OFFICIAL BUTTON WATCH

[EVNow]

For me, the most nonsensical thing Elon says about FSD relates to the business aspect of it. He says almost all cars will be autonomous soon, and that the leaders will take a "quarter":

When vast amounts of manufacturing are needed, as in robotaxis, this slows down rate of introduction, so maybe more like winner-takes-a-quarter. Still great.

He then goes on to say that FSD is the [most difficult technical challenge ever to exist]. So unless the winner shares (or others steal) their technology with other car makers, these two statements seem to contradict.

This is how Musk's quotes get a life of their own.

I can easily envision a scenario where Tesla, Cruise, Waymo are all operating robotaxis in US. And a few Chinese companies too (in China).

 

[powertoold]

I can easily envision a scenario where Tesla, Cruise, Waymo are all operating robotaxis in US. And a few Chinese companies too (in China).

If Tesla achieves what Elon is describing by the end of this year, I find this outcome unlikely. What will likely happen is Tesla sells the FSD chip, OEMs copy the low-cost sensor suite, and Tesla provides FSD as SaaS with subscription model and percent-take from robotaxi network, all coupled to Tesla insurance.

 

[Bladerskb]

If Tesla achieves what Elon is describing by the end of this year, I find this outcome unlikely. What will likely happen is Tesla sells the FSD chip, OEMs copy the low-cost sensor suite, and Tesla provides FSD as SaaS with subscription model and percent-take from robotaxi network, all coupled to Tesla insurance.

I see you are still peddling this and haven't responded to the facts laid out. Autonomous Car Progress
Why would anyone buy an inferior chip? or use a comprised sensor suite that is comprised with just light rain?

 

[Webeevdrivers]

Forget the button, will a new FSD release even come out by the end of the month so we can get some new videos to evaluate? I’m hoping yes, and we get to see the supposed V9 with 360 degree camera integration, but I’m expecting no.

I’m still going with 2024, at the earliest, at least in Canada.

 

[qdeathstar]

It’s gonna be may in a few days guys, y’all know what that means!

 

[BrianBigNFun]

It’s gonna be may in a few days guys, y’all know what that means!

When Elon tweets it will come in July?

 

[boonedocks]

When Elon tweets it will come in July?

and that will be two months before the "Monthly FSD Subscription" is released.

 

[Cheburashka]

It’s gonna be may in a few days guys, y’all know what that means!

Were we promised the button in May or June? I can't even remember at this point.

 

[Snuffysasa]

Earnings call - Feb 19 2019: "We will be feature complete full self driving this year. The car will be able to find you in a parking lot, pick you up, take you all the way to your destination without an intervention this year. I'm certain of that. That is not a question mark. It will be essentially safe to fall asleep and wake up at their destination towards the end of next year"

Can you confirm this is Elon's exact words, direct quote from this Earnings call? Or did you do any paraphrasing?

 

[run-the-joules]

Can you confirm this is Elon's exact words, direct quote from this Earnings call? Or did you do any paraphrasing?

I'm repeating a post from someone else, so there might be some paraphrasing or light editing there. I remember the gist of it being correct though because it caused quite a lot of consternation at the time.

 

[mikes_fsd]

Can you confirm this is Elon's exact words, direct quote from this Earnings call? Or did you do any paraphrasing?

yes, source please.
I searched 2018 Q4 and 2019 Q1 transcripts and nothing that matches the ascribed quote.

 

[mikes_fsd]

I'm repeating a post from someone else, so there might be some paraphrasing or light editing there. I remember the gist of it being correct though because it caused quite a lot of consternation at the time.

That is f!@#$% bull$#it

Here is the entire transcript:

