Power Play

1. Tesla's origins: Elon Musk's vision for electric cars revolutionizes the auto industry

"Elon Musk is the perfect investor," Martin Eberhard had confided to a colleague during the honeymoon period with Elon Musk.

A visionary partnership. Tesla Motors was founded in 2003 by Martin Eberhard and Marc Tarpenning, who sought to prove that electric cars could be high-performance and desirable. Elon Musk joined as the largest investor in 2004, bringing not only capital but also a grand vision for the future of sustainable transportation.

Challenging the status quo. Tesla's approach was radically different from traditional automakers:

• Focus on high-end electric sports cars first, then move downmarket
• Direct sales model, bypassing traditional dealerships
• Emphasis on software and over-the-air updates
• Vertical integration, producing many components in-house

This strategy allowed Tesla to build a strong brand and prove the viability of electric vehicles, setting the stage for its future growth and influence on the entire automotive industry.

2. Overcoming early challenges: Tesla's struggle for survival and the birth of the Model S

"It's not like I desperately want this fucking role," he said. "I'm doing this because I believe in the goddamn mission, that I think that sustainable energy needs to prosper."

Near-death experiences. Tesla faced numerous existential threats in its early years, including:

• Production delays and cost overruns with the Roadster
• The 2008 financial crisis, which nearly bankrupted the company
• Internal conflicts between Musk and co-founder Eberhard

The Model S gamble. Despite these challenges, Tesla pushed forward with the development of the Model S, a premium electric sedan that would make or break the company. This ambitious project required:

• Raising significant capital from investors and government loans
• Acquiring and retooling the former NUMMI plant in Fremont, California
• Developing new battery and powertrain technologies
• Building a team capable of designing and manufacturing a completely new vehicle

The successful launch of the Model S in 2012 marked a turning point for Tesla, establishing it as a serious player in the automotive industry and paving the way for future growth.

3. Building a unique company culture: Tesla's unconventional approach to manufacturing and innovation

"Elon was risky but he usually made pretty good business decisions," one longtime manager said. "But this just made no sense: Why would you acquire that company, that business, that brand? Except for the fact you're trying to bail it out."

Silicon Valley meets Detroit. Tesla's culture was a blend of tech startup mentality and traditional automotive engineering:

• Emphasis on rapid iteration and problem-solving
• Willingness to challenge industry norms and conventions
• High-pressure work environment with long hours and intense deadlines

Musk's management style. Elon Musk's leadership was central to Tesla's culture:

• Hands-on involvement in engineering and design decisions
• Setting ambitious, often unrealistic goals to drive innovation
• Quick to fire employees who didn't meet his standards
• Prone to making impulsive decisions and public statements

This culture enabled Tesla to innovate rapidly but also led to high turnover, quality control issues, and frequent clashes with regulators and investors.

4. The Model 3: Tesla's ambitious plan to bring electric cars to the masses

"You are now working at a different company," he said. "Everything has changed."

A pivotal moment. The Model 3 represented Tesla's transition from a niche luxury brand to a mass-market automaker. Key aspects of the Model 3 project included:

• Target price of $35,000 to make electric cars accessible to a broader market
• Goal of producing 500,000 vehicles per year by 2018
• Development of the Gigafactory to produce batteries at scale
• Redesign of manufacturing processes for high-volume production

Unprecedented demand. The unveiling of the Model 3 in 2016 generated enormous excitement:

• Over 400,000 pre-orders within weeks
• $1,000 deposits from customers worldwide
• Pressure to deliver on ambitious production timelines

The success of the Model 3 was critical for Tesla's long-term viability and its mission to accelerate the world's transition to sustainable energy.

5. Autopilot and autonomous driving: Tesla's foray into self-driving technology

"I can be on my own private island with naked super models, drinking mai tais, but I'm not," Musk bellowed. "I'm in the factory working my ass off, so I don't want to hear about how hard everyone else in the factory works."

Pushing the boundaries. Tesla's Autopilot system represented a bold step towards autonomous driving:

• Gradual rollout of features through over-the-air software updates
• Controversy over the "Autopilot" name and its implications for driver responsibility
• Fatal accidents involving Autopilot, raising questions about the technology's safety

Regulatory challenges. Tesla's approach to autonomous driving technology faced scrutiny:

• Debates over the ethics of beta-testing autonomous features on public roads
• Investigations by NHTSA and other regulatory bodies
• Competition with other tech companies and traditional automakers in the race for self-driving cars

Tesla's Autopilot program highlighted the company's willingness to push technological boundaries, but also exposed it to significant risks and public criticism.

6. Financial rollercoaster: Tesla's constant battle for funding and profitability

"Bottom line: I believe the Model 3 shares the same genetic defect as the Model S and Model X: it is destined to be a chronic money loser."

Cash burn and capital raises. Tesla's growth strategy required massive investments:

• Frequent equity and debt offerings to fund operations and expansion
• Reliance on customer deposits and regulatory credits for additional cash
• Constant scrutiny from investors and short-sellers over the company's financial health

The profitability question. Tesla's path to sustainable profitability was uncertain:

• Long periods of losses as the company scaled production
• Debate over whether Tesla was a car company or a tech company, affecting valuation
• Musk's promises of future profitability contrasted with ongoing cash needs

Tesla's financial situation remained a source of intense debate, with supporters seeing a path to long-term success and critics warning of potential bankruptcy.

7. Manufacturing hell: The painful journey of scaling production for the Model 3

"Let's say level nine is the worst, okay?" said Musk. "We were in level nine. We're now in level eight."

Ambitious goals meet reality. Tesla's plan to ramp up Model 3 production faced numerous obstacles:

• Delays in setting up the production line and automating processes
• Quality control issues requiring extensive rework
• Supply chain bottlenecks, particularly with battery production at the Gigafactory

The human cost. The push to meet production targets took a toll on Tesla's workforce:

• Long hours and mandatory overtime
• Concerns about workplace safety and injury rates
• Attempts to unionize met with resistance from management

The "production hell" of the Model 3 ramp-up exposed the limitations of Tesla's manufacturing capabilities and the challenges of scaling a car company from scratch.

8. Elon Musk: The driving force behind Tesla's success and controversies

"I wish we could be private with Tesla," he said. "It actually makes us less efficient to be a public company."

Visionary and volatile. Elon Musk's leadership was central to Tesla's story:

• Ability to inspire employees and attract talent
• Skill in generating publicity and building the Tesla brand
• Tendency to make bold, often unrealistic promises

Personal struggles and public scrutiny. Musk's high profile came with drawbacks:

• Conflicts with regulators, particularly the SEC
• Public feuds with critics and short-sellers
• Personal life and relationships becoming tabloid fodder

Musk's outsized personality and unconventional approach were both Tesla's greatest asset and a source of ongoing controversy and risk.

Last updated: November 7, 2024