NEWS: Q and A: Elon Musk, CEO, Tesla

August 16, 2012
Elon Musk Profile
Elon Musk, billionaire CEO of Tesla and SpaceX, cannot have a frozen yogurt. After he explained with some excitement that SpaceX headquarters has its very own stand, his assistant delivered the bad news: said stand closed at 7 p.m. and it is now 7:10 p.m. Visibly disappointed, Musk settled for an ice water and turned to our conversation.
The moment was notable for two reasons: 1) Deputy editor Joe DeMatio and I briefly thought the snack snafu might cripple our interview before it had begun, and 2) It is a very rare occasion that Elon Musk does not get what he wants, especially as of late. His start-up rocket company, based in Hawthorne, California, won a $440 million contract from NASA to help develop a replacement for the Space Shuttle. Some 360 miles north, in Fremont, California, Model S sedans are rolling out of a former General Motors and Toyota plant retooled with the help of a $465 million loan from the Department of Energy. And they're already sold out for some time.
"We don't have a demand problem; we've got over 12,000 people who put down a $5000 deposit for the car," Musk says.
Elon Musk Profile 2
We sat down with Musk at his SpaceX office -- actually a large, open cubicle -- expecting to find a very confident man. Indeed, he has no trouble savoring his successes. "It was the creation of the Roadster, not some PowerPoint presentation, that convinced Bob Lutz to do the Volt," he notes. But for all his bombast, delivered rather softly and with a refined South African accent, Musk also speaks with the sobriety of someone who's invested the better part of a decade and millions of his own fortune (currently estimated at around $2 billion) into building an automaker.
"The focus is on Tesla to ramp up the production rate, make sure quality's good, and then make sure...that the company's profitable. Because, obviously, there have been car company start-ups before that have brought cars into production. DeLorean and Tucker have done that, they built this debt, and then they died."
In our hour long interview, he reflected on Tesla's grueling gestation, elaborated on what we might expect from the electric car company in the future, and discussed what he hopes will be his own legacy. We also asked him about his spat with Henrik Fisker. - David Zenlea

On difficulties creating Tesla and the Roadster

Elon Musk Profile 6
Things these days are much better than they were in the past. 2008 was like going through the shredder. It was bad.
The debate in 2008 was whether I was going to let Tesla die or [not]. It was a very tough point. Because if I split my resources between Tesla and SpaceX, then there was a chance that both would die. Both were in very difficult positions in 2008.
It wasn't as though I thought it was going to be a fast way to make money or something. I thought it would be hard. I think the initial business plan was, like, $25 or $30 million to try to bring a car to market using...a derivative of the Elise chassis and some powertrain technology that had been developed by AC Propulsion. As it turned out, the AC Propulsion technology didn't work, so we had to redo all that. And the Elise -- once you added the electric powertrain, it invalidated all the crash work, the mass grew by 30 percent, the weight distribution was different, the load points were all different. We had to stretch the chassis just to be able to fit people in, so that turned out to be a really dumb strategy, too.
So it was like you wanted to build a house, couldn't find the right house, so you try to fix an existing house and end up changing everything except for one wall in the basement. It would have cost way less to just level the house [laughs] and start from scratch. What sounded like a good idea at first, which was to leverage the Elise chassis, was actually an incredibly dumb idea [laughs].
The guy that I hired as CEO [co-founder Martin Eberhard] turned out to be unable to execute on anything, unfortunately. And the thing I have trouble forgiving him for is that he hid it from me for a long time. It only came to light after we got some other investors and someone came in to help with the supply chain, and one of them did an audit. He said, 'This is crazy, we're going to be producing cars for twice as much as we're selling them for. And by the way, a third of the car (it turned out to be two-thirds) doesn't even work [laughs again], and even if we could make it, we shouldn't make it. And we can't make it. We had to do a massive redesign. We had to switch out the body supplier.
Tesla Roadster
It was such a nightmare. Anyway. In addition to those premises being wrong, the execution was crap. It ended up costing something like $150 million to get the Roadster into series production.
[The Roadster]'s like the Apple I, it's a brilliant proof of concept, it's pretty cool for what it did. It has its limitations but it's going to be a collector's item.
In this year, if we can do 5000 [Model S sedans] or something like that, that'll be twice the total for the roadster."

On the Model S and the end of range anxiety

We see our market as being the market for premium sedans above $50,000, accounting, globally, for a couple million units a year. The Model S is [an owner's] primary car.
We'll be unveiling the Tesla Supercharger strategy [quick charging stations] in a couple of months. The Supercharger strategy should address people's intercity concerns. It charges three hours of driving in 30 minutes, which is the convenience inflection point, approximately, for a gasoline car. Generally, if you start [driving] at 9 am, by the time you hit noon, you want to go to the bathroom, grab lunch. If you add up the time it's something like 20 to 30 minutes.

