Elon Musk

by Ashlee Vance

  By 2002, Straubel was living in Los Angeles. He’d gotten a master’s degree from Stanford and bounced around a couple of companies looking for something that called out to him. He decided on Rosen Motors, which had built one of the world’s first hybrid vehicles—a car that ran off a flywheel and a gas turbine and had electric motors to drive the wheel. After it folded, Straubel followed Harold Rosen, an engineer famed for inventing the geostationary satellite, to create an electric plane. “I’m a pilot and love to fly, so this was perfect for me,” Straubel said. “The idea was that it would stay aloft for two weeks at a time and hover over a specific spot. This was way before drones and all that.” To help make ends meet, Straubel also worked nights and on the weekend doing electronics consulting for a start-up.

  It was in the midst of toiling away on all these projects that Straubel’s old buddies from the Stanford solar car team came to pay him a visit. A group of rogue engineers at Stanford had been working on solar cars for years, building them in a World War II–era Quonset hut full of toxic chemicals and black widows. Unlike today, when the university would jump at the chance to support such a project, Stanford tried to shut down this group of fringe freaks and geeks. The students proved very capable of doing the work on their own and competed in cross-country solar-powered car races. Straubel helped build the vehicles during his time at university and even after, forming relationships with the incoming crop of engineers. The team had just raced 2,300 miles from Chicago to Los Angeles, and Straubel offered the strapped, exhausted kids a place to stay. About a half dozen students showed up at Straubel’s place, took their first showers in many days, and then spread across his floor. As they chatted late into the night, Straubel and the solar team kept fixating on one topic. They realized that lithium ion batteries—such as the ones in their car being fed by the sun—had gotten much better than most people realized. Many consumer electronics devices like laptops were running on so-called 18650 lithium ion batteries, which looked a lot like AA batteries and could be strung together. “We wondered what would happen if you put ten thousand of the battery cells together,” Straubel said. “We did the math and figured you could go almost one thousand miles. It was totally nerdy shit, and eventually everyone fell asleep, but the idea really stuck with me.”

  Soon enough, Straubel was stalking the solar car crew, trying to talk them into building an electric car based on the lithium ion batteries. He would fly up to Palo Alto, spend the night sleeping in his plane, and then ride a bicycle to the Stanford campus to make his sales pitch while helping with their current projects. The design Straubel had come up with was a super-aerodynamic vehicle with 80 percent of its mass made up of the batteries. It looked quite a bit like a torpedo on wheels. No one knew the exact details of Straubel’s long-term vision for this thing, including Straubel. The plan seemed to be less about forming a car company than about building a proof-of-concept vehicle just to get people thinking about the power of the lithium ion batteries. With any luck, they would find a race to compete in.

  The Stanford students agreed to join Straubel, if he could raise some money. He began going to trade shows handing out brochures about his idea and e-mailing just about anyone he could think of. “I was shameless,” he said. The only problem was that no one had any interest in what Straubel was selling. Investors dealt him one rejection after another for months on end. Then, in the fall of 2003, Straubel met Elon Musk.

  Harold Rosen had set up a lunch with Musk at a seafood restaurant near the SpaceX headquarters in Los Angeles and brought Straubel along to help talk up the electric plane idea. When Musk didn’t bite on that, Straubel announced his electric car side project. The crazy idea struck an immediate chord with Musk, who had been thinking about electric vehicles for years. While Musk had mostly focused on using ultracapacitors for the vehicles, he was thrilled and surprised to hear how far the lithium ion battery technology had progressed. “Everyone else had told me I was nuts, but Elon loved the idea,” Straubel said. “He said, ‘Sure, I will give you some money.’” Musk promised Straubel $10,000 of the $100,000 he was seeking. On the spot, Musk and Straubel formed a kinship that would survive more than a decade of extreme highs and lows as they set out to do nothing less than change the world.

