27 facts about Tesla and the future of automotive technology.

We in Europe stayed up late last Wednesday to watch Tesla 's first investor day, the "Super Bowl of the car industry". We watched a show with great entertainment value, with great and innovative advertising messages. Just like the Super Bowl.

But investors did not get the answers they expected. After the show, TSLA shares fell -5%.

In this edition of SALN, we have summarized 27 points about the future of Tesla.

In addition to what was shown, what wasn't said is quite revealing. However, the presentation was packed with information, and we almost missed some important topics. We've written them down anyway.

What we saw:

1. Once again "to the moon 🚀": Tesla's sales target is 20 million cars. With a portfolio of 10 models, Tesla is aiming to capture 20-30% of the total global passenger car volume.
2. This goal is part of a plan to tackle one of the world's biggest problems: global climate change. Their proposed solution is the electrification of the economy, achieved through huge battery farms that store, balance and convert wind and solar energy into base load. Tesla is no longer only active in the field of mobility, but is creating a new branch of supply with innovative technology.

3. Tesla wants to convince investors that it has outgrown the "Elon Musk hype", with core technical competencies, clear competitive advantages and a capable management team:
   • Drew Baglino (Batteries)
   • Tom Zhu (China and Manufacturing)
   • Zach Kirkhorn (Finance)
   • Lars Moravy (Engineering)
   • Franz von Holzhausen (Design)
   • Brandon Ehrhart (Corporate Secretary)
   • Rebecca Tinucci (Store)

The extended Tesla board on stage: all eyes on Elon Musk.

What we were "oversold":

4. Tesla demand is not endless. Although all major OEMs above a certain size face cannibalization, market players will fight fiercely against a Tesla monopoly. Besides, the day will come when a Model 3 in red, white or black is just boring, as with any car.
5. Positioning the solution to climate change has a corresponding problem: it is not necessarily a primary customer concern, but rather a social agenda issue.
6. AD is not yet fully automated. Automated driving was discussed in Ashok Elluswamy's presentation, but the presentation did not go beyond explaining how the AI infrastructure is used in Tesla's Full Self-Driving (FSD). There was no comparison with the competition, nor any mention of strategies to overcome regulatory challenges.
7. While the advantage of vertical integration and small teams may be significant, it will inevitably diminish as the company grows.
8. Supply chain management for Tier 1 producers is a common practice that has been practiced for decades, but also points to the challenge of scaling.
9. The impact on productivity that comes with ramping up a factory can be seen in any industrialization
10. Musk mentioned that Tesla may be building heat pumps.

What we haven't seen:

11. Concrete data to build investor confidence, such as a product cycle plan for new products, timing, or specific data on productivity. For example, aiming for an OEE target of 90% is not a common KPI in the industry and is vague. Avoiding sharing specific financial data, such as the cost of future cars, does not help the mission: Tesla shares fell 5% after the event.
12. No strategy on how to mitigate the risk of the current geopolitical environment in China. China can scupper the 20 million plan overnight. Also, the competitors closest to Tesla are from China. Although releasing a contingency plan would anger the Chinese government, without China as the largest global market for cars, the 20 million car master plan would immediately collapse.
13. No consideration of lessons learned from other automotive companies that have scaled heavily in the past. For example, VW's Dieselgate and its organizational fallout occurred after a massive growth phase. As the saying goes, "History doesn't repeat itself, but it rhymes."
14. The humanoid robot OPTIMUS physically on stage. Only a rendering of the robot assembling another robot was shown on the screen, much to the disappointment of the audience.

What we almost missed:

15. With the Cybertruck, car factories are losing press shops and paint shops. The body of the Cybertruck is made of stainless steel sheets that do not need to be stamped or painted. Press shops and paint shops usually absorb a large part of the total product investment.
16. Zonal E/E architecture with automated configuration of wiring harnesses. Tesla has redesigned the architecture of the car's electrical and electronic components. This is expressed in the zonal power supply of the controllers, which is connected via Ethernet. In the future, the wiring harness, which is typically configured by hand in today's assembly, will be assembled automatically.   

