Tesla Motors is the world’s most valuable car brand and here’s the interesting story behind it’s rise from a auto startup to becoming the most aspired and technologically advanced car brand in the world.
Most of us know that Elon Musk is founder of the auto startup, but the truth is Tesla was the brainchild of small group of engineers in Silicon Valley who would eventually go on to collaborate with Musk.
The concept of an electric car
In the early summer of 2004, Martin Eberhard a hardware engineer based out of Menlo Park, California invited product designer named Malcolm Smith to work together without disclosing in actuals what Smith had to work upon, but he did ask him to check the car he had.
Smith was introduced to the third partner – Marc Tarpenning and a rough business plan & specifications for a new car that needed to be built – an awesome electric car.
Smith had realized that Eberhard and Tarpenning were not reinventing physics; they were just combining barely available technologies to create a technological breakthrough.
Hopping into a tiny yellow car Eberhard said, “let’s go for a ride.”
tzero was an two seater all-electric car built by AC Propulsion, it could do a 0 to 60 in under 4 seconds. G-forces threw Smith back into his seat, which made him realise that it was much more than a nice little experiment – it was a full fledged technical vehicle.
No other car gives a 100% torque in an instant, but a high-performance electric car does.
Fascinated by the tzero, Eberhard had invested in AC Propulsion with hopes of getting a copy of the car.
For once, he also thought about partnering with the company, with his skills and AC Propulsion’s expertise, they could make a production-level electric car rather than a hobbyist vehicle. But he realized that it was not a good idea to mix his ambitions with the culture of the firm.
The challenge was for such cool an idea of an electric car, why were not industry leaders making a move on it. Yes, GM had successfully failed with their EV1s.
Eberhard though, considered launching his own enterprise, and he named it on Serbian-American genius Nikola Tesla – who invented electricity.
Eberhard and Tarpenning set upon refining their idea before making formal pitches to investors about building high-performance electric sports cars.
The plan described the electric sports car as a “disruptive” technology
Tarpenning had earlier met Paypal founder Elon Musk at a conference, and was aware of his interests in the space industry, with Musk already working on SpaceX.
Tesla had an opportunity as Musk had turned AC Propulsion down earlier, therefore Eberhard wrote to Musk to invest in a high performance electric car.
In April 2004, the paperwork was drawn up and finalized on. Musk led the $7.5 million round and became the chairman of the board.
It was time for Tesla to grow.
The Birth Of Roadster
Tesla built their first “mule” by November 2004. The car was missing all its body panels, but it had a revised battery pack, software, and hardware.
The Roadster could drive, and drive like hell.
That first fully functioning mule was the real proof of concept led to the production design and helped secure more funding too. A $13 million Series B came in February 2005, led by Valor Equity Partners and Elon Musk.
Till 2006 Tesla Motors was in stealth mode, but now, Tesla needed to announce itself to the world.
It would need to do something spectacular. A publicity plan was hatched. Tesla hired one PR firm to set up the event and another to wrangle Hollywood stars.
On July 19, 2006, the Roadster had its debutante’s ball at the Barkar Hangar in Santa Monica.
For Eberhard, the day was a “complete panic,” between setting up the event, getting the whole team arranged, and taking care of the friends and family who had flown in from all over the world for the big day.
It was showtime.
Hollywood responded. The 350-strong guest list included Ed Begley Jr., Michael Eisner, and Arnold Schwarzenegger, who was then governor of California. Everybody who came to the party was told to bring a checkbook. Tesla would be taking preorders for what they called the “Signature One Hundred” – 100 cars sold at $100,000 each with the signature of the company’s principles written on a plaque inside.
Both Musk and Eberhard spoke at the event. But Eberhard made by far the bigger impression, according to those who were present. Musk, who had nowhere near the cult following that he has today, was still finding his footing as a public figure. His presentation wasn’t as free-flowing. He seemed nervous.
Within two weeks of the event, Tesla had sold 127 cars.
