Tesla is the archetypal “moving target,” so my book, like Tesla’s automobiles, will continue to be regularly updated. On May 1, 2015, I added a significant amount of new material, including details of the new D package, up-to-date information about the Gigafactory now under construction in Nevada, and the latest news from the war with the auto dealers.
This book is a comprehensive history of Tesla Motors, the 21st century’s most exciting startup. The book begins with a brief history of electric vehicles and a biography of Tesla’s driving force, Elon Musk. I then detail the history of the company, told in the words of the Silicon Valley entrepreneurs who made it happen.
There are many fascinating stories here: Martin Eberhard’s realization that there were many like himself, who loved fast cars but wanted to help the environment and bring about the post-oil age; the freewheeling first days, reminiscent of the early internet era; the incredible ingenuity of the team who built the Roadster; Tesla’s near-death experience and miraculous resurrection; the spiteful split between the company’s larger-than-life leaders; the gloves-off battles with hostile media such as Top Gear and the New York Times; and the media’s ironic about-face when the magnificent Model S won the industry’s highest honors, and naysayers became cheerleaders overnight. And the story is just beginning: Tesla has breathtakingly ambitious plans for the future.
I was a participant and chronicler as the internet emerged in the 1990s, and I’m constantly struck by the parallels between that upheaval and the electromobility revolution that’s just beginning. I draw on my experience in the tech world as I discuss Tesla’s lasting influence, and where it fits into the technological revolution that is transforming society.
In researching Tesla Motors, I conducted personal interviews with two of Tesla’s founders, Marc Tarpenning and Ian Wright, and two members of the AC Propulsion team who were instrumental in the development of the Roadster, Tom Gage and Paul Carosa. I also cite over 300 secondary sources, with links to a wealth of further reading.
As Senior Editor of Charged, the print magazine of the electric vehicle industry, I write regular articles about all kinds of electric vehicles, the technology behind them and the infrastructure that supports them. My daily blog posts, which cover every facet of the EV scene, including the technical, business, marketing, political and social aspects, number over 1,400, including over 300 on Tesla.
The Tesla story is of course an ongoing one, and I will be regularly updating this book to incorporate the latest news.
If you liked the book, please write a review on Amazon, and tell your friends (and if you didn’t like it, tell them anyway - let ‘em get stuck like you did!).
The horseless carriage days
The cause acquires a martyr
EVs go underground
The electric century
Tesla’s unlucky siblings
Tesla’s grand strategy
Philanthropy and honors
The starting point
Mr Eberhard’s e-piphany
Electrons win the race
The Five Musketeers
Elise + tzero + Special Sauce = Roadster
Tangling with Top Gear
Bad blood in the boardroom
Get the Roadster out the door!
The rift goes public
Daimler gets smart
America bets on Tesla
The sincerest form of flattery
The Tesla Factory is born
The first auto industry IPO since Ford
Henrik Fisker and the doomed WhiteStar
Every inch an EV
Designing an endurance athlete
A bold move on batteries
Charger and Supercharger
Return to the valley of death
The tiff with the Times
The pot of gold: Motor Trend and Consumer Reports rave
Profitability and payback
Naysayers turn cheerleaders
The ZEV credits
Battery swapping, anyone?
Pumping up production
Tesla circumnavigates the globe
A year with Model S
A computer on wheels
Faster, greener, safer
Auto dealers declare war
The Model X crossover SUV
Roadster gets a revamp, Model S goes insane
Brave new batteries
The gargantuan Gigafactory
The model formerly known as E
At this price, it should drive itself
All our patent are belong to you
Where are they now?
In its eleven years of existence, Tesla Motors has made a number of remarkable achievements. It has produced a car that some of the industry’s most influential voices have called the best on the market. The performance of the Tesla Model S equals that of the most venerated luxury sedans, and it happens to use no gasoline. The company has established itself, and actually turned a profit, in an industry that, to say the least, does not welcome startups. It has changed the way the public perceives electric vehicles and, perhaps most importantly, has inspired several much larger automotive industry players to redouble their electrification efforts. If Tesla closed its doors tomorrow (and there are some who would rejoice to see it do so), it would already have earned a place in the annals of both business and technology.
