W19186 The Telsla Case Study was downloaded from the Ivey Business School Website through legitimate means, and for the sole purposes of peer research and peer study. Any subsequent selling or purchasing of this material is strictly prohibited and is not intended as the original purpose of communication for this material. This notice should not be removed. TESLA INC.: STRATEGIC PARTNERSHIPS FOR GROWTH1 Ken
Mark wrote this case under the supervision of Professor Cara Maurer
solely to provide material for class discussion. The authors do not
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Publishing, Ivey Business School, Western University, London, Ontario, Canada, N6G 0N1; (t) 519.661.3208; (e) cases@ivey.ca; http://www.iveycases.com. Our goal is to publish materials of the highest quality; submit any errata to publishcases@ivey.ca. Copyright 2019, Ivey Business School Foundation Version: 2019-05-03 In January 2018, Tesla Inc. (Tesla) was a key player in the global luxury automobile industry. The company had once been seen as a niche player in a small industry segment, but those days were in the past. It was now beginning to deliver its mass-market Model 3 sedan, and this milestone marked its move from a niche producer of eclectic and expensive electric cars to a major American automobile manufacturer.2 Tesla had grown through a combination of managerial talent, led by chief executive officer (CEO) Elon Musk and his team; capital from the public and private markets; and key partnerships that provided complementary technology.3 In the past, the company had partnered with future rivals such as Daimler AG and Toyota Motor Corporation (Toyota) and with multinational firms such as Panasonic Corporation (Panasonic). Tesla had pursued partnerships, even though the record showed that Musk preferred to maintain complete control of his companies’ destinies, avoiding outside collaboration and mergers. Musk himself was on record as saying he did not like partnerships in general because they were complicated and they seldom worked.4 The stakes were high as Tesla moved into regular production of its Model 3. Worldwide demand for electric vehicles was set to soar after reaching the 2 million milestone in 2017—up 60 per cent from 2016. The International Energy Agency estimated that there would be 140 million electric cars globally by 2030.5 The challenge for Musk was to define Tesla’s future partnership strategy and to determine what would become of its tie-ups with its global partners. THE GLOBAL VEHICLE INDUSTRY Since its adaptation for the automotive market in 1879 by Karl Benz,6 the internal combustion engine (ICE) had been the dominant technology in the global vehicle industry. The ICE generated power by igniting a mixture of petroleum or oil and air inside chambers and using the hot gases to power pistons. In turn, pistons and gears transferred this energy into forward motion. The ICE was inefficient at converting fuel into usable energy, achieving only about 20 per cent thermal efficiency—the measure by which the industry calculated the percentage of the total energy in fuel that was actually converted into motive power.7 The search for a more efficient engine began with the oil crisis in 1973, when members of the Organization of the Petroleum Exporting Countries (OPEC) imposed an oil embargo against the United States. The first Page 2 9B19M033 electric-powered car was the EV1, launched in 1996 by the General Motors Company (GM). Unfortunately, the EV1’s short range and long recharging time earned it a spot on Time’s 2008 list of the “50 Worst Cars of All Time.”8 The next year, 1997, Toyota launched the Prius, which would become the first successful energy-efficient vehicle. The Prius was a petrol–electric hybrid car that combined an ICE with a high-torque electric drive motor, a separate generator, and a nickel-metal hydride battery pack.9 The race to develop a commercially viable battery electric vehicle (BEV) began in the early 2000s as battery technology improved. BEVs worked by using electricity stored in powerful batteries to power electric motors. As there was no ICE, a BEV was significantly less complicated than a hybrid car, and it produced no exhaust. A BEV incorporated additional technology to minimize energy waste. For example, the car would be switched off when it was stopped, and regenerative braking technology allowed energy to be recovered during the braking process.10 Worldwide, 79.5 million passenger cars were sold in 2017:11 