Ousted Tesla cofounder Martin Eberhard sounds off on Elon Musk, how the company has changed, and the EV wars

• Martin Eberhard spoke with Insider about his perspectives on Tesla, EVs, and Elon Musk.

• While Musk is often referred to as Tesla's founder, Eberhard cofounded Tesla with Marc Tarpenning.

• Tesla's early history has long been a point of contention between Musk and Eberhard.

While Elon Musk is sometimes referred to as the founder of Tesla, his part in the carmaker's history is more complicated.

Martin Eberhard cofounded Tesla in 2003 with his longtime friend Marc Tarpenning. Musk led the company's $7.5 million Series A funding round and became chairman of the board in 2004.

But Eberhard and Musk butted heads, and Musk ousted Eberhard from his CEO role in 2007. Musk said that Eberhard was holding up production of Tesla's first car, the Roadster, and that Eberhard was responsible for other operational issues.

Musk, who took over as CEO in 2008, has called Eberhard the worst person he's ever worked with. Eberhard sued Musk in 2009, accusing him of libel and defamation. (The two men later settled the lawsuit.)

I spoke in December with Eberhard, who was once called "Mr. Tesla" and now describes himself as a "retired entrepreneur." The Tesla cofounder discussed everything from his startup's early days to the future of electric cars.

Tesla regrets

Eberhard said that there are a million things he would've done differently at Tesla knowing what he knows now but that they're mostly small regrets.

For example, he said Tesla spent too much time debating whether to sell its cars through dealerships or directly to customers. He also said that while he would have made technical changes to the Roadster, overall he's proud of what the team created.

"If you have hindsight, you can see all the mistakes you made," he said. "But I think in the large strokes, we got it right. And the proof is for the first time ever in decades we built a car company successfully.

"Would I take his money if I could do it over again?" he asked, referring to Musk's investment. "I didn't see a lot of other money on the table, you know."

Eberhard said that had he stayed, he would've made some different choices than Musk.

"For example, I would have very much opposed the acquisition of SolarCity," he said, calling it "a distraction" for Tesla.

Tesla acquired SolarCity, a solar-energy company, in 2016 for $2.6 billion. Musk came under scrutiny because the company was run by his cousin Lyndon Rive, who was facing headwinds running the business. Some Tesla shareholders filed a lawsuit accusing Musk of putting pressure on Tesla's board members to buy SolarCity and bail it out; Musk won the lawsuit last year. In 2021, Tesla's energy-generation-and-storage segment generated nearly $3 billion in revenue.

Eberhard also said he would've worked to create a more positive culture at Tesla had he remained at the company. "I'm a believer of treating employees with respect, and I'm not into random firings and things like that," he said. "So maybe the culture inside the company would have been a little bit nicer."

Eberhard appeared to be alluding to reports suggesting that Musk can be a difficult person to work for, prone to acting out of anger and even rage-firing employees. Musk has denied such allegations and said in 2021 that he gave "clear and frank" feedback to employees.

Musk did not respond to several requests from Insider for comment on this story. Emails to Tesla's press line were not returned.

Describing his own management style, Eberhard said: "I tried to keep the company motivated by keeping them on mission to realize that what we're doing was really important for the world. And that motivated people to put lots and lots of hard hours into it — but not out of fear, rather out of that feeling of accomplishment and a feeling of responsibility.

"We didn't do random firings," he added. "I did have to fire some people from time to time, but I hated it."

What Musk was like at work

Eberhard said that in recent years he's tried to avoid news about Musk.

"Honestly, I have Elon Musk blocked in my news feed," he said. "I don't need to read any more about him. It just gives me indigestion to read that. What happens is that Musk will make some wild-ass claim on Twitter and suddenly a bunch of reporters want to talk to me. That's how I hear about it."

But Eberhard did say he'd noticed a change: He described Musk as much more hands-on with his companies than he was at Tesla during Eberhard's tenure.

"Elon is a different person now than he was then," Eberhard said. "He was no more involved than any other board member. He came to board meetings. He did not have an office at the company. He didn't come there regularly. He did not give direction to my employees, anything like that. He was a board member."

