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Tesla, Inc.

Ch. 1 of 8
— CH. 1 · INTRODUCTION —

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Tesla, Inc.

8 sections
  • Tesla, Inc. is an American electric vehicle and clean energy company, and in 2020 its share price rose by 740%. By the 14th of December 2020, its market value was larger than that of the next nine biggest automakers combined. It is a strange result for a company that assembled its first car inside the service bays of a former Chevrolet dealership. Tesla has also attracted lawsuits, boycotts and government scrutiny. Critics point to everything from workplace complaints to safety recalls to the public statements of its chief executive. So how did a carmaker that started so small end up so large? Who actually founded it, and who gets to claim that title? What did it take to build electric cars ordinary people could afford? And why does a company this valuable keep turning up in court?

  • Martin Eberhard once described the company he wanted to build as "a car manufacturer that is also a technology company". He named its core technologies as "the battery, the computer software, and the proprietary motor". On the 1st of July 2003, he and Marc Tarpenning incorporated Tesla Motors, serving as chief executive officer and chief financial officer. The name pays tribute to the inventor and electrical engineer Nikola Tesla. Ian Wright joined a few months later.

    In February 2004, the company closed a $7.5 million series A round, and $6.5 million of it came from Elon Musk. Two years earlier he had received $176 million for his interest in PayPal. Musk became chairman and largest shareholder. J. B. Straubel arrived in May 2004 as chief technical officer. A $13 million round in February 2005 added Valor Equity Partners. A $40 million round in May 2006 drew Google co-founders Sergey Brin and Larry Page, plus former eBay president Jeff Skoll. A $45 million round in May 2007 pushed total private financing past $105 million.

    The partnership between founders and funder did not last. In August 2007, the board, led by Musk, asked Eberhard to step down as CEO. He took the title President of Technology and left in January 2008. Tarpenning left the same month. Michael Marks served as interim CEO, Ze'ev Drori became CEO and president in December 2007, and Musk took the job himself in October 2008. Eberhard sued Musk in June 2009 for allegedly forcing him out, and the case was dismissed in August. A settlement in September 2009 allows Eberhard, Tarpenning, Wright, Musk and Straubel all to call themselves co-founders.

    Outside backers kept the company alive. Daimler began working with Tesla in late 2007. On the 19th of May 2009, it bought a stake of under 10% for a reported $50 million, and in October 2014 it sold its remaining holdings for a reported $780 million. In January 2010, the Department of Energy's Loan Program Office lent Tesla $465 million. The loan was critical to creating the Model S, and Tesla repaid it in full. In May 2010, Toyota bought $50 million of Tesla stock. Then on the 29th of June 2010, Tesla went public, the first American car company to do so since Ford in 1956. It sold 13.3 million shares at $17 each and raised $226 million.

    The Toyota relationship soured, however. Bloomberg News described the work on a joint electric RAV4 as marred by clashes between engineers. On the 5th of June 2017, Toyota announced it had sold all of its Tesla shares.

  • In 2006, Musk laid out a plan that explains most of Tesla's product lineup. Start with expensive, low-volume cars, because buyers of sports cars care less about price. Use that income to bring battery costs down, then build cheaper cars in larger numbers. The first Roadster, built on a Lotus Elise chassis, fits the first step. Fewer than 2,500 were produced, at a price above $100,000. It was the first highway-legal serial production electric car to use lithium-ion battery cells. It was also the first production all-electric car to travel more than 320 km on one charge.

    The Model S sedan began production in June 2012 and won the 2013 Motor Trend Car of the Year award. In September 2013 it became the first electric car to top a country's monthly sales ranking, in Norway. It was the best-selling plug-in electric car in the world in both 2015 and 2016. The Model X followed in September 2015 with 25,000 pre-orders and rear doors that open upward in a "falcon-wing" design. Both were still luxury vehicles, only more affordable than the Roadster. The Model 3 and Model Y then aimed at volume, selling over 100,000 vehicles each quarter. In the first quarter of 2023, the Model Y outsold the Toyota Corolla to become the best-selling car in the world, the first electric vehicle to do so.

