Model growth: Tesla’s ambitious plans

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Hello, and welcome to the Intelligence from the Economist. I'm your host, Ora Ogumbiyi. Every weekday we provide a fresh perspective on the events shaping your world. Estimates of just how many Russian soldiers have died in Ukraine vary depending on who you ask. But the Economist has been digging into some new data, free of any political skew, which could help us draw some more accurate conclusions. And the 110th Tour de France is nearing its conclusion. The sport has evolved immensely since the very first. In some ways, it has become more exciting and nail biting to watch. But with that comes heightened and potentially fatal risks. But first, In 2006, before Tesla had any cars in production, Elon Musk set out his plans to take on the auto industry.

I think global warming is a very serious issue and it's something that we have to address. And the only way to address that is, is to come up with a car that doesn't add carbon emissions to the environment. And I think the way to do that is with electric vehicles.

He and his company set about doing just that, beginning with the Model S.

This illusion that electric cars cannot be as good as gasoline cars, that if you have to go with an electric car, you're accepting a product that's worse. What the Model S is fundamentally about is breaking that illusion.

And this weekend, the Cybertruck started rolling off the production line.

Doesn't look like anything else.

This truck is like no truck you have ever seen before. It is matte silver, it's very angular, and if you ask me, it looks like it should be roaming Mars, not the streets. But this unconventional approach to design and engineering says everything about Tesla's goal to stand out in the auto industry. And it's working. The insurgent company is growing at breakneck speed. Tesla publishes its quarterly financial results today, and it's about to unveil ambitious plans to double the production capacity of its German factory. But for all its successes recently, the company has been hitting some speed bumps.

Tesla is a really relatively young car company. It's only been making mass market vehicles for sort of 10 years now. And it's an insurgent in an industry where insurgents are hard to come by.

Simon Wright is the Economist's industry editor.

But as it goes from strength to strength and makes more and more cars, what it may find is it's going to have to start imitating some of the aspects of the traditional car industry. The traditional car industry that is eschewed up to now in order to grow and remain handsomely profitable.

And so, Simon, give us a sense of where Tesla currently sits in the car industry.

In 2011, Tesla said it wanted to become the most compelling car company of the 21st century, while accelerating the world's transition to electric vehicles. And it's hard to argue that Tesla hasn't achieved that. It's grown very, very fast. Last year it made 1.3 million vehicles. This year, Elon Musk, its boss, says that it could make 2 million vehicles. That's possible. Tesla Model Y, which is a small SUV, was the world's best selling car in the first quarter of 2023. And investors have bought into this. It's valued at nearly $900 billion, which is more than several of the world's other car companies put together, and operating margins of 17% last year. Only really, Porsche, which makes far fewer cars, can rival that. So it's in a good position. But Tesla wants to keep growing and it wants to remain profitable. And that's where having to adopt the sort of techniques of the traditional car industry may start to drag it down.

And how are they going to make sure that they stay profitable? Sell 2 million cars this year? What are Tesla's larger aims?

Elon Musk doesn't lack ambition, and his ambition has always been to dominate the car industry. He said he wants to make 20 million cars by 2030, which is double the current output of the world's biggest carmaker at the moment, Toyota. But the question is whether Tesla can actually do that. I mean, no one really seriously thinks he can make 20 million cars, but it's quite possible that he could be making 5 or 6 million cars by 2030, which would be an extraordinary achievement in itself. But in recent years, its advantages as a disruptive tech firm with Silicon Valley mindset are in danger of being eroded.

Eroded by what? What kind of challenges is Tesla facing?

Well, the first one is competition. When the Model S came out, basically it was in the category of one. It was a large, luxurious saloon car with a big battery and a long range. But now all the car companies are scrambling to electrify their product ranges and not to mention copy Mr. Musk's vertically integr approach to production. So there's a new wave of newcomers, not just the incumbents, but new Chinese car companies who are all trying to become the next Tesla. So nowadays, motorists can choose between 500 or so EV models from dozens of Marques and Bernstein. A broker estimates that around 200 new models may be launched this year and another 150 in 2024. So that's one of the big problems for Tesla, is that they now have competition.

