Mike Nudelman/Business Insider
Tesla Motors probably shouldn’t exist.
The last successful American car startup was founded 111 years ago. It’s called Ford.
Barely a decade old, Tesla is already gigantic and adored. Its market capitalization hovers around $28 billion. Morgan Stanley calls it “the world’s most important car company,” and a 2014 nationwide survey found that Tesla’s Model S was the “Most Loved Vehicle in America.”
So how has Tesla flourished where others have flopped?
Today, everybody thinks Tesla was created by its charismatic CEO, Elon Musk, a PayPal cofounder who is the face of the company.
The truth is way crazier than that.
Tesla was the brainchild of a tiny band of obsessive Silicon Valley engineers who would go on to collaborate with — and collide with — the young billionaire.
This is the tale of that collision.
In reporting the story, Business Insider conducted several in-depth interviews with most of the key players and pored over little-noticed documents made public in a lawsuit. We also met with a curious lack of cooperation from the usually press-friendly Tesla Motors.
This is Tesla, the origin story.
AP Photo/Mark Lennihan
Elon Musk celebrates Tesla’s initial public offering on June 29, 2010.
Try And Touch The Dashboard
In the summer of 2004, a product designer named Malcolm Smith got a call from a hardware guy he used to work with, one Martin Eberhard.
“I can’t tell you what we’re doing,” Eberhard said, “but why don’t you come check out this car I have.”
Smith headed over to Eberhard’s tiny office in downtown Menlo Park, California. Eberhard and his partner, Marc Tarpenning, showed Smith a rough business plan and some rough specifications for a new car they wanted to build.
Not just any car: an electric car.
Smith was skeptical, quizzical, curious.
He realized that Eberhard and Tarpenning didn’t need to reinvent physics; they just needed to combine barely available technologies to form a technological breakthrough.
“Well,” Eberhard said, “let’s go for a ride.”
He hopped into this strange tiny yellow car with Eberhard.
Wikimedia commons
The tzero by AC Propulsion.
It felt handmade — because it was.
A decal on the side read “tzero,” a reference to “To,” a symbol that mathematicians use to denote the beginning of time within a system.
As they pulled onto Sand Hill Road, the now famous thoroughfare that’s home to Sequoia Capital, Kleiner Perkins, and every other venture capital firm you’ve ever heard of, the hobby car was noticeably quiet.
Eberhard slowed the car to 10 mph.
“Try and touch the dashboard,” he told Smith.
As Smith reached out, Eberhard hit the accelerator.
Smith’s hand never made it to the dash. The tzero, an all-electric two-seater built by AC Propulsion, could leap from zero to 60 in under 4 seconds. G-forces threw Smith deep into his seat.
That’s when it hit him. “I get it,” Smith thought. “This isn’t a nice little science experiment.”
It was a highly technical vehicle.
No other car gives you 100% torque in an instant, he realized, but a high-performance electric ride does.
Another realization: Not all electric cars are clown cars or golf carts, even if the auto industry didn’t have the will to show otherwise.
Smith would become one of the first 20 employees of Eberhard’s new car company. His official title: vice president of vehicle engineering for Tesla Motors.
As Eberhard’s young company grew, he’d continue to ask would-be recruits to touch the dashboard, before throwing them into their seats with the torque of an electric sports car, properly unleashed.
REUTERS/Noah Berger
Mark Cuyler, an operations manager at Tesla, walks a Model S through the company’s factory in Fremont, California, June 22, 2012.
The Start
The Roadster, Tesla’s flagship sports car, made waves when it was released in 2008. Car and Driver said, “It is not just a car, but one of the strongest automotive statements on the road.”
The Model S, the sports sedan released in 2013, earned the distinction of Motor Trend Car of the Year. That year, the Model S outsold the Mercedes Benz S Class, the BMW 7 Series, and every other large luxury sedan.
But Tesla really began around 1990.
An engineer named Marc Tarpenning was working for Textron in Saudi Arabia. On a visit home to his native California, he met up with a longtime friend, Greg Renda, who worked for Wyse Technology in San Jose. Renda insisted that Tarpenning come into his office to see the terminals that Wyse was working on.
There he met Martin Eberhard, an engineer whose energy, thoughtfulness, volubility, and charisma were immediately apparent. Eberhard commanded a room. Tall and lanky, he brought Abraham Lincoln to mind for some, at least when he grew out his beard.
Tarpenning was a different animal: shorter, quieter, unassuming, but with an intensely dry sense of humor.
They quickly became friends, having long dinner-party conversations about the nature of government.
mordrack/flickr
Eberhard and Tarpenning nerded out with “Magic: the Gathering” cards.
As the friendship went on, they would also get together every few weeks with a larger group of geeks and play “Magic: The Gathering,” a vampire-and-dragon-filled collectible trading card game. Tarpenning recalls that Eberhard would always be experimenting with one clever strategy or another, some of which would work to devastating effect, while others fell apart in dramatic fashion.
