The Second Chapter of Tesla's Grand Plan

Elon Musk, July 20, 2016

Ten years ago, I released the first chapter of Tesla's Secret Master Plan, which is now in its final stage of completion. The plan is not complicated and can be summarized as follows:

Step 1: Build a low-volume car, which would inevitably be expensive.

Step 2: Use the profits from Step 1 to develop a medium-volume car at a relatively lower price.

Step 3: Use the profits from Step 2 to create a high-volume, affordable car.

And...

Step 4: Provide solar power. No joke, this plan has been on our website for the past 10 years.

I could only start with Step 1 (building a low-volume, expensive car) because the money I earned from PayPal was only enough to support Step 1! At the time, I believed that our chances of success were very low, and I didn't want to risk anyone else's money — so I had to use my own. There have been very few successful automotive startups in history. As of 2016, there were only two American automotive companies that hadn't gone bankrupt: Ford Motor and Tesla. Starting a car company is a foolish act, and starting an electric car company is even more foolish!

Furthermore, a low-volume car means that the factory needs to be smaller and more streamlined, with most processes done by hand. Before economies of scale are achieved, any car we produce — whether it's an economy model or a sports car — will be expensive. However, at least some people are willing to pay a high price for a sports car, but no one will spend $100,000 on an electric Honda Civic, no matter how cool it looks. One of the reasons I released the first chapter of Tesla's plan was to respond to criticisms that we only make cars for the wealthy. Some people argue that there aren't enough companies producing sports cars, or they come up with other strange reasons. Unfortunately, that blog post didn't completely stop the articles attacking Tesla that were written based on these reasons — my goal was not fully achieved.

However, the main reason for releasing the overall plan is to demonstrate our current strategic position and the planned nature of our company's actions. The purpose of all the planning and actions has always been to accelerate the arrival of sustainable energy, so that we can envision a future and still have a good life. This is the true meaning of "sustainability." It is not a foolish, hippie thing; it concerns every one of us.

Fundamentally, we must achieve sustainable energy economics at some point, or else fossil fuels will run out and human civilization will collapse. In any case, we must break free from our dependence on fossil fuels, and almost all scientists agree that significantly increasing carbon concentrations in the atmosphere and oceans is a crazy and foolish act. Therefore, the faster we achieve sustainability, the better. To expedite the arrival of this day, we plan to do the following:

Integrate Renewable Energy and Storage

Create integrated products of aesthetically pleasing solar panels and batteries, making them personal power devices that can achieve economies of scale worldwide. This only requires one order, one installation, one service point, and one mobile application.

If Tesla and SolarCity were two separate companies, this goal would be difficult to achieve. Therefore, we must eliminate the inherent barriers of being two independent companies through integration. Although both companies have similar origins and pursue the same overall goal of sustainable energy, they are completely independent, largely due to historical accidents. Now, Tesla is ready to expand Tesla Energy (Powerwall), while SolarCity is prepared to offer a rich variety of differentiated solar products. The time has come to integrate the two companies.

Expand Product Line and Cover Major Ground Transportation Forms

Currently, Tesla only enters the relatively small high-end sedan and SUV segments. With the launch of the Model 3, a compact SUV, and a small truck, we will enter more market segments. Based on the third part of this plan, it seems unnecessary to have models that are cheaper than the Model 3.

Expanding production capacity as quickly as possible is the key to achieving sustainable development in the future. Tesla's engineering department has devoted considerable effort to designing manufacturing equipment. First-principle analysis of automated production indicates that an iteration cycle takes about 2 years. The first set of equipment for producing the Model 3 can be considered version 0.5, and version 1.0 is likely to appear in 2018. Version 3 will achieve a 5 to 10 times increase in capacity.

In addition to passenger cars, we also need two other electric products: heavy-duty trucks and high-density urban transportation (tools). Tesla's development of these two products is still in the early stages and will be announced in 2017. We believe that Tesla Semi will significantly reduce transportation costs, increase safety, and enhance operational enjoyment.

With the emergence of autonomous driving, it may be possible to reduce the size of buses and transform bus drivers into fleet managers. By eliminating the central aisle of buses and adding seats at the entrance, the passenger density of the bus can be increased. By matching acceleration and braking with other vehicles, the inertia of traditional heavy buses that hinders smooth traffic flow can be avoided, thereby improving traffic congestion and delivering passengers to their destinations. Fixed call buttons at existing bus stops can be used by those without mobile phones. In addition, there are convenient designs for wheelchairs, strollers, and bicycles.

Autonomous Driving

As technology matures, all Tesla models will be equipped with the necessary hardware to achieve fully autonomous driving with fault tolerance, meaning that the vehicle can still drive safely even in the event of any system failure. It should be emphasized that software development and testing take much longer than installing cameras, radar, sonar, and computing hardware. Even if one day the software is highly advanced and even surpasses human drivers, it will still take a long time to obtain regulatory approval for fully autonomous driving, and this time will vary greatly depending on the region. We estimate that it will take approximately 6 billion miles (nearly 10 billion kilometers) of autonomous driving mileage to obtain approval from regulatory authorities around the world. Currently, the learning mileage of autonomous driving vehicles has just exceeded 3 million miles (nearly 5 million kilometers) per day.

I would like to add here that Tesla is currently using autonomous assisted driving, rather than waiting for a future moment to adopt fully autonomous driving. The most important reason is that, under the correct conditions, autonomous assisted driving is already much safer than human driving. Therefore, delaying the release solely because of fear of negative media coverage or the legal liability calculated from a business perspective is morally questionable.

According to a recent report from the National Highway Traffic Safety Administration (NHTSA) in the United States in 2015, the accident rate for automobiles increased by 8%, with one person dying in a traffic accident every 89 million miles. The mileage covered by Autopilot will soon exceed twice this distance, and the system is constantly improving every day. As some have called for, disabling Tesla's Autopilot is no more reasonable than disabling the Autopilot function on airplanes, and our system is named after the Autopilot function used in airplanes.

It is important to explain why Autopilot is referred to as a "beta test version". The term is not used here in the usual sense when describing "beta software". Before being released to consumers, each version undergoes extensive internal testing. The reason for calling it a "beta test version" is to reduce blind trust from consumers and indicate that it will continue to be improved (by default, the Autopilot function is always off). Once Autopilot reaches a safety level approximately 10 times higher than the average level of cars in the United States, the "beta test version" label will be removed.

Sharing

After obtaining regulatory approval for fully autonomous driving, it means that you can summon your Tesla from almost anywhere. Once you get in, you can sleep, read, or do anything else on your way to your destination.

You can also easily set a button on the Tesla App to add your vehicle to the Tesla shared fleet, allowing your car to earn income for you while you work or vacation, greatly offsetting or even exceeding the monthly loan or lease costs. This will significantly reduce the real cost of ownership to the point where almost everyone can afford a Tesla. Since most car owners only use their vehicles 5% to 10% of the time each day, the basic economic utility of fully autonomous driving vehicles is likely to be several times that of non-autonomous driving vehicles.

In cities where the demand for car usage exceeds the number of cars owned by customers, Tesla will operate its own fleet, ensuring that you can summon our cars no matter where you are. In short, the second chapter of Tesla's blueprint includes:

1. Creating astonishingly efficient, aesthetically pleasing solar panels with integrated energy storage capabilities.

2. Expanding the electric vehicle product line to meet the needs of various market segments.

3. Developing autonomous driving technology that is 10 times safer than human manual driving through extensive fleet learning.

4. Allowing vehicles to earn money for you by sharing them when they are idle.

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