Sunday, January 30, 2011

Why I Bought TSLA

I've been watching Tesla Motors for a few years, back when the Roadster was only a prototype. I've chatted online with Martin Eberhard and a few other early employees, and I watched with some dismay when many of them were forced out of the company. I've watched as they took less than ideal available components, improved them, and made them into the fastest production electric vehicle ever built. I've watched the company repeatedly do what detractors said couldn't be done. I've watched as major automakers stood up and took notice of what this little company had achieved. I stayed away from the IPO, stayed away when the price came back down after the euphoria, stayed away when it ran back up, and stayed away after it dropped back down after the 6 month lockup ended. I was hoping for a larger pullback but it never materialized. After all this time I can no longer ignore the potential of this company and what I think they are capable of, so I'm in. To me their biggest weakness has been their use of commodity cells to build a pack, yet by using them they've built the least expensive and most energy dense automotive pack on the market, and they will soon be using even better cells. Since the weakest part of their technology has proven successful and it's likely to get even better it's hard not to have a positive outlook on the company. The employees are skilled, passionate, and driven, as is Elon Musk. While I did not like his handling of the restructuring of the company and some of his design decisions I can't say that he was necessarily wrong. He obviously has what it takes to make innovative companies successful and I think betting against him is a mistake. The Model S sedan design is progressing well and looks to be as ground breaking in the performance sedan market as the Roadster was in the sports car market. Recent agreements with Panasonic should give them good pricing on improved cells. Partnering with Toxco and Umicore will provide a comprehensive recycling program for their battery packs when needed.
They continue to advance motor and controller design, battery technology, and vehicle design and construction. While some concern has been raised about rare earth magnets their motor doesn't use them. At 70lbs, 250hp, and 300 ft/lbs of torque they have the best power to weight ratio of any production EV motor. Their methods and results are actually influencing established automakers such as Toyota, who has partnered with Tesla for their RAV4EV program.
Tesla doesn't want to just build EV's, they want to build desirable vehicles that also happen to be EV's. Unlike most companies who try to keep costs as low as possible and target the general buying public Tesla has chosen to build vehicles without compromises that take full advantage of the benefits of their electric drive trains. A common complaint against Tesla is the average person can't afford their vehicles, which is true, for now. However, does BMW, Porsche, or Ferrari get hit with similar criticisms? Sure we all wish we could afford such vehicles but we don't argue that they should lower their quality or performance to achieve lower costs. Tesla creates products that compete directly with high end vehicles while also offering oil free transportation. They think, and I agree, that there is a strong and growing market for such products. The larger volume of the Model S production building on their experiences with the Roadster production will help them lower costs and move them towards profitability.
EV's are coming.  Tesla has led the way with the first real production EV in the 21st century, and I don't see them losing that lead any time soon. They won't lead in volume but they will lead in technology that other auto manufacturers want and in producing vehicles that people want. Going forward I don't see anything stopping them.


  1. JP - Interesting article. I'm not a car guy and wasn't an EV enthusist until I computer researched and read about Tesla in Nov 2007. As a retired Air Force guy who has a nephew currently serving his third tour in the middle east, I was looking for a way to get off of the oil vehicle merry-go-round. I bought a Tesla Roadster (#562) and have been using it as my only vehicle since Aug 2009. I bought a few shares of the IPO against my brokers advice and have held on to them through the ups and down of the first half year. As you are much more an expert in the EV world than am I,I hope your vision of Tesla is the correct one and they do in fact lead this technology for years to come.

  2. JP - Awesome post about Tesla, you have been a very patient investor. I bought in in late 2010 and again just recently when the share price dipped to 22.80.

    Secretly I hope the share price has another dip before the model X is announced later this year, after that point i see this stock gaining momentum as the production signature model S vehicles start rolling out in 2012.

  3. I grabbed some more on the drop as well, will probably do the same if there is another dip.
    If you haven't seen it there is a great piece on Elon Musk and Tesla, about an hour long.

  4. A friend who builds portable industrial fans said that they cannot find anything that even approaches the power to weight /size ratio of Tesla's motor. Something on the order of 10 times. Another part of Tesla's secret sauce -one that no one talks about.

  5. Yes, though typically industrial motors are rated at continuous power not peak, so that may explain part of the difference. I am puzzled by most OEM's still using PM motors instead of induction, but they may have an advantage in startup torque in relation to current. Mate Rimac has gone with PM motors instead of induction for his supercar, which surprised me since I know he was working on induction motors as well.
    I guess he hasn't figured out all of Tesla's tricks yet.

  6. JP writes about the Tesla motor, " At 70lbs, 250hp, and 300 ft/lbs of torque they have the best power to weight ratio of any production EV motor."
    The claim of 70lbs weight is deceptive and actually wholly false. What weighs 70lbs is just the motor iron and it can't run without the electronic motor controller. The huge electronic controller sits between the battery and the motor and generates and distributes the polyphase currents among the three phase windings. This controller must be able to handle over 250KW of power, a huge amount, using pretty massive solid state components. The controller for the Tesla motor weighs in at about 150 lbs and must be considered as part of the motor.
    While the combination still gives pretty impressive numbers, it seems that Tesla and Musk must always overhype their capabilities, but to the detriment of their credibility.
    Incidentally, the motor and controller design were purchased from the real designer, Alan Ciccone, and his company, AC Propulsion. The basic Roadster design was also purchased from AC Propulsion and is based on that company's Tzero sports car.

  7. You're really knocking yourself out with misinformation aren't you? Tesla no longer uses the ACP unit nor do they license the rights, they've come up with their own design. I highly doubt their controller weighs anywhere near what you claim since I've seen more powerful controllers that weigh much less. The old ACP unit used to include a DC/DC inverter and battery charger as well, it was not just the motor controller. I'm well aware of the Roadster history, but thanks anyway.