The Secret Tesla Motors Master Plan

Good blog post over at Tesla Motors about their "Master Plan" to make electric cars affordable for everyone. I totally agree with this vision. If you don't know who Tesla Motors is, see this blog post.

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 economy, 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? 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.

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 Roadster 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 possible. When someone buys the Tesla Roadster sports car, they are actually helping pay for development of the low cost family car.

Goes along with what I wrote on purchasing green power.

If I ever get around to it, I would like to write up my thoughts on Trickle Down Technology. If you want to create a technology to help all of society or to help the poor, instead of trying to sell it too them right at first, it is better to first sell to the rich people who will pay extra and then ramp up the process until it is cheap enough for everyone.

If you wanted to improve communications in Africa, it was better to wait for rich people to buy cellphones and then allow the mass markets in Europe, Japan and the US to really drive down the costs. Then you can sell cellphone service to those in Africa for a small price. If you had started out trying to provide the service to Africans directly it would have been too expensive and failed.

For this reason I am skeptical of projects like Simputer or the $100 laptop that try and sell a brand new technology to the poor for a cheap price. Better to let the rich subsidize the R&D first for the poor and then roll it out.

via TreeHugger