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Tesla's New Master Plan: Everything You Need to Know About Elon Musk's Wild, Futuristic Vision

Elon Musk. Image source: Tesla Motors.

About 10 years after Tesla Motors (NASDAQ: TSLA) CEO Elon Musk released his first "master plan," which laid out his vision for the electric-car maker, the CEO is back with part two. Detailing a vision for solar-roof-with-battery products, a Tesla semi, self-driving cars, a ride-sharing service, and more, this master plan is no joke. This overview will get you up to speed.

But first, here's a look back at Musk's original plan for some context:

Part 1: Becoming an auto manufacturer

When Tesla unveiled its "secret master plan" in 2006, there was little reason for anyone to take Tesla very seriously. At the time, it was hardly a business. Indeed, it was more of a research and development company than a vehicle manufacturer. Tesla hadn't yet delivered a single vehicle.

But despite the seemingly impossible task ahead of it to begin selling a high-end, fully electric sports car, Musk had a bigger vision than becoming a niche manufacturer of electric sports cars for celebrities.

Musk summed up part one of the plan like this:

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 

Sure enough, Tesla has followed through on this plan, executing at a ferocious pace. The company survived the Great Recession, went public in 2010, completely paid off a $465 million Department of Energy loan nine years early, and has expanded annual vehicle production to more than 50,000 units. And Tesla recently even went beyond manufacturing vehicles, introducing its own energy storage products and building the world's largest battery factory.

Deliveries of Tesla's newest vehicle, Model X, are on a trajectory to rival its Model S sales. Image source: Tesla Motors.

Currently, Tesla is executing on the tail end of its first master plan. It unveiled its "even more affordable car," its Model 3, in March, garnering an astounding 373,000 deposit-backed reservations for the vehicle as of last count, ramped up sales of its energy storage products, offered to acquire SolarCity (NASDAQ: SCTY) as part of its plan to integrate solar panels and energy storage into a single product, and announced a plan to double down on its production plans, moving back its timeline to achieve a 500,000-vehicle annual build rate from 2020 to 2018.

Part one was undoubtedly ambitious -- and it's difficult to criticize how well the company has executed on it in such a short time. But part two arguably dwarfs part one in scale, reach, and vision.

Part 2: Getting futuristic

In part two of Tesla's master product plan, the company envisions a far more expansive business, including:

  • Integrated solar-roof-with-battery products
  • Vehicle types to "address most of the consumer market," including a compact SUV and "a new kind of pickup truck"
  • Two types of commercial electric vehicles, including a semi and high passenger-density urban transport
  • Self-driving cars
  • A ride-hailing service made of self-driving Teslas, including a way for Tesla owners to enable their vehicles to participate -- essentially allowing owners to monetize their vehicle without them in it.

Here's a closer look at the most interesting tidbits from the plan, along with some relevant background.

Going solar: In the past, Tesla has clearly voiced interest in zero-emission electric power generation solutions. But given that Musk is also the chairman of publicly traded SolarCity, it was unclear whether Musk wanted to keep this portion of his vision for the future separate. However, after launching its own energy storage products in 2015 and making an offer to acquire SolarCity last month, Tesla is apparently determined to participate in the solar industry.

In Tesla's new master plan, Musk envisions an integrated solar and battery product that could take customers off the grid.

Create a smoothly integrated and beautiful solar-roof-with-battery product that just works, empowering the individual as their own utility, and then scale that throughout the world. One ordering experience, one installation, one service contact, one phone app.

Musk confirmed in the new plan that the separation of Tesla's master plan into two companies was "largely an accident of history."

New consumer vehicles: Today, Tesla sells vehicles in two small segments: premium sedans and SUVs. But Musk says the company will "address most of the consumer market." Its $35,000 Model 3, which is scheduled to begin its first deliveries late next year, is only the beginning. Tesla also plans to bring to market a compact SUV and "a new kind of pickup truck."

To be able to successfully sell a range of higher-volume, more affordable vehicles, Tesla is aiming to rethink vehicle manufacturing from the ground up.

What really matters to accelerate a sustainable future is being able to scale up production volume as quickly as possible. That is why Tesla engineering has transitioned to focus heavily on designing the machine that makes the machine -- turning the factory itself into a product.

Musk believes the company can improve automotive production methods five- to tenfold by the third version of its "machine that makes the machine." Tesla would iterate on subsequent versions roughly every two years, he explained.

Ahead of Tesla's first high-volume vehicle -- Model 3 -- production is already the No. 1 priority. Musk said, "The first Model 3 factory machine should be thought of as version 0.5, with version 1.0 probably in 2018."

Self-driving cars: Following a recent fatal crash that occurred while Tesla's Autopilot technology was enabled, Musk reaffirmed Tesla's commitment to aggressively move toward self-driving vehicles.

Tesla's Autopilot technology currently includes automatic steering on divided highways, automatic lane changes, adaptive cruise control, and emergency braking. Image source: Tesla Motors.

"As the technology matures, all Tesla vehicles will have the hardware necessary to be fully self-driving with fail-operational capability," Musk said, "meaning that any given system in the car could break and your car will still drive itself safely."

Musk has previously said he believes its cars could have self-driving capabilities by 2018 or 2019, but he has also emphasized that regulation will lag technology.

A Tesla Semi and passenger urban transport: Tesla's new master plan marked the first confirmation from the company that it is moving into commercial vehicles. What's more, these new vehicles are actually already in the early stages of development and "should be ready for unveiling next year," the plan states.

"[T]he Tesla Semi will deliver a substantial reduction in the cost of cargo transport, while increasing safety and making it really fun to operate," Musk said.

As far as the development of the "high passenger-density" vehicle for urban transport, Tesla imagines significant achievements:

With the advent of autonomy, it will probably make sense to shrink the size of buses and transition the role of bus driver to that of fleet manager. Traffic congestion would improve due to increased passenger areal density by eliminating the center aisle and putting seats where there are currently entryways, and matching acceleration and braking to other vehicles, thus avoiding the inertial impedance to smooth traffic flow of traditional heavy buses. It would also take people all the way to their destination. Fixed summon buttons at existing bus stops would serve those who don't have a phone. Design accommodates wheelchairs, strollers and bikes.

A ride-hailing service: After self-driving software is "highly refined and far better than the average human driver" and self-driving cars are approved widely by regulators, Tesla will deploy a ride-hailing service that will allow its owners to participate, Musk said.

You will also be able to add your car to the Tesla shared fleet just by tapping a button on the Tesla phone app and have it generate income for you while you're at work or on vacation, significantly offsetting and at times potentially exceeding the monthly loan or lease cost.

Meanwhile, Tesla will operate its own feet of vehicles "in cities where demand exceeds the supply of customer-owned cars."

Musk summarized the overall part two of his master plan like this:

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

Tesla Fremont Factory. Image source: Tesla Motors.

It's the action -- not the vision -- that matters

While Tesla's new master plan will undoubtedly guide the company's actions in the future, it's difficult to tell what this bold vision means for the stock today. As Musk said about its first master plan, it simply served to explain how Tesla's "actions fit into a larger picture, so that they would seem less random." Investors should think of this plan in a similar way: It's less of a material event, and more of a backdrop for informing the company's future execution.

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Daniel Sparks owns shares of SolarCity and Tesla Motors. The Motley Fool owns shares of and recommends SolarCity and Tesla Motors. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.