Tesla (TSLA) CEO Musk on Model X Demand, Apple

Elon Musk, CEO of Tesla (TSLA), joined Bloomberg Television’s Betty Liu following Tesla reporting net income that beat analysts’ estimates and projecting a 55 percent increase in vehicle deliveries. Musk discussed the company’s plans for a “gigafactory” to supply batteries, Model X SUV and fourth-quarter profit.

When asked about talks with Apple (AAPL), Elon Musk said “e had conversations with Apple. I can’t comment on whether those revolved around any kind of acquisition.” Below is the full transcript of the interview, courtesy of Bloomberg Television.

Highlights include:

• Tesla needs fundraising if battery plant comes within three years
• Model X delay due to desire for perfection
• Musk says it’s his decision to delay Model X sales start
• Tesla can fund battery plant if timeframe is over three years
• Confirms 2013 Apple talks ; declines to discuss details
• Tesla to be first to market with autonomous driving

ETTY LIU: That’s right. He is on the phone for an exclusive interview. Elon Musk, the founder and CEO of Tesla Motors. Elon, great to talk with you again.

ELON MUSK: Good to speak with you.

LIU: All right. And I know it’s been – it always is a marathon run before you release your results. I was listening in on the conference call. I know at one point you were a little bit maybe frustrated may be the word with how many questions you were getting over this giga battery factory. You’re going to have the details on that next week. How come you just didn’t – didn’t have some of those details or didn’t want to disclose those details in this call?

MUSK: Sure. There just wasn’t enough time to really get into the details of the giga factory on this call, and we had a lot of – a lot to talk about with the rest of the business just talking about the fourth quarter results and expectations in the – in the near term for this year, whereas the giga factory is something that’s more of a long-term development over the next three years and kind of really deserves its own call. So we’re going to do that call and answer questions in as much detail as we can next week.

LIU: Elon, as much as I can, can you just clarity though a couple of points on that? Number one, are you going to be building this with partners?

MUSK: We – yes. We expect this to be done with a number of partners, yeah.

LIU: And can you give a clue as to who they may be? Panasonic, Samsung?

MUSK: Well I think there’s a likelihood that Panasonic would be part of it, but that’s not 100 percent confirmed. But since they’re our main cell supplier right now, I think that – that seems like a pretty good likelihood.

LIU: Right, or a reasonable assumption there. And how are you going to pay for this, Elon?

MUSK: Well, I have to be careful what I say because we obviously are a publicly-traded company. And so I think I can reiterate some of the things that I said on the earnings call, which is that – that we – we – we could pay for the giga factory in more than three years if we – we could pay for the giga factory from retained earnings if we allowed the timeframe to extend beyond three years. If we want the factory done in three years, we would probably need to raise some capital.

LIU: Okay. You would prefer debt equity?

MUSK: Yeah. I’d love to answer those questions, but I can’t.

LIU: Okay. I want to talk a little bit about the Model X because one of the things you said on that call was that – that your best guess is that Model X demand is actually going to go exceed Model S demand. When I was out there in LA, Elon, I met several people who said that they were on the waiting list for the Model X. They’re excited to get those cars. But you’ve – you’ve said you were going to go into production with that in 2013. Then you went to 2014 and now it’s 2015. What’s going on there?

MUSK: Well, I think we needed to make sure that our house was in order with the Model S, that we had really done things right with – with the S and dealt with the multiple market deployment. So going into North America in 2012, into Europe in late 2013, obviously going into Asia in 2014. And before adding the complexity of sort of whole new product line, I think it was important to get our geographic deployment done and make sure we’re delivering excellent service in all geographies.

And then with respect to X, I’m somewhat of a perfectionist when it comes to product design. So I totally take the blame for some of that delay being due to me personally and not being completely happy with the product.

LIU: Why? What bothered you?

MUSK: The – the hardest thing about the X is achieving great form and great functionality. It’s easy to give up on one of those two. And it’s damn hard to make an SUV in particular that is beautiful and – and yet incredibly functional at the same time. It – it’s actually – it’s a harder design problem than the Model S. And I just don’t want to – want to come out with something where the – the production version is in any way worse than the prototype that was demonstrated to people. In fact, I really am quite insistent that whenever we go to production the production article is superior to anything we’ve demonstrated before.

LIU: But is it – is it going – is the actual car that’s going to be in production going to be very different from the prototype that you unveiled a few years ago?

MUSK: It’ll be better in – in a number of subtle ways. And I’m not – honestly I don’t know if most people were to actually even notice it, but it’s – I think it’s going to be better in a lot of ways, yeah.

LIU: And is any of the delays around the Model X going to affect the – the really heart and soul of why you – why you did Tesla, Elon, which is the third generation car, the mass market car?

