The editors over at Focus have an interesting theory: Tesla Motors, builders of the first viable electric sports car (the Tesla Roadster) and designers of the game changing Model S sedan, may be the next DeLorean Motors. In case you don’t remember your 1980’s pop culture and have never heard of the Back to the Future movie franchise, DeLorean Motors (DMC, for short) was an innovative but doomed automaker. At a time when beancounters ran the show in Detroit, DMC went their own way by building a car equipped with stainless steel body panels, a suspension based on the Lotus Esprit and gullwing doors. The cars were built in a factory in Northern Ireland, then shipped to Quality Assurance Centers in New Jersey, Michigan and California for final panel alignment and vehicle assembly.
Production of the DMC-12 was supposed to begin in 1979, but didn’t actually start until 1981. By the end of the year, DMC had sold only 50% of the volume required for break-even, forcing John DeLorean to make unsuccessful attempts to restructure his company and obtain additional funding from the British government. In 1982, DeLorean became the subject of an FBI sting operation, and was charged with attempting to smuggle $24 million worth of cocaine into the U.S. He was later acquitted of all charges, but the damage was done: by 1982, DMC was in bankruptcy and John DeLorean faded into the sunset of automotive history.
So how does Focus equate Tesla with DMC? in five categories: similar circumstances, reputable leadership & management, similar pricing relative to other cars, government funding and the environmental movement. Let’s look at each in depth below, and I’ll give you my view on the two companies and their products.
Similar Circumstances: Focus writes that both the DMC-12 and the Tesla Roadster were designed at a time when gas prices (and oil supply) were a concern for consumers. The two cars take different approaches to solving the problem: DMC-12 designers opted to use a fuel efficient Renault V6 engine, and the Tesla designers opted to use lithium ion batteries and electric motors.
I can’t argue with the timeline and fuel efficiency concerns, but DeLorean’s main focus was building a sports car, not necessarily a fuel efficient one. Early plans to use a rotary engine were scrapped when the designers realized the weakness of the Wankel motor: to make power, you need to wind it out, and fuel economy suffers (ask any RX-3, RX-7 or RX-8 owner). DeLorean originally intended the DMC-12 to have 200 horsepower, but emission regulations strangled the PRV V6 motor, which ultimately produced about 130 horsepower in the U.S. (but 170 in the E.U.).
My take? Both the DMC-12 and the Tesla Roadster were designed as sports cars, but only the Tesla had a primary goal of being green.
Reputable Leadership: Focus gives details on the credibility of John DeLorean, who became chief engineer for Pontiac in 1961 and was once considered to be a candidate for the role of President at General Motors. Tesla founders Martin Eberhard and Marc Tarpenning were respected Silicon Valley engineers, who were able to attract key leadership and investors to their new company.
Focus nailed this point, although they left out the colorful Elon Musk, an early investor in Tesla and now the company’s president. The role of Tony Starke in the Iron Man movies was said to be based on the hedonistic lifestyle of Musk, and there has been more than a little drama at Tesla throughout the years (including the departure of Eberhard in 2007). One thing is certain: like DeLorean, Tesla Motors is blessed (or cursed) with colorful leadership.
Similar Pricing: Focus points out that both the DMC-12 and the Tesla Roadster carried premium price tags. with the DMC-12 selling for the equivalent of nearly $60,000 in today’s dollars, and the Tesla Roadster selling for $109,000.
Agreed, but this only illustrates the drawbacks of low-volume manufacturing. DMC planned on building 12,000 cars per year to break even, but first year sales were half of that. Tesla, on the other hand, has only produced about 1,000 roadsters through January of 2010. It’s a Catch-22, really: to get lower prices, you need to increase manufacturing volume, but to justify increased production you need increased sales. Tesla pricing is likely to come down once they begin building cars in higher volumes, and as the cost of their technology matures.
Government Funding: Focus points out that both DMC and Tesla received substantial funding from the U.S. government, and that DMC also received funding from the British government since their manufacturing was located in Ireland. Both companies were successful in raising funding from private investors, as well.
Focus is correct, but DMC never had ties to a major automaker, and Tesla is now linked to Toyota via the purchase of their old NUMMI assembly plant in California and a $50 million investment from the Japanese auto giant. Tesla has viable electric car technology that Toyota lacks, so the real danger for Tesla is how much control Toyota has over the boutique automaker. The worst thing for Tesla would be assimilation by Toyota, with Tesla forced into irrelevance by building battery powered RAV-4s instead of their Model S sedan.
Environmental Movement: Focus contends that Tesla, and indeed all electric car manufacturers, have the support of the environmental movement. Furthermore, there is much more focus on ending reliance on foreign oil today than there was in the 1980s, and Tesla’s technology is more advanced than DMC’s.
I can’t argue here either, but the real question is whether or not consumers will embrace electric car technology. Sales of the Leaf have exceeded Nissan’s expectations, and Chevy is certainly enjoying plenty of media exposure on their Volt. Whether or not these cars will have an impact on our motor-based culture has yet to be seen, particularly given the limited range and functionality of battery powered vehicles. We may be getting closer to a practical alternative to fossil fuel based propulsion, but from where I site we’re not there yet.