In this video Elon Musk of Tesla describes their strategy steps with the Tesla car manufacturer:

1. Low volume, high price (Roadster)
2. Mid volume, mid price (Model S)
3. High volume, low price (future)

Interesting is his comment about criticism they received for first building a sports car for rich people. His response is that no matter what, the first version of their car would have been low volume and high price, even if they had designed a normal and affordable car like a Ford Focus. It would still have cost $70K and very few customers would have bought it. However, he said, there is a real market for $100K fast sports cars, and they chose to cater to that target market with their initial version. As they revise their product and increase volumes, they can move into lower priced segments.

I’m impressed with Elon Musk’s ability to combine revolutionary innovation with striking business acumen, as shown in SpaceX, Tesla, …

Link to Youtube video (32 minutes in)