Regular Business Insider readers will probably have figured out that I write a column of sorts about Tesla that runs every weekend.
I’ve been doing this for over a year, with 2016 being the first full 12-month period when I covered all things Tesla and Elon Musk.
I’ve been writing about Tesla for about a decade, and I enjoy commenting on the company, which has been ceaselessly interesting for its entire existence, and not just because Musk is such a charismatic CEO.
So for this weekend’s take on Tesla, I decided to look back over the year that’s nearly over and round up the Big Tesla Stories from each month.
Away we go!
Great Expectations for 2016: Tesla started the year at nearly $240 a share, fresh off the launch of its long-awaited Model X SUV in 2015 and its best-ever year for vehicle deliveries, just over 50,000. Could the carmaker push its stock price higher, toward the nearly $300 it achieved in 2014?
- Reuters/Noah Berger
JANUARY: “production hell” for the Model X, Wall Street wakes up, and Faraday Future arrives.
Tesla had some wind in its sails as 2014 got underway. The carmaker had just launched the Model X crossover SUV and was coming off its best-ever years for vehicle deliveries.
Shares had moved higher following the Model X’s arrival, and some newly bullish sentiment was building on Wall Street. But some new caution had also emerged. When Tesla was selling only two cars, as it had been with the Model S sedan and the outgoing Roadster, investors could look at the company as a fast-growth, high-risk, high-reward stock that could go to $500 a share.
Reality, unfortunately, bites. At the tail end of 2015, analysts seemed to collectively figure out that although Tesla was an innovative company who shares had risen over 1,000% at one point from the 2010 IPO, Tesla was also a car company whose future resided with building a lot of cars. The shock of this realization quickly set in.
“Tesla’s share price may very well increase dramatically over the next four years, as the company ramps up to the 500,000 yearly production target,” I wrote. “That will vindicate the calls being made by the biggest Tesla bulls and humiliate the bears.”
“If anyone thinks that growth is going to be of the financially frictionless type that tech investors usually love, they’re got another thing coming. In fact, in order for Tesla to fulfill its current market cap, in terms of future value, the company is going to have to shovel billions into the enterprise.”
Some months later, Elon Musk would reveal that Tesla was in “production hell” at this time, struggling to iron out early production glitches and issues with the Model X, a vehicle whose design Musk pointed to as being an example of “hubris.”
Meanwhile, at the Consumer Electronics Show in Las Vegas, a mysterious new startup, Faraday Future, pulled the cover off an exotic eclectic concept car. Did Tesla have a new competitor on the stage?
FEBRUARY: Buzz builds for the Model 3, the stock slides, Tesla guides high, and we sample the Model X — with all-new cupholders and “Bioweapon Defense Mode.”
- Benjamin Zhang/Business Insider
Even as Tesla stock was sliding, the drumbeat was beginning for the unveiling of the Model 3 mass-market vehicle, which would sell for around $30,000 after tax breaks and serve up over 200 miles of range on a single charge.
The most critical period in the company’s history had dawned.
“To go from a company building 50,000 cars a year to one building 500,000 annually will be immensely costly and immensely difficult,” I wrote. “But it’s where Tesla has to go if it wants to achieve Musk’s world-changing objective: to accelerate the end of the fossil-fuel era.”
While we waited for the Model 3, BI’s Ben Zhang and I headed over the Tesla Store in New York’s West Chelsea neighborhood and checked out the new Model X. We were impressed, even though we only got to spend about an hour with the vehicle. But during that time, we experienced “Bioweapon Defense Mode” air filtration – which can scrub the atmosphere inside the Model X to hospital grade – and Tesla’s brilliant new cupholders.
Tesla reported fourth-quarter and full-year 2015 earnings in February, and although no one expected them to be great, for the quarter they were a disappointingly hefty loss and kept the stock on a downward spiral, nearing a low of $140.
MARCH: How to tear apart a Tesla, the Model 3 is unveiled, and almost 400,000 people give Tesla $1,000 each.
- BI Graphics
Even though Tesla wasn’t getting much love on Wall Street, buzz was building for the Model 3 launch, and other automakers were revealing how interested they were in Tesla vehicles.
“We do teardowns of all major competitive vehicles,” Ford CEO Mark Fields said in response to a question posed by Business Insider when he dropped by our New York offices, about whether the company would dismantle the new Tesla Model X SUV in the same way it took apart the Model S sedan.