On Tesla's planned $30,000 sedan

Elon Musk Profile 5
If we are successful enough to get to our third-generation vehicle, our $30,000 vehicle, then we'll be able to use the whole [Fremont] plant. It'd be three to four years [from now]. It would be quite similar to the Model S but scaled down. Probably about the size of a BMW 3-series or an Audi A4.
I'd like to try to think of some innovative things we can do on that third-generation vehicle, but the focus will be primarily on having a great car at $30,000, which will require a lot ingenuity. So, we'll be on third-generation powertrain technology, we'll scale up production by an order of magnitude, roughly, and then the car itself will probably be twenty to thirty percent lighter.

On Henrik Fisker and the Karma

I don't think very highly of Henrik Fisker. At first I thought I'd outsource the design of the Model S to Henrik Fisker when he had a styling company...And, the initial proposals he came with were pretty good, and then as we got into it they started getting worse and worse. I was very puzzled as to why he was producing such awful designs for us. It turns out what he actually decided to do was to take our specifications for the Model S...he took that basic plans, shopped it, got it funded, didn't tell us. What it turned out was, we were paying him to do styling for his own car.
[Note: Tesla sued Henrik Fisker and lost in mediation.]
2012 Karma Fisker Front Three Quarters
The fundamental problem with Henrik Fisker he is a designer or stylist...he thinks the reason we don't have electric cars is for lack of styling. This is not the reason. It's fundamentally a technology problem. At the same time you need to make it look good and feel good, because otherwise you're going to have an impaired product. But just making something look like an electric car does not make it an electric car. [Fisker] thinks the most important thing in the world -- or the only important thing in the world -- is design, so he outsourced the engineering and manufacturing. But the fact is...that's the crux of the problem. And he's outsourcing to people who don't know how to solve the problem. So he came up with a product -- it's a mediocre product at a high price. It looks good. Particularly from the side it looks good. I don't love the front. It looks too much like a caricature of a Mexican Bandito, the grille. The car looks very big, it's bigger than the Model S, but it has no trunk space and it's cramped inside, particularly in the rear seats. The mark of a good design is something that has great aesthetics and great functionality.
[Note: In the interest of fairness, we provided Henrik Fisker the opportunity to respond to Musk's comments. He did so via e-mail:
"Firstly, to set the record straight, Fisker won in court...a judge threw out the case and awarded costs to Fisker.
2012 Fisker Karma Rear End In Motion
We are delighted that Elon thinks the Karma is a good-looking car.
Obviously, Tesla and Fisker are appealing to two different customer bases with two totally different technologies. Tesla has pure EV and Fisker has a range-extended offering with no compromise on range. We are proud to have delivered over 1000 Karmas to customers in the U.S. and Europe and are now moving into the [Gulf Cooperation Council countries] and Chinese global markets.
We wish Tesla all the best with their latest model and hope that both companies go from strength to strength as they challenge the automotive rulebook."

On high performance and gestalt

Elon Musk Profile 7
Before the Model S, my family car was a 911 Turbo. [The rear seats] fit two small boys really well. [Musk has five children.] It's a good car. So it's not as though I'm some super eco person. I believe you've got to have a compelling product at the end of the day. Otherwise you're just going to address a very small segment of the population that cares enough to suffer through this horrible product. And it's just never going to scale. We had to show -- and I think we have with the Model S -- that an electric car can be better than any gasoline car. When you look at it in terms of safety aesthetics, functionality, performance, entertainment, fit and finish -- when you combine all those elements, how they combine as a gestalt. Do they all fit together and make sense? I think the Model S does.

