WHEN: TODAY, MONDAY, June 1, 2015
WHERE: CNBC'S "POWER LUNCH"
Following is the unofficial transcript of a CNBC interview with Tesla CEO Elon Musk today on CNBC's "Power Lunch." Following is a link to video of the on CNBC.com: http://video.cnbc.com/gallery/?video=3000384638.
All references must be sourced to CNBC.
LEBEAU: WELCOME BACK TO POWER LUNCH I AM PHIL LEBEAU WITH A NEWS ALERT JOINING US ON THE CNBC NEWSLINE IS ELON MUSK CEO OF TESLA MOTORS AS WELL AS THE DRIVING FORCE BEHIND SPACEX AS WELL AS SOLAR CITY. ELON THANK YOU FOR JOINING US WE WANTED TO GET YOUR REACTION TO THE LA TIMES ARTICLE TALKING ABOUT THE GOVERNMENT SUBSIDIES OF WHICH THEY TABULATED AT %5.3 BILLION FOR ALL OF THE COMPANIES THAT YOU PLAY A ROLE IN WANTED TO GET YOUR REACTION TO WHETHER OR NOT YOU BELIEVE THIS IS A FAIR ARTICLE AND A FAIR REPRESENTATION OF THE ROLE OF GOVERNMENT SUBSIDIES IN ALL OF THE COMPANIES THAT YOU RUN.
MUSK: I THOUGHT THE ARTICLE WAS ACTUALLY INCREDIBLY MISLEADING AND DECEPTIVE TO THE READER. IT PROVIDES NO CONTEXT WHATSOEVER FOR AND OF THE INCENTIVES THAT MY COMPANIES BEEN AWARDED. AND MOREOVER BY ADDING UP EVERYTHING THAT'S EVER HAPPENED AND INCLUDING THINGS THAT WILL TAKE THE NEXT 20 YEARS TO HAPPEN AND THEN SUMMING THAT INTO A SINGLE NUMBER AND PLAYING IT TODAY IT MAKES IT SOUND AS THOUGH MY COMPANY IS GETTING SOME HUGE CHECK WHICH IS FUNDAMENTALLY FALSE AND IT'S ALSO INCREDIBLY OUTRAGEOUS THAT JERRY HIRSCH WOULD WRITE ABOUT WHAT TESLA AND SOLAR CITY ARE RECEIVING IN INCENTIVES BUT NOT TALK AT ALL ABOUT THE BIG IMF STUDY THAT JUST CAME OUT TALKING ABOUT THE SUBSIDIES FOR FOSSIL FUELS. AND THE CRAZY THING IS IF YOU ADD UP ALL THE SUBSIDIES THAT SOLAR CITY AND TESLA GET HISTORICAL AND GOING FORWARD IT IS 1000THOF WHAT THE OIL AND GAS INDUSTRY GET IN A SINGLE YEAR. AND NO MENTION IS MADE OF THAT. BASICALLY JERRY HIRSCH COULDN'T HAVE IF HE WAS PAID BY THE OIL AND GAS INDUSTRY LOBBY HE COULDN'T HAVE WRITTEN A MORE FAVORABLE ARTICLE FOR THEM.
LEBEAU: ELON LET ME ASK YOU ABOUT ONE OF THE CONTENTIOUS POINTS YOU HAVE WHEN WE TALKED EARLIER ON THE PHONE YOU SAID THAT THERE IS VERY LITTLE MENTION OF THE ECONOMIC BENEFITS THAT YOU BELIEVE YOUR COMPANIES WILL BE PROVIDING IN THE FUTURE THE GIGA FACTORY BEING A PRIME EXAMPLE IN NEVADA IN EXCHANGE FOR THE $1.3 BILLION IN TAX INCENTIVES FROM THE STATE OF NEVADA YOU ARE PLANNING TO BUILD A GIGA FACTORY THAT ULTIMATELY COULD HAVE AS MANY AS 6,000 JOBS THERE. GIVE US YOUR PERSPECTIVE THERE IN TERMS OF HOW YOU FEEL THAT IS NOT BEING REPRESENTED HERE.
