We are at a turning point in transportation. Although gas cars still dominate the roads, it’s becoming increasingly clear that the future of transport is electric and a lot of this excitement is because of one company. Tesla is disrupting the automotive industry by creating affordable EVs of all kinds. But it almost didn’t make it. Success was a longshot and Elon Musk knew it. When we first started Tesla and Solar City we thought they would fail. Tesla, in particular,
we thought probably we’ve maybe 10% chance of success. This is not the story of a company that nearly died many times. This is the story of a man who would not give up. This is the story of Elon Musks perseverance against all odds. In 2003, in Silicon Valley, two engineers created Tesla. Martin Bernhard and Marc Tar penning. They named it after Serbian-American inventor Nikola Tesla. Back then, Tesla was called Tesla Motors. They saw an opportunity to create an electric car after General Motors recalled the EV1 - the first mass-produced electric car in the modern era. It’s unclear why GM did this - it could have been because of a lack of demand, high production costs, or pressure from the oil and gas industry. Either way, GM crushed the cars in a junkyard.
Elon came into the picture when the founders went looking for funding. He made millions when the financial services company he co-founded, x.com, merged with a rival and became PayPal. When eBay bought PayPal in 2002, Elon walked away with $180 million. He was very successful. But instead of calling it a career, he sunk all his winnings into new ventures. He put $100 million into SpaceX, $10 million into Solar City, and $70 million into Tesla including $6.5 million at the start, and became the chairman of the company’s board. So, all of the money just came from me personally. I didn’t want to ask people - other investors - for money if I thought we were going to die. 2006 was a big year for Tesla. The roadster made its official appearance: a good-looking, fast electric car. But there were quality issues and a lot of production problems. In the end, Bernhard was ousted as CEO before the Roadster even went into production which didn’t happen until 2008. Tesla was running out of money. The company budgeted $25 million for the development of the Roadster but it ended up costing nearly five times that. By the fall of 2008, Tesla had only $9 million left to fund the entire company. It was a tumultuous time with multiple CEOs coming and going and in the end, Elon was left in charge. He said this in an interview about the big decision he had to make: ...do I let Tesla die or do I make it live with a lot of pain and grief?
He chose to make Tesla live but it couldn’t have been more painful. One of Americas largest banks, Lehman Brothers, collapsed, sinking the world economy into the worst recession since the Great Depression. Plus, SpaceX was close to being bankrupt after three failed rocket launches. And, he was going through a divorce from his wife Justine. Elon said 2008 was the worst year of his life and he never thought he was someone capable of having a nervous breakdown but came close to it. Elon fought hard to save his companies. He cut 25% of Teslas workforce and asked friends to help cover payroll. But by December 2008, Tesla was about to die. Still, he didn’t give up. He scraped together $20 million from various sources, including the money he made investing in his cousins data center startup Ever dream which Dell had bought the year before.
Investors agreed to match what he cobbled up and in the end, Elon managed to secure a $40 million round of financing on Christmas Eve. It was the last hour of the last day that it was possible. Ashlee Vance wrote a biography about Elon Musk and there’s one dinner conversation that Elon had with a Tesla investor that really shows his tenacity. During that dinner, Elon said, I will spend my last dollar on these companies. If we have to move into Justine’s parents basement, well do it. Tesla barely pulled through in 2008 but needed more money to stay alive. That came in May 2009 when German automaker Daimler invested $15 million by taking a 10% stake in the company. Daimler and Tesla had already been working on an electric smart car. The company also received a $465 million loan from the U.S. Department of Energy which had a program backing clean tech startups. The following year, Tesla found a more stable solution when it went public at $17 a share. Despite the problems with the Roadster, Tesla had achieved something no company had ever done before. It proved that electric cars could be cool and fast. But the Roadster was too expensive for most people - costing more than $100,000. So, they built another car. In 2012, Tesla stunned the world when it began shipping the Model S sedan. It took every ones breath away. The Model S could go more than 300 miles on a single charge and it was more affordable than the Roadster although still expensive. Teslas problems were still not over and nearly went bankrupt again in 2013. Even though the Model S was in high demand, customers who put down a $5,000 deposit were hesitant about going through with their purchase. There were a lot of reasons for this: complaints about the interior, kinks with the car, some of the earliest versions didn’t have parking sensors and cruise control which are common in high-end vehicles. There were also concerns about the resale value. We were operating with maybe one to two weeks of money.
When Elon found out about the problem he did three things. First, he turned every Tesla employee into a salesperson. They called everyone who put down a deposit and tried to convince them to go through with buying the car. Second, he convinced his friend Larry Page, the CEO of Google, to buy Tesla if the company actually did run out of money. Finally, Tesla shut down its factory when orders weren’t coming in fast enough but did not admit this publicly, or else it would have scared investors and sent the stock price plummeting. Instead, Tesla said it was closing down for maintenance which was technically true but not the whole story. The strategy worked. On May 8, 2013, Tesla stunned Wall Street by posting its first-ever profit as a public company. Tesla made $11 million on $562 million in sales after delivering 4,900 Model Ss in the first quarter. Elon saved Tesla from death again. But there were more hardships to come.
The company’s problems were still not over and nearly went bankrupt again in 2018. This time, it had to do with the Model 3. Elons vision from the beginning was to build an affordable electric car paid for by the more expensive cars - the Model S and also the Model X which came out a few years earlier. The Model 3 had a base price of $35,000. This is kind of crazy but I just learnt, I was just told that the total number of orders for the Model 3 in the past 24 hours has now passed 115,000. But the huge demand also meant the company had to produce the cars in time. And frankly, were gonna be in production hell. Welcome, welcome.
As the saying goes, if you’re going through hell, keep going. Tesla struggled to meet its production targets. It initially wanted to produce 5,000 Model 3s a week but in the first three months of 2018, it made just 9,800 of them. Tesla was bleeding money as it tried to increase production of the car. It lost $1 billion dollars in the first half of 2019 and scrambled to raise capital. Elon said the company was close to death within single-digit weeks. He even slept on the factory floor because he didn’t have time to go home and also because he says he wanted to suffer more than any other employee. Despite the torturous production process, Tesla managed to pull through once again. It turned a corner in the second half of 2019 by delivering over 92,000 Model 3s in the fourth quarter - that’s an increase from the same period the year before or a year-over-year of 46%. And the latest model - the Model Y - was ahead of schedule. Tesla has managed to survive. Now it’s looking ahead to many ambitious plans, including fully autonomous driving, a million-mile battery, and driverless cabs called robot axis.
Teslas stock price hovers around $1,000 a share as of the making of this video but the biggest bulls see it going up way more. Tesla has endured many near-death experiences and through it all, Elon has never ever given up. It’s hard to stay alive as a car company, honestly. Not only is Tesla alive but because of his vision, ambition, and relentless drive, its future is still being written. Thanks so much for watching, I’m Cindy Pom. If you liked what you saw, give us a like, and don’t forget to subscribe to my new channel. While you’re at it, hit that notification bell so you’ll know when I upload a new video. I hope to do a lot more stories on topics that I find super interesting. See you soon.
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