“He was always trying some new gambit to see how to hack the rules,” Tarpenning told Business Insider.
Eberhard would take the same approach to entrepreneurship.
movestill/flickr
A PalmPilot. It used to be the future.
After a while, Eberhard and Tarpenning’s bromance blossomed into a business relationship. They started doing consulting together for disk-drive companies, working from cafés with some embryonic forms of mobile computing — early cellphones, laptops, PalmPilots.
Mobile products were clearly becoming a thing.
Crucially, battery efficiency was ramping up. Tarpenning called it “slow Moore’s law.” Instead of doubling in power every 18 month, as was the case with processors, batteries doubled in power every 10 years.
This got the two thinking: Could they start a company to take advantage of all this technological momentum?
What product could benefit from a better battery?
They settled on an electronic book.
After all, this internet thing was going to allow people to buy books. Displays weren’t perfect, but they were getting better. Amazon.com was selling people physical books, Tarpenning remembers thinking, but you could also buy an image of those pages, which at the time would download smoothly on 9,600-baud modems.
AP
Martin Eberhard and NuvoMedia’s Rocket eBook.
On April 15, 1997, the pair founded NuvoMedia. In late 1998, they released the Rocket eBook. They made it through two holiday seasons, shipping 20,000 units in 1999. Then, in 2000, they got an unsolicited offer to sell the company. Sensing a crash to come, they sold it, to the conglomerate Gemstar-TV Guide, for $187 million.
By late 2000, they had a serious itch to start another company.
About the same time, Eberhard got divorced.
“I was thinking that I should do what every guy does and buy a sports car,” he told Business Insider, but “I couldn’t bring myself to buy a car that got 18 miles to the gallon at a time when wars in the Middle East seemed to somehow involve oil and the arguments for global warming were becoming undeniable.”
The better option, a high-performance electric vehicle, didn’t quite exist.
He started sorting through energy options, building out a spreadsheet with every power source he could think of. Hydrogen fuel cells, various kinds of gasoline and diesel, natural gas, several types of batteries. His calculus: How much of the energy that comes out of the ground makes your car go a mile?
“The results were quite startling,” Eberhard recalled.
For one, “Hydrogen fuel cells are terrible. Their energy efficiency is no better than gas.”
And two, “Electric cars were head and shoulders above everything else,” he said, “even if you made the electricity out of coal.”
He started looking into the electric-car hobbyist community and came upon AC Propulsion, a boutique electric-car maker that was doing lots of consulting for the major car companies in light of California’s zero-emissions mandate. They had this bullet of an electric sports car called the “tzero.”
24208255@N07/flickr
The tzero.
Eberhard felt vindicated as soon as he drove it. With its Lamborghini-level acceleration, the car was proof that an electric car didn’t have to be slow. Sure, you didn’t want to drive it in the rain (water would leak in and short out the computer), but it definitely didn’t behave like any other electric vehicle.
In the original Tesla business plan, Ian Wright, the company’s first VP of vehicle development and original car guy, rhapsodized about the power of the tzero:
The first time I drove the AC Propulsion tzero, I was immediately struck by the way the power didn’t fade as the car accelerated — it felt like a race car in first gear, but a first gear that just kept going and going, all the way to 100 mph.
The second revelation was how quickly I came just to expect the power or engine braking to be there when I wanted it — not even to think about downshifting. The power control had become as simple and instinctive as basic steering control.
Thirdly, at the end of the run, I was amazed at how smooth, precise and easy the speed control was a parking speeds. After all, I’m still in the same gear I was just using to do 100 mph, and there’s not even a clutch! How can this be? But it is.
Intrigued by the tzero, Eberhard invested in AC Propulsion with hopes of getting a copy of the car.
He thought about joining forces 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 soon realized it might be impossible to mesh his ambitions with the culture of the firm. He considered launching his own enterprise.
But if the electric car was so powerful, why wasn’t the auto industry taking advantage of it?
Well, some of the big boys had taken a big swing and missed.
GM said it gave it its best shot with the EV-1, star of the 2006 documentary “Who Killed The Electric Car.” The Washington Post reported that GM had spent over $1 billion developing it.
Youtube
A commercial for the EV-1.
And there was a lingering problem: The EV-1 could never get out of the green ghetto.
GM said it couldn’t market the car to anyone other than environmentalists and tech enthusiasts.
“There is an extremely passionate, enthusiastic and loyal following for this particular vehicle,” GM spokesman Dave Barthmuss told The Post. “There simply weren’t enough of them at any given time to make a viable business proposition for GM to pursue long term.”
Nearly all the EV-1s, which had been leased, were repossessed. Many were crushed.
Plug In America, Wikimedia Commons.
Many EV-1s were crushed.
