Tesla Master Plan Part 2 & 3

[M0DEL³]

A bit disappointed as I found it less of a Master Plan, more a Sales Pitch.

Gotta be honest.... I found it more troubling than just a sales pitch. My takeaway was that Tesla has pivoted and is deviating from a plan to grow into a mainstream automobile manufacturer. Here's how I got to that conclusion:

Elon said, "A lower cost vehicle than the Model 3 is unlikely to be necessary, because of the third part of the plan described below." then goes on to describe a public transportation model. This is a departure from previous statements that said of Tesla's plans "there will be future cars that are even more affordable down the road." Takeaway: The Model 3 will be as inexpensive as Tesla goes, and any fourth generation Tesla vehicles are unlikely to be more affordable to consumers.

From this we can start framing Tesla's market potential: If you assume the $35K base level entry cost of the M3 and follow the 20/4/10 Rule (Google it if you don't know what it is.) and limit payment periods to warranty duration (currently 4 years), then monthly payments come in at $762.07/Month for a Model 3. (Assuming a current average interest rate of 3.13% and a 20% down payment.) This data set puts the income level required to purchase a Model 3 (while being 20/4/10 compliant) at a little over $76K/year.

In the US, about 85-87% of the population makes less than $76K for median income. (I know Elon likes to say 50% but he's using average not median income which is statistically flawed.)

This means that the Model 3 market size is limited to a max of potentially 15% of the population, so even a 20% saturation of that potential market would represent a viable market of perhaps 3% of the population.

It seems to me that if this plan is codified, it relegates Tesla (motors) to continuing to being a niche vendor, never growing into an automobile manufacturer of significant market share.

Finally there is this simple, if disturbing, economic truth: The middle class is shrinking, not growing in this country. In the future less, not more, people are going to be able to afford a Tesla.

But they may ride in a Tesla-branded bus (or Uber) someday...

Your analysis may vary.

 

[JRP3]

Tesla is going to have to think very very hard about the pickup and who their prospective customers are . The Venn diagrams of pickup buyers and EV buyers don't have much overlap.

That could be because there are no EV trucks as of yet.

The problem with pickups is that, a lot of owners use them for driving back and forth to work each day on suburban roads 98% of the time. But they buy a pickup mostly for that remaining 2% when they want a lot of capability. I just don't see many people going hunting, fishing, or loading an ATV or sled into the back of a compact electric pickup. And there are no chargers at the trout lake located 100 km up some poorly maintained gravel logging road.

No gas stations up there either If they can put enough range into a truck, with enough supercharger coverage on the main roads, it shouldn't be an issue.

 

[JRP3]

It seems to me that if this plan is codified, it relegates Tesla (motors) to continuing to being a niche vendor, never growing into a significant automobile manufacturer.

I'm afraid you didn't understand what Elon was saying.

 

[xmetal]

Let's all reread this always-pertinent quote again, when struggling with the "crazy" things that Elon always brings up.

"But those world-changing moments don’t just smoothly glide into the world: these leaps into the future usually have to jam themselves through the canopy and then battle to keep themselves there. The past, which likes to loiter casually in our present world, hates when a piece of the future bursts onto the scene, because that exposes the past for being what it really is—the past. So a new and disruptive technology is often met with hostility as it emerges, as the existing canopy does whatever it can to squash the potential disruptor out of existence before it can gain momentum and start to spread."

 

[JohnSnowNW]

Tesla is going to have to think very very hard about the pickup and who their prospective customers are . The Venn diagrams of pickup buyers and EV buyers don't have much overlap.

The problem with pickups is that, a lot of owners use them for driving back and forth to work each day on suburban roads 98% of the time. But they buy a pickup mostly for that remaining 2% when they want a lot of capability. I just don't see many people going hunting, fishing, or loading an ATV or sled into the back of a compact electric pickup. And there are no chargers at the trout lake located 100 km up some poorly maintained gravel logging road.

I think there are plenty of truck owners that don't actually use their vehicles utilitarian-ly, other than the odd home depot run. That's why there are several pick-up truck segments.

My own experience with "urban" owners, is that when they do want to haul something it's usually <5,000lbs. Assuming Tesla meets SC roll out targets, and battery costs come down--while capacity goes up--a pick-up truck should be able to handle this pretty well in the next 5 years. For instance, a 110kWh Ford Ranger might be a sweet spot.

