better experience, but because they're being dragged into it due to efficiency gain. So I think for most customers, very soon, it will just seem weird that their car is vibrating uncontrollably. And they've got this extra noise. It you know, driving Tesla's it definitely is more noticeable at lower speeds, because once you get above 35-40 miles an hour road noise from tires and wind does start to become a much larger contribution of noise but when you're you know cruising at 5 or 10 miles an hour 20 miles an hour around the city or just in a suburban area it is quite disarming for the first few times being in such a quiet vehicle especially when you're you know backing out or you know knowing if the vehicles on for people who have hybrid vehicles it's definitely familiar to them but it can be a little disconcerting not knowing if the car is actually running because you just push on the accelerator and you're like "oh, it's actually on, I'm moving" I actually had a Prius Prius V for a while for about three years and it was actually quite a nice car in the grand scheme of things and I used to have a game where I would try to keep the car running in all electric mode and not push the accelerator too hard and just see how fast I could go. And I'm like, Hey, I'm driving an electric. No, I'm not. Okay. The engine just started sigh. Anyhow, but it was beautiful for that up to 35, 40 Ks an hour on a flat level grade, no, no hill. And it was, it was electric until I discharged the tiny battery pack in it. But I also, I've also driven a Nissan Leaf quite a bit as well, because there's one work and you can lend it, borrow it, you know what I mean? - A little fleet system. - Yeah, yeah, a fleet of one in this particular case. - Okay, there you go. - But yeah, and I thought that was beautiful as well. The thing that I enjoyed about when I was driving the Leaf in particular was that I found I didn't have to talk as loudly to the passengers in the car when I wanted to talk to them 'cause it was much less noisy. So in any case, so apart from electric car, sort of lustened all the positives and everything. And I just to wrap up on the Model S really quickly. And I say wrap up on the Model S like I could talk about the Model S for hours, but let's keep moving. I think there are approximately, I think about 200,000 or thereabouts Model S's have shipped to date. I think getting exact figures on that is not straightforward, but I think that's about right. - Yeah, that's about right. And they're now sort of at a run rate of around 25,000 vehicles per quarter, which includes the S's and the X's. globally. And so, yeah, they've sort of steady stated at around 100,000 vehicles for Model S and X, which we'll talk about the X. But yeah, they're at sort of luxury car volume for two models. And what's interesting is when you look at registrations for large luxury sedans, and these are US numbers, so apologize for the global listeners, but the Model S is the single largest car sold in the US for their category. So it's those Model S and the Mercedes-Benz S-Class and then the 7 Series and then everyone else is pretty far behind that. So what that is interesting to me is like when you look at luxury vehicles and the type of person who buys a hundred thousand dollar, eighty thousand dollar vehicle, they're competing, Tesla's competing with Mercedes and BMW and these are not weak competitors and yet they are the most popular in their segment. And so from Tesla's vantage point and I think for a lot of people who are very excited about the future of Tesla when they see that they say well if Tesla can make one of the highest performing vehicles in its segment in a very competitive luxury segment and a very discerning buyer and and also one that's very focused on cachet and not pure performance necessarily, what happens when they introduce an SUV and they introduce a small sedan and a small SUV or a pickup truck? What kind of market share could they garner? Because the large luxury sedan market is not very large and they're still selling 12, 13,000 of them per quarter. And so that's sort of the big thing that the Model S is sort of a harbinger for is not its individual unit sales, it's tiny. Tesla will admit they don't produce many cars right now compared to the 17 million cars sold in the US and the 100 million sold in the world. It's a speck in the ocean right now. But the important piece is for people who are looking for this type of car, they tend to choose Tesla more often than any other vehicle in its class. And that I think a lot of people don't actually internalize as much when they're evaluating Tesla or trying to poke at them because they're like, well, they've got this huge factory, it used to produce 500,000 cars, only making 100,000. And so that's a big piece. And I think one thing which obviously will flow through to the other vehicles is, and probably interesting to the listeners, is this idea that Tesla is the only car maker right now that does functional over the air updates that actually update the control units for the vehicle. You can get map updates for some companies, you can get some apps that are in a very thin layer in like Microsoft Sync or whatever. But Tesla actually updates the firmware of the vehicle to change controls, to change the way that the wipers work, to adjust your headrest automatically, to change the method of coming into the vehicle, to push software updates to autopilot, I'm sure we'll talk about, to updating the UI completely. And the important thing is that you get those for the life of the car. So if you bought one of those early Model S's, you're still getting new software updates. And I think that is such a progressive point of view. And still, five years on, no car company is doing this yet. And it's partly because they don't have the software engineering talent and ability to take on the integration of these systems to have the confidence that the system is secure. One of the things Tesla does above and beyond that a lot of other car companies don't is that integration between their software and hardware and their compute system that they try and consolidate as much of the compute in their own central computer versus thousands and thousands of individual computers running in all these other subsystems that their suppliers provide them. And one of the reasons car interfaces are so poor is that the car company isn't the one really making it. It's a supplier. Which means that when you get it, it's already a few years old because it's been validated and it's already a few years older than that because it had to go through this entire program. And it probably won't be refreshed until they refresh the whole car, which might be another few years. So many car interfaces are over a decade old, running on decade old hardware, where Tesla is running on somewhat modern NVIDIA hardware that they are refreshing every couple weeks. So it's hard to compete with that and have a software experience, especially as people care about that so much more. And certainly it's not perfect. A lot of people who have Teslas have lots of complaints about the software, but at least their car could be improved. And I think that's a huge advantage that, especially for me being in software, is so clearly the way of the future and yet no other car has it yet at five years in is pretty flabbergasting. It's an interesting point. I think about one of the things that Apple used to go on about quite a bit and I think I guess I still do is about owning the