The Electric Stars

There was a time when more electric cars drove on the roads than there were cars powered by fossil fuels. In 1900, electric motors powered 34 percent of the cars in New York, Boston, and Chicago. A steam or a combustion engine powered the other cars.³⁸⁵

Manufactured in the late 1800s, the first electric cars were quiet, clean, and could be charged in the home.⁵⁹ The torpedo shaped electric car, The Never Satisfied, was the first vehicle to reach a speed over 62 mph [100 km/h]. Those who saw the record thought they were going to die if they traveled so fast. While Henry Ford mass produced gasoline cars, his wife Clara Ford drove a 1914 Detroit Electric with a range of 80 miles [130 km] and a speed of 20 mph [32 km/h].²¹⁸

Around 1920, the gasoline cars began to outnumber the electric because they were easier to refuel. In most smaller towns in America, the gasoline car arrived before electricity. The gasoline car was also less expensive. You could buy three of Ford’s Model T for the price of just one electric car.^59,329 Several car manufacturers have since then again and again tried to sell electric cars. But all models failed. They didn’t always fail because the cars were expensive, slow, ugly, or had a limited range – they could also fail because the auto manufacturers wanted them to fail. The best example is General Motors’s EV1.

At the 1990 Los Angeles Auto Show, General Motors revealed an electric concept car: the Impact. Because of the name, you could hear comments like, “What’s next, the Ford Whiplash?” General Motors announced at the same time how the Impact would become a vehicle for the mass market. The California Air Resources Board realized this new generation of electric vehicles could solve the state’s problem with pollution. The same year, they passed the Zero-Emission Vehicle mandate. It said that if a car manufacturer wanted to sell cars in California, some cars must be free from exhaust. California was a large market, so the car manufacturers didn’t have any other choice than to begin selling electric cars.³³⁰

The Impact evolved into the EV1 [Electric Vehicle 1]. It became the first modern mass produced electric car – 1 117 were manufactured between 1996 and 1999. The EV1 had two seats, a futuristic shape where the rear wheels were almost covered, it was developed in California, and was supposed to be the first in a series of electric vehicles. The next car in the series would be called EV2, the next EV3, and so on. “This is going to represent a great step forward for people in terms of commuting to work, from work, if you don’t have to go more than 120 miles [190 km] a day,” the CEO of General Motors explained when he introduced the car.

Several celebrities enjoyed driving the EV1. The only sound they could hear from the car was a slight hum and the quiet clicks from the brakes. Because there was no lag between pedal and power, the EV1 owner and actor, Mel Gibson, thought he drove the same car as the superhero Batman. “With no gears to complicate acceleration, you get that launched sort of feeling, a childish giddiness called the EV smile,” a driver said.³³⁰

Another famous EV1 driver was Alexandra Paul, who played a lifeguard in the television series Baywatch. “Mine [EV1] was forest green, got 70 miles [113 km] on a charge, and handled like a Porsche,” she said. “A couple years later, improved battery technology in the EV1 allowed me to get 100 miles to a charge and then 120 miles to a charge. It was my only vehicle, and served 95 percent of my driving needs. When I needed to go farther, I borrowed a Toyota Prius.”

Paul had previously owned two other electric cars. She had taken an interest in them ever since the oil tanker Exxon Valdez struck a reef in Alaska and 500 000 barrels of oil spilled into the sea. “I was very much on my high horse about it, until I realized that I was part of the reason that the Exxon Valdez was out there in the first place – my car needed gasoline as much as the next person’s to take me from one place to another in my daily life,” she said.³⁷⁹

The actor and director, Peter Horton, wanted to join the other celebrities. “I decided to go electric,” he said. “I had seen those sleek, sort of George Jetson EV1s shoot by me with surprising speed on the freeways. I thought, fine, I’ll get an EV1.” But Horton couldn’t find one. General Motors had removed them from the market.²²⁹

According to General Motors, the EV1 failed. They didn’t believe the car would bring in any profits to the company because the EV1 would never appeal to anyone else than a small group of technology enthusiasts and environmentalists. But before the car was removed from the streets, 4 000 people had written on a list how they wanted to order the EV1. General Motors called these people and began the conversation with describing the car’s limitations. So when they came to the bottom of the list, it had shrunk to 50 people. The private individuals who supported the EV1 wondered if it really was a wise idea to sell a car by describing the limitations. This is how one of the supporters recalled a discussion with General Motors:

“What’s wrong with the batteries? The ones in my car seem to work fine,” an EV1 owner asked.

