Elon Musk at the 2015 Baron Investment Conference
Questions on ElonsFAQ asked in this interview (3)
Transcript
0:00Gilad ShaniGood morning.
0:06Gilad ShaniMy name is Gilad Shani and I'm a research analyst at Barron Capital. Following the tech and energy infrastructure sectors, it is my distinct pleasure to introduce our next guest.
0:19Gilad ShaniHe is a man who has been identified as everything from a super villain to a superhero. He doesn't stop at changing our world as we know it. He's on a mission to change our galaxy.
0:35Gilad ShaniElon Musk.
0:46Gilad ShaniIs the CEO of Tesla, a company whose mission is to accelerate the world's transition to to sustainable transport. In 2004, Elon was a lead investor in Tesla's first financing round.
1:01Gilad ShaniAnd in 2008, when the company was near bankruptcy, Elon became CEO and led its growth to over $5 billion of revenue. Today,
1:19Gilad ShaniThe company developed three electric vehicles, the Roadster, Model S and Model X. The Model S has been described as a remarkable car that paves a new unorthodox course. And it's a powerful statement of American startup ingenuity.
1:40Gilad ShaniModel X, which was recently launched, has a wait time of over a year. Tesla sold almost 100,000 vehicles, electric vehicles, to date. Tesla is building a battery manufacturing plant called Gigafactory that will be 10 times bigger than the largest Boeing facility producing Dreamliners.
2:05Gilad ShaniInterestingly, Tesla is the largest battery consumer in the world, surpassing consumer electronic companies like Samsung, Apple. Elon is a scientist, an inventor, a designer, and one of the world's most innovative minds.
2:23Gilad ShaniHe is helping to advance some of the world's most disruptive technologies. Tesla in the auto industry, SpaceX in the aerospace industry, and SolarCity in the power industry. Now please welcome Elon and Ron for a conversation.
2:48Ron BaronSo when I started my career, one of my first clients told me that what was most important was finding someone who could realize, dream, make it happen. And that's been my whole career, finding people in which to invest and whom to invest.
3:04Ron BaronI was with Eric Schmidt recently. He's a chairman of Google and he's one of Elon's best friends. And he was telling me that he regards Elon as a combination of Walter Chrysler and Thomas Edison.
3:18Ron BaronAnd I didn't really know very much about Walter Chrysler until I looked them up on Google and pretty interesting to be compared to those two guys. So again, keeping with the theory about investing in people.
3:32Ron BaronSo we're investing in you, and I think when we were talking about $5 billion in revenues, I'm sure you believe this is just the very beginning. So I'd like to touch a little bit before we get into the business on your background.
3:47Ron BaronWe just started to talk about that before. So you came from South Africa, your dad was an engineer and your mother.
3:55Elon MuskMy mother's a model and a nutritionist.
3:58Ron BaronAnd one of your brothers worked with you?
4:01Elon MuskYeah, we co founded the first company together.
4:04Ron BaronAnd so Elon was also a founder of. You know he's had these games and electronic games and then he was a founder of PayPal. Sold his business PayPal and PayPal got sold, went public 7,800 million dollars.
4:18Ron BaronSold it for a billion 2 eBay bought it ultimately 50 billion. So presumably that has some impact on the way you think about things.
4:26Elon MuskYeah, absolutely. Actually I actually was against the sale. I wasn't in favor of the sale but I was, I was largest, you know, owner of PayPal at the time, but I only had like 12% and so everybody else really wanted to sell so we went forward with that.
4:47Elon MuskBut I think, I think we probably shouldn't have.
4:50ModeratorYeah,
4:54Ron Baronso I was reading about your history and we've spoken before obviously and about your interest in space and sustainable transport and solar energy. Where did all this come from?
5:10Elon MuskWell, when I was in college I thought about what would most affect the future of humanity and I wanted to be involved in some of those areas and I thought there would be.
5:24Elon MuskThere were five things that I came up with that I thought would really affect our future as a civilization. One of them was the Internet and then the other was sustainable energy, both production and consumption of that.
5:41Elon MuskAnd the third was making life multi planetary and the fourth and fifth were genetics and AI. And I didn't think I'd be involved in those areas but I just those sort of more in the abstract of what I thought would affect things and.
6:06Elon MuskBut I mean going back a little further, I actually didn't really expect to be involved in creating companies. When I was like in high school or you know, middle school, I actually was going to pursue sort of physics and a career in physics and try to sort of understand more about the nature of the universe.
6:27Elon MuskBut then things like the Superconducting Super Collider got canceled and I thought, well you know, like what if I'm stuck in some situation like that and then there's like some active government basically stops things and then, then it would all be a waste.
6:46Ron BaronSo when I think about the course and so obviously you know, if you're using hydrocarbons and burning them and wrecking the environment, it makes it tough to live on earth.
6:58Ron BaronAnd as you pointed out, unless we adapt and construct or breathe carbon dioxide and so that's your effort there.
