Tesla has a new master plan. It's not a new car — just big thoughts on planet Earth

Tesla says it will cut the cost of its next generation of vehicles in half, largely by using innovative manufacturing techniques and smaller factories.

CEO Elon Musk and other executives outlined the goals during a 3 1/2-hour investor day presentation at Tesla’s Austin, Texas, headquarters Wednesday as they presented the company’s third master plan.

The changes could bring the cost of a new generation of vehicles to around $25,000. Many investors were hoping to catch a glimpse of the next-generation vehicles, but Musk said they wouldn’t be shown until a proper product unveiling.

“We’d be jumping the gun if we answer your question,” about the new vehicles, he told an analyst.

Shares of Tesla fell nearly 6% in after-hours trading during the presentation that ended just after 8 p.m. Eastern time.

Musk announced that Tesla plans to build a new factory in Mexico near Monterrey. Company executives said it will not take production from any other factories, where Tesla expects to expand production. They said the Mexican plant would build the next generation of vehicles, which also will be built at other factories.

It’s likely that the next generation vehicles will be smaller than the current ones to bring the prices down, but that wasn’t clear from the presentation. Many automakers build smaller vehicles in Mexico to save on labor costs and preserve profit margins.

CFRA Analyst Garrett Nelson attributed the drop in Tesla’s stock to the lack of details on the new vehicles as well as the company’s history of seeing its share price rise ahead of big events, only to fall when the actual news is made.

He said the company’s long-term focus may have disappointed some investors, but he sees Tesla’s vision as justifying its high stock valuation versus other automakers.

“What they outlined really made the case that it deserves to trade at a big premium to the rest of the industry,” he said.

Franz Von Holzhausen, Tesla’s design chief, said the company must make another sharp reduction in costs in order to reach its ambitious electric-vehicle production target of 20 million vehicles per year by 2030. Tesla expects to manufacture 1.8 million this year.

The company, he said, will build the cars in smaller modular units, then bring those units together. The system uses less space. Executives said as a result, its next electric powertrain factory will be half the size of the one Tesla just built in Austin, costing 65% less.

“That also means we can build more factories at the same time,” said Tom Zhu, who leads Tesla manufacturing.

Chief Financial Officer Zachary Kirkhorn said the company cut costs in half between the early Models S and X and the second generation, Models 3 and Y. It’s planning to do that again for the next generation, but also will improve the cars at the same time, he said.

The company also said it would design vehicles so they have fewer wires and transistors, and use fewer expensive rare-Earth metals in the batteries.

“As we improve affordability, the number of customers who have access to our products increases,” Kirkhorn said.

Musk said demand for Tesla vehicles is large, but many who want one now can’t afford them.

Executives said Tesla is unique from other automakers because all the people involved in vehicle design and manufacturing are in the same room. The company also designs and makes many of its parts and software while others rely on tiers of parts supply companies.

The company also said it has opened 10 of its supercharger stations to owners of other electric vehicles as of Wednesday. And it plans to offer a package of unlimited home charging for $30 per month in Texas using wind as the power source.

Kirkhorn said the new master plan includes product advances, rapid volume growth, and technology advancement.

Musk began the session by saying there is a clear path to sustainable energy on Earth, but it will take changing just about everything from fossil fuel power to electricity generated by renewable sources. The Earth can support more people than it does now without destroying natural habitats or huge austerity, he said.

Electric vehicle maker Tesla hosted a 2023 Investor Day presentation in Austin, Texas, on Wednesday. CEO Elon Musk took the stage to share his “Master Plan 3,” and to discuss how Tesla plans to scale up in the face of increasing competition.

The presentation was long on vision and included a review of prior achievements, but short on specifics about any new Tesla products or services.

Near the beginning of the presentation, Musk said, “There is a clear path to a sustainable-energy Earth. It doesn’t require destroying natural habitats. It doesn’t require us to be austere and stop using electricity and be in the cold or anything.” He added, “In fact, you could support a civilization much bigger than Earth, much more than the 8 billion humans could actually be supported sustainably on Earth.”

