5 Suggestions for a Better EV Incentive

In 2015, more than 17 million vehicles were sold in the U.S.  Of these, 114 thousand of them were cars with cords. That means plug-in cars were less than 1% of new vehicle sales. Specifically, they made up just 0.655%.

As much as we hear about electric cars discussed in the media, they still have a long way to go before they are the main mode of personal transportation. Certainly, I'd like to see EVs go mainstream and the wave of affordable long-range EVs that are coming out in 2017 will help greatly in this endeavor, but even if these are a smash hit, it will take years to make a dent in the massive number of cars that are already on the road.

Crawl, Walk, Run. I get it. The growth trend is there, but it will take a while. If I were investing, I'd rather be on the side with a small and growing market than the one with a large but shrinking market.

So how do you accelerate the growth? Incentives. There would undoubtedly be significantly fewer EVs on U.S. roadways today without the $7,500 Federal tax incentive. Depending on how big of a battery pack a plug-in vehicle has, it can qualify for from $2,500 to the full $7,500 incentive.

The point of this incentive is to encourage sales of these vehicles and it has done a great job so far. However, now that the incentive has been in use for several years, we are able to better understand how it could be better and the impending failure that it has coming.

Incentives? Who Needs Incentives? 

One could argue that plug-in cars, or any product, should stand on its own and that incentives are a waste of government (taxpayer) funds. Since I am writing this on April 18th and recently wrote a big check to Uncle Sam, I can agree with the sentiment. However, I will make a brief case for the plug-in car incentive.

Our government has a responsibility to maintain clean air and they have a responsibility to make sure that we have the energy we need to maintain, if not grow, our economy. EVs help meet both of these goals. And they do it without the need to deploy troops to desert wastelands or send destroyers to guard the Strait of Hormuz.

How do EVs help with these goals? The Union of Concerned Scientist report clearly shows that, cradle to grave, even with the partially coal-powered grid that we have today, EVs produce fewer emissions than gas cars. As coal plants across the country continue to shut down and wind turbines continue to go up, plug-in cars will continue to get greener.

The energy needed to power these cars can be generated right here in the U.S.. Energy storage solutions are experiencing a technological boom whether it's advanced battery tech or simple pumped hydroelectric storage, there are ways to store the intermittent energy that renewable generation often creates. This gives us a home-grown energy supply.

Additionally, gas cars are heavily subsidized every time they fill up at the gas pump. The price per gallon is far from the true cost that is paid for that fuel. There are environmental, health, and security costs associated with every gallon supplied and burned. It has been estimated that gas cars receive more than $12,000 in fueling cost incentives over a typical vehicle lifespan.

So, the case for EV incentives is that they help meet environmental, health, and security goals while reducing the future costs for the same and all of this with an incentive that is smaller than the lifetime fuel subsidies that a gas car receives.

What's Wrong With The Current Incentive?

The current EV incentive has a few problems. I first touched on this topic in February, near the end of this article.

As mentioned in the opening of this article, plug-in cars are currently only a fraction of one percent of new vehicle sales. Despite this fact, Tesla Motors already has to start dealing with end-of-incentive logistics for their customers and GM is not too far behind. This is exactly the opposite of what's needed. The automakers that are successfully putting plug-in cars on the road are ones that will have their funds cut off first. That is because the current system starts to phase out incentives by automaker 3 to 6 months after their 200,000th plug-in vehicle has shipped.

The current system is a tax credit. This means that you won't see the money until you file your taxes. Most people finance their car purchases. This means that it would be much better for them if the incentive could be used to increase the down payment and reduce the monthly car payment.

The tax credit system is also a problem for retirees. Many of them do not have an income, but that does not preclude them from having saving and occasionally buying a new car. Today, many of them work around this by first leasing the car (allowing the lessor bank to take the tax credit) and then buying out the lease. This does not reduce the number of incentives that are paid out and it unnecessarily inserts a middleman.

A Better EV Incentive 

If the law were to be revamped, how could it be better? A couple of ideas that I've heard are:

1) Make it a point-of-sale incentive instead of a tax rebate
This would solve the "wait until you've done your taxes" problem. It would also help retired folks that are often not even filing taxes.

2) Make it $10k, instead of $7,500
This one is straight forward. A bigger incentive will accelerate things even faster. We certainly saw this in Georgia when they had a $5,000 incentive on top of the federal $7,500 incentive. This launched the unexpected state onto the list of top 5 states with plug-in sales.

Additionally, I think other changes are needed:

1) The limit should not be per manufacturer.
The current system penalizes the companies that are early to embrace and promote the technology. If the goal is to have more EVs on the road, then it should not matter which manufacturer makes them. Let the market/buyers decide which vehicles they want on a level playing field. Auto manufacturers that are currently sitting on their hands know that (with the current system) their 200,000 cars are waiting for them and that they can use it later to make cars that will be even more profitable after the innovators have broken down the barriers. This removes the needed sense of urgency. In fact, it may even encourage omphaloskepsis.