7:08Elon MuskBut yeah, actually the Thing is that in college, my interest in sustainable energy was purely at the time, was really from the standpoint of us eventually running out of hydrocarbons to mine and burn.
7:25Elon MuskSo there's obviously a limited supply of oil in the ground and eventually we would have to transition to something that's sustainable, because when we're drawing oil from the ground, we're essentially taking the accumulated solar energy that was bound up in plants and animals and then over hundreds of millions of years was turned into oil.
7:52Elon MuskAnd that's obviously finite. And if we run out of that and don't have a good solution, then there would be economic collapse independent of any environmental concerns. And so that was actually what sort of initiated my interest in sustainable energy.
8:09Elon MuskAnd it's sort of tautological. I mean, if, you know, energy needs to be sustainable if it's going to last for the long term. And then over time, it became apparent that there was actually an even more pressing concern, which is that we're quite materially changing the chemical constituency of the oceans and atmosphere.
8:29Elon MuskAnd the way that humanity has kind of grown up around the world is that we've put so much of our. So many of our cities and settlements and towns right along the coastline, and that the world is quite sort of delicate in this chemical balance.
8:49Elon MuskAnd so if we do take trillions of tons of CO2 that was buried deep underground and has been since, in a lot of cases, since the pre Cambrian era, you know, when the most sophisticated thing was like a sponge, then that would be.
9:05Elon MuskIt would be a bad experiment to run.
9:08Ron BaronSo it seems so obvious. And we have all these car companies that make all these cars every year that burn gasoline and nobody wanted to do anything but fly.
9:19Ron BaronWhy? So it's so obvious. You know, you read and evidence, and Exxon was in the paper about the impact that they're having on the environment, and they hit it.
9:28Ron BaronJust like the cigarette companies in 1964.
9:31Elon MuskJust like the cigarette companies.
9:31Ron BaronSame exact thing, right?
9:32Elon MuskIt's the same playbook. In fact, the crazy thing is, I'd recommend reading the book Merchants of Doubt because they actually explored some scientists at JPL and elsewhere, sort of explored like, well, what's going on here?
9:48Elon MuskAnd actually found that the oil and gas industry is actually using literally the same lobbyists as the tobacco industry. Like, by name, not even the firm.
10:00Ron BaronAmazing.
10:01Elon MuskLike some of those guys, they're still going.
10:03Ron BaronAmazing.
10:04Elon MuskYeah. So, I mean. And just like, when they learned how to do it. Yeah, absolutely. And then, oddly enough, the one movie I was involved with making was a movie called thank youk for Smoking, which I recommend watching.
10:18Elon MuskIt's kind of a fun movie, but it's sort of, it's based on Buckley's book. And it really gets to the truth of the matter of like how all this happens.
10:35Elon MuskAnd what they do is essentially exploit doubt. And so even when you've got a situation where virtually every scientist on Earth agrees that this is, you know, that global warming is real, that adding billions of tons of carbon through the atmosphere and oceans is a bad idea, then you have a few percent who dissent.
10:58Elon MuskAnd then the way that it is presented to the public is not that, you know, 97 or 98% of scientists think what we're doing is crazy, but that, but simply that scientists disagree.
11:12Elon MuskNow, scientists disagree about everything. Okay? You will not find 100% of scientists who agree about anything. But this is a very disingenuous argument.
11:24Ron BaronSo I understand that. And then I go to visit your plant and I've been there, go every three or four months now. And I guess not very many people who are analysts on Wall street, even the 22 guys, publish about Tesla.
11:39Ron BaronI think very few have actually been there and hardly anyone's spoken to you. But then when I go into the plant and I see, and I've been to other automobile plants also, and there's a lot of people, not that many machines, and I see our plant in Tesla and I see a lot of machines and not that many people.
11:54Ron BaronAnd I look at it and it appears to me so Herculean. How do you build such a thing? And how could you ever think you're going to be successful?
12:03Ron BaronHow would you do such a thing? And then to start up, you're a poor immigrant kid, you come here and you do, how do you do that? How'd that work?
12:10Elon MuskSure. Well, I mean, at the beginning of Tesla, I didn't think we would be successful. I thought we would almost certainly fail.
12:18Ron BaronAnd you put all the money you had in PayPal to invest in this and you thought you failed.
12:24Elon MuskYeah, I mean, I could walk you through the basic logic of, I mean, so coming out of PayPal, I was fortunate enough to have about $180 million. And I thought, well, that's a lot of money.
12:45Elon MuskYou know, if I want to assign half of this to SpaceX, Tesla and SolarCity, and then I'll still have the other half and I'll be fine.
12:56Ron BaronYeah, but you told your wife if it doesn't work when you live in her parents basement.
13:00Elon MuskI did, yeah. I was, yeah. Hopefully kidding because it's not great in her parents basement. It's really not great. Yeah, so yeah, she didn't like that. But I mean the way things.
