The Story Behind Tesla's Success (TSLA)

The U.S. car market is saturated with established automakers like Ford (F), Honda (HMC), and Chevrolet (GM). But one company stands out from the mix: electric car maker Tesla Motors (TSLA). Tesla and its CEO Elon Musk gained notoriety in 2012 when it released its flagship car, the Model S.

Tesla’s release positioned it as one of the few successful independent automakers and a pioneer in the electric car market. Notably, it also proved to be a hit with auto buyers. The Model S, a sleek luxury sedan that starts at $74,990, is ranked best in class for safety by Euro NCAP. When the Model S premiered in 2012, Tesla made headlines when trade press gave it laurels. The electric plug-in car received a near-perfect score of 99 out of 100 from Consumer Reports in 2013, which noted this was "the highest score in our Ratings".

By September 2014, the car set a new sales record for itself in the U.S. with 2,500 sold in just one month, and in Q1 2015, sales reached a new high at 10,030 sold. It is now considered a staple within the electric car stratosphere. As of March 26, 2024, the company’s market capitalization was $571 billion.

History of Tesla Motors

Contrary to popular belief, Tesla was not an overnight success. The company was founded in 2003 by two Silicon Valley engineers Martin Eberhard and Marc Tarpenning, who sought to make electric cars that were fast and fun to drive.

The seeds of the company go back to 1990 when Tarpenning met Eberhard, then an engineer at Wyse Technology, and they became good friends. The two had much in common including a passion for starting companies, and they soon launched companies including NuvoMedia, which released the Rocket eBook in 1998.

A passion for autos started soon after Eberhard went through a divorce and decided to buy a sports car. He considered entering the electric car industry after investing in a boutique electric automaker named AC Propulsion.

In 2001, Eberhard and Tarpenning met Elon Musk after hearing him speak at a Mars Society talk at Stanford University. At that time, Musk already had a portfolio of successful start-ups. In 1998 Peter Thiel, and Max Levchin co-founded an online payments company. In 1999 Elon Musk founded a similar company called X.com, and they merged to form PayPal. The group then sold PayPal to eBay in 2002. Impressively, Musk made $165 million in stocks from the sale.  Soon after, Musk launched Space X, a company that designs, manufactures, and launches advanced rockets and spacecraft.

Tesla was officially incorporated in 2003 with the goal of inventing an electric car that was powerful, beautiful, and with zero emissions. Other co-founders were JB Straubel—the company's chief technology officer (CTO) until 2019—and Ian Wright, who left Tesla in 2004. Wright later founded the electric vehicle powertrain company Wrightspeed.

In 2004, the company’s co-founders went through initial rounds of investing with venture capital firms. Musk led the initial round of funding and soon joined as the head of the board of directors. Future investors in subsequent rounds would include friends, family, and a litany of VC firms, including Valor Equity Partners.

Tesla CEO: Elon Musk

Elon Musk has become the face of Tesla and is often mistaken as the company’s founder. Musk is a South African-born, Canadian-American who was trained as an engineer. He earned a dual bachelor of science degree in Physics and Economics from the University of Pennsylvania.

That said, he is an entrepreneur and inventor at heart. In 1995, Musk enrolled in Stanford's Applied Physics Ph.D. program but dropped out for entrepreneurship in the then nascent and growing internet space.

Soon after, he launched several small successful companies, including the online publishing company Zip2. From that sale, Musk started X.com, an online bank that merged with Confinity to form PayPal.

Tesla Motors: The Early Years

From 2004 to 2008, Tesla grew substantially and developed its first automobile, The Roadster. The company opened its manufacturing plant in Fremont, CA, a 5.3 million square-feet factory that was previously owned by Toyota and General Motors. The factory is known as Nummi, which includes two paint facilities and 1.5 miles of assembly lines.

In 2008, Musk became the company’s CEO and product architect, positions he still holds as of March 2024. That same year, Tesla released its first automobile, the Roadster sports car. "It is not just a car, but one of the strongest automotive statements on the road,” Car and Driver wrote.

Tesla Motors Today

Tesla, as part of its secret to success, continues to focus on creating electric cars and making electric vehicle (EV) powertrain systems and components. As of 2022, the company has a network of 438 stores and galleries as well as about 100 service centers. The company offers more than 50,000 Superchargers worldwide as of 2024.

One of the company’s trademarks is to focus on releasing one product at a time. And while Tesla continues making the Model S, it has rolled out newer models to expand its customer base. Other models include the less expensive Model 3 sedan, the SUV-style Model X, and the crossover Model Y. The next Tesla product on the horizon is the Cybertruck.

Tesla Motors Strategy

To move with the changing times, Tesla focuses on launching new offerings that target a wider range of consumers. To stay competitive in the niche market, Tesla Motors has expanded its operations globally with manufacturing facilities in the U.S., China, and Germany.

To keep costs down on lithium-ion battery packs, Tesla and key strategic partners, including Panasonic, built a Gigafactory in Nevada that produces the Model 3, battery packs, and energy storage products.

Tesla Motors: Looking Forward

The electric car market is growing, with luxury automakers like Mercedes Benz and BMW jumping into the space. Analysts forecast that the total global sales of electric vehicles will be approximately 29.5% of all new car sales by 2030.

That said, Tesla’s long-term success is anyone’s guess. In December 2014, Morgan Stanley’s auto analyst Adam Jonas predicted that the company would fall short by 40% of its goal to sell 500,000 cars in 2020. However, Tesla came in right around its goal with 509,737 vehicles produced and 499,550 delivered.

As with anything, there are no guarantees. The reality is that Tesla Motors has morphed from a start-up to an established industry player. What doesn’t change is its extraordinary story and its place as a pioneer in the frontier of electronic cars.