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Ludicrous: The Unvarnished Story of Tesla Motors

Ludicrous: The Unvarnished Story of Tesla Motors

by Edward Niedermeyer
Ludicrous: The Unvarnished Story of Tesla Motors

Ludicrous: The Unvarnished Story of Tesla Motors

by Edward Niedermeyer

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Overview

Tesla is the most exciting car company in a generation . . . but can it live up to the hype?

Tesla Motors and CEO Elon Musk have become household names, shaking up the staid auto industry by creating a set of innovative electric vehicles that have wowed the marketplace and defied conventional wisdom. The company's market valuation now rivals that of long-established automakers, and, to many industry observers, Tesla is defining the future of the industry.

But behind the hype, Tesla has some serious deficiencies that raise questions about its sky-high valuation, and even its ultimate survival.

Tesla's commitment to innovation has led it to reject the careful, zero-defects approach of other car manufacturers, even as it struggles to mass-produce cars reliably, and with minimal defects. While most car manufacturers struggle with the razor-thin margins of mid-priced sedans, Tesla's strategy requires that the Model 3 finally bring it to profitability, even as the high-priced Roadster and Model S both lost money. And Tesla's approach of continually focusing on the future, even as commitments and deadlines are repeatedly missed, may ultimately test the patience of all but its most devoted fans.

In Ludicrous, journalist and auto industry analyst Edward Niedermeyer lays bare the disconnect between the popular perception of Tesla and the day-to-day realities of the company—and the cars it produces. Blending original reporting and never-before-published insider accounts with savvy industry analysis, Niedermeyer tells the story of Tesla as it's never been told before—with clear eyes, objectivity and insight.


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Product Details

ISBN-13: 9781950665655
Publisher: BenBella Books, Inc.
Publication date: 01/12/2021
Pages: 275
Sales rank: 146,743
Product dimensions: 8.90(w) x 6.00(h) x 0.90(d)

About the Author

Edward Niedermeyer began covering the auto industry in 2008, quickly establishing himself as a leading chronicler and critic of the struggles and bailouts of GM and Chrysler. More recently he has focused on the collision between the auto industry and high tech sector, and the reinvention of the automobile. His work on automotive topics has been featured in the New York TimesWall Street JournalBloombergViewThe Daily BeastThe Verge, and elsewhere. He is currently the cohost of The Autonocast, a podcast about the future of mobility, and is the Silicon Valley reporter for Automotive News. He lives in Portland, Oregon.

Read an Excerpt

CHAPTER 1

THE SURVIVOR

This isn't a Silicon Valley versus Detroit story. Elon Musk, January 15, 2009

"You did it!"

The words rang out over the roar of the crowd, inspiring fresh waves of jubilation.

"Whooo!"

Elon Musk hesitated, letting out a brief laugh as he took in the wild cheers. Arms spread, the CEO of Tesla Motors acknowledged the crowd with a bob of his head. "So," he said, trying to return to his prepared remarks before being cut off by the same ecstatic outburst, shouted even louder this time.

"YOU DID IT!"

"Thank you," Musk responded, breaking into a chuckle. It was the first sentence he had been able to form since announcing that Tesla had received 115,000 preorders for the Model 3 he had revealed just seconds before. "That's a lot, yeah," he said, grinning. The crowd roared again as Musk beamed down at them from the stage.

As far as most observers were concerned, Musk had done it. All day, images of fans lining up at Tesla stores around the world to preorder a car they hadn't even seen yet flooded the internet. By the end of the next day, the number of preorders would double to more than 230,000, and headlines would hail the tidal wave of demand as "the auto industry's first iPhone moment." Within a week, Tesla would announce that it had received 325,000 preorders for Model 3, representing more than $10 billion in potential sales, and its reservation count would eventually top a staggering 450,000. Across a century of automotive history, there had never been anything quite like Model 3 mania.

Of course, there had also never been an automaker quite like Tesla. At a time when cars seemed to be slouching toward technological maturity and commodification, Musk had positioned his electric automaker as the vanguard of an automotive revolution and reignited the long-dormant public passion for cars. Each new model Tesla introduced was more than a mere improvement on the last: it was a speedy, sexy step toward a cleaner, safer, better future.

Now, with the $35,000 Model 3 poised to deliver on Musk's decade-old promise to make a truly affordable electric car, a piece of that future was within reach of anyone who could afford a $1,000 refundable deposit. Surrounded by gleaming Model 3 prototypes and awash in the crowd's admiration, Musk had never looked more like the smiling prophet of a seismic shift in the $4 trillion car business.

