By Amy, Tesla Investor | Follow her on Twitter: @SF___Tahoe
“Long term, I’m convinced that Tesla will be the most valuable company on Earth.”
—Elon Musk
How does a company become the most valuable company on Earth? It’s a lofty goal! Many of the answers will be found when Elon Musk releases his Master Plan Three at Tesla’s next event. Investor Day was announced at the beginning of January with Q4’22 delivery numbers. It will be held at GigaFactory Texas on March 1, 2023. All signs indicate that it will be a smaller event (more like the Semi Reveal at GigaNevada than the Cyber-Rodeo). Investor Day keynote speeches will be live-streamed, and there will be a Q&A afterward. Some institutional investors, and randomly chosen retail investors, will attend in person. Expect to hear updates on growth plans in all areas of Tesla’s business.
Investor Day Topics
Master Plan 3 Reveal
Capital Allocation
Gen 3 Platform
Most Advanced Production Line Tour & Tesla Plaid Rides (attendees only)
Discussions with Management about above topics and others (attendees only)
Tesla Press Release
Elon Musk’s goal is to extend the light of human consciousness, both by making life better on Earth and making all life (not just humans) multi-planetary. All Musk companies have a role to play in these goals.
Elon Musk recently tweeted that the term “Investor” is used in the context of all people and life on Earth, so Master Plan 3, which will be revealed at Investor Day, will be the most ambitious yet.
What do we know about Master Plan 3? It is the third Master Plan for Tesla. Chart of first two:
For starters, Master Plan 3 is the path to a fully sustainable energy future for Earth. This is an enormous goal that will require extreme scale and moving tonnage of materials and products. Perhaps some of these logistics will be addressed.
SUSTAINABLE ENERGY FUTURE
Elon has talked about pathways to a sustainable energy future many times in the past.
Elon has said a sustainable energy future could be achieved using the existing grid structure and a mix of solar and batteries. It will be interesting to see if these thoughts have evolved.
Elon has addressed what Master Plan 3 would be about before. But in thinking about Master Plan 3, we need to think Elon Musk big—civilizational-level big!—on what Master Plan 3 entails. Elon Musk has said that, while the path will be difficult, he can foresee Tesla becoming the biggest company in the world—bigger than Aramco and Apple combined.
Saying Master Plan (mé-nage à) Trois would be about “tonnage.” Ménage a Trois is classic Meme-Lord humor: But could the mix of “three” also be a reference to an element of the Master Plan? A mix of Elon Musk companies? Three main elements to the plan? Comment with your thoughts.
“Solar/wind + batteries + electric cars is obviously the future.”
—Elon Musk
Massive scale-up of supply needs to happen.
Tonnage is also a reference to the limiting factor of battery components and minerals. Tesla has put out a call to mining companies and entrepreneurs to start refining companies (calling lithium refining a license to print money)! Important to remember: Battery components aren’t like oil that can only be burned once. They don’t degrade and are almost 100% recyclable. So the tonnage plan needs to be a one-time plan—once enough battery components are mined, they can be recycled. Battery components are already being recycled. Tesla’s goal is to use 100% of all supplies that come in through the factory door. For example, scrap metal from the stamping department is thrown into the Gigacasting machine melting pot. Tesla typically first tells their existing suppliers what their future needs are; if the suppliers can’t fully accommodate the planned growth, then Tesla will continue to take all that their suppliers can provide but also vertically integrate to fill in the gap, like with the planned lithium refinery.
Tesla Solar
Auto has long been Tesla’s focus due to supply constraints. Energy is starting to make waves, but what about solar? Tesla’s entry into the solar business started with the Solar City acquisition, then one of the largest solar installers in the US. Solar produces a respectable 348 MWh, per year, but both solar and energy have been hampered in the past by supply constraints.
“The sun is absurdly, overwhelmingly the source of energy in our solar system. It doesn’t even need maintenance, it just works.”