end-to-end experience between everything from unboxing a product to turning it on to how the hardware and the software works together and so so on and so forth. And that integration, they own every step along the way. And they, and they're driving that ownership further and further now down to the chip level. And, you know, and then they've now, because I got PA semiconductor and all that, and they, they have their own chip team and they're doing so much of this stuff themselves. And they control that experience. And Tesla is much the same. Whereas auto manufacturers, I think they look at it as what's a, they would have from a more traditionalist sort of what's our core competency. And our core competency is to make a car that gets people from point A to point B. And they don't, they see software as something that it makes, it may be has more of a luxurious sort of a feel to it. Maybe it's something more modern that may attract the luxurious sort of luxury buyers. It's not something that they would put into their cars by default. And if you look at the ranges of most auto manufacturers, the ones that actually do have the nicer software are typically the higher end luxury versions of the cars as opposed to some of the entry level cars. Whereas Tesla don't see it that way. Tesla see it as an integral part of the experience and they would never do that. They will always have software as an integral part of their vehicles because they believe that it makes sense and is part of their core competency. I think that's the problem is that it's going to be a lot easier for other auto manufacturers to go electric than it is to go to a fully supported software solution with over-the-air updates because that's actually a far bigger paradigm shift for them to deal with progressively than actually just adding an electric drive train. Yeah, absolutely. I totally agree and I think, you know, to your point, the people inside of a company are what make the company what it is. It's sort of obvious, but if your company is filled with people who interface with thousands of contractors and you have mechanical engineers, and auto engineers who are used to bending metal. And the big competency of most automakers is building engines and then integrating their engine into a, you know, they do the stamping and the core engineering for the vehicle, but then the HVAC system, the computing system, the brakes, most of those are outsourced to their tier one supplier. And so if you see a commercial for a new automatic emergency braking system from X or Y manufacturer, 99% of the time, they did not build that themselves in-house. It's coming from a supplier. And so as a result, you find that those sort of are built for spec and for someone who's buying it for procurement. And the other challenge is that because the auto industry is such a low margin business, the buying teams have a lot of power. And as Apple has talked about in the past, it's very unlikely that enterprise buyers are prioritizing user experience on their spec sheet. There's very rarely a slot for that on your sheet. And so you make sure it can connect all these things, but you don't care how well it does it. And the person buying it isn't necessarily the person who's actually going to be using it. And that creates big problems. And so, yeah, I totally agree. I think the Tesla software advantage is going to be much more durable than having electric motors. Now, their battery pack costs might be quite durable and they're doing a lot of work there with the Gigafactory and other activities to try and make battery packs very low. And then the other big thing they want to push on is manufacturing, which I think people are the least confident they're going to be good at. But I tend to think they actually might be because of the automation, but we'll get to that. - Yeah, absolutely. And I think that we should probably start talking about the Model X 'cause we sort of, we should probably just keep moving a little bit there because the Model X from my personal perspective, okay, 'cause I've got four kids, so I need more seats in my car. So anyway, so yes, the Model X is a genuine seven seater and it's actually comfortable seven seats and I can say that 'cause I actually sat in one now, like I said, when I went to the Tesla shop and I sat in the back row and I was quite surprised how easy it was to get in and out. And the middle row doors are kind of the distinguishing feature on the Model X. So, it's an SUV and it's the doors, they call them Falcon wing doors, but which is a, I guess it kind of makes sense because the way a Falcon would fold its wings kind of, it has a hinge at the top apex of the outside corners, if that makes any sense. Because the best way to think of it is a DeLorean DMC 12. And I always like saying DMC 12 because DeLorean only ever made one car, the DMC 12. but anyway never mind that before John DeLorean got busted but never mind yeah the Falcon wing doors I think people think of gullwing doors and they only hinge at the top and the Model X doors the important pieces they have the two hinges that you mentioned so they actually can sort of go up and then out versus just sort of on a sweeping arc yeah exactly and that was one of there were a couple of problems with the the DeLorean gullwing door I don't know how many other cars actually have gullwing doors. I think there are a couple but the DeLorean is the only one I know of off the top of my head. Yeah, a few Lamborghinis I think. Okay, I know the Lambos had scissor doors. Yeah, they had scissors and oh I guess there's some old Mercedes that had the gullwings, I think the old SLs. Yeah, actually I think you're right, actually I think it was Mercedes is the one I was thinking of but in any case the problem with the gullwings as you said is it's a wide arc and that doesn't work if you're in a confined space. So, and the advantage of having a gullwing door or in this case, a Falcon wing door is that you can actually have a more genuine floor to ceiling and more headroom and the ability to actually walk in and out of the vehicle as opposed to having a higher lip and a step to get into a high vehicle and then having to duck your head to get in. And whilst most people I think we're all kind of used to that because we've had no option in most vehicles, it's just been side opening doors, side hinge doors. Come to think of it, I'm trying to think if that is actually their technical name, but a normal door. You know what I mean? So, we're kind of used to it, but once you actually get into a Model X in the middle or the back rows, it really is quite nice. It's a heck of a lot more comfortable to get in and out. In any case, I know that they had a lot of production problems with that and perfecting that design, getting a good seal against the elements and getting reliable operation turned out to be quite challenging, I think, and I think it delayed the Model X quite a bit more. But I don't know, I still, maybe it wasn't so smart in the end, but geez, they look nice. They're very, very distinguishing and they are very convenient, but in any case. So yeah, just their doors, apart from the, yeah, I I'm getting excited about doors, but hey. Yeah. I think that, I think the doors are certainly the, the most, distinctive feature of the Model X. The shape of the vehicle, I think some people will equate it to just sort of taking a Model S and inflating it a little bit and jacking it up. It is based on the Model X platform and chassis. And so it wasn't even