Has Tesla lost its way . . . a new master plan?
I’ve been following Tesla for over a decade - I first rode in a Tesla Model X in the USA in 2015 and I first wrote about how Tesla had changed the dynamics of the automobile sector in 2018 together with Professor Peter Murman. That article, which you can read here, argued that barriers to entry in the automobile sector had significantly reduced and also predicted the rise of Chinese OEMs like BYD, Nio and others. We also discussed how major IT companies might play in the sector, including capturing value as specialized hardware vendors (eg. NVidia) and also by leveraging their brands to build cars themselves (eg. Apple, Google). For the most part, our expectations in that article have come to be recent trends in the automobile industry.
However, it’s been over a decade since Tesla released the Model S and more than seven years since it released the Model 3, which really accelerated the adoption of battery EVs and the importance of the company. In this time period a lot has changed and given deliveries of Tesla cars dropped for the first time in December 2024, its legitimate to ask “has Tesla lost its way. . .?”
Before attempting to answer this question, it’s important to recognize that Tesla’s mission is to “accelerate the world’s transition to sustainable energy” – therefore, Tesla’s ambitions are much more than just being a car company.
Master plans
Tesla’s original master plan from 2006 is provided below:
1. Build a sports car (the Roadster)
2. Use that money to build an affordable car (Model S/X)
3. Use that money to build an even more affordable car (Model 3/Y)
4. While doing above, also provide zero emission electric power generation options
Clearly, Tesla has executed this master plan perfectly and took advantage of the fact that it was the only company focused on pure battery EVs until around the mid-2010s. By 2016, Tesla published a new master plan, Master Plan part Deux, which is provided below:
1. Create stunning solar roofs with seamlessly integrated battery storage
2. Expand the electric vehicle product line to address all major segments
3. Develop a self-driving capability that is 10X safer than manual via massive fleet learning
4. Enable your car to make money for you when you aren't using it
Unfortunately, Tesla hasn’t executed on this master plan as well as the original one; and is clearly struggling in several key areas.
Model expansion flops
Master Plan part Deux foresaw Tesla expanding its model range to provide for the needs of a wider set of customers – an SUV, a semi-truck and a new Roadster. However, by any objective means, the introduction of new models beyond the Model 3 and Y has been a flop.
The Tesla Semi, unveiled in 2017 and promised for 2019, is still not available. The Tesla Roadster, also unveiled in 2017 doesn’t even have a production date; and anyway, a high-priced sports car is not going to add any value to the Tesla business due to its invariably low sales volume. The Cybertruck SUV has brought a lot of innovation to the market, but its unconventional styling and high price mean that it’s not selling well; and it’s only available in the USA. The Tesla line-up is shown below, including Cybercab, Robovan and Optimus which are not available for sale yet and Semi which has been delivered to only two customers so far.
Source: Courtesy of Tesla Inc.
The solar roof tiles were a flop and Tesla seems to have scaled back its efforts in the solar installation market despite undertaking a merger with Solar City in 2016 valued at $2.6B USD. One area where Tesla has done well is in battery storage - both for residential and utility scale projects.
According to the second master plan “A lower cost vehicle than the Model 3 is unlikely to be necessary, because of the third part of the plan described below”, which refers to autonomy and ride sharing. While Tesla has been betting on leading in autonomous driving and more recently autonomous robots, it can’t claim to be leading in either of these fields. Google’s Waymo unit is already providing more than 150,000 fully autonomous rides per week; while Tesla’s Full Self Driving (Supervised), requires human supervision and is only at ADAS level 21. Similarly, Boston Dynamics (a subsidiary of Hyundai Motors) has demonstrated robots for many years with superior capabilities than the Optimus robot. And I haven’t even mentioned the latest developments in China in regards to battery electric vehicles or robotics.
Losing leadership and competition everywhere
So over the past six years, Tesla has failed to leverage the strong position it had after the introduction of the Model Y and missed the opportunity to establish leadership across the EV price/model spectrum. In the intervening period, stiff competition has emerged in China and legacy automakers from Europe, Japan and North America have all brought out battery EV models. While Tesla was still the number one battery EV maker in 2024, it is expected Tesla could lose this ranking in 2025 to China’s BYD.
Tesla is being forced to bring out a cheaper model than the Model 3, which I believe will arrive in 2025. However, it seems likely this car will be a cheaper Model 3 rather than a brand new smaller and cheaper platform, which could support multiple new vehicles.
