Leadership is important for any business, but it's especially key to fast-growing businesses in evolving industries. This is why when Tesla Motors (TSLA -3.55%) CEO Elon Musk speaks, many investors are quick to devour his words. While it's certainly possible to overanalyze or overthink words of a public figure like Musk, it's at least worth occasionally checking in on what the visionary leader is thinking and communicating.
Tesla CEO Elon Musk. Image source: Tesla Motors.
One of the CEO's most recent appearances was at the 2015 Baron Investment Conference. Here are some of the most insightful takeaways from Musk's interview, including a key update on Tesla's progress to reduce the costs of its batteries and a reminder about the superior safety of its vehicles.
Tesla's battery advantage
Musk recently told investors that Tesla didn't think "anyone is on a path to be even close" to the electric-car maker when it comes to reducing costs to build its batteries. But does Tesla believe it can maintain this position as competition begins to build more electric cars?
Tesla's rapid rollout of fully electric vehicles with 200-plus miles, alongside the construction of the world's largest battery factory, is positioning the company to lead in battery innovation, according to Musk.
When asked about what's driving innovation in Tesla's batteries and whether it worries about its batteries suddenly becoming obsolete, Musk said Tesla believes the electric-car maker would be approached with any innovations or breakthroughs before anyone else.
"We have quite a good understanding of all the battery technologies in the world," Musk explained during the interview.
He continued:
... There could be some small laboratory that's being super secret, but generally what people inventing battery technologies try to do is they approach Tesla first and foremost, because we are the biggest lithium-ion consumer in the world. We'd be their biggest customer. If somebody invents something, the obvious choice to license it to is Tesla.
Musk went on to explain that Tesla tracks about 60 developments around the world to make better batteries. Tesla rates these efforts on scales of one to five and Musk says there are a few threes but no fours.
"Four means we should be in, like, preliminary discussions," Musk explained.
Reducing battery costs
Key to Tesla's success in successfully producing and marketing its planned lower-cost model, Model 3, is reducing the cost of the batteries used in Tesla vehicles by approximately 30% per kilowatt-hour. When asked about Tesla's efforts to make this happen, the CEO was as confident as ever.
We are going to make some technology improvements as well -- to the fundamental cell chemistry and certainly to the way the battery modules and packs are organized, but the fundamental focus is on cost per unit of energy. That's what the Gigafatory is about. It's taking economies of scale as far as we can possibly imagine -- to a very extreme level.
Illustrating how extreme Tesla is taking its efforts to benefit from economies of scale, Musk described the Gigafactory as having railcars from the mines rolling directly into the factory on one side and completely finished battery packs coming out the other.
Rendering of Tesla's currently under-construction Gigafactory. Image source: Tesla Motors.
Musk went on to say that Tesla remains "very confident" it can achieve the 30% cost reduction per kWh needed to build and sell the Model 3.
Tesla vehicles are fundamentally safer
Musk emphasized the safety of Tesla vehicles during the interview, noting that Model S still holds the record for having the lowest probability of injury of any vehicle tested by the National Highway Traffic Safety Administration.
"Safety was our absolute paramount goal [when designing Model S]," Musk explained. "The whole car is architected for maximum safety."
But the safety of Model S is more than a matter of priorities.
"We have physics on our side," he added.
Model S front trunk.
The way Tesla vehicles are designed give them inherent safety advantages, including a larger front crumple zone and greater load transfer in side collisions thanks to the rectangular battery positioned across the floor of the vehicle, Musk explained.
While most of the material in the interview has already been discussed by Musk, the most notable takeaway was probably how the company thinks about its advantage as a leader in building fully electric, long-range vehicles, as well as the optimistic update from the CEO on efforts to reduce the costs of its batteries.
