Tesla: Leading the EV Revolution

In slightly over 20 years, Tesla went from a small outfit consisting of a founding team and a few employees to making it to the top of the automotive industry. The company's meteoric rise was made possible through a relentless pursuit of technological innovation and a crystal clear vision executed with brilliance. While most people interested in the business world are familiar with Elon Musk's company and its cars at large, the story of how Tesla took the automotive world by storm is well worth taking a closer look at.

• The house that Musk built: Elon Musk is part of the founding team, and his importance for the company is impossible to overstate.

• Infrastructure: Tesla is most known for selling cars, but the company also operates an extensive charging network.

• Vertical integration: Tesla is largely vertically integrated and relies very little on third-party suppliers.

• Stiff competition: The company is facing increasing competition from large and traditional automakers, as well as newer upstarts.

Tesla was founded in the summer of 2003 by Martin Eberhard and Marc Tarpenning. The pair served as the company's first CEO and CFO respectively, and the two had a goal that sounded simple enough when spelled out but was extremely difficult to pull off in practice: make the next generation of electric vehicles (EVs).

They weren't alone in believing in the vision. As you might've already noted, Elon Musk was not one of the original founders of Tesla, even though he's almost always listed as one. Musk entered the picture early on in the company's life, while things were still very much in the idea stage. He became Tesla's largest financial backer and shareholder in February 2004, using money from the sale of his PayPal stake. He quickly became heavily involved, leading a series of fundraising rounds in the following years.

But what about the co-founder thing? This is where some explanation is due. Tesla has since the late 00s used the term “founding team” rather than co-founders. This is a group that includes both Tarpenning and Eberhard, as well as Musk and a few other early investors and employees. Following a court case initiated by Eberhard (in which he asked to be declared as one of only two co-founders) that concluded in 2010, a judge has ruled that Musk and Tesla have nothing stopping them from using this wording.

When looking at the importance and impact that Musk had in the early months and years of the company, calling him a co-founder is only logical according to himself and the company. While he and the other members of the founding team weren't involved when the company was incorporated.

The Tesla Roadster, introduced in 2008, was the first car ever put to market by the company and was a significant milestone in the automotive industry. It was the first mass-market production car to use lithium-ion battery cells and the first all-electric car to travel more than 200 miles per charge. The car became living proof of what was possible with electric power, long before the traditional giants of the industry had tried to produce something similar. Most electric cars at the time were small, impractical, and with extremely limited range.

The Roadster's design was based on the chassis from the Lotus Elise. Tesla collaborated with Lotus to modify the chassis to accommodate an electric powertrain. The Elise is held in extremely high regard amongst sports car enthusiasts, something which helped to legitimize the roadster as it fought somewhat of an uphill battle against the preconceived notion that an electric sports car was something that wasn't to be taken too seriously.

The Roadster's release in 2008 marked a pivotal moment for both Tesla and the broader EV market. It featured a battery package that was extremely capable when compared to other market offerings at the time. The car's electric motor provided instant torque, allowing the Roadster to accelerate from 0 to 60 mph in under 4 seconds, which was comparable (and still is) to many high-performance sports cars.

What made the Tesla Roadster unique was its combination of performance, range, and eco-friendliness. Unlike other electric vehicles available at the time, which were often (rightly so) criticized for their limited range and subpar performance, the Roadster proved that EVs could compete with traditional internal combustion engine vehicles in both areas. In addition to its technological advancements, the Roadster garnered significant attention for its sleek, modern design.

It attracted a wide range of customers, from environmentalists to car enthusiasts, helping to shift public perception of electric vehicles from mere novelties to serious contenders in the automotive market. The success of the Roadster paved the way for Tesla's subsequent models in numerous ways. First and foremost: it put the company on the map. While the Roadster had its issues, it proved that Tesla was capable of producing mass-market electric vehicles. It helped to secure the financial future of the company, enabling forthcoming models and successes.

The Roadster's success gave the company some room to maneuver and paved the way for Tesla's subsequent models, which continued to build on the foundations laid by the Roadster. While making a sports car was flashy and garnered a lot of attention, there was also a very conscious strategy behind doing so. The Roadster was expensive and exclusive, and in the mid-2000s Musk laid out the thinking behind this: the strategy was to produce exciting, performance-focused cars for customers who weren’t very sensitive to price.

This would, in turn, allow them to make its battery technology less expensive, paving the way for offering cheaper cars in much higher volumes. The strategy, as we now know, was successful.

Tesla completed its IPO on the Nasdaq in the summer of 2010 raising $226 million, and the listing was a landmark moment in the automotive industry as a whole. Today there are numerous public car companies only producing EVs, with Lucid, Rivian, and Polestar being a few examples, but at the time of Tesla's IPO, they were the only ones. It was also the first U.S. automotive company to go public since Ford in 1956.

