Tesla’s wild ride

Friday, July 25th, 2008

Tesla’s wild ride got particularly wild when PayPal co-founder Elon Musk offered to fund the fledgling electric-car company:

Musk saw the franchise-dealership arrangements that U.S. car companies had tangled themselves up in as an increasingly expensive, margin-killing model. He wanted to own and operate Tesla dealerships rather than franchise them. He wanted final say over all decisions — which he would get by naming himself chairman. And finally, Musk demanded that they close the deal in two weeks. His wife was expecting twins, and he needed everything buttoned up by then. Though Musk had a reputation for outsized thinking and an ego to match, Eberhard wasn’t in a position to be picky. As he puts it, “You take money from the people who offer it to you.”

Tesla now had funding, a business plan, and even a chassis. The first prototype of Tesla’s car, dubbed the Roadster, would be based on a $45,000 fiberglass-skinned sports car that Lotus sold, called the Elise. Lotus made fast, light cars and also had the virtue of being the only sports car manufacturer that would give Tesla management the time of day. While Eberhard was thrilled to have a viable plan to build the Roadster, Musk had even bigger ideas. “Eberhard’s initial stimulus for starting Tesla was to build the EV he wanted to buy,” says Wright. “Musk had a much grander vision: He wanted to be the next General Motors.”
As the car progressed, staffers began to realize that a green light from Eberhard was not sufficient. “The question always had to be asked,” says Tarpenning, “‘What will Elon think of that?’”

As time went on, Musk became more and more comfortable pulling rank. Jessica Switzer, who ran marketing at Tesla until the car’s official launch in 2006, recalls persuading Eberhard to spend $30,000 on focus groups to test the car’s logo, look, and feel. A few weeks later Musk killed the project without explanation. With Eberhard’s approval, Switzer hired people from a PR firm in Detroit to drum up publicity in the automotive press before the car’s launch. Musk promptly fired them. She later learned that Musk didn’t want to spend money on marketing before the car was finished and figured his own involvement and the car itself would drum up more than enough PR.

When it came to design, Musk’s vision — building the Next Great American Car Company — soon came into conflict with Eberhard’s goal of getting a cool electric sports car to market quickly and relatively cheaply. The Lotus Elise chassis on which the Roadster was based had a high doorsill, a feature that makes entering the car tricky if you are not careful. Getting out is even harder. It took several attempts for Musk’s wife to get out of an early Roadster prototype while wearing a dress. So Musk ordered the engineers to lower the doorsill two inches, thereby losing much of the cost savings that come from using a crash-tested off-the-rack chassis. “Have you tried getting out of an Elise?” asks Musk. “It’s like you have to be a contortionist.”

And rather than use the fiberglass body panels from the Elise that Eberhard had suggested, Musk insisted on carbon fiber, a lighter, stronger, and “cooler” material, in his opinion. He then went on to redesign the headlights and the door latches. After riding for a weekend in an early Roadster model and taking a beating in the standard Lotus seats, he insisted that custom seats be developed. Every change meant additional cost and time. “I always argued that we would sell exactly as many cars whether the door latches were push-button or electronic, whether the body panels were carbon fiber or fiberglass,” Eberhard says. “All the nicer, cooler, faster stuff increased risk.”

But Musk got his way, in large part because he was putting more and more of his own money into Tesla. He led Tesla’s $12 million second round of financing in the fall of 2005, and also convinced some of his high-powered friends, including Google founders Sergey Brin and Larry Page and eBay employee No. 2, Jeff Skoll, to invest in later rounds. To date, he has personally put in $55 million of the $145 million Tesla has raised.

Musk, who is precise in his sentences, laughs easily, and if fired up will literally leap from his chair to punctuate a comment, admits he poked his nose into everything. “I was very insistent on things during the design phase, and it is true those things cost money,” he says, “but you can’t sell a $100,000 car that looks like crap.” Unfortunately, while the exterior of the Tesla was designed and redesigned to meet Musk’s exacting specifications, there was one very big problem: Two months before the car was set to debut in the summer of 2006, it still didn’t have a production-ready transmission.

I remember being perplexed by Tesla’s transmission problem, because electric vehicles generally have very simple transmissions with just one gear:

Electric motors have the advantage of being lightning fast from a standing start. But to get to the top speed that Tesla had promised (125 mph), they needed either a more powerful drive train or a second gear that could send the car speeding beyond 100 mph.

Problem was, Tesla’s engineering team didn’t yet have the experience to build a more powerful drive train, and no one had come up with a two-speed transmission that could go from 13,000 rpm to 7,000 rpm and survive for more than a few thousand miles before it wore out. Eberhard was inclined to stay on schedule, get cars on the road by sticking with one gear, and offer a Roadster that topped out at 110 mph.

Instead Musk launched the search for a supplier that could deliver a two-speed transmission. “Why did DeLorean fail?” Musk asks. “Because it was a shitty sports car. It may have looked cool, but it had the acceleration of a Honda Civic. That’s what our car would have been with the motor we had and the power electronics we had connected to a single speed.”

The whole point of an electric sports car is not top speed.

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