The Green(back) Revolution: Why Tesla Is Just A Distraction

Tyler Durden's picture

Tesla has been outselling specific Mercedes, BMW and Audi models at similar price/quality points, and Consumer Reports has given the car glowing reviews. Is there a broader meaning in this, other than the introduction of a very well-designed luxury automobile? JPMorgan's Michael Cembalest's suggests that the Tesla’s price and its fossil fuel footprint suggest that it’s a distraction regarding the issue of transportation and related environmental efficiencies.

 

Via JPMorgan's Michael Cembalest,

The Tesla Solution

 

[Vaclac Smil and] I pulled together some charts to illustrate both of his points.

 

 

 

Note that Tesla prices are net of the $7,500 credit that buyers receive, and after Tesla benefits from ZEV/GHG credits paid to it by its competitors. In the 2nd chart, you can see that the current fossil fuel footprint of the Tesla is not much different than the Honda Civic. It’s also higher than the Civic Hybrid, a car that gets all of its electricity through regenerative braking rather from than the electricity grid.

 

Currently, the "zero-emissions" Tesla Model S generates a fossil fuel footprint that is not much different than the Honda Civic. There are scenarios in which the Tesla's imprint could be lower, but they are all in the future

An explanation of the scenario analysis in the second chart:

  • 0. Tesla, Current: see table on next page for the energy math.
  • 1. Vamp: Tesla figures out how to reduce the vampire (standby) electricity loss by 80%, an issue in the car’s software which some users report as draining ~3.5 kWh per day from the battery when the car is idle
  • 2. C->NG: Within fossil fuels, the split between coal and natural gas, which is currently 63/37, falls to 50/50 as older coal plants continue to be shut down and more natural gas plants are built
  • 3. Foss: Fossil fuels fall from their current 67% share of US electricity generation to 60%. This sounds like a small change, but they have ranged from 65% to 72% for the last 30 years in the US. For an even larger decline on a national level, more nuclear and/or a break-through on battery storage of intermittent renewable energy would probably be needed
  • 4. Therm: Thermal efficiency of coal and gas plants rise closer to theoretical maximums. However, on coal, emissions standards and greater coal plant cycling impose parasitic loads that may make theoretical maximums hard to reach.
  • 5. Assume that 1, 2 and 3 take place simultaneously
  • 6. Assume that 1, 2 and 3 take place simultaneously, and that the Tesla is used just in low-fossil fuel states

A colleague of mine here at J.P. Morgan believes that Tesla’s long-range plan is to provide proof of concept at the luxury end of the market, and then eventually commoditize the concept at lower price points. If that’s what happens, and if the electricity “ifs” shown above take place, then Tesla would merit the attention they’re getting for current annual production of 20,000 units on a base of 15 million U.S. cars sold each year.

 

Otherwise, what we may be witnessing is simply a green revolution where green represents the buying power of the Tesla’s wealthy driver rather than a substantial environmental benefit.

 

The broader point is that the oft-promised rose garden of substantially lower environmental footprints from electric vehicles may be decades away from blooming, at least in the US. In the meantime, modest improvements in the internal combustion engine, changes in driving patterns and a move away from heavier, low-mpg cars could get to a similar place.