  After the meeting with Musk, Straubel reached out to his friends at AC Propulsion. The Los Angeles–based company started in 1992 and was the bleeding edge of electric vehicles, building everything from zippy midsize passenger jobs right on up to sports cars. Straubel really wanted to show Musk the tzero (from “t-zero”)—the highest-end vehicle in AC Propulsion’s stable. It was a type of kit car that had a fiberglass body sitting on top of a steel frame and went from zero to 60 miles per hour in 4.9 seconds when first unveiled in 1997. Straubel had spent years hanging out with the AC Propulsion crew and asked Tom Gage, the company’s president, to bring a tzero over for Musk to drive. Musk fell for the car. He saw its potential as a screaming-fast machine that could shift the perception of electric cars from boring and plodding to something aspirational. For months Musk offered to fund an effort to transform the kit car into a commercial vehicle but got rebuffed time and again. “It was a proof of concept and needed to be made real,” Straubel said. “I love the hell out of the AC Propulsion guys, but they were sort of hopeless at business and refused to do it. They kept trying to sell Elon on this car called the eBox that looked like shit, didn’t have good performance, and was just uninspiring.” While the meetings with AC Propulsion didn’t result in a deal, they had solidified Musk’s interest in backing something well beyond Straubel’s science project. In a late February 2004 e-mail to Gage, Musk wrote, “What I’m going to do is figure out the best choice of a high performance base car and electric powertrain and go in that direction.”

  Unbeknownst to Straubel, at about the same time, a couple of business partners in Northern California had also fallen in love with the idea of making a lithium ion battery powered car. Martin Eberhard and Marc Tarpenning had founded NuvoMedia in 1997 to create one of the earliest electronic book readers, called the Rocket eBook. The work at NuvoMedia had given the men insight into cutting-edge consumer electronics and the hugely improved lithium ion batteries used to power laptops and other portable devices. While the Rocket eBook was too far ahead of its time and not a major commercial success, it was innovative enough to attract the attention of Gemstar International Group, which owned TV Guide and some electronic programming guide technology. Gemstar paid $187 million to acquire NuvoMedia in March 2000. Spoils in hand, the cofounders stayed in touch after the deal. They both lived in Woodside, one of the wealthiest towns in Silicon Valley, and chatted from time to time about what they should tackle next. “We thought up some goofball things,” said Tarpenning. “There was one plan for these fancy irrigation systems for farms and the home based on smart water-sensing networks. But nothing really resonated, and we wanted something more important.”

  Eberhard was a supremely talented engineer with a do-gooder’s social conscience. The United States’ repeated conflicts in the Middle East bothered him, and like many other science-minded folks around 2000 he had started to accept global warming as a reality. Eberhard began looking for alternatives to gas-guzzling cars. He investigated the potential of hydrogen fuel cells but found them lacking. He also didn’t see much point in leasing something like the EV1 electric car from General Motors. What did catch Eberhard’s interest, however, were the all-electric cars from AC Propulsion that he spied on the Internet. Eberhard went down to Los Angeles around 2001 to visit the AC Propulsion shop. “The place looked like a ghost town and like they were going out of business,” Eberhard said. “I bailed them out with five hundred thousand dollars so that they could build one of their cars for me with lithium ion instead of lead acid batteries.” Eberhard too tried to goad AC Propulsion into being a commercial enterprise rather than a hobby shop. When they rejected his overtures, Eberhard decided to form his own company and see what the lithium ion batteries could really do.
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br />   Eberhard’s journey began with him building a technical model of the electric car on a spreadsheet. This let him tweak various components and see how they might affect the vehicle’s shape and performance. He could adjust the weight, number of batteries, resistance of the tires and body, and then get back answers on how many batteries it would take to power the various designs. The models made it clear that SUVs, which were very popular at the time, and things like delivery trucks were unlikely candidates. The technology seemed instead to favor a lighter-weight, high-end sports car, which would be fast, fun to drive, and have far better range than most people would expect. These technical specifications complemented the findings of Tarpenning, who had been doing research into a financial model for the car. The Toyota Prius had started to take off in California, and it was being purchased by wealthy eco-crusaders. “We also learned that the average income for EV1 owners was around two hundred thousand dollars per year,” Tarpenning said. People who used to go after the Lexus, BMW, and Cadillac brands saw electric and hybrid cars as a different kind of status symbol. The men figured they could build something for the $3 billion per year luxury auto market in the United States that would let rich people have fun and feel good about themselves too. “People pay for cool and sexy and an amazing zero-to-sixty time,” Tarpenning said.

