Elon Musk Returns to Tesla's 'Master Plan,' Focusing on Robotaxi Over Affordable EVs
Tesla Inc.'s CEO Elon Musk seems to be reverting to the company's original vision outlined in its "Master Plan." The focus appears to be shifting away from the development of a low-cost EV towards a dedicated robotaxi service, potentially heralding significant profits for the electric automaker.
Musk's recent announcement of an upcoming Tesla Robotaxi event, slated for August 8th, has fueled speculation about the company's future direction. This move comes hot on the heels of reports indicating the cancellation of Tesla's plans to develop a budget-friendly vehicle, referred to as the "Model 2."
Addressing these reports, Musk denied allegations of abandoning the low-cost car project, branding them as "lying." However, during an online interview with Nicolai Tangen, CEO of Norway's wealth fund, he remained tight-lipped about Tesla's vehicle roadmap.
Reprioritizing: A Tactical Pivot
Elon Musk's strategic vision appears to be undergoing a shift, with analysts suggesting that the pursuit of an affordable vehicle may have taken a back seat. Deutsche Bank analyst Emmanuel Rosner said in a research note Monday, "Such a decision would also be consistent with Elon Musk's well-documented choice to have Tesla's next platform entirely autonomous, while the Model 2 was only a compromise suggested by his engineers in case autonomous tech takes too long to be ready."
"Recall that as recently as in January 2023, Mr. Musk told investors on the earnings call that Tesla was no longer developing a $25,000 car, but he then seemingly reversed course," Rosner stated.
Regarding Musk's renewed emphasis on robotaxi initiatives, Rosner remarked, "Tesla has decided to press its unique AI and software advantage," highlighting the company's commitment to artificial intelligence.
Deutsche Bank maintains a bullish outlook on Tesla stock, assigning it a buy rating with a target price of $189 per share. Despite closing up 4.9 percent on Monday at approximately $173 per share, Tesla's stock has seen a decline of about 30 percent year-to-date.
Software's the Thing
In remarks to Automotive News on Monday, Michael Dunne, CEO at Dunne Insights, emphasized the increasing significance of software as the primary differentiator in the automotive industry, surpassing the importance of physical design. He suggested that Tesla could strategically lower the pricing of its current Model 3 sedan to attract new buyers, thereby negating the necessity for introducing a new model.
Dunne further highlighted the challenges posed by the low-cost EV market, noting, "A small army of Chinese automakers can already make $25,000 EVs." He questioned the wisdom of competing in a segment with minimal profit margins, advocating instead for a focus on cutting-edge technologies like AI-driven autonomous driving.
Despite the release of version 12 of its Full Self-Driving software last month, Tesla's vehicles remain non-autonomous. The $12,000 software option functions as an advanced driver-assistance system, requiring drivers to maintain full control.
Deutsche Bank cautioned that achieving full autonomy could be a lengthy process, potentially leaving Tesla without a new product. The postponement of efforts related to the Model 2 carries the risk of prolonged absence of new consumer vehicles in Tesla's lineup, which could exert downward pressure on its volume and pricing dynamics for an extended period.
Master Plan, Part Deux
Musk himself has added fuel to the speculation that Tesla's primary focus is on developing a dedicated robotaxi service. Over the weekend, he posted on X, describing Tesla not as just an automaker, but as "an AI/robotics and sustainable energy company."
In a post shared on Saturday on X, Musk referenced a 2016 document titled "Master Plan, Part Deux," where he outlined Tesla's future strategies, including the concept of a robotaxi service. Notably, this document did not mention the development of a budget vehicle below the existing Model 3 sedan, which has a starting price of $40,630 including shipping.
"I wrote this 8 years ago," Musk remarked in the post, underscoring the long-standing nature of his vision.
In the 2016 document, Musk expressed skepticism about the necessity of a lower-cost vehicle compared to the Model 3. Instead, he argued that a robotaxi fleet would offer affordable transportation solutions "no matter where you are."
