Tesla to close stores to reduce costs for $35,000 Model 3
By MICHAEL LIEDTKE and TOM KRISHER
AP Business Writers
Friday, March 1
SAN FRANCISCO (AP) — Tesla will only sell its electric cars online as it accelerates its cost cutting so it can realize its long-running goal of selling a mass-market sedan for $35,000.
The change announced Thursday will allow the Silicon Valley automaker to begin selling its Model 3 for $35,000 — a price point that Tesla CEO Elon Musk has been striving to reach in order to appeal to more consumers and generate the sales the company needs to survive.
The cheapest Model 3 that could be ordered before Thursday started at $42,900.
To save money, Tesla will close many of its stores, but leave some open as galleries or “information centers” in high-traffic areas. Musk declined to specify how many stores will be closed or how many employees will be laid off. The company has 378 stores and service locations worldwide.
“This is the only way to achieve the savings for this car and be financially sustainable,” Musk told reporters during a conference call. “It is excruciatingly difficult to make this car for $35,000 and be financially sustainable.”
The online sales shift will enable Tesla to lower all vehicle prices by 6 percent, on average, including its higher-end Model S and Model X.
All other major automakers rely on vast dealer networks, but Musk co-founded Tesla in 2003 in an effort to shake up the industry, starting with a focus entirely on a fleet of cars powered by electricity instead of gasoline.
Although he said going online-only was a difficult decision, Musk believes it’s the right one.
“It’s 2019,” he said. “People want to buy things online.”
That is particularly true of younger, technologically fluent consumers who already are accustomed to buying almost everything at Amazon and having it delivered to them quickly, said Karl Brauer, executive publisher of Kelley Blue Book.
Musk “doesn’t need the whole world to buy into this,” Brauer said. “All he needs is the same basic demographic that has been interested in his cars from Day One.”
Although he said he didn’t know for certain, Musk predicted there’s enough pent-up demand to sell about 500,000 Model 3s annually at the starting price of $35,000.
But buyers will have to wait far longer than they do when shopping on Amazon.
A U.S. consumer who places an order for the Model 3 at its new lower price now will likely get it by the end of June before a tax credit for electric vehicles is scheduled to be reduced, Musk said.
The store closures will come on top of a decision to cut 3,150 jobs , or about 7 percent of Tesla’s workforce, announced earlier this year.
Despite the austerity measures, Musk told reporters Tesla will lose money in the current quarter ending in March, backpedaling a statement he made last October when he pledged the company would remain profitable from that point on. But Musk said it’s “likely” Tesla will bounce back with a profit during the April-June period.
Tesla’s stock fell 3 percent in extended trading after the news came out.
The Palo Alto, California, company is slashing costs just a few months after paying half of a $40 million settlement of a case that the Securities and Exchange Commission filed against Musk last September after he tweeted that he had lined up financing for a potential buyout for the company. The SEC alleged Musk misled investors after concluding he didn’t have the money to pull off the deal.
The SEC has asked a federal judge to hold Musk in contempt after he posted another tweet about key Tesla information without getting company approval as required in the settlement of its previous case.
Musk declined to take questions about the SEC’s attempt to hold him in contempt — an action that legal experts say could culminate in him being forced out as CEO in a worst-case scenario.
Krisher reported from Detroit.
SpaceX debuts new crew capsule in crucial test flight
By MARCIA DUNN
AP Aerospace Writer
Thursday, February 28
CAPE CANAVERAL, Fla. (AP) — SpaceX closes in on human spaceflight with this weekend’s debut of a new capsule designed for astronauts.
The six-day test flight will be real in every regard, beginning with a Florida liftoff Saturday and a docking the next day with the International Space Station. But the Dragon capsule won’t carry humans, rather a test dummy — named Ripley after the tough heroine in the “Alien” films — in the same white SpaceX spacesuit that astronauts will wear.
NASA doesn’t expect this crucial shakedown cruise to go perfectly. But the lessons learned should improve safety when two NASA astronauts strap into a Dragon as early as July.
“Giant leaps are made by a series of consistent smaller steps. This one will be a big step!” retired astronaut Scott Kelly, NASA’s former one-year space station resident, tweeted Thursday.
Boeing is also in the race to end NASA’s eight-year drought of launching U.S. astronauts on U.S. rockets from U.S. soil. The space agency is turning to private taxi rides to reduce its pricey reliance on Russian rockets to get astronauts to and from the space station. NASA is providing $8 billion for SpaceX and Boeing to build and operate these new systems.
