After dropping out of a graduate program in physics at Stanford University after two days, he formed Zip2, which Compaq later bought for over $300 million. He went on to help found PayPal and make a second fortune. Now, he’s the founder and chief executive of Space Exploration Technologies, which puts satellites into orbit. He’s also chairman of electric-car company Tesla Motors (Musk owns the first vehicle that came off the factory line) and Solar City, a rapidly growing solar-panel installer.
He also has five kids, all under the age of 5. Oh, and he’s under 40. But rather than coming across as a frantic whirlwind of energy, he comes across as cerebral, precise, and calm. You’d think his only obligation for the day is grading final exams.
Musk sat down with Editor at Large Michael Kanellos recently to talk about the future for electric cars, biofuels, and how much it costs to launch a rocket.
Q: First off, I think everyone wants to know how does the Tesla Roadster drive?
Musk: I would say it’s great. According to one of the car magazines, either Car & Driver or AutoWeek, it’s apparently the best kind of mid-speed acceleration of any car they ever tested. So that’s perfect for when you’re driving on the highway and you want to make a lane change or something like that. It’s incredibly responsive, so it’s a very, very fun car to drive.
You haven’t been hit or scraped it yet?
Musk: No, I just basically drive from Tesla (in San Carlos, Calif.) to Palo Alto. I drove a little bit around Stanford and I picked up an anniversary gift for my wife on University Avenue.
You’ve proven that electric cars are viable and you’ve brought the concept back from the past. It seems the most interesting intellectual aspects of the challenge have been accomplished. Why don’t you sell the company?
Musk: Well, my motivation behind Tesla is really to do as much good as possible for the environment and the electric-vehicle revolution. I think there is still a lot of work to do and if we were to sell to a big company, I’m not sure it would progress at the same pace.
You see awfully big auto companies now putting a lot more emphasis on electric and hybrids. Do you think they are serious? In the past, people have accused them of doing these projects for window-dressing.
Musk: I think it depends on the company. Toyota is really very serious about hybrids and GM is, I think, pretty serious. The tide of history is really becoming difficult to avoid. It’s really very much in the direction of hybrid and also for electric vehicles.
I should say our focus right now is very much on the Roadster and ramping up the production rate, making sure our supply chain is secure, ensuring that the variable cost of the car is kept low, so that we get quite good margins, and making sure we don’t have our overhead grow out of control. What Tesla is focused on right now is producing a compelling car at a compelling price and making sure that the business fundamentals are good.
Can you give us an update on Whitestar, the sedan?
Musk: The only thing that’s significant outside the Roadster is that we have a portion of the company and its resources allocated to the sedan, which is code-named Whitestar. We need to think about the actual name, but the sedan is coming along. We are about to finish the styling on the sedan and hope to unveil it in the second quarter of this year. The working prototype would be later this year.
What sort of factory footprint and capital are you going to need or will you need for building a sedan?
Musk: It’s a good question. For the Roadster, our volume is only 1,000 to 2,000 (units) a year. The sedan–we’re having to increase that by a factor of 10, which will go to 10,000 to 20,000 a year, but still not large by the major car company standards. The starting price hopefully will be somewhere in the $50,000 to $60,000 range. We’re finalizing the factory location position in the next few months, maybe even this month.
Is the factory going to be in Albuquerque?
Musk: That is the default location, but we’re just making sure before we fully commit that that is the correct location. It’s the most likely location. We were awarded a pre-approval by the Department of Energy for a government-guaranteed loan, which will cover the majority of the Whitestar production costs, or the capital cost of the battery.
So you don’t even intend to refund the company before you start production of Whitestar?
Musk: No. There probably will be some equity funding. The Department of Energy loan guarantee covers a substantial portion of the Whitestar, the majority of the Whitestar productions, but it’s not all of it.
For a brief period, you guys planned on selling batteries to third-party car companies. Is it the kind of thing that you want to come back to?
Musk: I think we’ll have some discussions with car companies, but I think Tesla got too far ahead of itself by having discussions with supplying battery packs to other companies before our product was ready. We have to make sure we’ve got things sorted out with our own product before we try to sell to others. But I think there’s a good chance that there’ll be some power train supply deals. It could be the motor, the electronics, the system, the software that governs all of that. I think there’s a good chance of seeing an announcement later this year but I wouldn’t expect to see anything actually come to market before next year at the earliest. It’ll be at the earliest next year for us to supply power train components to other companies.
Do you take orders from foreign clients?
Musk: Right now the car is only available in the U.S. Some additional modification is necessary to meet European standards. It’s just a slightly different set of rules. I think it’ll probably be 2010 before we deliver cars to Europe.
What do you think of all the money going to biofuels? Do you think biofuel will be able stand a chance against electric?
Musk: It depends on the biofuel application. I think for high-value applications like jet fuel, it makes a lot more sense than it does for cars. Biofuels such as ethanol require enormous amounts of cropland and end up displacing either food crops or natural wilderness, neither of which is good.
What about cellulose?
Musk: That’s certainly a possibility. It’s obviously tricky to convert cellulose to a useful biofuel. I think actually the most efficient way to use cellulose is to burn it in a co-generation power plant. That will yield the most energy and that is something you can do today.
But in general, crops are not a very efficient way of turning sunlight into mobile energy. A solar panel from SunPower is probably 20 to 22 percent efficient, but if you look at the actual efficiency of plants, if you take the sunlight incidence and then how much of that gets converted into plant matter and then what it takes to take that plant matter and convert it into ethanol or some other energy source, it actually ends up being well under 1 percent efficient. I mean, in some cases 0.1 percent.
Another way to think about it is, the current cultivated land is what’s needed to provide food for about 6 billion people. The energy used by a car is much greater than a person. A person might use 3,000 calories in a day, but a car would use 300,000. Cars take a lot more energy than people do.
On a completely different topic, how is SpaceX doing?
Musk: Good. Last year we were profitable for the first year with over $100 million in revenue. We’ll do either two or three launches of our Falcon 1 vehicle this year.
When is the next launch?
Musk: It’s contingent on our satellite tests. It’s currently tentatively scheduled for June because that’s when they will be ready. We have 12 launches on manifest going forward. Over the next two and a half years we’ll do 12 launches at least. In fact we’ll probably add more to that manifest.
How much does each launch cost?
Musk: A Falcon 1 launch is about $8 million although, of course, if you ask for any kind of special work then it would be more. Then a Falcon 9 launch is anywhere from $35 million to $55 million.
Do you have more or less respect now for NASA and the government space agencies now that you’ve been doing this?
Musk: Well, NASA is our largest customer so I have enormous respect for them.
Why do you keep managing the company yourself? I mean, obviously you’re an investor but you are also a CEO and you like to manage.
Musk: Well, yeah, I’m primarily an entrepreneur and a technologist. So with SpaceX, I’m the CEO and the chief designer of the rocket.
Don’t you think there are too many things on your plate?
Musk: Yes, I do have too many things on my plate. I absolutely think that. SpaceX is really what I do on a day-to-day basis. The intention with Tesla is that of two to three days a month, although for the last several months it’s been much more than that. The CEO (Ze’ev Drori) and I are working closely on getting the company on track and making sure that our business fundamentals are good.
It’s certainly a significant strain on me personally, but I’m hopeful to reduce my time with Tesla to only two to three days a month. My intention is with Tesla and with SolarCity that those together don’t take up more than 20 percent of my time. Actually, fortunately SolarCity is doing extraordinarily well and requires very little of my time.
How did you get involved with SolarCity? A solar-panel installer seems kind of low-tech.
Musk: Lyndon (founder and CEO Lyndon Rive) is my cousin.