Tesla is an American automotive and clean energy company that designs and manufactures electric automobiles, energy generation and storage products.
Tesla has unquestionably developed into the most valuable company in the industry over the course of its 19-year existence.
The company has expanded exceptionally well, starting with a primary focus on making electric automobiles accessible to the average person to now becoming a diversified provider of clean energy solutions.
2021 Statistics Highlighting Tesla’s Success
- Total revenue of $17,719 million was generated.
- Record vehicle deliveries of 0.94 million in 2021
- Has nearly 100,00 employees in the labor force.
- Total revenue grew by 65% in 2021
- The total gross profit for the year 2021 was $13,606 million
- Operating cash flow of $11,497 million.
The following chapters concentrate on Tesla's incredible path from an electric car startup to the industry leader that it is today.
Tesla Rises To Challenge Gasoline-Driven Automobiles
Founded in 2003, Tesla is a relatively new company in the automaking industry, but it is one that has completely redefined the way people perceive electric vehicles.
Named after the famous Serbian American physicist Nikola Tesla, the company pays homage to innovation and technology.
In just two decades, Tesla has revolutionized electric vehicle innovation and has made remarkable breakthroughs in harnessing renewable energy.
The company’s exceptional growth over the years is but a testament to its strong foundation. Here is how the world’s most valuable automotive and clean energy company came to be…
Two Silicon Valley Engineers Recognize The Potential Of Electric Cars
Typically, people tend to associate the company, Tesla, with Elon Musk even though the company’s primary co-founders were Martin Eberhard and Marc Tarpenning.
Both Eberhard and Tarpenning were Silicon Valley engineers who were deeply interested in the potential of electric cars becoming a viable alternative to gasoline-driven vehicles.
The idea to start their own company came to them when they realized that the higher fuel efficiency of battery-electric cars went against the trend of low fuel economy in conventional high-performance automobiles.
Thus, Tesla was incorporated in July 2003 as a car manufacturer that was simultaneously also a technology company. Tesla’s vision at the time revolved around the battery, the computer software, and the proprietary motor which Eberhard regarded as the company’s core technologies.
After founding the company, Eberhard and Tarpenning had taken up the position of CEO and CFO respectively.
They eventually recruited Ian Wright as the third member of their team who was charged with the task of securing capital funding for the venture.
Elon Musk Secures Venture Capital For Tesla
It was around January 2004 that the founders of Tesla connected with Elon Musk - co-founder of PayPal. Musk ambitiously came on board with the vision of the company and was instrumental in securing venture capital for the company.
In February 2004, Musk led the funding for Tesla’s Series A by contributing $6.5 million and was made the chairman of Tesla’s board of directors. The first round of investment included Compass Technology Partners and SDL Ventures along with numerous private investors.
Musk also led Tesla’s Series B investment round in February 2005 - raising $13 million and adding Valor Equity Partners to the funding team.
Once again in May 2006, Musk co-led the third round with Technology Partners which amounted to $40 million. The third round had also attracted investments from renowned entrepreneurs like the co-founders of Google and the former President of eBay.
Elon Musk Pioneers High Tech Design
From the time he joined Tesla, Musk maintained an active role in the company as he meticulously oversaw the designing of its first electric car - the Roadster.
Musk was adamant about ensuring an innovative design for the Roadster. Right from the get-go, he insisted on a carbon-fiber-reinforced polymer body for the vehicle and personally led the designing of components such as power electronics modules and headlamps, among other things.
Musk excelled at his task since he was the recipient of the Global Green 2006 product design award for his work on the Tesla Roadster which also earned him the 2007 Index Design award.
The work on the creation of Tesla’s first electric car was well underway and Musk was heavily invested in the future of the company.
Tesla’s Plan To Accelerate The World’s Transition To Clean Energy
As early as August 2006, Musk had developed and unveiled his Master Plan for Tesla.
Musk had always been clear on Tesla’s long-term vision and he confidently made it publicly known what the company stood for.
He revealed his plans in 2006 in a blog entitled “The Secret Tesla Motors Master Plan (just between you and me)”.
Musk elaborated that while the development of the Tesla Roadster was the main focus of interest for the company, its overarching ambition was to usher in an era of a solar electric economy.