    The way Tesla sells cars is just as unusual. It skips franchised dealerships and sells through its website and its own stores. Where local laws forbid manufacturers from selling directly, it runs galleries that only educate customers. Altogether it operates nearly 400 stores and galleries in more than 35 countries, usually in shopping districts and malls rather than beside other car lots. Dealership associations sued to stop direct sales, arguing that franchises protect consumers by encouraging price competition. The Federal Trade Commission rejected those arguments and concluded that direct sales would save buyers 8% on average. Tesla argued that a dealer selling both gas and electric cars has no reason to promote the electric one. Musk added that electric cars need less maintenance, which would cut into service revenue.

    Tesla also builds many components itself, which is rare in an industry that typically outsources 80% of its parts. And it lets competitors license its technology, provided they agree not to file patent suits or copy its designs directly. The owner's manual shows how far the company departs from convention on maintenance. In 2016 it recommended an inspection every 12,500 miles or once a year. By early 2019 it said the car did not require annual maintenance or regular fluid changes.

  • Within a week of the Model 3 announcement in April 2016, Tesla held more than 325,000 paid reservations. That enthusiasm created a problem, because the car had to be built in large numbers and cheaply. Between 2015 and 2017, the company bought several automation specialists, including Compass Automation, Grohmann Automation, Perbix Machine Company and Riviera Tool and Die. It packed the Model 3 line with robots. Musk later admitted that the robots slowed production down. Tesla called the resulting stretch "production hell". Deliveries began in July 2017.

    In 2018 the company was pursuing a goal of 5,000 cars a month at the Fremont plant. To get there, it put up tension fabric buildings that were 53 feet high, 150 feet wide and 900 feet long. The structure went up in two weeks. By the end of 2018 the bottlenecks were cleared, and the Model 3 was the best-selling electric car in the world from 2018 to 2021. By June 2021, cumulative sales had passed 1 million.

    The strain showed up in the stock market, where Tesla became one of the most shorted companies. On the 8th of August 2018, Musk posted that he was considering taking Tesla private. His message read, "Am considering taking Tesla private at $420. Funding secured." The stock first rose, then fell when the claim was shown to be false. In September 2018, Musk settled fraud charges with the Securities and Exchange Commission. His tweets were to be reviewed by Tesla's in-house counsel, he temporarily lost the chairman role, and two independent directors joined the board. Tesla and Musk each paid civil penalties of $20 million. A shareholder class action followed, and in February 2023 a California jury unanimously found Musk and Tesla not liable.

    A separate cloud hung over the Model 3 itself. In September 2018, Tesla disclosed an FBI investigation into its Model 3 production figures. Investigators wanted to know whether the company had made projections it knew it could not meet. A stockholder lawsuit over those numbers was dismissed in March 2019.

    The lesson about robots changed the factory floor. Tesla moved toward enormous casting machines called Giga Presses, which form a whole underbody in one piece. They cut production time, labor costs, floor space and the number of welding robots. Critics note that fewer parts can make crashed cars harder or more costly to repair. Even so, on the 2nd of May 2024, Tesla announced it had dropped its plan for next-generation gigacasting and would keep casting vehicle underbodies in three pieces.

  • A copper rotor inspired the Tesla logo. It sits inside the older of the company's two motor designs, a three-phase, four-pole alternating current induction motor. Since the Model 3 arrived in 2017, Tesla has also built a second type with an iron rotor and embedded magnets. Channels cut into the iron let it keep pace with the magnetic field at high speed, where magnets alone lose performance.

    Batteries tell a longer story. For the first Roadster, Tesla chose the 18650 cell, measuring 18 mm by 65 mm and already common in consumer electronics. Each cell held little energy, so thousands had to be bundled into one pack. That brought challenges in electrical and thermal control, and the answer was liquid cooling and an intumescent fire prevention chemical. Even so, the choice was pragmatic, because factories could already make those cells in high volume at consistent quality. The larger 2170 cell came next, for the Model 3 and Model Y. In 2021 Tesla introduced the 4680, which it developed in-house and which is physically five times bigger than the 2170. Many entry-level cars also use prismatic lithium iron phosphate cells from CATL, which contain no nickel or cobalt and cost less to make.

