Tesla is one of the most valuable car makers in the world.
The company, which also makes energy generation products, has a reputation for industry-disrupting innovation, but Tesla wasn’t an overnight success. Tesla was founded by engineers Martin Eberhard and Marc Tarpenning in 2003, the same year General Motors discontinued its EV1, citing a lack of demand for electric vehicles (EVs). They sold their e-book business to start Tesla and build a greener car—a high-end performance EV for wealthy car enthusiasts.
Elon Musk joined the company in 2004 with an investment of $30 million and became the chair of the board of directors.
The company’s plan was to focus its efforts on lithium-ion batteries, which were cheaper and more powerful than the batteries used in previous EVs. They planned to create a high-margin, high-performance sports car to get away from the stigma surrounding EVs at the time and use the revenue to fund a more affordable car in the long run. Another core goal was to achieve economies of scale to bring down the cost per unit.
Tesla spent many years testing and designing components and prototypes of what would become the Roadster.
The company wanted to reduce the complexity in manufacturing, but costs spiraled out of control as the company customized more and more parts. Eberhard resigned as CEO in 2007 and was replaced by Ze’ev Drori, who pushed the company forward to finalize the long-awaited Roadsters.
Eberhard and Tarpenning broke all ties with Tesla around the same time Roadsters finally went into production; they later suggested they had been forced out.
The next year, Eberhard sued both Tesla and Elon Musk, alleging Eberhard’s leadership had been wrongly blamed for the company’s early financial and operational struggles.
Eberhard said Musk unfairly took credit for the Roadster.
Musk offered Eberhard a small severance package, but Tesla rescinded the package after Eberhard created a blog post discussing Tesla employees. Tesla denied Eberhard’s allegations, and he eventually dropped his lawsuit.
In 2008, Musk took the reins as CEO and made several big moves to save the company, including cutting 25 percent of the workforce, selling a 10 percent stake to Daimler AG, and borrowing $465 million from the U.S. government.
Though only 2,450 Roadsters were made, they demonstrated that EVs could have a longer driving range and reach high speeds, making EVs more appealing to the mass market.
Tesla’s 2010 initial public offering (IPO) raised $226 million, showing that investors had confidence in the EV revolution.
With one successful vehicle under its belt, Tesla decided to go after the wider market with the Model S, the world’s first premium all-electric sedan, in 2012 and the Model X, the safest SUV ever tested, in 2015. Both vehicles had impressive acceleration times and driving ranges, but the high cost of lithium-ion batteries was still weighing on the company. To reduce costs, Tesla brought battery cell production in-house with the creation of Gigafactory 1 outside of Sparks, Nevada.
The cost of battery cells declined through economies of scale and the reduction of waste, making the vehicles more affordable for consumers.
Next, Tesla began to focus on the energy side of its business, introducing Solar Roof solar tiles and the Powerwall home battery. The company changed its name from Tesla Motors to Tesla, Inc. in 2017, to represent the company’s shift from a car manufacturer to a sustainable energy solution company. The automaker’s energy solutions enable homeowners, businesses, and utilities to manage renewable energy generation, storage, and consumption.
Tesla introduced the Model 3 in 2017, which was considered to be its first car for the masses. By 2018, the Model 3 had become the number-one selling plug-in car in the world, passing the Nissan Leaf by 2,000 units. In 2019, the company achieved Musk’s goal of creating a more affordable EV for the broader market when it released a base model of the Model 3 at a price point of $35,000 for a limited time. Tesla continued to target the consumer market with its first compact crossover, the Model Y, and a new kind of pickup truck, the Cybertruck, in 2019. In addition to capturing more of the consumer market, Tesla is investing in heavy-duty trucks with Tesla Semi, an electric semitrailer truck that is designed to be far less expensive per mile than traditional semi-trucks. The truck accelerates faster and drives uphill faster than a traditional semi and includes advanced safety features.
Tesla, which has fumbled when it comes to setting expectations and meeting deadlines, will need to streamline its operations to be a contender in the mass car market.
Investors continue to bet on the automaker with its stock reaching record highs. In fact, Tesla became the most valuable automaker in the world based on market value. The company’s mission is to accelerate the world’s transition to sustainable energy. Working to cover more forms of transport greatly expands Tesla’s footprint in the automotive industry and improves the carbon footprint of the transportation industry as a whole.

 Questions
1. What strengths have contributed to Tesla’s success?
2. Tesla planned to create a high-margin, high-performance sports car and use the revenue to fund a more affordable car in the long run. Was this plan successful? Why or why not?
3. How does Tesla live up to its mission?