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Are electric vehicles the ‘bet of the century’? Journalist Tim Higgins on the rise of Tesla and the visionary leadership of Elon Musk

Podcast & Video

Tim Higgins is an automotive and technology reporter at The Wall Street Journal who has documented the remarkable success of electric automaker Tesla in his best-selling new book, Powerplay: Tesla, Elon Musk, and the Bet of the Century. He joins today’s episode of Hub Dialogues to discuss Tesla’s history and future trajectory, Elon Musk’s visionary leadership, and whether or not the future of the automobile is electric.

You can listen to this episode of Hub Dialogues on Acast, Amazon, Apple, Google, Spotify, or YouTube. A transcript of the episode is available below.

Transcripts of our podcast episodes are not fully edited for grammar or spelling.

SEAN SPEER: Welcome to Hub Dialogues, I’m your host, Sean Speer, editor-at-large at The Hub. I’m honoured to be joined today by Tim Higgins, an automotive and technology reporter at The Wall Street Journal, and author of the best-selling new book, Powerplay: Tesla, Elon Musk, and the Bet of the Century. Thank you for joining us, Tim, and congratulations on the book’s success.

TIM HIGGINS: Well, thank you. It’s an honour to be on.

SEAN SPEER: Let’s just set the stage for our listeners. Tesla wasn’t the first to conceive of the idea of electric vehicles. Your book notes, for instance, that General Motors had experimented with a model as early as the late 1990s and early 2000s. Pre-Tesla, what were the tradeoffs or obstacles standing in the way of building electric vehicles at something approximating scale? 

TIM HIGGINS: Yeah, the idea of an electric car goes back to almost the early days of the automotive industry, more than 100 years ago. But gasoline-powered vehicles won out for generations and generations. As the world started to think about climate change, carbon emissions, and these sorts of things, there was greater pressure in places like California to start thinking about zero-emission vehicles. 

And that’s where you see General Motors emerge with an early idea for what could potentially be a mainstream electric vehicle. It comes out for the California market and it’s a good example of what was wrong with thinking of electric cars at that point in time. It had a lot of compromises. It was struggling to balance these issues of cost of the batteries, which were very expensive versus the range and the ability of the car. 

Ultimately, GM killed that project, despite the fact that it has some very loyal customers in the California market. And that loyalty helped inspire some of the early people at Tesla to think, “Well, maybe there is a market for electric cars.” But the insight that the early Tesla people had was: start at the high end. Start an electric car that would be sexy and aspiring to have and that would make people see that an electric car was possible.”

And that’s really where you see Tesla emerged in 2003, as a startup in Silicon Valley, trying to bring about a cool two-seat sports car that was all-electric, that would change the notion of what an electric car could be: that it wouldn’t be a compliance car or that it wouldn’t be a golf cart. Instead, it could be something that you would take out on a Friday night date and impress your friends with.

SEAN SPEER: Yeah, let’s press that point a bit further. As you say, I think for many in the industry, the assumption was that those interested in electric vehicles were cost-conscious buyers who were looking for vehicles that would reduce the maintenance costs. And one of the interesting choices that Tesla makes early on, even before Musk takes over as CEO, was to prioritize the development of a high-end roadster. 

That may seem counterintuitive for some of our listeners. One might think you’d want to build a vehicle for a broader segment of the population before going more specialized and niche. How was the choice to pursue a high-end roadster wrapped up in the idea of selling a vision of a new exciting and different future?

TIM HIGGINS: Yeah, you hit it on the head there. The conventional thing was in order for this to be- become something that was viable, car companies were thinking about how they could get scale with the batteries. And in order to do that they needed to sell a lot of them. And how do you sell a lot of cars? You make it affordable. Kind of the idea at that period of time was cost-conscious people would be buying these vehicles, whereas Tesla was thinking in a different way: the trendsetters, the early adoption of the newest technology starts at a higher price point typically. 

Think about the iPhone. The iPhone is very expensive compared to other phones out there and their newest technology starts at the higher price and kind of steps its way down to the masses. And that’s how it actually had been for years in the automotive industry. Think about the way General Motors introduced technology through its Cadillac brand, and then bring it to the masses eventually to Chevrolet. This is how these things occurred, in part, because early adopters are willing to spend more, people who are conscious of little latest trends or want to project who they are through something as cool as a car. They’re willing to spend more. 

