Number of words: 2,885<\/p>\n\n\n\n
It sometimes happens that a symbolic event marking the end of one era neatly coincides with an event that ushers in the next, although no one notices the concurrence at the time. In late 2003, a brief Renaissance of electric vehicles came to an ignominious end, as GM rounded up and smashed its EV1 electric cars. Just a few weeks later, three Silicon Valley entrepreneurs sat down for a fateful lunch.
Elon Musk was a famous visionary who had made a fortune from the online financial service PayPal, then gone on to create a private space exploration company called SpaceX. JB Straubel was an engineer who had been part of a Stanford team that built a solar-powered car for the American Solar Challenge race. Harold Rosen was an aerospace pioneer who was known as the \u201cfather of the geostationary satellite.\u201d The three had plenty to talk about\u2014they all loved rockets, fast cars and green tech. As Musk recalls, Straubel told him about a prototype electric car that a local company called AC Propulsion had built\u2014not a pokey little runabout, but a roadster with Porsche-like performance.
EV pioneer Tom Gage\u2019s e-piphany happened in the early 1990s, when Honda hired him as a consultant to research the nascent EV scene. He went to Southern California, where there were a bunch of small shops doing EV conversions. \u201cMost of them were pretty amateurish or even crackpots,\u201d he told me. \u201cAlan Cocconi had clashed with GM on the Impact program, and thought he had a better idea, so he started AC Propulsion. When I drove his prototype car [a Honda Civic conversion with a 200-horsepower electric drive system] that was the light switch right there, because he really knew what he was talking about, and he put it into practice with this conversion that he practically built right in his front yard. I drove around the block, went up on the freeway onramp and when I looked down, I was doing 80 merging onto the freeway, going uphill. I came down off the freeway, just in front of the shop and he said, \u2018Stop here.\u2019 He flipped a switch and said, \u2018Now, floor it.\u2019 What he had done was turn off the traction control. I floored it and the front tires turned into smoke.\u201d
From that moment, Gage knew he wanted to build EVs. \u201cI knew a thing or two as an automotive engineer, but not that much about EV technology. The other guys really didn\u2019t know what they were talking about, but Cocconi did, and he had the hardware to back it up. I started helping him out on the side, one thing led to another and within a year, I was pretty much full-time at AC Propulsion.\u201d
The AC Propulsion team built a prototype electric car at their shop in San Dimas, and named it for t0, the mathematical symbol for a starting point in time. Plenty of other tinkerers around the world had built electric cars, but most were designed to be practical little gas-saving machines\u2014\u201cglorified golf carts\u201d as the tired clich\u00e9 has it. The tzero was another animal altogether.
Paul Carosa was AC Propulsion\u2019s VP of Engineering in 2003 when the Tesla boys came calling. He told me that the idea to build the tzero originated with John Fagan, a professor at the University of Oklahoma. \u201cThey did their own version of this little electric sports car that was based on a vehicle called the Piontek Sportech that was designed for a motorcycle engine. Alan Cocconi and I were intrigued by the idea, and we bought one of these vehicles from Piontek.\u201d
The first tzero used 28 Optima Yellow Top lead-acid batteries, which weighed 1,000 pounds and were mounted in the vehicle\u2019s sides. This meant that the doors didn\u2019t open the way most car doors do. \u201cThey were actually only maybe about 8 inches tall and kind of opened upwards at a 45-degree angle and you had to step over the side,\u201d Carosa told me. \u201cYou were actually stepping over the batteries. It was like a high sill on the side of the car and you had to step up a couple of feet over it. It wasn\u2019t a roomy vehicle.\u201d
The historic sports car had 200 hp of power and could go from zero to 60 mph in 4.1 seconds, but its range was only about 60 miles. The company envisioned selling it for $80,000.
The second tzero prototype, built in August 2003, was powered by 6,800 laptop-style lithium-ion cells (cylindrical cells in the 18650 format), was 700 pounds lighter than the original version, and had a range of about 300 miles. It could do 0-60 in an impressive 3.6 seconds.