really a planned vehicle early on. So some of the inside info on it that's intriguing is that the original plan was to do the Roadster, to do a sedan, and then to do an even lower cost sedan. And Elon and team decided to inject sort of a step 2.5 into the plan and create this Model X. And their original intention was, well, we'll just take the Model S and make an SUV version like a lot of the car companies do where they've got the platform and they just slap a bigger body on it and put more seats and you've got more space. And that would have been fine. And I think that was originally their plan was to really try and sort of slide it in there, make it a lot faster to build and quick to suit the at that point still a super growing segment of people who wanted SUVs and especially sort of this more sleek SUV that's not built on a truck chassis like the old SUVs of the 90s. And so they started taking reservations for the Model X almost you know less than a year after the Model S was introduced. So they're just starting production of the Model S and they start taking reservations for a prototype Model X in 2012. So they expected to get it out in about two years, in early 2014, but it actually didn't come out until September 2015, so a year and a half late, and that was just a dribble of units. So they took like two more quarters, only until the first quarter of 2016 did they really start shipping any volume, which was a few thousand vehicles in that quarter. So yeah, you're right. It did have many problems. And Elon later has talked about really that it was their hubris and he blames himself for putting in too much technology. I think as they saw that it was taking longer and longer to build, they kept adding more and more features versus just stopping and shipping what they had. And so the doors took a huge amount of time and they also added a new filtration system which they call bio-weapon, biohazard weapon defense mode, which basically is a HEPA filter. It's like 8x the surface area of most car filters. It's positive pressure, so it actually pushes air out of the vehicle when it's pressurized, which is impressive and unnecessary, but still pretty cool. It has this massive front windshield which is sort of equated to a helicopter where it's got this massive glass and having driven it, it's my favorite feature of the vehicle. They introduced a new material for the seats. They started taking and doing all the seats in-house during this time so they rolled out their whole new seating system. On the second row, instead of seats that are a bench, they're monopost and so they move individually, which is like a little bit crazy. And those are all controlled by software. And so, yeah, I mean, this car is chock full of technology. And I think for folks who have it now, it's great, but you know, they've done software updates now where the Falcon wing doors, they've got ultrasonics in them. They built a new type of sensor that can see through the metal so that it doesn't have those little warts that you'd see for the parking sensors on a lot of vehicles. So they took a lot of time to try and get this fixed and get it sorted out. But eventually, I think now if you're buying a Model X from the factory, it's in a really great state. But this is a recurring theme for Tesla as well is one of the big things they get slammed for. And I think it really just depends on your point of view for products and how companies operate. So there's certainly a model you could take where you say, we're going to develop this product completely in secret. We're gonna do all the testing, everything. We're gonna make it perfect. We're gonna lock it up in a box and that's it. We're gonna ship it and it never improves, but there are very few problems and that's it. Tesla does take a different approach where they try and run as fast as possible as a forcing function to getting stuff done quickly and then some things don't get finished in time or to the quality level they necessarily want and they start shipping it to customers in a state where they know it's going to continually improve because they make hundreds of changes every month to their cars. Tiny little changes where most car companies don't really do many running line changes like that. And so if you're in the mode of Tesla where you're like well we're always going to be improving anyways. So once it reaches a point where we're at least confident that it's good enough we're going to ship it. And people aren't used to that with vehicles. they're used to them being pretty much solid because they're never gonna improve and you're gonna own it for 10 years. Where Tesla sort of sees it as a continually improving thing and they have service centers to fix things if something's really wrong. But Elon talks about all the time that the best time to buy Tesla is right now because it's always gonna be better. It's always the best version right now. And they tend not to do too many big changes all at once, which frustrates buyers, certain buyers. But I think it's definitely unusual for the auto industry to behave this way, but it's how Tesla is able to push on boundaries. And they take advantage of the fact that they have software updates where the Falcon Wing doors now operate about 2x the speed than they did when they shipped because they've made software updates and improved the algorithms for detecting doors and going to the correct height and not hitting things. And some of the early doors did do that. and it's still up in the air whether or not that's going to hurt them or help them but ultimately they've got so many loyal happy customers who once they own the cars say they never want to buy another car that I think it's kind of hard to say it's the wrong approach for Tesla when their customers tend to be so happy and want to buy those cars for the future. Yeah, I think that the model is fine so long as you've got the ability to do repairs and replacements and upgrades as necessary. And Tesla have illustrated that they're more than happy to do that. Where they've had issues, they've had no issues with recalls and getting things retrofitted. I mean, the armor plating, I think on the battery packs, which we'll talk about in a little bit, is an example. I think that ultimately, maybe when they go to a much bigger scale, things will change. But for the moment, when you've got the production volumes at that level, I think you can be far more agile and you can do some cyclical refinement. And I think that it's probably the best end result is that, well, Tesla have got a lot that they want to do with the cars and they're not just happy to just let it be. They want to keep pushing the envelope. And I feel like with traditional auto manufacturers, they're not quite in that space. They're in the space of like the Fords, the Chevrolet's, the Toyota's and Honda's of the world. Their business is to crank out more of the same, keep it consistent, keep it reliable. Well, depending on your manufacturer, I'm pretty sure most of them see it that way. And, you know, you will get some things you have to some cars you'll have to take back. First generation of a vehicle, for example, a 10 year platform, like you mentioned earlier, like the first gen you expect you're going to have problems like we have a first gen vehicle at the moment. It's a Toyota Fortuna. And the particular, this particular model had issues with its diesel particulate filter. So we had to take it back and, you know, that was covered under the warranty, but it's a first of