Published on December 26th, 2013 | by Zachary Shahan


Co-Founder Of Tesla About Starting Tesla (VIDEO)

December 26th, 2013 by  

Here’s a video of one of the co-founders of Tesla Motors, Marc Tarpenning, talking about the early beginnings of electric car superstar Tesla Motors and its eventual development up to mid-2013. (The other co-founder was Martin Eberhard.) Below the video are quotes or stats I thought were especially worth highlighting. A humongous thanks to a reader for passing this along to me.

  • 500 million cars in 1996. Today, about 1 billion cars. Projection is that we will hit 2 billion from growth in the developing world.
  • Oil at that time was at $90/barrel. Now costing $60-70/barrel to make it. “The $20/barrel stuff we were using only in 2002 … there’s almost no production left that the production cost is that cheap.”
  • “The VCs were particularly interested in hydrogen fuel cells at the time. I have a whole presentation of why that’s really a nutty idea.”
  • “We did this thing called well-to-wheel energy efficiency…. If you look, a pretty good car is 26 MPG. And we did this for every conceivable fuel source, and we have a whole white paper on that. What that translates to [for a gas car] is about 1700 watt-hours per mile. A really nice gasoline car you can get down to about 1000 watt-hours per mile…. Electric cars are very, very efficient once the energy is on board. So, it’s about 250 watt-hours on board. But you have to make the electricity, you have to transport it, and stuff… Well, the worst possible case is a legacy coal plant. They just suck in all ways…. Their energy efficiency is terrible. It’s only 29% [of the energy in the coal]…. If you power an electric car with a legacy coal plant — there’s no place you could really do that, but if you did that — it would still be better than a really good gasoline-powered car. And if you used a state-of-the-art coal plant… that drops the watt-hours per mile down. And if you use natural gas… you get down to half a kilowatt-hour per mile.”
  • “New technology is frequently quite expensive, and it comes in at the top. Cell phones used to be $2,000 apiece…. And you’ve got to be able to get that market share and get the volumes up to push it down. So, it’s weird to think that electric cars would start at the cheapest possible thing.”
  • “It turns out that Priuses were selling really well in 2003. Now, Lexus… they were a little shocked. The Prius was a little bit of a publicity stunt. They brought it out to California for a variety of political reasons. They didn’t expect it to sell very well. And it sold pretty well…. But what freaked them out is that it cannibalized their Lexus sales. People were trading in their Lexuses and getting a Prius, which was built on their absolute cheapest possible platform that Toyota made at the time. So, again, Toyota thought that Priuses would only be for people that wanted to save money on gas. And instead, it was for people who had discretionary money that wanted to make a statement — you know, cars are all about statements…. Cars are all about making a statement. These people bought Priuses to make a statement to do the right thing — for whatever reason they wanted to do the right thing, they were doing the right thing. So, near where I live, in Palo Alto, it was a cliche: I mean, every driver had a Prius and a Porsche.” [I through this extended quote in here as a highlight because this is still a very important point for auto manufacturers who are inching their way into the EV market… but not from the top down like Tesla is doing.]
  • “This is the plan. Every iteration is going to be nice but a little bit cheaper. [The Model X] is still gonna be kind of an expensive sedan, because the technology, the fundamental electric technology, is pretty expensive. Not the motors and the power electronics, but the batteries, and batteries get cheaper at about 7% a year, on its natural kind of glide slope. It’s sort of a really slow Moore’s law…. Or if you keep their price the same, their capacity increases about 7% a year.”
  • “And they’re super fun to drive.” [This, imho, is what’s really going to blow up the electric car market. This is why you can compare the electric revolution to the smartphone revolution.]
  • This quote from a guy they were initially trying to get as an investor, who had just driven away in his Porsche after test driving a Tesla engineering prototype, and angrily called a few minutes later, is classic: “What the hell did you do to my Porsche? I just spent a quarter of a million dollars on this thing, and it sucks now!

The whole talk is fascinating, one of the most fascinating I’ve ever watch. So, I highly recommend watching the whole thing. There’s also some super interesting commentary about the culture of the larger auto companies and how that relates to their (super slow) transition to EVs is concerned (that part starts at around 50 minutes in). From that part, another interesting thing to note is that the budget for electric car development used to largely come out of the PR budgets(!) or the advanced propulsion budgets (which is apparently not a very serious section of these companies) — up to about a year and a half ago — but it is now mostly coming out of drive-train budgets — which indicates that they’re really starting to take this transition seriously. But the slow, entrenched business culture when it comes to this transformation really comes from a specific place, and is stronger than Marc had thought when he was at Tesla (before he went and advised these companies). In particular, car companies have gotten to the point where they outsource almost everything… but not the engines. So, engines are a critical part of the competitive advantage of their entire industry. They are also a central element in the power structures within these companies…. That all creates quite the wall when it comes to a transition to EVs, and it looks like it’s leaving a large door open for Tesla.

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About the Author

is tryin' to help society help itself (and other species) with the power of the typed word. He spends most of his time here on CleanTechnica as its director and chief editor, but he's also the president of Important Media and the director/founder of EV Obsession, Solar Love, and Bikocity. Zach is recognized globally as a solar energy, electric car, and energy storage expert. Zach has long-term investments in TSLA, FSLR, SPWR, SEDG, & ABB — after years of covering solar and EVs, he simply has a lot of faith in these particular companies and feels like they are good cleantech companies to invest in.

  • Wayne Williamson

    Very interesting video. Long but worth watching.

  • “So, it’s weird to think that electric cars would start at the cheapest possible thing.”

