Tesla Unveils New Master Plan, Lacks Specifics

Master Plan 3

The prolific CEO of Tesla Motors Inc unveiled the third iteration of his Master Plan during Wednesday's Investor Day 2023 at the firm's Gigafactory in Austin, Texas ^[1]. Mr Musk spoke of a "clear path to a sustainable-energy Earth", as he laid out a vision for an electrified economy and the elimination of fossil fuels.

His plan talks about renewably powering the existing grid, a switch to electric vehicles and heat pumps, which comes along a $10 trillion manufacturing investment. Mr Musk considers it "not a big number, relative to the global economy".

An array of engineers and executives took the stage, with increased efficiency and lower costs being the main theme along with the next generation vehicle platform, as part of Master Plan 3.

Next Gen Platform

Tesla design leader Franz von Holzhausen and vehicle engineering leader Lars Moravy talked about changes in the vehicle manufacturing and assembly procedure for the "next gen" vehicle. The "Unboxed Process" will lead to a 50% reduction in costs and 40% less manufacturing footprint, allowing the company to build factories "faster, with less capex and more output per unit".

Colin Campbell who is leading the powertrain engineering teams, alluded to that, saying that "our next powertrain factory will be 50% smaller" than the one is Austin, "even though it has the same capacity"

No New Cars Announced

CFO Zachary Kirkhorn also took note of the goal "to reduce 50% of cost" with the new generation vehicles, touting a lower total cost of ownership and stressing that product affordability. Elon Musk echoed these comments, saying that "the desire for people to own a Tesla is extremely high, the limiting factor is their ability to pay for a Tesla'.

All of the above suggest that Tesla is moving towards a cheaper, affordable electric car, which was part of Elon Musk's original Master Plan he had laid out all the way back in 2006 ^[2]. However, the company fell sort of such announcement, since it did not provide any specifics around a small affordable vehicle option.

The next vehicle we expect from the EV king, is the long awaited and delayed futuristic Cybertruck and we did not get any new information around its timeline. Earlier in the year, mr Musk had placed start of production to "maybe sometime this summer", but volume production will be achieved in 2024. ^[3]

Further Scaling Up

Last year was all about ramping up production and 1,369,611 units rolled of its factories, marking an impressive 47% increase compared to 2021, roughly in line with Tesla's target. For the current year, the firms intends to continue scaling up, with a goal of manufacturing 1.8-2 million vehicles. ^[4]

During yesterday's event, Tom Zhu who responsible for global production announced that Tesla Motors Inc had "hit the 4 million mark" for total Teslas built.

In pursuit of increasing the firm's output, its CEO announced on Wednesday the building of a new Gigafactory in Mexico, the third outside the United States. Mr Musk clarified that this is not about moving production between plants, but "about expanding total global output". Furthermore, the upcoming Mexico Gigafactory, is expected to produce the next generation vehicle.

Conclusion

Overall it is clear that Mr Musk has a broader vision for moving not only Tesla forward, but for a sustainable future with less fossil fuels. Yesterday's event also showed that the firm moves towards its next generation platform that will be more efficient and less costly.

This likely means that Tesla will at some point produce a low-price model, but did not provide any details around it, disappointing expectations for more specific and exciting news. The new Master Plan probably fell flat amongst investors due to the lack of specifics, as Tesla's stock dropped in after-hours trading.