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Comments on Q3 Q&A Webcast

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"The best thing is to not hit a car or pedestrian." (My comment: yes, definitely -- can we get rid of the noisemakers if we make sure it doesn't do that?)

Says that their data is showing lots of events where Autopilot avoids hitting a car or a pedestrian by detecting it. (Good!)

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GOOD first question. (Missed who it was.) A bit muddled, but basically, how to keep supply up -- labor supply at Sparks issue.

JB says they can use third-party cells for Energy when Sparks is tight. Productivity of existing lines is improving. Yet another production line started in the last few weeks, another by the end of the year, another after that. Hoping to source larger percentage of Energy supply from Giga.

Giga produces about half of world's EV battery consumption, more for S&X.

Question: plans for battery supply in China? Long term produced in China, short term uncertain.
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Feragu is next. Why is gross margin higher than guidance?

Mfg cost down 30%. Far less scrap. Fixed costs spread over more cars. Team is focused on cost optimization. Guidance was conservative.

Why MR, rather than cars to Europe?

We don't have the ability to get to the $35K right away, want to make a more affordable option. Expect Europe production in January, deliveries late Feb-March. Asia-Pacific deliveries definitely Q2, possibly late Q1.

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Romit Shah:

Musk guesses world demand is 500K-1M/year for Model 3? (Doesn't seem to be an answer to Shah's question)

Reaffirms European factory eventually. Says S&X will probably only be made in California, forever.
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Missed the guys name:
Are you still targeting 10K/week in 3 mo. and what's the capex expectation there? Will it need new lines?

Not prepared to answer.

Thinks they'll get to 7K/week with "very minimal" capex. Would at least need significant line upgrades to get over 7K.

Long term Musk's guess is 7K-10K Model 3 manufactured / week from Fremont, 5K-8K from rest-of-world.

Asks about options mix in Europe?

"We have given that zero thought."

Says their goal is to make mass-market cars and not mine options. There is more work needed to produce a $35K car and have it have positive gross margin. Guesses about 6 months.

(My comment: OK. Nobody will get their $35K cars until Q2. Good luck getting the $3750 tax credit...)

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Next guy: (missed the question).

Says no we aren't starving capex or R&D to be profitable. Model Y protoype approved to go into production, will be in production in 2020. Progress on Semi and Roadster. Most excited about Pickup. Solar Roof volume production next year.

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A question regarding the autonomous car business model. (my note: when it works)

Tesla will compete directly with Uber and Lyft, with a company-owned fleet, but customers can add their cars to the fleet or remove it at will.

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Adam Jonas (my comment: oh, dear god) asks about the new chairman. Disallowed topic. Asks about which cars Model 3 buyers are trading in.

Only pattern is "all across the board", more than half non-premium brands.

"For many people it's the most expensive car they've ever bought". (My comment: Adam Jonas acts surprised. Oy. We knew that. True for me!)

Softball question. "We do not intend to raise equity or debt. That may change in the future. The current operating plan is to pay off our debts, not to refinance them but to pay them off, to reduce the debt load of the company."

Musk says it's helpful to have logistics crisis situations. "As I dug into the finished part inventory from the factory to the customer I was suprised at how long it took, it was very expensive to get cars to customers, this was something I didn't appreciate before, we have a major initiative [to get that as short as possible]"
Average factory-customer time in August 30 days, end of quarter 20 days, next goal is under 10 days. (North America.) Giant improvement in capital efficiency of company. Also trying to improve Europe and Asia. Long term wants factory->customer under 7 days. Supplier terms on average just over 60 days.

Our parts inventory management, a lot of room for improvement there. Should be able to cut to 200-300 million dollars of parts at the factory (at any given time).

"Reversing" the working capital requirements of the company.

Deepak: Finding efficiencies in warehouse management. (Also repeats things Elon said.)
 
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Toni Sacchonachi (ugh): Question manages to spin opex control negatively. (Responses say nothing new.) Manages to suggest that gross margin is only because ASP is high.

(My comment: What a jackass.)

Elon says "the problem with asking questions like this in detail is that it's a rapidly changing situation; literally if you asked in another month it would be different."

Says the targeted COGS for the $35K model 3 is $30K. Deepak says it's a matter of time, points out fewer cells, non-cell pack cost-reduced, and general reductions in auto manufacturing costs, and "same factors that have helped us so far". (My comment: Slick response to jerk question.)
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James Albertine with Consumer Edge:
Where are logistics costs? They're mostly in automotive gross margin. Debt interest is on interest expense line, though. Musk thinks ABL interest belongs in COGS, Deepak agrees conceptually. (My comment: a new aspect of non-GAAP?)

Asks about service&other gross margin and battery costs.

Service&other will improve every quarter, Musk expects it to be a positive margin contributor, Deepak says more after warranty expires, says used car sales have good margin, points out service is the profit center for other car dealers.

Battery costs are a trade secret. "Much better than anyone else by a lot".

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LeBeau, CNBC: (stupid question about the US tax credit) It will not slow down sales, at least not below 5000/week.

