Today was the day, Tesla reported a profit for 4 straight quarters, making the ever growing company eligible for the S&P 500. With both die hard owners and fans of Tesla have been waiting for this day for a long time, it is also a rough day for the likes of TSLAQ devotees who have been vying for losses over and over again.
Below are my short hand notes of the earnings call today.
4th straight quarter of profit.
Texas awarded the next giga site.
Elon is testing the next gen FSD and confident in it’s abilities, is able to drive from his house to factory with almost no user intervention.
Giga Berlin will take advantage of newest production engineering, such as the single cast machine for the Model Y.
Full Short Hand notes:
Tesla earnings call Q2 2020
Net income: $104 million (GAAP)
Now can be considered for A&P 500 inclusion
Austin gets gigafactory over Tulsa, Tesla has already started building the Texas location, will produce Semi, Cybertruck, Model 3 and Model Y for the east coast.
It’s reasonable to assume we will make a compact vehicle of some kind and a high occupancy vehicle of some kind. But there’s a long way to go with 3 & Y and Cybertruck and Semi. We’ll do the obvious things
Tesla solar $1.49 per watt
Model S epa 402 miles
FSD currently testing intersections and city streets. Personally test full alpha, profoundly better than people realize. Almost to point from house to work with virtually no interruptions. Confident FSD functionality complete by end of this year.
First full year of profitability in our history.
Looking great with giga Berlin.
$48mil deferred revenue from FSD updates
2020 credit revenue is double of 2019
Mega project produced first profit
$8.6b free cash flows
What opportunities for FSD?
Overwhelmingly it’s the most important thing. Updating via software update might go down as biggest …ever. Depending on when it’s allowed. Suddenly cars being 5 times more valuable.
When things do become FSD, they will do productivity or games…
They’ve been experimenting.
Plumbing in place to scale other areas.
Ability to upgrade vehicle through the app(ex rear heated seats via update)
Car will have a giant improvement. Probably will roll it out later this year. Traffic lights, stops, turns. Probably will be better than humans. There is a massive amount of work with each order of magnitude of improvement. We should be concerned about where AI is going.
10,000% more engineering for the factory than the product itself.
Nevada factory starting to production v 1.
We are getting way better at making cars.
You will see that even more in Berlin.
Fundamental architecture will be different in Berlin. Will look same but will be different …
Minimizing process steps and complexity. Automating …raw material integration.
A better factory and a better process.
Nothing more rewarding to going to 1,000 cars per day.
One of the advantages from Tesla will be manufacturing
In Texas long term a lot.
Battery and solar will both be enormous, they have to be for our future.
Mega pack integrated rapidly deployable. Growing production rates as fast as we can.
Autobidder enduring battery is doing everything it can to take advantage of renewables . Ensures things are super smooth. Batteries willl communicate with each other. Power packs, power walls will all work together.
We expect to expand our business with Panasonic , etc. more on battery day.
Production next year. We have a few trucks driving around. First few units we will use ourselves between Fremont and Reno . Will prove reliability. Promised early units to long term customers. It didn’t make sense until now to do it. We have a lot of new tech we have been dreaming about out into the semi.
Nickle based cells have higher dense cells. It’s very important to have …better batteries. Power train efficiency , heat pump , total vehicle efficiency. We are comfortable with iron phosphate battery in China later this year. Getting range in high 200 miles with Ron phosphate pack. That frees up capacity for things like semi and things that require higher efficiency. We use little cobalt , that will trend to …(zero).
Any mining companies mine more nickel. Tesla will give you a high contract if you do it efficiently on an environmentally friendly way. Range will be 300 miles, people will have standard expectation. Need to account if it’s hot or cold, up a tall mountain with a full load? People want margin of range.
Insurance outside CA?
We are working hard. We are working on first version of our telematic product. Use data in Car to asses probably of a crash. It’s not available in any other product in the world. We can take CA product and replicate or delay and put more effort into telematic. Nearly complete with analysis of first version. Based on regulatory approval hope to have this available in handful of states by end of year . Product will be v1. V2 as time goes on.
Elon: can you look ahead and inform driver what action they can take to reduce insurance cost. People can make a choice, drive crazy and pay more or safe and pay less. Gives us a fundamentally great product . Would love to have some high energy actuaries, please join Tesla. Especially if you want to change things. We want revolutionary actuaries.
Tesla insurance will be available for ride sharing.
model Y was profitable in first quarter of production. Cost structure , Y is more expensive than 3. Shanghai is a pretty big factory, also locally sourcing is attributing to better cost of vehicle.
How much will EV credits affect margin?
We don’t manage business so that regulatory credits affect.
Continued cost efficiency in manufacturing cars.
Potential for software revenue .
Will expand .
Operating expenses continue to come down.
Trade off between industry margins ?
We achieve both with autonomy. We can have car more affordable and have more autonomy . There is value and affordability. It is important to make the cars affordable. Things bug me, cars are not affordable enough, we need to fix that. We are steadily making progress. We need to not go bankrupt , not trying to be super profitable , it’s 1 or 2%, nothing crazy. Slightly profitable and maximize growth.
DemNd is not our problem. We have some production supply chain problems. Model Y casting is tricky to maintain rate . 2 piece casting will transition to a one piece , being assembled in Fremont currently. Fire fighting on supply chain issues.
Deliveries being more difficult?
Nothing to do with demand, it’s supply chain. We need to use a lot of airplanes to get stuff, remove airplanes and improve costs.
Battery capacity with volume needs? Import for Berlin?
Elon: will be local cell production that will serve Berlin factory. Can’t say too much.
We are solving this problem , treating it like other problems , getting talented people.