its first generation. So you expect a few problems like that. But apart from that, I don't expect that car to change now for the next five years. Like you could buy this Fortuner next year, it'll be probably exactly the same. You know, nothing new, no updates to it. Same old maps, which are rubbish, by the way. And then you said before that some manufacturers do over the air updates. I wish that they did over the updates for the maps because yeah, getting a map update for this car is going to cost thousands of dollars and it's, why would I do it? I just, I get my, my iPhone on a windscreen suction mount and just load up a Sygic or Navigon or whatever. And that's always up to date maps and you know, all Google maps or Apple maps and it's, why would I even bother? But you don't have to worry about that with a Tesla. Cause it's all up. Yeah. It's all Google Maps embedded into the main screen and much bigger than the iPhone screen. Anyway, so actually on the point about the complexity of the Model X, I think Alan even said at one point it was the hardest car in the world to build. In the world. Yeah. I don't know whether or not that was actually true or that was just his frustration speaking. But in terms of component count, I don't know if that's actually true or not. But yeah, it's they could have made it easier for themselves, I guess, is the thing. But anyway, yeah, and I think they have, they certainly learned a lot from it. And one of the pieces that has flown, uh, sort of, uh, gone through to the model three is the very large piece of glass. Uh, unfortunately in my mind, it's on the back of the vehicle instead of the front. Um, but, um, the model three is, has a huge piece of glass from the rear trunk. Area to the center sort of B pillar. And they've said that, yeah, sort of getting good at building these really large pieces of curved glass. Glass is very cheap. It's sort of the raw materials in glass are certainly cheaper than metal. And so if you can come up with a manufacturing process that works at scale, having glass in your car is going to be a lot cheaper. And so they've taken that learnings from it. I think a lot of the detection algorithms they've done for the Model X for the Falcon wing doors will be helpful to them as well as they do deeper and deeper parking sensor and sort of low-speed detection in autopilot. And so I think with Tesla sort of the recurring theme is because they do so much of the development themselves and they're trying to push the limits you find that that technology is then something that they own. It's not a supplier. They have that know-how and and they have that technology in-house, and so when they want to bring it to future vehicles, it will benefit them, even if it was quite painful. And I think that is certainly one of the biggest sort of business reasons and product reasons why having more vertical integration is beneficial is you get to keep those learnings in-house and bring them to future products. So while most people will never own the Model X, there'll be pieces of DNA from the Model X the Model 3 and the Model Y for sure which will be their smaller SUV. So I don't I don't think it was a mistake I just think that it was probably didn't go how they wanted and they could have been selling more SUVs and more vehicles sooner but it may not have actually made the Model 3 come any quicker because as we'll probably talk about the battery costs are still the primary gating factor for making that sort of vehicle cost-effective. And I don't think the teams working on the Model X were necessarily the same people who could have advanced the battery technology years faster. So yeah, having driven the Model X, I prefer it over the Model S, but both of those vehicles are too large for me, so I'm excited for the Model 3. Yes, indeed. Having listened to every episode of the Tesla show, I have to say, yes, I can, I understand that. And I do like the Model 3, we'll get to it in just a second. So just a couple of things on the Model X. The thing, another thing I love about the Model X is you can tow things with it. Although you can actually get a non-certified towing kit fitted for a Model S, but it's not sanctioned by Tesla, I'm pretty sure. but still in any case and I also remember reading at some point that the X was potentially maybe one of the reasons or excuses that was leaked was that maybe the X was delayed as well because the when it was towing heavy something heavy that cooling the battery pack was an issue because the current drain that may have slowed down its delivery to market as well I remember reading that at some point I don't know if that's true but in any case, so it uses about 30% of the same components from the S but as you said, substantially different, lots of new stuff added in it. The first X was sold in late 2015 and the entry level at the time was about $80,000 US. And the top line model P100D, 0-60 in 2.9 seconds, which is kind of crazy considering that it's a 7-seater SUV. I don't know how many other seven seat vehicles can do that in under three seconds? I think the answer is zero. So that's only, they're the only one. And I think there's about only, they've only made about 60,000 of them to date have been shipped, I should say. So it's still early days for the Model X, but it's a gathering steam and I'm having sat in both cars. I haven't driven either, but I've sat in an S and an X. Again, I prefer the seating position in the X, but then I just, I don't know. I don't mind like, cause when the S is actually quite low to the ground and when you sit in it, I found I was quite low to the ground and it's yeah, I don't know, I guess if it was a sedan, I was expecting it to be sitting up a little bit higher, but the X certainly does and I kind of like that, but at the same time, you know, I kind of have to be thinking of an X because I've got four kids I've got to carry around. So, you know, still. All right. Yeah. Enough about the X. Time to your favorite Model 3. So mid 2014 Tesla announced the Model 3 and they only began shipping, I say shipping in quotes, a month ago or thereabouts at the time we're recording, maybe it's two months now, depending on what you define as shipping. But it's five seats standard and it's not technically a sedan, it's like a, how would you define it? It's like a mid-sized I suppose. I mean, it's still a compact sedan, so it's going to be under the BMW 3 Series or the Civic size. And it does have a true trunk, so it's not a hatchback. Even though it sort of slopes in the rear like a hatchback, it has a distinctive trunk, so the rear glass doesn't lift all the way up. So yeah, I mean, it's going straight after the largest part of the premium segment of the... Well, no longer. largest segment is the compact SUVs but of the sedan side it is the BMW 3-series the Mercedes C-classes the Cadillac C-class CTSs so yeah it's it's going straight for a market that many of those manufacturers sell many hundreds of thousands of those vehicles a year and it's starting at $35,000 US for 210 miles of EPA range and then there's a long-range version that's an extra $9,000 that will go 320 miles and then 310. So the long-range one has a very very strong amount of range and even more than many people who follow them pretty closely expect it. And I think this will be the breakout vehicle for Tesla. I think it you The Model S has won Car of the Year awards. The Model X is super impressive and gets a lot of attention. They're both very safe vehicles, so they get a lot of