“Do you know how much it costs to replace those batteries? A lot,” a General Motors representative replied.

“Yeah, but doesn’t it cost a lot to replace a transmission or an engine in a traditional car?”

“Not as much as you’d think. An engine’s only a couple hundred.”

“That’s because you mass produce them?”

“Well, that and other factors.”

“If you mass produced the batteries, wouldn’t their cost come down?”

“Yeah, but we’re not.”²²⁹

The final kill to the electric vehicle in California came when General Motors, Chrysler, and several auto dealers sued the California Air Resources Board. In April 2003, California killed the electric car mandate. They thought the batteries were not yet good enough to be a competitive alternative to the gasoline car.

Another technology shift happened at the same time. With one billion dollars, the US Government announced it would support the shift to hydrogen fuel-cell vehicles.³³⁰ Elon Musk is not a fan of fuel-cells and nicknamed them “fool-cells.”³²⁸ “If car companies can’t figure out anything else to do they give a technology that is always ten years into the future and something people don’t quite understand,” Elon said. “People say, ‘They are doing something for sustainable transport, but we don’t understand it and it’s ten years away.’ And then ten years go by and nothing happens.”³⁶⁶

General Motors didn’t sell the EV1, the customers leased it for $250 to $500 per month. When General Motors canceled the EV1 program, they told the owners they had to turn them in or they would face legal consequences. Some owners wanted to keep their cars, so they fought back. But nothing helped. General Motors called the police who carried away the last supporters who blocked the truck that transported the last EV1 away from the roads in 2004.³³⁰

The now heartbroken EV1 owners held a funeral for the cars. You could hear a musical piece with Scottish bagpipes and each owner held a speech. “What the contractors and critics of electric vehicles have been saying for years is true; the electric vehicle is not for everybody. Given the limited range, it can only meet the needs of 90 percent of the population,” an owner said.³³⁰

A group of EV1 supporters traveled across the country to find out what had happened to their cars. They heard a rumor that the cars had been transported to the General Motors proving ground in Arizona. With a rented helicopter, they flew over the area and found the now crushed cars. “The EV1 had to be forcibly taken from people, and then the cars were sent to some car graveyard where they were squashed, while the customers held a candle-light vigil,” Elon said. “Now, when was the last time you heard of someone holding a candle-light vigil for a product, let alone a General Motors product? How blind do you have to be to not realize that that is something you should be pursuing, not destroying? It’s astounding incompetence. Mind-blowing incompetence. How foolish. Where would GM be today if it had done the EV2 and EV3?”¹⁹⁷

While General Motors manufactured the EV1, Toyota manufactured 1 480 electric RAV4 EV. 500 of them were still rolling on the roads as late as 2012. One famous RAV4 EV driver was the actor Tom Hanks, famous from the movie Forrest Gump. He began to search for an electric vehicle in 2003, and since the EV1 didn’t exist anymore, he had to buy the RAV4 EV. “When the car companies collectively, and, to some, diabolically, decided to take these cars back, the electric vehicles disappeared,” Hanks said. “But not mine. I have the pink slip. I own that car, and it is still driven every day, albeit by one of my crack staff of employees. My electric car recently crossed 50 000 miles [80 000 km] on the odometer with its original battery but without so much as a splash of gasoline.”¹⁹¹

In addition to the RAV4 EV, Hanks bought an eBox, which is an electric Toyota Scion xB. The car actually looks like a box and may not win a design price, but Hanks liked it. “There are three electric cars sitting on the Moon, and now another one in my garage,” Hanks said. “The eBox makes even more sense in Los Angeles than in the Taurus-Littrow Valley of the Moon. I can drive all weekend, hauling dogs and helping my friends move, and the only reason I’ll need to stop at a gas station is for beef jerky and lottery tickets.”¹⁹² Ironically, it was engineers from General Motors who came up with the best design for the electric Lunar Rover that drove around on the Moon.³⁴⁸

AC Propulsion was responsible for converting the Toyota Scion xB to the electric eBox. Alan “Al” Cocconi, thus the AC in the company name, founded the company in 1992. Cocconi had earlier worked with the now crushed EV1. He designed the first prototype in his garage. But as General Motors didn’t believe in the EV1, he decided to make a better car on his own.