To Tarpenning, the auto industry was sleeping on its would-be killer app: taking full advantage of electric power.
“One of the things we kept running across was these articles that would say the reason why electric cars will never succeed is that battery technology has not improved in a hundred years,” Tarpenning said. “Literally, articles would say that, and it’s true of lead acid batteries.”
Yet it’s not true of lithium-ion batteries.
“They get better, on average, at around 7% a year,” Tarpenning said. “It goes in fits and starts as they roll out new chemistries … They get cheaper and better.”
So if he and Eberhard positioned the company the right way, they could ride the current of technological history.
“What that [dynamic] implies is that you can design stuff now, and unless that trajectory is broken for some reason, you can be assured that, over the next 10 years, everything just gets better for you,” Tarpenning said. “Everything becomes easier, and it just keeps getting easier and better, cheaper, higher energy density, perhaps higher power density depending on what you’re looking for. You want to be in industries where everything gets easier for you.”
By the summer of 2003, Tarpenning and Eberhard knew that they wanted to found an electric-car company, starting with a two-seater sports car and then moving into more accessible markets.
As their research — and Martin’s ride in the original tzero — suggested, electric motors allow cars to do things that internal-combustion engines are terrible at, such as generating oodles of torque the moment you stomp your foot on the accelerator, or employing regenerative braking, where the energy usually lost when the car slows down is fed back into the car’s battery.
By the time summer hit, they knew they wanted to put together a two-seater sports car with lithium-ion batteries and an induction motor.
“We had no experience making cars, and we had a lot to learn,” Eberhard said.
They had a realization: The automotive ecosystem had quietly made itself inviting to startups.
“We discovered that in the preceding 20 or 30 years, the car industry had completely refactored itself,” Tarpenning said. “It turned out that no car company made windshields anymore. They always bought them from the windshield makers, and the rear-view mirrors were purchased from the rear-view-mirror makers.”
The car companies had even outsourced their electronics people, he realized, since they didn’t think that was a part of their core competency. They really only kept the internal-combustion-engine design, final assembly, and sales and marketing on the inside, plus auto financing, which is where they made most of their money anyway. Even styling was outsourced.
rjshade/flickr
Everyone loved the DeLorean, but the company collapsed in seven years.
The auto industry had developed into a segmented network, one that, if the founders played their cards right, Tesla could become a part of.
They’d always been confident about the electronics half of things — that’s what Silicon Valley does — but they’d worried about the Detroit stuff, the nuts and bolts of automobile manufacturing.
Now it seemed the manufacturing partners were already there. They just needed to connect with them.
“In previous iterations, whether it was DeLorean or Tucker or whatever, which we were constantly asked about, those people really had to either sell their souls to get into GM’s part bin, like DeLorean did, or they had to actually manufacture their own windshield wiper blade,” Tarpenning said. “All of that stuff you can just buy now. You have to be Ford to get a good price, but at least you don’t have to have an engineering group trying to make a windshield wiper motor. That would kill us.”
After all this education, Tarpenning was convinced it was time to start an electric-car company.
The Incorporation
On Jan. 25, 2003, Eberhard went on a date to Disneyland with Carolyn, his now wife. They walked around the park, settling into the Blue Bayou, a restaurant inside the Pirates of the Caribbean ride.
It was about as romantic you could get at Disneyland.
He had been pitching her on car-company names for months, but the right branding proved elusive. This was to be a high-performance car that happened to be electric, so any overly “eco” or “engineery” name sounded tone-deaf — volts, surges, and leaves would be set aside. It would have to be easy to say and remember, and sound like a car company, not another high-tech startup.
Eberhard wanted to give credit to the man who patented the type of motor he planned on using, the AC induction motor, invented by the Serbian-American genius Nikola Tesla.
Tesla Incorporation
Tesla’s incorporation papers with the State of Delaware.
He said to her, “What about Tesla Motors?”
Her reply: “Perfect! Now get to work making your car.”
On April 23, 2003, Tarpenning bought the domain name Teslamotors.com.
On July 1, 2003, they incorporated.
That August, Eberhard and Tarpenning moved into the company’s first office in a professional office building in downtown Menlo Park, California. Eberhard said that before they rented the office the sign said “Bushtracks African Expeditions,” whatever that was. So they just turned the sign over and wrote the car company’s name on the back: Tesla Motors.
Workshopping The High-Performance Electric Car
Heading into the fall of 2003, Eberhard and Tarpenning set upon refining their idea before making formal pitches to investors, people they would have one shot at showing their outlandish idea.
They came up with an alternative strategy for workshopping the Tesla business plan. They would mock-pitch it to VCs who would never consider Tesla, acquaintances they knew from three rounds of NuvoMedia financing who invested only in optical routing or website designs.
By looking through their original plan, we can see the arguments they made to would-be investors.
