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Tesla's Musk summons Warren Buffett logic

Elon Musk, Tesla Motors chief executive, has quoted legendary investor Warren Buffett, suggesting that it is like dealing with a "manic depressive" when handling the stock markets.

"I try to avoid watching the day-to-day share price, because it's somewhat distracting," he told CNBC.

"People try to really read the tea leaves, even though there's really not enough information to make conclusions. And then they'll get exuberant, and then depressed. I mean, as Warren Buffet said, dealing with the market is like dealing with a manic depressive."

Read More Tesla's Musk says company won't decide on Gigafactory site til year's end

U.S-based electric carmaker has become a Wall Street darling in the past year, surging 344 percent in 2013 as the company announced plans to expand its battery manufacturing capabilities and as its flagship vehicle, the Model S, garnered strong reviews.

However, Tesla has been hit hard in the sharp sell-off in momentum stocks earlier in the year, as investors questioned stock valuations. Its stock price is now down 18 percent from a peak in early March although has still rallied 38 percent his year, with closing price of $208.171 on Friday. Tesla also has a price-to-earnings ratio - an important metric used by traders to gauge valuations - of 100, which compares to around 10 for Ford and GM and the average 22 on the Nasdaq blue-chip index.

Elon Musk
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Elon Musk

Musk, speaking at the U.K. launch of the Model S, said there was a lot of optimism priced into the shares and the company needed to perform very well over the next few years in order to justify that stock price.

"I'm feeling like we probably will," he said. "I don't even know what the value is right now...I'm just guessing because I haven't seen the share price in a few days, I think it's probably not too crazy."

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Despite recent volatility, Tesla has remained in favor with stock analysts on Wall Street with just one "sell" rating, according to Reuters data, and an average price target that predicts the share price to rise to $224 in the short term. Musk added that Tesla simply needs to continue to make to "really great cars" to remain competitive against growing competition in the space.

"They have to be a lot better because, we have to convince a customer who has bought a BMW, or a Mercedes, or an Audi for many years and is used to that, we have to convince them to shift to something different," he said.

"They're not going to make the shift if it's only a small improvement, it has to be a big improvement. So it's incumbent upon us to make really compelling products that are dramatically better. As long as we keep doing that, then I think we'll be OK, but we are a tiny company in sea of giants."

George Galliers, associate managing director of automotive research at ISI Global Automotive Team, is one such analyst that remains bullish on the auto company. Speaking to CNBC on Monday he said that German firms will eventually hit back with their own rival models but said that Tesla currently has a advantage due to its superior product.

"The growth opportunity for Tesla is enormous," he said.

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