Thank you for your reply. What would fundamentally prevent one company comprising majority market share in the s’improvise industry? Demand? Supply? Regulation? Other?
Thank you for your reply. My responses in order:
- Players often comprise smaller market shares in a competitive market, before a disruptor arrives. See Blackberry/Motorola/Nokia unit volumes before Apple grew the entire market by multiple times, for example.
- Subsequent Gigafactories, which will include final assembly, will take less time to build, as limitations of the past do not necessarily apply in the future: capital, lack of experience, need to invent new technology for cell/module/pack production etc.
- The market today delivers nearly 100 million vehicles, so I’m not sure why delivering 50 million units, seven years from today, after further innovation in automated manufacturing, artificial intelligence, machine learning, and other areas would be impossible. Seven years is an eternity in Elon Time.
- “They need to build the equivalent of another GF 1 for each 500K increment in production.” - GF1 will build enough batteries for one+ million vehicles, but even that will likely prove conservative, as one of Elon’s primary strengths is improving CapEx efficiency. This strength keeps catching Wall Street and bears by surprise, year after year, and some bulls fail to keep up too.
- Batteries can be recycled.
I also expect Tesla to be a major player, but if we extrapolate the 10x growth every 3 years, which Tesla is about to achieve for a third time against all odds, and combined with higher use efficiency due to FSD, Tesla could go beyond what Apple achieved, which is capturing the most profitable 20% of its market. Bulls dismiss this possibility.
I was going to answer each point under the point, but it wants to add new item numbers.
1) For small items, that is possible, but the larger and more complicated the machine, that isn't usually the case. Douglas aircraft came out with the DC-3 in the mid-1930s which was
the airliner everyone wanted. But it didn't put any other aircraft company out of business. Brewster failed during WW II because their quality control was awful (the Navy took over the company) and Curtiss pretty much folded up after the war ended (they kept making parts but quit building aircraft). The aircraft industry consolidated a lot in the 90s, but it wasn't because anyone had a killer tech, it was because demand for military aircraft went down and airliner demand was leveling out.
In the 1970s the Japanese invaded the US market with cars that were much more inline with what consumers wanted, but GM, Chrysler, and Ford are still around, though Chrysler has gone bankrupt once and almost went bankrupt in the 80s.
With small gadgets, manufacturing time and effort is far smaller, so scaling up production to meet demand is relatively easy. The more complex the machine, the more time and skill it takes ot make and demand is not always the biggest limit on supply. Back to the original example of the DC-3, Douglas didn't catch up with demand for them until 1946 and that was only because the military bought thousands and the civilian market became saturated with surplus airframes after the war. Even today Boeing can be booked years in advance for their airliners.
With smaller gadgets it's also relatively simple to retool if demand changes. But setting up a heavy industry production line is very expensive and retooling is not easy. With heavy industry you tool up to meet the leveled demand over the long haul, not meet what might be a peak in the market. If one company is tooled up to make 1/2 of all the cars produced in the world and either demand dropped sharply (as predicted by autonomous driving gurus) or a competitor came out with something that dropped demand for your cars, that could be an out of business scenario. You don't want to have the capacity to make 50 million cars ready to go and only sell 20 million, or even 40 million. That would be a massive waste of capital.
2) Subsequent Gigafactories will probably cost less per building for batteries. However they will be building final assembly factories to go with each new GF, which will up the price back to $5 billion or more.
3) Elon has begun to give up on super automation. He has said he underestimated what people can do. The guy in Michigan who disassembled an early Model 3 was also an expert in robotics for car manufacturing and he was saying a few weeks before Elon admitted it that some things are good to automate in a factory, but humans can do significantly more than robots can.
If autonomous driving actually does mature in the next 7 years, the worldwide demand for cars will drop as companies buy the bulk of cars for autonomous ride sharing networks. I strongly doubt it will eliminate private ownership, but it will probably curb it, especially in some areas where owning a car now is a pain like built up urban areas.
4) I misremembered that Tesla upped the capability of GF 1 during construction. It is possible that solid state cells will take less room per cell to manufacture. The current liquid electrolyte li-ion cells are very complex to make and there are stages that require parts to cure for 24 hours or more, which requires large drying rooms. However, there are still physical limits even Elon can't overcome.
5) By 2025 the number of batteries that will need to be recycled will still be tiny. The only 2012 Model S batteries I've heard that are off the road are cars that were wrecked and a few packs that had failures. Most 5-6 years old packs are still on the road and the quantity of early EVs that will be reaching end of life by the 2020s is tiny compared to what demand will likely be. The number of new cars built with recycled battery materials will be down in the noise percentage-wise.
The Roadster was essentially a hand built, limited production car. The Models S and X were a bit higher quantity, but still not quite mass market. The Model 3 is the first true mass produced BEV, but the S curve is going to start to flatten after this. The Model S and X are much more labor intensive to make than most mass produced cars, the Model 3 is approaching the labor effort most companies expend to make cars. Elon had a dream of automating the factory, but found out that just wasn't as easy as it sounded.
Just about every company in the auto business has tried super automation and went back to semi-automation because that's what works. There will be more fat trimming on the Model 3 line in the next year or two, but it will be more fine tuning than revolutionizing.
Tesla and SpaceX both have profited harvesting low hanging fruit others were ignoring. Elon figured out how to design a 21st century rocket which nobody else had done and he succeeded because everyone else was using 60s tech. Electric cars have many inherent advantages over ICE when designed correctly. Most other EVs are ICE that were converted, the Model S is one of the first designed from the ground up to take advantage of the tech. It was all there if anyone bothered to look but everyone else in the car industry had ICE tunnel vision. The last people before the Model S design team to make an EV who didn't have a lot of experience with ICE were dead. Their designs were on the street over 100 years ago.
Low hanging fruit can only be harvested once. The lessons learned can be applied to subsequent designs, but they aren't breakthrough anymore.
Elon thought he was harvesting low hanging fruit with Model 3 automation, but found it was a dead end.
There are probably some big breakthroughs coming, but we probably won't see a jump from an ICE to the Model S again.
Over the next 7 years Tesla will grow and it may even become one of the biggest car makers, but I don't think 50 million a year is either a wise target nor physically capable. I worked for Boeing for 7 years. I was on the R&D side, but I got a feel for what it takes to make heavy machines. I've also worked for small electronics companies and the production issues surrounding even a high tech electronic gadget are many orders of magnitudes easier than putting together a large mechanical machine like a car or an airplane.
