Tesla CEO Elon Musk has produced the company’s “Master Plan, Part Deux,” a sprawling update to Part Une of the plan, which Musk authored a decade ago.
Part Deux contained many things, some of them expected — there will be a variety of new Tesla passenger vehicles coming, possibly even a pickup truck — and some of the jaw-dropping, particularly Musk’s declaration that Tesla will soon build semi-trucks and buses.
Somewhat buried in the document was a significant potential pivot in Tesla’s business plan and its relationship with its owners.
Here’s what Musk wrote:
When true self-driving is approved by regulators, it will mean that you will be able to summon your Tesla from pretty much anywhere. Once it picks you up, you will be able to sleep, read or do anything else en route to your destination.
You will also be able to add your car to the Tesla shared fleet just by tapping a button on the Tesla phone app and have it generate income for you while you’re at work or on vacation, significantly offsetting and at times potentially exceeding the monthly loan or lease cost. This dramatically lowers the true cost of ownership to the point where almost anyone could own a Tesla. Since most cars are only in use by their owner for 5% to 10% 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, ensuring you can always hail a ride from us no matter where you are.
Mr. Musk, he is a-changin’
This is a major change. In 2014, on a quarterly earnings call with analysts, Musk didn’t sound very optimistic about car-sharing.
I think there will be some amount of car sharing for sure, but I think there’s like a limit to the whole sharing thing,” he said.
“There is an important role for sharing but it’s not — most things don’t get shared. People could easily share their house or their clothes or their bicycle or something like that and they do a little bit with like Airbnb or something like that, but mostly not.”
That was then. Now, Musk seems to have accepted the position, often articulated by advanced-mobility experts and car-sharing evangelists, that the very limited degree to which most automobiles are utilised is a substantial economic liability for car owners.
Tesla owners shouldn’t be so burdened.
Self-driving cars make all the difference
Reading the Master Plan, Part Deux, it appears that Tesla’s goal is to bring a sharing option online only when full autonomy arrives, which for Tesla means a much more evolved version of its Autopilot technology.
Other automakers are moving in this direction. Musk is certainly aware that GM CEO Mary Barra, for example, now routinely discusses GM’s investment in car-sharing using the lens of Cruise Automation, the self-driving startup that the car maker acquired this year for about $US600 million in cash and stock. So Musk may be reluctant to see Tesla fall strategically behind the curve here, simply because it’s still a small player, unable to attack new opportunities with the scale of a major automaker.
Presumably, much of the sharing economy that Tesla aims to join will be served by the forthcoming Model 3, a mass-market vehicle that’s expected to sell for around $US35,000.
It’s hard to imagine the owner of a $US100,000-plus Tesla Model S or Model X luxury vehicle wanting to let their all-electric baby out for hire. Most BMW and Mercedes owners don’t want to see their cars turned into taxis when they’re at work. Having to clean a bunch of McDonald’s wrappers or beach sand out of the back seat trumps whatever extra scratch you might pocket. And don’t forget that most Model 3s, inexpensive though they may be, will be financed. Would you want something you owe money on serving as a robot chauffeur for anyone and everyone?
Musk doesn’t often deviate from his own judgments. His usual mojo is to confidently express aspects of his vision — for all his companies, not just Tesla — and then move forward as rapidly as possible, with a risk-welcoming Silicon Valley attitude.
Singing a new tune
That’s why this retreat, modest through it may be, from his earlier position on car sharing is significant. It proves that although he and Tesla have successfully created a car company, they’re also aware that every car company around is being threatened by a collective realisation than traditional car ownership can be seen as a massive waste of money.
In that respect, I’d call his change of heart on car-sharing a hedge against an uncertain future. There are plenty of people in the auto industry who think that car-sharing will always be a modest form of economic activity, based on the limited scale of the sharing model as it now exists, confined largely to college campuses and cities where vehicle ownership is less common. The real action will always be with selling the convenience and freedom of a traditional car to buyers affluent enough to have an asset sitting idle for 90% of the time.
That said, this is an important shift in Musk’s thinking — and one we’ll want to keep close tabs on over the next two years, as Tesla pushes toward it’s objective of producing and delivering 500,000 vehicles annually.
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