Meet Tesla: The Company That Popularized EVs

Hey Everyone - Harry here 👋

Welcome to Issue #16 of Deep Dive with Munui. In this issue, we’ll cover the story of Tesla, one of the world’s leading automotive and energy companies, valued at over $735 billion as of September 2024. We’ll explore everything from its founding story to the strategies that helped it become the company it is today.

Early Days of Tesla

Tesla, Inc. is an American multinational automotive and clean energy company, renowned for its technological advancements in the fields in which it operates. Tesla offers a wide range of products, including electric vehicles, solar panels, and energy storage solutions such as the Powerwall and Megapack, catering to both residential and large-scale utility energy storage needs. The company was founded by Martin Eberhard and Marc Tarpenning in 2003, with Elon Musk joining shortly afterward as an early investor and eventually becoming CEO in 2008. Tesla is headquartered in Austin, Texas.

Overview of the Global Automotive, Electronic Vehicle (EV), and Renewable Energy Market:

1. According to the International Energy Agency (IEA), "[n]early one in five cars sold in 2023 was an electric vehicle (EV)."

2. In addition, the IEA reported that "electric car sales neared 14 million in 2023, with 95% of those sales occurring in China, Europe, and the United States."

3. When comparing EV sales in 2023 to those in 2022, sales in 2023 were 3.5 million higher.

4. Global EV revenue is expected to reach $782.2 billion in 2024.

5. Global renewable capacity increased by 50% in 2023, marking the fastest growth in the past two decades. This capacity has consistently increased for 22 consecutive years.

6. China is projected to contribute nearly 60% of the new renewable capacity that is expected to become operational worldwide by 2028.

7. According to the IEA, "[s]olar PV and onshore wind additions through 2028 are expected to more than double in the United States, the European Union, India, and Brazil compared with the last five years."

The Rise of Tesla - How it was First Started:

Tesla is one of the world’s most famous companies, known for its innovation and enormous valuation. It has been the world’s largest automotive company since 2020, with a valuation of $725.82 billion as of September 2024. The company is also known for its groundbreaking technologies and the controversies surrounding its CEO, Elon Musk, who, as of September 2024, is the world’s richest man and holds the title of “Techno King of Tesla.” Beyond its innovation and Musk’s controversies, Tesla is recognized for a turbulent history of major ups and downs.

One fact many people may not know is that Tesla wasn’t founded by Elon Musk—it was actually started by two engineers, Martin Eberhard and Marc Tarpenning, who served as the company’s CEO and CFO, respectively. Eberhard once stated that he wanted to build a "car manufacturing company that is also a technology company, with its core technologies being the battery, computer software, and the proprietary motor." (Note: Double-check the source of this quote, as it may not be verifiable.)

Tesla's rise can be divided into two key phases:

Part 1 - The Start of Elon Musk’s Era:
Approximately one year after Tesla’s founding, Elon Musk joined the company in February 2004 as Chairman of the Board of Directors and became its largest shareholder by investing $6.35 million (equivalent to $10 million in 2023). He only became actively involved in Tesla’s management in 2008, after the original co-founders left the company in 2007 and 2008. Eberhard departed following disagreements with the board, and Tarpenning resigned. This led to a lawsuit between the founders, Musk, and early employees. The eventual settlement declared that Eberhard, Tarpenning, Musk, and JB Straubel (Tesla’s Chief Technology Officer from 2005 to July 2009) could all officially call themselves "co-founders" of Tesla.

Tesla initially positioned itself as a premium electric car company, producing niche, super-fast electric vehicles aimed at early adopters, which led to the creation of the Roadster—the world’s fastest electric sports car. Later, the company expanded into more mainstream segments, including sedans and affordable vehicles. However, Musk had different plans for Tesla’s future, guided by his vision for the company’s "Master Plan."

The Secret Tesla Motors Master Plan (just between you and me)

According to the Master Plan mentioned above, the steps are as follows:

1. Build a sports car.

2. Use the money from the sports car to build an affordable car.

3. Use that money to build an even more affordable car.

4. While doing the above, also provide zero emission electric power generation options.

Part 2 - Start of “Build an Affordable Car”:

Despite facing numerous challenges—from redesigning the entire car from scratch and dealing with production issues to nearly going bankrupt in 2008—Tesla managed to survive and, most importantly, produce and deliver its first-ever sports car, marking the achievement of Milestone #1 from its Master Plan.