—Elon Musk
The sun provides energy every day, but humans harness little of this energy. Elon has indicated that ideally, energy would be a distributed system with solar and battery packs at houses, but permitting and installation are a hold-up.
A distributed solar/battery system could be combined with some large solar/wind farms and the existing transmission lines. This would hasten the advent of a sustainable energy future. Elon has addressed how little space is actually required to power the US (100 x 100 sq. miles) and the Earth many times in the past. He has suggested a single massive solar array in Spain could power all of Europe.
“Wind and solar, combined with batteries, will solve sustainable energy for Earth.”
—Elon Musk
TESLA ENERGY
“Tesla Megapack (and Powerwall) will make a massive difference to achieving a sustainable energy future for Earth!”
—Elon Musk
Tesla currently has three levels of energy products—Powerwall for individual households, PowerPacks, behind-the-meter installations for large businesses, and MegaPacks, utility level BESS—battery electric storage system.
Zach Kirkhorn on Tesla Energy: “The Energy business had its strongest year yet across all metrics, led by steady improvement in both retail and commercial storage. As we look towards 2023, we are moving forward aggressively leveraging our strength and cost. There are three key points I wanted to make here. First, on demand, as Elon mentioned, customer interest in our products remains high. Second, on cost reduction, we're holding steady on our plans to rapidly increase volume, while improving overhead efficiency, which is the most effective method to retain strength in our operating margins. In particular, we're accelerating improvements in our new factories in Austin, Berlin and in-house cells, where efficiencies are the highest.”
Elon has stated many times that the future of a sustainable energy civilization is solar combined with battery storage, making Tesla Energy a key part of Master Plan 3.
Expect to hear some major updates on Tesla’s future plans for solar and energy on the path to a sustainable future. Energy has hit the high growth stage. At the most recent earnings call, it was noted that Energy is growing faster than Auto. Zach Kirkhorn said Tesla’s 40GWh Lathrop Factory that produces MegaPack is ramping. GigaNevada expansion has been announced. Energy is poised for major developments. Elon has agreed there is near-infinite global demand for energy storage. Tesla is on a path to 1,000 GWh (or 1 Terrawatt) a year of production. Elon has promised updates on new MegaPack factories and plans this year and next.
TESLA AUTO
In transitioning the world to a sustainable future, don’t forget electric vehicles! Transitioning the existing global auto fleet—new and used cars estimated at 2 billion!—to EVs will reduce global emissions by 25%. Extreme scale will be necessary for the auto business, too, broadening out both the EVs on the road and with Robotaxi working around the clock.
Robotaxi/Gen 3 Platform
A Robotaxi can be used 24/7, dramatically increasing the positive emissions reduction from each electric car produced.
Robotaxis obviously will require FSD to be solved. On the value of FSD on the Q4’22 Earnings Call, Elon said:
“Every time we sell a car, it has the ability, just from uploading software to have full self-driving enabled …there’s millions of cars where full self-driving can be sold at essentially 100% gross margin. And the value of it grows as the autonomous capability grows. And then when it becomes fully autonomous, that is a value increase in the fleet. That might be the biggest asset value increase of anything in history.”
Elon Musk Q422 Earnings Call
There are other companies that are working on FSD—Waymo, Cruise, and Baidu.
Elon on the competitors in the FSD space:
“Right now, I don’t think you could see a second place [FSD general solution] with a telescope, at least we can’t.”
GEN 3 PLATFORM
“It’s always been our goal at Tesla to make cars that are affordable to as many people as possible.”
Elon Musk, Q4’22 Earnings Call
The Investor Day agenda includes the Gen 3 Platform. What do we know about the Gen 3 Platform? The goal is a step change improvement of BOM costs and to be able to sell a car profitably at a $20-25K price. Elon has indicated the goal is to make two cars in the time and effort it takes to make one Model 3.
“The next-generation vehicle will be about half the cost of the 3/Y platform and it will be smaller…It will, I think, certainly exceed the production of all other vehicles combined.”