13:20Elon MuskSo I thought ah, you know, so I figured I'd probably lose the money. But a good try and it's kind of important and worth doing. But then as time went by and the companies needed more money and then we hit that really tough recession of 0809 which was super bad for the car industry.
13:41Elon MuskI mean you had GM and Chrysler go bankrupt. So I was like, man, if I don't invest everything, if I invest everything, there's a chance and that we'll survive.
13:55Elon MuskIf I don't invest everything, there is no chance.
13:57Ron BaronSo if it wasn't for that recession, there's no way this could have existed. Being able to buy a billion dollar plant for $50 million.
14:03Elon MuskThat's true, but that came a bit later. But yeah, but the real key thing was 2008. Well even maybe if you go from mid 2007 to mid 2009, that two year period was super bad.
14:19Elon MuskAnd we'd made so many mistakes in the beginning of Tesla that we basically had to recapitalize the company almost completely in 2007. I mean almost every decision we've made was wrong.
14:31Elon MuskSo. And when we created the company, and I got to give credit here for the beginning for AC Propulsion, which is a little company in Southern California who created an electric sports car and it was actually based on AC propulsion sort of idea, I was trying to convince AC Propulsion to commercialize an electric sports car, commercialize this sort of prototype that they've done, but they had no interest in doing that.
15:04Elon MuskAnd after a while I got tired of trying to convince them and so I said, look, I'm just going to do this myself. And then they said, well, you know, there's some other people that also want to do it.
15:14Elon MuskDo you want to join in with them? I said okay, let's, let's do that. And those guys don't get enough credit that they did some cool stuff with an electric sports car before Tesla did.
15:25Ron BaronSo that's when you were thinking about should we use an engine and electric or should we just use electric.
15:31Elon MuskOh no, that was pure electric sports car. I mean the whole sort of saga of Tesla is quite complex and it's like many soap opera episodes that you could make out of it.
15:42Elon MuskBut no, AC Propulsion had created a pure electric sports car called the T0 as kind of just a demo. But they were just not interested in commercializing their stuff.
15:56Elon MuskAnd So I said, okay, look, this really needs to. We need to show people broadly what electric cars can do. So ended getting through with a bunch of guys and trying to commercialize that idea.
16:09Ron BaronSo again, so we go back to this plant, this massive plant that we have out in Fremont, California today.
16:14Elon MuskYeah, I never expected that we'd have
16:15Ron Baronthis plant, but it's amazing place.
16:18Elon MuskYeah. And the amazing thing is, like, it's kind of full, which is, I mean, when we got in there, we thought when we first got that plant, it's the.
16:27Elon MuskIs one of the biggest plants in the world. I think it's sort of like by footprint, I mean, I think it's like maybe the third or fourth biggest.
16:36Ron BaronHow many square feet?
16:37Elon MuskIt's five and a half million square feet.
16:41Ron BaronFive and a half million?
16:42Elon MuskYeah.
16:43Ron BaronSo that's what, 100.
16:46Elon MuskHow many acres you mean under roof?
16:49Ron Baron150 acres.
16:50Elon MuskYeah, exactly.
16:52Ron BaronIt's a General Motors building. Just to give you perspective, General Motors building, which is where the Apple store is, that one block, that's one acre. This 150 acres.
17:00Elon MuskYeah. It's crazy. You could go camping in there and like, it takes you a long time to walk from one side to the other. We have bikes in the factory, so you can just get around a bit faster.
17:16Elon MuskAnd when we first got this, which was actually, it was a little bit later, it was in early 2010, and we thought, man, there's no way we'd ever get that awesome plant because, you know, it just cost too much and we didn't have much money.
17:35Elon MuskBut then as a result of the recession, the plant, which was joint owned by GM and Toyota, they decided to close it down. And the story behind that is sort of a long story independent of Tesla.
17:52Elon MuskSo they were going to shut it down and it was just going to be empty and they were maybe going to turn it into like a mall or something like that, but it was going to be empty for a long time anyway.
18:06Elon MuskSo we sort of approached Toyota and said, like, look, you know, we'll take it off your hands, you know, and then. And we also did a bunch of other strategic elements.
18:22Elon MuskThe strategic elements we did with Toyota were actually independent. We also did an electric RAV4 program. And then Toyota also did an investment at the IPO, so. And they invested at the IPO $50 million.
18:36Elon Musk$50 million at a $17 share price. So it worked out for them, but we were amazed that they were willing to move forward and do it. But for us at Tesla was so tiny at the time, I Mean, it was like.
18:54Elon MuskImagine like you're like this little band, this little group, and somebody says, well, there's this giant alien dreadnought that you can have for pennies on the dollar, and you have no idea how it works.
19:08Elon MuskLike, where are the controls? How do you use this thing? And that's what. We were fortunate enough to buy it at a point where automotive plants were not worth much.
19:23Ron BaronSo this plan ultimately is going to be able to do half a million
19:25Elon Muskcars a year, I think. Half a million cars. And we could conceivably go beyond half a million cars there.
