Tesla (TSLA) Q2 2017 Earnings Call

Elon Reeve Musk – Tesla, Inc.

Model 3 is here with high production targets and zero promotion

 “…having with us steady production of Model 3s was an incredible milestone in the company’s history. We wanted to make a great, affordable electric car which is a fundamental thing that is missing. We wanted to make that from day one, and if we could only have done it sooner, we would have….I’m very confident that we will be able to reach a production rate of 10,000 vehicles per week towards the end of next year. And we remain – we believe on track to achieve a 5,000 unit week by the end of this year….what people should absolutely have zero concern about is that Tesla will achieve a 10,000 unit production week by the end of next year….We’re not promoting the car. If you go to our stores, we don’t even want to talk about it, really, because we want to talk about the thing that we can supply. If somebody orders a Model 3 now, it’s probably late next-year before they get it.”

The demand for Model 3 is pretty high

“there have been 518,000 gross reservations for 3, and we have 455,000 net reservations. But those cancellations occurred over the course of more than a year. The net gain since Friday, net of cancellations, has been over 1,800 per day.”

Demand for Model S and Model X unaffected by Model 3 release

“It should also be noted that one of our big concerns was that Model S, particularly, and Model X demand would suffer with the introduction of the Model 3. In fact, this has turned out to be the opposite situation. Model S and Model X demand increased with the release of Model 3.”

Learning to be less dumb

“When we make mistakes is because we’re stupid, not because we’re trying to mislead anyone. I just want to emphasize – I – we aspire to be less dumb over time. “

There may be more gigafactories coming

“we’re also thinking hard about, where do we put Gigafactorys three, four, five and six? We expect to keep the majority of our production in the U.S., but it’s, obviously, going to make sense to establish a Gigafactory in China and Europe to serve the markets there, because it’s not to build cars (29:23) in California and truck them halfway around the world, particularly when you’re trying to make things as affordable as possible – that really hurts.”

Tesla Motors (TSLA) Q3 2016 Earnings Call

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.”

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.”

Tesla 2Q16 Earnings Call Notes

Tesla Motors (TSLA) Elon Reeve Musk on Q2 2016 Results

No reason to merge TSLA and spaceX

“Yeah, I don’t think there’s a strong product rationale to combine SpaceX and Tesla whereas there is for Tesla and SolarCity. It’s really quite tenuous for SpaceX and Tesla. And there’s a little cooperation that happens between the companies, but it’s not that would justify merging them into one entity.”

Former mobileye solution will now be Tesla internal solution

“I think we’ll have a more significant announcement on that later. So it’s not really – earnings call is not the right time for that except that it will be a Tesla solution, internal solution.”

Model 3 and full autonomy are our two top priorities

” 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 can’t sneeze without it being a national headline

“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?”

We were in production hell for the first six months of this year

“Yes, I mean, sorry, I would also like to say a few words and Jason can address it. 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 halfway through June. And now the production line is humming and our suppliers mostly have their stuff (37:05) 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.”

Autonomy is going to happen faster than anyone thinks it will

“Well, again, major product announcements are not – I shouldn’t do those on an earnings call, obviously. And all I’d say is that full autonomy is going to come a hell of a lot faster than anyone thinks it will. And I think what we’ve got under development is going to blow people’s minds. It blows my mind, so.”

Our code-name for the model 3 production machine is the “alien dreadnought”

“The Model 3 – 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 making place (45:00) 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.”

The autonomous stuff we’re doing is blowing me away

“Well, 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. 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 probably going to blow other people away when they see it for the first time.”

We’ll probably exit next year at triple or quintuple our current production

” in the case of next year, I mean our unit volume – we’ll probably exit next year at unit volume that’s 200% or 300% what our current volume is, maybe 400%.

Jason S. Wheeler – Chief Financial Officer

Clearly disappointed with delivery numbers

:We’re clearly disappointed with our delivery numbers, but there’s some underlying stories that we feel really good about and I’m going to walk you through those briefly. First, automotive gross margin expanded this quarter. Automotive gross margin excluding ZEV credits grew from 20.1% in Q1 to 21.2% in Q2. :

Tesla (TSLA) CEO Elon Musk Interview

Tesla (TSLA) CEO Elon Musk on the difference between what him and Amazon CEO Jeff Bezos are doing with their respective space companies 

“Jeff and I believe that it’s important for humanity to be a space bearing civilization.  Ultimately, we need to be out there among the stars.  And that’s an exciting future that many people want.  It’s about being a multi-planetary species and having life on earth extend out into the rest of the solar system.