positive press when people unfortunately get into accidents but are able to walk away. And then their performance, when you have videos on YouTube of people doing drag races against pretty much every production car and the Teslas are winning, there's a lot of positive halo around those vehicles but to be fair most people cannot afford nor should they try to afford one of those vehicles and a lot of people who have bought those cars really stretched to get one because of it being a Tesla and they wanted to be environmentally friendly or they wanted the super high performance or they just really wanted to support the company in some way but the Model 3 is definitely going to be a much more important car for the entire industry and for Tesla in particular because it has the potential to sell hundreds of thousands of units per year and that really starts to make a difference where you will have people seeing them all the time in many more places that people who have normal car payments on you know somewhat nice cars could now have a Tesla instead of you know only people who are very very wealthy and so sort of the biggest knock on Tesla has been that it's cars for rich people yeah and the model 3 is certainly not a $20,000 $12,000 car so I'm not claiming that they're you know for everyone but the difference between an $80,000 car and a $35,000 car is massive in terms of demand. It isn't a linear demand curve. And so I think that's the really big thing here is bringing the DNA of Tesla. So you've got this really high performance car where even in the base model it's going to have a sub six seconds here to 60. That it's going to have 200 to 300 miles of range which for most people will be great. It has access to the supercharging network which we haven't talked about but is basically Tesla's proprietary charging network that they have over 900 locations and thousands of individual plugs all around the world. It will have five star safety crash rating. It hasn't been tested fully yet but they're still confident in that rating that it will have this very large 15 inch widescreen touchscreen that will have the same Tesla experience of controlling the car from the touchscreen and it even has more it pushes further than the Model S and X it has these incredible HVAC system that there's no vents the massive amount of glass the really premium interior and handling that's incredible because the battery pack is in the sled so you've got a very low center of gravity. So I think it has the potential to be probably I think it has potential to to do better than the 3 Series and just as the Model S has done. So that's sort of my expectation and my sort of excitement for the vehicle is that I don't I get to walk to work I'm very fortunate and I don't really drive a ton but when I do drive I'm I've always sort of lusted after having a Tesla but it's just too expensive for what I really need in a car and really should should be paying for a car. But the Model 3 is you know possible and so I put down my reservation and I'm a fan of it and It's just sort of been exciting to to watch and pay attention to what they're doing. So Yeah, happy to dig in any more on particulars for the model 3 But it's definitely the thing that's gotten me the most excited about Tesla. Obviously, I've seen them for years Being in California and the Bay Area in particular, but the model 3 is sort of the first one that's possible for for me to own and so particularly excited about it. Yeah, I understand. I mean, I'm also, I am excited about the Model 3. My problem is the number of people I have to carry in it. If I had to get a vehicle that was just for me, then whilst I would prefer a Model S, I'm in the same kind of boat as you are. It's like, it's difficult to justify that amount of money for a vehicle just for one person, but a Model 3 becomes something that you could use as a daily driver that would be within reach. And I realize that I'm here in my part of the world, we're at least a couple of years away probably from getting deliveries that can drive on the other side of the road and so on. But bottom line is that in terms of performance, I mean it has everything, it has Tesla's DNA in it for the want of a better way of putting it. And the thing that I find interesting is that for all of the stuff that they did on the Model X, that they put newer and newer technology you know, and you rattled off a whole list of them, like the HVAC system and the single display. And a lot of the other stuff that they're doing in the Model 3 is new, like the entry, the key card, smartphone entry system and everything, which I don't want to delve too much into, but it's like all these things are all new in the Model 3 and they're all big steps forward. And I don't know how much they've held it back or if they haven't, but it just shows that Tesla are know when they're done in pushing the vehicles forward with new technologies and new approaches to solving the problem. So I'm really excited when they get to mass production. My biggest concern is, well, how long is it going to be before they're able to produce in that sort of volume? And I know that Elon's been very bullish about being able to ship, you know, like get through, what was their backlog? There's 350, 400,000 pre-orders, I think? Yeah, around 450,000. 450, yeah. So, I mean, and he said he's going to get through that in what, a year and a half, 18 months or two years? Yeah, that's the goal. They want to end the year doing 5,000 vehicles per week production and then end next year at 10,000 per week. Which, depending on where in the year they do that, they could theoretically get through the backlog by the end of next year. Yeah, that's intense. I mean, I really hope that they do, don't get me wrong, and I want them to succeed, but that is aggressive, very aggressive. considering their production rates currently for the S and the X. And I realized that they're the, they've designed the three more for manufacturability, which is a, um, which is one of those things that a lot of people don't think about. This is that there's, um, there's design for reliability, design for maintainability, and there's design for manufacturability. And often these are in direct conflict with each other. So the, the easier something is to manufacture, for example, the more difficult it might be to maintain. So you could do like, um, you know, resin injection or something like that to keep, uh, make it more weatherproof and more reliable, but then you can't maintain it. Yeah, it's like these are all competing objectives and it's interesting, it'll be interesting rather, I should say that to see whether or not they can actually realize those production improvements in the Model 3. I watch on with a lot of anticipation and interest because it is truly the mass market sector model of vehicle that will truly change the game for the rest of the industry if it hasn't already, even just by the fact that it exists. But in terms of performance really quickly, the standard battery model 0-60 5.6 seconds and the long range model 5.1 seconds. And that for a car that's within grasp is still very very impressive. So, full marks to Tesla, they look like they've done a wonderful job. So for me it's just a matter of watching their production ramp and as a reservation holder I hope that you'll not keep waiting very long, basically. Yeah, no, thanks and same I think a couple things on the production side at least data points from Tesla and then sort of my own Interpretation I