(mellow funky music)
14:39
- [Sherry] Today.
14:40
At this time all participants are in listen-only mode.
14:43
Following the prepared remarks,
14:45
there will be a question-and-answer session.
14:47
If you would like to participate
14:48
in this portion of the call,
14:50
please press the star,
14:51
then 1 key on your touch-tone telephone.
14:53
If any assistance is needed any time during the call,
14:56
please press star, then 0,
14:57
and a coordinator will be happy to assist you.
15:00
As a reminder, this conference is being recorded.
15:02
I would now like to turn the call over to your host,
15:05
Mr. Martin Viecha, senior director of investor relations.
15:09
Mr. Viecha, you may now proceed.
15:12
- [Martin] Thank you, Sherry, and good afternoon, everyone.
15:15
Welcome to Tesla's first quarter 2019 Q-and-A webcast.
15:18
I'm joined today by Elon Musk, J.B. Straubel,
15:22
Zachary Kirkhorn, and a number of other executives.
15:25
Our Q1 results were announced
15:26
at about 2:00 p.m. Pacific time
15:28
in the update letter we published
15:30
at the same link as this webcast.
15:32
During this call, we will discuss our business outlook
15:35
and make forward-looking statements.
15:37
These comments are based on our predictions
15:39
and expectations as of today.
15:42
Actual events or results could differ materially
15:45
due to a number of risks and uncertainties,
15:47
including those mentioned
15:49
in our most recent filings with the SEC.
15:52
During the question-and-answer portion of today's call,
15:55
please limit yourself to one question and one follow-up.
15:58
Please press star 1 now
16:00
if you would like to be added to the question queue,
16:04
but before we jump into Q and A,
16:06
Elon has some opening remarks.
16:08
Elon?
16:09
- [Elon] Thanks, Martin.
16:11
On Monday we hosted our first ever Autonomy Investor Day,
16:14
showcasing our new in-house designed
16:16
full self-driving computer
16:18
and our AI-based software
16:20
trained by more than 400,000 Tesla vehicles.
16:23
All Tesla cars being built today
16:25
have all the hardware necessary for full self-driving,
16:28
and over-the-air updates will enable our customers
16:32
to use the Tesla ride-hailing network fleet
16:35
and generate income which,
16:38
as we said on Autonomy Day a few days ago,
16:41
we think is somewhere between 10 and $30,000 a year
16:46
in some cases, perhaps more.
16:48
We're the only company in the world
16:49
producing our own vehicles and batteries,
16:51
as well as our own in-house chip for full self-driving.
16:55
We're in a position unlike anyone else in the industry.
16:57
In 2020 we expect to have a million robo-taxis on the road
17:01
with the hardware necessary for full self-driving.
17:04
We believe we'll have the most profitable
17:06
autonomous taxi on the market,
17:09
and perhaps the, yeah...
17:13
Last quarter we experienced a massive increase
17:16
in delivery volume in Europe,
17:17
similar to what North America experienced last year,
17:20
as well as a massive increase in delivery volume to China.
17:24
As far as challenges go, this was a good one to have
17:26
because we built vehicles and consumers bought them,
17:29
but this rapid increase in overseas volume
17:32
strained our logistics operation
17:33
and resulted in over half of our global deliveries
17:35
occurring in the final 10 days of Q1.
17:40
This was the most difficult
17:44
logistics problem I have ever seen,
17:46
and I've seen some tough ones.
17:50
I'll say it again.
17:51
We literally delivered the half of all vehicles produced,
17:54
or half, all deliveries occurred
17:56
in literally the final 10 days of Q1.
18:01
As a result, a large number of vehicle deliveries
18:05
shifted into Q2,
18:06
which caused Q1 net income to be negatively impacted.
18:10
As we said, we could not get the vehicles to customers
18:12
physically in time.
18:14
In response to this,
18:15
we are in the process of regionally balancing
18:17
our vehicle builds throughout the quarter.
18:19
This will make the...
18:22
This will put much less strain on Tesla,
18:25
result in a much better delivery experience for customers,
18:29
and have a very positive effect on our working capital
18:35
in the middle of the quarter.
18:39
In Q1, Model 3 was yet again
18:41
the best-selling premium car in the U.S.,
18:43
outselling the runner-up by almost 60%.
18:47
It's worth just dwelling on that for a moment,
18:48
just how absurd this is
18:53
compared to predictions that were made several years ago.
18:59
There were literally, to the best of my knowledge,
19:01
zero predictions that this would happen
19:05
if you go back just even five or six years ago,
19:10
that an electric car
19:11
would be the best-selling premium car in the U.S.,
19:17
and we believe over time
19:18
it will be the best-selling premium car
19:19
throughout the world,
19:22
and in fact in Norway in March,
19:29
we set a record for the highest sales
19:32
of any car, period, ever,
19:36
and I believe something similar in Switzerland as well.
19:42
These are really incredible achievements by the Tesla team.
19:49
Since the introduction of Standard Range
19:50
and Standard Range Plus,
19:51
nearly 70% of premiums for Model 3
19:54
have actually been non-premium vehicles,
19:56
where people are actually paying more for a car
20:00
than they have ever paid for a car.
20:02
They never anticipated paying this much for a car,
20:03
but because they want the Model 3
20:07
more than they've ever wanted a vehicle,
20:09
they're willing to pay more to get a Model 3.
20:20
Keep in mind global expansion for the Model 3
20:21
has just begun,
20:22
and this segment is vastly larger internationally
20:27
than it is in the U.S.
20:29
We're continuing to make significant improvements
20:31
to our vehicle lineup,
20:32
including updating the Model S and X production line
20:35
to accommodate the next generation of power trains.
20:39
We announced this yesterday.
20:41
We're now in production
20:42
with the significantly more advanced power train
20:46
for the Model S and X,
20:48
as well as an upgrade to the suspension system
20:51
to have active adaptive damping
20:55
in the suspension system,
20:56
and to enable charging at 200 kilowatts, which is...
21:02
and there are a number of other small changes.
21:05
If anyone is thinking about upgrading
21:09
their Model S or X,
21:10
this is a great time to do it.
21:15
We also introduced a loyalty program
21:17
where if somebody is an existing Tesla owner
21:20
and they buy a performance Model S or X,
21:23
they get the Ludicrous upgrade for free
21:28
as a thank-you and appreciation to existing Tesla customers.
21:40
They have a longer range,
21:42
the Model S now has a range of 370 miles.
21:46
This is an actual EPA range of 370 miles,
21:49
and Motor Trend test-drove the car a few days ago,
21:55
and drove non-stop
21:56
all the way from San Francisco to Los Angeles
21:58
at normal highway speeds,
22:01
and they said they could have even gone faster,
22:03
and they were in a headwind as well.
22:06
This is pretty remarkable
22:08
that an electric car can go non-stop
22:10
between the two biggest cities in California.
22:16
I mean, I remember, back when I was driving gasoline cars,
22:19
I always had to stop at the gas station. (chuckles)
22:22
This is literally better than a gasoline car,
22:24
with rare exception.
22:28
There's also an increase in power.
22:34
It accelerates faster.
22:35
It's just better in every way.
22:41
We're able to do this
22:41
without increasing the size of the battery pack,
22:43
which is a testament to the powertrain team
22:49
for being able to improve the efficiency of the powertrain
22:53
by such a significant margin.
23:03
With the recently announced product improvements
23:05
on Model S and X,
23:06
as well as continued expansion of Model 3 globally,
23:09
we expect our order rate to increase significantly
23:12
throughout the year
23:13
commensurate with our production levels.
23:20
In terms of other products,
23:21
I'm very excited about the future for other products,
23:23
especially for full self-driving,
23:25
which will fundamentally transform transport as we know it.
23:30
The Tesla Semi truck, Model Y,
23:34
improvements to Powerwall, Powerpack,
23:36
the Solar Roof Version 3, on the energy side,
23:40
and no question in my mind
23:43
that Tesla has the most exciting product roadmap
23:45
of any consumer product company in the world.
23:49
Finally, I want to thank our employees
23:51
for their incredible work,
23:52
and our customers for their continued support.
23:56
- [Martin] Thank you very much, Elon, and I think Zach,
23:59
Zachary would like to have some remarks as well.
24:02
- [Zach] Yeah, thank you, Martin, and thanks, Elon, as well.
24:07
Overall, as we reflect on the progress of Q1,
24:10
this was one of the most complicated quarters
24:12
that I can think of in the history of the company,
24:15
and it was ambitious even by Tesla's own standards.
24:20
The global expansion of Model 3
24:22
was a huge theme within the quarter.
24:24
We launched the Standard Range lineup for Model 3,
24:27
product retooling for Model S and Model X,
24:30
which Elon just talked about,
24:31
with the range enhancements and suspension upgrades,
24:35
and then we implemented various pricing adjustments
24:38
and worked through the corresponding impact that had
24:41
on our order mix in deliverable cars.
24:43
There's two key themes that I'd like to discuss briefly,
