1. Get Your Motor Runnin’
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My ambivalent relationship with motor vehicles continued even after, at twenty-nine years old, I moved to the United States of America, the spiritual home of the automobile. At the wheel of my wife’s 2001 Honda Civic, I learned how to drive on the wrong side of the road and fine-tuned my aggression on the gas pedal so that I could stave off death on the highways, but I remained ignorant of how spark plugs sparked and timing belts belted.
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I had joined Pando in April 2012, a few months after Steve Jobs, the cofounder and CEO of Apple, died, and I found a tech world still grieving the loss of its superstar. The industry was bereft of a figure who could command the world’s attention with the twitch of a stage-managed eyebrow, a man who could send the media into conniptions with an addendum to a slide show.
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Then I watched Revenge of the Electric Car, a 2011 documentary that showed Tesla struggling to survive the financial crisis. I read news stories and magazine profiles that told of how Musk paid Tesla employees out of his own pocket to keep the company alive. Tesla was on bankruptcy’s doorstep at the end of 2008, before it was saved at the last minute by a $40 million investment and then, the next year, a helping hand from Daimler.
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In attempting to transform transportation and radically improve space travel instead of developing another photo-sharing app or the next Flappy Bird, Musk set an example for a new generation of entrepreneurs.
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The Model S—like all of Tesla’s cars—can be better thought of as a battery on wheels. Just look at it. Stripped of its shell and seats, the machine is essentially a set of four wheels bracing a low-slung metallic mattress that contains several thousand cylindrical lithium-ion batteries like those used in old laptops. Peel off the lid and you’ll see the batteries standing on end and packed rump to rump in eight modules, arrayed in tidy rows like obedient schoolchildren. It is this modest configuration of cells that is finally bringing an end to the oil industry’s dominance of global energy supply.
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Tesla also sells its batteries as energy storage units. Since it acquired SolarCity in 2016 and added solar panels to its offerings, Musk has made his intentions clear: Tesla is an energy company.
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This is the story of how the electric car became a Trojan horse for a new energy economy. I believe it is the most important technology story of the twenty-first century.
2. A Rush of Electrons to the Head
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Before SpaceX, no private company had ever returned a spacecraft from low earth orbit. Before Tesla, few people believed it would be possible for a high-performance electric car to travel more than two hundred miles on a single charge of its battery. “One of Elon’s greatest skills is the ability to pass off his vision as a mandate from heaven,” Max Levchin, who cofounded PayPal with Musk, said in 2007. “He is very much the person who, when someone says it’s impossible, shrugs and says, ‘I think I can do it.’”
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High school, however, was not fun. In those days, South Africa could be a rough place to grow up, and Musk became a target of severe bullying. One incident hospitalized him for two weeks. He was beaten so badly that his father didn’t recognize him. “Kids gave Elon a very hard time, and it had a huge impact on his life,” Kimbal later said.
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While at Wharton and finally starting to fulfill his American Dream, Musk wrote two papers that hinted at his future career. In one, titled “The Importance of Being Solar,” he predicted the proliferation of solar technology. In the other, he dedicated forty-four pages to detailing how ultracapacitors could be used for energy storage, which would be helpful for things like electric cars.
3. The Fight for the Electric Car
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By the end of 2007, Musk had interviewed at least twenty candidates for the role. He wanted a CEO to build Tesla into the next great automaker, but it was hard to find someone who understood start-ups and knew how to build hundreds of thousands of cars.
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Building a new business is hard in any context. “Starting a company,” Musk has said, paraphrasing his friend Bill Lee, an entrepreneur and investor, “is like eating glass and staring into the abyss.” But it’s even harder if you’re trying to enter the auto industry, where the incumbents have been protected by high barriers to entry, such as the costs of building manufacturing plants, finding quality suppliers willing to work with small production numbers, and establishing distribution networks. Starting an electric car company, meanwhile, is a challenge on an altogether different level. History has been no friend to electric cars.
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Hopes for electric cars were dealt a killer blow when, just as Edison failed to make his batteries work, Charles Kettering perfected the design on an electric starter motor that eliminated the need to start a gasoline car by hand crank. Suddenly, internal combustion engine vehicles seemed eminently more practical, not least because of a lack of electrical infrastructure in the United States. Ford turned his full attention to mass manufacturing the gasoline burners, and cheap oil from the Texas oil fields, discovered in the early 1900s, fueled a momentum shift that made electric cars essentially obsolete by the 1930s.
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Six decades after they disappeared from America’s roads the first time, they made a sudden resurgence—only to die again. The revived hopes for electric cars started in California. In an attempt to curb air pollution, the California Air Resources Board (CARB) established a rule that required automakers who sold cars in the state to offer zero-emissions vehicles.
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Meanwhile, at the time of the EV1’s death, the Bush administration pushed CARB to abandon its electric car mandate. In 2002, the administration’s Department of Justice supported a lawsuit brought by GM and DaimlerChrysler against CARB that claimed California was attempting to set a mileage standard. Such a standard was (and continues to be) the domain of the federal government, the parties argued. President Bush’s chief of staff at the time, Andrew Card, had been chief lobbyist for GM and was head of an auto industry trade association when California first proposed the mandate (which he opposed).
