When you’re Elon Musk, you get to do fun things like reveal master plans to the consumer masses. His most recent one was recently outlined in a July 20th post published on the official blog for Tesla (NASDAQ:TSLA), his electric vehicle producing company which recently dropped the “Motors” from the website name. The four-part plan discusses integrating energy generation and storage, expanding its transportation and vehicle options, increasing vehicle autonomy and enable car sharing to provide revenues to car owners.
The new master plan updates an older master plan which Musk had unveiled 10 years prior in another blog post on the Tesla site. That plan also had four prongs: build a sports car, use the money from that car’s sales to build an affordable to build an affordable car, use revenues from that car to build an even more affordable and providing zero-emission electric power generation options. It should be noted, Musk’s explanation of the 2006 plan in his 2016 post leans more heavily on solar when the original plan accounted more for the breadth of alternative energies in development, but his paraphrasing was otherwise consistent.
Tesla has shown some success in implementing the 2006 plan, especially where it comes to vehicle development. The Tesla Roadster was the company’s first vehicle and it was first produced in 2008 with a whopping $109,000 base price. The Tesla Model S, which began deliveries in December 2014, was marketed at a base price of $57,000, a sizable step down from the Roadster but still out of the reach of the mass consumer market. $35,000 isn’t exactly cheap but it does represent another price reduction which will be seen in the Tesla Model 3 when it begins shipping in 2017. That price tag still puts the Model 3 in a class above the base price seen in many vehicles produced by Ford (NYSE:F) and General Motors (NYSE:GM), but the downward trajectory is clear.
The past 10 years have also seen Musk involved in developing energy technologies. In June 2014, Tesla began construction of the Gigafactory, a lithium ion battery production plant located near Reno, NV, which the company expects will produce more lithium ion batteries in 2020 that the entire world produced in 2013. Last year, Musk made his vision for Tesla’s future as an energy company clear when the Powerwall battery was unveiled as an option for home energy storage. Tesla’s shift towards becoming an energy producer is further highlighted by current news reports about the company’s negotiations for merging with SolarCity (NASDAQ:SCTY), the solar power systems developer owned by Musk’s cousins and for which Musk serves as chairman.
The initial response to Musk’s new master plan outline included no small amount of scoffs from industry analysts. Some noted that the new vehicle options Tesla promised to roll out, including a compact SUV, an autonomous bus and a semi truck, will require a great deal in terms of development costs. Elon Musk may have deep pockets himself but go ahead and ask executives at Ford and GM if they could justify high research and development costs on the sale of 125,000 units over the course of eight years. Lucky for Musk, he was exceedingly light on the timeline details so as long as he produces those vehicles eventually, he gets to say that he followed through in due course. It’s probably all for the best, however, as Tesla has a tendency to miss its own production and shipment deadlines.
Musk’s master plan is also overly optimistic on the SolarCity acquisition, which is still in the negotiation phases: “Now that Tesla is ready to scale Powerwall and SolarCity is ready to provide highly differentiated solar, the time has come to bring them together.” CEOs are typically pretty tight-lipped about mergers and acquisitions before they actually happen, but of course not many CEOs are Elon Musk. It’s also the truth that not many corporate executives are in the position of acquiring a company run by relatives, but Elon Musk truly is one-of-a-kind. And if Musk needed any additional help at the bargaining table, there’s also the tens of millions worth of SolarCity bonds that he’s purchased through SpaceX he could leverage.
It could also be troubling for observers to note that in the five paragraphs which Musk devotes to the autonomy section of his master plan, he never once mentions any of Tesla’s failures in this regard. This would include the recent death of a Florida man when his Tesla crashed while in Autopilot mode. Investigators noted that the car, which failed to recognize a tractor trailer and didn’t automatically brake, was also traveling nine miles per hour above the posted 65 MPH speed limit. Tesla’s official response on the incident indicated that the automatic brakes weren’t initiated because the white tractor trailer was indistinguishable against a bright sky backdrop. It was the first fatality in Autopilot mode over a total of 130 million miles driven. Tesla’s new master plan cites one fatality for every 89 million miles driven as a reason why autonomous technologies need to be developed. So if we can all just ignore this one death, Autopilot will still be our savior, Musk’s reasoning seems to suggest.
The car sharing concept is not so outlandish and indeed the idea is being tried out by at least one major automaker. Last year, Ford announced its own car sharing program that was being tried out in some American and UK cities. This May, GM announced that its car sharing startup, Maven, would be expanding its operations in Boston, Chicago and Washington, DC. Both Ford and GM would allow subscribers to these programs to schedule rentals where they pay by the hour; Ford’s system does allow for per-minute pricing. Insurance and other costs are covered by rental fees. These programs are small and are limited to a few cities but they’re still ahead of where Elon Musk wants Tesla to be.
Elon Musk’s updated master plan reeks of overconfidence. He envisions entire fleets of autonomous Tesla vehicles while missing recent sales targets by thousands of units. He wants to pump massive amounts of money into R&D for autonomous technologies and new types of vehicles, but the company is having trouble with bleeding warranty costs which are double the amount seen at Ford or GM. The lack of timeline details in the master plan was not well received by financial analysts and Tesla stock was down by 3 percent in the days after the announcement.
The future certainly looks bright to Elon Musk. It’s just hard to tell whether or not he’s viewing that future through rose-colored glasses instead of the hard lens of reality.