“On a personal level, this is an extremely important mission,” SpaceX executive Hans Koenigsmann told reporters Thursday. “And I’m pretty sure it’s not just me, I think everybody within SpaceX feels this and wants to get this right.”
A look at the newest space ride:
CREW VS. CARGO
SpaceX has made 16 space station deliveries over the past seven years. The private company overhauled the cargo Dragon capsule to make it safe — and comfortable — for passengers. It’s slightly bigger — 27 feet (8 meters) tall — and also launches atop a SpaceX Falcon 9 rocket. But now there are four seats, three windows, computer touch screens and life-support systems. Instead of solar wings, solar cells are on the spacecraft itself. And eight engines are built into the capsule walls for use in an emergency; these abort engines could shoot the capsule off a malfunctioning rocket anytime during the launch.
You can’t go into space looking dowdy. SpaceX founder and chief executive Elon Musk wants Dragon riders looking sharp and 21st century, just like their new, white, sleek spaceship. The streamlined spacesuits are also white with black trim, with matching helmets and gloves. No bulky orange flight suits left over from NASA’s space shuttle program. Boeing is going with royal blue spacesuits for its Starliner capsule crews.
ALONG FOR THE RIDE
The life-size test dummy Ripley — wearing SpaceX’s slick new spacesuit — is strapped into one of the capsule’s seats. The mannequin, whose name was unveiled Thursday, is rigged with sensors to see how it holds up. Ripley is similar to Starman, which blasted off last year in the driver’s seat of Musk’s red Tesla convertible, on a test launch of the company’s bigger Falcon Heavy rocket. The capsule can accommodate up to seven astronauts. For this test, it’s carrying 450 pounds (200 kilograms) of supplies and gear.
OLD PAD, NEW LOOK
Kennedy Space Center’s historic Launch Complex 39A, used a half-century ago for Apollo moon shots and later space shuttle flights, has been remodeled and gussied up by tenant SpaceX. Most notable is the long, enclosed, gleaming white walkway at the top. The old bridge for rocket-boarding astronauts was open to the elements. Astronauts like the new, air-conditioned design. “They’re very happy that it’s covered, and we’re trying to keep the mosquitoes out. Those Florida mosquitoes, they can get in anywhere,” said NASA’s commercial crew program manager, Kathy Lueders.
This mission is a night owl’s dream, with most of the big events happening in the wee hours. Saturday’s liftoff is scheduled for 2:49 a.m. to sync up with a space station arrival the next day. Unlike cargo Dragon, plucked from orbit by the station’s robot arm and guided to its berth, crew Dragon will dock on its own early Sunday morning. The three space station astronauts will enter the Dragon, unload the fresh supplies on board and then fill it with science samples and old equipment. The capsule will undock March 8 and, shortly after sunrise, parachute into the Atlantic, a couple hundred miles off the Florida coast.
Just because SpaceX is first off the pad doesn’t mean it will launch astronauts before Boeing. SpaceX is shooting for a July crew launch, but that could slip depending on the results of the upcoming demo and a launch abort test this spring. Several items — parachutes and thrusters, among others — still need work and possibly redesign before certified for human use. Boeing is targeting an April test flight of its Starliner capsule without crew, and a launch with three astronauts no earlier than August. Whichever company delivers astronauts first wins a small U.S. flag left at the station by the last shuttle crew in 2011. NASA’s Doug Hurley and Boeing’s Christopher Ferguson — who both flew that final shuttle mission — will test drive the new commercial capsules. Hurley will ride the Dragon and Ferguson the Starliner.
The Associated Press Health & Science Department receives support from the Howard Hughes Medical Institute’s Department of Science Education. The AP is solely responsible for all content.
How SpaceX lowered costs and reduced barriers to space
March 1, 2019
Author: Wendy Whitman Cobb, Associate Professor of Political Science, Cameron University
Disclosure statement: Wendy Whitman Cobb does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.
On March 2, SpaceX plans to launch its first test of an unmanned Dragon vehicle which is designed to carry humans into low Earth orbit and to the International Space Station. If the test is successful, later this year, SpaceX plans to launch American astronauts from United States soil for the first time since 2011.
While a major milestone for a private company, SpaceX’s most significant achievement has been in lowering the launch costs that have limited many space activities. While making several modifications to the fuel and engines, SpaceX’s major breakthroughs have come through recovering and reusing as much of the rocket and launch vehicle as possible.
Between 1970 and 2000, the cost to launch a kilogram to space remained fairly steady, with an average of US$18,500 per kilogram. When the space shuttle was in operation, it could launch a payload of 27,500 kilograms for $1.5 billion, or $54,500 per kilogram. For a SpaceX Falcon 9, the rocket used to access the ISS, the cost is just $2,720 per kilogram.
