--- title: Elon Musk Could Be the Next Henry Ford description: Can Tesla revolutionize the world by making an affordable electric car for the masses, much the way Ford did with the Model T? canonical: https://time.com/4005107/elon-musk-tesla-henry-ford/ author: TIME Staff article:opinion: true article:content_tier: free article:published_time: 2015-08-20T19:04:16.000Z article:modified_time: 2026-08-04T08:04:59.299Z article:section: Ideas og:title: Elon Musk Could Be the Next Henry Ford og:description: Can Tesla revolutionize the world by making an affordable electric car for the masses, much the way Ford did with the Model T? og:url: https://time.com/4005107/elon-musk-tesla-henry-ford/ og:site_name: TIME og:image: https://static.time.com/v3/assets/bltea6093859af6183b/blt4ed0a4ba07700d9d/69886048cd1bbabe166fcd4f/elon-musk-tesla.jpg?branch=production&width=594&quality=75&auto=webp&crop=16:9 og:image:width: 594 og:image:height: 334 og:image:alt: Elon Musk at the Allen & Company Sun Valley Conference in Sun Valley, Idaho on July 7, 2015. og:type: article twitter:card: summary_large_image twitter:title: Elon Musk Could Be the Next Henry Ford twitter:description: Can Tesla revolutionize the world by making an affordable electric car for the masses, much the way Ford did with the Model T? twitter:image: https://static.time.com/v3/assets/bltea6093859af6183b/blt4ed0a4ba07700d9d/69886048cd1bbabe166fcd4f/elon-musk-tesla.jpg?branch=production&width=594&quality=75&auto=webp&crop=16:9 ---  # Elon Musk Could Be the Next Henry Ford > Sponsored content. 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Scott Olson—Getty Images by [TIME Staff](https://time.com/author/time-staff/) ## TIME Staff Aug 20, 2015 7:04 PM UTC The share price of Tesla Motors shot up this week after a financial analyst said that the electric vehicle maker is “[uniquely positioned to dominate](http://blogs.wsj.com/moneybeat/2015/08/17/tesla-is-uniquely-positioned-to-dominate-auto-business/)” the auto industry. Is Tesla, with its tightly integrated supply chain, following the strategy of another one-time dominant automaker – the Ford Motor Company – of more than 100 years ago? Can it revolutionize the world by making an affordable electric car for the masses, much the way Henry Ford did with the Model T in 1908? Henry Ford took control of his supply chain and made his own parts rather than buy from suppliers, which gave the company the scale needed to [improve performance and lower costs](https://en.wikipedia.org/wiki/Ford%5FModel%5FT). Now Musk is building a new “giga” battery factory, giving Tesla more control over this strategic component. Will it work out the same as it did for Ford? **Putting Ford in the black** In his 1926 book, [_Today and Tomorrow_](http://www.amazon.com/Today-Tomorrow-Special-Fords-Classic/dp/0915299364/ref=sr%5F1%5F1?ie=UTF8&qid=1439839761&sr=8-1&keywords=today+and+tomorrow), Ford claimed his integrated approach was the key to his success (“if you want it done right, do it yourself”). In fact, he claimed to mine iron ore in Minnesota, ship it to the famous River Rouge facility in Detroit and have it sitting as a Model T in a Chicago driveway in 84 hours! However, at the time, complete standardization (yes, Ford is [said to have stated](https://www.thehenryford.org/exhibits/showroom/1908/model.t.html) “You could have any color you wanted as long as it was black”) was necessary to make this happen. No options were available as they are for today’s cars, but standardization led to lower prices. Prior to the Model T, the typical car’s sticker price would often hit $2,000, or almost five years of wages, which put cars out of reach for all but the rich. Working to make his car affordable, Ford sold the [Model T for $260 by 1926](https://en.wikipedia.org/wiki/Ford%5FModel%5FT), leading to massive market share – more than [50% of the automobiles on the road worldwide were Ford’s](https://en.wikipedia.org/wiki/Car%5Fof%5Fthe%5FCentury). Ford also paid his workers a startling [$5 per day to reduce employee turnover](http://www.forbes.com/sites/timworstall/2012/03/04/the-story-of-henry-fords-5-a-day-wages-its-not-what-you-think/). By this time the average working household income had reached about $1,300 per year. That put the Model T at two to four months of a typical factory worker’s wages, something comparable to or less than today’s economy car! **Huxley’s