A Tesla executive laid out the company’s next 5 years at an invite-only conference

Tesla executive Martin Viecha just took investors through the company’s next 5 years, explaining which trends and metrics matter most, and what to expect when it comes to a cheaper electric vehicle, a robotaxi service, and other potential future products.

As Tesla’s head of investor relations, Viecha was speaking during the invite-only Goldman Sachs tech conference in San Francisco on Monday. A person who attended the event shared with Insider details of his wide-ranging talk.

The executive started by focusing on two big-picture topics that are crucial for Tesla and the EV industry over the next 5 years: battery supply and technology, and the cost of making vehicles.

He said the industry will ultimately grow as fast as battery supply. This will impact areas such as the building of cells and battery packs, but also battery design and the mining and refining of lithium, nickel and other raw materials.

‘A third revolution in automotive manufacturing’

Viecha stressed that the per-vehicle cost of manufacturing is the most important metric to monitor in coming years, saying this is the ultimate determinant of how many cars companies can make and how big you can become.

In 2017, it cost Tesla $84,000 to make each car. That’s down to $36,000 per vehicle in recent quarters, the VP noted. Almost none of those savings came from cheaper battery costs. Instead, Tesla benefited from better vehicle design to make manufacturing as easy as possible, and new factory design.

Tesla’s first factory in Fremont, California, near Silicon Valley, is not a great place to build cars, Viecha added, noting that there are cheaper places including Shanghai and Berlin. Tesla has 2 new factories in those locations, along with another in Austin, Texas.

The company wants to continue this trajectory, pushing the boundaries of how much it costs to produce an electric vehicle.

The Fremont factory accounts for about half of Tesla’s production. As new facilities produce more cars, they will be able to manufacture each vehicle for less than $36,000, which should be good for Tesla’s profitability, Viecha said.

During 120 years of the automotive industry, he argued there’s only been 2 major revolutions in manufacturing. One was the Ford Model T and the other was Toyota’s cheaper production approach in the 1970s, he explained.

“EV architecture is so different from internal combustion engine, it allows for a third revolution in automotive manufacturing,” Viecha said.

When asked about the possibility of Tesla making a cheaper EV, Viecha said that the company eventually wants a more affordable vehicle on the road. If a company wants to be a high-volume automaker, it needs a broad portfolio, and Tesla needs a cheaper offering before its company-operated robotaxi service comes out, he explained.

Demand for the Model 3 and Y has been stronger than expected, so that reduces the need for a new model any time soon, he noted.

“Model Y will basically next year become the best selling vehicle of any kind of all time in the world,” the executive added, while noting that it includes elevated costs from the Fremont factory and almost no leasing.

“This is an important sales lever that we’ve never touched, but in the future we might be boosting demand in other ways,” Viecha said.

The future of Tesla’s Full Self-Driving software

The discussion then moved to Tesla’s Full Self-Driving, or FSD, software service. Viecha said “supervised” FSD, where drivers and the software can intervene, is being used on US city streets by about 100,000 people. Based on the data Tesla sees, supervised FSD could roll out to Tesla’s entire fleet in the US by the end of this year, he predicted.

Noting that this is “supervised autonomy,” he pointed out drivers still need to pay attention or risk losing access to the service.

As Tesla collects more data from interventions, it will address issues and roll out software updates to improve the system. This iterative process will ultimately get Tesla to full autonomy, he added.

“We profoundly believe mass collection of data and AI is only way to solve generalized autonomy,” Viecha said. “That’s the path we’re taking.”

The executive described the Model X and S as the first generation of Tesla’s platform. The Model 3 and Y are the second generation. The robotaxi platform is generation 3, he explained.

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