24:47
and then we'll open it up to Q and A,
24:50
around cash and profitability for the quarter.
24:53
First, on the cash front,
24:55
we exited Q1 with 2.2 billion in cash
24:57
and cash equivalents on hand.
24:59
This was a 1 1/2 billion reduction
25:01
from our 2018 ending cash balance.
25:04
This reduction is attributed to two factors.
25:06
The first is that we paid off $920 million convertible note
25:11
on March 1st.
25:12
Note, for those of you looking to the cash flow statement,
25:16
$188 million of this is flowing to our operating cash flows.
25:20
The balance to the 1.5 billion reduction
25:23
is more than explained by the working capital impact
25:26
of expanding Model 3 operations overseas.
25:29
The two components to this, which we've discussed,
25:31
is that an international operation
25:34
naturally commands additional working capital
25:36
because of transit times,
25:37
but then also the stress on our delivery operations
25:40
meant that not all of our cars were delivered.
25:43
Both of these factors which occurred in Q1
25:45
we do not expect to repeat in Q2,
25:48
and we expect our quarter ending cash balance
25:50
to continue to increase going forward.
25:53
I'll also note that we're tracking in April
25:56
to the largest month of deliveries for a month one
25:59
in the history of the company.
26:02
On the working capital point, as Elon noted,
26:05
50% of our deliveries in Q1
26:07
occurred in the final 10 days of the quarter.
26:09
This is because we prioritized international builds
26:12
for the first half of the quarter,
26:13
and then U.S. local builds in the second half.
26:16
This led to a binary inflow
26:18
of Model 3 cars to EMEA and China,
26:21
and significantly stressed their delivery operations.
26:24
We also faced import issues in Shanghai and Beijing,
26:27
and worked through those,
26:28
but that also skewed deliveries
26:29
towards the final couple days and weeks of the quarter.
26:33
We're addressing this by building regionally balanced,
26:38
and we've already executed on this for Model 3,
26:40
and S and X will be implemented in the next week or two.
26:43
The secondary benefit of this
26:45
is that it enables us to run stable operations
26:48
throughout the quarter
26:49
so we don't have to staff many of our delivery areas
26:52
and logistic operations to the peak,
26:54
and we expect significant cost savings to come from this.
26:58
On the P and L side,
27:00
we incurred 188 million of one-time adjustments
27:03
that flowed through to net income.
27:05
120 million of this
27:06
was related to S and X pricing adjustments
27:08
that we announced on February 28th.
27:11
This included a reserve
27:12
for a potential increased return rate
27:14
for our residual value guarantee
27:16
and buyback guarantee vehicles,
27:18
and also an adjustment for the inventory value
27:22
of our used Tesla inventory and service loaners.
27:25
There's an additional 67 million related to Q1 restructuring
27:28
and other charges that flowed through.
27:32
Within the automotive business,
27:33
one thing that I wanna note here
27:35
is that automotive revenue was negatively impacted
27:39
by 501 million attributed to the reserve increase
27:42
for S and X that I just noted.
27:44
If you adjust for this, the decline from Q4 to Q1 in revenue
27:48
is roughly in line with the decline in deliveries.
27:52
Within automotive gross margin,
27:54
Model 3 gross margin declined slightly
27:57
to approximately 20%.
28:02
This is due to two factors.
28:03
One is the pricing adjustments
28:05
that we made on February 28th,
28:07
as well as the mix shift towards the Standard Range lineup
28:10
which we launched.
28:11
We also successfully executed on a number of cost reductions
28:15
which offset this impact.
28:17
Labor content, warehousing, and scrap, as examples,
28:20
all had double-digit improvements from Q4 to Q1.
28:24
In spite of launching the Standard Range variants,
28:27
we wanna note that North American ASPs are close to $50,000,
28:32
but with the majority of our orders
28:33
being for long-range variants of Model 3.
28:36
In S and X, the impact on margin was more significant.
28:40
Two major pieces here.
28:41
The volume reduction led to a reduction
28:44
in fixed-cost absorption,
28:46
so that impacted our margin,
28:47
as well as the pricing actions
28:48
that we took on February 28th.
28:51
Even though S and X have been in production for a while,
28:53
we still continue to make operational improvements there.
28:57
The labor content, as an example,
28:58
which improved quarter over quarter.
29:02
As we look to the future here,
29:03
I agree with Elon's sentiments
29:05
about the excitement of our product lineup.
29:08
From a financial standpoint,
29:10
what we've effectively done here
29:12
is build an incredible base of knowledge and assets
29:15
that we can quickly scale and replicate
29:17
into different products around the world.
29:19
Gigafactory Shanghai is a terrific example of this.
29:23
As we noted in the letter, capex per unit of capacity
29:26
is 50% for Giga Shanghai
29:28
as compared to Model 3 in the U.S.,
29:31
and the 50%,
29:33
our internal forecast that we're executing against
29:35
is actually better than that.
29:37
Model Y, as we've noted, is built on the Model 3 platform,
29:41
so we're able to leverage the knowledge there
29:43
for capital-efficient expansion.
29:46
In energy, as well, as we've noted previously,
29:50
2019 is a big year for storage,
29:53
so a lot of exciting improvements coming there,
29:55
and the expansion will help improve margin
29:58
as we can better utilize some of the assets
30:01
that we've made investments in that.
30:03
Just to conclude the opening remarks here,
30:05
I've personally never felt more excited
30:07
about the future of the company,
30:09
so looking forward to discussion.
30:11
- [Martin] Thank you very much, Zachary.
30:13
Let's take some first questions from retail shareholders
30:16
who have been submitting their questions on Say.com.
30:20
The first question is
30:21
will Tesla be able to complete their purchase
30:23
of Maxwell Technologies?
30:25
What is holding that back?
30:28
- [Elon] Jonathan, do you wanna?
30:29
- [Jonathan] Yeah, hi, it's Jonathan Chang,
30:30
the general counsel here.
30:32
Right now we're just going through approvals with the SEC.
30:36
There's not a whole lot of things holding it back.
30:39
We're on schedule.
30:40
We're on track.
30:41
Right now we're looking to close in mid-May.
30:44
- [Elon] Great, thanks.
30:45
- [Martin] Thank you.
30:46
The second question is
30:48
is Tesla considering creating an insurance program
30:51
in order to further simplify the ownership experience
30:54
and to more accurately take into account
30:56
safety of driving on Autopilot?
30:58
The insurance market is very unreliable
31:00
for Tesla owners right now.
31:04
- [Elon] The answer is yes,
31:05
we are creating a Tesla insurance product,
31:08
and we hope to launch that in about a month,
31:15
and it will be much more compelling
31:16
than anything else out there.
31:19
- [Martin] Great, thank you very much.
31:20
The next question is, Elon,
31:23
most people, when they think of Tesla,
31:25
only see it as an automotive company.
31:28
Can you speak of the energy side of the company,
31:30
specifically the roadmap
31:31
for when you see the energy side of things really taking off
31:34
and generating major revenue for the company?
31:38
- [Elon] Sure.
31:40
The challenge really is battery cell scarcity.
31:43
As far as stationary storage is concerned,
31:48
we basically need enough cells
31:50
to support the vehicle production
31:52
as well as for Powerwall and Powerpack.
31:56
Last year, in order to have enough cells for the Model 3,
32:00
we actually had to convert
32:03
all of the lines at the Gigafactory
32:05
to produce cells just for the Model 3,
32:09
as opposed to Powerwall and Powerpack,
32:11
and so we were essentially scrounging cells
32:13
from all around the world
32:14
to at least continue some level of production
32:17
on the Powerwall and Powerpack.
32:22
This year we think we'll be able to allocate
32:26
at least maybe
32:29
five to 10% of cell output.
32:33
J.B., what do you guys think?
32:36
- [J.B.] Yeah.
32:37
- [Elon] Yeah, something like that.
32:38
- [J.B.] Between five and 10%, exactly right.
32:40
- [Elon] Yeah, so
32:43
there are far fewer cells in a Powerwall than in a car,
32:47
so that translates to,
32:50
it's quite a decent number of Powerwalls,
32:54
and then we will continue to use cells
32:57
from a variety of suppliers around the world.
33:00
The Powerwall and Powerpack,
33:02
because they don't have to go through vehicle homologation,
33:05
are much more adaptable to using a variety of cells
33:09
from other cell providers.
33:11
I would expect the Powerwall and Powerpack
33:14
to see a very significant percentage growth this year,
33:18
maybe on the order of 300% or some quite high number.
33:21
- Three. - Sorry?
33:23
- 300. - Sorry?
33:24
- 300. - Yeah, 300, okay, I was,
33:26
Tim was just confirming he has 300%.
33:30
This is a very big percentage growth rate.
33:32
It's much faster than in automotive,
33:34
so over time we would expect that to
33:38
that sort of growth rate
33:39
would hopefully be able to continue,
33:41
and then battery storage
33:43
will become a bigger and bigger percentage
33:47
of Tesla's business over time.
33:51
We're also planning a significant increase
33:53
