Tesla’s Future Is Not What We Thought

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Well, it’s true — the response to Tesla Battery Day is a mixed bag of cats and we are all trying to see what we should make of it. It has been more than a week now. I have gone through the technologies, have gone through the numbers, and have come to the following conclusion: what Tesla presented to us is exactly what we had hoped for and were expecting. Even though I wrote an article about Tesla needing a chain of terafactories all the way back in 2018, however, it seems I set the bar too low.

In the end, it all comes down to climate change. “Tesla’s mission is to accelerate the world’s transition to sustainable energy.” The only addendum missing at the end of that is “preferably, before it’s too late.” While most scientists and governments aren’t really willing to admit it, 2050 is too late. 2050 is the year not just when the world should be completely climate neutral, or even greenhouse gas negative, it’s the year when we are too late. Hell, with the uncertainties of science, we might already be too late, but one thing is for sure — 2030 is a good year to be more than halfway there.

Before a lengthy conclusion, this article has 3 parts. The first is an examination and exploration of the numbers Tesla presented. The second part of the article is about how those numbers apply to Tesla. The third part is a literary exploration of Tesla’s future based on those numbers. Keep in mind that we are talking about a time period of 10 years. To put that into perspective, 10 years ago is when we were still in the old days of the original Tesla Roadster. In fact, 10 and a half years ago is when we got to see an alpha prototype version of the Model S, which was quite different from the actual product launched in 2012. So, we do expect great things from a larger and more mature Tesla, with its improvements measured by an order of magnitude in Elon time.

The EV Future As Tesla Sees It

During Battery Day, Tesla presented this chart you see above (enhanced by CleanTechnica to improve visibility and make it easier to read). Make sure to take all the time you need to study it very closely, because the entire article centers around it. From this slide, some might have mistakenly thought that, by 2030, Tesla plans to produce 10 TWh of batteries a year. Well, to that I would say: if only it was true. What this chart represents is how much battery production per year the world needs to transition all vehicles to electric. 10 TWh per year for 15 years straight — that is what it will take to make the full transition by 2045.

Tesla even divided the chart into what appears to be the Tesla Semi, the Tesla Cybertruck, the Tesla Model S, the Tesla Model 3, and the ~$25,000 Tesla Model Placeholder. Here is where the troubles begin, as do the explanations. After a lot of calculations, what this appears to be is a division of market segments and predicted costs and sales of each segment. Keep in mind that there are no certainties on this, so we will be talking about ballparks of millions of vehicles in a somewhat different market 10 years from now.

Semi Trucks

First, let’s fill in the segment for semi trucks. We know that the longer range Tesla Semi will have a 1,000 kWh+ battery configuration. This gives us approximately 3 million electric semi trucks based on the figure in the chart. Interestingly, by 2024, yearly semi truck sales in the world are predicted to reach 2.4 million, so 3 million by 2030 is not that much of a stretch. Accounting for less efficient trucks and even bigger batteries, this seems like a good number to use. Although, 750 kWh, halfway between the standard-range and long-range Semi, is also a good number.

Luxury Vehicles

Then, for the luxury segment, considering that the Plaid Model S is already 125 kWh, I am am inclined to say that an average of 150 or even 200 kWh 10 years from now is a good bet, especially since it’s doable from a technical standpoint and rich people would for sure pay a dime or two more for good range that they will probably never need — luxury is an indulgence after all.

Currently, this segment sells approximately 4 to 5 million vehicles per year. Considering that the upper class is growing in numbers as the middle class is getting poorer, the calculation that the 150 to 200 kWh range leads us to 4.5 to 6 million vehicles also seems right on the money.

Pickup Trucks

The pickup truck market is a little more complicated to explain. The tri-motor Cybertruck will have a range of 500+ miles (EPA estimate), 100 miles more than the lighter and more aerodynamic Model S gets with a 100 kWh battery. It is likely a stretch, but you could say that the Cybertruck needs a battery almost twice as big, at 200 kWh, to reach the advertised 500+ mi range.

However, considering that most pickups can get as much as 1000 mi of range when they have a big tank, a 350 kWh battery 10 years from now is not unreasonable. It’s also convenient because that number yields a market segment slightly bigger than 3 million vehicles, which is exactly where that market is today. The one thing I doubt was considered by Tesla is that this market is expected to shrink significantly within the next decade. However, if Tesla has not taken that into the consideration, then we have yet again explained away Tesla’s numbers.

The Elephant In The Room: A Small Robotaxi?

