Tesla’s second master plan: A look ahead

Credit: Lux Research
Ten years ago, Elon Musk outlined Tesla’s “secret” master plan to scale up its automotive business by building progressively cheaper vehicles, while also calling Tesla a “side project” to Musk’s space exploration company SpaceX. Much has changed since then, and in hindsight it’s difficult to argue that Tesla failed at this mission: The Model S beat its competition in the high-end luxury segment, and the premium mass-market Model 3 is set to debut at a base price of US$35,000. Following the company’s success thus far on implementing its first master plan, it’s no surprise that Elon Musk’s announcement that he was working on a second plan was met with great anticipation. Well last week he did release that plan, and it included autonomy, solar power, some vehicles we expected, and some vehicles we didn’t.  

Integrate energy generation and storage: This announcement follows shortly after Tesla announced a proposed bid to acquire SolarCity, and uses the opportunity to plug the deal. However, there remain some fundamental issues with the timing of this deal, as the two companies are burning through cash in order to bring massive new manufacturing facilities online. It’s also not clear if the company can lower the cost of solar-plus-storage enough to open new market opportunities in a way they can’t do through their existing partnership. Tesla has the right long-term vision of becoming a fully integrated solar-plus-storage company, but it is not clear what the company can gain in the short-term.

Expand to cover the major forms of terrestrial transport: Tesla outlined its future passenger vehicle lineup, and it includes a crossover based on the Model 3 as well as a “new kind of pickup truck.” These are great moves from Tesla, as both are substantial portions of today’s automotive market while sales of larger vehicles have increased with cheaper oil. More surprisingly, Tesla announced that it is developing heavy-duty trucks and a type of electric bus, which the company stated could be unveiled as early as next year. The duty-cycle of heavy-duty trucking does not suit electric powertrains, and Tesla offered no technical explanation of how the company will tackle this problem. Innovations in charging speed or alternative operational models will be required to efficiently transport cargo, as the concept of a fossil fuel burning range extender will surely not be entertained by a company so critical of the internal combustion engine.

Autonomy: Following the first fatality of a driver using the Autopilot feature, Tesla dedicated a substantial portion of this report to defending its approach to deploying Autopilot. It also outlines how autonomy will be a key differentiator in its future products, such as electric buses without drivers to save space and reduce congestion. Full driverless autonomy faces many regulatory and technical hurdles before commercial adoption, and goals of shuttling goods and people around without drivers is unlikely to happen within the next 20 years.

Sharing: While Lux is skeptical of Tesla’s deployment of Autopilot, we are intrigued by Tesla’s proposed car-sharing and ride hailing scheme that leverages autonomous features. In this scheme, owners could add their Tesla to a shared fleet, an autonomous ride hailing fleet which brings in revenue for the owners. Tesla is not the first to suggest such an idea, as Uber and the GM/Lyft partnership have already announced plans for testing and developing their own autonomous fleet.

Lux Research view on Tesla's second Master plan. Credit: Lux Research
Tesla’s goals are much longer term than in previous plans, as the company discussed business models that required technology that doesn’t yet exist, and needs to pass a plethora of legal hurdles before we see them. We could see watered down versions of these technologies first. Imagine a car sharing service that uses a fleet of Tesla’s parked near a customer’s residence. Tesla’s Summon feature could drive the car to a house, leveraging a feature already in development without needing to wait for fully autonomous driving technology to mature.

Shortly following the proposed SolarCity acquisition, this announcement marked the second major development from Tesla in the last month, and the company must be careful not to lose sight of the most important product: The Model 3. If Tesla suffers the same quality control issues and delays as it has with previous models, the company may not have the time or resources to execute its longer-term goals.