Analysis: Elon Musk’s Plans Asks What Can Governments Really Do to Support Car Business?

As soon as the Tesla electric car had its first high-speed driving tests a couple of years ago, founder Elon Musk told employees the car would be part of an automotive revolution. Tesla was…

Analysis: Elon Musk’s Plans Asks What Can Governments Really Do to Support Car Business?

As soon as the Tesla electric car had its first high-speed driving tests a couple of years ago, founder Elon Musk told employees the car would be part of an automotive revolution.

Tesla was destined to push human navigation further and further off the road – so much so that the name of the electric car was drawn from a nod to the inventor’s pet project: a race to build the fastest electric car on the planet.

When Tesla started in 2007, it was known as the development arm of Musk’sSpace Exploration Technologies Corporation (SpaceX). In 2014, it took over the design and production of the vehicles, which had been designed by Mario Couto.

The company had already been running 100 hours a week for four years when Musk approached the highly successful entrepreneur Brian Wong, author of “Daring Greatly,” to become a “director of growth.”

Musk’s rationale: “You’re going to get better car designs at dramatically lower costs.”

One strategy for achieving that was the so-called “resourced management model” or “PPM.” Instead of going through the long, drawn-out process of staffing a team or product that a company would typically do, Tesla would simply pick one brief project and focus full-time on that.

For the Model S, Tesla decided to make one chassis and use it for every car – a cost saving of $4 million. At about the same time, executives also spotted opportunity in the older Tesla Roadster and sought to reuse it for the Model S’s rear-wheel drive. For the Model X – Musk’s first car – the X and S chassis were swapped out for one completely new chassis and two all-wheel drive versions.

All in all, in just two years, Tesla managed to produce 28,000 Model S and X cars for customers.

These investments were also one way of overcoming the logistical obstacles for Musk’s vision: The company needed an auto body factory in the United States to manufacture the cars, and hundreds of thousands of miles of tunnels to transport people and goods around Los Angeles. Tesla delivered its first electric semi-truck just a few months ago and is set to produce its first pickup truck next year.

There are also obvious questions over how sustainable Tesla’s business model can really be. Musk recently told The New York Times that the company is generating cash flow again, a development that has prompted investors to perk up. For this year, the company has produced a profit. But questions have started to surface: Has Musk overstated the business? Has Tesla used borrowed money to spend cash, or is its cash reserves low enough that they will soon have to start taking investment from third parties?

Musk has said Tesla has 10 years worth of cash on hand. That, coupled with his ambitious expansion plan, was what gave him the confidence to head to Washington – and claim that a Republican transportation bill could pave the way for the future of self-driving cars.

Trump’s efforts to spearhead a $1 trillion infrastructure program have proved little help, and Democrats are wary of any bill that ties government funding to federal fuel tax hikes.

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