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Oil companies were in on the action, too. The Western States Petroleum Association, an oil industry lobby group, had funded a campaign against utilities that were installing electric car chargers. Through proxies called Californians Against Utility Company Abuse and the Clean Air Alliance, the lobby group urged a ratepayer revolt by calling the planned charging infrastructure a “hidden tax” on electric bills. It also disseminated technical and economic arguments against electric cars.
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Musk has characterized his companies as moral missions as much as businesses. He didn’t start Tesla or SpaceX to make money, he has said, but because he believed the world needed them. The future for humans on Earth would be terrible if we didn’t switch to sustainable energy, and without electric cars, the peril from climate change would be unimaginable. His goal to colonize Mars is also motivated in part by a moral impulse.
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As Tesla moved beyond the Roadster and closer to becoming a mainstream automaker with the Model S, it would find itself fighting to protect its safety record in the wake of a series of high-profile fires; to defend its sales model against auto dealers; and to reassure skeptical consumers about the long-distance drivability of its cars in the face of entrenched “range anxiety.”
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As a business leader, Musk shares at least one thing in common with Steve Jobs: He is a wartime CEO. Such leaders preside over their companies when they face an imminent existential threat, says Ben Horowitz, a Silicon Valley investor and partner with Netscape cofounder Marc Andreessen in the celebrated venture capital firm Andreessen Horowitz. The wartime CEO’s companies depend on strict adherence to a mission, Horowitz wrote in his book, The Hard Thing about Hard Things. While a peacetime CEO follows protocol, a wartime CEO violates it in order to win. While a peacetime CEO defines company culture, the wartime CEO lets the war define the culture. A peacetime CEO knows what to do with a big advantage, while a wartime CEO is paranoid.
4. On Fire
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Appearing in an interview on CNN in the midst of the drama, Musk said he felt like he had been “pistol-whipped.” “Our three noninjurious fires got more national headlines than a quarter-million deadly gasoline-car fires,” he said, holding his arms out wide. “That’s mad! What the heck is going on?”
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To reduce the chances of fires from battery-pack punctures, Tesla would update software in the Model S to raise ground clearance when driving at high speeds. At the same time, the company started designing shields that would sit on the underside of the cars to provide further protection for the battery packs.
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Despite the vivid images of violent blazes and grotesquely melted cars, however, the stock market and the media, willing to accept the logic that other cars catch fire, too, tempered their previous panic. Tesla’s business continued as normal. Fire, it seemed, was no longer a threat to the company.
5. Just Deal
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In 2007, Musk envisaged Tesla’s stores as combining the best of Starbucks, Apple stores, and “a good restaurant,” writing in a blog post that the company planned to put as much energy into making the stores look good as it did with its cars.
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Automobile dealers associations have objected to Tesla’s direct-sales strategy, claiming that Musk’s company is breaking the law by cutting out the middleman. In some states, including Texas, Michigan, and Connecticut, long-standing franchise laws grant dealers the exclusive right to sell new cars.
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In late 2013 and early 2014, Consumer Reports conducted a secret survey of eighty-five dealerships in four states and found that “many dealership salespeople were not as knowledgeable about electric cars as you might expect.” Thirteen of the eighty-five dealers actively discouraged the sale of electric cars, and thirty-five recommended buying a gasoline car instead. A 2016 mystery shopper survey of 308 dealerships by volunteers from the Sierra Club found that many salespeople didn’t know about tax credits and rebates for electric cars, nor how much it cost to operate them. My
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Meanwhile, electric cars, with fewer moving parts and theoretically less need for maintenance, also pose a threat to the dealers’ service departments, their number one source of profits.
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New-car dealerships account for 15 percent of all US sales tax revenue, according to the National Automobile Dealers Association—and in some states, that figure is as high as 20 percent.
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Collectively, dealerships employ more than a million Americans,
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The “mafia” line was bold, given the special significance of the term in the state Christie governed and in which the TV series The Sopranos was set. But it paid off. The ensuing headlines marveled at Musk’s temerity. “Oh No He Didn’t,” wrote the Wall Street Journal’s MoneyBeat blog. “Elon Musk Throws Mafia, Bridge References at Gov. Christie.” In one paragraph, Musk had turned a local fight into a national cause and positioned Tesla as a plucky underdog just trying to get by in a system that had been rigged to work against it.
6. Range Anxiety
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(a 220-volt outlet with 30–50 amps, such as those used for tumble dryers, would deliver about thirty miles every hour). This fretful condition is what people are talking about when they use the words range anxiety.
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GM trademarked it for the ostensible purpose of “promoting public awareness of electric vehicle capabilities.”
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An even less forgiving critic might go so far as to suggest that GM, which would face consternating profit problems were electric cars to become too popular too quickly, arguably had cause to perpetuate and promote the notion of range anxiety™ as much as it could. Whatever the case, it’s now moot. GM abandoned the trademark in 2011, and with the Chevy Bolt (not to be confused with the similarly named Volt), it finally has a long-range electric car to promote.