He laid a heavy emphasis on putting an end to the mine-and-burn hydrocarbon economy and regarded a solar electric economy as the primary sustainable replacement.
Moreover, while the Roadster was meant to be a high-performance electric sports car, Tesla intended to introduce a diverse range of models in the long term. An affordably priced family car was already part of the company’s long-term agenda.
Essentially, Tesla sought to mass-market electric vehicles - starting with the development of a premium sports car and eventually venturing into mainstream automobiles such as sedans and affordable compacts.
Changes In Top Leadership To Reduce Internal Inefficiencies
As Tesla began to near the completion of its initial product offering, its board of governors decided to make some changes to its leadership.
They asked Eberhard, who had been serving as Tesla’s CEO, to step down from his position in August 2007.
The decision was assumed to come about owing to Eberhard’s inability to properly deal with the project’s finances which delayed the Roadster’s development.
Instead, Eberhard assumed the title of “President of Technology” but did not stick around for long and left the company in January 2008.
Around the same time, Marc Tarpenning, who had been serving as the company’s Vice President of Electrical Engineering, also decided to leave the company.
In November 2007, Tesla brought Ze’ev Drori on board and appointed him as the new CEO and President. Under the new CEO, Tesla conducted a performance review to eliminate the inefficiencies within its workforce.
The review brought to light all the factors that were holding Tesla back from realizing its true potential. Thus, the company was forced to make some tough decisions.
Tough Decisions Help Tesla Avoid A Financial Crisis
By the end of 2007, the rate at which Tesla was spending its initial capital was out of control. Tesla was on the brink of a fatal financial crisis.
Thus, the company decided to fire a number of key personnel - even though they had been involved in the company since its inception - as they did not meet the mark in the performance review.
Tesla also had to cut down its workforce by 10% to address the burn rate.
Despite the tough but timely decisions, the company still needed another round of financing to keep it afloat.
Under such a dire situation, Musk decided to take it upon himself to help Tesla survive. In October 2008, he took over as the company’s CEO with Drori becoming vice-chairman before eventually leaving in December 2008.
Once in control, Musk decided to fire 25% of Tesla employees but he still needed to address the issue of securing more funds.
Thus, in 2008, Musk initiated a new round of investments which also served as debt financing. In the end, he managed to obtain $40 million, thereby avoiding bankruptcy.
Key Takeaway 1: Conviction To A Clear Vision Shapes Companies
Tesla’s initial years in business made it clear how big of an influence effective leadership can have.
Despite not having been at the helm from the start, Musk was a driving force behind Tesla’s establishment. He was the one who had secured the venture capital which made it possible for Tesla to fund the development of the Roadster.
Musk was also the one who had introduced Tesla’s vision to the world. He had imbued purpose and ambition into the company and gave it a unique identity.
From the very beginning, Musk wanted Tesla to stand for more than just an automaking company. Musk’s vision for Tesla saw it as a sustainable solution that could effectively replace traditional hydrocarbon-fueled vehicles.
Moreover, when Tesla’s very survival was uncertain, Musk did not shy away from making tough decisions. Instead of deserting a seemingly sinking ship, he stepped up to the task.
It was because of determined leadership that Tesla not only survived but is currently one of the world’s most valuable companies.
Tesla Dominates As A Clean Energy Automaker
The tough decisions taken by the company yielded positive results as Tesla managed to bring the Roadster into production on time.
Musk obtained the keys to the first car in February 2008 and the company delivered 147 cars to its investors in January 2009 after successfully navigating through a severe financial crisis.
The Roadster Permanently Alters The Way The World Views Electric Cars
With the Roadster going into production, Tesla had achieved the improbable. The Roadster was touted as not just a car but one of the strongest automotive statements on the road.
While being an electric car, the Roadster possessed practical specifications that could meet consumer needs. Electric cars had failed in the past because of a variety of reasons.
The companies could not produce a sufficiently powerful battery that could keep the cars on the road. They also struggled with developing a cost-effective motor that could fit within a consumer vehicle and still provide acceleration for highway speeds.
Tesla had managed to do all that with the Roadster.
The Roadster had achieved 394 km on a single charge during the company tests which was unprecedented for a production electric car.
Moreover, the tests also revealed that the Roadster could accelerate from 0 to 96 km per hour in under four seconds. Its performance was comparable to that of many gasoline-driven sports cars.
