Q3 2015 Report & Conference Call

[AmpedRealtor]

Jerome officially out or just speculation?

Just listened to the recorded call... Jon McNeill is "head" of Global Sales & Service according to Elon, but Jon signs his Tesla emails as "President, Global Sales & Service" based on the email that Bjorn Nyland posted on Facebook. We can all probably guess Jon's email address. I wonder if he will bother responding to owner issues like Jerome. I would tend to doubt it, as it's been said that one of the reasons why Jerome moved on was because he was stretched too thinly.

 

[ItsNotAboutTheMoney]

So you are suggesting that the $145/kWh price from LG is a cross-subsidized price based on packaging in other components? I just want to make sure I understand what you're saying.

I'm arguing that it _could_ be, which is why I don't consider the number especially meaningful and after initially being excited.

When Tesla was negotiating with Samsung there was talk that Samsung wanted to tie an infotainment deal in with the cells. In the case of the Bolt, LG isn't just supplying the infotainment system, it's supplying _all_ of the valuable electronics and electrical. That gives them room to concede on the big headline price, get partners interested and go big on PR.

When it comes to automotive cells and batteries there is simply no definitive pricing information out there.

 

[jhm]

I'm arguing that it _could_ be, which is why I don't consider the number especially meaningful and after initially being excited.

When Tesla was negotiating with Samsung there was talk that Samsung wanted to tie an infotainment deal in with the cells. In the case of the Bolt, LG isn't just supplying the infotainment system, it's supplying _all_ of the valuable electronics and electrical. That gives them room to concede on the big headline price, get partners interested and go big on PR.

When it comes to automotive cells and batteries there is simply no definitive pricing information out there.

Great. Thanks for the background. I guess this would pose difficulty for scaling up battery production and improving size of battery per car. $147/kWh is not a great price if you can't scale it.

 

[Roamer]

Yeah, I hope it is just an issue with my car. Sometimes it becomes unavailable in heavy rain such as last night.

I've been using TACC on my commute since I got the car in March. And it just feels wrong not to have it available. I was just getting hooked on Autosteering too. I guess I'm going through AP withdrawl.

Also check your front bumper sensor. Dead bugs can disable the system.

 

[jhm]

Also check your front bumper sensor. Dead bugs can disable the system.

Thanks for the tip. There was a leaf covering part of the radar, but removing that did not resolve the problem. Hopefully the service folks can solve this easily. It would sure be nice if the AP software had diagnostics to tell you which sensors are not working right.

 

[Robert.Boston]

Here is my take....

1)If they reduce the 50K number to below 50K, the stock will tank
2) If they keep the 50K number but admit of Model X ramp behind schedule, stock will tank
3) If they keep the 50K number and say Model X ramp to really start Late Q4 stock will hold steady or decline slightly (eg. nothing new from last quarter's call)
4) If they keep the 50K number and say Model X ramp, no problems, ramping late Q4 as stated in last quarter, stock may rise
5) If they exceed 50K number and admit no problems with Model X ramp and admit healthy Model S demand, stock will rise
6) If they keep the 50K number and say Model S demand solid, Model X demand higher than anticipated, stock will rise

anyway...my guess is on option #2. Probably I'm wrong but oh well

One thing I would LIKE to see, as a shareholder, is a little bit more ENERGY in the conference call. If I recall last conference call was like attending a wake. ENERGY, please. Sound UP-BEAT. Not dead-body.

And Tesla chooses #6.

 

[Seattle]

Since they said they would deliver more model X in Q4 than they manufacture in Q4 (someone else reported "In Q4, we plan to build 15,000 to 17,000 vehicles, and deliver 17,000 to 19,000 vehicles"), this sounds like when they first ramped up the model S production but it was delayed because they were not getting parts in, and they had a bunch of cars almost done sitting around waiting for parts.

It sounds like could be building up a number of cars that are not quite finished. Maybe it was seats, since they are now making seats in-house. Maybe it was related to the surprising model x reduction of charging capacity (from 72 amps down to 48 amps). Maybe they added more sensors, like when they revamped the S last year and added the extra auto-pilot sensors. I hope its something exciting like more sensors being added that they haven't told us about, but it's more likely to be slow parts delivery.

Update - the earnings letter says they had trouble with the second row seats. I bet that explains the delayed deliveries.

 

[replicant]

What's your take on the last sentence of the shareholder letter?

We are looking forward to the day when we can tell you how far our cars have driven our customers, and to the introduction of many more innovative products manufactured and sold globally.

I don't want to pump up rumours like the hypothetical Uber-like service and English isn't my native tongue, but I find this quite intriguing for a closing remark.

