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Text丨Zhang Jiahao Li Zinan
Editor丨Cheng Manqi Gong Fangyi
The prerequisite for realizing the new plan may be that the earth first becomes another world. The release of Tesla's third chapter is bad for short-term investors and is very likely to cause a decline in the currency circle.
On the morning of March 2, Musk announced the third phase of Tesla’s “Secret Plan” (Master Plan) at the Tesla (TSLA.US) Texas factory: establishing an energy system to support a “fully sustainable Earth".
"Master Plan" is often used to describe a movie villain's impractical evil plan. Musk has always used this word to describe Tesla’s grand vision.
Musk expects that to achieve the goal, a series of conditions need to be met, such as: global energy storage capacity reaching 240 TWh, building 85 million electric vehicles a year, and investing US$10 trillion. With today's global battery production capacity, it would take 200 years to produce that many batteries. The United States spent only $8 trillion on two wars in 20 years after 9/11.
The first two plans were released in 2006 and 2016 respectively. In 2006, Musk described in his plan how Tesla would step by step start from high-end sports cars and become a first-tier car company. Tesla had not mass-produced a single car at that time, but today it is the world's most valuable automaker and has basically realized this unimaginable plan.
The progress Tesla has made is because of a founder who understands technology and engineering and is fully committed, and because these plans started in a world of global cooperation. A company with the ability and ambition to change the world can organize the resources it needs most around the world: innovative technologies in Silicon Valley, an environment that tolerates "crazy people", and technical talents who dare to invest "from 0 to 1"; China's efficient , cheap supply chain, highly qualified industrial workers and local officials with the courage to support super factories; global consumer market.
In the past five years, this division of labor system formed through long-term market competition and based on respective advantages has been affected by more non-market and efficiency factors. All major countries hope to become more self-sufficient in important industries and no longer rely on distant overseas countries for their lifeblood. The fields such as electric vehicles, solar energy, autonomous driving, and robots that Tesla hopes to make achievements are all in this range.
Musk still plans a distant future in his third plan, but it is more difficult to realize.
Two big countries work together to help Tesla grow into a trillion-dollar company
When Musk first proposed the secret plan in August 2006, Tesla was four years old, had just 150 employees and was developing its first car, the Roadster. Musk's main focus is still on launching rockets, and building cars is more like a hobby and interest.
As a Tesla investor and strategist at the time, one of the purposes of Musk's release of the plan was to respond to the misunderstandings faced by new energy vehicles at the time and to explain why this emerging industry could promote people's shift to clean energy. He mentioned four points at the time: step:
build sports cars;
Use the money you earn to build relatively reasonably priced models;
Then use the money earned to build cheaper models;
At the same time, it provides zero-carbon power generation solutions.
At that time, people did not believe that Tesla could really bring any changes to the automobile industry. A hundred years before this, there had not been a publicly traded car company in the United States. As late as 2015, the former chairman of Daimler said in an interview: "Tesla can't even make car doors well and cannot be compared with the great German car companies."
Tesla overachieved in the first three items despite setbacks. The first mass-produced sports car, the Roadster, was more expensive than a Porsche 911 and was a toy for the wealthy Silicon Valley people who loved the environment. The second item is the Model S, a luxury sedan that was mass-produced in 2012, and the Model X, a luxury SUV that was launched three years later. While bringing back funds to develop the Model 3, it also defined the general shape of future electric vehicles. In 2016, the Model 3, which laid the foundation for Tesla’s growth miracle, arrived. It and the Model Y released in 2020 have sold more than 3 million units so far.
While more cars are sold, there is also some progress in the fourth goal, "providing sustainable energy." At the end of 2015, Tesla released the first generation of small lithium battery and solar energy storage system Powerwall for home users, and the energy storage system Powerpack for enterprises. The solar power company SolarCity acquired later helped Tesla build several photovoltaic charging stations in China and the United States.
This success stems from Musk’s imagination, extraordinary courage, his understanding of technology, and his full commitment. What also cannot be ignored is the smooth competition and division of labor environment at that time, as well as the support of the two major powers.
In 2006 the earth was flat. Beijing is in the final stages of preparations for the Olympic Games, and China is looking forward to a more open environment. This year, China surpassed Mexico to become the second largest trading partner of the United States. People believe in the power of division of labor.
