The U.S. electric car market includes the established automakers such as Ford (F) and Chevrolet (GM). But one company stands out from the car maker mix, and that is Tesla Motors (TSLA). Tesla entered the media spotlight in 2013 along with its CEO Elon Musk when it unleashed its flagship car the Model S.
Tesla’s release has been a hit with not only car buyers, but also catapulted the company into the spotlight as one of the few successful independent automakers along with being a pioneer when it comes to the electric car market.
The Model S, a sleek luxury sedan that starts at $69,000, has received top ratings from the trade industry and the press. Car & Driver has given the car five stars, and when the Model S first came out in 2013 Tesla made headlines when trade press gave it laurels. The electric plug-in car received a near perfect score of 99 out of 100 from Consumer Reports, which also named it as “the best car ever tested.” (For more, see: The Economics Of Owning A Tesla Car.)
By September 2014 the car hit all-time sales records in the U.S. with 2,500 sold, and in Q1 2015 sales reached a new high at 10,030. It is now considered a staple within the electric car stratosphere. The company’s market capitalization, as of May 24, 2015 was $31.3 billion.
Contrary to popular belief, Tesla is not an overnight success, and it is no longer a start-up so much as it is a pioneer in the electric car market. The company was founded in 2003 by two Silicon Valley engineers Martin Eberhard and Marc Tarpenning, who, according to the company website, “wanted to prove that electric cars could be better than gasoline-powered cars.”
The seeds of the company go back to 1990 when Tarpenning met Eberhard, then an engineer at Wyse Technology, and they became good friends. The two had much in common including a passion for starting companies, and they soon launched companies including NuvoMedia, which released the Rocket eBook in 1998. A passion for autos started soon after Eberhard went through a divorce and decided to buy a sports car. He invested in a company and boutique electric auto maker called AC Propulsion, and wondered if this was a market he could get into.
In 2001 Eberhard and Tarpenning met Musk when they heard him speak at a Mars Society talk at Stanford University and introduced themselves. Musk came with a successful history of starting up companies. He along with Peter Thiel and Max Levchin were co-founders of PayPal. After making a fortune from his shares in PayPal after the company was sold to eBay in 2002, he launched another company Space X, which designs, manufactures and launches advanced rockets and spacecraft (For more, see: The Making Of Tesla: Invention, Betrayal, And The Birth Of The Roadster.)
A few years later their paths would cross again when Eberhard and Tarpenning asked to meet Musk to share their idea of the electric car with him. The three met to discuss the idea with Musk on board.
Tesla was officially incorporated in 2003 with the goal of inventing an electric car that was powerful and beautiful with zero emissions. Other co-founders were JB Straubel who is still the CTO at Tesla and Ian Wright who left Tesla in 2004 and founded another company Wrightspeed.
In 2004 the company’s co-founders went through initial rounds of investing with venture capital firms. Musk, a co-founder of PayPal, came into the picture a year later when he led the initial round of funding for the company, and joined as the head of the board of directors.
Who Is Elon Musk?
Elon Musk has become the face of Tesla and is at times mistaken as the company’s founder or co-founder. Musk is a South African-born Canadian-American who was trained as an engineer. He earned a dual bachelor of science in Physics and Economics from the University of Pennsylvania.
That said, he is an entrepreneur and inventor at heart. In 1995 Musk enrolled in Stanford's Applied Physics Ph D program but dropped out soon thereafter to focus on his business efforts in the renewable energy and outer space arena.
Soon after he launched a number of small but successful companies including online publishing company Zip2. From that sale Musk started X.com an online bank that was acquired by Confinity, which had launched the online payment company PayPal.
PayPal became an incredible success and was purchased by eBay in 2002. Musk made $165 million in stocks from that sale.
With his early fortune from PayPal, Musk founded his third company SpaceX, an outer-space exploration company. After a meeting and pitch with Eberhard and Tarpenning, Musk came on board Tesla as the chair of the company’s board of directors, and played a key role in helping the company raise money. The company’s investors included friends and family, and a litany of VC firms including Valor Equity Partners.
In the years between 2004 and 2008, Tesla continued to grow and develop its first automobile The Roadster. The company opened its manufacturing plant in Fremont, CA, a 5.5 million square feet factory that used to be owned by Toyota and General Motors. The factory is known as Nummi which includes two paint facilities, a 1.5 miles of assembly lines.
Musk became the company’s CEO in 2008 and product architect, positions he still holds. That same year Tesla launched its first car and sports car the Roadster. "It is not just a car, but one of the strongest automotive statements on the road,” Car and Driver wrote. The Executive Summary for The Roadster reveals that the company has always been focused on the mechanics of the car as much as the design. “High performance” as defined in the executive summary included going from 0-60mph in less than 3.9 seconds, and zero maintenance for up to 100,000 miles other than tires.
Tesla, as part of its secret to success, continues to focus on creating electric cars and making EV powertrain systems and components. The company has a network of 80 stores and galleries across North America, Europe and Asia and over 100 charging stations in the US.
One of the company’s trademarks in success is focusing on one product at a time. And while Tesla continues to focus on making the Model S, it is rolling out new models to expand its customer base. New models in the pipeline include the Model X SUV, which started production in early 2015.
In order to move with the changing times, Tesla has tried to launch new product that aim to target a wider range of consumers. In the pipeline is also the Model E a cheaper version of the Model S, which will come in at under $40,000.
In order to stay competitive in the niche market, Tesla Motors has expanded its manufacturing footprint in The Netherlands and Lathrop, California. To keep costs down on lithium ion battery packs, Tesla and key strategic partners including Panasonic started building a gigafactory in Nevada that will facilitate the production of a mass-market affordable vehicle, Model 3, according to the company’s website.
The electric car market is growing with luxury auto makers such as Mercedes Benz and BMW jumping into the space too. Analysts forecast that the total global sales of electric vehicles was 320,000 units in 2014, which is on pace to easily exceed 500,000 in 2015. That said, Tesla’s long term success is anyone’s guess. Tesla is aiming to selling 500,000 cars by 2020 but in December 2014, Morgan Stanley’s auto analyst Adam Jonas predicted that the company would fall short by 40%. Jonas has reportedly said that the goal is unrealistic and unachievable.
As with anything in life and business there are no guarantees. The reality is that 12 years since incorporating Tesla Motors has morphed from start-up to an established industry player. What doesn’t change is its extraordinary story and its place as a pioneer in a frontier of electronic cars.