6.3 million cars were sold in the United States12 and 24.7 million cars were sold in China.13 When including the other types of passenger vehicles available—light-duty trucks, sport utility vehicles, and cross-over vehicles—the market for passenger vehicles in the United States totalled 24.4 million vehicles in 2017.14 Global sales of BEVs were expected to break the 1 million unit mark for the first time in 2017.15 THE GROWING DEMAND FOR ELECTRIC VEHICLES Electric vehicles were becoming more viable and more popular due to advances in technology. Starting in 2009, battery costs declined by a factor of four and battery energy density increased six times. In addition, an estimated 2.3 million charging stations were available globally in 2016. These charging points allowed owners of electric vehicles to recharge their cars during visits to shopping malls or doctors’ offices, for example.16 Approximately 200,000 electric cars were sold in the United States in 2017.17 China was the world’s biggest market for electric cars, with 600,000 units sold in 2017, up 71 per cent in one year.18 The Chinese market was dominated by local brands including the BAIC EC-Series, the market leader with 78,079 units sold, and the Zhidou D2 EV, with 42,342 units sold.19 In September 2017, China indicated that as part of a change in industrial policy, it would require foreign automakers with manufacturing locations in China to build electric vehicles by 2019. Large automakers set their targets high: GM planned to offer 10 models of electric vehicles in China by 2020; Volkswagen Group stated a target of selling 1.5 million electric cars in China alone by 2025; and Ford Motor Company and the Renault-Nissan-Mitsubishi Alliance announced Chinese joint ventures to build electric cars.20 In 2016, China accounted for one-third of global car sales—about 28 million units—an increase of 13.7 per cent over the previous year.21 In the first half of 2017, the best-selling electric cars in China sold between about 6,000 and 18,000 units each (see Exhibit 1). China’s goal was for 11 per cent of all cars sold, or about 3 million vehicles per year, to be electric models by 2020.22 The country was also building out the infrastructure necessary to support the growth of electric vehicles. In March 2017, China had 156,000 charging points across the country, compared with 43,000 in the United States. By 2020, China intended to have 4.8 million charging points.23 In a sign that Chinese firms were looking beyond local automotive players, Tencent Holdings Limited (Tencent), a large Chinese technology firm, acquired a 5 per cent stake in Tesla on March 28, 2017. Tencent’s investment served to reinforce the importance of strategic partnerships in Tesla’s founding and emergence as only the fourth major American automaker in the last century. With Chinese interest in electric cars on the rise, Tencent’s investment seemed timely.24 Page 3 9B19M033 TESLA’S HISTORY OF PARTNERSHIPS Tesla was founded by Martin Eberhard, Marc Tarpenning, J. B. Straubel, and Ian Wright. Tarpenning observed that, by the early 2000s, car makers had outsourced the majority of their parts development and sourcing, keeping just three technologies in-house: “internal combustion research, sales and marketing and final assembly.”25 In January 2004, the co-founders looked to raise a round of capital in support of their plan to build a powerful electric car around licensed drivetrain technology from AC Propulsion. AC Propulsion had created a prototype car called the tzero but had decided to focus instead on another electric car project based on a Toyota model, the Scion xB.26 Musk, who had been excited by the prospects for electric cars ever since building models as a child,27 became both the start-up’s largest investor by contributing $6.35 million28 and the firm’s chairperson.29 In 2006, Eberhard explained the partnership with Lotus Engineering Inc. (Lotus): For those of you who don’t know, the Lotus Elise’s chassis is a work of genius. Some have suggested that the Tesla Roadster is built on a Lotus chassis. This is not true. Tesla licensed the Elise chassis technology, but Tesla’s UK-based chassis engineering team designed the Roadster’s chassis using that technology. . . . Tesla has built a strong, friendly relationship with the team at Lotus, focused primarily on bringing a great new sports car to the market quickly and efficiently. . . . Tesla has licensed key technology from Lotus, principally related to structure and