We are not holding the lower-cost version of the car back intentionally. The lemur was created to provide the end customer with the most affordable car they can produce now. The smaller pack will take at least 3 months, and longer to spool up, longer to manufacture, longer to deliver, so probably customers see it in March or February.

Comments on Tesla having best $/kwh and best mi/kwh, which gives them an advantage which it is very hard for competitors to match. "I really encourage our competitors to make a huge investment, I've said this for a long time,"
"we want to be as helpful as possible to the rest of the industry"...
"they can use our superchargers if they make an adapter"...
Says the other companies just didn't invest, and that's what has put Tesla in such a strong competitive position. (My comment: that's what I've been saying!!!)

Deepak repeats the thank you and reiterates the mission: to accelerate the world transition to sustainable energy.

Musk says he's looking forward to the next call. :cool:
 
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Toni Sacchonachi (ugh): Question manages to spin opex control negatively. (Responses say nothing new.) Manages to suggest that gross margin is only because ASP is high.

(My comment: What a jackass.)

Elon says "the problem with asking questions like this in detail is that it's a rapidly changing situation; literally if you asked in another month it would be different."

Says the targeted COGS for the $35K model 3 is $30K. Deepak says it's a matter of time, points out fewer cells, non-cell pack cost-reduced, and general reductions in auto manufacturing costs, and "same factors that have helped us so far". (My comment: Slick response to jerk question.)
----
James Albertine with Consumer Edge:
Where are logistics costs? They're mostly in automotive gross margin. Debt interest is on interest expense line, though. Musk thinks ABL interest belongs in COGS, Deepak agrees conceptually. (My comment: a new aspect of non-GAAP?)

Asks about service&other gross margin and battery costs.

Service&other will improve every quarter, Musk expects it to be a positive margin contributor, Deepak says more after warranty expires, says used car sales have good margin, points out service is the profit center for other car dealers.

Battery costs are a trade secret. "Much better than anyone else by a lot".

----
LeBeau, CNBC: (stupid question about the US tax credit) It will not slow down sales, at least not below 5000/week.

We are not holding the lower-cost version of the car back intentionally. The lemur was created to provide the end customer with the most affordable car they can produce now. The smaller pack will take at least 3 months, and longer to spool up, longer to manufacture, longer to deliver, so probably customers see it in March or February.

Comments on Tesla having best $/kwh and best mi/kwh, which gives them an advantage which it is very hard for competitors to match. "I really encourage our competitors to make a huge investment, I've said this for a long time,"
"we want to be as helpful as possible to the rest of the industry"...
"they can use our superchargers if they make an adapter"...
Says the other companies just didn't invest, and that's what has put Tesla in such a strong competitive position. (My comment: that's what I've been saying!!!)

Deepak repeats the thank you and reiterates the mission: to accelerate the world transition to sustainable energy.

Musk says he's looking forward to the next call. :cool:

Sacconaghi's model 3 GM question was on point.
 
Toni Sacchonachi (ugh): Question manages to spin opex control negatively. (Responses say nothing new.) Manages to suggest that gross margin is only because ASP is high.

(My comment: What a jackass.)

Elon says "the problem with asking questions like this in detail is that it's a rapidly changing situation; literally if you asked in another month it would be different."

Says the targeted COGS for the $35K model 3 is $30K. Deepak says it's a matter of time, points out fewer cells, non-cell pack cost-reduced, and general reductions in auto manufacturing costs, and "same factors that have helped us so far". (My comment: Slick response to jerk question.)
----
James Albertine with Consumer Edge:
Where are logistics costs? They're mostly in automotive gross margin. Debt interest is on interest expense line, though. Musk thinks ABL interest belongs in COGS, Deepak agrees conceptually. (My comment: a new aspect of non-GAAP?)

Asks about service&other gross margin and battery costs.

Service&other will improve every quarter, Musk expects it to be a positive margin contributor, Deepak says more after warranty expires, says used car sales have good margin, points out service is the profit center for other car dealers.

Battery costs are a trade secret. "Much better than anyone else by a lot".

----
LeBeau, CNBC: (stupid question about the US tax credit) It will not slow down sales, at least not below 5000/week.

We are not holding the lower-cost version of the car back intentionally. The lemur was created to provide the end customer with the most affordable car they can produce now. The smaller pack will take at least 3 months, and longer to spool up, longer to manufacture, longer to deliver, so probably customers see it in March or February.

Comments on Tesla having best $/kwh and best mi/kwh, which gives them an advantage which it is very hard for competitors to match. "I really encourage our competitors to make a huge investment, I've said this for a long time,"
"we want to be as helpful as possible to the rest of the industry"...
"they can use our superchargers if they make an adapter"...
Says the other companies just didn't invest, and that's what has put Tesla in such a strong competitive position. (My comment: that's what I've been saying!!!)

Deepak repeats the thank you and reiterates the mission: to accelerate the world transition to sustainable energy.

Musk says he's looking forward to the next call. :cool:

That was a nice recap. Pretty much as I recalled it. I was mostly listening to it but was doing something in the background at times. My husband didn't get a chance to hear the call at all so we were discussing it over dinner. I'll have him read your recap for things I missed relaying.