19:32Ron BaronBut that's not really the dream.
19:35Elon MuskI mean, long term, I think we want to try to do several million cars. Yeah, I mean, from volume standpoint, but
19:42Ron Baronwe're now doing 50,000 this year and 75,000 next year, and we're talking about several million. But we think about Volkswagen, 10 million, Toyota, 10 million, General Motors, 8 or 9 million.
19:56Ron BaronProfit margins a fraction of what we think we can do. Why can't we be bigger than them?
20:03Elon MuskWell, I mean, I guess.
20:04Ron BaronI mean, that's pretty possibly.
20:06Elon MuskPretty possibly. It's not out of the question. I think over time, if we continue to. If we build great products and we keep our cost structure competitive, then I think, who knows what the ultimate.
20:22Ron BaronSo we're going to need a lot of these plants.
20:24Elon MuskYes, many plants, in fact, many auto plants and many gigafactories, I think, are needed.
20:30Ron BaronSo the gigafactory. Let's do that one. So gigafactories in Nevada. And this is 4 billion, 5 billion.
20:38Elon MuskIt's. We're expecting it to be roughly a $5 billion capital investment to get to full production, although Tesla is providing roughly 50, 60% of that over time. And then our strategic partners like Panasonic and a number of others are providing the other half, roughly.
20:54Ron BaronAnd then Nevada gave us a billion in tax credits or savings or something.
21:01Elon MuskThe whole tax credit thing drives me crazy,
21:05Ron Baronbut we're not going to turn it back.
21:07Elon MuskYeah, it sounds much better than it is. So. Actually, the first time I heard that the amount was 1.3 billion was at the press conference announcing the deal. And I was like, really?
21:17Elon MuskHow do we get to 1.3? What we actually got was Nevada gave us some free land, but the state of Nevada has a lot of land. So this is not a.
21:31Elon MuskIt's not in short supply.
21:32Ron BaronLike the desert.
21:33Elon MuskYeah, there's a lot of land in Nevada. Nevada, as I said. And then they also agreed to build a connecting highway on the southbound that connects to Carson City, but they were going to do that anyway.
21:48Elon MuskSo I don't think like that should be included in our, in what they gave us. And then they repurposed, I think, I don't know, $80 million of tax credits that was going to the like insurance company.
22:03Elon MuskInsurance companies or something. They repurposed that to us, but that's the only sort of thing that we can actually monetize. And then they also gave us relief on sales and use tax for equipment in the factory.
22:23Elon MuskAnd depending upon what type of situation, it's either 10 or 20 years for the sales and use tax abatement. So if you assume that we fully use the sales and use tax abatement, which requires building, which requires actually capital equipment in excess of $5 billion over 20 years, and you add all of that up, it adds to 1.3 billion.
22:45Elon MuskSo it's really 1.3. Yeah. In effect the contribution, the initial contribution to the factory, the gigafactory by state of Nevada is less than 5%. And then they're, and then they have roughly a 1% contribution over 20 years.
23:00Ron BaronSo. So presumably for them this is a great deal because they're getting a lot of jobs.
23:04Elon MuskOh, it's a no loss proposition for the state. I mean, as the saying goes, the house always wins. And like Nevada understands the house, okay. Nevada is the house.
23:19Elon MuskSo it's like the only way for us to actually have the sales and use tax credits be meaningful is for us to have enormous numbers of machines and enormous numbers of people operating those machines, which is good for Nevada.
23:36Elon MuskNevada's calculation was that their return on their tax credits would be somewhere between 80 and 100. Not percent times. Times. So it's like it's a good deal for the state.
23:52Elon MuskSo,
23:54Ron Baronso, so the battery plant, that's what the giga plant is, is being done without a lot of, without any. I, I understand. Public viewing of what we're doing inside of that factory.
24:10Ron BaronAnd there were some reporters.
24:12Elon MuskYeah, there will be some.
24:13Ron BaronBut so far.
24:14Elon MuskYeah, yeah.
24:15Ron BaronAnd there have been some reporters, I guess a couple or three weeks ago that snuck into our property.
24:20Elon MuskYeah. And like right. Over 2 of our people tried to kill us.
24:23Ron BaronKill our guys.
24:24Elon MuskYeah, yeah. That was pretty crazy.
24:27Ron BaronWhy?
24:28Elon MuskWell, I think they just got a bit overzealous and then I assume that they panicked and weren't actually trying to kill our employees, but they did run over two of our employees, which is what, you know, while they were trying to get away.
24:42Elon MuskAnd so they ran over to our guys and like, unfortunately like the Injuries aren't too serious, but yeah, that's like not cool. So
24:57Ron Baronwe think it's important enough to not let anyone see what we're doing inside and other people trying to figure out what's going on. And obviously not a nightclub. And so what I think about is not knowing very much about technology and how things work.
25:15Ron BaronIs that so we're making that kind of a battery. Lithium.