 

[3s-a-charm]

Gotta be honest.... I found it more troubling than just a sales pitch. My takeaway was that Tesla has pivoted and is deviating from a plan to grow into a mainstream automobile manufacturer. Here's how I got to that conclusion:

Elon said, "A lower cost vehicle than the Model 3 is unlikely to be necessary, because of the third part of the plan described below." then goes on to describe a public transportation model. This is a departure from previous statements that said of Tesla's plans "there will be future cars that are even more affordable down the road." Takeaway: The Model 3 will be as inexpensive as Tesla goes, and any fourth generation Tesla vehicles are unlikely to be more affordable to consumers.

From this we can start framing Tesla's market potential: If you assume the $35K base level entry cost of the M3 and follow the 20/4/10 Rule (Google it if you don't know what it is.) and limit payment periods to warranty duration (currently 4 years), then monthly payments come in at $762.07/Month for a Model 3. (Assuming a current average interest rate of 3.13% and a 20% down payment.) This data set puts the income level required to purchase a Model 3 (while being 20/4/10 compliant) at a little over $76K/year.

In the US, about 85-87% of the population makes less than $76K for median income. (I know Elon likes to say 50% but he's using average not median income which is statistically flawed.)

This means that the Model 3 market size is limited to a max of potentially 15% of the population, so even a 20% saturation of that potential market would represent a viable market of perhaps 3% of the population.

It seems to me that if this plan is codified, it relegates Tesla (motors) to continuing to being a niche vendor, never growing into an automobile manufacturer of significant market share.

Finally there is this simple, if disturbing, economic truth: The middle class is shrinking, not growing in this country. In the future less, not more, people are going to be able to afford a Tesla.

But they may ride in a Tesla-branded bus (or Uber) someday...

Your analysis may vary.

Inexpensive and affordable can be mutually exclusive. iPhones are expensive but affordable as cell providers roll the cost into the monthly service cost. A future Tesla may not be less expensive than a Model 3 but have ways to offset the cost so it becomes more affordable.

We are being challenged to think about a time in life that doesn't exist - kind of like how Steve Jobs envisioned everyone walking around with calculator-sized touch-screen phones that could do just about anything. Read the comments and thoughts from the masses when he shared that vision... a lot of people doubted it could/would ever happen. Coincidentally people thought Steve was distracted from Apples main vision of creating computers and felt Jobs would run Apple into the ground with the iPhone. Some similarities here to Tesla.

 

[Daliman]

I am quite excited about the new Master plan, and this time we are allowed to tell everyone about it. A lot of what follows is probably obvious and has been said before on these forums, but I wanted to sum up my thoughts about the plan. I think the key to understanding Tesla from the beginning is the central goal of accelerating sustainable transport and the energy to power that transport. This is not an accident but a deliberate choice to disrupt the transportation and energy production sectors, the two largest sectors of CO2 emissions and drivers of climate change. When the company started there was almost no possibility that electric vehicles would form a significant part of the market within the next 20 years, no one was doing the research and the auto and oil companies were total vested in ensuring this didn't occur. There was even less chance that energy production would shift to non CO2 producing renewables, again little research and an enormous entrenched industry. The idea of an electric car startup surviving and disrupting two of the most established industries on the planet was total madness squared. Fortunately for all of us Elon and his team were crazy enough and he had enough money left from Paypal to get through the first stage of the plan.

What has developed in 10 years is an enormous almost miraculous shift. By doing the research and showing the economic case Tesla, although not a truly large auto producer or profitable enterprise yet has made an enormous contribution to achieving its purpose. Open sourcing their patents to allow other companies to take a running start at developing EV's is another crucial part of the puzzle. From almost nothing electric car startups are now everywhere, in China BYD is already making more vehicles than Tesla and a wider variety, but it likely never would have existed without the seed planted by Tesla. Given the size of the markets in China and India it seems likely that there will be several large companies competing to make very cheap EV's using much cheaper bases costs than Tesla has. I think it is likely that Tesla isn't taking a shot at a lower priced vehicle largely because China is likely gong to produce a lot of them. The Tesla model is to make high quality mid priced vehicles affordable.

What I think Tesla is trying to do is plant as many seeds of disruption as it can in the most important areas. The seeds planted by the Model S and X taking over the luxury segment have lead virtually every automaker in that class to start production or at least plans for competing vehicles, accelerating the advent of sustainable transport much more than Tesla could on its own. The level of response to the Model 3, all of us should be proud of this, has led to at least VW planning an EV future and billions being poured into EV startups, again accelerating sustainable transport much more than Tesla could on its own.