17. The ability of the car computer to assess correct assembly during vehicle build. As the various components are assembled and connected to the car, the car computer performs tests and can report assembly errors at an early stage. This increases the "first run rate" and minimizes rework. The accumulation of rework leads to major logistical distortions when scaling up factories.
18. Tesla did not complete the transition from lead-acid batteries to lithium-ion batteries until 2022. This underlines that all players in the automotive industry rely on common standards, making rapid changes to old standards a lengthy process.
19. The switch to 48V. The industry standard is 12 V, and overcoming this is expensive and difficult. However, the benefits are huge as wiring weight, heat loss and high current fusing can be significantly reduced.
20. Fast software cycles through OTA and fleet data. Tesla now has a fleet of 4 million in operation. All cars can be updated "Over-the-Air (OTA)" and conversely these cars provide data back to Tesla. Tesla can use these data sets to evaluate functionalities in real life.
21. Tesla has 129,000 employees, half of whom work in production. Meanwhile, a traditional OEM has 80% of its employees in production. This shows that the future of the automotive industry is moving towards office jobs.
22. Like the "production hell" of 2018, Tesla also experienced the "back office and operations hell". Instead of turning to large ERP vendors and consultants to implement new processes, Tesla has developed an internal digital platform that improves internal processes. The productivity gains demonstrated are impressive, e.g. in accounts payable (6x improved productivity) or in document creation (e.g. for legal requirements) (7x improved productivity).

Other important little things we noticed:

23. Another automotive uniformity: no one wore a dress, suit or tie. No one had gray hair.
24. It remained unclear how the 16 executives live governance. The group on stage was not the board, and there was no clarity about reporting lines either. Except for who was the boss.
25. There were few women; only two out of 16 executives were female.
26. There was no mention of Twitter, Starlink or SpaceX.
27. There were no references to policy issues other than climate change.

Has Tesla really moved away from the "Elon hype"?

Tesla has made great strides in so many areas, but Elon can't take credit to the team. Tesla remains his idea.

Tesla is in a teenage stadium, searching for its identity independent of the "superpadre".

The breadth and depth of innovation expertise that Tesla has developed as a car manufacturer is simply breathtaking. The speed of change is dramatic, and there is no doubt that Tesla has already successfully revolutionized not only the car market, but also the way we as a society perceive mobility . Customer expectations have changed, and Tesla has become the benchmark not only for every electric vehicle, but for cars in general.

Tesla has not moved away from the cult. Elon Musk still seems to be the head of anything substantive, while process improvements can be made by the team. All the presenters behaved like support acts to him. There is no lack of bold ideas and fancy technology, but there is a lack of clarity and therefore transparency.

What's more, the vision outlined is shared by most parts of the automotive industry.

But will it actually happen?

Only the future will tell. There is no doubt that, in addition to wind and solar energy, mankind will receive cheap, non-fossil energy from modern nuclear reactors. For example, massive investments have been made in new reactor designs, with innovations in fuel cycle efficiency and elimination of risk effects. These efforts will one day bear fruit and have an impact on the scenario described by Tesla.

This would drive the adoption of electric vehicles and replace any other propulsion technology. However, this would also make wind, solar and batteries less competitive.

So the key question is: when exactly is "someday"? Musk explained: "In your lifetime."

But being right about timetables doesn't seem to be his main concern, if we only think about the promises of automated driving. 

What is most relevant to us is the pace of learning at Tesla and the assimilation of new areas such as AI, chip design, cell manufacturing, software development and charging at scale. This is exciting, showing new insights in technology and conquering new businesses.

Let's learn from Tesla. To use a metaphor provided by one of the Tesla managers:

Let's peel the onion, layer by layer.