25:19Elon MuskLithium. Although the general rubric of lithium covers many types of chemistries. I mean it's a really broad range of things of batteries that use lithium as the ion transport.
25:32Ron BaronSo whatever you describe here is going to go over my head. But my question is, how do we know when we're making such an investment that what we're building in that factory is going to persist?
25:43Ron BaronAnd why is it that, that in a hundred years. So we do all sorts of things, you're sending things out of the atmosphere, out of the galaxy, out of the universe planes.
25:52Ron BaronAnd yet for 100 years we haven't been able to build a battery that goes for more than 300 miles. So how can that be? How is it possible that we haven't been able to spend money on that?
26:03Ron BaronAnd if that's the case because no one's paid attention to it and all of a sudden we come along and pay attention. We're going to try to reduce the weight in the existing batteries and use maybe silicon and having a 300 mile battery going 1000.
26:14Ron BaronOh yeah. So how do we worry that what we're building isn't going to get obsolete also?
26:20Elon MuskWell, the reason is that at this point I think we have quite a good understanding of all the battery technologies in the world. Like there could be some small laboratory that's being super secret.
26:31Elon MuskBut, but generally what people inventing battery technologies try to do is approach Tesla first and foremost because we're the biggest lithium ion consumer in the world.
26:41Ron BaronTo anyone who wants to build a battery, has new ideas, they're going to come to us before they go anywhere.
26:46Elon MuskWe'd be their biggest customer. So if somebody invents something, the obvious choice to license it to or is Tesla. And so, and we try to take things, you know, seriously as possible, but I mean we track Right now about 6, 60 different efforts around the world to develop improved batteries.
27:08Elon MuskAnd you know, some of them hold some long term promise. But we rate all of them on from a one to five, where five is we should be doing business with them and one is complete bs.
27:25Ron BaronHow many fives are there?
27:27Elon MuskThere's no fives, there's Some, there's some threes currently there's no, no one in the, there's no one even in the four. Like there's some that might go from a three to a four.
27:37Elon MuskFour means we should, we should be in like preliminary discussions.
27:41Ron BaronSo what's that, what's going to change in the technology that's going to enable us to have this different. Are we going to have something in 10 years that's going to be an unusual battery that's going to be able to do a thousand miles and going to weigh less than it does presently?
27:53Elon MuskI don't think we'll have quite a, that much of an improvement. And actually I think most likely we would not like technically right now for us to do say a 500 mile range car.
28:06Elon MuskWe could absolutely do that right now with current batteries, but the cost would be too high and the useful load impact on the vehicle would be too high. So we'd have to fill up part of the trunk and the front trunk and the rear trunk with batteries.
28:22Elon MuskWe'd have to impinge a little bit on passenger room. But for us to do a 500 mile range car right now would be no problem. A 500 mile range car in the current form factor, I think that's, you know, probably less than 10 years away.
28:38Elon MuskYou know, within the same volume and roughly the same mass.
28:41Ron BaronAnd the way we're going to drive the cost of the kilowatt hours from 250 to 100, that's because we're doing what, that's just because we're doing scale, because we're using different materials, because we're changing chemistry.
28:54Ron BaronHow do we do that?
28:56Elon MuskYeah, so we're making quite substantial improvements in the total pack energy density. So there's the cell energy density and then as you put those cells together in a pack and you have to figure out how to do that safely, we're able to reduce the pack energy density.
29:15Elon MuskSo we'll make I think quite significant improvements in the pack energy density. But the thing that's most important really is the cost because for a lot of people that are driving Model S, you know, the current, say dual motor Model S will do over 300 miles right now at 6,65 miles an hour.
29:40Elon MuskSo that's, that's more than enough range for most people. It's. And then you've got the supercharger where you can recharge very, you know, very quickly. We have a supercharged network that's now ubiquitous throughout the country.
29:52Elon MuskYou can, lots of our customers do cross country trips Louisiana, New York, whatnot, using a supercharged network. So there's really. You have freedom of travel at this point, and certainly incremental improvements to the battery pack range are important.
30:08Elon MuskBut the thing that's really important is reducing the cost per kilowatt hour. So the.
30:15Ron BaronAnd we can do that with existing.
30:17Elon MuskYes, yes, we are going to make some technology improvements as well to the fundamental cell chemistry and certainly to the way that the battery modules and packs are organized.
30:30Elon MuskBut the fundamental focus is on cost per unit of energy. And so that's what the Gigafactory is about. It's taking economies of scale, as far as we can possibly imagine, to a
30:49Ron Baronvery extreme level as far as we can. That's what gets it to 100 or that's what gets it lower than 100.
30:55Elon Musk100 what?
30:56Ron Baron100 hours a kilowatt.
30:58Elon MuskOh, we can't comment on exact price numbers, but I mean, that's not. That's approximately, you know, that's in the ballpark of what we're aiming for. And that's. It's important to cut essentially the cost per kilowatt hour at least by 30% with the Gigafactory and our aspiration of forces to do better than a 30% cost per kilowatt hour reduction in order to achieve the 50% cost reduction for the Model 3, which is about a 20% smaller car, and so would require for the same range, 20% pure, you know, less energy.