What Made Tesla’s Roadster Unique?
The Tesla Roadster was at the intersection of innovative design and cutting-edge technology.
Since the Roadster did not employ an internal-combustion engine, it produced no tailpipe emissions. Tesla was well and truly honoring its commitment to delivering sustainable, clean energy solutions.
Instead, the Roadster’s electric motor was powered by lithium-ion cells which are interestingly often used in laptop/computer batteries. The battery could be recharged from a standard wall outlet.
The body of the Roadster was made from carbon fiber and built on a chassis that was based on Lotus Elise. Tesla and Lotus had signed a production contract in July 2005 for the production of gliders and the two companies agreed to extend their cooperation; thus, Lotus continued to provide advice on design and development.
Tesla’s Strategic Decision To Not Mass Market The Roadster
With its impressive performance and premium design, the Tesla Roadster was not a widely viable consumer product - nor was it marketed as such.
At the time of its release, the Roadster was priced around $100,000 - which naturally meant that a large section of consumers could not afford it.
However, from the very beginning, the company was not looking to create a relatively affordable car that could easily be mass-produced and marketed.
Tesla was a startup company that had already encountered serious financial troubles during its early years. The company only had one technology iteration and no economies of scale, which meant that it could not afford to mass market its first product.
Instead, Tesla went against the flow and prioritized making a powerful statement by introducing a unique car that would be compelling enough to create a demand for electric vehicles.
Therefore, Tesla decided on a premium sports car to be its first product offering. Musk believed that a sports car had the highest chance of effectively competing with its conventional gasoline alternatives.
Tesla Goes Public For Financial Stability
Even after having launched the Roadster, Tesla was still facing financial uncertainty.
By 2009, the company had less than $10 million in cash - which was not sufficient enough to deliver on the cars it had already sold.
A little of the financial burden was alleviated when Daimler AG bought a 10% stake in the company in May of 2009. In June, the United States Department of Energy approved a $465 million loan to Tesla.
Although the company now had enough working capital to survive, it still needed more financial stability for the long term.
In 2010, the company decided that going public would provide it with the financial stability that it needed. Thus, Tesla opened on the NASDAQ at $17 per share and succeeded in raising $226 million in its initial public offering (IPO).
Tesla Unveils The Model S
Tesla had already announced the Model S in 2008 and even previewed it in 2009.
The Model S was the second step to Musk’s Master Plan that he had shared in 2006.
Unlike the Roadster, the Model S was more of a luxury sedan and was also the company’s first foray into the mainstream consumer market instead of catering to a niche of sports car drivers.
In 2012, Tesla’s first electric sedan went into full production. The Model S boasted a power of 670 hp.The car could accelerate from 0 to 96 km per hour in 4.6 seconds and reach a top speed of 209 km per hour. Moreover, it had a range of 482 km and a reduced charging time.
With the Model S, Tesla proved that it could build an electric car on par with the best luxury sedans that run on petrol or gasoline. The Model S retailed for $76,000 which was three-quarters the price of the Tesla Roadster.
The lower price point made the Model S accessible to a wider consumer base and it let Tesla tap into a growing demand for affordable yet environmentally-friendly vehicles. The company sold more than 2400 Model S sedans in the first year of release.
Key Takeaway 2: Exceptional Products Attract Customers
The success of both the Roadster and the Model S was a testament to the wisdom behind Musk’s original plan; of focusing on a compelling product that will create the demand for electric cars.
Both the Roadster and the Model S made a powerful statement and set a new standard for what electric cars could achieve. Tesla was not just creating clean energy automobiles, it was actively enticing consumers away from gasoline-driven vehicles.
Tesla succeeded where other electric car companies failed because it managed to deliver on its promise of creating an electric car that was better, quicker, and more fun to drive than gasoline cars.
The high-performance rating of the Roadster and Model S proved that consumers didn’t need to compromise to drive electric. Thus, it was inevitable that the demand for Tesla products would go up.
Tesla Develops Clean Energy Products For Mass Consumption
By 2012, it was clear that Tesla was ready to break into the mainstream.
This time, the company had more than just new car models on its agenda - after all, Musk had already pointed out how Tesla’s primary ambition was to promote a solar electric economy.
