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  • - We like to too.

  • Okay, welcome guys.

  • Hello, everyone, thank you for joining me here today.

  • I'll be your kind of post moderator, Ben Sullins.

  • I have a show called Teslanomics,

  • if you guys are new here and unfamiliar.

  • For everyone else that does know, that is in Crowdcast.

  • Make sure to go ask your questions,

  • up vote questions, and all that.

  • I do have, we will be restreaming the broadcast,

  • once it begins, which is set for 2:00, 12:00,

  • sorry 2:30.

  • I have it in the back of my ear,

  • so I'm waiting for them to come on.

  • So, when that happens you know that's where,

  • that's what we'll jump over to,

  • and I'll kind of be quiet during the duration of that,

  • but Tesla just did release the new update letter.

  • And so, I just wanted to go

  • through some of those talking points with you real quick.

  • First and foremost let me just take a look and see,

  • what it has, too, too, too, too.

  • I had it in the other screen.

  • There it is, okay, Tesla second quarter update 2018,

  • Q2 automotive gross margin increased to 20 percent

  • 20.6 percent GAAP and 21 percent non GAAP.

  • I think that's pretty amazing.

  • Those were some of the things that we

  • really needed to be looking for

  • was an increase in the margin,

  • because that is where, how they're gonna actually end up

  • being profitable down the road.

  • Next, you have the Model 3 gross margin,

  • turned to slightly positive in Q2,

  • expecting roughly 15 percent in Q3,

  • so that's good, that's the direction that we want

  • the margin and everything to be headed,

  • because that will lead to profitability.

  • Then you have the next bullet

  • here on the update letter

  • expecting to produce 50 to 55,000 Model 3s in Q3.

  • Delivery should exceed that.

  • So, if you just go back a year ago,

  • and see what they were doing,

  • it's pretty, it's pretty wild,

  • to see kind of how far they've came,

  • how far they've come on this.

  • So, that's just an astounding number

  • if you've been with Tesla for a while,

  • and you know kind of

  • what they're normally producing.

  • So, there you go.

  • They did a major cost restructuring in Q2,

  • and they have $2.2 billion of cash

  • and cash equivalents at the end of Q2,

  • and they're expecting to grow in Q3 and Q4.

  • So, remember that's the big equation right?

  • If you run out of cash that's where things will go bad.

  • So you can, you know you can be taking on date.

  • You can be spending and expanding your business,

  • and doing all these things

  • as long as you still have cash in the bank,

  • which you're getting from either financing operations,

  • or you know divesting some of your assets,

  • which doesn't typically happen.

  • So, the last bullet on the update was a CAPEX projection

  • in 2018 adjusted to less than $2.5 billion,

  • meaning that they're gonna be spending less money

  • on new things that they need to do

  • to kind of scale this and grow.

  • So, some other notes that I thought were interesting.

  • The Model 3 according to their letter here

  • in July of 2018 the Model 3 not only had

  • the number one market share position

  • in its segment in the US,

  • it outsold all other mid-size premium sedans combined,

  • accounting for 52 percent of the segment overall.

  • The popularity of the Model 3

  • is a true testament to the product.

  • Based on trade ins they've received so far,

  • they can see that the total addressable market

  • for the Model 3 is much larger

  • than mid-sized premium sedans.

  • We are drawing customers from many other segments

  • including non premium sedans and hatchbacks.

  • So, the reason I bring that up,

  • because I think that is extremely interesting,

  • because what I think, what you're gonna see,

  • is you're gonna see a lot of people that weren't BMW

  • or premium car owners already coming into this space,

  • and you know this would be the most expensive one

  • that they'll ever purchase.

  • So, that's what they mean

  • by expanding the market segment,

  • and I think that's tremendous.

  • They went on to talk about how some of the things,

  • these things are produced,

  • and one of the things that they're talking about here

  • are that they're now producing,

  • or they have multiple times in July

  • achieved 5,000 per week milestone.

  • We will now continue to increase that further

  • with our aim being to produce 6,000 Model 3 vehicles

  • per week by late August.

  • We then expect to increase production

  • over the next few quarters beyond 6,000 per week

  • while keeping additional CAPEX limited.

  • So, that's the thing, right?

  • If you just wanted a big number

  • of how many can you actually,

  • how many cars can you actually produce?

  • Then yeah you could just kind of

  • just keep having that number go up and up and up and up

  • by spending more.

  • So, what they're saying is that they're gonna try to do it

  • in a capital efficient way,

  • meaning not spending much more money,

  • but still increasing production,

  • so that way they'll you know

  • be a kind of a bigger margin on those dollars coming in.

  • Now they also state that they aim to increase production

  • to 10,000 Model 3s per week as fast as we can.

  • Notice they took off the date

  • of when that might be possible.