Brave New World and Fordism** Ford’s significance can even be seen in Aldous Huxley’s classic futuristic science fiction work [_Brave New World_](https://en.wikipedia.org/wiki/Brave%5FNew%5FWorld) from 1932\. Huxley anticipated a world with intercontinental rocket plane travel and TV networks, in vitro fertilization, cloning and genetic engineering. Huxley also saw Ford’s approach to be so central to the future that Fordism – Ford’s system of mass production – would become the primary religion! Huxley correctly saw so many things to come, yet clearly we don’t all worship Henry Ford today. So why did this prediction not come true? Maybe it is because not long after the book was written, the growing design complexity of cars and the demands of customers made Ford’s black-only Model T no longer competitive. To offer multiple lines of vehicles and options, Ford’s integrated supply chain had to be broken into separate companies supplying specialized sets of products. No one company could handle it all. Yet by the 1980s, local area networks meant computers could autonomously control machines and make multiple products from the same facility at relatively low costs. Then in the 1990s, the Internet made physical proximity unnecessary for achieving economies of scale since manufacturers didn’t need to control every component in the supply chain. What Huxley missed, in other words, was the impact of computers and IT innovations, considered one of the key facilitators to modern supply chain management. **What can Musk learn from Ford?** Let’s roll the clock ahead 100 years. Elon Musk and Tesla Motors are looking to bring the electric car to the masses much the way Ford did with the Model T. Parallels include decisions to build a “giga” factory to make batteries that are currently sourced from [Panasonic in Japan](http://www.greentechmedia.com/articles/read/Reports-Tesla-Selects-Nevada-as-Giga-Battery-Factory-Site%20;http://blogs.wsj.com/corporate-intelligence/2014/05/14/the-logic-of-teslas-gigafactory-the-economics-are-a-no-brainer/), paying a premium wage to workers to reduce turnover, and planning to make an electric vehicle priced for the mass market – the upcoming Model 3. Even model names – Tesla sells the Model S and soon the Model X – may be more than coincidental. Will it work for Tesla the way it worked for Ford? Does today’s technology allow Tesla to do even more than Ford? The battery pack is the single most important and expensive component in an electric car. A battery can exceed $15,000 per vehicle (or $500 per kilowatt-hour of capacity). The Nissan Leaf electric car has a 24 kilowatt-hour battery and has an average range of [84 miles](http://www.nissanusa.com/electric-cars/leaf/charging-range/range/). Some industry experts believe batteries need to cost about [$100 per kilowatt-hour and have almost triple the current range](http://www.economist.com/news/technology-quarterly/21651928-lithium-ion-battery-steadily-improving-new-research-aims-turbocharge) to be truly mass market. Achieving that sort of reduction in cost and improvement in performance comes from manufacturing at greater scale, rather than relying to suppliers. In other words, as Tesla makes more batteries, it gains more opportunities to refine production and product design. Ford found that out, and Tesla will as well. It plans to use most of the “giga” factory capacity in Reno, Nevada to supply Tesla’s auto assembly plant in Fremont, California, but also make [batteries for utilities, homes and businesses](https://theconversation.com/has-tesla-cracked-the-grid-energy-storage-problem-41131). Because there are common battery designs and production, Tesla will be able to transfer any product and process improvements between batteries for vehicles and the grid. Tesla estimates that they will reduce battery costs [by over 30%](http://www.teslamotors.com/sites/default/files/blog%5Fattachments/gigafactory.pdf) with the “giga” factory. Claims that Tesla with [pay an average of $25 per hour in Reno have not been confirmed by the company](http://www.freep.com/story/money/cars/2015/04/13/tesla-battery-plant-nevada-wages/25723015/), but the ability to retain high-caliber workers is necessary to leverage the accelerated experience that comes from scale into lower costs and improved design. Ford demonstrated that a long time ago. Tesla appears to have learned that lesson. **What will it take to be the Next Model T (or Model 3!)