2) The limit should not be some arbitrary number of vehicles sold, rather it should be in place until 2% of all new vehicles are PEV.
Why 2%? Hybrids have been in the 2%-4% of the market for years now. This is enough of a sales volume to have an ongoing market. Let me be clear, I think PEVs will continue to grow far beyond this level, but there's no way that *any* incentives should be stopped before this level of sales volume is achieved.

3) The incentive should go down 15% per year after hitting the 2% mark.
The current system has a 50% reduction. That is a big drop. Under the current system, if you miss an end of quarter delivery date by a day, it could cost you $3,750. Smaller steps at an annual rate is a smooth transition (soft landing) to the incentive-free market.

Summary 

Here are five purposed improvements to the federal plug-in vehicle incentive. This incentive is important. It helps us, as a country, achieve many of our important goals. The current system has been in place since 2009 and it is in need of an update. The needed changes are relatively minor and can have a great impact. These changes would help people making car payments as well as retired car buyers.

Tesla Gave Me a Model 3

Tesla has given me money directly and I have made money by investing in them. Now I am giving all of this back to them in exchange for a Model 3.

$1000 Reservation Deposit

When Tesla launched the Powerwall in 2015, I watched the reveal like many others. At the end of the presentation a screen popped up and asked if I wanted to sign up for more information about the Powerwall. Yes, yes I did. After the name, email address, etc., there was a little checkbox that asked if I was interested in solar energy. If you've read this blog much, you'll know that solar is one of my interests, so, of course, I checked the box.

Soon I was contacted by Tesla and they asked if I was interested in talking to someone from SolarCity about solar and potentially a Powerwall. I agreed. Long story short, we had an 8.3 kW solar array installed (but no Powerwall). Soon after the installation was complete, a check from Tesla showed up. It was for $1000. Alright, I didn't even know that was part of the deal. It was a nice surprise.

Six months later, when Tesla announced the Model 3, I gave Tesla $1000 as a reservation deposit. This was the same amount Tesla had given me.

Buying A Tesla Model 3

In 2010, Tesla Motors IPOed. They started trading stock in their company on the public market. I had seen and even test driven the Roadster. It was an incredible machine. It was a reinvention of driving. I was amazed at how responsive it was. I would just think of accelerating and we were moving. I swear I had not even moved my foot yet. The same was true with the tight sports car steering.

So when they IPOed, I read the "Secret Master Plan" and several of their whitepapers on energy efficiency. I didn't know if they were going to be the next in a long sting of EV car companies that would go bankrupt, or if they were going to be the game changing company. But I did know, there would be no middle ground and I was going to buy at least a few shares. I bought a few shares on June 29th, 2010 for $17.84 per share and I started watching the stock. It was slowly going up. On July 6th I bought more. This time at $18 per share. The next day the price dropped some to $16.01. I decided this was a bargain price and I bought my final lot.

Then I sat back and promptly ignored the stock. That's right. I stopped watching it all together. I didn't buy much. Each of these purchases were very small. If the stock went to zero. I had a tax write-off. And I knew that was a real possibility. I bought only enough that I would not worry about it. Individual stock like this, can be very volatile. One news article or car fire and the stock makes huge moves. I didn't want to be on that emotional rollercoaster that causes the wrong move. This is one of the rare cases where ignorance can out performance diligent mindfulness.

Now I am looking at the stock again. And to be fair, I did peek at it now and then. As I write this, the stock is at $265 per share. That is up 1,400% from where I purchased it in 2010. It's nearly enough to pay for my Model 3. I wish I had bought more, I might get a Model X too :)

Blink can't spell FREE

I received an EZ Charge card as part of the Nissan Leaf 2011/12 battery class action lawsuit. I was excited to use it. The idea of a single card that works on multiple networks is much better than the jungle of charging cards I usually carry. And it was free to use for 90 days! I registered on my local networks and was ready to charge!

I drove out to Gresham yesterday. Stopped at a Blink DC Fast Charge (DCFC) station on the way home. There was a Leaf there already and they were just starting a charging session. The Blink DCFC stations have two cords, but only one is operational at a time. I was not in a hurry.

I pulled into the open spot. I grabbed the EZ Charge card and scanned it to start the session. There was a note that this would be a 30 minutes free charging session. I had never seen this 30 minute limitation before. I learned later that it is a restriction on the EZ Charge program, but not on normal Blink members. 30 minutes should be enough so I plugged in. It said, "The other side is in use. Your next." I retreated to my car and occupied myself on my phone while I waited.

About a half hour later, the other car finished and unplugged. I expected my side to start charging. It did not. I went out and looked at the station. I had been logged out. My "30 minutes" had expired! That's right, the session never started, but the time had expired. There are only two primary usecases, (immediate charging and delayed charging) and they didn't even bother to consider them both. If I would have left and then come back an hour later expecting to find a charged car, I would have been disappointed.

So I scanned the card again and it started charging. After 30 minutes the charge stopped. I had enough to make it home, but before I left, I wanted to try the Level 2 Blink station there too, just to see if the EZ Charge card worked. I scanned it, logged in and it said that I would be charged "normal membership rates of $0.39 per kWh." What? It should be free. Did I miss some fine-print. Is it only for the DCFCs on the Blink network? I let it charge for a minutes and the kWhs and pennies were ticking by. I was being charged a fee on my "free card". I stopped the session.