Cocconi bought a Piontek kit car, converted it to electric power, and renamed it to tzero. “We designed it to show that ultimate performance is available for electric vehicle technology,” Cocconi said. The plan was that the tzero would be the first in a series of the next generation environmental friendly vehicles. The name tzero originates from the engineering term t0, which indicates the first measurement of time in a sequence of several measurements, where t1 is the next measurement, and so on.

It was the tzero that convinced Hanks to buy an eBox. “I drove their tzero electric sports car a few years ago, so when they put the same technology in a four-door I wanted one for myself,” he said.²¹⁹ The yellow tzero wouldn’t win a design competition, it had no safety systems, and it was expensive. But it was fast. When the car competed with a famous sports car, the Dodge Viper, the tzero had a better acceleration.³³

Elon has always liked cars. He has owned, among others, a 2007 Porsche 911 Turbo, a Hamann BMW, an Audi Q7, the 1967 Series 1 E-type “bad girlfriend” Jaguar, and of course the McLaren F1.⁴ He used the Porsche as a family car. Two of his children could sit in the tiny back seat.¹⁹⁰ But electricity didn’t power any of these cars.

Cars are the type of transportation that consumes the most oil. Out of the 20 million barrels of oil consumed each day in the US, cars are using 25 percent, light trucks are using 18 percent, heavy trucks are using 16 percent, and airplanes are using 6 percent. When there’s no more oil to fill the gasoline vehicles, then we have no other choice than to choose another type of fuel. Elon’s prophecy is that peak oil will happen in 2020, so he believes a majority of all new cars manufactured in year 2030 will be pure electric. 20 years after that, a majority of all cars on the roads will be pure electric.³⁶⁰ “There may be something cooler than a car in 20 years, but the most likely outcome is that we’ll still have cars and they’ll be predominantly electric,” Elon said.³¹⁶

Alternatives such as ethanol or fuel-cells are not good enough compared with the electric alternative. Ethanol may work in countries where there’s plenty of room to grow the plants that will be turned into ethanol, but not in other countries. “Domestic ethanol as the primary solution will definitely not work for the world’s most populous countries, such as Japan, China, India, Pakistan, Indonesia,” Elon said. “Those countries are either breaking even on domestic food production or are net importers. If you argue that ethanol is to be grown elsewhere and shipped, where are the vast tracts of unused arable land?”²⁴⁸

Electricity is the best alternative because electricity is like cash – it can be generated in many ways. You can power an electric vehicle by generating electricity from coal, wind, solar, water, oil, natural gas, geothermal, or nuclear power.³⁵⁹

Electric vehicles are also energy efficient to use. Let’s say you produce electricity in a coal power plant. If you calculate the CO2 per mile if an electric vehicle is charged with electricity from the coal power plant, the electric vehicle will release less CO2 per mile compared with a hybrid car. This is because even without clean electricity production, it’s very efficient to produce power at a power plant. “What’s important to appreciate is that even if the power is 100 percent coal-generated, the CO2 per mile is still better than a gasoline engine,” Elon said. “The electric motor is incredibly good at turning energy into motion. Mostly what you’re doing with a gasoline engine in a car is generating heat.”⁵⁷

In 2003, Elon went to a lunch in Los Angeles organized by Harold Rosen.¹⁹⁹ With them was also JB Straubel, who first heard of Elon when he attended a Stanford University speech where Elon talked about SpaceX.²¹⁴

At age 14, Jeffrey Brian Straubel, known to all as JB, discovered a discarded electric golf cart. He decided to rebuild it. To find the parts needed, he convinced his mother to drive as far as 50 miles [80 km] in search for batteries, tires, and electric motors. “He was passionate about it,” his mother said. “He wrote to the manufacturers for information. He worked on it every day, all day long, all evening long, until he got it to run. JB was born to be an engineer. He was always passionate about anything that had wheels and required engineering.” To motivate himself, he watch the movie October Sky. “I watch it every year or so,” he said. “It’s inspirational. I always come out of it wanting to work harder.”^213,215