“I’m a big believer that you should never shut yourself off to learning,” he said.
Fields was echoing an entertaining comment he made about the Model S on an earnings call in 2014: “We have driven the Model S, torn it down, put it back together, and driven it again – we’re very familiar with that product,” he said.
Fields would have another Tesla to buy and give to his engineers to dismantle in late 2017 – a vehicle that arrived with a massive bag in late March, at an event Tesla held in Los Angeles. The Model 3 was unveiled in all its glory, at a typically upbeat Tesla party that went on long into the Southern California evening.
The bang was caused by the nearly 400,000 advance deposits that Tesla would eventually receive, at $1,000 a pop, for the Model 3.
That was a nice infusion of needed cash – and it provided the catalysts for he stock to reverse its dire, downward course, beginning a recovery that would send it rallying above $260. But Tesla now had a new challenge: build all those cars. And that would bring with it something entirely new for the carmaker.
“Tesla isn’t really a compromise-oriented company,” I wrote. “Its pattern is to overpromise but under deliver – at this stage of its life, Tesla gains nothing from setting realistic expectations. The company needs to chart an impressive, world-altering destiny.”
The mass market is all about compromise. Consumers don’t get the best of anything: engine, tires, wheels, seats, windows, audio – you name it. Only within the realm of infotainment do mass-market cars meet their luxurious superiors in the automotive peeking order, but that’s only because once you add a touch screen and the software to drive navigation, audio, device integration, and so on, you have little more than the user interface to set the everyman apart from the elite.
This will most likely be the case with the Model 3, which is slotted to be the least impressive Tesla from a pure engineering standpoint but won’t be left out when it comes to the large central infotainment screen featured by the Model S and the X.
Investors were bullish again. But at Tesla’s factory in Fremont, CA, the pressure was one.
APRIL: Tesla does the unimaginable, I take a spin in the first Tesla I ever drove, we dismantle the Model 3, and Musk abandons a key business practice.
- Matthew DeBord/Business Insider
While I was in LA to attend the Model 3 unveiling, I got to revisit my first Tesla: the wonderful Roadster Sport. It was everything I remembered it being – what a thrill!
But things were anything but thrilling for Tesla, as it grappled with production issues related to the Model X SUV, leading to an astonishing admission.
A shortfall in deliveries for the first quarter, Tesla said, “largely resulted from a lack of necessary parts for the Model X SUV,” I reported. “‘The root causes of the parts shortages,’ Tesla said in a statement (emphasis added), was “Tesla’s hubris in adding far too much new technology to the Model X in version 1.'”
This totally stunned me:
Tesla has said some revealing things in the past – Elon Musk was actually calling the carmaker’s stock overvalued when it was surging above $200 per share in 2014 and 2015. And we already knew that problems with the Model X’s exotic “falcon wing” rear doors and sculptural rear seats nearly sank a timely launch of the crossover last year.
“I’m not sure anyone should have made this car,” he said in October. “We probably should have just [modified the Model S],” he added. “There are so many more features and difficult-to-build parts on [the Model X] than it is necessary for us to sell the cars.”
Hence the remarkable “hubris” admission this week. In case you were wondering, the word comes from Greek tragedy. It means, in fact, “tragic overconfidence” and to fall victim to it leads to a confrontation with Nemesis, the goddess of retribution.
It’s the ancient equivalent of a world of hurt.
Tesla was going through some changes, and it wasn’t just expressed in terms of humility. Musk and his team were also compelled to alter their relationship with stocking demand, something the automakers had assiduously avoided in the past.
All those pre-orders for the Model 3 changed Tesla’s tune. “Musk and his team didn’t ease us into exploding demand,” I wrote of Tesla abandoning a key business practice. “They flipped a switch and let it flow.”
As all this was going down, the BI Graphics team and I decided to get a jump on Ford and do our own dismantling of the Model 3’s controversial design.
MAY: The first quarter is in the books, Musk made a mind blowing change to strategy and sets himself up for epic failure, Tesla sells more of itself, and an owner dies in an Autopilot crash.
- Reuters/Bobby Yip; Business Insider/Dave Smith
The year really started to heat up for Tesla in May, as the impact of the Model 3 launch and pre-orders set in – and the company reported first-quarter earnings. They were better than Wall Street expected, but skepticism about the company’s ability to meet its 2016 vehicle-deliveries guidance of 80-90,000 weighed in the stock as it continued a sustained slide from its earlier peaks.
