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

The situation

In 2006 Tesla Motors was a small company in California building its first car, the Roadster, an electric sports car based on a Lotus chassis. Electric cars had a reputation for being slow, short-ranged and odd. Batteries were expensive, and established carmakers had largely abandoned electric vehicles. Musk, Tesla’s largest investor and chairman, wanted to explain why a company with a mission to change transportation was starting with an expensive sports car.

What the post argues

The post states its purpose directly. The “overarching purpose of Tesla Motors (and the reason I am funding the company),” Musk wrote, was to help speed the move from a “mine-and-burn hydrocarbon economy” toward a solar electric economy.

It then explains the strategy. The Roadster was expensive because new technology always is, and the company would use its sales to fund cheaper cars. The second model, Musk wrote, would be “a sporty four door family car at roughly half the $89k price point of the Tesla Roadster.” He stressed that “all free cash flow is plowed back into R&D to drive down the costs,” so that someone buying a Roadster was helping pay for the affordable car to come.

The post makes a case for electric cars’ efficiency, claiming the Roadster “has twice the energy efficiency of a Prius,” and connects the plan to solar power through SolarCity, “a photovoltaics company (where I am also the principal financier).”

It ends with a short summary. “So, in short, the master plan is:” build a sports car; “use that money to build an affordable car”; use that money to build an even more affordable car; and, while doing so, provide zero-emission electric power generation options. The final line plays on the title: “Don’t tell anyone.”

The decision it carried

The post made public a strategy Tesla had already chosen: begin at the top of the market and move down in steps, using each product to fund and build capability for the next. It also committed Tesla publicly to a purpose larger than any single car, which shaped how investors, employees and customers understood the company.

What happened

The Roadster began deliveries in 2008, during the financial crisis, and Tesla came close to running out of money before an emergency funding round at the end of that year. It went public in 2010. The Model S, the four-door car the plan described, began deliveries in 2012, at a price higher than the plan’s “roughly half” of the Roadster, and became a commercial and critical success. The Model 3, the more affordable car, was unveiled in 2016 and began deliveries in 2017, after a difficult production ramp. In 2016 Tesla also acquired SolarCity, the solar company mentioned in the plan, in a deal that shareholders challenged in court because of Musk’s ties to both companies; a Delaware court later ruled in Musk’s favour.

Tesla published sequels in 2016 and 2023, extending the plan. The original sequence was broadly realised.

How to read it as a product manager

The plan is a classic example of strategic sequencing, the idea that a company can reach a goal it cannot attack directly by choosing an order of steps where each step makes the next one possible.

Start where the economics work. A mass-market electric car was impossible in 2006 because batteries were too expensive. A sports car for wealthy buyers could absorb the cost and generate learning, revenue and brand.

Make each step feed the next. The Roadster financed and taught the company how to build the Model S; the Model S financed the Model 3. Product leaders can ask the same question of their roadmaps: does each release make the next one cheaper or easier?

Tell people the plan. Publishing the sequence turned early customers into participants in a mission and gave employees a clear understanding of why they were building an expensive niche product.

Expect the steps to be harder than they look. The plan reads as four simple lines. Executing them took more than a decade, several near-failures and far more capital than the post suggested.

The decision, examined closely

What triggered it

Tesla needed to explain itself. Critics asked why an environmentally motivated company was building a sports car for millionaires, and the company was raising money and recruiting talent. The post answered both audiences at once.

The constraints

Battery costs, the lack of a factory, the difficulty of competing with established carmakers on manufacturing, and limited capital all ruled out starting with a cheap car. The company also faced scepticism that electric cars could be desirable at all.

What the author was optimising for

The plan optimises for reaching the mass market eventually, without dying first. Starting expensive maximised margins and minimised the volume Tesla needed to make, while proving that electric cars could be fast and desirable.

Second-order effects

The Roadster and Model S changed the public image of electric cars, and the success of the Model S pushed established carmakers to accelerate their own electric programmes. Publishing the plan also set expectations that Tesla would eventually be judged against, including the promise of an affordable car, which took longer than many expected.

The counterfactual

A Tesla that started with a cheap car would very likely have failed, as several electric car start-ups of the period did. A Tesla that stayed in sports cars might have survived as a niche maker. The sequencing strategy was not the only possible path, but it fitted the constraints closely.

What is contested

Critics note that the plan’s timelines and prices proved optimistic, that Tesla relied heavily on government incentives and regulatory credits during its early years, and that the SolarCity acquisition raised serious governance questions. Supporters point out that the core strategy was executed as described. Both are true.

Sources and limitations

Quotations were verified against a reprint of the post, because Tesla’s own page could not be retrieved directly during research; the original is linked. Prices, dates and the history of Tesla’s products come from widely reported company history. The assessment of the plan is the author’s interpretation.