Fast Company

Elon Musk Owes Customers 6,500 Cars, So Why Is He Smiling?

With a documentary film crew recently at his back and deals in place with Daimler, Toyota, and Panasonic, Tesla's Elon Musk talks to Fast Company about his rosy future.

Elon Musk, the Chairman, CEO, and Product Architect of Tesla Motors and CEO/CTO of SpaceX, has a problem with so-called modern cars. Their on-board tech feels five years old from the moment they hit showrooms. Instead, Tesla's new mid-priced Model S electric sedan has a unique dashboard framed around a 17-inch touch screen and an "85 kilowatt battery pack that will run the frickin' computer for a year," Musk says.

Neat.

Fast Company sat down recently at The Atlantic Meets the Pacific conference in California with the veteran entrepreneur first known for co-founding PayPal to find out how, exactly, Musk has emerged from what appeared to be a rocky few years for Tesla Motors. For starters, the company inked a partnership in 2009 with Daimler (the car-maker invested a reported "double-digit" million-dollar sum in exchange for a 10% stake); then came a Toyota deal in October 2010--for "certain services related to the supply of the Tesla Battery and Powertrain," for the Toyota RAV4 EV in exchange for a $100 million investment, according to a SEC filing; and just this month (October), Panasonic invested $30 million in Tesla and is slated to become the company's preferred provider of lithium-ion battery cells through 2015, according to another SEC filing.  

Still, with 6,500 unfulfilled Model S reservations (at $5,000 a pop), there's tremendous pressure for Tesla to deliver. Here's why Musk--who's also at the center of a Chris Paine's fascinating new electric vehicle documentary, Revenge of the Electric Car (narrated by Tim Robbins and including legendary auto industry figures Bob Lutz and Carlos Ghosn)--isn't worried.

FAST COMPANY: SolarCity and PayPal were based around already existing technologies that were used to do new things. However, SpaceX and Tesla are based around entirely new technologies. Is there a difference between running one type of company and running the other?

Elon Musk: Well, in the case of SolarCity, I do not run the company day-to-day. Really, I ascribe the vast majority of the credit to Peter and Lyndon Rive, who run the company. I did suggest the original idea of going into the solar space to them. However, it wasn't like there was nobody in solar. They just needed a big company to do it right. That was why I was trying to get them started. They agreed to it and I provided some strategic advice to them over the years. But basically what I do at SolarCity is I show up and hear the good news at board meetings. I love it (laughs).

In the case of Tesla and SpaceX, there's a lot more outlook as far as technology development. It's much more of an engineering problem in those two cases than a business problem. SpaceX especially is much more of an engineering problem. That's good though; I think of myself primarily as an engineer. In order to create the products that I want to create, I have to run the company. Otherwise, I'd be working at another company, and I'd just be creating the stuff they want me to create.

When did you first know you wanted to be involved in the electric car business?

It was about 20 years ago, when I was in college. Originally, what bought me out to California was the chance to study at Stanford and to study material science and applied physics and trying to develop advanced ultracapacitors as an industry storage mechanism for electric vehicles. I think put that on hold to start an internet company (Zip2) because I always figured I could go back to Stanford but I didn't want to watch the internet getting created while I was in school. I circled back to electric cars later.

Speaking of studying in the United States, did you have a hard time adjusting to American culture after growing up in Africa?

Not really. My mother is Canadian and my grandfather was American; I was fortunate as I was growing up to take trips to the United States. I watched a lot of American television and comics; America just seemed like the place where... when there was cool technology coming out, it was mostly from America. So I wanted to be there.

Tesla's cars all run on a Linux architecture. How was the decision made to go with Linux?

It just seemed pretty obvious in Silicon Valley. Linux is free and it works very well.

Taking a look at the Model S, the dashboard and especially the touchscreen system are different from pretty much everything on the market. What was the process like when you were coming up with the interface and design?

I guess I've been disappointed in cars where you step inside the car and it's like going back five years. You have your laptop and your smartphone. I thought that was pretty lame and with the Model S, we decided to be ahead (of the curve) in consumer electronics instead of behind.

We're pushing the envelope--there isn't going to be a 17-inch iPad out, I think, but there will be a 17-inch touchscreen computer in the Model S. And the screen has a better image than you get from a MacBook Pro; you might ask how you got that? Well, we saw the MacBook Pro's supply chain and we took away the limitations associated with laptop computers--which are very energy constraining. You've got viewing angle constraints, there are contrast limitations... all of those are aimed at minimizing the power usage. On the Model S, you've got an 85 kilowatt battery pack that will run the frickin' computer for a year. We took away those limitations. When you go from your laptop to the car, the car has a better screen.

America has a relatively limited infrastructure for electric cars compared to Europe. Do you see a way for, say, long-distance truckers to eventually switch over to electric vehicles?

Absolutely. I think all modes of transportation will go fully electric, with the ironic exception of rockets. Unfortunately, Newton's Third Law is in the way of rockets becoming electric.

Early adopters already know all about Tesla Motors. But... say you were meeting an average American who makes $50,000 a year and drives an older used car. Would you tell them that they will be driving an electric car down the line?

I think all cars will go fully electric. It takes a little bit of time. You have new technology that needs to be refined and adapted to economics of scale. You can look at the early days of the cell phone—like when you look at the original Wall Street movie where the guy is walking around with the brick phone with a lousy signal and 30 minutes of battery time and it was really expensive.

In those days, if you asked people if eventually everyone would have a portable phone with the power of a supercomputer you would be told “no way.” That's how it is when you have a new technology--you have to look at where it's headed. To quote Wayne Gretzky, “skate to where the puck's going to be.” That's how it is with electric cars.

There are pretty radical improvements taking place and if you make reasonable extrapolations from those improvements, it's clear that all cars are going to go electric. The sooner the better.

