The whole saga of Tesla is quite complex, and it is like many soap opera episodes that you could make out of it. So even this history is glossing over a lot of things, but will still give people a good sense for how things started out, what led from one thing to the next, and to understand what really happened. There's a lot out there, some of it is correct some of it is false.
Like I said, my interest in electric vehicles goes back a long time, and in fact predates the current climate issue when nobody was really talking about global warming, because I just thought it was the obvious means of transport. I do think the climate thing does add urgency to things, and I do think we will see quite a significant increase in the cost of oil. Just from a demographic standpoint you've got China, India, and a few other countries that represent almost half the world's population and have very few cars on the road, but are rapidly adding cars to the road. So you can expect a doubling of demand, and I think it's going to be difficult to achieve a doubling of supply.
I thought that big car companies would develop electric cars because obviously it's the right move. I thought that was vindicated when General Motors was doing their EV-1. California regulations basically forced General Motors to create the EV-1. Then Toyota did the electric Rav-4, the original one, and they made those announcements and brought those to market. I thought, okay, this is great, we're going to have electric cars. GM, the biggest car company in the world is making an electric car. It's called EV-1, that would imply that there's going to be an EV-2, 3, 4, and they'll just keep getting better, and everything will be cool.
But then when California relaxed its regulations on electric cars, not only did GM cancel that project, they forcibly removed the EV-1s that they'd given out.. which they only gave out on lease. They removed them from customers against their wishes. Took the cars and crushed them into little cubes in a yard, so they could never be used again, which seemed kind of nutty. There's a great movie by Chris Paine called ‘Who Killed the Electric Car?’ and it's noteworthy that in that movie Chris shows how much people really wanted that EV-1 car. The customers, who's cars had been taken away, tried to sue General Motors to keep their car. The people tried court orders to stop the cars from being recalled. In fact they wanted it so much that when the cars were forcibly taken away and crushed, they held a candlelight vigil at the yard where the cars were crushed. I did not attend, but I was moved by it. It's crazy - I mean, when was the last time you heard about any company's customers holding a candle lit vigil for the demise of a product. You know that's pretty ridiculous. Particularly a GM product. Can you imagine anyone holding a candle lit vigil for a GM car? Why would you discontinue a product line with that level of customer interest, that's pretty amazing. I mean, you have to be pretty tone-deaf. You don't need to do a customer survey to figure out that at least some number of people want the cars, if they are treating it like somebody has been sentenced to death. What bigger wake-up call do you need? It's like, hello, the customers are really upset about this. They'd really prefer it if it didn't get recalled. That kind of blew my mind. I was like wow, okay. It's really short sighted action, I mean it's really unwise, in retrospect that seems perhaps obvious, and I think it's fair to say that with the benefit of hindsight, General Motors probably wishes they had done an EV-2 and an EV-3 following the EV-1.
Then we had the advent of lithium-ion batteries which really - that's one of the key things to making electric cars work - and still nothing. The electric motor is actually very old, in fact the early days of cars there was a competition between gasoline cars and electric cars, and there was a range issue with electric cars so the gasoline cars ended up winning out. But with the advent of lithium-ion batteries we could now address the range issue. When GM did the EV-1 initially with lead acid batteries it had a range of about 60 miles. Lithium-ion had four times the energy density of lead acid, so basically if you just replaced the battery pack, you go from 60 miles range to maybe a 240 miles range. The basic math was pretty obvious, but despite it being fairly obvious, nobody was doing electric cars.
At the time in sort of the 2003/2004 timeframe electric cars had gotten sort of a really bad reputation. The auto industry had concluded that electric cars were a waste of time. Basically that you couldn't make a compelling electric car, and if you would make an electric car, people wouldn't buy it because they love gasoline so much.