Tesla (TSLA) CEO Elon Musk on staying inspired

“Life can’t be just about solving problems.  You need things exciting and inspiring that make you glad to be alive.”

Tesla (TSLA) CEO Elon Musk shared his thoughts on a possible Apple electric car

“I think it’s great Apple is doing this, I hope it works out.  I think they should have embarked on this project sooner actually but they don’t share with me their production plans.  I don’t think they’ll be in volume production sooner than maybe 2020.  It’s a missed opportunity.  They’ll probably make a good car and be successful.  The sheer scale of auto plant manufacturing is staggering.”

 

 

 

Source: June 1, 2016 Video Interview https://www.facebook.com/RecodeDotNet/videos/1049067815183201/

 

Tesla (TSLA) Q1 2016 Earnings Call

Tesla (TSLA) CEO Elon Musk said the model 3 car reservations they received make it the most successful consumer product launch in history

“In the first week of taking deposits for Model 3, we received more than 325,000 reservations despite no advertising or paid endorsements. This implies about $14 billion in future sales, making the Model 3 introduction the biggest consumer product launch ever. Since then, reservations have continued to grow to surpass even our expectations.”

Tesla (TSLA) CEO Elon Musk said they may need to raise capital to meet demand

“Given the demand for Model 3, we have decided to advance our 500,000 total unit build plan (combined for Model S, Model X, and Model 3) to 2018, two years earlier than previously planned. Increasing production five fold over the next two years will be challenging and will likely require some additional capital, but this is our goal and we will be working hard to achieve it.”

Strong Model S order growth from Asia

“Q1 Model S net orders rose 45% compared to a year ago, and grew at a faster pace than last quarter. The more rapid pace of growth was driven by increased order growth in North America and Europe, and a more than 160% increase in orders from Asia compared to a year ago.”

Consumers are continuing to opt for leasing their cars as opposed to buying

“The popularity of leasing increased again this quarter, as did the percentage of Tesla direct leases. Tesla directly leased 1,405 cars to customers in Q1, worth $149 million of aggregate transaction value.”


SK Additions:

Elon Reeve Musk – Chairman & Chief Executive Officer

Tesla is going to become hell bent on becoming the best manufacturer on Earth

“Tesla is going to be hell-bent on becoming the best manufacturer on earth. Thus far, I think we’ve done a good job on design and technology of our products. The Model S and X I think are generally regarded by very critical judges as technologically the most advanced cars in the world. And so I think they’ve done well in that respect. The key thing we need to achieve in the future is to also be the leader in manufacturing. We take manufacturing very seriously at Tesla. It’s the thing that we need to obviously solve if we’re going to scale and scale rapidly and make the cars more affordable. So I really want to sort of send the message out there to the best manufacturing people in the world, we want you to come join our company. And that is going to be the primary focus of Tesla, is how do we get super-good at making large, complex objects?”

I’m spending an enormous amount of time on the production line

” I’m personally spending an enormous amount of time on the production line. My desk is at the end of the production line. I have a sleeping bag in a conference room adjacent to the production line, which I use quite frequently. The whole team is super-focused on achieving rate and quality at the target cost.”

No element of the Model 3 will be approved without having manufacturing’s approval

” And with Model 3 we’re being incredibly rigorous about ensuring that we don’t have anything that isn’t really necessary to make a very compelling version one of the car. We also have a much tighter feedback loop between design engineering, manufacturing engineering, and production. And so no element of Model 3 can be approved unless manufacturing has said that this is easy to manufacture and that the risk associated with manufacturing it is low”

You cannot extrapolate from the Model X to Model 3

“It’s always tempting for people to reason by analogy instead of first principles. And that would be the mistake of assuming that anything to do with the X production has bearing on Model 3. They are very different programs with completely different approaches. So I would not try to extrapolate from that any more than it would’ve made sense to extrapolate from the Roadster that when we were making 600 cars a year to 20,000 cars a year with the Model S.”

Move your desk around

” my desk has frequently been in the factory. This is not some new thing. On the Model S ramp, my desk was also in the middle of the factory at the start of the body line for a year. So I move my desk around to wherever the most important place is for the company. And then I sort of maintain a desk there over time to sort of come and check in on things.”