Martin Eberhard v. Elon Musk, Tesla Motors
The executive summary of the original Tesla business plan.
In the opening lines of the executive summary, the company promised it would build high-performance electric sports cars.
“This sounds impossible — both the idea of building cars in the first place, and further, the idea of building a high performance electric car,” the plan read. “But key technologies have recently been developed that make electric cars suddenly very attractive, and the international business climate makes it now possible to build a ‘fab-less’ car company — a car company without a factory.”
The summary went on to enumerate the promised Roadster’s vitals:
● 0-60 mph in less than 3.9 seconds
● World-class handling
● 100 mpg equivalent
● Zero tailpipe emissions
● 300 mile range
● Zero maintenance for 100,00 miles (other than tires).
● A selling price less than half that of the cheapest competitive sportscar.
The plan described the electric sports car as a “disruptive” technology, borrowing a phrase from Harvard professor Clayton Christensen. The Roadster would provide the value of a high-end sports car at a lower cost to the customer and a lower resource cost to the planet.
Martin Eberhard v. Elon Musk, Tesla Motors
The plan argued that “with a gasoline engine, performance comes with a big penalty — if you want a car that has the ability to accelerate quickly, you need a high-horsepower engine, and you will get poor gas mileage when you are not driving hard.”
This would not be the case with Tesla.
“On the other hand, doubling the horsepower of an electric motor from 100 hp to 200 hp only adds about 25 pounds, and efficiency is, if anything, improved. It is therefore quite easy to build an electric car that is both highly efficient and also very fast.”
Therein lies the disruption.
“At one end of the spectrum, the Tesla Roadster has higher efficiency and lower total emissions than the best of the most efficient cars,” the report said. “At the other end of the spectrum, the Tesla Roadster accelerates at least as well as the best sports cars, but it’s six times as efficient and produces one tenth of the pollution.”
With the business plan finally completed, the pitch honed, and the presentations prepared, Eberhard and Tarpenning were ready to try raising money in earnest.
As VCs volleyed back with challenges, Eberhard and Tarpenning saw that there were details they hadn’t thought through.
Justin Sullivan/Getty
Tesla realized it didn’t want to deal with dealerships.
For one, they didn’t fully grasp the franchise sales model of the auto industry. After talking with a few dealership owners, they realized that a startup didn’t want to be selling through dealerships — you’d lose opportunities to gather feedback from customers. Moreover, they learned that a company has few options if a franchisee fails to deliver, since all 50 states have laws on the books protecting franchisees.
The Tesla partners also realized that they’d need to position themselves as palatable to both Democrats and Republicans. Those on the left would see benefits in decreased fossil-fuel use, while those on the right would see a path to energy independence.
Another breakthrough: They quickly realized they couldn’t possibly build an entire car — the human and financial costs would be way too much. They wouldn’t have to. Instead, they’d simply build on top of, and within, an existing car.
That appropriation is not uncommon in the auto industry. The tzero was built upon the Piontek Sportech kit car.
The car needed to be small. The batteries were barely good enough, Eberhard recalled, and any heavier automobiles would rein in the car’s range. Plus, he reasoned that the motor should be behind the driver for the sake of weight distribution and safety, so he focused the search on companies that made lightweight midengine cars.
Reuters
The Lotus Elise makes its debut at the Frankfurt IAA International car show, Sept. 12, 1995.
After some deliberation, Eberhard and Tarpenning settled on the Elise, an elf of a sports car built by Lotus, the boutique British carmaker.
Founded in 1952, Lotus had made a name for itself by building Formula One race cars and slick consumer sports cars.
Lotus had its financially separate Lotus Engineering division, so they were already working with other carmakers. Eberhard briefly considered going after Porsche, which has a similar consulting arm, but he remembers the German company’s rate being three times that of Lotus.
So the Lotus Elise it was.
The tiny British sports car had already been used as a base by other companies. The Vauxhall VX220, also known as the Opel Speedster in Europe and the Daewoo Speedster in Asia, was built on the Elise chassis.
nicolas-serre/flickr
The Lotus Elise S1.
Eberhard and Tarpenning found a way to introduce themselves. At the Los Angeles Auto Show on
Dec. 28, 2003, the two founders muscled their way into the Lotus booth, introduced themselves, and invited a member of the Lotus team to drive the tzero.
That same winter, Eberhard went back to AC Propulsion and sketched out a license to use some of the company’s technology in the development of Tesla’s motor and controller.
With those pieces put together, the new year of 2004 became the time to start pitching to VCs in earnest.
Actually Raising Funds
The thing about having a product that’s really “out there” — like building an electric sports car, as opposed to launching a messaging app — is that it screams risk to possible investors.
In raising their first round in 2004, Eberhard and Tarpenning secured small investments from family, friends, and a handful of VCs, but there wasn’t anybody to lead the round, to make the gigantic keystone investment to allow the young company to rapidly start maturing.