Now we have come to the hardest part to guess. Let’s start by addressing the elephant in the room. Why on Earth does the future robotaxi appear to share the segment with the small, low-budget, iron-heavy-battery EV? Well, this is a whole other article that I intend to write if I have the chance. I think what Tesla has secretly unveiled here is its strategy for the robotaxi market, a market that will be limited by the number of vehicles available at rush hour.

Most people commute to work alone and don’t really need a large vehicle most of the time. Heck, without a spare tire, a 4 person family and groceries for an entire week could fit into a tiny Volkswagen Up with a frunk and trunk. While I am sure the other models will be available as robotaxis when necessary, the small, cheap Tesla is the ideal way to scale the robotaxi network and make it as cheap and enticing as possible. With a tabless battery, these will also be able to recharge rather quickly. This is how you build enough capacity for rush hour.

This likely means we can expect an moderate battery size, perhaps as small as the 50 kWh that the SR+ Model 3 has, or maybe even smaller than that. However, it doesn’t matter if in the calculations we:

Go big and set:

• Small/Robotaxi to 75 kWh (like Model 3 LR) and
• Model 3/Y category to 85 kWh (85 kWh = 75 kWh SR and 100 kWh LR)

Or go small and set:

• Small/ Robotaxi to 40 kWh and
• Model 3/Y category to 75 kWh

Either way, if you add it up with the other market segments, you get a range between 72 and 95 million vehicles, which, when calculating ballparks, seems like quite an accurate prediction for 2030.

Tesla’s Role In The Transition

Out of the 10 TWh the world needs to transition to sustainable transportation, Tesla by 2030 wants to make less than 30% of it. The company has set itself a goal of 3 TWh, and in a recent tweet, Elon specified that he expects the company to make around 20 million vehicles by then (tweet below). This allows us to make some pretty concrete calculations and draw conclusions. The first and most certain conclusion is that not all of the 3 TWh is going to vehicles. Some of that will go to grid storage. According to the battery presentation, to transition the world to sustainable energy, another 10 to 15 TWh of battery production will be necessary.

Now, with the numbers we just discussed and the additional information of 3 TWh and 20 million vehicles per year by 2030, we were able to try out many scenarios of Tesla’s potential future. One thing is for sure — the numbers preclude the possibility of an even split.

1.5 TWh will under no circumstances lead to 20 million vehicles. The most pessimistic battery size predictions (no improvements 10 years from now versus today) barely get Tesla to 16 million vehicles.

2.5 TWh, with our previous predictions mostly in tact and slight capacity increases to 55 kWh for small/robotaxi and 85 kWh for 3/Y, gets us our 20 million vehicles.

That’s total market, not all Tesla. We do see Tesla reaching 20M vehicles/year probably before 2030, but that requires consistently excellent execution.

— Elon Musk (@elonmusk) September 28, 2020

These numbers all don’t really match up with reality, however. The 2 TWh for vehicles prediction seems the most logical, but Tesla’s original chart dividing up the automotive battery market into segments, while correct for the overall market, doesn’t make sense for Tesla’s 3 TWh goal, nor its 20 million vehicle goal. That is when it hit me: changing those proportions to conform to Tesla’s reality is what needs to happen. The question here is how many vehicles Tesla can sell in each segment.

For that, the easiest to fill in is the Tesla Cybertruck. During Battery Day, while answering a question, Elon said that based on the pre-orders, the Cybertruck will have “at least, like, a unit volume of like 250,000 to 300,000 a year, maybe more.” Well, obviously, in 10 years, Tesla can expect some more sales. Though, I am not sure how likely it is to dethrone 2019’s third place vehicle in the market, the Chevy Silverado lineup, which had 576,000 sales. This may be the segment with the most stubborn brand loyalty, and the design of the Cybertruck simply isn’t for everyone. So, at 140 GWh, Tesla could make 400,000 super Cybertruck+ models.

Moving on, let’s set the Semi to 400,000 as well (400 GWh). Keeping the proportions of luxury, 3/Y, and small/robotaxi intact, we need to multiply them 1.3 times to get back to 2 TWh — and, sadly, we only get to 16.5 million vehicles. However, let’s change the battery capacity as follows:

• Small/ Robotaxi to 50 kWh (like Model 3 SR+)
• Model 3/Y category to 85 kWh (85 kWh = 75 kWh SR and 100 kWh LR)

When we do that, everything suddenly works out and we have nearly 20 million vehicles. There is only one problem — the Semi. With a 2–3 million vehicle market and Tesla being the main contender for rolling out electric autonomous trucks, Tesla will sell as many as it can make. It is a supply-limited market, not a demand-limited market like the case of the Cybertruck.

