Let’s see…SOME website run by SPIES predicted a slowdown across the board in EV’s about 4 months ago. Even for Tesla. Because most are a hassle, dull and boring (outside of Cybertruck). And that MOST people who truly want one already own one. AutoSpies.com was the ONLY website to see this coming.
Here is a detailed synopsis of the Tesla earnings call today:
What is YOUR read on it? Are you IMPRESSED or DEPRESSED?
* Elon opening remarks
* Q1 recap, Model Y is selling well
* Model Y success in spite of production and delivery issues
* Worth pointing out that the current macro environment remains uncertain
* Pushing for higher volume, larger fleet is the right move
* We expect our vehicles, over time, will drive profitability via autonomy
* Harvest margins in the future as we perfect autonomy
* Cybertruck alpha versions being built
* Completing installation of volume production line at Giga Texas
* Planning delivery event in Q3 2023
* Expect S curve for production ramp of Cybertruck
* "Hall of Famer" Radical Product
* Not made like other products
* Megapack had its strongest quarter ever
* As we've expected, stationary storage growth will exceed vehicle growth
* FSD, 150 million miles driven in the beta
* Data advantage that no one else has
* Importance of training data for achieving incredible AI outcome
* Focused on improving neural network training
* Remains a constraint to achieving FSD
* Significant purchases of NVIDIA GPUs
* Still working on DOJO
* DOJO could become a service for other companies too
* Really think that DOJO potential is very significant
* Wanna make and sell as many cars as we can
* Continue to invest in growth as fast as possible
* Elon thanks Tesla employees for doing an incredible job
* Zach CFO remarks
* Record vehicle productions and deliveries
* Automotive gross margin decreased sequentially
* Per unit costs at Austin and Berlin improved
* Those factories are a margin headwind
* Storage growth and profitability remain on track
* Grow volumes in vehicles and energy at the same time
* Focus on cost efficiency and working capital
* Investor questions
* How do you determine price cutting criteria?
* Elon "we do our best to evaluate production output and macroeconomic conditions"
* Zach "can't get into the details"
* Second question, will Tesla Energy be bigger than auto?
* Elon clarifies that it will be bigger in auto in gigawatt hours, not necessarily revenues
* We are seeing faster growth with stationary storage than vehicle sales
* Zach, we will get to a point where we provide battery storage guidance
* Relative to the whole company, energy storage is still a relatively small segment
* As the business grows and smoothes out, including our numbers more formally will happen in a few quarter
* Next question, about margins
* Zach says "in terms of margins, generally in the same area we have seen in vehicle margins"
* We are aiming at mid-20 percent margins on everything we do
* Next question about 4680 battery progress
* Zach says the company is making progress
* 4680 factory in Texas will be 70% less capex than existing battery factories
* A number of cathode material side efforts under way
* Cathode precursor lower process cost described at Battery Day is being integrated into Texas plant
* Structural pack concept 50% lower capex for the same output of gigawatt hours/year
* Iterating the design of structural pack
* Q1 was all about cost and quality for pack team
* Altogether the pack team decreased costs in Q1
* Next question, what do you anticipate 2023 auto gross margin will be?
* Zach says "this is a difficult environment to make projections"
* Regarding costs, there are a set of costs we do control, and others we don't
* Most of the efforts are cost optimization in Austin
* Similar story in Berlin, without the 4680 pack considerations
* Aggressively going across every cost bucket we can
* Logistics costs are now improving
* Zach praises supply chain team
* Commodities have been a pain point
* Still at the maximum of pain of commodities in cost structure
* Elon "it's worth mentioning that lithium prices have dropped"
* Zach we expect commodity prices will drop by the end of the year
* Next question, how has global ordering tracked since recent price cuts?
* Elon: "orders are in excess of production"
* Next question, specs pricing for Cybertruck?
* Musk: "It's an incredible product"
* A product like this only comes along once in a long while
* Analyst questions begin
* Alex from Piper Sandler asks "first question, Lathrop growth, when will that facility be close to full utilization?"
* Zach classic ramp at Lathrop, but supplier ramps also a factor
* We will that unlock latter half of the year
* "Second question, on ability to serve other markets out of Shanghai, what other regions are you not yet serving effectively?"
* Elon: Good question, there are many markets we do not serve well yet
* The markets do add up to something significant
* It's high time that Tesla offers its cars to the rest of the world
* Next analyst George from Cannacord
* "First, if you could discuss your FSD take rates?"
* "Next, do you think you need to reduce your prices of FSD?"
* Elon: tricky price in question, value of autonomous vehicle is enormous
* That value is ultimately will be very significant
* There will be a little two steps forward and two steps back
* I think we will do "it" this year, says Musk
* Elon wishes he has a crystal ball that could predict battery commodity costs
* "We're in uncertain times"
* Just my guess, stormy economic weather for 12 months, and things could get sunny next spring
* Zach, not all EV components/commodities are super liquid
* Small mismatches in supply and demand can cause temporarily large price swings
* Seeing quite a bit of softening in the lithium carbonate market
* Because of price spikes, more companies are investigating upstream sources
* Lithium refining is a choke point, not supply, according to Musk
* Lithium is a very common element on Earth - Musk
* We will have the most lithium refining capability when compared to everybody else combined
* Can other people please do this work?
