On July 1, 2019, the Tesla electric car company will celebrate its 16th birthday. Its capitalization has already reached $ 50 billion, but Tesla has never completed a year with net profit over the entire period of its existence, the loss only for the past 2018 exceeded $ 970 million. Nevertheless, Tesla is a brand that has proved to the whole world that electric cars are not needed only on the golf course, and for gasoline engines a place on the museum shelf has long been reserved. About the grandiose substitution of Ilon Mask, the ideological developers of Silicon Valley.
At the beginning of the XX century, Henry Ford bought electric cars for his wife
Starting the story about electric cars, one can not help but remember that this market existed and for some time even flourished long before Tesla, Martin Eberhard, Mark Tarpenning and especially Ilon Mask. Since the beginning of the 20th century, electric cars have plowed the streets of America with might and main. According to The Washington Post, in 1901, approximately 38% of cars in the United States were electric, 40% were powered by steam engines, and only 22% were powered by gasoline. Already at that time the streets of many large cities were getting rid of tons of manure – an indispensable “companion” of horse-drawn carriages, and gasoline cars were considered too dirty and difficult to drive.
By 1915, there were 1,325 electric vehicles in Washington, about the same as in Detroit, over 4,000 in Chicago and over 3,000 in New York. As American newspapers wrote then, the real lobby of electric vehicles was women: the electrical equipment was cleaner, quieter, and many times easier to control than steam and even more gasoline, which spewed corrosive fumes and was launched using the handle. Charging stations for electric cars were located mainly in numerous city car dealerships. By 1909, electric cars on a single charge could cover distances of up to 80 miles (about 120 kilometers).
The first faces of America made truly fashionable electric cars in the States. The first electric car began to drive the wife of the 27th US President William Howard Taft – Helen, which triggered a real sales boom. Henry Ford, who was making his gasoline cars in Detroit at that time, was buying electric cars for his wife Clara Jane – she preferred them to cars that her husband made.
At that time, several American companies were engaged in the production of electric cars, including Baker Motor Vehicle Co., Milburn Wagon Co., Anderson Electric Car Company. Electric cars were predicted to have a great future in the world market, but this was not destined to come true in the next century.
The tin Lizzy, a gasoline-powered Ford Model T manufactured by Ford Motor Company in 1908, put an end to the electric car era. Ford’s revolutionary model subsequently became the first car in the world to be produced in million series. Due to its simplified design and low cost, the Tin Lizzy simply collapsed the market: the Ford Model T sold for $ 650, while the price of an electric car comparable in characteristics reached $ 1,750.
The Texas oil boom of the 1920s put the point in the development of electric cars: a large amount of cheap fuel appeared in the country, gas stations were built on roads throughout America, including rural areas that did not have access to electricity. By the 1930s, electric cars had virtually disappeared.
Martin Eberhard and Mark Tarpenning – the beginning
The history of Tesla begins in 1990 – from the moment the young electrical engineer Martin Eberhard met computer developer Mark Tarpenning. At the time of the first, chance meeting, both were a little over 30, and both had pretty impressive professional experience. Both founders of Tesla are originally from California, already infected with Silicon Valley magic at the time. Their youth came at a time of tremendous breakthroughs in the development of computer, mobile and energy technologies.
Mark Tarpenning was born on June 1, 1964 in Sacramento. After earning a bachelor’s degree in computer science from the University of California, he began his career at the Textron conglomerate in Saudi Arabia. Martin Eberhard was born May 15, 1960 in Berkeley, received a bachelor’s degree in computer science and a master’s degree in electrical engineering from the University of Illinois, after which he served as an electrical engineer at Wyse Technology (manufacturer of cloud computing systems until 2012). During another absenteeism from the kingdom to his native California in 1990, Tarpenning, glancing at Wyse Technology’s office with his old friend Greg Rendu, met Eberhard.
They were complete opposites, which is probably why their business union became successful, writes Business Insider. The quiet, modest and thoughtful Mark Tarpenning immediately drew attention to the hyper-energetic and charismatic Martin Eberhard, who had the habit of capturing everyone’s attention as soon as he entered the room. Very quickly out of friendship their relationship lbushes in business. Engineers began to conduct joint consultations for manufacturers of portable energy storage, working with the nascent forms of mobile computers – early mobile phones and laptops. Both young men understood that the ideal time was coming to take advantage of the technological impulse and monetize their experience.
In 1997, a choice was made. On April 15, Eberhard and Tarpenning founded the first joint venture, NuvoMedia. A year later, entrepreneurs launched one of the world’s first portable reading devices – an e-book under the Rocket eBook brand. The developers did not fail. In 2000, novice businessmen received one of those offers that they do not refuse: the media company Gemstar – TV Guide International offered a nine-digit figure for NuvoMedia. Soon, the startup was sold for $ 187 million. By the end of 2000, partners now burdened with some fortune began to think about creating a new company. At this time, Martin Eberhard is undergoing a divorce.
