The Electric Infrastructure Paradox

"Tim (Fractal Footwork)" (fractalfootwork) 09/16/2013 at 20:00 • Filed to: Tesla, Elon Musk, Electric Infrastructure Paradox, Mercedes, OppositeLock

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The Implications of a Per-Firm Electric Charging Network and How Elon Musk Could be the Driving Force of the Automotive Industry's Shift From Gasoline Powered Vehicles to Electric Only Vehicles.

Companies and firms exist to make a profit, first and foremost; this is a basic economic assumption. However, if accountants ran your favorite automotive company and stuck directly to this theory, then no risk would be taken and we'd all be driving around in Toyota Corollas, and what a bleak future this would be.

Elon Musk has made it clear that he is looking to change the way we live and survive in the long run instead of looking directly at Tesla's profits. He has mentioned that the long-run ideology behind SpaceX is to kickstart inter-planetary existence. Elon's reach to change the way and length that we live pours light onto how he may solve the electric infrastructure paradox.

Tesla is the first major automotive company to see through the major deficiencies of electric vehicles (lack of luxury, lack of cargo space, lack of people space, lack of excitement, lack of range, excessive charge time), and begin to fix them, thereby creating their own market away from the established range of electric vehicles. The last hurdle Tesla faces is creating an infrastructure that can compete with the enormity of gasoline/diesel stations that exist on every street corner across the world.

Before Tesla, and still somewhat after, the automotive oligopoly's plans for your newly purchased electric vehicle was for you to charge it at home and, hopefully if you lived close enough, also at work. The electric car was meant as a commuter vehicle, and perhaps this is why it was never taken with open arms by proper car culture.

Tesla's initial reaction to allow a larger range for their electric vehicles was to build their !!!error: Indecipherable SUB-paragraph formatting!!! . This seems like a great idea until you realize that even their 100% coverage of the United States only works on long distances, and you may have to go a bit out of your way just to reach one. The other problem with the Supercharger network is the time it takes to charge, but Tesla got ahead of everyone and showed off their !!!error: Indecipherable SUB-paragraph formatting!!! technology that saves a few hours and is even faster than filling a standard gas tank.

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A seemingly-plausible solution to extending Tesla's charging network would be for Tesla to team up with a gas company (Shell, BP, etc), yet this would never happen because every gas company would be loosing substantial profits (hundreds of billions of Dollars), as we all realize we can switch. While we all expect electric vehicles to take over in a few hundred years, no gas company that gives up their infrastructure now will win back those profits later by being an early-adopter.

So what can Tesla do to extend their charging network and not lose profits from the cost of land, excessive infrastructure, and giving away free electricity?

Tesla and Mercedes recently announced a collaborative B-Class, where Tesla supplies the batteries and Mercedes supplies everything else. Why is this important? If Tesla supplies the batteries, then they may also have power over the charging connection, the chassis, and most importantly the placement of the batteries within the car. If enough cars have Tesla battery packs, they could charge these vehicles to charge/battery swap at their Superchargers and start to make a profit; this would allow Tesla build more Superchargers, increasing the demand for Tesla-powered vehicles, and increasing the demand for more Superchargers all in a downward spiral for gas companies.

Turbineguy: Nom de Zoom > Tim (Fractal Footwork) 09/16/2013 at 23:32

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I met up with a Tesla rep in southern CT today for a test drive & photos. They recently installed a Supercharger at a nearby rest stop on I-95, and are in the process of putting more of these in nationwide. As for the car, it was amazing. Corvette-like acceleration without the noise (not that that's a bad thing) and a Buck Rogers dash.

dsigned001 - O.R.C. hunter > Tim (Fractal Footwork) 09/16/2013 at 23:34

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First of all — the oil companies do not own the gas stations : they are almost ALL independently owned and operated. While they have certain restrictions on what they can and can't do, I suspect putting in charging stations isn't one of them (many of the supercharging stations are at normal fill up stations).

Second, setting up an electric charging station takes almost no cost or commitment. Nearly every building in existence is wired for 220V, and most RV parks have 30A and 50A outlets. The infrastructure is already there — somebody just needs an adapter to make it work with Tesla's charging system (and Nissan/Chevy's).

I think Elon's insight is what I just said — if you build it they will come. The fact that the charging stations are free is incentive for businesses to at least experiment with pay stations (or invite Tesla to bring their superchargers and charge non-Tesla owners).

Tim (Fractal Footwork) > dsigned001 - O.R.C. hunter 09/16/2013 at 23:46

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Do you mean that some gas stations are franchises? That would make more sense, but my point still remains. I don't mean that gas stations have restrictions on installing charging stations, but they will not ever do it because they will start to loose substantial profits as everyone realizes they can switch to electric vehicles.

Second, land is pretty expensive. Tesla's battery swap is also pretty expensive, and this is the key to swaying buyers toward and electric vehicle though it's time savings.

I can see a third-party that has no relation to an oil/gas company setting up paid charging stations, but they will have minuscule profit margins, and they will eventually get bought out by oil/gas companies and erased off the face of the earth for threatening their business.

dsigned001 - O.R.C. hunter > Tim (Fractal Footwork) 09/17/2013 at 07:27

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Yeah, I'm afraid I disagree. There is no additional land requirement: the parking spaces they already have can be turned in to charging stations. Second, I think you are overestimating the amount that has stations make of of actual gas. Many of them make most of their money off of selling stuff :/ their stores, and selling gas at extremely thin profit margins. Selling electricity at likely double the cost (say 20c a kilowatt) would be a major step up, as would having a captive customer with nothing better to do than spend money.
Third: what you're referring to is called anti-competitive behavior and is illegal. That's not to say that it won't be tried in some semi-legal form, but I think the oil companies buying out the charging stations would be a bit too ham handed, even for them. Regardless, I think it's too late for them to stop electric cars at this point.
Lastly, I think you overestimate how much they care. Most of their business comes from selling other petroleum products. Diesel (shipping, trucking, trains), jet fuel, natural gas (heating, electricity generation). Gasoline is just icing on the cake for them.

Tim (Fractal Footwork) > dsigned001 - O.R.C. hunter 09/17/2013 at 12:14

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I think you underestimate how much they care, but all we have are opinions until numbers are presented.

I do understand that the franchises make little on the sale of gas. I would like to point out that there is most likely already (or definitely will be) a contractual stipulation between the franchises and the gas companies that restricts them from selling electricity to cars. While the "icing on the cake" may be minimal (I'd have to see some serious numbers in order to fully corroborate this statement) it still is considered to be part of the cake. Gas companies make more per mile from gasoline than they do creating electricity to power electric cars (per mile).

As for the cost of the charging stations, you're correct. I guess I was more concerned with the costs of the battery swap, and for a third party business to attempt to capitalize off this would take serious investment.