Of course, Tesla has no plans to shut up shop, or even to settle into a lucrative little niche. Its long-term goal is to grow from a low-volume manufacturer of luxury vehicles into a much larger company that offers affordable electric cars for the masses. This is an incredibly ambitious objective, and many obstacles lie in the way. Not the least of these is competition from Tesla’s much larger rivals, some of which have already begun to incorporate the Silicon Valley startup’s best ideas into their own new vehicles, and intend to muscle their way into the market that Tesla has practically created. Some have speculated that one of them will someday acquire the company itself.
Who knows where Tesla will be in another ten years? Not I. Crystal balls are unreliable, and they grow more so every year, as technology motors onward and the pace of technological innovation accelerates. However, Tesla and its driving force, Elon Musk, are firmly focused on the future, so making predictions may prove too tempting to forego as I relate the history of this quintessential 21st-century manufacturing firm, and consider the questions of its lasting influence, and where it fits into the technological revolution that is transforming our society.
Two experienced entrepreneurs, Martin Eberhard and Marc Tarpenning, founded Tesla Motors in 2003. Elon Musk, a charismatic immigrant to the US from South Africa, soon joined the company as Chairman of the Board. The startup’s goal was to build automobiles powered by electricity, not gasoline. It was not a new idea—electric cars were common in the auto industry’s early years—but it was a timely one, as advances in lithium-ion technology were just beginning to enable batteries powerful and light enough to build cars that could rival the performance of gas-powered models.
New technology or no, the quest to build a practical electric car was a quixotic one. Building cars isn’t like building web sites—it can’t be done in a garage or a dorm room. In fact, the auto industry is the one that economists usually invoke when explaining the concept of “barriers to entry.” Vast amounts of capital are required just to get into the game. Then the challenge is to design, build and market an extremely complex piece of technology, manage a network of suppliers, production facilities and distribution and service channels, navigate a maze of regulations and requirements, and somehow do all of this better than the giant conglomerates that have been in the business for a century. Even for the big boys, it may take ten years to bring a new vehicle to the market, and sales in the tens of thousands are required before any profit appears.
The technological obstacles were no less formidable than the organizational ones. While all the necessary components seemed to be available, it would be a challenge to put them together into a vehicle that would perform as required at a price that would be at all reasonable. It was also far from certain that lithium-ion batteries, which work fine for evanescent consumer electronics, would hold up for the 8 to 10 years required in an automotive application.
There was also what one might call a philosophical obstacle. There’s always a lot of skepticism about entrepreneurs who are motivated by altruism rather than by straight dollars and cents, as Tesla’s founders admittedly were. In this case, there would be not just skepticism, but outright hostility from the automotive establishment, oil companies and certain segments of the political sphere.
Both startups and established automakers had tried and failed to build a viable electric vehicle (EV) many times. The oil shocks of the 1970s inspired a Florida company to produce the CitiCar, but it soon gave up the ghost. In the late 1990s, several of the majors brought electric models to the market, the most famous of which was General Motors’ EV1. The company killed the program and crushed the cars after three years, sparking anger and conspiracy theories among EV boosters.
However, Musk and company were determined, and they were armed with more than just awesome entrepreneurial skills and deep pockets. They had a brilliant idea: instead of building a sensible, money-saving car, they would build a sexy, sporty little racer.
It worked. Ten years later, the Roadster has been honorably retired, and the company’s second car, Model S, is selling well and garnering one rave review after another. The company has declared a profit and is going full speed ahead with its plans for another model, and another. The millions who have just tuned in to the story may wonder, what’s the big deal? And why didn’t the major automakers think of this a long time ago?
As we study the history of Tesla, we’ll see that it was a hard road, with several near-fatal incidents along the way. We’ll also learn that, while the company has achieved many impressive feats in the realms of technology and business development, the real reason for its success is quite simple: it conceived and produced revolutionary products.
The undisputed quality of those products owes much to a long series of wise technological decisions along the way. Some of these seemed daring (or foolhardy) at the time they were made, but later proved to be selling points against Tesla’s competitors.
Tesla’s decision to use standard laptop-style batteries to power its cars sounds like a hack that might have been thought up in a college dorm room. However, it means that Tesla will never have problems securing a supply of batteries. Most other EVs use highly-specialized, large-format battery cells that could be hard to obtain if a battery maker goes out of business (a not infrequent occurrence).