    As of 2023, Tesla bought cells from three suppliers: CATL, LG Energy Solution and Panasonic. The business analysis firm BloombergNEF estimated its 2021 pack cost at $112 per kilowatt-hour, against an industry average of $132. Research ties reach into universities. In 2016, Tesla set up a five-year battery partnership with Jeff Dahn at Dalhousie University in Nova Scotia. It also secured lithium supply. In September 2020 it signed a deal with Piedmont Lithium for ore from North Carolina. In 2022 it contracted for 110,000 tonnes of spodumene concentrate over four years from the Core Lithium mine in Australia's Northern Territory. In 2023 it broke ground on a $375 million lithium refinery near Robstown, Texas, where local residents raised concerns about its water use.

    Software may matter as much as hardware. Over-the-air updates add features or fix problems without a trip to a service center. They also let Tesla decide what each owner can use. Every Model 3 left the factory with heated rear seats, but only buyers of a premium interior could switch them on, until Tesla let others pay for access. Enhanced Autopilot and Full Self-Driving work the same way, since every car carries the computers and cameras they need.

    Tesla's charging connector spread far beyond its own cars. It has been on every Tesla sold in North America since 2012. Tesla opened it to other manufacturers in 2022, and nearly all of them have announced plans to build it into their electric vehicles from 2025.

  • The Fremont plant has been through several lives. General Motors opened it in 1962, and in 1984 it became NUMMI, a joint venture of GM and Toyota. That venture ended when GM entered bankruptcy in 2009. Tesla now makes the Model S, Model X, Model 3 and Model Y there, and the table of its primary facilities lists about 22,000 employees on site.

    In 2016, Tesla opened its first purpose-built plant in Storey County, Nevada. State and local governments granted abatements and credits that let the company operate essentially tax-free for 10 years, later extended to 20 in exchange for adding a Semi line and more battery capacity. In January 2021, Panasonic could produce 39 GWh of cells a year there.

    The next addition came with an acquisition. In November 2016, Tesla bought the solar installer SolarCity in an all-stock deal worth $2.6 billion. The purchase was controversial because SolarCity faced liquidity problems that shareholders were not told about. The deal brought Tesla a factory in Buffalo, New York, on the site of a former Republic Steel plant. The state spent cash to build and equip it through the Buffalo Billion program. Solar Roof production there started in 2017 and ran into multiple challenges, and critics said the plant gave little economic return for the state's money.

    The merger also created Tesla Energy. In April 2015, Tesla had unveiled its Powerwall and Powerpack batteries and received orders valued at $800 million within a week. In 2023 the energy business deployed 14.7 gigawatt-hours of storage, up 125% on 2022, while its solar installations fell 36% to 223 megawatts. A former JC Penney distribution center near Lathrop, California, bought in 2021, became the Megafactory for Megapacks and opened in 2022.

    Abroad, Tesla signed a deal with Chinese authorities in July 2018 to build Gigafactory Shanghai, the first car factory in China wholly owned by a foreign company. It rolled out its first Model 3 less than a year after groundbreaking in January 2019. By 2024, China was Tesla's second-largest market, with 21% of revenue, behind the United States at 48%. In Europe, Germany won a competition among host countries in November 2019. Gigafactory Berlin opened on the 22nd of March 2022, with planned capacity of 500,000 cars a year.

    Texas followed. Tesla chose Austin on the 23rd of July 2020, and the plant opened to the public on the 7th of April 2022. It is the only factory that builds the Cybertruck. The choice of Texas was partly shaped by a spring 2020 dispute. Tesla closed Fremont in March 2020 under local pandemic rules, sued Alameda County, and restarted production on the 11th of May. The county lifted its restrictions two days later and Tesla dropped the suit. On the 1st of December 2021, Tesla moved its legal headquarters to the Texas site. A planned plant near Monterrey, Mexico, was put on hold as of July 2024 over tariff threats from former President Trump.

  • In 2008, Tesla lent two Roadsters to the British television programme Top Gear, and the segment ended in a lawsuit that Tesla lost. The show said the battery would have lasted 55 miles in its track tests, a number that Tesla itself had supplied. Tesla called the figure untrue and libelous, insisting that normal use gave 211 miles. The company sued and lost.

