With Elon Musk’s cost-cutting initiatives, Tesla Motors was able to withstand its financial crunch. Musk drew on relationships he formed in the computer industry—with investors ranging from eBay’s cofounder to Google’s founders to Silicon Valley venture capitalists—to help fund Tesla. Meanwhile, the company focused on filling its backlog of orders for its Roadster sports car to generate needed cash. Musk says, “The reason we started off with a sports car is because initially any new technology’s expensive.” Sports cars, even with their hefty price tags, do not suffer sales slumps the way an average mom-and-pop car would—buyers still want the latest technology. But their smaller market limits the growth that Tesla can expect. To realize his vision of bringing electric cars to the masses, Musk needs to produce a more mainstream, less expensive model. So Musk is now working to get his sedan project rolling. In 2009 Tesla previewed its luxury Model S sedan. Designed to travel up to 300 miles on a single charge, the Model S can seat seven passengers. Cars will be assembled in the United States, with full production of up to 20,000 units a year. Though priced at $57,400, the Model S qualifies buyers for a $7,500 federal tax credit through the government’s economic stimulus package. That price puts the car in the range of more mainstream buyers. If it is successful, the Model S could catapult Tesla into industry leadership and allow the company to expand into its planned company-owned dealerships. Musk has applied for a $350 million loan from the U.S. Department of Energy to help produce the Model S. He also hopes to receive some funding from the government’s $25 billion auto industry bailout package, 10 percent of which is set aside for small business. In addition, Musk has expressed interest in taking Tesla Motors public in the next few years. Of his efforts to bring electric cars to the masses, Musk said, “In all frankness, I don’t really need the stress of building a car company. . . . If I didn’t think it was extremely important, I wouldn’t have done it . . . We need to change the world. There’s no choice.”

• Consider Elon Musk’s background in the computer industry and the difficulty of starting a revolutionary car company. Do you think California is a good place from which to base Tesla Motors? What are some advantages and disadvantages to this strategy?

• Musk has drawn on his background in both physics and finance to get Tesla off the ground. But he has also used his managerial skills to keep the company moving ahead. Which skills has he used? Do you think Musk is more of a specialist or a generalist? Why?