The thing that kinda spurred things in 2003 was a lunch I had with Harold Rosen and JB Straubel in LA, I think in El Segundo. I got this call sort of out of the blue from JB Straubel and Harold Rosen, who wanted to meet and talk about space stuff. Harold Rosen is somebody who is actually very famous in the space arena, and also in the electric car arena, and he had also worked for Hughes Aerospace. They wanted to do a hydrogen airplane or something. Which sounds cool, but I don't think is very practical. But then they also mentioned an electric car, because Harold had done an electric car company called Rosen Motors that didn't ultimately succeed. That’s kinda how the connection bridged over from rockets to electric cars. We were just talking a bunch of things in general, and I mentioned that I originally came out to California to work on electric vehicle technologies, and Harold told me about his past with Rosen Motors. Then JB mentioned that: “Hey there's this company called AC Propulsion, in Southern California, that has a kind of very rough prototype of an electric sports car, running on lithium ion batteries, and it's getting really good performance” They had some of the guys, I think, who had been on the EV-1 program, and they took a gasoline sports car, kind of a kit car, and outfitted it with lithium-ion batteries, sort of consumer grade cells, and they created a car. I said that sounds interesting, so JB arranged for a test drive with the AC propulsion tzero in 2003. So I got a test drive in a proto type, and I said wow this is awesome. Driving the tzero really showed that the timing was right to create a compelling electric car. The advent of lithium-ion really being the key enabling technology. AC Propulsion deserves a ton of credit, and doesn't get enough credit for the concept of doing an electric sports car, that really made clear that you could create a long range, fast electric car.
The tzero was lithium-ion powered using cylindrical cells. It actually started off by being lead acid, and then upgraded to lithium ion I think in early 2003. It was a two seater sports car with really good statistics, it did 0 to 60 miles per hour in under four seconds, and had a 250 mile range. It did have some drawbacks, it was quite primitive, it was basically like a kit car, with fiberglass. It didn't have a roof for one thing, at all. In fact, I don't know if it had doors. The battery was air cooled instead of liquid cooled, so it would overheat very quickly. It didn't have any safety systems, no airbags, it wasn't homologated - so it wasn't something that you could ever sell to people. Certainly not something you could sell to the general public. So, in order to create a commercial version of the car, something we could actually produce and sell to people, there was a fair bit of work that was required. It was very expensive, it had to be hand built. The production cost was basically $300.000 or $400,000, like really high.
But the basic concept and capabilities were demonstrated by AC Propulsion. I tried to convince them to commercialize the sports car and said like: “Hey I'm willing to fund you if you want to commercialize the tzero.” I mean I've tried hard, I can be persistent about these things. I was like guys you got to show the world that this is real, and prove to the industry that they are wrong about electric cars. I said, look, I'll fund the whole effort, you really need to do this, and they just sort of refused to do it. I kept pushing them on this, but hey didn't want to do it. They were a very sort of small inventor type shop, they liked to tinker and experiment, and didn't want to put the time into creating an electric sports car. They wanted to make like an electric Scion. Which, in principle sounds good, but it would have cost $75,000, and no-one wants to buy a $75,000 Scion. The technology was just not ready - there was just no way to make a good value-for-money proposition with something like a Scion. I even tried to get them to make one for me, but they wouldn't even make one for me. I said: “if you don't want to commercialize the tzero can you please make one for me” and they were like no they didn't want to do that. Can you convert my current car to an EV? and they were like no. But I kept pushing them on this, so eventually after not being able to convince them for several months, finally I was like: “ OK look guys if you're sure you don't want to do a commercial version of an electric sports car do you mind if I do that? I'd like to try to commercialize electric sports cars, because I think we really need to show that you can make a compelling electric car.” and they were like no that's cool, we're cool with that.
My initial plan was just get together with JB and form a company, and potentially commercialize the tzero concept and create an electric sports car. Then the AC Propulsion guys said well if you're going to do that, there are some other groups that are also interested in doing the same thing, why don't you team up with them? They ended up introducing me to three guys, and that’s how I met Martin Eberhard, Marc Tarpenning and Ian Wright, and I was actually able to convince JB to join. We teamed up with Martin, Marc, and Ian, and created Tesla Motors basically to commercialize the tzero, and that was sort of the founding team of Tesla with the five of us.
