Tesla Motors (TSLA) Q3 2016 Earnings Call

posted in: Earnings Call, Notes | 0

Elon Reeve Musk – CEO

Best Quarter ever

“…we were able to have our best quarter ever, achieved full GAAP profitability and, moreover, I think we are headed to have a great fourth quarter as well…we currently believe that Q4 will be profitable, excluding non-cash stock-based expenses. I think there’s actually a chance that we will be profitable even including non-cash stock-based expenses. There’s just a chance.”

On SolarCity

“So contingent upon shareholder approval, we expect SolarCity to be somewhere between neutral and a cash contributor in the fourth quarter. And yeah, I mean things are looking good. ”

Some nuggets of wisdom

“It’s really just we want to make products that people love. And then make enough money from that to be able to develop new product. And that’s it really. There’s like so few products, like, how many products can you buy that you really love? So, rare. And I think if you do something like that, people will buy them. They will pay a premium for something that they love, of course.”

On Autopilot fatalities

“And what’s sort of less visible to the outside are all the cases where the version one of Autopilot actually did a lot to mitigate the accident so that the impact velocity went from being potentially fatal or severe injury to customer stepped out and walked away. There are many of those which provides a much more statistically significant sample set than the fatalities, because the fatalities are extremely rare, and you need really 1 billion miles or more to try to achieve a statistically significant conclusion on fatalities.”

A full year of production of model 3 sold out

“…when somebody comes into our store to buy a Model 3, we say, well, why don’t you buy Model S or an X instead? So we anti-sell the 3. Still a lot of people order to the 3, but whatever. Plus the 3, like, we basically sold out the first year of production, so the first 12 months production or thereabouts. So what’s the point of trying to sell the 13th month of production? Very little gain to be had there in doing so.”

Jeffrey B. Straubel – Chief Technology Officer

More reliable cars create greater demand

“I think one additional thing is that the reliability of the cars continues to get better, so our warranty costs sort of decreasing as well. And that’s a really – that’s a key driver for us, not only from the cost side but from the demand side where we’re creating demand in market given the reliability of the vehicles.”


SK Additions:

I probably took a year off of my life camping out at the factory

“I personally probably took a year off my life or more camping out at Fremont (17:27) factory solving that along with a number of other members of the Tesla team. We went through bloody hell in the first half of this year. We got out of that basically around mid-June, and then the result is achieving a weekly production target of roughly 2,000 cars a week.”

Elon getting testy when asked about autopilot design

“First of all, I would separate what Tesla says from, say, some supplier of ours is issuing, bullshit. Okay? The blog that I wrote was very clear that radar is moving from a supplemental to also a primary sensor. It is not to the exclusion of vision, but it is also a primary sensor. Vision is still the main thing, but radar, instead of merely being, like, a cross-check against vision is really, when done well, and we’re very confident at this point that it can be done this way; it can be a primary sensor such that you can take actions based on radar information alone. You can also take actions just based on vision alone. Much as a person who might take action based on whether you hear something or you see something, but you don’t need to both hear it and see it. Yeah, so, there’s no – we feel highly confident that the 8-camera solution with 12 ultrasonics and a Ford radar, and the computing power that we now have onboard is capable of full autonomy at a – it’s simply greater than human (26:44). There are obviously skeptics out there. Well, I suggest that they do not bet against us.”

Trying to get people to buy other models

“And then when somebody comes into our store to buy a Model 3, we say, well, why don’t you buy Model S or an X instead? So we anti-sell the 3. Still a lot of people order to the 3, but whatever. Plus the 3, like, we basically sold out the first year of production, so the first 12 months production or thereabouts. So what’s the point of trying to sell the 13th month of production? Very little gain to be had there in doing so.”

Alien dreadnaught v1 should be ready by summer 2018

” So sort of an internal codename for the factory machine that builds machine is the alien dreadnought so a point in which our factory looks like an alien dreadnought and we know it’s probably right. So we think with Model 3, it will be alien dreadnought version 0.5 approximately, and then it will take us about another year or so, I don’t know, summer 2018 to actually get to alien dreadnought version 1.”… “Yeah. I mean, the long-term aspiration for the machine that builds the machine in the factory, alien dreadnaught thing, is the long-term aspiration is limited physics. I maybe call it, like, limited physics manufacturing.”

Reasonably confident we’re on timeline for Model 3, but improving internal capabilities to produce parts

“I think our confidence has been approximately the same. Obviously, as time goes by, there’s some amount of the uncertainty is collapsed. And so, I guess you could kind of call that confidence, but it’s – yeah, it’s looking good for production volume, second half of 2017. As always, I really want to remind people that a car is – consists of several thousand unique items. We can only go as fast as the slowest item. And so what we’re trying to do in advance of 3 production is increase the scope of Tesla’s internal capabilities so that we’re internally capable of making almost anything.”