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History of Tesla

Discover the history of Tesla, the leading electric vehicle manufacturer – including how the company was founded and the influence of Elon Musk.

All trading involves risk. Losses can exceed deposits.

Considering the popularity and share price history of Tesla Motors (TSLA-US), it may come as a surprise that the company isn’t expected to turn a profit until 2020. 

So how has the company managed such impressive growth, despite numerous financial setbacks?

Let’s take a look at Tesla’s history to find out.

Tesla’s early years

Who founded Tesla?

Tesla Motors was founded in 2003 by two Silicon Valley engineers, Martin Eberhard and Mark Tarpenning. The pair wanted to produce an electric vehicle (EV) that would benefit the environment without compromising on speed and quality. 

Tesla’s business plan had three steps:

  • develop a high-end sports car to create excitement about EV
  • produce a sedan to compete in the luxury market,
  • roll out low-cost EVs to the mass market

Enter Elon Musk

Initially, Tesla only managed to secure small investments from family and friends. But then Eberhard and Tarpenning met Elon Musk – co-founder of PayPal and sustainable technology enthusiast – who agreed to invest $7.5 million in 2004. 

Contrary to popular belief, Musk was not a co-founder but he did become chairman and was Tesla’s main source of capital for years to come. 

The Roadster makes its debut

In 2004, the prototype for Tesla’s first model, the Roadster, helped to attract $13 million in investments. In 2006, Tesla held an event to debut the model and 127 cars were pre-ordered as a result – each Roadster cost $100,000. 

But customers were left waiting as production issues delayed the release of the Roadster from 2006 to 2008. On top of that, the founding team had no experience in automobiles so development costs of the Roadster massively exceeded its purchase price. In November Ze’er Driori took over as CEO. The first Roadster was delivered to Elon Musk in February 2008. 

Elon Musk takes charge

The Roadster may have finally debuted, but in 2008 internal disputes were causing investors to lose faith in Tesla. So in what many saw as an inevitability, Elon Musk became CEO in October 2008. As Tesla’s largest shareholder he wanted both hands on the wheel. 
 

Facing financial collapse 

Musk took over in the midst of the financial crisis and, just like the rest of the auto-industry, Tesla was suffering. By November 2008, Tesla was almost bankrupt. It was saved by two financial agreements: 
 
  • Strategic partnership with Daimler AG, May 2009. The German automotive giant took a 10% stake in Tesla for $50 million. They sold the shares in 2014 for a $780 million profit
  • Loan from US Department of Energy, June 2009. As part of a clean energy scheme, Tesla were given a $465 million loan to continue developing sustainable technologies. They have since repaid this in full 

Tesla’s stock market debut 

On 29 June 2010, Musk took Tesla public, making them the first US automaker to hold an IPO since Ford Motors in 1956.
 

Tesla shares began trading at $17 each. When the market closed, they had climbed 40% to $23.89. The IPO raised $226.1 million, leading Tesla to a valuation of $1.5 billion.

Chart showing a year of Tesla share price movements from the IPO in June 2010.

Despite the success of the IPO, Tesla’s share price fluctuated the following year as further production issues caused investor sentiment to sour. 

Though the Roadster had helped change public perception of EVs, Tesla announced that the model would be discontinued to focus on the more reasonably-priced Model S. 

Tesla on the markets

The Model S released in early 2013, but manufacturing delays caused sales to decline and Tesla was facing bankruptcy again. 

Musk reached out to Google to encourage an $11 billion takeover deal. 

But while disagreements stalled the negotiations, sales of the Model S took off and the EV sedan began dominating the luxury market. 

In 2013, Tesla’s Model S outsold every competing gasoline-powered sedan in the US. The popularity of the all-electric vehicle caused Porsche, Audi and Mercedes to quickly start production of their own competing models. 

First quarter sales 2013

Clearing the road to sustainable transport  

Due to intellectual property rights, anyone who wanted to use Tesla technology would have to pay or face a lawsuit. In order to speed up production, many large manufacturers did choose to use Tesla components for their own models. For example, under a technical cooperation deal, Toyota paid $100 million for Tesla electronics and software for their RAV4 EV.  

In 2014, Musk announced that they would no longer be filing patent lawsuits, because accelerating the use of sustainable technology was more important than fending off competitors. 

In the same year, Tesla unveiled its Gigafactory project that, once completed, will produce more lithium-ion batteries than any other factory in the world. Tesla would be able to reduce their car manufacturing expenses and increase their output, as well as begin the production of solar panels for homes and businesses. 

Overtaking market giants

Tesla’s three-step plan was almost complete: the Model S had a 25% share of the premium sedan market, the Model X SUV had been released in 2014 and the Model 3 economy car was announced in 2016. 

By 2017 investor confidence in Tesla, and its charismatic CEO, had increased dramatically. Tesla stock reached $312.39 per share in April 2017, and it became the most valuable car manufacturer in the US with a market value of $51 billion – $1 billion more than General Motors. 

Tesla today

While Tesla’s market capitalisation grew, there was still a question mark hanging over the company – it has never turned a profit. 

Tesla still doesn’t measure up to other manufacturers for production and sales, turning out the same number of cars in a year that its competitors do in a month.  

The difference between Tesla’s revenue and market capitalisation arises because they are often viewed as a technology company, rather than a car manufacturer – their surge in value is a result of a belief in the future of EVs, not the amount of cars they actually sell. 

Comparison of Tesla to its auto-industry competitors in 2016:

Market cap (as of 10 April 2017)

Revenue in 2016

How many Tesla shares does Musk own?

Elon Musk reportedly owned 20% of Tesla shares in April 2017 – making him the largest shareholder, far above any other individual or institution. 

Musk’s net worth rose by over $2.21 billion in 2017 alone and Forbes estimated the he was worth at least $19.9 billion based on reports that he holds an additional 3.6 million shares of Tesla in a trust. 

The car company of the future   

Tesla has created excitement about the potential of EVs and with plenty more plans for the future, Musk believes Tesla could one day reach a $700 billion valuation. Analysts predict that EVs could reach 90% of global car sales by 2050, up from just 1% in 2017: and Tesla is expected to lead the way. 

But as Tesla’s history shows, producing electric cars at affordable prices isn’t easy – even the ‘affordable’ Tesla Model 3 will retail at $35,000, well over the usual price range for economy cars.    

TSLA stock price from IPO in 2010 to January 2018.

Though automobiles remain their primary focus, the company has expanded to produce energy solutions for homes and businesses – all in the name of their mission to accelerate the world’s transition to sustainable energy. 

In 2017, Tesla was one of the most shorted stocks in the world but so far short sellers have been disappointed – despite the ups and downs, buying Tesla is seen as buying the future. And if Musk can achieve his goal of creating affordable electric vehicles, Tesla could be on the road to success. 

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