?** Musk’s public goal of 500,000 cars per year and a $35,000 price tag on the Model 3 [will need every bit of output and resulting innovation the “giga” factory creates](http://www.bloomberg.com/news/articles/2015-05-07/tesla-battery-factory-runs-ahead-of-plan-to-power-cars-homes). Ford’s limitations in communicating along his supply chain meant very little variation in what was done or how things were done. Today, models for left-side driving, back seats big enough for customers who want a chauffeur, a third row of seats, four doors, two doors add volume but unfortunately bring complexity as well. Today’s computer-controlled process technology makes design variety much more scalable than in 1920\. [Research](http://scholar.google.com/scholar?q=Newman%2C+W.+Rocky%2C+Mark+Hanna%2C+and+Mary+J.+Maffei.+%22Dealing+with+the+uncertainties+of+manufacturing%3A+flexibility%2C+buffers+and+integration.%22+International+Journal+of+Operations+and+Production+Management+13+%281993%29%3A+19-19.&btnG=&hl=en&as%5Fsdt=0%2C36) and [practice](http://www.emeraldinsight.com/doi/abs/10.1108/19355181200900002) [show](http://www.amazon.com/Integrated-Operations-Management-Perspective-Advantage/dp/0324377878/ref=sr%5F1%5F2?ie=UTF8&qid=1439839208&sr=8-2&keywords=hanna+newman) that now, the ability to collaborate with others (within or outside of Tesla) makes physical proximity moot as well. Unlike Ford, Tesla can use a global supply chain to make a wide variety of products while still pursuing the cost benefits of large-scale manufacturing. At the same time, Tesla can focus on making in-house “core” components, like batteries, with high learning and innovation potential. Henry Ford had to control it all because even a missing hubcap could stop the line. Musk can now choose to outsource the more commodity-like components where the potential for process or product design improvement is small. **Not there yet** Musk has increased production from 10,000 vehicles in 2012 to a projected 50,000 by the end of 2015\. However, forecasts and supply issues for a variety of parts (especially batteries) are [causing scheduling hiccups](http://seekingalpha.com/article/3268965-teslas-battery-supplier-panasonic-forecasts-drastically-less-growth-than-forecast-by-tesla), which has made [Wall Street anxious](http://seekingalpha.com/article/3443586-tesla-another-reset-of-expectations?auth%5Fparam=17cvng:1at2ojj:095b14a3d242f90bcf4fb237255bdad3&dr=1). While the new “giga” factory coming online in the next couple of years (and others like it) may help achieve many of the needed performance and cost objectives, Tesla is not there yet. Here are three things the company needs to remember to achieve its goal of mass-market electric cars: * First, keep your eye on the [core aspects](http://www.amazon.com/Integrated-Operations-Management-Perspective-Advantage/dp/0324377878/ref=sr%5F1%5F2?ie=UTF8&qid=1439839208&sr=8-2&keywords=hanna+newman) of your business that define your [competitive strategy](http://www.emeraldinsight.com/doi/abs/10.1108/19355181200900002). Tesla making their own batteries fits their strategy of a high-performance, low-cost electric car for the masses. Accumulating experience here moves them toward both volume and cost goals. These are both defined criteria necessary and sufficient for strategic success. * Second, avoid allocating resources to noncore aspects because the payback is not there. Shortages or failures in hubcaps or trunk carpeting are as much problems now for [Tesla as for Ford](http://seekingalpha.com/article/3443586-tesla-another-reset-of-expectations?auth%5Fparam=17cvng:1at2ojj:095b14a3d242f90bcf4fb237255bdad3&dr=1). But you can outsource to supply chain partners far more easily now than then. * Finally, new products or variations of existing ones [should be consistent with maintaining your core competency](http://www.amazon.com/Integrated-Operations-Management-Perspective-Advantage/dp/0324377878/ref=sr%5F1%5F2?ie=UTF8&qid=1439839208&sr=8-2&keywords=hanna+newman). That is the key to transferring innovation. If adding scale through color choices or design combinations can add to accumulated experience in the core areas without unnecessarily adding to the burden of complexity, great! Ford’s view on color choice is no longer relevant. But Tesla’s Musk can still learn from Henry Ford’s strategy of making strategic