As we see Tesla stock exploding past the $900 mark, we look back at the relatively short and remarkable history of the highest valued carmaker in the United States, that has recently seen its market cap exceeding that of GM, Fiat-Chrysler, and Ford. For a company less than 20 years old that was quite an achievement. But it is not Tesla’s biggest.
The company’s biggest achievement has to be the fact that it survived for 17 years and even became profitable several times.
Tesla’s Early Days
Tesla began its life as Tesla Motors in 2003, the brain child of an electrical engineer and a computer scientist who set out to make an all-electric car that would be on par with a gasoline car in terms of both looks and performance.
Martin Eberhard and Marc Tarpenning first partnered on an e-book venture before they decided to make an electric car. NuovoMedia was set up in 1997, and three years later Gemstar-TV Guide International bought it for $187 million.
At the time, according to Tarpenning, the two wanted to start another venture, but initially did not know what exactly they wanted to do. “We knew we wanted to solve a real problem,” Tarpenning said in a 2009 interview. “We just couldn’t do another network widget.”
The duo considered fuel cells and cellulose ethanol initially, as the problem they decided to solve at the time was peak oil: a major concern in the late 2000s. Eventually, however, they picked electric cars. And not just any electric car, but an “aspirational” electric car that was beautiful and expensive, and that would create a new image of EVs and make them mainstream.
The Roadster
To create their aspirational vehicle, Eberhard and Tarpenning needed funding. The first funding round of venture capital took place in 2004 and it was led by a co-founder of PayPal named Elon Musk. A fresh billionaire after eBay bought PayPal in 2002, Musk had the money that Eberhard and Tarpenning needed.
Three years and three funding rounds after Tesla Motors came into existence, the final version of the first Tesla car, the Roadster, was born. Mass production of the car began in 2008. The price tag of the first Roadster was $109,000, and between 2008 and 2012 Tesla sold 2,450 Roadsters.
The car certainly lived up to the hype. It could accelerate from 0 to 60 mph in less than 4 seconds and had a top speed of 135 mph. It could travel 245 miles on a single battery charge and had an efficiency rating equivalent to 135 miles per gallon of gasoline. Related: What Happens If The Next U.S. President Bans Oil Exports?
The years that led up to the first mass-produced luxury EV in the world were hardly problem-free. Musk, who served as chairman at the time, had differences with one of the founders of the company, Martin Eberhard, that ultimately led to Eberhard leaving Tesla and suing it. That was settled, but financially, the company remained in a tight spot, habitually spending more than it made.
The Secret Master Plan
In 2006 Elon Musk released a document called the Secret Master Plan that detailed the long-term plans Tesla Motors’ chairman had for the company. In it, Musk revealed his goal with investing in the electric car maker was never just to make cars and sell them. Things went further than this.
The purpose of the Tesla investment was “to help expedite the move from a mine-and-burn hydrocarbon economy towards a solar electric economy, which I believe to be the primary, but not exclusive, sustainable solution.”
Ultimately, as Musk summarized it at the end of his plan, Tesla would help the transformation from a fossil fuel-based economy to a more sustainable one by doing the following:
“Build sports car
Use that money to build an affordable car
Use that money to build an even more affordable car
While doing above, also provide zero emission electric power generation options”
Since then, Tesla has been trying to do just that, with mixed success.
Going Public
2008 was not a good year for anyone, and it was particularly hard for Tesla because of its already chronic financial problems. During that year, Elon Musk became chief executive of the company, replacing Tarpenning, who left Tesla altogether. Musk immediately announced job cuts as well as a delay in the release of the next Tesla, the Model 3, to 2011.
It survived the first year of the crisis on loans: a $40-million convertible bond pulled it from the brink of bankruptcy at the end of 2008 and next year, Germany’s Daimler bought a 10-percent interest in the carmaker for $50 million. In the same year, the U.S. Department of Energy granted Tesla a loan of $465 million.
Yet loan financing would not cut it. Tesla announced its long-awaited initial public offering in 2010. The listing took place in June on Nasdaq. Tesla issued 13.3 million shares at a price of $17 apiece, raising over $226 million. On the day of the IPO, the stock closed 40 percent higher. Seven years later, in June 2019, Tesla was trading at $370.
That same year, Toyota joined the Tesla party, investing $50 million in a joint venture with the EV maker, to develop electric vehicles jointly. That joint venture survived until 2017 when Toyota sold its stake: the competition between the two in the EV space had taken over.
The Model S
Tesla announced the prototype for the Model S, a sedan with a more affordable price tag of $76,000, in 2009 in the midst of its serious financial troubles. Serial production of the model only began in 2012 with deliveries reaching 3,100 cars during that year.
