12. July 2019 by Chanan Bos
Elon Musk shook up Twitter a bit this week. Some fans got worried Tesla would stop selling cars at some point, but the core point was simply that the value of Tesla cars will go a lot when Full Self Driving is implemented. Elon made it clear that what he meant was that the price would go up considerably.
To be clear, consumers will still be able to buy a Tesla, but the clearing price will rise significantly, as a fully autonomous car that can function as a robotax is several times more valuable than a non-autonomous car
– Elon Musk ( @elonmusk) July 8, 2019
In response, I was primarily to share as I felt like Tesla backstabbed Society with this news, as this would effectively mean that a large part of the Tesla community, including me even, who cannot yet afford the car, will never experience the pleasure of one day picking up their own Tesla in the shop / service center one day. Then I began to crush the numbers, and suddenly sadness was replaced by excitement. If you have also felt a little down at this news, this may encourage you. Everything began with Elon's answer to this tweet:
– Elon Musk (@elonmusk) July 8, 2019
Elon's response to this tweet suggests that this course of action assumes full autonomy before they has enough factory capacity to build as many cars as the world needs. This leads to some very important questions. How many cars can Tesla end up doing? How Many Autonomous Vehicles Need the World? There is probably a deep rabbit hole to explore.
How many robot axes do the world eventually need?
This is the absolute most important question, and it seems that no one in the media has asked this question, or has just not written about it since they do not find answers. We also do not know the answer, but we can present data and do some guesswork.
When Tesla's autonomous vehicle comes out, it seems that the world has just reached 8 billion people. According to a calculation, there were 1.3 billion vehicles in 2016, and the number of passenger vehicles (except large trucks and buses) was just under one billion. So, we know we need less than one billion cars.
According to Statista, nearly 79 million cars were sold worldwide in 2018. So basically the whole market was turned into autonomous vehicles, we could replace all previous cars in 11 years. One difference, however, is that Tesla's autonomous vehicles cannot be treated as ordinary cars – they want more benefits. Let's go through them.
These Tesla robot axes should have a "mile mile drive." Although it's an overstatement, the average car never makes 200,000 miles – although with extremely routine maintenance, some taxis have been known to make it 400,000 miles. At worst, Tesla doubles the upper limit, or it can quadruple the average.
Next, because autonomous robot shares are shared by many people, theoretically you need fewer of them than regular cars today. The question of how many autonomous cars are needed is also very much dependent on problems such as: rush hour; ownership split; first / last few kilometers from public transport; as well as accessibility, privacy, efficiency and punctuality in public transport. Do we want enough autonomous cars to allow each individual or family to access an autonomous vehicle during peak hours? For now there is a question without a reply.
Assuming the US average of 832 cars per 1,000 people in 2016 becomes a global average for people trying to get to work during rush hour, it would mean a need for 6 and a half billion autonomous cars worldwide. Not very realistic, but let's say Tesla will build half of the cars over the next 10 years. That would mean a need for 325 million cars a year! If every Gigafactory could issue 500,000 cars a year, like Gigafactory 3, Tesla would need 650 factories worldwide, or have each Gigafactory production 3 million cars a year and have 100 factories. Obviously this is not a reasonable number, and Elon has stated this before.
So, let's try this from a different perspective, a cost and capacity perspective than a worldwide maximum demand perspective. This is where the latest tweets from Elon come into play. Let's say Tesla is starting to produce autonomous cars that cost $ 50,000 to build, Tesla Model Omega, and sell them for $ 100,000 with a 50% surplus. Let us then use the 150 vehicles for 1000 people worldwide average of 2010 (not US average). It's not a perfect number to use, but since Elon's future vision shows that many fewer people use cars and people hardly own cars, it's just as good a guess as ever. That would mean a need for 1.2 billion cars. Let's say Tesla will do a little less than half of them – say 500 million cars.
If Tesla wanted to reach 500 million cars in 10 years, it would mean building 50 million cars a year. It is much. It's a hell of a lot. But considering how many cars are being made each year, it is much more sensible. Let's see what the numbers tell us. We need to find out:
- How much money Tesla had to get to finance it.
- How fast it could get the required money.
- How many cars they need to sell to achieve it.
- How long will it take to build all these self-financed Gigafactories to make this happen.
To build 50 million cars a year, Tesla would need 50 GF1-type factories that could build 1,000,000 cars or 100 GF3-type factories that could build 500,000 cars a year and each cost $ 5 billion to build. Okay, so that means Tesla must raise $ 500 billion, less than the annual US military budget. That is the goal and the answer to the first question.
So the news is that self-propelled Teslas becomes considerably more expensive. To reach $ 500 billion, Tesla will have to build and sell 10 million $ 100,000 autonomous cars with a profit margin of 50% to fund it. Now suddenly these numbers start to make much more sense – as you will see if a moment is not yet clear.
According to current trends and plans, consistently, Tesla should be able to build 2 million cars by 2023, and according to estimates, could build a total of ~ 17 million between 2023 and 2026. So let's say in 2023, Tesla will begin to build it completely Autonomous Tesla Model Omega for $ 100,000 and will sell about 2 million of them. That would be enough for 20 GF3-type factories. That means Tesla will have enough money to start building 100 GF3 factories in just 4 to 5 years!