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On online forums, Tesla owners reported comparable effects, and a survey of a hundred electric-car owners by the research firm PlugInsights found that driving range in cars such as the Nissan Leaf and Ford Focus Electric diminished by between 25 and 50 percent in cold weather.
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Tesla has claimed that the Model S loses about 10 percent of its range in cold weather.
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Of course, skeptics said the same thing about Thomas Edison’s electric light bulbs. Critics assumed that the market would continue to favor gas lamps, which were supported by a well-established infrastructure.
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For cars bought from 2017 on, Tesla offers four hundred kilowatt-hours of free charging per year (the equivalent of about a thousand miles), beyond which users must pay a small fee.
7. Go Ahead, Start a Car Company
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Musk stepped onstage at Tesla’s annual shareholders’ meeting on May 31, 2016,
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high-energy density batteries instead of fuel cells
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Soon after meeting in April 2004, Musk agreed to invest $6.35 million in Tesla Motors’ Series A funding, out of a total of $6.5 million.
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It had taken the company just three months to go from the first schematics to a functional car.
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another $9 million into Tesla as part of a $13 million Series B funding round, which also included Valor Equity Partners.
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raised another $40 million. Musk contributed $12 million in the new round and, after a ten-mile-an-hour test drive (there was a bug in the software), convinced friends Larry Page and Sergey Brin, the founders of Google, to join in, too. Joining them in the round were some high-profile investment firms, including Draper Fisher Jurvetson, VantagePoint Capital Partners, and J.P. Morgan Securities.
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“If you took the energy in a gallon of gas and used it to spin a turbine, you’d get enough electricity to drive an electric car 110 miles,”
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“Some people are going to miss the sound of a roaring engine,” he said, “just like people used to miss the sound of horse hooves clippity-clopping down the street.”
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Musk was making all the major decisions. People inside the company came to see Drori as a mere implementer of the chairman’s will.
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Fisker, Coda, and DeLorean were not outliers. The historical trend for new car companies is one of quick decline soon after birth—and, ultimately, failure. Detroit Electric, Think Global, Aptera Motors, Vector, Tucker, Kaiser-Frazer, Duesenberg—the list is long and stretches back to the early 1900s. In fact, all but two significant American auto companies started in the last hundred years have succumbed to the auto industry’s unceasing challenges. One was founded in 1925 by a guy named Walter Chrysler. The other is Tesla Motors.
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In late 2008, Musk met with Dr. Thomas Weber, a Daimler board member, who told him the company wanted to make an electric version of its Smart microcar,
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That test drive resulted in a development contract that Musk now credits with saving Tesla. The German giant enlisted the start-up to make the Smart power trains, and in May 2009, it announced it was buying 10 percent of the company for $50 million.
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The Daimler deal, as well as the Model S prototype unveiling, helped secure a $465 million loan from the US Department of Energy, part of a George W. Bush administration–led program to encourage the development of alternative-energy vehicles. The deal required Tesla to build electric cars and power train components in the United States and pay off the loan within twelve years. While the loan was confirmed in 2009 during President Obama’s first year in office, the first payments weren’t due until early 2010.
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Tesla got another $50 million and a hugely important partnership when, in May 2010, Toyota bought a 2.5 percent stake in the company and contracted it to build power trains for the electric version of the RAV4. But Toyota brought something even more important to Musk: a factory in Fremont, California.
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The company marked the repayment, which came nine years ahead of deadline, with a press release in which it pointed out that none of the car companies that had received bailouts in the financial crisis had fully paid off their debts.
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Then, in a surprise move, Musk defied convention by declaring that Tesla would make its patents freely available to all. He promised that the company wouldn’t initiate lawsuits against people who used Tesla’s patents without paying—even competitors (provided they used them in good faith).
8. California Dreaming
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For Faraday to get started, Jia Yueting had to get rich.
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when he established the Sinotel group, a wireless communications provider that started off distributing cell phones in China and later expanded to designing, installing, and maintaining network infrastructure for China Mobile, China Telecom, and China Unicom, among other telco customers.
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Leshi, the name of a holding company Jia also set up. LeTV’s streaming service had acquired the rights to popular TV shows and movies and established itself as one of the most visited online video sites in China. Leshi later started a film production division, Le Vision Pictures, which partnered with acclaimed directors and invested in and distributed The Expendables 2, among other Hollywood movies. In 2014 and 2015, Leshi started selling smart TVs and smartphones. By 2016, it had a market valuation of about $14 billion and rebranded itself into two groups: Le.com for media services and LeEco for electronics products (its future cars would fall under this group).
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Leach was running his consultancy, an automotive services group called Magma International, when he was introduced to William Bin Li through a mutual acquaintance. Li was the CEO and founder of Chinese online automotive marketplace Bitauto, which has been described as like Cars.com, Autotrader, and Consumer Reports rolled into one. In 2016, the publicly traded company reached a valuation of about $2 billion.
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By March 2015, Leach had given up his other jobs and committed himself full-time to Nio. At that time, there were ten people at the start-up. It didn’t take long for the company to start hiring aggressively, especially in China. By the end of 2015, it had close to eight hundred employees, and in December it announced a huge hire. Padmasree Warrior, former chief technology and strategy officer at Cisco, had signed on to be Nio’s US chief executive and head of software development.
