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First on CNBC: CNBC Transcript: Telsa CEO Elon Musk on CNBC's "Closing Bell"

Wednesday, 15 Jan 2014 | 12:36 PM ET

WHEN: TUESDAY, JANUARY 14TH

WHERE: CNBC'S "CLOSING BELL"

Following is the unofficial transcript of a FIRST ON CNBC interview with Tesla CEO Elon Musk today on CNBC's "Closing Bell." Following is a link to the interview on CNBC.com: http://video.cnbc.com/gallery/?video=3000235882. All references must be sourced to CNBC.

LEBEAU: THANK YOU, KELLY. ELON, THANKS FOR JOINING US TODAY FROM THE COMPANY'S FACILITIES DOWN IN SOUTHERN CALIFORNIA. LET'S START FIRST OFF BY SETTING THE STAGE FOR EVERYONE. WHEN YOU ARE PUTTING OUT THE TWEETS TODAY SAYING YOU OBJECT TO THE USE OF THE TERM "RECALL" FROM THE FEDERAL GOVERNMENT, THIS HAS TO DO WITH A FIX FOR THE CHARGING STATIONS THAT YOU GUYS ANNOUNCED LAST FRIDAY. YOU FILED THE PAPERWORK WITH THE FEDERAL GOVERNMENT. IT COMES IN AND IS LISTED ON THE NATIONAL HIGHWAY TRAFFIC SAFETY ADMINISTRATION AS A RECALL, BUT YOU SAY THAT SHOULDN'T BE WHAT IT'S TABBED AS. YOU THINK IT SHOULD BE CALLED SIMPLY A REMEDY OR SOMETHING OTHER THAN A RECALL. EXPLAIN.

MUSK: SURE. WELL, THE WORD "RECALL" IS VESTIGIAL BECAUSE IN THE PAST THE ONLY WAY TO UPDATE A SOFTWARE IN THE CAR WAS FOR THE CAR TO BE BROUGHT INTO THE DEALERSHIP TO GET SERVICED AND THEY'D HAVE TO PLUG IT IN

AND UPDATE IT, BUT ALL OF THE TESLA VEHICLES HAVE AN OVER THE AIR UPDATE CAPABILITY JUST LIKE YOUR CELL PHONE OR YOUR LAPTOP. SO EFFECTIVELY IT'S A BIT – IT DOESN'T MAKE SENSE TO CALL IT A RECALL IN THIS SITUATION. IT'S AN OVER THE AIR UPDATE, SO IT'S JUST -- IT'S NOT A WORD THAT MAKES SENSE IN THE 21st CENTURY FOR THE MODEL S. NOW, I THINK THERE ARE CASES WHERE A RECALL, OF COURSE, IS NECESSARY WHEN THERE'S A MECHANICAL PROBLEM WITH THE CAR AND THAT REQUIRES THE CAR TO BE BROUGHT IN BUT THAT'S SIMPLY NOT THE CASE HERE. I WOULDN'T SORT OF CHARACTERIZE THIS AS, YOU KNOW, AS BEING AT ODDS WITH NHTSA IN ANY SIGNIFICANT WAY. WE JUST WANTED TO MAKE SURE WE CLARIFIED TO CUSTOMERS THAT THEY DON'T NEED TO BRING THEIR CAR IN. THEY COULD BE UNDER THE WRONG IMPRESSION THAT THEY NEED TO BRING THEIR CAR IN AND THAT'S SIMPLY NOT THE CASE.

EVANS: IS THIS A NECESSARY UPGRADE FOR PEOPLE THOUGH? IN OTHER WORDS, IS IT AN UPGRADE THEY NEED AND OUGHT TO MAKE IN TESLA'S OPINION?

MUSK: WELL, THE OVER THE AIR UPDATE HAS ALREADY TAKEN PLACE. IT TOOK PLACE LAST MONTH.

EVANS: THE REASON I ASK IS THIS. THERE'S SOMETHING VERY DIFFERENT BETWEEN WHAT YOU'RE KIND OF DESCRIBING AS A SOFTWARE OR HARDWARE UPGRADE AND A BUG OR AN ISSUE OR A PROBLEM THAT NEEDS TO BE FIXED. WHICH ONE IS IT?

MUSK: NO, I THINK YOU'RE CREATING A FALSE DICHOTOMY THERE. THE REMEDY IN THIS CASE WAS TO DO AN OVER THE AIR UPDATE WHICH WE DID LAST MONTH, AND OBVIOUSLY BRINGING THE CAR IN IS KIND OF POINTLESS BECAUSE THE SOFTWARE

HAS ALREADY BEEN UPDATED.