Because of the fee, I logged on to my Blink account and checked my account history. Both the DCFC session and the Level 2 session were there and neither were completely free.

The DCFC session had a $0.25 junk fee on it. Twenty-five cents is not much, but this is part of a lawsuit settlement. The agreement is "Free for 90 days".  I went to Blink's website and found the agreement. Here is the relevant section:

The programs is even called "No Charge to Charge", not "No Charge, but only on fast chargers and some junk fees might apply and you are limited to 30 minutes and must wait 60 minutes between charges-To Charge".

So there you have it. The Level 2 stations are not part of the program. In my region, the Level 2 Blink stations outnumber the DCFC stations by ~10 to 1. Eliminating the Level 2 stations, means most Blink stations are not in the program.

In my experience, reliability of Blink's network has been an ongoing problem, and again they have found another way to disappoint me.

I used this same card on the AeroVironment network and I was not charged junk fees.

Charging can be a fun, hassle-free experience. With Blink, for me, that is too often not the case. I wish they would replace them all with something more reliable and better managed.

The Jungle of Charge Cards

When I was a kid, my parents had store credit cards for nearly everyplace they shopped. They had a Sears card, a Meyer and Frank's card, a Fred Meyer's card, a Chevron card and many many others. They even had a special wallet just to hold all the cards.

Today, I have a collection of charge cards too. Mine, however, are not credit cards; they are EV charging network membership cards. This is a problem. Today, people don't carry a collection of store cards. Carrying a single credit card that can be used anywhere is much more convenient. Likewise, it would be nice to have a single card that could work at any EV charging station.

Why don't the charging stations just take Visa and/or Master Card? Charging transactions are generally small amounts. There are fees that the credit card companies charge with every transaction. These fess can consume most of the profit from a small transaction. This is why you might see signs like "$10 minimum for credit card purchases" at many small businesses.

This why most of the EV charging networks have membership cards. They charge a $10 or $20 amount to join and give you this amount of credit. When you have used this credit, they make another $10 or $20 credit card transaction. This way the small fees for charging up come out of your pre-paid account and the network only makes $10+ credit card transactions. This makes the transaction fees a much smaller percentage of the transaction cost.

If credit cards are not the way go, then what is?

1. Status Que - Carry a bunch of membership cards - No
2. One Card - Most of us have a debit/ATM card and they work at ATMs from nearly any bank (although fees may apply). These ATMs are on a common network such as Star or Plus. This allows them to record the transaction at your bank and give you cash from the ATM you are standing in front of, even if it is not from your bank. 
3. Smartphones - Apps such as PlugShare are offering payment services.

Let's look at each option. 

1) The Charge Brigade 

I have a large collection of charging membership cards. Below is a picture of them. 

There are 14 of them. Some are startups that installed one or two stations, some are for local networks, others are for my workplace, and a few were just to see if I could get them. As my employer tried different strategies for workplace charging (starting in 2008), they changed charging station providers several times. This started my collection membership cards. 

Handing someone a stack of cards like this if they were to rent an EV, is not a workable solution. Even 3 or 4 cards would complicate charging.

The good(?) news is that consolidation is occurring in this area. As with many industries, this may settle on a duopoly or triopoly. Then again, local electrical utilities are just starting to explore this space, so convergence on just a few providers may take some time.

2) One Card To Rule Them All

As part of a class-action lawsuit, Nissan recently sent out EZ Charge cards to many 2011 and 2012 Leaf owners in the US. These cards have 90 days of free use in any of four networks listed below. Additionally, in select cities, Nissan is giving EZ Charge cards to new Leaf buyers with 2 years of free charging. This is a smart move. 

I have activated my account and signed up with all of them (other than Blink, they are having technical difficulties). I am not particularly interested in the 90 free days since I don't charge outside of home or work often and the EVSE provider that my employer is currently using is not on the list. But the part that I am excited about, is that this is one step closer to having a single card that can operate on any of the networks. After the 90 day free period is over, I'll be able to use this card (paying member rates) at any of these networks. Blink and ChargePoint make up the bulk of the public infrastructure around here and now they are on one card.

3) Smartphone - NFC for you and me

The smartphone ecosystem thrives on in-app purchases. Rolling in-app purchases into regular monthly bills and other techniques have been used to solve the micro-payment problem. PlugShare, Greenlots, GE Wattstation, and others allow you to pay for charging sessions with your smartphone.
 

Apple Pay and Android Pay are growing with merchants. These seems like they will be the eventual winners in the smartphone payment arena. If they were to add a small pre-paid buffer, like the charging networks have, they could further reduce the credit card transaction fees. It would be ironic, however, if your phone had a dead phone battery and this prevented you from charging up your car's dead battery.

Summary

The jungle of charging network providers has been thick. Two forces, consolidation and ATM-style network sharing, are allowing you to carry fewer cards. Smartphone payments could eliminate the need for membership cards altogether. Local electric utilities are just starting to enter this space and could have a big impact, especially on billing if they can tie it into your monthly home electric bill. With all of these factors, that pile of membership cards that we EV drivers are carrying today will be something to display in a future museum of transportation because they will be history.

