In the first two parts of our discussion, Tesla Motors Chairman Elon Musk described how he came to be a part of Tesla Motors and how he influenced the development of the Roadster. It's important to note that he never described himself as the designer or creator of the Roadster. Rather he considers himself the co-architect of the sports car.
With production of the Roadster now sort of underway and the updated drivetrain hopefully coming soon, it's time to look forward. As the self-declared Product Architect, Musk is playing perhaps an even bigger role with the next product, a sedan that we've known for some time by the code name WhiteStar. We had hoped to see WhiteStar this spring but that obviously hasn't happened yet. In the conclusion of our discussion, Musk gives out some hints about what to expect and what Tesla has learned over the past five years. Read on to learn more about what's coming next.
Make sure you read Part 1 and Part 2.
ABG: It sounds like ultimately the right decision was made to go back to the path that you probably should have gone in the first place, based on the expertise that was available within the company. As far as your role, specifically, how involved are you in the technical decisions about what's been done with the Roadster and what's being done with the next project, the sedan (WhiteStar)?
Elon: I'm very deeply involved, I think I understand the whole thing better than most people. JB understands the powertrain more than I do, as far as what it takes to make the whole thing work and the nuances of it, all the way down to what cell chemistries make sense; what the future upgrade paths are for the battery pack, the transmission, motor, power electronics.
As far as the Roadster, and the same thing for the sedan, I'm basically the product architect of the sedan and was co-product architect of the Roadster. I won some awards for this, if you know, actually, I won an INDEX Design award...A Global green award. So, wrote the spec for the sedan which is code-named WhiteStar and we're going a pure EV approach by the way. I don't think most people are completely aware of that. Martin was really pushing a hybrid approach, but we're not going to do a hybrid approach. We're going to go pure electric.
I think, the whole hybrid thing is a red herring.
ABG: This is your first experience, obviously, in the automotive industry.
Elon: Yes.
ABG: And clearly, I think you've found that it's quite a bit different from your previous projects, you know, the software side with PayPal, or the technology side with PayPal, and now with SpaceX. I'm curious to know your reaction as far as dealing with the kinds of issues that have to be dealt with in the automotive industry in terms of dealing with the regulations that have to be met; dealing with suppliers and all the testing that needs to be done in order to get a product like a car to market. Has your outlook on the automotive industry changed at all over the last five years?
Elon: Well, I've gotten to know a lot about the auto business and what it takes to design and make a car and a lot about energy storage technologies. You know, one of the predictions I've made on several occasions recently, is that I think within 30 years, a majority of the new cars produced in the United States will be electric. And I mean pure electric, not a hybrid. It'll take much longer than that to replace the vehicle fleet but I'm just saying the new cars made within 30 years which are going to be electric.
I think some of the people in the automotive business might agree with that, like Bob Lutz or somebody, he might agree with that. I've learned so much about the car business, I don't even know where to start. It's a very competitive business. There is so much of it that's supply chain driven. It's a supply chain chess; it just sort of feels like.
ABG: Obviously, with the issues that Tesla has had, particularly with transmissions, you definitely learn the downside of having to work with suppliers for critical parts of your product, as opposed to doing everything yourself.
Elon: Yes, at SpaceX, we do 80 percent in-house so we really have very little in the way of supplier dependency. Even the stuff we do that have suppliers do, we generally have the ability to bring it in-house if they either screw us or they voluntarily they just can't get the job done, that type of thing. So sort of weird, I'm like, I'm so used to in the space business, in SpaceX, not being supplier dependent, and just being completely very much self-reliant.
I tell you, it's really anxious to have your... it's anxiety inducing to have your fate in the hands of the suppliers. It's sort of you can't do that much about it. It's really hard to do dual source everything, and particularly when you are low volume like we are.
