Tesla Saga continues: When is production car #2 not?
Creating big things is generally the province of visionaries. All too often, big visions go hand in hand with big egos. Big egos are generally like electrons. Anyone who has studied sub-atomic particles knows that similarly charged particles repel each other. You can force them into the same space for a period of time but eventually they push each other apart. Such is often the case with startup companies.
Let's start with a little background. When Tesla Motors was first getting launched a few years back, as part of their initial investment in the company, the first two dozen or so people involved agreed to buy what became known as Founders Series cars. Initially, company founder Martin Eberhard who had the vision that became the Tesla Roadster intended to keep the first production unit for himself. When Paypal founder and seriously rich guy Elon Musk got involved as a major investor in Tesla Motors the situation changed. As Eberhard tells the tale (and I have no reason to doubt him on this) since Musk was putting up the bulk of the cash, he asked to get the first Roadster. After some back and forth Eberhard ultimately relented and took car #2. According to Martin:
During the entire time I was at Tesla, staff discussions about the early production cars rarely referred to the first two cars as "P1" and "P2." They were simply called "Elon's car" and "Martin's car." Everyone at Tesla knew this, and everyone knew how important these cars and their production sequence meant to both of us.
Continue reading the tale after the jump.
Gallery: Tesla Build Order Docs
Musk's car which was labeled as production car #1, was built in December and delivered to Musk in February of this year. On March 17, of this year Tesla began "series" production of Roadsters. The car that was started on that day was to be car #2 and delivered to Eberhard. Unfortunately, this is where things start to get hazy so let's step back and look at how all this stuff typically works.
First of all, vehicle ID numbers (VIN) don't necessarily reflect the order in which the cars were completed. The VIN is assigned to a chassis at some point in the process and stays with that car forever. The VIN is usually assigned to a car before the build starts and any number of factors could cause it to be built out of sequence. If special parts for a particular unit are not available, the production of that car could be stalled. Sometimes in mass production cars will be built in batches such as when they are being painted. A batch of red cars might be built followed by a batch of black, etc. The bodies might then be reordered before final assembly. At best, the VIN gives you a general idea of when a vehicle was built and nothing more. Then there is the issue of "saleable" cars.
In the auto industry during development of a car, there will typically be a series of prototypes, pilot and pre-production vehicles built before "Job 1". Those pre-production units are usually built in small numbers in the months leading up to start of production. These vehicles are built from production tooling and considered saleable. Most of the time most of these vehicles are never sold but kept internal for fleet testing and final verification. More often then not there are further changes made between the build of these vehicles and SOP. Sometimes these updated vehicles do get sold to the public. This, of coursem inevitably leads to confusion about which is really the "first" or "second" example? For all practical purposes, it doesn't matter as long as the customer gets the car they want with the equipment they want. When you're building Focuses or Cobalts, usually no one cares because they are unlikely to have any special value in the future.
However, when you are talking about the first Mustang or the first Corvette ZR1 or the first Tesla Roadster, things are different. Collectors tend to give these vehicles some value above and beyond their retail price. Recently there was an argument about the "first" production Ford Mustang. Although the Mustang with serial #1 is in the Henry Ford Museum, the first one sold was one of those pre-production units and was delivered to a customer in Nova Scotia Canada the day before its official debut. In the course of production some units typically get pulled out and are assigned to other purposes and never sold to the public. These cars get used for various purposes such as marketing or development of updated components or systems. Some of these cars become development mules for other production models, such as the Malibus that are being used to develop the Chevy Volt.
All of which brings us back to Tesla Roadster #2. There were at least two dozen engineering and validation prototypes built by Tesla. There were also some number of pre-production units built during the latter half of 2007 and early 2008. In December 2007 a car with VIN #1 was built and declared as production unit #1. In the months leading up to production start up, a number of vehicles were started and built in order to check out the build processes. The ultimate owner of what would be car three agreed to take one of these cars and VIN 3 was assigned to that car. It was originally built with the Magna transmission and used for testing.