But the real news was Musk’s mind-blowing change to Tesla’s strategy.
“Musk now wants to hit 500,000 by 2018, a full two years ahead of schedule,” I wrote. “He called it the biggest ‘strategic change’ that Tesla is now making.”
From my perspective, Musk was setting himself up for an epic failure – even by Silicon Valley’s failure-embracing standards.
“Tesla is an impressive company and Musk is a visionary, but the automaker’s inability to get better at building its cars is alarming,” I wrote. “Musk knows this and repeatedly stressed to analysts last week that, as awesome as Tesla is at design and technology, it must become a premier manufacturer of ‘large, complex objects.'”
Actually, you could sense at this time a change coming over Musk. He had figured out that Tesla needed to get better at building cars, and fast. Soon, this epiphany would lead him to completely rethink manufacturing and propose some revolutionary new ideas.
But before all that could happen, Tesla went back to the capital market to raise another $2 billion!
Few people knew it in May, but in Florida, a Tesla Model S owner had been killed a crash while his car was operating on Tesla’s Autopilot semi-self-driving technology. When the news broke, it would send Tesla into its first identity crisis as a company.
JUNE: Monetize everything in sight, and Tesla announces a merger with Solar City.
With summer looming, and Tesla preparing to go from being a niche purveyor of sexy all-electric luxury cars to the Silicon Valley elite to a mass-market automaker with ambitions to rival Toyota and GM, it was readily apparent to me that Job One for the company was to bring in as much money as possible.
“As Tesla leaves the luxury space, where it had to coddle its persnickety, early-adopter customers, and enters the mass market, it has to figure out ways to both build the Model 3 more cheaply than the S or the X and get owners on the hook for follow-on payments,” I wrote, as Tesla began to prepare it new owners to not have quite as many perks as old owners, chiefly free access to the Supercharger fast-charging network.
That was the news for prospective Tesla owners to digest.
But Tesla investors had a much biggest bite to swallow: Tesla announced that it was doing a $2.6-billion deal to acquire SolarCity, a solar-panel concern founded by Musk’s cousin, and on whose board Musk served as Chairman.
I didn’t like the deal all that much, but I could easily see why Musk wanted to do it.
“If the SolarCity deal goes through, then Tesla will be a carmaker; a battery maker, thanks to the Gigafactory being built in Nevada; an energy storage company, thanks to Tesla Energy, unveiled last year and selling residential battery packs; and a solar finance firm,” I wrote.
“Put all that together under one roof and you get a company that can sell or lease you a zero-emission, off-the-grid lifestyle.”
The deal would ultimately be approved by Tesla and SolarCity shareholders. And just like that, Tesla wasn’t just a car company anymore. It was a full-service clean energy one, too.
Wall Street was troubled. Shares would continue their slide and never mount a recovery to earlier 2016 levels.
JULY: Tesla’s first major identity crisis, Autopilot 101, and we learn the hard way why Teslas are different from all other cars.
- Matthew DeBord/Business Insider
By July, summer had arrived, the Model X was back on track – but Tesla was dealing with its biggest crisis since it has almost gone bankrupt in 2008.
Had bringing Autopilot to market so aggressively led owners, such as the one who tragically died in fatal accident in Florida in May, to think that Tesla’s could drive themselves when they clearly couldn’t, at least not yet?
You could sense Tesla’s struggle. I called it an identity crisis, as distinct from the existential crises that Tesla had dealt with previously:
In order for Tesla to be Tesla, is has to keep pushing the tech envelope. Autopilot was the furthest it’s pushed – so far that the company required owners to acknowledge that, in activating a beta version of the software, they understood the risks.
I expect Tesla to keep right on pushing. But I also expect the company to have more debates about whether technologies that are closely connected with safety should be pursued a zealously as Autopilot was.
The resolution, I thought, was to offer “Autopilot 101” to owners – to make sure that they knew what they were dealing with.
While Tesla was contending with its crisis, I brought on a crisis on my own – behind the wheel of an Autopilot-enabled Model S P90D that I took on a road trip with my family to drop off our son and a friend as their summer camp in New York’s Catskills.
Let’s just say that even though I’ve driven plenty of Teslas, I never fully appreciated how different they are from other cars. It’s all about the electric charging, stupid!
Sometimes you just have to learn things the hard way.