LEBEAU: BUT IT IS A REMEDY. AM I CORRECT, ELON, NOT TO CUT YOU OFF?

MUSK: YEAH, YEAH, IT'S CERTAINLY A REMEDY. IT'S JUST THAT -- THERE NEEDS TO BE A BETTER WORD THAN RECALL TO DESCRIBE -- REMEDY WOULD BE CERTAINLY AN ACCURATE WAY TO DESCRIBE IT. BUT I REALLY HOPE THAT'S -- THAT'S THE LEAST IMPORTANT THING THAT WAS ANNOUNCED TODAY. I THINK THE MOST IMPORTANT BY FAR IS THE FACT THAT THE DEMAND FOR OUR CARS IN THE FOURTH QUARTER WAS VERY HIGH AND WE ACTUALLY EXCEEDED OUR GUIDANCE BY ALMOST 20% DELIVERING 6,900 CARS, AND THE KEY FACTORS THAT WE ASCRIBE THAT INCREASE TO ARE THE FACT THAT PEOPLE REALIZE THAT OUR CAR IS THE SAFEST CAR ON THE ROAD. IT HAS THE LOWEST PROBABILITY OF INJURY OF ANY CAR. THE MODEL S AND TESLA IS THE ONLY -- TESLA IS THE ONLY MANUFACTURER TO HAVE NO DEATHS OR SERIOUS INJURIES, AND IT'S VIRTUALLY IMPOSSIBLE TO HAVE A CAR THAT IS SAFER THAN THE MODEL S.

EVANS: ELON --

MUSK: AND I THINK THAT WAS A KEY FACTOR AND THEN ALSO WERE THE SALES THAT IN NORWAY, FOR EXAMPLE, WE HAVE THE HIGHEST SALES PER CAPITA OF ANY COUNTRY IN THE WORLD. IN FACT, FOR A FEW MONTHS IN THE FOURTH QUARTER, WE ACTUALLY WERE THE MOST SOLD CAR IN NORWAY. NUMBER TWO WAS THE VW GOLF.

EVANS: AND THAT'S CERTAINLY SOMETHING THAT THE MARKET IS REWARDING YOU GUYS FOR TODAY. THEY LIKE THE PERFORMANCE OBVIOUSLY. I JUST WANT TO GO BACK TO THIS POINT BECAUSE SOME OF THE INVESTORS THAT I SPEAK WITH

ABOUT THE SALES FIGURES SAY THEY DIDN'T REMEMBER SEEING A REVENUE PROJECTION WHEN YOU'RE TALKING ABOUT BEATING THAT PROJECTION BY 20%. OBVIOUSLY THE DELIVERIES ARE ABOVE WHAT PEOPLE WERE EXPECTING, BUT CAN YOU COMMENT ON THAT LANGUAGE AT ALL?

MUSK: I GUESS IN OUR CASE WE HAVE BASICALLY ONE PRODUCT, SO FOR US DELIVERS AND REVENUE ARE VERY, VERY SIMILAR THINGS. THERE'S NOT A MEANINGFUL DIFFERENCE BETWEEN THE TWO, SO. WE DON'T HAVE A WIDE RANGE OF PRODUCTS. WE REALLY JUST HAVE ONE.

LEBEAU: WHAT IS YOUR PRODUCTION RATE AS YOU ARE STANDING RIGHT NOW? IS IT 600 VEHICLES PER WEEK? WHERE WERE YOU STANDING AT IN TERMS OF YOUR PRODUCTION AND WHAT WE CAN EXPECT FOR 2014?

MUSK: I THINK OUR RESERVE COMMENT ON THOSE POINTS FOR THE Q4 EARNINGS CALL WHICH IS SCHEDULED FOR NEXT MONTH, BUT I'M VERY OPTIMISTIC ABOUT 2014. YOU KNOW, OUR ROUGH ASPIRATIONS AS I HAVE SAID BEFORE ARE TO BE

SOMEWHERE IN EXCESS OF 800 VEHICLES A WEEK BY THE END OF THE YEAR. OBVIOUSLY WE'LL TRY TO EXCEED THAT, BUT I'M CONFIDENT WE CAN MEET THAT NUMBER AT A VERY MINIMUM.

EVANS: AND HOW IMPORTANT IS IT -- I'M SORRY, PHIL. I WAS GOING TO SAY REAL QUICK.

LEBEAU: GO AHEAD.