in retrofit solar this year,
33:55
'cause we've finally refined the product offering
33:59
to be something that's extremely compelling
34:02
and much more cost-efficient to deliver and install.
34:07
It's a radically streamlined process
34:09
from what was being done before,
34:12
and we'll have more to say on that, possibly next week,
34:17
and then the Solar Roof tile,
34:19
we're on version three of the design.
34:23
That necessarily takes a while to scale up
34:25
because we have to be confident
34:28
that the Solar Roof is going to last
34:30
for on the order of 30 years,
34:33
because the warranties are 20, 25 years,
34:36
and so the rate at which you can iterate
34:41
on Solar Roof
34:42
is necessarily slowed down by,
34:45
according to the rate
34:46
at which you can do accelerated aging on the roof,
34:49
and we want the installation process to be simple and easy.
34:55
I was just actually at the Tesla Buffalo factory
35:01
a few weeks ago,
35:02
and I was pretty impressed with the team,
35:06
and we're looking forward to scaling that up significantly
35:10
through the balance of this year and next.
35:13
- [Martin] Thank you very much.
35:15
The next question comes from Jeffrey.
35:16
When and where will the Tesla Semi production begin?
35:22
- [Jerome] This is Jerome.
35:23
Next year we'll start production.
35:25
We're very happy we're driving the trucks extensively
35:28
with, I think, so far, quite amazing success, yeah.
35:33
- [Elon] With the prototypes are working amazingly well.
35:34
- [Jerome] Yeah, very well.
35:35
We just use them all the time.
35:37
We load them to maximum weight,
35:39
and continue to make improvements, so--
35:42
- [Elon] We even use them to deliver some Model 3s.
35:44
- Yeah, that was fun. - Yeah.
35:49
- [Jerome] So yeah, we'll start production next year.
35:51
The location is not yet set, but it's pretty clear
35:55
that we make all the batteries and drive units in Reno.
35:59
- [Martin] Great, thank you very much--
36:01
- [Elon] It was Sparks, technically.
36:02
- [Jerome] Yeah, it's Sparks, yeah.
36:04
Northern Nevada.
36:05
- [Elon] Yeah, Northern Nevada.
36:07
- [Martin] Perhaps the last question from retail.
36:09
How soon should current owners that purchased FSD
36:12
get the new FSD computer?
36:16
- [Elon] I think,
36:20
from features and functionality standpoint,
36:22
I think there's no point getting the FSD upgrade
36:27
if you don't really have it in the car
36:29
for probably about two or three months.
36:31
That's when we'll start releasing features
36:34
that are materially different from the feature set available
36:38
on the version two hardware,
36:42
so there's no need to rush
36:44
to get your computer replaced.
36:47
It's like two to three months before it becomes relevant,
36:51
and then it will, obviously, increase rapidly from then.
36:56
One other comment I'll make
36:58
since nobody asked this explicitly,
37:01
for Model Y production
37:03
we are right now trying to decide
37:07
whether Model Y vehicle production
37:10
should be in California or Nevada,
37:13
and we expect to make a final decision on that very soon,
37:18
but in the meantime we've ordered
37:19
all of the tooling and equipment required for Model Y,
37:24
so we don't expect this
37:27
to in any way delay production of Model Y,
37:31
but it's currently
37:36
a very close call between Nevada and California
37:39
as to whether we do the Model Y at Giga or at Fremont,
37:43
but those are the two options,
37:45
and we'll hopefully be able to make a decision
37:47
in the next few weeks.
37:50
- [Martin] Thank you very much.
37:51
Sherry, we can go to analysts' questions
37:53
in the question queue.
37:55
- [Sherry] Thank you.
37:56
Our first question
37:56
comes from Ryan Brinkman with J.P. Morgan.
38:00
- [Ryan] Hi, thanks for taking my question.
38:03
Your guidance for 90 to 100,000 2Q deliveries
38:06
when combined with the full year outlook,
38:07
it suggests somewhere between 35 and 45% sequential growth
38:11
from the first half to the second.
38:13
Can you talk about what is giving you the confidence
38:15
to project that growth,
38:16
and in particular what the order book or reservation list
38:19
may be telling you?
38:24
- [Elon] Yeah,
38:27
we do see strong demand for the vehicles,
38:33
both S, X, and 3.
38:39
The Standard Range Plus Model 3
38:41
with Autopilot included at 39,500
38:44
is just an incredibly compelling vehicle,
38:47
and affordable to probably something on the order of
38:51
like the top 40% income earners in the U.S. and Europe,
38:56
so I think we'll see
38:59
a lot of interest and demand in that,
39:03
we are, and then, with the upgraded S and X,
39:06
think a lot of people were kind of anticipating
39:09
that there would be an S/X upgrade,
39:12
and this really is kind of a game changer of an upgrade,
39:15
so I think, well, we are seeing an uptick in demand,
39:19
and we expect to see that be quite significant,
39:25
and we're also out of the seasonality of Q1,
39:30
where people just generally
39:31
don't like buying cars in winter,
39:33
and we're getting past the overhang
39:35
of that tax credit cliff
39:38
which, for us, ended, in the U.S., on December 31st,
39:43
so these are all very positive factors.
39:47
We also have just a lot of markets where there's
39:49
where we're not even tapped into the demand,
39:51
especially for Model 3,
39:53
so we'll be
39:56
releasing the right-hand drive Model 3
40:01
and expect to see significant demand
40:03
in right-hand drive countries.
40:09
Overall, I feel really good about where things are headed--
40:12
- [Ryan] Okay, thanks, and then my follow-up, sorry.
40:18
I was just gonna say on a previous call
40:20
you indicated that the Y would not be built in Fremont
40:23
because it was, I think you said packed to the gills.
40:26
I heard today that it is now a close call
40:28
between California and Nevada.
40:30
Is anticipated demand for Fremont-built vehicles
40:35
less than was previously thought,
40:36
or have you managed to maybe find more capacity in Fremont,
40:40
for example, with the tent or some other production method?
40:46
- [Elon] Well, first of all, on account of tents,
40:51
I mean, real hardcore tents,
40:54
not like Cub Scout tents, which are fine,
40:59
but
41:03
this is actually,
41:05
credit goes to a lot of people on the Tesla team,
41:07
'cause they actually looked at
41:09
how could we do this in Fremont if we had to,
41:12
and we feel that we can actually append building space
41:20
basically to the west side of the building
41:22
and use a lot of internal space
41:24
that is currently used for warehousing
41:27
in our Fremont factory,
41:29
and so we believe it actually can be done
41:32
with minimal disruption to add Model Y to Fremont.
41:37
- [Ryan] Thank you.
41:39
- [Sherry] Thank you.
41:40
Our next question
41:41
comes from Pierre Ferragu with New Street Research.
41:47
- [Pierre] Hey, thanks for call.
41:50
My first question is really on the Model S and Model X,
41:53
and Elon, you said you're comfortable with demand you see.
41:59
Based on what you saw in April,
42:01
do you think that the 25,000 units per quarter
42:05
is a level of demand
42:06
that is where you see the market coming back already,
42:11
or are we not there yet?
42:14
More specifically, in the U.S.,
42:15
the pull forward in Q4 probably hurt a lot
42:19
demand for S and X.
42:20
Is that something that you still see in the numbers today,
42:23
in recent weeks, or is that behind us?
42:26
And I'll have a follow-up on Q2.
42:29
- [Elon] Yeah, I mean, I think something like...
42:35
Returning to the 100,000 a year
42:38
annualized demand for S and X
42:40
is what we anticipate.
42:43
That's to the best of my knowledge.
42:45
We don't have a crystal ball,
42:46
but that's probably our best guess,
42:49
and sorry, what was the other point?
42:55
- [Pierre] Yes, my question was that
42:57
at the run rate of demand you see at the moment,
42:58
do you still feel like weak demand in the U.S.
43:03
because of the pull forward in Q4,
43:06
or do you think demand returned to normal already?
43:10
- [Elon] I think we expect demand to,
43:13
we are seeing demand returning to normal in Q2,
43:17
and it might be a little better than normal.
43:21
I don't have a crystal ball, so it's hard for me to say,
43:23
but my impression right now
43:26
is that demand is quite solid,
43:30
quite strong, yeah.
43:33
- [Pierre] Okay, and then my second question was,
43:37
briefly on the--
43:39
- [Elon] Sorry, Zach (mumbles) would like to...
43:44
- [Zach] Yeah, well, just one thing I wanted to add to that,
43:46
just on the production side of S and X,
43:48
we did reduce production in Q1, as was noted.
43:52
That was part of the retooling that we put in place
43:55
to get the longer range vehicle out
43:58
with the improved suspension,
44:00
and we're in the process of increasing production back up
44:02
over the course of Q2,
44:04
so just for the purpose of expectations,
44:07
I mean, we will exit Q2 at a higher production rate
44:11
than we did in Q1 on S and X,
44:13
and then return back to a more normal volume in Q3.
44:17
- [Man] It's already high.
44:18
- [Zach] I mean, it's already increasing.
44:19
- [Man] Yeah, it's, yeah.
44:21
- [Martin] Okay, let's have that second question.
44:23
- Could this-- - My--
44:25
- S/X, yeah, it's like, yeah, or buy an S/X, yeah.
44:31
- [Pierre] My follow-up was really on Q2,
44:33
like with 90 to 100,000 units,
