The Real Story Behind Tesla's Near Bankruptcy

Does the name Elon Musk ring a bell? Well, how can it not after all the uproar this man has been creating since the beginning of this decade? One thing can pretty much sum up the reason. This man has entered the year 2021 with over a $190 billion addition in his net worth from 2020. Most of that success can be linked to the massive sales of Tesla, Elon Musk's EV manufacturing company. Well, do you know that Tesla, with a current market capitalization of over $800 billion, was on the verge of bankruptcy? And this man, with his hard work and wit, managed to pull Tesla out of that miserable state and made it to the top name in the current automotive industry. How did he exactly do that? Well, that's the thing we'll be knowing about in this video. Tesla today is known as one of the most valuable companies as well as one of the most profitable automakers all around the world. Not only that, Tesla's valuation remains bigger than all other automakers. Well, when you hear the fact that Tesla has a market cap that adds up to the next four companies' market cap together, you know we aren't joking. Most of the credit goes to the CEO Elon Musk who worked for the success. But that doesn't mean Elon had smooth sailing from the very beginning with this EV manufacturing company of his. Yes, actually, as he recently confessed, it is quite hard to believe that this multi-billion dollar company was on its way to bankruptcy. Elon Musk, J.B. Straubel, Martin Eberhardt, who was also Tesla's first CEO, Mark Tarpenning, and Ian Wright founded Tesla Motors back in 2003 with the dream of providing sustainable transportation to the masses. But things definitely got off to a rocky start. Three of the five Tesla founders had to leave the company due to management differences. Musk later took responsibility as CEO of Tesla Motors in 2006. Although Tesla Motors had 100 pre-orders of the first long-range electric sports car, the Tesla Roadster, the company was experiencing serious financial troubles as they weren't able to start Roadster production before March 2008. Musk said it was extremely difficult to raise money for an electric car startup in 2008 and that he had put all his money into the business at the time, even though I thought we would still fail. Well, there came times when it seemed almost game over for Tesla. The company even had to lay off 18% of its workforce. Elon reflected on some dark times in a Twitter conversation with biographer Ashley Vance. According to Vance, both Tesla and SpaceX were close to going under. Musk replied that Tesla financing round closed at 6 p.m. December 24, 2008, last hour of last day possible, or payroll would have bounced two days later. I gave Tesla the last of my remaining cash from PayPal. Didn't even own a house or anything sellable. It looks like Elon wasn't even close to giving up on his hard work, and Musk has always had skin in the game when it comes to his companies. I thought the probability of success was so low that I provided all of the money, Musk said in an event in Paris in 2015. All of the money just came from me personally. I didn't want to ask people, other investors for money if I thought we were going to die, because I thought we were. I invested entirely the money that I got from PayPal. All of that got invested into Tesla, SolarCity, and SpaceX. And it turns out Tesla continued struggling in the years following the 2008 financial meltdown. Even as recently as early 2013, we were operating with maybe one to two weeks of money, Musk said at the Paris event. It became quite a bad turn for the company during the 2008 global economic crisis, as the first ever dedicated electric vehicle manufacturer was quickly running out of cash and was in dire need of outside funding to survive. Elon Musk decided, as a last resort, to approach Daimler in pursuit of getting a contract that could help save the company. In September 2008, Musk took a flight to Stuttgart, Germany, and met with Daimler executives, only to return with a promise that the execs would visit Tesla's factory in Fremont in November. Musk and the Tesla team took up on what was seen both as an opportunity and a challenge for the struggling company, as they had a chance to get some funds, but only had six weeks to impress the Daimler executives. Musk's idea was to turn Daimler's smart car into an EV before the Daimler team arrived, so with five and a half weeks of hard work around the clock, Elon Musk and the Tesla team were able to fit the smart car with a battery pack and motors. Then, Daimler's team received a demonstration of the first ever smart electric drive EV that was pulled together in less than six weeks by Musk and his resilient team at Tesla. Sure enough, this turned out to impress Professor Dr. Herbert Kohler and his team from Daimler. This effort secured a last-minute contract with Daimler and gave Tesla some credibility along with If we hadn't done that, Tesla would have died because the Daimler partnership gave us credibility, that a major OEM was willing to work with us, said Elon Musk. Without that investment, Tesla would have been game over, he added. Well, that wasn't the only time Tesla was on the verge of death, actually. The probability again sneaked into the scene in 2017. And this time, the situation got even worse as the bankruptcy was just one month away. In response to a tweet about how close was Tesla to bankruptcy, Musk replied, Closest we got was about a month. The Model 3 ramp was extreme stress and pain for a long time, from mid-2017 to mid-2019. Production and logistics helped. The problems occurred while Tesla was working towards mass production of the Model 3, its cheapest electric car, between mid-2017 and mid-2019. Musk described the process as production and logistics helped. The Model 3 was slow to come off production lines, and Tesla struggled to make money selling it at $35,000. The company found it hard to string together successive profitable quarters, leaving investors worried. In the end, it all paid off. But it took time. According to reports, Tesla's real turnaround didn't come until 2019, when sales of Model 3, its first mass-market EV, allowed the company to post a quarterly profit for the first time. Tesla has been on a meteoric rise since then, seeing its market cap growing over 700% in the past 18 months. Well, Elon Musk had quite a strategy from the beginning, actually. In 2008, Musk said, it takes time to optimize a new technology. The critical point is that you can't get to low-cost cars unless you start with expensive cars. And do I have to say, what is the result of that strategy? That's all for now. I hope you've learned all about how Elon Musk was the savior of Tesla from being bankrupt. Don't forget to subscribe to the channel if you haven't, and turn on notifications so you're up to date on the channel's updates. See you in the next video!