Long road to success for mass-market electric and driverless cars

Elon Musk has built the Tesla Gigafactory in the midst of the Nevada desert. But even the deep pockets of the greenminded billionaire could be challenged by the investment needed to create mass-market cars that are electric and driverless, writes Jon Gertner.

Elon Musk, pictured on stage with the Tesla Model 3.

Twenty miles east of Reno, Nevada, where packs of wild mustangs roam free through the parched landscape, Tesla Gigafactory 1 sprawls near Interstate 80.

It is a destination for engineers from all over the world, to which any Reno hotel clerk can give you precise, can’t-miss-it directions. The Gigafactory, whose construction began in June 2014, is not only outrageously large but also on its way to becoming the biggest manufacturing plant
on Earth.

Now 30% complete, its square footage already equals a small city of construction workers, machinery and storage containers has sprung up around it.

Perhaps the only thing as impressive as its size is its cloak of secrecy, which seems of a piece with Tesla’s increasing tendency toward stealth, opacity and even paranoia.

When I visited in September, a guard at the gate gave militaristic instructions on where to go. Turning to my Lyft driver, he said severely:

“When you complete the drop-off, you are not to get out of the car. Under any circumstances. Turn around and leave. Immediately.”

To hear its executives tell it, Tesla is misunderstood because it is still perceived as a car manufacturer, when its goals are more complex and far-reaching. But at least some people have bought into these grand ambitions.

This summer, Tesla’s stock- market valuation at times rose above those of Ford and General Motors, and its worth exceeded €60 billion.

It did not seem to matter to investors that the company had never made an annual profit, had missed its production targets repeatedly and had become enmeshed in controversy over its self-driving “autopilot” technologies, or that Tesla’s chief executive, Elon Musk, had conceded that the value of his company, of which he owns about 22%, was “higher than we have the right to deserve.”

Tesla was a headlong bet on the future, a huge wager on the idea of a better world. And its secretive Gigafactory was the arsenal for a full-fledged attack on the incumbent powers of the car and fossil-fuel industries.

The factory would help validate Musk and his company’s seriousness about leading humanity’s turn to greener technologies, with a vision now encompassing solar roofing tiles and battery packs for home and industry.

Most crucial, it involved producing millions of Tesla cars and trucks, all of which would be sleek, electric and self-driving.

If ambitions were all it took, Tesla would be crowned the colossus of the global car industry.

But rapidly accelerating new technologies have brought uncertainty as well.

Automakers are encountering three destabilising forces all at once: automation, electrification and sharing. And sizing up which companies will be the winners and losers in their wakes is in no way obvious.

In terms of self-driving cars, it seems likely that long-established companies — General Motors and Ford, as well as BMW and Audi — will benefit from their substantial reserves of cash and deep manufacturing experience.

Because these automakers can invest deeply in research (and spend hundreds of millions to buy start-ups), they can remain competitive with companies less inherently cautious, like Tesla and Waymo, the spinoff of Google’s self-driving projects.

Tesla’s goal has always been focused on going green, rather than creating the driverless future. (Its mission is emblazoned on its factory walls: “To accelerate the world’s transition to sustainable energy.”)

Yet as the automobile industry settles on the consensus that self-driving cars are coming — their promise to improve safety and to help ride-sharing replace car ownership for many Americans propels their inevitability — Tesla finds itself in the midst of a contest to do both.

This set of challenges should be enough for any company, but Tesla has given itself a few others too.

One is to essentially reinvent modern manufacturing processes at the Gigafactory. Yet another is to create the first mass-market electric car ever.

In the meantime, a company that has never made much profit needs to somehow figure out how to do so — that is, to put itself in the black before financial losses and missed deadlines curdle any hope that Tesla inspires, among customers or stockholders, into skepticism.

The Gigafactory is considerably more than a battery factory: It’s the physical embodiment of various technological breakthroughs the company — which just manufactured its 250,000th car — is trying to bring to its cars and energy-storage systems.

Tesla makes motors here for its new Model 3 car, for instance, which are then trucked to its assembly plant in Fremont, California, 240 miles away.

When we went inside, after a labyrinthine walk through offices and up and down stairways, we reached a rapidly moving automated factory line, where batteries were being installed into Powerwalls and Powerpacks — the residential and industrial units that store energy collected from solar panels (or any electrical generator).

Later in the month, devices like these would make their way to

Puerto Rico, where Tesla rebuilt the power infrastructure for a children’s hospital, and southern Australia, where the company is involved in a vast public project to shore up the country’s electrical grid.