The belief that Tesla had already reached the end of its heroic journey — that Musk had truly "done it" — was understandable. Thirteen years earlier, when Tesla was first incorporated, even its founders could hardly have believed that their startup would some day begin taking deposits for an affordable electric car. The company had repeatedly overcome extraordinary odds, and it had never seemed so close to fulfilling its revolutionary promise.

But even as the shouts of triumph echoed into silence and the crowd dispersed to await delivery of the Model 3, an awkward question remained: Had Tesla really "done it"? Years of hard work, huge challenges, and massive missteps still lay between Tesla and its dream of an affordable, mass-produced Model 3. For all the obstacles Tesla had already surmounted, it was stepping into the unknown to an extent that even its visionary CEO didn't yet fully appreciate.

Today, after years of relentless struggle, the Model 3 exists, and at the time of this writing, it is being produced at a rate of more than five thousand units per week. Yet it's taken about $4.5 billion in fresh capital (enough for at least two new factories) to reach that production volume, which is only slightly over half the 500,000 units per year rate Tesla said it would hit by the end of 2018. By the first quarter of 2019, demand for all but the cheapest versions had been exhausted in North America, which is Tesla's largest market, and deliveries were down by more than thirty percent from the previous quarter.

The company has always been hugely successful at tapping into the public's aspirations, yet challenges have dogged it every step of the way and kept it from delivering on its most important promises. For more than fifteen years Tesla's expertly crafted popular perception kept it afloat in the face of setbacks, but with the Model 3 it has reached the point where the gritty realities of the car business can no longer be ignored. There's a disconnect between the perception that Tesla has effectively achieved its mission of creating a truly affordable mass-market electric car and the reality of the company today. This disjuncture has been a defining characteristic of the company nearly from day one.

* * *

When I started writing about the auto industry in 2008, the first thing that struck me was that this was a business that nobody should want to be in. Companies have to spend billions of dollars to develop new products, knowing that they'll be released into market conditions that are four years away or more; then, they must sell them into a brutally competitive marketplace that operates on a massive, globe-spanning scale. It's arguably one of the hardest ways to make a buck. When things go well, an automaker might generate reasonable (but hardly exciting) returns. But when things go badly, the losses quickly become staggering — as America's automakers were just then in the process of proving.

To survive this meat grinder, existing players were consolidating in order to spread their massive capital expenditures over as many cars as possible. Sergio Marchionne, who masterminded one of the biggest consolidations of the period by merging a bailed-out Chrysler with the Italian automaker Fiat, loudly pronounced that an automaker needed to produce on the order of five million units per year just to survive over the long term. The top three automakers, GM, Toyota, and Volkswagen, each sell a little under twice that number of vehicles most years.

This industry of leviathans was suffering billions of dollars in losses. Yet despite that, the period around 2008 also witnessed a bizarre phenomenon: new startup companies trying to break into the punishing business of making and selling cars. Soaring gas prices had caught the truck- and SUV-dependent Detroit automakers flat-footed and were inspiring a new generation of entrepreneurs to launch fledgling "green car" companies for the coming era of "Peak Oil." Whether or not these new players fully understood how tough the car business could be, their boundless optimism and often wildly experimental ideas presented a sharp contrast to the homogenized, commodified mainline auto industry.

Though the explosion of new ideas and companies in the automotive world was a hint at the "mobility technology" revolution we see unfolding today, it was still firmly anchored in the privately owned car paradigm (with the exception of car-sharing pioneers like Zipcar). Some of these new green car startups, like ZAP, Miles, and Coda, imported cheap electric vehicles from China. Some, like Aptera, designed aerodynamic and hyperefficient vehicles that looked like they rolled out of an episode of The Jetsons. Companies like Brammo and Zero got into electric motorcycles; a Norwegian startup called Think Global developed a lightweight plastic-bodied electric commuter, TH!NK; and Israeli startup Project Better Place launched an ambitious battery-swap network that promised to make EVs as cheap and fast-refueling as gas cars.

This wasn't the first time that electric cars had loomed large in the public imagination. Since the fuel crises of the 1970s, battery-powered electric cars had been held up as the answer to fossil-fuel dependence and pollution. They were seen as a kind of automotive cure-all that would sustain America's car-crazy culture while doing away with its worst attributes. Actually, electric cars had outsold crude gas-powered cars at the dawn of the auto industry, and for many Americans it was just a matter of time before they rose again, like the return of King Arthur, to deliver us from the woes of internal combustion.

Even in the 1990s, electric cars had inspired a sense of anticipation and inevitability, especially when the California Air Resources Board (CARB) determined that electric vehicles were both technologically viable and capable of cutting the growing local emissions coming from the state's booming vehicle fleet. CARB has historically been the most aggressive regulator of auto tailpipe emissions in the United States. It sets its standards high enough to drive regulation at the federal level (and consistently frustrate mainstream automakers), and its Zero Emission Vehicle (ZEV) mandate has been hugely influential. This mandate seeks to incentivize the development, production, and sale of ZEVs by requiring that a certain percentage of each automaker's California sales be made up of vehicles with no tailpipe emissions. CARB enforces this mandate with a credit system, in which ZEV sales earn the automaker credits that must offset the debits created by non-ZEV sales.

