Tesla’s Exponential Growth: 2.5 Mio Sales in 2025?

It was a close call, and in the end 450 cars were short of the 500,000 mark. A few years ago, Elon Musk set a target of selling half a million electric cars a year by 2020. The competition just shook their heads, and analysts thought he was a megalomaniac. As is well known, BMW’s head of development Harald Krüger was still stubbornly claiming in the summer of 2019 that customers don’t want to buy electric cars. Well, you can be that far wrong, or maybe you can be right, because people obviously want Tesla’s electric cars, it’s just that nobody seems to want BMW’s electric cars.

The development of Tesla’s sales figures also nicely illustrates the exponential curve that young and growing companies with new technologies often present. From 2013 with 22,442 vehicles sold (only the Model S at that time) to 2020 with 499,550 (Model S, X, 3, and Y), that is now 22x as many vehicles as 7 years ago.

Tesla Sales Numbers from 2013 to 2020

When we are not counting 12 months as period, but about 24 months for doubling the numbers, then we see the exponential curve even better:

2013: 22,442
2015: 50,792
2017: 103,014
2018: 245,491
2020: 499,550

And that is why people don’t get that, because they see a ‘linear curve’ where there is an ‘exponential one’ and lull themselves into the false believe it’s all fine. And that makes them vulnerable for being run over by that competitor.

This is not so surprising. Almost every successful new technology that opens up a new market grows along an S-curve. A comparison with a number of other technologies shows this impressively. From TVs and VCRs to microwaves, these exponential adoption curves can be seen.

Exponential growth of various technologies

For the top dogs, this is a problem. At first, they ignore the new technology and wave it off as inadequate and flawed. Often, they have even developed it themselves. But now they make fun of it, after all their own experience speaks against it. As soon as the first small successes of the new competitors appear, however, they write them off as temporary hype that would soon pass. And as soon as the top dogs realize the seriousness of the situation, it is already too late. The new market has been occupied by the new competitors and the product or service has mostly been redefined with innovation in adjacent areas, while the previous top dogs are first trying to catch up with and understand the core technology. And this is where the additional functions introduced by the new competitors and now familiar to customers are missing.

The comparable example with Tesla is that the core functionality lies in the electric drive, but the additional services such as over-the-air updates or autonomous driving are hardly really understood by the top dogs and their importance is misjudged.

Matthias Hohensee, Silicon Valley bureau chief for the German weekly Wirtschaftswoche, writes:

“In 2019, Tesla had delivered 367,500 vehicles, and 245,240 the year before that. At that pace, Tesla should get to about 850,000 vehicles in 2021, but Elon Musk will surely aim for the one million mark, then with support from the new factory in Grünheide near Berlin.”

With the factories in Berlin-Grünheide and Austin scheduled to start operations in 2021, we’ll probably see just this kind of further growth. And who knows what else Tesla is planning to maintain this growth. Currently, supply, not demand, is limiting Tesla’s sales numbers. To meet demand, building new factories may no longer be enough. The purchase of existing car factories, or even the acquisition of competitors such as Daimler or BMW, could multiply production capacities in one fell swoop. And that could become a real option in view of stock market valuations.

If we calculate an annual growth of 36% per year, Tesla will reach 2.3 million cars sold in 2025, and that means, in addition to the existing factories and those under construction, 3-4 more factories per year to be completed in the next few years.

Tesla sales number projection with 36% growth per year until 2025

If we calculate with the average growth value over the last 7 years of 59 percent, then the annual sales figures will even reach 5 million vehicles per year in 2025.

Tesla sales number projection with 59% growth per year until 2025

However, for Tesla, only the sky seems to be the limit at the moment. But if you want to better understand what is behind those exponential calculations and how you can better forecast the future, how to benchmark your own technology, backcast what steps you have to take and how scenarios could play out, and not fall into the trap of calling something a hype, you may want to check out an online-course that I just created. It is called Future Mindset. Check it out here.

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This article was also published in German.

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