Half of all new cars will be electric

Tesla Motors Inc Chief Executive Elon Musk, an entrepreneur known for his outsized ambition, on Friday made a stunning forecast: battery-powered cars will likely match the internal combustion engine in popularity by the middle of the next decade.

“In 20 years more than half of new cars manufactured will be fully electric,” Musk said. “I feel actually quite safe in that bet. That’s a bet I will put money on.”

Musk, who divides his time between Tesla and his space exploration startup SpaceX, said it might even happen sooner than that.

“It’s probably going to be in the 12- to 15-year time frame,” he said, speaking at an event at Tesla’s manufacturing plant in Fremont, where he handed over the keys to the first buyers of the new Model S sedan.

Electric vehicles have struggled to find an audience beyond Hollywood celebrities, Silicon Valley venture capitalists and policymakers in Washington, primarily due to their premium pricing and anxieties about their driving range.

Most analysts see pure electric cars accounting for only a single-digit percentage of total sales over the next decade, in part because of the cost of batteries and the uncertainty around continued government subsidies for the new technology.

Rival automaker Nissan Motor Co., the most bullish mass-market car maker, forecasts that by 2020 10 percent of all cars sold will be electric. In an interview with Reuters on Friday in Tokyo, Nissan CEO Carlos Ghosn said he believed that forecast was attainable if enough automakers followed Nissan into offering EVs.

Musk, the inspiration for Robert Downey Jr’s Tony Stark character in Iron Man, has overcome odds and a turbulent time at the carmaker, marked by a near-debilitating financial crisis, to now deliver the second car in its portfolio. The company also sells the Roadster sports car.

In addition to Tesla, Musk founded SpaceX, which last month sent the first privately developed ship into space to dock with the International Space Station, and online payments site PayPal, now part of eBay.

Despite the slow adoption of electric vehicles, many automakers are planning to launch them to meet rising fuel efficiency standards.

Apart from General Motors’ Volt and Nissan’s all-electric Leaf, Toyota has begun selling a plug-in Prius, and EVs from Ford, Honda, BMW and Fiat will join the fray this year, along with cars from start-up Coda Automotive.

Tesla, which has said it has adopted a slow, methodical approach to the launch, expects to deliver 5,000 Model S sedans by the end of 2012. Reservations for the sedan have topped 10,000.

The company expects to deliver over 20,000 vehicles next year, Musk said.

The owner of the first Model S to roll off the assembly is Steve Jurvetson, managing director of venture capital firm Draper Fisher Jurvetson, an early investor in Tesla. Musk gets the second Model S.

Tim Draper, founder and managing director of Draper Fisher Jurvetson, received his keys on Friday after having waited nearly three years for the car.

“It’s the smoothest car I have ever driven,” Draper said, who also likes its large touch navigation screen.

The Model S is the electric carmaker’s most crucial launch yet as it represents the company’s transition to the mass market.

Tesla has described 2012 as a “year with two halves” with the Model S launch as the dividing line. Ninety per cent of the company’s revenue this year is expected to come from the sedan.

Tesla also draws revenue from its partnerships with Toyota Motor Co’s (7203.T) and Daimler AG (DAIGn.DE). In February, Tesla announced an expanded deal with Daimler to create an electric powertrain for a new Mercedes Benz EV.

Musk said that while he was positive about Tesla’s powertrain business, he added “10 CEOs determine whether we have a powertrain business or not.”

Tesla was talking to a major carmaker about a “high volume” powertrain deal, Musk said, but did not give any details.

Tesla also makes the powertrain system for the electric Toyota RAV4. Toyota, which unveiled the model last month, said it projects to sell 2,600 of the sport-utility vehicle over the next three years in the United States.

The Model S base model will be priced at about $57,000 U.S., before a $7,500 U.S. federal tax credit, for a car that can travel 160 miles on a full charge.

More popular will be the Model S version that will be able to travel 230 miles on a full charge. That version will cost $10,000 more. A version of the Model S that will have a range of 300 miles will cost another $10,000.

A Tesla Motors Model S is displayed in the Tesla showroom at Tesla Motors headquarters May 20, 2010 in Palo Alto, California. Tesla announced the production cars will become available to customers on June 22, 2012.
Photograph by: Justin Sullivan, Getty Images