The company now set its sights on producing affordable electric SUVs for mass consumption. Tesla also made plans to expand beyond the automobile market by producing electric appliances that could power homes and offices in a sustainable manner.
Tesla’s Network Of Superchargers Makes Charging More Accessible
Tesla had also started building a network of superchargers in 2012 so that drivers could easily charge Tesla cars at various locations across the city.
The project was first started in California with a total of six free-standing charging stations and soon spread to other cities. Today, there are more than 1000 charging stations across the globe.
The charging outlets were more convenient because they offered faster charging compared to regular power outlets.
Establishing a supercharger network was part of a well-planned strategy to remove the hindrances that come with driving an electric vehicle so that more people could smoothly transition from regular cars to Tesla’s sustainable alternatives.
Tesla Upgrades The Model S
By 2015, Tesla had upgraded its Model S sedans to make them faster and safer on all kinds of terrain.
The company incorporated an all wheel drive (AWD) feature into the new sedans so that the tires would have better grip on roads even on a rainy day.
Tesla also added a dual motor to all new Model S sedans. The dual-motor helped Tesla introduce an ‘Insane’ driving mode so that the new sedans could accelerate from 0 to 96 km per hour in a mere 3.2 seconds.
Tesla Enhances Its Production Capacity To Build More Cars
In 2016, Tesla Motors opened a Gigafactory in Nevada to accelerate the production of batteries for electric appliances including cars.
In-house manufacturing allows Tesla to produce batteries on a massive scale to prevent battery shortages that hold up the production of electric vehicles and other devices.
The company also officially released the new Model X SUVs and AWD vehicles that year.
The Model X and Model 3 Break Into The Mass Consumption Market
The new cars had attractive gullwing-type doors that open upwards. The new cars were built for utility and aimed at consumers who preferred a car for daily driving over luxury vehicles.
Furthermore, the Model X had the best safety features and received a 5-star rating from the National Highway Traffic Safety Administration.
The release of the Model X was part of Elon Musk’s plan to expand Tesla’s product line and going forward the company introduced newer models such as the Model 3 (official production of the Model 3 began in 2017).
It was the first high-volume electric vehicle with an all-glass roof and a 15-inch central touchscreen. The Model 3 retailed at a price of $35,000 and the affordable price made the Model 3 extremely attractive to buyers.
The Model 3 quickly became Tesla’s most widely sold car and helped the company cement its place in the mass consumer market. Indeed, the Model 3 soon became the best-selling electric car of all time leaving behind Nissan’s LEAF.
Tesla Introduces Solar Energy Products
In 2016, Tesla merged with SolarCity- a company that made solar energy generation systems for homes and offices.
The $2.6 billion acquisition helped Tesla expand into the production of solar energy products such as solar panels and batteries.
The following year, Tesla manufactured the Solar Roof - a roof with energy-generating tiles built exclusively for homes. The tiles have a 25-year warranty and can be paired with Tesla’s Solar Inverter to produce energy even on roofs that receive intermittent sunlight.
Tesla also manufactured the Powerwall - a compact home battery that stores energy from solar panels for night-time use or as an emergency back-up.
Other solar products introduced by Tesla included the Powerpack which is a DC energy storage device containing 16 individual battery pods. The Powerpack essentially functions as a microgrid.
It can be used by homes and offices to create an independent power grid that is completely run using solar energy.
In 2017, Tesla Motors renamed itself Tesla Inc. to celebrate its diversification beyond electric cars. The expansion into solar energy helped Tesla unlock a new consumer base who wanted renewable energy systems and products to power their homes and workplaces.
Key Takeaway 3: Expand To Adjacent Categories To Grow
After Tesla had established itself as a respected clean energy automaker, the company shifted its focus to tap into newer consumer bases.
It did so by diversifying its product range and introducing new cars and appliances specifically targeted toward mass appeal. The company capitalized on the demand for a low-cost electric vehicle and introduced the Model 3 at an affordable price of $35,000.
Tesla also recognized the need for expanding beyond the automobile industry and positioning itself as the biggest provider of clean energy solutions. In doing so it was able to offer renewable energy systems and products for mass consumption.
Due to these strategies, Tesla’s market capitalization hit the $52.32 billion mark in 2017 - surpassing both Ford and General Motors.
Tesla Leads Digital Transformation In The Automotive Industry
By 2018, Tesla had achieved numerous milestones in its journey.