Now, Eberhard added, Musk is "a super-active kind of guy." He pointed to the layoffs at Twitter in November shortly after Musk took over that company.

Tesla's early history is a point of contention between Musk and Eberhard. In a tweet in November, Musk said he "was head of product and led the design of the original Roadster." Eberhard pushed back on that characterization.

Eberhard said that while he was the CEO and Musk was the chairman of the board, Musk came to board meetings monthly but didn't regularly work at the company. "So, you know, the idea of him, like, sitting around working on the car or something is simply not true," Eberhard said. "He was not there."

Eberhard said he realized friction was growing between him and Musk when Tesla started getting more media attention.

"His behavior changed dramatically as soon as we started having press about Tesla," Eberhard said. "He got mad if anything was ever written about Tesla and it didn't feature his name prominently. And that's when I realized that there was an ego involved here that I hadn't recognized before."

Eberhard, who at the time had the nickname "Mr. Tesla," said that anytime Musk wasn't mentioned in an article about the company, Musk would call him and "scream" at him.

Musk ousted Eberhard in 2007 and became CEO shortly after. But that wasn't the end of their contact.

Eberhard filed a defamation lawsuit against Musk in 2009, after Musk started calling himself a Tesla founder and made negative comments about Eberhard. The lawsuit was settled the same year for an undisclosed amount, with the condition that Musk and two other Tesla executives, JB Straubel and Ian Wright, could also claim the title of Tesla founder. Musk and Eberhard also signed a nondisparagement agreement.

Eberhard said that was the last time he spoke with Musk. He added that he'd sent Musk a congratulatory message in 2008 when Musk sent his first rocket into space but that he never received a reply.

Musk has occasionally tweeted about Eberhard. Eberhard said that while he's not sure why, he has a theory.

"My guess is because he tried for years to set the narrative that he was the founder and people know that's not true now. It's under his skin," Eberhard said. "What my therapist told me is that 'what you can read from all that is you're still under his skin, so if he's under yours at least you're even.'

"Like I said, I'm relatively powerless, and there's not much I can do. I just take it."

How the EV market has evolved

Eberhard said that when he and Tarpenning founded Tesla in 2003, everybody knew it was "impossible" to turn a profit by making electric vehicles. Tesla was the only startup trying after legacy automakers like Ford had largely given up on electric cars.

The International Energy Agency has estimated that 13% of automobiles sold globally in 2022 were electric. "I see it as we won, basically," Eberhard said. "The revolution that we set out to start — we succeeded."

Eberhard said he had one piece of advice for startups and legacy automakers alike joining the EV industry: "Don't try to compete head-on with Tesla."

"Unlike so many Silicon Valley companies, the auto industry is not a winner-take-all industry," he said. "There's different kinds of cars for different market segments."

The Tesla cofounder said he was disappointed by certain companies, like Lucid. He said Lucid is trying to compete directly against the Model S with a similar electric sedan, the Lucid Air. (Eberhard said he worked for the company when it was still known as Atieva in 2015 but was "not a big fan" of its CEO and left after six weeks.)

Lucid confirmed that Eberhard worked at the company for a short period in 2015 but declined to comment on his departure. A representative for the startup pushed back on Eberhard's characterization of the Lucid Air, calling it a "new benchmark for EV sports sedans."

Eberhard said he was more impressed by companies like Rivian. "Rivian has looked out there and said, 'You know, the No. 1-selling vehicle in North America is the F-150 truck. So if we want to find a new market, that's a lucrative place to work,'" Eberhard said.

While Tesla dominates the US EV market, Ford has taken the No. 2 spot. Ford sold just over 41,000 EVs in the first three quarters of 2022, while Tesla delivered over 900,000 in the same period.

Eberhard said that Tesla has been waiting for other companies to catch up but that he doesn't see companies like Ford as a threat. "The world has supported more than a dozen successful large car companies for generations," Eberhard said. "I don't see that changing."

Tesla's Autopilot and the rise of auto tech

Eberhard might not think Tesla is threatened by other automakers, but he said he sees a greater threat coming from within the company: self-driving technology.