Straubel has always enjoyed the sound of silence. He can drive for hours without listening to music. This might be the reason to why he became fascinated by machines powered by electricity. “Electric vehicles don’t make much noise,” Straubel said. “When they do, something is not right.” Among other projects, he worked with unmanned electric airplanes, he converted a Porsche 944 to electric drive, and he constructed an electric bicycle nicknamed the Red Bike. He was also a fan of the EV1 and you can see him, or his unknown twin, driving it in the documentary Who killed the electric car? “I was talking to anyone and everyone to promote the idea that electric vehicles had turned a corner,” Straubel said. “I told them that with new battery technology, they could go much, much farther than anyone thought was possible.”^213,215

Armed with two engineering degrees from Stanford University, Straubel joined Rosen Motors where he met Harold Rosen who was one of the founders. Rosen had previously worked within the space industry and he’s considered to be the father of the geosynchronous satellite. Straubel and Rosen left Rosen Motors and founded Volacom where they helped the company Scaled Composites – the same company that won the Ansari X Prize.³⁹

Straubel and Rosen sat now at the lunch table together with Elon. The topic of the day was space, but they also talked about general topics. Elon mentioned how he came to California to work on a new battery technology for electric vehicles, and how he became interested in them before global warming became a hot topic. Maybe they laughed when Elon said he talked about cars with girls he dated. “And we talked about lithium-ion and what that meant for electric vehicle range.” Elon said. “The EV1 had a range of about 120 miles [190 km] or so with nickel metal hydride and so if you did a direct substitution of lithium-ion for nickel metal hydride, which has directly two times the energy density you get to around a 240-250 mile range, which would be acceptable to people.”¹⁹⁹ It’s true because nearly eighty percent of all Americans drive less than 40 miles [64 km] a day.⁵⁹

They began talking about AC Propulsion. Straubel, who had friends working at AC Propulsion, mentioned that the company developed early prototypes of electric sports cars, and the performance of these cars was good. After Elon told him he wanted to learn more, Straubel arranged a meeting with AC Propulsion so Elon could drive the tzero.

Despite the car’s disadvantages, Elon liked the ideas behind the tzero. He said it was a really awesome vehicle. For several months, Elon tried to convince AC Propulsion to accept funding from him to commercialize the tzero by creating an electric sports car for the mass market. But AC Propulsion was a small company. They wanted to tinker and experiment with their vehicles before they commercialized it, so they declined the offer. AC Propulsion also declined to sell a tzero to Elon and convert his Porsche to electric drive.¹⁹⁹

What Elon could do was to buy an eBox. While Hanks liked the car, Elon didn’t like the idea to convert the Toyota Scion xB. The basic vehicle cost $20 000, the electric conversion cost $45 000, so you had to pay $65 000 for the final vehicle. “Who wants to take an ugly $20 000 car and buy it for $65 000?” Elon asked. “That’s not a very viable strategy. I wouldn’t want to drive it. My wife certainly wouldn’t want to drive it. I said, ‘Look, I wouldn’t even drive an electric Scion if it was free.’ I mean, it’s OK as a car, but come on.”^4,209

Elon told AC Propulsion that if they didn’t want to manufacture an electric vehicle for the mass market, then he would do it on his own. “Do you want to meet Martin, Marc, and Ian?” AC Propulsion asked Elon.¹⁹⁹

Martin Eberhard was born in 1960 in California and at age thirteen, he drove his first car. With a degree in computer and electric engineering from the University of Illinois, he had founded several companies.²⁰⁹

In 1996, Eberhard co-founded NuvoMedia together with Marc Tarpenning. He was born in 1964 in California and earned a degree in computer science from the University of California. After graduating, he spent the next five years in the oil-rich nation of Saudi Arabia where he worked at Textron - an American company involved in a wide range of products, including electric golf carts.

It was when he was working in Saudi Arabia that Tarpenning discovered the oil industry’s darker sides. “The amount of treasure that is sent to the Middle East to supply our oil addiction is astonishing,” he said. “And it doesn’t necessarily do good things there and it doesn’t do good things for us, and that got me thinking that oil is not so great.”⁴⁵³

In 2000, Eberhard and Tarpenningand sold their company to Gemstar for $187 million.⁷¹ Now they wanted to create a new company. “We knew we wanted to solve a real problem,” Tarpenning said. “We just couldn’t do another network widget.” They researched a wide range of major problems, including water scarcity and income inequality. “So we looked at these big problems, and there are a lot of big problems out there, but the one that we took was oil,” Tarpenning said.⁴⁵³