Tesla’s decision to design Model S “from the ground up” as an electric vehicle, rather than adapting an existing gas-powered model as most other companies have done (and as Tesla did with the Roadster), has given it several advantages over other current EVs. The battery pack in Model S is flat, and sits at the bottom of the chassis, which gives the car a low center of gravity and greatly improves handling and safety. It also frees up a lot of space for passengers and cargo, which is a sore point with most other EVs. That bulky battery has to go somewhere, and most EV makers have resorted to awkward compromises, usually sacrificing trunk space, as many auto reviewers have noted. Model S, on the other hand, has more cargo space than a comparable gas vehicle.
In the business realm, Tesla has done amazing things. It has turned a profit after only 10 years in business, an impressive feat for any startup, and an unheard-of one in the automotive industry. Many a company has been started on the basis of a truly impressive technology, but failed in the business arena. Tesla’s leaders, however, have displayed impressive business and financial skills from the beginning.
Some have pointed out that it doesn’t hurt to have a deep-pocketed superstar at the helm, who can call fellow billionaire friends when funds are needed. However, such a view shortchanges Elon Musk’s awesome financial savvy. It’s worth remembering that he made his original fortune in the financial industry, because finance is a huge part of the way he innovates in the other industries that he has rearranged. Without the big financial picture, it’s safe to say that none of Musk’s technology companies would work.
SolarCity has redefined the solar energy industry, without ever building a single photovoltaic cell, by offering game-changing leasing offers to consumers and large-scale deals with utilities. SpaceX has successfully sent a couple of spaceships to the International Space Station and back. The technology it uses is not radically different from what’s available to NASA and the various other commercial space travel firms, but SpaceX has found a way to accomplish the complex process of space flight at much lower costs.
Musk is not a serial inventor, like Edison, but more of a “big picture” specialist, and nowhere is the big picture more important than in the auto industry. Manufacturing vehicles is only one part of what automakers do. They must also plan, design, finance, market, distribute and service those vehicles, and they must build and maintain the physical infrastructure required to do all these things. Furthermore, if they hope to make any money, they must try to create this complex network at just the right scale—under- or overcapacity on a production line or any other link in the chain can mean failure. Tesla has foreseen these needs, and has been methodically building scale from the very beginning—supply lines, manufacturing capabilities, distribution, etc.
The long-term goal was to build an affordable EV, but Musk and his partners knew that it was unrealistic to attempt that right away, so from the very start, they devised a three-phase strategy for the long haul. The company would first produce a high-price, low-volume model (the Roadster), then a medium-price offering (Model S), and finally a lower-price vehicle that it can sell in high volume. “Any new technology needs at least three major iterations to get to the mass market,” said Musk. The third-generation vehicle, slated to hit the market in 2017 or so, will be “half the price of Model S,” and have a range of about 200 miles.
Many writers have called Musk a marketing genius, but that seems to be news to the man himself. In several interviews, Musk has said that he rarely thinks about marketing, and that if you build a truly revolutionary product, the marketing will take care of itself. To date, Tesla has done almost no traditional advertising, and has little in the way of a marketing department. It has had no need to reach out to the press—the press has been knocking at its door from the beginning.
We all know how good marketing can spin profits from a worthless product (see the Pet Rock), and poor or inadequate marketing can sink a brilliant one (see Betamax). However, Tesla’s self-selling vehicles have triggered something much more profound than any media buzz or viral campaign—they’ve created what pundits call a paradigm shift, an entirely new way of looking at a product.
Henry Ford built his automotive empire by conceiving of motorcars not as luxuries for the rich, but as affordable tools for the masses and (at least in the view of more leftish observers) by paying his workers enough that they could afford to buy Model Ts for themselves. Apple and Microsoft started a revolution by presenting computers not as practical tools for stodgy bankers, but as fun accessories for the home.
Likewise, Tesla’s success has been built on changing the way people perceive electric vehicles. Pre-Tesla, if the Average Joe thought about EVs at all, his image would have been, at best, a practical, boxy, underpowered thing that was vaguely supposed to benefit faraway polar bears or, at worst, a completely impractical plastic golf cart suitable only for hairy granola-munchers. That image has persisted to this day, as mainstream newspapers and magazines have often portrayed even the ubiquitous Toyota Prius as something for “eco-hippies.” Try googling “electric car” and “granola” some time.
Well, nobody eats granola while riding in a two-seat roadster that can do 125 mph (you’d spill your organic soy milk). The Tesla team’s stroke of genius—which, like most such strokes, was really quite simple, and didn’t require much genius—was to present an electric car as something hip, fun, super-high-tech and maybe even a little bit dangerous.