But there was this one guy.
AP
Peter Thiel, left, and Musk in the early 2000s.
Back in 2001, Tarpenning, being a bit of a space nerd, had dragged Eberhard along to see a PayPal cofounder speak at a Mars Society conference held at Stanford. His name was Elon Musk, and his ideas about what to do in the space industry were strikingly clear. Tarpenning and Eberhard introduced themselves.
By this time in 2004, Musk was already deep into SpaceX, though the company had yet to successfully launch anything into orbit.
Eberhard had previously made a handshake deal with the head of AC Propulsion, agreeing that they wouldn’t pitch to the same investors.
Orlando Sentinel
A young Elon Musk.
Musk turned AC Propulsion down, so Tesla stepped to the plate.
On March 31, 2004, Eberhard sent him an email.
“We would love to talk to you about Tesla Motors,” he wrote, “particularly if you might be interested in investing in the company. I believe that you have driven AC Propulsion’s tzero car. If so, you already know that a high-performance electric car can be made. We would like to convince you that we can do so profitably, creating a company with very high potential for growth, and at the same time breaking the compromise between driving performance and efficiency.”
Musk replied that evening.
“Sure,” he said. “Friday this week or Friday next week would work.”
Eberhard and Ian Wright, the third member of their team, flew to Los Angeles, where SpaceX was based, and pitched Musk in his SpaceX office.
The pitch was supposed to be 30 minutes, Eberhard recalled. It lasted two hours.
Eberhard realized that Musk was the first guy he had met who shared his vision for electric cars: Make a vastly superior car, not just a car that sucks less.
A car like that would redefine what an electric car could be. And given the relatively small size of the sports-car market, a new automaker could have an effect on its first at bat, rather than trying to force its way into the crowded economy market.
Then, once the Roadster had destroyed the myth that electric cars had to apologize for being cars, Tesla could move into more accessible price points.
AP Photo/Jae C. Hong
Elon Musk, CEO and CTO of SpaceX, introduces the SpaceX Dragon V2 spaceship at the SpaceX headquarters on Thursday, May 29, 2014, in Hawthorne, California.
Eberhard and Wright walked Musk through their business plan. For all their shared enthusiasm, Wright remembers Musk being skeptical about what the production and design of the car would cost.
Tarpenning was out in Washington, D.C., and he spent the weekend getting peppered with due-diligence questions:
“How do you know you’re going to get your partnerships in line?”
“Can you really build the electronics for the proposed amount of money?”
Tarpenning returned to California, and he and Eberhard made a final pitch at SpaceX. Musk said he was in, but they would have to make it quick. His then wife was pregnant with twins, and once those boys came into the world he wouldn’t have time to deal with the guys from Tesla.
The paperwork was quickly drawn up and finalized on April 23, 2004.
Musk led the $7.5 million round and became the chairman of the board.
It was time for Tesla to grow.
Funding
The way Ian Wright describes it, working with Lotus was an education in Tesla’s ignorance.
28370466@N05/flickr
A 1970 Lotus Europa.
The Tesla team had a long-standing relationship with the English automaker’s work. Eberhard and Wright first bonded on a flight to Tokyo where they took turns damning and praising the Lotus Europa, an idiosyncratic 1970s-era sports car they had each owned.
The New Zealand-born Wright, who used to build and race sports cars back in the day, had come on as the “car guy” for Tesla when he joined as the third member of the team in 2003. Thin, thoughtful, and unavoidably from Down Under, Wright had equal parts Gandalf and Crocodile Dundee.
As part of the fellowship of Tesla, Wright’s biggest responsibility was nurturing the relationship with Lotus.
The first time he visited the Lotus factory, in Hethel, England, he was amazed by two things. The first was the ingenious way Lotus had managed to intersperse Vauxhall 220s with Lotuses on the assembly line. The second was what a ridiculously difficult project Tesla had signed up for.
He was shocked when a Lotus engineer told him that it was easier to redesign an engine than remake a door. In what would become a theme for Tesla, seemingly simple parts revealed unending intricacies. You have to fit locks, switches, and windows into the confines of a door, all while keeping rain and wind out and getting that satisfying thunk when you close it. Perhaps most maddeningly, a would-be carmaker has to navigate manufacturing tolerances.
In car manufacturing, a tolerance is the allowed variation of some measurement in a part, whether it be a dimensional factor such as length or an electrical one like resistance. Part of an engineer’s job is to make sure that the car’s design will work within those tolerated variations — so that, for instance, the longest length of one part still works when mated with the shortest allowable version of another.
“All these things that we thought were easy were really not that easy,” Wright said. “We didn’t know anything about building cars.”
What made things harder, of course, was that Tesla was trying to build a new kind of car. The Elise chassis would require tons of modifications — with Tesla’s electric powertrain and battery pack included.