So, another insight that Martin Eberhard, who was the founding CEO, had—he was a guy that came out of personal electronics and been steeped in Silicon Valley for a number of years. He was also interested in cars and sports cars and he knew, from personal experience, that if you have a sports car in your garage and it’s not your daily driver, that you’re going to be willing to perhaps overlook some of its eccentricities because it was something cool that you were taking out on the weekends. Maybe just a little bit more willing to forgive. That realization was that the early cars were probably going to be a challenge and they might not be perfect, but people would be willing to overlook that.

That was really very helpful because what you see with those early Roadster buyers, that’s the car that they eventually came out with at Tesla, was that they were very loyal. Some of them were motivated by green technology. But some of them were motivated purely because it was, they thought, a cool car, and they had bought into the brand. These people were very forgiving in the early days, but the car was delayed. It cost more than originally thought it was going to cost and didn’t necessarily have all the refinements you might expect to see in a $100,000 car, but you were buying into something that was perceived as cool. 

That perception was very critical for Tesla early on, and even to this day because you think about other brands in the automotive industry—Jeep, for example—they’ve created a brand. People are willing to pay extra for it, they’re willing to kind of jump through hoops for it. One of the key things, insights that Tesla had early on was how to make something cool that could also happen to be an electric car. You really see that with the development of their Model S, which is their next vehicle that Elon Musk was really pushing the team to make the best car out there, that just happened to be electric and that there wouldn’t be compromises. That if you are buying it, you weren’t saying “Oh, it’s an electric car, but it’s cool.” You were saying “This is a Model S, it’s cool. And oh yeah, it’s electric too.”

SEAN SPEER: We’ll come back, Tim, before we wrap up, to the issue of the kind of culture and philosophy of Tesla and how it’s wrapped up to its brand in the consumer market.

But maybe one more scene-setting question. You alluded in your last answer, that notwithstanding Musk’s inextricable link with Tesla, it wasn’t his initial conception. He didn’t actually start the company. Do you want to just talk a bit about how Musk came to be involved in Tesla, and how he ultimately took it over?

TIM HIGGINS: Yeah, the founding story of Tesla is messy, it’s not black or white. Musk was interested in the electrification of the automobile. He was thinking about trying to convert a sports car into an electric vehicle. He was having these ideas but his love at that period of time was, and his attention was focused on, his startup—which we know as SpaceX, a rocket company with the idea of taking humanity to Mars—he had set up in Los Angeles. He had created a fortune from his involvement with what we now know as PayPal. And that’s kind of where his life’s work was at that point in time. 

Meanwhile, in Silicon Valley, you had Martin Eberhard and his friends thinking about this electric car, and this market. By happenstance, the two, Martin and Elon, are connected and Elon becomes the biggest investor and becomes the chairman. So, without Elon, there probably wouldn’t have been a Tesla. But, the early ideas of Tesla Motors Inc. were founded months before the two met. Now, they hadn’t gotten really off the ground at that point and really was nothing probably more than a business plan and a small office. But the early days of Tesla were largely shaped by Martin Eberhard, who built a team. A lot of the team were people he had worked with on his previous startup or people he knew in the community. 

But one of the key hires for Tesla—and really considered a founder—was a man named JB Straubel. At the time, he was really just a recent college grad from Stanford. He’d gotten a master’s and an undergraduate degree and he had actually previously met Elon and had sold him on the idea of having an electric car and was trying to raise a little bit of money to create essentially a prototype that JB thought could show the world that an electric car was possible and maybe get people excited for it. Once JD realized that Elon was funding Tesla, he got on board and was really, really integral in the development of the battery technology that would be the real secret sauce of Tesla. 

Tesla was founded on the belief that they could take off-the-shelf batteries that were already being made for laptops and repurpose them for a car, which would give them the scale needed to bring the cost down and make the car eventually affordable. Now, things didn’t quite work out that way. But, you know, the basic framework was there. And so, they use lithium-ion cells—they would take these fat finger-sized cells—they’d have to string together thousands of them to get enough juice to power the car. They put it in a battery pack they would manage with software. JB and his team, he put together a team from a lot of people from Stanford that he knew, and they developed that technology, and the key breakthrough was the management of the heat that those cells produced or could produce. 

