Driving Against the Tide: The Case of Tesla Motors

Abstract

The electric vehicle manufacturer Tesla Motors Inc. (Tesla) was founded in 2003, and substantially increased public attention towards electric mobility. Until the 1990s, automakers saw no pressing need to develop electric vehicle technology, largely due to low oil prices and facile environmental policies. By the turn of the millennium, some car manufacturers, for instance GM, made initial attempts to introduce environmentally friendly vehicles, such as the Chevrolet S-10 Electric. Such projects mostly failed, due to a lack of market driving factors. The most significant among them was the lack of performant batteries and infrastructural units like recharging stations, paired with a public policy not yet fully committed to supporting the development of electric vehicles. Some projects however succeeded: hybrid cars like the Toyota Prius and the Honda Insight found an incipient market of early adopters. Yet in a market, in which incumbents were mostly doubtful about the market acceptance of electric vehicles, new entrants with a sole focus on such models faced a hard time. Main entry barriers were the extremely high investments in production plants, immense technological know-how, and brand recognition. In spite of such hurdles, in 2008, when Tesla began serial production of its first model, the Roadster, it became the first company worldwide to manufacture serial electric sports cars. Tesla’s high-performance battery electric vehicle had an impressive travel range of up to 400 kilometers, which was double the range of other BEVs in the mid-2000s. Its performance was at least comparable to, if not exceeding, that of ICE vehicles. The time seemed right for setting in motion a worldwide transition towards electric mobility. This vision helped Tesla’s founders to persevere stubbornly in introducing a new product and a new business model in an industry dominated by giants.