August 04, 2016

Tesla reveals secret project codename, vehicle rollout plan, and mind-blowing tech advances

Yesterday, according to the Tesla Motors [NASDAQ: TSLA] Shareholder Letter and financial results conference call*, "Q2 was certainly busy." If you've been following this blog, that shouldn't come as any surprise. Yes, big improvements were announced: Tesla set a quarterly production record. But, there's plenty, plenty more. There is much to report from yesterday's earnings update, so let's dive right in...

Financial Results / Production Ramp

According to the Shareholder Letter, although they missed their vehicle deliveries estimate, it turns out that: "For the quarter Tesla reported revenues of $1.56 billion, which was in line with most expectations right around the $1.6 billion mark, up 31% from a year ago." Also, production is ramping nicely: "We exited Q2 consistently producing nearly 2,000 vehicles per week and our total Q2 production of 18,345 vehicles constituted a new quarterly production record, up 18% from Q1 and up 43% from Q2 last year."

Tesla looks to produce the Model S and X at a rate of 2,200 units per week (combined) by the end of Q3, improving to 2,400 per week in Q4. Looking ahead, they forecasted: "50,000 deliveries in the second half of this year, with automotive gross margin improvement." This translates into a full year sales forecast closing in on 80,000 vehicle deliveries.

Machine that makes the Machine

Musk has been laser-focused on production, what he calls "the machine that makes the machine." Why? Lots of early issues with the Model X: "We were in production hell... we climbed out of hell in June." He added that he's "not losing sleep at night because of production issues" anymore, but that he has "a whole lot of mental scar tissue from earlier this year." But some good has come out of it all. Musk revealed the internal secret project codename for the machine that makes the machine for Model 3: its been coined “the alien dreadnought.” And, he noted that the manufacturing capability is currently at alien dreadnought version 0.5, explaining that by the time Tesla reaches version 3.0 in a few years, it will look like nothing anybody has ever seen ever before.

Tesla Model 3

Tesla stated that: "We have completed the design phase of Model 3 and released Model 3 for tooling, production planning and validation... some Model 3 production equipment is already on line, including initial capacity in our stamping and paint centers. Later this year, we plan to begin construction of new Model 3 body and general assembly centers." This follows recent rumors that, right now: "sources within Tesla’s supply chain told Electrek that the automaker has been ordering enough Model 3 parts over the past two months to build a fleet of around 300 prototypes."

Tesla Model S and Model X

After noting the introduction of the 60 versions for both S and X, and the new Model S refresh, some numbers were revealed: "With the addition of Model X orders, total Q2 net new vehicle orders rose 67% from a year ago... [and] Model S average prices increased 3% sequentially, due to higher option take rates and the modest price increase associated with the Model S refresh. Model X average prices were more than 15% higher than for Model S."

Future Vehicles

With so many new Tesla vehicles served up in Musk's Master Plan sequel, he finally gave some guidance on a new vehicle rollout plan. The compact SUV (Model Y) will be the next Tesla vehicle following the Model 3. Musk noted that Tesla expects 500,000 - 1M sales for the forthcoming Model Y. But, Musk is also planning new product unveilings for both the Tesla Semi and Tesla Minibus (which will be on the Model X platform) — the timing should be middle of next year (next 6 - 9 months). When does Musk expect to begin production on these new vehicles? He forecasted that: "They should enter production within low single digit years. I consider anything past 5 years as infinity."

Above: Truck design concepts as imagined for Tesla (Youtube: Auto Cars Of The World)

Tesla Autopilot

Now that Tesla and Mobileye have gone their separate ways, Musk confirmed that autonomous driving, going forward, will be an "internal solution from Tesla.” He noted that full autonomy will be here sooner than people think. The hardware is not the issue, it's a matter of software "developing advanced narrow AI [and] advanced neural nets that can work inside the cars" and lead to full autonomy. He seemed to be thrilled with progress that internal teams within Tesla have shown thus far: "what we have under development is gonna blow people’s minds... The recent progress we are doing right now blows me away. And if it blows me away, it will blow away other people too."

Above: Current system for Tesla Autopilot (Source: How it works)

Tesla Energy

Tesla Energy (Tesla Powerwall and Powerpack initiatives) will have a production ramp concentrated in Q4, most heavily in November and December, and then Musk expects exponential growth from there. After the fourth quarter, he remains extremely enthusiastic about growth prospects in 2017 saying: "I think it’s really gonna go ballistic.” Looking at other competitors in the stationary storage industry, he noted, Tesla Energy will be: "head and shoulders above anything else I’ve even heard announced as future plans from other companies."

Above: Tesla Powerwall (Source: The Next Web)

New Stores

Tesla has impressive expansion plans: "We are also accelerating store openings and plan to add a new retail location every four days on average during the remainder of Q3 and through Q4. We are adding stores in new population-dense markets like Taipei, Seoul, and Mexico City, while also adding stores in our most mature markets like California... [and] the quality of our new locations is also improving as many shopping malls now consider us the new standard for an anchor tenant based on the amount of foot traffic that we draw and our very high revenue per square foot."

Above: Tesla store recently opened in Sydney, Australia (Source: Go Auto News)

If you couple yesterday's updates with the recent news surrounding SolarCity and the Gigafactory, it's clear that Tesla is pushing ahead with major growth plans for the remainder of 2016 and even bigger plans in 2017. We'll be sure to keep you posted on updates. In the meantime, to check out the full audio from last night's earnings conference call, and, Tesla's Shareholder Letter below...