Tesla (TSLA) Q2 2016 Earnings Call

Tesla (TSLA) CFO Jason Wheeler said they are focused on reducing costs across their operations in order to deliver the Model 3 at their projected price point of $35K 

“On a go-forward basis, the way we’re thinking about margins is we certainly see opportunities for continued cost-downs, both on the engineering front, also on the commercial front as well. We’ve got a supplier base that is very excited about the Model 3 and it’s giving us the ability to leverage that on commercial cost downs, also continue manufacturing efficiencies. As we mentioned in shareholder letter, labor hours per car is trending quite positively right now and we’re laser focused on continued improvement in that key metric.”

And optimizing efficiency on their capital expenditures 

“On a go-forward basis, thinking about CapEx efficiency, you’ve heard Elon talk a lot about the machine that makes the machine. A big part of that is focusing on volumetric efficiency. In our call on Monday, I talked about how when we started to review a lot of the Model 3 CapEx plans across the company, there were a bunch of new buildings everywhere. And the reaction to that was, wait a second, we’ve actually got a nice facilities footprint already and how can we just densify those facilities and not have to invest further in this area? And we’re starting to see a lot of that take hold now.”

Tesla (TSLA) CEO Elon Musk said full autonomy requires highly detailed maps

“What we’ve said thus far is that there’s need to have much higher definition maps than currently exists anywhere in the world in order to have full autonomy. And we’re in the process of building those and I think making good progress.”

Tesla (TSLA) CEO Elon Musk said autonomous cars will remain capacity constrained for years to come

“Well, I think the demand for autonomous cars will vastly outweigh the production capability. So it’s more in our mind that the global fleet of vehicles is about 2.5 billion roughly and total new vehicle production per year is only about 100 million. So, the fleet is basically turning over every roughly 20, 25 years. So we would have to make some truly enormous number of autonomous vehicles for there to be any land saturation because it will basically be the only car anyone wants to buy.”

Tesla (TSLA) CEO Elon Musk described his near term priorities 

“Well, I think the Model 3 is overwhelmingly our focus. Yeah. Things feel really quite stable with Model S and Model X. We’re kind of in the mode of continuous improvement, but no fundamental issues. So, I feel like the machine that’s making Model X and Model S is actually functioning quite well right now. And I definitely burn out of few neurons and a lot of other people did solving the production ramp earlier this year. I feel we’re in a good place at this point. So, the focus really is on Model 3 and followed by full autonomy as – well it’s our two priorities.”

Tesla (TSLA) CEO Elon Musk said Tesla got too much media attention from the recent Model S autonomous driving crash 

“Unfortunately and fortunately, Tesla cannot sneeze without there being a national headline. So I think you don’t have to worry too much about whether we’ll report it because the media will and then inflate it in size by 1,000. Like last year there were 35,000 automotive deaths in the U.S. How many did you read about?”

Tesla (TSLA) CEO Elon Musk said the first half of this year was hell from a car production standpoint 

“Basically, we were in production hell for the first six months of this year. Man, it was hell. And then we just managed to climb out of hell in like basically partway through June. And now the production line is humming and our suppliers mostly have their shit together. There’s a few that don’t. One I’m going to be visiting on Saturday personally to figure out what the hell’s going on there. But we’ll solve it. But just the thing that’s crazy hard about cars is that there’s several thousand unique items and you move as fast as the slowest item in the whole car. nd I feel actually really good about Model S and Model X right now, but I’ll get a whole lot of mental scar tissue from first six months of this year.”

Tesla (TSLA) CEO Elon Musk calls the Gigafactory the “alien dreadnought” 

“The internal name for designing the machine makes the machine is the – we call it the alien dreadnought. At the point at which the factory looks like an alien dreadnought, then you know you’ve won. It’s like, what the hell is that? So we’ve got alien dreadnought version 0.5 will be Model 3. It will take us another year get to version 1 and probably a major version every two years thereafter. By version 3, it won’t look like anything else. It might look like a giant chip pick-and-place machine or a super high-speed bottling or canning plant, and you really can’t have people in the production line itself. Otherwise you’ll automatically drop to people speed. There’s still a lot of people at the factory, but what they’re doing is maintaining the machines, upgrading them, dealing with anomalies. But in the production process itself there essentially would be no people.”

Tesla (TSLA) CEO Elon Musk said we’re getting closer to full autonomy 

“Full autonomy is really a software limitation. I mean the hardware is just to create full autonomy, so it’s really about developing advanced, narrow AI for the car to operate on. I want to emphasize narrow AI, it’s like not going to take over the world, but it needs to be really good at driving a car. So increasingly sophisticated neural maps that can operate in reasonably sized computers in the car. That’s our focus. I’m very optimistic about this. It’s exciting, it blows me away, the progress we’re making. So I think if I’m this close to it and it’s blowing me away, it’s really going to blow other people away when they see it for the first time.”