31:37Elon MuskThat means to get to the full 50%, we need another 30 points coming from economies of scale, which I'm actually very confident we will achieve. And at the Gigafactory, what we're doing is consolidating the production of the pack all the way from the raw materials.
31:53Elon MuskSo there's literally cars coming in from the mines, like rail cars of raw materials from the mines, and then out come completely finished battery packs. And this has actually never been done before.
32:06Elon MuskSo this for batteries at least. And what we're able to do in this process is massively improve the cost of the cells and the packs. Because today, if you were to trace the movement of the raw materials from when they're mined and they go through the various refining steps around the world and eventually are put in a cell, and then that cell eventually is put into a module and a pack and then put into a car and then deliver.
32:38Elon MuskDelivered to somebody the raw material, that molecule from the Mayan is doing it around the world trip like three times. It's really crazy. And there are even steps in the process where it is converted first into one that's a big opportunity for.
32:56Elon MuskHuge, huge.
32:59Ron BaronSo one of the things, Jeffrey Katzenberg is someone who I'm friendly with, and he had a well publicized accident in his Tesla car a week ago or two weeks ago or a month ago when someone went through a stoplight and a big SUV and hit him at 40 miles an hour.
33:21Ron BaronAnd he says that the Tesla car saved his life. And he said, because of crush zones, I guess. And he said it was just the most amazing thing. So.
33:31Ron BaronSo here this guy, well known, great publicity. Then there's something on the Internet. It says that someone was just driving a car along, and the car was about to smash into them.
33:41Ron BaronAnd the car. And he didn't see it. And the car saw it and stopped. Turned around and stopped.
33:46Elon MuskRight.
33:48Ron BaronSo here we have this safety. Much safer car than the other cars.
33:53Elon MuskYes.
33:54Ron BaronAnd Tom Pritzker, I presume you know him and his mom, Cindy. Tom is in his 60s, and his mom, Cindy, I don't know how, I guess she won't say how old she is, but she's more than 60s.
34:12Ron BaronAnd so he drove his car to her house, and she said, I like this car. And so she kept the car. And so one of the things that's interesting to me is that just you talk about safety, but you don't really say, you know, your promotion isn't, this is the safest car ever.
34:31Ron BaronI mean, I know you say it, but isn't that an unbelievable opportunity to. To promote, to change the demographic of who's buying our car and to get more Cindy's buying Cindy Pritzkers instead of Tom's or instead of Tom's children.
34:44Elon MuskYeah, glad you mentioned that. In fact, in designing the Model S and the Model X, safety was our absolute paramount goal. And, you know, I felt like, obviously my family will be in the car, my friends, families.
35:03Elon MuskIf I didn't do everything possible to maximize safety and something went wrong, I couldn't live with myself. So.
35:14Elon MuskWe spent enormous amounts of time on safety. And the whole car is architected for maximum safety. And we have physics on our side here, which is very, very important.
35:30Elon MuskSo, and I'll just go briefly, like, why exactly is the car safe? Because you hear things like, cars are five stars and all that. But I mean, this five stars, that's not an actual statistic.
35:42Elon MuskStatistical number, like safety statistics are not measured really in stars.
35:52Elon MuskThere's an actual probability of injury, which is. That's the number that's most important. And the probability of injury, you can look it Up. It's sort of buried in the Department of Transport website.
36:06Elon MuskBut they have this for each individual car. Yeah. Every car has a combined probability of injury. And the model S is still. Even though we did it three years ago, it still has the lowest probability of injury of any car ever tested.
36:20Elon MuskAnd that's just on passive safety. And then we have the active safety as well. And the reasons basically are that because the car does not have a big steel engine block in the front, we have a front trunk as well as rear trunk because the electric motors are so small that they're actually coaxial with the axles.
36:41Elon MuskSo when you have a high speed frontal collision, what really matters is force over distance. You know, it's just like jumping into a pool from a high. If you jump from a high diving board or something into a pool, you'd want a deep pool and one without rocks in it.
37:02Elon MuskIt's really not that complicated. It's the same thing for a car. And what people don't realize is you think of having a steel engine block is protecting you, except that when you hit something, you're going 60 miles an hour, so it's stopping you that is important.
37:18Elon MuskAnd so that deceleration distance is incredibly important, or described another way. The length of the crumple zone is extremely important. And the crumple zone on the front is of a Model S is two to three times greater than that of any other premium sedan, which means that the impact attenuation is two to three times greater.
37:39Ron BaronAnyone with their family, they want to buy one of these cars instead of a gasoline car.
37:43Elon MuskAbsolutely. Definitely. I mean, this is if safety is of concern for sure. I mean, it's just objectively true. It is the safest car by far. The accident that Jeffrey was in where he was t boned by an suv.
