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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

  • is to jump to level four, level five.

  • So, yeah that's kind of my thoughts on that.

  • Thanks, thanks for the question, Liz.

  • Phil asks, hello Ben, as it has been reported

  • that Panasonic are ramping up battery production

  • so as not to cause any bottlenecks for Model 3.

  • Do you think the new objective of 10,000 a week

  • will be announced today by Elon?

  • Well, Phil, as I just mentioned in the update letter, it,

  • they state sort of what their goal is with the 10,000.

  • They didn't really put a specific date on it,

  • and I and many others do believe that they will need

  • an additional factory to do this.

  • I don't think they can just keep, you know,

  • maybe if REI has a sale

  • they can just build some more tents or something.

  • Kidding, but yeah I think it'll be a while.

  • I don't think you'll see 10,000 any time very soon,

  • but maybe in a couple years, and that probably aligns,

  • because you're gonna need

  • a place to build the semi.

  • You're gonna need to have a place to build the roadster,

  • very important, as well as the Model Y,

  • and the pickup truck, so that's all coming.

  • I think that's when we really get more serious

  • about 10,000 a week per Model 3.

  • and you know that calls, but could just be 10,000 overall,

  • which means a lot of them could be done

  • in the new Gigafactory in Shanghai,

  • which I think they said will be up in a couple years.

  • So, there you go.

  • That's my thoughts on that Phil.

  • Thank you for the question.

  • Crafty Geek asks, if you've got to be on the call

  • what would your question to Elon, JB, who else be?

  • Do you know if HyperChange will be on again?

  • So, I know Gali at HyperChange is trying to get on.

  • I don't know if he is or not,

  • certainly last time was a kind of a watershed moment

  • for a lot of us in this new media space

  • as you might call it.

  • I was, I and a lot of people were very excited,

  • and very happy about that.

  • So, I don't think it's gonna happen again,

  • because of the consequences of last time.

  • So, that's my guess.

  • If I had a question for Elon and JB in this?

  • I don't really know if I have one in this context.

  • I actually don't think I'd be a great person

  • to be on the call, just because I'm not.

  • Yeah I would rather talk to them about other things

  • that I think are far more interesting.

  • So, thank you.

  • Thank you for the question.

  • Kay X42, wonder if there's any analysts

  • are going to ask any boneheaded questions

  • that are already answered in letter this time?

  • Ignore if already discussed.

  • I don't think they're gonna play that game.

  • I don't think it's gonna happen, but you know we'll see.

  • That's kind of why these things are fun to do.

  • We've got a couple more minutes here.

  • Then I'm gonna cut out.

  • I'm gonna stop talking at five minutes prior

  • just 'cause you don't know exactly

  • when they're gonna go live, so there you have it.

  • Tony asks, Ben it's pretty cool that Tesla is now offering

  • unlimited free supercharging

  • for Performance Model 3 buyers.

  • Not sure if that's enough to sway your decision

  • to purchase one though.

  • You know I think what it comes down to for me

  • and why I'm not buying a Performance Model 3 is that

  • for my family that vehicle just doesn't work perfectly.

  • I think a better option for us would be to get a Model X,

  • because it was just more storage and things like that.

  • So, I just don't see us keeping a Model 3 forever.

  • I do love my car now and it's fantastic,

  • and I love taking it around and showing people,

  • making videos with it but yeah.

  • I think that that's one of the things that it's not,

  • it's just not the right car for me and my family.

  • So, there you have it.

  • And so, yeah that's kind of my answer in that.

  • So, if you guys aren't familiar

  • with what Tony's talking about here,

  • the referral program was extended to September 16th.

  • This is officially when the end

  • of the unlimited free supercharging will happen.

  • Now in addition to that, Model 3 Performance Edition

  • does qualify so if you haven't ordered your Model 3 yet,

  • you can go get one of those.

  • You can use a code like mine or anyone else's,

  • and you can then actually get free supercharging

  • as long as you keep that vehicle,

  • if, one on a Model 3, which is great.

  • So, if you're doing a lot of road trips

  • and long trips and stuff,

  • I think that that's probably a good buy.

  • If you're interested in my code,

  • if you guys haven't heard me say it a thousand times,

  • it's teslanomics.co/td.

  • You have to fill out a form,

  • but become my friend and I'll email it to you.

  • And then you know, you ask me any questions,

  • 'cause that's honestly where,

  • that's, people ask me how I got so many referrals.

  • That's why, it's because you get on,

  • you get on the email list and I send you a note

  • with the code and then I respond a week later

  • saying hey how was it,

  • and then a lot of people respond to that,

  • and that's when I come in personally

  • and answer questions and go back and forth.

  • So, if you guys are doing that,

  • if you're interested whatever, go ahead.

  • There's literally zero additional benefit to me,

  • so if you have someone else's referral code,

  • please go ahead and use theirs,

  • but you can get mine at teslanomics.co/td.

  • So, you have it.

  • Thanks for the question, Tony.

  • Russ asks, how will Tesla and Panasonic overcome

  • raw material shortages or pipeline snags?

  • I think I had heard before

  • that they were buying mines and so forth.

  • Can Panasonic buy mines, and it routes ...

  • Okay, so just a couple bits about this.

  • So, the main components,

  • there's a lot of different materials

  • that go into these batteries as far as I know.

  • There's lithium, obviously,

  • and then cobalt is another big one

  • that is difficult to source.

  • So lithium, I don't think there's a ...

  • There, I did a video on this.

  • There's an enormous supply out there,

  • and with you know, literally everything you use

  • that is rechargeable, essentially using that material,

  • this, there you know, tons of industries

  • that are really pushing hard to expand

  • mining or in many cases dehydrating that resource.

  • You get it from the salt brines, in Chile, and anyways,

  • so lithium shouldn't be a problem.

  • Cobalt is a problem, but JB had recently said,

  • that they think they're gonna be able to get

  • the cobalt in their batteries down to almost nothing.

  • And so hopefully you know

  • with the advancements in battery technology,

  • these things won't actually be, won't be an issue.

  • So you have it, there's my thoughts on that, Russ.

  • Alright, last question,

  • then we're gonna be cut over to the stream

  • and just wait for it to start.

  • Flying Panda asks, hi there I understand that there's

  • a multi coat option that cost $1500

  • more than the original black

  • and $500 more than the other paint colors.

  • Do you know how much of a difference it is

  • to have a multi coat from Tesla.

  • Okay, so quick answer, the black is not the multi coat one.

  • That's an obsidian black, which is $1,000 more.

  • The white and the red are multi coat.

  • Those are the $1,500 more, so there's a difference.

  • There's a solid black.

  • Then there's all the other colors

  • with the exception of white and red,

  • and those are the $1,500 ones.

  • I think it would make a difference

  • I think would probably look

  • a lot better than the solid black.

  • I had to spend about $1000 on paint correction

  • just from my Model 3, just to make it look decent

  • before we did ceramic coating.

  • So yeah, the paint, the solid black paint,

  • definitely soft definitely prone to nicks and scratches.

  • So yeah, and it sucks that it's black,

  • because like of all the colors

  • that you wanna have the weakest paint on,

  • black is not the one, heh heh.

  • Anyways, thanks for the questions guys.

  • I'll come back after it's all over and we'll do it there,

  • but let me switch over to the broadcast near now

  • as they should be getting started here any second.

  • (upbeat classical music) This is their waiting music.

  • - [Cherie] Good day ladies and gentlemen

  • and welcome to the Tesla Q2 2018

  • Financial Results and Q and A webcast call.

  • At this time, all participants are in a listen-only mode.

  • Later, we will conduct a question and answer session,

  • and introductions will follow at that time.

  • If anyone should require assistance during the conference,

  • please press star then zero on your touch-tone telephone.

  • As a reminder, this conference may be recorded.

  • I would now like to introduce your host

  • for today's conference, Mr. Martin Viecha,

  • Senior Director of Investor Relations.

  • Mr. Vieira, you may begin.

  • - [Martin] Thank you very much Cherie,

  • and good afternoon everyone.

  • Welcome to Tesla's second quarter 2018 Q and A webcast.

  • I'm joined today by Elon Musk, JB Straubel, Deepak Ahuja,

  • Robin Ren, our Head of Sales,

  • Jerome Guillen, our VP of Trucks,

  • and we also, they're our autopilot team with us here,

  • Andrej Karpathy, Director of AI,

  • Stuart Bowers, our VP of Engineering,

  • and Pete Bannon, our Director of Silicon Engineering.

  • Our Q2 results were announced

  • at about 1:00 p.m. Pacific Time,

  • in the update letter we published

  • at the same link as this webcast.

  • During this call, we will discuss our business outlook

  • and make forward-looking statements.

  • These comments are based on our predictions

  • and expectations as of today.

  • Actual events or results could differ materially

  • due to a number of risks and uncertainties,

  • including those mentioned

  • in our most recent filings with the SEC.

  • During the question and answer portion of today's call,

  • please limit yourself to one question and one follow-up.

  • Please press star 1 now

  • if you would like to join the question queue.

  • Before we jump into Q and A,

  • Elon has some opening remarks.

  • Elon?

  • - [Elon] Hi, thank you for joining.

  • First of all, I'd like to say we're incredibly proud

  • of the Tesla team for producing 7,000

  • Model 3, Model S, and Model X vehicles

  • in the last week of June.

  • It was amazing efforts.

  • It's an honor to work with such a great team

  • to produce that incredible result.

  • It's like mind-blowing.

  • We continued to achieve 5,000 Model 3s per week,

  • 7,000 combined S, X, and 3,

  • multiple weeks in July,

  • showing that they were able

  • to do this on a sustained basis,

  • and we expect to,

  • in the absence of a force majeure

  • or some very very unexpected event,

  • be able to achieve an average

  • of 5,000 Model 3s or above for Q3,

  • and 2,000 Model S, X's or above

  • for week four for Q3 as well.

  • So essentially 7,000 cars a week plus,

  • for an average above for Q3.

  • That's an amazing jump from only a year ago

  • when we were producing 2,000 vehicles a week.

  • It's really kind of a mind-blowing leap forward

  • for a manufacturing company.

  • So yeah, it's incredible work by the team to do that.