    Workplace complaints have been far more serious. In 2021, seven women came forward with claims of sexual harassment and discrimination at the Fremont factory. One of them, Brooks, told The Washington Post, "I was so tired of the unwanted attention and the males gawking at me, I proceeded to create barriers around me just so I could get some relief." Attorney David A. Lowe described "a shocking pattern of rampant harassment that exists at Tesla". In May 2022, a California judge rejected Tesla's request for closed-door arbitration and let the case move toward court. In a separate 2022 suit, the California Civil Rights Department alleged a pattern of racial harassment and bias at Fremont.

    Safety was another front. From 2014 to 2018, Fremont had three times as many Occupational Safety and Health Administration violations as the ten largest US auto plants combined. A Reveal podcast investigation alleged that Tesla failed to report some serious injuries. In January 2019, former security manager Sean Gouthro filed a whistleblower complaint alleging that the company hacked employees' phones. In June 2022, an arbitrator rejected the claims of another former employee, Karl Hansen, in a separate whistleblower retaliation case.

    Financial reporting drew its own skeptics. In November 2019, hedge fund manager David Einhorn publicly accused Musk of "significant fraud" and said he was "beginning to wonder whether your accounts receivable exist." From 2012 to 2014, Tesla earned more than $295 million in Zero Emission Vehicle credits for a battery-swapping technology that was never made available to customers. In July 2023, Tesla board members returned $735 million to the company to settle a claim over stock options granted to Elon Musk, Kimbal Musk, Larry Ellison and others.

    Environmental and property disputes followed. In 2019, the Environmental Protection Agency fined Tesla for hazardous waste violations from 2017. Walmart sued in August 2019 over rooftop solar fires at seven stores and settled in November on undisclosed terms. In April 2021, a Norwegian judge found that Tesla had throttled charging speeds through a 2019 software update. Thirty customers received 136,000 Norwegian kroner each. In January 2024-25 California counties sued over hazardous waste disposal. Tesla paid $1.5 million and agreed to have 10 percent of its facilities audited over the next five years.

  • In December 2024, a Delaware court rejected Musk's $56 billion pay package, ruling that the board had not properly approved it. Two months later, Tesla's stock price and European sales had dropped sharply, a decline widely linked to Musk's political advocacy. Polling tied his connections to President Donald Trump and the Department of Government Efficiency to falling opinion of the brand. Protests, vandalism, gunfire and arson hit Tesla stores and charging stations. By the 7th of March 2025, the stock had fallen for seven weeks running, its longest losing streak in 15 years as a public company. On the 29th of March, over 200 protests were held worldwide.

    The sales data kept falling. In December 2025, UK registrations fell by more than 29% year-on-year. Then came a symbolic loss. Full-year 2025 figures showed the Chinese rival BYD selling 2,256,714 battery electric vehicles against Tesla's 1,636,129, and BYD took the title of largest maker. The shareholders, meanwhile, approved a pay package worth $1 trillion for Musk in November 2025, to be earned over 10 years if he meets specific goals.

    The company's attention has shifted toward machines that drive and walk. Cybertruck shipments began on the 30th of November 2023, and Tesla originally planned capacity above 250,000 units. By 2025 it was selling only around 20,000 a year. In October 2024, Tesla showed a concept Cybercab with no steering wheel or pedals, and 20 prototypes gave short rides to attendees. A robotaxi service launched in 2025 in Austin, though it still relies on human supervisors. In July 2025, an update put the chatbot Grok into Tesla cars, but it cannot control vehicle functions. In China, the AI systems added in August 2025 can.

    Then came the Optimus humanoid robot, under development since 2022. On the 28th of January 2026, Musk said the Model S and Model X would end in the second quarter of 2026 so the company could focus on Optimus. The goal is 1 million robots a year at Fremont. Days earlier, on the 22nd of January 2026, Tesla had dropped basic Autopilot on new cars in the United States and Canada, steering buyers to Full Self-Driving, sold only as a monthly subscription from the 14th of February.

