×

Musk: Millions of Teslas, 500-mile range coming

The most successful electric-car company in the world surprised investors in its earnings earlier this week with its plans to sell as many as 52,000 cars this year. But Tesla dealer lots are going to be commanding a lot more square footage based on comments given by Elon Musk on Friday at the Baron Investment Conference.

Musk, chairman and CEO, sees Tesla Motors eventually churning out "several million" electric cars per year, a far cry from the roughly 50,000–52,000 it expects to deliver this year, and notable given Musk's view that in its early days, he believed Tesla "would almost certainly fail."

Money-losing Tesla now boasts a market value of roughly $30 billion, but that hasn't stopped many investors from driving up the stock's value, including long-term buy-and-hold investors like Ron Baron, the billionaire with whom Musk spoke on Friday in New York City.

Musk believes improvements in battery life and affordability can carry Tesla to these lofty production goals.

"We're making quite substantial improvements," Musk told Baron, whose funds hold sizable positions in Tesla shares. "Most important, really, is the cost," Musk said.

In response to a question from Baron that to meet production goals, Tesla would need to add a lot more manufacturing, Musk said, "I think over time if we continue to, if we build great products and we keep our cost structure competitive, [Tesla will have] many plants — in fact, many auto plants and many gigafactories, I think, are needed."

Musk highlighted the importance of increasing battery efficiency and, in turn, reducing the cost of electric cars and other energy sources. He would eventually like to see a car with a 500-mile range, which could be feasible in a decade or more, he said. In fact, he said it could be done now; it just wouldn't be worth the compromises.

"For us to do, say, a 500-mile-range car, we could absolutely do that right now with current batteries, but the cost would be too high and the use for load impact on the vehicle would be too high. So you would have to fill the front truck and rear trunk with batteries, [and] we would have to infringe a little bit on passenger room," Musk said.

Elon Musk
Krisztian Bocsi | Bloomberg | Getty Images
Elon Musk

Musk, whose high ambitions range from eliminating the need for fossil fuels to colonizing Mars, often personally overshadows his ventures, which include SpaceX and SolarCity. Some shareholders, including Baron, bet as much on Musk as his companies.

"We're investing in you," the Baron Funds CEO told Musk on Friday.

Question everything, trust Musk

In his third-quarter letter to shareholders, Baron weighed in on the Volkswagen diesel deception and specifically used VW's transgressions as a means to further back Musk and Tesla.

We "question everything," Baron wrote shareholders. "Questioning everything is what gives us confidence to 'invest in people,' another tenet of our investment process. For example, we have made a significant effort to understand Tesla's culture by tirelessly questioning its executives. As a result, it is unimaginable to me that if a car part or an assembly process wasn't exactly 'right' and potentially compromised the safety of Tesla passengers, that Elon Musk would lie about it."

After Tesla's quarterly results this week, Musk said plans to start battery-cell production at its Nevada GigaFactory in 2016 are ahead of schedule. He contended the operation should make production more seamless, though company outsiders have gained little access to the facility thus far.

"What we're able to do in this process is massively improve the cost of the cells," Musk told Baron.

"I think over time if we continue to, if we build great products and we keep our cost structure competitive, [Tesla will have] many plants — in fact, many auto plants and many gigafactories, I think, are needed." -Elon Musk, chairman and CEO, Tesla Motors

Musk downplayed concerns about the cost of Tesla cars. Starting at a base price of $70,000–$75,000, Tesla's flagship Model S prices out many non-luxury buyers. He said he sees the upcoming Model 3, at a price of about $35,000, as an alternative to the Model S and Model X lines — the Model X is Tesla's new SUV, which is expected to cost as much as the S, if not a little more.

After results this week, Tesla said it was on track to unveil the Model 3 in March.

"The 3 will be a smaller version, 20 percent smaller, comparable in size to say a BMW 3 series or an Audi A4, but it is going to have a similar feel to the S, it will have great acceleration, good driving feel and great cargo space," Musk said.

Baron has repeatedly touted Tesla and its vehicles. Multiple Baron funds added to their Tesla exposure in the last year, during which Tesla introduced its Model X and released a home and business energy-storage service, which can be linked to solar-power sources.