Elon Musk outlines his 'Master Plan, Part Deux' for Tesla

Thursday July 21, 2016 , 7 min Read

Elon Musk, Chairman, Product Architect and CEO of Tesla, who turned 45 on June 27, has made immense progress with his multiple companies in the last decade. Tesla has launched multiple electric vehicles and is now in the process of manufacturing Model 3, its first mass-market vehicle. Tesla also recently announced its intention to acquire SolarCity, hinting that the company is shifting its stance from being just an electric vehicle company to something broader.

In 2006, Musk had written a post titled 'The Secret Tesla Motors Master Plan (just between you and me)' where he outlined his thought process and long-term intentions for Tesla-

Musk noted on Wednesday that his first master plan was in the final stages of completion, while announcing his 'Master Plan, Part Deux'.

Owing to his amazing achievements, Musk is a revered figure globally, and a recent Buzzfeed report noted that he has risen up from the ranks of 'piddling software slingers (PayPal) to become a metal-bending (Tesla), gravity-defying demigod (SpaceX)'. Musk has become so influential and credible that the general public and many experts believe that his moonshot ideas like settling on Mars is possible in the near future. He is also able to influence markets through his tweets. Responding to rumours that Tesla was working with Samsung SDI for its batteries, Musk posted a clarification on Twitter-

S and X cells are also Panasonic
— Elon Musk (@elonmusk) June 8, 2016

This clarification resulted in an eight-percent plunge in Samsung SDI’s market value, resulting in a $580 million loss while Panasonic's market value rose by about $800 million. However, in 2006, Musk didn't have the same level of street credit, when he outlined his first 'Master Plan' for Tesla.

'Starting a car company is idiotic and an electric car company is idiocy squared.'

In a blog post for his latest Master Plan, Musk notes that the list of successful car company startups is short. As of 2016, only two American car companies have not gone bankrupt - Ford and Tesla.

So the reason Tesla started with an expensive low-volume car was because it was all Musk could afford to do with his earnings from PayPal. Also, without without economies of scale, Musk realised that anything they built would be expensive, whether it was an economy sedan or a sports car. While at least some people would be prepared to pay a high price for a sports car, no one would pay $100,000 for an electric Honda Civic, irrespective of looks. He explains,

I thought our chances of success were so low that I didn't want to risk anyone's funds in the beginning but my own.

So, part of the reason he wrote the first master plan was to defend Tesla against the inevitable attacks it would face, accusing it of caring about making cars only for the rich. Musk notes that, unfortunately, the blog didn't stop countless attack articles on exactly these grounds, so it pretty much completely failed that objective.

However, the main reason was to explain how Tesla's actions fit into a larger picture, so that they would seem less random. Musk believes that at some point we must achieve a sustainable energy economy or we will run out of fossil fuels to burn and civilisation will collapse.

The point of all this was, and remains, accelerating the advent of sustainable energy, so that we can imagine far into the future and life is still good.

Here is an overview of Master Plan, Part Deux

1.Integrate energy generation and storage

Create a smoothly-integrated, solar-roof-with-battery product that works, and then scale that throughout the world. The goal is to provide one point of contact for the entire value chain from ordering and installation to after-sales services. Musk notes,

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. Now that Tesla is ready to scale Powerwall and SolarCity is ready to provide highly differentiated solar, the time has come to bring them together.

2. Cover major forms of terrestrial transport

Currently, Tesla addresses two small segments of premium sedans and SUVs. With the Model 3 in the pipeline, Tesla plans to address most of the consumer market. Musk believes that a lower cost vehicle than the Model 3 is unlikely to be necessary, because what really matters to accelerate a sustainable future is being able to scale up production volume as quickly as possible.

That is why Tesla engineering has transitioned to focus heavily on designing the machine that makes the machine -- turning the factory itself into a product.

While Tesla's focus has been on consumer vehicles, it is now expanding to include heavy-duty trucks and high passenger-density urban transport. Both are in the early stages of development and are estimated to be ready for unveiling next year. Musk believes that the 'Tesla Semi' will deliver a substantial reduction in the cost of cargo transport, while increasing safety.

3. Autonomy

As technology matures, Musk envisions that all Tesla vehicles will have the hardware necessary to be fully self-driving with fail-operational capability (any given system in the car could break and your car will still drive itself safely). He also believes that even once the software is highly refined and far better than the average human driver, there will still be a significant time gap, varying widely by jurisdiction, before true self-driving is approved by regulators. He expects worldwide regulatory approval will require something on the order of six billion miles. Current fleet learning is happening at just over six million miles per day.

Musk explains why Tesla is deploying partial autonomy now, rather than waiting until some point in the future. He says,

The most important reason is that, when used correctly, it is already significantly safer than a person driving by themselves and it would therefore be morally reprehensible to delay release simply for fear of bad press or some mercantile calculation of legal liability.

Musk cites a recently released 2015 NHTSA report, which notes that automotive fatalities increased by eight percent to one death every 89 million miles. Autopilot miles will soon exceed twice that number and the system gets better every day.

After a recent Tesla autopilot crash that resulted in a death, Tesla has come under scrutiny for multiple reasons, including why it refers to its autopilot feature as "beta". Musk clarifies,

This is not beta software in any normal sense of the word. Every release goes through extensive internal validation before it reaches any customers. It is called beta in order to decrease complacency and indicate that it will continue to improve (Autopilot is always off by default). Once we get to the point where Autopilot is approximately 10 times safer than the US vehicle average, the beta label will be removed.

4. Sharing

Musk believes that when true self-driving is approved by regulators, consumers will be able to summon their Tesla from almost anywhere. He said, "Once it picks you up, you will be able to sleep, read or do anything else en route to your destination."

Consumers will also be able to add their vehicle to the 'Tesla shared fleet' by tapping a button on their Tesla phone app and have it generate income for the owner while one is at work or on vacation, significantly offsetting and at times potentially exceeding the monthly loan or lease cost.

Musk believes that this will lower the true cost of ownership to the point where almost anyone could own a self-driving car. Since most cars are only in use by their owner for 5-10 percent of the day, the fundamental economic utility of a true self-driving car is likely to be several times that of a car which is not.

In cities where demand exceeds the supply of customer-owned cars, Tesla will operate its own fleet, to let people hail a ride no matter where they are.