Tesla 3Q15 Earnings Call Notes

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New CFO coming from Google

“Jason comes to us from Google, where he was basically the number two finance guy at Google, responsible for their global finance function, and just thought he was a super smart guy and really understood what we were doing and was like a very cultural fit with the company.”

“Several hundred” Model X by the end of the year

“we feel very confident of being able to get to several hundred vehicles per week by the end of the year.”

Autopilot features cost $3k to turn on if you didn’t buy them with the car

“The convenience features like Autosteer, Autopark are $2,500, but most people had actually already ordered that. So those that haven’t ordered it, can actually turn it on for – it’s actually slightly more if you get it after the fact – turn it on for $3,000, and that’s something that we’ll be allowing people to do at some point in the coming months. Sort of like an in-app purchase, I guess. Yeah.”

We have a strong push to be free cash flow positive in Q1

“we do have like a very strong push towards free cash flow. I mean, that is – our aspiration is to be positive – I do emphasize, this is an aspiration, not a promise, but our aspiration is to be positive cash flow in Q1.”

No comment on whether tesla would sell autonomous vehicles to third parties or not

“I think we’d have to say, no comment…Actually, I think it’s quite a smart question, actually…But still no comment…nor is our strategy fully baked here. So for us to state what it would be – it’s not fully baked, so there’s no – we’d prefer to announce something when we think we’ve got the full story understood.”

Autopilot cars have logged several hundred thousand miles of driving

“This has gone out to the whole fleet of Autopilot enabled cars, and those are racking up miles extremely quickly. At this point, I don’t have the exact number at the tip of my tongue, but it’s, I believe, several hundred thousand miles of driving.”

We’re aware of many accidents that were prevented but none that were caused by autopilot

“we’re aware of many accidents that were prevented from Autopilot, and we’re not aware of any that were caused by Autopilot. But this is still early, but it’s a good indication. So it appears to be quite beneficial from a safety standpoint, and I believe some of our customers have posted videos to this fact.”

We don’t think anyone is close to us on battery cell and pack cost

“we’re constantly agonizing about cell cost and pack cost, and we don’t think anyone is on a path to be even close to us. If they are, I would be the first to congratulate them.”

Model X sales depend on what macroeconomic conditions are like next year

“I think it’s likely that we could be in that 1,600 vehicles to 1,800 vehicles range, per week range, in Q1. I mean, I’m guessing we’ll probably be towards the lower-end of that range, but then maybe exceed that, the high-end of that range, towards the end of next year if things go well. I mean, there are some caveats there, depends on what macroeconomic conditions are like around the world next year.”

Goal is to make drive units that never wear out

“we’re actually very happy with the quality of the drive units. I mean, internally, our goal – we changed the goal of the drive unit endurance from being approximately 200,000 miles to being 1 million miles. Just basically we want drive units that just never wear out.”

All cars will have full autonomy within 15 -20 years, and Tesla long before that. Buying a non autonomous car will be like owning a horse

“I’m actually on record saying that I think that all cars will go fully autonomous in long-term. I think it will be quite unusual to see cars that don’t have full autonomy, let’s say, in – before new car production in the 15-year to 20-year timeframe. And for Tesla, it will be a lot sooner than that. So I actually think at the point at which cars being made that have full autonomy – that any cars that are being made that don’t have full autonomy, will have negative value. It will be like owning a horse or not – you’re really owning it for sentimental reasons.”

Production ramp is dependent on the slowest supplier

“because there’s several thousand unique components in a car, the production can only move as fast as the slowest component. So even though 99% of the Model X is ready for high production, less than 1% of the parts are not. But those are what drive the rate. So that’s the thing that makes car – vehicle production really, really challenging and vehicle ramp really challenging”

“you can basically think of like the production will move as fast as the least lucky supplier that we have in our network. So, yeah the most – and there are sort of fires, floods, issues of various kinds around the world. And, yeah, so several thousand parts and, in fact, if you go down to Tier 2 and Tier 3, several thousand suppliers, it moves as fast as the thousandth worst supplier.”

Gigafactory cell production for vehicles target is 2017

“we still are targeting around 2017 for the first cell production that would be going into vehicles and into the Model 3. So that remains on target.”

Focused on capex efficiency, producing more units for every dollar

“as we add incremental capacity in the CapEx related to that, we are continuing to increase on that efficiency in terms of CapEx dollars per unit of production. So fully agree this is an asset-intensive business. And the key here in terms of return on investment is how efficient we are with that capital. And that’s what we’re focused on.”

From the point at which the car is designed it takes almost two years to get fully tooled up

“I think we’re still aiming to have Model 3 in about two years. So – but, I think, the cadence of future products should improve as we have more resources to shorten the critical path on things like – as mentioned earlier, like stamping tools and molding dies and things that tend to drive our schedule. Because from the point at which the car is designed, it can take almost two years to get fully tooled up. That seems like a crazy amount of time to us, and we want to try to reduce that significantly.”