  • I and many others still believe that this will be something

  • that we'll see in 2019 maybe,

  • but not something that you're gonna see

  • very, very kind of soon.

  • Best guess, 2019.

  • Could be even even kind of beyond that.

  • So, they also said that they are trying to get GA3,

  • which is the main general assembly line in Fremont

  • to produce 5,000 Model 3s per week,

  • and then GA4 the one out in the tent,

  • would be in addition to that.

  • So, that means that there are

  • some changes that they need to do.

  • And so, I'll just bring that up here it says,

  • to address the short-term issues with GA3, we built GA4

  • to help us reach our 5,000 units per week target earlier,

  • and ultimately to push us past that point.

  • We were able to build the GA4 quickly,

  • due to the design simplicity of the Model 3 architecture,

  • and because it's a tent.

  • Okay, the layout and processes of GA4

  • are similar to those of the Model S and X assembly line,

  • while the quality and cost of production are roughly equal

  • to those of GA3.

  • General assembly excluding the cost of components

  • accounts for approximately three percent of Model 3 cost.

  • The rest of our manufacturing processes

  • remain highly automated,

  • including stamping, body, welding, paint shop,

  • powertrain assembly, and battery pack assembly.

  • I thought that was pretty crazy to see that it,

  • that it's only three percent of the overall cost.

  • To me, I just, it seems like the assembly of it

  • is such a huge part of the process.

  • Yeah, it's wild to that that only accounts

  • for that small percentage there.

  • So, they also stated in this that

  • they're now selling the performance Model 3,

  • which you've seen a lot of,

  • you've heard a lot of, and that the,

  • at the end of July, Gigafactory 1 battery production

  • reached an annualized run rate

  • of roughly 20 gigawatt hours,

  • making it the highest volume battery plant in the world

  • by a significant margin.

  • Consequently, Tesla currently produces more batteries

  • in terms of kilowatt hours

  • than any other car makers combined.

  • I don't know if that's a big achievement.

  • Not many other car makers are purely electric

  • and selling at this high volume.

  • It just doesn't, it's just not happening.

  • so you know, that, I don't know.

  • Yeah, you're the best of you know,

  • the only one in the industry.

  • So in Q2, they said that we've produced a 53,339 vehicles

  • and delivered 22,319 Model S and X vehicles,

  • and 18,449 Model 3 vehicles,

  • totaling 40,768 deliveries.

  • Now remember, they were able to push out

  • the 200,000th car being delivered to Q3,

  • so that was a big milestone,

  • because now that means the tax credit at least in the US

  • is gonna be extended.

  • So, that's a big news,

  • and I think we're gonna see even bigger stuff

  • happening in Q3,

  • because a lot of people kind of be you know,

  • basically saying that they're sandbagging

  • on their deliveries in order to maximize that,

  • which makes makes a whole lot of sense.

  • Now, there's some comments here about the energy side.

  • They said while we are largely focused

  • on the Model 3 ramp in Q2,

  • our energy business grew as well.

  • Demand for our energy storage products

  • remain significantly above our production rate,

  • even as we gradually add capacity.

  • Overall, we expect our energy business revenue

  • to improve in the second half of this year.

  • And I bring that up, because I know a lot of people

  • are waiting on the energy products.

  • So, it's good news that that stuff is happening,

  • and that the people I've spoken to a Tesla about this

  • all agree that it's, you know,

  • it's important for them and it's going up,

  • and they're working on it.

  • So, if you have a power wall,

  • you're waiting on a power wall, something like that,

  • I think you know hopefully

  • we'll start to see some deliveries

  • and some changes to that down,

  • down in the future here.

  • Okay, so that kind of ends the update letter there.

  • There's a lot more tidbits in there,

  • but well of course we're gonna,

  • we're gonna get into the call here.

  • And so, let me switch over and just make sure.

  • I'll take some questions now from Crowdcast

  • while we're waiting.

  • And guys, give me a thumbs up if the audio and video,

  • and everything looks good.

  • I am on a new set up here with crazy high performance,

  • so it should be should be pretty solid.

  • And then of course like I said,

  • I have the actual webcast in my ear,

  • so as soon as that starts,

  • or you know even a couple minutes before,

  • I'll switch over and then I'll shut up,

  • so he doesn't have to listen to me yammer.

  • Okay, let's see.

  • Going to the questions on Crowdcast.

  • Liz asked, have you heard when the autopilot self-driving

  • beyond level two is planned?

  • I don't think that you're gonna see that anytime soon.

  • I think that honestly autopilot

  • or self-driving beyond level two

  • is something maybe five years from now

  • will actually be a reality.

  • There may be little nuances and additional features,

  • but I think you'll still see a hands on system

  • that requires the driver to pay attention

  • and isn't truly beyond level two.

  • Level three I think is actually kind of a scary one,

  • so I'm a little mixed on that.

  • I think what we ought to do