Some of my comments that have been recorded... I think I've sounded kind of arrogant with respect to what I think... the Silicon Valley can do anything type of thing. But that isn't really what I meant. Silicon Valley is good at technology development. And it's not good at other things. In order for Tesla to be successful we have to be good at all the things that are necessary to build a great car company. So that's, sure there's a vast technology development; there are also all the other pieces of car... design, suspension, body, high production, supply chain management, key systems ... There's a huge array of stuff. In fact, one of the things you'll see in the next few months is announcements of some really high profile people joining Tesla from the automotive sector. It's names that you would know – you would recognize. And what Ze'ev (Drori, Tesla CEO) are working right now is building up the expertise.
We really do intend to be a one of the... or at least aspire to create one of the great car companies of the 21st Century with Tesla. We're not necessarily the biggest, but to be up there the Big League – that type of thing – and to make high volume production, and to make cars that ordinary people can afford.
My motivation with Tesla and with SolarCity is just, I think, time is running out. We've got to do something. If things are just left on their own devices, it might be too late. So, I don't really care about making... if this was just a sports car company, it would not interest me at all.
ABG: You want to change the world, basically, or at least, change transportation?
Elon: I want to help make a difference... in terms of how Tesla influences the automotive industry, we'll have far more effect than the cars we're making ourselves. But we still need – in order to be an infuencer , we need to keep driving forward. I think, play as large a role as we can. But the bigger role will be how we, sort of, show people, "Look, it can be done." Because, really, there were two fundamental false premises that the auto industry had or has had for a while.
One is that it's not possible to make a compelling electric car and the other is, even if you made it – the electric car – people wouldn't buy it. And we're showing that to be false, at least on a small scale, with the Roadster. I think most of it would be false on a larger scale with the sedan and the future cars that we make.
ABG: You mentioned a moment ago ... bringing in some additional people with more experience in the auto industry and that kind of leads into the other question I had as far as the lessons that you've learned through the Roadster program and the issues that you've had during development of that and how that will influence what you're doing with WhiteStar and future programs.
Elon: There's a lot of lessons learned. Again, boy where do I start. I'm like full of scar tissue at this point. But one of the things we're going to do is we're going to try to centralize our activity a little more. With the Roadster, things were way too spread out. You know, assembly... I've actually...with Ze'ev Drori, we've begun to consolidate some of that activity even for Roadster. There are things like moving the battery pack production from Thailand to California, and transmission production will be in California as well. And the final assembly of the car will be in California because the Powertrain will be installed, in the glider in California. I think it will be considered a California car, actually.
ABG: For the Roadster?
Elon: Yes. Previously, the battery pack production was going to be in Thailand and final assembly was going to occur at Lotus but we've changed that to what I've mentioned previously. Moving more of that stuff to headquarters and final assembly occurring in California. So Lotus will just assemble the glider (body and chassis without powertrain). But even with the way it is right now, it's just far too spread out. It's really hard to control the supply chain that's at every corner of the world and it's also kind of expensive and the fixed costs end up really hurting us. And if there's some sort of transportation interruption, then it's screws up the whole production line.
So, with the sedan, we're going to much more centralized. So that's one of the big lessons. We're going to a higher level of production – we're going from 2000 units a year to 20,000 units a year with the sedan. So that's a whole order of magnitude increase so that's different processes, different tooling equipment. It will be a stamped aluminum body instead of a carbon-fiber body.
There's some pretty big changes on the powertrain side that I don't want to... I'm going to make an announcement on that probably in a few months. There are really huge improvements on the powertrain side that are really fundamental to making a pure electric car work, not a hybrid. You have to address the range issue if you're going to have pure electric. So how are you going to address the range issue. There's a few things we're going to do to address the range issue.
ABG: Is the energy storage system part of that change? Or is that something you don't want to discuss yet?
Elon: Yeah changing the name of the ESS to the battery pack, that's what it is. I actually understand that makes something sound more than it is, so I guess it's just now called the battery pack. Yes, it's a battery pack. So the battery pack... yes, there's some significant improvements to the battery pack. The Roadster's got really... Version 1 history of the technology; Version 2 is a whole step above that in many different ways, and then the rest of the powertrain, motor, transmission, power electronics – that's going to be much more tightly integrated package – much more cost-efficient. And so there are some really cool things that you'll see announced about WhiteStar . So you'll see some pretty cool announcements, happy to talk about it when we're ready to make that announcement. I can talk about some generalities that the WhiteStar is going to be something which is... it's going to be a good-looking car, but it's also going to be a very functional car. And I think functionality is extremely important.
