Erik Nordeus - The Engineer

To save the world from its dependency on oil, Tesla needed to manufacture many cars. But that would have been impossible for a newly founded company. A better idea was to begin with an expensive car that might not save the world, but it will start the snowball. Any new technology on the market is expensive: the first computers, the first mobile phones, and the first gasoline cars. “You can look at the early days of the cell phone – like when you look at the original Wall Street movie where the guy is walking around with the brick phone with a lousy signal and 30 minutes of battery time and it was really expensive,” Elon said. “In those days, if you asked people if eventually everyone would have a portable phone with the power of a supercomputer you would be told ‘no way.’ That’s how it is when you have a new technology – you have to look at where it’s headed. To quote Wayne Gretzky, ‘skate to where the puck’s going to be.’ That’s how it is with electric cars.” 375

You need two things to make a technology available to the mass market and at the same time make it affordable: economies of scale and optimize the design. Usually at the third version of a product, it starts reaching mass market potential. 322“Any car that we make at low volume, which is the first version of technology will be expensive,” Elon said. “It didn’t matter what that car look like. We can make something that look like a very standard vehicle, such as a Toyota Corolla, and it would have cost $70 000. But nobody would pay that for what looks like a mid-size economy sedan. But people are willing to pay $100 000 for a fast sports car.” 339

So the strategy Tesla had was to begin with a high-price, low-volume car. This model’s codename was DarkStar after a classic science fiction movie. 272You can only charge a high price for a limited number of cars, and you can expect a customer to pay a high price for a sports car. DarkStar would prove that the customers wanted a high-performance electric car. It would also give the company credibility. The suppliers would be willing to write contracts with Tesla and Tesla could find more money from investors who now trusted the company.

WhiteStar would be phase two. That’s a mid-price, mid-volume car. The profits from the DarkStar would pay for the development of the WhiteStar. “In keeping with a fast growing technology company, all free cash flow is plowed back into R&D [Research & Development] to drive down the costs and bring the follow on products to market as fast as possible,” Elon said. 247

Phase three would be the car with mass market potential. The high-volume, low-price car, with the codename BlueStar. “Our long term plan is to build a wide range of models, including affordable priced family cars,” Elon said.

Tesla thought it would cost $25 million before they could deliver the first DarkStar, but in the end, they would need $140 million. “We hugely underestimated the challenge – the complexity of supply chains, of manufacturing, of the battery design. It was like working through a maze,” Straubel said. 59“Pretty much everything went wrong,” Elon added. But no one outside of the company knew what was happening because Tesla developed the DarkStar in secret. “Silicon Valley is a great place to run a secret car company,” Eberhard said. “Nobody expected something to sprout up in Northern California, so no one came looking.” 272

A few years after General Motors crushed the last electric car, an engineer, who had worked with the EV1, made a statement. “Today, with the Panasonic batteries, carpool lanes, free parking at meters, the infrastructure, the subsidies – if we could start over again today with all that, we’d change the world.” 229Others who noticed an increased interest in electric cars were the Toyota RAV4 EV drivers. Because they got so many questions from people who were interested in how it is to own an electric car, they began to bring with them FAQ fliers.

In the beginning of July 2004, Tesla Motors was just an empty shell. “When we started, we had nothing,” JB Straubel said. “We didn’t have a screwdriver. We had an office.” 209The office and machine shop were in San Carlos, California. Neither Martin Eberhard, Marc Tarpenning, nor Elon Musk were an automotive engineer. So to learn how to build a car, they did what Elon believed in: read books and learn by doing. Ian Wright, who was an amateur race car builder and driver, and JB Straubel, who had some experience from building electric cars, could teach the others what they knew. 267

The team might have had little experience, but what Tesla had was the possibility to recruit the right stuff. Designing an electric vehicle in Silicon Valley, not in Detroit, was an advantage. An electric vehicle is like a hybrid between a gasoline vehicle and a computer. “The electric powertrain requires certain kind of engineers that are in the Valley, and the best of them can be found here,” a Tesla employee said. “If Tesla was founded in Detroit, the mindset there is so focused on the internal combustion engine that the level of innovation Tesla was looking for would never have happened.” 335

The first car from Tesla, the low-volume, high-price model, was the DarkStar. Since it was only a codename, the real name became Roadster. Teslas’s goal with the car was to prove that an electric car didn’t have to be a glorified golf cart. An electric car could look like and have the same, or even better, performance compared with a gasoline car. “We have to make better cars than say GM and Chrysler,” Elon said. “I don’t see that as a huge challenge. The sad thing in the United States is if people can afford an expensive car, they don’t buy an American car.” 361

Tesla designed the Roadster to beat a sports car in a head to head showdown and at the same time be more energy efficient compared with a Toyota Prius. 4Elon’s vision said the Roadster would be the car that inspired other auto companies to design their own electric vehicles. They would ask themselves: if a small company in California can make an electric car – why can’t we? “I would like to be able to look back and say: Tesla accelerated the transition from hydrocarbons to sustainable electric transport by at least five to ten years,” Elon said. Thus, it’s not strange the company’s vision became: Create the most compelling car company of the 21st century by driving the world’s transition to electric vehicles . 382

As Eberhard and Tarpenning wrote in the business plan, the idea to build the Roadster was to license the powertrain from AC Propulsion and use an existing car manufacturer to build the rest of the car. “Well, so we set out to build a high performance sports car and we looked at who we could partner with to put that car together,” Eberhard said. 200

Tesla decided to collaborate with Lotus. The British sports car manufacturer is well known for its Formula One history with the famous black-gold colored car, as well as the iconic Esprit. But Lotus make at least as much money by selling its engineering expertise. “Lotus was a company that made sense for us because of the size of the cars that they made and the fact that their factory has built cars for other companies already. They’re used to doing that,” Eberhard said. 200

To contact Lotus, Tesla went to the 2004 Los Angeles Auto Show where they cornered the Lotus booth. After a convincing speech, Lotus agreed to invite them to England so they could talk to the rest of the company. 200

The Lotus model Tesla wanted to rebuild was the Elise. Named after Lotus chairman’s granddaughter, the Elise happened to be the lightest production car on the road, and light is always a good start for any electric vehicle. In November 2004, Tesla bought an Italian version of the Elise. Lotus had earlier transported the car across the Atlantic Ocean to use it as a demonstration vehicle. But they couldn’t sell it to a consumer because of the US legal requirements, so Lotus sold it to Tesla. 355