Tesla Motors CEO Elon Musk just concluded the annual Tesla Shareholders meeting for 2014. As in previous years, it was the Q&A session that was most interesting, with Musk revealing some tidbits that perhaps hadn’t been said elsewhere, and generally answering concerns currently floating around the fate of Tesla Motors.
Here’s a brief rundown of his answers:
Fiduciary duty versus public benefit: Typical corporations in America have fiduciary requirements to maximize shareholder value. That ends up with a lot of crazy stuff being done in the name of that requirement. The questioner asked how does Tesla Motors balance between the public benefit goal of maximizing the adoption of electric cars, with Tesla’s continuation as a corporation?
Obviously, if other automakers were to become as gung-ho about electric vehicles as is Tesla Motors, that would mean Tesla had succeeded in the goal even if that meant Tesla as a corporation failed.
It made me think about whether Tesla Motors should become a B Corporation. Public Benefit corporations in order to have an additional goal to the fiduciary duty to shareholders, and that is to serve the benefit of all stakeholders. Tesla’s strategy seems to border on what a B Corporation would do. However, it’s not clear that Tesla is doing all the things B Corporations do – for example, maintaining proper work/life balance is something a B Corporation must do, because a big stakeholder is the employees.
Toyota deal: The press is currently full of the idea that Tesla and Toyota have abandoned their partnership. What Elon Musk said is that the companies had reached the end of the RAV4 EV program, and that Toyota desired to make a deal with Tesla for a higher volume electric car, but Tesla Motors is currently production constrained. Therefore, the two companies cannot move forward on a new car until Tesla can address the production constraints that’s limiting Model S production.
Constraints: Several times Musk talked about constraints, that Tesla is Production Constrained and not Demand Constrained. The company has more demand for the Model S than they have production capacity. Musk has talked about this before.
I’ve seen news items bemoaning a supposed drop in Model S sales. From my understanding there’s two parts to this – a) production constraints limiting their ability to ramp up – b) they’re filling the delivery pipeline for sales overseas in Europe, China, England, Australia, etc. It means the production they can build are being sent not just to North America but all these other places.
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Model E brand name: Tesla recently abandoned the Model E brand name for the Gen 3 Affordable Volume Production Electric Car. Apparently Ford Motors offered to sue Tesla over that name. They’re planning to unveil the brand name “soon”.
Lathrop Facility: I’m happy to say my guess about the Lathrop facility was correct – that the purpose was to offload manufacturing of parts so that the Fremont factory can focus on building cars. What’s new is that Musk described that facility as one of several they’re building in the “Stockton Area”, all with the same purpose in mind.
I’ve seen other reports suggesting the Lathrop facility instead was for far-out skunkworks R&D. That line of thinking is wrong.
Gigafactory locations: I, and apparently others, have been confused from Tesla’s statements about the Gigafactory. If they’re building one factory, then why would they be breaking ground in multiple locations? The way Musk has described this in other occurrences, Tesla is playing off multiple states in order to get the best deal and the highest likelihood of actually setting up the factory.
However, during his answer Musk said “Gigafactory 1”. I’ve been assuming Tesla would only be building one Gigafactory, but this name (“Gigafactory 1”) is a clear signal they plan multiple Gigafactories.
Gigafactory to be capable of switching anode & cathode quickly: There’s always new announcements of battery technology that’s going to revolutionize the electric car. Usually, however, those announcements show a researcher in a lab holding up a button cell and they haven’t figured out how to scale the idea to mass volume production. In any case, the concern is whether Tesla Motors would be painting themselves into a corner by building a Gigafactory to produce one kind of cell, and another kind of cell comes along which blows them out of the water.
Elon Musk said that in the Gigafactory, they’ll be able to adopt new anode and cathode material rapidly. In fact, they plan on iterating anode/cathode material rather than standing still.
What’s after Gen3 car – trucks: Okay, the Gen3 car will happen, they’ll knock it out of the park, then what? Musk talked about the kind of vehicles which might make sense – such as Trucks. By the time Tesla gets around to trucks they might find a crowded space. But it’s interesting to think of the ultimate direction for Tesla Motors. Does the company have a role to play as a full fledged car company manufacturing vehicles in every category?
Upgrade to Roadster: Roadster owners are probably looking jealously at the advancements in the Model S. Especially because the P85+ Model S can smoke the Roadster despite being such a bigger car. Musk promised an upgrade to the Roadster by the end of the year.
A successor to the Roadster in a few years: He also promised a successor, in a few years. Obviously though the company needs to focus on launching the Model X and the Gen3 car.
Staying as CEO until at least Gen3 car launch: Another concern about Tesla’s viability is whether Elon Musk should remain as CEO, whether he personally has the bandwidth or work/life balance to be the CEO of two companies at once, and whether Tesla Motors would be better or worse off with another person in the CEO chair. Musk answered that he didn’t want to be the CEO, but there was a period during the dark time when he had to take the role for the company to survive. Since then he’s made promises to investors that he’ll stay in the CEO chair until the Gen3 car is launched.
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