Chevy Bolt & Tesla Model 3, The 1-2 Punch That Kills Fuel Cell Vehicles

The Chevrolet Bolt and the Tesla Model 3 are oft squared off as rivals. You can find this head to head square-off in story after story (and even this blog). Both are 200+ mile range EVs and both are in the ~$30K price range. But there is another foe that these two have in common and that is fuel cell vehicles. If fuel cell vehicles are the future of transportation, then Tesla, GM, and others are wasting their efforts on battery powered vehicles.

Honda, Toyota, and others are betting heavily on fuel cell vehicles (FCV).

2017 Honda Clarity FCV rendering

To see how these technologies will square off we'll look at infrastructure, cost, and consumer acceptance.

Comparing Infrastructure

We have detailed the problems with FCVs here, but the simple truth is that FC passenger vehicles require a vast, expensive hydrogen refueling infrastructure that does not exist.

Plug-in vehicles require infrastructure too, but recharging can be done from any outlet, the very same ones that we use to recharge our phones and computers. Overnight charging in your own garage means that you can start out each day with a "full tank" and you don't have to detour to a filling station.

The one advantage that FCVs can tout over EVs is refilling time. That is, if you can find an hydrogen (H2) filling station. Fast refill time is a great component for long distance driving. However, the few H2 filling stations that we do have in the U.S. are primarily in California. This currently makes the FCVs a regional vehicle, despite their range and refueling speed. You can drive a FCV from L.A. to San Diego and back, but there is no refilling available to make a coast to coast trip.

        

You can drive a FCV from LA to San Diego and back, but forget about driving from LA to NYC.

Comparing Cost

The Toyota Mirai currently sells for $57,500. The Honda's FCV is expected to have a similar ~$60k price tag. The Chevy Bolt is expected to cost $37,500 before $7,500 federal incentive price and Tesla says the Model 3 will be $35,000 before the federal incentive.

H2 filling for the first two years of FCV ownership is currently free. After that, it is not clear how much it will cost. The current estimates available, when broken down as price per mile, are that H2 will cost approximately the equivalent to $6 per gallon gasoline.

Driving on electricity, depending on your local utility rates, it costs about the same as $1 per gallon gasoline.

        

Fuel cell vehicles are twice the cost to purchase and 6 times the cost to fuel.

Customer Acceptance 

Both battery electric vehicles and fuel cell vehicles offer smooth rides and great acceleration driven by electric motors, both can be 'fueled' from renewable resources. Despite these similarities, they have had very different acceptance in the alt fuel community.

Given the small region that actually has H2 filling stations, there are not many places that currently sell FCVs. This has significantly reduced the number of potential customers for FCVs. In contrast, EVs are currently sold around the world. And the Chevy/Opel Bolt and Tesla Model 3 will be sold worldwide.

Additionally, Toyota's marketing has specifically attacked battery electric vehicles. This, and other events, has divide the community into two camps. Many of the customers that are early adopters of alt fuel vehicles are now adamantly opposed to fuel cell vehicles. Without an enthusiastic group of early adopters, you can not move to the mass adoption stage.

        

Fuel cell vehicles don't have the enthusiastic following that is needed to move to beyond a niche market.

Summary

The Chevy Bolt and Tesla Model 3 will coming out and competing with the Toyota Mirai and Honda Clarity FCV.

The Chevy Bolt and Tesla Model 3 will be affordable long range electric vehicles. These two vehicles, and the fast followers like them, will bring new customers to the EV market. These will be customers that were not comfortable with the ~100 mile range EVs and those that could not afford the more expensive Tesla Model S.

The FCVs will be twice the price with a fraction of the locations to refuel. This will leave cars like the Toyota Mirai and Honda Clarity FCV with no significant number of prospective customers.

The affordable 200+ mile EV could be what is finally needed to bring an end to idea that passenger cars are the right segment to first deploy FCVs.

Vehicle Type	Vehicle Cost	Range (miles)	Fuel Cost eqv	Refueling Time
Battery Electric	~$30,000	200-250	~$1 per gallon	30 min to 80%
Fuel Cell	~$60,000	300-400	~$6 per gallon	5-10 minutes

Table 1 - Battery Electric and Fuel Cell Vehicle Comparison

What's Next for Tesla After Model 3

Tesla is soon to unveil the Model 3. This is their affordable high-volume car and it completes their 2006 Secret Plan. So what's next for Tesla?

There's been a few hints, a lot of speculation, and even an April Fools' joke. The April Fools' joke is that Tesla is going to make an RV.

Jokes aside, what will Tesla make after the Model 3? Will it be a motorcycle, a truck, will they bring the Roadster back, will they make a vertical takeoff and landing airplane?

CNN Money quotes Elon Musk saying, “If you’re trying to replace the most gasoline miles driven, you have to look at what people are buying. That’s the best selling car in America. If people are voting that’s their car, then that’s the car we have to deliver.”

The best-selling vehicle in America is a truck. It's the Ford F-150. Musk told Automotive News, “I have this idea for a really advanced electric truck that has the performance of a sports car but actually more towing power and more carrying capacity than a gasoline or diesel truck of comparable size.”