Tesla’s grand plans in many respects depend on how much innovation the company can bring to the process of battery making.

Elon Musk had originally focused on electric cars but he now finds himself embroiled in a battle to also bring driverless vehicles to the market.
 

If the Gigafactory succeeds in reducing costs — one battery-industry analyst, Sam Jaffe, the director at Cairn Energy Research Advisors, told me he thinks the company should be able to drive down the price of its cells by 30% — multiple dividends will accrue to Tesla.

Cheaper batteries mean more than cheaper cars. They mean Tesla can put larger battery packs into cars for the same cost, increasing the vehicles’ range, power and appeal compared with the competition. At the same time, they could make its home energy-storage systems more efficient.

Tesla could also gain an advantage in the race to produce autonomous vehicles, or AVs. The electric vehicles, or EVs, that Tesla wants to make autonomous have zero emissions.

If self-driving cars go on rotation, say, in Uber and Lyft fleets, they could run 24-7, possibly leading to more cars on the road.

“One of the concerns about automation is that it’s going to drastically increase the miles we drive,” Stephen Zoepf, the executive director at the Center for Automotive Research at Stanford, told me. “So if we expect as a society that we’re going to be driving a lot more, we obviously want to mitigate the environmental
impact.”

At the Gigafactory, J.B. Straubel, a Tesla founder and the company’s chief technology officer,
recounted the plant’s origin story.

In 2012, he did a back-of-the- envelope calculation and realised that if Tesla were to sell something on the order of 500,000 cars a year, it would require the world’s entire output of lithium-ion batteries at the time.

“We realized, holy crap, this means we need a huge factory,” he said, “because there was no way to do this just by putting in an order with some cell company and have them ship a few more.”

His projections were not far off. When we met in September, orders for the Model 3, which began production in midyear and has been billed as the company’s first mass-market car, were around 455,000 through July, suggesting that the demand for EVs is far larger than any of the traditional automakers ever imagined.

All of Tesla’s cars, including the Model 3, come with cameras and sensors; the sensors are small radar and ultrasonic devices situated around the car’s exterior that could enable it, presuming the right software is eventually developed, to become self-driving.

Because each Tesla car maintains a mobile connection, over-the-air improvements dispensed by the company are a regular feature — tweaking acceleration or braking capabilities through uploaded instructions, for instance.

Self-driving, which Field assured me would ultimately come to pass with the right software and which Musk has repeatedly promoted toinvestors and customers, would allow Teslas to become something much more than they are.

In the parlance of the Society of Automotive Engineers, which has quantified the capabilities a car must have to be considered self-driving, the vehicles will have nearly attained Level 5.

This level denotes a safe and fully autonomous car that can operate in any place, and anyconditions, without a driver. At the moment, Teslas are at Level 2.

Whether the current fleet of Teslas can become AVs is not merely a technical question for the company; it may prove crucial as Tesla struggles to become a major automaker.

In 2006, when Musk began to articulate his aspirations for Tesla publicly, he posted what he called his “Master Plan” on the company’s blog. He wrote that Tesla would transition from making an expensive electric sports car built in small numbers to making a luxury electricvehicle that expanded its manufacturing competence and market share before ultimately entering the electric mass market.

The money from one project would be used to fund each successive project.

And the larger idea was not to sell cool cars, or even fast cars, but to hasten the transition of automobiles from gas and diesel to electricity.

Steve Jurvetson, an early venture investor in Tesla who now sits on its board, told me that there wasn’t much talk of a self-driving future at the start.

“I don’t recall a discussion of autonomous vehicles and driving being part of the original pitch of Tesla,” he said. “It was a big-enough issue to prove that an electric drive train could be a success.”

As he and Musk knew, there had not been a start-up American car company that had succeeded in nearly a century.

In the summer of 2016, Musk updated his vision for the company — “Master Plan, Part Deux”. In the decade since Part 1, the acceptance of electric vehicles had grown to the point where some traditional carmakers, in a surprising turn, were beginning to speak of an inevitable transition to an era when all models were battery-powered.

Entire countries (like China) and enormous markets (like California) were also considering eventual bans on internal-combustion engines.

As EV technology seemed ascendant, a variety of factors outside the autoindustry were creating real potential for self-driving vehicles: great gains in computer-processing power, cheaper hardware sensors, better mobile connectivity, advances in
artificial intelligence and enhanced mapping software.

In his updated master plan, Musk stated that every Tesla would now have self-driving capabilities and that the application of “fleet learning” — a variation on machine learning — would help the company someday deliver a car that was 10 times safer in self-driving mode than when controlled by a human.

