In early 2013 Tesla was in dire straits. The automaker was struggling to take orders, produce, and deliver the first batch of Model S sedans, and those that did roll out of the factory were of dubious build quality at best. Tesla was on the verge of implosion, so Elon Musk called up his friend Larry Page at Google.
The trials and tribulations of the launch of the Model S are well documented, and a new book by Ashlee Vance, Elon Musk: Tesla, SpaceX, and the Quest for a Fantastic Future, outlines just how close to the brink Tesla was in late 2012 and early 2013.
A lack of resources, a range of quality and competitive issues, and Musk’s fierce demands of his employees had come to a head by Valentine’s Day, and Musk contacted Page to start talking about a deal.
In the first week of March 2013, Musk reached out to Page, say the two people familiar with the talks. By that point, so many customers were deferring orders that Musk had quietly shut down Tesla’s factory. Considering his straits, Musk drove a hard bargain. He proposed that Google buy Tesla outright — with a healthy premium, the company would have cost about $6 billion at the time — and pony up another $5 billion in capital for factory expansions. He also wanted guarantees that Google wouldn’t break up or shut down his company before it produced a third-generation electric car aimed at the mainstream auto market. He insisted that Page let him run a Google-owned Tesla for eight years, or until it began pumping out such a car. Page accepted the overall proposal and shook on the deal.
A few weeks later, lawyers for the two executives and Google met to finalize the terms of the deal, but then sales began to rally. By the next quarter, Tesla had delivered a thousands of cars, posted a small profit and $562 million in revenue, eventually paying off its DoE loan, and the deal with Google evaporated.