Fortune's Katie Fehrenbacher took detailed notes of Musk's lengthy retelling of the Tesla origin story, including his revelations of previously-unpublicized problems that arose during the automaker's first foray into building an electric car.
In the early days, it sounds like Musk didn't even give his fledgling company, now 13 years old, a fighting chance at survival. On stage at the annual shareholder's meeting in Mountain View, California, Musk revealed that he thought the company only had a 10-percent chance of surviving when he first co-founded it with engineer (now Chief Technical Officer) JB Straubel. Saying that in the early days, they had "no idea what we are doing, " and characterizing their original efforts as "completely clueless, " Musk admitted that he wanted to invest 99 percent of the company's Series A funding, to avoid having investors and friends lose money on the endeavor.
Musk says that the company was founded in 2003 based on assumptions which "turned out to be staggeringly dumb." Mostly, he was referring to the original business plan for the Roadster, when Tesla's heads figured they could turn a profit on the Roadster by licensing drivetrain technology from the startup AC Propulsion and packing it in to chassis provided by Lotus.
As Fehrenbacher writes in Fortune, that daydream proved completely impossible:
That technology from AC Propulsion could not be reproduced and commercialized, said Musk and Straubel. That was partly because the information system that ran the motor was analog, instead of digital, so engineers had to rewrite all of the code involved. Another reason was because the AC Propulsion battery pack was air-cooled, which didn't provide enough cooling for batteries that get hot when they discharge to power an electric car. Tesla later converted the Roadster's battery pack to be liquid-cooled instead.
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In the end, Musk said, the final design of the Roadster only contained around six or seven percent of the technology licensed from AC Propulsion and Lotus. The Lotus Elise platform had to be stretched to accommodate the batteries; Lotus's U.S. crash test results couldn't be applied to the modified design, necessitating expensive crash testing; Straubel revealed that the entire suspension and braking systems had to be redesigned for the Tesla.
Musk compared the ordeal to building a house by remodeling an existing structure until only one basement wall was left.
Even when all that unexpected re-engineering was completed, the Roadster was still a basket case. Musk said that when he took Google co-founders Larry Page and Sergei Brin for a ride in an early Roadster, the car wouldn't do more than 10 mph. "I was like I swear guys it goes way faster than this, " said Musk. Page and Brin "were kind enough to put a little money in the company despite the world's worst demo, " he said.
The problems continued. At the Roadster launch party in 2006, a few examples were on hand to give rides to potential customers. By the end of the night, "the cars were destroyed, " Straubel said. Musk admitted that the early Roadster "was completely unsafe, " it "broke down all the time, " and it "didn't really work."
Somehow, the company survived. The Roadster production process was completely overhauled in 2008 and 2009, with major changes to component suppliers and internal technology. Tesla also brought its battery production in-house at that time. It was late 2009 before Tesla stopped losing money on every Roadster it sold.
Musk said he wanted to talk about Tesla's early stumbles to let future entrepreneurs know that they can make mistakes and enter unfamiliar industries and still have a chance at success. But as we know, the young electric carmaker isn't out of the woods just yet.
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