Tesla Motors (NASDAQ:TSLA) is not always an easy stock to own. The real-money position I started in the summer of 2014 is barely breaking even two years later. Seven months ago, my shares temporarily lost 27% of their value as investors worried about the upcoming fourth-quarter report.
But Tesla's stock recovered quickly from that deep well, and I'm as committed as ever to the long-term value of this oft-misunderstood stock. Why? Because the company recently outlined the next decade or so of its core operations, and it's a mighty forward-thinking vision.
The old plan
Tesla investors should already be familiar with CEO Elon Musk's original "secret master plan," first published in 2006.
In it, Musk explained that electric cars were just a temporary business plan. These vehicles, starting with a pricey roadster and then expanding to lower-cost but higher-volume productions, would simply raise capital and generally pave the way toward a larger ambition:
[The] overarching purpose of Tesla Motors (and the reason I am funding the company) is to help expedite the move from a mine-and-burn hydrocarbon economy toward a solar electric economy, which I believe to be the primary, but not exclusive, sustainable solution.
So, in short, the master plan is:
Build 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
So, if you thought Tesla's long-term aim was to beat Toyota Motors (NYSE:TM) and Ford (NYSE:F) at their own vehicular production game, you're missing the point. Tesla only wants to sell enough cars to be able to finance the next stage of a global energy makeover.
The cars had to be excellent, in order to encourage the likes of Ford and Toyota to follow suit into a gas-less transportation model. But dominating the car market was never the end game, here.
The new plan
A decade later, Musk revisited the old not-very-secret plan and sketched out the second stage.
"The point of all this was, and remains, accelerating the advent of sustainable energy, so that we can imagine far into the future and life is still good," Musk wrote. "That's what 'sustainable' means. It's not some silly, hippy thing -- it matters for everyone."
The first stage was described as close to completion. The last step of stage one would presumably be the launch of the reasonably affordable Tesla Model 3 in 2017. That's the high-volume passenger car that will carry the rest of Tesla's electric ambitions -- arguably to the end of the line. To wit:
"A lower cost vehicle than the Model 3 is unlikely to be necessary, because of the third part of the plan described below."
Sticking with Elon's presentation format, here's Tesla's "master plan, part deux " in a nutshell:
Create stunning solar roofs with seamlessly integrated battery storage
Expand the electric vehicle product line to address all major segments
Develop a self-driving capability that is 10X safer than manual via massive fleet learning
Enable your car to make money for you when you aren't using it
There's nothing in there about developing even cheaper passenger cars under the Tesla brand. Instead, Musk wants to extend his electric transportation designs to new markets such as buses and heavy-duty trucks. Both are already in development, and Tesla should present its first efforts in 2017.
Tesla cars will get better, though. Self-driving features are seen more as an important safety feature than a convenience item. The U.S. Department of Transportation largely agrees, hoping to get fully automated cars on American roads as early as 2020. Removing human error from the driving experience could reduce the accident count by as much as 95%, saving more than 30,000 American lives every year. That's the game-changing "third part" of Tesla's plan, removing the need to create more low-cost car models.
Autonomy dovetails neatly into the fourth piece of the plan, which could let every owner of a self-driving car rent the vehicle out at any time. We're talking about an army of Uber-style rides, provided by both private car owners and corporate fleets. Your car can be out there earning some cash on your behalf while you sleep, study, or work.
And of course, we skipped over the very first and most important piece of the new long-term plan, which remains focused on alternative energy. Solar roof panels everywhere with integrated high-capacity batteries, selling power back to the grid when that makes sense, and charging your Tesla car straight from this pollution-free solar feed. This is still the very core of Elon Musk's true vision, which includes starting a human colony on Mars with the help of solar-powered tools.
But I guess we'll hear more about that stage in 2026.
The big takeaway
Musk may be dreaming big, but he's also bringing a practical approach to this huge vision. How many entrepreneurs have built a 30-year plan to explore other worlds, complete with in-house rocketry and a worldwide power revolution along the way?
Better battery technologies are coming, and Tesla should be prepared to tap into this important research. The so-called Gigafactory is only one small step toward a more robust energy storage infrastructure.
Meanwhile, car makers in Detroit and Japan are taking Tesla's bait. Ford is spending $4.5 billion to come up with 13 "electrified vehicles" by the year 2020. Toyota doesn't like heavy batteries, but it's putting its back into electric vehicles powered by fuel cells instead. Nearly every major car company is exploring both electric drivetrains and self-driving platforms.
You may call that trend a threat to Tesla's car sales, but you'd be missing the point.
This is exactly what Elon Musk wanted to happen all along. It's not about muscling out the Corolla and the F-150, but about changing the way American and the world think about vehicles. And then the oil wells can dry up, because we won't need them anymore.