The transportation targets chosen for the next decade all represent either all remaining major consumer segments, small SUV's and trucks or the most important forms of mass transport. Suv's and trucks remain the two largest transport carbon emitters. Although it is unlikely that Tesla will take over as lead manufacturer in either segment designing a truck that can do 0-60 in 3 sec, has instant torque and air suspension has the potential to force Ford, GM and Chevy to produce competitive vehicles or lose their market share, just as BMW and Mercedes have. The top ten SUV's sell millions of vehicles per year. By showing that a more spacious, powerful safer vehicle is possible again Tesla is likely seeking to force Toyota, Honda and Ford to produce their own to keep their market.

Transport trucks are the next largest source of transport CO2 emissions. Buses are far less carbon intensive than cars, but are not convenient. Building mass transit with dedicated corridors like subways and LRT's is more convenient but very expensive. Making Bus transport more convenient and dropping carbon emissions to zero Several companies have already started producing traditional buses, it isn't clear exactly what Elon means but I am looking forward to seeing Tesla's design. Producing designs in these diverse but high CO2 emitting areas is likely to push others to do more than Tesla could do on its own. The transportation targets are not the obvious next conventional steps, but are clearly the most important steps in fulfilling Tesla's purpose.

The most fascinating part for me is manufacturing. For Tesla to actually manufacture a million vehicles a year by 2020 seems impossible given their record. Can they improve the production process by 5-10 fold by 2022? I will be totally fascinated to watch.

Integrating solar home generation/storage and transportation under one company is actually the most obvious part of the plan and was likely intended from 2006. I have been on the point of installing solar panels for a while, but I am waiting to see what the Tesla package is and if I can buy it in Canada, obvious step given that the solar panel plant will be in Buffalo. Hopefully the purchase of Solar City will happen soon and the package will come soon after.

The plan as I see it remains focused on Tesla acting as a catalyst to accelerate broader change. Even if it meets the production and growth targets it has it is unlikely that Tesla as a company will produce even 5% of the vehicles needed to make a real change. But by providing the basic engineering, open sourcing its patents and showing consumers that they can demand better of all producers they can stimulate and accelerate a sustainable and hopeful future. Thanks Elon & Tesla, time to get it done.

 

[Ludus]

Tesla is going to have to think very very hard about the pickup and who their prospective customers are . The Venn diagrams of pickup buyers and EV buyers don't have much overlap.

The problem with pickups is that, a lot of owners use them for driving back and forth to work each day on suburban roads 98% of the time. But they buy a pickup mostly for that remaining 2% when they want a lot of capability. I just don't see many people going hunting, fishing, or loading an ATV or sled into the back of a compact electric pickup. And there are no chargers at the trout lake located 100 km up some poorly maintained gravel logging road.

There's also a large market for work trucks where self driving would matter a lot. Pickup trucks could actually be sent on their own to pick things up. Businesses especially serving construction would rapidly adapt to putting orders into self driving vehicles.

There would be more demand for a full size pickup that competes directly with Ford F-150 and Chevy 1500 than a compact. There are a lot of unforeseen advantages to camping with an L4 pickup. You can put a canoe in the water upstream and have your truck pick you up downstream. There are probabably a lot of people who would want to use a pickup occasionally and would use one with a Mobility app that can't justify having it around all the time. Mobility fleets would likely have also have modes more like rental where the vehicle is available by the day.

 

[3s-a-charm]

I picked up on a couple of things about the plan:

1. No mention of the next-gen roadster
2. The points of the summary plan are not numbered like the first plan - perhaps it means nothing or perhaps it means that this plan may not be linear - that he may plan to execute several items simultaneously?
3. It was awesome

 

[Saghost]

I picked up on a couple of things about the plan:

1. No mention of the next-gen roadster
2. The points of the summary plan are not numbered like the first plan - perhaps it means nothing or perhaps it means that this plan may not be linear - that he may plan to execute several items simultaneously?
3. It was awesome

I think you're right - this plan isn't sequential much at all, but a bunch of interlocking strategies and goals, all pursued together.

 

[Causalien]

I read the plan, read the points. All points except for #1 is about automotive. #1, TE and solar city stand out like a sore thumb. Perhaps a better option is to spin out TE and have that part merge with SCTY. It can be best done now while TE is still very small. Better yet, sell off the R&D department for TE to SCTY.

 

[buckerine]

I read the plan, read the points. All points except for #1 is about automotive. #1, TE and solar city stand out like a sore thumb. Perhaps a better option is to spin out TE and have that part merge with SCTY. It can be best done now while TE is still very small. Better yet, sell off the R&D department for TE to SCTY.

Why? Unless it's a financing move, there's no reason to spin them off. "Synergies" from being integrated can't be ignored.

