An Electric Dream

With the drive of a budding Silicon Valley mogul and the heart of a shade-tree mechanic, the 36-year-old Musk has a taste for the grandiose. His day job is running SpaceX, a company he founded to build rockets to take Earthlings to Mars. But he spends plenty of time—some insiders say too much time—tinkering with Tesla, whether it's the design of the Roadster or the structure of the company. He recently demoted Eberhard from CEO to president of technology and installed an interim chief, while looking for a permanent replacement who had experience running a big company. "He can potentially feel a little hurt," Musk says of Eberhard, "but I didn't think we could wait. We need somebody who understands running a larger company and can take us from 300 people to 3,000 people in the next two or three years." Eberhard says he understands the need for a more seasoned CEO but admits his ego was bruised by Musk's management change. "If you know Elon," he says, "you know he does things abruptly."

Musk also insisted the Roadster's doorsills be lowered after his wife had difficulty exiting the car modestly while wearing a skirt. "With doorsills like that," he says, "those shots of Britney will get a lot more common." Eberhard resisted that move, saying it would be too costly and time-consuming, adding, "My wife tends to wear jeans." But Musk won by arguing: "I'm the guy saying this isn't too much money because it's my money."

So far, Musk has sunk $37 million into Tesla—more than one third of its $105 million in start-up funding. That's a big bankroll by Silicon Valley standards, but chump change in an industry where it can cost $1 billion and take four years to get a car from drawing board to dealer showroom. "They are definitely undercapitalized," says auto analyst Jim Hall of Auto- Pacific in Detroit. "You know what $105 million will buy you at Toyota? Headlights, taillights and a bumper." Tesla plans to float an initial public offering once the Roadster hits the street next year. But even billions from a stock sale could burn up quickly as Tesla creates its next models from scratch, without Lotus's help. "White Star will require more capital than these guys even realize yet," says Hall. "And the problem with investors is they want their money back."

Tesla had better get its car on the road soon because the big boys are coming up in its rearview mirror. Toyota, which has already sold more than a million hybrids, is testing a plug-in Prius powered by lithium-ion batteries. GM is fast-tracking the Volt, which it says will offer 40 miles of electric drive before a small engine kicks in to recharge the battery, allowing for up to 150mpg. And even if Tesla gets a head start, the auto establishment could still crush it by copying its cars and undercutting its sticker price.

Tesla, of course, has designs on becoming a major automaker itself. It's even opened an engineering office in suburban Detroit, staffing it with refugees from the beleaguered Big Three. Musk says he expects a 10-fold increase in employment at the company within three years. But for now, as Tesla struggles to get its first model out of the garage, some wonder if it is being hobbled by delusions of grandeur. "At some point their vision got altered to a 'change the world' mentality," says AC Propulsion's Gage. "But you can't change the world if you don't deliver the car." Will Tesla prove the skeptics wrong? Perhaps, but success might mean eventually being bought up by one of the big wheels they're showing up right now. And even if Tesla ends up as another automotive roadkill, this small band of Silicon Valley dreamers could leave a legacy that paves the electric highway for others to follow.

© 2007