Tesla could press China joint venture in 2017, but face headwinds in Trump’s America

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PUBLISHED : Friday, 30 December, 2016, 7:03pm
UPDATED : Friday, 30 December, 2016, 7:02pm

Tesla started 2016 as a maker of electric cars that had branched out into energy storage. By the end of the year, Elon Musk’s company has become a carmaker, an energy company, the builder of a massive battery factory in Nevada, and a solar company through its acquisition of SolarCity.

Tesla was also on track to delivery about 80,000 vehicles in 2016, more than ever before. So it was a big year. But 2017 will be even bigger. Here are some of the major innovations Tesla has in store for the year ahead.

Launch of the Model 3

Tesla’s mass-market vehicle, which will be priced at around US$30,000 in the US after tax breaks and will serve up 200 miles (322km) of range on a single charge, is scheduled to launch in late 2017. There’s scepticism about whether Tesla will be able to meet that goal, but the Model 3 should be far easier to build than the delayed Model X SUV was.

Make no mistake – this is Tesla’s most important execution point of the entire year. Bringing in the Model 3 on time will vindicate Musk’s promises, vision and ambitions. The vehicle will also enable Tesla to start fulfilling the nearly 400,000 pre-orders that have come in for the vehicle. Interested buyers put down US$1,000 each to reserve a Model 3.

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Solar roof

The first important product from the SolarCity tie-up will be the solar roof. Effectively, it will turn an entire roof into a giant, durable solar panel. It will also likely be an expensive product. But it will feed into Tesla’s other products – and provide Tesla with a way to free SolarCity from its current leasing model, moving towards selling solar solutions rather than loaning them out.

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More Superchargers

Tesla is changing the way it manages its Supercharger network. It eliminated free access for new owners in 2016, and it introduced an idle fee for owners who leave their vehicles parked too long at a Supercharger station after fully recharging.

The objective is to make the Superchargers the standard for long-distance trips while encouraging owners to do their regular recharges are home. Tesla is likely to expand its worldwide Supercharger network, especially in China, where the company has at times struggled to convince prospective owners that “range anxiety” isn’t a problem with Teslas.

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Joint venture in China

Speaking of China, it’s one of Tesla’s largest potential new markets. But at the moment, the carmaker has to import all its vehicles, which cuts into profitability.

The way to change that is to set up local manufacturing, which in China can be done only through a joint venture with a Chinese firm. Some might worry that this would compromise Tesla’s technology, but the company has already open-sourced its patents, so it’s not much of a concern.

Look for Tesla to get aggressive about a Chinese joint venture in 2017.

“Alien dreadnought” factory and doubling of production

Earlier in 2016, Musk addressed questions about Tesla’s uneven production capabilities by saying he wanted to focus on being one of the best manufacturers in the world. Part of that plan appears to be a radical reinvention of what’s known as “vertical integration” – in essence, a manufacturer making everything that goes into its products.

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Henry Ford built his business with this approach, but for the past four decades, vertical integration has been replaced in the car industry by “just in time”, or “lean”, production, with a manufacturer managing a complex supply chain and running minimal inventories. Toyota pioneered this approach, and it’s been widely emulated.

Musk seems to want to go back to vertical integration. His idea is to transform Tesla’s factory in California so significantly that you wouldn’t recognise it – it would resemble an “alien dreadnought”. Musk thinks that to achieve Tesla’s bold target of 500,000 vehicles delivered annually by 2018, a lot more automation will have to enter the picture. He’s kept his ideas about this under the radar, but expect them to burst into view in 2017.

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More Autopilot

Autopilot was being improved mainly through software updates, but in 2016, Tesla began to push the envelope on hardware. The company now thinks of hardware and software releases as being similarly iterative, with “Hardware 2” now being installed in new Teslas. As the big story in the car business has shifted from electric cars to self-driving vehicles, we can expect Tesla to double down on its Autopilot advantage, even as it continues to deal with the aftermath of a fatal Autopilot-related Tesla crash last May.

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A new Roadster

Tesla has been hinting that it will update its first vehicle, the no-longer-available Roadster, with a new model. I’d expect 2017 would be a good year to begin showcasing some possible designs. This would energise the Tesla base and, for what it’s worth, add a proper sports car to the lineup – which, if all goes according to plan in 2017, will include the Model X SUV, the Model S sedan, and the Model 3 in a sedan and maybe a crossover version.

Model Y

Speaking of a crossover Model 3, it’s rumoured to be called Model Y.

We already know what the Model 3 sedan will look like, and Tesla’s goal all along has been for the Model 3 to be a platform on which different types of vehicles can be built. As we get close to a Model 3 launch in 2017, we will almost certainly start to see designs for, and perhaps even a prototype of, the Model Y.

The Trump factor

Musk has reportedly joined US president-elect Donald Trump’s business council, but there are no two brains on Earth that are more different.

Beyond that, however, a Trump White House and executive branch may not be all that receptive to Musk’s grand vision of accelerating the end of the fossil-fuel era. It also remains to be seen whether incentives to support electric cars in the US will continue under Trump, not to mention clean-energy initiatives pressed forward by President Barack Obama.

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“Master Plan, Part Trois”?

It took Musk 10 years to update his original “Master Plan” with last year’s “Master Plan, Part Deux”. But the world seems to be moving faster now – and Tesla could quintuple in size by 2018. So Musk may undertake more frequent updates.

Maximum Plaid?

When Tesla introduced Ludicrous Mode for its Model S, a feature that yields supercar-beating acceleration, Musk joked that the only thing faster would be “Maximum Plaid”. Both terms are references to Mel Brooks’ 1987 Star Wars spoof, Spaceballs.

Ludicrous Mode keeps getting more ludicrous, so 2017 could be the year to unleash Maximum Plaid.