It's important to emphasize that when we created Tesla, it wasn't from the standpoint of like "Hey this is a great way to make money." When I told my friends about this they told me "you're crazy. How much money do you plan to lose" Basically the idea of starting a car Company was considered extremely stupid, and the idea of creating a electric car company was like stupidity squared. It was like wow that's dumb. The last time there was a successful mainstream car start up was the Jeep in 1941, so it's been a while.
The reasoning behind Tesla, specifically, was that there needed to be an acceleration of electric vehicles. It became clear to me, and I think to a lot of people, that the big car companies had abandoned electric vehicles, and that if it was simply left up to the big car companies, we wouldn't see compelling electric cars. It seemed that as though if action wasn't taken, and it was simply left up to Detroit we would be waiting for a very long time.
I think there were issues with organized labor, there was issues with entrenched management that still wants to run the company like it's 1955. There were too many country club memberships, and the management sort of focused on the wrong things. I think that became very clear in the movie ‘Who Killed The Electric Car.’ That really hammered home the message that unless some new company came along and created an electric car, it'd be a long time before we would see sustainable transport. When I saw that I was like holy crap, if this is not going to happen there really needs to be a new car company that comes in and shows that it can be done, and that really made clear that you could create a long range, fast electric car. The only option is for a start up to do electric vehicles, even though the historical track record for automotive start ups in the United States is extremely bad. The only two American car companies in history that have not gone bankrupt are Ford and Tesla.
The key thing that needed to be done is to show that you can make an electric car that was good looking, high performance, long range, and if you made such a car that people would buy it. That they didn’t have some fundamental affinity for gasoline.
Tesla was created in late 2003 and really got going in mid 2004. My opinion of the success of Tesla at that point was so low, I thought maybe optimistically there's about a 10% chance of success. The beginning investment money was basically all me, not from the standpoint of this is a great way to make money, but I didn't want to have it on my conscience that other people that invested lost their money. If they had asked me what my opinion was on the likelihood of success I would say very low.
President Bush was in charge at that time, who's not the biggest proponent of electric vehicles, so it was really with no expectation of government assistance that we created the company. There was no electric vehicle incentive at all, nor was there any discussion, we didn't expect there to be any incentive or something.
My day job was SpaceX, but on the side I was the chairman of Tesla Motors and helped formulate the business and product strategy with Martin and the rest of the team. Then we had like a lot of drama. I think we exceeded the level Eberhard could handle. That became apparent in 2007. My initial thought was okay I'll hire some people, and work with the team, and I'll just sort of work on the part design, and the overall strategy or something, but I'll leave the day to day operations to a CEO that I’d hire. Unfortunately that didn't work out. I've actually tried hiring a couple of CEOs, and I guess I couldn't find the right person, so then it came to 2008 and I was kinda co-CEO from 2007 to 2008 while trying to bring some other people up to speed, and then when the international market fell apart, and the economy fell apart, I had a choice basically of committing all my remaining resources in Tesla, or it's gonna die for sure. I thought okay if I'm going to do that, I've got to bite the bullet and run the company, because there's just too much at stake. When you've got all your chips on the table, you've got to play the hand yourself. I mean, I tried pretty hard not to be the CEO. I could have been the CEO from day one, since I provided, like 95% of the money I could have been the CEO from day one, but the idea of being CEO of two startups at the same time was not appealing, and shouldn't be appealing, btw, if anyone is thinking that's a good idea. It's a really terrible idea. My initial thought was that I did not want to create an electric car company and run it myself, because I was running SpaceX. The idea of running two companies, that's a lot of work. Imagine if somebody had two pretty demanding jobs, or you had one pretty demanding job, and now you got to do two of them. That kinda takes the fun away. I really didn't want to be CEO of two companies. I tried really hard not to be actually, but something's gotta give. I feel that people sometimes don't realize that, but I just wasn't able to find the right person. In retrospect I should have bitten the bullet and be Tesla CEO right from the beginning.
That's basically how Tesla came together.