Musk was initially joined on stage by the Senior Vice President of Powertrain and Energy Engineering at Tesla, Drew Baglino. They discussed a future in which the company would play a role in “re-powering the grid with renewable fuels” as they ramp up battery production, both for Tesla’s electric vehicles and for the company’s utility-scale energy storage systems.

Tesla’s goal is to produce 20 million electric vehicles per year by 2030, executives reiterated. The company reported full-year deliveries of around 1.31 million vehicles in 2022.

During a question and answer session following the 3-hour presentation, executives fielded a question about how Tesla could grow its market share in China.

All eyes on Elon Musk and Tesla for company's investor day
All eyes on Elon Musk and Tesla for company’s investor day

Elon Musk passed the question to Tom Zhu, who is heading up global production and has run the China and APAC businesses for Tesla for years. “As long as you offer a product with value at an affordable price you don’t have to worry about demand,” Zhu said. “We try everything to cut costs,” he added, “and pass down that value to our customers.”

Musk then added, “Demand is a function of affordability not desire.” He said, “Even small changes in the price have a big effect on demand.”

Zhu also announced that as of Wednesday, Tesla had produced 4 million cars in total.

Tom Zhu speaking at Tesla Investor Day.
Tom Zhu speaking at Tesla Investor Day.
Courtesy: Tesla

“It took us 12 years to build the first million, and about 18 months to the second million. The third million, 11 months. Then less than 7 months to build the 4 millionths,” Zhu said touting the company’s improving operational efficiency.

He said that the company plans to build new car and battery cell factories, and also to produce more cars per year at its existing factories.

Tesla charging leader Rebecca Tinucci said that in 2022 the company provided 9 terawatt hours across charging methods, including home charging including 40,000 Superchargers. (By way of comparison, the entire U.S. consumes about 4,000 terawatt hours of electricity per year.) Tinucci also noted that about half of the company’s Superchargers in the EU are open to other vehicles and that the company just opened 10 Superchargers in the US to non-Teslas.

Tesla design leader Franz von Holzhausen and vice president of vehicle engineering Lars Moravy took the stage to show off a number of planned manufacturing changes meant to improve the efficiency of Tesla vehicle production. But von Holzhausen said that Tesla would not yet reveal its “next-gen” vehicle.

The company’s powertrain vice president, Colin Campbell, said that Tesla’s next powertrain factory will be 50% smaller than the one in Austin, Texas, but will have the same capacity. He also said the company is working on a new kind of drive unit that is compatible with any battery cell type and a motor that will be built without any rare earth metals.

Ahead of the 2023 Investor Day, at a press conference on Tuesday, Mexico president Andres Manuel Lopez Obrador said Tesla had agreed to build a large factory in Monterrey, Mexico. He said Tesla agreed to use recycled water and take other initiatives to cope with water scarcity in the region.

Musk confirmed the factory plans on Wednesday, and said production there would supplement, rather than replace, any manufacturing at other Tesla facilities.

Tesla shares have rebounded from declines during 2022, and are up more than 60% for the year so far. However, the stock dropped 1.43% on Wednesday prior to the event, and 5% after hours.

Mizuho Securities analysts maintained a buy rating on shares of Tesla ahead of Investor Day, seeing Tesla in a leadership position in a growing market for fully electric vehicles. They wrote in a note earlier this week, “Near-term, we see continued strength in TSLA’s market share, but see cheaper competitor EVs coming to market as potentially dilutive to TSLA’s share of the US EV market.”

Currently, the lowest-priced Tesla available is the Model 3 sedan, which starts at a price point of around $43,000, they wrote. Seven models from other automakers are currently priced below that, Mizhuo noted.

Musk’s ambitious Master Plan Part Deux was published in 2016 and has not been completely fulfilled. It included four main objectives:

  • “Create stunning solar roofs with seamlessly integrated battery storage”
  • “Expand the electric vehicle product line to address all major segments”
  • “Develop a self-driving capability that is 10X safer than manual via massive fleet learning”
  • “Enable your car to make money for you when you aren’t using it”.

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