When "series" production began on March 17, 2008, the car that started down the line carried VIN #2, the Roadster ultimately destined for Martin Eberhard's garage. For various reasons including but possibly not limited to a custom paint job, that car has not yet left the Lotus factory in England. While #2 awaits completion, at least two other cars have been finished. The pre-production car that got VIN #3 was ultimately retro-fitted with the single-speed gearbox and motor that were destined for the early production cars and has since been delivered to its owner. Car #4 was borrowed as a marketing vehicle and is the unit that has been making the rounds in Europe in recent weeks. Following the Cannes Film Festival this month it will be shipped to the U.S. for delivery to its owner.
Now that we have all of that clear, let's get back to what triggered all of this. Over on Eberhard's Tesla founders blog there is some heated discussion about the fate of Martin's car. In an email exchange with Tesla VP Darryl Siry, he explained that:
There are also some production spec marketing cars that were built that technically pre-date VIN002 as production vehicles.
I called Martin in early March and told him this on the phone, so I don't know why he is portraying this as some form of deception on my part or the company's part.
In the member agreement there is language about the fact that we reserve the right to produce cars out of sequence for various business reasons and to insert non-customer cars (i.e. marketing cars) into the sequence. There is nothing strange about it and it will likely happen every now and then.
For example, we have an early customer who has asked us to delay his delivery until the fall, so we will make his car later on but with the original intended VIN.
From the comments in his blog, Martin had this to say in response to a commenter:
I am very glad that Tesla's quality team is taking care to build my car well. However, claiming this as the reason for slow delivery of my car is simply not telling the truth. The truth is that Tesla built P3 before P2, despite their contractual obligations otherwise. Why would they do that? There was no good reason at all for this... but P3 was bought by a rich and powerful friend of Elons; P2 was not.
Blaming the quality team for this is sort of like blaming the transmission for why I got canned. The real reason for both is the same: Elon's ego.
Understandably, Eberhard is not happy about everything that has transpired between himself and Tesla Motors. He had the vision for what became Tesla and was ultimately pushed out. Clearly from the following passage, his understanding of what he paid for differs from what has transpired.Yes, I saw that VIN sequence thread from Siry. The trouble is that my agreement with Tesla is for "Tesla Founders Series Production Number 2", not for any particular VIN. This agreement was followed up by later written assurances from Tesla that my position in line was assured. (We sent these letters to customers when we decided to ship the first cars as MY 2008 instead of MY 2007-1/2.) Siry seemed confused about this nuance in his phone call to me last February, when he was trying to explain why I was not getting the car they contracted to build for me.
Of course I know who got VIN 3/production 2, and he is a good person whom I admire greatly. This has nothing to do with him, except perhaps Elon's wanting to suck up to him while simultaneously slapping me one more time.
Eberhard ultimately provided me with some documents which he claims support his view of things including letters that were sent out to earlier buyers in January and April of 2007. The letters were sent to all those buyers by Eberhard in his role as CEO including one to himself as a buyer. The letters, particularly the April letter make it pretty clear where in the build sequence that buyers car is supposed to be. In the letter Eberhard received, it says in no uncertain terms:
In an email I received from Martin Eberhard last night he had this to say about Siry's recent comments:
Darryl is really stretching to interpret "Production Number 2" as anything except the second car produced. He tried earlier to dance around this issue with his blog comments about Tesla's right to produce VIN numbers out of sequence, and he tried to make that case to me on the phone on February 8th. He was actually surprised to learn that my agreement is for Production Number 2, as opposed to VIN2, and now he is dancing around this issue.
Is Martin right or is Tesla right? From a legal perspective, I have no idea. I'm an engineer not a lawyer and in any case as I said don't have access to all the details. All I can do here is use my experience to provide some perspective to explain the process of how vehicles are built. Undoubtedly, Martin's understanding was that he would receive the second production car built. From a purely legal standpoint, what Tesla is doing may well be kosher is certainly consistent with standard auto industry practice. From a moral and ethical standpoint I'm inclined to side with Martin on this one. It seems that everyone involved understood that Martin wanted the "second" production car. From my very first conversations with Siry and Eberhard over a year ago this was my understanding. After everything that has transpired, it seems like the right thing to do would have been to hold on to cars 3 and 4 until after Martin's car had at least left the factory. Martin Eberhard and Tesla will have to settle that amongst themselves and their respective lawyers. There are a lot nuances here.
