On September 13, local time on Monday, Tesla’s head of investor relations, Martin Viecha, was invited to attend a technology conference held by Goldman Sachs and introduced Tesla’s development plan for the next five years to the investors present.Vicha emphasized that the cost of manufacturing each electric vehicle will continue to decline. He started by addressing two big themes that will be critical to Tesla and the entire electric vehicle industry over the next five years: battery supply and technology, and the cost of building a car.
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Tesla executives talk about the company’s five-year plan: the average manufacturing cost of a single car will be less than $36,000
Auto manufacturing will eventually grow as fast as the battery industry, he said. This will affect the manufacture of cells and battery packs, as well as battery design, and the extraction and extraction of lithium, nickel and other raw materials.
“The Third Revolution in Automobile Manufacturing”
Vicha emphasized that the manufacturing cost of each electric vehicle is the most important indicator to monitor in the coming years. Ultimately, he said, that will determine how many vehicles the carmakers can produce and how large they can grow.
In 2017, Tesla cost an average of $84,000 per electric vehicle. The cost per vehicle has dropped to $36,000 in recent quarters. Almost none of the cost reductions are due to lower battery costs. Instead, Tesla has made it easier to build cars thanks to better car designs and newer factory designs.
Wicha added that Tesla’s first car manufacturing plant in Fremont, California, near Silicon Valley, was not a good place to build a car. Factories in places such as Shanghai, China and Berlin, Germany are cheaper to manufacture, he said.
Tesla hopes the cost of manufacturing each electric vehicle will continue to fall.
The Fremont, California factory accounts for about half of Tesla’s total vehicle production. As the new factory builds more electric vehicles, it will cost less than $36,000 per vehicle to produce, which will help boost the company’s profitability, Wicha said.
Weicha believes that in the 120 years of the development of the automobile industry, the automobile manufacturing industry has only experienced two major revolutions. Once, he explained, was the advent of the Ford Model T, and the other was the cheap production method Toyota created in the 1970s.
Weicha said: “The internal structure of electric vehicles is completely different from that of gasoline vehicles, which will bring a third revolution to the automobile manufacturing industry.”
A cheaper Tesla electric car?
When asked if Tesla could potentially make a cheaper electric car, Wechat said the company ultimately wants to make a more affordable electric car. He explained that if a company wants to produce more, it needs a product portfolio that reaches a wider audience, and Tesla needs to offer cheaper cars before the company-operated robo-taxi service goes live.
He said demand for the Model 3 and Model Y electric vehicles has been stronger than expected, so Tesla has less incentive to launch new models in a short period of time.
“The Model Y is basically going to be the best-selling car the world has ever seen next year,” Wicha added, taking into account rising costs at the Fremont, Calif., factory and a shrinking car rental business.
“It’s an important sales lever that we’ve never encountered, but may boost demand in other ways in the future,” Vicha said.
The future of Tesla’s fully self-driving software
Subsequent discussions shifted to Tesla’s Full Self-Driving (FSD) software service. About 100,000 people use the beta FSD, which drivers can intervene at any time, on U.S. city streets, Vicha said. He expects the beta FSD to roll out to all Tesla vehicles on U.S. roads by the end of the year, based on the data Tesla has seen. Vicha stressed that this is a “supervised autonomous driving” system, and drivers still need to pay attention to road conditions or they may not be able to use the service.
Wechat said Tesla could collect more data from driver interventions to help address Autopilot issues and improve the system through software updates. This iterative process will eventually allow Tesla to achieve full self-driving, he added.
“We strongly believe that the collection of data and artificial intelligence at scale is the only way to solve the puzzle of fully autonomous driving,” Vicha said. “That’s the way we’re going.”
Vecha described the Model X and Model S as Tesla’s first-generation platforms, with the Model 3 and Model Y being the second. Self-driving taxis are the company’s third-generation platform, he explained.