- Build sports car
- Use that money to build an affordable car
- Use that money to build an even more affordable car
- While doing above, also provide zero emission electric power generation options
Don't tell anyone.
Tesla have followed their master plan and have been incredibly successful, yet some are critical of the new carmaker as Tesla are losing money. True. Yet there is a big difference between losing money for every car sold and spending more money than you make. Considering the profit margin on the Model S is over 25%, Tesla is actually in the latter category. Making the Model S is profitable. Rapidly expanding into a major car manufacturer while making the Model S is not.
Tesla are executing on their long term master plan and now it is crunch time. The Model 3 is their even more affordable car and Tesla have over half a million reservations from enthusiastic customers. This Model 3 is the defining car for Tesla and the next 18 months are make or break time. Everything led up to this point and they have invested huge money gearing up to make the Model 3 and if they manage to mass produce the Model 3 (read 5,000/week) at Elon's projected 25% gross profit margin then they will achieve massive scale and lower costs for electric cars that other car makers will not be able to match. If they can overcome current production challenges then they successfully executed their whole master plan. Previously the same Fremont factory built 428,633 cars in 2006 before it was purchased by Tesla.
Here is simple projection for gross profit. Model 3 sales assume a $42,000 average selling price, a 25% gross margin, and 47 working weeks in a year:
If they can mass produce the Model 3 at a profit then certainly their market capitilisation can foreseeably rise to above $80 billion, hence they would have larger market capitiisation than Ford, GM, Honda, SAIC, Volkswagen, BMW and Daimler. This implies the financial markets will agree they have won the future of electric vehicles as they are the only company that have had the courage to innovate and invest big to mass produce the first electric car with autonomous driving.
How are Telsa tracking with mass producing the Model 3?
https://docs.google.com/spreadsheets/d/1BWscIZyLsh42IHcj1AJNfEF-vzj-vRo-3skcCXgO_Nc/edit#gid=176863077
https://docs.google.com/spreadsheets/d/1BWscIZyLsh42IHcj1AJNfEF-vzj-vRo-3skcCXgO_Nc/edit#gid=176863077
If they manage to achieve 5,000 vehicles/week during the next 18 months they will have huge advantage over other car makers:
- They have massive scale in electric car production, thereby much lower prices
- The have worked out engineering challenges to mass produce electric cars
- Their plants are ready to mass produce electric cars rather than in 5 years time giving them first mover advantage
- They have massive scale on batteries the most expensive component on electric vehicles
If they can not mass produce the Model 3 within 18 months whilst making a profit the investors may not be so forgiving and Tesla may end up losing and join the long list of defunct carmakers. I am still cheering for Elon and the innovators at Tesla...they have innovative culture and massive investment, the other legacy carmakers just have strategy.
Peter Drucker the "father of modern management" famously said culture will eat strategy for breakfast as company culture has huge momentum and is very difficult to change even though management know they must change, furthermore the larger the company the more difficult it is to change the culture of the whole organisation.
Update: 5/10.2018 -Tesla Model 3 is a clear winner:
- 4th best selling car in USA
- best selling car by US company
- best selling car by revenue
| Car | USA Sales — September | Base Price Today |
| Toyota Camry | 27,640 | $23,495 |
| Honda Accord | 25,357 | $23,570 |
| Honda Civic | 24,806 | $18,940 |
| Tesla Model 3 (est.) | 24,040 | $49,000 |
| Toyota Corolla | 20,797 | $18,600 |
| Hyundai Elantra | 19,923 | $16,950 |
| Nissan Sentra | 16,795 | $16,990 |
| Ford Fusion | 15,878 | $22,215 |
| Nissan Altima | 11,867 | $23,260 |
| Kia Optima | 10,976 | $16,800 |
Best selling EV:
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