The other big task for Wright, who would amiably leave the company about a year after joining, was to form a relationship with AC Propulsion, the manufacturer of the tzero, which was so effective at convincing people that electric cars didn’t have to suck. Tesla’s original plan was to acquire the company and get its powertrain technology, motor tech, and the management system. The AC Propulsion executives didn’t want to be acquired, but they agreed to a license deal instead.
With those partnerships in place, Tesla could start creating cars.
Designing The Roadster
Martin Eberhard
The Roadster quarter-scale clay model, circa January 2005.
Malcolm Powell had been working as a project manager at Lotus for over 15 years when he walked into a meeting with Eberhard and Wright in early 2004. They were in England to talk about building a car.
Powell couldn’t help feel skeptical. While Lotus was always a progressive company, he said lots of people would approach the carmaker trying to make their ill-conceived ideas into a reality.
“Most people outside of the industry have little idea how complex and difficult it is to design and develop a production vehicle, even one using conventional technology,” Powell told Business Insider. “Don’t forget, at that time, no one was making a high-performance electric vehicle, nor was anyone achieving adequate range. Their product was therefore out of the ordinary.”
And Eberhard and Tarpenning — two dudes who blew up by making an e-book — were unconventional automakers, to say the least.
“They didn’t have experience building production cars,” he said, but “they knew they didn’t have that experience.”
After serving as the point of contact within Lotus for Tesla, Powell moved to the other side, taking a job as the VP of vehicle integration about six months after that first meeting. He acted as a bridge between the companies — he knew everything you could about the Elise, and he had worked intimately with the whole team at Lotus.
In those days, Lotus held a lot of the cards. Tesla was an unheard-of startup; Lotus was an established name in racing. Powell recalls that Lotus didn’t want to do anything that might dent the reputation of its ace product.
The Roadster was to be new in a way that almost every other new car was not, Powell recalls, because when GM or Ford or Toyota wanted to roll out a product line, they were limited to a pool of parts from preexisting vehicles.
In that sense, a new car from one of the major manufacturers couldn’t be truly new.
But the Roadster — with parts sourced from the dispersed ecosystem of auto manufacturers and Tesla’s proprietary technology — was legitimately new.
With that came headaches and opportunities.
How would it look? Equally as important, how would it feel?
The following summer, Eberhard had a clear understanding of what he wanted the Roadster to look like, so he sent out his first call for design submissions.
The proposals that came back were “awful,” he recalled. They were all loaded with doodads and thingamajigs that screamed “electric.”
No matter how clearly he could picture the Roadster in his mind, he couldn’t communicate the vision to designers.
AP
IDEO cofounder Bill Moggridge helped shape the Roadster’s styling.
In the fall of 2004, Bill Moggridge, a long-time friend who happened to be a legend in design, had Eberhard over to his elegant, modernist home two doors down from Eberhard in rural San Mateo, California.
The London-born Moggridge, now deceased, was something of an elder statesman of industrial design. He was a cofounder of IDEO, the legendary design consultancy. He’s credited with styling the first modern laptop. He served as the director of the Cooper-Hewitt, National Design Museum in New York City.
In his upper-crust English accent, the Santa Claus-looking Moggridge spent two afternoons with Eberhard talking about what he wanted out of the car and the place it would have in the world.
The Tesla intrigued Moggridge because IDEO had designed almost every consumer product the world had seen, but never a car.
Ignoring the view of the Pacific stretched out before them, the two slowly untangled what this mystery car would look like. After a few glasses of wine, Moggridge suggested a way for Eberhard pinpoint his vision.
“OK, let’s consider this axis, from retro to futuristic,” Moggridge said. “On one end here’s a car that’s an electric car and on the other end, here’s the car that’s futuristic. Where would you want your car to be on that axis?”
Eberhard leaned toward retro. The Roadster needed to say “sports car” the moment you laid eyes on it, plus anything futuristic would put the vehicle in the uncomfortably crunchy territory of the Prius or Leaf.
“Here’s another axis, masculine to feminine” Moggridge said. “Where do you imagine your car on that axis?”
In the middle, Eberhard replied. It should be appealing to men, but it didn’t need to be a Mustang.
Another axis.
“Curvaceous or boxy,” Moggridge said. “You could look at the classic old Ferraris, which are very curvaceous, and the modern Lamborghinis, which are very boxy.”
“Where do you see your car?” he asked.
“Somewhere in between, but closer to the curvaceous end,” Eberhard replied.
While the Roadster certainly leaned toward the future, it was designed to be rooted in timeless forms.
After all that articulation, Moggridge created a presentation. It was “magic,” Eberhard said. Moggridge had translated his engineerspeak into something design people could understand.
Eberhard put out another call for styling, and this time people understood it.
Submissions came back, and he knew just the way to evaluate them.
