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Extended Interview: Tesla Motors Chairman Elon Musk

June 25, 2008 at 12:00 AM EDT

SPENCER MICHELS: So is this the future, do you think? Is this — I mean electric cars — really coming at us at this point?

ELON MUSK: Absolutely, electrics cars are, I cannot tell you how much electric cars of the future, they are absolutely what we will drive […] and not that far away. I’ve actually made a prediction that within 30 years a majority of new cars made in the United States will be electric. And I don’t mean hybrid, I mean fully electric.

SPENCER MICHELS: And not fuel cell but plug-in electric?

ELON MUSK: Plug-in electric. The fuel cell will never ever, ever, ever be a mainstay.

SPENCER MICHELS: You say that very emphatically and yet some of the folks at Toyota and so forth say they will be a mainstay eventually.

ELON MUSK: Well then, time will tell who is right.

SPENCER MICHELS: Why do you say what you said, though?

ELON MUSK: The fuel cell is just a fundamentally inferior way of delivering electrical energy to an electric motor than batteries. First of all, you have to say what is the fuel source for a fuel cell? Okay, so there is not naturally occurring hydrogen in the world. There’s carbon element in the universe but not in the world, so you have to get the hydrogen from somewhere. Where do you get it from?


ELON MUSK: Yes, but it takes an enormous amount of energy to break down the water. So where did you get the energy to break down the water?

SPENCER MICHELS: Solar panels.

ELON MUSK: Okay, so you could do all those things. But it’s a tiny fraction as efficient to do that as it is to use those same solar panels just directly to charge a battery pack, as opposed to using the solar panels to split water, then take hydrogen, oxygen, separate them, compress the hydrogen into either a very high pressure gas or liquid, and then put that into a car and then run a fuel cell process and then generate electricity. It’s incredibly inefficient to do that. You’ll always win by taking that same electrical source and just directly charging a battery. Always, guaranteed. This is a fact of physics.

Some people will say, well what if the technology were improved? It’s not. You can say, you can take the ideal case, let’s say all the technology was perfect for a fuel cell. It still doesn’t work. It is still not competitive for a battery, not even close. And one last item, you know on fuel cells. If fuel cells were good, don’t think you’d see them somewhere, like maybe in a laptop or a cell phone or a $200 million military satellite maybe? And yet, where do you see them?


ELON MUSK: Exactly.

Battery technology

SPENCER MICHELS: Okay, but the thing with the battery is that for 15 years or more, people have been talking about electric cars with batteries and they haven't really materialized. They haven't been very successful, because the battery technology hasn't been very good. Is your battery tech . . . you're using essentially computer batteries.

ELON MUSK: Well, [...] separate the nomenclature. The individual little thing is actually called a cell. A battery by definition is a collection of cells. So the cell is a little can of chemicals. And the challenge is taking a very high-energy cell, and a large number of them, and combining them safely into a large battery.

And this car [made by Tesla] has almost 7000 cells. And so you have to combine those in such a way that you don't have some runaway -- that you control the temperature and charge state of all those cells, make sure there's no unevenness, yet they have to be safe in the event of a crash. They have to endure for many years and many cycles and go over shock loads and vibrations and all that sort of stuff.

So the really tough part is not the cell. The individual cell, the little can of chemicals, is somewhat of a commodity. There's dozens of companies that make those. It's combining those little cans of chemicals, a very large number of them, and making it safe and making it reliable and making it last a long time, and those are very difficult things and nobody's succeeded in doing that except Tesla.

SPENCER MICHELS: Have you succeeded to the point where this could be a technology that everybody could use eventually, modified a little bit?

ELON MUSK: Yeah, the reason we started off with a sports car is because initially any new technology's expensive. If you think back to the beginning of cell phones, laptops or really any new technology it's always expensive. And getting it until they're able to refine the technology, and the technology just needs to gestate for a period, and they go through that constant proving to the point where it is affordable to the masses.

So you know if you look at your blackberry or iPhone or whatever, it's an incredibly sophisticated device. But that's only possible after decades of refinement and year after year improved engineering. And the same is going to be true for electric cars. So we're starting off with $100,000 electric sports car. Not because we think that the world has a shortage of sports cars, but because that's about as cheaply as we can make a car right now.

But model two, which is under development, that's a luxury sports sedan -- a four door, five passenger, it's just going to be awesome. That car's going to have a starting price list of about $59,000 so it already made a big jump down even with model two.

SPENCER MICHELS: I guess what I'm really curious about though is whether the battery technology is so far advanced at this point that that's why the whole world has changed in terms of electric cars. Or has it? I'm not convinced it has.

ELON MUSK: Well, the world hasn't changed yet. It will change however. It is definitely true that the fundamental enabling technology for electric cars is lithium-ion as a cell chemistry technology. In the absence of that, I don't think it's possible to make an electric car that is competitive with a gasoline car. Now even within the lithium-ion there are many variants and nuances and there's constant improvement going on of the lithium-ion cell. And then we're making improvements at the battery pack level, the combining of those cells in an efficient way, such that you've got cells which make it light, say, and all the things I mentioned before, efficient, long lasting, safe, and cost effective. So we're taking advantage essentially of cell chemistry improvements that are driven primarily by consumer electronics. And then combining those little cells to a large scale to provide a very long range with electric vehicles.