AC Propulsion bet did not play, spawning Tesla Motors
Eberhard went through all the possible options for energy consumption, compiling a summary spreadsheet with energy sources: hydrogen fuel cells, various variations of gasoline and diesel fuel, natural gas, several types of batteries. The results surprised the developer – in the race of energy efficiency indicators, the electric car became the undisputed leader. The scientist decided to delve into the issue and went to the company AC Propulsion, the largest manufacturer of electric cars, at that time already released the Tzero sports car, which was outrageous in cost (by the characteristics of the Tzero with the original lead-acid battery, it was not inferior to Lamborghini, only three cars were produced).
Tzero was living proof that the electric car should not be slow. After the test drive, Eberhard was delighted, but perfectly understood that a car with a cost of $ 220 thousand would never enter the market. He decided to become part of the AC Propulsion team, one of the developers of Tzero. His main goal was to make a mass-produced electric car out of a luxury electric car. The developer has replaced lead-acid batteries with lithium-ion batteries, similar to those used for laptops. From year to year, they became cheaper and the characteristics were not inferior to the original Tzero batteries.
By September 2003, in six months, Eberhard completed the finalization of the Tzero. Now the car could accelerate to 480 kilometers per hour, weighed only 230 kilograms and accelerated to 100 kilometers per hour in just 3.6 seconds. The developer invited the founder and CEO of AC Propulsion Tom Gage and Alan Kokkoni to launch a prototype of the new Tzero lithium-ion engine in production, but was refused. On July 1, 2003, Martin Eberhard and Mark Tarpenning founded Tesla Motors to commercialize electric cars with lithium-ion batteries and an induction motor, already tested on Tzero.
What does Ilon Mask have to do with it?
As you might guess, the Tesla brand trademark was born as a tribute to the inventor Nicole Tesla, whose design – an asynchronous AC motor – Eberhard and Tarpenning intended to use in their cars. The first Tesla Motors office they opened in the office center of the California city of Menlo Park. Throughout 2003, partners will refine their idea and formulate a commercial proposal that could interest potential investors. The developers decided to start with the production of a two-seater sports car, after which they gradually master the more massive segments.
The car was supposed to provide all the advantages and incorporate all the characteristics of a high-class sports car, moreover, at a lower cost to the client and lower cost of resources for the planet. The plan was this: acceleration to 100 kilometers per hour in 3.9 seconds, zero exhaust gases and a selling price below half the cost of the cheapest sports car. As the basis of the new electric car, it was decided to use the Elise model of the British manufacturer of Lotus racing cars, Tesla borrowed some components from Tzero. By the beginning of 2004, all agreements were signed, Eberhard and Tarpenning could begin the search for investors.
Through joint efforts from venture funds, family and friends, partners managed to raise several million dollars, but this was too little. The key investor was still in no way. Eberhard and Tarpenning recalled their acquaintance with Elon Musk in 2001 at the Mars Society conference in Stanford, where the then famous co-founder of PayPal Inc. He acted as the main speaker, infecting everyone with “cosmic” ideas. In 2002, PayPal Inc. was sold to eBay for $ 1.5 billion.
The deal turned 31-year-old Ilon Mask into a wealthy businessman and promising investor. In May 2002, he founded yet another Space X company, which designs, manufactures and launches cutting-edge missiles and spacecraft, proclaiming as its mission “reducing the cost of flights into space” and “paving the way for the colonization of Mars.” After the presentation, Musk agreed to invest in Tesla Motors and became chairman of the Eberhard and Tarpenning board of directors. According to Business Insider, the first round of investment was $ 7.5 million.
The trick Mask with Eberhard: this could not go on forever
Tesla was an unheard of startup. Eberhard and Tarpenning swung to release a car that was supposed to prove to the world that electric cars are needed not only on the golf course. At the same time, they were very far from the automotive industry, everything was new to them. This could not but affect the timing of the release of the first model – literally everything had to learn from scratch, every little thing turned into a problem, Tarpenning recalled years later.
Tesla continued to grow and develop its first car, The Roadster. The company opened its own production facility in Fremont, in a 5.5-million-square-foot factory formerly owned by Toyota and General Motors. By 2006, the company’s staff consisted of more than a hundred employees. In May, the first prototype of the new racing electric car – EP1 – was ready. About $ 40 million was raised at the second investment round. According to Forbs, Ilon Musk invested $ 13 million, the rest was collected from contributions from the largest US venture funds Valor Equity Partners, Compass Technology Partners, VantagePoint Capital Partners and business angels, Google co-founders Larry Page and Sergey Brin.
It became obvious that Tesla Motors should go into the information field. The company signs agreements with several advertising agencies. On July 19, 2006, Tesla held a large presentation of the prototype The Roadster in Santa Monica. The list of 350 invited guests included major politicians, movie stars and billionaires, including California Governor Arnold Schwarzenegger even at that time. The purpose of the presentation was to create a “List of a Hundred” – the first hundred buyers of The Roadster. Guests were invited to take a checkbook to the party, conduct a prototype test drive and buy an exclusive model with a special sign with the signature of Eberhard, Tarpenning and Mask for $ 100 thousand.