The company was able to survive thanks to multiple fundraising rounds, significant internal changes, direct investments from Elon Musk, and, most critically, a $465 million interest-bearing loan from the United States Department of Energy. By 2009, Tesla had raised a total of $187 million and delivered 147 Roadsters (its first car designed and produced), which enabled the development of the flagship sedan, the Model S, and its commercial powertrain technology.

Despite the challenges, Tesla was ultimately able to achieve its first milestone and continue pursuing its plan. Through the development of its sports EV, Tesla proved to the world that the negative stereotypes surrounding the EV industry—such as low range, inefficiency, unattractive design, and poor performance—were unfounded. The introduction of the first-generation Roadster marked a pivotal moment not only for Tesla but for the entire global EV industry.

How Did Tesla Become the One of the Biggest and Fastest-Growing Automotive and Clean Energy Company?

Obsession with innovation, efficiency, and ambition can be used to describe the rapid growth and dominance of Tesla. Achieving Milestone #1 of the Master Plan was just the beginning. In the early 2010s, Tesla was still seen as a "niche sports car manufacturer" without its own manufacturing facilities (the first-generation Roadsters were produced at Lotus Motors' factory through a partnership). However, the acquisition of the NUMMI plant in Fremont, California, marked Tesla’s transition into a true manufacturing company, moving beyond its niche focus. The purchase of the factory from Toyota for $42 million became one of Tesla's many pivotal moments, especially after achieving Milestone #1.

The Model S was launched in June 2012, and Tesla successfully completed its Initial Public Offering (IPO) in 2013. Production of the Roadster ceased in January 2012. The Model S received numerous awards from reputable magazines.

After launching its first sedan, the Model S, and completing the IPO, Tesla focused on key areas such as maximizing efficiency and building a strong foundation in both production and core technologies like Autopilot. Autopilot became a major revolutionary feature that differentiated Tesla from its competitors. To achieve Milestone #3, Tesla not only required capital but also needed to build its infrastructure and maximize efficiency in order to simultaneously pursue Milestone #4. This obsession with efficiency, innovation, and ambition helped Tesla grow rapidly and become one of the world’s most valuable EV makers, enhancing its competitive edge by heavily focusing on technology and energy.

One of the ongoing concerns for consumers before transitioning to EVs was the lack of infrastructure (e.g., charging stations and energy supply). However, Tesla addressed these concerns by fueling the demand for infrastructure with renewable energy (solar power), storing energy through batteries, and reducing carbon emissions in transportation via electric vehicles powered by renewable energy sources, which do not harm the environment.

By addressing a major global issue and breaking it down into specific, solvable problems, Tesla not only identified key challenges but also provided solutions. By tackling real-world issues like global pollution and the depletion of natural resources, Tesla attracted capital, customers, and built a global community of individuals committed to solving one of the world’s biggest problems. This, in turn, fueled the company’s rapid growth. Tesla’s focus on maximizing efficiency and its ambitious strategy allowed it to grow continually, building a community that includes individuals, governments, and agencies.

By 2024, Tesla generated $96.7 billion in revenue for 2023 and was valued at $764.32 billion as of September 20, 2024. The company delivered approximately 1.81 million vehicles globally and raised roughly $19 billion in total funding from institutional and public investors following its 2010 IPO.

Below are the strategies that contributed to Tesla’s growth:

1. Identify a major problem, break it down into specific achievable challenges, and create solutions one by one:
   → Tesla is addressing the global climate change issue by creating an ecosystem based entirely on renewable energy. The company offers solutions that help individuals reduce their carbon emissions, such as owning and using a Tesla vehicle and powering their homes with Tesla Energy’s solar panels. On the B2B side, Tesla provides high-capacity solar energy and battery-based energy storage solutions, enabling large-scale renewable energy production.
   Additionally, Tesla is making EVs more accessible by strategically producing and launching various types of vehicles designed to be affordable and highly reliable—helping make EVs the standard for transportation while providing the best possible user experience.

   
   This success is possible because Tesla identified a major global issue—climate change—and broke it down into achievable challenges, such as making EVs accessible and standardizing clean transportation, and created solutions one by one. These solutions combine to form a comprehensive ecosystem that tackles the larger problem. Tesla is well on its way to achieving this goal.

2. Be innovative, obsess on the process, and solve problems:
    → While many individuals and companies focus solely on reducing dependence on fossil fuels, Tesla takes a more holistic approach to tackling climate change. The company is committed to creating a self-sustaining ecosystem powered entirely by renewable energy. Building this ecosystem from the ground up requires not only innovation but also a relentless focus on process and problem-solving—qualities in which Elon Musk and his team excel.