"How far our cars have driven our customers"

Why would the number of miles matters to Tesla:

A) just the pride of building high quality cars
B) cost-savings on warranty from long-lasting drivetrains (and increased sales from a reputation of high reliability)
C) all the data sent by the fleet on autopilot, which helps Tesla build truly autonomous cars
D) new revenues from the rumoured on-demand service: if they release an app to request a drive, Tesla would be more interested in the total number of miles traveled than the number of cars produced.

"Many more innovative products manufactured and sold globally"

The company talks about "expanding the global sales capability" but, to my understanding, the aforementioned sentence also stresses on expanding its global manufacturing capability.

This isn't new, since Elon already talked and tweeted about future plans to build plants in Europe and Asia, and said in this letter, that it would make sense to build a gigafactory in India if current interest is confirmed.

"There is also an exciting market opportunity for us in India with strong government alignment that we look forward to growing in 2016". How would they grow this market opportunity as soon as 2016? Tesla Energy seems to have plenty of reservations from Hawaii, Australia, Germany and South Africa, so they could be negotiating the support of the Indian government and local state to build a gigafactory in the country, before delivering powerpacks there.

 

[Newb]

What's your take on the last sentence of the shareholder letter?

"How far our cars have driven our customers"

Why would the number of miles matters to Tesla:

A) just the pride of building high quality cars
B) cost-savings on warranty from long-lasting drivetrains (and increased sales from a reputation of high reliability)
C) all the data sent by the fleet on autopilot, which helps Tesla build truly autonomous cars
D) new revenues from the rumoured on-demand service: if they release an app to request a drive, Tesla would be more interested in the total number of miles traveled than the number of cars produced.

English is not my mother-tongue but I too found this very intriguing. Usually auto manufacturers would say "we're proud to share 'how far our customers have driven their cars'" (customer = driver). But the shareholder letter closes with "how far our cars have driven our customers" (!car = driver!). And then they say, they were "looking forward to" tell us about it. Well, they already do keep telling us how many billion miles Tesla cars have been driven. But instead they're looking forward to tell us how many miles Tesla cars have driven our customers. I might be wrong but this is a substantial and intriguing difference in the syntax and therefore meaning, isn't it?

And this would be in line with Tesla's long-term strategy to lead the autonomous driving in the future and eventually offering Teslas as paid services (what A. Jonas implied in his question). I think Jonas seems to know more about it and Elon knows that Jonas knows - that's why Elon was laughing on the phone when Jonas posed the question on the Uber-like services with autonomous Teslas.

I'm now curious to find out when Tesla will announce those plans in detail - I'm quite sure TSLA will skyrocket after such an announcement.

 

[ItsNotAboutTheMoney]

English is not my mother-tongue but I too found this very intriguing. Usually auto manufacturers would say "we're proud to share 'how far our customers have driven their cars'" (customer = driver). But the shareholder letter closes with "how far our cars have driven our customers" (!car = driver!). And then they say, they were "looking forward to" tell us about it. Well, they already do keep telling us how many billion miles Tesla cars have been driven. But instead they're looking forward to tell us how many miles Tesla cars have driven our customers. I might be wrong but this is a substantial and intriguing difference in the syntax and therefore meaning, isn't it?

And this would be in line with Tesla's long-term strategy to lead the autonomous driving in the future and eventually offering Teslas as paid services (what A. Jonas implied in his question). I think Jonas seems to know more about it and Elon knows that Jonas knows - that's why Elon was laughing on the phone when Jonas posed the question on the Uber-like services with autonomous Teslas.

I'm now curious to find out when Tesla will announce those plans in detail - I'm quite sure TSLA will skyrocket after such an announcement.

Tesla always mentions miles driven, so now with Autopilot delivered and a continuing commitment to improving autonomy they can make a little joke. It's really a throwaway line that shouldn't be analyzed.

 

[replicant]

English is not my mother-tongue but I too found this very intriguing. Usually auto manufacturers would say "we're proud to share 'how far our customers have driven their cars'" (customer = driver). But the shareholder letter closes with "how far our cars have driven our customers" (!car = driver!). And then they say, they were "looking forward to" tell us about it. Well, they already do keep telling us how many billion miles Tesla cars have been driven. But instead they're looking forward to tell us how many miles Tesla cars have driven our customers. I might be wrong but this is a substantial and intriguing difference in the syntax and therefore meaning, isn't it?

Ditto.