Tesla currently sells five different vehicles, which include sedans, SUVs, and the polarizing cybertruck. The available vehicles are as follows:

• Model S: Launched in 2012, the Model S was Tesla's first mass-produced sedan. Known for its high performance and advanced technology, the Model S set new standards for electric vehicles. The Model S has long range, rapid acceleration, and introduced key innovations such as over-the-air software updates, a large touchscreen interface, and Autopilot capabilities, which have become standard in Tesla's lineup.

• Model X: The Model X, introduced in 2015, is an SUV. It is notable for its distinctive falcon-wing doors and spacious interior, which can accommodate up to seven passengers. The Model X combines performance with utility, offering a great range and impressive towing capacity.

• Model 3: The Model 3, launched in 2017, marked Tesla's entry into the mass-market segment. With a starting price lower than previous models, the Model 3 aimed to make electric vehicles more accessible to a broader audience. It has been highly successful, becoming one of the best-selling electric cars globally.

• Model Y: Released in 2020, the Model Y is a compact crossover SUV that shares many components with the Model 3. It offers the versatility of an SUV with optional third-row seating, making it suitable for families.

The Tesla vehicle that has generated the most amount of buzz in recent years is without a doubt the Cybertruck. The body is made from ultra-hard 30X cold-rolled stainless steel, with a design that is truly one of a kind. It was unveiled in 2019, and during the presentation, a hard metal ball was thrown at the armored glass famously resulting in the window shattering. Despite this mishap, the preorders started flowing in and Tesla made the first deliveries at the end of 2023 following a series of delays.

Since its debut, the Cybertruck has garnered mixed reactions. On the positive side, it has been praised for its innovative design and potential. Its high performance, design, range, and advanced features have generated significant interest. But the Cybertruck's reception has not been universally positive. Critics have pointed out several concerns. The unconventional design, while praised by some, has been polarizing, with detractors labeling it as impractical and visually unappealing.

While several things make Tesla stand out from other automotive companies, one of the most interesting things from a business standpoint is how the company sells its cars. Traditional car companies like Ford or General Motors get their cars into the hands of consumers through networks of retail stores operated by a franchise model.

However, this is not how Tesla does it. Instead, the company owns and operates all of its stores itself and combines its retail locations with its online e-commerce platform, giving Tesla complete control over the customer experience.

Quartr Pro is revolutionizing professional public market research

Request a personal demo to learn why Quartr Pro is quickly being adopted by leading asset managers, hedge funds, investor relations departments, and sell-side analysts worldwide.

• Request personal demo

One of the main issues for owners of EVs, and one of the biggest roadblocks for even wider adoption, is range and charging. While most drivers charge their vehicles at home during the night or while at work, finding somewhere to charge when on longer drives can be an issue. To alleviate some of this, and to make the overall experience of owning a Tesla vehicle better, the company owns and operates charging stations primarily throughout North America, Europe, and parts of Asia.

These charging stations are typically placed along major travel routes and in urban areas, often near amenities such as restaurants, gas stations, and shopping centers. A supercharger can add up to 320 kilometers/200 miles of range to a Tesla vehicle in about 15 minutes, though this varies with the model and conditions. The network primarily serves Tesla vehicles, although some pilot programs have opened specific stations to other EV brands, particularly in Europe.

The company has stated that a vast majority of the electricity used for supercharging is from 100% renewable sources, with some charging stations even incorporating solar panels into their design.

Tesla's Autopilot and Full Self-Driving (FSD) programs are, as suggested by the names, programs aiming to improve driving safety and increase convenience through automation. These systems use a combination of hardware and software to assist drivers, and even automate some aspects of driving.

Autopilot, introduced in 2014, serves as Tesla's advanced driver-assistance system (ADAS). It includes features like traffic-aware cruise control, which matches the speed of the car to surrounding traffic, and autosteer, which assists in steering within clearly marked lanes. Over the years, Autopilot has evolved, incorporating more sophisticated capabilities such as Navigate on Autopilot, which can guide the car from a highway on-ramp to an off-ramp, including making lane changes and handling highway interchanges.

The hardware making Autopilot possible consists of an array of sensors, cameras, and a powerful onboard computer. Tesla vehicles are equipped with cameras providing 360-degree visibility, ultrasonic sensors for detecting objects, and a forward-facing radar to see through fog, heavy rain, dust, and even the car ahead. The neural network-based software processes this data in real time, enabling the vehicle to make decisions and respond to its environment.

