Future of the Car: The Real Founding History of Tesla


Tesla co-founders JB Straubel and Elon Musk sat down for the first time ever during a Financial Times keynote to discuss the history of Tesla, revealing new insight into the company’s founding and associated development of the Tesla Roadster.

Almost fortuitously, Elon Musk met with fellow Tesla co-founders at a lunch originally involving the topic of space exploration. This transitioned into an enthusiastic discussion about electric vehicles, suggesting that Musk take a test drive in a proof-of-concept electric sports car prototype by AC Propulsion called tzero.

Musk had already held a strong interest in electric vehicles for several years, believing that they would be the future of transport. His graduate studies at Stanford would have aided him in the field to develop an ultra-capacitor for electric vehicle use; regardless, Musk decided to drop out of the program in pursuit of his own ventures.

While Musk suggested to AC Propulsion that they commercialize the sports car prototype, they had no desire to bring it to market.

Instead, the company gave what would become the Tesla co-founding team permission to utilize their prototype for commercial purposes.

In fact, they suggested to partner with other teams that were attempting to do the same.

This led to the joining of the remaining three co-founders of Tesla: Marc Tarpenning, Martin Eberhard, and Ian Wright. At that point the group wasn’t officially called Tesla, or even a proper company.

The founding team realized only during development that their design for the Tesla Roadster was inherently flawed.

While it seemed feasible to combine a Lotus Elise chassis with the electric powertrain developed by AC Propulsion, it wasn’t a straightforward integration and both ended up being drastically modified from their original designs. Contrary to popular belief, the Tesla Roadster only shared 6% of parts with the Lotus Elise thereby invalidating its structure.

The evolving Tesla team learned through trial and error that it would have been smarter to design Tesla Roadster from the ground up, rather than attempting to use what amounts to off-the-shelf parts. Even AC Propulsion’s powertrain technology became unrecognizable, developing into a proprietary Tesla design once shipped to customers.

This was compounded by the fact that the Lotus Elise chassis presented limitations in its size and design, as well as a reliance on Lotus for production which contribued to volatile pricing.

Tesla faced additional supply chain issues with the Roadster, as suppliers were unable to meet uncategorically advanced demands. Even the battery was outsourced to a barbecue company in Thailand as no other factory would produce such a sophisticated design, leading to Tesla eventually producing the battery pack themselves.

A positive is that these challenges led to Tesla being almost a decade ahead of other automakers in electric vehicle development, learning from design mistakes to guide the development of new products.

It’s clear that Tesla beat the odds where hundreds of other startups couldn’t, as the likelihood of an automotive startup succeeding was incredibly low. Automakers are hyper-competitive, indicated by the fact that no monopoly exists in the automotive industry.

There are less opportunities for electric vehicle startups to introduce a new product into the space that’s better or different than what’s already being developed by Tesla or conventional automakers, lessening the need today for a new automotive startup today.

It was unlikely for Tesla to become a lucrative venture, but that wasn’t what motivated the founding of the company.

It is important to note that there would have been no need for Tesla to exist if automakers had already been planning to build practical electric vehicles, and the effect that Tesla has had on the industry and thus the world has been truly remarkable.

The mission of Tesla remains to transition the world to sustainable energy; fundamentally, the advent of that wouldn’t have been possible without the company’s founding lunch and the many production challenges faced during the development of the inaugural Tesla Roadster.


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