  • Many, many late nights, weekends,

  • extreme amounts of effort,

  • and lots of smart ideas.

  • It's amazing.

  • One of the results you're seeing

  • is that the Model 3 market share

  • has surpassed all competitor premium

  • mid-size sedans in line.

  • So Model 3 market share is now a majority,

  • or in July, it was a majority of all premium sedans.

  • That trend is we think likely to continue,

  • so it's not, we do not think it will stop there.

  • I have Robin Ren here who's our Head of Sales

  • to talk about some the interesting elements

  • that we're seeing in terms of cars

  • that people are trading in,

  • the sales and demand trends.

  • It's looking really,

  • really positive.

  • We're also getting great feedback

  • on the Model 3 from our customers,

  • and we're now delivering

  • the Performance dual motor and all-wheel drive versions.

  • And the Model 3 reviews are outstanding.

  • We really couldn't ask for better reviews

  • from some of the toughest critics in the world.

  • And it's yeah, and it's just ...

  • the thing that we're really finding is that

  • the more Model 3s we deliver to the field,

  • it's actually causing viral growth of our sales.

  • So we deliver a Model 3 to somebody, they love it,

  • they tell all their friends.

  • They're actually really,

  • our customers are our primary sales force.

  • They love their car and take their friends for a drive,

  • and that's the thing that fundamentally drives our sales.

  • But not everyone has a friend

  • who has a Model 3, obviously,

  • so we need to get the cars out there for test drives.

  • As it is right now, not even all stores in North America

  • have Model 3 for test drives.

  • We're supposed to be prioritizing

  • getting cars to customers,

  • but we're soon gonna have

  • Model 3s available for test drives in all stores,

  • and both the Performance version

  • and the rear-wheel drive version.

  • So, 'cause you know, a lot of people,

  • they will not buy a car until they test drive it,

  • which is not unreasonable.

  • Although on Sunday, when I delivered it,

  • we're testing out like direct delivery,

  • which I think is definitely the future,

  • direct delivery from factory to customer's home or work,

  • wherever they are.

  • But the guy who bought it

  • had never actually even sat in a Model 3.

  • Like, wow okay.

  • I said, well how do you feel about the car

  • now that you have it and you've driven it?

  • He's like, I love it, it's amazing.

  • So.

  • Yeah, it just seems to be really (mumbles).

  • Yeah so, at approximately 7,000 cars a week

  • we believe we can be sustainably profitable from Q through,

  • Q3 onwards.

  • We're gonna try to raise that rate of Model 3 productions

  • steadily in the coming quarters

  • and try to get to the 10,000 cars a week number

  • as soon as we can.

  • We found as we spent

  • a lot of time debugging

  • a wide range manufacturing issues

  • that the potential for our existing lines

  • to be able to produce far more cars

  • is much greater than expected.

  • That by simplifying production lines,

  • by speeding them up,

  • by in some cases have things being done manual

  • instead of with automatic

  • and in other cases having it be done

  • automatic instead of manual,

  • we've been able to achieve dramatic improvements

  • to the output of existing lines,

  • which means that our CapEx

  • going from 5,000 cars a week

  • to 10,000 cars a week is a tiny fraction.

  • CapEx five to 10 is a tiny fraction

  • of the CapEx needed to go from zero to 5,000 Model 3s.

  • This is I think very good news

  • for capital efficiency of a company.

  • And with Web's transmount,

  • that's gonna bring future mass market

  • to the vehicles that we produce.

  • So the, and from an operating plant standpoint,

  • from Q3 onwards, I really wanna emphasize,

  • our goal is to

  • be profitable

  • and cashflow positive for every quarter going forward.

  • Now obviously, if there's a big recession

  • or there's a severe force majeure event

  • that interests the supply chain,

  • that's not always possible,

  • but and we're confident that

  • and provided the economy is roughly where it is today

  • or reasonably good

  • and there's not a big force majeure event that we,

  • I feel comfortable achieving a gap incompositive

  • and cash flow positive quarter

  • every quarter from here on out.

  • So.

  • As you said, there may be occasional quarters

  • we'll pay back a big loan or something,

  • where there may be,

  • you know, just because we paid back a big loan,

  • but,

  • absent that, it would be cash flow positive.

  • So okay, I thank

  • the Tesla team for their incredible work

  • and our customers for their support.

  • Without the great crew we have at Tesla

  • and the customers who put their faith in us

  • by buying our product,

  • we would not be here today.

  • And yeah, I've really never been more excited

  • about the future of Tesla.

  • We have a super exciting

  • set of products to bring out in the future

  • and yeah.

  • It's like yeah.

  • Hey, I'm sorry if I sound a little tired.

  • I've been working

  • like crazy in the body shop lately.

  • But uh it's really

  • going great, I'm super excited.

  • Damn good, some good people.

  • And a good,

  • a number of the executive team here,

  • in particular asked the three key leaders of Tesla

  • Autopilot team to be here,

  • so they're gonna pick up from here to

  • see if the Autopilot leaders of Tesla

  • could introduce themselves

  • and say a bit about what you're working on,

  • what you're excited about in the future.

  • Sorry to put you guys on the spot.

  • But we're making pretty radical advances

  • in the core software technology

  • and the vision and all that,

  • and then very importantly,

  • the Tesla

  • self-driving chip technology that

  • we've been working on for three years

  • is finally coming to fruition.

  • Pete Bannon is gonna talk a lot about that,

  • but it's,

  • it's a plug-in replacement for the existing computer

  • and it enables an order of magnitude improvements in,

  • in operations per second

  • or frames per second is the way to think about it,

  • and we can go say it

  • the really key to Tesla full vehicle autonomy.

  • And like I said, designed to be really easy to replace.

  • I'll let Pete talk about that.

  • So we're gonna start with like,

  • maybe Stuart, Andrej Karpathy.

  • - [Stuart] Okay, hi, I'm Stuart.

  • - [Elon] You have to talk loud, by the way.

  • - [Stuart] Oh yeah, I'll talk extra loud.

  • So I'm Stuart.

  • Yeah, joined the team relatively recently,

  • incredibly excited,

  • see the foundation the team has built up until this point.

  • I'm gonna be building on top of that right now.

  • So right now a lot of the focus is on Autopilot V9.0,

  • which is our on ramp to off-ramp solution

  • that's going to automatically attempt to change lanes,

  • understand what lane the car is in,

  • understand the route the user wants to travel,

  • and take that route for the user

  • and ultimately hand back control to that user,

  • kind of safety control. - Integrate navigation?

  • So you like, to get to one place.

  • You said I go out just, by the way, a little,

  • a little tip for, if you're driving

  • Model S or X or 3 is if you just tap in that, hold,

  • tap the navigate button and just drag down,

  • it will automatically navigate you to home or work

  • depending upon where you are.

  • That's pretty cool feature.

  • Yeah.

  • - [Stuart] So you have this model focus right now.

  • We're also kind of digging out some new safety features.

  • I think probably the thing is most exciting

  • for me coming to the team is just seeing

  • the foundation's that's been built out over last two years.

  • I think Andrej will talk a lot about

  • some of the perception vision work we've done there,

  • including data engine.

  • But it's sort of a lot of to build on top of that

  • very very quickly.

  • I think we're all starting to see

  • a new set of safety features that really only makes sense

  • in this world we have such an extremely high understanding

  • what's happening around the vehicle,

  • so I think, when I sort think what will get me excited,

  • I come into work it's like one

  • starting to introduce real aspects with kind of not

  • just making the commute kind of reducing the drudgery,

  • or kind of the risk of commuting,

  • but also really make the element fun.

  • And the second is like

  • dramatically improving safety

  • in a way you really can only do

  • once you have this very nuanced understanding

  • of the world around you, the perception.

  • - [Andrej] Yeah.

  • Hello everyone, my name is Andrej Karpathy.

  • I'm Director of AI here at Tesla.

  • In particular, I lead the Vision team

  • which is responsible for turning the video stream

  • that we receive from all the cameras in a vehicle

  • into an understanding of what is around us

  • and around the vehicle.

  • I worked with Neural Networks for about 10 years

  • mostly as a PhD student of Stanford

  • and as a Research Scientist at OpenAI.

  • And what I'm really excited about is

  • really building out this infrastructure for computer vision

  • that underlies all the neural network training,

  • trying to get those networks to work extremely well,

  • and make that a really good foundation on top of which

  • we build out all the features of the Autopilot

  • like the features associated with the v9 release

  • that's going to come up and that Stuart has mentioned.

  • - [Peter] Hi, this is Pete Bannon.

  • My team--

  • - [Elon] He's gonna talk to (mumbles).

  • - [Peter] My team is leading currently

  • the Hardware 3 development.

  • The chips are up and working,

  • and we have drop-in replacements for S, X, and 3,

  • all have been driven in the field.

  • They support the current networks

  • running today in the car at full frame rates

  • with a lot of idle cycles to spare.

  • So, I think we're all really excited about what

  • Andrej and his team will be able to do

  • with this hardware in the future.

  • I think like one little anecdotal story was,

  • I gave a talk to ...

  • - Hey guys, looks like the call just dropped

  • on Tesla's end.

  • So I'm gonna to try to get that back up real quick.

  • I'm not sure what happened to it.

  • Give me one second here.

  • - [Peter] Development, the chips are up and working,

  • and we have drop-in replacements for S, X and 3,

  • all have been driven in the field.

  • They support the current networks

  • are running today in the car at full frame rates

  • with a lot of idle cycles to spare.

  • So, I think we're all really excited about what

  • Andrej and his team will be able to do

  • with this hardware in the future.

  • I think like one little anecdotal story was,

  • I gave a talk to his team on Hardware 3 last month

  • explaining how it worked and what it was capable of,

  • and then afterwards, one of the researchers came up to me.

  • He was really excited, and he said, this is so ...

  • - Hey guys, yeah sorry about that.

  • It looks like something is going on

  • with the Tesla website here,

  • so give me one second to spin that back up,

  • and I will get the call going yet again.

  • Be right back.

  • - [Peter] Adding something to accelerate

  • neural networks, but nobody was doing

  • a bottoms-up design from scratch,

  • which is what we elected to do.

