I recently read an August 2006 blog post from Elon Musk. This is right after Tesla’s first car, the $109,000 Tesla Roadster (the blog post states a target price of $89,000) was revealed to the public in June 2006. The first Roadster was delivered in February 2008.
At the time, many industry observers criticized Tesla because its electric vehicle was too expensive for mainstream consumers. This defeated the company’s stated goal of producing a mass market zero emission alternative to hydrocarbon fueled vehicles.
In the post, Elon shares his long term plans for Tesla. You can read the full post together with detailed calculations, but the two interesting pieces are below.
“Almost any new technology initially has high unit cost before it can be optimized and this is no less true for electric cars. The strategy of Tesla is to enter at the high end of the market, where customers are prepared to pay a premium, and then drive down market as fast as possible to higher unit volume and lower prices with each successive model.”
“So, in short, the master plan is:
- Build sports car
- Use that money to build an affordable car
- Use that money to build an even more affordable car
- While doing above, also provide zero emission electric power generation options”
It’s now 2016 and Tesla has a $66,000 Model S on the market. The company also unveiled the $35,000 Model 3, to be delivered in late 2017. For comparison, the average price of a new car in the US is $33,666. This means that the Model 3 is price competitive with the average new car. This is taking place 11 years after Elon’s blog post.
This is a great example of long term planning in action. Like any big goal worth pursuing, it takes a long time to execute. It also undergoes many tactical changes along the way. But if you persevere, the outcome is well worth it.
Also published on Medium.