How fast Tesla can grow

A parking lot full of Tesla's waiting to be loaded on the ship (source)

(~5 minute read)


Tesla stock is a big part of my family’s retirement plan. And it’s not something I take lightly because, if I’m wrong, there would be a big hole that would need to be filled before Tiffany and I can retire and “ride off in the sunset”.


With that said, the reason why Tesla makes up a sizable portion of the retirement plan is because, as I previously wrote about, the company has a clear bigger picture vision AND real product market fit.


And as someone who gets paid to help companies define a clear vision and find product market fit, I understand how important both of these are. And how elusive it can be to have just one.


Through years of hard earned lessons as a Product Manager, I now know that if a company doesn’t have a clear vision and product market fit yet, no matter how much it tries to grow, it won’t be able to. At least, not sustainably. But I also know that after a company has a clear vision and product market fit, the focus turns to how fast it can grow. And as the company executes (ie. grows sustainably), then over the long term, positive things happen for the value of the company.


As I look at just how fast Tesla can grow vs. how fast it is actually growing, my mind is blown.


Before product market fit

About five years ago, I joined a venture backed startup called LoftSmart whose goal was to help college students find off-campus housing. At the time, the company had not found true “product market fit” yet.


Day to day, I could feel the lack of "product market fit" because even though the Marketing team spent millions of dollars on billboards, partnerships, and branding exercises, the company didn’t grow. At least, not sustainably.


And even though the Product team furiously ran experiments, tested prototypes, and launched new features, the company didn’t grow. At least, not sustainably.


And even though the leadership team spent countless hours modeling out the growth needed to raise the next round, the company didn’t grow. At least, not sustainably.


Put another way, no matter how much time and energy we spent trying to grow, we could not grow sustainably.


Let’s now contrast this with what is happening at Tesla.


Growth at Tesla

Zooming in to the car business (the most mature part of Tesla’s business), you can see the opposite thing happening.


Tesla is selling more cars every year. And the growth is sustained. And not only that, but growth is accelerating!

Just how fast can Tesla grow

Instinctively, if asked, "how many cars will Tesla produce in 2030?", most of us (myself included), would be tempted to answer this is by drawing a straight line on the chart above to try and guess what the future holds.


However, this would be a mistake.


Instead of growing linearly (ie. in a straight line), in the real world, adoption actually happens much much MUCH faster than that.


(heads up, going forward, I'll refer to this as "exponential growth" vs. linear growth).


I know this can be a bit abstract, but this example below will help it make sense.

Above is a picture of New York City in 1900 (source: Tony Seba). If you had a time machine and stepped out, the first thing you would notice is that everyone has a horse and no one has a car (yet). (technically, if you squint, you'll find one car in this picture).


And it’d be natural to think that just a dozen-ish years later, it would still mostly be horses and maybe a few cars in the picture. But here is what actually happened.

Just 13 years later (ie. 1913), this is what a New York City street looked like. 


What happened to all the horse and carriages? 


Gone. And replaced by a car. 

(technically, if you squint, you'll find ONE horse and carriage in this picture)


To me, this is mind blowing because at that time, there weren’t many paved roads for cars to drive on, gas stations to refill at, or even mechanics in case you needed repairs.


Cars should not have been adopted so fast. And yet, despite all the shortcomings, cars were rapidly adopted!


Now, before you think I’ve cherry picked this example, just think about how fast the iPhone was adopted. Or the internet itself.


Fast. Very fast.


And now, the exciting part! This same kind of adoption is happening with Tesla as well.


S-curve adoption

In the horses-to-cars example above, what we saw is known as “s-curve” adoption. Practically, it means that companies first grow slowly (while finding product market fit), but once they find it, then there is a period of explosive growth. And then, at some point, growth levels out again (ie. when the majority of the market has now adopted the product).


Visually, it would look like this:

Now, let's connect the dots. Let’s superimpose Tesla’s car sales growth on this s-curve because it makes it much more clear where the company is headed.

All of a sudden, we can see that Tesla is only getting started. And that the explosive period of growth is still to come.


We have another data point to back this up. Tesla has very publicly stated their goal is to make 20 million cars per year by 2030, while having delivered 1.3 million cars in 2022 and a target of 2 million in 2023.


Wrapping up:


*to be clear, I’m not talking about the price tomorrow or next week or next month. In the short term, there is a lot of volatility. But over a multi-year time horizon, it’s clear for me to see that Tesla stock is going up. Just as it has been for the past 10 years that I’ve been investing.


Uber-bullish case

If you remember, we purposely zoomed in to focus on the car business. But now, by zooming out, we can see that Tesla isn’t just going through massive adoption for one product, but rather, it’s going through multiple s-curves…stacked on top of each other.


The numbers get so big so fast, that my mind has trouble comprehending what this even means.


Visually, I'll leave you with this to chew on...

Tesla is just getting started. And the next 5-10 years are going to be exciting to say the least.


Next time

Let's talk about how Tesla is able to grow this fast. Sneak peek: happy customers.