44:36
you're getting back to fairly nice volumes,
44:39
and I'm surprised you don't, you still expect a loss,
44:44
so maybe if you could take us through
44:46
where we will see in Q2 pain points
44:49
compared to Q4 and Q3,
44:51
where you had a profit for similar
44:55
similar volumes.
44:57
How much of the loss in Q2
44:59
would be one-off costs,
45:02
how much is price points coming down
45:07
in the mix,
45:08
and how much is related to pricing and other things?
45:13
- [Elon] Sure, so quite a bit
45:17
that we think if we didn't unwind or pull the wave,
45:21
where we make cars
45:26
in the first half of the quarter
45:28
almost exclusively for Asia and Europe,
45:30
and in the second half almost exclusively for North America,
45:35
and then actually, even that is subdivided
45:38
depending on whether it's West Coast or East Coast,
45:42
then we could deliver more cars,
45:44
but we think it is important to unwind this wave
45:48
because it ends up being sort of optimizing
45:52
for one quarter,
45:54
but really adding a lot of cost and difficulty,
45:58
and not just, not being a good experience for customers
46:04
and putting great stress on Tesla's team,
46:06
so
46:09
if we're to fully optimize for profitability in Q2
46:12
I think we could do it,
46:13
but then we would be unable
46:15
to unwind this crazy wave of deliveries,
46:19
and it also helps our working capital within the quarter
46:23
to not have the wave,
46:26
and then, Zach,
46:28
do you wanna talk to some of the other items?
46:30
- [Zach] Yeah, no.
46:30
I think you summarized it well, Elon.
46:33
Two other things that I would add.
46:35
One is that we did make pricing adjustments
46:37
to our products in Q1,
46:39
which puts pressure on margin,
46:43
and so that's part of what we will see in Q2.
46:46
The teams are working extremely hard,
46:48
and making terrific progress
46:50
on improving the cost efficiency of the business
46:52
without sacrificing growth,
46:55
and that, in combination with the efficiencies
46:58
from unwinding the wave,
47:00
is where we feel we'll be comfortable
47:03
returning to a place of profitability in Q3
47:05
once all of those pieces are in place.
47:09
- [Pierre] Thank you.
47:10
- [Martin] Thank you very much.
47:11
Let's go to the next question.
47:12
- [Sherry] Our next question
47:13
is from Adam Jonas with Morgan Stanley.
47:18
- [Adam] Thanks.
47:19
First question, Elon, a couple days ago I asked you
47:22
how safe is the Autopilot technology,
47:25
and you said something like twice as safe as normal driving,
47:29
but you seem to be in a really unique position
47:31
to really collect exabytes of data.
47:34
You could potentially be externally validated,
47:37
much more rigorously provided
47:39
to a regulatory body or insurance institute
47:41
to just show how much safer Autopilot is.
47:43
When could we expect to see Tesla do that,
47:48
that type of validation
47:49
that investors could also get a sense of?
47:51
It seems really, really important for adoption.
47:53
Thanks, and I have a follow-up.
47:57
- [Elon] I think we're just gonna continue
47:59
to report the absolute numbers,
48:02
but I think reporting of details
48:05
just gives those who are opposed to Tesla,
48:10
they sort of like data-mine the situation
48:13
and then try to turn a positive into a negative,
48:16
so we're just gonna keep reporting what we report.
48:19
We do give some more detailed information
48:21
to insurance companies
48:24
to help with rates,
48:26
and obviously,
48:28
as we launch our own insurance product next month
48:31
we will certainly incorporate that information
48:33
into the insurance rates,
48:36
so we essentially have
48:38
a substantial price arbitrage
48:41
or information arbitrage opportunity,
48:43
where we have direct knowledge
48:45
of the risk profile of customers
48:49
based on the car,
48:50
and then, if they wanna buy Tesla insurance
48:52
they have to agree to not drive the car in a crazy way,
48:56
or they can, but then the insurance rate's higher,
49:02
so we're just gonna keep reporting the numbers
49:06
at a broad-brushstroke level,
49:07
which I think is really what matters.
49:12
Autopilot on, Autopilot off, - Okay, I understand it.
49:13
- [Elon] that's the safety.
49:16
- [Adam] Okay, and just to follow up, Elon,
49:19
and you kind of alluded a little bit,
49:20
is there's just so much drama
49:24
around Tesla's share price and quarterly results.
49:27
From the outside, at least,
49:28
it just looks like a huge distraction,
49:31
and at the same time there's so much alternative capital
49:34
and large amounts of strategic capital
49:36
that is incrementally deployed
49:39
in domains where Tesla has real leadership,
49:42
so how important is it for Tesla
49:44
to be a publicly traded company, Elon?
49:49
(executives chuckling)
49:51
- [Elon] Well, mate, I don't wanna surprise you,
49:53
but I would prefer we were private,
49:59
but unfortunately I think that ship has sailed, so...
50:05
- [Adam] But is it important?
50:06
I mean, do you think the company's value
50:08
is maximized being public,
50:12
or is it just there's only so much you can do,
50:14
and you just gotta play the hand that you're dealt?
50:18
- [Elon] Well, it being public does feel like
50:23
the price of the stock
50:25
is being set in kind of a manic-depressive way,
50:28
and I think Warren's Buffett's analogy is just like
50:33
perhaps being a publicly traded company
50:34
is like having someone stand at the edge of your home
50:39
and just randomly yell
50:41
different prices for your house every day. (chuckles)
50:44
Still the same house,
50:48
so it's a bit of a distraction at times,
50:55
but I'm not sure what to do about it.
50:59
- [Adam] Okay, I understand.
51:01
Thanks.
51:02
- [Elon] Back to you.
51:03
- [Sherry] Thank you.
51:04
Our next question comes from Maynard Um with Macquarie.
51:08
- [Maynard] Hi, thanks.
51:09
In your update letter you talked about
51:11
supplier limitations impacting production.
51:14
Can you just talk about what that was
51:14
and how long you think than might continue to impact you?
51:18
And then I have a follow-up.
51:22
- [Man] Elon.
51:23
- [Elon] Oh, in Q2 we think we are through
51:27
supplier interruptions.
51:29
At least there aren't any significant ones
51:30
that we're aware of.
51:35
- [Maynard] Okay, and I guess
51:38
there was some concern out there
51:39
that Model 3 was cannibalizing S and X,
51:43
despite them being all different vehicle classes,
51:45
and it doesn't sound like you're seeing that at all,
51:47
but I was just wondering if you had any evidence
51:49
that proves or disproves this.
51:51
Any thoughts there would be helpful.
51:52
Thanks.
51:55
- [Elon] They really do seem to be
51:56
different market segments, yeah.
52:01
- [Zach] And also, about only 3 1/2% of our trade-ins
52:05
for Model 3 are coming from Model S,
52:09
so it's from all the Model 3 trade-ins,
52:11
Model S accounts for a super-super-tiny portion.
52:14
- [Elon] Yeah, for sure.
52:15
People who've bought a Model S just wanna trade it in
52:17
for another Model S, or maybe an X.
52:23
- [Martin] Okay, let's go to the next question, please.
52:25
- [Sherry] Thank you.
52:26
Our next question comes from Dan Galves with Wolfe Research.
52:31
- [Dan] Hey, thanks, everybody.
52:35
Got a couple questions.
52:36
One, you mentioned a $50,000 ASP
52:40
for North America Model 3s.
52:44
Can you give us a little bit more detail on kind of
52:47
is that a number
52:48
since the February 28th price adjustments?
52:53
Is that what you're seeing as order flow?
52:55
I mean, I'm sorry, is ASPs in the current order flow
52:58
since those price adjustments?
53:01
- [Zach] Yes, this is Zach.
53:03
I mean, what we saw on February 28th,
53:05
when we launched the Standard Range
53:07
and Standard Range Plus variants,
53:10
is that there was pent-up demand for those products
53:12
that released very quickly after it was announced,
53:15
and then, as more time has passed
53:18
and order rates have stabilized, it's starting,
53:22
the average ASP has actually been increasing
53:25
each week ever since as the order rate stabilizes,
53:28
and just under 50,000 ASP represents the most recent data,
53:33
and we think it's starting to stabilize there,
53:36
and we'll see where things trend
53:40
in EMEA and China as well,
53:42
but what we're seeing in North America
53:44
is that over 50% of our orders
53:47
are for the Long Range variants,
53:48
and the ASPs are holding up.
53:52
- [Dan] That's really helpful, and the follow-up is,
53:55
I know order questions have been asked before,
53:58
but let me put it this way.
54:02
I imagine that S and X orders
54:04
need to have a couple of days to pick up after the upgrades,
54:09
but on Model 3, whatever your assumption is
54:12
within the 90 to 100K Q2 deliveries,
54:16
whatever that assumption is for Model 3,
54:18
does your current order flow support that,
54:20
or do you need something kind of positive to happen
54:23
over the course of the quarter to get there?
54:32
- [Elon] I think we'll be fine.
54:33
Yeah, I don't think that there's any major thing required.
54:38
- [Dan] Okay, thanks a lot, guys.
54:41
- [Sherry] Thank you.
54:42
Our next question comes from Toni Sacconaghi with Bernstein.
54:47
- [Toni] Yes, thank you.
54:49
Elon, I was wondering if you could talk about
54:52
this whole notion of raising capital.
54:56
For about the last year you sort of eschewed it
55:00
