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Elon Musk is on the verge of making a huge change for Tesla's owners

July 24,2016 04:19

Tesla CEO Elon Musk has produced the company's "Master Plan, Part Deux," a sprawling update to part one 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 ...and more »

Motors CEO Elon Musk.

Tesla CEO Elon Musk has produced the company's "Master Plan, Part
Deux," a sprawling update to part one 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 them 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

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

"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," Musk went on. "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 used is a substantial economic liability for
car owners. 

Tesla owners shouldn't be so burdened.

Tesla Autopilot in

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 carmaker acquired
this year for about $600 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 $35,000.

Tesla Model 3.
AP Photo/Justin

It's hard to imagine the owner of a $100,000-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 realization 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 its objective of producing and delivering
500,000 vehicles annually.

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