MUSK: SURE AND I ACTUALLY WROTE A BLOG SPECIFICALLY ABOUT THE NEVADA INCENTIVE WHICH MAKES JERRY HIRSCH'S ARTICLE EVEN MORE INEXCUSABLE BECAUSE HE COMPLETELY IGNORES WHAT WAS WRITTEN THERE. THE $1.3 BILLION THAT NEVADA MAY END OF AWARDING TESLA IS ACTUALLY SPREAD OUT OVER 20 YEARS WE ARE TALKING ABOUT AN AVERAGE OF A LITTLE OVER $50 MILLION A YEAR OVER 20 YEARS. IN ORDER FOR THE FACTORY TO GENERATE OR THE FACTORY TO RECEIVE THAT INCENTIVE, WE ACTUALLY HAVE TO HAVE AN ECONOMIC OUTPUT FROM THE FACORY OF ABOUT $5 BILLION A YEAR OR $100 BILLION OVER 20 YEARS. WHICH MEANS THE INCENTIVE IS ACTUALLY ONLY A LITTLE OVER 1%. I MADE THAT CLEAR IN THE BLOG THAT I WROTE. HIRSCH CHARACTERIZED THIS AS BASICALLY A CHECK THAT WE JUST GET WHICH IS TOTALLY FALSE. WE ARE NOT GETTING ANY CHECK FROM NEVADA. ALL IT IS IS SALES AND USED TAX ABATEMENTS OVER THAT PERIOD OF TIME IF WE DO ALL WE ARE SUPPOSED TO DO AND PRODUCE 6500 JOBS FOR THE STATE AND DIRECT JOBS THAT DOESN'T COUNT TEACHERS, CONSTRUCTION WORKERS, ELECTRICIAN, PLUMBERS AND ALL THE SUPPORT JOBS THAT WILL COME INDIRECTLY.
LEBEAU: ELON IF YOU DID NOT GET THE..
MUSK: AND ONE THING TO JUST FINISH I THINK THE ACID TEST FOR ANY INCENTIVE PACKAGE LIKE THAT IS HOW DOES AN EXTERNAL RATING AGENCY VIEW THAT INCENTIVE PACKAGE AND IT WAS ASSESSED BY INDEPENDENTLY BY MOODY'S AS CAUSING THE NEVADA CREDIT RATING TO INCREASE TO IMPROVE. SO IT WAS INDEPENDENTLY ASSESED AS SOMETHING THAT MADE THE NEVADA STATE CREDIT BETTER, NOT WORSE.
LEBEAU: ELON IF YOU DID NOT GET THAT INCENTIVE PACKAGE FROM THE STATE OF NEVADA OR REALLY ANY STATE THAT YOU WERE CONSIDERING THE GIGAFACTORY FOR, WOULD YOU BE ABLE TO BUILD THAT GIGAFACTORY? HOW CRUCIAL ARE THOSE INCENTIVES IN ORDER TO TAKE THAT NEXT STEP FOR DEVELOPING THE BUSINESS.
MUSK: NONE OF THE INCENTIVES ARE NECESSARY. THEY ARE ALL HELPFUL. THESE THINGS TEND TO BE CHARACTERIZED AS EITHER ABSOLUTELY NECESSARY OR ABSOLUTELY UNNECESSARY. BOTH POSITIONS ARE FALSE. WHAT THE INCENTIVES DO IS THEY ARE CATALYSTS THEY IMPROVE THE RATE AT WHICH A CERTAIN THING HAPPENS. THE REASON THESE INCENTIVES ARE PUT IN PLACE, THE VOTERS WANT A PARTICULAR THING HAPPEN AND THEY WANT IT TO HAPPEN FASTER THAN MIGHT OTHERWISE OCCUR. SO WHAT THESE INCENTIVES DO IS JUST LIKE A CATALYST IN A REACTION THEY CAUSE THIS GOOD THING THAT VOTERS THINK IS GOOD TO HAPPEN FASTER THAN MIGHT OTHERWISE THAT'S ALL THAT THE INCENTIVES ACHIEVE.
