Interview with Bloomberg
Questions on ElonsFAQ asked in this interview (2)
Transcript
0:00Bloomberg InterviewerI want to first ask you, I mean, you've been working on this for several weeks as you just explained to me earlier. Why do this now with the Model S?
0:11Elon MuskWell, I thought it was important to, to get a financing product out there that broadened the marketplace because with what we saw with, with SolarCity, we had an incredibly good experience when we're able to offer a compelling, easy to use, accessible financing program.
0:25Elon MuskWe saw a dramatic increase in, in the, in the market, the accessible market for, for solar. And I think we'll see something similar to that with, with the Model S.
0:35Elon MuskSo it's about, it's about improving and highlighting the true affordability of an electric car and then providing that residual value guarantee, which is probably the next question you can ask me.
0:47Elon MuskThe, the fact that the, the Model S, we're guaranteeing that the value of the Model S will be no less than that of a Mercedes S class after three years.
0:57Elon MuskSo a lot of people are worried about the residual value. Is it going to hold up? What's going to happen to electric cars? Tesla is guaranteeing that value and then as a, as a further backstop, I am personally guaranteeing that value and standing behind it.
1:09Bloomberg InterviewerWell, you had, you know, I was listening on a conference call, you had quite a few questions on what that personal guarantee exactly meant. What does it exactly mean, Ellen?
1:21Elon MuskWhat it means is that no matter what happens, obviously I'm very optimistic about the future of Tesla. I think it's going to do very well. And I also think that the residual value of the Model S will be greater than the number we're guaranteeing.
1:32Elon MuskThat's just a floor. So, so, so it's, I think it actually more than that, but I'm standing, I'm standing behind that guarantee with all of my assets, not, not just with, with Tesla.
1:45Elon MuskSo no matter what, I will make sure that you have nothing to worry about if you buy a Model S. Right.
1:50Bloomberg InterviewerSo, so the idea is that, look, you're, you're, you have plenty of confidence in the future of Tesla, but let's say Tesla went under, then you would buy back all the Model S is out there that have been done under this program.
2:02Elon MuskThat's exactly right.
2:03Bloomberg InterviewerOkay. Why did you pick the Mercedes S class to be the comparable, you know, the comparable car in terms of depreciation for the Model S?
2:14Elon MuskWell, Daimler is actually a partner of ours, so Daimler is an investor. We have some deals with Daimler over the years, many deals with Daimler the years we're providing the battery packing, powertrain, for the Mercedes B class that's coming out.
2:27Elon MuskI have a great deal of respect for the Mercedes S class. Many people consider it to be the best premium sedan on the market. And so I think that that makes for a good reference point in the case of the Model S.
2:39Elon MuskElon, you
2:40Bloomberg Interviewerand I were talking a little bit ahead of this, and I know you were talking about how you really wanted the people that are covering this company to really look at this new deal from a consumer's perspective.
2:50Bloomberg InterviewerSo I got on your website and I clicked on Tesla and I looked at the financing options that you were talking about with, with Wells Fargo and US Bank.
2:59Bloomberg InterviewerOne of the things I noticed though is that in the calculations that you have for the monthly payments, you add in sort of cost benefits from things that other car companies might not.
3:08Bloomberg InterviewerYou know, you've got the savings coming out from electricity versus gas. I get that. But you also have sort of a, you have something called a business tax benefit.
3:18Bloomberg InterviewerI can get that as well. Perhaps, however, you have other things called a commuting benefit, which is that you, you know, you make the argument on your website that electric vehicles are allowed to use, you know, HOV lanes essentially.
3:30Bloomberg InterviewerAnd so that can save you $167 a month. You have avoid the gas station benefit. That could save customers $100 a month. That, I'm not sure if I buy that.
3:40Bloomberg InterviewerElon, as a way to calculate what your overall payment will be at the end of the month.
3:46Elon MuskYeah. And you don't have to. In fact, that's why we, we provide the calculator so you can, you can check or uncheck any of those options. And so if you, if you don't think something applies to you, then you can just uncheck it and see what the cost is without that.
4:02Elon MuskBut I mean, the key thing is that if you buy the 60 kilowatt hour version of the car, you may have clicked into the 85, which is the more expensive.
4:10Bloomberg InterviewerI did both. Yeah.
4:11Elon MuskIf you. Okay. Yeah. But if you, if you look at the 60 kilowatt hour car, which is essentially our mid range car since we canceled the 40 kilowatt hour version, the monthly payment, taking into account the cost of gasoline and just basically the tax incentives that you're sure to get, gets you to around the 500 or $600 a month payment option.
4:36Bloomberg InterviewerOkay. So even if you're saying, even if you discounted some of those benefits I just talked to you about, I mean, I still got, I didn't quite get $1,000, but I got a little bit under that.