The challenge, and why the traditional auto industry hadn’t gone down this route, was essentially the auto industry was always looking for the perfect technology in the battery cell. And the problem with that it was either too expensive or didn’t quite have the range. Whereas the lithium-ion cell was there, it was a known thing. And the industry was concerned that it might be too volatile, that it might be dangerous, that it can create fires. And in fact, early on, Tesla struggled to get these cells in large quantities, because the battery makers didn’t want to be associated with the car with the fear that it might create fires and put people’s lives in danger. 

And so, JB and Martin and his team really had a struggle with figuring out a way to keep that from happening. They developed this battery pack management system that was really cutting edge and was really the key to Tesla’s technology going forward, essentially allowing the heat from those cells to be dissipated in a way that would not be largely dangerous. That has proven to be the case here. I mean, you occasionally hear about a fire, just like you’ll occasionally hear about a gasoline car having a fire, but they’ve been able to put millions and millions of these cells on the road, and now has pushed the industry toward using lithium-ion cells in different forms or whatnot.

SEAN SPEER: That is such a key point, Tim. One of the most fascinating aspects of the book for me was that if the core battery itself was a conventional technology, the innovative genius of Tesla was to ensure that the cars didn’t turn into driving bombs. This was especially crucial to the company’s trajectory from 2003 to 2008 when Musk takes over.  

You say that when you started on this project in 2018, you thought you were going to be documenting Tesla’s bankruptcy. I have two questions on this point. One, why did you think that at the time? What was the context? And two, what happened? How did you go from a story of a pending bankruptcy to one of the highest valued companies in the world? 

TIM HIGGINS: Yeah, you’re right. It looked pretty bleak for Tesla. In the summer of 2018, you have to remember, this was a period of time when Musk was in the news for a lot of the wrong reasons. The company was about a year behind and struggling to ramp up production of the Model 3 compact sedan, which was really make-or-break that the company had made; that they could bring a relatively affordable electric car to the masses that would essentially recast Tesla from being a niche luxury carmaker to something that could compete against the likes of General Motors, or Ford, or Volkswagen. To get the global scale, they would need not hundreds of thousands of sales a year but millions of vehicles sold a year. And the Model 3, that was really unheard of for the masses. 

When it was revealed in 2016, it was greeted with great excitement. People were literally lining up around the blocks of these stores to put in orders for a car that they’d never driven in and weren’t really clear when it was going to come out. This had built up a lot of anticipation for the vehicle. When production began in 2017, it was much harder than Tesla had expected. You have to remember, they were going from making a relatively small number of vehicles on an annual basis compared to the rest of the auto industry to becoming much bigger in their scope and ambitions. It was tough. The problem for Tesla, going back to the beginning into 2018, was cash. Being in the auto industry is a capital-intensive business. These businesses eat cash for breakfast and if you aren’t paying attention, they can be the end of you. 

That was what it looked like for Tesla in the summer of ’18. Their cash was running low, they were—Elon would not admit it at the time, but now admits that they were pretty close to death, the company was close to the abyss. Really, the key was to get production to a certain level, that they could then sell those cars to generate the cash they needed to keep the lights on. Meanwhile, Elon was burning through executives. At one point in time, that count was more than 50, vice presidents or higher executive rank at the company up and left, either by choice or because he had grown tired of them. Key lieutenants and deputies were gone. He was sleeping on the factory floor trying to hold it all together. Ultimately, the solution to fix their production problems—which were because he believed in turning a lot of the work over to robots and that was a lot harder than he anticipated—was to just start essentially making a lot of the cars not quite by hand, but pretty close to by hand, under a tent outside of the factory, just to untangle the knots. 