Musk also explained a new fundamental goal of the company. Tesla, he said, wanted to “enable your car to make money for you when you aren’t using it”.

In other words, any new Tesla could in due time be part of a sharing network, able to taxi strangers around while its owner worked, slept or did whatever.

What’s crucial here is that the Tesla network, if it becomes functional, can defray the cost of an electric car like the Model 3, which is billed as Tesla’s affordable car but can easily surpass $50,000 with various options.

Musk has promised that before the end of this year, a Tesla vehicle will drive itself coast to coast completely on autopilot.

The Tesla Gigafactory construction outside Sparks, Nevada.

A number of competitors — especially Waymo and General Motors — seem to be closing in on similarly ambitious goals.

But it’s worth noting that no company or researcher has ever demonstrated that a robotic automobile can consistently operate in the everyday world more safely than a car with a human driver.

Unlike other tech innovations, the development of driverless cars cannot count on something like Moore’s Law, which has projected a doubling of computing power at regular
intervals and has allowed Silicon Valley entrepreneurs a clear window into the future.

This challenge is as arduous for Tesla as it is for engineers everywhere working to solve it. And yet the exigencies of Tesla’s business model add an additional layer of
complexity.

To reach its sustainability goals and become profitable, the company must make lots of cars that are electric and sporty and increasingly affordable; meanwhile, to prepare for the future, Tesla has to build cars that eventually won’t need us.

Some of the most experienced researchers working on AVs believe that these are two separate and possibly irreconcilable ambitions and that it makes more sense to focus on a pure driverless car, even if it proves to be a very expensive proposition at first, rather than follow Tesla’s incrementalist policy, which would involve rolling out software on a regular basis until the driver does less and less and finally nothing at all.

Musk declined my interview requests over the course of several months. By early November, the number of Model 3 cars coming out of the factory had fallen far short of what he had promised, the company’s stock price had taken a nose-dive and there appeared to be serious software and robotic glitches at the Gigafactory.

The company’s evasiveness and secrecy extended to self-driving cars, a subject it was unwilling to discuss in any detail.

One Tesla engineer I spoke with, who works on autopilot systems, maintained that the company’s camera and sensory hardware will prove good enough to get his team where it wants to go, which as a near-term goal means cars with a self-driving capability that is twice as good as a human driver (rather than 10 times as good, per the second master plan).

By November, Musk was telling investors that the actual goal was to get the system simply on a par with a human driver and that that might require a more powerful computer in the cars, which Tesla would swap in free if necessary.

There’s no clear indication of whether these efforts are on track, and in the past year, several engineers who ran Tesla’s autopilot unit have left the company.

In early October, Scott Miller, an executive involved with General Motors’ self-driving efforts, charged publicly that Musk was “full of crap” for claiming that his cars could offer self-driving capabilities with their current hardware.

Tesla’s setbacks, Musk noted in November, shouldn’t eclipse the fact that the company has already grown faster by some measures than Ford when it rolled out the Model T in the early 1900s.

He takes a longer view of his business than Wall Street analysts. In a recent TED interview, while discussing his plans for cities on Mars, he argued that it’s a mistake to assume that technology gets better as time goes on.

“It does not automatically improve,” he insisted. “It only improves if a lot of people work very hard to make it better, and actually it will, I think, by itself degrade.”

Long before anyone saw Tesla as a legitimate player in the auto industry, Musk also appears to have understood that in taking chances that no established carmaker would, Tesla could be an innovative force to quicken our slow, plodding progress in transportation.

Imagine Tesla didn’t exist, Steve Jurvetson told me.

“What would the world look like? I have this sinking suspicion it wouldn’t look that different than 10 years ago. A bunch of hybrid cars. A bunch of noise about hydrogen
vehicles.

“You know, I don’t think the world would look anything like today — where entire nations are saying, ‘We’re going to stop making gas cars’.”

The company’s impact, real and potential, is all the more surprising considering that Musk has staked Tesla’s success on the industrial equivalent of a shoestring, lacking the resources of established carmakers.

He has used customer revenue, his own wealth, venture capital, bank and government loans, investments by other automakers and the American stock and debt markets to
effectively fund a multibillion-dollar research-and-development project.

In that way, he has led the industry to the start of a new era. And now his company, hindered by debilitating manufacturing bottlenecks and its extravagant promises of self-driving, is poised to find out whether, in laying the groundwork for an electric and autonomous future, he took one risk too many.

Jon Gertner writes frequently for the New York Times Magazine about science and technology. Adapted from an article that originally appeared in the New York Times Magazine


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