March 01, 2023

Elon Musk: This is the best I've ever felt about Tesla

Coming off a landmark Tesla Model 3 launch event last week, Elon Musk sounded upbeat, positive and somewhat relieved on Tesla's conference call discussing the company's second quarter financial results*. He explained that this was: "maybe the best I've ever felt about Tesla. Last week stressed the hell out of me but I really think this is probably the best I've ever felt about the company." At one point, Elon said bluntly: "At a systemic level we are substantially more efficient than other carmakers."

Above: Tesla Model 3 (Image: Tesla)

Model 3

Elon explained that the Model 3 was extremely well-received with those who test drove the car — he even remarked that about: "80% of the journalists who test drove Model 3 said they wanted the car for themselves with most of the remaining 20% saying probably. This is crazy - I've never seen anything like it." In terms of production, Elon said, “What people should absolutely have zero concern about — zero — is that Tesla will achieve a 10,000-unit production week by the end of next year.” According to the shareholder's letter, it's all due to manufacturing simplicity: "Early Model 3 builds will have fewer than 100 permutations due to standardized content and packaged options as compared to over 1,500 permutations for Model S."

Above: Tesla Model 3 vehicles waiting for their first 30 owners (Instagram: _jeemus)

Musk confirmed some 518,000 gross reservations and 455,000 net reservations for Model 3 — with roughly 1,800 new reservations per day since the reveal. The shareholder's letter emphasized that this was all accomplished while the company was anti-selling the Model 3: "With no advertising, paid endorsements or guerilla marketing campaigns, Model 3 net reservations have still steadily climbed every month, and have even accelerated further in recent weeks." Elon added: "If you go to our stores, we don't even want to talk about [the Model 3]."

Solar Roof

The shareholder's letter explained: "The first Solar Roof installations have been completed recently at the homes of our employees, who we chose to be our first customers to help perfect all aspects of Solar Roof customer experience." On the conference call, Musk explained that solar roof is now installed on the roofs of Tesla's founder and CTO, JB Straubel, and, on his own roof.

Above: A look at one of Tesla's recently installed Solar Roofs (Image: Tesla)

Elon added: "I think this roof is going to look really [like a] knockout." Solar Roof production will be in full swing at Tesla's Buffalo Gigafactory 2 soon, which he is deeply committed to and described as "a kick-ass" facility. The shareholder's letter noted that, "In June, Solar Roof was certified by Underwriters Laboratories with its highest Class A fire rating. It has also been awarded ASTM International’s best Class F wind rating."

Model S and X

The shareholder's letter put to rest any worry about the osborne effect: "Orders for Model S and Model X have also been increasing, both leading up to and following the Model 3 handover event. In July, our weekly net order rate for these vehicles was about 15% higher than our Q2 average weekly order rate. In addition, although too early to draw strong conclusions, we are seeing an even further increase in net Model S orders since the July 28th event. This growing demand gives us even more reason to expect increased deliveries of Model S and Model X in the second half of this year." Elon emphasized: "Model S and X demand increased as a result of Model 3."

Above: Tesla Model S and X (Instagram: bypantheon)

Tesla Stores

The shareholder's letter explained: "During Q2, we opened 29 new store and service locations, bringing us to a total of 300 locations globally. Ahead of scaling deliveries for Model 3, we have also broadened our distribution capabilities with the launch of new delivery hubs." Elon also confirmed that the conversion rate (from store walk-ins) had improved quarter over quarter and month over month. The revenue Tesla earns at their store locations is so impressive that Elon stated: "you need a telescope to see who's in second place."

Above: The star of the show inside Tesla's stores (Instagram: pontuspg)

Autopilot, Superchargers, and Gigafactories

Elon acknowledged that: "I spend a lot of my week working on Autopilot with the Autopilot team." He said that the team focuses on vision, image recognition, neural nets, and narrow AI. Elon said with great pride that "I think we have the best team in the world on that front." He also promised that Tesla would triple supercharger locations by the end of next year in order to address the needs of of Model S, X, and 3 owners. Elon also mentioned that future Gigafactories "made sense" in China and Europe and announcements were likely coming before the end of this year.

Above: The iconic Tesla Model X (Instagram: eighthwondertravel)

Model Y

Elon pivoted and explained that "upon the counsel of my executive team, the Model Y will in fact be using substantial carry-over from Model 3 in order to bring it to market faster.” Musk explained prior that the Model Y would be using a new architecture but “the executive team wheeled me back from the cliffs of insanity.” He also reminded analysts that the compact SUV market is far larger than that of the Model 3's sedan market.

Above: Tesla Model Y concept design by Mike Bleczyc (Instagram: autodeskautomotive)

Future Teasers

Although the Model Y will share much of Model 3's platform, Elon noted: “I still think we want to do the crazy thing in the future,” making reference to his original idea of a new future vehicle platform. “But we will want to punt that until after the compact SUV.” And, he hinted at possible battery breakthroughs noting that a breakthrough looks promising but he can't talk about it due to confidentiality. He reminded analysts that Tesla is the world's biggest buyer of lithium ion batteries giving them easy access to the newest developments in the field.

Above: Some surprises may be coming at Tesla (Instagram: turkeyteslamotors)

Financials

Tesla beat analyst expectations. So much so — the stock jumped in after hours trading finishing up almost 8%. Nevertheless, be ready for more TSLA volatility (as always) with wild fluctuations as bulls and bears continue their ongoing tug-of-war. That said, Elon was colorful discussing prior predictions: "When we make mistakes it's because we're stupid not because we're trying to mislead anyone... We aspire to be less dumb over time." The infographic (below) and shareholder's letter outline some key highlights:

Model 3 production on track to achieve previously announced targets 
Expecting positive Model 3 gross margin in Q4; targeting 25% margin in 2018 
Deliveries grew 53% compared to Q2’16 in flat luxury vehicle market 
Projecting Model S and Model X deliveries to increase in 2H’17 vs 1H’17 
Q2 Automotive gross margin at 27.9% GAAP and 25.0% non-GAAP 
Q2 GAAP loss from operations improved sequentially, two quarters in a row 
More than $3 billion cash on-hand at the end of Q

Infographic: Alphastreet

In closing, Elon expressed a lot of pride in his growing staff — it's up to 33,000 employees now. He even gave kudos to his ever-improving "A team" of suppliers. The shareholder's letter concluded, "We remain confident in our plans and look forward to the upcoming unveiling of the next exciting addition to our portfolio of electric vehicles – Semi Truck." In any event, to take a deeper dive, listen in on the entire conference call below...