Tesla will one day change the world. I’ve long believed that, and after some of the revelations of the last few weeks, I’m more convinced than ever before.
Climate change is in the news again, with scientists recently concluding that 2016 was the hottest year on record. That broke the previous mark, which was set the year before – and also the year before that. Of course, environmentalists have always contended that one of the only ways to combat this trend is to curtail fossil fuel emissions, often through government regulations that put a lid on oil drilling or coal production. Yet, if they really wanted to make an impression, they’d work toward stemming demand for fossil fuels instead.
Admittedly, this is a difficult task, especially in the case of oil, since it’s mostly an inelastic good, meaning price swings have relatively little impact on the market's thirst for it. Still, there could be a point at which oil and other fossil fuels become progressively less attractive, but the only way to get there is to make alternative energy resources more popular.
All of which brings us back to Tesla. If environmentalists want to affect meaningful change, they should do everything in their power to help Elon Musk’s company grow and succeed (though it's easy to make the case that, through force of its own will, that’s going to happen anyway).
Naturally, this effort begins with electric cars. In certain markets, like the Bay Area, parts of the Pacific Northwest and Southern California, electric and hybrid cars are – if not ubiquitous – highly visible. In most locales nationwide, though, such vehicles are few and far between.
All-electric cars, in fact, make up less than 1% of all new car sales in the United States. But thanks to its Gigafactory in Nevada, Tesla hopes to change that, especially after it unveils the more affordable, yet still stylish, Model 3 later this year.
Upon completion, the battery plant will be 5.8 million square feet, providing the company with the requisite scale to mass produce high-performing lithium-ion batteries, the secret sauce behind making electric cars affordable to a wider consumer audience. Tesla has said it wants to churn out enough batteries to produce 500,000 cars by 2018 and over a million in 2020.
Whether Tesla can meet these ambitious goals is debatable (Last year, by comparison, it built just under 84,000 vehicles). Nevertheless, if it experiences measurable success in this area, other car manufacturers are sure to ramp up production as well, a good thing for the electric car market – which, obviously, has plenty of room to grow – but also welcome news for the environment.
Meanwhile, the other part of this equation is making solar energy more affordable and efficient. Up until now, solar firms have generally been unprofitable, including Tesla-owned SolarCity. In part, that's because not enough consumers, including many businesses, were willing to absorb the massive upfront costs associated with buying and installing solar panels, but such costs have come down in recent years, and, importantly, Tesla-produced batteries packs will enable more storage capacity – another huge problem weighing on solar's potential in the past. Together, these factors should make solar energy more cost-effective, which could lead to a greater number of homes, commercial buildings and utilities installing solar panels backed by Tesla-made batteries, thus limiting the use of fossil fuel-emitting energy sources going forward.
Ultimately, Tesla’s vision for the world is a near 360-degree solution in which the power source for every home and business across the country is long-lasting, rechargeable batteries capable of storing massive amounts of solar energy and propelling everything from cars to the simplest light bulb.
Certainly, achieving this vision is no sure thing. Obviously, environmentalists the world over would be giddy if it happened. But so too would Tesla investors, because the successful integration of all these businesses means there’s no limit to how big and influential it could one day become.
By CEO Ross Gerber
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which course of action may be appropriate for you, consult your financial advisor. No strategy assures success or protects against loss.
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