In sometimes apocalyptic tones, Tesla Motors CEO Elon Musk has finally revealed the broad corporate strategy he has been promising for several weeks — but rather than focusing on just producing battery-powered cars, it shows Tesla’s real vision takes it into a range of additional business ventures.
According to Tesla’s “Master Plan, Part Deux,” the California-based company will add a “new kind of pickup truck,” as well as a compact battery-SUV, an electric semi-truck and commercial battery bus. But the strategy also calls for a push into car-sharing, as well as broader sustainability projects tied to the planned acquisition of solar panel maker SolarCity.
While filled with broad-stroke ideas, skeptics caution that the Master Plan doesn’t say much about how to make them a reality. "The plan is like before — or like much of what Tesla does — long on exciting visions of the future and short on financial details," Brian Johnson, the automotive analyst for Barclay’s Capital, wrote in a note to clients.
Tesla is by no means the only automaker pushing into battery power. Even mainstream manufacturers like General Motors, Toyota, Volkswagen and Daimler AG have extensive plans in place to add hybrids, plug-ins and pure battery-electric vehicles to their line-ups. Daimler’s Mercedes-Benz, for example, plans 10 PHEVs by the end of next year.
What has long motivated a legion of Tesla fans — and driven the company’s stock to the sort of level generally reserved for Silicon Valley tech firms — is Musk’s vision and personal drive. He is also an effective user of social media, routinely tweeting on a variety of topics. And he released his latest strategy, appropriately enough, on Tesla’s blog site.
Musk is nothing, if not a visionary, and the Master Plan, Part Deux will clearly speak to the legion of followers who look to him to help change the world, with a focus on sustainability.
“By definition, we must at some point achieve a sustainable energy economy or we will run out of fossil fuels to burn and civilization will collapse,” he wrote. “Given that we must get off fossil fuels anyway and that virtually all scientists agree that dramatically increasing atmospheric and oceanic carbon levels is insane, the faster we achieve sustainability, the better.”
Of course, sustainability comes in many forms, and the challenge Tesla faces is, perhaps first and foremost, sustaining its own business. The carmaker is barely operating in the black — and, even then, only by using its own accounting procedures. Despite a stock price that has been running in excess of $200 a share in recent months, Tesla has been so short of cash it needed a nearly $2 billion May public offering to help fund the final development of its Model 3 sedan.
That’s Tesla’s first entry into the mainstream auto market, and initial signs are positive, with about 400,000 advanced reservations for the vehicle, which is set to debut at around $35,000. Tesla’s goal is to launch late next year and, by 2018, be selling 500,000 vehicles annually — or nearly 10 times its 2015 volume.
Despite the initial reception for the Model 3 it could be argued that the carmaker missed the mark, focusing on a new sedan at a time when Americans by the millions are abandoning passenger cars for light trucks. So, the addition of a compact SUV in the new Master Plan appears aimed at rectifying that problem. And it will be joined by a “new kind of pickup truck,” a move that will take it into one of America’s largest product segments.
But Musk’s vision is that cars alone won’t save the world. Tesla may have been launched as an electric car company but it has been broadening its reach, notably with the addition of the Powerwall battery backup system launched last year.
Now, Musk wants to see the company become even more of a one-stop shop for all your green energy needs. That includes the ability to buy an all-in-one solar roof that would take advantage of Tesla’s proposed acquisition of SolarCity.
That move has generated plenty of controversy, in part due to the questionable synergies of the two companies, but also due to a seeming conflict of interest. A close Musk relative runs SolarCity and the Tesla CEO himself serves as the solar panel company’s chairman.
A fair section of Musk’s Master Plan takes a defensive tone. There is a strong defense laid out for the Solar City deal, for one thing. Pointing to the breadth of the Master Plan, Musk wrote that, “We can't do this well if Tesla and SolarCity are different companies, which is why we need to combine and break down the barriers inherent to being separate companies.”
The blog post also downplays the intense criticism that has arisen in recent weeks, ever since Tesla belatedly revealed the fatal crash of a Model S running in semi-autonomous Autopilot mode in Florida on May 9. In fact, the brouhaha, and news of two more crashes and several federal probes — one by the National Highway Traffic Safety Administration, the other by the National Transportation Safety Board — may explain why the release of the new Master Plan comes a week later than Musk originally said.
"When used correctly, (Autopilot) is already significantly safer than a person driving by themselves," he wrote in the new blog post.
If anything, Musk made it clear he is committed to fully autonomous driving, though he suggested it will need at least five more years of testing. But eventually, he made clear, Tesla plans to make all of its vehicles, commercial and retail, self-driving.
The company even appears ready to get into the ride-sharing game – in part by taking advantage of autonomous technology. Tesla appears to be interested in taking on giants like Uber and Lyft, and will tap its owners to help field a large fleet of vehicles.
“You will also be able to add your car to the Tesla shared fleet just by tapping a button on the Tesla phone app and have it generate income for you while you're at work or on vacation,” he explained.
As broad as the Master Plan appears to be, the initial response is running from wildly upbeat to skeptical.
“The document is relatively short on details,” cautioned Deutsche Bank analyst Rod Lache, and though it discusses new products and ventures, he added, it does not lay out specific financial targets.
That concern seems reflected in Tesla’s stock price, which is sharply down since the Master Plan was announced, dropping 3.3 percent by Thursday afternoon.
Broad visions can be useful for a company entering uncharted territory. But Tesla is no longer a start-up. And there are growing demands for it to deliver. It needs to show that what it has already bitten off will work, many observers believe, before it moves on to the next grand plan.