It had established itself as a crucial player in the automotive industry and had even managed to tap into mainstream consumer demand by developing products and solutions geared toward the mass appeal.
In 2018, Musk stepped down as Chairman of Tesla’s board of directors - with Robyn Denholm replacing him.
But even with the significant change in its top leadership, the company continued to prosper in the coming years and even ushered in a new wave of digitization.
Tesla’s Over-The-Air Software Updates Enhance User Experience
Tesla is a highly innovative company as it builds its cars by developing software on unique hardware. The process can be comparable to the way Apple develops iPhones.
Due to the unique nature of the cars it produces, the company is capable of providing automatic over-the-air firmware updates that improve their safety, performance, and infotainment capabilities remotely.
These updates to the car’s software functionality remotely improve upon the original mechanical design features such as the look and feel of the touchscreen. These features can be continuously upgraded according to consumer needs and expectations.
Tesla is the only automobile manufacturer in the world that is capable of providing such remote enhancements regularly.
Tesla Offers An Integrated Network of Connectedness
A cornerstone of Tesla’s digital transformation is its network of connected cars.
Tesla cars are leading the digitization of the automobile industry as they are connected to the internet and equipped with features such as cameras, radar, and ultrasonic sensors. These features allow Tesla cars to offer services such as streaming services, web browsing capabilities, and even sentry mode (allows owners to monitor their parked car).
Digital connectivity has allowed the company to optimize value creation as it has led to the creation of an intelligent data platform and connected ecosystem.
Tesla uses the data to study customer driving experience and has proved to be instrumental in aiding the development of its autonomous driving capability.
The connectivity of Tesla cars means that the system is essentially learning and improving as it is being driven.
Tesla Implements Smart Process Across Its Operations
Tesla has also incorporated smart processes throughout its organizational structure in order to enhance customer connectivity.
The company has simplified its purchasing process to such an extent that customers need only go online, pick a model, select their features, place the deposit, and schedule the pickup.
Whereas traditional automobiles have been sold through dealerships which inserts a middle-man between the company and the customer.
Compared to conventional means of selling cars, Tesla’s process is not only significantly more convenient and accessible but it allows the customer to deal with the company directly through its website and company-owned stores.
Tesla introduced an unprecedented level of customization and personalization to the process of buying a car which has enabled it to connect with its customers on a deeper level.
Tesla Sets Its Ambitions For Digital Technology Application
In 2021, Elon Musk reiterated Tesla’s commitment to pursuing further digitalization and investing in R&D.
Musk also highlighted that the ultimate application of digital technology would be the integration of Artificial Intelligence.
The ambitious proclamations were intimately tied with Tesla’s continuing work on developing a fully self-driving car. Musk believes that this is possible with practical, vision-based AI and that vision-neutral nets can lead to the development of autonomous driving.
Already the data collected by Tesla car sensors enable it to design a map that is ten times more accurate than that of its competitors.
Moreover, Tesla’s machine learning algorithms are relaying information through sensors from both inside and outside of the car.
These systems are sophisticated enough to identify different types of vehicles, driver alertness, pedestrians, traffic lights, etc., and make split-second decisions in the form of adjusting the speed and direction of the vehicle.
Tesla Continues To Make An Impact Today
Today Tesla is a force to be reckoned with in the automobile industry, becoming bigger and better.
In 2019, it had unveiled its plans for the Cybertruck - an electric six-seater pickup truck - which had already gotten 250,000 orders before its official launch.
In 2020, despite the general upheaval caused by the pandemic, Tesla stocks surged (reaching $900) due to its strong fiscal quarter and analyst upgrades.
In 2021, the company decided not to launch a new model and instead focused on scaling up output. However, the company has more competition incoming from new models like Lyriq - Cadillac’s first electric vehicle and the Nissan Ariya.
Nevertheless, Tesla has a headstart on many of these traditional automotive companies that are just venturing into EVs.
Key Takeaway 4: Vertical Integration Shapes Categories
A huge reason why Tesla was able to deliver high-quality products to its customers and why it still continues to achieve breakthroughs in digital transformation is because of its vertically integrated business model.
Tesla owns most of its supply chain therefore the production of its batteries, car bodies, and even programming is done in-house. This self-sufficient model provides the company with the stability to safely navigate uncertain times when its competitors’ supply chains break down.
