The Rise of Tesla: Part 1 - The Early Years
I make no apologies for devoting a few of my blogs (and a chapter of my book) to Tesla as there is no doubt it has been absolutely instrumental in starting the Electric Revolution. Here is the first.
The Early Years
As of November 2021, the market capitalisation of Tesla has reached over $1.1 TRILLION.
That makes it the 6th largest company in the world and more than the next TEN biggest global car brands combined!
Yet Tesla produce only a fraction of the number of cars compared to these global brands. Toyota and Volkswagen alone delivered almost 20 million cars annually compared to Tesla’s 500 thousand units in 2020.
Tesla released its first production car in 2008, the Roadster, and completed a successful IPO becoming stock market listed in 2010 with a market capitalisation of $1.7bn. In just 11 years the value of the company has increased by 700 times.
In contrast, Ford for example, was valued at $30 billion in 2010 and $81 billion in November 2021. Ford Motor Company, founded in 1903, is now worth just 7% of the value of Tesla, after 117 years in business compared to Tesla’s 13 years.
Tesla is not an internet stock, whose valuations can skyrocket overnight on the potential of exponential online user growth. Tesla makes a physical product, is constrained by the limitations of production output and to date has put just under two million cars on the road.
So how did this once ridiculed upstart manage to overtake a century of automotive progress in less than a decade and create the richest man in the world, Elon Musk, (as of January 2021)?
The answer is simple and complex at the same time. Vision, belief, singular focus, timing and growing awareness of climate change combined to create the iconic brand.
Tesla not only rose from zero to hero in a decade, it has shaken a century old industry and sparked the most radical transformation of mobility since the Ford Model T. Tesla is responsible for resurrecting the electric car and bringing ideas previously considered science fiction ideas to reality; from Superchargers to self-driving cars, Tesla has created the future and it’s just the beginning.
In July 2008 Elon Musk took delivery of the first Tesla Roadster, a modified Lotus Elise stripped down and packed with lithium-ion batteries. Capable of over 200 miles range and supercar-like acceleration of 0 – 60 mph in just 3.7 seconds – it was the first highway legal electric lithium-ion production car ever.
Costing over one hundred thousand dollars, almost 2,500 were sold over a 4-year period, mostly as expensive novelties to the rich and famous. Elon Musk’s Roadster is now in outer space, where it is projected to orbit the sun for at least the next 20 million years.
Although most major manufacturers have declared their electric future and produced some respectable Tesla competitors, Tesla is simply still way ahead in efficiency, Supercharging networks, battery technology, software and data.
It has to be said that Tesla’s meteoric valuation rise is in part driven by mob mentality and a degree of ‘follow the crowd’ speculative investing. Yes, there is a fair bit of irrational exuberance but… there’s another reason. Perhaps the world is beginning to realise, just maybe, that Tesla was really on to something after all. Just maybe, the electric car is the future, just maybe, the model of internal combustion is over and soon. Perhaps, finally, the way we have burned oil to move for the past one hundred years is about to suddenly come to an end. Perhaps the valuation is justified, and the other car manufacturers are struggling for survival as the electric revolution turns exponential.
Elon Musk did not start Tesla Motors. Founded in 2003 by Martin Eberhard and Marc Tarpenning, the South African immigrant became chairman in early 2004 following his $6.5 million investment in the company. After a legal settlement in 2009, there are five individuals allowed to declare themselves as Tesla’s founders: Musk, Tarpenning, Eberhard, Ian Wright and J. B. Straubel. Only Musk remains at the company today.
Tarpenning and Eberhard had researched the potential of electric cars and other propulsion methods for years before Tesla, having together developed consumer electronics in the past. They also founded the ‘Mars Society’, two self-admitted ‘space-geeks’ promoting a future human civilisation on Mars. It was at a Mars Society gathering that the pair first encountered Elon Musk.
Prior to Tesla and SpaceX, Musk started X.com in 1999, a ‘fin tech’ at that time in the payments space. Following a merger with what eventually became PayPal, his exit from the business netted him $165 million when PayPal was acquired by eBay in 2002. The pair contacted Musk and pitched the idea to him.
Musk got the electric car vision immediately. The key was the lithium-ion battery. Old electric car concepts, with lead-acid or nickel batteries, would not allow for rapid charging and continuous re-use. At the time lithium-Ion batteries had a poor reputation over safety with their potential to overheat and explode due to what is known as thermal runaway.
With engineering backgrounds, Eberhard and Tarpenning conducted thermal runaway experiments, inventing a battery cooling system and ultimately created a stable lithium-ion battery pack configuration.
The pack was created by ‘wirebonding’ multiple cylindrical battery cells together. This is effectively many single battery cells, not much bigger than a typical ‘AA’, wired together in an efficient configuration. Prior to their invention no one had ever tried to put thousands of battery cells together to form a single battery pack. This method has become the standard for all subsequent battery pack designs.
However, it’s not so much the individual batteries, but the battery management system controlling temperature, discharge and recharge that makes it viable. This ‘pack’ is what gave rise to the viability of the new electric car with enough capacity for a credible range.
Musk saw the potential and the rest is history, albeit history still very much in the making.
