"Tesla wouldn't exist, basically", if the pair hadn't gone out to lunch in 2003, Musk said.
Straubel's public role for the company that often played well with Musk's zeal.
The weak results and Straubel's step back risk undermining Musk's bid to sustainably make money building and selling electric cars. Revenue jumped to $US6.3 ($9) billion, from $US4.5 ($6) billion in the first three months of the year. The nasty surprise helped push Tesla shares down almost 14% to $228.82, their worst day since 2013.
In a letter to shareholders, Musk said he's still aiming for positive third-quarter earnings, but will focus on delivering more cars, expanding capacity and generating cash.
During his almost two decades at Tesla, Straubel helped drive some of the company's key technological achievements and breakthroughs.
Straubel's departure comes amid a tumultuous year for the electric auto manufacturer as it struggles bringing its long-promised affordable Model 3 electric vehicle to the mass market. The Stanford grad has been the mastermind behind key decisions made on Tesla's power systems and battery technology-decisions that have given the company a continued advantage in efficiency and driving range after other companies have created rival electric models.
Elon Musk on Wednesday said Tesla now aims to be profitable in the fourth quarter, with the current quarter to be break-even. Musk announced the company was now deciding on locations for production of the vehicle, which will be molded after the Model 3 platform. The ex-CTO confirmed his executive shuffle and said, "I'm not disappearing". Straubel is being replaced by one of his subordinates, Drew Baglino.
As Tesla looks to expand the volume of its output, the company has struggled to get its manufacturing processes - many of which are handled by the company itself - under control. He's considered a co-founder of Tesla, as well as an expert on energy storage and propulsion-and in many intents and purposes has been Musk's partner in Tesla's rise.
Tesla's automotive gross margins dropped in the quarter to 19% from 20%.
Many analysts note that Tesla will be challenged not only to meet its deliveries target of 360,000 to 400,000 vehicles this year, but to keep profit margins from further eroding. Because of the large market for SUVs and their higher prices, the company sees the vehicle being more profitable than the Model 3, which is selling for about $50,000.
"It's hard for people to really feel an exponential", Musk said on the call.