Musk has dropped hints about a small crossover based on the Model 3's platform, much as the Model X was based on the Model S platform. In his now deleted tweet, Musk called this the Model Y. That would complete the set and give Tesla the Model S, ≡, X, and Y. Thereby making Tesla vehicles officially S≡XY.

There have also been hints that Model 3 platform could also be the basis for a new Roadster. With a dual motor, a carbon fiber body, and Maximum Plaid acceleration, Tesla could make a new tire destroying machine.

So what can we expect after Model 3? An electric motorcycle or an RV don't seem likely. An electric truck, a smaller crossover, and a new Roadster seem the most likely.

These seem like the right moves for the company. As mentioned above, trucks sell well in America. We'll see if Tesla can attract a new set of buyers with an offering there. The Model Y will be the affordable family hauler; Tesla's appeal to the soccer moms. And the new Roadster will be a nice nod to their beginnings and give the high end buyers a reason to part with large sums of money to get fast 0 to 60 times and autopilot features.

After these, maybe Tesla really should consider that RV. There's a lot of room for solar panels on top of a Winnebago :-)

It will likely be 2020 or later before we even see alphas of any of these, I wonder which one will be first, or if there are more surprises in store for us.

Live electric!

Model 3 Completes Tesla's Secret Plan

One fan's (ultimately incorrect) rendering of what the Tesla Model 3 could look like

As the March 31st reveal date approaches, the Tesla Model 3 has been dominating the alt car news recently. Many people will be hearing about this vehicle for the first time as the reports from the big reveal are circulated, but it has been planned for a long time.

When Tesla was started, they had a plan to start at the high end of the market and work their way down. Plenty of EV startups had tried starting at the bottom and gone bankrupt. Tesla planned to start at the high end of the market because new technology is expensive. For example, when DVD players came out in the mid-1990's they were over $500. Today, you can buy one for less than $30. Economies of scale bring down prices.

Tesla's plan was to follow this natural adoption curve and use a start-at-the-top business model. In 2006, Elon Musk wrote:

        
XX
X
X

In short, the master plan is:
Build sports car.
Use that money to build an affordable car.
Use that money to build an even more affordable car.
While doing above, also provide zero emission electric power generation options.
Don't tell anyone.

So, Tesla's plan was to create a high-priced low-volume car, then a medium-priced medium-volume car, then a low-priced high-volume car. The first car was the Tesla Roadster.

Tesla Roadster

Tesla Roadster

The Tesla Roadster was codenamed DarkStar. The plan was to use Lotus Elise frames, AC Propulsion motors, and commodity batteries. Tesla would work on battery packaging and battery management. The rest would be nearly as simple as the home EV conversions that many hobbyists undertake. That plan didn't work out as expected.

The car body had to be significantly redesigned. Quality problems plagued the AC Propulsion motors. Tesla had to raise the price and delay the launch several times. These problems nearly killed the fledgling company. But they got through them and learned many lessons that they could directly apply to their next project. In 2008 the Roadster was launched and the campaign to change the view of EVs as glorified golf carts was off to a racing start.

Tesla Model S

Tesla Model S

The Tesla Model S was the medium-priced, medium-volume, part two of the strategy. It was codenamed Whitestar. As a designed-from-scratch project, they again had many unforeseen problems and the launch was delayed. They worked through these issues and launched the car in June of 2012. When the Model S was introduced there were three battery options: 40 kWh, 60 kWh, & 85 kWh. The respective prices were: $57,400, $69,900, & $79,900. The smallest battery pack met Tesla's goal to have an offering in the $50k price range ($49,900 after the federal tax incentive).

Then something unexpected happened.

When the GM EV1 was being sold, there were two battery options: the standard lead-acid pack and a longer range nickel-metal hydride option. The cheaper lead-acid model accounted for the vast majority of sales leases. Many of us expected Model S sales to follow a similar course but things were different this time. The Model S is a vastly different vehicle than the EV1 and the design and tech in Model S made it attractive to more than just the environmentalist crowd.

After 3 months of preorders, the 40 kWh version was just 4% of the demand. Tesla canceled the 40 and said that existing preorders for the 40 would receive a vehicle with a 60 kWh pack and a software restriction to make it effectively a 40 kWh vehicle.

This was just the first step in Tesla recognizing their buyers' attraction to the high-end market. They continued to court the high-end making improvements and adding options that led to higher margin products. Battery upgrades, performance models, dual motors, ludicrous mode, and autopilot moved subsequent offerings up the price scale.

All this upscaling helped Tesla's cash flow.

Is it time for the high volume car?

• The Roadster was done - Phase 1 (low volume, high price)  
• Model S was shipping and winning awards left and right - Phase 2 (medium volume, medium price) was complete-ish.
• So now it's time for the affordable high volume car, right? Almost. 

Phase 3 Needs A Gigafactory 

The battery market had not blossomed the way a high volume vehicle would need. Tesla had defined their mission as, "To accelerate the advent of electric vehicles." This meant that if battery price/production was the limiting factor, that is what they would focus on and address.