Eight other states have adopted CARB's ZEV mandate, but none has the market size — and therefore, the impact — that California does. Thus, one state's mandate nudged the major automakers to start developing pure electric cars. Among these companies was General Motors, which introduced a small but affluent segment of the market to the joys of electric drive. Afraid of being shut out of the biggest car market in the United States, other automakers joined a technological arms race that convinced much of the public that a fundamental shift in the industry was at hand.

Originally conceived and engineered by a group of California engineers who would go on to develop some of Tesla's early technology, the Impact concept car was a pure expression of forward-thinking engineering. Its slippery aerodynamics and use of lightweight materials allowed it to squeeze eighty to one hundred miles of range and peppy acceleration out of lead-acid batteries — even after GM's engineers reworked it into a more market-friendly car, renamed the EV1 (a move that alienated its visionary engineer, Alan Cocconi). Still, the EV1's high cost and low volume, as well as GM's internal ambivalence toward it, doomed it to unprofitability. Lobbying and lawsuits eventually delayed and watered down CARB's requirements for ZEV sales, and as financial woes consumed GM in 2003, the EV1 program was cut.

When GM canceled the EV1 and crushed the remaining vehicles after their leases ran out, angry erstwhile owners protested with a mock funeral for the electric car. From their perspective, the EV1 had proven that electric cars could be viable, but the industry's subsequent lobbying against the ZEV mandate showed that the automakers simply didn't want to manufacture them. Filmmaker Chris Paine captured their anger in Who Killed the Electric Car?, a documentary highlighting the EV1's adoring celebrity fans and exploring the possible culprits for its failure. The film was released in 2006, and its conspiratorial passion helped popularize the blossoming field of green car startups.

The logic forwarded in Who Killed the Electric Car? was intoxicating — electric-drive technology was mature, and battery-powered cars were viable and popular, but a conspiracy composed of automakers and oil companies was holding back their utopian promise. This belief had revolutionary implications: Electric cars needed political support to take on their entrenched enemies, but once the opposition was overcome, they would be rapidly and enthusiastically adopted by the public and turn the companies who made and sold them into industry leaders. It also strongly suggested that these new leaders would have to come from outside the established auto industry players, whose investments in internal-combustion engine technology made them the enemies of this inevitable revolution.

By 2010, however, gas prices declined nearly as precipitously as they had risen. The American automakers roared back as truck and SUV sales rebounded, and nearly all of the new green car startups were either bankrupt or circling the drain. The dream of a new environmentally friendly auto industry turned out to be a mirage — electric cars were no more appealing when gas was cheap than Detroit's gas-guzzlers had been when gas prices were high. One of the fundamental challenges of the auto industry, the need to develop vehicles for market conditions years into the future, claimed many of these optimistic new startups. The intense capital requirements, regulatory obstacles, and brutal competition did in most of the rest. But of all the companies that emerged during this tumultuous period, one hung on in spite of all the headwinds, surviving the "green car winter" and emerging as a serious force in the industry: Tesla Motors.

* * *

Tesla had always stood out among its green car contemporaries: Founded by proven high-tech entrepreneurs, it tapped into Silicon Valley's burgeoning venture capital scene and pursued the high end of the market. The typical electric vehicle of the time was an overpriced and design-compromised commuter car, either converted from a cheap internal combustion vehicle or little more than a golf cart, which appealed only to the most hard-core environmentalists. By parting with the flock and building a fast, beautiful electric sports car, Tesla attracted customers who were less price sensitive, more forgiving of quality problems, and constantly on the lookout for a car that helps them stand out.

Tesla's first car, the Roadster, offered more range than any electric vehicle on the market, sleek, handsome styling, and acceleration rivaling the best sports cars. Its six-figure price tag was eye watering, but you simply couldn't get a better or more desirable electric car for any price. Despite running into nearly every possible roadblock along the way (as we'll explore in the coming chapters), it came to market in 2008 with a healthy waiting list packed with celebrities and the financial and political elite. It also didn't hurt that its arrival coincided with the first successful private rocket launches by its sister company SpaceX, which dramatically raised the profile of the founder and key figure at both companies, Elon Musk.

