By Farzad Mesbahi

Innovation has always been, and forever will be, the driving force behind the growth of human civilization.

Even today, the human race still experiences some pretty incredible changes to the fabric of daily living. The first innovation that I was personally able to grasp was the computer, and soon after it the internet. These two things gradually transformed into the smartphone; first with the Blackberry, then with the iPhone. Nowadays there's a familiar vibe surrounding a particular electric car company, and we could all be witnessing something that may be on par with the ground shattering impact of computing and the internet.

There isn’t one single reason why I say this. There's usually a number of advantages that a new innovation brings forward that end up being drastically better than the tech it replaces. It also usually starts at a small scale, but filters its way through the masses as the economies of scale and acceptability in our society take over. With Tesla, I see five major reasons (and many more smaller ones) that I think will take this car maker from industry darling to industry giant. These five things are its lack of dependency on foreign oil and oil's impact on the climate, cost of ownership & reliability of an EV vs. ICE (internal combustion engine) cars, autonomy & self-driving, batteries, and the "Innovator's Dilemma".

Dependency on Foreign (and domestic) Oil & Oil's impact on the Climate

Americans tend to be a prideful and stubborn bunch, with good reason. We are the strongest economy in the world, have the best Higher Education system, and the best technology sector with companies such as Apple and Microsoft taking the lead. Tesla is arguably the pinnacle of what can be called an American company. Tesla's cars are currently manufactured in Freemont, California. These vehicles are built by Americans, tested by Americans, and sold by Americans. However, the biggest and most important fact to take away from this point is not that it’s made in America, but that it can ultimately be powered by America.

When you plug in your EV to charge, you will tap a variety of energy sources. According to Wikipedia, 51% of the energy in electrical usage is generated by coal mined in the United States. The rest of it comes from a mixture of natural gas, nuclear and solar. Oil comes in at a measly 1%. When you fill up at a gas station, the petroleum often comes from a country other than the U.S. According to the EIA, 40% of oil consumed in the U.S. comes from imports.

An additional interesting angle that continues to emerge is Tesla's relationship with SolarCity, a solar panel and power distribution company (of which Tesla CEO Elon Musk is the chairman and yes, an American company), as well as other Solar companies throughout the world.

What this means is the following:

EVs are not dependent on oil to be powered, unlike ICE vehicles. They can be plugged in and take advantage of power generated by solar, wind, hydro, coal, or any other source currently available (yes, even oil). If the growth of solar continues, we could one day have all EVs powered fully by sunlight.

Dependency on foreign oil falls sharply, even with today's current grid make up. This will naturally decrease our interest in foreign relations and their impact on the production of oil, which lately seems to be a sore spot due to growing concerns around terrorism and our involvement in the middle east (i.e. ISIS).

As it pertains to the climate - I won't rehash the impacts of burning fossil fuels. There's a million articles with a billion numbers thrown around that very strongly allude to the fact that burning fossil fuels is having a material impact on our climate. Elon Musk famously calls the above the 'dumbest experiment in history'. We tend to agree with him.

Lastly, the impact of having the grid supply power to EVs cannot be ignored. Any nation, estate, or household has the option to make their electricity as clean as they want. This is not an option we have with ICEs today - it's either oil or bust.

Cost of Ownership & Reliability

Let’s start the comparison by looking at the cost of gas and other expenses for a current ICE (internal combustion engine) vehicle:

At $2.50 for a gallon for gas, with the average car getting ~25mpg, and the average driver traveling 40 miles a day 250 days a year, we come to $1,200 yearly cost of gas @ 10,000 miles, which over 5 years it nets out to be $6,000

For maintenance, in order to account for tires, rotations, alignments, fluids, emissions, etc., let's add about $500 a year on average, which nets out to be $2,500 over 5 years

This nets very conservatively to a total of $8,500 for 5 years in maintenance and fuel. This number is likely going to be reserve for extremely reliable and fuel efficient cars.

Next, let's look at the cost of "gas" (in this case, electricity) and other expenses for a Tesla (or any other EV):

At a national average of about $0.11 per kWh for electric cost we can deduce the average cost of filling a typical 85 kWh battery, which according to Tesla's website has the ability to travel 270 miles on a single charge. This means that the total cost to fill up a Tesla battery is 85 x 0.11 = $9.35. In order to figure out how many fill ups we need to travel 10,000 miles (an entire year), we can divide 10,000 / 270 = 37 fill ups. Therefore, our total "gas" cost for an entire year is 37 x $9.35 = $345.95, which extrapolates to $1,730 over 5 years. If you compare it to the above, that's a savings of about $4,300 compared to a typical ICE vehicle.

For maintenance, EVs need to be looked at a little different. There are no engines, transmissions, alternators, timing belts, clutches, radiators, catalytic converters, engine mounts, sensors, etc. that could go wrong and need maintained. The only real maintenance cost in an EV are tires and rotations, brakes, and alignments. A typical tire swap, alignment, and brake change can be pegged at around $750. Since this cost would only be happening once in the 50,000 that we would drive the car, we can add an additional $250 for 5 years worth of inspections. This brings the total maintenance cost of a Tesla to about $1,000 over five years, a savings of $1,500 over a typical ICE vehicle.

One very important thing to consider is that maintenance and fuel costs can vary greatly between ICE vehicles. A Range Rover costs quite a bit more to maintain and run vs. a Honda Accord. EVs, due to the fundamental nature of the vehicle, have very consistent costs of operations. There's not much difference between the cost of running a Nissan Leaf vs. a Tesla Model S, and the parts that run both are very similar in nature, so we won't see the wild swings we do in cars today. Due to this, the ~$5,800 in savings we would realize over 5 years would be consistent regardless of what EV we drive vs. an average ICE vehicle. Naturally, these savings would be greater if we were to compare them to a gas guzzler who's notorious for expensive maintenance costs.

You will notice that there's a key component I left out for an EV car - the battery. According to Green Car Reports (http://www.greencarreports.com/news/1096801_tesla-model-s-battery-life-how-much-range-loss-for-electric-car-over-time), a typical Tesla will see 92% battery retention over 100,000 miles, meaning that after 5 years, if we figure the degradation is linear, we will have roughly 96% battery left of the original 270, which equals to about 260 miles of range leftover.

Given this small degradation over a relatively long period of time, I'm going to bake in the "cost" of a battery into the general depreciation of the Tesla, which is on par with many luxury vehicles currently in the market.

As far as reliability goes, logic tells us that due to the fact that EVs have significantly less parts that can break (i.e. engine, transmission, etc.), there's less risk of an EV breaking down. In the case of Tesla, its recent troubles with reliability have been very widely covered (http://www.consumerreports.org/cars/tesla-reliability-doesnt-match-its-high-performance). It is definitely a problem that Tesla needs to address in order to become mainstream, and it seems to be well on its way (http://www.engadget.com/2015/10/22/musk-tesla-model-s-consumer-reports-response/).

However, once logic takes hold and Tesla matures as a manufacturer, and as other automakers flood the market with EVs, these issues will come to pass. In very few years times, ICE vehicle will transform from routine maintenance hogs too maintenance-free electric transportation devices.

Autonomy & Self Driving

I'm pretty sure a lot of people have already seen this video: