How Tesla is changing the world

The one thing that never quite seems to fit into London's cityscape is the random sighting of the G-Wiz electric car. The peculiarly named G-Wiz was the top selling electric car in the UK for several years and is a product of India: it is just a renamed REVAi which was launched in 2001 by Bengaluru's REVA Electric Car Company, which has now been acquired by Mahindra & Mahindra.

The reason why the G-Wiz doesn't quite seem to fit in to London's cityscape is that, frankly, it doesn't quite seem like it would fit anywhere, other than tight parking spots. This Electric Vehicle (EV) isn't a car that inspires the popular imagination: it looks like a miniature buggy and has a low range of 80km on a full charge.  It is neither aspirational nor ground breaking in any way. Perhaps, it wasn't designed to be that. More accurately, it couldn't have been designed to be that when launched in 2001, largely owing to inadequacy of available technology - but more on that later.

With the overall transport sector contributing to approximately 22 per cent of CO2 emissions globally (as reported by the International Energy Agency), we can agree that there is merit in moving away from Internal Combustion Engine (ICE) based, fossil fuel-consuming, greenhouse gas-emitting automotive engines. This is especially true in the light of the Fifth Assessment Report (AR5) of the Intergovernmental Panel on Climate Change (IPCC) strongly suggesting the role of the human hand in global warming and the required urgency in tackling this issue.

The discerning reader may be quick to point out that even if EVs went mainstream, carbon emissions may not change - and in fact may increase - as electricity is still largely sourced from coal based power plants in several countries, including India. Further, there are significant transmission losses in electricity supply systems.

However, in spite of these concerns, there are short and medium term gains to be made with the increased adoption of EVs (there are long term advantages too, but in the words of John Maynard Keynes, in the long run, we are all dead). In the short run, greater adoption of EVs would lead to lowering Local Air Pollution levels where there are greater concentrations of personal vehicles, ie. in urban areas. This is important in the light of the fact that over 53 per cent of the global population in 2013 was based in urban areas (up from 43 per cent in 1990, as reported by World Bank), and this will keep rising over time. In the short run, there may be merit in displacing pollution from heavily concentrated urban areas to areas with low population densities, where coal-based power plants are based. Undoubtedly, this is a privileged suggestion - more likely to be proposed by an urban resident - and one that ignores the social justice angles of industrialisation and urbanisation. For this reason, this author would like to focus on the medium term argument, which is also of academic interest to him.

The global economy today is "locked-in" to carbon based energy systems. There is a techno-institutional inertia in place, which will ensure fossil fuel based energy systems continue to be the mainstream long after alternate energy systems have proven commercial viability. Such techno-institutional inertia exists due to the co-evolution of legislation, investments, demand-side technology and culture, which has led to the society being locked into a fossil fuel dominant economy. In order for this lock-in to break and for renewable technologies to take centre stage, the demonstration of commercial viability will not be enough. Specifically in the case of private road transport, apart from changes in legislation and investment patterns, the cultural notion of mobility will have to change. This, unfortunately, will take much longer than the expected time for renewable fuels to meet grid parity with coal (ie. the cost of producing electricity from renewables becoming equal to electricity from coal).

Electricity from solar technology, for instance, is expected to become as cheap as electricity from coal by 2020. Once such grid parity is achieved, the transformation of electricity supply will prove to be far less difficult than changing the demand patterns of automobile consumers. Since the transformation of the private transport industry may take longer than the transformation of electricity supply systems once grid parity is achieved, there is good reason to start the process of the adoption of EVs sooner, even if there are more carbon emissions in the short run from greater consumption of coal-based electricity. After all, the breaking through of EVs into the mainstream is not going to be easy.

Let's face it: consumer acceptability is a very important determinant of popularity of a product. On average, automobile consumers want cars to look "normal", and they want to not have "range anxiety". This is where Telsa comes into the picture. Telsa Motors is an American electric car company that was founded in 2003 and their popular sedan Model S was released in 2008. The Model S is succeeding at going mainstream where others have failed in the past. Firstly, their popular Model S looks like regular cars do: it has a front compartment where the internal combustion engine (ICE) would normally be, and is as long and wide as any other car in its segment. Indeed, Tesla's Model S is as "inefficiently" designed as cars that run on motor spirit or diesel. EVs do not need to be designed like traditional cars, but Tesla has understood that it is important to do so in order to find acceptability at the marketplace. In doing so, Tesla has not challenged the cultural notions of personal mobility, which is far harder to change.

EVs before Tesla looked far too much like golf carts, or were far too quirky - much like the G-Wiz. Others - like Nissan's Leaf - are named, marketed and designed look "green". Such cars thus have a niche market among those who care about the environment and efficiency over performance. However, in order to go mainstream, EVs need to look and perform like the next car, perhaps marginally better.

Telsa has successfully done that with its Model S, and is on track to launch an SUV and a cheaper sedan in the coming years. The SUV - named Model X - also looks like a "regular" car which could have a petrol or diesel engine in it. Tesla's cars also perform like ICE cars. In fact, they perform better on acceleration, speed, safety tests and other indicators than many cars in its class.

Secondly, Tesla has solved the "range anxiety" issue by installing charger stations strategically in a manner that ensures inter-state highway travel becomes possible in the United States, Europe, China and Japan, where they operate. Even without charging stations, the Model S has enough battery life to travel more than the distance from Delhi to Jaipur - and back - on a single charge. Tesla is also introducing "battery swap" stations that would automatically replace batteries faster than it takes to refuel a traditional car with petrol or diesel.

Tesla is thus creating the institutional infrastructure that is required for the EV technology to become mainstream. This had never been attempted at such a scale before: so far, charging stations were unorganised, rare and localised. The lack of charging infrastructure along highways and the time taken to charge are two of the key reasons why electric cars did not succeed in the past. Indeed, it is why the new hydrogen fuelled cars being launched by Toyota and other manufactures will in all likelihood fail to go mainstream: there simply isn't enough infrastructural support, and these cars do not look like the next car.

To be sure, Tesla's Model S - which has sold over 50,000 units so far - is not the best selling EV.  That honour goes to the far more moderately priced Nissan Leaf. However, unlike other EV manufacturers, Tesla is addressing the techno-institutional lock-ins that are characteristic to the ICE dominated automobile industry. Further, it is creating an ecosystem which can be taken advantage of by other EV manufacturers: Telsa has stated that it will allow its technology patents to be used by other companies in good faith in order to deepen the EV industry.

Ever since Tesla succeeded with Model S, other manufactures - such as BMW and General Motors - have released or are working on releasing mainstream EVs. BMW and Volkswagen are even planning to develop fast-charging stations. As Henry Ford did to the automobile industry in the early 1900s by creating a standard industrial line, Tesla's founder Elon Musk is doing towards mainstreaming EVs today.

It is true that the natural progression of battery capacity was a necessary condition in the mainstreaming of EVs. It is the reason why REVA's fourteen year old G-Wiz is petite and has a low mileage. Newer batteries permit the construction of larger cars like the Model S, which can go much further. However, the breaking of techno-institutional barriers which was needed for the mainstreaming of EVs has been facilitated by Telsa. The necessary conditions are now being met. If the breaking of techno-institutional lock-in in the automobile sector is made possible by the EV industry, it could lead to significant gains in curbing CO2 emissions from the transport sector in the medium run. And Tesla is poised to lead the way and make it happen.

Post script: With the help of appropriate government incentives and a large network of charging stations in Norway, new electric vehicle registrations have gone up from 733 in 2010 to 23,390 in 2014. The next two decades could go down in history as the ones that transformed the automobile industry.