Tom Gage met Martin Eberhard in 2002. \u201cWe were just getting involved in converting the tzero over to lithium-ion batteries,\u201d Gage told me. \u201cHe put some money into AC Propulsion and we finished this conversion of the tzero. We drove it from LA up to San Francisco with only one stop, so it was obviously getting much better range with the reduced weight and increased capacity of the lithium-ion batteries, which had replaced the lead-acid batteries. Martin was pretty impressed. In November 2003, I remember going to the LA Auto Show with him and he started talking up Tesla, saying he wanted to convert a Lotus Elise, and that was sort of the start of it right then.\u201d
AC Propulsion was in dire financial straits at that moment. Eberhard\u2019s $100,000 investment was very welcome, and gave the team the funds they needed to develop the lithium-ion-based tzero. \u201cMartin borrowed the tzero in 2004 for about three months,\u201d said Gage. \u201cHe took it up to northern California and used it to woo investors, show them what he was talking about and that it could really be done. I think it was pretty key in getting the company off the ground.\u201d
The tzero was a completely hand-built car. \u201cThere\u2019s almost nothing but headlights and shock absorbers and things like that, that were taken from other cars. All the major parts were hand-built. It was a Sportech kit, but we actually changed the frame and the body by the time we built the second car.\u201d
\u201cWe realized that we couldn\u2019t continue to make money, let alone meet crash test standards and the like, so we sort of changed gears and started developing the eBox, an EV conversion based on the Toyota Scion xB. The plan was to commercialize that and get some money to do so, so I went to see Elon Musk. I took the tzero and he drove it. I said what we\u2019re really looking for is money to do this eBox, but he wasn\u2019t interested in the eBox\u2014it was too mundane, he wanted a sports car. I said he should talk to Martin Eberhard.\u201d
Gage and company thought the eBox had a better chance at being commercialized, but Musk and Eberhard were interested in the sexier tzero. \u201cMartin asked \u2018Are you going to build my car? How\u2019s the progress going?\u2019 I told him we weren\u2019t going to build any more tzeros. So that to some degree was the impetus for him to get into the business (if you\u2019re not going to build it, I\u2019ll build my own).\u201d Eberhard and his partners decided to build their own electric sports car, and in May 2004 they signed a license agreement to use AC Propulsion\u2019s powertrain technology.
Martin Eberhard loved fast cars, but was concerned about climate change and the country\u2019s dependence on Middle East oil. He was one of the early adopters who leased an EV1, and he was as angry as anyone when the company took the cars back and crushed them. However, his real electrical epiphany came about on a drive through Palo Alto, where he saw stylish performance cars like BMWs and Mercedes parked next to sensible \u201cdork-mobiles\u201d or \u201cpunishment cars,\u201d as he called them, such as the Toyota Prius. \u201cIt was clear that people weren\u2019t buying a Prius to save money on gas\u2014gas was selling close to inflation-adjusted all-time lows,\u201d he observed. \u201cThey were buying them to make a statement about the environment.\u201d
Realizing that there were others who shared his conflicting loves of speed and the environment, and who could afford to pay for what they wanted, he determined to build a car that had it all\u2014high performance, beautiful styling and minimal fossil fuel consumption. In a presentation he created around this time, Eberhard imagined \u201cthe Porschius, a car for people who love cars and who also care about oil consumption,\u201d that combined the best features of Porsche and Prius.
Marc Tarpenning spent a few years as a contractor and consultant for an aviation conglomerate in Saudi Arabia before he came to Silicon Valley and got involved in a couple of startups in the disc drive business. He found the startup experience to be \u201creally compelling, exciting, great fun and potentially really life-changing.\u201d In 1997, he and Martin Eberhard started a company called NuvoMedia that made an early e-book reader called Rocket eBook, which they later sold for $187 million.
Eberhard and Tarpenning got back together and incorporated Tesla Motors in July 2003.\u00a0 \u201cWe were ready to do another startup,\u201d said Tarpenning. \u201cThe first one had been great fun and successful. I worked in the Middle East for years and the idea of sending all of our treasure to the Middle East just doesn\u2019t appeal to me.\u201d\u00a0 The two wanted to build cars with the most efficient and sustainable propulsion method available, and they considered several alternatives before concluding that electricity is \u201cby far the best choice.\u201d
Once they had settled on electricity as the optimal power source, Tarpenning and Eberhard turned their idea into a business plan. \u201cWe quickly convinced ourselves that we could make a compelling electric drive,\u201d Tarpenning told me. \u201cThat\u2019s Silicon Valley stuff\u2014computers and batteries. But I was extremely concerned with our ability to actually make a car, because there are thousands of components and it just seemed like that was impossible. [However] I learned that the car industry had sort of re-factored itself starting in the 70s, and that they had essentially gotten rid of everything except…marketing, some styling, and internal combustion engine development. Almost all the [other] components come from other companies. So, that was what convinced me that this business was actually possible, because we could buy from those same suppliers.\u201d
Now that they had a business plan, Tarpenning and Eberhard set about securing funding, a game that they already knew well how to play. A startup that\u2019s looking for funding needs to have a concise and compelling one-hour presentation for the money men, and these two were constantly polishing their pitch by rehearsing it with other entrepreneurs.
\u201cWe were in that mode of taking our pitch and refining it, and it just so happened that Ian Wright had been trying to raise money for [an optical subsystem startup]. So, we asked that he pitch to us and we\u2019d critique him, then we\u2019d pitch to him and he\u2019d critique us. That\u2019s how we found Ian. He didn\u2019t get his optical thing going…but he loved our idea and a few weeks later he said he wanted to join us.\u201d
Ian Wright, a native of New Zealand, was a racing enthusiast who had converted a lawn mower to a go-kart at age 10. He moved to California in 1993, and happened to be a neighbor of Martin Eberhard. Wright\u2019s automotive expertise was just what Eberhard and Tarpenning needed, so he took the chance to combine his interests in software, engineering and racing, and became Tesla\u2019s VP of Vehicle Development.