And you mentioned earlier that Tesla should be taking some lessons from the legacy carmakers, the incumbents. What exactly could Tesla be learning from them?

If Tesla wants to expand, it's probable that they're going to have to expand their model range. Unlike incumbent carmakers, who have a sort of something for everybody approach, Tesla has just five models, if you count the cybertruck, which has just gone into production this last week. And it relies incredibly heavily on just two of them. The Model 3, which is a small saloon, and the Model Y, which is the smaller SUV, account for 95% of sales. If you compare that with Toyota, its two bestsellers, the Corolla and RAV4, make just 18% of sales by volume. If Tesla is really going to be making 20 million cars a year by 2030, which probably isn't, but even if it's going to make 5 or 6 million, both cars would need to absolutely dominate, selling about 50% of vehicles in their class. And no single carmaker has ever held more than a 10% share in the segments they're in. So what Tesla needs to do is think about offering more models, offering newer models, but also add variations of the models it currently offers.

Okay, so they should shake up their product range. That's one option. But what else should they try.

Well, one thing Tesla might have to do is more marketing. In the contrast to other big carmakers, Tesla doesn't spend any money on advertising at all. It's dependent on word of mouth and Mr. Musk's own sort of Persona to promote its products. Barclays bank reckons by pursuing advertising and other marketing, it currently saves the company between $2,500 and $4,000 for every car it sells. But Tesla will need to reach many more customers if it wants to reach its targets. Musk's personal brand may not be enough to keep it going. Another car making staple to which Tesla has later come around is price cuts. Mr. Musk pledged never to offer discounts or allowed inventory to build up and in fact, he's done both.

And you mentioned earlier competition from Chinese carmakers. How is Tesla faring in China?

Well, that's a really interesting question. At one point, Tesla seemed to have a privileged position in China. China needed Tesla more than Tesla needed China, almost in the sense that it was allowed to set up without having a joint venture with a domestic Chinese carmaker, unlike any other foreign carmaker. The reason was that China wanted to boost EV sales, but also it wants to encourage its domestic carmakers. But it's almost done too well at that, in the sense that now Tesla is struggling in China like other foreign carmakers. Although it's growing, its market share is slipping because these Chinese carmakers are doing very well at producing their own EVs that appeal to Chinese buyers.

And Simon, how do you think Tesla will be able to overcome this myriad of challenges and maintain growth and profitability?

Well, it's a good question and it's a hard question to answer. In a sense, Tesla has some other advantages over car companies. It still has this sort of simplicity of manufacturing. Elon Musk has promised this thing called the unboxed process, which is another approach to manufacturing, to make the system even more simple, which could help it to keep costs down. And also it could get over the China problem by manufacturing other low cost countries. It's instructed that Elon Musk recently visited India to discuss how he might start building cars in that country at some point in the future. So I think Tesla is going to continue to grow. The real question is where it will be by 2030. Most sober analysts think it will be making 5 to 6 million cars and its margins will still be some way above the legacy car industry that it's taken on. So even if it does have a more difficult future, it still looks quite a bright one for Tesla.

Simon thank you so much for joining us.

Thank you.

In any war, it's hard to pin down an accurate number of soldiers killed and wounded. In fact, either side may well give an underestimate of its losses to protect morale, and the other side and its allies may overestimate those same losses to do the opposite.

The US says 100,000 Russian forces have.

Either been killed or wounded since the.

Start of the new year.

But the Kremlin disputes these numbers, saying.

That they were, quote, plucked from thin air.

So what's the best way to work out the true number?

So Russia's President, Vladimir Putin hasn't given an updated or realistic figure for the number of soldiers on the Russian side that have died in Ukraine.

Sondra Solstad is a senior data journalist at the Economist.