SULLIVAN: LET'S TALK ABOUT WHAT YOU HAVE ASKED FOR. AND BY THE WAY THIS IS NOT THE FIRST FOR THE LA TIMES THEY WROTE BACK IN 2013 ABOUT SUBSIDIES MOTHER JONES NATIONAL REVIEW THEY HAVE ALL DONE STUFF ON THIS IT DOESN'T SEEM TO BE A LOT NEW THERE. HOW MUCH THOUGH OF THIS TAX CREDITS OR WHATEVER THEY ARE HAVE YOU DIRECTLY OR THE COMPANY DIRECTLY ASKED FOR FROM THE GOVERNMENT, IF ANY.
MUSK: THE ONLY ONES THAT WE ACTUALLY BARGAIN FOR DIRECTLY ARE THE STATE LEVEL INCENTIVES OR RATHER TO BE PRECISE THE PLACEMENT OF THE GIGA FACTORY AND ON THE SPACEX SIDE A VERY TINY ONE IN TEXAS FOR A LAUNCH SITE. THE VAST MAJORITY OF THE INCENTIVES WERE NOT CREATED BY TESLA THEY WERE SIMPLY THERE. FOR EXAMPLE THE ZERO EMISSION VEHICLE CREDITS THAT WAS SOMETHING THAT WAS ESTABLISHED ABOUT 20 YEARS AGO DRIVEN INITIALLY BY THE STATE OF CALIFORNIA WORRIED ABOUT AIR QUALITY IN LOS ANGELES AND THE BAY AREA. THESE THINGS EXISTED FOR SOME TIME. IN THE CASE OF THEIR CREDITS IT'S ACTUALLY NOT ANYTHING COMING FROM THE GOVERNMENT ITS BASICALLY OTHER CAR COMPANIES WHO ARE UNWILLING TO PRODUCE ELECTRIC CARS BUYING THEIR EMISSION CREDITS FROM TESLA INSTEAD. SO INSTEAD OF THEM PRODUCING ELECTRIC CARS WHICH IS WHAT THEY SAID THEY WOULD DO THEY BUY CREDITS FROM TESLA. THAT'S NOT COMING FROM THE GOVERNMENT. IT'S COMING FROM OTHER CAR COMPANIES.
SULLIVAN: AND DO YOU FEEL ELON I KNOW YOU REFERENCED THE OIL AND GAS INDUSTRY WHICH IS IRONIC I AM AT AN OIL AND GAS CONFERENCE TODAY, BUT DO YOU FEEL THE OTHER CAR MAKERS HAVE MAYBE PUSHED SOME OF THIS ON TO YOU BECAUSE THEY HAVE STRUGGLED TO SELL EITHER HYBRID OR ALL ELECTRIC CARS.
MUSK: I THINK SOME OF IT IS COMING FROM THE CAR COMPANIES THAT DON'T WANT TO GO ELECTRIC. I THINK MOST OF IT'S COMING FROM THE OIL AND GAS INDUSTRY AND SOME OF IT IS COMING FROM THE CAR COMPANIES. FOR THE CAR COMPANIES GOING ELECTRIC IS SORT OF AN ANNOYANCE AND SOMETHING THEY WOULD RATHER NOT DO AND IT IS A BIT OF A BOTHER, BUT FOR THE OIL AND GAS INDUSTRY, IT'S LIFE OR DEATH.