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By the end of 2016, it would pull back the covers on a million-dollar 1,360-horsepower supercar that it said would “outperform all combustion (engine) supercars in the world.”
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There’s a reason that Faraday Future and Nio are in California. Nowhere else on the planet can you find such ideal conditions for the germination of a new auto industry.
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First, there are market considerations. California is the biggest auto market in the United States and, thanks to tough emissions standards, the biggest market for alternative-fuel cars.
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Then there are the regulatory considerations. California has been an international leader in establishing strict carbon emissions regulations. In 1990, the state enacted a rule that required 10 percent of vehicles for sale in California to be zero-emission vehicles (ZEV) by 2003. To accommodate hybrids, the California Air Resources Board (CARB) later introduced credits for “partial zero emission” vehicles and enabled a scheme that allowed automakers to trade credits to meet their ZEV obligations—a feature that would become an important source of income for Tesla. After legal challenges by automakers, CARB adjusted its targets so that, in 2015, only 2.7 percent of new cars sold within the state had to be zero emission. But it would gradually increase the quota so that, by 2025, the figure would be closer to 22 percent.
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“For a hundred years, automobiles have been a mechanical engineering industry. Now, there is the shift to software—and the mecca of software is Silicon Valley,” Dragos Maciuca, director of Ford’s Palo Alto research and innovation center, told the Los Angeles Times in late 2015. Ford, Toyota, Honda, Hyundai, Volkswagen, BMW, Mercedes-Benz, GM, Nissan—they’ve all established Silicon Valley–based research centers to work on autonomous driving and connectivity.
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Uber and Lyft, both based in San Francisco, are hogging the early spoils in the ride-sharing market. Younger companies like Mountain View’s Smartcar (infrastructure for the connected car), San Francisco’s Reviver (digital license plates), and Palo Alto’s Nauto (AI-powered autonomous driving) are pursuing other software-related opportunities. Meanwhile, electric power-train companies like Wrightspeed (heavy-duty trucks), Zero (motorcycles), and Proterra (buses)
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the dispersal of intellectual labor from one node to the next. For instance, PayPal is well known in the Valley for producing a number of high performers who left the company to start, join, or invest in others. The so-called PayPal Mafia
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In a similar way, Tesla alumni are involved with many of the ventures that make up Silicon Valley’s new-auto ecosystem.
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There’s one more Silicon Valley car company that is part of the Tesla diaspora. Intriguingly, it has something in common with Faraday Future: an investor by the name of Jia Yueting.
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Lucid Motors was started under the name Atieva (which stood for “advanced technologies in electric vehicle applications” and was pronounced “ah-tee-va”) in Mountain View in 2008 (or December 31, 2007, to be precise) by Bernard Tse, who was a vice president at Tesla before it launched the Roadster.
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He had been the original leader for development of the Model S. A former engineer at Jaguar and Lotus, Rawlinson ended up leaving Tesla at the same time as fellow Brit Nick Sampson, who had led chassis engineering.
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The cars would be built to be fully autonomous so, when the technology and regulations allowed, passengers could relax and enjoy the ride on reclining seats surrounded by touch screens that would stream LeEco’s video content.
9. Build Your Dreams
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Wang plotted a course for BYD to become a leading producer of electric cars and solar power systems—a move that would eventually lead to Warren Buffett, through a Berkshire Hathaway subsidiary, buying 10 percent of the company for $230 million. Buffett’s investment partner Charlie Munger had told the “Oracle of Omaha” that CEO Wang was like a mix between Thomas Edison and Jack Welch—“something like Edison in solving technical problems, and something like Welch in getting done what he needs to do.”
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By selling “dual mode” plug-in hybrids, which carry both a battery and a gas tank, BYD still qualifies for government subsidies, which can take as much as $8,000 off the sticker price and, crucially, exempt owners from a license plate lottery that would otherwise complicate their efforts to get on the road.
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BYD had made branding its top priority for the next two to three years. “We don’t have the ability now to sell tens of thousands of cars before producing a single one,” Senior Vice President Stella Li told Bloomberg, referring to the Tesla Model 3, which attracted hundreds of thousands of preorders more than a year out from the first deliveries. “The day we can do that will be the day our brand is established.”
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Che He Jia, one of China’s most intriguing new auto start-ups. Li, who was also a founding investor in Nio, started the company in 2015
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Che He Jia calls it a “smart electric vehicle” (SEV) and it’s designed purely for city driving, so it has a top speed of forty miles an hour and up to fifty miles of range. It’s small enough that four can be (autonomously) parked side by side in a regular parking spot.
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As well as Nio and Byton, the list of car start-ups funded by Chinese Internet companies also includes Xiaopeng, whose investors include Alibaba, Foxconn, and Russian billionaire Yuri Milner; Sokon, which acquired Martin Eberhard’s battery start-up Inevit and named him chief innovation officer at its US subsidiary, SF Motors; WM Motor, started by a former executive at Volvo’s Chinese parent company, Geely; Singulato Motors, started by a former Qihoo 360 executive; and a joint effort between Alibaba and the state-owned Shanghai Automotive Industry Corporation (SAIC). Established car companies such as CH-Auto and Changan Automobile are also making electric vehicles.
