Erik Nordeus - The Engineer

A computer store couldn’t explain Apple’s products. Apple didn’t want their products to sit on a shelf between a Dell and a Compaq while a salesperson, who didn’t have the knowledge to explain why Apple’s products were different, just wanted to sell any computer. “All the salesman cared about was a $50 spiff,” Steve Jobs said. “Unless we could find ways to get our message to customers at the store, we were screwed.” 3

In a similar way as Apple, Tesla didn’t want a Model S to sit between a General Motors and a Ford. “Existing franchise dealers have a fundamental conflict of interest between selling gasoline cars, which constitute the vast majority of their business, and selling the new technology of electric cars,” Elon said. “It is impossible for them to explain the advantages of going electric without simultaneously undermining their traditional business.” 244The problem is that auto dealers get most of their revenues from servicing the cars, and an electric car requires less service than a gasoline car. “It’s harder to sell and they make less money from servicing so for sure we will be the last thing they sell,” Elon said. 366

When we visit a car dealer, we have already decided which car to buy. It’s often a gasoline car with the same brand as the car we already own. So the Tesla Stores had to be close to potential customers in malls and at similar locations. It’s exactly like the Apple Stores. “We may not be able to get them to drive ten miles to check out our products, but we can get them to walk ten feet,” Jobs said. “If they’re passing by, they will drop in out of curiosity, if we make it inviting enough, and once we get a chance to show them what we have, we will win.” 3

In 48 US states, it’s illegal for a car company to own the dealer of the cars sold, so these stores have caused some stir within the auto industry. The idea behind the law is to prevent automakers from killing competition and driving independent franchises out of business. “Franchised dealers can’t compete with manufacturer-owned businesses because they can’t spend as much on facilities or advertising,” a New York dealer said. 204

To go around this law, not all Tesla Stores are selling cars. Some are called galleries where you can’t buy a car. When you are ready to buy a car, you have to go home and order one on the Internet. The question is if Tesla can educate a customer without trying to sell a car? Tesla said they could and were sued by the National Automobile Dealers Association. “The dealer association is a very powerful lobby on the local level,” Elon said. “Really powerful. And we’re a tiny little mouse compared to them on the level of politics. Hopefully the right thing will happen.” 194

In 2010, Tesla became the first public American car company since Ford in 1956. Marking the first day of trading, Elon rang the bell at Wall Street together with his family. 54

The television show Mad Money with the host Jim Cramer analyzed the company. “You don’t want to own this stock,” Cramer shouted as he always does. “You don’t want to lease it. You shouldn’t even rent the darn thing.” Elon replied to the criticism in an interview. “Yeah sure Jim, you know we are not Bear Stearns, but I think that we are going to do okay,” Elon said. “I think that Jim recommended Bear Stearns, so frankly, he’s a contra indicator.” 34On the March 11, 2008, episode of Mad Money , a viewer submitted the question if he should be worried about Bear Stearns in terms of liquidity and get his money out of there. “No! No! No! Bear Stearns is not in trouble,” Cramer replied. “If anything, they’re more likely to be taken over. Don’t move your money from Bear.” Later the same year, Bear Stearns became one of the companies that didn’t survive the so called credit crisis. 396

By the end of 2012, it looked like Tesla could become a profitable company. “Overall, I feel Tesla was really kind of past the point of high risk,” Elon said. “And it’s the classic phrase of going through the valley of death – and I feel as that we are through that valley at this point.” 198

As death was far away, Tesla wanted to expand outside of the US. It’s a big job to get into each market because each country has its own rules for cars. What are the safety requirements? Do you have to sell through a dealership? 200

But expanding to some countries would be easier than expanding to other. Norway is the country with the most Model S customers compared with the size of the population. The five million inhabitants ordered 1000 of the 20 000 pre-ordered cars. 202If that’s not all, the number one customer is also from Norway. A Norwegian who lives above the Arctic Circle, in Narvik, has bought twelve cars from Tesla. 443There were also reports from Norway that you have to pay a higher price for a second-hand Tesla than for a brand new Tesla. This is because it takes a few months to order a new Tesla and the Norwegians want their cars today.

The European country is also the world’s fifth largest oil exporter, so why are they using electric cars? The answer is that the Norwegians are well aware of peak oil, and they know that their oil production has declined since year 2000.

To motivate people to begin driving electric vehicles, the Norwegians established a number of incentives. “The benefits are too good,” a Norwegian said. “You can take bus lanes, get free parking and it costs very little to refuel.” 378These incentives seem to work. While three percent of all cars sold in Norway are electric, the same number in US is 0.1 percent. The current number of electric cars on the Norwegian roads today is 7000, and the total amount of cars is 2.4 million. About 40 percent of those who own an electric car also own a gasoline car. But the goal of the Norwegian Electric Vehicle Association is to have 100 000 electric cars in Norway before year 2020 – the same year as Elon estimated peak oil will happen. These numbers can be compared with the neighboring country Sweden where the incentives are less favorable. The Swedes have 4.4 million cars, but only 600 of those are electric.

Without much success, the Norwegians have earlier tried to produce electric cars through the company Think Global. For the fourth time in twenty years, the company filed for bankruptcy in 2011. Several experts argued that also Tesla was close to bankruptcy, so the car after the Roadster, the Model S, would never see daylight.

In 2012, Tesla manufactured and delivered the first Model S. The customers were happy and described Elon as the Steve Jobs of heavy industry. Apple’s customers are known for loving their products, and Tesla’s customers have begun to love their cars – and Elon himself. Probably as the first CEO of a car company ever, Elon was asked to write his autograph on the inside of a Model S.

One of the first customers who bought a Model S was Christian von Koenigsegg, a Swede who like Elon has founded his own car company called Koenigsegg Automotive. McLaren F1 used to be the fastest production car in the world, but Koenigsegg broke that record when their car reached 241 mph [388 km/h]. Von Koenigsegg has been a fan of Elon since 2001 when he heard that Elon was going to build space rockets. After driving the Model S, von Koenigsegg explained that it’s inevitable that electric cars will become more popular than cars powered by oil. 447

The next model from Tesla would be an SUV called Model X, so Model X is not the BlueStar. The history of the SUV [Sport Utility Vehicle] began after the Second World War when large military vehicles were brought home from the battlefields. The upper class used these vehicles when they hunted animals in the wilderness. As the middle class wanted to act as if they were part of the upper class, they also began to use these vehicles when they hunted food in the supermarket.