  • We had the benefit of having the insight into

  • seeing what Tesla's neural networks looked like

  • back then and having projections of what

  • they would look like into the future,

  • and we were able to leverage all of that knowledge

  • and our willingness to totally commit

  • to that style of computing

  • to produce a design that's dramatically more efficient

  • and has dramatically more performance

  • than what you can buy today.

  • - [Elon] Cool, thanks.

  • Yeah, I mean, essentially the key is

  • to be able to run the neural net

  • at a fundamental, at a bare metal level

  • so that it's you actually, in the circuits

  • and especially during the calculations,

  • in the circuit itself and not

  • in some sort of emulation mode,

  • which is how a GPU or a CPU would operate.

  • So, you want to do basically a massive amount

  • of localized matrix multiplication

  • with the memory right there.

  • So, it's a huge number of very simple complications

  • with the memory needed to

  • store the results of those complications

  • right next to the circuits

  • that are doing the matrix calculations.

  • And the net effect is an order of magnitude improvement

  • in the frames per second.

  • Our current hardware, which,

  • I'm a big fan of NVIDIA, they do great stuff.

  • But using a GPU, fundamentally it's an emulation mode,

  • and then you also get choked on the bus.

  • So, the transfer between the GPU and the CPU

  • ends up being one of the constraints of the system.

  • So, the net effect is we're able to,

  • with the Tesla computer,

  • and we've been like in semi-stealth mode basically

  • for the last two to three years on this,

  • but I think it's probably time to let the cat out of the bag

  • because that cat's gonna come out of the bag anyway.

  • But it's an incredible job

  • by Pete and his team to create this,

  • the world's most advanced computer

  • designed specifically for autonomous operation.

  • And as a rough sort of rough figure of merit,

  • whereas the current NVIDIA's hardware can do

  • 200 frames a second,

  • this is able to do over 2,000 frames a second

  • and with full redundancy and fail-over.

  • So.

  • It's an amazing design and we're gonna be looking to

  • increase the size of our chip team

  • and our investment in that as,

  • as quickly as possible.

  • I think we have some of the best aces in the world,

  • but I think we want to build on that even more.

  • And it costs the same as our current hardware

  • and we anticipate that this would have to be replaced,

  • this replacement, which is why we made it easy to

  • switch out the computer,

  • and that's all that needs to be done.

  • If we take out one computer and plug in the next.

  • That's it, all the connectors are compatible

  • and you get an order of magnitude, more processing

  • and you can run all the cameras at

  • primary full resolution with the complex neural net.

  • So it's super kick-ass, thank you for doing that.

  • - [Peter] You're welcome.

  • - [Elon] Thanks for making nets

  • and thanks for making the software.

  • Anyway, basically I wanted to introduce

  • three of the key people at Tesla that are doing this.

  • I have huge respect and admiration for you guys and,

  • and it's because of what you and your team's doing

  • that Tesla will be successful in this arena, thank you.

  • - [Martin] Thank you, Elon.

  • Shiree, let's go to the first question.

  • - [Shiree] Thank you, our first question comes

  • from Tony Sacconaghi with Bernstein.

  • - [Tony] Yes, thank you.

  • I have one question and one follow-up, please.

  • First, just on gross margins,

  • it looks like S & X gross margins were up

  • maybe 500 basis points sequentially and I'm wondering

  • maybe you can articulate what drove that.

  • And then, more importantly,

  • it looks like you're calling for Model 3 gross margins

  • to go from about maybe 3% this quarter

  • to 15% next quarter.

  • That's about a $6,000

  • cost out per car

  • and I'm wondering if you can maybe

  • help us understand what sort of the forces

  • that drive that kind of improvement

  • in a relatively short timeframe.

  • - [Elon] Yeah, absolutely.

  • First of all, I'd like to apologize for

  • being impolite on the prior call.

  • Honestly, I think there's really

  • no excuse for bad manners

  • and I was violating my own rule in that regard.

  • Certainly, I have some excuse.

  • There are reasons for it in that I'd gotten no sleep and

  • been working sort of

  • 110-hour, 120-hour weeks.

  • But, nonetheless, there's still no excuse.

  • My apologies for not being polite on the prior call.

  • - [Antonio] I appreciate that, thank you.

  • - [Elon] And let's see, with respect to gross margin,

  • I'll touch on that and then hand the rest to Deepak,

  • but certainly, when it's filling up the production line,

  • there are a tremendous amount of inefficiencies.

  • There's a lot of

  • hurry up and wait, where

  • some parts of the production line move well.

  • Then, one part doesn't

  • and you have associates waiting around

  • with nothing to do.

  • There are parts that we thought were right

  • but then it turns out

  • that they weren't right because

  • we got to send them back to the supplier.

  • It's just like a whole sort of giant machine.

  • It just needs to kind of lurch into

  • a high pace and there's a lot of lurching,

  • which is very inefficient.

  • So, you end up having super high

  • labor costs per car

  • and it just takes time

  • to sort of spool up this giant machine.

  • Basically a production system is like

  • a giant cybernetic collector and,

  • and it moves as fast as the slowest part.

  • So, as we address those slow parts

  • and as we improve efficiency,

  • then gross margin and so the profitability per car

  • just improves dramatically.

  • That's sort of at a high level.

  • Deepak, do you want to add to that?

  • - [Deepak] Elon, you described it

  • extremely well, so just to sort of summarize,

  • this was a major milestone for us in Q2

  • that the gross margin in Model 3 turned slightly positive

  • and we feel really good about the path ahead.

  • And as Elon said, it's driven predominantly

  • by manufacturing cost efficiencies.

  • The labor hours that we use

  • to produce each car becomes less.

  • The initial ramp-up costs that we have that are one-time,

  • those inefficiencies disappear.

  • Our fixed costs that are there,

  • that gets leveraged to a higher volume.

  • So, all of that.

  • - [Elon] Actually, a thing that can also happen is that,

  • if it turns out that say, a production part

  • was either designed wrong or built wrong,

  • there's something wrong with it,

  • then on camera, on emergency basis,

  • we have to go with low volume tooling

  • which can be produced quickly.

  • But a part produced off of low volume tooling

  • can easily be 10 times more than a part

  • produced off of production tooling.

  • And so, sometimes where it gets really bad,

  • if you've got a machine something

  • out of a block and has either that or gonna make a car,

  • then the cost of,

  • of using low volume cost,

  • of low volume tooling can be really nutty.

  • - [Antonio] Yeah.

  • - [Deepak] And the journey just continues as we stabilize

  • and grow production from these levels,

  • we achieve even more efficiencies.

  • And Q3 also benefits with somewhat improved mixes.

  • We're gonna sell more All-Wheel Drive

  • and Performance cars and in the long run,

  • as we continue to achieve those efficiencies on cost,

  • our gross margins will continue to increase.

  • - [Elon] Yeah, I don't know if this trend will continue.

  • We're trying to give you essentially

  • all the information that at least we know of.

  • But we're seeing roughly half of all customers

  • choose the Dual Motor or All-Wheel Drive option,

  • which is actually quite a good positive surprise.

  • - [Deepak] Yeah, it's been heartening to see the mix

  • in terms of what customers want.

  • Robin can probably add more to that.

  • - [Robin] Yeah, so,

  • so starting from end of June

  • when we opened the configurator

  • and invited existing reservation orders,

  • we saw tremendous

  • excitement and response from our customers.

  • As Deepak just mentioned, we actually see

  • more orders for the All-Wheel Drive Dual Motor car

  • and Performance cars combined

  • than the rear wheel drives.

  • - [Elon] Yeah, we don't want to say like

  • this should be assumed to be a continued thing.

  • It's just the thing we are seeing now.

  • - Yes - Yeah.

  • - Correct. - And another thing

  • I want to point out is that

  • we are actually, since we opened the configurator

  • to the general public in early July,

  • we are seeing an increased demand coming from people

  • who do not currently hold a reservation.

  • I think that's something that we found super exciting,

  • because these are the people who actually had

  • no idea about Model 3 and they heard about Model 3

  • as available to order, many of them requested test drives

  • and since early July,

  • we have over 60,000 test drive requests

  • in the U.S. alone and these people come into our stores,

  • do the test drive, and they become super excited

  • and they decide to order the car.

  • So, we believe that the strong demand

  • coming from especially the non-reservation orders

  • is gonna dramatically increase

  • as we increase our test drive population.

  • To give you an example, three weeks ago,

  • we had only eight stores having test drive cars

  • to Elon's point earlier.

  • Now we have over 90 stores having test drive cars.

  • - [Antonio] Okay.

  • - [Elon] It's worth mentioning,

  • just an interesting little

  • bits of information

  • that Robin was telling me.

  • I'd just like to also commend Robin on doing

  • a great job running worldwide sales.

  • Nice to have you in this role

  • and the awesome work done in China

  • was really some next level stuff.

  • Anyway, Robin was born and raised in Shanghai

  • and has been,

  • along with the, Tom and Grace (mumbles),

  • entire team in China

  • has been sort of instrumental in

  • establishing the China factory

  • and making sure that gets done right

  • and having a great relationship with the government.

  • And so it's nice work in that regard.

  • It's really, I think

  • some of the things people don't expect like

  • what are the top five trading cars for Model 3?

  • - [Robin] Yeah, this is very interesting.

  • So, we looked at what people

  • who are buying Model 3 cars in the United States,

  • what cars they are trading in.

  • What we found is

  • through this year, from January to July,

  • the top five non-Tesla cars people are trading in

  • to get into a Model 3,

  • they are Toyota Prius,

  • BMW 3 Series, Honda Accord,

  • Honda Civic, and Nissan Leaf.

  • - [Elon] Really surprising.

  • - [Robin] Yeah.

  • They are surprising because they are not

  • the traditional premium sedans, they are actually,

  • many of them are the mainstream midsized sedans.

  • - [Elon] Right, and we're obviously at this point

  • not yet selling our $35,000 car,

  • so this is promising for the future.

  • All right, cool, next question?

  • - [Shiree] Thank you.

  • Our next question comes from Joseph Spak

  • with RBC Capital Markets.

  • - [Joseph] Hi, good afternoon, thanks.

  • Maybe we could tackle

  • some of the commentary about

  • the Gigafactory coming in China.