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In fact, a 2016 study by the China Automotive Technology and Research Center found that the country had more than two hundred manufacturers of new-energy vehicles.
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As a teenager in the 1990s, he wrote gadget reviews for tech websites and then, as an eighteen-year-old, started his own, PCpop .com. The venture was a success, becoming one of the most well-known electronics review sites in the country and earning millions of dollars in annual revenue. But Li had greater ambitions. At twenty-three years old, he spun off PCpop’s auto vertical to create the car information portal Autohome. Autohome started as a simple reviews site like Edmunds.com but evolved into a comprehensive online marketplace that carried independent news and reviews while linking dealers and manufacturers with a trove of consumer data. Autohome quickly became one of China’s most trusted sources of automotive information and grew into a highly profitable business. In December 2013, it listed on the New York Stock Exchange for an initial public offering that raised $133 million and valued the company at $3.2 billion, making Li rich.
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He is a tycoon in the Silicon Valley mold—geek first, businessman later—and much admired by China’s millennials, who see in Li a self-made success willing to turn his back on the country’s restrictive education system to pursue his dreams.
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charge—a concession to China’s lack of charging infrastructure. By contrast, the SEV will carry a twenty-two-pound battery pack that can be removed by hand and plugged into a normal power outlet so it can be charged under a desk at the office or at home overnight—a practice familiar to almost every one of the approximately 200 million electric-bike riders in China. The battery pack’s lithium-ion cells come from Panasonic, which also supplies Tesla. It takes six hours to charge the SEV’s battery fully,
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“Autonomy may come even earlier than electric,” Li posited. “There’s a faster revolution in autonomous driving software than there is in battery technology.”
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Four years passed before I returned to the Middle Kingdom. If you have even a passing familiarity with how China’s economy has been developing over the last three decades, you might expect me to say here that so much had changed. The cliché about the transformative times the Chinese people have been living through since the country’s capitalist revolution is so well worn that it has become as smooth as Yosemite granite. But still. So much had changed.
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In October 2014, Shaun Rein, of China Market Research Group, published The End of Copycat China, in which he applied an economic lens to the argument I had made in Beta China. China had been progressing along an innovation development curve, Rein wrote, from copycat stage to “innovation for China” stage to a global innovation stage. The impetus for the shift toward innovation of global significance, he wrote, “is being driven by Chinese consumers who want the best products and services developed for them directly and by ambitious, well-capitalized companies looking to offset a slowing, more competitive economy by becoming global players.”
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Shen, who had been a product executive at the Internet security company Qihoo 360, started Singulato Motors in October 2014 with the Chinese name Zhiche Auto, the translation of which is “intelligent vehicle.”
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He had always been ahead of his class, studying at Shanghai’s prestigious Jiao Tong University from age fifteen and graduating by nineteen with degrees in management and automation. In 2000, after moving to Japan to work as an engineer at a software company called Open Net, he started JWord, which solved an Internet search problem for Japanese consumers by replacing user domain names with keywords. In 2005, he sold the company to Yahoo! Japan and became an executive there while taking a stake in Kingsoft Japan, which also specialized in digital security. He helped the company through an initial public offering but later took up an executive role at Qihoo 360, at CEO Zhou Hongyi’s request, where he led a team developing connected devices, such as a smart watch for kids and a smart router.
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The charging infrastructure challenge also remains an open question. As of 2016, grid operators in China were running far behind targets for charging-station installations and hadn’t found a way to make them profitable.
10. A Supertanker’s Three-Point Turn
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Aston had teamed up with Jia Yueting to build an electric car. In February 2016, the company announced that it had signed an agreement with LeEco to develop and produce the RapidE, an electric version of Aston’s Rapide, a high-performance sedan. They planned to get it to market by 2018.
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He now credited Nissan with making the modern electric car a commercial reality, and Mitsubishi with being the forerunner of the electric era with its i-MiEV. “Tesla was a slow third,” he added, apparently disregarding the role of the Roadster.
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It was seen as a direct response to Tesla and new CEO Mary Barra’s biggest risk since she took over in 2014. Wired magazine celebrated the Bolt’s impending arrival with a February 2016 cover story about how GM had beaten Tesla “in the race to build a true electric car for the masses.”
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Compared to the mass-market electric vehicles that have come before it, the Bolt is a master achievement. It boasts more than twice the range of the 2016 Nissan Leaf (although an upcoming version of the Leaf looked set to drive two hundred miles per charge) and beats the seventy-six-mile-per-charge Ford Focus Electric on most measures. It boasts about three times the range of a BMW i3 and is $6,000 cheaper.
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they found that VW’s cars emitted up to forty times more toxic fumes than permitted.*
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Over the next decade, VW would launch more than thirty electric vehicle models, and Müller predicted that by 2025 a quarter of the company’s sales would be electric. By then, it expected to be making them at a rate of between two million and three million a year.
