Tesla CEO Elon Musk has unveiled a new master plan for his company in a blog post titled “Master plan, Part Deux.”
In the newly revealed road map, the Silicon Valley tycoon announced plans to introduce a new compact SUV and a new pickup truck.
In the process, the company is marching head-on into the most competitive segment — compact SUVs — and the most territorial segment — pickup trucks — in the US auto market.
But Musk’s decision to do so makes sense. In the blog post, the Tesla CEO cited his desire for the company’s products to reach a greater swath of the automotive market than luxury sedans and premium SUVs.
With the addition of these two models, Tesla would indeed achieve that goal.
Compact SUVs make up the single largest segment in the US auto market with more than 2.9 million vehicles of the type sold in 2015. Last year, compact SUV sales grew more than 20% compared to 2014 and that growth has continued into 2016. However, the strength of the segment also begets the high-pressure competition that exists within it.
Models such as the Toyota RAV4, Honda CR-V, Ford Escape, and Nissan Rogue dominate the market by offering great utility and rock-solid reliability at a reasonable price.
It’s also a segment seldom frequented by electric automakers. The only compact SUV in recent memory to reach the mass market was the Toyota RAV4 EV and was discontinued in 2014. Coincidentally, the RAV4 EV was actually powered by Tesla’s battery and electric drive systems. So, in that respect, Tesla has been here before.
In addition, the compact SUV will, in all likelihood, be built on the same platform as the $35,000 Model 3 sedan. Since Musk confirmed in his new master plan that a car cheaper than the Model 3 will be unlikely, the new compact SUV will be priced higher than most mass-market offerings.
However, none of the mass-market SUVs have Tesla’s brand caché. Considering the type of demand Tesla has seen for the Model 3, Tesla will likely have no problem finding buyers for its compact SUV.
Pickup trucks
The pickup truck is one of the great symbols of Americana. As a result, they are big business in the US. Americans bought more than 2.5 million pickup trucks last year — which translates to more than 16% of all passenger vehicles sold. For that reason, American truck-buyers are fiercely territorial with the market neatly carved up by Ford, GM, and RAM. For the last couple of decades, Nissan and Toyota have tried desperately to gain traction in this segment, but have, thus far, not made much headway.
In 2015, Ford sold more than 780,000 F-Series trucks in the US — commanding roughly 36% of the full-size pickup truck segment. Toyota, the best performing brand not from Detroit, sold just 119,000 full-size Tundra trucks — which translates to about 5% of the segment.
Ford and Chevrolet tried out all-electric versions of their respective Ranger and S10 compact trucks in the late 90s with not a whole lot of success. Since the Ranger EV and the S10 EV were put out to pasture, the electric truck segment has been a very quiet neighbourhood for the last 15 years.
It will be interesting to see Tesla’s approach to the pickup truck. Although its ultra-torquey electric drivetrain is perfect for towing, it remains to be seen if Tesla will actually build a bonafide truck. The company could opt for a crossover-truck mashup in the realm of a Honda Ridgeline or a car-truck combo such as the cult classic Chevrolet El Camino.
In statement to Business Insider, Kelley Blue Book analyst Akshay Anand wrote,
“Elon Musk has laid out a grand plan, but it’s all in the execution for Tesla. There are plenty of lofty goals, and with them, come items such as cash burn, production, etc. First off, Model X issues need to be solved. Second, Tesla needs to deliver the Model 3 on time and reliable. Third, the Model 3 needs to sell to enough consumers to make the rest of Musk’s plan feasible. It’s awesome that Musk is really thinking about the future, but acting out the plan will be an interesting challenge.”
Anand is right. At the end of the day, Tesla will have to tackle its immediate challenges such as ramping up production and delivery of the Model X. At the same time, the company has to finish development and ramp up delivery of the Model 3 as well. Only then, can Tesla dive into the Musk’s new master plan.
This story was originally published on Business Insider Australia.