  • When you first announced

  • the Gigafactory 1, I think you said that was gonna be

  • about a $5 billion investment,

  • and you mentioned

  • some volume numbers associated

  • with what you think you could do in China.

  • So we do some extrapolation,

  • looks like maybe 15 gigawatt,

  • 15 gigawatt hours of initial capacity.

  • I'm wondering if you could also do

  • a linear extrapolation on the costs

  • you think you need for that factory.

  • - [Elon] Sure, and,

  • I would also like to apologize for

  • being impolite on the last call with you.

  • It's not right, and

  • I hope you accept my apologies.

  • - [Joseph] Thanks.

  • - [Elon] So with respect to Gigafactory CapEx,

  • I think we learned a tremendous amount

  • with Gigafactory 1, and

  • we're confident that we can do

  • the Gigafactory in China for a lot less.

  • I think it's probably

  • closer to, this is just a guess,

  • but probably closer to $2 billion,

  • and that should be at a higher,

  • and that would be sort of at the

  • 250,000 vehicle per year rate.

  • So I think we can be a lot more efficient with CapEx,

  • and that would include at least

  • a factory module and pack production,

  • body shop, paint shop, and general assembly.

  • Might even be less than that, but that's,

  • that's about the right number for that.

  • And then cell production is something

  • we're still figuring out

  • with respect to the Shanghai factory.

  • JB, would you like to add to that?

  • - [JB] Yeah, I...

  • I'd agree with all that.

  • We found a surprising number of ways

  • to improve efficiency and speed

  • and density as well at Gigafactory 1,

  • and all those lessons

  • will absolutely be shared with Gigafactory 3.

  • The teams are already of course

  • beginning to collaborate and start to figure out ways

  • to do this more efficiently

  • and with less CapEx than last time.

  • Yeah.

  • - [Elon] Yeah, I think, we,

  • like less than half is like would be a good estimate.

  • And maybe a lot less than half,

  • but not more than half, would be a fair estimate

  • for CapEx to get to that 250k level.

  • So it's just, we just learned a tremendous amount

  • about manufacturing, it's like,

  • it's definitely burned out a lot of neurons,

  • yeah, mental scar tissue, it's like next level,

  • but on the plus side we really know a lot about

  • volume manufacturing at this point.

  • - [JB] I mean, there are so many specific examples,

  • but even in just recent weeks and months,

  • we found some, certain areas of production

  • that have been very capital intensive

  • that we've been able to speed up

  • with almost no additional CapEx

  • by maybe 20%, even 25% or 30%.

  • - [Elon] Yeah, kind of crazy.

  • Including on the cell, including the cell production.

  • - [JB] Yeah, just by challenging some

  • of the initial assumptions, the specifications,

  • tweaking the controls and software.

  • - [Elon] Look, what really matters,

  • what actually doesn't matter, things we think matter,

  • and some of it actually ends up

  • not mattering at all.

  • - [JB] And that's with basically zero CapEx.

  • So as you start to add-- - Yeah.

  • - [JB] Very tactical, strategic CapEx to the existing lines,

  • that's how we can get to something

  • close to double or beyond

  • with a really, really small increment.

  • - [Elon] Yeah.

  • Obviously one of the keys to success

  • on the Model 3 production was the GA4 thing,

  • which was led by Jerome.

  • And General Assembly is key,

  • and doing the sort of zone one, two, semiauto lines,

  • which were critical because

  • we had this fundamental failure

  • especially in zone one, zone two

  • of factory module production.

  • Thank you, Jerome, 'cause that was,

  • It turns out Jerome was pulling some

  • pretty incredible rabbits out of the hat, that was amazing.

  • - [Jerome] Thank you.

  • - [Elon] And people make fun of our tent,

  • but by the way our tent is amazing

  • and this is not like, when people like say tent,

  • they'll think it's like some sort of,

  • it's like made by REI to go camping.

  • This is a tent that is actually

  • commonly used as a permanent structure.

  • It's a giant thing that is

  • very commonly used as a permanent structure

  • and we just had to come up with a creative solution

  • because GA3 was not going to be able to make the rate

  • and so we had to come up with some ideas,

  • and that's how that all transpired.

  • It's interesting, if you want to...

  • - [Jerome] Yeah, thank you, it was a fun project actually.

  • - Yes. - So not only was it

  • producing good results, but a lot of people

  • contributed from different engineering groups

  • and had a lot of fun in the process.

  • We set out...

  • - [Elon] Some of the people are

  • the ultimate in building cars.

  • (laughing)

  • It's cool, it's great.

  • It is like really, there's something really satisfying

  • about building a car.

  • - [Jerome] We just wanted to

  • create an assembly line that would be

  • very easy and very straightforward.

  • So, it's a straight line, very simple.

  • Car enters at one point and it's finished at the other end.

  • Very simple access on all sides.

  • Very simple tooling that we reused for most of,

  • actually, nearly all of it is systems

  • and tools that we discarded

  • from previous SNX or for Model 3.

  • - [Elon] Especially Model 3.

  • Like it was probably we had two weeks

  • to solve this problem, which is like quasi impossible.

  • So, we actually didn't have time to order new equipment,

  • because it would have taken too long to arrive.

  • So, we took the conveyors

  • that we'd discarded from the GA3 line,

  • which didn't work

  • or was way too complex to actually do our products.

  • - [Jerome] And we amplified, repurposed them,

  • make them sturdy for what was needed, and--

  • - [Elon] Well, I think like the really cool idea was

  • the putting them on the 1% grade.

  • So it's like technically

  • the conveyors for parts delivery to GA3

  • were not graded to be able to move something

  • as heavy as a car, so,

  • we made it downhill and on a 1%-downward grade

  • with the car at the top.

  • So then, you can actually overcome the transport.

  • - Gravity helped. - Yeah, gravity.

  • So, basically, even on your slides,

  • you can do, accomplish a lot.

  • - [Jerome] Yeah, it's pushing the car.

  • - [Elon] Exactly.

  • - [Jerome] No.

  • And something that I'm particularly happy about

  • is that we installed the quality team at the end of the line

  • and we wanted to have at least as high standards

  • on this new line as in the other one,

  • because it is so simple and straightforward,

  • they can run very quickly to any point in the line

  • if there is any potential concern

  • and address very quickly, there is no maze

  • to move around or identify where something happened.

  • And the quality of the cars that come out

  • of this structure is at least as good

  • and we make all the Performance cars

  • on this particular line

  • and they seem to be doing quite well.

  • So, this is a very pleasant surprise

  • and the associates seems to be

  • very happy and engaged in that particular area.

  • So, this may be a model of how

  • we may want to start general assembly

  • for future vehicles, at least start

  • and we can always add

  • further automation and complexity.

  • - [Elon] And something that's like

  • somewhat counterintuitive is

  • that this actually has fully considered

  • fewer labor hours per car than the GA3 system.

  • And just to elaborate on what Jerome was saying,

  • where we have parts delivery to GA4,

  • the truck literally just backs up to the side of the line,

  • where there is like a door in the tent.

  • And then, that is used to unload parts from suppliers

  • directly to where they are needed on the line.

  • So there's no intermediate assistant.

  • Whereas for GA3, they're unloaded,

  • they're put in a warehouse,

  • then they're repackaged from the warehouse

  • into these totes, which ...

  • So we actually have 220 people, something like that,

  • across all shifts whose only job it was

  • was to repackage parts

  • from the boxes that came in from suppliers

  • to the boxes that, to these totes

  • that go into the lifters that go up into GA3.

  • That's literally all they do

  • is move things from one box to another box,

  • and we don't need that at all on GA4.

  • - All gone. - All gone, yeah.

  • And there's a tremendous amount

  • sort of 24/7 robotics

  • technicians that are constantly trying

  • to make the machines have uptime.

  • That's very expensive

  • and that's where we figured like

  • not having to maintain all these robotic systems,

  • that's a big cost savings as well.

  • And now we're gonna be gradually adding

  • simple automation into GA4

  • to make it easier to build a car

  • and better sort of labor saving devices,

  • but it's just fundamentally,

  • it's already at an efficiency level greater than GA3,

  • which is pretty impressive.

  • - [Martin] Joe, do you have a follow-up question?

  • - [Shiree] Our next question comes from

  • James Albertine with Consumer Edge.

  • - [James] Good afternoon,

  • and thank you for taking my question.

  • And appreciate all the color you've been providing.

  • Wanted to dig a little bit deeper, though,

  • in terms of capital spending plans.

  • Considering your growth you've identified

  • in China with the Model Y, we believe also in the EU,

  • it's been discussed about a factory there.

  • How do you plan to fund all of this growth

  • without going back to the capital markets to raise funds?

  • And can you verify for us

  • whether or not there is a notice from a regulator

  • that would prevent you from raising outside capital?

  • Thanks.

  • - [Elon] We do not...

  • We will not be raising any equity

  • at any point, at least that's,

  • I have no expectation of doing so, do not plan to do so.

  • For China, I think, our default plan will be to

  • use essentially a loan from

  • the local banks in China

  • and fund the Gigafactory

  • in Shanghai with local debt, essentially.

  • And we certainly could raise money,

  • but I think we do not need to

  • and we, yeah ...

  • I think, it's better to,

  • it is better discipline not to.

  • - [Deepak] Yeah, we're executing on

  • an operating plan that keeps us sufficiently self-funded

  • despite our CapEx needs and our debts maturing,

  • and still keep a very healthy balance

  • on our balance sheet.

  • - [Elon] Yeah, our default plan is

  • we pay, we start paying off our debts.

  • I don't mean refi-ing them, I mean paying them off.

  • For example, there's a

  • convert that's coming due soon,

  • a couple hundred million,

  • then there's a $900 million one,

  • in (mumbles) something like that.

  • We expect to pay that off with

  • internally generated cash flow.

  • - [Deepak] And still be, still have a healthy cash balance.

  • - [Elon] Yeah.

  • - [Stuart] And to answer the other question,

  • there is no such notice from a regulator.

  • - [Elon] Yeah, I'm not sure what you're talking about,

  • but there is no such notice from a regulator.

  • - [James] Very good, thank you very much.

  • - [Martin] Let's go to the next question, please.