Tesla Gigafactory Rendering

In a speech announcing the Gigafactory's site location, Elon Musk said, "This factory is very important to the future of Tesla because without it, we could not make the mass market car."

The gigafactory was not just planned as yet another battery factory. The massive scale of it needs to be mentioned. This one factory will double the global battery production. If you add up all the battery factories in China, Japan, Korea and elsewhere that were operating when the Gigafactory broke ground, this one factory would produce more than all of the others combined.

Tesla expects the Gigafactory to reduce the production costs by 30%. The factory is currently under construction and partially operational, but Tesla will need much more of it complete before moving to phase 3.

So what to do while the massive battery factory is being built? If the low price vehicle is not an option, then another phase 2 vehicle. Let's call it Phase 2.5.

Model X

Tesla Model X

After Darkstar and Whitestar, Tesla aimed for the stars with Model X. It was an ambitious project based on the same foundation as the Model S, but this time in a crossover form. The stats for the Model X are filled with in-class superlatives (fastest, safest...). It has the largest panoramic windshield of any vehicle in production. The gullwing doors are double hinged and Tesla has dubbed them falcon wing doors. The double hinge allows them open and close even in tight spaces.

Just as with Tesla's first two cars, this vehicle was plagued with production delays. Again, given time, Tesla's engineers worked through the issues. In a recent earnings report conference call, Elon Musk said that it was hubris that caused Tesla to take on such an ambitious project and that no car company, not even Tesla, will ever again make a vehicle so great.

Many have lamented that the Model X was causing the affordable car to be postponed. This is not the case. What's delaying the Model 3 is lithium batteries produced on a massive scale, but it's coming.

Model ≡

So we are finally going to see the Tesla Model 3 at its unveiling set for March 31. The Model 3 was codenamed Blastar Bluestar and it is the final step in the original secret plan. The low-cost, high volume 200+ mile range vehicle. Tesla has confirmed that the base price will be $35,000. As with their other vehicles, there will likely be multiple battery options and possibly an all-wheel drive (dual motor) option.

But enough speculation, we'll learn more about Model 3 in less than a month. The real question is, when the Model 3 is shipping and the secret plan from 2006 is complete, what will Tesla do next?

Plug-in Hybrid SUVs Are An Underserved Market

Two years ago I wrote that my next vehicle would be a plug-in hybrid SUV.

Yet I'm still waiting to buy that vehicle. In the 2014 story, I listed many PHEV SUVs or crossovers that were "coming soon". A few have actually made it to the U.S. market, while others, like the Mitsu Outlander PHEV have been delayed again and again.

Some of these may be hard to find, but are plug-in SUV and crossover models that are for sale in the U.S. today:

Porsche Cayenne S-E

Base MSRP: $78,000
Federal tax credit: $5300
Technology: Plug-in Hybrid
Body type: Crossover
Seats: 5
EPA Range: 14 miles electric + gasoline
Battery size: 11 kWh

BMW X5 xDrive40e

Base MSRP: $64,000
Federal tax credit: $4600
Technology: Plug-in Hybrid
Body type: SUV
Seats: 5
EPA Range: 13 miles electric + gasoline
Battery size: 9 kWh

Volvo XC90 T8

Base MSRP: $69,000
Est. tax credit: $4600
Technology: Plug-in Hybrid
Body type: SUV
Seats: 7
EPA Range: 17 miles electric + gasoline
Battery size: 9 kWh

Tesla Model X

Base MSRP: $80,000+
Est. tax credit: $7500
Technology: Electric Vehicle
Body type: Crossover
Seats: 7
EPA Range: 250 miles pure electric
Battery size: 90 kWh

This one is not a PHEV, but it was on my original 2015 list of potential plug-in SUVs and it is actually shipping now.



It's time to plug in!

How To Get $3750 Of Free Upgrades On A Tesla Model 3

Tesla confirmed that the highly anticipated Model 3, set to be unveiled on March 31, will have a base price of $35,000 before incentives. Tesla will start taking pre-orders on unveiling date and they plan to start delivers of vehicles in Q4 of 2017. With the $7,500 federal tax subsidy, you could drive off in a base Model 3 for $27,500. If you live in a state that has additional tax credits, it could be even cheaper.

That $7,500 federal tax incentive is a significant price reduction to a $35,000 vehicle, but (even if you pre-order this year) there is no guarantee that this incentive will still be available by the time you receive your Model 3. The law creating the federal tax incentive only applies to the first 200,000 vehicles sold in the US from each auto manufacturer then it phases out over 1 year. More specifically, after the quarter following the 200,000th sale, the incentive drops down to $3,750 for six months and then it drops to $1,875 for the next six months.

When Will Tesla Hit 200,000 Total Sales?