  On July 1, 2003, Eberhard and Tarpenning incorporated their new company. While at Disneyland a few months earlier on a date with his wife, Eberhard had come up with the name Tesla Motors, both to pay homage to the inventor and electric motor pioneer Nikola Tesla and because it sounded cool. The cofounders rented an office that had three desks and two small rooms in a decrepit 1960s building located at 845 Oak Grove Avenue in Menlo Park. The third desk was occupied a few months later by Ian Wright, an engineer who grew up on a farm in New Zealand. He was a neighbor of the Tesla cofounders in Woodside, and had been working with them to hone his pitch for a networking startup. When the start-up failed to raise any money from venture capitalists, Wright joined Tesla. As the three men began to tell some of their confidants of their plans, they were confronted with universal derision. “We met a friend at this Woodside pub to tell her what we had finally decided to do and that it was going to be an electric car,” Tarpenning said. “She said, ‘You have to be kidding me.’”

  Anyone who tries to build a car company in the United States is quickly reminded that the last successful start-up in the industry was Chrysler, founded in 1925. Designing and building a car from the ground up comes with plenty of challenges, but it’s really getting the money and know-how to build lots of cars that has thwarted past efforts to get a new company going. The Tesla founders were aware of these realities. They figured that Nikola Tesla had built an electric motor a century earlier and that creating a drivetrain to take the power from the motor and send it to the wheels was doable. The really frightening part of their enterprise would be building the factory to make the car and its associated parts. But the more the Tesla guys researched the industry, the more they realized that the big automakers don’t even really build their cars anymore. The days of Henry Ford having raw materials delivered to one end of his Michigan factory and then sending cars out the other end had long passed. “BMW didn’t make its windshields or upholstery or rearview mirrors,” Tarpenning said. “The only thing the big car companies had kept was internal combustion research, sales and marketing, and the final assembly. We thought naïvely that we could access all the same suppliers for our parts.”

  The plan the Tesla cofounders came up with was to license some technology from AC Propulsion around the tzero vehicle and to use the Lotus Elise chassis for the body of their car. Lotus, the English carmaker, had released the two-door Elise in 1996, and it certainly had the sleek, ground-hugging appeal to make a statement to high-end car buyers. After talking to a number of people in the car dealership business, the Tesla team decided to avoid selling their cars through partners and sell direct. With these basics of a plan in place, the three men went hunting for some venture capital funding in January 2004.

  To make things feel more real for the investors, the Tesla founders borrowed a tzero from AC Propulsion and drove it to the venture capital corridor of Sand Hill Road. The car accelerated faster than a Ferrari, and this translated into visceral excitement for the investors. The downside, though, was that venture capitalists are not a terribly imaginative bunch, and they struggled to see past the crappy plastic finish of this glorified kit car. The only venture capitalists that bit were Compass Technology Partners and SDL Ventures, and they didn’t sound altogether thrilled. The lead partner at Compass had made out well on NuvoMedia and felt some loyalty to Eberhard and Tarpenning. “He said, ‘This is stupid, but I have invested in every automotive start-up for the last forty years, so why not,’” Tarpenning recalled. Tesla still needed a lead investor who would pony up the bulk of the $7 million needed to make what’s known as a mule or a prototype vehicle. That would be their first milestone and give them something physical to show off, which could aid a second round of funding.

  Eberhard and Tarpenning had Elon Musk’s name in the back of their heads as a possible lead investor from the outset. They had both seen him speak a couple of years earlier at a Mars Society conference held at Stanford where Musk had laid out his vision of sending mice into space, and they got the impression that he thought a bit differently and would be open to the idea of an electric car. The idea to pitch Musk on Tesla Motors solidified when Tom Gage from AC Propulsion called Eberhard and told him that Musk was looking to fund something in the electric car arena. Eberhard and Wright flew down to Los Angeles and met with Musk on a Friday. That weekend, Musk peppered Tarpenning, who had been away on a trip, with questions about the financial model. “I just remember responding, responding, and responding,” Tarpenning said. “The following Monday, Martin and I flew down to meet him again, and he said, ‘Okay, I’m in.’”

