[U13] Model S -> Ludicrous -> Plaid
Break a world record, leak the news and launch updated product at live event
This week in Product | Strategy | Innovation we share examples of how to 1. refresh a product and 2. extend a product and brand with an adjacent opportunity. And if executed well, both can enhance the company’s mission. Lifecycle management is critical for any product portfolio, but even more so for a company like Tesla that continuously updates current products to improve the customer experience. That keeps products competitive for a longer period of time, but at some point the core design may need to be refreshed or phased out altogether.
Tesla released its forward looking original Master Plan in 2006 with the following summary of its objectives:
Build a sports car
Use that money to build an affordable car
Use that money to build an even more affordable car
While doing above, also provide zero emission electric power generation options
The original Tesla Roadster was released in 2008 to meet objective #1. Tesla then fulfilled objective #2 with the Model S in 2012 after they acquired the NUMMI factory in Fremont, CA from Toyota. The Model X was released in 2015 to expand the Model S with an SUV format. The Model 3 was released in 2018 to fulfill objective #3. The Model Y release in 2020 further expanded the Model 3 platform with a cross-over SUV format.
Total vehicle production was just under 500,000 units in 2020 with the addition of Giga Shanghai in China to increase unit volume production. Tesla is expected to hit a run rate of 1 million vehicles by early 2022 with the addition of Giga Berlin and Giga Texas. But this focus on scaling the Model Y and Model 3 production capacity beyond the first half of 2021 opened an opportunity to refresh the Model S and Model X vehicle designs and update their production lines at the Fremont, CA factory in the first half of 2021.
Model S success was critical for Tesla to become the first financially viable US automobile company since Ford Motor Company’s founding in 1903.
The Model S has been pivotal to Tesla’s success. Consumer Report rated the Tesla Model S P85D with a score of 100 out of a possible 100 points July 2015. (Note: A month later the score was revised up to 103 out of 100 points, but to be transparent Consumer Report no longer recommends the Model S due to suspension, body hardware and touchscreen issues. That likely contributed to the plan for a Model S refresh). Scaled Model S production was a critical bridge between the outsourced original Roadster’s low-volume production to the vertically integrated, high-volume, in-house production for the Model 3. But with Tesla’s success executing it’s Master Plan, the Model S design has remained relatively unchanged separate from software updates and adding more battery capacity to boost performance over its 9 year history and has experienced some recent quality issues as mentioned. The following figure shows how Model S vehicle deliveries peaked in 2017 at 54,715, but have trended down each year since then to 28,543 vehicles delivered in 2020.
Competing forces and threats to Tesla Model S product positioning and sales include:
Tesla Model X expands the Model S platform, but also competes for the luxury EV buyer that might be less concerned about performance.
Tesla Model 3 and Model Y compete with Model S at lower price points.
Production of Model 3 and Model Y on other continents will make these models more accessible globally.
Tesla’s future expansion into other market segments like pickup trucks (Tesla Cybertruck) and high performance sports car (new Tesla Roadster) offer more Tesla options.
Quality issues from potentially dated Model S component life cycles.
Market entry of EVs from competitors like the Porsche Taycan and Ford Mustang Mach-e.
What levers does Tesla have for a Model S product refresh? Tesla could update the Model S to achieve a superior performance metric. The Top 5 official quarter mile times for stock production vehicles are listed below. Notice these are all limited production vehicles with fewer units produced than even the original Tesla Roadster with about 2,400 units produced.
Tesla announced at its September 22, 2020 Battery Day a Model S refresh branded as the “Model S Plaid” with the release in late 2021. Tesla revisited the original Master Plan and decided to make an update to the 2nd objective in addition to executing the current Master Plan. The recent sequence of events include:
Jay Leno leaks news around June 3rd that he drove an official NHRA quarter mile time in a stock Model S Plaid at the Bakersfield Drag Strip with a time of 9.247 seconds at 152.09 mph.
Tesla updates its website on June 6th with new info on the Model S.
Dual motor Long Range base price is $74,490 including estimated savings, 412 mi range, 155 mph top speed, 3.1 sec 0-60 mph, estimated delivery Sept/Oct.
Tri Motor Plaid base price $114,490 including estimated savings, 390 mi range, 200 mph top speed, 1.99 sec 0-60 mph, quickest accelerating car in production today, 1/4 mile 9.23 sec @ 155 mph, 1020 hp, torque vectoring, estimated delivery June. (Note: price increased to $124,490 on June 10).
Tesla releases official NHRA quarter mile new world record time of 9.23 seconds @ 155 mph.
Elon Musk tweets on June 6, 2021 the Model S Plaid+ is canceled. Anticipated specs were base price $144,490 including estimated savings, similar performance as Model S Plaid, 500+ mi range, estimated delivery 2022.