components. Making batteries for home and business can help Tesla fuel more innovations in car batteries and vice versa. _This_ [_article_](https://theconversation.com/elon-musks-brave-new-world-it-worked-for-henry-ford-why-not-tesla-46002) _originally appeared on_ [_The Conversation_](http://theconversation.com) ## Transcript >> Hi, I'm Bryan Alexander with TIME and I'm here with Elon Musk who's been dubbed the real- life Tony Stark and who is also the founder of PayPal, the founder of Tesla Motors and the current head of this company, SpaceX. >> Right. >> Thank you so much for joining us. >> Thanks for having me. >> Kevin Lennon in Harbor, Michigan asks: Tesla Motors was recently awarded $ 465 million in a loan from the Federal Government and I believe SpaceX seeks money from the Federal Government as well. Doesn't this contradict your libertarian views? >> No, I don't think it does contradict those views because we're just living in very unusual times. We're living in times with capital availability is extremely difficult and even the private markets somewhat weak right now. I mean, this is the worst periods-- financial period since the Great Depression. So I think, you know, special times call for special circumstances and I think in this time particularly when you're dealing with something requires enormous amount of capital to get done, which is susceptible to car company. I think it does make sense to accept alone from the Department of Energy. >> Tom Hale in New York City asks: Do you really think the electric car can replace the combustion engine? >> I think probably within 20 years, a majority of new cost manufacture will be pure electric. It will take another 10 or 15 years beyond that or the fleet of existing cost will be primarily electric 'cause it takes a while to switch out things, but I feel confident in saying that within 20 years, probably sooner, majority of new cost manufacture will be pure electric. >> And what about plans? I mean, do you have any kind of timetable for that when you talk about-- >> Yeah. >> You know, it seems pretty hypothetical at this point and when does a concrete work begin with that. >> I do feel pretty confident that with what I know-- with what I've learned from doing SpaceX, which is an aerospace company and what I've learned from doing Tesla actually has a lot of experience with electric motors and batteries like a thing. I combine the knowledge that's a boost too, then it's really ideal for creating a supersonic electric plane, right? >> You're the guy. >> I've kinda make sense. So-- >> I don't see anybody behind you. >> Right. I don't know who's been-- who's chasing on that one, but-- So, I do think I've got the necessary ingredients to design the plane and make it work. I just need enough bandwidth, a personal bandwidth to be able to get it done. >> Andrew Colgree from Perth, Western Australia asks: How did you feel when the Falcon 9 successfully launched and achieved orbit? >> I was definitely elation in that case. I was super-- super excited and glad and it was-- You know, there was a lot of riding on that rockets beyond just basics because we're really at the historic inflection point for a transition to commercial space and the success or failure of Falcon 9 was at that point in history really kind of shifted that whole debate. NASA is right now moving towards commercial. The president is moving things towards commercial. There's a lot of opposition in Congress. Ironically, a lot of that opposition is coming from Republican side of the House. I think it's somewhat not well reason that it's sort of strange that you have some Republican centers and Congressmen oppose to commercialization. You know, they think the public auction is, you know, public auction is terrible unless it applies to space. It doesn't make any sense. >> Eric Kulu from Tartu, Estonia asks: >> Wow. From Australia to Estonia. >> Yes. We give you the world here at time. SpaceX was founded with the long- term goal of enabling humanity to become a space- faring civilization. Are you hoping to see that in your lifetime? >> Yes. I really am. I know, of course, it depends on how long I live. Within 40 years, we could be a space- faring civilization. The critical breakthrough-- technological breakthrough that's necessary for that is to create a truly reusable rocket system. I mean, it's not-- you know, launching expendable