MELISSA LEE: SO ELON – SORRY TO INTERRUPT, IT'S MELISSA LEE HERE. LET ME JUST PLAY THE FOIL TO THIS ARGUMENT BECAUSE I THINK IT'S A GOOD ARGUMENT IN TERMS OF THE OIL AND GAS INDUSTRY. AND YOU MAKE THE POINT THAT YOU GET ONE ONE-THOUSANDTH OF WHAT THAT INDUSTRY GETS IN TERMS OF SUBSIDIES. SOME MIGHT ARGUE THOUGH, THAT THE OIL AND GAS INDUSTRY BY SUBSIDIZING THEM BRINGS DOWN ENERGY COSTS FOR THE AVERAGE AMERICAN IN A WAY THAT SUBSIDIZING YOUR INDUSTRY DOES NOT. WHAT WOULD YOU SAY TO THOSE CRITICS?
MUSK: YEAH, I MEAN, FIRST OF ALL, SUDDENLY THERE ARE ELECTRIC CARS THAT ARE AFFORDABLE. I MEAN YOU HAVE THINGS LIKE THE NISSAN LEAF AND THE CHEVY VOLT. THE TESLA MODEL S IS CURRENTLY A RELATIVELY EXPENSIVE CAR, BUT WE EXPECT TO COME OUT WITH OUR HIGH VOLUME, SORT OF MORE AFFORDABLE CAR IN APPROXIMATELY 2017. IF WE COULD DO SO SOONER, WE WOULD DO SO SOONER. BUT THE NATURE OF TECHNOLOGY DEVELOPMENT AND THE NEED TO ACHIEVE ECONOMIES WITH SCALE PREVENT US FROM COMING OUT WITH A COMPELLING, LOW COST ELECTRIC CAR RIGHT NOW. HOWEVER, THOSE THAT DO PURCHASE THE MODEL S AND THE MODEL X COMING OUT LATER THIS YEAR ARE DIRECTLY HELPING TESLA FUND THE AFFORDABLE ELECTRIC CAR.
LEE: AND ON THE TOPIC OF THE MODEL X, ELON, IN TERMS OF IT COMING OUT ON SCHEDULE, IS EVERYTHING UP AND RUNNING? ARE THE FACTORY LINES IN PLACE FOR THE PRODUCTION OF IT?
MUSK: YEAH, I MEAN, I DON'T WANT TO – I MEAN THERE IS A LOT OF THINGS I GET ASKED ABOUT TESLA THAT I THINK PEOPLE ARE CURIOUS ABOUT, BUT I DO HAVE A SHAREHOLDER MEETING COMING UP IN ABOUT A WEEK, SO, I'D PREFER TO ANSWER QUESTIONS ABOUT TESLA AT THAT TIME.
LEBEAU: ELON, TIH IS PHIL AGAIN. ONE LAST THING –
SULLIVAN: ELON, IT IS BRIAN SULLIVAN AGAIN. DO YOU FIND IT – SORRY, PHIL.
LEBEAU: GO AHEAD BRIAN.
SULLIVAN: LET ME JUMP IN. IT'S JUST BECAUSE MY FAMILY IS IN THE CAR DEALERSHIP BUSINESS. ELON, DO YOU FEEL LIKE IT'S A LITTLE BIT IRONIC THAT PEOPLE ARE BASHING YOU OVER THESE SUBSIDIES ON THE BACK END WHEN LITERALLY YOU HAVE CAR DEALERSHIP ASSOCIATIONS BY STATE WHICH ARE LOOKING TO LEGISLATE YOUR SALES MODEL OUT OF BUSINESS?