You know, you look at the Roadster. The Roadster is in many ways a toy. It's a small two-seater sports car, and it has a small trunk. We need to make it much more usable. We need a lot of trunk space; we have to put a lot of people in it. It's going to be very safe. I mean, safe enough that if you're a mom, you don't mind putting your kids in the car. People are pretty excited. I think this is going to be... it's that sort of thing where you want this to be a car that even if it wasn't an electric car, you'd say, "Wow, I really wish I had that as a sedan – whether it was electric or not, I don't care. It's just such a great car."
ABG: Yes, you want people to just see it as a great piece of transportation, regardless of what the Powertrain is.
Elon: Exactly, and the powertrain is just a plus. Oh, now instead of spending $5 a gallon and putting 20 gallons in your car so like a $100 fill-up for a sedan... that's just what it costs right now... this car costs $5 to recharge at current California electricity rates. This is what it will cost. $5... five percent of what it will cost you to fill up an equivalently sized gasoline sedan.
And it's now like, "Wow, it's really a good economic proposition." We're targeting $59,000 starting price for the car. And that's before there are any tax rebates or anything. So if there are federal tax rebates that come into effect, which I think, there's a good chance it will – that could reduce the price by several thousand dollars, to maybe bringing it close to $50,000 as a starting price.
And if you factor in that the cost of operation is so low, because the equivalent cost of electricity, you're paying five percent of what you pay to run a gasoline car and its like, "Wow, this is likely to become a really competitive economic proposition." It's not something everyone can afford, but it's a hell of a lot more affordable than a sports car and it's a hell of a lot more functional.
ABG: Right, and when you do factor in the difference in the operating costs, you know, the ultimate total cost of ownership gets to be a lot closer to what would be a conventional car today.
Elon: Exactly. And then you know, we're working on some projects with some major car companies, you probably read some of the rumors and I think there's some exciting stuff that will come out of that as well.
ABG: Thanks for taking the time to talk today.
Elon: Bye.
With production of the Roadster now sort of underway and the updated drivetrain hopefully coming soon, it's time to look forward. As the self-declared Product Architect, Musk is playing perhaps an even bigger role with the next product, a sedan that we've known for some time by the code name WhiteStar. We had hoped to see WhiteStar this spring but that obviously hasn't happened yet. In the conclusion of our discussion, Musk gives out some hints about what to expect and what Tesla has learned over the past five years. Read on to learn more about what's coming next.
Make sure you read Part 1 and Part 2.
ABG: It sounds like ultimately the right decision was made to go back to the path that you probably should have gone in the first place, based on the expertise that was available within the company. As far as your role, specifically, how involved are you in the technical decisions about what's been done with the Roadster and what's being done with the next project, the sedan (WhiteStar)?
Elon: I'm very deeply involved, I think I understand the whole thing better than most people. JB understands the powertrain more than I do, as far as what it takes to make the whole thing work and the nuances of it, all the way down to what cell chemistries make sense; what the future upgrade paths are for the battery pack, the transmission, motor, power electronics.
As far as the Roadster, and the same thing for the sedan, I'm basically the product architect of the sedan and was co-product architect of the Roadster. I won some awards for this, if you know, actually, I won an INDEX Design award...A Global green award. So, wrote the spec for the sedan which is code-named WhiteStar and we're going a pure EV approach by the way. I don't think most people are completely aware of that. Martin was really pushing a hybrid approach, but we're not going to do a hybrid approach. We're going to go pure electric.
I think, the whole hybrid thing is a red herring.
ABG: This is your first experience, obviously, in the automotive industry.
Elon: Yes.
ABG: And clearly, I think you've found that it's quite a bit different from your previous projects, you know, the software side with PayPal, or the technology side with PayPal, and now with SpaceX. I'm curious to know your reaction as far as dealing with the kinds of issues that have to be dealt with in the automotive industry in terms of dealing with the regulations that have to be met; dealing with suppliers and all the testing that needs to be done in order to get a product like a car to market. Has your outlook on the automotive industry changed at all over the last five years?