  • - [Shiree] Thank you, our next question comes

  • from George Galliers with Evercore.

  • - Hi, George. - Okay, our next--

  • - [Martin] Okay, let's go to the next one.

  • - [Shiree] Thank you, our next question comes from

  • Adam Jonas with Morgan Stanley.

  • - [Adam] Hey, everybody, first, there's so much love

  • and respect for colleagues

  • and Wall Street analysts on this call, it's almost,

  • it is lifting my spirits, what can I say?

  • I got two questions, the first is for the Autopilot team.

  • There's an argument that

  • a fully autonomous car is essentially like a terminator

  • that is programmed to save lives

  • in highly complex terrestrial environments

  • and that this same technology with a few tweaks

  • have some pretty obvious military capability.

  • Do you see any risk that U.S. companies

  • will ultimately not be allowed to operate

  • weapons grade AI-based technology

  • in a market like China and vice versa?

  • - [Elon] Well, this has never come up.

  • I wouldn't call it weapons grade.

  • It's just like the car is trying to

  • drive, you know, and if anything,

  • the autonomous cars will be pretty easy to bully

  • because they'll be optimizing so much for

  • avoiding collision.

  • So that'll be more of a challenge than anything else is

  • as soon as somebody sees that the car's autonomous,

  • they know they can like cut them off

  • and the car is gonna do everything it can

  • to avoid a collision.

  • So it's like that'll actually be probably

  • a bigger challenge than anything else,

  • but we've not encountered

  • anything of the nature of what you're saying.

  • - [Adam] So you don't see autonomous cars

  • as a potential germination or training grounds

  • for things that would have a national security

  • or military interest, okay.

  • Maybe a follow-up, Elon,

  • and my last question, who do you think would be

  • a more formidable competitor over time,

  • BMW or Amazon?

  • - [Elon] For Tesla?

  • - [Adam] For Tesla.

  • - [Elon] I don't think either of them are likely to be.

  • As far as I know, I'm going to be pretty shocked

  • if Amazon got into the car business,

  • but I think BMW has great engineering.

  • And it's good to see that they're making

  • some investments in electrification.

  • Hopefully, they do more of that.

  • And I'm not sure where they stand on autonomy.

  • It's not on our radar from an autonomy standpoint.

  • - [Adam] Thanks a lot.

  • - [Martin] Okay, let's go to the next question.

  • - [Shiree] Thank you, our next question comes from

  • Pierre Ferragu with New Street Research.

  • - [Pierre] Thank you for having me on.

  • So I wanted to make sure we understand well

  • how you stop burning cash going forward,

  • in coming quarters.

  • And my understanding is that

  • an important moving part here,

  • probably is the most important one

  • is a positive impact of the ramp of the Model 3

  • on your working capital.

  • And so I did some quick math on the quarter

  • and I see your favorables increased by $430 million,

  • while your risk level didn't move much

  • which makes sense because you get paid on the spot

  • and you pay your suppliers

  • only on a 60 day notice or more.

  • And so if I divide that by the number

  • of incremental cars you've been producing in the quarter,

  • I get to $23,000 per car.

  • And of course my question is whether

  • this is a good way to think about it,

  • which means that going forward

  • when we move into Q3 and Q4 every additional car,

  • every additional Model 3 you're going to produce

  • you're going to bump up payables by something

  • in the region of $20,000

  • and that's going to be the main driver

  • getting you to break even and to stop burning cash.

  • - [Deepak] Deepak here.

  • I mean, there are many factors.

  • Clearly, the working capital benefit

  • of the difference in the payable terms

  • versus collecting cash is one of them.

  • But also, it's our gross margin improvement

  • on the business.

  • With the, it's the higher volumes

  • and the higher gross margins,

  • I'm thinking higher gross profit,

  • I'm stating the obvious here on Model 3.

  • Our S and X volumes are increasing too

  • in the second half, that's gonna help us significantly.

  • And all of our other businesses

  • are improving their profitability,

  • while our OpEx is staying essentially flat,

  • so massive leverage in the business.

  • So when you combine all of that,

  • that's what is giving us the cash flow from operations

  • to fund the rest of our business and grow cash.

  • I'm stating the obvious,

  • but just sort of summarizing the whole point.

  • Yeah.

  • - Okay, so-- - In terms of follow-up

  • on EP, sorry, go ahead.

  • - [Elon] Sorry, what was your question?

  • - [Martin] Sorry, can you repeat the follow-up?

  • Sorry Pierre, can you repeat the follow-up?

  • - [Pierre] My follow-up was on in terms

  • of order of magnitude,

  • does like $20,000 per car

  • of payables boost over a 60-day period,

  • does that sound like something that makes sense

  • or am I missing other moving part?

  • - [Deepak] It's rough order of magnitude correct, yeah.

  • - [Pierre] Excellent, thank you.

  • - [Martin] Okay, let's go to the next question.

  • - [Shiree] Thank you, our next question comes from

  • Romit Shah with Nomura Instinet.

  • - [Romit] Yes, thanks very much.

  • I guess my question is for the Autopilot team.

  • We've been looking forward to this

  • fully autonomous coast-to-coast drive

  • and, Elon, I think you sort of said on previous calls

  • if I can paraphrase that the team has been focused on

  • developing a full self-driving suite

  • that would work basically

  • on all different kinds of road conditions.

  • And I'm just curious, what's holding back

  • that capability today to go coast to coast?

  • And are we closer

  • now that you've strengthened the compute technology?

  • - [Elon] Yeah.

  • We can do a coast to coast drive,

  • especially if we,

  • if we pick a specific route

  • and then write code to really make that route work,

  • we could do a coast to coast route drive,

  • but that would be kind of gaming the system.

  • And I think it's really important

  • for the autopilot team to be focused on

  • fundamental safety of the existing features.

  • So that's, the focus is

  • really massively on safety of existing features.

  • Then there's an advanced dev role that

  • can do things like recognize traffic lights and stop signs

  • and make hard right turns and that kind of thing,

  • but it's not at the safety level

  • that's considered okay for release.

  • So that, yeah, because it really,

  • you want many lines of reliability

  • for anything that's released to end customers.

  • So I don't want to take the team off that until

  • we feel like we've really

  • done everything we possibly can

  • for the core functionality.

  • Stuart, do you want to add to that?

  • - [Stuart] Yeah, I mean, I think the big thing

  • I would say is to reiterate Elon's point.

  • There's no question you can kind of build

  • a demo around this stuff.

  • The challenge right now for the team

  • is just increasing the safety and utility of autopilot

  • to over a quarter of a million cars we have today

  • and pushing more out after that.

  • So I think when we look forward to what the next

  • probably six to 12 months look like, it's taking

  • those same kind of features we've been working on,

  • probably deploying them

  • in the form of active safety features.

  • That's like a thing we can do already to understand like,

  • use this rich understanding of the environment

  • to actually try to keep you safer, to either beep or brake.

  • And then also, of course like

  • one huge advantage that we have is we can understand

  • what humans actually did in these vehicles

  • and test our software to make sure

  • that we would have made decisions that were similar

  • if not safer.

  • So that's gonna be a huge part

  • of what we do over the next probably two quarters.

  • - [Elon] Yeah, that said,

  • we might be able to pull off coast-to-coast demo

  • before the end of the year if we,

  • but really like right now Subaru has not focused on

  • the version 9 software release

  • which has got a number of really cool things in it.

  • And we're hoping to get that out to

  • early access program

  • in about four weeks and then broadly in September.

  • That's the hardcore focus right now,

  • and that will certainly include some

  • significant advancements in autonomy.

  • And then once that's out and stable, I think

  • that could be a good time

  • to work on the coast-to-coast drive.

  • - [Romit] I don't know if you guys have shared

  • what attach rates are for autopilot.

  • And just as my follow up, I guess I'm curious

  • what you can do to

  • increase the number of cars that have that functionality.

  • It would seem like

  • the effects of auto margins and cash flows

  • could be pretty positive.

  • - [Elon] Yeah, I think it's extremely powerful

  • once people are comfortable using the technology

  • and see just how much utility it brings.

  • I think that is a very significant

  • potential for margin gain in the future,

  • but it's contingent on that functionality

  • really making a difference.

  • I think we will really start to see

  • some of the breakthrough stuff in about a month or so.

  • - [Martin] Okay, let's go to the next question.

  • - Thank you. - Thank you.

  • Our next question comes from

  • John Murphy with Bank of America.

  • - [John] Good afternoon, just a first question.

  • Is it fair to assume the GA4 in the tent

  • is now essentially permanent?

  • And if so, is this potentially a new model for capacity

  • and capacity additions

  • that might be much more capital efficient over time?

  • - [Elon] What do you think, Jerome?

  • - [Jerome] It's permanent for now.

  • Until we come up with something different or better,

  • but...

  • Personally, I think it's a good model

  • to start assembly of any product.

  • Gives a lot of flexibility,

  • and then we can build and iterate over it, yeah.

  • - [Elon] Like, necessity is the mother of invention,

  • and when you have to do something quickly,

  • then you just don't have time to spend a lot of capital.

  • So it forces you to be capital efficient.

  • - [Deepak] Yeah, it's taught us a lot of lessons

  • on how to be capital efficient

  • in the general assembly area.

  • And so, in that sense,

  • those lessons will carry forward, John.

  • - [Elon] Yeah, I think so, it's still by and large

  • we'll be aiming for steel-frame buildings to be clear.

  • It's not like it's gonna just become tents everywhere.

  • Yeah.

  • - [JB] I mean the tent itself might be

  • a little bit of a distraction

  • from actually the focus of what's happening inside.

  • And then the methodology-- - Yes, exactly.

  • - [JB] And that's a similar methodology

  • that we've kind of reverted back to

  • and then moved forward from in the module,

  • where we simplified and then did a very,

  • very linear intuitive process that was a bit more manual

  • and then have automated and scaled that up

  • as we understand it and get good control of it.

  • And I think that's a lesson that we're taking to heart

  • broadly across other things

  • that we're going to do in the future

  • and it's an efficient way to scale up.

  • - [John] I mean, is that replication of that simplicity

  • why you think Shanghai could be

  • that much less costly

  • and that then Model Y capacity

  • might be that much less costly to add?

