Posted on November 07, 2015 by Matt Pressman
Disclaimer: I’m a huge fan and investor in Ron Baron’s funds and Tesla Motors (TSLA) and I couldn’t have been more happy to see these two mavericks take the stage for an in-depth “back and forth” at this year’s investment conference. It’s hard to hold back my admiration and respect for these two, but, without editorializing (too much) I wanted to provide you with a recap of these two "facing off" in this epic convergence of two genius thinkers.
Renowned mutual fund manager and investment icon Ron Baron of Baron Capital is known for his conservative, long-term approach to stock picking. He's been compared to Warren Buffett (both for his investing style and outstanding track record), and last year he boldly forecasted that Tesla Motors (TSLA) investors will make 10 times their money over the next ten years.
Fast forward to this Friday. The 24th Annual Baron Investment Conference* took place in New York City drawing over 5,000 shareholders at the Metropolitan Opera House and Baron's surprise guest was Tesla Motors CEO Elon Musk. And, at the event, Tesla vehicles were on display for shareholders to check out and (for some) test drive. In an interview with billionaire founder and investing legend Ron Baron, Musk discussed a wide range of topics including his focus on safety, his early days at Tesla, the Tesla Gigafactory, Battery Technology, and forthcoming Model 3.
Musk emphasized his focus on safety at Tesla: “In designing the Model S and the Model X, safety was our absolute paramount goal… I felt like obviously my family will be in the car, my friends’ families, and if I didn’t do everything possible to maximize safety and something went wrong, I couldn’t live with myself.” He spoke of the inherent advantage that electric vehicles have with no internal combustion engine block in the front of the vehicle. This expands the front trunk (frunk’s) “crumple zone” — he explained, “When you have a high-speed frontal collision, it’s just like jumping into a pool from a high diving board—you want a deep pool and one without rocks in it.” Although the Model S has received 5 star safety ratings across the world, he explained, “This ‘5 stars’ is not like an actual statistic. Safety statistics are not measured really in stars. The Model S still has the lowest probability of injury of any car ever tested. It is just objectively true, it is the safest car by far.”
Early Days at Tesla
Although many naysayers point out Musk’s high level of confidence, he displayed his humility when discussing his early days at Tesla. He gave credit to AC Propulsion for inspiring the Tesla Roadster and spoke of the company’s early days: “At the beginning of Tesla I didn’t think we would be successful, I thought we would almost certainly fail,” he said. “The 2007-2009 period was really bad,” said Musk. “Almost every major decision we made was wrong.”
The media has been quick to write that the Tesla Gigafactory deal in Sparks, Nevada has been a big win for Tesla but a detrimental deal on behalf of the state of Nevada. Musk (rightly) disputes this — even though Nevada is offering Tesla tax credits if they create a certain number of jobs and meet other key milestones, Musk said the state will definitely benefit in a big way, with Nevada forecasting its own return of 80 to 100 times on what it’s giving in tax breaks. “Not percent—times,” Musk emphasized. “As the saying goes, the house always wins. And Nevada, that’s the house. Nevada is the house.”
Musk believes Tesla battery technology is improving and company growth and expansion (as a result) will follow: "We're making quite substantial improvements," Musk explained. "Most important, really, is the cost," Musk said. Baron asked about more aggressive production goals requiring more factories, Musk responded, "I think over time if we continue to, if we build great products and we keep our cost structure competitive, [Tesla will have] many plants — in fact, many auto plants and many Gigafactories, I think, are needed.” When asked about improved battery technology, Musk remarked: "For us to do, say, a 500-mile-range car, we could absolutely do that right now with current batteries, but the cost would be too high and the use for load impact on the vehicle would be too high. So you would have to fill the front truck and rear trunk with batteries, [and] we would have to infringe a little bit on passenger room."
Tesla Model 3
Musk explained that he felt the forthcoming Tesla Model 3 will have similar traits to the Tesla Model S — from speed to handling to safety. "The [Model] 3 will be a smaller version, 20 percent smaller, comparable in size to say a BMW 3 series or an Audi A4, but it is going to have a similar feel to the S, it will have great acceleration, good driving feel and great cargo space," Musk said.