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Blomhäll’s review highlighted how strange it is to assume that the internal combustion engine—invented around the same time as the first telephone message was sent, as Edison came up with the phonograph, and as the world’s first typewriter punched out its first letters—should prevail as motor transport’s primary technology.
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But the real difficulty for anyone arguing the case for gasoline cars is found in the economics. We are fast approaching a time when gasoline cars will no longer be able to compete with electric cars on price.
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in 2013, chief technology officer JB Straubel told the MIT Technology Review that it accounts for less than a quarter of the cost of each vehicle—which for the eighty-five kilowatt-hour Model S, at that time, would have put the battery pack somewhere in the $18,000 to $25,000 range (assuming Straubel was factoring feature-rich versions of the car into his calculations). That would have put the cost per kilowatt-hour of the battery pack at anywhere between $210 and $300.
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Despite some uncertainty because of fluctuating costs of battery materials such as lithium, cobalt, and nickel, the downward trend will likely be accelerated by Tesla’s Gigafactory, at which the company has claimed it will be able to reduce pack costs by a third simply by consolidating production processes under one roof and benefiting from economies of scale.
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Here’s where things get interesting. Analysts have found that electric cars will reach cost parity with equivalent gasoline cars when battery cell prices hit $100 per kilowatt-hour.
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It took just fifteen years for the cost of laptop battery cells to drop from $2,000 to $250 per kilowatt-hour, according to Deutsche Bank—an improvement rate of 14 percent a year. From 2010 to 2016, that rate increased to 16 percent a year, according to calculations done by Tony Seba, a clean-energy investor and author of the 2014 book Clean Disruption of Energy and Transportation. It’s unlikely that rate will slow down anytime soon. Indeed, in 2017, the price of a lithium-ion battery pack was 24 percent lower than the year before, according to a Bloomberg New Energy Finance survey.
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He said Tesla would be disappointed if its battery costs weren’t in the “ballpark” of $100 per kilowatt-hour by the end of the decade. Even if Straubel’s estimates prove overly optimistic, battery prices will fall to $100 per kilowatt-hour by 2023 just by following the 16 percent per year cost improvement that the world saw between 2010 and 2016. And that’s probably a conservative estimate. GM has predicted that its lithium-ion cell costs will hit $100 per kilowatt-hour by 2021.
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No electric all-wheel-drive car has been put into production by any company other than Tesla. No car company has a charging network that comes close to being as extensive as the one Tesla has been working on since 2o12. In the United States, no automaker has been able to sell directly to consumers or establish its own Apple-like retail stores. None has the extent of electric-vehicle service knowledge that Tesla has.
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“If disruption theory is correct,” Christensen concluded, “Tesla’s future holds either acquisition by a much larger incumbent or a years-long and hard-fought battle for market significance.” Tesla may not fit Christensen’s classic definition of disruption, but that doesn’t mean the auto industry shouldn’t be concerned. After all, the theory has shown its limitations in the past. In 2007, five months after the iPhone was announced and eleven days before it hit stores, Christensen predicted the smartphone wouldn’t succeed. “They’ve launched an innovation that the existing players in the industry are heavily motivated to beat,” he said in an interview, adding that history speaks loudly on that point and “the probability of success is going to be limited.”
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Volvo has announced plans to sell only electric or hybrid cars from 2019 onward. BMW will produce an electric version of its bestselling 3 Series . . . sometime around 2020.
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Daimler is spending $10.8 billion to make at least ten electric models available by 2022.
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VW has said it will invest nearly $12 billion with Chinese partners by 2025 in developing electric cars for China.
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Ford said it will invest $4.5 billion by 2020 to develop thirteen electric vehicles, including a new SUV with three hundred miles of range, and a hybrid version of the F-150 pickup truck, the bestselling vehicle
11. Electric Avenue
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The Gigafactory is the inverse of the oil rigs that Boyd Danks used to work on—not a facility that drills deep into the earth to extract fossil fuels but a building on top of it to prevent the need for them. It is a powerhouse for a new energy economy.
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Two billion, Musk contends, isn’t all that many. That’s about the number of cars and trucks on the road—and those fleets get refreshed every couple of decades. “This is actually within the power of humanity to do,” Musk says with subdued insistence. “We have done things like this before.”
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Tesla will make its Gigafactory patents available to use free of charge, just as it does with its vehicles.
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If you own the “full stack,” you have holistic control of the system. In this way, philosophically and strategically, Tesla bears more in common with Apple than it does with GM or Toyota. Just like Apple, Tesla wants to control the whole experience around its business, from the design of its battery packs, to the making of the software, to the manufacturing of vehicles, the building of components, the management of infrastructure, and the sale of its products through its website and retail stores.
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The next phase of Tesla would focus on four areas, Musk said in his blog post. It would pair its Powerwalls with SolarCity’s energy business to create an integrated generation-and-storage product “that just works.” Family homes could be their own utilities, and customers would get “one ordering experience, one installation, one service contact, one phone app.” In the years ahead, Tesla would also expand its vehicle fleet, adding a compact SUV, a pickup truck, a heavy-duty truck, and a small bus into the mix. The buses would be autonomous, to be summoned by smartphone app, or via buttons at existing stops. The advent of full self-driving capability, which Musk said would ultimately be safer than human-driven vehicles by an order of magnitude, would also enable a business built around car-sharing. Owners could add their cars to Tesla’s shared fleet to generate income when they weren’t using them. In cities where there weren’t enough customer-owned cars to meet the demand for such shared-use cases, Tesla would operate its own fleet—a move that would put it in direct competition with Lyft and Uber.