MUSK: YEAH, THAT IS A DIFFICULT BATTLE. I MEAN I THINK IN THE END CONSUMERS WANT THE OPTION OF EITHER GOING THROUGH A CAR DEALER OR – EITHER THROUGH A FRANCHISE OR DIRECT. SO I THINK IN THE LONG RUN, WE ARE LIKELY TO WIN. MAYBE NOT IN ALL PLACES, BUT IN MOST PLACES. AND THE FTC HAS COME OUT CERTAINLY IN FAVOR OF ALLOWING DIRECT SALES. BUT YEAH, I MEAN, WE WILL SEE HOW THIS GOES. BUT YEAH, THE MAIN THING I WANT TO EMPHASIZE IS THAT THE INCENTIVES THAT TESLA AND SOLAR CITY RECEIVE ARE TINY, TINY COMPARED TO WHAT THE OIL AND GAS INDUSTRY RECEIVES EVERY YEAR. IF YOU BASICALLY ADD UP ALL PAST AND FUTURE, IT IS A DROP IN THE BUCKET COMPARED TO WHAT THE OIL AND GAS INDUSTRY GETS EVERY YEAR.
LEBEAU: ELON, IT IS PHIL. ONE LAST QUESTION BECAUSE I KNOW YOU HAVE TO RUN. A FEW WEEKS AGO, SERGIO MARCHIONNE WAS OUT IN THE BAY AREA. HE TALKED ABOUT HAVING A CHANCE TO VISIT YOUR FACILITY THERE AND TO TALK WITH YOU AT TESLA. AND HE HAS BEEN VERY VOCAL IN SAYING HE SEES A MEGA MERGER IN THE AUTO INDUSTRY BY 2018. TWO QUESTIONS. FIRST, DO YOU THINK THAT HE IS CORRECT THAT WE WILL SEE SOME TYPE OF A MEGA MERGER OR MERGERS WITHIN THE AUTO INDUSTRY BY 2018? AND TWO, HAS FIAT CHRYSLER APPROACHED YOU ABOUT POSSIBLY DOING A MERGER?
MUSK: GEEZ. MAN, THERE IS NO WAY I CAN ANSWER THAT, BUT – WELL I MEAN, I CAN SAY NO. NO THEY HAVE NOT ASKED US IF THEY WANT TO MERGE WITH TESLA. SO, WE HAD A GREAT MEETING WITH JOHN ELKANN – SORT OF HEADS THE FAMILY THAT OWNS FIAT CHRYSLER – GREAT GUY AND SERGIO. AND IT WAS A REALLY ENJOYABLE MEETING. BUT IT WAS MOSTLY TO TALK ABOUT POTENTIAL COOPERATION IN THE FUTURE. BUT NOTHING TO DO WITH A MERGE OR ANYTHING LIKE THAT. AND VERY INFORMAL. THERE'S NO – I DON'T WANT TO OVER-CHARACTERIZE THIS AS ANYTHING MORE THAN WE HAD A PLEASANT MEETING AND THERE'S A SLIGHT CHANCE SOMETHING MAY COME OF IT IN THE FUTURE.
LEBEAU: AND FROM YOUR PERSPECTIVE FOR THE AUTO INDUSTRY AS A WHOLE, DO YOU AGREE WITH HIM THAT WE WILL WE SEE A MEGA MERGER BY 2018?
MUSK: I THINK SERGIO MAY KNOW MORE THAN I DO. I DON'T REALLY FOLLOW WHAT OUR COMPETITORS ARE DOING VERY CLOSELY IN TERMS OF WHO IS MERGING WITH WHO. OUR GOAL IS REALLY JUST TO BUILD COMPELLING ELECTRIC CARS AND MAKE PROGRESS AS FAST AS POSSIBLE TOWARDS THE GOAL OF TESLA THAT HAS BEEN THERE FROM THE BEGINNING, WHICH IS TO MAKE A REALLY COMPELLING, AFFORDABLE ELECTRIC CAR. THAT REALLY HAS BEEN OUR GOAL FROM THE START AND I WISH WE COULD HAVE GOTTEN THERE SOONER, BUT YOU KNOW, WE ARE DOING THE BEST WE CAN.
LEBEAU: ELON MUSK, CEO OF TESLA JOINING US TODAY ON THE CNBC NEWSLINE. ELON, THANK YOU VERY MUCH. GOOD OF HIM TO SPEND A FEW MINUTES TALKING WITH US.
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