2021 Q1 Tesla Earnings Call Notes

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I spent sometime listening to today’s earning call and have created raw some notes which I have included below for your reference. Enjoy!

  • Opening Remarks from Elon
    • Record quarter on many levels
    • Record production, deliveries and surpassed $1B in non-GAAP income
    • Demand is the best they have ever seen
    • Used to seeing a reduction in Q1 and this year it was the opposite
    • Model 3 became best selling mid-sized, premium sedan of any kind in the world (used to be BMW M3)
    • Elon predicts Model Y will be best selling vehicle of any kind in the world in CY2022
    • FSD continues to make great progress even though its one of the hardest technical problems ever to solve
    • With the elimination of radar, Tesla is getting rid of the last crutches
    • When computer vision works, it works better than the best human
    • Elon is highly confident they will FSD this done
    • Q1 was one of the most difficult times in terms of supply chain constraints for Tesla
    • China growth was restricted by COVID-related personnel restrictions which made them 100% reliant on drive unit production at Giga Nevada 
    • More challenges than expected in developing the refreshed Model S & X
    • Battery was one of the biggest challenges as most energy they have ever packed in such a footprint
    • They have iterated on the Model S test units they have built and should begin deliveries in Q2 and ramping in Q3
    • Goal is to produce 2000 Model S & X per week with 2400 – 2500 being peak production target
    • Expect to have limited in production later this year and volume production in CY2022 at Giga Berlin & Texas
    • Model Y continues to ramp in Fremont & Giga Shanghai
    • Semi & Roadster development continues to ramp
  • Financials
    • Successfully launched and ramped Model Y in China (while retaining profitable)
    • Reduction in S & X deliveries were meaningful headwinds to profits
    • Continuing to work through supply chain issues however still experienced higher expedite costs
    • Cost structure is reducing and thus leading to future gains in profitability
    • Energy growth margins remained negative due to winter seasonality and solar roof ramping
    • Remain on track for industry leading ASPs and operating margins
    • Making progress on reducing varying forms of debt
    • Trimmed BTC investment by 10% which resulted in a $127M profit
    • Global demand remains meaningfully higher than production levels so still trying to ramp production rates
    • Q2 & Q3 will hinge on S & X, Model Y in Shanghai, and cost reduction in these programs
      • Cash generation should respond positively
  • Questions from Say
    • Question: How is Dojo coming along? Will Tesla become the AWS of the AI / robotics world with Dojo?
      • Answer: Long term Elon believes Tesla will be thought of as a AI / robotics company as much as a car & energy company. Training system will need to be able to address data produced by a fleet greater than 2M cars in 2022. Surround video labeling is quite tricking as you are looking at quite a bit of data when you consider 30 fps x 6 cameras over time. No tool that existed and Tesla created their own labeling tool to address this. Holy grail is auto labeling which Tesla is getting quite good. Dojo is really a supercomputer optimized for Neural Net (NN) training. Tesla believes an order of magnitude cost efficient per frame of video in terms of hardware & power compared to a GPU solution. Tesla plans to eventually make it available for public consumption.
    • Question: Could Tesla share more about Solar Roof challenges and if the outcome has changed at all from 1000 roofs per week?
      • Answer: Elon mentioned demand still exceeds production & ability to install. He admits to underestimating roof construction variance which has presented install challenges. Tesla is shifting whole solar + battery situation to only 1 configuration where every house with solar will include at least 1 Powerwall. Powerwall 2+ (+ refers to 2x higher peak power output) which started production in September of 2020. Difficulty of installation will be much less due to the way they are wiring the Solar always to the Powerwall, and Powerwall in between utility and house. You never need to touch the circuit breakers of the house as a result become your own utility. In working with the utilities, Tesla can harness the Powerwalls to stabilize the overall grid and address situations like what happened in Texas. They can then operate as if they are a decentralized utility. With the ramp of EVs, Tesla estimates we will need 2x if all transportation goes electric and 3x if all heating goes electric as well (along with ever changing weather patterns).
    • Question: Master of coin, can you tell us Tesla’s future plans in crypto currency.
      • Answer: Zach responded saying BTC investment was based on desire to leverage cash that is sitting idle and get a return on it. Tesla does believe long term in BTC stability and is committed to holding its position long term. There is some additional plans related to crypto being worked on but no announcements as of yet. 
    • Question: Does Tesla have any plans to deal with the current fud campaign being amplified by the media?
      • Answer: Elon mentioned how journalists should be ashamed for their deceptive ways in how they covered the Texas crash story. Tesla is continuing to work alongside crash investigation agencies and help them where needed. Autosteer would not and could not engage as designed. TACC only engaged after driver was in seat, seat belt buckled, and vehicle going 5mph. The car only accelerated to 30mph with TACC which was not the final speed when the vehicle crashed (it was much higher). Through further investigation Tesla was able to determine driver was in the seat at time of crash due to the steering wheel being deformed (amongst other evidence). NTSB is still investigating and we will wait for their report. 
    • Question: What is Teslas response to seasonal energy storage?
      • Answer: US could be powered off a single 100mi x 100mi solar array, 200MW per KM^2. Entirely possible with using only a small percentage of earth’s area. Elon believes you do not need room temperature super conductors. Low cost, long distance, high-voltage DC powerlines are key. Technologies that exist today can easily solve earth’s energy problems. Tesla believes there should be a carbon tax on energy production just like a cigarette or alcohol tax. No question in Elon’s mind that Li-Ion batteries can solve world’s energy needs when it comes to sustainable energy. Iron-based Li-Ion batteries will become a key player in energy storage use cases due to its cost and stability. 
    • Question: Where does Berlin sit relative to the 5-10x production improvement that Tesla achieved with the Model 3?
      • Answer: Truly profound that Tesla was the first American car company in 100 years to reach volume production. Tesla has numerous stories where insignificant components restricted production (USB cables being one of them).
    • Question: High volume transport-related question?
      • Answer: No answer at this time.
  • Questions from Institutional Investors
    • Question: Looking for an update to progress since battery day.
      • Answer: Tesla has made quite a bit of 4680 cells however not quite reliable enough to ship in cars (but getting close). Most of equipment already ordered for battery production in Giga Austin & Berlin. Overall very optimistic in achieving volume production of 4680 cells in CY2022. Progress in yields is really strong and current trajectory aligns with cost production. While they are ramping up their battery manufacturing capabilities, they are working with suppliers to help supplement overall battery production (LG & Panasonic). Aiming for comparable margins in energy storage just like vehicles, already off to a great start with Powerwall however more room to go with Megapack (runway to improve this going forward).
    • Question: L ooking for an update on rollout of FSD V9 and plans regarding a subscription model.
      • Answer: Currently working on FSD subscriptions and hope to roll out soon. OpEx costs will be reduced with completion of industry first projects like 4680 battery cells. On the SG&A side, business is pivoting to being global. China is continuing to ramp quickly and Tesla is trying to stay ahead of the volume to manage growth. 
    • Question: What is the path to reduce COGs on powertrain to do something like a $25k vehicle? Interested to learn about new efficiencies in new factories and how does that relates to new COGs. 
      • Answer: Plenty of opportunities to improve COGs in terms of battery production, materials, etc. Tesla does not want to talk further about new products.
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