Interview with Bloomberg

I want to first ask you I mean you've been working on this for several weeks as as you just explained to me uh earlier why do this now with the model S well I I thought it was important to to get a financing product out there that broadened the marketplace uh because with uh what we saw with with Solar City we had an incredibly good experience when we're able to offer a compelling easy to use accessible financing program we saw a dramatic increase in the in in the market the accessible market for for uh for solar and I think we'll see something similar to that with the with the model S so it's about it's about improving um and highlighting the true affordability of an electric car and then providing that residual value guarantee which is probably the

next question you're going to ask me um the uh the fact that the uh the model S we're we're guaranteeing that the value of the model S will be no less than that of a Mercedes S-Class after 3 years so a lot of people are worried about the residual value is it going to hold up what's going to happen to electric cars Tesla is guaranteeing that value and then as a as a further back stop I am personally guaranteeing that value and standing behind it well and you had you know I was listening on the conference call you had quite a few questions on what that personal guarantee exactly meant what does it exactly mean Elon what it means is that no matter what happens obviously I'm very optimistic about the future of Tesla I think it's going to do very well and

I also think that the residual value of the model less will be be greater than the number we're guaranteeing that that's just a floor uh so uh so so it's I think it actually be more than that um but I'm stand I'm standing behind that guarantee with all of my assets not not just with with Tesla so no matter what um I will make sure that you have nothing to worry about if you buy a Model S right so so the idea is that look you're you're you have plenty of confidence in the future of Tesla but let's say Tesla went under then you would buy back all the Model S's out that have been done under this program that's exactly right okay why did you pick the Mercedes S-Class to be the compar you know the comparable car in terms of depreciation for the model S well

um daima is actually a partner of ours so dla is an investor we have a some um uh deals with da over the years many deals with da over the years we're providing the battery packing power Trin for the Mercedes bclass that's coming out uh I have a great deal of respect for the Mercedes S-Class many people consider it to be the the best uh premium sedan on the market and so I think that that makes for a good reference point uh in the case of the model S Elon you and I were talking a little bit uh ahead of this and and I know you were talking about how you really wanted uh the people that are covering this company to really look at this new deal from a consumer perspective so I got on your website and I clicked on Tesla and I looked at the financing options

that you were talking about with uh with Wells Fargo and US Bank One of the things I noticed though is that in the calculations that you have for the monthly payments uh you add in sort of cost benefits from things that other car companies might not you know you've got the savings coming out from electricity versus gas I get that uh but you also have sort of a you have something called a uh a business tax benefit I can get that as well perhaps however you have other things called a commuting benefit which is that you you know you make the argument on your website that uh electric vehicles are are allowed to use uh you know HOV lanes essentially and so that can save you $160 $7 a month you have avoid the gas station benefit that could save uh customers

$100 a month that I'm not sure if I buy that Elon as a way to calculate what your overall payment will be at the end of the month yeah and and and you don't have to in the fact that's why we we provide the calculator so you can you can check or uncheck any of those options um and so if you if you don't think something applies to you then you can just um uncheck it and and see what the the cost is without that um and but but I mean the key thing is that if you buy this the 60 KW hour uh version of the car I think you may have clicked into the 85 which is the more expensive one both um if you okay yeah um but if you if you uh uh look at the 60 Kow car which is um essentially our mid-range car since we we canceled the 40 KW version um the the monthly payment

taking into account the cost of gasoline and just basically the the tax incentives that you're sure to get um gets you to around the the $5 or $600 a month payment option okay so even if you're saying even if you discounted some of those benefits I just talked to you about I mean I still I still got exactly uh I I didn't quite get $1,000 dollar but I I got a little bit under that so I see I see where you're coming from uh Elon now you're you're doing the you're doing this financing because you want to open this up to uh to more and more consumers so is it possible that you might see more demand than for 2013 and therefore you might exceed this 20,000 Target that you've been talking about well we always have to be cautious about forward-looking statements

but the things that I've I've made sort of hard commitments on um were the start of production of the model S the fact that we would do at least 20,000 units this year of deliveries and the third that we would achieve at least a 25% gross margin by the end of the year um and I'm very confident that that we will we will meet or exceed all of those promises obiously our goal is going to be to exceed right you would always want to do that of course uh Elon the the what puzzles me a little bit though is that uh you mentioned how you want to make this affordable for the uh you know for the average consumer but you also had to cancel the 40 kilowatt uh battery powered modeless because you didn't see as much Demand on that lower end as you saw in the higher

end so how do you reconcile the two yeah that that's actually a really good question because we had an intense debate at Tesla about the 40 K Kow hour car and um and you know we we we we test drove some initial units and it just wasn't it wasn't a good product and one of the commitments I made at Tesla is that we will never produce a bad product just never I I don't care even if we could make money on it uh on on on a bad product we will not we will just not do it and and and I I just don't think the 40 Kow hour was was was a good product it was it was it felt hobbled like a hobbled horse um and and you'd always need to really have another car if you wanted to do longdistance trips and this I think what people don't don't quite understand about something

like say the leaf I mean I'm glad that that that uh that Nissan is doing electric cars and I encourage them to do Furs to to do more but if you've got an if you got an electric car that can only do short distances it means you need to have another car anytime you want to do long distances so you've actually got to buy two cars so that that like double to doubles the price of it it it it makes it sounds like you're like a lower cost car but it but it it really isn't but was but then but I'm I'm confused then Elon what was the problem was the problem was that it was it was too short of a range and that's why it wasn't appealing to consumers or was it because just mechanically technically it just wasn't uh up to par as the 85 kilowatt car well it it it's

uh no mechanically it's I mean from a reliability standpoint it's fine the fundamental issue is that at 40 you just don't have enough range to make it a um a useful longdistance car okay um so it's it's like I said it's like a it's like a horse that's been HED and um and so it it just it it just wasn't a it just wasn't a compelling product um and it was also clear to us that customers were recognizing that because no hardly anyone was choosing it we only had 4% of our customers ever choose that that car um because the vast majority of customers recognized that it's not a good product and that they're voting with their wallet and so we thought well this is this is just silly we should not make a product that that we don't 100% believe in and neither do

our customers well talking about that and kind of addressing that issue of trying to make electric cars more longer range you know vehicles that can go longer ranges a lot of people actually speculated that your announcement today was actually going to be about the supercharger Network so what can we what can we expect on that well um we we've actually got a number of announcements coming out in in the future we're going to probably put them out um with a Cadence of of every one to two weeks um and one of those announcements is going to be a very exciting super supercharger announcement um we've made a lot more progress on that front than I think most people realize we're also going to do um what I think is a very exciting announcement about um re-engineering

of Tesla's service MH uh because just just as we we make the best car in the world we really want to have the best service in the world and um we need to do a few things to get there um and then there's then there's a third announcement that I won't quite talk about but I think is is pretty cool um except to say that if you're driving a Model S it's right under your nose are you going to a tweet about it though first uh maybe SEC just gave me just gave approval for such things which is comforting I can imagine uh Elon just quickly just on a few more notes this financing option that you've got for the for the model S will you eventually extend that out to the next model the model X absolutely yeah we're going to um extend and refine this financing product

over the years for the model X and for for all of our future cars uh our goal with our goal is to make the most consumer friendly the to make the best financing product um and and we're going to um I I think we I think what we've debut today is is that thing um but we're going to keep making it even better over time