AUGUST: Tesla enters its surreal phase, Musk offers Master Plan, Part Deux, second-quarter earnings hit, Ludicrous Mode is just for quick thrills, and get ready for the “alien dreadnought.”
- Benjamin Zhang/Business Insider
As second-quarter earnings approach, the news maelstrom around Tesla led me to conclude that Tesla had entered a new, surreal phase, complete with a wildly ambitious new blueprint from Musk.
“It all makes your head spin,” I wrote.
“Which challenge do you focus on? What’s the priority? Or does this all have to happen at once? Musk clearly thinks so – he just authored a vast, far-reaching manifesto, his ‘Master Plan, Part Deux.’ Tesla as a carmaker was never easy to understand. But Tesla as a sustainable-energy, manufacturing, and transportation conglomerate will be baffling.”
Gearing up to build 500,000 vehicles annually just wasn’t enough. Tesla also had to create a semi-truck to tackle the freight business, as well as a pickup truck to capture all those potential owners who wanted an EV with a bed in the back.
Was this an instance of Tesla getting addicted to the business version of Ludicrous Mode, the system in its cars that serves up supercar-beating acceleration?
I don’t know, but it did occur to me at the time that although Ludicrous Mode is awesome, it’s also something of a temporary and impractical thrill.
Something tremendously fascinating happened in August, as well, a tantalizing follow-up to Master Plan, Part Deux.
Musk started to reveal some of his new ideas about manufacturing.
It happened when on a call with analysts after Tesla reported second-quarter earnings, Musk decided to delve into how Tesla would take matters to a new level to build the Model 3 and other future vehicles:
Musk said that the in-house term they have for the manufacturing advancement he hopes to introduce is “alien dreadnought.”
“The point at which that’s what the factory looks like, that’s when you know you’ve won.”
Musk then outlined, using software terminology, the evolution of the factory, from version o.5 to version 3.0
“By version 3, it won’t look like anything else,” he said. “You can’t have people in the production line itself, otherwise you drop to people speed. So there will be no people in production process itself. People will maintain the machines, upgrade them, and deal with anomalies.”
Just wow. As soon as you think Musk has more than enough to think about, he comes up with something radically different to add to his plate.
SEPTEMBER: It’s hard to be Elon Musk, the Big Story changes, and how Tesla could save your dog’s life — and the Chevy Bolt under-prices the Model 3 by $5.
Summer ended, and Tesla hurdled into its most intense period of the entire year.
The stock had stabilized after a swoon-and-spike earlier in the year. But it’s didn’t look as if anything was going to push it back toward $300 per share.
It was, I figured, a tough time to be Elon Musk:
There’s not much point in underestimating Musk. He’s seen Tesla past the verge of bankruptcy (in 2008) and has put more electric vehicles on the road than anyone thought possible back in 2010. His contributions to society have thus far been heroic. But he’s going to have to call on all his reserves of innovation and inspiration to ride out the next six months.
Why? Because beyond the specific challenges facing Tesla, Musk was up against a new concern: that the Big Story his company had been telling for a decade was abruptly changing. Self-driving cars and ride-sharing, à la Uber and Lyft, could be overtaking electric vehicles in the attention-span Olympics, I suggested:
It remains to be seen whether the autonomous leap we’re currently witnessing in its first stage will go according to expectations. The real world is a messy place, and humans are optimized by evolution to deal with mess. Computers aren’t.
For Tesla, the risk that it will get steamrolled by a disruption of the disruption that it set in motion is substantial. I wouldn’t consider this unusual. Sometimes, a transitional company has to set the stage for a future that it can’t participate in.
And even though Tesla was keeping pace with its own technological innovations, including a software update that could prevent a pet from fatally overheating in a Tesla vehicle, there was a fight on the horizon.
General Motors was about to bring its own mass-market EV, the Chevy Bolt, to market, promising better range than the Model 3, a year ahead of the Model 3’s arrival in 2017 – and price tag that would be exactly $5 less than the Model 3’s after-tax-credits $30,000.
OCTOBER: Tesla suddenly starts building a lot of cars, starts to grow up, and needs to start a bank. Plus, GM fires a warning shot, a change comes to the business, and an unexpected profit. Musk proves to be the greatest car salesman who has ever lived, and we get our first look at Tesla’s solar roof. Also, Musk solves the Uber problem.
- Screenshot via Tesla
October was Tesla’s big month. The automaker picked up tremendous speed as it raced through the third quarter – and rolled out an entirely new product, a beautiful “solar roof” as part of its merger with SolarCity.
