Elon Musk has never been accused of dreaming small dreams. Transforming all cars to run on electricity. Colonizing Mars. Even his most ardent supporters were ambivalent about whether Musk could meet these visions.
Now he’s massively advanced one of his key strategic milestones related to Tesla. The quarterly shareholder letter‘s first line contains the blunt announcement that Tesla is targeting 500,000 cars in 2018, two years earlier than the already head-scratchingly aggressive 2020.
It’s time to look at those goals, the plans behind them, and how they are progressing in a bit more detail. Are they realistic, or is Elon deluding a lot of people?
Let’s start with that bit about living on Mars. There is a nefarious and hidden master plan which can only be found by Googling, one which Musk undoubtedly dreamed up while lolling in his volcano lair reachable only by his submersible Lotus and stroking his white-furred cat like some benevolent Ernst Stavro Blofeld.
How’s that going?
- Phase 1: Founded in 2002, in 2008 SpaceX put the first commercially developed rocket into orbit, a much more significant milestone than going out of the atmosphere for five minutes.
- Phase 2: SpaceX has contracts to supply ISS, launch satellites, etc. It has become the cheapest launch platform in the world. But it’s not done. In late 2015 it landed its stage 1 rocket, the really expensive part, back at launch. In early 2016, it successfully landed its stage 1 on a downrange robot barge named Of Course I Still Love You in the ocean. If it can do that regularly and reuse the stages for later launches, which is the entire design point, total launch cost is cut by roughly 75% from the already historically low costs. As they just did it again on a much more difficult trajectory, the odds that they have a repeatable solution have just increased substantially. Close to an order of magnitude of total cost takeout is pretty revolutionary. That opens up a lot of space commercialization opportunities that didn’t have business cases.
- Phase 3: still coming but a very interesting piece occurred recently when a SpaceX rocket delivered an inflatable habitat from Bigelow Aerospace to ISS for testing. That’s key technology for Mars colonization. Lots more to come.
That’s 14 years to get a lot of the way through a three-phase strategic plan in one of the most demanding industries in the world. It’s not called strategy for nothing, although most of the world’s perspective on strategy is limited to 1–2 years in the future in my experience. Musk and SpaceX are playing a long game and a good one.
Musk’s dream of colonizing Mars is pretty much on plan. What about electrification of transportation?
He is also closing in on the final step in his equally secret master plan, hidden in a deep vault called the Tesla Motors Blog:
So, in short, the master plan is:
- Build sports car
- Use that money to build an affordable car
- Use that money to build an even more affordable car
- While doing above, also provide zero emission electric power generation options
Don’t tell anyone.
It’s been ten years. How is this evil plan for world domination working out?
- Tesla Roadster. Check.
- Top selling premium luxury sedan in NA and Europe, with a total cost of ownership comparable to a Honda Odyssey minivan. Check.
- Impossible-to-roll SUV that beats Ferraris in drag races, tows 5000 lbs, and has a TCO much better than any of its competitors. Diversion from the master plan, but okay. Production ramping up. Undoubtedly going to crush its SUV competition just as Model S is crushing its category. Check-ish.
- $35,000 car that out-accelerates its category with much better TCO announced with 400,000 global pre-orders. Tesla Gigafactory on track to start building batteries for it, and Tesla current car factory has more than enough capacity, as it had a 500,000 annual production capacity when owned by Toyota. Those 400,000 pre-orders are a big reason why Tesla is bumping its annual car manufacturing projections. Check.
- Zero-emission electric power generation options. Well, I have to say Tesla isn’t doing much in the generation space, but there is a lot of goodness there regardless. Musk is also Chairman of SolarCity, which does exactly that. The Gigafactory’s roof is all solar panels. Many Superchargers are getting green electricity although the intent for them all to be green is lagging. And Tesla has introduced home and grid storage battery packs. Check.
- Not being satisfied with making a car that has a total cost of ownership cheaper than a Toyota Camry that is also a total sex-rocket, Tesla is aiming further down market. “With something like the Model 3, it’s designed such that roughly half the people will be able to afford the car. Then, with fourth generation and smaller cars, we’ll ultimately be in the position where everyone will be able to afford the car.”
So far there’s little reason to believe that Tesla’s reach exceeds its grasp on any strategic timescale. If you want to look at specific quarters, you can find missed deadlines, but frankly, that’s nitpicking. This is a company which is running on all battery cells — running on all cylinders is so 1999 — and hitting its strategic targets.
In my opinion, Musk’s goals aren’t crazy. I’d say he’s got great strategic visions and plans and is doing an amazing job of bringing them to fruition. And part of the reason he is succeeding is that he’s inspired people in three separate companies with them. Tesla pays less than competitors because everyone wants to work for Tesla; competition is fierce to get in. Similar stories exist for SpaceX. SolarCity isn’t run directly by Musk, but it’s a pretty amazing place too by the sounds of it.
Great goals make for great workforces make for great results. Crazy doesn’t enter into it. After all, aiming for the moon leaves you in orbit, but aiming for the clouds just leaves you in a passenger jet.
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