Published on September 3rd, 2018 | by Maarten Vinkhuyzen0
Tesla In 2025 Bigger Than Toyota In 2017 — Forecast
September 3rd, 2018 by Maarten Vinkhuyzen
I did something quite irresponsible lately. I made a prediction 6½ years in the future about Tesla’s finances. The normal financial analyst horizon is a single quarter, and that is often too difficult.
In 6½ years, many things will change. There will be elections, in the USA and abroad (great markets like Ontario will disappear from one day to the next). There will be recessions and new regulations. The competition might actually become effective and outcompete Tesla. New technology like a solid-state battery could come to production, or many other developments could surface that we don’t think about today. The only thing that is sure, is that the future will be different from what my simple extrapolation of current developments predicts.
The goal of this exercise is not to predict reality in 6½ years, but to look at what is possible around 2025. This year being the horizon most carmakers and futurologists use to predict their own hegemony and the demise of Tesla — the normal order of the car industry will be restored, Toyota and VW will be competing to be the biggest company, Ford and GM will be shrinking to local North American companies, the Europeans will be cheating, the Japanese will be boring, and the Chinese will be ready to take over the world.
But what about Tesla? Will it be relegated into a footnote in automotive history, will it be a boutique carmaker, or will it have realized its potential as a disruptive force that could not be stopped?
It is this last scenario that was presented to me when I was working on our Long Range financial model of Tesla. I just put in all the plans at the intended timelines and with the expected volumes and prices. Just as if nothing could go wrong. When it got too exuberant, I tempered the prognoses to a less scary level. And when I reached 2024, Tesla was close to the revenue level that Toyota had in 2017. I went back, correcting mistakes, tempering expectations — and then 2025 was the year Tesla would overtake the Toyota of 2017.
I did not do this exercise, or anything else like it, for any other company. I have no idea how big or small any of the legacy carmakers will be by that time. Nor did I look into the emergence of the Chinese companies onto the world markets.
So, what happened at Tesla in our model that gave these results? By 2025, Tesla will have built another 4 gigafactories (GF) and 3 large car/truck plants. There will be:
GF3 and GF4 in China and Europe, each producing 500,000 Models 3 & Y a year.
A plant for the Model Y in the USA and a plant for the Semi in both the USA and Europe. Because GF1 has the battery production capacity for Models 3, Y, and Semi, they don’t need a dedicated GF.
For the Tesla pickup truck and the newly introduced future $25,000 model, there are two GF (5 & 6) in the USA.
The Model 3 and the Model Y are each produced in the USA (10,000/week) and the two GF in China (5,000/week) and Europe (5,000/week). Being more popular, the production of the Model Y is slightly larger. Competition, which started with the Jaguar I-PACE, Mercedes EQC, and Audi eTron quatro, has scaled battery production at last and learned to produce BEVs at a competitive price. The segments of luxury cars and CUV/SUF starting around $35,000 did grow thanks to the lower cost of ownership, better quality, and the popularity of this class for MaaS. Tesla has a market share of nearly 20% in both the car and CUV/SUV markets.
The Semi has two factories, each with a production of 700/week. The competition has figured how to beat the laws of physics like Tesla does and is also producing electric trucks. The sale of diesel trucks is down to small fraction of what it used to be. Tesla has made inroads among the early adopters, the legacy truck makers have kept a lot of their customers by using their brand loyalty to their advantage.
The Roadster is no longer the halo car that it was. For 10 times the money, the former gas wizards have now electric drivetrains that are a fraction better than the Roadster. But the Roadster is still by far the most “affordable” super sports car. It is very popular for a day at the track, and there are many local “Formula Tesla R” competitions.
The Tesla Pickup was a sensation when launched. It should not have been, since the possibilities of the Tesla Semi showed what was possible for a F-150 competitor. The problem was that pickup manufacturers and drivers could not believe their eyes. They stayed in denial until Elon and a group enthusiasts drove a few dozen Tesla Pickups on full Autopilot through gun & bible loving fly-over country from California to Maine and from Washington to the Florida Keys, stopping at every town and giving test drives. A new GF7 should come online soon to double production.
The $25,000 Tesla model is the best car in its class, according to the fanboys, but Nissan/Renault, Hyundai/Kia, VW Group, and PSA did have the advantage of being earlier and benefiting from brand loyalty. Toyota is leading a group with the other Japanese carmakers that were too late to the party. The competition in the classes below $30,000 is now between the Europeans and the Chinese, with the Koreans tagging along.
At least that is how my fantasy explains these numbers. Extrapolation is a blind way of predicting the future. Without a story to make the numbers believable, it is really unusable.
In this scenario, Tesla automotive revenue is only 2/3 of Toyota automotive revenue of 2017. The revenue of energy systems and other activities makes the total revenue close to $300 billion.
Another big difference is that Tesla is retail while Toyota is wholesale, and the average sales price (ASP) of a Tesla is a lot higher than Toyota’s ASP. In numbers Tesla sells in 2025 only one third the number of vehicles that Toyota sold in 2017.
And to finish were I began, are these result likely? Not at all. I am a world-class futurologist with a lot of luck if reality is plus or minus 30% of these figures.
But the fun is in realizing that this is really possible.
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