The Model S scored top marks in every performance-related category that car assessment experts use to rate a vehicle, and quickly became one of the most popular passenger cars in the world.
The car was offered in three versions, differing on battery range. The cheapest one, with a 40 kWh battery pack, was indeed cheap, but it soon became clear that prospective Tesla buyers were not interested in a low price. They were interested in a longer range. Tesla cancelled the 40 kWh battery pack Model S version before manufacturing even began, continuing with the 60 kWh and 85 kWh versions.
Between 2013 and 2016, Tesla was producing 50,000 Model S cars annually.
The Model X
The Tesla SUV came out soon after the Model S and, like the sedan, was rated with top marks by none other than the National Highway Traffic Safety Administration. Sales began in 2015 and by 2017, Tesla was selling 2,000 Model Xs in the United States. Again, buyers shunned the lowest-price version of the car, opting for the longer range that the 75 kWh battery pack provided.
As with the Model S, the production of Model X faced some delays, which led to delays in deliveries. But over the years both production and deliveries have smoothened out, and now Tesla is preparing to launch a similar mode: the Model Y crossover.
The Model 3
The game-changer for Tesla, the truly affordable luxury electric car Musk was talking about in his Secret Master Plan, also became the most notorious for the numerous and lengthy delays at every milestone. Some argue that these delays were the result of Elon Musk setting the company unrealistically tight deadlines, but whatever the reason, the delays hurt the company’s share price and prompted a secondary offering of shares that raised $1.46 billion.
That was not enough to ramp up the production of Model 3 to the desired level, which was planned to bring total car production to half a million annually: in the second half of 2017, when Musk had said Tesla would deliver 100,000-200,000 cars, it only delivered 55,000.
Despite the delays, hundreds of thousands of people wanted to own a Model 3. By May 2016, there were more than 370,000 reservations for the car whose price starts at $36,000.
Tesla continued struggling with the ramp-up of Model 3 production well into 2018, after deliveries began, but by the following year it managed to exceed its own delivery goals. In 2019, the EV maker delivered 367,500 vehicles, which was 50 percent more than its total deliveries in the previous year. In January 2020, Tesla began deliveries of the first Model 3 cars made in China.
As it struggled with deadlines, Tesla also managed to release an all-electric semi truck aptly named the Semi, and a rather controversial pickup truck dubbed the Cybertruck. Preorders for the Cybertruck, according to Elon Musk, topped 200,000 in the first days after its showcasing.
Superchargers and the Gigafactory
When you decide to make all-electric vehicles you would naturally want to also provide drivers with the charging network they would need. This is what Tesla did in 2012, when it launched the first six Supercharger stations, all in California, where Tesla Model S drivers could recharge the cars’ batteries for free.
Seven years on, the Supercharger network has reached more than 1,800 stations with a total 15,911 chargers across North America, Europe, and Asia, allowing drivers to recharge in just half an hour. While still a lot longer than filling up a tank with gasoline, Tesla’s charging times are the fastest currently available commercially.
Besides charging stations, Tesla has also put a lot of money and effort into its own battery production capacity. Construction of the first battery plant, called the gigafactory, began in Nevada in 2014, and by 2016 the facility was already operational.
Production capacity was initially to be 35 GWh—hence the name—but by 2020 it was planned to ramp up to 105 GWh for battery cells and 150 GWh for battery packs used in Tesla’s energy storage products.
The Nevada facility was only the first one. Tesla has since then built another one, in New York, a third one is under construction in China, and a fourth one was in 2019 announced to be built in Germany.
Fires and Autopilot Troubles
Tesla made headlines in 2013 when a Model S caught fire in Seattle. This was the first of a series of fire accidents involving Tesla cars over the next few years, with some of them ending in fatalities.
The accidents sparked a debate about the safety of electric cars, given that lithium ion batteries are prone to explosions on collision. However, Tesla has countered criticism by noting that in many of the cases, the people who died would have died even if there had been no fire: in at least two of the accidents that ended with deaths, the drivers were doing speeds much higher than the limit.
The debate continues and it is not the only one Tesla has sparked unwillingly as a result of accidents. The other big issue critics take with the company is its Autopilot system.
Tesla’s Autopilot entered the scene in 2015. Since then, there have been a dozen incidents where a Tesla has crashed while the Autopilot has been on.