Some analysts argue that Tesla’s FSD is improving rapidly, and that the combination of AI and camera vision will enable Tesla to establish leadership in self-driving autonomous vehicles very soon. The announcement of the Cybercab is apparently proof that this strategy is working. In the long run I do believe that camera only autonomous cars will be possible (and safe), however, Tesla’s system is clearly not sufficiently capable today; and while Tesla works to perfect its software, it’s inevitable that some lives will be lost due to edge-case accidents that the system is unable to detect. This is unnecessary and will further impact on its reputation. As of June 2023, there were 17 deaths and over 700 crashes while Autopilot was engaged2. On the other hand, Waymo’s self-driving cars are geo-fenced to pre-mapped cities and include lidar and radar to augment cameras and provide redundancy to improve safety in all conditions. The hardware is more expensive, but the system is evidently more capable and safer than Tesla’s Autopilot and FSD, with only three minor injuries reported in 7 million miles of fully autonomous driving3. Over time, Waymo (and others) could readily transition to a camera-only system if the software performance warranted it. So, Tesla’s approach does not seem to be the winning strategy, especially if there are lots of fatal accidents before the system is perfected and/or the system is clearly inferior which will delay the introduction of Cybercab.
A critical precondition for deployment of autonomous driving is that it’s far safer than human driving. Waymo’s data suggest their system has already achieved this. Tesla’s system is not ADAS level 5 and their data releases do not enable a clear conclusion to be reached4. How can consumers be sure Tesla’s autonomous products are really safer than human drivers?
Tesla’s business model for the Cybercab and autonomous driving seems to be a bet each way – on one hand they will sell the car to owners who can manage their own fleets and on the other hand they will establish a Tesla fleet as well. And once the software is perfected, they will roll that out to existing Tesla’s with the requisite hardware, enabling existing Tesla’s to become robotaxis. Superficially it sounds good, but how exactly will Tesla make outsized returns? Uber’s revenue is currently less than half that of Tesla’s with much smaller margins.
Details of the Optimus humanoid robot are limited, so it’s unclear what its capabilities are and when, or if, it will ever be sold. The robot space is also competitive with existing players like Boston Dynamics and new entrants showing off their robots’ capabilities at CES 2025. It’s also not clear how Optimus really fits into Tesla’s vision of accelerating the transition to sustainable energy, but in principle there are big market opportunities for practical robots with real world capabilities.
A new master plan for Tesla
It’s clear then that Tesla has not yet delivered on its Master plan part Deux and lost the market leadership position it had at the time the Model Y commenced deliveries. Therefore, it makes sense to formulate actions to address these issues. I propose A New Master Plan5 which has the following elements:
Expand the electric vehicle product line to address all major segments, by:
a. Evolving the Cybertruck SUV into a more conventional SUV design that can be sold globally
b. Building a compact car (sedan and cross-over) which is smaller and more affordable than the Model 3 and Y
c. Building a small truck for local freight and a semi-truck for regional freight
d. Building a practical electric bus for 40 seated people
e. Building a practical electric drone for 4 people
Deploy a self-driving capability that is 10X safer than a human driver in all conditions, by:
a. Using massive fleet learning and adding additional sensors, if needed
b. Deploying Cybercab initially as a Tesla robotaxi network
c. Selling Cybercab and other autonomous vehicles once the 10X safety standard has been met for several years.
Expand battery storage capacity for residential (Powerwall) and utility scale (Megapack) use to accelerate the adoption of wind and solar
Deploy an autonomous humanoid robot, by:
a. Developing the robot initially focusing on industrial applications and internal use at Tesla
b. Selling the robot to industrial customers, while improving its capability 10X over existing robots by using AI
c. Deploying a consumer-focused robot to help society, once utility has increased and cost is affordable
Incorporated into my proposed new master plan is a release of products (robotaxis, humanoid robot) to consumers aligned with their capabilities, a strong track record of safety and at affordable costs.
It will be interesting to see if Tesla adapts its current plans and follows the path that I have outlined above. Or will Tesla risk losing further market share to Chinese and other OEMs in the electric vehicle space? Will Tesla risk an unsafe autonomous vehicle product launch? The above master plan is an evolution of its current plan, aligned with its mission and not a radical departure. All of the steps above could easily be implemented by Tesla, if it wanted to.
ADAS (Advanced driver assistance systems) levels go from 0 (no automation) to 5 (fully automated). Level 2 requires continuous supervision from the driver.
As Tesla Autopilot and FSD are ADAS Level 2, they need driver supervision at all times. Many crashes have been attributed to drivers not properly supervising the car and the lax monitoring of the driver.
It’s impossible to directly compare Tesla and Waymo data as they have different ADAS level’s and capability. However, I think it is evident that Waymo’s full self-driving system is more capable and safer than Tesla’s at the moment.
Manufacturers like Tesla often report safety data as crashes per million miles driven and compare this with human crash data. However, I believe safety statistics need to account for fatalities and major injuries – if an autonomous car has less crashes (with minor injuries) but more fatalities than a human driver, is it really safer?
Tesla already published a Master Plan part 3 but it is focused on how the world can transition to sustainable energy. Nowhere in this master plan does it clearly articulate what the strategy and actions of Tesla are.