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Ultimately, the building would stretch a quarter of a mile long and cover 5.8 million square feet in floor area, sitting on 3,200 acres of land. There was room enough for another right next to it. Musk wanted it to produce up to 150 gigawatt-hours by 2020, enough to support 1.2 million cars.
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The Gigafactory is large enough to house ninety-three 747 airplanes, or fifty billion hamsters.
12. We Didn’t Run Out of Stones, Either
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In the post, Tesla defended the safety of the system and noted that this was “the first known fatality in just over 130 million miles where Autopilot was activated.” The accident was widely considered the first death in a “self-driving car”—though that term overstated the scope of the technology.
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“On May 18, eleven days after Brown died, Tesla and CEO Elon Musk, in combination (roughly three parts Tesla, one part Musk), sold more than $2 billion of Tesla stock in a public offering at a price of $215 per share—and did it without ever having released a word about the crash.”
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This doubt-creation engine has also been central to the New York attorney general’s fraud investigation into ExxonMobil over the gap between what the company has known for decades about climate change science and the public relations efforts it allegedly used to create the impression that the science was inconclusive. For instance, Exxon helped create a fossil-fuels-industry lobby group called the Global Climate Coalition, which peddled the idea that the role of carbon emissions in climate change was “not well understood.”
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If you’re wondering why the Kochs might have been worried about electric cars when the cars represented less than 1 percent of all vehicles on the road, you might consider an ionic compound called sodium chloride.
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In the civilizations of the Nile, Babylon, India, China, Mexico, and Peru, autocratic rulers controlled their subjects by maintaining a monopoly on salt, and taxing it.
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There were, of course, wars. In Roman times, German tribes fought over salt sources. France’s salt tax, the gabelle, caused such outrage that it was an aggravating factor leading to the French Revolution.
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Even during the American Civil War, salt was a military target. At the end of 1864, for instance, Union forces captured Saltville, Virginia, a leading producer of the stuff, then embarked on a destructive two-day rampage that, according to the historian Rick Beard, effectively brought an end to salt making in the South of the United States.
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So if salt carried such strategic importance only 150 years ago, why is it so cheap today? The answer is that it was supplanted by an invention that changed the course of history. The first refrigerated ships appeared in the mid-1870s, and General Electric started marketing the first household refrigerator in 1911. Instead of relying on salt for food preservation, or using large ice blocks to keep their food cold, people in developed countries started storing it in electrically chilled boxes.
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It also made salt a lot less valuable. There would be no more wars over sodium chloride. Its multithousand-year reign as the world’s most important commodity was over.
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The oil industry may be the most lucrative the world has ever known, and the idea that still-scarce electric cars pose a serious imminent threat to it might seem fanciful. The industry is worth trillions of dollars a year. The production, supply, and distribution of oil is the subject and cause of much geopolitical instability, and it has been central to conflicts on every continent, from the Middle East to Sudan and the South China Sea.
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It doesn’t take much to trigger an oil market crisis. From June 2014 to January 2015, an oversupply of oil sent prices crashing from $116 a barrel to $47 a barrel, prompting an industry panic.
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The displacement of two million barrels of oil a day—about 2 percent of global daily production—would be enough to trigger oil price decreases equivalent to those seen at the start of the crisis in 2014, according to a story by Bloomberg that drew on a 2016 study by Bloomberg New Energy Finance. Electric cars could do that by the early 2020s, the study found. The growth rate of electric cars from 2014 to 2015 was 60 percent, which was similar to the growth rate Tesla was projecting for the years ahead. If that rate continued, electric cars could displace two million barrels of oil a day by 2023,
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For example, Norway is working on a combination of taxes, subsidies, infrastructure, and other incentives in an effort to end sales of gasoline cars in the country by 2025.
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October 2016, Germany’s federal council voted for a nonbinding resolution to end all sales of gasoline cars with internal combustion engines by 2030. In May 2017, India’s power minister announced a plan to have only electric cars—and “not a single petrol or diesel car”—sold in the country from 2030 on. Both the UK and France have said they will end sales of diesel and gasoline cars by 2040. And even China has said it will set a date that will signal the end of all gasoline car sales in the country (although it hasn’t said what that date will be).
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technology—and the Stone Age ended. Not because we ran out of stones.” Sears was paraphrasing former Saudi Arabian oil minister Sheikh Ahmed Zaki Yamani, who made the statement in 2000. Innovation would provide the way out of the oil era.
