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Digging Deeper Into The Baron–Musk Interview

We shared an interview earlier this week where investment guru Ron Baron brought Elon Musk to his company’s investors conference for a 1 hour Q&A. Because they talked through so many juicy details, I wanted to pull out some of the other key points that stood out to me that we didn’t yet highlight.

The Fremont Factory

They talked a bit about the current Tesla factory. Notably, they talked about how big it was — 5.5 million square feet under roof or about 150 acres — then Elon casually mentioned that “it’s kind of full.” That surprised me a bit, but considering the lack of supporting details — how much capacity have they installed, how many production lines per model, what percent utilized their installed capacity is, etc — it’s tough to say. Never the less, it surprised me. I’m always looking for insane expansion from Tesla, so it feels like we could hear news of another factory purchase or expansion any day now… though they do already have a fully operational facility in Tilburg, Netherlands, that Tesla could upgrade into a full production factory if it made sense.

Robots

Gigafactory Tax Credit

Elon spilled many of the details supporting the heavily advertised $1.3 billion dollar tax credit with some humor. Here are the incentives that Tesla received from the state of Nevada supporting the Gigafactory site selection and buildout:

  • Free land from Nevada (though Nevada has tons of land)
  • Nevada committed to build a southbound highway connecting the Gigafactory to Carson City (which they were going to build anyways, but was still lumped in with the Gigafactory benefit package)
  • Nevada repurposed $80 million dollars worth of tax credits to apply to the Gigafactory
  • Nevada provided relief on sales and use tax for equipment in the Gigafactory across 10 or 20 years depending on the type of equipment. To take full advantage of this, Tesla has to spend $5 billion dollars over the 20-year term.

Gigafactory goals

The total of all of these was indeed $1.3 billion, though much of it was either already planned or re-purposed from elsewhere, as was the case with the $80 million dollar tax credits — though not for Tesla. This only works out to around a 5% contribution to the Gigafactory, or less than 1% over 20 years.

Elon’s attitude when discussing these credits makes it obvious that he thought the much-advertised $1.3 billion dollar figure was overhyped and the actual contribution from the state was basically not worth mentioning. On top of that, he shared that the return on the initial tax credits that the state would see was in the 80 to 100 X range… not 80-100% return… but 80 to 100 times Nevada’s initial investment, which is basically a no-brainer and a huge win for the state. It seems a bit odd that the terms are so mediocre given the heated competition to land Tesla’s Gigafactory…. It’s also humorous to hear Ron Baron call it the Gigaplant. 😀

Tesla Safety

With the formal announcement of the Model X, Elon shined his uber bright, press-catching spotlight on the fantastic safety performance of the new Model X, which exceeds the 5-star safety rating by a large margin. In this new interview, he shared just how much of a core value safety is at Tesla, stating that it was the “absolute paramount” goal for the team when designing the Model S (and presumably the Model X as well). He shared that the Model S has the best safety of any car ever tested, which is crazy impressive for a relatively new company competing against entrenched manufacturers that have been doing this for several generations…. I for one am thankful that they are setting a new high bar for safety.

(Editor’s Note: There are some quite interesting specifics Elon talks about in the interview that help explain why the Tesla Model S protected Jeffrey Katzenberg enough to save his life in a recent accident).

Battery Technology

Elon shared its internal process for reviewing and rating new battery technology which has to be a key topic of discussion given the massive amount of money being poured into EV batteries and grid-scale batteries overall. We share new technologies and updates on previously discussed battery technology all the time here on CleanTechnica and it’s great to hear that they are aggressively but rationally reviewing and ranking new tech at Tesla.

Their basic process for assessing new battery solutions is to review them and give them a ranking from 1 to 5, where 1 is vaporware and 5 is “we need to do this now!” As obvious as it is that they have to be doing this, it’s good to hear the process. Right now, Tesla is tracking ~60 battery efforts around the world, but none are rated higher than a 3 in Tesla’s system. There are some that “might go from a 3 to a 4,” though, with a 4 meaning “we should be in preliminary discussions.”

model_x_4

Overall Snippets of Interest

Tesla is making improvements in total battery pack energy density. It can do a 500-mile range now with minimal issues. Cost is the most important factor, though, as batteries are still comparably expensive. I see this as a key reason why they knew the Gigafactory was key — build scale to drive costs down, paired with Tesla Energy, as a key building block for the Model 3. We knew this… but it was good to hear again. And he did say that a 500-mile car with the same form factor (same volume and roughly the same mass) was “probably less than 10 years away.”

Tesla will continue to make changes to the cell chemistry and the way the packs are organized to maximize pack energy density and minimize price. Its fundamental focus is on the cost per unit of energy, as this is key to building cars for the masses.

Ron mentioned a target of 100 hours a kilowatt (hah) which elicited a smile from Elon and a rare “no comment” alluding to a potential future announcement. 100 does seem like a nice round number, doesn’t it? 🙂

However, Elon did say that “that’s in the ballpark of what we’re aiming for.”

The Gigafactory will be the first factory that can bring in rail cars of raw materials directly from the mines and be able to put out complete batteries. Today’s process for assembling batteries requires tons of unnecessary (and non-value add) travel averaging 3 trips around the world, which is obviously very inefficient. The current process also adds time to the supply chain, which means more money tied up in inventory and more money spent on transportation.

Exciting times in the world of Tesla. 🙂

 
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Written By

I'm a tech geek passionately in search of actionable ways to reduce the negative impact my life has on the planet, save money and reduce stress. Live intentionally, make conscious decisions, love more, act responsibly, play. The more you know, the less you need. As an activist investor, Kyle owns long term holdings in BYD, SolarEdge, and Tesla.

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