I’m a space policy analyst, and I’ve observed that cost has been a major hurdle limiting access to space. Since the 1950s, the high cost of a space program has traditionally put it beyond the reach of most countries. Today, state and private actors alike have ready access to space. And while SpaceX is not the only private company providing launch services – Orbital ATK, recently purchased by Northrop Grumman, United Launch Alliance and Jeff Bezos’s Blue Origin are also players – it has emerged as the most significant.
Frustrated with NASA and influenced by science fiction writers, Elon Musk founded SpaceX in 2002. Though it suffered several setbacks, in 2008 it launched the first privately funded liquid-fueled rocket, the Falcon 1. Falcon 9 flew for the first time the next year, and in 2012, the Dragon capsule became the first privately funded spacecraft to dock with the ISS. SpaceX has since focused on recovering key parts of the Falcon 9 to enhance reusability and reduce costs. This includes the Falcon 9’s first stage which, once it expends its fuel, falls back through the atmosphere reaching speeds of 5,200 miles per hour before reigniting its engines to land on a drone recovery ship.
In 2018 alone, SpaceX made 21 successful launches. The new Falcon Heavy rocket – a more powerful version of the Falcon 9 – launched in February. This rocket can lift 63,800 kilograms, equivalent to more than 27 Asian elephants, to low Earth orbit and 16,800 kilograms to Mars for just $90 million. The test payload was Musk’s own red Tesla Roadster, with a mannequin named Starman in the driver’s seat.
In addition to the crewed Dragon tests this year, SpaceX is continuing development of its Starship, which will be designed to travel through the solar system and carry up to 100 passengers sometime in the 2020s. Musk has also suggested that the Starship could serve as the foundation for a lunar base.
Impact on space exploration
SpaceX’s technical advances and cost reductions have changed the direction of U.S. space policy. In 2010, the Obama administration moved away from NASA’s Constellation program, which called for the development of a family of rockets that could reach low Earth orbit and be used for long-distance spaceflight. With NASA falling significantly behind schedule, because of technological difficulties and budget cuts, the Obama administration was left with a choice of whether to boost funds for NASA or change direction.
SpaceX’s Falcon Heavy first stage falls back to Earth and is reused to boost cost savings.
In 2010, then-President Barack Obama toured Kennedy Space Center and even met with Elon Musk to get a firsthand look at SpaceX’s facilities. The administration chose to reorient the program to focus solely on deep space. For missions closer to home, NASA would purchase services from companies like SpaceX for access to low Earth orbit. Critics objected to budget cuts to NASA as well as concerns about whether the private sector would be able to follow through on providing launch services.
While NASA has struggled to develop its Space Launch System, an analysis from NASA’s Ames Research Center found that the dramatically lower launch costs SpaceX made possible offered “greatly expanded opportunities to exploit space” for many users including NASA. The report also suggested that NASA could increase its number of planned missions to low Earth orbit and the ISS precisely because of the lower price tag.
In addition to substantially affecting human spaceflight, SpaceX has also launched payloads for countries including Kazakhstan, Bangladesh, Indonesia and, most recently, Israel. On Feb. 21, 2019, a Falcon 9 launched a privately built Israeli lunar lander which, if successful, will be the first privately built lunar probe.
Overall, SpaceX has significantly reduced the barriers to space, making it more accessible and democratizing who participates in space-based commerce and exploration.
Despite SpaceX’s successes, it faces significant challenges. Earlier this year, SpaceX laid off 10 percent of its workforce to reduce costs. NASA remains suspicious of some of the launch procedures SpaceX plans to use, including the fueling of the rocket with astronauts on board, which was linked to an explosion of a Falcon 9 on the launchpad. The Department of Defense’s inspector general has also announced an investigation into how the Air Force certified the Falcon 9, though it is not clear what initiated the probe.
Among some in NASA, the concern is with Musk himself. In a video last year, Musk was seen smoking marijuana, which prompted NASA to initiate a safety review of SpaceX as well as Boeing, another company aiming to provide launch services. Musk has also found himself in hot water with the U.S. Securities and Exchange Commission regarding his tweets about another one of his companies, Tesla. In recent days, the SEC has asked a judge to hold Musk in contempt for apparently violating a settlement deal reached last year. While he is undoubtedly the driving force behind both Tesla and SpaceX, erratic behavior could make potential customers wary of contracting with them.
Musk, regardless of his personal missteps, and SpaceX have aggressively pushed technological boundaries that have changed minds, my own included, about the potential of private companies to provide safe and reliable access to space.