rockets is nice and, yes, we can be a very successful rocket company and we could even be the, you know, the overwhelmingly successful rocket company. I think there's a good chance we could be the-- the main, you know, a very high market share and really be, you know, quite dominant in the aerospace launch. But nonetheless if we do not make reusability work, I would not consider it to be a success. >> What advice would you give to young persons of developing countries who are seriously considering to be an entrepreneur, but still feeling a bit wobbly? >> You really-- When you try to create a company what you really try to do is organize a group of people to do something useful and something useful is as measured by other people who are the consumers of your products and services. But this team may seem like an obvious thing, but often people organized groups into a company that doesn't produce something useful, or the people consider useful. So, you definitely wanna listen to any positive or negative feedback that you get, which is not necessarily you believe it, but you need to look at it if any positive or negative feedback is safe, maybe it's correct, maybe it's not. Weigh it up and just sort of [ unk ] reflect on all information you receive. >> But don't be afraid to pull the trigger even in this-- >> No. >> if you got the guts. >> Yeah, exactly. ```json [{"@context":"https://schema.org","@type":"OpinionNewsArticle","@id":"https://time.com/4005107/elon-musk-tesla-henry-ford/","mainEntityOfPage":{"@type":"WebPage","@id":"https://time.com/4005107/elon-musk-tesla-henry-ford/"},"headline":"Elon Musk Could Be the Next Henry Ford","datePublished":"2015-08-20T19:04:16.000Z","dateModified":"2026-08-04T08:04:59.299Z","description":"Can Tesla revolutionize the world by making an affordable electric car for the masses, much the way Ford did with the Model T?","url":"https://time.com/4005107/elon-musk-tesla-henry-ford/","keywords":["Ford","Business topic","Elon Musk","Tesla","automobile","car"],"thumbnailUrl":"https://static.time.com/v3/assets/bltea6093859af6183b/blt4ed0a4ba07700d9d/69886048cd1bbabe166fcd4f/elon-musk-tesla.jpg?branch=production&width=1200&quality=75&auto=webp&crop=1200:675&height=675","author":[{"@type":"Person","name":"TIME Staff","jobTitle":null,"url":"https://time.com/author/time-staff/"}],"articleSection":"Ideas","image":[{"@type":"ImageObject","url":"https://static.time.com/v3/assets/bltea6093859af6183b/blt4ed0a4ba07700d9d/69886048cd1bbabe166fcd4f/elon-musk-tesla.jpg?branch=production&width=1200&quality=75&auto=webp&crop=1200:675&height=675","width":1200,"height":675,"headline":"Elon Musk at the Allen & Company Sun Valley Conference in Sun Valley, Idaho on July 7, 2015.","caption":"Elon Musk at the Allen & Company Sun Valley Conference in Sun Valley, Idaho on July 7, 2015.","creditText":"Scott Olson—Getty Images","representativeOfPage":true}],"publisher":{"@type":"Organization","name":"Time","url":"https://time.com/","logo":{"@type":"ImageObject","url":"https://time.com/images/logo.png","width":528,"height":156},"foundingDate":"March 3, 1923","sameAs":["https://www.facebook.com/time","https://www.instagram.com/time/?hl=en","https://twitter.com/time","https://www.pinterest.com/timemagazine"]}},{"@context":"https://schema.org","@type":"BreadcrumbList","itemListElement":[{"@type":"ListItem","position":1,"item":{"@id":"/section/ideas/","name":"Ideas"}},{"@type":"ListItem","position":2,"item":{"@id":"https://time.com/4005107/elon-musk-tesla-henry-ford/","name":"Elon Musk Could Be the Next Henry Ford"}}]},{"@context":"https://schema.org","@type":"VideoObject","name":"TESLA Factory","description":"See inside the TESLA car making process.","thumbnailUrl":"https://cdn.jwplayer.com/v2/media/aqsVjgs5/poster.jpg?width=720","uploadDate":"2015-08-18T17:23:43.000Z","contentUrl":"https://cdn.jwplayer.com/manifests/aqsVjgs5.m3u8","embedUrl":"https://time.com/4005107/elon-musk-tesla-henry-ford/","duration":"PT6M54S","potentialAction":{"@type":"SeekToAction","target":"https://time.com/4005107/elon-musk-tesla-henry-ford/?jw_start={seek_to_second_number}","startOffset-input":"required name=seek_to_second_number"}},{"@context":"https://schema.org","@type":"VideoObject","name":"10 Questions for Elon Musk","description":"The engineer-magnate is a co-founder of electric-car maker Tesla Motors. 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