After the test drive EP1, a new wave of problems and deficiencies The Roadster. The whole Tesla Motors team once again took up the elimination of imperfections. Meanwhile, PR did its job. In the two weeks after the presentation, Tesla sold 127 cars. They started talking about the company – publications began to appear in The Washington Post, The New York Times and other newsletters of America. True, not all of them were satisfied with Ilona Mask.
The year 2006 is considered the date of the beginning of the conflict between the main investor Tesla and its founders – Eberhard and Tarpenning. Musk was outraged by his role as an “early Tesla investor,” which was attributed to him by journalists and the public. He insisted that, along with the founders, he took part in developing the concept of The Roadster. Looking ahead, we note that later Musk will retroactively call himself the co-founder of the company, provoking confusion.
Misunderstanding at the top of Tesla accumulated. At the same time, work on The Roadster was in full swing, questions remained open in literally every direction – from serial design to acquiring parts and testing reliability, Eberhard said in a conversation with Business Insider. As soon as the team completed work on any part, all new optimization proposals arrived. The release of the electric car was delayed. The staff grew, the bookkeeping of a huge enterprise became more and more confused, and Eberhard could no longer combine all managerial functions with work on The Roadster. The question arose of finding a new CEO who could offload Eberhard.
Responsibility for the failure to meet the deadlines for the release of the first Tesla model lies largely with Ilon Mask, the American media agree. He always had his own look at The Roadster’s style and often made constructive suggestions, but was rarely present in the office, which meant that his proposals always created chaos. Musk and Eberhard spent hours arguing about the “stuffing” and the aesthetics of the electric car, and the new Tesla CEO was never found. Eberhard ceased to cope with all administrative duties.
The production of components and parts for The Roadster was located in dozens of countries in Europe and Asia, due to a lack of attention to the choice of foreign partners, fuzzy accounting and erroneous calculations, the cost of the car increased from the estimated $ 85 thousand to almost $ 200 thousand. There are different points of view regarding the culprit of the first failures of The Roadster. We will not delve into hypotheses, but be that as it may, at the insistence of the Tesla board of directors on August 8, 2007, Eberhard resigned from his post as president of technology. The decision of the council of the founder of the company was announced by telephone to Elon Musk.
Eberhard’s breakup with Tesla was dirty: litigation defamation proceedings and severance pay lasted several years. Michael Marx, the former CEO of electronics manufacturer Flextronics, took a temporary leadership position in the company. Already on November 27, 2007, Marx was replaced by Zeev Drori, the former CEO of the automaker Clifford Electronics. Elon Musk, however, sank deeper into the affairs of Tesla. By that time, his managerial skills no longer raised any questions. He has earned the fame of a tough, aggressive, sometimes even tyrannical, but effective manager. For the year, Musk actually rebuilt the entire Tesla management system, significantly shuffling the staff. At the end of 2007, Tarpenning left the company, not resigned to innovations.
Tough control Mask gave its results: even before the release of The Roadster, the whole world knew about Tesla. By 2008, the company was finally ready to launch its first electric car. However, by that time, after conducting a control audit, Tesla had come up with disappointing results: the development of the machine cost $ 140 million, five times higher than the original budget. The falling car market could not be ignored – the world’s leading automakers announced bankruptcy one by one, and Tesla brought The Roadster to light. To save the company, Elon Musk invests several tens of millions of dollars from his personal budget and again turns to investment funds. After the situation can be balanced, in October 2008, Musk becomes the CEO of Tesla.
In March, the production of The Roadster was launched. The model turned out to be successful – by 2012 the number of machines that had rolled off the assembly line was 2,600 units. The performance of the electric car exceeded all expectations – the car accelerated to 60 miles (100 km) per hour in 3.6 seconds and could drive 220 miles (350 km) without recharging, The Roadster accelerated to 125 miles (200 km) per hour and actually became the first the world’s affordable all-electric car. Since the Tesla contract with Lotus for the supply of 2.5 thousand cars expired at the end of 2011, in 2012 the model ceased to be sold.
In March 2019, Tesla made a presentation of its first SUV, the sixth model, Model Y. Serial production of cars will only begin in the fall of 2020. Model Y has a power reserve of 370 km without recharging and accelerates to 100 kilometers per hour in 5.9 seconds. The maximum speed of the car will be 193 kilometers per hour. In the basic configuration, the car will cost $ 39 thousand.
In 2014, Tesla’s capitalization, according to Forbes, was $ 28 billion, over the past 5 years it reached $ 50 billion. Although many experts now call the company Mask a “soap bubble” that is about to burst. In 2018, Tesla’s revenue amounted to $ 21.4 billion, but over the entire period of its existence, the company never ended the year with net profit, the loss for the past 2018 exceeded $ 970 million. Ilon Mask himself has become famous for his careless and doubtful for years at the helm of Tesla often conflicting sayings on Twitter. In his social network account, he was repeatedly convicted of making unrealizable promises to increase the production of cars, receive profits and buy back Tesla shares that are in free circulation in order to make the company private. The US Securities Commission accused the businessman of fraud and an attempt to raise the stock price. After litigation in September 2018, Musk was removed from the post of chairman of the board of directors, paid a fine of $ 20 million and was forced to agree to coordinate his posts on social networks.