Wednesday, July 23, 2014

Is Tesla the New Ford?

An article in the online edition of PCMag featured the newest model of Tesla's electric car. The headline wondered if the new $35,000 Model 3 is Tesla's "Model T moment," referring to Ford's introduction of a new, low-cost car in 1908.

And if you do a little research and a little math, it doesn't seem so far off the mark. The average wage in 1908 was 22 cents an hour. An average worker then would have toiled around 3750 hours to buy the $825 Model T. Today's average wage is about $24.50 an hour overall, so today's average worker would put in about 1429 hours. (You can argue with these numbers if you want; reliable statistics are hard to come by with so many interpretations of the word "average.")

So, by the numbers, the Tesla seems to out-Ford the Model T, at least at this initial price point.

But the Model T revolution was not about numbers. It was about creating the mass market, not just for cars, but for all manner of manufactured goods. By going for the common masses instead of the upscale few, Ford created not just a new car, or even a new kind of car, but a new kind of industry destined to make what were once luxury goods available to almost anyone in the Western world.

With all due respect to the folks at Tesla and their new technology and their new vision of how we power cars, nothing they are doing at this juncture looks like a Ford kind of revolution.

Not only that, but over the next fifteen years or so, Ford brought the price of the Model T down in nominal dollars, even as wages were going up. By the mid-20s an average factory worker could buy a Model T with 465 hours of labor. You can just barely do that now, if you are lucky enough to earn that "average" wage of $24.50. But I'm not holding my breath to see if a Tesla can be brought down to the under-$12,000 price point.

I think electric cars can be an important part of our future transportation, if enough other things change. But in spite of the rhetoric, Tesla has not yet reached that incredible turning point embodied in the Model T.