  The Tesla founders felt like they had lucked into the perfect investor. Musk had the engineering smarts to know what they were building. He also shared their larger goal of trying to end the United States’ addiction to oil. “You need angel investors to have some belief, and it wasn’t a purely financial transaction for him,” Tarpenning said. “He wanted to change the energy equation of the country.” With an investment of $6.5 million, Musk had become the largest shareholder of Tesla and the chairman of the company. Musk would later wield his position of strength well while battling Eberhard for control of Tesla. “It was a mistake,” Eberhard said. “I wanted more investors. But, if I had to do it again, I would take his money. A bird in the hand, you know. We needed it.”

  Not long after this meeting took place, Musk called Straubel and urged him to meet with the Tesla team. Straubel heard that their offices in Menlo Park were about a half a mile from his house, and he was intrigued but very skeptical of their story. No one on the planet was more dialed into the electric vehicle scene than Straubel, and he found it hard to believe that a couple of guys had gotten this far along without word of their project reaching him. Nonetheless, Straubel stopped by the office for a meeting, and was hired right away in May 2004 at a salary of $95,000 per year. “I told them that I had been building the battery pack they need down the street with funding from Elon,” Straubel said. “We agreed to join forces and formed this ragtag group.”

  Had anyone from Detroit stopped by Tesla Motors at this point, they would have ended up in hysterics. The sum total of the company’s automotive expertise was that a couple of the guys at Tesla really liked cars and another one had created a series of science fair projects based on technology that the automotive industry considered ridiculous. What’s more, the founding team had no intention of turning to Detroit for advice on how to build a car company. No, Tesla would do what every other Silicon Valley start-up had done before it, which was hire a bunch of young, hungry engineers and figure things out as they went along. Never mind that the Bay Area had no real history of this model ever having worked for something like
a car and that building a complex, physical object had little in common with writing a software application. What Tesla did have, ahead of anyone else, was the realization that 18650 lithium ion batteries had gotten really good and were going to keep getting better. Hopefully that coupled with some effort and smarts would be enough.

  Straubel had a direct pipeline into the smart, energetic engineers at Stanford and told them about Tesla. Gene Berdichevsky, one of the members of the solar-powered-car team, lit up the second he heard from Straubel. An undergraduate, Berdichevsky volunteered to quit school, work for free, and sweep the floors at Tesla if that’s what it took to get a job. The founders were impressed with his spirit and hired Berdichevsky after one meeting. This left Berdichevsky in the uncomfortable position of calling his Russian immigrant parents, a pair of nuclear submarine engineers, to tell them that he was giving up on Stanford to join an electric car start-up. As employee No. 7, he spent part of the workday in the Menlo Park office and the rest in Straubel’s living room designing three-dimensional models of the car’s powertrain on a computer and building battery pack prototypes in the garage. “Only now do I realize how insane it was,” Berdichevsky said.

  Tesla soon needed to expand to accommodate its budding engineer army and to create a workshop that would help bring the Roadster, as they were now calling the car, to life. They found a two-story industrial building in San Carlos at 1050 Commercial Street. The 10,000-square-foot facility wasn’t much, but it had room to build a research and development shop capable of knocking out some prototype cars. There were a couple of large assembly bays on the ride side of the building and two large rollup doors big enough for cars to drive in and out. Wright divided the open floor space into segments—motors, batteries, power electronics, and final assembly. The left half of the building was an office space that had been modified in weird ways by the previous tenant, a plumbing supply company. The main conference room had a wet bar and a sink where the faucet was a swan’s mouth, and the hot and cold knobs were wings. Berdichevsky painted the office white on a Sunday night, and the next week the employees made a field trip to IKEA to buy desks and hopped online to order their computers from Dell. As for tools, Tesla had a single Craftsman toolbox loaded with hammers, nails, and other carpentry basics. Musk would visit now and again from Los Angeles and was unfazed by the conditions, having seen SpaceX grow up in similar surroundings.