Tesla's FSD program is an extension of Autopilot with the goal of achieving full autonomous driving capabilities. Although termed "Full Self-Driving," it is important to note that as of now, FSD does not make a vehicle completely autonomous. Instead, it adds more advanced features beyond those available in Autopilot. These features include automatic lane changes on highways, automatic parking, the ability to summon the car in a parking lot, and traffic light and stop sign control, where the vehicle can recognize and react to traffic signals.

The FSD package also includes the development of city driving capabilities, aiming for the car to navigate urban streets, including responding to complex traffic scenarios and making turns at intersections. This is part of Tesla's long-term vision to achieve full Level 5 autonomy, where the vehicle can handle all driving tasks without human intervention. One of the central components of Tesla's FSD is the Tesla Vision system, which relies primarily on cameras rather than lidar or radar.

This decision, spearheaded by Musk himself, is based on the conviction that vision-based systems are more scalable and cost-effective. Tesla Vision utilizes the car's cameras to interpret the surroundings, much like a human driver would, feeding visual data into the neural networks that guide the vehicle's actions.

However, the deployment of these technologies has not been without controversy. There have been incidents where the systems have been involved in accidents, leading to scrutiny from regulators and the public. Critics argue that the names "Autopilot" and "Full Self-Driving" can be misleading, potentially giving drivers a false sense of security about the capabilities of the system. Tesla emphasizes that both Autopilot and FSD require active driver supervision and are not substitutes for attentive driving.

Regulatory challenges also loom large for Tesla's autonomous driving ambitions. The legal and safety standards for self-driving cars are still evolving, and Tesla must navigate these regulatory frameworks in different markets around the world. This complexity is compounded by the varying levels of public acceptance and trust in autonomous vehicles.

Vertical integration refers to a company's ownership and control over multiple stages of its supply chain, from raw materials to final product delivery. This is something that Tesla has utilized extremely effectively. Its strategy encompasses everything from manufacturing its own batteries to developing proprietary software for its vehicles, aiming to streamline operations, reduce costs, and improve product quality. All in all, Tesla makes most of the things it needs themselves, whereas other automakers often outsource a majority of their production to third-party suppliers.

One of the most critical aspects of Tesla’s vertical integration is its investment in battery technology. By manufacturing its own batteries, Tesla can control costs, innovate more rapidly, and avoid supply chain disruptions. This contrasts with other automakers who often rely on third-party suppliers for batteries, limiting their ability to influence pricing and technological advancements.

Tesla manufactures many of its own components, including electric motors, inverters, and chassis, in-house. This integration allows Tesla to tightly coordinate production processes, reduce lead times, and maintain higher quality control standards. Unlike many traditional automakers that outsource software development, Tesla designs and updates its software internally.

Tesla is first and foremost known for its vehicles, and its cars represent the bulk of the revenue generated by the company. However, in a bid to continue pushing the adoption of renewable energy and expand the business, Tesla also operates an energy subsidiary called Tesla Energy.

One of the cornerstone products of Tesla Energy is the Powerwall, a rechargeable lithium-ion battery designed for home use. The Powerwall stores energy generated from solar panels, or from the grid during off-peak hours, to provide power when it is needed most. In addition to the Powerwall, Tesla Energy offers the Powerpack and Megapack systems for commercial and utility-scale applications.

The Powerpack is designed for businesses and utilities seeking to enhance energy reliability and manage demand. Each Powerpack is scalable, allowing for configurations that meet the specific needs of large-scale energy consumers. The Megapack, introduced later, is a larger-scale solution capable of delivering significant power storage, often used in utility-scale energy projects to support grid stability and renewable energy integration.

Tesla Energy's solar products complement its battery solutions. The Solar Roof is a key product, integrating photovoltaic cells into roof tiles that are both functional and aesthetically pleasing. This approach allows homeowners to generate electricity from their rooftops without compromising an unacceptable amount on the appearance of their homes. Tesla also offers traditional solar panels, which can be installed on existing roofs, providing a more conventional solution for solar energy generation.

Tesla's Gigafactories are a series of large-scale manufacturing plants spread out across North America, Asia, and Europe, all built with the same purpose: to produce EVs and energy storage products at high volumes and reduced costs. The Gigafactories are spread out across North America, Europe, and Asia. The rationale behind building Gigafactories is multi-faceted:

• Economies of scale: By consolidating production into large facilities, Tesla can achieve economies of scale, which significantly reduces the cost per unit of output. This efficiency is vital for lowering the prices of electric vehicles and making them competitive with traditional internal combustion engine vehicles.

• Vertical integration: Tesla's Gigafactories are part of the aforementioned strategy of partial vertical integration, where the company controls multiple stages of its supply chain. This approach reduces dependency on third-party suppliers, enhances quality control, and secures a stable supply of critical components like batteries.