We’re not going to actually meet our July 1 deadline because that is impossible

” I want to emphasize that the July 1 date is not a date that will actually be met. It’s an impossible date. However, it’s a date we need to hold ourselves to internally and we need to hold suppliers to. But it is an impossible date because there are 6,000, 7,000 unique components in the Model 3 and that would assume that all of them arrive on time”

We’re going to have to raise some money

“Well, I don’t think we want to rely too much on customer reservation money as a source of capital. Maybe there is a buffer or something, but it’s not as a primary source of capital. So yeah, I mean, I think it’s going to make sense for us to raise some amount of money, some combination of equity and debt and make sure the company has a good buffer of cash on hand. I think it’s important for de-risking the company.”

It’s feasible to make 1m cars at the Gigafactory and Fremont

“Well, I think it is actually feasible, maybe not advisable, but feasible to do it with just Fremont and the Gigafactory. We actually believe that Fremont and the Gigafactory could scale to a million vehicles. Whether that’s actually wise is a separate question, and as I said earlier, it’s going to make sense to do localized production at least on a continent basis. Otherwise your logistics costs end up being quite extreme.”

Tesla 4Q15 Earnings Call Notes

Tesla Motors (TSLA) Elon Reeve Musk on Q4 2015 Results

Expect to be cash flow positive starting next month

“something I’m personally quite excited about is that we expect to be positive cash flow starting next month and then continuing on into Q2 and beyond. And there’s one caveat there, that’s including the asset-back line, and the asset-back line is – that’s just funding for cars that are en route to customers. So, particularly as sales to international markets increases, there’s more finished goods inventory on its way to customers.”

Model S was the best selling premium sedan in the US last year

“The Model S was the best-selling premium sedan in the United States last year, of any kind. And our sales actually increased by 51%, whereas everybody else’s sales declined and the overall market segment declined by about 1%.”

We’ve done what we could to suppress demand for the Model X

“we – to the degree that we could suppress demand for the Model X, we did. So, we took basically every action we could to suppress demand for the Model X, because production wasn’t – we need to get production up. There’s no point in amplifying demand if production cannot meet that demand. So, we did our best to really suppress demand, or simply not encourage demand.”

The Gigafactory will not be a constraint to Model 3 production

“Basically, to the best of our knowledge, you shouldn’t worry about the Gigafactory as a constraint in Model 3…That does not appear to be anywhere near the critical path for Model 3. So, yeah.”

The gigafactory will be the largest footprint building on earth when it’s done

“the Gigafactory will be the largest footprint building in the world when it is done. I’ll tell you, (40:54) the Fremont factory is currently number two; and, if you’re curious, number one is a flower auction house in The Netherlands.”

We don’t plan to obsolete things we just relentlessly make things better

“we don’t plan to obsolete things. We just relentlessly make things better. So, for example, for the Model S, there’s an average of 20 improvements per week. Mostly, these are a little tiny nuance things that most people wouldn’t notice. But, it is a continuous improvement process. That’s why I say, when people say, when should they buy Model S? Like what model year? It’s like, we don’t really have model years. We keep improving the car. If you want to wait until the car stops improving, you’ll be waiting forever.”

The model 3 is designed for ease of manufacturing

“Yeah, I think the way to think of the customers is really that the Model 3, being a sedan, is about 20% lighter than – and actually quite a bit less complex to manufacturer, than the Model S. Model S was really the first car we ever made ourselves. So, it was – we were designing to make it work, as opposed to designing it from ease of manufacturing, whereas the Model 3 is really designed for ease of manufacturing.”

Jonathan McNeill – President-Global Sales & Service

Autopilot is a core story of what’s going on here at Tesla

“Autopilot is certainly one of the core stories of what’s going on here at Tesla.”

Jason Wheeler – Chief Financial Officer, Tesla Motors, Inc.

Gigafactory going according to plan despite reports

“Sure. In general relative to the initial forecasts and timelines, we feel pretty comfortable and where we’re at. I think there has been a lot of drama and a lot of negativity in the reporting on this. Somewhere around the head count recently that I think a lot of people picked up on…So, the general plan is executing actually quite closely to what we had laid out back in 2014. Because it’s a fast growth, we have to be really careful at what snapshot in time you actually look at, and what you compare that against.”

Tesla 3Q15 Earnings Call Notes

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.”