So, is an alternative possible? If you decrease the number of passenger vehicles, switch the Semi to 750 kWh, make the pickup 250 kWh, put luxury vehicles at 150 kWh, put Model 3/Y at 62.5 kWh, halfway between the LR and SR+ of today and the robotaxi to 40 kWh, then, yes, Tesla could produce a bit more than a million semi trucks and still maintain the 20 million vehicle figure.

If there is any conclusion you can draw from all the math, it is that the future of EVs and Tesla sales is quantifiable, but that there are still pieces of the puzzle missing and that we either have a future with more semi trucks while all other vehicles have equal range to today, or we have fewer semi trucks and longer range on all vehicles.

Here is a link to an interactive spreadsheet I have made. Feel free to play around with the numbers. If you have come up with a better scenario, please feel free to leave it down in the comments below. Now let’s move on to the second half of the article, the description of Tesla’s future using our more exciting, low-semi numbers and a sales estimate.

Tesla’s Future: Literature Edition

The year is now 2030.

Cybertruck

In this version of Tesla’s future. Tesla’s pickup is a huge success, rising to the 4th best selling pickup in the entire market, which is saying a lot considering the gap between the Chevy Silverado occupying 3rd place by selling 576,000 pickups 2019 and the Toyota Tacoma occupying 4th place by selling less than half that, 249,000 in 2019. That is a fantastic accomplishment in what is probably the most stubborn market of all.

Tesla Semi

In this version of Tesla’s future, the Tesla Semi occupies about 17% of the entire semi truck market worldwide, making 30% more semi trucks than it it did Model 3s in 2019. If these numbers are correct, it rises 3 percentage points more than even the biggest semi truck manufacturer, Daimler, which is at 14% of the market. It is, however, the same old story — a lot of demand and heavy pollution regulations, but too few cells to fulfill the orders.

Tesla Luxury Vehicles

In this version of Tesla’s future, in the last year before 2030, Tesla owns a quarter of the luxury car market, because it’s the only brand with luxury vehicles that can drive themselves while the occupants relax by scrolling memes on their phone or watching a movie on the optional, large, 24 inch center console upgrade that could be retrofitted to replace the 15 inch screen when service centers were removing no longer mandatory steering wheels. Almost like the way they once retrofitted the FSD computer on older Tesla’s a decade ago. (Alright, I might have taken some creative license there.)

Tesla Robotaxi

In this version of Tesla’s future, for the common folk, there is the new but already quickly expanding ride-hailing robotaxi network. The Tesla Robotaxi, available in a 2 or 4 seat variant, was only introduced in 2028 since multiple governments were finally getting close to certifying Tesla’s driverless system as safe enough for activation. That’s after they closely monitored FSD disengagement rates gradually drop to insignificantly low levels over the years.

In the next decade Tesla is expected to produce a lot more robotaxis than consumer vehicles, and more and more people are starting to re-evaluate whether owning a car is really worthwhile. Even though the 2020 pandemic is now long over, a lot of people still work from home, as it was deemed cheaper by a lot of companies.

Because most people commute to work alone, don’t have luggage most of the time, and a smaller car is just a lot cheaper to make, the Tesla Robotaxi is approximately the size of a VW Up!. Though, without the need for a spare tire in the back and having a frunk, it is still sufficiently large for a family of 4 together with weekly grocery shopping. Although, at this point even more shopping is done online than a decade ago in 2020. If needed, a larger robotaxi could also be hailed, anything from a Model 3 to a Cybertruck — though, for a higher price of course.

Tesla Model 3 and Model Y

In this version of Tesla’s future, the Model 3 and Y still exist and are as popular as ever. The long range versions now have a 100 kWh battery, giving them more than the 400 mi of range the 100 kWh Model S had a decade ago. What was previously known as long range has now become standard range. The price of this vehicle has also gone down, offering a true $35,000 vehicle all around the world, and at $43,000, the Model 3 LR has also gotten somewhat cheaper. Meanwhile, overall, the vehicle hasn’t changed much on the surface. Most changes have to do with how it’s built. The Model 3 and Model Y have become decade-old classics and have become the real stereotypical vehicles symbolizing the move to electric vehicles. Now, with the robotaxi network, a dual screen version has been launched and existing vehicles can also have their steering wheels removed at service centers.

