Michael Rundle, Wired’s UK editor, got a tour of the Tesla factory recently conducted by none other than Diarmuid O’Connell, Tesla’s vice president of business development. Variously described as committed or combative, it is fair to say O’Connell has drunk deeply of the Tesla Kool Aid and is a firm believer in the gospel according to Musk. If you think Tesla is about building very cool electric cars, you need to delve deeper to understand what is going on below the surface.
“Tesla is in the business of inspiring competition,” O’Connell told Rundle. “The more electric vehicles the better. It would be a fulfillment of our mission if the biggest manufacturer in the US put a mass-market EV on the road. We’re hopeful that they will and frankly that everyone else does.” O’Connell may believe deeply in the Tesla sense of mission, but he is hardly the only one. Rundle heard another Tesla staffer say during the tour that the company is out to save the Earth from “petro-dictators.”
Tesla has been criticized for always being late to market with its cars. Both its Model S sedan and Model X SUV were two years behind schedule by the time they finally went on sale. O’Connell is unapologetic. “If we had been able to produce [the Model S] out of the box 12 years ago we would have done so. We had no brand, no capital, no manufacturing base and no developed technology,” he says. “This is the classic technology introduction model that has led to the mass market for everything from air travel to cell phones. This is how you do it if you’re starting from zero.”
Getting to the next step — a mass market car — will require help from Tesla’s massive battery manufacturing facility under construction in Nevada. When completed, Tesla expects the GigaFactory will lead to a 30% decline in the cost of batteries. That’s because everything need to make them will be under one roof for the first time ever.
“[In Japan] there are multiple suppliers feeding into multiple facilities, in order to deliver a finished product. They are doing so in a geography where some of the input costs are quite high — electricity, labour, some of the raw materials — so simply by bringing together multiple operations into one facility, a facility where logistics, labor, utility inputs and other factors of production are cost-advantaged, you’re going to make significant improvements there. With the Gigafactory, we’re now going that final step where, in partnership with Panasonic, we are making that cell together in a single factory.”
In the world of Tesla, that sort of vertical integration model is just common sense. He thinks when Tesla opens factories in other countries, it will source most of the parts and materials it needs from within those countries. That includes the batteries. “We will develop local supply chains,” he said. “So if we have a factory in Europe, more of the components will come from European suppliers. So too in China or in Japan. If we’re producing vehicles in a market, it’s just logical we would be sourcing more from that market. There will be multiple GigaFactories as there are multiple car factories.”
Asked about the future of autonomous cars and car sharing services, O’Connell says, “I think what’s important is the emissions profile of any car, whether it’s shared or owned. Big or small. We’re trying to move as quickly as possible where the emissions profile of a vehicle is zero, and the emissions profile of the original electron going into the vehicle is as close to zero as possible.”
Some have criticized Tesla for relying too heavily on government incentives and the selling of emissions credits. O’Connell has no patience with that kind of talk. There are “$2 trillion in global subsidies to petroleum,” he says. (The International Monetary Fund puts that number at closer to $5 trillion.) He cites “The $25 billion R&D tax credit that Exxon Mobile and some of the other big American gasoline petroleum producers still enjoy 120 years into the development of that technology” as another example of a subsidy that does not receive equal criticism from the press.
The bottom line is that Tesla, as a business entity, does not adhere to the strict dictates of capitalism, which can be characterized as ‘Profits aren’t everything. They’re the only thing!” Some would say thinking otherwise is pure foolishness. Once again, O’Connell disagrees. “[Y]ou also have to put on the table how are we as a society thinking about larger issues, and moving ourselves towards taking other than strictly market oriented actions, to deliver public health benefits,” he says. “Maybe survival [depends] on how you think about carbon intensity and the logical progression of too much carbon in our atmosphere.” in other words, Tesla has its own definition of what is foolish and who the real fools are.
Oh, about that factory tour? Rundle says it is a very cool place. Enjoy the photos, which are provided courtesy of Tesla Motors.