4:46Bloomberg InterviewerSo I see where you're coming from, Elon. Now you're doing this financing because you want to open this up to, to more and more consumers. So is it possible that you might see more demand than for 2013 and therefore you might exceed this 20,000 target that you've been talking about?
5:05Elon MuskWell, we always had to be cautious about forward looking statements. But the things that I've made sort of hard commitments on were the start of production of the Model S, the fact that we would do at least 20,000 units this year of deliveries and the third, that we would achieve at least a 25% gross margin by the end of the year.
5:23Elon MuskAnd I'm very confident that, that we will, we will meet or exceed all of those promises, Elon. Obviously our goal is going to be to exceed.
5:33Bloomberg InterviewerRight? You would always want to do that. Of course. Elon, the what puzzles me a little bit though is that you mentioned how you want to make this affordable for the, you know, for the average consumer.
5:43Bloomberg InterviewerBut you also had to cancel the 40 kilowatt battery powered model S because you didn't see as much demand on that lower end as you saw in the higher end.
5:52Bloomberg InterviewerSo how do you reconcile the two?
5:54Elon MuskYeah, that's actually a really good question because we had an intense debate at Tesla about the 40 kilowatt hour car. And, and you know, we, we test drove some initial units and it just wasn't, it wasn't a good product.
6:08Elon MuskAnd one of the commitments I made at Tesla is that we will never produce a bad product. Just never, I don't care. Even if we could make money on it, on a bad product, we will not, we will just not do it.
6:20Elon MuskAnd I just don't think the 40 kilowatt hours was a good product. It felt hobbled like a hobbled horse. And you'd always need to really have another car if you wanted to do long distance trips.
6:32Elon MuskAnd so I think what people don't quite understand about something like say the Leaf. I mean, I'm glad that Nissan is doing electric cars and I encourage them to do further, to do more.
6:41Elon MuskBut if you've got an electric car that can only do short distances, it means you need to have another car anytime you want to do long distances. So you've actually got to buy two cars so that, that like double the doubles the price of makes.
6:55Elon MuskIt sounds like you're like a lower cost car, but it, but it really isn't.
6:59Bloomberg InterviewerBut what was. But then, but I'm confused then, Elon. What was the problem was, the problem was that it was, was too short of a range and that's why it wasn't appealing to consumers.
7:06Bloomberg InterviewerOr was it because just mechanically, technically it just wasn't up to par as the 85 kilowatt car?
7:15Elon MuskWell, it's. Mechanically, it's. I mean, from a reliability standpoint, it's fine. The fundamental issue is that at 40, you just don't have enough range to make it a useful long distance car.
7:25Bloomberg InterviewerOkay?
7:26Elon MuskSo it's like I said, it's like a, it's like a horse that's been hobbled. And so it just wasn't, it just wasn't a compelling product. And it was also clear to us that customers were recognizing that because hardly anyone was choosing it.
7:41Elon MuskWe only had 4% of our customers ever choose that, that car because the vast majority of customers recognized that it's not a good product and that they're voting with their wallet.
7:50Elon MuskAnd so we thought, well, this is, this is just silly. We should not make a product that, that we don't have to believe in and neither do our customers.
7:56Bloomberg InterviewerWell, talking about that and kind of addressing that issue of trying to make electric cars more longer range, you know, vehicles that can go longer ranges, a lot of people actually speculated that your announcement today was actually going to be about the Supercharger network.
8:09Bloomberg InterviewerSo what can we, what can we expect on that?
8:13Elon MuskWell, we've actually got a number of announcements coming out in the future. We're going to probably put them out with a cadence of every one to two weeks. And one of those announcements is going to be a very exciting Supercharger announcement.
8:28Elon MuskWe've made a lot more progress on that front than I think most people realize. We're also going to do what I think is a very exciting announcement. Announcement about re engineering of Tesla service.
8:40Elon MuskBecause just as we make the best car in the world, we really want to have the best service in the world and we need to do a few things to get there.
8:47Elon MuskAnd then there's a third announcement that I won't quite talk about, but I think is pretty cool, except to say that if you're driving a Model S, it's right under your nose.
8:59Bloomberg InterviewerAre you going to tweet about it though, first?
9:03Elon MuskMaybe SEC just gave, just gave approval
9:06Bloomberg Interviewerfor such things, which is comforting, I can imagine. Eli, just quickly, just on a few more notes, this financing option that you've got for the, for the Model S, will you eventually extend that out to the next model, the Model X?
9:21Elon MuskAbsolutely. Yeah. We're going to extend and refine this financing product over the years for the Model X and for all of our future cars. Our goal is to make the most consumer friendly, to make the best financing product.
9:36Elon MuskAnd we're going to. I think what we've debuted today is that thing, but we're going to keep making it even better over time.