\u201cThe original conversation I had with Martin was over a beer at a party,\u201d Wright told me. \u201cHe said, \u2018I know you used to build and race cars, and my buddy and I have built a startup company and we\u2019re thinking of building very high-performance electric sports cars. What do you think of that idea?\u2019 And I said, \u2018I think you\u2019re crazy! They\u2019re only golf carts, aren\u2019t they?\u2019 Clearly, I was wrong. The tipping point for me…was when he borrowed the tzero from AC Propulsion and I got to drive it. Although I wouldn\u2019t want to buy that car, I could certainly see how you could make something new and interesting with electric drive.\u201d
The Tesla team needed not only money, but an experienced investor to lead the first funding round. \u201cWhat the lead does is deal with all the negotiations and set the valuation, and then they represent the series,\u201d explained Tarpenning. \u201cWhen you\u2019re raising money, you get people who give you a tentative yes, but they won\u2019t lead. If they have to do all the due diligence and be the ones with the lawyers for two weeks closing the deal, it\u2019s not worth it to them. So they\u2019ll say, \u2018This is interesting enough, as long as we don\u2019t have to lead.\u2019 They looked us up and saw we made money for the investors last time. It was a roll of the dice, but it was kind of cool and as long as they didn\u2019t have to do any of the work, they were willing. We pitched Elon, and when he said that he would lead, then we were off to the races, because he was the point person who was willing to do the legal work.\u201d
\u201cOne of the questions we were asked in our pitches was, \u2018What\u2019s your competitive advantage? How could you possibly think that you could have a competitive advantage against GM?\u2019 Remember that the auto companies had all said that there was no future in electric cars and they had no interest in it. It wasn\u2019t like we were out there doing battle with Ford on a daily basis because they weren\u2019t in the game. They had specifically said they were never going to be in the game. And that was one of the things that we would pitch in our business plan. We have some number of years where we have the field to ourselves, and when we show the world that [we can] make compelling cars, the big guys are going to care, and we will have been years ahead of them at that point.
\u201cNow, we believed (quite naively), that once the Roadster was out and people saw that you could make a compelling electric car, all the car companies would jump on this idea and they would all spend a ton of money with R&D teams. And we would have more experience and more electrically driven miles than anyone on the planet at that point, so even if the stand-alone company becomes questionable, it\u2019s okay because there\u2019ll be ten car companies around the planet that will want us, the whole world will be wanting to build these cars and we\u2019ll be the world\u2019s experts on the drivetrain, which is the only thing that they don\u2019t have. And of course what has shocked me, quite frankly, is that the big car companies are still screwing around with nothing. They are still lamely trying to figure out what to do.\u201d
Elon Musk agreed to come on board, investing a chunk of cash himself and tapping his connections for more, with the condition that he would be chairman of the company, and have the final say over all decisions. If Eberhard and Tarpenning had reservations about turning over so much control of their company, they set them aside, because they needed what Musk could bring to the table. \u201cYou take money from the people who offer it to you,\u201d said Eberhard.
As is the case with most human collaborations, Eberhard\u2019s vision and Musk\u2019s were closely aligned in some ways, and quite different in others. Those differences came to light years later, fortunately after the Roadster was firmly on the path to production. Ian Wright later articulated the basic fault line. \u201cEberhard\u2019s initial stimulus for starting Tesla was to build the EV he wanted to buy,\u201d said Wright. \u201cMusk had a much grander vision: He wanted to be the next General Motors.\u201d
Musk led the Series A round of investment in early 2004, and joined Tesla as Chairman of the Board and Head of Product Design. Musk ponied up $7.5 million of his own personal funds, and became the controlling investor in the new company. He also brought several venture capital firms and private investors on board.
The official five founding fathers of Tesla were Chairman Elon Musk, CEO Martin Eberhard, CFO Marc Tarpenning, CTO JB Straubel and VP of Vehicle Development Ian Wright. They opened the company\u2019s first office in San Carlos, California in July 2004.
The founders initially estimated it would take $70 million to get the Roadster into production. \u201cWe started that company with a lot of naivet\u00e9 about what it takes to create a car company, and pretty much everything went wrong,\u201d said Musk. \u201cUltimately, I think it took five times the amount of capital that we thought it would to bring the Tesla Roadster to market.\u201d
Who knows exactly what the actual figure was? In later interviews, Musk has given different estimates, from $150 million to $195 million. Several observers have estimated that it took a cool billion to get the company up and running.
Excerpted from https:\/\/evannex.com\/blogs\/news\/an-automaker-is-born-the-early-days-of-tesla-new-book-excerpt<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"