One thing must be kept in mind. Cars might be machines, but they are created by people. People with emotions and egos. As such conflicts will inevitably happen. It as an unfortunate reality.
[Sources: Tesla Founders Blog, Tesla Motors, Tesla Motors Club]
Reader Comments (Page 1 of 2)
whatda 2:15AM (5/13/2008)
Tesla execs and Elon are being ridiculously childish. They don't understand that Martin has a following and keeps a close eye on what's going on in Tesla.
Since Martin was kicked out I haven't seen any "real" progress in Tesla except go backwards with Martin had said like the transmission. It's unfortunate that there is no respect except money with the current execs.
It is looking more and more like a red burarcracy without any real execution of the job.
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why not the LS2LS7? 12:15PM (5/12/2008)
Doesn't matter who is right. There's no point in fighting over this. Car 3 is as good as car 2. I think perhaps Martin (a true believer in every sense of the word) thinks that this car will be seen as monumental and so owning the 3rd instead of the 2nd is somehow a big problem.
In reality, in the long term, owning the #2 Tesla Roadster will turn out to be something that wasn't worth fighting about.
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BlackbirdHighway 12:26PM (5/12/2008)
It wouldn't be worth fighting over to me, but then I didn't put years of my life into building a revolutionary electric car company.
I don't know what Martin can do about it now. The car has already be made and custom painted just for him, but it's not the second card produced. There is no easy answer to this one.
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ckm 1:09PM (5/12/2008)
Funny thing is that Tesla's innovation has nothing to do with the engineering and everything to do with the financials. In the end, however, the jury is still out as to whether Tesla can actually become a mainstream manufacturer. Given this sort of infighting, pushing out the visionary founder and the general lack of true gearheads at Tesla, I think Fisker is going to win this battle.
I actually wrote a blog post about this yesterday here: http://alwayson.goingon.com/permalink/post/27029
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Chris H. 1:35PM (5/12/2008)
I have a few questions:
First, how long do you think it should take to paint two orange stripes on a Tesla Roadster?
Secondly, how long does it take to build a Tesla Roadster? Martin's car, P3/VINF003, was supposedly started on March 17th 2008. That was 57 days ago (just over 8 weeks). It seems that two more Roadsters have been produced since then. One has already been delivered to Jeff Skoll, the other has toured Europe and is now on its way to its owner, and yet Martin has had no delivery notice as far as I am aware.
Thirdly, doesn't this just seem a little odd to anyone?
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Chris H. 1:39PM (5/12/2008)
Corerection:
Martin's car is P3/VINF002...
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Chris H. 3:00PM (5/12/2008)
One more question:
Why has the Tesla Motors Club site been down since 6am (PDT) this morning? Any theories?
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why not the LS2LS7? 3:44PM (5/12/2008)
Chris H:
I have a theory. They're trying to jerk with Martin. There's no doubt in my mind.
But I also don't think it's worth making a federal case over.
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Kardax 4:49PM (5/12/2008)
Chris H.: Tesla Motors Club's ISP, NetGroupOne, has been down all day. My guess is that all NetGroupOne customers are down.
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Doug 4:49PM (5/12/2008)
Thanks, Sam, for a fair and level headed article. Martin has been (understandably) vocal about this topic, where as Tesla (perhaps also understandably) has not. I appreciate the additional information from Tesla's POV.
The only other detail I think worth adding is this comment from someone who went to the Tesla LA store open house.
"As for the showroom, looked nice. Very open layout. They did have 5 cars there including one production model. One of the things I found most interesting is that the car’s VIN ended in 00003 but they referred to it as production model number #2. When asked why this was the case you got a blank stare for a moment and then a canned explanation that they are in the order of production and this one came through before the other and so the numbers are in order like that…"
Given that, as you say, "everyone involved understood that Martin wanted the 'second' production car," and that Martin has a document that promises him "Vehicle Production Number: 2," I find it odd that Tesla representatives made a point of referring to the VIN F003 car as "production model #2."