safety Tesla has contracted Lotus Engineering for various engineering and styling jobs Lotus Cars is the contract manufacturer for the Tesla Roadster, with Tesla as a key supplier to the factory in Hethel [England]30 However, Eberhard’s goals for Tesla—to be selling Roadsters by 2006 and to be profitable by 2008—were overly optimistic. Eberhard’s original plan was to drop Tesla-designed drivetrain components into a stock Lotus Elise “glider,” or chassis, and then finish the car with customized technology and body panels. Tesla itself was to have been responsible for just five subassemblies in the Roadster, with Lotus providing the rest of the parts and installation. But attempts to improve the Roadster—by adding customized headlights and a carbon-fibre body, for example—meant that Tesla took responsibility for hundreds of subassemblies, introducing complex processes—such as reworking engineering, sourcing materials, and retooling so that new parts could be made—which a start-up could not handle.31 By August 2007, Musk realized his venture was at stake, ousted Eberhard, and appointed himself as president of technology. He took steps to assert his authority over Tesla, even working to recast his role as a key contributor at the firm, even though he had been the chairperson:32 The way that my role has been portrayed to date, where I am referred to merely as “an early investor” is outrageous. That would be like Martin [Eberhard] being called an “early employee.” Apart from me leading the Series A & B and co-leading the Series C, my influence on the car itself runs from the headlights to the styling to the door sill to the trunk, and my strong interest in electric transport predates Tesla by a decade. Martin should certainly be the front and center guy, but the portrayal of my role to date has been incredibly insulting. I’m not blaming you or others at Tesla—the media is difficult to control. However, we need to make a serious effort to correct this perception.33 Page 4 9B19M033 A new CEO, Michael Marks, was installed in the summer of 2007. Marks had been CEO of Flextronics International Ltd. (Flextronics), a contract electronics manufacturer. He had experience growing firms, having taken Flextronics from $93 million in revenues to $16 billion. In addition, Marks invested $2.5 million in Tesla in 2007.34 Marks set out a list of priorities for Tesla’s operations team, focusing on the battery pack, the battery cooling system, and the transmission. He narrowed Tesla’s scope, eliminating a side unit that was producing batteries for other companies, and delayed the opening of Tesla’s factory in New Mexico.35 In November 2007 Marks was replaced by a new CEO, Ze’ev Driori. Driori had experience building and selling both a semiconductor firm (sold to Applied Micro Devices) and an electronic auto security firm (sold to Allstate Insurance Company). While no public reason was provided for Marks’s departure, Musk stated that he wanted someone with experience taking a firm through the initial public offering process and someone with Silicon Valley experience.36 Tesla released its first vehicle, the Tesla Roadster, in February 2008. Preparing to Launch the Model S Musk, who was guiding Tesla’s development, earmarked $130 million to create, engineer, launch, and put into production the company’s Model S, with a target of 10,000 vehicles a year. This estimate was a significant cost reduction; a typical automaker would spend $1 billion and commit thousands of employees for a new model, designed from scratch. Musk aimed to achieve this goal by keeping as much of the work as possible in-house, making up for the company’s “lack of R&D money by hiring smart people who could outwork and outthink the third parties relied on by the rest of the automakers.”37 Musk replaced Driori, appointing himself CEO in December 2008. He referred to the unfolding economic malaise—later dubbed the Great Financial Crisis—as his reason for ousting Driori and naming himself CEO.38 Facing a working capital shortage the same month, which threatened to bankrupt his firm, Musk personally invested $20 million to keep Tesla going. For Musk, it was an all-or-nothing bet on Tesla’s future.39 Relying on Key Partnerships to Provide Funding and Infrastructure Tesla was not a typical car manufacturer that had gone it alone, developing a new product internally based on its own technology. A large part of its success was because it had been able to secure partnerships along the way and had managed