as almost an evil thing,
55:04
and I think a lot of investors believe that the company
55:07
might be better served in its growth aspirations
55:11
if it did raise capital or had a stronger cash base,
55:16
and given that you used up
55:19
about $2 billion worth of cash in the quarter,
55:22
aren't you potentially trying
55:26
to go through a very thin space
55:30
while trying to grow quickly and be self-funding,
55:34
which, quite frankly, may be unrealistic,
55:37
so why not raise capital,
55:40
and why do you view that as something
55:44
that Tesla shouldn't do or wouldn't do?
55:47
And I have a follow-up, please.
55:51
- [Elon] Yeah, I mean, I don't think raising capital
55:53
should be a substitute
55:54
for making the company operate more effectively,
55:58
so in that sense I think it just is important
56:01
to have strong financial discipline at the company,
56:03
and just to make sure we don't have extraneous expenses,
56:08
and that we're just being frugal with capital.
56:12
If we just keep raising capital every time,
56:14
then
56:18
we don't have the forcing function
56:19
for improving the fundamental operation of the business,
56:22
so I think it is healthy
56:23
to be on a spartan diet for a while.
56:29
At this point I do think
56:31
there is some merit to raising capital,
56:38
but this is sort of probably
56:40
about the right timing, but yeah.
56:47
- [Toni] Does that mean that investors
56:50
should expect a capital raise in the near to medium term,
56:53
and I hear you on the forcing constraint,
56:56
but I mean, growth does eat cash,
56:59
especially in a capital-intensive business,
57:01
and if you really do believe
57:02
you have a first-mover advantage
57:04
why wouldn't you wanna push it as quickly as possible,
57:07
even if it meant raising capital in the short term?
57:14
- [Elon] Yeah.
57:15
First of all I should say
57:16
I don't think that capital has been a constraint
57:18
on our growth thus far,
57:20
and if I thought
57:20
there was a fundamental constraint on growth
57:22
we would have raised capital before now,
57:26
but I think it is very important as the company scales
57:28
to make sure we are on a solid foundation
57:31
and that we have the appropriate financial discipline
57:35
throughout the company
57:37
and are spending money very efficiently.
57:41
At this point, I think we are doing that.
57:44
Not that there isn't more work to do,
57:46
but I think Tesla today
57:48
is a far more efficiently operating organization
57:51
than it was a year ago.
57:53
We've make dramatic improvements across the board,
57:56
and so I think there's merit
57:58
to the idea of raising capital at this point.
58:02
- [Zach] Just to add to that,
58:04
that the journey we've been on for the last 12 to 18 months
58:08
on being more efficient in how we've spent money,
58:10
and how we spend money,
58:12
has really changed the culture inside the company.
58:15
It's enabled us to accelerate a number of cost reductions
58:19
on the COGS side of our products,
58:21
and then make improvements in operating expenses as well,
58:25
and then, as we look forward to capital investments
58:29
for Giga Shanghai, and Model Y,
58:31
and ultimately a European facility,
58:33
our capex capacity has come down significantly
58:37
through the work from the team here,
58:39
so I think it has been a very productive journey for us.
58:43
- [Elon] Technically, we did raise some dead capital
58:45
in China for the Shanghai Giga on the order of $500 million,
58:49
so we wanted to make sure
58:54
that we don't have to draw upon Global Capital's fund
58:59
for the Shanghai factory.
59:02
- [Martin] Thank you,
59:02
and let's go to the next question, please.
59:04
- [Sherry] Thank you.
59:05
Our next question comes from Alex Potter with Piper Jaffray.
59:09
- [Alex] Hi, guys.
59:11
Was wondering, when you say, obviously,
59:13
the logistical challenges were a headwind in the quarter.
59:17
You talk about trying
59:18
to regionally balance your deliveries going forward.
59:20
Is that basically saying that people in Europe and China
59:25
are just gonna need to wait longer to take their deliveries,
59:28
and you're gonna try to emphasize more North America
59:30
in order to, I guess, boost your working capital
59:33
and your profitability in every quarter going forward?
59:36
- [Elon] No, they would actually receive their cars sooner.
59:39
It just means that
59:41
instead of building cars in batches,
59:45
where, say, the first half of the quarter
59:48
is just dedicated to China/Europe cars
59:50
and the second half is dedicated to North American cars,
59:52
that we blend vehicle production
59:56
for customers throughout the world, throughout the quarter,
60:03
and that this puts much less strain on the system.
60:05
We don't want a situation, again, like we had,
60:07
like in Q1,
60:09
where essentially all the cars
60:13
were arriving at customers worldwide at the same time.
60:17
We literally delivered
60:18
half of the entire quarter's deliveries
60:20
were in the final 10 days of Q1.
60:23
That's insane, (chuckles)
60:25
so I think we need to unwind that.
60:29
It's also just not a great customer experience
60:31
'cause we're shorthanded,
60:33
and then we have to redeploy people
60:37
that are working in sales, HR, legal, engineering, everyone,
60:42
just to deliver cars,
60:43
and then they can't do their regular jobs,
60:48
so it just makes sense
60:49
to just blend the production
60:53
according to demand throughout the quarter.
60:57
- [Alex] Okay, that makes sense.
60:59
Then the second question, I guess, on go-to-market.
61:02
There was some period of time there
61:04
where the company was focused on closing storefronts,
61:06
a fair amount of noise made around that,
61:08
and then it looked like some of the commentary
61:09
was hedging that strategy.
61:12
Was just wondering if there's any update there,
61:15
and if you have one, that'd be helpful.
61:17
Thanks.
61:19
- [Elon] Sure.
61:21
I think, I mean, Tesla, I suppose, specifically,
61:26
I didn't handle the messaging of that well,
61:31
and then that's amplified by a statement
61:34
we make a statement as sort of taking to an extreme
61:38
or there's a misunderstanding.
61:40
We certainly will continue to have stores,
61:44
and we will continue to add stores,
61:47
provided they are in locations
61:49
where there is high foot traffic
61:52
and for people
61:56
that are in our target market,
61:58
so we actually will continue to add stores
62:01
in locations that are no-brainers,
62:03
but we will close stores
62:06
in locations where they are incredibly hard to find
62:11
and the foot traffic of potential buyers is very low,
62:15
such that it does not support
62:18
the cost of the store and the people in it,
62:21
so I think this is just common sense,
62:24
and then all sales online just means
62:26
that even if you go into a store
62:30
we guide you to order the car on your phone,
62:35
so the store's essentially,
62:36
they're like information centers,
62:38
a place you can get a test drive
62:42
and buy some Tesla merchandise, that kind of thing,
62:46
but all sales online, it doesn't mean all stores are closed.
62:48
It just means that when you buy a car
62:51
you always do it on your phone in the store,
62:54
or at home, or anywhere.
62:57
People took all orders online
62:58
to mean all stores are closing.
63:01
That's not what's meant.
63:04
- [Alex] Okay, very good, thanks.
63:07
- [Sherry] Thank you.
63:08
Our next question
63:09
comes from Philippe Houchois with Jefferies.
63:13
- [Philippe] Yes, thank you for taking the question.
63:16
I was just wondering if you can comment
63:17
on the agreement you seem to have reached with FCA
63:21
on the possibility
63:22
of selling your CO2 credits to them in Europe
63:27
and what that means to your potential cash inflow,
63:31
when that might start occurring,
63:34
and if there is, by any chance,
63:36
any of those terms are in the Q1 cash position?
63:41
- [Elon] This is a confidential deal with FCA,
63:45
and we agreed with FCA not to comment on it publicly,
63:48
so we must abide by that.
63:51
- [Philippe] All right, and can I ask you a question of,
63:54
going back to what Adam was saying,
63:55
about the drama that surrounds your stock, unfortunately?
63:59
Why don't you reduce some of it by disclosing,
64:01
maybe on a monthly basis, your deliveries,
64:04
and also maybe disclosing early
64:07
your greenhouse revenues that are just reserved
64:10
so we get, right away,
64:12
a better view on some of these details
64:15
that kind of move the stock?
64:19
- [Elon] I think that would actually be counterproductive
64:21
because people read too much into what occurred in a month.
64:24
I mean, even at a quarterly basis things can be lumpy,
64:28
and so the more granularity
64:32
that's provided, let's say at a monthly level,
64:35
the people would reach all sorts of conclusions
64:38
that don't make sense.
64:40
It's literally like sales to a particular country,
64:45
say, overseas, are affected by when the ship arrives,
64:50
and so if a shop arrives on the 31st of the month
64:55
or the 1st of the next month,
64:57
this will make it look like something dramatic has happened,
64:59
but actually the ship was just a day late,
65:02
so that would increase the problem and not decrease it.
65:06
- [Zach] And we're filling the ships 100% in--
65:08
- [Elon] I agree.
65:10
- [Philippe] All right, we're all set, thank you.
65:11
