Tesla has done one thing really well for more than a decade — brought the excitement. There’s almost never been a dull moment covering Tesla. There was a period of time after the company exploded in terms of production, sales, and revenue when I drafted stories like “Tesla is Boring Now” — because it was basically just smoothly, efficiently, profitably fulfilling its mission and selling tons of Tesla Model 3 and Model Y vehicles. And perhaps that’s what’s happened with Elon Musk — Tesla’s core business got too boring for him and he went looking elsewhere for tiger b**** to flick (this is a reference to a New Year’s meme he tweeted, among other things).
However, just as Tesla was starting to get boring, it got exciting again. Yes, there was a pretty stable ramp-up period in which Tesla could do no wrong and the fireworks seemed like they’d go forever. But peace and tranquility can only last for so long in this world. Maybe we’re still in a long-term ramp-up and Tesla’s sales and revenue will only grow for the next several years. Or maybe not. And that uncertainty is one of the things that’s so interesting or exciting right now. I’m going to also tackle “full self driving” in a moment, but I first want to lay out two scenarios separate from that.
Two Tesla Scenarios for the 2020s
Tesla’s explosive growth
One scenario is basically what Elon Musk and most Tesla bulls assume. It entails constantly growing demand for the Tesla Model 3, Tesla Model Y, Tesla Cybertruck, and Tesla Model C (or whatever the next-gen, lower-cost Tesla will be called). This scenario sees word of mouth and maybe even — gasp — traditional advertising leading to record-shattering sales of Tesla’s top models. The Tesla Model Y is on track to be the top selling vehicle model in the world in 2023, but this scenario sees that as a starting point to greater and greater sales. In this potential future, Tesla builds one or two or even three gigafactories a year for the next several years to keep meeting growing demand for its vehicles and to keep driving down costs (Moore’s Law and all that). Perhaps Tesla reaches its astronomical goal of 20 million vehicle sales a year. Perhaps it only meets half that target, 10 million, but still becomes the best selling automaker in the world. Either way, Tesla wins.
This is definitely a possible scenario. For anyone who’s laughing or thinks it isn’t, I’d like to know what you thought was possible for Tesla back when we were all in 2012 or 2013, or even 2015 or 2016. Did you see Tesla getting to where it is today? I know you didn’t, so don’t get started. If you deny this possible Tesla scenario and you previously denied the possibility of Tesla selling millions of vehicles a year, or even millions of vehicles in total, then you need to consider if you’ve truly got the right approach to analyzing Tesla.
However, that doesn’t mean that sales go up forever, that the stock goes up forever. If you were right about Tesla getting to where it is today, that doesn’t guarantee you’ll also be right about Tesla getting to 10–20 million vehicle sales a year by 2030. Indeed, big success has a way of clouding our vision and making us miss the fact that what goes up must come down — sooner or later. The bet with the above scenario, at the least, is that Tesla will come down much later on, not in this decade. But we have to leave the door open to the possibility that it’s going to happen sooner than 2030.
What if Tesla stumbles?
The Tesla Model Y is quite an expensive model to be the top selling vehicle in the world. Total cost of ownership may help it to compete in the long term with cheaper models, but you still have to have the funds to buy the vehicle or make the monthly payments. Furthermore, in some places, rather than being the hot new things on the block, the Model Y and Model 3 are becoming so commonplace that they are losing some of their appeal. When there are 5 of them at a small intersection (something I saw today), some buyers are going to start seeing them as boring (there’s that word again) and may get much more intrigued by the Hyundai IONIQ 5 or Rivian that pulls up next to them. Just anecdotally, I feel like that’s already happening in my area. People used to be so excited to see a Tesla just a few years ago. Now they don’t care and don’t even seem to notice. Other EVs are popping up more and more with new-buyer plates, and people’s heads are turning.
Does it matter that early adopters have moved on to other products if the mass market is now getting into Tesla? Maybe not. But maybe it does. Perhaps all of the other competitive EV choices on the market will deflate the Tesla hype balloon a bit. We’ve already seen some Tesla price cuts to try to stimulate more demand. What if that’s just the beginning of a long challenge? What if Tesla is peaking in 2023, or will peak in 2024, and then will crash and burn as lack of demand growth leads to floundering, cash-burning gigafactories that were built in haste? What if 10–20 million Teslas a year is a big pile of false expectations?
What if Tesla struggles to get the Cybertruck through production hell? What if the Model C takes much longer to develop than expected? What if core EV supply chains get totally crunched and costs rise instead of falling? What if opening up the Supercharger network leads to many more people choosing a non-Tesla (that can Supercharge) over a Tesla? These are possibilities to consider.
Then there’s also the risk of brand reputation crashing (ahem). This has been occurring for many as Elon Musk has unabashedly tilted at conspiracy theory after conspiracy theory, and gotten deep into the mud of far-right-wing politics. (He thinks a moderate is someone who has been chasing Disney, the largest employer in Florida, out of the state and who has been banning books from Florida schools.) For someone who for years touted the idea of “1st principles reasoning,” he has fallen for oodles of misinformation due to false assumptions and he has not been getting down to 1st principles or basic facts. What if the results of that are not so evident today but become evident in the next few years as Tesla owners jump ship and try something new, or as new EV buyers choose a Ford Mustang Mach-E, Volkswagen ID.4, Nissan Ariya, BYD Atto 3, BMW iX, Kia EV6, Mercedes EQE, Rivian, Hyundai IONIQ 5, or some other EV instead of a Tesla?
And Then There’s the Robotaxi Stuff …
When I bought my Tesla Model 3 in mid-2019, “Full Self Driving” was going to be feature complete by the end of the year. Musk was certain of it. Surprisingly, he didn’t say right off the bat that the entire software stack Full Self Driving (FSD) was based on was going through a rewrite. Eventually, I guess we can say it became “feature complete,” but it’s got glaring problems that seemingly have not improved for a few years now. Musk continues to think, or say, that Tesla vehicles with FSD should be robotaxi capable by the beginning of next year, but “next year” is of course a myth that never comes — next year is always next year.
Musk is convinced that Tesla vehicles will explode in valuation and demand in the not-too-distant future when true robotaxi capability is achieved. If that happens, forget about the Atto 3 or ID.4, demand for Tesla vehicles will be through the roof, Tesla won’t be able to build gigafactories fast enough, and even many Tesla bulls will be positively surprised. However, if Tesla can’t get to a basic robotaxi level by 2030, I think a lot of interest and hype in Tesla will have been thoroughly deflated. Growing demand and exploding revenue by dependence on hyper-efficient manufacturing, unbeatable value for money, and increasing interest in Tesla vehicles that won’t be all that different from the Tesla vehicles of today will be a hard task — perhaps an impossible target.
If Tesla FSD and robotaxis matter a great deal, and if they continue to fail by 2030, it’s hard to see how Tesla as a whole doesn’t take a big hit. Much is riding on this robotaxi vision. That’s not to say Tesla can’t reach 10+ million vehicle sales a year by 2030, but it sure makes the task much harder.
Tesla: Company of the Decade or About to Crash?
As I put in the title, if Tesla does follow along scenario #1, expect the tech giant to be the obvious company of the decade (again). But if it follows scenario #2, expect a big crash in Tesla’s reputation, in Tesla’s plans for the future, and in Tesla stock.
We don’t know which future Tesla will go down, but let us know in the comments if you feel strongly about either of them — or something else.
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