• Supply chain security: With the global demand for lithium-ion batteries increasing, securing a steady and reliable supply is crucial. By producing batteries themselves, Tesla mitigates risks associated with supply chain disruptions and price volatility in the raw materials market.

• Technological advancements: Concentrating production in Gigafactories allows Tesla to streamline and innovate manufacturing processes continuously. This focus enables the development of advanced battery technologies and improvements in energy density, charging times, and overall performance.

Elon Musk's tenure as CEO of Tesla has been marked by a blend of visionary leadership, ambitious projects, and significant controversy. Since assuming the role in 2008, Musk has been the driving force behind Tesla's transformation from a niche EV manufacturer into one of the most valuable automotive companies in the world. The company's advancements in battery technology, autonomous driving, and energy solutions can be attributed largely to Musk's relentless focus on innovation.

However, Musk's tenure has not been without controversies. His unorthodox management style and frequent use of social media have often attracted scrutiny. His handling of labor relations at Tesla's factories has been criticized, with reports of worker injuries and disputes over unionization efforts. Furthermore, the aggressive production targets and timelines set by Musk have sometimes led to what is known as "production hell," where the company struggled to meet its ambitious goals. The Model 3 production ramp-up is a prime example, where initial delays and quality control issues created significant stress for the company and its investors.

Regardless of this, one thing is for certain: Tesla would not be where it is today without him.

Tesla had been a public company for roughly ten years when its stock price started soaring. At the same time, as the global economy was shifting and adapting to the global COVID-19 pandemic, Tesla's stock started its rapid climb. From a low in early April of roughly $30, the stock price soared to over $400. But the good times were not to last. Through a combination of factors, including rising interest rates, declining sales numbers, supply chain issues, rising competition and a myriad of other challenges, the stock price entered a downward turn. At the time of writing, the stock has declined roughly 50% from its peak in November 2021.

An overview of Tesla's market cap in November 2021 vs April 2024

An overview of Tesla's market cap in November 2021 vs April 2024

For a long time, Tesla was the clear dominating force in the EV industry. While the company still carries a lot of weight and prestige, it's no longer a world that they rule over alone.

Companies such as General Motors, Ford, Volkswagen, and others are aggressively expanding their electric vehicle lineups, investing heavily in new technologies, and leveraging their established manufacturing and distribution networks to challenge Tesla's dominance. Several key factors underpin this growing competition, with one of the main reasons being the global shift away from internal combustion engines powered by fossil fuels. Governments worldwide are increasingly implementing regulations to reduce carbon emissions and promote electric vehicles. Traditional automakers are leveraging these policies to accelerate their EV strategies. For example, in Europe and China, stringent emission regulations are pushing automakers to increase their electric vehicle offerings.

Traditional automakers benefit from their extensive manufacturing capabilities and established supply chains. They have decades of experience in mass production and can leverage this to scale up EV production quickly and efficiently. Moreover, their global distribution networks allow for broader market penetration and quicker delivery times.

This contrasts with Tesla, which, despite its innovations, has faced challenges in scaling production and maintaining consistent quality. Established automakers also have long-standing relationships with customers and a strong brand presence. This loyalty can be a significant advantage as they transition to electric vehicles. Many consumers may prefer to buy from a brand they trust, especially when it comes to significant investments like a vehicle. All in all, competition is rapidly ramping up, and Tesla needs to continue to innovate in order to keep up their momentum.

One of these initiatives and innovations is Tesla's push into robotics and AI. At the time of writing this article, much is still in its early stages and being kept relatively secretive. However, Elon Musk is extremely bullish on its potential. The program, dubbed Optimus, is working on developing humanoid robots. During the ASM in June 2024, he outlined a plan for Tesla to achieve a valuation ten times that of Microsoft, including a $1 trillion profit from Optimus:

Tesla has undeniably revolutionized the automotive industry, transforming electric vehicles from niche products into mainstream contenders. Through relentless innovation in battery technology, autonomous driving, and vertical integration, Tesla has set new standards and paved the way for a future where electric vehicles are increasingly prevalent.

However, Tesla's journey is far from over. As competition intensifies from both established automakers and new entrants, Tesla must continue to innovate and improve its products to maintain its leadership position. The expansion of its Gigafactories, ongoing development in autonomous driving technology, and growth of Tesla Energy are crucial components of its strategy to stay ahead. Looking ahead, Tesla's position in the automotive industry is likely to grow, as the global shift towards sustainable energy and transportation accelerates.

The company's ability to navigate regulatory challenges, manage production complexities, and sustain its innovative edge will determine its future trajectory. While the road ahead is filled with hurdles, Tesla's pioneering spirit continues to shine bright.