and maintained the partnerships so as to generate value for both sides. Tesla had deals with more than 10 major entities, harnessing expertise, infrastructure, and capital. In January 2009, a few weeks after the financing closed, Musk seized an opportunity for a discounted spot at the North American International Auto Show in Detroit, showing up at a time when other automakers were declining to attend. Displaying the Roadster and its electric powertrain helped Tesla attract the attention of Daimler, and the two firms partnered to create an electric version of a Daimler smart car. Daimler also gained a 10 per cent stake in Tesla by investing $50 million.40 The validation by one of the industry’s largest automakers seemed to help persuade the U.S. Department of Energy to provide a $465 million loan to Tesla in January 2010. A third piece of good news arrived in April 2010, when Tesla acquired GM and Toyota’s New United Motor Manufacturing Inc. (NUMMI) factory in Fremont, California. GM and Toyota had spent $1 billion to develop NUMMI but closed the plant in 2009 as a result of the recession and GM’s bankruptcy. Toyota, in late 2009, was preparing to make all of its workforce at NUMMI redundant when Tesla stepped in and bought the plant for $42 million. As part of the deal, Toyota invested $50 million for 2.5 per cent of Tesla and agreed to work with the firm to produce an electric sport utility vehicle (SUV) based on Toyota’s RAV4 platform.41 Page 5 9B19M033 To add to its cash reserves, Musk took Tesla public on June 29, 2010, raising $226 million. The company, with no near-term cash issues, focused on bringing the Model S to production.42 Panasonic Provides the “Heart” of the Car Tesla deepened its partnership with Panasonic in October 2011, securing a supply of automotive-grade lithium-ion battery cells to build up to 80,000 Model S cars in the following four years. Tesla’s collaboration with Panasonic began in 2009 with a supply agreement for battery cells for 6,000 cars, and Panasonic had built upon that agreement with a $30 million investment in Tesla stock in 2010. Importantly, the October 2011 agreement meant that Tesla would be able to deliver on its cost and margin targets for the Model S.43 In remarks made to the Japanese press in September 2014, Musk emphasized the significance of Panasonic’s involvement in Tesla’s cars: “An important point that I should emphasize about the Model S is that the batteries are all made in Japan. . . . Because the battery is the ‘heart’ of an electric car, . . . the heart of Model S is Japanese. I think that’s a pretty cool thing.”44 Musk Reaches Out to Google The first Model S sedans were delivered in June 2012, to much fanfare. The base 85-kilowatt hour model retailed for $77,400 and had an estimated range of 350 miles (563 kilometres).45 However, instead of selling 10,000 cars46 as Musk had forecast, the company delivered only 3,000 by the end of 2012.47 By February 2013, Tesla was facing another working capital deficit. Due to negative publicity from the first Model S deliveries—mostly due to complaints about workmanship and battery issues—Tesla was having trouble converting $5,000 Model S reservations into sales. The situation became so tenuous that Musk entered into a handshake deal with Larry Page, the co-founder of Google, to sell Tesla to Google for what was thought to be $6 billion, with the understanding that Google would provide an additional $5 billion in capital to fund the firm and would guarantee that Musk could continue to be involved. He had agreed to sell Tesla because the company was running short of cash. Meanwhile, Musk rallied his employees, temporarily reassigning them the job of closing sales. He was desperate: “I don’t care what job you were doing. Your new job is delivering cars.”48 The last-chance appeal was a success, and the 500 reassigned employees helped drive Tesla to its first quarterly profit, $11 million, on May 8, 2013. Tesla’s shares rose from $30 to $130 by July 2013. The deal with Google was scrapped.49 Broadening Tesla’s Reach By June 2014, Tesla shares broke through the $200 mark. Taking advantage of this momentum, Musk delivered a surprising announcement: Tesla’s patents would be open-sourced. In a blog post entitled “All Our Patent Are Belong to You,”50 Musk stated that he used to believe in creating and holding patents as a way to erect barriers to entry. At Tesla, he changed his mind, believing that the firm’s ability to attract talent would differentiate