   
   A prime example is Tesla's Gigafactory, a massive manufacturing facility that produces most of the core components for Tesla vehicles. Instead of outsourcing production, Tesla aims to manufacture nearly all essential parts in-house. This strategy not only lowers production costs and achieves economies of scale but also enables the company to implement sustainable manufacturing practices. Notably, the Gigafactory operates entirely on renewable energy, primarily powered by solar panels, further reinforcing Tesla's mission to create a sustainable future.

3. Build your own community and make the fans sell it:
    → Tesla is known for its massive global community and status as an icon of innovation, thanks to the problems the company aims to tackle and the impact Elon Musk has made through his other ventures (e.g., SpaceX, Neuralink, etc.). Importantly, Tesla has built its community by providing the best possible experience for its customers through a Direct-to-Consumer (D2C) sales model, along with continuous technological and non-technological improvements to its cars. By listening to and incorporating feedback from its customers, Tesla consistently delivers value and an exceptional experience, which naturally encourages customer involvement and fosters a loyal community.

4. Referrals also work for cars too:
    → Tesla is not only known for its innovation and technical impact but also for its uniqueness in non-technical areas. One notable example is the fact that Tesla has no marketing budget at all. Instead, the company focuses on marketing and sales by leveraging its community and the referrals actively spread by community members to people in their network who are interested in buying a Tesla.

5. Don’t be scared to not follow the traditional sales model:
    → Tesla is one of the few companies in the global automotive industry that operates without dealerships, relying solely on a Direct-to-Consumer (D2C) model for its sales. One of the main reasons the company avoids the dealership model is to maintain full control over product pricing, customer experience, and to save on fees associated with dealerships.

   A key lesson we can learn from this is that not every company should follow traditional structures; what works for one may not work for another. Companies should not be afraid to experiment in various areas, whether that means operating without a marketing budget or deviating from conventional sales methods.

Challenges for Tesla:

1. Navigating through the extreme competition:
    → Tesla is facing significant competition both inside and outside the United States, from institutionally backed EV startups like Rivian to aggressive Chinese EV companies entering the global market. As time passes, these challenges will need to be addressed by Tesla, despite the company’s rapid innovation and improvements.
   It is crucial for Tesla to navigate this intense competition by further deepening its “secret sauce”—the unique advantages that differentiate the company from its competitors. For Tesla, this will involve its Autopilot feature and the vast amounts of real data it has collected from its customers, allowing the company to focus on self-driving technology as its primary “secret sauce.”

2. Navigating through the Global Slowing in EV Sales.
    → It is true that a global slowdown in EV sales is occurring. Following the transition from early adopters to a more general audience, many consumers remain skeptical about issues such as charging infrastructure, range, and costs. Policy uncertainty, particularly with upcoming elections, is also causing hesitation as governments reconsider EV incentives. Economic factors like inflation and rising interest rates further discourage purchases. Automakers and policymakers must address these concerns and provide stable support for EV growth.

Future of Tesla:

1. Focusing on further developing their “Secret Sauce.”
    → One of Tesla’s key components of its “secret sauce” is the technology behind its consumer and enterprise-focused products, from the software to its long-lasting, efficient batteries. These batteries are produced in one of the largest and most efficient factories, the Gigafactory, which operates primarily on renewable energy. We can expect the company to further develop its “secret sauce” and continue to enhance the product experience for its customers.

2. Hello to the Future:
    → Apart from enhancing their "secret sauce," we can also expect Tesla to launch their future lineup of products (e.g., Semi Truck, Model Y, new Roadster, Robotaxi, Full Self-Driving, humanoid robots, and more) in the near future. These efforts aim to further develop their secret sauce while accelerating the future of humanity.

3. More Focus on Global Expansion:
    → Global EV sales are decreasing in developed markets (markets where EVs have already been introduced and adopted as a transportation method), which is why it is crucial for companies like Tesla to further expand and enter new untapped markets in an effort to continue increasing their global EV sales.

4. Continuous expansion inside the Tesla Energy Division:
   → One thing many people tend to overlook is that Tesla isn’t just an automotive company—it is a multinational automotive and clean energy company. Since acquiring SolarCity in 2016, Tesla’s Energy division has experienced rapid growth. This growth was sparked by successful collaborations between its automotive and energy divisions, such as using solar panels from the Energy division to power its Gigafactories.
   Countries around the world are trying to accelerate the transition to renewable energy in an effort to achieve the United Nations' Sustainable Development Goal 7 of "Affordable and Clean Energy" by 2030. With the rising demand for lithium-ion batteries, driven by both new and traditional automotive companies shifting to EVs, the global energy market is an exciting space with continuous rapid growth. These developments naturally lead to Tesla’s ongoing focus on expanding its energy division, Tesla Energy.