- [Elon] Filling the ships 100%,
65:12
so it just ends up being lumpy,
65:19
so like if you calculate it like GDP
65:25
of a country, say, of the U.S.,
65:28
GDP on Sunday is extremely low.
65:31
GDP on Monday is extremely high. (chuckles)
65:34
That does not mean,
65:35
nothing's really changed.
65:39
- [Martin] 'Kay, thank you.
65:40
Let's go to the next question.
65:41
- [Sherry] Thank you.
65:42
Our next question comes
65:43
from David Tamberrino with Goldman Sachs.
65:46
- [David] Great, thanks for taking our questions.
65:49
First one, on customer deposits,
65:51
it looks like it's essentially flat, maybe slightly down.
65:54
I understand there's probably some timing with deliveries
65:56
that could have helped it towards the end of the quarter,
66:00
but we would have thought that it would have increased
66:01
given the Model Y unveil,
66:03
so our question is
66:04
what was the initial order intake for the Model Y,
66:08
and just coming through some of your comments earlier,
66:10
what daily order rate are you seeing right now
66:12
for the rest of your products?
66:16
- [Elon] I think we don't wanna comment
66:17
on the granularity of deposits.
66:19
Again, people just read too much into this.
66:22
We're not playing up the Model Y
66:24
because it's not in production,
66:26
so you can't really read anything into Model Y orders
66:29
at this point.
66:33
- [David] Okay, well then my second question would just be
66:36
if you anticipate a further price adjustment
66:38
with the next level of U.S. credit phasing out July 1st.
66:42
- [Elon] We don't comment on future price changes
66:45
unless you see it publicly.
66:49
- [Martin] Okay, let's go to the next question, please.
66:51
- [Sherry] Thank you.
66:52
Our next question comes from Colin Rusch with Oppenheimer.
66:56
- [Colin] Thanks so much.
66:57
Could you comment on whether you'll be better constrained
66:59
at 100,000 vehicles a quarter in 2Q?
67:05
- [Elon] Self-constrained, you mean?
67:07
We don't anticipate - Yeah.
67:08
- [Elon] being self-constrained at 400,000.
67:11
- [Colin] Okay, and then,
67:12
as you look at the Maxwell Technology integration,
67:15
post close, how quickly do you think you'll be able
67:17
to integrate that technology into the battery production,
67:19
and could you comment on potential
67:21
for chemistry and form factor changes
67:24
as that gets integrated?
67:26
- [Elon] I mean, you're really asking
67:27
some secret sauce questions here.
67:30
Yeah, I think we'll have a
67:33
I think we'll probably have an Investor Day
67:36
like we had Autonomy Day
67:38
maybe later this year or early next,
67:41
just to go over
67:43
the cell and battery technology
67:47
and future strategy,
67:49
and I think that'll be very informative,
67:51
but we do recognize the criticality of this.
67:55
- [Colin] Okay, thanks so much, guys.
67:57
- [Elon] Thanks.
67:58
- [Sherry] Thank you.
67:59
Our next question comes
68:00
from Joseph Spak with RBC Capital Markets.
68:04
- [Joseph] Thanks.
68:05
First question is really
68:06
just a clarification on the outlook,
68:07
the 25% non-GAAP gross margin that you're targeting.
68:10
Is that over the mid-term,
68:12
or is that something you expect to hit
68:14
by the end of this year,
68:16
and if so, what gets S and X back higher
68:19
given the price cuts?
68:22
- [Zach] Yeah, this is Zach here.
68:23
That's guidance that we're targeting
68:25
for the end of the year,
68:26
although internally we're working towards
68:30
S and X non-GAAP gross margin, achieving that sooner.
68:35
The biggest lever there, it's kind of two components.
68:37
One is, as we increase volume back
68:40
on our S and X production lines
68:43
there's just a natural benefit there
68:44
from the fixed-cost absorption, which will help us,
68:47
but we also have a number
68:48
of cost-reduction projects in place
68:50
that we're executing on over the course of the year,
68:52
and then the third piece,
68:54
which applies to S and X, but also Model 3,
68:57
seeing an increased take rate
68:58
on our full self-driving offering,
69:00
and there are revenue deferrals associated with that,
69:03
given that the full suite of functionality's not there,
69:06
and as that option becomes,
69:10
approaches feature complete and we roll out more,
69:12
we'll be able to collect more revenue on that,
69:16
and so all of those things together,
69:17
within our internal plans, gives us confidence.
69:20
- [Elon] Yeah, we should first mention
69:22
that the upgraded power train for S and X
69:26
was actually launched in a significant cost-down,
69:31
because we essentially took
69:32
the high-volume rear-drive units
69:36
of the Model 3, which is extremely efficient,
69:39
the semi-permanent magnet motor,
69:41
and power electronics, and everything,
69:43
and we made a version of that
69:48
for the front-drive unit of the S and X,
69:52
so we're actually able to get a cost reduction
69:56
while improving range and performance of the car.
69:59
That's just one example.
70:02
- [Joseph] Okay, and the second question is
70:04
just looking at the 10-K,
70:07
you've concealing notice $4.9 billion purchase obligation,
70:11
which I think is primarily related to Panasonic at Giga 1,
70:14
and then Elon, in some of your communication
70:16
you've indicated production constraints.
70:18
I guess the question is
70:19
does that 4.9 billion correlate
70:22
to reaching that 35 gigawatt-hour rate,
70:24
and if you can't hit that because of production constraints,
70:28
does that adjust?
70:37
- [Man] Yeah, this (mumbles),
70:39
so the purchase obligation, the 10-K,
70:41
is basically for the entire contract
70:43
which we have for Panasonic.
70:45
It's not something that we need to hit,
70:47
I mean, make the purchases tomorrow,
70:49
so this is gonna take a couple of years.
70:54
- [Joseph] Okay.
70:59
- [Sherry] Thank you.
70:59
Our next question comes from Colin Langan with UBS.
71:03
- [Colin] Oh, great.
71:04
Thanks for taking my question.
71:06
I mean, it sounds like, from the tone of the call,
71:07
that you don't see that there's a demand issue
71:09
for some of the products,
71:10
but margins seem to be under pressure,
71:14
and typically automakers cut pricing
71:16
when there is a demand issue,
71:17
so what is the logic of the price cuts during the quarter?
71:24
- [Elon] I mean, our goal, as we've been very clear about
71:27
from the beginning of the company,
71:28
is to make our cars as affordable as possible
71:33
and we thought it was important
71:35
to offer the $35,000 Model 3
71:39
and then to create a sort of a bundled package
71:41
for the Model 3 with the increased range,
71:46
'cause we think, actually,
71:47
that difference between 220 and 240 is quite important,
71:50
and more important than people realize, in range,
71:53
and having a posher premium interior,
71:56
and then bundling Autopilot,
71:58
so we thought this,
72:00
like we wanted to create a product
72:01
that really just nails the sweet spot,
72:03
which I think
72:04
the $39,500 Model 3
72:09
just really nails the sweet spot,
72:11
and we're seeing consumer response accordingly,
72:13
and people can still buy the $35,000 version of the Model 3
72:17
that, of course, doesn't have Autopilot,
72:21
and has a software range restriction, that kind of thing.
72:24
It's like slightly more inconvenient to buy.
72:26
You just have to make a phone call or visit a store,
72:29
so it's not like you have to complete
72:33
some obstacle course or something,
72:39
but we see very few people
72:41
actually taking us up on that $35,000 offer,
72:44
but it is there and will remain there.
72:47
- [Colin] As a follow-up,
72:49
you're still targeting the China facility ramp
72:52
by the end of the year.
72:53
Are you still confident in the 3,000 per week,
72:55
and do you have a battery supplier yet,
72:58
'cause it's getting pretty close to the point?
73:03
- [Elon] Yeah, the Shanghai Gigafactory progress
73:07
is going incredibly well,
73:09
a testament to the outstanding execution
73:10
of our team on the ground there.
73:13
I get daily e-mails
73:15
with delta pictures from one day to the next
73:19
from Tom Zhu, who leads the Gigafactory program,
73:24
and so I'm literally discussing it,
73:28
or getting updates seven days a week,
73:31
so the midnight Gigafactory e-mail,
73:36
but so in terms of execution it's outstanding,
73:39
but of course the production
73:41
goes as fast as the slowest item.
73:43
This is always very important to bear in mind,
73:45
so we have 99% of things in good shape,
73:49
but 1%'s missing you still can't make the car,
73:51
so with respect to,
73:56
with that said,
73:57
it looks like we'll reach volume production
74:00
at the end of this year with,
74:03
let's say more than 1,000 cars a week, maybe 2,000,
74:07
from Shanghai Giga at the end of this year.
74:11
That's what it looks like to be the case right now.
74:14
If it's not then it'll be shortly thereafter,
74:17
and then we expect to have multiple sales flyers
74:22
for Shanghai Giga.
74:25
- [Martin] Great, thank you very much, everyone.
74:28
Unfortunately, this is all the time we have
74:29
for Q and A today.
74:31
Appreciate all of your questions,
74:33
and we look forward to talking to you in the next quarter.
74:37
- [Sherry] Ladies and gentlemen,
74:38
thank you for participating in today's conference.
74:40
This concludes the program.
74:41
You may all disconnect, and have a wonderful day.
74:48
(mellow funky music)