Now, as Elon said, you would need 100 Gigafactories to drive the world. It was back in 2016 and he meant GF1-type Gigafactories, so it would mean 200 GF3-type Gigafactories. One of the biggest problems with GF1 is that, because it's so big, Tesla has trouble finding enough people, and the factory is now only ~ 30% complete. For that reason alone, it is more sensible to build less. Almost like when Elon scaled the interplanetary transport system down to Big Falcon Rocket.
You can also remember that Elon mentioned the world needed 100 Gigafactories, not that Tesla would build so many alone. Although Tesla is well advanced on autonomous vehicles and electric power stations, perhaps a thought experiment based on 200 GF3-type Tesla Gigafactories is not that much for a Friday in July.
Tesla Factory Versions 1 to 3.2
Let's reflect on Tesla's evolution with factories first. We have version 1 from the Fremont factory, to produce model S, then version 1.4 for model S and model X, then version 1.8 for model 3 and 1.82 for addition of sprung structure GA4, and then version 1.99999 for model 3 and model Y ( if it actually happens).
Gigafactory 1 (GF1) for a short period was version 2.4, when it was announced that it would also produce vehicles, but which the factory seems to have had problems with expansion to an over-ambitious size and lack of people to to hire in the region, we now have design version 3, Gigafactory 3 in Shanghai.
I'm guessing Gigafactory 4 in Europe will also be a "version 3" factory since the announcement is probably around the corner. What comes next is what people probably don't expect yet, and I think it's Gigafactory 3.2. It is Gigafactory 3 successful with a layout slightly better than the original GF3 and GF4 blue copy. If the theory is correct, then around 2022, Tesla will announce Tesla Model Omega, and at the end of 2023 a lot of new Gigafactories. Elon is probably willing to go as far as possible without getting into another "bet on the company's" scenario. (They should be far away.)
Tesla is not in a hurry because of competition, but because of the nature of Tesla's mission. It works counter-clockwise. While some governments are working to make the world cool down by 2050, in reality reality will not be relatively safe if the world is not carbon neutral by 2030.
The machine that builds the machine, Built in batches  From what I have learned from people who monitor large factories, it is impossible to have several identical factories unless they are built at the same time. No matter how much you want standardized, identical equipment, businesses, and technologies to develop, you'll buy or create the latest and greatest as much as possible (as much as economically efficient).
The same goes for Tesla, since we've seen how different Fremont factory lines are for the S&X vs. Model 3 General Assembly 3, and Tesla executives have also talked (including CleanTechnica ) to Gigafactory 3 in China. As mentioned earlier, the only exception to being for identical factories seems to be built at exactly the same time. So in other words, to achieve economies of scale and different efficiencies, we need factories built in batches, as fun as it may sound. (It's another topic, but be aware that some years ago, the idea of large batches of mass-produced satellites was intimidated, and now we have Starlink satellites sent to room 60 at a time.)
Now, let's say complete This type of factory will take between 3 and 5 years, depending on where they are built – say 4 for the average. This is something that has never been done before and stands a chance of failure. Batch factory building is not exactly a standard part of university architecture and engineering if you catch my business. But let's see how the numbers will look.
In 2023, by selling 2 million "Omega" cars and investing 80% of it into new Gigafactories, Tesla could earn enough to fund the first batch of 12 Gigafactories. When the first batch comes online, the speed will really start to ramp up. In any case, it means that from 2033 you have 200 factories that produce 100 million cars a year or one billion every 10 years.
Tesla Model Omega vs. Tesla Model 3
If Tesla starts making this perfect autonomous vehicle, without a steering wheel, the latest model it will ever need (hence the model name Omega), in 2022 it can pump out 2 million cars per year. It can generate funding for 50 Gigafactories in just 2 years. Here is a comparison of Model 3 against Model Omega out:
As you can see, while Model 3 is profitable, without investing in the company, sticking it with the 2019 system, will take much longer For the company to ramp up to meet global consumer needs, Tesla would not really accomplish its mission. Now I do not say that Tesla will be able to hit hundreds of factories that are just by throwing money at the problem. There are other enormous challenges, such as making sure that the world can supply my enough raw materials, produce enough batteries, create a whole host of batch factory construction jobs, and get a sufficiently trained workforce. It is therefore also in the above calculations that only 80% of the revenue went against the new Gigafactories.
There are many ways you can change the figure to even greater if you feel bullish or reduce the numbers by half if you are bearish. You can change the duration of the project from one billion cars every 10 years to 2 billion every 20 years, since Tesla's goal is for vehicles to have millions of miles of drives. There are many ways to play with the numbers. It's a very big point, and it is that it actually makes sense for Tesla to significantly increase prices when it has played autonomy.
So, let's not become too judgmental about the fact that we may not all be owning a Tesla. It's not a gloomy future – it's just so bright that you can't even see it yet. Still, Elon, what really comes when we have full self-driving cars? Where should the company go? Against the Model Omega as described in this article? Against Mars? Towards electric aircraft? To handle climate change and prevent further climate disasters? At the moment there are more questions than answers.
Since this is a very complex subject and contains some large and not very simple calculations, we have created a very user-friendly spreadsheet where you can play with the numbers and see what kind of results you get. Here is the link.