MUSK: No. I don’t think the – the X is affecting the third generation car. Three – three years is about as far as we could do the third generation car no matter what because we’re somewhat constrained by the creation and – and construction of the giga factory. So there’s kind of a natural rate of progression or sort of a maximum rate of – of technology progression. I think we’re at that maximum rate. So we’re kind of doing the X in between the S and the third generation vehicle, but I – and I think it helps generate a bunch more cash flow to fund that third generation vehicle, but I don’t think it slows it down in any way.

LIU: Elon, yesterday your shareholders got a little bit richer on these reports that you had met with the acquisition team at Apple. Is there any truth to a possible partnership, merger with Apple?

MUSK: Well of course it’s – if – if – if one or more companies had approached us last year about such things, there’s no way we could really comment on that.

LIU: Well did you have a conversation with Apple?

MUSK: We had conversations with Apple. I can’t comment on whether those revolved around any kind of acquisition.

LIU: Are you for sale? If there was a right price, are you for sale?

MUSK: I think that’s very unlikely because we need to stay super focused on achieving a compelling – creating a compelling mass market electric car. And I’d be very concerned in any kind of acquisition scenario, whoever it is, that’d be become distracted from that – from that task which has always been the – the driving goal of Tesla.

LIU: But you say it’s very unlikely, but I’m not hearing, Elon – sometimes when I – the years that I’ve known you, if something is not going to happen you say no. But I’m not hearing that. I’m hearing that there is a door open here perhaps at some point.

MUSK: Well if there was a scenario where it seemed like it would be more likely that we would be able to create the mass market sort of affordable, compelling electric car, then – then possibly it would make sense to entertain those discussions. But I – I don’t currently see any scenario that would improve that probability. So that’s why I think it’s very unlikely.

LIU: If anything, Elon, if Apple were to come to you and say, you know what? We want to get in the car business. We actually want to perhaps start making cars. What would you tell them, given your own experience?

MUSK: What would I tell Apple if they said they wanted to make cars?

LIU: Yeah.

MUSK: I’d probably tell them that I think it’s a great idea.

LIU: Okay. All right. As you know, it’s been – it’s been certainly a long and – and tumultuous road to where you’ve gotten. Some have said also that what would make sense is some sort of partnership between – between your company and let’s say Google and Apple and using their software, their systems to power your cars. Is that something that you’ve thought about or that you’re open to?

MUSK: You mean using like iOS or Android?

LIU: Exactly, in your own systems.

MUSK: Well, we – we considered Android in the beginning, but at the time (inaudible) he thought that Android wasn’t ready for implementation into an automotive application. It was sort of – it was too early in the life of Android. I could certainly see us potentially doing some sort of projector (ph) made or emulator or something that allows people to use Android or iOS applications, but – but that’s somewhat peripheral to the fundamental goal of Tesla, which is to accelerate the electric car revolution, to make it happen. That’s really the important thing. I think there’s things like whether there’s iOS or Android in the car, it’s somewhat peripheral to that.

LIU: Elon, just before I let you go, I tweeted out to our followers questions they would have for you. And most of the questions that came back revolved around driverless cars. And I know that there have been reports out that – that Tesla has partnered with – there’s an Israeli company called Mobileye to look into driverless technology. Do you want to be the first out of the gate with driverless cars? Do you want to be – do you want to be breaking into that market?

MUSK: Yeah. I should clarify that Tesla has built up a significant expertise in autonomous driving. I wouldn’t necessarily use the word driverless cars because I think – in fact, the terminology we like to use is autopilot, which is analogous to the autopilot function that an aircraft has where you still expect someone to be able to pilot the – the plane, but – but the autopilot helps improve precision and improve safety and reduce pilot work load and that kind of thing. And I think that’s – that’s the way we view autopilot in a car. That’s why we also call it autopilot.

But I would venture to say at this point we’ve probably got the strongest autonomous driving engineering team of any car company, or maybe any company. And – and we’re continuing to build – build on that engineering expertise. So we – we do expect to be the first – I think the first company to market with significant autonomous driving function in the vehicles.

LIU: Well how far away are we from that?

MUSK: I think not more than a few years.

LIU: Really? And how far are we away do you believe from mass adoption of that? Also a few years?

MUSK: Well, when you say mass adoption, do you mean (inaudible).

LIU: I mean that – that all cars – that – that this will become a standard for the auto industry.

MUSK: I think it’s probably going to take a while for most car makers to transition. And I’d sort of look for what their predictions for their vehicles. But I think it’s generally more in the – the 10-year timeframe.

LIU: All right. Elon, great to talk with you. It’s been a while. Thank you so much for joining us.

Video for viewing here.

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