The latest number that he gave was in September last year, where he said there were around 6,000. That absurdly low number makes sense from his perspective, because if he gave a true tally, it might lead fewer people to want to sign up to fight. However, new data enables us to provide an independent estimate. The basic idea is that people who die leave two things, memories and money.

Sondra, tell me a bit more about that. How can memories and money work as indicators?

So the way that the people behind this investigation, which were from two independent Russian media outlets, MediaSona and Medusa, put it together, was that they started by going through memories. And by that, I mean that they went through local media, through social media, and through all sorts of official records to try to find individuals who had been killed in Ukraine that had been remembered in some way that actually enabled them. So this was mainly worked by Mediasona, together with the BBC, to construct a list of 27,000 individual Russian soldiers who had died in Ukraine. Now, obviously, that's not the full list because not everyone could be identified. And even if you put a lot of people at work to do this, you're going to miss a lot of people. But there is another source of information that you can use, which is official inheritance records. So if you have valuable property and someone to leave it to, then if you die, there needs to be a record of that. Not everyone has the kind of possessions or the ears to warrant a record, but what they could do was check, using this long list of names, how many dead soldiers there tended to be who had an inheritance claim filed, and then they could look at the surplus inheritance claims filed since the war began, and that basically enabled them to come up with an estimate of the total number dead. So, excluding the dead still listed as missing, this gives a range of about 40,000 to 55,000 Russian soldiers killed in Ukraine by May 27th of this year. So that's before the latest counteroffensive started.

And how do these numbers compare to other data that we've seen on the conflict casualties?

So they tend to sync up pretty well with most estimates, but there are exceptions. So one is the center for Strategic and International studies in Washington, D.C. which estimated that there were about 60,000 to 70,000 fatalities on the Russian side in the first year of the war alone. That, however, even at the time seemed very high. And we had an American estimate come out in May that said about 50,000, which would sync up very neatly with this number. However, the researchers behind this new estimate really wanted to make sure that they got it right. And so what they did was something clever. They managed to obtain another estimate based on a different method that they could compare with their new one. So the Russian statistical agency ROSTAT every year publishes the number of people who have died. So this data, analyzed by a Germany based researcher called Dmitry Kovac, came up with a total of 24,000. By the end of 2022, this new method comes up with 25,000, which is pretty close, if you ask me. Moreover, and pretty impressively, they also sync up nicely if you look within age groups. And that, I think, is good evidence that this method should be taken seriously.

And is there anything else that we can draw out of these statistics more broadly?

So these numbers are specifically deaths, and for each one, one can probably estimate that about 3 or 4 are sufficiently wounded to be taken out of action. So that would imply that there are about 200,000 soldiers who have been killed or wounded in Ukraine already, and not before this latest counteroff. Now, the wounded might return to action, but what the mediasona and Medusa researchers actually were able to do was to look at compensation payments to see who were wounded so severely that they had to leave service. And the total number of irrecoverable losses to Russia is about 125,000, according to these estimates. And that's almost the size of the entire original invading force. So what is happening now is that both demand and supply for soldiers are hit at the same time. The more soldiers there are, the more soldiers you need to replace them, and the fewer people will want to sign up. And this puts Mr. Putin in a pickle. He can either try to continue recruiting and perhaps fail, or he could start increasing conscription, which is extremely unpopular. All these studies are uncertain, but they now point in a pretty consistent direction. Russia's losses have been massive and regardless of the exact numbers, it is clear that Mr. Putin will need more soldiers and that that will be difficult.

Sandra, thank you so much for joining us.

It was a pleasure. Thank you.

Tom Pidcock has been described as as the most exciting cyclist in the world. His descent of the Col de galibiere during the 12th stage of last year's Tour de France was both exhilarating and terrifying to see.

Chris Impey co edits the Intelligence and is glued to this year's Tour de France.