guess would be Elon talks about a lot is you know when they went from Roadster to Model S They went from one production method of pretty much hand-built Where they could do a couple dozen a week to doing a couple thousand per month with the Model S and that was a huge step change in production volume and the enabling factor there was that they went from hand-built to a factory And that factory, you know, they had to put that line together very quickly And they also this was the first time they were doing them on a car. And so they they weren't quite sure what they were doing necessarily and with the Model 3 What they've done is they've dedicated a very large percentage of the factory to Model 3. So for folks who haven't visited the factory I think they may think well this 5.6 million square foot factory is only producing a hundred thousand cars that seems pretty inefficient compared to what BMW or Toyota or Honda will do in a similar facility size. And I think what they sometimes might forget is that Tesla is only using a portion of the factory to do the Model S and X. There's been a very large percentage that's just literally been dark and hasn't been used and that's where they've been building the Model 3 production for final assembly and for the body in white which is sort of when they you know glue and rivet all the pieces together for the body and weld. So that whole section has been brought online and the very first few cars have been built in a much slower process either by hand or now sort of running through the line. But the time to build the car, Elon and the team have said, is about four times quicker. It uses four times less human effort. And so in the same square footage as the Model S and X, they're able to do 400,000 cars a year. And that's sort of what the baseline is. The other big thing is that they know they now have this many reservations. I think one of the benefits for Tesla taking reservations is that you get to understand the future. For most products you are having to forecast what to build on past data or historical trends but you don't really know if someone's going to come into your store and buy something. When you take reservations you can eliminate some of that risk because you have some sense that there's a very large amount of demand and so over a year and a half ago they knew they had way more demand than they were expecting. And so that allowed them to go back to suppliers and work with better suppliers, make sure the suppliers took them seriously. Because one of the big concerns with any auto manufacturing process is that you've got 5 to 10,000 unique parts coming from hundreds and potentially 1,000 plus suppliers. If any of those parts aren't available and you don't have the capability to make them in-house, you can't make the car. And so it really is the slowest, most unlucky, or most incompetent supplier can stop production. And so you want to work with the best you can. And companies like working with other companies where they know they're going to have a lot of business. So that's one big advantage for the Model 3 over previous cars in terms of their ability to ramp is supplier sort of stability and supplier quality. The other piece to your point is they've actually designed this to be manufactured. And so from the experience of the Model S and the Model X, which the Model X was very difficult to manufacture, they've been able to eliminate steps of the process and taking out humans, taking out human judgment, roboticizing a lot of the work, and making a production line that's much more robot dense so that it can be done at the precision of a robot and at the speed of a robot instead of the speed and precision of a human, which nowadays is less. So I think those sort of factors all play in. And also, Tesla knows this is critical. They've really made the Model 3 simpler and cut out features. And to your point, I think it is very impressive that there are so many new features that it makes me wonder what's going to be coming in future generations of it, because they've clearly cut back. Elon has explicitly said there are features they've held back just so that they could focus on the manufacturing process and get engineers working on that. And I think they certainly are going to be doing everything they can to make them as quickly as they possibly can. And we know at least this point that there are 300, 400 or so vehicles have now been delivered to employees and they're shooting for around 1500 by the end of September. So we'll know in a couple of weeks, depending on when the episode comes out, how they're doing, but eventually I think they will get there. And the important thing is where they're at in a year, where are they at in two years, and is the demand still there? And ultimately, you know, that's the thing that will matter to Tesla and to customers. You know, for me personally, waiting an extra month or two is definitely annoying, but in the long arc of time, I think we'll sort of forget about the first few months and we'll care more about the quality of the car and how well Tesla's doing overall. Yeah, I think it's going to be very much like the new, the new iPhone. And when I say the new iPhone, I mean, that's the repeating meme every year, the new iPhone. Yeah. It's like there's always a queue up on day one and there's shortages for the first month or two. And then after that, you can walk into any store you might like and they'll be just available on the shelf, go grab it. And I think that the Model 3 will be no different, but just on a lot longer timescale. I think that the pre-orders are a really good indication that Tesla have done that all of the momentum that Tesla has gained between the progression from the Roadster to the S to the X shows how much people are partially lusting, I suppose, to a point. I mean, okay, there's definitely an element of lust in it because, I mean, to put a thousand dollars down or fifteen hundred dollars down, depending on where you live, to get a reservation for a three, Doing that up front and say, here, Tesla, hold on to my money for me. That takes a certain amount of passion and excitement to want to do that for a vehicle that hadn't even been- I mean, when people, they opened up reservations, they hadn't even shown- They hadn't seen it. No. Yeah. It's like that's sort of- that's amazing. The fact that Tesla have actually been able to do that is quite impressive. And I know that some have dropped off, but then again, lots more have also signed up and reserved since. they've revealed it. So anyway, look exciting. - Yeah, and I think it does make some people frustrated the same way that Apple makes a lot of people frustrated is that it's just branding. Apple is just branding and it's well, if you think that that's what you think, but it's trust. People line up for the new iPhone because they trust that their previous iPhone was great and that what Apple says is gonna be better, will be better. and they're not perfect, but in general, the next iPhone is better, and people care deeply about their iPhone and their smartphone, and they love that experience that they are given. And so it's trust. And what Tesla has been able to do, and the reason I follow Tesla so closely now, I used to follow Apple a lot closer, or I used to follow Apple closely, and now I follow Tesla more closely, is I just see a lot of parallels of people seeing a premium product previously in the Macs and then the iPods bringing that to more people and then coming out with a new