The press had been hailing Eberhard as a hero. He was featured as a face of Research in Motion’s campaign for the BlackBerry Pearl in 2006. His claim to fame, according to the ad, was that he ” created the first electric sports car .”
While the media attention may have been good for Tesla, it left Musk feeling neglected.
OnJuly 18, 2006, Musk wrote an email to Harrigan, the VP of customer service and support who would become the VP of marketing
I would like to talk with every major publication within reason. The way that my role as been portrayed to date, where I am referred to merely as ‘an early investor’ is outrageous. That would be like Martin [Eberhard] being called an ‘early employee.’ Apart from me leading the Series A & B and co-leading the Series C, my influence on the car itself runs from the headlights to the styling to the door sill to the trunk, and my strong interest in electric transport predates Tesla by a decade. Martin should certainly be the front and center guy, but the portrayal of my role to date has been incredibly insulting. I’m not blaming you or others at Tesla – the media is difficult to control. However, we need to make a serious effort to correct this perception.
Eberhard thought that Tesla would start shipping the Roadster in 2006, ramp up to 500 cars by 2007, and be profitable by 2008.
He was off by a few years. The Roadster wouldn’t ship until February 2008.
“We have a tremendous number of difficult problems to solve just to get the car into production,” Eberhard wrote to Musk that November, “everything from serious cost problems to supplier problems (transmission, air conditioning, etc.) to our own design immaturity to Lotus’s stability. I stay up at night worrying about simply getting the car into production sometime in 2007.”
Over dinner with Musk in San Carlos the following January, the night before the board of directors meeting, Eberhard floated the idea of bringing in a new CEO, pointing out that sorting out the company’s financial picture and getting SAP up and running was beyond his skill level.
Meanwhile, Musk had heeded Eberhard’s request to move out of the CEO role. Musk emailed about getting the CEO search started in earnest in February 2007. The executive search firm Russell Reynolds was engaged to pull in a successor.
But none of the candidates were good enough. And neither, apparently, was Eberhard.
In August while Eberhard was speaking at a conference when he got a call from a nervous-sounding Musk.
The chairman had some tough news for him: Michael Marks, the former CEO of the manufacturer Flextronics and early Tesla investor, was taking over as CEO.
The Tesla board had held a meeting without him, Eberhard said, and decided that it was time for him to go.
“There was no discussion,” Eberhard said. “I didn’t get to hear what they said. I didn’t get to defend myself. I felt totally stranded.
Eberhard had been shut out of the company he founded.
The divorce between Eberhard and Musk got messy – suits and countersuits were thrown in either direction.
It was messy inside the organization, too.
“There was a lot of turmoil after Martin left, ” Harrigan said. “Everybody knew Marks was a temporary CEO until we supposedly found the right guy. He didn’t know anything about electric vehicles or our business – he’s manufacturing guy. He didn’t try to do a lot of house cleaning. He just ensured that the company kept running.”
Marks was replaced by Ze’ev Drori, the former CEO of car-alarm maker Clifford Electronics, on Nov. 27, 2007.
The Elon Musk Reign
Drori stayed on as CEO until October 2008, when Musk took the helm and fired a quarter of Tesla’s employees. By that time, Musk had invested $55 million in Tesla himself.
Tesla first gained widespread attention following its production of the Tesla Roadster, the first electric sports car, in 2008. The company’s second vehicle, the Model S, an electric luxury sedan, debuted in 2012 and is built at the Tesla Factory in California.
Since, then Tesla Motors has been achieving new heights under Elon Musk, Tesla Motors has sold over 50,000 vehicles. It launched its initial public offering on NASDAQ on June 29, 2010. At a price of US$17.00 per share, 13,300,000 shares of common stock were issued to the public. US$226 million were raised for the company through IPO.
From a supercar that changed everyone’s minds about electric vehicles with the Roadster, then making a more affordable sedan in the Model S. The Model X SUV is next on the line-up – originally scheduled for 2013, eventually launched in October 2016.
Here’s Nat Geo Documentary on Tesla Motors
Story inputs from Business Insider