 

[Skotty]

I have to admit, I was getting close to pulling the trigger on rooftop solar. I even found an installer I like. But I'm concerned about the future of net metering, and I'm very curious about what kind of package Tesla might offer (load balancing storage mitigates the risk of depending on net metering) and whether or not it will be available in my area (SolarCity seemed to have no interest at all at servicing my state, but Tesla might). Now I'm torn between committing to a build with the installer I already found or waiting to see what Tesla can offer.

 

[Chopr147]

I think there are plenty of truck owners that don't actually use their vehicles utilitarian-ly, other than the odd home depot run. That's why there are several pick-up truck segments.

My own experience with "urban" owners, is that when they do want to haul something it's usually <5,000lbs. Assuming Tesla meets SC roll out targets, and battery costs come down--while capacity goes up--a pick-up truck should be able to handle this pretty well in the next 5 years. For instance, a 110kWh Ford Ranger might be a sweet spot.

Pick-up trucks are a HUGE market in the USA. And yes most are used as an every day driver. But guys/gals love their pick-ups

 

[Causalien]

Why? Unless it's a financing move, there's no reason to spin them off. "Synergies" from being integrated can't be ignored.

Synergies come from eliminations of redundancies.

Most likely scenario since TSLA is the acquirer. All SCTY sales and admin gets laid off. Service tech stays.
Factory gets downsizes and moved to gigafactory1.

 

[buckerine]

Synergies come from eliminations of redundancies.

1. Synergies also come from pooling and sharing resources as an integrated company.
2. A spinoff isn't necessary to eliminate redundancies

 

[Chopr147]

As far as the Tesla/Solarcity/Powerwall merging: Tesla can become so huge eventually they will be looked at as the evil corp. like Exxon/Mobil is today. IDK if anything can be done about that but it will happen. I am waiting on the Powerwall to come down in price. I have solar (not solarcity) and an S on order so 2 out of 3 is not bad
As far as the Uber: I don't like anyone driving my car and can't see letting strangers in to mess up the interior. The payoff would have to be very substantial for me.
Pick-ups, Semi's , small SUV , sedan, small sedan, solar etc................ Elon is really becoming Dr. Evil

 

[andrerodpt]

I know you guys over there in the States are not fans but if Tesla would make a station wagon for Europe (maybe using the Model S platform) it would be a major entry gate in a huge market. Maybe a factory here is being considered?

Midsize wagons have remained popular because of their combination of practicality and good value despite increased and stronger competition from premium midsize vehicles and SUVs.

The share of station wagons compared with sedans and hatchbacks in the segment rose to more than 60 percent in 2014 from about 30 percent in 2000, analysis from IHS shows.

“This segment had been under pressure for the past decade, but the wagon has been relatively resilient to this contraction as it remains something of a workhorse,” IHS analyst Ian Fletcher toldAutomotive News Europe. “They offer customers a great deal of space and practicality.”

from Wagons give lift to Europe's severely weakened volume midsize segment

 

[sandpiper]

There's also a large market for work trucks where self driving would matter a lot. Pickup trucks could actually be sent on their own to pick things up. Businesses especially serving construction would rapidly adapt to putting orders into self driving vehicles.

There would be more demand for a full size pickup that competes directly with Ford F-150 and Chevy 1500 than a compact. There are a lot of unforeseen advantages to camping with an L4 pickup. You can put a canoe in the water upstream and have your truck pick you up downstream. There are probabably a lot of people who would want to use a pickup occasionally and would use one with a Mobility app that can't justify having it around all the time. Mobility fleets would likely have also have modes more like rental where the vehicle is available by the day.

Electrification and autonomy are two completely different things. One does not imply or preclude the other. And for all intents and purposes I think we can disregard L4 autonomy for the time horizon that matters for Tesla's product planning. The question is... would somebody buy an electric pickup?

I agree that there is some potential purpose for local work vehicles; vehicles that shuttle people and materials around - simply because of potential fuel and maintenance cost savings. As for selling one for a personal vehicle to a "truck guy" - I think that's a tough row to hoe until we can get batteries that will provide 600+ km range.

 

[Chopr147]

I know you guys over there in the States are not fans but if Tesla would make a station wagon for Europe (maybe using the Model S platform) it would be a major entry gate in a huge market. Maybe a factory here is being considered?


from Wagons give lift to Europe's severely weakened volume midsize segment

Quick story? Mercedes Benz had never made a station wagon until 1960 or so (not sure the year) An older wealthy lady goes into the MB dealer in NYC and demands a station wagon. She was so insistent (and did I say rich) MB made her one. There were only 2 built with one on display in California MB HQ. Story was on Wheeler Dealers recently