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The incredible story of how Elon saved Tesla

April 12,2017


This week Tesla overtook General Motors to become the most valuable car company in America - worth over $51 billion - Just one week after overtaking Ford.

This, just 10 years after Elon Musk saved Tesla from “A near-fatal financial situation”…

At the end of 2007, Elon (before he ran the company) had already sunk over $100 million in Tesla as an investor. That’s when he realized the Tesla roadster was still a long way from being finished, and the company would run out of money long before it was.

What did he do? In September 2007 he flew to Stuttgart, Germany to meet with Daimler executives, thinking if he could just find a big contract, he could get extra funding and pull Tesla through.

As a result of that visit, in November (a month before Tesla’s money ran out) Herbert Kohler, Daimler’s head of advanced engineering, said he would come and visit the Tesla factory in California.

Elon called JB Staubel, Tesla’s CTO and said “We need to make an electric Smart car in six weeks. Can you do it?” (Smart was made by Daimler).

The problem was, there were no Daimler Smart cars in the US. JB found the closest one for sale - in Tijuana, Mexico. So he walked into the Tesla finance department and said “I need $20,000 in cash in a bag right now. We’re sending someone to Tijuana to buy a Smart car.”

A Spanish-speaking staff member made the trip, and the Tesla team then worked for five and half weeks around the clock to replace the gas engine with a battery pack and motor.

When the Daimler team arrived, they asked how long it would take for Tesla to come up with a battery that could work with their Smart Car. Elon said “We’ve actually got something to show you”, taking them to the garage where the Smart car was waiting. “It’s electric”, he said.

Herbert Kohler said “What do you mean?”

“We put in a Tesla battery and motor.”

The two took the Smart car for a spin. Elon remembers "it was so fast you could do wheelies in the parking lot". JB called it "The fastest Smart car ever made.”

When they got back from the test drive, Herbert said “Let’s explore a partnership” - and that led to Tesla’s first development contract.

Elon said of the partnership "The Daimler partnership gave us credibility. If we haven't done that, Tesla would have died.”

Elon took over as CEO, and let go of 25% of the staff to keep the company going. By 2009, in the midst of the global economic crisis, both Tesla - and Elon - were down to their last dollar and he said “I had to borrow money for rent.”

He managed to pursuade Daimler to buy around 10% of the company in return for $50 million. (Valuing Tesla at $500m - Just 1% of what it is worth today). Elon says "We were bailed out by Daimler. Without that investment, Tesla would have been game over.”

If Elon hadn’t flown to Germany to create that partnership, Tesla wouldn’t exist today.

Are you more focused at your product, or your partnerships?

What partner could make the biggest difference to your success?

“If you help enough people get what they want, you will get what you want.” ~ Zig Ziglar

Tesla listed on Nasdaq in 2010 and Daimler went on to sell their stake four years later for a $780 million profit (if they had kept the shares they would now be worth billions).

This week Tesla has become the most valuable car company in the US, and is on track to become more valuable than Honda in the near future, and then Daimler, the company that saved it from bankruptcy.

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