Tesla 2Q15 Earnings Call Notes

There’s not not a need to raise capital

“I don’t think that there’s not a need to raise equity capital. There may be some value in doing so as a risk reduction measure, but to be clear, we – what Deepak is saying is that even in the absence of any additional capital generation activity, we would have on the order of $1 billion through – basically that would be, our minimum cash position.”

Well over $1B in powerpack reservations already taken

“if you just take the reservations that have been made thus far, it’s well over $1 billion worth of Powerpacks and Powerwalls. So – and that’s with no marketing, no advertising, no sales force to speak of, really, we’re not trying to sell it, it’s basically a presentation and a webcast and 30 minutes of press Q&A.”

Doing our best to make sure Model 3 production doesn’t impact S and X production

“For the Model 3, we really are doing our best to make sure that it does not affect S and X production. We don’t currently anticipate it affecting S and X production in 2016, but there may be some effect in 2017.”

We have to create our own map data for autopilot, we can’t think of another way to do it

“there’s not publicly available data that is sufficiently accurate for Autopilot as far as navigation data, street data, it’s too coarse. So it looks like we don’t really have much choice, but to create our own data set for driving in order to – in the long-term, in order to provide a high quality Autopilot experience. Yeah, I mean, it’s – yeah, that’s just the only way we can think of to do it.”

Stationary storage isn’t just about renewable energy

“It seems like sometimes people link this too much to renewable energy. Of course we’re huge believers in renewal energy, but that is not the gating function of demand for stationary storage. Stationary storage is really as compared to existing power plants.”

The passenger can’t just go away with autopilot. It’s like an airplane

“in the initial Autopilot. The – we don’t want to set the expectation that it’s – that you can just basically pay no attention to what the car is doing, we do want to set the expectation that it’s much like the Autopilot in a plane where you turn the Autopilot on in a plane but there’s still some expectation that the pilot will pay attention to what the plane is doing and weren’t sort of go to sleep or disappear from the cockpit. So we do want to set that expectation with consumers.”

Autopilot is very strong right now when you have a tracking vehicle in front of you

“it’s capability in steering and control of acceleration and braking is excellent. When it has a tracking vehicle in front and you can basically have high confidence in steering, braking, and acceleration when basically when you’re in some kind of traffic situation where there’s a car on the road in front of you. I think it’s pretty good in the absence of that, so if it’s just lanes, it’s pretty good, and it will get better over time as we refine the software. So I would certainly not take the initial version of Autopilot as the final version. It will just get better and better over time.”

We’re going to try to push production in favor of X because people have been waiting a long time for their cars

“we’re going to try to do is to push the production slightly more in the direction of X because people have been waiting for a long time for their cars. And then, in any given month it could be 60/40 one way or the other. If you look at worldwide demand for SUVs and sedans, it’s almost dead-even, at 50/50”

We have found that we can do even more with the Gigafactory than we thought

“what we have found is, with the Gigafactory, that as we spent more and more time on it, we found we’ve been able to improve the space efficiency of the production and the overall efficiency by more than our initial expectations.”

I am confident that we can produce 500k cars in 2020

” I do remain confident about half a million cars in 2020, and maybe being able to exceed that. It’s worth noting that, so 2020, that’s five years from now. If you go five years in the past for Tesla, we were producing 600 cars per year. Now we can produce 600 cars in three days. So I think going from here to 500,000 cars a year is a much smaller leap than what we did over the past five years.’

To go larger than 500k we’ll need to localize production in other markets

“Long-term, again, we’re getting very speculative here, but in the three to five-year timeframe, it’s going to make sense for us to think about localizing production in different markets, having a factory in Asia, a factory in Europe, other factories in North America. So in order to go beyond the 500,000 units a year, that’s what we would need to do. ”

We’d love for the whole industry to go electric

“what we’ve said is like we’re really excited to see other car companies do electric vehicle programs. What’s been done to-date is not much. They’ve generally been fairly small programs and often just set to achieve a regulatory minimum. So that hasn’t been great thus far, but I’m encouraged by what I see about the future plans, they sound like they’re headed in the right direction and I would be super happy to see the whole industry to go electric.”

Tesla 1Q15 Earnings Call Notes

Expecting a big production ramp with Model X in 4Q

“Sure. So, yeah, I mean, that’s about right. I mean, actually with Model X production ramping up quite heavily in Q4 depending upon how that ramp goes and obviously it’s difficult to predict that with perfect clarity, but our volume essentially doubles in Q4. So depending upon how the ramp goes. So, I do want to emphasize that, like sometimes people don’t totally appreciate is that, there are several thousand unique parts in a car and if even one of those parts is not available for any reason, then you cannot ship, you cannot scale production.”

