The Exchanges

Q and things like that. But I think it actually comes with a different set of challenges to be part of a bigger company that has a big focus on something that's Maybe adjacent, but not the same sort of core problem they're ultimately trying to solve. So can you talk a little bit about those dynamics and ultimately how you created a team and how you all functioned within Tesla?

A I mean, it was truly bootstrapping. We had to be extremely scrappy because in this period of time from 2014 to ultimately 2019, like Tesla was definitely not sustainably profitable on the car side. And, and, and not just was it not sustainably profitable. We went through some very challenging times like the Model Three ramp, uh, in 2017 and 2018. You know, in that period of time, we were able to build, like, a small, very, like, I would say, like, Swiss Army knife, Marine Corps, Jack of all trades group of people that could put together that early Powerwall I and Powerpack II, Powerwall II programs. You know, this was like a couple dozen group of people that made that all happen on the engineering side, and we also benefited from the fact that There was a little bit of disruption in the solar space at that time. You know, you had companies like SunPower and others, SunEdison, like a large sort of restructuring of the solar industry, the whole SolarCity acquisition. There was some talent available, and so we could really pick demonstrated, talented individuals that had done utility-scale solar projects, that had done great things in the power electronics space in the early days of solar. And then the SolarCity acquisition itself You know, there was a lot of efficiency found in that integration. Not everybody stayed, for sure, through that acquisition, but the best people did. It…

AI assessment note: “We had to be extremely scrappy because... Tesla was definitely not sustainably profitable”

Q That's very cool. And it seems like, I mean, so everybody was kind of okay with this, and they were interested in working on different things at different times, and it worked out pretty fluidly, or were there any moments where you were like, I can't get what I need to make this happen, particularly on the Powerwall?

A Yeah, it was, it was tough. Not everybody was okay with it. Some people, you know, couldn't hack it or, or left on their own accord. Specifically on the Powerwall, We did. We had this like blitz. I think we called it the, the module line blitz where, you know, we were burning down a huge list of action items to figure out how to ramp that, that energy module line. And it was everything from how do we figure out how to get the potting to cure faster to the like module palette doesn't work and needs to be completely redesigned and like, let's figure out how to get that done. And the people that made the pallet said it's going to take six months. Let's figure out how to get it done in two weeks. You know, and, and, and just really stretching people to do things that they didn't know they could do. And, and then there's always some things that have to give, right? Like, especially as we got into the 2017 and 2018, there was a cell, a cell sort of pinch. Panasonic was having a hard time ramping, and we didn't have enough cells to go around between vehicles and energy, and, and so we had to kind of, like, pare back on the, the Powerwall build plan, which was tough. And it was tough, especially in light of this, like, growing backlog we had because of all of the PSPSs. And people became frustrated that they had to wait really long for a Powerwall. And, and again, the same thing happen…

AI assessment note: “Not everybody was okay with it. Some people, you know, couldn't hack it”

Q you built that, you fought a whole lot of battles, and so you've mentioned some of these, that, like, you know, the learnings from the Powerwall One and the initial scrappiness, challenges with cell supply, needing to sort of move over to ramp the Model Three. When was the moment that you knew that the second Powerwall was a commercial success? Because that was a huge milestone for you, right?

A Yeah, that felt awesome, especially through the struggles with the cell shortages and things like that. I think it was when the VPP success, and we saw that translate into, like, The request from lots of places around the globe to, to repeat it. When we saw the Green Mountain Power model be replicated with other utilities. And when we saw the channel partners on the direct business, like basically to the end customer, you know, either directly through, through Tesla Solar or through partners like Sunrun, Sunova and others. Just keep asking for more. I think, I think Puerto Rico was a, we had that hurricane in Puerto Rico where the grid was out for so long and it really drove, A lot of demand for energy resiliency and grid support on the battery side, and Puerto Rico is still one of the largest power wall markets, which is kind of wild, because there's not a lot of people in Puerto Rico. But I think it, I think it might be the single largest power wall market still. Just the customer happiness with the final product, and things like StormWatch, and, and finally persevering through cell shortages, supply chain shortages, and hitting seven K power walls per week. You know, in, in Reno and, and, and taking all of that learning into Powerwall three and have that hit the market with such success. I mean, that's not a single, single answer I know, but, but maybe if I were to zoom out …

AI assessment note: “I knew Powerwall two was a success when Powerwall became the term for a home battery.”

Q the climate world, right, because too often we're, you know, in a business-to-business sort of environment. We don't necessarily have to make things beautiful. We just have to make them functional. But it's different for the handful of businesses that are ultimately developing consumer products. So do you have advice or learnings on how best to focus your attention when there are some of those trade-offs between aesthetics and functionality?