So, once they got production going in the summer of 2018, then it was a matter of delivering these vehicles, which was a struggle because they never had dealt with so many cars at one point. That is because it was a race to the street to have these sales or run out of cash. It looked pretty bleak. When I began, that was the scenario. What ultimately occurred was the car started hitting the streets and they were able to keep production going. They were able to get the sales they needed to generate money. But then also, a second thing occurred, which was—the issue was they needed a greater scale to bring costs down but also to generate more money. They were able to get a deal to go into China to open a factory there, to tap the world’s largest auto market—a huge market for electric vehicles, a huge market for luxury vehicles—and really tap into this great potential. And so, with really record time, they were able to open a factory there and start production. 

Those two things, getting production for the U.S. and production on for China, really turned on the spigot and allowed them to meet the goals that they had forecast, surprised a lot of people, and really changed the minds of a lot of people on Wall Street about the future of the car. The investor community had already been betting that Tesla and Elon Musk could potentially be the future, that the electric car was there. But the success that they had in 2020, the mindset changed that the future was going to be electric but it was also going to be heavily dominated by Tesla. 

At least, that was the bet that you saw a lot of people make. It raised the stock price to such levels that the company became one of the world’s most valuable automakers while having just a fraction of the sales. It also solved one of the biggest problems Tesla had from the get-go, that issue of cash, and allowed them to, very cheaply, raise money to build a fortress balance sheet that allows them to perhaps weather that inevitable downturn, but also fuel future growth. Which then helps the stock keep up because investors are seeing the potential for the future. So, really kind of a very unique dynamic that allowed Tesla to get firm footing, unlike they had in 2018 when things looked pretty bleak.

SEAN SPEER: You mentioned, Tim, the embrace of Tesla by both China and Wall Street. How much of Tesla’s success is a reflection of the inherent futurism of Musk’s personal philosophy of progress? That is to say for those buying or investing in Tesla, how much of it is buying into his vision for the future? 

TIM HIGGINS: It’s a huge part of it. I think that Elon Musk is a very unique individual. I mean, he likes to think of himself as an engineer. He likes to talk about how that’s where he likes to focus his time and his attention and I have no doubt that that’s what excites him. But probably the real value that he added to Tesla over the years is his ability to sell his vision for the future, sell it to customers, which was important, but more importantly sell it to investors. To raise the kind of cash needed to keep the company afloat during those troubled times, when they were still learning how to walk. 

Time and time again, Tesla has been able to go to public markets and raise billions and billions of dollars despite the fact that they had years and years of red ink. People bought into what he was selling in part because early on the company had some incredible wins. The Roadster was unlike any electric car that the public had seen before. The Model S was perceived by many to actually be one of the greatest cars of the generation. In the Model 3, while it didn’t deliver on the promise of the low price point that Elon had long talks about, it was pretty close and it was attainable for a lot of people at a time when the average cost of a new car had kind of crept up beyond what it was in the past anyway, and the Model 3 was all of a sudden there in a way that nobody had anticipated before. The ability to deliver on those things was very difficult. 

But there were proof points. And you know, there’s also a lot of people out in the world who are betting against Tesla, because of his bravado and the ego and some of the broken promises or the exaggerations that he’s made over the years. And that creates, in some ways, a lot of drama that the company has to deal with. That drama also generates attention, and that attention helps sell cars sometimes. People know what Tesla is. We’re talking about it here; people are talking about it all over the internet. And Elon has been able to be one of those rare corporate titans who goes from earnings conference calls to being in mainstream publications, gossip magazines, and really a king on social media. His Twitter following is massive, which provides a huge upside at times. Sometimes, it provides a downside when he does things that perhaps are regrettable to the company, but it allows the company to not have to advertise in traditional ways on TV, like General Motors. So, there’s some good and there’s some bad there.

SEAN SPEER: I’ve heard you say that if SpaceX is Musk’s wife, Tesla might be described as his mistress. 

TIM HIGGINS: A spicy mistress!

SEAN SPEER: Let’s just talk a bit about the integration of his various businesses and technologies. To what extent are Tesla, SpaceX, and Starlink connected? How much is he leveraging the R&D technology, or even marketing profiles of these different businesses?