On Tesla's testing standards and air conditioning

I don't think [mainstream automakers] standards are higher. I think their standards are not high enough. Let's be clear about that. I would invite you to visit [our] test facility. It's pretty extreme.
The battery pack goes through every possible scenario. We have full-scale vibration tables that are also capable of thermally cycling the pack, so it can go through the "shake and bake." We can actually thermally shock the pack...while vibrating the pack, we have the salt tests, we do accelerated power cycling of the pack...
The toughest testing has been for safety. We want to make sure that, in extreme circumstances, the pack cannot break down. In order to achieve that, there are many levels of safety, starting with the cell; the cell is internally fused and then externally fused on each side so each cell is triple fused. Then each cell has a heat-shield sleeve around it. So you can have a cell go into thermal runaway and not affect the rest of the module. Let's say all those things fail, including the active safety systems -- there's a coolant loop running through that makes it very difficult for something like thermal runaway -- let's say in a very bizarre circumstance all of that fails, and the cells go into runaway. Then even at the module level we must contain that thermal runaway. We have to take the hot gas and vent it down at just the right angle, about a 45-degree angle away from the car, because we don't want it going under the car or into the wheel well. We're talking about an extremely unlikely event. But even in this event we want to make sure everything is OK.
The Roadster has prior-generation technology, but despite being involved in accidents -- none of which have ever been blamed on the car, by the way, people have just driven the cars like sports cars -- there's never been any battery fire in any Tesla, ever. I think we're taking extreme measures here to be safe.
Elon Musk Profile 4
The Roadster is not strong on air conditioning. If you're in a humid and a hot environment, the Roadster can sometimes struggle to keep up. That is not the case with the Model S, which can keep you ice cold in the middle of nowhere. If you want to be really cold in the middle of an Arizona summer, the pack is liquid thermal controlled. It's chilled and heated according to what the situation is. And the cell chemistry that we're using is actually conducive to high temperatures. We just completed our hot weather endurance testing, we had the Model S out in Death Valley. [During] the hottest portion of the day, we wanted to see if the Model S could maintain cabin temperature while going at 70 mph up an incline in Death Valley. Yes it can. I'll tell you what couldn't: the tow truck that we brought.

On being involved at such a detailed level

I'm an engineer, so what I do is engineering. That's what I'm good at.

On the fact that some automakers' CEOs are not so involved

Elon Musk Profile 8
It's shocking. I don't know how they make any kind of sensible decision. No, I'm super 'in the weeds.'

On what he'd tell someone trying to start a car company

It's an extremely capital-intensive industry. It should certainly not be anyone's choice if they are trying to get the highest return on investment.
So my first advice would be, unless they have some compelling non monetary reason to create a car company, as I did, than this is not a good use of their capital.

On environmentalism and his overriding mission

We needed to accelerate the advent of electric cars. There's a tragedy of commons problem that we have, a classic Economics 101 issue where there's a common good that's being consumed where the appropriate prices [don't exist to] cause the right actions to occur. And since we are not appropriately pricing the capacity of the oceans and atmosphere, then the only way that I could think of to address that was with innovation -- to come up with a product that was better so that people would choose to buy an electric car because it's the best car in the current economics of the source of energy. And that's the fundamental value that I was trying to achieve with Tesla. And we've had, I think, some effect. The [Chevrolet] Volt is a direct result of Tesla, which Bob Lutz has kind of credited us with.
My goal is to accelerate the advent of the electric car by whatever means necessary. And if we simply tried to sell electric powertrain technology to the car companies we would have had no success. We need to show by example.

On the viability of his businesses (and Mars)

Elon Musk Profile 3
SpaceX has been profitable now for a few years. There's a separate question as to how much progress SpaceX is going to make in developing technologies necessary to establish life on Mars. But there's not really much of a question whether SpaceX itself will survive.
The next six months for Tesla are going to be tough. I think six months from now, we'll know whether it will survive or not. And I think it will. But the next six months will determine that.

On manufacturing versus Internet startups [Musk founded what became PayPal]

I think manufacturing is really cool. It's like the ultimate Lego. I think there are a lot more smart people in America that should be working on manufacturing. There are far too many smart people that went into finance and real estate and stuff. We used to have a lot of smart people that went into manufacturing. I think we are seeing a bit of resurgence in U.S. manufacturing and we'll see more of it because things are getting not that cheap in China. I would never build in China, out of intellectual property concerns. It's asking for trouble there. And I'd have to travel to China all the time.

On how he'd feel if Tesla fails to compete with mainstream automakers' electric cars.

2012 Tesla Model S Side Profile
If Tesla had served as [an accelerant], we'd consider it mission accomplished at that point. Because it means that big car companies had made lots of electric cars. The more electric cars, the better. On a financial level it would be disappointing, and there would probably be lots of people angry at me, but I honestly would still feel personally that we had been successful if that were the outcome.

On the personal toll of running two companies

Elon Musk Profile
It would suck if I went insane. I really hope that doesn't happen. Please send me a note [if that happens]: "It appears you're going insane. Just letting you know." It's good to question one's sanity because at the point you stop doing that, you're probably insane.

On retiring to a vineyard

Maybe when I'm really old. I plan to be at least 65 or 70 before I have a vineyard.

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