A I think there can be too much focus on aesthetics while missing attention to detail. Because actually what really matters is that attention to detail. Like, a great example with Powerwall, too. We were like, we still want the product to look beautiful, but it needs to also seem rugged. Like, it's a part of your house, you know, and it, you want it to last forever. It shouldn't have, like, a fancy plastic enclosure. It should look like it's robust, so it should be, you know, it's made out of steel, right? And you, you go touch it, you're like, yeah, this is solid. But at the same time, we wanted it to feel beautiful and, and something you're proud to have on the front of your house. And, and again, like, ok, so that's, that's all well and good. Well, how do you translate that In terms of attention to detail to the end customer. Well, a good way is to have them take the wrap off. And then they're like, they get to experience that. And you need a wrap because you have this aesthetic, a surface product, you're going to stick it in packaging and move it around the world and installers are going to be, you know, manipulating it and you don't want, you don't want it to get damaged. But then when the customer actually like kind of peels off that plastic film and sees their product for the first time, it's like, They really appreciate what they just installed, and, and then, like, combi…

AI assessment note: “I think there can be too much focus on aesthetics while missing attention to detail.”

Q a massive cell shortage, and you're really trying to get product out there. So what, what did that look like? So what exactly were your conversations like with Panasonic when you understood that they couldn't supply at the level you required? And then what did your conversations look like with new suppliers? How did you negotiate those contracts? How fast were you trying to push everyone? What was that like?

A It was highly collaborative with Panasonic. You know, both Tesla and Panasonic had to help each other bring labor into the area. You know, they were huge employers in that area, the first big factory in Reno. So there was a lot of collaboration there, helping each other out. Myself and other members of my team kind of volunteered to go in and help de-bottleneck their ramp up of their new lines. You know, we simplified their life by telling them they didn't need to make the energy sale anymore, even though that was Hard for Powerwall, but it was necessary for them to ramp vehicles. But at the same time, you know, it, like, built a conviction in, in our minds to find new sources of supply. Which, again, is not easy, because I think it's important to remember at this time, this was probably 2017 when this was actually happening, there weren't a lot of well-renowned, high-quality cell suppliers out there. And we, we didn't want to be involved in something that wasn't going to be, like, a volume play. Like, one of the reasons why We went with cylindrical cells in the first place was because they were the only batteries built in, in high volume, and it wasn't just about volume, but, uh, but about commitment to safety and reliability, because especially with stationary storage, but also with vehicles, like you're talking about something that needs to survive through 4000 to 10,000 cyc…

AI assessment note: “It was highly collaborative with Panasonic. You know, both Tesla and Panasonic had to help”

Q what you could do as a company, but you're also at the level of explaining why people want residential batteries. So can you say a bit more about, like, how the leverage felt in the negotiation? Did it feel like it was trivial for you to get them to a place where they realized this was a big market for them, or was it, or was it trickier than that?

A It was tricky. It was not easy, especially given how, like, the level of expectations we held the suppliers to. It was not Not easy. To give you a sense of what it was like at the time when I was working with LG, like, I was interacting with their IT applications subdivision. Like, I wasn't talking to their head of vehicle batteries or anything like that, you know. And that was because that's where the cylindrical cells were within LG at the time. It was not, you know, they considered pouch cells and to be their vehicle cell form factor. Um, and I think actually in some ways that was a good thing because the laptop Industry had sort of moved away from cylindrical cells at this point, led by Apple and others, slimmer and slimmer all the time, you know, pouch had become dominant. And so this, like, IT, Apple, you know, business unit within LG was like, well, I need to find something to be relevant, you know. And so, if, if laptops are going to be repeat, repeat sales outside of Korea, maybe Japan, a couple markets, like, I'm going to need to find a new thing. And so that helped. It's hard just to overstate Just how amazing it is to have businesses that are willing to take large risks, like the gig factory in Reno was a huge risk taken by Panasonic to build a single factory bigger than all other factories combined in a new country where they had never done battery manufacturing be…

AI assessment note: “It was tricky. It was not easy, especially given how, like, the level”

Q this? Because I imagine that, like, You're, you've got all this really amazing talent. At the same time, you're being very public about these projects that you're ultimately pursuing, so when you needed it, was it easy to marshal the resources you required within the company to deliver on these things, or did you have to still kind of fight for them in the moments when things mattered to you?

A It was intense nights and weekends situation, you know, burning the midnight oil, as they say. I had my, like, three-month-old first son and my wife with me up in Reno living out of the Whitney Peak Hotel. I was there on Thanksgiving Day. It was that kind of situation. But hey, it was like, we were doing stuff that we were, we felt passionate about. But I think beyond that, there are difficult trades to make. In that 2016 period, we were developing the energy module. It was also the same time that the hundred kilowatt hour module for Model S and X was being developed, and the module for Model Three. And the interesting thing was, they each went Different directions. So it was, like, it's important as, like, broader context to consider that, like, this was still the time when battery cells and battery modules were, like, coming down the cost curve really quickly, and there wasn't, like, an obviously best way to do anything. And in 2016, we were literally trying three different ways to make a cylindrical cell module. And so, manufacturing engineering was not easy to come by to think about how to develop the automation for all of these different ways to do cylindrical cell modules. And so, There was a lot of people wearing multiple hats. You know, there were some strategic moves to, to partner with some awesome automation houses that, that helped Tesla out. The way I would describ…

AI assessment note: “jumping on the most critical thing that week and harnessing the team to do that”