—Elon Musk
It will not be just one vehicle but a platform from which multiple vehicles can be produced. The Investor Day invite background was decoded. Is this the Gen 3?
This goal represents a two-fold increase in the pace of production with a 50% decrease in cost! Growing auto CAGR ~50% YoY on a multi-year horizon will require extreme efficiency and reducing costs. To sell 20 million cars a year, Tesla will have to appeal to a much broader addressable market.
PRODUCTION LINE TOUR
In furtherance of the Tesla Mission of increasing EV adoption, Tesla is always focused on gaining efficiencies and lowering costs. Tesla Investor Day will include a tour of a production line (no photos allowed). Management has talked about this drive for production efficiency on many occasions. For example:
Elon Musk, Zach Kirkhorn, and Drew Baglino have spoken about Tesla’s drive to lower costs. Elon has long said Tesla’s advantage was the Machine that builds the Machine, or the alien dreadnaught.
“On the powertrain side, we’re…going..after…some materials where we’re paying for more performance than we need…without impacting reliability at all. Adds up to a pretty significant cost reduction on the powertrain side over the course of 2023. So we’re not just sort of relying on supply. We’re also doing design actions to bring cost out.”
Drew Baglino, Tesla SVP Q4’22 Earnings Call
One part of Tesla’s continuous focus on cost reductions is the rumored Project Highland for the Model 3, possibly Y. Project Highland is rumored to feature many improvements with cost efficiency gained through design and production improvements. It is possible the production line tour will showcase some of these innovations. Great videos here on what is known or forecast:
We know Tesla is attacking costs (COGs) on all possible levels: through a supply chain redesign, extreme focus on production efficiencies (by car design, removing unnecessary parts, castings), reducing battery costs (through battery chemistry and production innovations), and using as close to 100% of the supplies that come in the door.
CAPITAL ALLOCATION
Capital allocation is a topic of Investor Day. Master Plan 3 will require capital expenditure. Locking down raw materials, supplier contracts, logistics, and new factories all may be discussed. Elon has indicated that share buybacks would be considered. Perhaps investors would like some clarity on how Tesla intends to spend the increasing cash balance of the company? We know that some new factory announcements can be expected in the next few years, along with new products.
“In severe recessions, cash is king... I feel we’re in a very strong position to get through a recession, because we really don’t have any debt. And we’ve got over $20 billion of cash, which is great.”
Elon Musk Q4’22 Earnings Call
TESLA OTHER BUSINESSES
There will be a lot to talk about on Investor Day. Perhaps we also hear updates on Optimus, AI-as-a-service/Dojo, and Tesla Insurance. Does Tesla have other products/business areas in the pipeline we don’t know about yet? The future is bright!
We’ve [Tesla] has more great ideas…then we know what to do with. So the future is very exciting.
The three pillars of a sustainable energy future are obviously electric vehicles, solar and wind, and the third key item is stationary storage to store the energy from solar and wind because obviously, the sun doesn't shine all the time and the wind doesn't blow all the time. So you have those three things, you can convert all of it to a fully sustainable situation many times over, actually. So I would like to just make it clear that there is a path to a fully sustainable future for humanity, and we -- our goal at Tesla is to accelerate progress on that path as much as humanly possible.’
Elon Musk Q4’22 Earnings Call
Tesla has many possible pipeline products. One possibility: Elon has tweeted for years about his desire to do a home HVAC system. This would replace the need for fossil fuels that are used in many places. An electric heat pump can be used for both AC and heat. Combined with solar, Powerwalls, and an EV would create a complete Tesla home solution. Elon just tweeted about an ideal air conditioner system again.
“We have other products in development. We're not going to announce them, obviously, but they're very exciting. And I think it will blow people's minds when they -- when we reveal them. Tesla has the most exciting product road map of any company on earth by a long shot.”
—Elon Musk
While it is unknown what may be discussed at Investor Day, Tesla will continue to innovate, and the future is bright.