In a response to a tweet on Monday, Tesla (NASDAQ:TSLA) CEO Elon Musk revealed some insight into the company's longer-term vehicle sales volume aspirations. As if Tesla's target for a vehicle production rate of 500,000 units in 2018 and 1 million in 2020 isn't already big enough, Musk may be thinking about what it would take for Tesla's total vehicle sales to eventually rival one of the world's most established automakers: Ford.
The path to nearly 7 million vehicles per year
Asked on Twitter how many factories it would take for Tesla to duplicate Ford's global production of close to 7 million vehicles annually, Musk said it would take just four to five.
Probably closer to four or five factories. Logistics costs mean you want to be close to the end customer.— Elon Musk (@elonmusk) June 5, 2017
In a follow-up tweet in which Musk said the factories would have a very high headcount, despite much greater manufacturing automation, Musk clarified that the factories he was referring to are Tesla's upcoming Gigafactories. While Tesla's Gigafactory today is primarily aimed to support battery production, Musk said future Gigafactories will produce everything -- from battery cells to full vehicles.
Notably, given that Tesla has already said it is planning to finalize locations for two to four more Gigafactories by the end of the year, Musk may already be carefully mulling over plans for achieving Ford's production volume.
Tesla's existing Gigafactory 1, which is still undergoing expansion in Nevada, will be able to support battery production for up to 1 million units, Tesla has said. So, between Gigafactory 1 and Tesla's factory in Fremont California, Tesla believes it can take vehicle production from a rate of about 100,000 units annually today to 1 million units by 2020.
Refocusing engineering talent on manufacturing
Last year, Tesla began to shift its focus toward manufacturing. "Tesla is going to be hell-bent on becoming the best manufacturer on earth," Tesla CEO Elon Musk said in the company's first-quarter earnings call in 2016.
Tesla has continued in this direction. Musk went into more detail about its vision for manufacturing in the company's first-quarter earnings call in 2017: "I think in the future, the factory will be a more important product than the car itself. ... I think we're making good progress in that direction."
To build this many vehicles in such few factories, Musk has said Tesla will focus on the speed of the production line by subsequently deploying new and more advanced versions of these production lines. Musk explained this vision for iterations of what he calls the "machine that makes the machine" in Tesla's second-quarter earnings call last year (via a Reuters transcript):
[T]he internal name for the designing machine that makes the machine is the, we call it the alien dreadnought. The point at which the factory looks like an alien dreadnought, then you know you've won. It's like, what the hell is that? So alien dreadnought version 0.5, will be Model 3. It will take us another year to get to version 1 and probably a major version every two years thereafter.
By version 3, it won't look like anything else. It might look like a giant trip second place machine or a super-high-speed bottling or canning plant.
Investors, of course, shouldn't count on Tesla's vision for reinventing vehicle manufacturing to play out as optimistically as Musk hopes it will. But it's interesting that the CEO is apparently already brainstorming about the shortest and most efficient path to becoming one of the world's largest automakers.