Though I have no idea how the market will react short-term, I thought this was quite an encouraging call. My takeaways from the call and the shareholder letter,
New Positives
- Semi goals ambitious near term... 4 years out 100,000 per year, possibly more (IIRC, total US market, roughly 250K per year... so, perhaps something like 20% US market share in just 4 years, balance shipping to ROW) While, we could envision such a large opportunity for the Tesla Semi, this is the first explicit indication of how quickly Tesla thinks the industry will be ready to go from testing to wide adoption (and how quickly they see their capacity to ramp production).
- Model Y may aim for as much as 1 million per year (sounded as though meant 1 million at initial production plant), Model 3 at Fremont, could be 600K, total with S/X 700K, and, reiterated 1 million by 2020 still in their sights
- Model Y goal of roughly 1/2 capex spend per unit of production capacity
- Energy storage revenues expected to triple year-over-year
- on developing autonomous driving from the letter, "an extensive overhaul of the underlying architecture of our software has now been completed, which has enabled a step-change improvement in the collection and analysis of data and fundamentally enhanced its machine learning capabilities."
Bear Rebuttals
- Cash flow far far better than street expectations, only about 1/3 the size of outflow as expected. Further reduces the likelihood of a cap raise to get through the ramp to 5K/week that the bears often pound the table about.
- Clarification on bottlenecks... only two currently known material ones, only one holding back from 2.5K/week rate. The first, module assembly, that the company is now on record saying replacement machines are working in Germany (and 3-4 times as efficient as machines they are replacing), and it's simply about timing re having them shipped and assembled in Nevada. The second not being fundamental to the design of the Model 3 (i.e., supports the case that Tesla did, in fact, design a simpler vehicle), but, relating to their automated process of moving stored parts to their appropriate spot in the assembly process, i.e., "conveyance system"). days are numbered for bear concern trolling that Tesla cannot mass manufacture
- Expect to generate positive quarterly operating income on a sustained basis this year, and, cautiously optimistic re positive earnings without any asterisks Q3 (I might not have the wording on the latter quite right), this is a near term path to demonstratively rebut the most persistent bear gibberish thesis
- Implicit rebuttal by JB of FUD from CNBC last week suggesting the human involvement of temporary patch to battery module issue is resulting in flawed products shipped to customers (JB said something to the effect that, machines are doing what machine precision is needed, humans are just moving works in process from machine to machine)
- First explanation of any detail I've ever heard from Tesla as to why they believe their path to autonomy vs. LIDAR is the clear choice, despite nearly all the rest of the industry going with LIDAR. This comes amid concerns from Adam Jonas re other players in the space, and a consulting report claiming Tesla was last of about 20 competitors in the autonomy race. While, it's beyond my field of view to evaluate whether what Elon offered to back his emphatic assertion that Tesla is on the right path & the LIDAR crowd misguided, I take the coast-coast drive coming at any point in the next year or so as a positive... I see a coast to coast demo is vastly more meaningful than the consulting report a few weeks back (I do realize people heard 3-6 months and saw that as a big negative... I just see a demo period as a positive. fwiw, the Falcon Heavy launch yesterday was roughly 5 years after its originally targeted debut).
Substantial reiteration of overlooked Tesla moat goal
- current auto manufacturing, movement of vehicle along the line slower than grandma with a walker, how do we not target at least a jog, even 20-30 mph, and, paraphrasing, ~it's as though no one else in the industry is even thinking about how much it can be improved~
Downside
- Departure of John McNeill, head of sales and service announced
- Implicit in discussion of resolving bottlenecks, until the new machinery from Germany arrives and is installed, there will not be much of any improvement in 3 production volumes. This may get considerable attention from bears, but, unless one is making a short-term market play, it's not material.
- Some will hear coast-coast drive 3-6 months out as a negative... as I described above, in my view, it's still a net positive, even if it happens beyond 6 months out (I doubt there will be a parade of competing programs achieving this before Tesla does, whether in 6 months or 10 months).