Finally, in this version of Tesla’s future, the automaker with a mere 20 million yearly vehicle sales has not exactly taken over the world. A few automakers didn’t make it through the transition because they weren’t really willing to switch over to EVs or tried to make EVs without a skateboard architecture, but most are still here in one form or another. A couple of the EV startups are now the same size as Tesla was a decade ago. Sales of internal combustion engine vehicles has only just stopped, and not everywhere in the world. Though, for the last few years, very few were sold, as some countries (like Norway) are already close to banning ICE vehicles from the roads.

Finally, while the EVs of other automakers may still be inferior to Teslas in technology and performance, with the battery shortage, people who want to own a vehicle will take whatever they can get their hands on.

Conclusion

It’s funny, even though I was the first journalist to write that Tesla will need not gigafactories but lots of terafactories, I am a lot more worried about the prospect now than I used to be, even though it’s more tangible than ever. The terafactory prediction felt more exciting back then, possibly because there was no timeline attached to the prediction and because it was simpler. At the time, I had only accounted for regular passenger vehicles, simply giving each vehicle 70 kWh, and so the world only needed 5 TWh. In reality, together with grid storage, the world needs 20 TWh per year, or even 25 TWh per year. It could be even more than that depending on whether Tesla took into account the increasing power requirements of certain technologies and how developing countries are starting to mature and use a lot more power as well. Now that we know more precisely what it will take and that Tesla is only able to account for about 30% of the work — the rest is up to the big auto industry.

That the world for 70% will depend on big auto in the next 10 years to save us from climate change, it sends cold chills down my spine. Don’t get me wrong — 20 million vehicles by Tesla is a lot. It’s twice what Toyota or Volkswagen Group sold in 2019. Interestingly, the second most promising candidate after Tesla is Volkswagen, but whether the conglomerate can live up to its promises is a big question. Volkswagen Group (which includes Audi, Skoda, Seat, Porsche, and others) promises 22 million EVs by 2030, even though it has never sold much more than 10 million vehicles before.

Volkswagen (brand, not group), Hyundai–Kia, and GM each plan to sell only around 1 or 1.5 million EVs by 2025. It’s unclear what we can expect from Toyota, Renault-Nissan-Mitsubishi, Ford, and BMW, which haven’t set targets and have sneakily talked about electrification, but not that much about EVs or investment plans. Talk is not enough.

It’s not that there is no hope. Thanks to Tesla Battery Day, the goal of completely transitioning the world before — let us say, 2040 — is no longer out of reach, but Tesla cannot do it on its own and sadly is planning to do less than I expected. There are two possible ways that Tesla with its 3 TWh, 20 million vehicle goal for 2030 can still help make the transition happen in other ways. The first one, and this is something I have been wondering about for quite a while: Even though Tesla might be too cell deprived to sell any batteries to competitors, it could still sell the underlying battery terafactory technology to its battery partners. Tesla could also sell the Terafactory technology directly to automotive competitors. In a best case scenario, Tesla could start making battery manufacturing equipment in bulk like it plans to make starships in bulk. In a worst case, it could simply sell the information of how it creates all of these fantastic batteries and let them figure out the blueprints for themselves.

Here is another factor: governments have pledged to help the world transition to sustainable energy and sustainable transportation, but thus far very little of that has ended up in Tesla’s pockets, especially when compared to the compensation the oil & gas industry get. Sure, governments can give citizens subsidies or tax cuts for electric vehicles. However, if the issue is not consumer demand for sexy electric vehicles, but rather how quickly automakers can scale the production and supply of EVs, other solutions might be called for. A government motivated to help EV and battery manufacturers could help out even if it just means getting out of the way by cutting red tape. The question here is, what exactly is the limiting factor for Tesla? Is it the number of good people Tesla has that need to be present at a construction site? Is the problem the amount of capital it can raise, earn, and receive? (This isn’t it.) Is it how much nickel, iron, and lithium can be mined? So, really, this may be the biggest question of all — why only 3 TWh Tesla? Why only 20 million vehicles?

I have some hope that Tesla, just like with the Model Y, may be underselling and may then over deliver. If in the decade after 2030 Tesla scaled twice as fast and the rest of the world also plays its part, then by 2050 the world will have transitioned to cleantech in the transportation sector. This, however, is not the future I was hoping for. While negativity is warranted for climate change, and there are a lot of questions that still need to be answered, for long-term investors in Tesla, the future is more promising than ever!