Musk’s Problem: Cheaper Cars, Expensive Electricity

Elon Musk introduced Teslas that were less expensive than any of the existing models. The new Model Y will cost $40,000. The new Model 3 will cost $37,000. The first problem may be that these are inferior Teslas. They have lost enough amenities that customers will reject them as not really Telsas at all. 

Tesla has two other immediate problems. The first is just electricity. Like water, there is electricity in most homes in America. However, electricity is becoming increasingly expensive. The culprit is usually AI server center. But in some areas, the use of air conditioning is just as important. 

Musk is building server farms the size of small cities, and they also eat as much electricity as well. The latest is in Tennessee and may be the largest in the US. He plans a second of the same size. He has already encountered resistance from residents and businesses, who worry that their rates will go up or that service could be interrupted altogether.

Server Farms Get Bigger

Musk’s xAI, one of the third- or fourth-largest AI companies in America, has a significant ability to raise capital. He raised $10 billion, and xAI’s value exceeded $100 billion. xAI and OpenAI have demonstrated their ability to raise money at any time.

In theory, the increased demand for electricity will lead to higher prices. Charging a Tesla at home or at a public charging station will get noticeably higher. The advantage EVs have over gas-powered cars in terms of fuel efficiency could diminish.

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