Elon: Well, I've gotten to know a lot about the auto business and what it takes to design and make a car and a lot about energy storage technologies. You know, one of the predictions I've made on several occasions recently, is that I think within 30 years, a majority of the new cars produced in the United States will be electric. And I mean pure electric, not a hybrid. It'll take much longer than that to replace the vehicle fleet but I'm just saying the new cars made within 30 years which are going to be electric.
I think some of the people in the automotive business might agree with that, like Bob Lutz or somebody, he might agree with that. I've learned so much about the car business, I don't even know where to start. It's a very competitive business. There is so much of it that's supply chain driven. It's a supply chain chess; it just sort of feels like.
ABG: Obviously, with the issues that Tesla has had, particularly with transmissions, you definitely learn the downside of having to work with suppliers for critical parts of your product, as opposed to doing everything yourself.
Elon: Yes, at SpaceX, we do 80 percent in-house so we really have very little in the way of supplier dependency. Even the stuff we do that have suppliers do, we generally have the ability to bring it in-house if they either screw us or they voluntarily they just can't get the job done, that type of thing. So sort of weird, I'm like, I'm so used to in the space business, in SpaceX, not being supplier dependent, and just being completely very much self-reliant.
I tell you, it's really anxious to have your... it's anxiety inducing to have your fate in the hands of the suppliers. It's sort of you can't do that much about it. It's really hard to do dual source everything, and particularly when you are low volume like we are.
Some of my comments that have been recorded... I think I've sounded kind of arrogant with respect to what I think... the Silicon Valley can do anything type of thing. But that isn't really what I meant. Silicon Valley is good at technology development. And it's not good at other things. In order for Tesla to be successful we have to be good at all the things that are necessary to build a great car company. So that's, sure there's a vast technology development; there are also all the other pieces of car... design, suspension, body, high production, supply chain management, key systems ... There's a huge array of stuff. In fact, one of the things you'll see in the next few months is announcements of some really high profile people joining Tesla from the automotive sector. It's names that you would know – you would recognize. And what Ze'ev (Drori, Tesla CEO) are working right now is building up the expertise.
We really do intend to be a one of the... or at least aspire to create one of the great car companies of the 21st Century with Tesla. We're not necessarily the biggest, but to be up there the Big League – that type of thing – and to make high volume production, and to make cars that ordinary people can afford.
My motivation with Tesla and with SolarCity is just, I think, time is running out. We've got to do something. If things are just left on their own devices, it might be too late. So, I don't really care about making... if this was just a sports car company, it would not interest me at all.
ABG: You want to change the world, basically, or at least, change transportation?
Elon: I want to help make a difference... in terms of how Tesla influences the automotive industry, we'll have far more effect than the cars we're making ourselves. But we still need – in order to be an infuencer , we need to keep driving forward. I think, play as large a role as we can. But the bigger role will be how we, sort of, show people, "Look, it can be done." Because, really, there were two fundamental false premises that the auto industry had or has had for a while.
One is that it's not possible to make a compelling electric car and the other is, even if you made it – the electric car – people wouldn't buy it. And we're showing that to be false, at least on a small scale, with the Roadster. I think most of it would be false on a larger scale with the sedan and the future cars that we make.
ABG: You mentioned a moment ago ... bringing in some additional people with more experience in the auto industry and that kind of leads into the other question I had as far as the lessons that you've learned through the Roadster program and the issues that you've had during development of that and how that will influence what you're doing with WhiteStar and future programs.
Elon: There's a lot of lessons learned. Again, boy where do I start. I'm like full of scar tissue at this point. But one of the things we're going to do is we're going to try to centralize our activity a little more. With the Roadster, things were way too spread out. You know, assembly... I've actually...with Ze'ev Drori, we've begun to consolidate some of that activity even for Roadster. There are things like moving the battery pack production from Thailand to California, and transmission production will be in California as well. And the final assembly of the car will be in California because the Powertrain will be installed, in the glider in California. I think it will be considered a California car, actually.