The reason why they thought oil was the major problem is because oil causes several other problems, including global warming, political problems, and economical problems. “If you can reduce your dependency on oil everything gets easier,” Tarpenning said.⁴⁵³

When US refused to sign the Kyoto Protocol on climate change, Eberhard was embarrassed, and he was concerned about how US had to import oil from troublesome countries. This was when primarily US troops for the second time in twelve years invaded Iraq.²⁰⁵ “To me, the only way that I can be successful at something is to work at something I actually care about,” Eberhard said. “This time around, the something meaningful I care about was oil consumption. It was clear to me that we had to do something about our oil consumption, both from a global warming perspective and from a national security perspective.”³⁵⁵

To calm his nerves, he tried to buy an electric car. But he realized he couldn’t find one to buy. “So I was considering some of the electric cars that were on the market,” Eberhard said. “I didn’t particularly like them, but I thought about maybe I would convince myself to get one. And just about when I had talked myself into that, they disappeared from the market.” He realized not a single car company in America tried to design a decent electric car.²⁰⁰

While not petting his Siamese cat, Eberhard cruised around in California. He saw how wealthy people, including actor Clint Eastwood, drove the environmental friendly Toyota Prius only because they cared about the environment. The gasoline price was in 2003 low, so they didn’t drive it to save money.¹⁹⁶ “Every time I get into my Prius, I feel like I’m demonstrating my point of view on national security,” the talent agent, Ari Emanuel, said when he replaced his Ferrari with a Prius.³⁴⁶

When the Prius drivers returned home, they also had a Porsche or a similar expensive gasoline car parked in their garage. Eberhard realized a market existed for a sports car with the same performance as a Porsche and at the same time was more environmental friendly than the Prius – a Porschius as he called it.³⁴⁵ The average income of the EV1 drivers was above $200 000 per year. Since they couldn’t drive the EV1 anymore, maybe they would buy a Porschius? Or maybe they needed an electric motorcycle? But the market for such as bike wasn’t as interesting as the market for electric cars.⁴⁵³

The Prius had both a battery and a gasoline engine, but the battery couldn’t charge when the owner parked the car. “Without plug-in capability, a hybrid is just a gasoline powered car with some fancy hardware,” Eberhard said. He nicknamed the Prius dork mobile. Elon had the same ideas. “You could have the entire country driving the Prius and we’d still be addicted to oil,” Elon said. “When you create a hybrid, you’re designing an amphibian – and an amphibian is going to be a worse fish than a fish, and a worse mouse than a mouse or whatever creature you want to pick.”¹⁹⁷ Elon nicknamed the Prius gas-guzzling hog.

Eberhard and Tarpenning examined the electric car market, mainly with the help of a Google search and by ordering brochures on eBay. They came to the same conclusions as Elon had when he did a similar market research. Electric power is the future because electricity gives you the highest efficiency and performance compared with other alternatives.³⁴⁵ Hydrogen fuel-cells, natural gas, hybrid technologies, and diesel were all dismissed as competitive alternatives.¹⁹⁶ “What surprised me was that electric cars were substantially more efficient than everything else out there,” Eberhard said.²⁰⁵

The tzero did not only convince Elon, it also convinced Eberhard he could design a true electric sports car. He had earlier invested money in AC Propulsion – they had lost several contracts and were about to go bankrupt – and he also drove the tzero as a daily driver during three months. “The company was about to go out of business,” Eberhard said. “When I saw them, they had five employees left and were not paying salaries. I paid their rent and commissioned them to build a car.”²²³

The drawback with the tzero wasn’t the speed - it was the 60 miles [100 km] range. To increase the range, Eberhard told AC Propulsion to replace the old batteries with thousands of lithium-ion batteries – the same battery as in a laptop or a mobile phone. Eberhard used these batteries at NuvoMedia where he and Tarpenning developed the RocketBook – an early e-book reader similar to the Kindle and the iPad. Before Amazon developed the Kindle, NuvoMedia negotiated with the CEO of Amazon, Jeff Bezos, if Amazon wanted to invest in their company. But Ebehard didn’t agree to Bezos’s demands.⁴¹¹