    In a sense that is very true. Psychologically I guess that would have been much better. Instead of pushing an ‘econobox’ (the LEAF is rather nice though, it has all the bells and whistles you’d ever need) onto the market into the hands of a minority of eco-conscious consumers, they could have started with a large luxury sedan at perhaps double the price of a LEAF.

    So suppose Nissan had started with a luxury sedan. They should have made it really luxurious and fast, so every car idiot would go: “Oh I want one” (like now with the Model S). That would have positioned EV’s in general as a desirable object instead of an ecologically responsible “you know you have to eat your vegetables, they’re good for your health” type of product. People would be eagerly awaiting the day that electric drivetrains trickled down the hierarchy into the more affordable models. Instead it has given petrolheaded idiot journalists with an agenda an opportunity to implant the idea that EV’s are dull, overpriced, have short range and long charge times in the public consciousness. Luckily, Tesla is doing a mighty fine job undoing that damage.

    For that luxury LEAF that I was alluding to: to appeal to the general consumer in that price class, you really have to offer something that works. No ifs, no buts. It should have tremendous range and you should be able to take it anywhere and recharge it fast etc.

    To start off, that means it should have at least 3x the range of the LEAF. But with the Nissan level of battery technology, that would mean a battery weighing a ton (literally). You can not hope to build anything compelling with that kind of dead weight on board. Perhaps 1.5x the current LEAF battery, giving a range of 150 km or so. But premium buyers will not shell out big $$$ for a vehicle of limited use. They’ll want something that works. So their low-tech battery actually closed the door on that route into the market and forced them to start at the cheap end and hope for the “I will eat my vegetables because I know they’re good for me” customers to give them enough sales to fund a next, slightly improved generation of EV’s. And hoping to expand market share steadily but slowly.

    Another key aspect is that you must be able take your car beyond the city limits, anywhere. Nissan is thinking like a dinosaur car company: we provide the wheels, someone else provides the energy. The clear separation between car manufacturers and oil companies has been the status quo in the car world for over a century. That’s why Nissan would have never embarked upon the agressive rollout of a Supercharger network the way Tesla is doing. They simply do not think of themselves as a company that provides a ‘personal transportations solution’ to their customers. They see themselves as a car manufacturer.

    Lastly there is the short recharge time. There you can find another reason why Nissan would never build a Supercharger network, also the result of dinosaur thinking: “we need an industry standard”. Standards are of vital importance, but they come about very, very, very slowly. And when they do, they’re always some lame duck compromise (did I hear anyone saying “CCS”?). CHAdeMO is capped at 60 kW, you can not recharge a large battery in a sufficiently short time with that kind of power. You really need twice as much. And so Tesla ended up thinking: “if the standards are no good, then we’ll make our own”. I predict they will license their Supercharger technology to others and it will become the standard.

    Like Tarpenning said: the main problem for large car manufacturers like Nissan is they are slow to change. They are not funded by VC’s (like Tesla), but by large, institutional investors that are deeply risk averse. They are not just unable to shake up the business, their funders simply won’t allow them. Going slowly and steadily, making small steps. No risks.

    But I am nonetheless very happy that Renault-Nissan decided to go this route. I enjoy the heck out of my Zoe. Electric cars are simply better.

    • Excellent addendum. Thanks. 😀 Love those first couple of paragraphs. The rest also very interesting, but I sort of thought that Marc was referring to companies such as GM, Honda, Ford, VW, etc, who haven’t recognized the transition is coming, like Nissan/Renault has at least done. But, yes, Tesla has obviously taken a different route and is not a fan of the way Nissan/Renault have approached the transition.

    • Bob_Wallace

      I think Nissan made a wise choice. It wouldn’t be reasonable to introduce EVs for all shares of the market. Nissan went for a high volume share, the average commuter.

      What Nissan didn’t predict, and what I think has kept their cost high, was the Great Recession. The new car market got trashed and people became much more conservative in their purchases. If new car sales had held up Nissan would probably now be manufacturing in volumes that would make their EVs less than $20k without subsidies. And most multi-car households would be customers.

      Tesla went for a different niche, a much smaller one but with a higher per car profit possibility. I think both approaches will pay off in the long run.

      • Tesla went for a large share of a small segment, while Nissan went for a small share of a large segment.

        The end result is that Nissan is selling more LEAFs in the US than Tesla is selling Model S’s, but by a surprisingly small margin. How much the financial meltdown is to blame for the lower than expected sales numbers, is speculation. It did play a role, but how big was it?

        Whether or not the decision of Renault-Nissan was wise, I can’t tell. Most of their direct competitors (eg GM, BMW, VW) do the same, which seems to validate Nissan’s strategy. And as I said, Nissan didn’t have a choice anyway because of the battery technology they chose to use. So it is merely a hypothetical question that intrigues me. Did Nissan, in their quest to bring EV’s to the mass market, do exactly the thing that has slowed down widespread adoption in the medium term?

        Long term, there is no question about how this will end: you can suppress superior technology for some time, but not forever.

        • Bob_Wallace

          My guess is that Nissan was damaged a lot more by the recession than was Tesla.

          New car sales really fell and people, in general, became more risk adverse. Higher income people were hurt less and recovered quicker. (The stock market is going great while many people are dealing with lower/stagnant incomes.)

          I think Nissan’s biggest failure was to not make a better looking car. I just don’t think it appeals to the US market. The Mini sold a lot of cars on nothing but appearance.

  • Thanks for sharing this video, Zachary. Very interesting.

    Small typo, however: “we were using only in 2020”. mmmm, using past tense while 2020 is still ahead of us 😉 He said: “we were using only in 2002”.

    • haha, thanks for that. 😀

      And, yes, this is such a great presentation. So happy one of our readers passed it along to me. (I think it was the guy who filmed it, but not sure now.) 😀

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