Prior to 2008, Tesla had received only a smattering of public attention outside the blogs and forums dedicated to electric and other green cars. Over the course of that year, with Roadsters finally reaching owners and SpaceX finally reaching orbit, Tesla's profile began taking off. Not all the attention was good. The Roadster had launched with a transmission that would require replacement. Tesla was burning through cash, Musk had to take over as the company's fourth CEO in two years, and his personal life was becoming a staple of Silicon Valley gossip blogs. Yet somehow, Musk would manage to raise more funding at the height of the financial crisis, and over the course of several dizzying years, a combination of good luck and sheer hustle kept the company afloat.

By 2013, a decade after it was founded, Tesla's Model S had made it the most successful American automotive startup since the Chrysler Corporation, which had been founded some ninety years before. The perception that Tesla was on its way to establishing itself as a dominant force in the auto industry was becoming increasingly commonplace, as the company's base of hard-core fans grew bigger and ever more emboldened thanks to their investments in Tesla stock. The company even managed to straddle the growing ideological divide in America, appealing to both libertarian techies and left-leaning environmentalists in equal measure.

Here, finally, was the champion that electric car fans had been waiting decades for: Having survived major technical, financial, and organizational challenges, Tesla was selling cars as fast as it could make them, it was backed by two of the most respected automakers in the world, and its high-flying stock and ubiquitous media coverage made it the envy of the industry. And for all its accomplishments, the company's future seemed to have no limits, thanks to a string of announcements promising bold innovations to come.

Tesla's triumph seemed to be the long-awaited return of the king and the fulfillment of prophecies passed down for decades. It also tapped into the most popular new ideology in American life. As the internet, social media, and smartphones gave birth to some of the most profitable and powerful companies in history, many people believed that software-centric startups would bring about inevitable "disruption" in every traditional business. Having already established Tesla as the auto industry's champion of the environment, Musk increasingly positioned the company as the cutting edge of Silicon Valley's conquest of the auto industry.

Thus, by 2013, Musk turned Tesla into one of the most powerful brands of the twenty-first century. Between the planet-saving mission and the disruptive potential to dominate the trillion-dollar auto industry, nearly everyone had a reason to support Tesla, and there was always a positive way to frame news about the company. Headlines lauded the company's world-saving mission as well as its cars' extraordinary features, such as the super quick zero-to-sixty acceleration option that Musk nicknamed "Ludicrous Mode." And at a time when heroic public figures were an increasingly rare commodity, Musk's centrality to Tesla's capitalistic, technological, and environmental ambitions (to say nothing of his numerous other techno-utopian causes, including SpaceX, Hyperloop, The Boring Company, Neuralink ... and, of course, the company whose success provided the funding for all of them, PayPal) made both him and his car company even more appealing.

(Continues…)


Excerpted from "Ludicrous"
by .
Copyright © 2019 Edward Niedermeyer.
Excerpted by permission of BenBella Books, Inc..
All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.
Excerpts are provided by Dial-A-Book Inc. solely for the personal use of visitors to this web site.

Table of Contents

Contents



Introduction


1 The Survivor


2 The Top Secret Master Plan3 The Accidental Automaker


4 The Startup Trap


5 Making Cars Is Hard


6 Bailout


7 Zero to Sixty Billion


8 The Lovers and the Haters


9 Solar, Superchargers, and Swap


10 The Autopilot Pivot


11 X Marks the Spot


12 Defects, Disclosure, and Drama


13 The Remastered Plan


14 The Machine That Builds the Machine


15 The Empire Strikes Back


16 Ludicrous Mode


17Where the Rubber Meets the Road


Acknowledgments


Notes


Index

What People are Saying About This

From the Publisher

“Exceptionally well written, impressively informative, and ... extraordinary.”


—Midwest Book Review


"Fascinating and frustrating at the same time . . . Edward Niedermeyer has really worked hard in researching this well-balanced book."


Washington Book Review


Ludicrous is a revealing look at Tesla’s tumultuous history from the internet’s leading Tesla skeptic.”


—Timothy Lee, reporter at Ars Technica


“Ed Niedermeyer’s deep dive into Tesla reveals the complex, fascinating, and often frustrating world of a company that has achieved great heights and is at risk of an even bigger fall. This isn’t a book for the faint of heart. It lays bare all of Tesla—including the flaws and scar tissue—giving an unadulterated view of an enigmatic company and its rise from unknown upstart to a high-profile global automaker.”


—Kirsten Korosec, senior reporter at TechCrunch


“The Tesla book we need, but don’t deserve.”


—Alex Roy, founder of the Human Driving Association and author of The Driver: My Dangerous Pursuit of Speed and Truth in the Outlaw Racing World


“Ed Niedermeyer has taken on the challenge of chronicling a company that prefers to only be discussed by its fans in an even-handed way that covers what went right and what failed. It’s a fascinating read.”


—Sam Abuelsamid, principal mobility research analyst at Navigant Research

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