The RocketBook’s batteries lasted for 20 to 24 hours. When they installed the new batteries, the device became lighter but had the same performance.³⁴⁴ It turned out AC Propulsion already experimented with the same batteries, and the new batteries worked as expected. The tzero’s range increased to 300 miles [480 km] and the acceleration improved to 0-60 mph [0-100 km/h] in 3.6 seconds.¹⁹⁶

In the summer of 2003, Eberhard co-founded Tesla Motors together with Tarpenning. When they founded the company, they chose between if they should name the company after the scientists Nikola Tesla or Michael Faraday.³⁵⁰ They agreed on Tesla Motors. Another fan of Tesla is Elon, who even contributed with financial aid to a future Tesla museum. JB Straubel is also a fan of Tesla and one of his favorite biographies is Wizard: The Life and Times of Nikola Tesla by Marc J. Seifer.²¹⁵

Born in 1856, Tesla became a productive scientist, and has given name to the units of magnetism, which are units of tesla [T]. At the end of his life, he went a little crazy. He became fascinated by the pigeons in the park and he designed death-rays that would end all wars. “Tesla’s problem was that he wasn’t entirely sane, and that got worse later in his life,” Elon said. “Retaining sanity is important.”¹²⁸

In 1943, Tesla died poor and alone in a hotel room. The reason why he was poor was that he could build his inventions in his brain – he almost never made the physical products – so he couldn’t make any money. When he finished the design in his head, he became bored, and moved on to the next idea. “I need no models, drawings, or experiments,” Tesla said. “I could picture them all as real in my mind. I do not rush into actual work. When I get an idea, I start at once building it up in my imagination. I change the construction, make improvements and operate the device in my mind. It is absolutely immaterial to me whether I run my turbine in thought or test it in my shop.”

Tesla and Elon are quite similar to each other. As children, both of them read many books and made experiments. Both studied physics and they moved from other countries to the US. While Tesla decided not to join the military by living in the forest for a year, Elon moved to Canada to avoid joining the military.

In February 2004, the founding team behind Tesla finished writing a business plan. Their idea was to license the electric powertrain technology from AC Propulsion and to use an existing car manufacturer to build the rest of the car. What they needed now was money, lots of money, so they began looking for outside investors.

One interesting thing they did was to present Tesla in front of investors and friends they from the beginning knew wouldn’t invest in the company because they invested in other areas. “We asked them if we could pitch to them this goofy car company idea we had,” Tarpenning said. “We wanted the feedback before we shot our silver bullets with the real people that might fund us.” Because of the feedback they received, they changed their business plan, including the entire distribution model.⁴⁵³

One of their friends they practiced in front of was Ian Wright. He had met Eberhard in 1998 when they sat next to each other on a flight between San Francisco and Tokyo. They began to talk and realized that both were interested in cars and they lived only a short distance from each other. Wright worked as a senior director of engineering at Network Equipment Technologies and was an amateur race car builder and driver.³⁸⁴

Wright was also an entrepreneur and he practiced to present his business idea in front of Eberhard and Tarpenning. It turned out that Wright’s idea never worked, but he thought Tesla’s idea was so interesting that he joined the company. “They were keen to get me to join up because I used to build and race sports cars as a hobby in Australia,” Wright said. “I knew a bit more about how cars worked than they did. The tipping point for me was when Martin borrowed the tzero from AC Propulsion, and I got to drive it. That was the thing that persuaded me – although I wouldn’t want to buy that car, I could certainly see how you could make something new and interesting with electric drive.”²⁶

The NASDAQ stock market index was at an all-time low and most investors licked their wounds from the dot.com bubble. They were not interested in financing heavy industry, especially not in companies involved in environmental friendly technology when the price of oil was low. “Back then the only electric vehicles you could buy were golf carts, and the VCs couldn’t imagine themselves wanting to buy one of those, so it was a very uphill battle at that time,” Wright said. A few investors were interested, but only if Tesla found a lead investor.²⁰⁵

One interesting thing they did was to present Tesla in front of investors they from the beginning knew wouldn’t invest in the company because they invested in other areas. “We asked them if we could pitch to them this goofy car company idea we had,” Tarpenning said. “We wanted the feedback before we shot our silver bullets with the real people that might fund us.” That changed their business plan, including the entire distribution model.⁴⁵³

Eberhard had earlier met a person called Elon Musk at a conference arranged by the Mars Society. He contacted Elon by e-mail when AC Propulsion told him Elon was interested in electric cars. Elon replied with an invitation to a meeting at SpaceX.