Later, when the financial tsunami swept across the world, China did not respond to its neighbors' proposals to sell off the bonds of the two major U.S. lending institutions, and significantly increased its holdings of U.S. Treasury bonds in the following years. During this period, Chinese companies also fully enjoyed the dividends of globalization, absorbing capital, technology and manpower.
The open and cooperative environment makes it possible for Tesla to mobilize all favorable factors on both sides of the Pacific. Tesla has redefined cars with new technologies just as Apple's iPhone reshaped the mobile phone market. But the most critical product, Model 3, encountered production capacity problems after it was put into production. Although Musk personally led a team to adjust the factory, Tesla had not completely solved the production capacity problem and reduced production costs before the Shanghai factory was put into production, and had to suspend sales of the most basic models for a long time.
When financial analysts in Manhattan began estimating that Tesla would have enough money to burn for several weeks, it began discussing the possibility of building a factory there with the Shanghai government. In 2018, Tesla became China’s first wholly foreign-owned automobile company.
In Shanghai, Tesla has received almost all the support it can get: cheap land, low-interest loans, preferential tax rates, bridge loans to alleviate urgent financial needs and efficiency with Chinese characteristics.
The total land transfer price of Tesla's Shanghai factory, which covers an area of 865,000 square meters, is 973 million yuan, equivalent to about 1,100 yuan per square meter, which is nearly 40% cheaper than the average price of industrial land in Shanghai during the same period. Tesla doesn’t need to spend all of this money at once. Since 2018, Tesla has obtained 18.5 billion yuan in low-interest loans in China, and the interest rates of each loan are lower than the central bank’s annual benchmark interest rate. These help allowed Tesla to invest in building new factories when its market value plummeted and it was unable to raise financing, thus avoiding the impact of the new coronavirus epidemic.
The Shanghai factory took less than a year from foundation laying to completion and is Tesla's fastest factory to start production so far. Its new factories in Berlin, Germany, and Austin, USA, took 28 months and 21 months respectively from construction to production. Musk has mentioned the importance of the Shanghai factory many times.
As of Wednesday, Tesla had built 4 million vehicles. Among them, the first 1 million units took 12 years, and the second 1 million units only took 18 months - the Shanghai factory has already started operation. It took Tesla just 7 months to harvest its fourth global million.
During this period, China also got the exports, taxation, employment and industrial chain iteration it wanted. Around Tesla's Shanghai factory, a group of local suppliers have grown up. Its huge sales also promote the explosive growth of local car brands amid technological upgrading.
The second plan hits the global decoupling
In July 2016, Musk published another blog post, revealing the goals of the second secret plan (Master Plan, Part Deux):
Create amazingly efficient, beautiful solar panels with integrated power storage;
Expand the electric vehicle product line to meet the needs of various market segments;
Develop autonomous driving technology that is 10 times safer than human manual driving through extensive fleet learning capabilities;
Let the vehicle be driven out to make money when it is idle.
Goal 2 was achieved relatively smoothly. Tesla released pickup trucks and heavy-duty trucks, although they were not delivered as scheduled. But for the other three goals, whether energy or autonomous driving, Tesla no longer has "Shanghai speed."
The latter two goals were based on people's romantic imagination at that time about the rapid development of artificial intelligence and its ability to drive instead of people. By 2022, technology pioneers and investors, including Musk, have admitted they overestimated the pace of autonomous driving development.
But the energy business, which Musk has high hopes for, is not going well. Tesla officially acquired SolarCity in June 2016, and in October of that year launched SolarRoof, a solar roof in Los Angeles.
Musk has repeatedly claimed that Tesla’s energy business will be larger than electric vehicles in the future. Six years later, the energy business still accounts for only 1.5% of Tesla’s revenue.
One area where development has been particularly rocky is solar rooftops. In the third quarter of 2017, Tesla's solar power generation reached 109 MWh. Since then, it has stopped growing significantly and has fallen below 100 MWh many times.
Musk had expected that Tesla would be able to lay 1,000 solar roofs per week by 2019, but according to new energy industry media Electrek, Tesla will still only be able to lay 20 solar roofs per week in the second quarter of 2022. Solar roof rollout was briefly halted in 2022 due to a shortage of solar panels.