For the company Christmas party, Eberhard invited the 15 other members of the Tesla team, advisers, and their families to a company holiday party at his home in San Mateo County. Aside from Elon Musk, everyone who mattered to the company was there.
Eberhard stripped his guest bedroom of anything but the white walls. On those walls he placed the sketches and computer renderings from the four design finalists. The guests were each given three red Post-it notes and three green Post-it notes.
Martin Eberhard
The contestants for the Roadster design contest.
He told his guests that red was bad, green was good, and they could put the Post-its wherever they wanted.
Throughout the course of the night, guests drifted down to the guest room, studied the designs, and placed their Post-its.
By the end of the night, one wall was full of green: that of Barney Hatt, then principal designer for Lotus Design Studio.
The Roadster had found its form.
Martin Eberhard
Barney Hatt of Lotus Engineering won the design contest.
The Roadster’s First Flight
By November 2004, Tesla built their first “mule,” an Elise stuffed full of Tesla technology.
Martin Eberhard
The Mule being built.
Malcolm Smith recalled that when the time finally came to take the mule for a spin, there was some debate about who should drive. A few people suggested that Eberhard do it, but the CEO thought that JB Straubel, now the CTO, would like to take the wheel.
In interviews with other employees, Straubel was repeatedly described as a wunderkind. The guy rebuilt an electric golf cart when he was 14. He had cofounded the Aerospace firm Volacom. The MIT Tech Review wrote that “more than anyone else, [Straubel] is responsible for the car’s impressive acceleration,” the engineer who engineered the Roadster’s electronic controls, electric motor, and battery pack.
Pretty fitting, then, that he got the first ride in the first true Tesla.
The car was missing all its body panels, but it had a revised battery pack, software, and hardware.
Straubel hopped in and stepped on the accelerator. The mule rocketed down the pavement.
Everybody stood slack-jawed.
The wheels didn’t fall off, the software didn’t crash.
The Roadster, embryonic as it was, could drive, and drive like hell.
“The first fully functioning mule was the real proof of concept and would lead us to the production design,” said Smith. “Any time you have some new tech that you’re not sure is going to work or not, you get a little bit of that Wright Brothers feeling — it did get off the ground.”
That proof helped secure more funding too. A $13 million Series B came in February 2005, led by Valor Equity Partners and Elon Musk.
Martin Eberhard
Tesla Roadster wireframe, June 2006.
The Roadster Meets The World
In the spring of 2006, Tesla was still in stealth mode.
But it’s hard to stay stealthy when you’re making something as crazy as a high-performance electric vehicle. The creators of the documentary film “Who Killed The Electric Car” had already come a-knocking, and more buzz was gathering around Silicon Valley.
Though it wasn’t his quite his job, Mike Harrigan, who was brought in as VP of customer service and support, realized that the time for staying quiet had passed. 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.
At the center of the hanger was a stage. A track looped around the inside of the hanger, went out the door, ran down the airport runway, looped around on a straightaway, then back into the hanger, as if you took a long rubber band, made a rough T shape out of it, and laid it on the tarmac of Santa Monica Airport.
ori/flickr
A fan shot of the Tesla launch party in Santa Monica on July 19, 2006.
Most guests got a short ride in the prototype, piloted by Tesla engineers who had put long hours into test drives.
By the end of the day, both cars were making some alarming noises.
The drivers were hearing a loud clunk in the back of the car whenever they punched the accelerator. The upper motor mount — which they had built out of magnesium — had broken. You couldn’t see it by popping open the trunk; you had to crawl around inside the car.
“The cars nonetheless did a perfect service,” Eberhard said. “From the audience perspective they didn’t have a problem. Anybody who got into one of those cars had their opinion of electric cars instantly changed.”
Stephen Casner was a friend of Eberhard’s and a colleague when they both worked at Packet Design, attended the event. Now retired, Casner had a long-time interest in electric vehicles; he had once given Martin a ride in his own EV-1.
ori/flickr
Another fan shot of the Tesla launch party in Santa Monica on July 19, 2006.
Both Musk and Eberhard spoke at the event. But Eberhard made by far the bigger impression, according to those who were present.
At the time, Eberhard was Mr. Tesla, Harrigan said. He was confident and knowledgeable enough to inspire a following, but nerdy enough to feel accessible.
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.
“Elon’s ability to speak in public and convey the sense of the company was not nearly as good as what Martin had done,” Casner said. “I don’t know if its a matter of what language is used or colorful phrases. He just didn’t seem to be nearly as effective in making people excited and believe in this trend.”
As a result, Casner remembered, Eberhard was the one doing one media interview after another. He did dozens that day — some in front of a camera, some for radio, some for print, with some reporters just listening while he spoke with others.
In any case, the event worked.
Within two weeks of the event, Tesla had sold 127 cars, Harrigan recalled.