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In an unprecedented personal interview, Sheikh Yamani also predicts that, within a few decades, vast reserves of oil will lie unwanted and the "oil age" will come to an end. In an interview with Gyles Brandreth, he says: "Thirty years from now there will be a huge amount of oil - and no buyers. Oil will be left in the ground. The Stone Age came to an end, not because we had a lack of stones, and the oil age will come to an end not because we have a lack of oil." https://www.telegraph.co.uk/news/uknews/1344832/Sheikh-Yamani-predicts-price-crash-as-age-of-oil-ends.html
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The New Yorker’s Jane Mayer has described these efforts as a “40-year project that Charles and David Koch have been funding with their vast fortunes to try to change the way Americans think.” The journalist and climate activist Bill McKibben has said the Kochs “may be the most important unelected political figures in American history.”
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dark money https://www.nytimes.com/2016/01/24/books/review/dark-money-by-jane-mayer.html https://www.rollingstone.com/politics/politics-news/inside-the-koch-brothers-toxic-empire-164403/
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In May 2016, there appeared a website called WhoIsElonMusk .com. Most prominent on the site was an autoplaying video on the home page that featured foreboding music and the dark, smoky-voiced narration of a true-crime TV show. It spent two minutes shifting through B-roll footage and clips pilfered from documentaries about Musk. The video announced itself with the title American Swindler: The Elon Musk Story
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By looking around in the source code, he found a different URL that was registered under the name Brad Summey, the chief technology officer for a political ad agency named Orange Hat, based in the outskirts of Washington, DC. According to OpenSecrets.org, Orange Hat had previously been paid $220,200 by supporter groups for Minnesota Republican representatives John Kline and Erik Paulsen, both repeat beneficiaries of funding from Koch Industries and its associated political action groups.
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The American Swindler video carried a caption that referred to $4.9 billion in subsidies that Musk has received for his industries, with a credit to the Los Angeles Times. Indeed, in May 2015, the Times carried a piece by Jerry Hirsch that reported Musk’s companies had collectively benefited from $4.9 billion in government subsidies, according to data compiled by the newspaper. The article counted the zero-emission credits trading scheme that Tesla has benefited from and construction-related incentives from Nevada, Texas, and New York for Tesla, SpaceX, and SolarCity, such as the billion-dollar incentives package afforded to Tesla for the Gigafactory. The article quoted hedge fund manager Mark Spiegel, who short-sells Tesla stock, as saying Musk’s companies wouldn’t be around without government support.
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The International Energy Agency has estimated that the fossil fuels industry collects about $550 billion in global government subsidies annually, compared with about $120 billion for the much smaller renewables sector.
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Two weeks before the Times printed its article about Musk’s subsidies, the International Monetary Fund (IMF) published a report that put the fossil fuel industry’s garbage bill for 2015 alone at $5.3 trillion—a figure that took pollution and climate change into account.
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He said it didn’t make sense to compare subsidies that Tesla would receive over a twenty-year period for the Gigafactory with fossil-fuel industry subsidies that were a thousand times larger in a single year.
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Sears was right that the large oil companies agreed to put a price on carbon. Exxon, BP, and Shell had all spoken in favor of it. A tax would ensure “a uniform and predictable cost of carbon,” an Exxon spokesperson said, and “allow market forces to drive solutions.”
13. Heaven or Hell?
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Ultimately, Breitfeld was pushed over the edge by China itself. He recognized the emergence of an entrepreneurial culture. Hordes of people in their late twenties, full of optimism and brimming with entrepreneurial passion, were starting companies. But more importantly, the political framework was right. “It’s the best in the world,” Breitfeld said matter-of-factly. The market is large, the middle class is on the rise, and the government is committed to supporting new-energy vehicles.
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I asked Breitfeld if there were other people like him who were still at traditional automakers but wanted to try something new. He pointed out that he had hired the core team from BMW’s i8. That group included Dirk Abendroth, who developed the electric power trains; Benoit Jacob, who was head of design; and Henrik Wenders, head of product management. Byton had also hired Luca Delgrossi from Mercedes-Benz to head up its autonomous driving unit, and Mark Duchesne, formerly of Toyota and Tesla, as head of manufacturing. ‘‘At the end of the day, it’s about the idea of the company and what they really want to do,” Breitfeld said. He scratched his head and shifted in his seat. “This industry is transforming to a completely new era. The good ones want to be part of it.”
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Byton encapsulates the main characteristics of the modern multinational auto start-up. It has offices in China and Silicon Valley and is funded by Chinese financiers. It boasts German engineering leadership and American design expertise. Its vision is for connected, autonomous cars that have business applications beyond just unit sales, and it sees Tesla as a trailblazer whose cars will nevertheless come to be seen as passé. Like Nio, Faraday Future, and Lucid Motors, Byton has the braggadocio of youth and the optimism that comes with a fresh start. However, it also shares the same vulnerabilities.
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Marrying a technology industry mind-set with the traditional mind-set of the auto industry will continue to be tough, not just for incumbents such as BMW, GM, and Ford but also for newcomers such as Che He Jia, Singulato Motors, and Nio. Tech people want to move fast and be bold. Auto people want to move deliberately and according to a tried-and-tested playbook. Only Tesla has proven an ability to take a Silicon Valley approach to automaking and turn it into a moneymaking enterprise—and even then, it has much to prove when it comes to long-term sustainability.