* Instead of making a picture sharing app, please make a lithium refinery
* We have a lot of fish to fry, and we wish other people would do that
* Deutsche Bank question... Emmanuel
* First, pricing strategy
* Second, for Zach automotive gross margin
* Autopilot related deferrals are non-repeating issues
* Elon - two macro factors that are tricky
* Fed rates and economic uncertainty
* Baird
* How do you rate all other Tesla businesses versus the vehicle business?
* Elon - DOJO is a longshot bet that could pay off in a very very big way
* Solving autonomy will unlock a lot of value if it happens
* "I think it will happen" - Musk
* Pricing question again
* "Every day we get a daily real-time update of how many cars were ordered and delivered" - Musk
* I am not sure there is a company on Earth that has more real-time data than Tesla, outside of SpaceX Starlink...
* We know how many cars were ordered yesterday
* Our finger on the pulse is real-time and does not have latency
* We look at pricing 7 day/week
* On balance, our decisions are pretty good/better than the rest of the industry
* Zach, regarding EV market share, we don't look at it that way
* We don't look at it that way
* It is about the car market
* Not just EV market share
* Gotta stop looking at it as EV vs EV
* "All cars will be EVs" - Musk
* We will look back on ICE cars as we look at steam engines today
* Colin Rush from Oppenheimer asks "how much of the cost structure is variable, and plus/minus lithium cost variances?"
* Elon - depends on what time scale you are looking at, most of the car costs are variable
* If I had to guess, I think we will see improved costs from suppliers
* Drew "we are already starting to see that"
* Some of lithium prices are already trending the right way
* Takes several months to flow into cost structure
* Air expedites are down from the peaks
* Attacking all vectors and becoming cost efficient
* Second question on stationary battery storage
* We are focused on ramping Megapack
* We are being selective on projects that best fit our mission and objectives
* Musk - we are making improvements
* Improving the speed at which you can plug Megapack into the grid
* Goldman Sachs, 2 million units in 2023 a possibility?
* Elon - makes crystal ball reference for the 10,000th time on this call
* If things go well, 2 million, which is the upside case
* We feel comfortable with 1.8 million shipments
* 2nd question on opening up the Supercharger network?
* Drew - as you may have seen we opened our V4 and Magic Dock chargers last quarter
* Continuing to roll out those improved offerings as we build new stations
* Balancing our ability to serve customers vs all EVs
* Roll out to continue over the coming quarters
* Wolf Research
* Follow up on leveraging cost position mentioned in release
* Can you give us a sense as to how far you are willing to take this?
* Is there a margin range?
* Elon - I think we may have answered this question a few times
* It depends on the macroeconomic environment
* Federal Reserve rate decisions affect consumer demand - Elon
* Zach adds investing with 2024 and 2025 in mind
* What happens to margins over the next couple of quarters only matters in how it affects investment plans for 2024 and 2025
* We are planning to keep the business healthy, but don't focus too much on the near-term
* The focus is to position the company best for exiting this macroeconomic time
* Do you have a view on elasticity of demand?
* Elon - affordability is a main factor
* In some cases, some people can't get a loan at all
* I think banks are not leaning forward in providing loans these days
* There is quite a powerful story here, that Tesla is in a uniquely strong strategic position
* We could technically sell cars at zero profit now, and unlock future profits with FSD revenues
* Adam Jonas, Morgan Stanley
* First, good luck with the Starship launch
* Now that you have gotten to know Twitter, what can you tell TSLA shareholders about how X app could affect the company?
* It could potentially make it easier to buy cars - Elon
* There is probably some benefit - Musk
* Followup on manufacturing, 1913 Ford Model T prices fell another 70%
* and a bunch of rival companies went bust
* Is the recent cost cutting leading history to repeat itself
* could this catalyze a darwinian moment in the EV market
* "We really don't think of competitors that much" - Musk
* Focused on improving service and making cars more affordable
* We are making a car that is an asset that could be worth more in the future
* Drew - "we want all EVs to succeed"
* Elon "We are not out to destroy competitors"
* Dan Levy from Barclays
* First question, ramping supply at Austin and Berlin
* How important is it to ramp to get better cost efficiency
* Should we generally expect that you will produce at max capacity regardless of macroeconomic conditions
* Elon - there could be a macro shock so severe that people stop buying, but outside of that we will keep making as fast as we can
* Remind us what the margin profile of Austin and Berlin will look like compared to Shanghai
* Elon - won't be as great as Shanghai, but we do expect to make significant improvements in Austin, Berlin, and Fremont
* Final question, Jeffries
* Longer term, I agree we should look at Tesla market share of total vehicles, is there a limit to developing global market share?
* Elon - seems to be working well so far
* We hear different feedback from customers, seeing growing pains?
* Elon - we are always going to have growing pains
* Sometimes service is behind sales, sometimes it is ahead
* Tesla is growing faster than any company in history - Musk
* (company did not grow EPS this quarter) - Asif
* Best service is no service - Elon
* The reason incumbents succeed and new companies fail is their ability to operate at lower margins
* Newcomers succeed when customers are willing to pay a premium
* In the absence of electrification or autonomy, a newcomer is unlikely to succeed
* Call mercifully ends
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