One of those was Stephen Casner’s. On July 28, he and his wife gave Tesla a $100,000 check to become “Signature One Hundred Members,” which meant they had a reservation for one of the Signature One Hundred special-edition Roadsters.
Stephen Casner
People put the money down to get the Signature One Hundred series cars received this thank-you note.
They received the following thank-you note from Tesla:
Congratulations on becoming a member of the Tesla Signature One Hundred
You have joined an elite circle of automotive visionaries who have chosen to reserve the world’s first high performance, electric sportscar.
We look forward to delivery dates in summer of 2007 and will keep in touch with you on a regular basis regarding the status of the Tesla Roadster as well as Tesla Motors company updates.
As a Signature One Hundred Member, we welcome you to the Tesla Motors Family
The note was signed by Eberhard, Tarpenning, and Musk.
Meanwhile, the media plan appeared to be working.
Stephen Casner
The reverse.
Harrigan remembered putting together three full binders of clippings. He said the company was careful not to limit itself to the automobile press but also work hard to get attention in financial magazines like Fortune and landed a massive, splashy spread in Wired.
The press was glowing. CNET reported that “as soon as the driver hits the accelerator, you are thrown back against the seat.” The Washington Post raved “This is not your father’s electric car. The $100,000 vehicle, with its sports car looks, is more Ferrari than Prius — and more about testosterone than granola.”
The New York Times told readers that Tesla was making a car that was “very specialized, very expensive and very, very fast.”
Eberhard was becoming a star. 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.
In an email to Harrigan on July 18, 2006, he wrote that he would “like to talk with every major publication within reason.”
He continued:
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.
Two days later, after The Times ran its write-up of the Signature One Hundred event, Musk felt slighted again.
“I was incredibly insulted and embarrassed by the NY Times article” — he wrote in an email cc’d to Eberhard and Harrigan on July 20, 2006 — “where I am not merely unmentioned, but where Martin is actually referred to as the chairman. If anything like this happens again, please consider the PCGC [public relations firm] relationship with Tesla to end immediately upon publication of such a piece. Please ensure that the NYT publishes a correction as soon as possible.”
In a column about Tesla a week later, the paper of record gushed that “Martin Eberhard, the company’s chief executive, recognizes that new technologies usually start out as high-end products. He and his team are making their car the newest hot gadget, a status symbol. If rappers and football stars buy them, maybe the company can make a dent in the market.”
There was no mention of Musk.
“The first time we really bumped heads was over that press coverage of the debut,” Eberhard said. “We had technical disagreements that we worked through, and it was always very collegial. We would work through our opinions and come to a conclusion. That was the first time where it was this emotional.”
Shortly thereafter, Musk took Harrigan aside, letting him know that if he wanted to keep his job with Tesla, he’d have to start getting him some recognition.
A Bump In The Road
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.
In October 2006, it seemed to Musk that the Roadster was at a crossroads: Tesla could either “sacrifice a six month first mover advantage in a market that is like the Internet circa 1992 (but slower moving) or focus every bit of energy on getting our product right,” he said in an email.
“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.”
When he’d originally promised a 2006 delivery date, Eberhard said, the Roadster was a lower-risk proposition. The original plan was simple: Tesla would supply the drivetrain components for Lotus to build. Production would be low cost and low friction. As Smith remembers, the idea was to reduce cost and headcount by sourcing as complete a vehicle as possible, then adding a few pieces of swank technology and finishing the car. They’d throw on a few body panels and make sure it didn’t look like a Lotus.
But that didn’t happen, thanks to what Smith called “elegance creep.” They could keep making the car a little nicer, so they did.
The original plan called for Tesla to be responsible for five or so subassemblies in the car — discrete chunks of car that come in complete and are bolted on. Tesla would be in charge of the battery-pack subassembly, for instance, then Lotus would take care of most of the chassis (wheels, tires, shock absorbers) and Tesla would bolt on the parts.
But instead of Tesla being responsible for five assemblies, it wound up taking care of hundreds of them.
The complications began piling up.
Martin Eberhard
The custom headlight decision naturally pushed the Roadster’s delivery back.
They decided to go with a carbon-fiber body instead of a polyester glass composite. At Musk’s request, they lowered the doorsills — the lowermost part of the door — to make it easier to get in and out of the car. They switched out standard headlights for bespoke ones. Musk thought that the seats were uncomfortable, so they were retooled. Musk didn’t like the material of the dashboard, Eberhard recalls, “and wanted something less cheap.” Then there was the transmission, which got delayed again and again. As Musk put it, the transmission “is not an inherently difficult item, but if you have two suppliers screw the pooch on you,” then you’re looking at some tardiness.
“Each of these is a reasonable decision,” Eberhard said. “You have to consider that it’s going to cost more money and cost on the schedule, and that was never accounted for.”
With all those switches, Tesla became responsible for the entire s