  • - [Elon] Yeah, Model Y is sort of a whole separate thing

  • but it's definitely one of the elements that

  • convinced us that we can scale up quickly

  • and at low CapEx in Shanghai,

  • we would do an improved version of GA4.

  • And then, we're also figuring out

  • how to make the paint shop a lot simpler

  • and general assembly a lot simpler.

  • And after this call, I'm headed back out to the...

  • - Body shop. - The body shop

  • and making the body shop

  • a lot simpler. - Making it a lot simpler.

  • - [Elon] Yeah, we can really simplify the body shop.

  • Man, wow.

  • And there's a lot that we can

  • really easily improve like design to manufacturing

  • and changing some of the joining

  • approaches that we use

  • and actually making the car lighter, cheaper

  • and better and actually stabler.

  • Yeah, it's ridiculously safe already, but yeah.

  • - [JB] Maybe one other point, just to follow up quickly.

  • I think some people have taken this as like

  • a walk back from automation,

  • which is not really accurate. - Yeah, exactly.

  • - [JB] This is basically, I mean,

  • a more thoughtful and focused way

  • to apply automation to the actual issues that matter most.

  • - [Elon] Yes, that's well said.

  • Actually, it's really worth emphasizing JB's point here.

  • Yeah, we're seeing a gain.

  • - [JB] Yeah, it's not an overall reduction in automation.

  • It is a focusing of our efforts automating the processes

  • and the value-add processes that matter the most

  • and I think we got maybe a little bit distracted

  • on this first round automating a lot of things that

  • added complexity that didn't necessarily speed up.

  • And-- - Way too fancy.

  • - And we can save-- - Start simple

  • and get fancy later.

  • Fancy's going to bite you in the ass.

  • - [JB] But it's not like we're reverting to the dark ages

  • of all manual everything, that's not at all the case.

  • - [Elon] Yeah, I mean, Gigafactory is ...

  • - Massively automated. - Massively automated.

  • It's pretty crazy.

  • And the body production is

  • also heavily automated, almost entirely robots.

  • So it's a mixture of people and automation.

  • There's so much that goes into producing a car

  • going from raw metal and plastic and glass

  • to an actual finished car.

  • And, yeah, as JB was saying,

  • the vast majority of that is highly automated.

  • - [John] Okay, if I can sneak in one quick follow-up?

  • I mean, when we look at the grosses

  • on the Model 3, you're saying 15% in 3Q,

  • 20% in 4Q and I think the ultimate target is 25%.

  • I mean, what are the average transaction prices

  • you guys are assuming?

  • I mean, it sounds like they are gonna be

  • a bit higher earlier, but is that 25% gross

  • ultimately still built around the low-40,000 ATP?

  • - [Elon] Yes.

  • - [John] Okay.

  • - [Elon] The simple answer is yes.

  • - [Deepak] It'll be lower ASPs than what we have today,

  • clearly, and we are having a richer mix

  • of All-Wheel Drive, as Elon alluded to earlier,

  • so that's gonna help, but yeah, 25% is still

  • the target that we have ahead of us.

  • - [Elon] I'm highly confident that

  • it may not be Q1

  • but I would be shocked if it's not Q2 that we get to 25%.

  • - [John] Great, thank you very much.

  • - [Martin] Thank you, let's go to the next question.

  • - [Shiree] Thank you, our next question comes from

  • Alex Haissl with Berenberg.

  • - [Alex] Good evening, everyone,

  • and thanks for taking the question.

  • I would like to come back

  • to the point made on the manufacturing efficiencies.

  • I mean, one of two main challenges

  • for Tesla but also for the rest of the industry

  • is the manufacturing parts,

  • which has been overcome by a lot of companies already,

  • with the second one being the technology part.

  • My question is how would you describe

  • the learning curve

  • of the manufacturing process versus technology

  • and what is really

  • the pace of advancement you're making?

  • Because it looks like on the manufacturing side

  • the curve maybe has meaningfully accelerated here.

  • Thank you.

  • - [Elon] Well, I don't really know actually

  • how others do it, to be totally frank.

  • I just know that,

  • we, the way we,

  • I see the way we are doing it

  • and I'm told that this is how others do it

  • and we're able to find ways to make it much better.

  • - [JB] I guess I--

  • - [Elon] I don't know what the delta would be though.

  • - [JB] We also don't really I think differentiate it

  • quite the way maybe you're implying.

  • I mean, technology and manufacturing

  • are sort of one and the same in many cases

  • and we're treating a lot of the manufacturing problems

  • as a technology problem. - Yeah, exactly.

  • - [JB] And applying our design teams,

  • our technology teams, if you want to call them that,

  • to solving those issues.

  • So I think the learning curves

  • in some ways are quite similar.

  • - [Elon] Yeah.

  • In fact, it's amazing how much of production

  • is actually software.

  • We're really quite good at software

  • relative to other car companies and

  • manufacturing at volume is

  • mostly a software problem.

  • I think that was not well appreciated.

  • - [JB] I think maybe one other

  • lesson learned is that

  • it's obviously not the best approach or best efficiency

  • to outsource some of that development.

  • - [Elon] Yeah.

  • - [JB] Some of the areas that we struggled

  • the most through the Model 3 ramp were those where

  • we had perhaps less visibility, and less control,

  • and less direct kind of skin in the game

  • on how those production lines were designed and built.

  • - [Elon] And these are cases where we took,

  • we engaged with

  • companies that were supposed to be

  • world class experts in automotive production

  • and we just assumed that they would do

  • stuff that worked but it didn't.

  • - [JB] Yeah, so that learning curve often involves

  • Tesla coming directly in,

  • understanding the process intimately, simplifying it,

  • and then essentially doing our own

  • design or changes to the lines that were built.

  • I think that's a key learning point that we've taken

  • and I think the way that we can do this

  • a lot more efficiently in the future

  • is doing that approach from the start.

  • - [Elon] Just having that very rapid iteration

  • between design and production is incredibly helpful

  • and we understand for example,

  • what are the rate limiters,

  • what makes it hard to produce factory modules.

  • We came up with a new design that

  • achieves the same outcome,

  • that's actually lighter, better, cheaper

  • and we'll be introducing that

  • around the end of this year,

  • probably reach volume production on that

  • in Q1 or something, that will

  • make the car lighter, better, and cheaper

  • and achieve a higher rate.

  • That line is under construction,

  • will be active in about six months.

  • - [JB] We did this somewhat the first time around

  • but now there's I think even more exciting understanding

  • of the value of having those, as Elon said,

  • having the design engineers just working

  • intimately with automation and line engineers,

  • simplifying the process as they're designing the product.

  • - [Elon] Yeah, I mean,

  • because we're sort of desperate to

  • try to get the production working,

  • we actually took a design engineering team and

  • had them work in the factory

  • and improve it, work on production

  • and it's given them tremendous insight into

  • how they need to change the designs in the future

  • to make it easier to produce

  • because you feel the pain directly.

  • Once you feel the pain, like okay, didn't realize

  • I was torturing people with my terrible design.

  • Now I know.

  • - [Martin] Great let's go to the next question.

  • - [Shiree] Thank you, our next question comes

  • from Ben Kallo with Baird.

  • - [Ben] Elon, (speaking in a foreign language)

  • sunglasses.

  • - Hello. - Douglas Adams.

  • Can we do more Douglas Adams?

  • - [Elon] Sure.

  • - [Benjamin] And less everything else.

  • - [Elon] Sure.

  • He is one of my favorite authors.

  • - [Benjamin] And mine too.

  • Deepak, so after July here,

  • how close are you to cash flow positive?

  • - [Deepak] So your question is after July,

  • how close are we to cash flow positive?

  • - [Benjamin] Yeah, you have July,

  • you have July under the books here,

  • so how close are you--

  • - [Deepak] Yeah, well, we don't have,

  • let me tell this point, one, we don't have

  • July results done but

  • it doesn't matter exactly

  • where we are in the month of July.

  • What really matters is over the quarter

  • because it depends on deliveries,

  • depends on production, many factors, so.

  • We will be significantly cash flow positive for the quarter.

  • I think that's what really matters.

  • - [Elon] And like the logic question is like

  • do we have like a low balance in the bank?

  • The answer is no, we've got,

  • we're in no, we're not in any kind of cash shortage at all.

  • - [Deepak] Yeah, I mean if that's,

  • that's the simple answer.

  • - [Elon] Are we running low on money, the answer is no.

  • - [Benjamin] No, no, no, that's not the question.

  • It's just as you're here and you have,

  • you're selling your higher priced cars

  • for a better margin,

  • how's the third quarter look for what you said,

  • for being cash flow positive?

  • - [Elon] Oh, yeah yeah.

  • I'd say highly confident of being cash flow positive

  • and being GAAP profitable in Q3.

  • - [Deepak] We're sitting here today saying that

  • based on what our expectation is.

  • So yes, sitting here on August 1.

  • - [Elon] Is there anything we know at the end of July,

  • it's one month in, we're highly confident of

  • being cash flow positive and GAAP profitable

  • in Q3 and Q4.

  • Now there could be force majeure like earthquake,

  • touch wood, but something like that

  • or massive recession all of a sudden,

  • but in the absence of that, of really unusual--

  • - Straightforward answer. - Macro events, yeah.

  • - [Benjamin] Thanks, guys.

  • - [Martin] Great, thank you very much.

  • Let's go to a journalist question.

  • - [Shiree] Thank you, our next question comes

  • from Tim Higgins with Wall Street Journal.

  • - [Tim] Hi, thanks for the call, question for you.

  • Do you still plan to make a total of one million vehicles

  • in the calendar year of 2020?

  • - [Elon] I think so.

  • Yeah.

  • If it's not a million, it's going to be pretty close.

  • I'd say,

  • if it's not a million it's probably at least 750,000

  • or something like that

  • in 2020.

  • So, we're aiming for a million, 2020, but

  • somewhere between half million and a million

  • seems pretty likely.

  • - [Tim] Where do you get the capacity to do that?

  • - [Elon] There's this place called Shanghai.

  • - [Tim] Okay, Shanghai will be important

  • for that, that goal?

  • - Yeah. - Okay.