The Perfect Power Curve for the 2021 Tesla Model S Plaid shows a linear increase in motor power and speed all the way to about 1020 hp and just under 60 mph for 0 to 60 mph performance in less than 2 seconds. And then Plaid basically holds 1000 hp all the way to 200 mph using 3 electric motors with carbon-wrapped rotors.
Tesla Model S Plaid vehicle deliveries started with June 10 event at the Tesla Fremont factory.
Does the Model S Plaid help accelerate the transition to sustainable energy?
Tesla’s Master Plans focus on continuously scaling unit volume production of EVs to reduce the cost of batteries and automate production according to Wright’s Law as previously discussed here. This allows Tesla to continuously reduce the price of current vehicles and offer lower priced models to drive adoption with a lower total cost of ownership relative to internal combustion engines. This race to lower priced vehicles is a key feature for a flywheel to continuously drive demand towards more sustainable energy. Tesla also announced at the September 2020 Battery Day a $25k economy model would be launched in the future using advancements in its battery design and scaled manufacturing. Key geographic markets (Asia, Americas, Europe) would likely have a unique design to help drive adoption.
However, price is not the only factor to drive demand. Why does the Volkswagen Group sell Porsche, Audi and Volkswagen? And why does the Volkswagen Group also support Porsche Motorsports? Because performance elevates the brand and matters to some buyers and key demographics. And not just to sell Porsche, but to also position Audi and Volkswagen in the marketplace when marketed effectively.
But Tesla is one brand with no public relations department. Marketing is primarily carried out by Elon Musk on Twitter with 56+ million followers. Tesla events are usually reserved to reveal or deliver new vehicle models. But with the Cybertruck, Tesla Semi and new Roadster release dates in the future, why not slot in a refreshed Model S now to boost the luxury performance sedan segment that has trailed off in recent years. And if that is the objective, anything less than a world record with the updated Model S would be a non-event. That was a product requirement. The Model S Plaid/Plaid+ had to beat 9.4 seconds in the quarter mile. And when the Model S Plaid achieved that goal for $30k less than the Plaid+, the Plaid+ was canceled. But more importantly, every Model 3 and Model Y produced now has a little more swagger. They are part of a brand that set a world record for a stock vehicle in the quarter mile. And a refreshed Model S allows any quality concerns with existing components to be addressed.
The future Tesla Roadster will provide even better performance with a top speed of over 250 mph for a current purchase price of $200k. This will be another low unit volume, high-priced performance EV to elevate the brand towards accelerating the transition to sustainable energy. But how can we further extend that transition with the existing product portfolio and brand?
Food production and its supply chain contribute to 26% of greenhouse gas emissions within the global ecosystem.
On May 27, 2021 Tesla filed a trademark application with the US Patent Office to use the Tesla brand for “restaurant services, pop-up restaurant services, self-service restaurant services and take-out restaurant services.” At first, this seems a bit like Porsche Design selling sunglasses and luggage, but the growing network of over 25,000 Tesla Superchargers present a unique opportunity for Tesla and its mission to accelerate the transition to sustainable energy. In many locations, these Superchargers will continue with 8-10 units co-located with other businesses, but in some key areas like southern California and Las Vegas, Superchargers could be designed as a stand alone Tesla destination.
These destinations could consist of Tesla solar panels to generate electricity, Tesla Megapacks to store electricity, 50+ Tesla Superchargers to charge EVs with this microgrid electricity and other complementary services for travelers. Adding restaurants allows Tesla to test and iterate various food concepts for different customer experiences. Once Tesla builds adequate demand for restaurant services in a region, it could then expand into sustainable energy and food sources to produce and supply key food ingredients for these Tesla restaurants and a network of other participating restaurants in the region.
Tesla is uniquely positioned to accelerate the transition to sustainable energy beyond its core business of manufacturing and selling electric vehicles. Converting the fleet of 1 billion hydrocarbon fueled vehicles is a key objective. Recharging more of these vehicles with sustainable energy is another objective. But looking beyond this immediate ecosystem to adjacent ecosystems is additional upside. Strategically located restaurants to serve the growing number of Tesla EV owners who travel from time to time for business and leisure can further influence their decisions around energy generation, storage and consumption. And sustainable energy and sustainable food sources for what we eat elevates a broader scope altogether for a brand, its products and society at large.
I expect Tesla to experiment in this food area to see where they can make a positive contribution just as they investigated building underground tunnels before founding the Boring Company. The Vegas Loop recently launched with human drivers in about 60 Tesla vehicles and is expected to start transporting passengers with full autonomy EVs later this year through underground tunnels in Las Vegas starting just at the convention center, but will expand to major hotels and the airport. Tesla is not just a car company. They will compete with Apple and Amazon in the future for the top global brand.
Best,
Stephen
Nothing in this post is intended to serve as financial advice. Do your own research. I’m long TSLA.