What Happened: Baron's investment firm Baron Capital owns more than 7.3 million shares of Tesla at an average split-adjusted price of $43.07.
Since then, Baron Capital has seen its investment grow by a factor of 10, but there is much more upside ahead, he said on CNBC's "Squawk Box."
Baron always assumed Tesla's valuation would rise to at least $1 trillion and as high as $2 trillion, he said.
The company's momentum, including expectations for vehicle sales to grow by 50% annually in the coming years, implies the upper end of the valuation range is justified, he said.
The path toward a $2-trillion valuation is a testament to Tesla CEO Elon Musk's "sheer willpower" to build a viable business, Baron said. Musk now oversees 50,000 employees and production facilities in the U.S., China, and Germany, with more to come "continuously" over the next 10 years.
Why It's Important: Tesla's stock has been going "up and down like a yo-yo" over the years, Baron said, adding that he's unworried by volatility.
As a long-term investor in the business, he said near-term fluctuations in the stock are something that can't be controlled.
What's Next: Baron's math makes the case for Tesla's annual revenue to come in at anywhere from $500 million to $800 million within 10 years on cars alone, he said.
"We made 10 times so far, three to five times to come in the next 10 years," he said. "Two more doubles, maybe three more doubles in 10 years. That's what the expectation is."
TSLA Price Action: Tesla shares were trading 2.89% higher at $459.58 at last check Wednesday.
Photo courtesy of Tesla.