it from the rest: Technology leadership is not defined by patents, which history has repeatedly shown to be small protection indeed against a determined competitor, but rather by the ability of a company to attract and motivate the world’s most talented engineers. We believe that applying the open source philosophy to our patents will strengthen rather than diminish Tesla’s position in this regard.51 Tesla aimed to build a manufacturing cluster by attracting automotive suppliers to Silicon Valley and Fremont. This location was far from traditional automotive clusters such as Detroit, and therefore Page 6 9B19M033 represented a commitment by these suppliers to Tesla’s business model.52 These automotive parts manufacturers and technology firms included Cypress Semiconductor Corporation, SolarCity Corporation (SolarCity), Methode Electronics Inc., Kennerly-Spratling Inc., AGC Automotive, South Bay Solutions Inc., Tentex, A&P Solutions, AMAX Information Technologies Inc., Dimensional Control Systems Inc., and Autodesk Inc. (see Exhibit 2). Even electric car competitors Faraday&Future Inc. and Atieva decided to locate their offices in the vicinity. Tesla’s success attracted new partners, some of whom were not even in the electric car industry. In 2015, the utility company Southern California Edison teamed up with Tesla to build a 20-megawatt lithium-ion battery storage facility to store and deliver electricity. The contract’s value was purported to be around $45 million.53 In November 2016, Tesla expanded its scope by acquiring SolarCity, an installer of rooftop solar panels run by Musk’s cousin Lyndon Rive. After the transaction, Musk personally owned 22 per cent of SolarCity as well as 21 per cent of Tesla’s shares. More than 85 per cent of Tesla shareholders voted in favour of the acquisition.54 While the offer valued SolarCity at $2.1 billion,55 Tesla’s market value declined by $4.8 billion in the time between the acquisition announcement and SolarCity’s acceptance of the deal.56 Musk explained the rationale behind the acquisition: “We’re trying to make an integrated product. So you have an integrated solar roof with a Powerwall57 and an electric car, and you just go into a Tesla store, just say yes, it just happens. It all works, it’s seamless and you love it.”58 With the objective of developing innovative dies to shape aluminum—which was difficult to work with— Tesla partnered with Fuji Technica & Miyazu Inc., a Japanese supplier of dies, to design the tools to make the Model S possible. Tesla required a partner that could produce aluminum panels that retained an aesthetically pleasing, smooth curve. The choice of aluminum was deliberate: it was a lightweight metal, helping Tesla deliver longer range for its vehicles.59 Tesla Sells Direct to Consumers Tesla’s founders had always wanted to sell directly to consumers because of the value the company could gain from customer feedback—information it would not be able to rely upon if its cars were sold through dealerships.60 Musk realized that traditional dealers would be interested in protecting existing sales, and that it would be difficult for them to tout the benefits of an electric car without undermining their business of selling cars driven by internal combustion engines. He also noted that, before stepping into a car dealership, most car consumers had either conducted research or had an idea of the type of car they wanted to buy. The only issue left to resolve was the price at which they could buy the car from the dealer. Musk concluded that selling through dealerships would offer little opportunity, given the interests and incentives on both sides, to educate consumers on the benefits of a Tesla.61 He offered an alternative: to sell Teslas through company-owned stores: That is why we are deliberately positioning our store and gallery locations in high foot traffic, high visibility retail venues, like malls and shopping streets that people regularly visit in a relatively open-minded buying mood. This allows us to interact with potential customers and have them learn about our cars from Tesla Product Specialists before they have decided which new car to buy. The Product Specialists are also trained to answer questions about electric vehicles in general, not just ours. They are not on commission and they will never pressure you to buy a car.62 At the start of 2012, Tesla had 10 stores, one gallery, and nine service centres in the United States. By the end of that year, this collection