Like, crazy, demand for powerwall and powerpack

“et me just talk more broadly about the response to the Powerwall and Powerpack because I don’t think that’s really the question you should be asking. The response has been overwhelming, okay, like crazy. In the course of like less than a week, we’ve had 38,000 reservations for the Powerwall, 2,500 reservations for Powerpack. The Powerpack, it should be noted, typically this is bought by utilities or large industrial companies for heavy industrial work. So, typically Powerpack, it’s like at least 10 Powerpacks per installation. So if there’s 2,500 reservations, actually 25,000 Powerpacks.’

There’s, like, no way we could satisfy demand this year

“there’s, like, no way that we could possibly satisfy this demand this year and we’re basically like sold out through the middle of next year in the first week.”

It’s, like, crazy off the hook

“it’s like crazy off the hook. ”

If somebody wants to go off the grid with these powerpacks, it’s going to be more expensive than being on the grid

“f somebody wants to do a daily cycling, basically go off grid. It’s going to be more expensive than being on grid. This doesn’t mean that people won’t buy it because there are people who want to go off grid on principle, or they just want to be independent.”

Target for the battery pack is markets where there’s a feed in tariff for electricity

“the main target application for the daily cycling battery pack was actually were several markets not in the Continental U.S. and particularly Germany and Australia are very strong markets where it does make economic sense today based on the feed in tariff and the electricity rate structures in those countries.”

Battery packs should have ~15yr battery lives

“And the daily cycler one, I mean, we expect it to be able to daily cycle for something on the order of 15 years. Actually the warranty period would be a little bit less than that. But we expect it to be something that’s in the kind of 5,000 cycle range capability, whereas the high-energy pack is more like around the maybe depending upon on how it’s used anywhere from 1,000 cycles to 1,500 cycles. And they have comparable calendar lives’

We already feel like we need to make the gigafactory bigger

“we’re fairly confident at this point like so that the entire Gigafactory output could just do stationary storage. I mean it’s like, wow, okay. Well, we need to make cars too, so we’re just trying to make the factory bigger.”

I guess we’d pick cars, but stationary storage demand is just nutty

“Well, I guess, we’d pick cars because we got this whole other plant here in Fremont making cars. So, cars will get the priority. Yeah. That would be a logical priority. And yeah, but I mean, it really feels like, man, the stationary storage demand is just nutty. Like worldwide, it’s just crazy.”

We still haven’t seen large advances in battery chemistry

“we’d love it if somebody could come up with a better internal chemistry for the cell. But it’s worth noting that nobody has sent us anything, a sample cell that’s better than the cell we’re producing, or that something that we will produce in the Gigafactory. So, we’d love it if somebody would do that, they just haven’t. So, there’s like always things, which are big on promise and short on delivery when it comes to battery chemistry, and it’s just a real hard problem.’

We need to get you all to think differently and have an expectation of innovation

“it is tricky as companies grow to maintain a consistent culture. I think we’re doing okay. I think it’s measured relative to most companies. But we do need to get you all to think differently and have an expectation of innovation. I mean, I think we’re doing okay on that front.”

I hope Apple gets into the car business. You can figure out a lot of stuff from Linkedin

“‘I certainly hope Apple gets into the car business. That would be great. But no, we’re not really seeing significant attrition of engineers to Apple, for anything, car or otherwise. And actually, anyone can like figure this out by just going on LinkedIn. LinkedIn can produce statistics on what the relative flow of people is from one company to another. And I think it’s like – something like – if you look at like the trailing 12 months, Tesla has recruited five times as many people from Apple as Apple’s recruited from Tesla. It’s like some – it’s a fairly high number.”

Hoping to show off model 3 next year, production in late 2017

” we are hoping to show off the Model 3 in approximately March of next year. Again like, don’t hold me to that month, but that’s like – that’s our aspiration. And that’s – and then be in production with Model 3 in the, I’d like to say mid, but probably closer to late 2017 timeframe. Late 2017 is probably more realistic.’

exponential ramp of production fall in Q4

“Things are looking pretty good for Q4. I think it’s hard to predict full quarter exactly because that whole quarterly boundary and where does the exponential ramp of production fall exactly on that side of Q4 boundary. But I think it’s extremely likely that cash flow is really good at the end of Q4.”