Tesla Remains the Gold Standard in a Growing EV Sector

By: June 16, 2022

How Did Tesla Come to Be?

Would you be surprised to know that although Elon Musk was a founder of Tesla (NASDAQ: TSLA), he wasn’t there from day one. Rather, he was the first investor. The original idea for the company came from Martin Eberhard. In fact, Eberhard may have been the first person to put lithium-ion batteries in an electric car. However, it’s well documented that Elon Musk had a special passion for electric vehicles going back to at least college.

A very young Elon Musk (right) with Martin Eberhard in 2008. (Source: flickr.com)

In the late 1990s in Silicon Valley, Martin Eberhard, along with friend Marc Tarpenning, founded NuvoMedia with the goal of producing the world’s first eBook, the Rocket eBook. One of the most challenging aspects of the development was finding batteries that were small enough for easy reading. They found the newly developed lithium-ion batteries ideal for the task.

Sometime after NuvoMedia was successfully sold, Martin Eberhard learned of a very small EV built by a man named Alan Cocconi. The car was named the Tzero. Back then, Cocconi was well known among techies for his company, AC Propulsion, that converted Honda Civics to EVs.

Eberhard remembered what he had learned about lithium-ion batteries at NuvoMedia, and he saw an opportunity to improve the Tzero. He commissioned building a prototype with the higher power density lithium-ion batteries, replacing the big heavy lead acid batteries. In doing so, it was possible to reduce the mass of the car’s batteries by several hundred pounds while more than tripling the range.

Alan Cocconi with the electric Tzero, the beginning of the Tesla bloodline. (Source: cleantechnica.com)

Convinced by the merits of the vehicle, Eberhard launched Tesla Motors to produce something similar to the Tzero. As part of his efforts to raise funding for the fledgling car company, Eberhard would take potential investors for rides in one of the lithium ion battery equipped Tzeros. He would demonstrate quite convincingly that the acceleration achievable with the electric powertrain and lightweight batteries was so fierce, that a passenger wouldn’t be able to touch the dashboard during full throttle acceleration.

Enter Elon Musk

One of the lucky passengers was Elon Musk. Musk was so impressed he decided to take some of his recent gains from the sale of PayPal (NASDAQ:PYPL) and invest in Tesla. In fact, he funded most of the $7.5 million Series A funding of Tesla out of his own pocket. The year was 2004.

The first Tesla, the Roadster, was a production realization of the Tzero. However, it was actually based on the Lotus Elise. Nearly as diminutive as the original Tzero, the Elise provided the perfect platform for the Roadster. It was light, compact, properly sorted from a handling perspective, readily adaptable to an electric powertrain, and most importantly, reproducible in volumes large enough to support both Lotus and Tesla.

The Roadster proved to be a success, selling approximately 2,450 cars between 2008 and 2012, but more importantly, it helped provide the necessary confidence for the investment community, and even the US government, to supply the funds necessary for Elon’s grander vision, the Model S.

Synthesis of the Tesla Roadster and beyond 

Be sure, getting to the launch of the Model S was no trivial task, either from a technical standpoint or from a financial one. Regarding the latter, it took five rounds of funding, the sale of an equity stake to both Daimler AG and Toyota (NYSE: TM), a loan of $465 million from the US government, and finally, an initial public offering in June 2010. There were several brushes with bankruptcy in between, but in June 2012, the Model S was released to rave reviews.

Martin Eberhard left as CEO in 2007. Elon Musk took on the CEO role shortly thereafter, and the rest is history. The Model S led to the Model X, then Model 3, and then finally the Model Y. Soon, there will be the Cyber Truck and maybe even another Roadster.

The last time we reported on the car division of Tesla was in February 2021. At that time, Tesla was operating four major plants; the Tesla Fremont Plant in California (Model S and Model 3), the Gigafactory 1 in Nevada (battery packs), the Gigafactory 2 in Buffalo, New York (superchargers), and the Gigafactory 3 in Shanghai, China.

Increases and Changes for TSLA

A lot has changed at TSLA over one short year. First, upon the news that Hertz placed a purchase order for 100,000 cars, Tesla’s stock price made a step function increase in price. TSLA became the sixth stock in the US to have a market capitalization greater than $1 trillion. Then in December 2021, Tesla decided to protest California’s strict COVID 19 mandates by moving its headquarters to Austin, Texas.

In March 2022, Giga Berlin opened in Germany. It’s also known as Gigafactory 4, and Tesla will use it to build Model Ys and Model 3s for the EU market. On the day the plant opened, Elon Musk personally delivered cars to new customers at the factory.

Tesla is also in the process of launching Gigafactory 5 just outside of Austin. It will use this plant to build the Cyber Truck, the Tesla Semi Truck, the Model Y, and additional Model 3s. Gigafactory 5 started initial production in April 2022. In a kick-off celebration known as the Cyber Rodeo, the factory delivered its first Model 3s and Model Ys.

Tesla has announced plans to roll out more Gigafactories in the US, as well as future plants in China.

Stock Value Outlook

Given all this activity, the current level of Tesla’s stock is only of concern for the very short term. After topping the $1 trillion market cap mark and making Elon Musk the richest man in the world, TSLA stock has been hit along with the rest of the market.

Today, its market cap is down to $670 billion, but that’s still impressive given it still has yet to really ramp up production to global automaker levels.

As you can see from the graph below, even its current swoon hasn’t taken much shine off the finish. This EV pioneer still remains the gold standard and has the money behind it to continue its dominance.

In the long term, TSLA will continue to provide incredible growth and value. Therefore, don’t be concerned about the stock price if you own Tesla stock already. In fact, whether you own stock or not, it’s a good time to purchase your first shares or buy more.


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