  • Where does the Model Y-- - I think so, yeah, yeah.

  • I think, you know.

  • I think so.

  • I think we

  • can do over half a million vehicles,

  • actually probably more like 600,000 vehicles

  • with current Giga and Fremont,

  • and so they could throw like, you know,

  • 100,000, 200,000,

  • maybe more,

  • a couple that came from Shanghai.

  • We're probably going to be more than 600k

  • with Fremont and,

  • and Giga, Nevada.

  • That's why I think maybe it's not,

  • I think we have a shot at a million but

  • somewhere 700, 800k seems pretty likely

  • given the current what we know today.

  • - [Tim] Have you made any decisions

  • on where you're gonna make the Model Y,

  • anyway you'd like to tell me?

  • - [Elon] Not yet.

  • - [Tim] Do you expect to announce it this year though?

  • - [Elon] Maybe.

  • Maybe.

  • - [Martin] Cool, let's go to the next question,

  • please. - Thank you.

  • - Thank you. - Thank you, our next--

  • - [JB] I should say we are hoping to identify

  • a Gigafactory location in Europe

  • before the end of this year.

  • It's not for sure but we are hoping

  • to do that before the end of the year.

  • - [Tim] Got you.

  • - [Shiree] Thank you, our next question comes

  • from Zachary Shahan with CleanTechnica.

  • - [Zachary] Hello.

  • First of all, thanks for the recent retweet, Elon.

  • I was really impressed with the Model 3

  • after owning a Model S, so I'm really impressed

  • how much you've developed since the early days.

  • My first question was about Conquest sales, actually.

  • Right before the call we published an article that

  • Camry sales were down 22% year-over-year,

  • Prius sales were down 23% year-over-year,

  • and we're very curious how much

  • you're pulling from these other cars, other segments.

  • It sounds like you sort of

  • answered that question at the beginning,

  • but can you give anything in terms of what percentage

  • those top five are in terms of trade-in sales?

  • And how broad you're pulling?

  • I know you pull from pickup trucks, from sports cars.

  • Can you speak a little more

  • about the diversity you're pulling from?

  • - [Elon] Actually, what we have right now

  • is just the top five.

  • So I'm not sure what

  • the allocation is between top five

  • or where it goes beyond top five.

  • We just sort of

  • out of curiosity asked for the top five breakdown.

  • It's just interesting that,

  • that people are trading

  • up into a Tesla, so they're choosing to

  • spend more money on a Tesla than their current car,

  • just based on the trade-in values.

  • A Civic is a very inexpensive car

  • compared to particularly the Model 3 today.

  • So that's promising from

  • a market access standpoint.

  • But of course, long term, we're gonna do

  • the Model Y and compact SUV.

  • We're gonna do the pickup truck,

  • the Semi, the next generation bus.

  • I mean, we got lots of awesome ideas.

  • And...

  • Probably the biggest limiter on our growth

  • is like how fast can we grow battery production?

  • And especially cell production

  • and the wholesale supply chain I think

  • will be the fundamental determinant of Tesla's growth.

  • - [Zachary] And regarding the--

  • - [Elon] We're super fired up to do the set.

  • I think they're all super cool.

  • I know Jerome's favorite is the Semi,

  • and that's pretty wicked, obviously.

  • And-- - I love it.

  • - [Elon] Yeah, it's great.

  • And the, where we unveiled,

  • we've actually figured, we've made significant improvements

  • to the design since the unveiling that we had,

  • and it's really even better than what we talked about.

  • Probably my personal favorite for the next product

  • is pickup truck,

  • and we are gonna just do an amazing pickup truck.

  • And the Model Y, compact SUV,

  • probably the most popular car category in the world,

  • so that's like obviously gonna sell pretty well.

  • So a lot of cool things.

  • And of course, Tesla Energy, getting the,

  • we're kind of cell starved for Powerwall right now,

  • so we actually had to artificially

  • limit the number of Powerwalls

  • because we don't have enough cells.

  • So we're solving for that very rapidly

  • and we expect to ramp up

  • Powerwall and Powerpack production

  • substantially later this year and early next

  • and as well as-- - End Recording.

  • - [Elon] As well as ramping up retrofit solar

  • and then the Solar Roof.

  • We now have several hundred homes

  • with the Solar Roof on them, and that's going well.

  • It takes a while to just confirm that the Solar Roof is

  • gonna last for 30 years and all the details worked out,

  • and we're working with First Responders

  • to make sure it's safe in the event of a fire

  • and that kind of thing.

  • So it's quite a long validation program

  • for a roof which has got to last for

  • 30, 40, 50 years,

  • but we also expect to ramp that up next year

  • at our Gigafactory 2 in Buffalo.

  • That's gonna be super exciting.

  • (many talking at once)

  • If there's a company with a better product roadmap,

  • I'd like to know what it is,

  • because we've got some super awesome stuff coming.

  • Yeah.

  • - [Zachary] And regarding the Model Y,

  • there's been a lot of questioning

  • if you're gonna have the same process

  • as with Model 3 with reservations,

  • if you're gonna shorten the reservation timeline

  • or if you're gonna

  • have a different process this time around.

  • - [Elon] We haven't made a final decision on that.

  • - [Zachary] So a last question then.

  • Regarding the daily production,

  • we've been seeing a rise and fall

  • with the daily production of the Model 3

  • as you incorporate new performance or white seats.

  • Can you speak at all, we always like to get

  • the technical side of what you're doing there,

  • can you speak at all about what the bottlenecks are

  • right now that you're working through

  • and what we can sort of, how we can picture ourselves

  • in the factory there with you?

  • - [Elon] All right.

  • And actually one of the things I love

  • about your writing is that you really care about

  • getting the details right,

  • and you really understand things well,

  • which is awesome.

  • But I have to be careful I don't have a sound bite

  • that is then for those

  • that don't have a nuanced appreciation of the situation,

  • that sound bite then gets, becomes front page news.

  • So it's like, nope, that's not what I meant.

  • - [Zachary] Yeah, we know.

  • - [Elon] Yeah, exactly, I'm like, oh, man.

  • This is like shooting myself in the foot there.

  • Right now, the biggest constraint on production again,

  • please, do not make a federal case out of this,

  • because it's something that's solved like

  • in a matter of a week or two,

  • is body production.

  • So that's why,

  • you can generally tell what am I personally working on,

  • that's gonna be the bottleneck in the company so

  • most likely, so reducing Model 3 bodies.

  • We've made huge progress in the last few weeks

  • and in fact I was just told that we were

  • able to achieve our first

  • 24 hour period where we made

  • over 800 Model 3 bodies which is pretty great.

  • So, if it sets us, you know, sets a picture of that

  • or we sustain that 800 plus per day rate,

  • and then paint is doing great, Gari is doing great.

  • Yeah, it's good. - Yeah.

  • - [Zachary] I've got 47 questions.

  • But I'll end with a quick request.

  • Years ago you-- (audio garbling)

  • - [Elon] Sorry, go ahead.

  • - [Zachary] Years ago, you warned about

  • a coming short tsunami,

  • and it seemed obvious that it was coming,

  • but the shorts didn't really seem to recognize it,

  • and then sort of attacked you, trolled you for months,

  • and then finally, it came.

  • You again, warned very honestly, I think very directly,

  • that there's gonna be an epic short squeeze.

  • We have I think the whole community has a little request.

  • Don't let the trolls get you down,

  • don't see the trolls too much,

  • but we do like it when you tease the trolls a bit.

  • So use your judgment.

  • But thanks a lot for what you're doing.

  • - [Elon] All right.

  • Well, thank you for your in-depth coverage

  • of clean-energy technology.

  • - [Martin] Thank you very much,

  • and the very last question comes from Galileo Russell,

  • who represents the retail shareholders.

  • - [Galileo] Congrats on an awesome quarter.

  • Really proud to be a Tesla shareholder

  • with the Model 3 ramping to 5,000 a week.

  • And I think you may have touched on this but I'm curious.

  • Will Tesla ever produce vehicles at Gigafactory 1,

  • maybe the Semi?

  • And then I'm curious on any manufacturing synergies

  • between the Semi and the Model 3.

  • - [Elon] Oh wow.

  • Interesting questions.

  • You always come up with really interesting questions.

  • Really interesting questions that I cannot actually,

  • the first one I cannot,

  • it gets so much attention, where we put production.

  • So I can't answer any,

  • like where we're gonna put production questions.

  • Will the Semi use a bunch of Model 3 technology?

  • The answer is yes.

  • Jerome, I don't know if you wanna elaborate

  • on that or, up to you.

  • - [Jerome] Well, I mean you can already see

  • in the prototype that we've leveraged

  • a lot of the Model 3 components, the screens--

  • - Yeah. - The door handles.

  • I mean, as much as possible. - The motors.

  • - [Jerome] Yeah, the motors, yeah, in the prototype,

  • a lot of the cell technology.

  • But there are some changes,

  • and I'd rather not make that public.

  • Yeah, obviously it's going to be better

  • than what we showed last year.

  • There is a lot of improvements, yeah.

  • - [Galileo] Okay.

  • So hopefully you can talk more about this,

  • with the battery project,

  • with PG&E that was recently announced.

  • I'm wondering if you could elaborate how you're prioritizing

  • battery pack between auto and energy storage,

  • 'cause it seems like you ramped auto battery pack

  • to 20 gigawatt hours in the past 12 months,

  • but are only guiding for about one gigawatt hour

  • of Tesla Energy installation in the next year.

  • So I'm wondering why is Tesla Energy,

  • given its supply constraint,

  • like why not ramp up supply to 10 gigawatts?

  • It seems like the guidance is a little low there.

  • - [Deepak] Yeah, as Elon suggested earlier, we are,

  • it essentially makes sense for us to prioritize Model 3,

  • but we are adding a ton of capacity, cell capacity,

  • and JB can talk more about it,

  • that will enable us to dramatically ramp

  • our energy storage business

  • as well in the coming quarters.

  • - [JB] Yeah, you kinda mentioned only one gigawatt hour.

  • But that's a big number in that business.

  • And it's maybe on the order of 300%

  • what we did the prior year,

  • and we're still aiming at maybe

  • another three to four X growth for 2019.

