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It has been five and a half years since Automotive News' Jason Stein last interviewed Tesla CEO, Elon Musk. Today Tesmanian reports on the latest installment of the "Daily Drive" podcast--part one of a three-part series. It would seem a lot has changed at Tesla since they last spoke.
Early in the interview, Stein acknowledged that this was a huge week for the company: "You had your first ever streak of four consecutive quarterly profits."
"Took us awhile," Musk chuckled. "There were certainly a lot of people who said that would never happen...The Tesla team worked incredibly hard," he continued. "It's such an honor to work with such great people. And as a consequence of their great efforts, we were able to achieve four consecutive quarters of profit."
Stein swiftly followed-up, adding that now, "some people are lauding you as a legitimate player on the global scene"--to which the EV maker CEO exploded in laughter: "Finally!--Yes!--I'm legit!"
Of course, it was not only fun and games--they also talked shop: "You're now producing vehicles on a regular basis," Stein started. "Let's just go back the last two years, where you said you were mired in production hell, and now you're saying--even just this past week--that you think the long-term sustainable advantage of Tesla is going to be manufacturing. What was the biggest thing that changed (with improving manufacturing)?"
Musk responded, explaining that he believes that Tesla will have the edge here, because manufacturing at scale--and effectively--is the hardest problem for automakers to solve. And the CEO expanded on why ultimately solving for this problem will be so crucial: "There's 2 billion cars and trucks on the road, in the fleet, and there's 100 million made per year, roughly... even if all cars tomorrow were autonomous, it would take 20 years to replace the fleet. So, if you assume other companies will figure out autonomy, or somebody will provide them with that solution... we'll just have to be better at manufacturing than them."
It is clear that Tesla looks closely and regularly at ways to enhance factory efficiency. Unsurprisingly, as the CEO also of SpaceX, Musk looks at this problem with a physics-first lens. He asks the question: "At the limit, how good could manufacturing be, if you fully optimized the velocity and density of the factory?...You can think of the factory like a CPU or a microchip. You bring the circuits closer together, you increase the clock speed, and then you can calculate some theoretical limits for the output of a given silicon fabrication technology. I think the same is true of factories."
Musk continued to explain that, basically, your typical automotive factory today is quite slow--pushing out cars at about a fifth of walking speed. Remarkably, with the right focus, Musk believes "it is possible to increase automotive efficiency by at least 1,000%, and possibly 10,000%."
Acknowledging the magnitude of this statement, Stein "shifted gears" to explore Tesla's overall market success over legacy OEMs. Musk's answer was simple yet powerful: "We make products we love, all the way down to the little details." From fun Easter eggs to games, from autonomy/driver's assistance to an excellent phone app, and an ultra-easy buying/delivery experience--Tesla puts its heart into making cars and features buyers will love, too.
Given the larger COVID-19 context, Stein recognized Tesla's leadership in particular with contactless deliveries--within their broader digital first retail model. And that "many dealers are changing to that model."
"Yeah, I mean, we still saw strong orders through the entire pandemic," the CEO replied. "We still had good order volume... because I guess people are less inclined to want to go to a dealership, do test drives, hang out in the lobby, and that kind of thing." A straightforward digital model, with just as simple ordering and deliveries, indeed seems to be what many people want.
And what many people want, also, is good range on their electric vehicle. Musk shared his perspective on what "good" might be: "I do think expectations for range are growing over time. The goal posts are moving. Where 250 miles is currently an acceptable standard for range...Long term I think 300 miles will be kind of what people expect as normal for an electric car.. And for the Model S, we're already over 400 miles."
In reflecting back to their 2015 conversation in Detroit, where Musk had spoken to the importance of legacy auto embracing EV development, Stein asked how encouraged Musk has been since that time. While Musk admitted to feeling surprised at the slower pace, he is still pleased to see automakers increasingly committing to EVs: "I think we have reached some sort of inflection point in automotive, where I think most car companies have made it clear they are going to make a lot of EVs, and some of them have said they see the future as being only EV. I think there are still a few on the fence about hydrogen fuel cell BS but, they'll get off that fence or the market will teach them a lesson. So, yeah."
While Stein recognized that there are hundreds of EVs slated for production in coming years, he was less than convinced on the existence of non-Tesla demand: "I think there is tepid demand outside of Tesla, would be my analysis." Stein Later added that "maybe that points back to not having cars that are as interesting."
Musk admitted he does not focus much of his attention on the competition, though he took a stab at it: "Yeah, I think maybe the range is not good enough, they're too expensive, or don't have good autonomy. I don't really know because I haven't tried 'em [other EVs]. What do you think they should do?"
Stein's answer: "Make attractive, interesting vehicles."
Tesla has been doing exactly that for years now. And the product map ahead is only ever-more mindblowing. All-the-while, as Musk noted today, Tesla's competitors actually have a $7,500 tax credit advantage per vehicle--and yet we see they comprise lackluster market share.
For Tesla to be a successful catalyst to the world's transition to sustainable energy, legacy OEMs will need to step up, or likely learn a difficult lesson. Refocusing away from fossil fuels and instead ramping EV and autonomy development will prove not only the right thing to do, but essential to maintaining future relevance. So, as Musk suggests, roll up your sleeves, move beyond spreadsheets and Powerpoint, and start making cars that excite you and matter to the world.
Part two and three of Jason Stein's interview with Elon Musk on "The Daily Drive" air Monday and Tuesday, August 3 and 4, 2020.
For the full interview, please click here.