An Electric Dream

The road to high expectations began in 2002, when Eberhard was looking for the next big thing after selling his electronic book company, NuvoMedia, to Rupert Murdoch for $187 million. Eberhard's automotive epiphany occurred after he crashed his Audi when avoiding a deer on his way home in the hills above Silicon Valley. He looked at replacing it with a Porsche, but it just didn't feel right. "Post 9/11, post the Kyoto protocols [on climate change]," he says, "getting another sports car that gets crummy gas mileage felt a little irresponsible."

A Prius wasn't an option. "Not everybody wants a car that ugly," says Eberhard. So he began investigating an experimental electric sports car, the tzero, which supposedly could outrun a Ferrari. It was the work of AC Propulsion, a Silicon Valley start-up that was founded by Alan Cocconi, the engineer who created the prototype for the electric-drive system in GM's EV1. Eberhard wanted to buy a tzero for himself and even help sell it to the public. But AC Propulsion wasn't interested. The tiny company didn't have the resources to make the sports car street legal and didn't believe it would have mass appeal anyway. AC Propulsion CEO Tom Gage suggested Eberhard connect with a rich Internet investor also shopping for an electric sports car: Elon Musk, who made his fortune by founding PayPal, the Web pay service, and selling it to eBay in 2002 for $1.5 billion. "I don't know whether to blame myself or credit Martin," Gage says now, "for gathering in Elon and all his investment money."

Musk would go on to become Tesla's chairman and primary investor. But when he first approached AC Propulsion, he was just a guy trying to find a way to go green in his distinctly un-green Porsche 911 Turbo. "I'm very much an environmentalist," he insists. "But I'm a proponent of solving problems with better products, rather than deprivation." Musk offered AC Propulsion a quarter-million dollars to sell him a tzero or to electrify his Porsche. It refused, offering instead to sell him an electrified Scion xB, a boxy economy car from Toyota, for $70,000. Musk's response: "Nobody wants an e-Scion for 70 grand." (Apparently, somebody did. AC Propulsion sold its first electric Scion to Tom Hanks earlier this year.)

Eberhard, who once met Musk at a meeting of the Mars Society (dedicated to exploring the Red Planet), sought a meeting in early 2004 to explain his concept of a plug-and-play sports car for the rich. The pitch: most technology breakthroughs show up first on luxury goods, but electric cars have always tried (and failed) to appeal to budget-minded buyers trying to pinch pennies at the pump. Why not take the luxury lane? "Our first half-hour meeting turned into two hours," recalls Eberhard. "And by the end of it, we had a handshake deal."

Eberhard quickly struck a development deal with Lotus, but he and Musk didn't want to simply electrify an Elise. Instead, they substantially redesigned the car, lengthening it by a foot, adding a trunk big enough to hold a set of golf clubs and jamming a big battery pack and electric motor behind the driver's seat where the engine used to be. They also tackled one of the biggest drawbacks of lithium-ion batteries: their propensity to run so hot they burst into flames (remember those laptop fires?). J. B. Straubel, a Stanford engineer who was one of Eberhard's first hires, came up with a way to encase each of the 6,831 battery cells in a fire retardant material so that if one fails, it won't cause a wildfire. The $20,000 battery pack is pricey, but it is generating so much interest, Tesla hopes to license it to major automakers.

But Tesla's ambitions go beyond becoming a battery supplier and creating a sports car for the Hollywood set. The company's aim is nothing less than becoming the plugged-in Henry Ford, electrifying the highways for the multitudes. After the Roadster, there's a $50,000, five-passenger luxury sports sedan on the drawing board, code-named White Star, that's due in 2010. And a few years later, Tesla hopes to have a $30,000 model for you and me, code-named Blue Star. "This is only interesting if we go mass market," says Musk. "The world isn't lacking for interesting sports cars."