Advice For EV Startups From Tesla Co-Founders JB Straubel & Elon Musk
Tesla co-founders JB Straubel and Elon Musk shared some sage advice for other EV startups this week. The advice itself was an answer to a question posed by Peter Campbell, who interviewed both co-founders at Financial Time’s Future of the Car summit. Campbell pointed out that there were a lot of other EV startups all wanting to do the same thing Tesla has done.
“You blazed the trail 10 years before the industry really caught up with you. You had the advantage of having no one else playing in the same area, but the disadvantage was that all the time you were trying to break through virgin snow. Was it more difficult to do it ten years ago than you think it is today and if there’s one piece of advice that you could offer to the various EV startups, what would it be?”
Tesla co-founder and former CTO JB Straubel noted that people seem to forget about the first 8 to 10 years of Tesla.
“They kind of see success and then they’re like, ‘Oh, that looks good. Let’s do that. Let’s copy that.’ But it was brutal confusion and tons of mistakes and a lot of money invested for a lot of years.”
Straubel added that he personally thought that it would be a lot harder for EV startups to compete today because they need to identify the niche that makes sense to have a new startup EV company relative to all the products from other OEMs or Tesla.
“What are they going to do better than Tesla. Tesla didn’t exist. There was no Tesla in the world 17 years ago, so that was sort of the imperative and gave a runway to make a lot of mistakes and still make it work.”
Tesla co-founder and CEO Elon Musk added he didn’t think he or JB would have wanted to go through the extreme pain of creating an electric car company if the traditional automakers were going to make EVs — which they’re now doing in earnest.
“An important thing for the world that needs to happen to move to a sustainable technology future […] but if at the time we created Tesla, there were no startups doing electric cars and the big car companies had really no electric car programs going, and the few tiny, tiny electric car programs they had going they were shutting down. So, therefore, unless we tried to create an electric car, there was not one going to be created.
“It’s not from the standpoint of thinking, ‘Hey, here’s a super lucrative idea. Let’s make — start a car company.’ The history of car company startups is horrific. They’ve almost all gone bankrupt. It’s a big graveyard of car startups that all died. You’ve only heard a tiny number of them, sort of the Tuckers and Deloreans of the world, but there are hundreds of others that people didn’t hear about.
“So, at this point in the United States, the only two American car companies that have not gone bankrupt are Ford and Tesla. And Tesla almost went bankrupt so many times I lost count. Basically, it’s a world of hurt. To start a car company is mega pain. It is not easy money; is the furthest thing from easy money you could possibly imagine.
“And what I see with some of these new car companies is that they are jumping in at the deep end and trying to create a high volume vehicle when they’ve never made a vehicle before. This is, you know, not practicing your athletic sport and then going to the Olympics. You’re not going to win. This is crazy.
“You really need to start out small, make your mistakes at a small scale, make sure you’ve got a lot of reserve capital, and gradually build up from the dumb things you do in the beginning and be less dumb over time. Otherwise what will happen is vast losses of money. The car industry is very competitive. It’s the opposite of a natural monopoly.
“You have sort of natural monopolies in things like social media or say Google Search. Car companies are naturally not monopolies. They’re hyper-competitive and they’re used to being hyper-competitive throughout the world. They have entrenched customers, dealers, services, factories, and existing expertise. These are veteran armies like in fortresses.”
To Recap The Advice
Although the two co-founders didn’t sit down and lay out a detailed to-do list for EV startups, the advice they shared is valuable and I want to go back and add to what JB Straubel and Elon Musk said.
Advice 1: Niche
For the past 10 or so years, as a jewelry artisan trying to market my art, I’ve always been told by friends in marketing that you have to establish your niche. This means that you find the place for your product to solve a specific problem for potential customers. Now, jewelry and cars are two very different markets. Jewelry is over-saturated and can be created by one person yet anyone can do well in it.
The automotive industry is entirely different, and Tesla is a unique case study for any marketing class since it was able to identify a problem in this market and meet a specific goal: creating an EV and bringing it to production for the masses. The problem Tesla is solving isn’t the lack of EVs, but one that is much larger.
Advice 2: Solve A Problem
That problem is the heating of the planet caused by the greenhouse gas emissions from tailpipes. Tesla solves this problem by making EVs that don’t need gasoline or diesel. This eliminates tailpipe emissions.
Advice 3: Be Prepared For Pain
The next piece of advice is from Elon Musk, who spoke of pain. One may think that he could be exaggerating, but no, a great deal of work, time, effort, and money is needed. Elon is basically telling anyone willing to listen that if you want to do this, be prepared to go through emotional hell.
As JB said, people now tend to forget the first 8 to 10 years of Tesla. All they see are the shiny EVs on the roads, the headlines, and Elon Musk. The average person probably doesn’t know about all of the hardships Elon Musk and the Tesla team faced in order for Tesla to be where it is now. If you’re going to start an EV company, you need to be prepared for the work, which, as Elon said, is painful.
Advice 4. Know Your Market
Elon spoke of the hyper-competitiveness of the industry. Anyone starting any type of business needs to know their market. And they need to be able to compete as well as be prepared for any challenges presented by the competition.
In Tesla’s case, the dealership associations make it hard for customers to buy a Tesla in some states. Tesla’s workaround is selling online, and the customer has to either pick up their vehicle in another state or arrange for delivery via a third party.
In conclusion, I think this is great advice for anyone trying to start up something, whether it’s an auto company or even a small jewelry business. The most important thing is to never give up on your dreams and goals once you start. And to believe in yourself no matter how challenging things get.
You can watch the full FT interview with JB Straubel and Elon Musk here.
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