There are technical reasons for the slow progress on energy targets. The power generation efficiency and cost of solar panels are limited by material technology. The current mainstream crystalline silicon solution is only a transitional technology route, and the power generation system can only convert 29.7% of the energy into electricity. The conversion rates of coal power and hydropower can reach 40% and 60% respectively. In theory, there are new materials that can increase the solar power conversion rate to more than 44%, but they are currently not commercially available.
Breaking through these technical bottlenecks requires innovative methods. An environment where talent flows freely is more conducive to this kind of innovation. But not anymore.
The year the second phase of the plan was released, Trump won the US presidential election, and the global cooperation environment quickly changed. The flow of technical talent has decreased. Cross-border cooperation in the fields of artificial intelligence and chips may trigger investigations by law enforcement agencies and CFIUS reviews.
Technology infrastructure is also fragmenting. Chip technology and high-end commercial GPUs have been placed on the U.S. export control list today. Artificial intelligence algorithms are included in China’s Catalog of Technologies Prohibited and Restricted from Exporting. Almost all major economies in the world have controls on data leaving the country and are reviewing foreign investment in high-tech enterprises.
Countries are more inclined or have to rely mainly on their own talents, markets and capabilities to solve technical problems - to achieve technological breakthroughs that have not been achieved through global cooperation before.
Even without considering technical cooperation, global division of labor could have made Tesla's solar roof cheaper, thereby opening up a larger market and supporting subsequent research and development. But tariff barriers reduce the efficiency of this business.
The U.S. imposed tariffs of more than 40% on photovoltaic modules from China after the trade conflict broke out. In the first quarter of 2022, Tesla said in its earnings report that "import delays in certain solar modules were beyond our control."
In December 2022, the United States announced a tax avoidance review of some photovoltaic modules imported from Southeast Asian countries, closing the loophole that allowed some Chinese products to be transshipped to the United States through Southeast Asia.
Less collaboration, higher goals
"I hope today is not an Investor Day for Tesla, but an Investor Day for the Earth," Musk announced today. The ambitious goals are impossible for Tesla to accomplish alone.
The new goals require manufacturing more energy storage batteries, building more green power generation facilities (mainly photovoltaic panels and wind turbines), producing more electric vehicles to fully replace fuel vehicles, and building electric aircraft and ships. This plan will completely transform the way humans obtain, store, and use energy.
The first step is to make all cars electric. Musk estimates that Tesla alone will build 20 million electric vehicles a year—twice as many as Toyota. All companies around the world need to build a total of 1.44 billion electric vehicles to replace current transportation.
To support this vision, 240 TWh of energy storage batteries are required. Based on current battery production capacity, production would take more than 200 years. Musk believes that this goal does not require extensive mining. To achieve it, only 30% of the world's nickel will be needed. It will also require iron, but Musk is not worried about iron, which is the most abundant element on earth.
However, according to the existing lithium battery technology, this plan will also use about 80% of the world's proven lithium resources. Zeng Yuqun, founder of CATL, calculated that the lithium resources on the earth can only produce 300 TWh lithium batteries. Moreover, the service life of energy storage lithium batteries is only 15-20 years. At present, the lithium in most used batteries has not been effectively recycled. People will need to significantly increase the level of battery recycling and find other technical solutions, such as sodium-ion batteries, to ensure that 240 TWh batteries continue to exist on the earth.
To fill these batteries, Musk believes humans should build more than 30 TWh of green power generation equipment. The photovoltaic panels needed to reach this figure would cover 0.2% of the Earth’s surface, equivalent to two Frances.
There is also the issue of money. Musk believes that achieving this goal will require an investment of $10 trillion. "It's not a big number relative to the global economy," Musk said.
The United States’ annual GDP exceeds $23 trillion. However, the two online ride-hailing giants in China and the United States have only raised tens of billions of dollars in total. Nuclear fusion research has received less than $50 billion in investment from government and commercial institutions over decades. TSMC’s annual investment in equipment factories is only more than $30 billion. The last single investment of this magnitude would have been a 20-year war on terror.
If Musk's grand vision can be realized, the earth will become another world, as he said. But the prerequisite for achieving this goal is that the earth first becomes another world.
