Elon Time? Part 1

Elon Musk has developed a reputation for so-called “Elon Time”, projecting new products or services in seemingly impossible to deliver timescales. While good humouredly accepting the charge, he responds “I may be late, but I always deliver!”

Despite this reputation, Musk consistently projects the financial performance of Tesla with amazing accuracy; in fact, one may say that he has been fantastically prescient, significantly besting even the most farsighted of fellow CEOs.

The following slide, taken from a February 2014 Tesla deck introducing the “Gigafactory” for the first time, projected 500,000 vehicle sales in 2020, six years in the future.

https://www.tesla.com/sites/default/files/blog_attachments/gigafactory.pdf

At the time this slide was produced in February of 2014, Tesla had never produced even 7,000 cars in a quarter. They had but a single vehicle model, at a price point that could not conceivably reach volume annual sales, and they were faced at having to invent and develop a range of technologies to enable and justify the 2020 projected 500,000 vehicle sales per year, only 6 years hence. Amongst the many technologies that would have to be evolved to make that possible were batteries, at volumes and specifications that were not considered practical or economic at the time.

https://www.tesla.com/sites/default/files/blog_attachments/gigafactory.pdf

An illustration of the scope of the challenge is that Tesla were planning to build more batteries in a single U.S. based plant as the entire global cell production at that time, almost all of which based in Asia (and all focused on delivering computer/phone batteries).

So, Tesla had to (1) Persuade a leading, Asian based battery supplier to the computer industry to (2) invest a very significant amount of money in an unprecedented manufacturing plant in the US, to (3) manufacture batteries based on a new design and evolving technology for a (4) a newly minted car manufacturer that claimed it was going to 15x its sales (5) with a car that was not yet designed, but would contain (6) not only the novel batteries, but a whole new drive train (not to mention computer system) (7) and the success of the car would depend on a greater than 30% reduction in cell cost!

What could possibly go wrong?

It is quite stunning that Tesla will hit, and probably best these delivery goals set in early 2014, despite the broad range of unknowns on that date. (As we sit here at the end of Q3 2020, the best estimates for deliveries for the year 2020 are a shade over the 500,000 targeted in 2014!).

Given the pressure of constant, rapid innovation, Tesla’s guidance has been quite reliable, at least in it’s broad brushstrokes, and despite some understandable lapses.

The company has had to learn to introduce products, and production lines. In the past, they faltered in the introduction of both the Model X and the Model 3, and in managing global delivery logistics for the Model 3, all of which had repercussions on Tesla’s financial expectations. However, that past negative must be balanced with the most recent quarters: the extraordinary speed of the Shanghai factory build out, the smoothness of Model Y launch execution, the launch of the Model Y in Shanghai, and the apparent high speed of the build out of Giga Berlin and Giga Texas.

Given the gigantic scope of their 2014 ambition, achieving it has been truly astonishing, giving the expression “Elon Time” a completely different complexion.

In Elon Time, Part Deux we will explore what the future holds for Tesla, per Elon.