TIM HIGGINS: I mean, SpaceX is a different company than Tesla. Tesla’s publicly traded, SpaceX is privately held. But you know, Elon is the kind of the CEO—he’s the top guy at both of these companies and at the other startups that he has. If not the top guy, he’s definitely in the background, you know, letting his opinions be known. He describes that he tries to spend half his time with SpaceX, half of it with Tesla, and a little bit of time with these other things. In reality, he’s really kind of jumping between fires, wherever there’s the most urgent issue is where his attention goes. And so, in 2018, he’s sleeping on the factory floor at Tesla’s factory outside of the Bay Area in San Francisco, trying to save the company. These days, he seems to be very focused on what SpaceX is doing. You’ve seen this pattern over the years he’s been doing this. And he sees some crossover marketing. 

For example, Tesla definitely had a coup when years ago, when in that SpaceX launch they included a Tesla Roadster to demonstrate the payload package. So, they’ve launched a roadster towards Mars. GM probably would love something like that. I mean, that was dominating social media for forever. And to this day, you still see it. It creates this aura of the future of technology, a forward kind of brand in Tesla, which Elon has been very astute and very savvy in trying to kind of continue that presence for Tesla. SpaceX definitely helps with that. It’s also gotten to the point now when SpaceX began, the idea was pretty crazy as to what he was doing. The Roadster, people can understand that; people can understand cars. They got a lot of attention, and it really helped build his profile. But now it’s gotten to the point where SpaceX is everywhere as well. The twin things really are a lot of fuel, and you can see him kind of bounce between the two. So, there’s always some kind of Elon Musk Inc., if you will, kind of storyline going out there. 

SEAN SPEER: Just a penultimate question, Tim. One of the interesting things about Musk and Tesla is that while you recognize that they deserve credit for some of the innovations that have contributed to progress electric vehicles, it’s noteworthy that President Biden rarely mentions them when he’s talking about the industry. 

What do you attribute that to? Do you think that Musk and Tesla get sufficient credit for creating the conditions for the mainstreaming of electric vehicles in America?

TIM HIGGINS: You know, a lot of people always want to know, what’s the future of Tesla? Where’s it going to be in the generation from now? It’s hard to say, but without a doubt, if there’s no Tesla tomorrow, it just went away all of a sudden—it’s clear that Tesla and Elon Musk’s vision for the future of the car is winning the day. You can say that because look at General Motors, look at Ford, look at Volkswagen, look at Toyota, look what all the “Mighty Car Titans” of the world are doing. They’re investing billions and billions of dollars to bring electric cars to the roadways. 

You know it, we haven’t quite seen the huge sales of electric cars yet. People are not en mass running out and buying them. It’s still a small percentage of overall sales. But these companies are betting that the future is electric, in part because the success of Tesla has shown Wall Street and investors, that they think that’s the future. But it’s also shown regulators around the world that customers, if given the opportunity to buy a sexy, to buy a useful electric car, will do that. And so, Tesla’s success has given them kind of the leverage they need to regulate in such a way that electric cars are going to be needed in places like Europe and China. So, these car makers are having to do this as well. What Tesla did was create this was kind of critical mass. And so, the future, at this point, the bet of the century, really, is that the car is going electric. 

Now, when you ask, you know, people who are caught up in kind of the political squabbles of today. With President Biden and Elon Musk, there’s other things apparently going on, right? Joe Biden has long counted on United Auto Workers Union for political support. And Elon Musk has spent a lot of time fighting efforts to unionize his factory in California. It has been a pretty brutal fight. Maybe perhaps brutal isn’t the right term. It’s nothing like the days of early Detroit, but it hasn’t gone very smoothly in recent years. So, there’s some tension there. And you know, it’s also if you look at President Biden’s history, he has long been a supporter of Detroit automakers. He was part of the Obama administration when they saved or they helped restructure General Motors through its bankruptcy and to make the new GM. I’ve seen him at auto shows. He likes to drive his Corvette. He likes to get behind the wheel. He’s a car guy. There’s clearly some tension there between Musk and the current administration.

SEAN SPEER: Tim, you anticipated my last question about looking into the future. So, let’s just wrap up our conversation here. The book is Powerplay: Tesla, Elon Musk and the Bet of the Century. Tim Higgins, from The Wall Street Journal, thank you so much for joining us today at Hub Dialogues.

TIM HIGGINS: Well, thank you. It was fun.