ABG: For the Roadster?
Elon: Yes. Previously, the battery pack production was going to be in Thailand and final assembly was going to occur at Lotus but we've changed that to what I've mentioned previously. Moving more of that stuff to headquarters and final assembly occurring in California. So Lotus will just assemble the glider (body and chassis without powertrain). But even with the way it is right now, it's just far too spread out. It's really hard to control the supply chain that's at every corner of the world and it's also kind of expensive and the fixed costs end up really hurting us. And if there's some sort of transportation interruption, then it's screws up the whole production line.
So, with the sedan, we're going to much more centralized. So that's one of the big lessons. We're going to a higher level of production – we're going from 2000 units a year to 20,000 units a year with the sedan. So that's a whole order of magnitude increase so that's different processes, different tooling equipment. It will be a stamped aluminum body instead of a carbon-fiber body.
There's some pretty big changes on the powertrain side that I don't want to... I'm going to make an announcement on that probably in a few months. There are really huge improvements on the powertrain side that are really fundamental to making a pure electric car work, not a hybrid. You have to address the range issue if you're going to have pure electric. So how are you going to address the range issue. There's a few things we're going to do to address the range issue.
ABG: Is the energy storage system part of that change? Or is that something you don't want to discuss yet?
Elon: Yeah changing the name of the ESS to the battery pack, that's what it is. I actually understand that makes something sound more than it is, so I guess it's just now called the battery pack. Yes, it's a battery pack. So the battery pack... yes, there's some significant improvements to the battery pack. The Roadster's got really... Version 1 history of the technology; Version 2 is a whole step above that in many different ways, and then the rest of the powertrain, motor, transmission, power electronics – that's going to be much more tightly integrated package – much more cost-efficient. And so there are some really cool things that you'll see announced about WhiteStar . So you'll see some pretty cool announcements, happy to talk about it when we're ready to make that announcement. I can talk about some generalities that the WhiteStar is going to be something which is... it's going to be a good-looking car, but it's also going to be a very functional car. And I think functionality is extremely important.
You know, you look at the Roadster. The Roadster is in many ways a toy. It's a small two-seater sports car, and it has a small trunk. We need to make it much more usable. We need a lot of trunk space; we have to put a lot of people in it. It's going to be very safe. I mean, safe enough that if you're a mom, you don't mind putting your kids in the car. People are pretty excited. I think this is going to be... it's that sort of thing where you want this to be a car that even if it wasn't an electric car, you'd say, "Wow, I really wish I had that as a sedan – whether it was electric or not, I don't care. It's just such a great car."
ABG: Yes, you want people to just see it as a great piece of transportation, regardless of what the Powertrain is.
Elon: Exactly, and the powertrain is just a plus. Oh, now instead of spending $5 a gallon and putting 20 gallons in your car so like a $100 fill-up for a sedan... that's just what it costs right now... this car costs $5 to recharge at current California electricity rates. This is what it will cost. $5... five percent of what it will cost you to fill up an equivalently sized gasoline sedan.
And it's now like, "Wow, it's really a good economic proposition." We're targeting $59,000 starting price for the car. And that's before there are any tax rebates or anything. So if there are federal tax rebates that come into effect, which I think, there's a good chance it will – that could reduce the price by several thousand dollars, to maybe bringing it close to $50,000 as a starting price.
And if you factor in that the cost of operation is so low, because the equivalent cost of electricity, you're paying five percent of what you pay to run a gasoline car and its like, "Wow, this is likely to become a really competitive economic proposition." It's not something everyone can afford, but it's a hell of a lot more affordable than a sports car and it's a hell of a lot more functional.
ABG: Right, and when you do factor in the difference in the operating costs, you know, the ultimate total cost of ownership gets to be a lot closer to what would be a conventional car today.
Elon: Exactly. And then you know, we're working on some projects with some major car companies, you probably read some of the rumors and I think there's some exciting stuff that will come out of that as well.
ABG: Thanks for taking the time to talk today.
Elon: Bye.
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