EVANS: HOW IMPORTANT IS IT TO STAY AN INDEPENDENT COMPANY HERE BECAUSE PEOPLE LOVE TO TALK ABOUT WHO COULD BE A POTENTIAL BIDDER FOR THE TESLA.

MUSK: YEAH. NO, I THINK TESLA IS GOING TO REMAIN INDEPENDENT AS FAR INTO THE FUTURE AS I CAN IMAGINE.

EVANS: PHIL?

LEBEAU: ELON, ONE LAST QUESTION FOR YOU. WHAT'S HAPPENING WITH CHINA? HAVE YOU ACTUALLY STARTED SHIPPING MODEL S TO CHINA?

MUSK: ACTUALLY VERY OPTIMISTIC ABOUT OUR PROGRESS IN CHINA. SO WE EXPECT TO START SHIPPING -- WE'RE PUTTING CARS ON A BOAT ESSENTIALLY IN ABOUT A MONTH, AND THEN THEY'LL -- WE'RE HOPING TO MAKE OUR FIRST DELIVERIES IN CHINA IN MARCH. WE'RE NOT 100% CERTAIN BUT WE'RE HOPING TO DO THAT, AND I THINK TOWARDS THE END OF THIS YEAR WE'LL SEE VERY SIGNIFICANT SALES IN CHINA. WE'VE SEEN A TREMENDOUS AMOUNT OF ENTHUSIASM FOR THE PRODUCT, AND WHENEVER THERE'S SORT OF A TOUR GROUP THAT COMES BY, THE MOST ENTHUSIASTIC PEOPLE ABOUT OUR CAR ARE PEOPLE FROM CHINA. SO I THINK THAT BODES VERY WELL FOR OUR PROGRESS IN THAT MARKET.

EVANS: AND THE FOLKS WHO HAVE PUT DOWN MONEY --

MUSK: I SHOULD ALSO MENTION SORRY, BEFORE I FORGET, ONE OTHER THING I SHOULD SAY IS THAT THE RIGHT HAND DRIVE VERSION OF THE MODEL S WILL BE COMING OUT IN APRIL. THAT'S GOING TO BE IMPORTANT FOR MARKETS LIKE THE UK, JAPAN, AUSTRALIA, HONG KONG, SINGAPORE AND THAT KIND OF THING.

EVANS: ABSOLUTELY. I WAS GOING TO ASK FOR THE PEOPLE WHO PUT DOWN DEPOSIT FOR THE MODEL X WHEN THEY CAN EXPECT TO BE DRIVING THAT VEHICLE?

MUSK: WE EXPECT VOLUME PRODUCTION OF THE MODEL X TO BE BASICALLY IN THE FIRST HALF OF NEXT YEAR. SO WE'LL HAVE -- AS WITH THE MODEL S, THE INITIAL PRODUCTION STARTS OFF SLOWLY BUT GROWS EXPONENTIALLY. SO WE'RE ABOUT A YEAR AWAY FROM THE FIRST MODEL X DELIVERIES AND PROBABLY ANOTHER THREE TO FOUR MONTHS AFTER THAT WILL BE -- WILL BE THE POINT AT WHICH WE DO VOLUME PRODUCTION OF THE MODEL X.

LEBEAU: AND IN TERMS OF YOUR WORK ON --

EVANS: GO AHEAD, PHIL.

LEBEAU: I WAS GOING TO ASK HIM QUICKLY ON THE MODEL E IN TERMS OF THE MASS MARKET MODEL, ANY UPDATE IN TERMS OF HOW – WHAT KIND OF PROGRESS YOU'RE MAKING THERE?

MUSK: YEAH. SO KEY WITH THE MODEL E, THAT'S A VEHICLE THAT WOULD BE SMALLER THAN A MODEL S BUT HALF THE PRICE, KEY TO THAT IS SOLVING THE LARGE-SCALE BATTERY PRODUCTION CHALLENGE. I'LL TALK MORE ABOUT THAT NEXT MONTH IN THE Q4 EARNINGS CALL, BUT I'M VERY EXCITED ABOUT OUR PLANS FOR A GIGA FACTORY. IT WOULD BE THE BIGGEST BATTERY FACTORY IN THE WORLD BY FAR AND WE'D DO IT IN PARTNERSHIP WITH SOME OTHER COMPANIES AND THAT'S SHAPING UP REALLY WELL. I'M VERY EXCITED ABOUT IT. WE'RE MAKING THE FINAL SELECTION AS TO WHICH STATE IT WILL BE IN IN THE NEXT MONTH OR SO.

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