product in the iPhone and it was just demonstrably better in many, many facets in an industry that had sort of been stuck not really doing much improvement. And you could use those same exact words to describe what Tesla's been doing. And so when you see something like the Model 3 and it still exudes so much of what people like about Tesla and actually brings it even closer to the sort of idealized version of what a car could be for a lot of people. I think that's what gets people really excited. You know, I've test driven the Chevy Bolt and that's a Chevy's 230 mile all electric vehicle. And it is good. I mean, I recommended it to my parents. They bought one because they're not going to wait for a Model 3, and they wanted an electric car. But I don't think many people are excited about the Bolt. And it's that difficult to quantify thing that separates products that people really desire and products people buy because they just need them, or it's a very practical decision. And that can be frustrating to people who don't feel that way about the product, but it doesn't mean that many other people feel the same way. So I think Tesla does have that sort of X factor, and it's very intriguing to watch because it's from Elon all the way down to the product, to the mission of the company, to the environmental factor, to the sort of crazy performance levels. I mean, there's just so many parts of the story that are really intriguing. And then to the autonomy piece, which I'm also super fascinated by. So there's just a lot going on that all blends together to make the car really exciting to people. And they tend to sort of be extreme in all those areas. So if you care about environmentalism, getting an all electric car is great. If you care about performance, Tesla is pretty much the highest performance car you could get. If you care about autonomy and pushing the boundaries there, Tesla is pushing the boundaries for you. So it's really intriguing to have a company that pushes the buttons for so many people at almost the peak. There is no other automaker that pushes that level for so many different things that people care about all in one product. And I think that's what makes them pretty special. - I absolutely agree. And you mentioned Tesla's mantra, motto, mission, or whatever you wanna call it, is accelerating the advent of sustainable transportation. And it kind of says it quite nicely, I think. but they do also do so much more like on the performance as well as on the autonomy. So and you mentioned also branding and on branding, I actually just want to quickly touch on that on the naming, which I found to be quite a fascinating little journey from the Roadster that started off being unofficially 1.5, 2.0, 2.5, which really wasn't an official thing to the branding of the S and the X. And so there's a couple of ways that they differentiate their models. Cause there's the Model S, but it's not as you know it. So you've got the D, which is dual motor, or I suppose S in the absence of that, because I don't think they ever wrote S on the car. It was just sort of like an implied single motor, I think. I'm not sure. Right. Yeah. It was just model S 100 or 75 or 85. Yeah. So like the S was silent, but anyhow. So the D for dual motor, otherwise known as all wheel drive. So that's the smaller motor in the front and the primary drive motor in the rear. Then there was the P for performance models. And they all by requirement had a larger battery pack and, you know, higher specified switch gear internally. And then of course the actual number that people think of is the battery pack size measured in kilowatt hours, usually rounded up or down to the nearest kind of round number. And that sort of embedded and that became the model, the sub model number, I suppose. And, and the, so you had the P100D as the top of the line and the 85D for example, for dual motor 85 kilowatt hour, similar for the X. And I suppose the thing, the problem that I had with that is that people, people don't want to think about the obvious, well, the obvious baby to us, like things like the drag coefficient of an S and an X is different. The curb weight's different. Hence your overall efficiencies, that isn't going to be the same. So if I've got a 90 kilowatt hour battery on a Model S versus a Model X, I'm going to get different ranges. So whether or not it even makes sense to mention how big the battery pack is in terms of an actual number, I don't really think it in the long term really makes much sense. And I think looking at the model three, they talk about the standard and the long range version. I think that's a far better way of going down the road. It makes me think a lot about like the SNEX numbering makes me think a lot about the specs and numbers game that PC makers used to do back in the nineties and the early noughts. And it looks to me at least like Tesla's getting away from that. I think. Yeah, they certainly are. I think you're right. They're reading the tea leaves the same way I am that the model three does not a badge on the rear. It doesn't even say Model 3 on the back of the vehicle, it just says Tesla. So similar to the way that Apple has continually removed branding and badging from their products, Tesla is removing branding and badging. And yeah, the kilowatt hours do not make sense to people. I don't think most people know what a kilowatt hour is. They don't know what that 70 means or 80 means and it to your point as more and more electric vehicles come out it isn't a comparable metric due to the efficiency of the vehicle and so it is not a useful feature for consumers it's sort of too technical of a spec and I think you'll see Tesla move the Model S and X to short to regular and long range as well. I think similar to Apple having three battery capacity or storage capacities and now they've just got two. At some point you just sort of need, well do you want the regular or do you want sort of the extra bonus-y bigger one? And yeah I think that's sort of where they're going and they also have the ludicrous mode which is a little underline on the badge so they've got a lot going on and so to your point earlier, if you're in a Model 3 you won't know the difference between the $35,000 Model 3 or the $80,000 fully specced out Model 3. And from what I've seen, people who buy the $100,000, $80,000 version are a little frustrated with that because they want to show off that they bought the really rich one. But the people, everyone else who buys the majority of the others are really happy about that. Because then if you hear, oh, the Model 3 goes zero to 60 in 5.1 seconds, but you've got the 5.6 second one, no one knows. So they think you've got a quicker car. And I think it'd be unrealistic to not describe that a lot of people buy cars as sort of an avatar for themselves to sort of, it says something about me if I buy a Subaru versus a Hummer or a Tesla, right? And it's not just about the functional. Well, it gets me to my work in the same amount of time, so it's irrelevant. If that were the case, people would buy the cheapest and most reliable vehicle possible, that's the smallest for their needs. But people clearly don't do that. And I think that's just evidence proof that clearly people care about what the car says about them or what they believe it says about them. And that's something that Tesla has keyed in on. And as more and more people want a more tech focused, good for the environment vehicle, Tesla is ready to accept them as a customer. And there aren't