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Martin Eberhard 6:17PM (5/12/2008)
An important detail that has been lost in this story:
VIN 3 was actually STARTED on the production line many weeks before VIN 2 went on the production line. The real reason that VIN 3 was completed first has NOTHING to do with the paint job on VIN 2 and EVERYTHING to do with the fact that they began building VIN 3 many weeks before they began building VIN 2.
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Carolyn Eberhard 5:28PM (5/12/2008)
Seems to me that basic project management and customer service practices would require that Tesla notify a customer as soon as a slippage in their delivery schedule is known. Keep in mind that Tesla knew in February that they already had an unhappy customer on their hands. However, not one person at Tesla felt the need to pick up the phone and tell Martin about the "defects" and "delays." He had to learn about it through the Tesla blog. This is not great customer service. As an investor in Tesla, I am hoping that management learns from this and does not treat any other customer as Martin has been treated.
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Sam Abuelsamid 6:01PM (5/12/2008)
Martin, I did indicate in the article that the car with VIN 3 was originally built as one of the pre-production cars. Looking at it may not have been entirely clear what the timing of the build was. It was indeed originally built well before your car was started and then retrofitted with an updated powertrain at some point after March 17.
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why not the LS2LS7? 6:25PM (5/12/2008)
Interesting to see the comments showing up now.
Martin, I'm sorry you got hooked up with the gang that couldn't shoot straight. First the stupid layoffs, then botching the layoffs, now them going out of their way to screw with a customer and thus showing they don't know how to treat customers really shows that they have little idea how to run a business.
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Tommy Boy 7:47PM (5/12/2008)
If this nonsense isn't enough to convince anyone why Martin wasn't the right person to execute the business end of his vision, I'm not sure what is.
Martin, probably better if you stop talking for a while, OK champ?
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Joseph 9:55PM (5/12/2008)
First off, kudos to Sam for the excellent article.
I think any reason as to why Vin 3 was produced before Vin 2 is tolerable, although still far from acceptable.
But actually delivering Vin 3 before Vin 2 is delivered is a disgrace to the company. Disgrace.
Tesla Motors is gonna need to put out some good PR real fast.
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Anonymous 10:17PM (5/12/2008)
Tommy Boy you have no idea what you are talking about! This entire sordid affair is payback by Elon to give Martin a hard time. Elon is being petty and behaving like a spoiled brat. Martin wants the world to know and nobody can blame him.
The fact is that Elon's games are casting a very negative light on Tesla and will definitely result in lost sales for the company. Moreover, Elon's reputation has certainly been irreparably damaged by his own actions. He will never be able to invest in another great start-up again because only the really desperate will every take his blood money, and the desperate ones are never the Google's of the world.
Martin should have known something was up when Elon demanded to have the first car and told him to go jump off a cliff. But entrepreneurs need funding so Martin made a deal with the devil hoping Elon would turn out to be an OK guy. Many start-ups are killed by the Elon's of this world.
Elon Musk is a typical example of what happens when ethically challenged people strike it rich: they think they have the right to screw with other people's lives. He needs to go back to Kindergarten and learn how to play nice. Personally I believe Karma is a funny thing and Elon will get his just deserts one day. People who drive fast cars and play with rockets shouldn't mess with Karma.
Tommy Boy! Probably better if you stop talking for a while, OK champ?
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why not the LS2LS7? 10:22PM (5/12/2008)
Why do I think Anonymous is one of the folks who made the jump to Fisker?
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Chris H. 10:45PM (5/12/2008)
Well said Anonymous!
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Martin Eberhard 12:15AM (5/13/2008)
Funny thing - I am not the one who went public about this whole VIN3/P2 deception.
Posters on my blog and on www.teslamotorsclub.com have been asking about my car for some time. I always responded with words along the line of "I am looking forward to getting my car and will blog about it when it arrives."
But Tesla Motors went public with private details about my car (its color, etc.), and also bragged about shipping VIN3 to someone else before shipping mine - and bragging that VIN3 was P2 - the second car produced.
Savvy readers connected the dots and realized that Tesla did me in again. Obviously, I was aware that something was not right with my car, but I said nothing until blog commenters had it pretty much figured out anyway.
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