Silicon Valley the next Detroit?

SPENCER MICHELS: How much is what you've developed appealing to venture capitalists, the state and so forth? Is everybody buying what you're saying?

ELON MUSK: I wouldn't say everyone's buying what we're saying. There are always skeptics and naysayers, but I think the smart money's on us. If you look at some of our investors, we've got, you know, the co-founder of eBay, cofounders of Google -- some of the smartest venture money in Silicon Valley -- Draper Fisher Jurvetson, we've got J.P. Morgan. So it's a pretty smart group. And if you look at our buyers, it's a who's who of technology, space and of the entertainment world. In fact, as perhaps one of the best endorsements, Chris Payne, who directed Who Killed the Electric Car? is a buyer of Tesla. So if Chris Payne, the guy who did the movie about the electric car being killed, has bought one of our cars, I think what better endorsement?

SPENCER MICHELS: What do you think was the reason that so many other companies that started up, Zebra, and Zap and Miles and so forth, haven't cracked the market open yet?

ELON MUSK: Sure. Well, this is a very difficult technology problem. I mean, to solve the challenges of an electric drive train and make it safe, and efficient enough, just to get it all done right, takes tremendous engineering talent. And that's why it's come out of Silicon Valley. Silicon Valley has some of the smartest engineers and technology business people in the world. In fact I think the smartest engineers and technology business people in the world, I think most people would agree with that statement. So that's why it's come out of this. It's -- you know that's the problem that needed to get solved.

SPENCER MICHELS: Is Silicon Valley the next Detroit?

ELON MUSK: Well Detroit has some negative connotations, so to say something like 'Silicon Valley's the next Detroit' could be a grab bag of positive or negative things. But I think there's, well, and I don't think there are any other car companies in Silicon Valley. So I'm not sure Silicon Valley is the next Detroit in the sense of being the hub of automotive activity. And actually we do have an engineering office in Detroit. But I think -- could Silicon Valley be the home of one of the great car companies of the 21st century? I think it will be and that'll be Tesla.

SPENCER MICHELS: Tell me a little bit about this car -- other than the fact that we talked about the batteries already -- but tell me what this car can do and why it seems to impress you and others.

ELON MUSK: Yeah, this car is just a phenomenal sports car. And the goal we had in designing this car was to have a car that even if it was -- whether it's electric or gasoline, it's still a great sports car. So in other words we don't want people just to buy the car because it's electric, and then accept all sorts of compromises. So this car has a zero to 60 in 3.9 seconds.

SPENCER MICHELS: Which compares with . . .

ELON MUSK: That actually is faster than any Aston Martin or any Ferrari currently in production. And that understates the acceleration of the car because a gasoline car 0 to 60 is measured from when the wheels start moving. The wheels only move after you've engaged the clutch. In our case there's no clutch. So if you were to measure a green flag to 60, we'd probably be apples to apples about a quarter second better than an equivalent gasoline car. So our 3.9 is probably like a gasoline car's 3.6.

SPENCER MICHELS: And this is of great interest to sports car aficionados, right?

ELON MUSK: Yeah, well I think anyone who likes fast cars will love the Tesla. And it has fantastic handling by the way. I mean this car will crush a Porsche on the track, just crush it. So if you like fast cars, you'll love this car. And then oh, by the way, it happens to be electric and it's twice the efficiency of a Prius.

I mean the well-to-wheel efficiency of this car, it uses half the energy and creates less than half the CO2 per mile of a Prius when doing the full well-to-wheel calculation. So if you were to take a gallon of oil, and use that to generate electricity, and take the transmission losses and charging losses and say "well how many miles can the car go?" Or you take that same gallon of oil and you refine it, send the gasoline to a gas station, pulled up a car and drove that car, that's how you do the [...] so it's the same energy source, it's a full apples-to-apples comparison. We get about 135 miles per gallon equivalent, so compare that, that's more than twice what a Prius is.

SPENCER MICHELS: But you don't use any gasoline at all. This is equivalent in terms of electricity.

ELON MUSK: Right, the energy content, the energy used by this to go 220 miles is about the equivalent of two gallons of gas.

SPENCER MICHELS: That's amazing.

ELON MUSK: Yeah, and [...] so you can see the, the energy efficiency of the Tesla reflected in the cost that it takes to charge the car. At current California rates it only costs you about $4 to fully recharge the Tesla and go 220 miles. So I mean $4, that's the equivalent of 1 gallon of gas right now and you're at 220 miles.

So you can imagine that, for a high end sports car, maybe the buyers aren't that sensitive to the cost of transportation, but as we bring the price of the car lower and lower, can you imagine a $30,000 car that was 20 times cheaper to use than a gasoline car? And your cost of operation? I mean then even if you don't care about the environment at all, just on pure economics you're going to want the electric car because it's so expensive to run a gasoline car.

