The beginnings – Roadster and private funding

Tesla was incorporated (as Tesla Motors) on July 1, 2003, by Martin Eberhard and Marc Tarpenning in San Carlos, California. The founders were influenced to start the company after General Motors recalled all its EV1 electric cars in 2003 and then destroyed them, and seeing the higher fuel efficiency of battery-electric cars as an opportunity to break the usual correlation between high performance and low fuel economy in automobiles The AC Propulsion tzero also inspired the company's first vehicle, the Roadster. Eberhard said he wanted to build "a car manufacturer that is also a technology company", with its core technologies as "the battery, the computer software, and the proprietary motor".

Ian Wright was the third employee, joining a few months later. The three went looking for venture capital (VC) funding in January 2004 and connected with Elon Musk, who contributed US$6.5 million of the initial (Series A) US$7.5 million[10] round of investment in February 2004 and became chairman of the board of directors. Musk then appointed Eberhard as the CEO. J.B. Straubel joined in May 2004 as the fifth employee. A lawsuit settlement agreed to by Eberhard and Tesla in September 2009 allows all five (Eberhard, Tarpenning, Wright, Musk and Straubel) to call themselves co-founders.

Musk took an active role within the company and oversaw Roadster product design, but was not deeply involved in day-to-day business operations. Musk insisted from the beginning on a carbon-fiber-reinforced polymer body and contributed to the car style. Musk received the Global Green 2006 product design award for the design of the Tesla Roadster, presented by Mikhail Gorbachev, .Elon Musk, Martin Eberhard, Barney Hatt, Tesla Motors also received the 2007 Index Design award for their design of the Tesla Roadster.

Musk consistently maintained that Tesla's long-term strategic goal was to create affordable mass market electric vehicles. Tesla's goal was to start with a premium sports car aimed at early adopters and then moving into more mainstream vehicles, including sedans and affordable compacts.

Musk's Series A investment round of US$7.5 million in February 2004 included Compass Technology Partners and SDL Ventures, as well as many private investors. In February 2005, Musk led Tesla's Series B US$13 million investment round which added Valor Equity Partners to the funding team. Musk co-led the third, US$40 million round in May 2006 along with Technology Partners. This round included investment from prominent entrepreneurs including Google co-founders Sergey Brin & Larry Page, former eBay President Jeff Skoll, Hyatt heir Nick Pritzker and added the VC firms Draper Fisher Jurvetson, Capricorn Management, and The Bay Area Equity Fund managed by JPMorgan Chase. Musk led the fourth round in May 2008 which added another US$40,167,530 in debt financing, and brought the total investments to over US$100 million through private financing.

Also in the 2006 "Tesla master plan" a partnership with SolarCity was announced to co-market photovoltaic solar panels, which could be installed on the roof of a carport, allowing those who drive less than 350 miles/week to become "energy positive" with respect to personal transport.

On January 29, 2010, Tesla Motors filed Form S-1 with the U.S. Securities and Exchange Commission, as a preliminary prospectus indicating its intention to file an initial public offering (IPO) .