Harari wrote in A Brief History of Mankind: "There is an important relationship between major changes and the lives of individuals. This also applies to the behavioral characteristics and connections exhibited by Musk and his two companies, Tesla and Space X.
Recently, CNBC reported that Tesla's Shanghai factory removed one of the two electronic control units in the bogies of some domestic models, involving tens of thousands of new cars delivered in China and the European market.
The removal of the steering column control unit may seem trivial, but behind this behavior, there is a vague connection with Musk's grand cause of space exploration and colonization of Mars.
Pledged shares
"If investors start to worry about Tesla's ability to meet earnings expectations, the company's rising stock price could be hit hard."
This was in early December 2020, when Musk warned employees in an internal letter that there could be potential risks to the company. At the time, Tesla's global employees were working overtime to impact new performance.
The results of the effort are clear. In Q4 2020, Tesla delivered 180,700 new vehicles, up 61% year-on-year, while the cumulative delivery of 499,600 vehicles for the whole year exceeded Wall Street's expectation of 18,000 units, a sharp increase of 36% year-on-year.
Rapidly growing deliveries spurred investor confidence, and the stock price continued to rise. On January 29, 2021, Tesla touched $900.4 per share intraday, setting a new high since the company went public.
Musk didn't stop the script, and Tesla didn't stop growing. At the shareholders' meeting, Musk pledged to "be confident that it can maintain at least 50% delivery growth rate and achieve 20 million annual deliveries by 2030."
The commitment has been recognized by the capital market. In the following period, the stock price continued to rise, and hit a record $1243.49 per share in the intraday on November 5. Musk has secured the throne of the world's richest man.
For sudden wealth, Musk is not an idealist, but a pragmatist. He knew that wealth on paper was neither reliable nor practical, so he somehow turned paper wealth into cash.
According to data released by Forbes, as of October 31, 2021, its net wealth was $292.6 billion, mainly from the 21% stake in Tesla. However, more than half of them are used by him as mortgages.
This was confirmed by Musk. He said on Lex Fridman's podcast show that I used my stock to get a mortgage.
It's not hard to imagine where huge mortgages are going. In addition to Tesla, Musk has another well-known company, Space X. Compared to Tesla, Space X is obviously more cash-burning and lacks financing capabilities.
In his latest speech at Starbase City, Texas, Musk revealed that 50 launches are planned for 2022. And each launch will cost more than $10 million, which means burning $500 million in this alone.
In addition, Musk also plans to "produce one starship per month, and eventually one every three days", carry out the first orbital flight, build a maritime spaceport, carry out a NASA lunar mission and build a "self-sufficient city" on Mars, and these grand ambitions mean huge amounts of money.
In contrast, Space X's equity financing is too much of a drop in the bucket. According to foreign media statistics, since the establishment of Space X in 2002, the company has raised 51 rounds of financing and raised $6.6 billion. This means that the full equity financing can only cover the cost of launching for one year. So where does the huge amount of money that underpins Space X come from?
From price reduction to allocation reduction
Space X's vastly disparate equity financing and operating costs give us reason to believe that Musk has tied the fates of himself and Space X and Tesla to each other. "If Tesla goes bankrupt, I'll go bankrupt immediately." In an interview with Lex Fridman, he said so.
Because of this, Musk must maintain Tesla's market value to ensure a steady stream of blood transfusions for Space X's money-burning projects, and the key to maintaining Tesla's market value is to expand delivery, reduce manufacturing costs, and improve profitability.
In order to expand deliveries, Tesla has built new factories and expanded production capacity around the world. At the end of 2021, the Berlin plant has started pre-production equipment testing, and the total production capacity of the California plant and the Shanghai plant has been expanded to 1.05 million units.
"We plan to increase capacity as quickly as possible, not only from new plants such as Austin and Berlin, but also from existing plants such as Fremont and Shanghai. We believe that the market competitiveness of electric vehicles will be determined by their overall supply chain and production ramping capabilities. Tesla said in its 2021 earnings report.
Reducing manufacturing costs is also one of the important tasks. In Q3 and Q4 of 2021, Tesla's bicycle cost has dropped to $36,000, and the operating profit margin has reached 14.7%, which has surpassed BMW, Daimler, General Motors and other auto giants to become the world's most profitable car companies.
However, Tesla didn't stop there. In its 2021 earnings report, Tesla said it firmly believes that we can further solve the cost problem by manufacturing innovative, well-planned products and factories. Manufacturing innovations include large castings, structural battery packs, 4680 batteries, and more.
In September 2020, Tesla released the 4680 electrodeless ear battery. Compared with the 2170 battery, the energy density of the 4680 battery will be increased by 5 times, the cruising range will be increased by 16%, and the battery power output will be increased by 6 times. What's more, manufacturing costs can be reduced by 56%.
At the same time, Tesla announced that it will use a one-piece die-casting post-floor assembly, which will be the general term of the original stamping and welding of parts. Compared with the previous manufacturing process, the one-piece die casting process can reduce 70 parts and reduce manufacturing costs by 40%.
However, the contribution of production process innovation to cost reduction is slow. More than a year after the release of the 4680 battery, in February 2022, Tesla battery supplier Panasonic announced that it would "produce a 4680 battery on a trial basis in April". It is conceivable that from trial production, mass production to loading, the 4680 battery still has a long way to go.
At the same time, rising raw material prices, chip shortages, and subsidies have posed new challenges to Tesla, seriously threatening the business strategy of reducing costs and prices. Since Q3 last year, Tesla has raised its price in China for five consecutive times, of which the Model 3 rear-drive version has been raised from 235,900 yuan to 265,652 yuan, an increase of nearly 13%.
In a harsh environment, Tesla inevitably made some short-term behaviors. In May 2021, Tesla removed the front passenger seat waist support for the Model 3 and Model Y models. In November 2021, some Tesla owners reported that the new vehicle has no USB interface in the inner control and rear row, and only reserves the hole. In response, Tesla said that it is expected to start re-installing the USB interface in December.
From the continuous reduction of the price of the vehicle, to the reduction of waist support, USB interface, steering column control unit, tesla's behavior seems to be independent of each other, but in fact it is closely related. Their goal is to expand deliveries and improve operational capabilities to maintain Tesla's stock price and secure Space X's imaginative, money-burning projects.
"Going out, being a multi-planet species, being a civilization carrying space, and making science fiction never a novel, I think that's what excites me the most." In a speech at Starbase Star City, Musk emotionally revealed his heart. And this can also be seen as the logical starting point for the entire behavior of this tech maniac.