In April 2004, after a two-hour meeting, Elon decided to invest $6.3 million in the company Tesla Motors.¹⁹⁶ “It’s kind of crazy, who in their right mind would start a car company?” Elon asked. “But I guess I have more than my fair share of hubris. I’ll do it. I’m in, we’ll draw up the paperwork, but we have to close it in three weeks, because my wife is having twins and if we don’t get it done by then it’s not going to happen.”²⁰⁵ Elon wasn’t the only investor, but he contributed with 98 percent of the funding. The other investors consisted of smaller venture capital firms and individuals like Eberhard.^199,209

But the founders of Tesla and Elon didn’t agree on all points. The main difference was that Elon had a larger vision. While he wanted to build a company as large as General Motors, the founders wanted to build a small company. “Well, there are a few things that I disagreed in what they showed,” Elon said. “I didn’t want to be a niche sports car company. I wanted it to be something that would aim for the mass market as soon as possible.”¹⁹⁹ But Tesla didn’t have any other options. Tesla needed a deal with Elon far more than Elon needed an investment in Tesla. “You take money from the people who offer it to you,” Eberhard said. “People think I’m some kind of rich guy, but I’m not. I still clean the bathrooms in my house, I wash my own laundry, I change my children’s nappies.”^196,205

The total number of employees at Tesla was now five. Eberhard became the CEO, Tarpenning became the CFO, Ian Wright became the VP of vehicle development, Elon became the chairman and the head of product design. Straubel joined the company and worked as an engineer for about a year before he became the CTO.¹⁹⁹

To save the world from its dependency on oil, Tesla needed to manufacture many cars. But that would have been impossible for a newly founded company. A better idea was to begin with an expensive car that might not save the world, but it will start the snowball. Any new technology on the market is expensive: the first computers, the first mobile phones, and the first gasoline cars. “You can look at the early days of the cell phone – like when you look at the original Wall Street movie where the guy is walking around with the brick phone with a lousy signal and 30 minutes of battery time and it was really expensive,” Elon said. “In those days, if you asked people if eventually everyone would have a portable phone with the power of a supercomputer you would be told ‘no way.’ That’s how it is when you have a new technology – you have to look at where it’s headed. To quote Wayne Gretzky, ‘skate to where the puck’s going to be.’ That’s how it is with electric cars.”³⁷⁵

You need two things to make a technology available to the mass market and at the same time make it affordable: economies of scale and optimize the design. Usually at the third version of a product, it starts reaching mass market potential.³²² “Any car that we make at low volume, which is the first version of technology will be expensive,” Elon said. “It didn’t matter what that car look like. We can make something that look like a very standard vehicle, such as a Toyota Corolla, and it would have cost $70 000. But nobody would pay that for what looks like a mid-size economy sedan. But people are willing to pay $100 000 for a fast sports car.”³³⁹

So the strategy Tesla had was to begin with a high-price, low-volume car. This model’s codename was DarkStar after a classic science fiction movie.²⁷² You can only charge a high price for a limited number of cars, and you can expect a customer to pay a high price for a sports car. DarkStar would prove that the customers wanted a high-performance electric car. It would also give the company credibility. The suppliers would be willing to write contracts with Tesla and Tesla could find more money from investors who now trusted the company.

WhiteStar would be phase two. That’s a mid-price, mid-volume car. The profits from the DarkStar would pay for the development of the WhiteStar. “In keeping with a fast growing technology company, all free cash flow is plowed back into R&D [Research & Development] to drive down the costs and bring the follow on products to market as fast as possible,” Elon said.²⁴⁷

Phase three would be the car with mass market potential. The high-volume, low-price car, with the codename BlueStar. “Our long term plan is to build a wide range of models, including affordable priced family cars,” Elon said.

Tesla thought it would cost $25 million before they could deliver the first DarkStar, but in the end, they would need $140 million. “We hugely underestimated the challenge – the complexity of supply chains, of manufacturing, of the battery design. It was like working through a maze,” Straubel said.⁵⁹ “Pretty much everything went wrong,” Elon added. But no one outside of the company knew what was happening because Tesla developed the DarkStar in secret. “Silicon Valley is a great place to run a secret car company,” Eberhard said. “Nobody expected something to sprout up in Northern California, so no one came looking.”²⁷²