had grown to 19 stores, 3 galleries, and 26 service centres.63 In June 2016, Tesla partnered with Nordstrom Inc., a high-end retailer, to offer an electric car boutique in the men’s section at its Page 7 9B19M033 store in The Grove in Los Angeles. This store-within-a-store concept was discussed in detail before it was approved by both firms. In November 2016, a second Tesla boutique opened in Nordstrom’s SouthPark store in Charlotte, North Carolina (see Exhibit 2).64 Here was Tesla’s official comment on the venture: Tesla and Nordstrom share a relentless drive to engage and delight customers with new and innovative shopping experiences. ……. The Nordstrom shopper embodies a lifestyle that parallels that of many Tesla owners—people who are forward-thinking, savvy, and curious to explore the latest and best trends.65 Yet as of late 2017, there were no further announcements about Nordstrom and Tesla’s partnership. In some states, such as Texas, it was illegal for Tesla to circumvent the automotive dealerships. Despite hiring 20 lobbyists and making $150,000 in campaign contributions, Musk was unable to gain permission to sell Tesla cars direct to consumers in Texas.66 Connecticut Senate Majority Leader Bob Duff tabled a bill in February 2016—for the second year in a row—to allow the sale of electric vehicles directly to consumers, without going through the franchise dealership model.67 However, Duff’s efforts were blocked by GM and its local dealership association, which successfully lobbied legislators not to support the bill.68 Tesla had 265 sales and service locations globally at the end of 2016.69 Tesla Prepares the Model 3 for the Mass Market Tesla announced that it would launch its third-generation, mass-market vehicle, the Model 3, on March 31, 2016. The car’s starting price was $35,000, and it had a range of 215 miles (346 kilometres) on a full charge. Within an hour and a half of the announcement, 15,000 pre-orders had been placed by buyers who each put down $1,000 as a deposit. By the start of April 2016, Tesla had 130,000 pre-orders for the Model 3.70 By May 2016, Tesla had 373,000 pre-orders, and by September 2016, it was holding nearly $690 million in cash from customers’ deposits. An automotive analyst, Sandy Munro, estimated that Tesla’s Model 3 had margins of over 30 per cent.71 Musk took the unusual step of “anti-selling” the Model 3: it would not offer test drives and would not advertise the model for six to nine months, beginning in May 2017. He intended to convince potential customers to select the Model S and hoped to dispel the notion that the Model 3 was an upgrade to the Model S: “Model S will be better than Model 3, as it should be because it’s a more expensive car.”72 Tesla began delivering Model 3 cars on July 28, 2017. The Model 3 was touted as the car that would finally nudge Tesla into profitability—a significant milestone that would herald the company’s entry into the ranks of both global and independent automakers. Musk was not unaware of the challenges that still lay ahead for Tesla. Speaking to his employees on July 31, 2017, he said, “We’re going to go through at least six months of manufacturing hell. Welcome. Welcome to production hell.” But Musk was not afraid of falling short. He had once said, “Failure is an option here. If things are not failing, you are not innovating enough.”73 Meanwhile, Tesla continued to expand its Supercharger network to support its growing number of cars. In 2015, Tesla had 584 Supercharger locations around the world and a total of 3,400 Supercharger stalls. It valued its Supercharger network at $339 million.74 By 2017, it aimed to have 7,200 Supercharger locations around the world. It cost Tesla about $197,000 to set up each new location, and the company spent $40.6 million to build Supercharger locations in 2016. For comparison, Tesla’s total capital expenditures in the same year were $1.3 billion.75 Operating costs for Supercharger locations were “immaterial,” Page 8 9B19M033 according to Tesla, and the costs were allocated to its cost of goods sold and to selling, general, and administrative expenses.76 To encourage users to use its stations efficiently, Tesla introduced a $0.40 per minute “idle fee” that would be charged five minutes after the car was fully recharged.77 ELON MUSK Musk, born in South Africa, had suffered through a tough childhood as the target of bullies and the son of a disciplinarian father. Later in life, he pointed to his difficult upbringing as a reason