June 01, 2016

Tesla Motors 2016 Shareholder Meeting Highlights [Video]

Yesterday, Tesla Motors [NASDAQ: TSLA] held its 2016 Shareholder Meeting at the Computer History Museum in Mountain View, CA. Tesla CEO Elon Musk was joined on stage with co-founder and CTO JB Straubel for three and a half hours. Musk also included others from the Tesla team in order to tell the "soap opera like history of Tesla" from the genesis of the company. Even though the meeting ran extra long, there were key insights to be gleaned if you were able to sit through the entire presentation. In order to recap, synthesize, and deliver you the key highlights, I've taken my own notes (along with highlights from a few excellent articles) in order to distill the best from yesterday's marquis event.

THE EARLY DAYS

Musk, Straubel and a few of Tesla's early staffers told tales of engineering triumphs (and careless missteps) bringing the breakthrough Tesla Roadster to market. Credit was given to AC Propulsion and their all-electric tzero as the inspiration for the Roadster. Musk noted that much of the early drama of the company was captured in the movie, Revenge of the Electric Car. Most intriguing was the critical role Daimler played early on by investing $50 million into Tesla when it was "make or break" time for the young company. In contrast, the Department of Energy $465 million loan, which came later on, was not "fundamental" to Tesla's survival, and, was paid back in full -- early (in 2013) and with interest.

Above: Musk profiled in Revenge of the Electric Car and referred to it as a great resource to learn more about the early days of the company

The story was wild, as reported by CleanTechnica: "In order to potentially bring Daimler on as an investor or business partner, Tesla determined it had to get a Smart Car (from Mexico — Tesla sent a guy down to Mexico with $20,000 to get one — since the cars weren’t available in the US) in order to electrify it based on a custom-designed battery and drivetrain JB [Straubel] and crew put [it] together in ~3 months. The car packed all the torque of a Roadster into the Smart Car, and was thus pretty amazing. Daimler loved it, and the German company saved Tesla from premature death. Elon noted repeatedly that Tesla wouldn’t be around if it weren’t for Daimler."

PRODUCTION RAMP

Part of the reason Musk reviewed the past was to demonstrate the company's unique ability to achieve near-impossible goals. As reported in The Street, "Musk did hint at the challenges that the company is facing, saying it was 'worth dwelling on how big of a leap it was to go' from the company's initial Roadster to its more mainstream Model S. The company delivered about 500 Roadsters per year, doing about half of the work in-house, while the Model S aimed at 20,000 deliveries per year almost entirely done by Tesla. 'I think it is important to point out we have made much bigger leaps than this in the past,' Musk said."

REVOLUTIONIZING FACTORY PRODUCTION

As reported in the LA Times, "Musk said he and his Tesla team will completely rethink the factory process... 'The most important point I want to make is … that we’ve realized that the true difficulty and where the greatest potential lies is in building the factory,'... Musk said, 'We can make dramatic improvements to the machine that makes the machine. A lot of people will not believe us about this, but I am absolutely convinced this can be accomplished.'”

From my notes, Musk had also stated, "I actually think that the improvement in the machine that makes the machine is a factor of 10, maybe more than a factor of 10. I don’t have a desk or an office anymore, I just spend my time on the production floor." He continued, "At least an order of magnitude room for advancement in production... [we will] design a factory like you’d design an advanced computer." He noted that most in auto manufacturing are, "operating according to the invisible walls [in their mind], we’re in the process of explaining that these walls don’t exist."

TESLA GIGAFACTORY

Big news also came on the Tesla Gigafactory front. As reported by Electrek, "Tesla CEO Elon Musk announced that the company could triple the total planned battery output of the Gigafactory to ~105 GWh of cells and ~150 GWh of battery packs – or over 3 times the current total li-ion battery production worldwide." Regarding Tesla's next generation of lithium-ion batteries, Musk announced, "a new 20700 cell format – compared to the current 18650. It means the battery cells that will be produced at the factory later this year will be a little taller (70mm) and a little wider (20mm) than the current cells used in the Model S and X... The CEO referred to Panasonic’s machinery to produce the new cells as 'impressive machines' and that it should create 'by far be the best cell production in the world.'"

TESLA ENERGY

And, Musk changed his projections for the Tesla Energy division: "Musk previously said that he expected about 1/3 of the Gigafactory production would go toward Tesla Energy products for energy storage, Powerwall and Powerpacks, and 2/3 toward battery packs for Tesla vehicles. Today he updated his expected split to closer to even'... He added – with a “high degree of uncertainty” – that on a revenue standpoint in long-term, he expects Tesla Energy products will generate similar revenue for Tesla as the company’s vehicles."

MODEL 3 SUPERCHARGER ACCESS

Tesla Central reported, "that the upcoming Tesla Model 3 sedan will not get free Supercharger access without purchasing a 'package'... Here's what Musk said in response to a question from a current Model S owner about what was meant by that: 'Obviously, [free Supercharging] fundamentally has a cost. … The obvious thing to do is decouple that from the cost of the Model 3. So it will still be very cheap, and far cheaper than gasoline, to drive long-distance with the Model 3, but it will not be free long distance for life unless you purchase that package. I wish we could, but in order to achieve the economics, it has to be something like that.'"

FINAL THOUGHTS

At the end of this marathon meeting, it became clear that Musk chose this unique forum to demonstrate open lines of communication, accountability, transparency, and a mix of both audacity and humility concerning past, present, and future opportunities for Tesla Motors. But Musk's outlook remains grand, "In the future you can expect a wide range of vehicles from Tesla.” And, most evident, was Musk's unwavering conviction about ramping production for Model 3: "This is the most excited I’ve been about the future of Tesla. Building the machine that builds the machine. I’m really fired up about that." We'll keep you posted on news as these efforts begin to materialize.

We've included some video footage highlights (see below), and, we'll also include additional footage as it becomes available...