How did your partnerships with companies such as Toyota and Panasonic come about?

Let's see. With Toyota, it occurred...maybe around Feburary or March of last year. It's relatively recent, but it's been a great relationship since our first meeting. I had Akio Toyota at my house in Los Angeles, we really hit it off.

With Panasonic the relationship has been going on for several years. We first talked to them about supplying cells for the Roadster in 2004, I think. We then gradually built the strength of that relationship over time; they also invested in Tesla. We actually signed the biggest battery cell contract in the world, I believe.

What was it like being trailed for Revenge of the Electric Car?

It was fine. You kind of forget about the cameras after a while... it looks like [director Chris Paine] was there all the time but... I really like Chris Paine a lot, he's a cool dude. He's super-authentic and does the right thing, always. It was a little risky I suppose because I didn't have any editing rights or anything--we didn't pay for the movie, nor did Chris allow us to make any payments. If Chris wanted to, he could really screw us over but I knew he wouldn't do that because he's a good guy.

How has demand for the Model S been so far?

It's been great, particularly since very few people have had an opportunity to test drive it. In fact, only recently did people even get an opportunity to only test ride. Given that fact, we now have over 6500 reservations. It costs $5,000 to put down a reservation; you have to think about it, it's not like it's just $99 or something. We're actually sold out of our production next year and I think that's really great.

Are many of the S customers Roadster owners or are they newcomers to Tesla?

Mostly newcomers. In fact we've only sold 2000 Roadsters and we have over 6500 Model S reservations. You think that out of that 6500, maybe 2000 already have Roadsters but it's only more like 600 or 700 (repeat Tesla customers). 90% of the people who have put down a Model S reservation do not have a Roadster.

I've driven an electric car before, and the one thing that amazed me was the lack of noise and just how fun it was compared to a regular car. What do you think the easiest way of convincing people that electric cars are not just a piece of green technology but really fun to drive?

The best thing is to get as many people in the Roadster or Model S as possible. I wish we could have produced a $30,000 car from Day One. That would have been the ideal situation. However, the fact of the matter when you have new technology is that it always takes a few iterations of that technology and an economy of scale to make it an affordable and compelling mass market product.

Again, look at mobile phones, laptops and any new technology. It just takes time so we don't have any other choice besides starting up with low-production, high-price products and then to go to mid-price and mid-levels of production with the Model S; our third-generation vehicle will be low-price and high-volume.

Since you've come to America, you've obviously made your fortune here. What do you think is so appealing about American business culture that it attracts people from foreign countries to come here, compared to, say, India or China?

I think the United States is the best environment in the world to create a company... that's not to say the environment couldn't be better; there's always room to improve. Maybe if I was Chinese, I might have stayed in China.

However, if you look at new technology, it's crazy how much of it comes out of the United States. If you want to do cutting edge stuff, you come to the United States. It's not so much that there aren't great entrepreneurial opportunities in China and India, they are huge—especially for people who were born and raised there. But it's not cutting-edge technology. It's been a long time since China or India come up with cutting-edge technology. Name three things that came out of India or China in the last 200 years.

For more stories like this, follow @fastcompany on Twitter. Email Neal Ungerleider, the author of this article, here or find him on Twitter and Google+.

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6 Comments

  • Stephen Alan Jove

    I saw electric cars early on as the solution to our increasingly mobile population, decreasing world oil supply, increasing gasoline prices, and incresed domestic threat of international economic terroism. Of course it takes time to orchestrate a meaningful infrastucture for an all-electric car society, but that doesn't mean that gasoline and diesel-powered vehicles will be totally out of the picture in the foreseeable future. A major improvemnent in battery technology is very important for attaining higher range and lower charging times. I have a Tesla Roadster with over 20,000 miles logged now, and find it to be my primary vehicle even though I own quite a few. I am also signed-up to get the Model-S when it comes out next year for my wife's vehicle. All in all, I've become quite an advocate for Tesla, and cannot help but admit that Elon Musk is a true visionary in every sense of the word.

  • Mikkel deMib Svendsen

    I have been driving a Tesla Roadster for the past 5 month and one thing I have realized is that we do not need a wide infrastructure to switch to EVs. I can go 400 km in my Roadster and I can charge at any standard outlet. I drive to work (175 km), I drive to my vacation house in Sweden (300 km from where I live in Denmark) and it all works perfect. Time is right for EVs now. I blog about my daily life with driving electric at: www.elbilbloggen.dk (in Danish - but also includes some nice videos)

  • Andrew Norris

    I'm not sure the phone battery analogy applies. Battery technology has not changed that much at all in decades. Phones went digital and that allowed for them to send in tiny pulses, thus not actually sending most of the time. Plus more powerful base stations. That sort of technology cannot be applied to cars. You cannot pulse your motor for 10% of the time you did before - and still get 100% of the performance - you will get 10%. So I feel this is a misleading analogy. Same with how computer power increased. How this can apply to cars I cannot see, not even loosely. 

    However, there has been some improvement recently in how quickly batteries can charge up. But still need an infrastructure to handle this. It's the future, but an unprecedented breakthrough in battery technology, or massive investment in infrastructure is needed before it will take off anytime soon. It's not happening at the moment.      

  • BuckleyKristy

    my classmate's step-aunt
    makes $73 every hour on the laptop. She has been without work for 7 months but
    last month her check was $7246 just working on the laptop for a few hours. Read
    about it here

    http://ufil.ms/jfiHL

  • BuckleyKristy

    my classmate's step-aunt
    makes $73 every hour on the laptop. She has been without work for 7 months but
    last month her check was $7246 just working on the laptop for a few hours. Read
    about it here

    http://ufil.ms/jfiHL