The unveiling event in Hollywood was a surprise showcase from a company that didn’t have any new cars to roll out in late 2016.
But the month was huge for Tesla in other areas:
•The carmaker delivered an impressive 24,500 vehicles in the third quarterand promised that it would make its goal of delivering 50,000 for the second half of the year – meaning that it would make or get close to making the low end of its 80,000-90,000 yearly guidance.
•With that kind of sales volume, I thought Tesla should think about starting a bankand doing its own loan-and-lease financing.
•But GM had fired a warning shot across Tesla’s bow: the soon-to-be-launched Chevy Bolt EV would sell for $5 less than the Model 3 – and go 238 miles on a single charge, farther than the Model 3’s 215 miles.
•Easing that pain was a surprise third-quarter profit, which nonetheless didn’t send the stock price surging.
•With a month like that, I decided that Elon Musk is the greatest cat salesman who every lived– and a guy who wasn’t going to get steamrolled by Uberand its CEO, Travis Kalanick, on the Next Big Thing.
NOVEMBER: Musk revives vertical integration, Supercharging is no longer free, Tesla buys a company, and Elon offers an alternative to The Donald.
- Win McNamee
As Tesla’s massive October slipped into the history books and the US Presidential election approached, Musk continued to press the case for a revival of “vertical integration” in manufacturing, a practice that experts thought had been killed off decades before.
To that end, Tesla announced that it has bought an obscure German company, Grohmann Engineering, that specialized in automated production. But they carmaker also confirmed what many had long expected: that it would begin to restrict free access to superchargers for new owners.
Those relatively mundane news items were completely overwhelmed by Donald Trump’s stunning victory over Hillary Clinton in the election.
Here was a candidate who had called global warming a Chinese hoax and who would soon name a climate-change denier to run the EPA and appoint a Big Oil CEO to be Secretary of State.
Now more than ever, I thought, we needed Elon Musk:
Musk represents the latest in a long line of scientists and technologists that have charted the future of humanity since the Enlightenment. Trump, by contrast, appears to have no engagement with science, has implicitly denied the scientific consensus when it comes to global warming, and he wasn’t supported by the tech industry during the election (the highly ideological, libertarian Thiel notwithstanding).
I won’t go so far to say that Trump is obviously anti-science or anti-tech – he loves Twitter, after all – it’s just that he doesn’t seem to have ever given the subjects any thought whatsoever. (That said, no less an authority than Scientific American is concerned that Trump will be anti-science.)
Musk, meanwhile, is a de facto mechanical engineer, energy authority, computer scientist, economist, and rocket scientist. He is an actual physicist. He thinks about science and technology every minute of every day.
It’s possible that there are no two more diametrically opposed brains currently functioning on the planet.
DECEMBER: Tesla stands alone, Consumer Reports dings the Model X, Elon will never have to worry about selling cars, Tesla prepares to crush a test, and Mr. Musk goes to Trump Tower.
- Alex Wong/Getty Images
The last month of the year is about setting accounts in order. So what did I think when I sat down to review Tesla?
Well, Tesla remains the biggest name in electric cars. Other automakers – too many, really – want to join the party, but I’m not sure why, and I’m not sure it will be good for their business.
Tesla took it on the chin from Consumer Reports in a review of the Model X, but Tesla owners don’t seem to have any qualms about owning the SUV, and Tesla is never going to have to worry about selling cars.
Will the Model 3 arrive on schedule in 2017? I’m betting on it.
And what about Trump? Musk join major tech leaders in marching to Trump Tower to meet with the president-elect. It’s possible that Musk could have gone expecting to make a deal on global warming and a carbon tax. I hope he didn’t.
Tesla’s Biggest Year Ever: But the stock was still trading down over 15% in mid-December.
- Markets Insider
So it was a pretty big year for Tesla, although in all honestly it was dwarfed by what took place in the world-historical stage.
In the end, Tesla will once again have the best year, as far as vehicle deliveries go, in its existence. If all goes well, it will also spend next year preparing to launch the Model 3, the most important vehicle it will ever build.
Despite all this, Tesla shares will likely end the year down about 15%, after surging to touch their previous highest points earlier this year. In that respect, Tesla has disappointed investors.
But it hasn’t disappointed anybody else.
And 2017, to say the least, is going to be very, very interesting.