    The newest announcements reach beyond cars. In March 2026, Musk unveiled a project pairing xAI's Grok language model with a Tesla-built agent that watches a computer screen and handles keyboard and mouse actions. On the 21st of March 2026, SpaceX announced Terafab, a joint project with Tesla and xAI. It would be a vertically integrated "mega-fab" aiming to produce more than one terawatt of artificial intelligence compute capacity a year, spanning advanced logic chips, memory modules and packaging.

Updated

Common questions

Who founded Tesla?

Martin Eberhard and Marc Tarpenning incorporated Tesla Motors on the 1st of July 2003. Elon Musk led the first funding round in February 2004 and became chairman. A September 2009 settlement lets Eberhard, Tarpenning, Ian Wright, Musk and J. B. Straubel all call themselves co-founders.

Why was the Model 3 era called production hell?

Tesla invested heavily in robots and automation to build the Model 3 quickly and cheaply. The robots actually slowed production, causing delays and financial pressure. The company said the problems were overcome by the end of 2018.

Why does Tesla sell cars without franchised dealerships?

Tesla sells through its website and company-owned stores. It argues that dealers selling both gas and electric cars would have little reason to promote the electric ones. Some US jurisdictions prohibit direct sales, so Tesla runs galleries there that only educate customers.

How did Tesla lose the title of world's largest electric vehicle maker?

Full-year 2025 deliveries reported in January 2026 showed BYD with 2,256,714 battery electric vehicle sales against Tesla's 1,636,129.