So the question is, when will Tesla hit 200,000 in sales? And will it be before they start Model 3 deliveries? Tesla holds their sales data closer to the vest than most car companies. They release quarterly sales numbers, rather than monthly, and they don't break down their sales by country. Inside EVs reports that cumulative worldwide sales through the end of 2015 for Tesla tally up to some 107,000 Model S, the first batch of 214 Model X, and about 1900 Roadsters. Trying to determine the US sales for Tesla, I found the Inside EV folks also have a monthly sales scorecard that was very helpful. They comb Tesla's data and they make monthly and US estimates. Taking their data, I have created the chart below:

After plugging their data into a spreadsheet, I added a trendline to estimate the 200,000 vehicle mark. This trendline, of course, is just based on the historic data. It has no weighting for economic factors or other very important (and possibly unpredictable) things like competitor's products or production delays. Additionally, there are many ways to generate trendlines. This one is a 4th order polynomial. Some other options were more optimistic, others were less optimistic. This one felt right. In other words, while a good fit, it's just a guess. This guess predicts that Tesla will cross the 200,000 mark in September of 2017. The Model 3 is planned to start deliveries in Q4 of 2017. If this guess is accurate, it would mean that the federal tax incentive for Tesla vehicles will be halved right about the time that Model 3 deliveries begin.

        

The federal tax incentive for Tesla could be halved just as Model 3 deliveries start.

How to move up in the queue

In the Tesla Motors fourth quarter 2015 financial conference call, regarding Model 3 sales, Elon Musk said:

Our default plan, as we've done in the past, is that the initial sales are the relatively highly optioned versions of the car. Because, obviously, we've got to pay back the investment of all the tooling and everything, so that sort of makes sense to have the higher optioned versions first. That's what we did with the Model S and also again with the Model X.

So your neighbor could order a base model on in the first hour of pre-orders, then two weeks later, you could order an optioned-up version with the tech package, premium interior, and high fidelity sound system and you would get your car months before your neighbor. Is it fair? Maybe not, but that's how it works.

$3750 Of Free Upgrades

So we finally get to The Click-Bait title of the article. How do you get $3750 worth of free upgrades?

If the trendline above is close to accurate, then it is likely that only the first quarter of Model 3 delivered vehicles will qualify for the full $7500 of federal incentives. After that, the incentive will drop down to $3750. So waiting in line behind the optioned up vehicles could cost you $3750 in incentives. If you are going to pay an extra $3750 for waiting in line for a basic model, why not spend the $3750 on upgrades, pay the same price and get your car sooner and get the entire federal incentive?

There are a few caveats that I should include. Tesla's sales may ramp slower than the trendline above, in which case you'll be able to receive the full incentive. Conversely, the Model 3 could be delayed and there is no guarantee that even the first Model 3 would receive the full incentive if sales of the Model S and X continue at a brisk pace.

A Better Incentive

Tesla is not the only auto manufacturer that is approaching the 200,000 vehicle mark in the 2017/18 timeframe. I'd like to propose a change to the tax incentive to make it apply to the first 4 million EVs sold, rather than the first 200,000 per manufacturer. The argument is that setting a limit per manufacturer punishes the early pioneering companies that advanced the technology and created the market.

Imagine it's 2019, VW and Kia EVs receive a $7500 discount, while Tesla, GM, & Nissan EVs would have no federal incentive. This would be a very uneven playing field for EV sales. Additionally, I propose that the ramp down steps are per tax year, rather than 6-month intervals. This would simplify tax filings for credit.

There have been other ideas to improve the incentive too such as making it $10,000 and applying it at the point of sale rather than a tax credit. These are good ideas that should also be considered for a better incentive program.

Good luck and I hope to see you in a Model 3 soon!

Tesla Model 3 vs Chevy Bolt - Charging Network tips the scales

Tesla and GM are both coming out with ~$30,000 electric vehicles with ~200-mile range. How do these two compare?

Today, we don't know the specs in detail or the final pricing so it is impossible to make an objective comparison. However, one thing we do know though is the charging network support.

When people talk about cars, they generally talk about things like acceleration, cargo space, styling and the like. While these things certainly matter, today I'm going to be discussing charging. Other than asking "How long does it take?", charging is often overlooked by first-time EV buyers.

Fast charging matters

Most EV charging happens at home or at work. Level 2 public charging is nice to have, but cars don't tend to spend a significant amount of time at shopping centers or restaurants, so Level 2 charging, while nice for an opportunistic sip, is not convenient for road trips. Long distance driving requires DC fast charging. Depending on the car and its range, fast charging can add more than a hundred miles of range in less than 30 minutes. This is not as fast as a gas station fill up (yet), but it certainly makes long distant trips possible. This greatly increases the utility of an electric vehicle, even if it is only needed occasionally.

Tesla Model ≡ vs Chevy Bolt :: battle to be EV of the future 

Assuming the Model 3 and Bolt are similar in price and specifications, they'll be in direct competition and their differences will be far more important than their similarities.

This coming clash of monster EVs reminds me of a stop-motion monster fight I saw in a movie as a kid. Bear with me, this really does tie back to our topic. I think there are lessons in that old movie battle that might apply to the battle for the EV of the future.

