In 2006, Tesla ( TSLA 1.74% ) CEO Elon Musk laid out an audacious plan for the electric car company to go from a start-up with an expensive sports car in development to a volume manufacturer of fully electric vehicles. Few believed the CEO at the time — and for good reason. Starting a capital-intensive business in and of itself is no easy feat, let alone starting an auto manufacturing company.
Here’s how Musk summarized his plan in a 2006 blog post.
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
The plan was simple in words. But as investors would find out, the journey would be rife with challenges. Yet somehow Tesla managed to do the impossible, and it has become a volume auto manufacturer, on pace to deliver well over 1 million vehicles in 2022 alone. Even more, long-term investors in the growth stock have been rewarded handsomely.
Since then, Musk has provided a master plan update, which focused largely on the company’s aspirations to expand its energy business and develop autonomous driving technology. With these efforts well underway since the 2016-released “Master Plan, Part Deux,” the CEO has confirmed that Tesla is now working on a part three to its master plan.
So, what’s next?
Bigger is better
The next growth phase of Tesla is about getting big — much bigger.
“Main Tesla [master plan part 3] subjects will be scaling to extreme size, which is needed to shift humanity away from fossil fuels, and [artificial intelligence],” Musk said on Twitter this week. The plan, Musk noted, will also include some details regarding his other two companies: space technologies giant SpaceX and underground tunnel specialist The Boring Company.
It’s no secret that Tesla’s current growth rates already put the company on a path to be one of the biggest auto manufacturers (by volume) in the world someday. Consider that Tesla exited 2021 with its vehicle deliveries growing at a rate of 71% year over year and management guidance for deliveries to grow about 50% or greater this year. Further, Tesla has two new high-volume factories that it recently finished building. Altogether, the company has the pieces in place to be building several million vehicles per year as early as 2023.
Despite a wild trajectory already, Tesla may be planning on doubling down even more on its growth ambitions.
Investors may have got an early glimpse into Tesla’s part three to its master plan in the company’s most recent earnings call. Management said it had shelved its efforts to bring to market new vehicles in the near term and even completely discarded aspirations to bring to market an even cheaper Tesla model at some point.
The rationale behind these moves was that (a) demand was sufficient without new models, and (b) bringing to market new models during a supply-constrained environment simply didn’t make sense.
“The fundamental focus of Tesla this year is scaling output,” Musk said in Tesla’s fourth-quarter earnings call. To do this, the company is focusing its engineering resources on the successful products it has already brought to market.
“So if we’d actually introduced an additional product, that would then require a bunch of attention and resources on that increased complexity of the additional product,” Musk added later in the call, “resulting in fewer vehicles actually being delivered. And the same is true of this year. So we will not be introducing new vehicle models this year.”
Of course, Tesla said it still plans to bring to market some new vehicles, including its long-awaited Cybertruck, Tesla Semi, and a redesigned Roadster sports car. But manufacturing streamlining and, ultimately, significant growth in production and delivery output appears to be the company’s main focus. And based on Musk’s preview of Tesla’s part three to its master plan, the company may be even more committed to this priority now.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.