38:07Elon MuskSo that's a side impact collision. The reason the side impact collision on the S is so much better than another car is because the main structural component is the battery pack in the floor pan.
38:20Elon MuskSo the battery packing floor plan effectively acts as a big shear plate to transfer load from a side impact into the rest of the car. So the whole car moves sideways in a side impact collision.
38:38Elon MuskBut what happens in a gasoline car, again, because you've got the big steel engine block in the front, you've got a huge portion of the mass in the front.
38:45Elon MuskSo you've got. And the rest of the car is relatively weak. You essentially have just thin sheet metal on the side of the car and in the floor pan of the car.
38:57Elon MuskSo the effect of side impact, the load transfer for a gasoline car to the rest of the mass of the car is weak and as a result the side impact distance is dramatically greater.
39:13Elon MuskThe net result is that you are much safer in a site impact.
39:19Ron BaronSo I'll just do a couple more questions and I'll open it up for everyone else. But so safety. SpaceX and Uber. So safety. With all these other automobile companies having one safety issue after another, not just a submission problem, but also about brakes and about, I'm sorry, the emissions.
39:39Ron BaronNot just about brakes and about batteries and I'm sorry, gasoline tanks. Why? So when we have a car that's existing, that is spoiling the atmosphere, in addition, that's not as safe.
39:54Ron BaronWhy don't you think people have moved more rapidly to adopt our technology, which we've offered to give them for free?
40:01Elon MuskOh, you agree with the patent survey? I think actually that there are a number of companies using the patents.
40:07Ron BaronSo it's starting.
40:08Elon MuskYeah, yeah, absolutely.
40:09Ron BaronThat's one question. Number two is space SpaceX and we'll come back to Uber. So SpaceX. So when I was a kid, there was a television program called Captain video
40:20Moderatorand
40:24Ron BaronChannel 5 and the rocket would go up and it would fly around and come back. And then in the 1960s, we started going out to orbit and go to
40:36Elon Muskthe moon
40:38Ron Baronand the rockets, as they would take off the stage, one after another would fall off. And my first thought when that was happening, I didn't really understand why that would happen.
40:47Ron BaronAnd now your idea is that, hey, this rocket ship's going to stay together and we could do 99 trips instead of one or something, something like that. And therefore we can do it for 1 or 2 or 3% as expensively as we did it before.
41:03Ron BaronWhy didn't anyone think of that before?
41:05Elon MuskWell, actually, in the rocket industry, people have thought about reusability for a very long time and it just happens that Earth's gravity is quite strong and it's just barely possible to get reasonable payload to orbit with an expendable rocket.
41:31Elon MuskSo then if you add reusability, then that tends to give it negative payload to orbit. So you can't.
41:36Ron BaronSo how do you do it?
41:38Elon MuskSo you've got to do two things. You've got to really advance the core rocket technology itself as far as the engines, the airframe, the avionics, the recovery systems like landing legs and the boostback capability.
41:59Elon MuskYou've got to make the rocket such that if it was in a pure expendable mode, it would get approximately 4 or slightly more than 4% of its payload mass to orbit.
42:11Elon MuskAnd to put this in perspective, normally a rocket gets about 2% of its payload mass to orbit, so it's a very small number. But if you can push that to 2ish percent to more like 4% on an expendable basis and then be really efficient in the way that the reuse takes place, such that the reuse penalty is only maybe half of that, so you still have a net payload to orbit of 2%.
42:39Elon MuskThat's essentially the what's needed to achieve reusability. And SpaceX has been at it now for 13 years and we haven't yet achieved it. So, and so I think what we've done thus far is evolutionary, not revolutionary, but I think we're within sort of shooting distance of this.
43:01Elon MuskI think within, I think within the next year we'll be able to land the rocket intact. We will land the rocket, just not intact. Some exciting videos on YouTube if you want to watch them and, but I think we're close to landing it intact.
43:24Elon MuskAnd then we need to examine the rocket once we get it back to see what needs to be strengthened. Where do we over strengthen things that we don't need to add as much mass.
43:33Elon MuskAnd then we'll be able to do reusability with the, with the rocket and the, and just like some of these things are maybe not, they're not obvious to people who aren't familiar with the rocket industry, but the cost of our rocket is to build it is $60 million.
43:52Elon MuskAnd the, but the cost of the propellant, the fuel and oxygen and so forth is only about $250,000 or maybe $300,000 thereabouts. But it's basically, yeah, it's, it's only about as expensive as say, fueling up a 747.
44:13Ron BaronOkay, my last question is Uber. So I listened to your conference call and someone asked whether we could be like Uber. And I won't ask you that, but,
44:25Elon Muskbut been asked that a lot.
44:26Ron BaronYeah, you'll say, oh, can't comment on that, not ready to make any announcements in that area. But my question is. So there's another company, it's much smaller than Uber, called Lyft and I guess it's.
44:38Ron BaronCarl Icon is an investor in that and I think Lynn Robotnik is too. And so my question is that what is it about Uber's business that will make them immune from being attacked?