In my opinion, it's far too early to develop such a service (even more so to announce it). If Tesla wants to enter this market, I think they should start by doing the following:
- establish itself as the #1 car manufacturer "for individuals" in the US and in Europe
- increase production capacity for minimum 5M vehicles in these market (no fleet car yet)
- provide car owners with the right tools (SDK) to work for any on-demand / car sharing companies (Uber, Blablacar...)
- equip cars with tools to share trips (ex: split payment for trip cost, safety system with interior dash cam)
- work with network transportation companies so they can purchase their fleet of cars directly from Tesla (with custom option and paint job)
- let fleet operators use Autopilot provided that a professional driver is behind the wheel

Then, when the cars can be 100% self-driving, Tesla can release its service (owned and operated by them) that allows anyone to request a trip.

Other on-demand companies could purchase and operate an autonomous fleet but pay Tesla a fee for every mile driven. This platform would open to passengers and package delivery companies.

 

[Beckler]

I think during Jonas' question Musk should have, as he's done before about someone else, called him a huge d-bag.

 

[Drax7]

Today TACC was not available to me. My daily commute is all slow and go surface streets. I explicitly bought this car to aid me with this commute and paid good money for AP. I will take my car to the service center to find out what's going on. If Tesla has taken AP from me, I will be quite pissed.

Active safety is the real benefit, autopilot is not comprehensive yet.

 

[farzyness]

I think during Jonas' question Musk should have, as he's done before about someone else, called him a huge d-bag.

Why? I thought AJ's question was actually very insightful - I'm very happy there are analysts out there that are actually thinking about the long-term future of the company.

 

[jhm]

I think during Jonas' question Musk should have, as he's done before about someone else, called him a huge d-bag.

I am quite irritated with Jonas. He is focussed on his own vision of the future, and wants to be personally validated for this by Musk. Then if he gets this validation, he pumps the stock up adding in an Uber valuation. Or if he feels invalidated by Musk, he trashes the stock. So Musk has to be careful not to damage Jonas' fragile little ego. It's all very unprofessional and disgusting to watch.

The best analysts are the ones that focus on getting the story right and checking to see that the numbers add up. They don't conflate their own vision of where a company should go with where management actually sees it going.

In Musk's mind a Tesla autonomous car sharing strategy is not fully baked. Jonas OTOH has this fantasy strategy in is own mind and is not sufficiently self-aware to know this is is only half-baked. Knowing the best way for Tesla to participate in this future market is by no mean trivial to figure out. Knowing when to be a miner and when to sell shovels to miners is not always easy to know.

 

[CHGolferJim]

Good analysts need to bring value-added commentary on top of accurate reporting. Most companies are somewhat secretive and misleading in disclosures, so interpretation of what is really happening in the company and industry are important, ideally. Like many people, some get carried away with their cleverness........

 

[Citizen-T]

I think Jonas was just trying to take advantage of Elon's terrible self control when it comes to new product announcements. True, that's more of a button that a reporter should be pushing, but I don't think he was out of line. I think Elon's people need to step in sooner though.

 

[aznt1217]

I think Jonas was just trying to take advantage of Elon's terrible self control when it comes to new product announcements. True, that's more of a button that a reporter should be pushing, but I don't think he was out of line. I think Elon's people need to step in sooner though.

I believe so also, but I think what needed to be said was good in terms of having an idea in the oven. Adam Jonas should know that with Tesla literally anything is possible so long as it is in line with the mission of accelerating the world to sustainable transportation. If having an Autonomous driving service will help cut carbon emissions (which it absolutely will) then it's on the table. The only thing that needs to be figured out is what is the most efficient way to execute. Should Tesla do this? Should Uber do this?

For me, I think Tesla will continue to improve the hardware and leave an Uber or Lyft (with the installed customer base and experience with pricing/regulations/UI) to buy the cars and mapping software tech. Obviously things will change. It's just that Tesla needs to be laser focused on getting Model 3 out and getting company to a healthier financial position to the point where they won't need external financing and such.

 

[tftf]

I think during Jonas' question Musk should have, as he's done before about someone else, called him a huge d-bag.

You do know who handles Tesla'a capital rounds?

There's another huge one coming in 2016 imho.

Don't bite the hand that feeds.

 

[austinEV]

I think Jonas was just trying to take advantage of Elon's terrible self control when it comes to new product announcements. True, that's more of a button that a reporter should be pushing, but I don't think he was out of line. I think Elon's people need to step in sooner though.

I actually appreciated the line of questions even if he was pugnacious. He was right after all, it is uncharacteristic for Elon to punt. I am glad he asked the question again too, because he learned what he wanted to learn and we all learned something. In the Q2 call when he said no comment to the Uber model, I kind of ignored it. I took it as a "maybe, someday. maybe we will partner with Uber. I just don't want to talk about it". This time Elon's refusal to talk about it sounded much more to me like he is serious about it. I mean, if he is dedicated to 100% autonomous driving, then dispatch software is a relatively simple add on. So, now we can conclude that that is Elon's plan and adding in valuation for that is reasonable.