Key Takeaways from Tesla’s Q1 2019 Earnings Call

Apr 24, 2019   
  • All Tesla vehicles shipping today include full self-driving hardware, with the potential to make an estimated $30,000 per year on the company’s upcoming ride-hailing taxi network.
  • Only company producing their own cars, batteries, and full self-driving hardware which will result in the most profitable autonomous taxi on the market.
  • Large number of overseas deliveries were moved to Q2 due to logistical issues.
  • Tesla believes it will have the top-selling pre-owned cars in the world. (Only Used Tesla is the premier source for buying and selling used Tesla’s, and we expect to expand to meet global demand.)
  • Customers willing to pay more to get a Model 3 than any other car, with global sales just beginning.
  • Model S and X have a “significantly more advanced powertrain” with an improved suspension and charge rate, as well as other minor improvements and a significant increase in range that didn’t necessitate making changes to the battery pack.
  • New loyalty program: all current Tesla owners who order a Model S or X Performance model will receive a free $20,000 Ludicrous upgrade.
    Semi, Model Y, Roadster, Powerpack, and Solar Roof version 3 coming soon.
  • Quarter-ending cash balance expected to increase at this point, was negatively impacted by Tesla paying off a $920 convertible bond.
    Model 3 gross margin decreased slightly to 20% following price adjustments and Standard Range variants, which has been offset by improvements in labor cost.
  • April will have largest amount of deliveries in the first month of a quarter for the company.
  • Battery storage growth rate will become a significant source of Tesla’s revenue over time.
  • “Much more cost efficient” solar product that Tesla will detail next week.
  • New insurance program offered by Tesla which will be “much more compelling than anything else out there.”
  • Semi prototypes “working very well,” and have been used to deliver some Model 3’s.
  • Current owners will get the FSD computer in about 2-3 months when features are ready that require it.
  • Model Y vehicle production will be in either California (Fremont) or Nevada (Gigafactory), with all tooling that’s required already ordered and no delays expected.
  • “Strong demand” for all three vehicles, with Standard Range Plus being an “incredibly compelling vehicle” that’s “affordable to the top 40% of income-earners in the U.S. and Europe.”
  • Right hand drive Model 3 being released this year.
  • Demand expected to “return to normal” in Q2.
  • Only 3.5% of Model 3 trade-ins come from Model S, indicating customers are keeping their Model S or trading it for a Model X. Or, Model S owners are selling their vehicles privately and receiving top value.
  • “Over 50% of orders are for Long Range variants,” with a $50k average sale price for Model 3.
  • $500 million in debt capital raised for upcoming Shanghai Gigafactory.
  • Instead of building cars in batches to deliver to various markets, Tesla will balance the vehicle deliveries throughout the quarter to ensure quicker delivery.
  • Tesla will continue to maintain and add stores in high-traffic areas for prospective customers to take test drives and buy merchandise while encouraging sales to be completed online.
  • No comment on future price changes. (We do anticipate to see price adjustments when the tax credit is cut in half again on June 1st.)
    Cost reduction programs in place.
  • Full self-driving option becoming more popular over time.
  • Upgraded S/X powertrain significantly reduces cost.
  • Goal is to make cars as affordable as possible, with the $35,000 Model 3 to remain in the lineup off-menu for the foreseeable future.
  • Other key takeaways from the earnings report:

  • $702 million loss for Q1 2019, with $2.2 billion in cash reserves.
  • Model 3 remains the top-selling premium car in the U.S., with 69% of trade-ins coming from non-premium cars indicating a broader consumer response.
  • Tesla will be able to produce a “robotaxi” that can travel a million miles on a single battery pack for under $38,000. (All Tesla’s are built to last a million miles; however, battery packs currently do need to be replaced after 300k-500k miles.)
  • Model S and X are built to order, while Model 3 is produced in batches then matched to orders.
  • 360,000-400,000 vehicle deliveries expected this year, with a targeted gross margin of 25% on all vehicles.

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