The Secret Tesla Motors Master Plan (just between you and me)

[ … ] Not shown: Musk introduces himself as chairman and main early funder.

As you know, the initial product of Tesla Motors is a high performance electric sports car called the Tesla Roadster. However, some readers may not be aware of the fact that our long term plan is to build a wide range of models, including affordably priced family cars. This is because the overarching purpose of Tesla Motors (and the reason I am funding the company) is to help expedite the move from a mine-and-burn hydrocarbon economy towards a solar electric economy¹ (Editorial note 1)Editorial · 1Known at the timeThe post states the purpose before the product. That lets the reader judge each step by whether it moves towards the purpose, not by whether an $89k sports car is green on its own., which I believe to be the primary, but not exclusive, sustainable solution.

Critical to making that happen is an electric car without compromises, which is why the Tesla Roadster is designed to beat a gasoline sports car like a Porsche or Ferrari in a head to head showdown. Then, over and above that fact, it has twice the energy efficiency of a Prius. Even so, some may question whether this actually does any good for the world. Are we really in need of another high performance sports car?² (Fact note 2)Fact · 2With hindsightTen years later Musk wrote that part of the reason for the post was to defend Tesla against attacks “accusing us of just caring about making cars for rich people”, and that on that count it “pretty much completely failed that objective”.SourceTesla blog (Internet Archive copy)Master Plan, Part Deux20 Jul 2016 Will it actually make a difference to global carbon emissions?

Well, the answers are no and not much. However, that misses the point, unless you understand the secret master plan alluded to above. 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.³ (Editorial note 3)Editorial · 3Known at the timeThe core of the plan. Sell first to buyers who will pay for performance while unit costs are high, then step down market as volume brings costs down. It spares the first product from competing on cost, but each step waits on the one before it.

Without giving away too much, I can say that the second model will be a sporty four door family car at roughly half the $89k price point of the Tesla Roadster⁴ (Fact note 4)Fact · 4With hindsightWhen Tesla opened Model S orders on 26 March 2009, it gave an anticipated base price of $49,900 after a $7,500 federal tax credit, and listed the Roadster at $101,500 after the credit. Musk said “Model S costs half as much as a Roadster”: half, then, of a higher Roadster price than the $89k the post quoted.SourcesTesla Motors blog (Internet Archive copy)The Secret Tesla Motors Master Plan (just between you and me)2 Aug 2006Tesla Motors press release (Internet Archive copy)Tesla unveils world’s first mass-produced, highway-capable EV26 Mar 2009 and the third model will be even more affordable. In keeping with a fast growing technology company, all free cash flow is plowed back into R&D to drive down the costs and bring the follow on products to market as fast as possible⁵ (Fact note 5)Fact · 5With hindsightTesla’s own date for the sedan moved. When Roadster production began in March 2008 it said the next model would come “in 2010”; in March 2009 it expected Model S production “in late 2011”. The first Model S deliveries came on 22 June 2012, which Tesla called “approximately one month earlier than previously announced”.SourcesTesla Motors press release (Internet Archive copy)Tesla Motors Begins Regular Production of 2008 Tesla Roadster17 Mar 2008Tesla Motors press release (Internet Archive copy)Tesla unveils world’s first mass-produced, highway-capable EV26 Mar 2009Tesla Motors press release (Internet Archive copy)Tesla Motors Delivers World’s First Premium Electric Sedan to Customers22 Jun 2012. When someone buys the Tesla Roadster sports car, they are actually helping pay for development of the low cost family car.⁶ (Fact note 6)Fact · 6With hindsightRoadster buyers were not the only payers. In March 2009 Tesla said it believed it was “close to receiving $350 million in federal loans” to build the Model S plant, and it filed the final prospectus for its initial public offering on 29 June 2010. By 22 June 2012 it had delivered more than 2,300 Roadsters.SourcesTesla Motors press release (Internet Archive copy)Tesla unveils world’s first mass-produced, highway-capable EV26 Mar 2009Tesla Motors press release (Internet Archive copy)Tesla exceeds 1,500 Roadster deliveries worldwide10 Jan 2011Tesla Motors press release (Internet Archive copy)Tesla Motors Delivers World’s First Premium Electric Sedan to Customers22 Jun 2012

[ … ] Not shown: Battery disposal, power-plant emissions and well-to-wheel efficiency arithmetic.

I should mention that Tesla Motors will be co-marketing sustainable energy products from other companies along with the car. For example, among other choices, we will be offering a modestly sized and priced solar panel from SolarCity⁷ (Fact note 7)Fact · 7With hindsightCo-marketing became a merger. On 1 August 2016 Tesla agreed to combine with SolarCity in an all-stock deal with an equity value of $2.6 billion, and Tesla’s shareholders approved the acquisition on 17 November 2016. Musk wrote that solar “has literally been on our website for 10 years”.SourcesTesla blog (Internet Archive copy)Tesla and SolarCity to Combine1 Aug 2016Tesla blog (Internet Archive copy)Tesla’s Acquisition of SolarCity Receives Shareholder Approval17 Nov 2016Tesla blog (Internet Archive copy)Master Plan, Part Deux20 Jul 2016, a photovoltaics company (where I am also the principal financier)⁸ (Editorial note 8)Editorial · 8Known at the timeThe disclosure sits in a parenthesis, but it is where a careful reader should stop: the chairman of one company is recommending the product of another company he funds. Saying so openly is good practice. It does not remove the conflict..

[ … ] Not shown: The panel’s output, and drivers becoming “energy positive”.

So, in short, the master plan is:

1. Build sports car

2. Use that money to build an affordable car

3. Use that money to build an even more affordable car

4. While doing above, also provide zero emission electric power generation options

Don’t tell anyone.⁹ (Editorial note 9)Editorial · 9With hindsightThe joke carries the strategy. A plan posted on the company blog is meant to be told: it asks buyers, staff and investors to read an expensive sports car as step one of a longer bet. Musk’s 2016 restatement is plainer about that step: “Create a low volume car, which would necessarily be expensive”.SourceTesla blog (Internet Archive copy)Master Plan, Part Deux20 Jul 2016