Tesla Motors has to remain on a course of rapidly growing sales, service and production capacity. Why? In a recent interview with Bloomberg News, Elon Musk confidently predicted that by 2025 the total Tesla Motors sales volume will be a “few million cars per year”. As cool as their factory in Fremont is, that factory only has a 500,000 car per year capacity, and when Toyota & GM ran that building the maximum production in any year of NUMMI’s operation was around 450,000.
During that interview Musk said a few other things indicating the need for continued rapid growth.
The big primary goal for Tesla Motors is to lead the transformation of the automotive industry to electric vehicles, so that we all can collectively avert climate change catastrophes.
As Elon Musk put it, if Tesla Motors plateaus at 0.1% of the total car market, the company will have failed at that goal.
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For example, he claimed that Tesla Motors could be profitable today. All it would take is to ramp down research & development & production capacity increases. Sales of the Model S are strong enough that Tesla Motors could have a sustainable business for many years into the future selling that car, and perhaps other luxury cars.
But to confine Tesla to the luxury market would limit its total impact on the overall car market. We collectively need the car industry to transform itself to selling electric cars.
Instead the goal is “a few million” cars per year by 2025.
Given that the former NUMMI plant has a 500,000 car per year capacity – how many factories are required, by 2025, to sell “a few million” cars per year? Maybe car 10 factories total by 2025? (“a few million” might mean 4-5 million)
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The gigafactory Tesla is building for battery production – the company’s projection is 50 gigaWatt-hours of production capacity by 2020, which will be enough for 500,000 cars per year, according to Tesla’s projections. Additionally, Tesla plans to direct some of the gigafactory production into grid energy storage products that would be sold perhaps in a joint venture with Solar City.
Therefore – to match the 10 or so car factories in full production, by 2025, Tesla will also require 10 or so full battery gigafactories? By 2025.
Meeting that sales and service rate will require a transformation of Tesla’s business model. Musk discussed the possibility of opening sales to some kind of franchised model, perhaps starting with the Model 3. An announcement is due in a month or so concerning a new service model. But, what service model scale to where it’s giving an awesome experience to millions of Tesla car owners?
With sales in the millions per year, will the current “stores in malls” sales model scale to delivering an awesome sales experience?
I’m just asking questions, but the implications are a continued rapid growth in Tesla’s size as well as a major transformation in its business model.
These questions seemed significant enough to warrant their own posting. To read a write-up on the interview, click on the link above.
Let’s discuss below what we think will happen to Tesla Motors to meet these projections.
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