44:51Ron BaronAttacked by Lyft. Does Lyft have a chance against Uber?
44:55Elon MuskOh, wow. I'm not really an expert in that
44:57Ron Baronarena, I mean, is there some kind of scale that they have that makes it impossible for someone to compete against them is really my question.
45:04Elon MuskI think there's probably. I think, I mean this is, I'm, I've spent no time thinking about it. But my impression, this is an impression with like low competence is that there's, there's room for both Uber and Lyft.
45:18Elon MuskYeah, that's what I can see.
45:21Ron BaronOkay, so Elon, I'll take some questions now. Is that okay?
45:24Elon MuskYeah, sure, no problem.
45:25Ron BaronAnd then afterwards, I'm sure that there's a couple of Teslas out on the mall and I'm not getting a commission to sell them, but if you sign up for a test drive and we know about it, then we will send you a presentation so you can get that afterwards.
45:45Ron BaronBut in the meantime, questions I should
45:48Elon Muskmention, I guess got reminded that there's actually for anyone that isn't able to do a test drive today, we've actually arranged a special VIP URL just for you guys, which is tesla motors.com Baron Wow.
46:07Gilad ShaniCool.
46:08Elon MuskYeah. So it's just. Yeah.
46:12ModeratorThank you.
46:17Ron BaronNumber six.
46:20Audience MemberHi. I had the pleasure of test driving a sick an S just the other night. So it was five minutes in New York City traffic, but sweet.
46:30Elon MuskYay.
46:32Audience MemberI know you're not saying a whole lot about the Model 3 at this point. Point. But I'm just curious what you're willing to say about the experience of driving a $35,000 or so Model 3 as compared to driving a Model S.
46:48Audience MemberSure.
46:49Elon MuskWell, our intent is the Model S and the X will be a kind of premium sort of high end cars and we will try to lead with new technologies in the S and the X.
47:01ModeratorSo.
47:02Elon MuskSo that will be the advantage of the S and the x. But the 3 will be a smaller version. So maybe about 20% smaller, comparable in size to say a 3 series BMW or an Audi A4.
47:20Elon MuskBut it's going to have a very similar feel to the S and so it'll be have great acceleration, good driving, feel good handling, and for the size of the vehicle, great cargo space.
47:38Elon MuskYeah, I should mention like the S because it's got a trunk in the front and a trunk in the back. The actual cargo space of the S is anywhere from 50 to 100% more than a gassing carve the same external dimensions.
48:01Ron BaronYou're the one.
48:03ModeratorThank you so much for joining us. I think that is fantastic. I think I as well everybody else here enjoyed hearing, you know, from you and you were indeed a Visionary.
48:18ModeratorI have one observation. We have a favorite restaurant that has installed about six Tesla charging stations right outside the door. Okay. It's a good restaurant, but I notice they're always full.
48:32ModeratorAll those charging stations are full. And thinking of the great synergy of, you know, having a restaurant, I've got charging stations and now I get extra business. So I hope they're paying you to put in this, these stations.
48:45ModeratorBut I, I have. You know, what I want to get to is a technical question. Read an interesting article about inroad charging. You know, take your pick. It can be inductive, it could be rf.
48:56ModeratorIs there any potential for that? Okay. In terms of, in, you know, if there is. Is Tesla involved or engaged in looking or doing something with that? Thank you.
49:07ModeratorSure.
49:08Elon MuskI, I actually don't. I think that's unlikely to occur. I think it's really going to be just long range batteries and then most charging tends to occur at people's home or business.
49:21Elon MuskAnd then that's really 80, 90% of charging. 10% of charging is long distance, which is what we have, the superchargers. So you can travel anywhere in the country. Actually did this great road trip with my kids from LA to Mount Rushmore in South Dakota.
49:40Elon MuskSo you can travel anywhere in the country. Complete freedom.
49:47Elon MuskBut I think in locations that are not home or business and not long distance, there will be a small amount of charging that occurs. But it's in the sub 5% category.
49:58Elon MuskSo it's nice to have, but it's not needed. Full utility of the car. Okay, sure. So that's our aspiration actually is to put the supercharging stations somewhere where you can meet me.
50:14Elon MuskThen go and have a nice meal and grab a coffee and be on your way and do some shopping if you want.
50:23Ron BaronSo I apologize to everyone. I hogged the time and I didn't realize that we were running over. I thought that this was the amount of time we could take, talk and then there'll be more time for questions.
50:31Ron BaronWould you be able to answer some questions a little bit longer?
50:33Elon MuskYeah, no problem.
50:34Gilad ShaniSure.
50:34Ron BaronSo Elon can stay here for a bit. There's entertainment that's now starting in three venues. In the left venue we have Steve Martin and Martin, short for comedy. On the right venue we have Michael Buble.
50:50Ron BaronAnd in the center there's Tony Bennett and Lady Gaga.
50:56Elon MuskNot bad.
50:58Ron BaronPretty cool, right,