Yay, fricking, yay! Tesla’s Giga factory aims to reduce the cost of lithium-ion batteries by 30 percent in three years and 50 percent by 2020. This big, bold move invites historical comparison. Henry Ford’s massive factory scale and vertical integration cut the cost of internal combustion-based cars by more than half, made Ford Motor Company the (then) biggest car company in the world, and helped bolster the American middle class in the process. A hundred years later, China’s use of scale economies and vertical integration made it the global market leader in solar PV in less than a decade -- and reconfirmed the power of scale and vertical integration. But what does Tesla’s Giga factory really mean? Let’s start with the obvious: cheaper batteries will allow mainstream pricing of Tesla’s EVs in six years. That’s consistent with Musk’s vision to put an EV in every garage. Mainstream pricing will turn Tesla into a massive company. Sure, Tesla’s competitors are big and confident -- just like Apple’s competitors when Steve Jobs announced his vision to put a PC on every desktop. As was the case with Apple in 1976, Tesla won’t need to worry about cannibalizing sales of existing products. Competitors with smoke spewing from their corporate tailpipes face a far more complex transition. Just as Digital Equipment Corporation failed to make the turn from mini computers to PCs, some big and famous car companies might not make the curve in the road to EVs.
Posted on: Tue, 11 Mar 2014 10:28:38 +0000