Most people don’t buy cars based on practicality or even price—they buy based on emotional appeal and the fashion of the moment, as they buy clothes. They buy based on what their peers (or the people they want to be their peers) are buying. Elon Musk and his colleagues were far from the first ones to understand this fact (anyone involved in automotive marketing would tell you something similar), but they were the first to take it to its logical conclusion regarding EVs.
There is certainly a group of people who are enthusiastic about EVs as money- or planet-savers. However, this group is not a terribly large one, and it’s not a group that the average American wants to identify with. Since the internet boom, the bespectacled, pocket-protector-wearing geek gets more respect than he used to (it always seems to be a he, and never accompanied by a she), but he’s not an image that companies invoke to sell cars. And the mere mention of “the planet” is enough to turn a certain type of conservative American off a product for good.
But if the people driving your cars are movie stars and Silicon Valley high rollers, and if they’re driving the cars to the trendiest parties—“She does 0 to 60 in 3.9 seconds…uh, I forget about how much gas it saves”—now that’s an image that can move some metal. From the very beginning, Tesla’s creations have gotten many times more press coverage than other EVs (the massive press resources of giants such as Nissan and GM notwithstanding), and have been discussed in a much broader range of media (tech, business, green, automotive, fashion).
By no means all the attention was complimentary (in fact there’s even a whole web site devoted to anti-Tesla bile). The electric vehicle industry became a bęte noire for many right-wingers, which is unsurprising, considering that such a new and revolutionary technology is easy to ridicule, and that the Obama Administration has strongly supported the industry (although the most important pro-EV programs were signed into law by President Bush). Mitt Romney mentioned Tesla during the second presidential debate in 2012, mistakenly lumping it with the failed solar panel maker Solyndra (“You don’t pick the winners and losers. You pick the losers.”) and again at the third and final debate.
On the other hand, some prominent conservatives, for example former GM executive Bob Lutz, have struck quite a different tone, praising the electric vehicle’s role in revitalizing American manufacturing, and lessening the nation’s dependence on foreign oil.
The stock market was also skeptical of Tesla at first. The shares performed respectably since the 2010 IPO, but were always vulnerable to huge temporary drops on the slightest hint of bad news. Tesla stock attracted an unprecedented number of short sellers—they had no idea that a silent but powerful electric sedan was about to mow them down.
In mid-2012, Tesla began to gather momentum. In June, it began deliveries of its second model, in itself a miraculous feat that has eluded many a would-be automaker. The company had been taking advance deposits on Model S since 2009, and had a backlog of orders that would take a year or more to work through at the initial rate of production.
That sounds like a good problem to have, and it is, but it pointed to the next big test for Tesla, one that many a promising young company has failed. Could it ramp up production quickly enough? If the company couldn’t deliver its cars to buyers in a reasonable time frame, its reputation would collapse. Just as important, it needed to start collecting some cash to pay the bills from developing the car and building its manufacturing infrastructure.
Once again, the Silicon Valley standard-bearer came through. In January 2013, it announced that the Model S production line had reached its stated goal of 20,000 vehicles per year. The new sedan had a relatively trouble-free rollout, with no major recalls or scandals.
Tesla kept the good news dribbling out—an improvement to the service plan here, a new Supercharger network there—and Musk’s regular tweets made sure each announcement ricocheted around the online EV echo chamber.
Then came the reviews. Motor Trend named Model S its Car of the Year. Consumer Reports gave it the highest possible rating. Federal safety regulators gave it the highest score of any vehicle ever built. The New York Times published a snarky and scathing review that looked like a black eye…excuse me, make that a media coup, for Tesla.
The big banana appeared in May 2013, when the company announced a profit, making business history and turning many of the media naysayers into cheerleaders overnight. Rather than retrench and consolidate its gains, Tesla immediately used its improved cash position to raise more funding and push full speed ahead on its plans for new features and new models.
Tesla’s recent history has unfolded like one of those infomercials in which the amazing attributes of a product are revealed one by one: “Now, how much would you pay? But wait! You also get…”
The pattern is now familiar: Musk tweets out hints of something big in the offing, the media anticipates, then trumpets, the news of the latest new feature or new milestone, the stock inches higher. Pre-2013, it was just the EV media, but increasingly, the business and automotive press have joined the chorus. Each blockbuster announcement simply sets the stage for the next—Elon’s already got his sights set on the next big prize.