Key Takeaways from the Story of Tesla:

The story of Tesla is filled with continuous innovation and an obsession with efficiency in solving problems that ultimately stem from a major issue known as "climate change." From popularizing a new way of transportation to becoming an icon of technology and innovation, the story captures both the highs and lows of running a startup and scaling it into one of the world’s most successful and largest companies while maintaining innovation.

One key lesson from this issue is the importance of being obsessed with the process. Many people and companies tend to overlook the process, focusing heavily on results instead. While focusing on results is crucial, Elon Musk emphasizes the importance of the process. This focus has allowed the company to maximize efficiency by heavily investing in and adopting robots to build cars from start to finish, as well as powering 100% of its factories with renewable energy from Tesla Energy products (e.g., solar panels).

Finally, another major lesson from Tesla’s story is the importance of having a clear, fixed vision supported by strong ambition from every team member who backs that vision. When Tesla was first introduced, many people thought it was a bad idea. In fact, Elon Musk was often seen as merely an "internet entrepreneur" due to his success with internet companies, not traditional manufacturing-heavy businesses. However, Musk and Tesla were able to break this stigma and continually achieve their goals by maintaining a clear vision and ensuring that every team member believed in the possibility of what they had planned, dreamed of, and were working on. This alignment of vision and ambition is a major reason Tesla has become the company it is today—and, most importantly, why it continues to grow.

Below are the key strategies that Tesla used to become the company it is today:

1. Identify a huge problem, break it down into smaller problems, and tackle them one by one:
   → Climate change is a real problem that needs to be addressed, affecting everyone regardless of geographical location, age, religion, gender, or beliefs. Much like how Tesla approached its challenges, you should break down this massive issue into smaller, more manageable problems, then develop solutions for each, connecting them to create an ecosystem.
   From recent newsletter cases, we see that many companies follow this process: identify a major problem → break it into smaller, manageable issues → solve those issues → tackle the next set of smaller problems by providing solutions → combine all solutions into an "all-in-one" or "ecosystem of solutions" → ultimately addressing the larger problem once the smaller issues are resolved.

2. Are you crazy enough to think you and your team change the world?
    → Be ambitious, curious, and even a bit delusional—believe that you and your team can change the world. This was the case for Elon Musk and Tesla. They believed they could make EVs accessible, run them on 100% renewable energy, and even make self-driving cars a reality. By 2024, most of these goals have been achieved, except for full self-driving, which is close but not yet complete. This progress was made possible because everyone at Tesla believed their vision and ambitions were not only achievable but also realistic.
   The key lesson here is that anything is possible if you truly believe in it and work toward it with conviction. This highlights the importance of having strong conviction and obsession when building or reinventing something from the ground up.

3. Obsess over everything from solving problems to making solutions more efficient:
   → Even if you have the obsession, ambition, curiosity, and a bit of delusion for solving problems, you also need to apply these same characteristics to the process and its efficiency. Tesla was able to make EVs more affordable compared to its previous models by making the production process more efficient. This comes from being obsessed not just with solving the problem, but also with improving the process. Many people focus solely on solving problems, doing whatever it takes to 'solve' them. However, Tesla’s goal goes beyond just solving a problem—it’s about making the solution accessible, which can only happen by being equally focused on optimizing the process.

4. What is your secret sauce?
    → Having a "secret sauce" is crucial because it makes your company unique and different from your competitors, which is why every company should have one. Tesla’s "secret sauce" is its technology, such as Full Self-Driving (FSD), which enhances safety and convenience for EV owners. This specific technology cannot easily be copied due to its nature, requiring massive amounts of data that can only be accumulated over the years.
   The lesson we can learn from this is simple: the more competitive the space your company is in, the more crucial it becomes to have its own "secret sauce" in order to attract new users, retain existing ones, and scale the company for the future.

5. Communities are a must during 2024:
    → Tesla has built its community through its vision: solving one of the most critical problems with proven results over the years, alongside the founder and the team actively sharing their progress with the public. This approach has ultimately led to the creation of a strong community for the company.
   Additionally, by implementing non-traditional marketing and sales models (e.g., referral programs, loyalty programs, direct-to-consumer (D2C) strategies), and actively listening to and incorporating feedback, the company has been able to build its globally growing community. This is a crucial aspect that every founder, business owner, and company should follow, especially in 2024 and beyond.

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Thank you so much for reading!

-Harry