too many other really great options. And I think that's the frustrating thing for me, or just sort of still puzzling is, to your very early point on the conversation, why would you be charging for map updates? Don't you understand that people are using their smartphones? They're not using your bad maps. What are you doing? Why are you putting, why is any engineer in your team doing any work on that with this old method? So if they get that wrong, if they think people are actually gonna do that, or they're so cynical that they wanna charge $2,500 for a map upgrade 'cause some people will do it, if those are the same people making decisions, how could you imagine they're gonna make good decisions about all these other things that need to change about their business and about their cars? And I never was into cars, but because they just seem to be the same. They were basically all the same with slightly different badges. They all compete on the same features. They all are exactly the same size, weight, dimension. I mean, it's incredible if you look at a mid-sized car, they're all within an inch or two of themselves in every dimension. So they're clearly copying each other. There's no doubt. And yet the one company that seems to be pushing the boundaries that they should be copying from, they're not. And clearly they will in the future, but they move at such large, slow timeframes of 10, five, 10 years, that it's gonna be a long time. And Tesla isn't standing still. And I think that's, you know, if you look back at like Google and you're like, hmm, there used to be all these terrible search engines. They were all the same. They all had these big portals. And then Google came along and had this fresh approach. You'd be like, well, clearly Yahoo and Excite and ask Jeeves are gonna copy Google because they figured it out. But they didn't because there were durable, competitive advantages that Google built and they weren't stopping, they weren't getting worse, they were getting better. And I think, at least in my view, that is the more likely scenario here with Tesla is that they actually get to build on their lead versus getting absorbed because the advantages that the traditional car companies have are not the same advantages needed that is what Tesla cares about. So if Tesla can figure out production, and that's the biggest question, even in my mind, but there's clearly evidence proof that there are many car companies in the world that can produce lots and lots of cars. So there are people in the world who know how to do it. - Yes. - That they may wanna work with Tesla more than they work with their current car company. And if they can attract those people and do this, then the other things that they have huge advantages in, the other car companies don't. So not that I don't really care if Tesla wins, but I just find it so interesting how many people are betting that Tesla's gonna fail. Like the failure case for Tesla seems pretty rough now to imagine that they're gonna fail or go bankrupt at this point. - No, no, they're not going to. - They could possibly be less important, but there are plenty of car companies that are about their size that still continue to exist. So that seems like an unlikely scenario of complete failure. It's just a matter of how big is the magnitude of impact. But again, you look back at Apple In 2001, 2002, I don't think many people would have predicted that they would be the largest market cap company in the world 15 years later, 16 years later. And yet it's still philosophically the same company. Yeah. I mean, certainly not in the mid-90s, that's for sure. Well, yeah, even way back then. But way back then, there was certainly a lot more turmoil happening, right? Like going through two or three CEOs and basically going bankrupt and cutting your product line down to four products is a pretty big shock to the system. But in 2001 they were doing really well, but people were like, well, it's cool, but it's a music player. Like that's not a big deal. The iPod you mean. And the thing is with the Mac is that the iMac at that point had sort of come out and it was, you know, it sure was pretty and it had a great carry handle, but I mean, really seriously it's not going to change the world. But the funny thing is people didn't see the iPhone coming and when it did, it just changed everything. Apple's entire fortune. So it just took it didn't change your entire fortune I suppose. It did and didn't. It pushed it up into a much higher gear than anyone expected was possible and now look at them and I feel like Tesla's has that same potential in the car market. So what's going to be exciting is to see how this unfolds in the next five years. If you'd like to talk more about this you can reach me on Mastodon at [email protected] or you can follow @engineered_network on Twitter to see announcements about all the shows on the Engineer Network, which you can find at Causality recently has taken off. It's a solo podcast I did that looks at the cause and effect of major events and disasters in history. So if you're a fan of Pragmatic, you may like it as well. So be sure to check that out. If you'd like to get in touch with Caleb, what's the best way for them to get in touch with you, mate? Yeah, probably on Twitter @theteslashow or Awesome. And if you'd like to send any feedback about the show or the network, please use the feedback form on the website. That's where you'll also find show notes for this episode. If you're enjoying Pragmatic and you want to support the show, you can. Like some of our backers, Ivan and Chris Stone, they and many others are patrons of the show via Patreon and you can find it at or one word. So if you'd like to contribute something, anything at all, it's all very much appreciated. A special thank you to all of our patrons. A big thank you to everyone else for listening and as always, so thank you very much for joining me to talk about Tesla. Thanks John, always appreciate it. Cool. So that was the end of part one of this particular episode. More will be coming up in the next episode. [MUSIC PLAYING] (upbeat music) (upbeat music) (upbeat music) (upbeat music) (upbeat music) (Music) (upbeat music) (upbeat music) (upbeat music) (upbeat music) (upbeat music) (upbeat music) (upbeat music) [Music] (dramatic music)
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Show Notes





Episode Gold Producer: 'r'.
Episode Silver Producers: Chris Stone and Eivind Hjertnes.
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Caleb Elston

Caleb Elston

Caleb is a passionate Tesla follower and has run a wonderful and informative Tesla-centric podcast, has been on several Fremont factory tours and attended some of the recent Tesla events.

John Chidgey

John Chidgey

John is an Electrical, Instrumentation and Control Systems Engineer, software developer, podcaster, vocal actor and runs TechDistortion and the Engineered Network. John is a Chartered Professional Engineer in both Electrical Engineering and Information, Telecommunications and Electronics Engineering (ITEE) and a semi-regular conference speaker.

John has produced and appeared on many podcasts including Pragmatic and Causality and is available for hire for Vocal Acting or advertising. He has experience and interest in HMI Design, Alarm Management, Cyber-security and Root Cause Analysis.

Described as the David Attenborough of disasters, and a Dreamy Narrator with Great Pipes by the Podfather Adam Curry.

You can find him on the Fediverse and on Twitter.