Tesla's Master Plan
In 2006, Tesla CEO Elon Musk posted Tesla's secret master plan online for the world to see.
"So, in short, the master plan is:
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"
2008: Tesla delivered the first Tesla Roadster. Check.
2012: Tesla delivered the first Model S. Check.
2016: Tesla acquired Solar City. Check.
2017: Tesla delivered the first Model 3. Check.
On July 28, 2017—three years ago today—Tesla's decade-long master plan came to fruition when Tesla handed over the first BlueStar, now known as Model 3, vehicles to customers. The goal for BlueStar was clear from the start: drive volume.
"With BlueStar, we're looking at cost and lowering the overall expense to the user. If it's not cost-competitive (with oil), you are going to have a hard time scaling to a high level." - Tesla co-founder JB Straubel to CNET, 2008
While scaling to a high level has not been without challenges, the Model 3 has cemented its revolutionary status by quickly becoming the best-selling electric vehicle in history despite 5-10 year head starts from runners-up.
But it's not just other EVs that the Model 3 has overthrown. In the United States, the Model 3 has outsold competing premium internal combustion engine sedans: the Mercedes C-Class, BMW 3 Series, Audi A4 and S4, Lexus IS, and Jaguar XE. Combined.
As the Model 3 has swallowed up market share, other brands have struggled to find their footing. With today's announcement of Jaguar Land Rover's new CEO, all five of the automakers mentioned above have replaced their CEO since the Model 3's arrival in mid-2017.
Meanwhile, Elon Musk has guided Tesla to roughly 600,000 Model 3 deliveries and will likely surpass 1,000,000 Model 3 deliveries sometime next year.
Redefining a Segment
At the first Model 3 delivery event, Musk described the new vehicle by saying, "you will not be able to find a better car, gasoline or electric, in that price range that is anywhere near as great."
Based on market share, a large portion of the market agrees. But the Model 3 has pulled new customers into the premium sedan market as well. In 2018, Tesla reported the most common trade-ins they received for the Model 3: the Honda Accord, Honda Civic, Toyota Prius, Nissan Leaf, and BMW 3 Series.
Owners have not been disappointed. In 2019, the Model 3 ranked as the car with the highest owner satisfaction in the world, according to Consumer Reports. An exhaustive 2019 Bloomberg study of more than 5,000 Model 3 owners found that 99% of owners would recommend the Model 3 to a friend.
One Bloomberg respondent captured the revolutionary nature of the Model 3 by simply stating, "It has forever changed my expectations for what a car should be." Other respondents agreed, with 93% saying they would never buy another gasoline-powered vehicle. Critical accolades have not been a problem for the Model 3, either. Most recently, the Model 3 was crowned as the 2020 UK Car of the Year.
Safety has always been a priority for Tesla, and the Model 3 has delivered. In NHTSA testing, the Model 3 achieved a Vehicle Safety Score (NHTSA's measure of relative injury risk) of 0.38, a better score than any other vehicle rated in NHTSA’s public documents has achieved. The IIHS has awarded the Model 3 with its highest Top Safety Pick+ designation.
Internationally, the Euro NCAP highlighted how Tesla's software has improved safety, giving the Model 3 a score of 94% on safety assistance features, the highest rating since the release of the Model 3. Over the last four quarters, Tesla vehicles equipped with active safety features have been involved in roughly 30% fewer accidents than those without active safety features.
A Company Thriving
Benefits of the Model 3 program have not been limited to vehicles owners. Owners of the company, TSLA shareholders, have been handsomely rewarded. Tesla has seen its stock price increase by 341% since the first Model 3 deliveries, significantly outpacing the returns of the Nasdaq (+63%) and the S&P 500 index (+30%) that TSLA may soon be a part of.
When deliveries were beginning, Tesla had just entered the Fortune 500 as a top 500 revenue company, but with the Model 3 generating around $15B in revenue for Tesla in 2019, the company has already risen to 124th in the revenue rankings. Last week, Tesla announced their fourth consecutive profitable quarter and first profitable full year.
While the first three years of Model 3 have been a tremendous success, Tesla isn't planning on slowing down. Elon Musk recently reiterated Tesla's ambitions to grow at 50% per year for the next decade, implying targets of more than 4 million annual vehicle deliveries in 2025 and more than 20 million deliveries in 2030. The growth targets are ambitious, but Tesla is currently building out capacity at three new factories in Europe, China, and North America to help get there.
With the emphatic completion of the first master plan, Tesla has now shifted their focus to completing Master Plan, Part Deux, and despite the success of the last decade, CEO Elon Musk last week commented, "I’ve never been more optimistic, more excited, about the future of Tesla in the history of the company."
Disclosure: Rob Maurer is long TSLA stock and derivatives.