why he was able to work punishing hours leading three large companies: Tesla, SolarCity, and Space Exploration Technologies Corp. (SpaceX).78 After leaving home, he enrolled at Queen’s University, then transferred to the University of Pennsylvania, where he completed a dual degree in physics and economics.79 While he was a student, he and a friend had cold-called a high-ranking executive at the Bank of Nova Scotia in Toronto and secured a summer internship reviewing the bank’s emerging market bond portfolio.80 Then in 1995, two days into his program, Musk abandoned a Stanford doctorate program in applied physics and materials sciences to co-found Zip2, an online city guide and mapping firm, with his brother. Key to Zip2’s growth was getting the code for navigation software—for free—from Navteq, a firm that developed Global Positioning System (GPS) products.81 Musk invested about half of the $22 million gain he had realized from the sale of Zip2 into X.com, an online financial services company. As with Zip2, Musk knew next to nothing about the intricacies of the banking and financial industry. He just had a hunch he could do it better.82 X.com, which provided banking services, merged with its competitor, Confinity Inc., which had a new product called PayPal. However, as X.com gained traction in the market, it began losing even more money as a result of the increased transaction volume. In September 2000, the board ousted Musk from his position as CEO of the combined entity. Nevertheless, he continued to stay involved as an advisor and even increased his stake in the venture.83 When eBay Inc. paid $1.5 billion for PayPal in July 2002, Musk walked away with $250 million. He used that money to start SolarCity, SpaceX, and to become an investor in Tesla.84 Musk was well known as a trailblazing entrepreneur. He had steered Tesla from a concept to its current position as a premier luxury electric car company. His SolarCity venture, run by his cousins, focused on leasing solar-power systems to homeowners.85 SpaceX had contracts with governments to launch payloads into space using its Falcon Heavy rocket technology. Musk insisted he would land a Tesla on Mars one day. This announcement had the added benefit of signalling to NASA that SpaceX was readying its rockets to make the trip to Mars, should the space agency require it.86 Musk stated in a 2006 blog post, humorously entitled “The Secret Tesla Motors Master Plan (Just between You and Me),” that “the overarching purpose of Tesla Motors (and the reason I am funding the company) is to help expedite the move from a mine-and-burn hydrocarbon economy towards a solar electric economy, which I believe to be the primary, but not exclusive, sustainable solution.”87 With his many innovative ventures and ambitious goals, it was remarkable that Musk seemed to manage his businesses directly. He did not insulate himself from the front line of the business, for example by surrounding himself with multiple layers of managers. As Musk’s biographer noted, “Most high-profile CEOs have handlers all around them. Musk mostly moves about Musk Land on his own.”88 TESLA LOOKS TO THE FUTURE Tesla, a company that had raised its first, Series A round of funding in February 2004, was now seen as a legitimate challenger to the world’s premier car brands. Yet Tesla still had many hurdles to overcome. In Page 9 9B19M033 the United States, the automotive dealer network continued to fight Tesla in several key states to prevent it from selling vehicles directly to consumers. Tesla had shouldered the burden of creating its own Supercharger network, recharging stations at which Tesla owners could refuel their cars. But while owners were initially offered use of the Supercharger network for free, Tesla took steps to introduce fees and penalties in an effort to defray the network’s operating costs, a move that concerned them.89 Tesla’s Gigafactory was the first attempt to bring battery manufacturing in-house, albeit with support from Panasonic, the company’s long-term battery partner. The Gigafactory was focused on producing batteries for the upcoming Model 3. Tesla announced that the Gigafactory would be built with an estimated price tag of between $4 billion and $5 billion, the majority of it provided by Tesla. At the start of 2016, Panasonic announced that it would be investing up to $1.6 billion in the Gigafactory.90 Six months later, Panasonic raised its stake in the Gigafactory after it raised $3.86 billion by issuing corpor