  • - [Elon] These are mad,

  • at scale, these are insane growth levels.

  • - [JB] Crazy growth rate.

  • - [Elon] Yeah, it's not like shipping a software.

  • This is like you actually need to build,

  • it's like a lot of atoms-- - No offense to software.

  • - [Elon] Yes, no, no, I mean like once you build software,

  • you can obviously have lots of copies,

  • but like when it's like a lot of really complicated atoms,

  • man, (sighs) hard.

  • - [JB] Maybe specifically also your cell,

  • to the cell-limitation question.

  • I think this has been mentioned before,

  • but we also do use some other vendors.

  • - Oh, yeah. - Other than Panasonic.

  • - [Elon] Yes, we use Samsung and LG and yeah.

  • - [JB] Exactly, in our energy products.

  • So I've heard people feel like this is

  • kind of a zero-sum game or something with Model 3,

  • but that is not the case.

  • And we do--

  • - [Elon] It's a partial-sum game.

  • We did shut down a Powerwall cell line in favor of Model 3,

  • to be totally honest, but we kind of had to do that.

  • But we're adding new cell lines,

  • and we'll be able to address that issue very soon.

  • - [Deepak] I think to put it in perspective,

  • we are soon tripling our storage.

  • - [Elon] These are mad growth numbers, mad.

  • - [Deepak] And it's one thing to produce,

  • but it's also another thing to install.

  • - [Elon] Yeah, exactly.

  • - [Deepak] You need infrastructure

  • and the people to do that.

  • So, it's massive scaling,

  • as very few companies grow at that rate.

  • - [Elon] Yeah, and one of the biggest challenges like,

  • we've got a, there needs to be a lot more electricians.

  • So we actually had an electrician training program.

  • We're gonna actually have to train new,

  • you know, people who've never been electricians before

  • to be electricians,

  • because otherwise there's not enough electrician capacity

  • in the United States and the most places in the world

  • to install Powerwalls. - Yeah.

  • - [Elon] So it's like we have to actually literally

  • train electricians and it takes like two years, basically,

  • before somebody is certified to be an electrician.

  • So it's sort of like, okay,

  • we obviously can't grow faster than the rates,

  • the number of electricians

  • who can physically install a Powerwall.

  • That's like one of the limitations.

  • - [JB] And that PG&E project you mentioned

  • is an incredibly exciting one.

  • It kind of is indicative-- - Yeah, it's awesome actually.

  • - [JB] Of the growth rate.

  • It has a-- - Yeah, can you elaborate

  • on that?

  • - [JB] We can't say too much.

  • - [Elon] I hope I haven't said anything that's like, oop--

  • - It is over a gigawatt hour. - Yeah, a gigawatt hour.

  • That's public, right? - Fully considered.

  • - Okay. - It is now.

  • - [Elon] Okay, all right, okay.

  • - [JB] And just to give you a sense,

  • it took us five years of growing that business

  • to get to a gigawatt hour, cumulative deployed.

  • - [Elon] And there were like so many people

  • who had said a gigawatt hour

  • is an impossible number for lithium ion.

  • Like that's, yeah.

  • - [JB] I mean, the car business is still much bigger,

  • as we sit here today,

  • but the growth rate on energy is faster.

  • - [Elon] Yeah, if you extrapolate energy growth rate,

  • well, obviously, if you extrapolate anything,

  • when that triples for a year,

  • pretty soon, it becomes the size of the universe,

  • but long-term, we would expect the energy business

  • to catch up to the auto business in size.

  • - [Galileo] Nice.

  • And then, lastly, I'm really curious, Elon.

  • Do you have any part of the business

  • that shareholders should be asking or thinking more about?

  • Or what do you wish would have been asked on the call?

  • - [Elon] Good question.

  • We were trying to anticipate,

  • actually, I try and anticipate the questions

  • that are on people's minds,

  • that's why we have the Autopilot,

  • the key leaders of the Autopilot team here,

  • and much of the executive team of Tesla here

  • to try to be proactive in that regard.

  • And is there anything--

  • - Well, I guess, in terms of-- - I think we really

  • covered a lot, so if there's any, yeah.

  • - Just very last thing. - Okay.

  • - [Elon] Your very last thing, go ahead.

  • - [Galileo] Yeah, sorry, one last thing.

  • The new fiscal engineering strategy

  • of profits and cash flow,

  • and you saying that would last in perpetuity,

  • sort of caught me by surprise, personally.

  • And so I'm curious if there's any trade-off to growth

  • with that new strategy,

  • or sort of, what's the rationale behind the scenes

  • because this seems like the biggest change

  • in Tesla's financial engineering strategy since the IPO.

  • - [Elon] Yeah, being cash flow positive

  • and capping at positive doesn't mean like,

  • that doesn't mean we're rolling in money.

  • There's definitely gonna be cases

  • where we're just barely cash flow positive

  • or barely profitable in some quarters in the future.

  • But I think it's been a long time,

  • it's been almost 15 years now.

  • I think we're at a scale where

  • the amount of time that it takes

  • to actually scale up and do things is,

  • there's a certain, like we're big enough,

  • where we actually can spend money efficiently

  • to make things go faster.

  • So we kind of hit scale with volume production of cars.

  • And I think we can,

  • I think this is probably the right thing to do

  • is to be sort of essentially self-funding

  • on a go forward basis

  • and apart from selective situations

  • where there's say some debt, temporary debt

  • for construction of a Gigafactory

  • in China or Europe or something like that.

  • But apart from that, I think we,

  • essentially like I don't think we're constraining growth

  • in any significant way

  • by adopting this strategy at this point.

  • It would have been true in times past,

  • but I think it is no longer the case, yeah.

  • - [Martin] Okay, I think that's gonna be--

  • - [Galileo] Awesome, thank you so much.

  • - [Martin] Thank you very much.

  • Unfortunately, that's I think all the time we have today.

  • Appreciate all your questions

  • and looking forward to speaking to you next quarter.

  • - [Shiree] Thank you.

  • Ladies and gentlemen,

  • thank you for participating in today's conference.

  • This does conclude the program.

  • You may all disconnect, and have a wonderful day.

  • (classical music)

  • - Wow, okay.

  • Well here we are a couple hours later,

  • hour and a half later.

  • Thank you guys for sticking with me, those that have.

  • Lots of big stuff there.

  • A couple quick things that stood out to me.

  • First off you know, we didn't have any more meltdowns

  • this time, which are great.

  • Gali from HyperChange TV got on the call,

  • asked some great questions.

  • I, you know, it was interesting to hear them talk

  • about why they can't talk about production,

  • and all those other things,

  • but one of the most interesting things I heard

  • was that they're trying to get to that 25% margin

  • on the Model 3 coming up next year,

  • which would be huge for them,

  • and also that they're still hoping or planning to get the,

  • to one million vehicles by 2020,

  • and I think the guy that was asking the question

  • was kind of a short or negative on it,

  • and the answer basically was yeah.

  • Remember Shanghai?

  • Remember that giant factory we're building there?

  • Yeah, by 2020, they'll add

  • a couple hundred thousand vehicles.

  • So super interesting call, lots of great insights.

  • Also earlier on, when they said that the top five trade ins

  • for the Model 3 were, from January to July,

  • were the Prius, the BMW 3 Series,

  • Honda Accord, Honda Civic, and Nissan Leaf.

  • With the exception of the BMW 3 Series,

  • those cars are all far more inexpensive than the Model 3 is,

  • so I think that's what people

  • are really excited about when it comes to this.

  • Also, we heard Elon apologize for,

  • you know, being plight on the last call.

  • He, you know, had some excuses,

  • but basically said look, you know, that's no excuse.

  • And we heard from the Autopilot team

  • in the very beginning, which was pretty interesting.

  • I thought that was great that they invited him,

  • because I think this is a big question for a lot of folks,

  • is like how is that coming?

  • One thing I didn't hear was any updates on the roadster.

  • Hopefully we'll hear more about that.

  • It sounded like they might have a plan to build that,

  • but it's still one of those things that is not official yet.

  • So thanks again for hanging out.

  • If you guys didn't catch it during the actual broadcast,

  • let me bring it up on screen.

  • I'm gonna show you some stuff.

  • So I am now going to, I'm officially launching, I guess,

  • my giveaway for the signature black wall connector,

  • and I already brought it up on screen.

  • One second, there it is.

  • Heyyo.

  • Okay, so this is a signature black wall connector

  • that I received from the referral program.

  • So just to be clear, you cannot buy this.

  • This doesn't have a technical monetary value.

  • It is the wall connector, which is, retails for 500 bucks.

  • So it operates the same, but it's signature.

  • It's this matte black and does have Elon's signature on it.

  • I think that's why they call it the signature one.

  • So you can enter to win this.

  • I'm gonna run the giveaway for 14 days.

  • It looks like we got some people that have already entered.

  • And you can do so at Teslanomics.co/BWC.

  • Let me put that on the screen for you here.

  • And I'll drag that down.

  • Oh, maybe that goes up there.

  • Okay, at Teslanomics.co/BWC, go enter,

  • and the big catch about this is that you refer friends,

  • and then when you refer them,

  • you get triple the amount of entries.

  • So for each one person you refer, you get three entries.

  • So I just wanted to do that.

  • I thought it was cool, something fun to give back.

  • I hope you guys win.

  • You are responsible for shipping, is the only thing,

  • and I will announce the winner one week after,

  • after the contest ends.

  • So good luck to everyone.

  • Okay, that's gonna be it for today folks.

  • I will be back here on Friday,

  • where I'm talking with Bryan Birsic,

  • the founder and CEO of Wunder Capital.

  • There, we'll be talking about the future of energy.

  • So if you're into that and if you're new here,

  • please subscribe and you'll get a notification,

  • or make sure to click the bell,

  • and you'll get that notification when the time comes.

  • So thanks again everyone for joining me,

  • and don't forget, when you free the data,

  • your mind will follow.

- We like to too.

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特斯拉財報電話會議--2018年第二季度財報及問答網絡直播【直播】。 (Tesla Earnings Call - Q2 2018 Financial Results and Q&A Webcast [LIVE])

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    lawrence 發佈於 2021 年 01 月 14 日
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