 Griffin vs Cyclops Centaur

In the movie, The Golden Voyage of Sinbad, a griffin and a centaur are locked in battle. They are evenly matched, it's a stalemate. One of them fights for Sinbad, while the other fights for the bad guy, Sorcerer Koura. Earlier in the movie, The Oracle of All Knowledge said, "For it is the deeds of weak and mortal men that may tip the scales one way or the other." Koura figures out that this battle is what the oracle's prophecy referred to; so (spoiler alert) he slashes at the griffin when it's distracted by the centaur. One small cut from a human on a giant monster would normally not matter much, but in this case, it was all that was needed to tip the scales. The griffin's weakened leg slips, the centaur gets the upper hand and the battle is quickly over.

This lesson has stuck with me. The little things matter and can often be the deciding factor for big issues. In our EV battle, the charging network could be the "deeds of weak and mortal men that tips the scales."

Too Many Standards Means No Standard

"The nice thing about standards is that you have so many to choose from." ~Andy Tanenbaum

Today, there are three options for DC fast charging. They are CHAdeMO, CCS, and Tesla Supercharging.

Japanese and S. Korean automakers (Nissan, Mitsu, Kia) use CHAdeMO. European and US automakers (GM, Ford, BMW, VW) use CCS. Whereas Tesla, of course, has their own proprietary (open patent) system.

There are plenty of comparisons out there that have details of the charging rate for each. For the purposes of this discussion, they are fast enough for treks and that is fast enough.

SAE Combo Charging System (CCS)

GM supports the CCS DC Fast Charge standard. This is the standard defined by the Society of Automotive Engineers (SAE), the same organization that defines the Level 2 standard that is used worldwide. Despite great engineering from a trusted engineering standards body, CCS has a few problems.

SAE CCS Plug and Receptacle 

First, CCS was the last of the three DC methods to be deployed. This generation of EV started selling in December of 2010 with the Leaf and Volt. CCS did not start deploying in any significant amount until 2015. This is 4 wasted years.

Second, as you can see the CCS locations in the map below, CCS stations are not spread throughout the country. You could not drive coast-to-coast using CCS stations. The stations are clumped in the areas where the cars are sold.

There is no central body examining the CCS network to determine where they are needed. About a year ago BMW, Volkswagen, and ChargePoint teamed up to deploy CCS stations. They seem to be focused on the coasts. This makes sense since that is where the cars sell the best. But that does not mean those are the only places that owners want to drive.

SAE CCS DC Fast Charger Locations Feb 2016 via Plugshare

Third, I'm concerned about how well the CCS stations will be maintained. Today, the Blink CHAdeMO stations have a horrible reliability record. The stations are installed at stores and restaurants that know little if anything about them. And they are often even unaware when they are not functioning, let alone how to repair them. Additionally, at these stations, there is often only one DC fast charger at a given site. That means when it breaks down, you're out of luck. What you had planned as a 30-minute quick charge stop could turn into a 4 hour Level 2 charging stop.

Tesla Supercharger Network 

Tesla was unhappy with the fast charge options offered by either CHAdeMO or CCS, so they created their own. Unfortunately, this added yet another method and complicates charging matters. Tesla superchargers use the same connector for either AC charging or DC supercharging. 

Below is a map of the Tesla Supercharger network that is active today.

Tesla Supercharger US Network Feb 2016 via Tesla Motors

As you can see there are multiple routes that you could take on a coast to coast drive with this network. And as you'll see below, before the Model 3 comes out, the network will be even more complete.

Tesla Supercharger US Network Planned By End Of 2016 via Tesla Motors

Tesla's locations are selected to allow for intercity travel. Station locations are more likely to be in between cities than in an urban center. This allows it to be used by traffic in either direction.

At a supercharger location, there are generally multiple stations. This means that if one station is broken or occupied, there are other stations that you can use.

This supercharger network is just a part of Tesla's charging infrastructure available to their cars. There's also destination charging that allows you to fill up overnight at many hotels and BnB locations.

Tesla's stations are free and they are part of the Tesla ownership experience. This helps them sell cars. This means that the stations are well maintained. The stations are internet connected and the state of each station can be queried. If supercharger stations are down, it reflects poorly on Tesla's brand and quality. It is in their best interest to keep these stations up and running. They respond quickly.

The final advantage that Tesla has is that their cars can use any the three DC fast chargers. Tesla has an adapter for CHAdeMO stations and they are making an adapter for CCS stations.

Wrap Up

The Tesla Model 3 has several advantages over the Chevy Bolt.

First, Tesla has taken an active role in creating a maintaining a vast, free charging network. GM, on the other hand, seems to think that, just as with gas cars, refueling is not part of their business.

Second, reliability is incredibly important in a charging network. When you plan a route and expect recharging to be there, it had better be there, available and functional. Tesla's stations are maintained by Tesla, they have skin in the game. The network is there to help them sell cars. Other networks are deployed by companies that are trying to make a profit from charging fees. For them, if 95% of their network is operational, they are still generating 95% of their revenue.

Third, the ability for Tesla vehicles to use adapters is a significant advantage. CHAdeMO equipped vehicles can only use the CHAdeMO network. CCS-equipped vehicles, like the Bolt, can only use the CCS network. Tesla vehicles will be able to use both of these networks and the Tesla Superchargers. This makes Tesla's vehicles the easiest to find charging for compared to any other.

If the oracle from Sinbad was referring to charging networks, then the scales are tipped in Tesla's favor.