Production and sales strategy

SPENCER MICHELS: You're pretty concerned, or the company is, about proprietary technology or development. You want to protect it. What, in general terms, does that technology do and I assume that's outside just the fact of the battery?

ELON MUSK: Yeah, well the whole power train, Tesla's been developing an entire electric power train, which is really the battery pack, the power electronics, the motor and the transmission. They're all Tesla proprietary, and then there's all the software that controls and manages all that. And the software's actually a quite significant piece as well. So we're very concerned about protecting that element.

We're also very concerned about just protecting the knowledge of what it takes to integrate that electric power train into a car and what it takes to certify that and get that past the crash tests and past the U.S. government regulatory bodies. All that information is something that -- we spent a lot of money and effort figuring all this stuff out. And so we want to make sure it's protected. But one other thing I should say is we're actually very happy to sell batteries and motors, we're happy to sell power train components to other car companies. So we're not trying to keep the power train to ourselves, we're happy to sell that to other companies.


ELON MUSK: We actually have some, yes, we do. It's still confidential, but we think we'll be able to announce a deal with a major car company maybe later this year.

SPENCER MICHELS: There are some practical things about this car at this stage that must have to be addressed. I mean this is almost a one-of-a-kind car and even when it gets built, who's going to be able to fix a car like this? How are you going to find places to charge it? What if you have a flat tire?

ELON MUSK: So Tesla has a company-owned dealership strategy, so we'll actually have Tesla stores all around the country, in fact we'll be opening up our first Tesla store. We call them stores, where we do sales and service. We're opening our flagship store in Los Angeles on May 1. We'll be opening a store in the bay area in Menlo Park, in probably June or July. And then we've got a series of openings, so in about a year we expect to have at least 10 sales and service centers around the country.

And then as time goes by we expect to have eventually hundreds of Tesla stores. And maybe, kind of, the strategy's similar to what Apple has with the Apple store. And we want to really control the customer experience in the sales and service, almost, because it's often really bad. And we have a fantastic service experience with Tesla, so that's why we're going with the company-owned approach.

SPENCER MICHELS: Does that make sense? I mean it's very expensive to do that and if you're only going to sell, I don't know how many you expect to sell, not many, how can you do that? That's really high.

ELON MUSK: We expect to sell probably 2000 a year of this car, but when we go to model two, we're going to step it up to 20,000 a year. When we go to model three, it might be over 100,000 a year, so we actually expect to have eventually millions of cars on the road. It's certainly going to justify having those sales and service centers. And yes it does take a little more capital, a little more expensive. But this is something I felt very strongly about in the beginning is that we've got to ensure that there's a fantastic customer service experience, which people don't typically have with their cars.

Problem that's 'got to get solved'

SPENCER MICHELS: I talked to the editor of Green Car magazine who is a big supporter of the Tesla. He loves it, but he says, you know, you've really got to understand that to start a car company is an tremendous undertaking and in this day and age -- this isn't 1912 anymore. You know, it's very risky.

ELON MUSK: Yes, it is.

SPENCER MICHELS: To put a car company together today. Do you agree with that?

ELON MUSK: I agree. I agree completely. It's been 67 years since the last successful car company start up, which was Jeep in 1941.

SPENCER MICHELS: So how do you deal with that? How do you get all this infrastructure that you're going to need to make this successful? You must have to go begging to every venture capitalist in the country.

ELON MUSK: I guess I've got a lot of money. I don't really have to go begging to any venture capitalist. They typically -- well actually the interest in Tesla's been very high, despite the fact that there aren't a lot of, I mean despite the fact that last time there was a successful car company start up was 1941. We actually had a lot of investor interest and we have some very smart money in the company.

So you know I think if this were simply a gasoline car company start up, I'd say well "what's the point?" But this is really about leveraging a completely new technology that the big incumbent car companies don't really understand that well. And it's something that is well suited to Silicon Valley where electrical engineering expertise is the greatest in the world. So and at the end of the day, this was just something that I personally felt was an important enough problem that it needed to be done.

So in all frankness, I don't really need the stress of building a car company. It is a difficult and stressful thing. If I didn't think it was extremely important, I wouldn't have done it. And I certainly would never have started a gasoline car company. But it must be done so we're doing it.

SPENCER MICHELS: You could change the world.

ELON MUSK: We need to change the world. There's no choice.

SPENCER MICHELS: So this is more of a pioneering effort than it is just a way to make money.

ELON MUSK: I don't need to make money, but no, I should say that Tesla, Tesla needs to make money because if it doesn't make money we will be unable to grow the company and we will be unable to add additional models. And we really want to have -- Tesla wants to make millions of cars, and we have to make millions of cars to make a difference. And to make millions of cars, we have to be profitable with each car along the way.

So is my personal motive out of profit? It isn't. If I got a bunch of money tomorrow, it wouldn't change my life. There's nothing -- I've bought everything I want. I don't like yachts or anything, you know I'm not a yacht person and I've got pretty much the nicest plane I'd want to have. So this is not about wealth accumulation for me personally. It's just that I think this is a very important problem and it's got to get solved and if we don't solve it we're in trouble.