 

[Silicon Desert]

From Tesla.com/autopilot

I wonder when they are going to remove that line, and what issues it will cause when they sold people cars with radar for 4.5 years and they disable it in a SW update and it can no longer see the car ahead.

yes, that will be interesting, BUT present thinking is the radar won't be disabled in existing cars. Just to be used for a little different purpose. It's actually surprising to me that camera vision alone can determine distance to a car in front (not precisely, but good enough). Think about it a minute. You people are pretty smart and will figure it out.

 

[gearchruncher]

I don't even remember them saying "Hey, our radar bounces under the car ahead of you and can see the car ahead of him"

The "see under the car" is right on Tesla's Autopilot description page as a reason for having radar. It's one of the primary functions:.

A forward-facing radar with enhanced processing provides additional data about the world on a redundant wavelength that is able to see through heavy rain, fog, dust and even the car ahead.

 

[Soda Popinski]

yes, that will be interesting, BUT present thinking is the radar won't be disabled in existing cars. Just to be used for a little different purpose. It's actually surprising to me that camera vision alone can determine distance to a car in front (not precisely, but good enough). Think about it a minute. You people are pretty smart and will figure it out.

Pseudo-Lidar may do it, but I'm not sure how accurate it is at distance, though having cm level precision probably isn't important at greater than 10 meters.

Skip to 22:13 in Karpathy's talk to see it.

The "see under the car" is right on Tesla's Autopilot description page as a reason for having radar. It's one of the primary functions:.

I, too, worry about losing that functionality. I'm guessing Tesla couldn't get sensor fusion working, or at least it was too complex to train. We know Radar has previously lead to false positives and phantom braking, so wouldn't be surprised if they couldn't get rid of phantom braking without getting rid of Radar. If that's the case, is it safer with occasional rear end accidents from behind due to phantom braking with Radar included, or occasional rear-end accidents in front due to not detecting the car in front of the car in front stopping?

 

[gearchruncher]

BUT present thinking is the radar won't be disabled in existing cars.

So they are going to run two software versions, one for cars with radar, one for those without. And those with radar will perform better? But they don't need radar?
It really makes zero sense for them to do anything with the radar on old vehicles if they believe they are at the point they can remove the hardware from new ones.

 

[Silicon Desert]

So they are going to run two software versions, one for cars with radar, one for those without. And those with radar will perform better? But they don't need radar?
It really makes zero sense for them to do anything with the radar on old vehicles if they believe they are at the point they can remove the hardware from new ones.

Good thought, but no I didn't say that I think you know that a product can have one set of software that takes advantages of varying features between different versions and releases of the same product. I've done it for years in various products. And Tesla has also been doing it. I'll add that it is NOT a long term solution.

 

[gearchruncher]

Good thought, but no I didn't say that

If the are not disabling it on existing cars, what function does it provide, and why do new cars not need that function but old ones do? Is Tesla really going to release a new car with less AP safety / functions than previous cars? "Why didn't my car start braking for the line of traffic ahead?" "Oh, you don't have a car with radar"

Elon is full on that vision is the only thing needed- why would Tesla continue using radar just because it's there? Isn't his best way to prove how good and committed they are to vision only is to turn off radar on the 1M vehicles they have with radar?

 

[Silicon Desert]

you'll see the answer to your questions soon enough and then it will make sense. This can go back and forth forever.

 

[gearchruncher]

you'll see the answer to your questions soon enough

LOL. I assume we're talking Elon "soon enough" I'd bet my Tesla shares that Tesla is still putting radar on cars a year from now, and this is another one of Elon's first principles future looking hopes and dreams.

Also, if you believe Tesla will still be using radar in v9.0 for cars that have it, it means you don't belive Elon when he says something. He could not be more clear that radar is not used in the v9.0 release:

https://twitter.com/x/status/1380599694154362882