I think the reason why it's terrifying watching Tom Pidcock going down that mountain is you can kind of put yourself in his position. Right. We've all ridden down a steep hill, our fingers poised over the brakes. But Tom Pidcock is an expert at this. He learned his trade as a mountain biker. He's an Olympic champion. He knows what angle to go into the corners, what angle to come out of them. He knows when to put the brakes on and that allows him to make big gains on his competitors. So he's flying down the Galabiere in last year's Tour de France, which is this twisting Alpine pass, and when he's doing that, he's exceeding 100 kilometers an hour.

Back in Europe, the cycle marathon season is in top gear, or should we say bottom gear.

Thirty years ago, riders went down mountains fast, but they didn't really attack each other on the mountain. They didn't try and overtake each other. These days, it's part of the modern sport that has of course, increased the risks. And this was really sadly underscored in June during the Tour de Suisse, which is a warm up event almost for the Tour de France. One of the Grand Tours. Gino Mader, who was riding in his home event, he fell on a turn while he was going down an alpine descent. He was severely injured. He had to be airlifted from a ravine to hospital and the next day he died from his injuries. Tom Pidcock was one of those riding alongside him in that race.

It hit everyone hard. One of the things that hit me was it happened descending, which is something that I love. I never take uncalculated risks when I'm descending and I don't take unnecessary risks. But yeah, things can happen.

Maeda's death reignited the conversation about the dangers of descending. And there have been particular concerns about this year's Tour de France. There are eight mountain stages, which is two more than last year, and the organisers have brought in new safety measures. There's a Stage today, for example, where there's one notorious descent, which is on the Col de la Loze, which is another alpine pass. 30 metre long mattresses have been brought in from the World Ski Championships. They're being placed on the most severe turns. There's going to be netting to stop anyone who does fall plummeting down the mountainside. And there are going to be warnings sounded ahead of dangerous corners. Those measures are, of course, welcome. But there are many other dangers that cyclists face on the road, whether it's steep or it's flat. The bunch sprint, for example, when riders charge in a group for the line, they're separated by milliseconds and it's this dangerous cocktail of elbows, wheels and speeds, even though they're on the flat, exceeding 60km an hour. There's a Dutch rider called Fabio Jakobsen. He's one of the best sprinters in the world. He suffered life threatening injuries after crashing in the 2020 Tour of Poland.

Clearly, the barriers move and that flings him up in the air.

We've already seen in this year's Tour wandering spectators, bringing down riders and putting them out of the race. And in one infamous case in the Tour de France of 2021, one woman brought down the entire peloton.

Well, the stupidity of a fan at.

The side of the road.

Look at this.

Tony Martin comes through, is not even facing the peloton.

She was actually taken to court. Prosecutors wanted her jailed. She ended up with a fine. But it's not just reckless spectators who pose a danger in what is one of the most physically demanding of all sports. Cardiac arrest and heart attacks have ended the lives of cyclists throughout the sport's history. We're seeing at the moment Europe in a heat wave and climate change is only going to mean ever more grueling days in the saddle. Other sports have taken a more aggressive approach towards eliminating serious injuries. Track and car designs have meant there's been just one death in Formula one this century. And road surfaces are being improved on sections of this year's Tour de France. But usually the only protective technology a cyclist has in a 100 kilometer an hour crash is a helmet made of expanded polystyrene foam and that millimeter or two of Lycra. And those who have second thoughts about taking risks coming down the mountain will be taken advantage of by those who can put those thoughts to one side. Risk is accepted as an inherent part of the sport. As the head of the Tour, Christian Prudhomme, observed on the eve of this year's race, cycling is a magnificent but cruel sport, and the riders know it.

That's all for this episode of the Intelligence. Let us know what you think of the show. You can email us@podcastconomist.com and if you're not a subscriber to the Economist, what are you waiting for? Join the club. Get a free 30 day digital subscription by going to economist.com intelligenceoffer the link is in the show notes. We'll see you back here tomorrow.

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