All sources

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  123. 368Tesla's chaotic year after Musk's 'funding secured' tweetMichael Wayland — CNBC — August 8, 2019
  124. 370NewsTesla 10-K Files with SECFebruary 19, 2019
  125. 375Elon Musk's Big Lie About Tesla Is Finally ExposedRolling Stone — December 17, 2023
  126. 379Economic Effects Of State Bans On Direct Manufacturer Sales To Car BuyersGerald R. Bodisch — Department of Justice — May 2009
  127. 390When Elon Musk Tried to Destroy a Tesla WhistleblowerMatt Robinson et al. — March 13, 2019
  128. 391Tesla Enters 'Whistleblower Hell'Matthew Klippenstein — July 21, 2019
  129. 392Tesla wins lawsuit against whistleblower accused of hacksSean Szymkowski — September 18, 2020
  130. 404Tesla Impact Report 2021June 26, 2022
  131. 409NewsCalifornia sues Tesla over Black workers' allegations of discriminationDaniel Wiessner et al. — February 11, 2022
  132. 433NewsTesla hit with 'right to repair' antitrust class actionsMike Scarcella — March 15, 2023
  133. 434Tesla accused in lawsuit of monopolizing parts, repairsMichelle Thompson — March 17, 2023
  134. 442NewsTesla hit with class action lawsuit over alleged privacy intrusionHyunjoo Jin et al. — April 10, 2023
  135. 444NewsChina had access to Tesla employees' data, whistleblower claimsJames Titcomb — December 11, 2023
  136. 452Buffalo Billion audit: shock and ughJim Heaney — August 24, 2020
  137. 456NewsElon Musk Sets Ambitious Goals at Tesla – and Often Falls ShortSusan Pulliam et al. — August 15, 2016
  138. 459Tesla Model 3 delivery delayed againRuss Mitchell — January 9, 2018
  139. 460NewsWhat Will Tesla And Elon Musk Over Promise Next?Damon Lavrinc — December 17, 2014
  140. 461Tesla CEO Elon Musk: The 60 Minutes InterviewLesley Stahl — CBS News — December 9, 2018
  141. 462Tesla's Model 3 earns top safety award | CNN BusinessPeter Valdes-Dapena — September 19, 2019
  142. 465MagazineTIME Best Inventions Hall of FameMerrill Fabry — October 9, 2025
  143. 468NewsTesla is recalling most of the cars it sold in 2016Timothy B. Lee — April 20, 2017
  144. 476Confidential Business Information: Re: PE20-010 – Response to Information Request (First Submission)Jeffrey Quandt — National Highway Traffic Safety Administration — August 14, 2020
  145. 479Tesla recalls 6,000 cars over risk of loose boltsJessica Bursztynsky — CNBC — June 2, 2021
  146. 480Tesla to recall 475,000 cars in the USBBC — December 30, 2021
  147. 485NewsTesla to Recall 362,000 Cars With Its 'Full Self Driving' SystemNeal E. Boudette — February 16, 2023
  148. 488ReportPart 573 Safety Recall ReportNational Highway Traffic Safety Administration — December 12, 2023
  149. 489NewsHow Over-the-Air Updates Are Changing the Auto Recall GameKeith Laing — December 13, 2023
  150. 491NewsTesla's Door Handles Lead to Its Biggest Recall YetAarian Marshall — 2026-08-21
  151. 502NewsTesla Says Car Fire Started in BatteryChristopher Jensen — October 2, 2013
  152. 504NewsFederal Safety Agency Ends Its Investigation of Tesla FiresDanielle Ivory — March 28, 2014
  153. 505NewsThe Tesla Model S: Now With Road Debris-Crushing Titanium!Patrick George — March 28, 2014
  154. 506NewsFederal safety officials probe alleged Tesla battery defectsFaiz Siddiqui et al. — November 1, 2019
  155. 509NewsSelf-Driving Tesla Was Involved in Fatal Crash, U.S. SaysBill Vlasic et al. — June 30, 2016
  156. 516Tesla Must Send Autopilot Data to Feds by October 22Annie White — September 2, 2021
  157. 526NewsResearchers hack a Tesla Model S, bring car to stopSamantha Masunaga — August 6, 2015
  158. 539NewsTesla hit with proposed class action over phantom braking issueTom Hals et al. — August 29, 2022
  159. 543NewsDutch watchdog looking into alleged Tesla data breachRiham Alkousaa et al. — May 26, 2023
  160. 555NewsElon Musk's business empire is built on $38 billion in government fundingDesmond Butler et al. — February 18, 2025
  161. 562Other dealers 'stiffed' as Tesla claimed rebatesMARCO CHOWN OVED — March 7, 2025
  162. 567NewsTeslas turn toxic as sales crash in Europe and the UKJonathan M. Gitlin — February 5, 2025
  163. 571News'Don't buy a Swasticar': Elon Musk is wrecking Tesla's brandProinsias O'Mahony — March 2, 2025
  164. 576NewsMusk mocked in Tesla 'Swasticar' poster at London bus stopJordan Liles — February 26, 2025
  165. 579NewsTesla shares slump after European sales fallTom Espiner — February 26, 2025
  166. 580Tesla sales down 49% across Europe in AprilRobert Lea — May 27, 2025
  167. 581Tesla produces its 1 millionth electric carFred Lambert — March 9, 2020
  168. 583The Tesla Model Y is now the world's bestselling carJess Weatherbed — May 26, 2023
  169. 586NewsTesla Bets on Bitcoin in Blue-Chip Boost to CryptocurrencyBloomberg L.P. — February 8, 2021
  170. 594Tesla, Inc. TSLA on NasdaqUS Securities and Exchange Commission
  171. 601NewsTesla investors seek stronger boardroom controlsRichard Waters — April 12, 2017
  172. 603NewsTesla names close Musk friend Larry Ellison to boardSonam Rai et al. — December 28, 2018
  173. 605NewsTesla Investors Elect Former Executive JB Straubel to BoardDana Hull et al. — May 16, 2023
  174. 607More Background On New Tesla Chair Robyn DenholmMaximilian Holland — November 8, 2018
  175. 610NewsRobyn Denholm replaces Elon Musk as Tesla's board chairLora Kolodny — CNBC — November 8, 2018
  176. 614NewsTesla Announces Departure of 4 Board Members Ahead of a Really Big WeekEric Wesoff — Greentech Media — April 22, 2019
  177. 615NewsTesla adds billionaire Airbnb co-founder Gebbia to boardNiket Nishant et al. — September 28, 2022
  178. 616Tesla appoints Airbnb co-founder to boardKirsten Korosec — September 28, 2022
  179. 617NewsGlass Lewis recommends vote against Tesla board nominee JB StraubelHyunjoo Jin — Reuters — April 27, 2023
  180. 618Tesla, Inc., Form 8-KMay 15, 2025
  181. 622BookElon Musk: Tesla, SpaceX, and the Quest for a Fantastic FutureAshlee Vance — HarperCollins — 2015

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