"In my opinion, we need to get out of the habit of thinking about all of this autonomous stuff as being connected to EVs," Eberhard said, adding, "I'd like to see people thinking about making cars that people can drive."

Musk has made self-driving technology a key part of Tesla's future. Last year he described the carmaker's self-driving software as the difference between Tesla being worth a lot of money or almost nothing. Musk has said the company "is as much a software company as it is a hardware company." But Eberhard says it's not that simple.

"I think it's a mistake to think of a car as a software platform — you know, like an iPhone or something. It's not the same," he said.

"I have an iPhone, and every time I get a software update there's bugs in there," Eberhard added. "These bugs mean, for example, that occasionally my news-feed app crashes. That's not a big deal, because it's just an annoyance on iPhone. But that kind of a bug shows up in the software that controls, for example, my brakes or the steering, it can kill you."

Eberhard said that while he appreciated "safety-oriented systems" like driver-assist features, he's "not a big fan" of autonomous driving. He said Musk appeared to be preoccupied with autonomous cars, and he described that as one of his biggest concerns for Tesla under Musk's leadership.

"I think the technology is way too immature to be laying on the road," he said, referring to Tesla's Full Self-Driving beta software. "I mean, this is my cautious nature, but I would have had a really hard time releasing software that is as buggy as that onto the roads."

Musk has said in the past that some bugs are to be expected with beta software and has encouraged drivers to report issues with the software.

For years Musk has been promising that Tesla will soon have fully autonomous cars on the road. And while the automaker equips new Teslas with its Autopilot driver-assist program and sells its Full Self-Driving beta feature for $15,000 or for $200 a month, the company is far from achieving fully autonomous driving. Its software requires a licensed operator to monitor the vehicle at all times.

The company is also facing scrutiny from several regulators over the technology. The National Highway Traffic Safety Administration is investigating Tesla's Autopilot software and its Full Self-Driving add-on. Last month, Tesla disclosed an investigation by the Department of Justice into its self-driving claims. And the Securities and Exchange Commission is investigating whether Tesla made misleading statements about its software's capabilities.

Eberhard said that when he was Tesla's CEO, none of that "Autopilot crap" existed. "I didn't have the budget to do a decent infotainment system in the car, let alone contemplate something like Autopilot," he said.

Life after Tesla

It wasn't easy after Eberhard left Tesla. He said he was "basically unemployable" for two years because of an intellectual-property agreement with Tesla, which he said left him largely out of money and work until the agreement expired.

"Pretty much on the day that time period expired, Volkswagen hired me," Eberhard said.

He joined VW in the fall of 2009 as the director of EV development at the carmaker's Electronics Research Laboratory. He left in 2011. He said that trying to make EVs happen at the company was "a lot like pushing strings."

"I think they got tired of me, and I left," he said.

He went on to work briefly with several other startups, including Lucid and SF Motors, and he launched two EV-battery startups, Inevit and Tiveni.

Even as he's bounced around, Eberhard hasn't strayed far from his Tesla roots. He said he still drives his Roadster every day, while his wife drives a Model S.

He said that in 2008 he bought the second Roadster ever produced but that he stopped driving it about six or seven years ago, though he occasionally takes it to car shows; the custom-painted car has a vanity plate that says "Mr. Tesla." Now he drives a used Roadster.

Eberhard said he's maintained a "small stake" in Tesla. Though he declined to comment on the size, he said he's kept his stake longer than anyone — he got it two minutes before Tarpenning got his stake. Eberhard owned less than 5% of Tesla's stock when he left in 2007.

"I had a larger stake, and I sold a bunch of my stock early, which, you know, in hindsight was maybe not the ideal thing to do, but that's what I did," he said.

Today, Eberhard and Tarpenning work together on a small private investment firm. They meet for coffee every Wednesday — something they've been doing since 1988.

"If one of us is out of town that week we move it to a Tuesday or Thursday, or sometimes it turns into lunch — but yes, even through COVID times we did virtual coffee," he said. "It was over such coffee where we dreamed up Nuvomedia, the rocket book, and it's also where we dreamed up Tesla."

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