Elon Musk and the Ownership of Tesla

Issue # 5

👋 Hey Friends, a quick note before digging into this week's issue. As you can probably tell, I have decided to change the newsletter name to better reflect what it's all about. I am proud to announce the new name going forward  'Beyond the Failure' which I think fits well and I am super happy about. Thanks to those who provided feedback and I hope you like the new name. 

*Note - gmail’s email service seems to be down this morning. Typically this email is sent at 7:00 am EST. In order to ensure this reaches everyone, I am attempting to sending this out once more. My apologies if you receive this email twice.

Elon Musk is a man of many talents and businesses. So many in fact, it would be hard to fit it all into a newsletter without a massive post. In this week's post, I decided to specifically concentrate on Tesla and its origins. I will make a future post on Elon specifically, and the rest of his businesses as I am sure there are plenty of lessons learned, like tweeting about the FCC 😉 

Let's dive in! 

Back in the 1990s, a GM electric vehicle called the EV1 was unveiled which attracted a loyal following of supporters. Unfortunately, in 2003 this car and most importantly its concept didn't acquire enough interest and was deemed a failure and did shut down. All EV1s were eventually sent to the scrapyard and were buried. 

A shining light in the failure of EV1 was its intentions, which helped to create Tesla Motors in July 2003. Two engineers named Martin Eberhard and Marc Taperenning sold their e-book business for a whopping 187 Million dollars and started the Tesla Motors Company. Elon Musk joined as an investor in the early stages of this company by leading the series "a" financing and other roles.

EV1 GM

Subtle distinctions from EV1 made Tesla's plan simple but effective. 

1. Focusing on lithium-ion batteries, which would be cheaper and last longer.

2. Start with a high-margin and high-performance sports car to help fund an affordable car later.

3. Achieve economies of scale to target other segments in the market.

4. Plans to incorporate energy generation and storage in the average home. 

5. Advance the technology by introducing autonomous driving vehicles.

Imagine being told this ambitious plan in the early 2000s or late 90s? What would you have thought about it?

Nonetheless, with the plan in motion, Tesla began to design and develop its first Roadster. At first, Tesla wanted to lower the cost of production by leveraging the Lotus Elise chassis. However, Tesla kept customizing new parts which contributed to more and more costs. In the end, approximately, the Lotus Elise had 7% of its original parts left.

Tesla: Electric Cars, Solar & Clean Energy - Tesla is accelerating the world's transition to sustainable energy with electric cars, solar and integrated renewable energy solutions for homes and businesses. (tesla.com)

Tesla at this point was on the verge of bankruptcy. To make matters more complicated many CEOs tried their hand in the role but many were unsuccessful and this role changed hands often. In October 2008, Elon Musk became CEO of Tesla Motors (now Tesla Inc). Drastic changes were eventually implemented to save the company from bankruptcy. Such as;

  • cutting 25% of the workforce

  • recalled 75% of the roadsters

  • raised 40 million dollars of debt-free financing

  • formed a partnership with Daimler

  • borrowed 465 million dollars from the US government 😳

2,450 total Roadsters were made which became the main image of the EV evolution. The Lithium-cobalt-oxide battery in each roadster weighed 992 lbs which resulted in a 244-mile driving range. The range itself was probably the most important factor. I think initially we all were hesitant due to the distance range and lack of charging stations. The range naturally helped cut that anxiety and made the car more appealing to the public. 

In 2010, Tesla IPO‘d on the NASDAQ raising 226 million dollars.  I secretly wish I had invested at that initial period 🤦🏽‍♂️ This was a huge deal as Tesla was the first American car company to go public since Ford in 1956. At, this point, Tesla started to focus on the market launching two new cars, the Model S & Model X. Although these cars were put into a position of success, the cost of lithium-ion batteries did prove to be a challenging issue for the car company. The math was simple if batteries were too expensive Electric vehicles would stand a chance against Fuel sourced ones. 

In typical Elon fashion, in 2013 he unveiled an ambitious plan to build and launch a GIGAFactory! A huge and I mean a huge project to reach economies of scale and lithium-ion battery production. This would ultimately make the electric vehicle less expensive than fuelled competitors. During this period, other milestones were achieved. For example, releasing autopilot - semiautonomous capabilities,  the power wall was released for homes and finally, the Model 3 was released in 2016. This was meant to be the car for the average person. 

Tesla acquired SolarCity for over $2 billion in 2016 and converted it into its solar division; the announcement of the deal resulted in a more than 10% drop in Tesla's stock price. (en.wikipedia.org)

By the end of 2017, Tesla passed Ford in market value! A huge milestone in the company. Thinking about Tesla's mission, transforming how we use energy by harnessing and utilizing sustainable energy and strategies to productize the factory so vehicle assembly can be automated in record time. Telsa is aware that selling a few hundred cars wouldn't make much of a dent in these two points. 

As of December 31, 2019 [update], Musk owns 38,658,670 shares, or 20.8% of all Tesla shares. (en.wikipedia.org)

Other launches entailed, the Model Y, Tesla Semi, and Tesla Pickup "Cybertruck.” To carry out all this more GIGAFacotires have been built throughout the globe. The plans are ambiguous but have taught us one thing. They are achievable. Since its IPO the stock has split and as of today is worth $615 per share. 

Looking back at what this company has achieved and what it was up against is nothing but inspiring. All odds were stacked against Tesla and Elon, but its vision, its purpose outweighed its problems and roadblocks. I often read about startups and business and one thing that Sam Altman mentioned from Y-Combinator that sticks with me is

"ideas tend to have three things in common: they're something the founders themselves want, that they themselves can build, and something a small number of people want a large amount of. The key is to have a mind that's prepared in the right way." 

With that said I hope you found this issue inspiring, useful, and informative. 

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Thanks so much to you all, I really appreciate you. 

Stay safe. 

Cheers,

Paolo