The in-house production also ensures that the components required by the company are not only on par in terms of their quality but also compatible with Tesla’s overall digital landscape.
By owning most of its supply chain, Tesla enjoys greater control over its production process which translates well into the finished product.
Why Is Tesla So Successful?
Tesla has grown over the years from being a financially struggling yet ambitious startup to a pioneer of clean energy solutions.
Tesla products constitute a league of their own as they mass market sustainable and clean energy solutions for mass consumption.
The company’s business model built around a three-pronged strategy for selling, servicing, and charging its electric vehicles has paid off remarkably well. Tesla is regarded as one of the world’s most valuable companies.
Tesla has managed to carve out a unique identity for itself which sets it apart as a leading innovator and pioneer of clean energy systems and products.
In this day and age, owning a Tesla product is a powerful statement and one in which consumers actively take pride in.
Although the macroeconomic impacts of the COVID-19 pandemic might hinder the company’s growth trajectory in the future, presently, Tesla’s future prospects seem to be on the right track with the company leading digital transformation in the industry.
Tesla’s Growth By Numbers
Strategic Takeaways From Tesla’s Journey
Tesla’s exceptional growth journey holds valuable insights about navigating a sophisticated clean energy and technology company.
The main strategic takeaways are as follows:
1. Have A Clear Vision For The Future Of The Company
One of the secrets to Tesla’s success was that its top leadership was clear on the company’s future and purpose.
Even before the Roadster had gone into production Musk had revealed that Tesla was going to change the landscape of electric vehicles forever. Due to this determination, he was able to devise the most appropriate path toward the end goal.
Tesla first established itself in the industry by targeting a niche consumer base (sports car drivers) and then slowly worked towards introducing clean energy products and solutions for mass consumption.
By sticking to its core principle - that of eventually developing into a diverse clean energy solutions provider - the company made steady progress and eventually climbed to the position it is in today.
2. Don’t Just Sell Products - Sell Innovation & New Technologies
Tesla is set to dominate the traditional automaking industry.
People and businesses all around the world are experiencing increasing digitization which means that companies that are able to adapt to this changing reality stand a better chance of surviving in the long run.
Tesla is ideally positioned to capitalize on the changing market landscape as it builds vehicles by developing software on unique hardware which enables the company to enhance its products’ functionality every few weeks. Moreover, Tesla offers unique features such as the auto-pilot advanced driver assistance system, the network of superchargers, and the ability to virtually control the car through its app.
Thus, Tesla is not just selling cars but leveraging newer technologies to pave the way for the future of automobiles.
3. Explore The True Potential Of The Business Through Diverse Means
Tesla was able to grow exponentially because it did not restrict itself to automaking but chose to expand the company’s scope to include various clean energy systems and products.
Despite making a name for itself in the automotive industry, Tesla followed its ambition of ushering in an era of sustainable energy products. Due to this willingness to explore diverse initiatives, the company was able to develop innovative new technologies such as the SolarRoof and Powerpack.
Thus, Tesla was able to diversify as a business and significantly expand its consumer base which in turn increased its sales and profitability.
4. Place Your Marketing Strategy Within The Larger Context
Tesla has gained momentum and popularity in recent years because it has attached itself with the predominant market trend of the present day - i.e., promoting clean energy to reduce global warming.
Global warming is one of the biggest existential threats to people all over the world. Increasingly consumers are shifting towards more sustainable modes of life.
Within this context, Tesla can effectively market its products as they create no pollution, reduce dependence on burning fossil fuels, and is overall environmentally friendly.
As people’s lifestyle choices continue to shift, Tesla is ideally positioned to capitalize on the demand for green technologies.
Over the course of just 19 years, Tesla has cemented its name not just in the automotive industry but as a pioneer of clean energy systems and solutions. Its commitment to developing products that appeal to the masses while also being powered by highly sophisticated systems of clean energy has made it one of the world’s most valuable companies. Tesla has revolutionized the automobile industry with its range of luxury and affordable electric cars whose performance is on par with many gasoline-driven vehicles. It has provided numerous other clean energy solutions to a growing base of consumers. As the world adapts to more advanced digital technologies, Tesla is ideally positioned to capitalize on future opportunities.