In many of these cases the drivers have been over-reliant on the Autopilot, despite Tesla clearly stating it was not a complete self-driving mode and the driver must keep their hands on the wheel at all times. Related: The Big Four In Tech Are Buying Into The Renewable Boom
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In other cases, however, accidents have been attributed by investigators to design flaws in the Autopilot system. Some have also questioned Tesla’s safety statistics reports and the reliability of the data they use.
There are several ongoing investigations into Tesla crashes that may or may not have involved the Autopilot system. Three of these occurred over less than a month in December 2019 and all ended in fatalities. Meanwhile, the company is planning to launch a full self-driving option for its cars.
Powerpacks, Powerwalls and SolarCity
Tesla first unveiled its home and utility and business battery packs, the Powerwall and the Powerpack, in 2015, staking a direct claim in renewable energy. The entry into renewables was stipulated in Elon Musk’s Secret Master Plan and was an organic part of that plan.
The company’s ultimate ambition was to become a one-stop shop for all things power-related. In a vision Musk described in a 2017 presentation, the household of tomorrow will drive a Tesla and charge it from the Powerwall, storing energy generated by the Tesla solar roof.
While working on bringing this vision to life, Tesla made further inroads into energy storage. In 2017, following a tweet exchange between Elon Musk and the then-Prime Minister of Australia, Tesla said it would build the largest battery in the world: a 100 MW/129 MWh Powerpack system.
The battery was built within the 100-day period Musk had promised and will serve to prevent more massive blackouts like the ones that crippled Southern Australia two years ago. Since then, the Tesla battery record has been broken repeatedly, but its energy storage business has proved a lucrative addition to its core carmaking operation.
Even though in hindsight it seemed like only a matter of time for Tesla to enter the solar energy space directly, the acquisition of SolarCity in 2016 took most observers by surprise. The $2.6-billion deal remains controversial to this day not least because it included Tesla’s taking on SolarCity’s $3-billion debt burden. What also did not sit well with shareholders and analysts was the fact the solar company was run by a cousin of Musk, and Musk himself was chairman of the company.
The performance of Tesla’s solar business since the acquisition has served to harden the scepticism. From a major player in solar panels three years ago, Tesla has turned into a minor seller of panels, stifled by growing competition. Its flagship solar roof product—roof tiles with solar panels on them—is not even sold in the United States, but rather exported.
Legal Trouble
With such a rollercoaster of a history it is unsurprising that Tesla has faced multiple legal challenges along the way. The company is currently being sued by shareholders who claim that Tesla’s board of directors acted against shareholder interests when it approved the SolarCity acquisition. And this is just one example of Tesla’s legal woes since its inception.
The company has been sued by employees and invested by the Securities and Exchanges Commission on numerous occasions, most notably for a tweet from 2018, in which Elon Musk said he had plans to take Tesla private and had already secured the funding from Saudi sources. The “funding secured” affair played havoc with Tesla’s share price and prompted the SEC to take action that cost Musk his chairman position at the company.
In a continuation of its push against what was broadly seen as Musk’s irresponsible use of social networks, the SEC took Tesla to court over another tweet, this one regarding the planned production numbers for 2019. The court ruled that the two should settle their differences themselves.
While this is probably the most colorful legal trouble that Tesla has been through, there are also several lawsuits regarding accidents with Tesla cars or features the owners claim are not working properly. According to analysts, these will only rise in numbers as sales increase.
From Cash-Strapped to Well Off
Since its inception, Tesla has only been profitable occasionally. It reported its first quarterly profit in 2013 and then shareholders and fans had to wait for years before Tesla turned in a profit again. As of the end of 2019, the company has reported profits for five quarters total, and has never turned in an annual profit. Still, it has been doing much better than short sellers have bet on, and this has cost them billions and the mockery of Elon Musk.
Cash is still tight to date, but as Tesla finally hits its production and delivery targets it has one less thing to worry about and, as evidenced by the release of yet another new model, the Cybertruck, it can—probably—afford to focus on developing new models.
Future Challenges
The biggest challenge Tesla is facing is growing competition both at home and abroad. The company may have led the way in the EV revolution and it certainly did, but now every large carmakers along with several boutique firms are developing electric cars with many of those cheaper than Teslas. One may argue that cheaper is not necessarily better and they would be right.
Through the years, Tesla has built a loyal following of fans that many other brands can only dream about. This following is one of the reasons for Tesla’s success despite its chronic money problems, and the company’s reputation will likely continue to make its cars popular. The phase-out of EV subsidies in the United States will likely hurt sales, but it remains to be seen exactly how hard the blow will be. Chances are, whatever the impact, Tesla will get back on its feet again if only to scorn short sellers.
By Editorial Department
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