Tesla Conference Call Concentrate

1 year ago by Tesla Mondo 26

Tesla

Tesla

Tesla CEO Elon Musk Tweets Pricing And Reveal Timeline This Past September (via @elonmusk)

Tesla CEO Elon Musk Tweets Pricing And Reveal Timeline This Past September (via @elonmusk)

*Direct quotes are red. Everything else is paraphrased by TeslaMondo:

Model 3

We haven’t decided whether we should show all the cards or keep a few cards close to the vest at the unveiling. The car will be designed for manufacturing ease, compared with Model S. Will Model III cannibalize S? No. They’re in different market segments. And what about the Bolt, which will come to market sooner? Musk pointed to the Model S and its ability to shove through a crowd of very established cars. If Model 3 is at all similar in its market segment, it doesn’t look we’re going to be demand-constrained.

Tesla Model S

Tesla Model S

Marketing, or lack of it

Musk thinks most ads are stupid: I think I could see us doing advertising where the ad is interesting, entertaining and people don’t regret seeing it, which unfortunately is not the case with most advertising. But first, Tesla needs to bring Model III to market. So if we do mass media, it’s more likely that somebody could buy the car.

Model S

The Model S was the best selling premium sedan in the United States last year, of any kind. Our sales sales actually increased by 51 percent whereas very one else’s declined, and the overall market segment declined by one about percent. And this is despite us being really quite under-penetrated particularly in the northeast.

One additional note is that Tesla does not advertise. We don’t pay for any endorsements. We do not discount our cars for anyone, including me — I pay full retail price — you know, whereas all of our competitors take those actions. We also have far fewer sales outlets than our competitors. So essentially there are a lot of degrees of freedom that we are not exercising that we could, in theory, exercise.

*Editor’s Note: This post appears on TeslaMondo. Check it out here.

Tesla Model X

Tesla Model X

  • Switzerland: Outsold Benz S-Class, BMW 7-Series, Porsche Panamera, Audi A8 combined.
  • Germany: Outsold Panamera.
  • Lease returns: Many returning lessees grab another Model S. There’s also a healthy aftermarket for off-lease Teslas. They’re coming back above residual value, so banks will offer good financial terms for lease buyouts too.
  • Reliability constantly improving. Tesla is seeing only a fraction of the service visits it used to see.

Model X

Why hasn’t Tesla courted the automotive press? Musk: To the degree that we could suppress demand for the X, we did. In the next few weeks, look for Model X write-ups. The X should sell just as well as the S. It’s all about personal preference. Do you value a high seating position? Panoramic views?

Here’s Musk, looking back at X headaches: We put too many new features and technology — too many great things at once — into a product. In retrospect, it would have been a better decision to do fewer things with the first version of X, and then roll in the capabilities and features and new technologies over time . . . there was some hubris there. The net result, however, is that the Model X is an amazing car.

One of the biggest production pains was the brightwork around the front windows, and seals. They had to be redesigned, and existing ones re-fitted by hand. The second row seats ended up getting “in-sourced” to end agita with suppliers. Musk: The last several months have been quite excruciating, I’d say. I mean, many late nights and weekends, but I think we’re through the worst of it at this point.

When the X rubs shoulders with the S in showrooms, Tesla will see how customers react to each and then build accordingly. Will X cannibalize S? Probably not. Cars like the BMW 5 Series and 7 Series seem to coexist without mutual disembowelment, and they’re a lot more similar than the Model S and X. JB Straubel: When the X was launched, Tesla saw a surge of interest in the brand and a boost in Model S sales.

Tesla Gigafactory - October 2015

Tesla Gigafactory – October 2015

Numbers and stuff

Tesla’s new state-of-the-art paint shop can do 10,000 cars per week. Look for less capital expenditure in 2016 than in 2015. Every year Tesla roughly doubles its fleet. Gross margin for S and X should eventually converge at 30 percent. Tesla should become profitable this year. Tesla Energy is already profitable. Cash is king for 2016. That’s the mantra.

Fireside chat with Adam Jonas from Morgan Stanley

As usual, it ended abruptly with Musk tossing a bucket of water into the fireplace. Jonas asked if the recruiting of microprocessor wiz Jim Keller means Tesla “might be moving to design some of their own silicon.” Musk declined comment. We’ve seen this dance before. Jonas has asked suggestive questions about whether Tesla is plotting a robo-fleet of autonomous cars. Musk has declined comment after pregnant pauses. This duo paints some mighty interesting pictures without even putting a brush to the canvas.

Gigafactory

The simpleton press can’t report its way out of a paper bag. Job creation is on track, contrary to reports. Nevada’s incentives are hardly egregious, since they phase in over 20 years and tie directly to factory milestones in performance. When the factory is in full swing, around the end of the decade, what will be Tesla’s battery cost per kW? Musk: We see most people over-estimating our cost per kilowatt hour. But that’s a proprietary number. Regarding construction progress: To the best of our knowledge, you don’t have to worry about the Gigafactory as a constraint to Model 3 . . . It does not appear to be anywhere near the critical path for model 3.

Macro-malaise

Any slowdown in pace of orders due to macroeconomic-tumult? We’re not seeing that impact. Musk: Tesla needs more stores, and in better locations, to maximize brand awareness and insulate against any possible downturn. Example of poor location? Manhattan. You basically need to be Sherlock Homes to find it. As an alternate approach, TeslaMondo suggests a fleet of Tesla halal street carts.

*Editor’s Note: This and countless other Tesla-related posts appear at TeslaMondo. Check it out here

Tesla Reports Large Q4 Loss, But Shares Soar On 80k-90k Sales Guidance/Profit In 2016

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26 responses to "Tesla Conference Call Concentrate"

  1. Jonathan B says:

    Don’t Tesla employees get 25% off the price of a new car? How does he not get a discount?

    1. Vexar says:

      There is no such thing as an employee discount at Tesla Motors. Other manufacturers do that. The only discount they get is on stock, and that is a pretty good deal I’ve heard.

  2. Jonathan B says:

    These things are going to sell like hot cakes. I’ll be standing in line to place my order on 3/31.

    1. Sammy says:

      Ill get in line for my reservation as well.

    2. evcarnut says:

      The key words that I like most about the model 3., “designed for manufacturing ease”…The simpler, The better!.. That way they can built them Quickly , More precisely & Keep costs down while making a profit.. Infact.,They should build them so simple ,that the buyer should be able to trouble shoot & remedy Issues , If he/she is technically inclined & chose to do so…

  3. HVACman says:

    “One of the biggest production pains was the brightwork around the front windows, and seals. They had to be redesigned, and existing ones re-fitted by hand. The second row seats ended up getting “in-sourced” to end agita with suppliers.”

    Sounds like a lot of last-minute scrambling. Is it common among auto mfgrs to have these types of production glitches in new models that are in-production or are very, very near production? Or is it another sign of Tesla’s inexperience at basic car-design and building relative to their competitors?

    1. Anon says:

      It’s a sign that the Model X is an uncommon vehicle with many design and tech challenges to overcome, before mass production. Most automakers would never have been as bold and put so much uniqueness, tech and features into one vehicle

      That said: Model X is a lingering reminder of what not to do with Model III. And that’s quite a good thing.

    2. Mark says:

      I’d hardly call the X a “basic car design”. The only flaw is that they should practice more under promise over deliver, so they leave themselves some extra time to allow for delays.

    3. DonC says:

      Yes, I’d say it’s a sign of lack of process and quality control. To some extent the proof is how frequently the Model S needs repair. Tesla and Musk keep saying that these problems were from early released cars but the data on sites like truedelta.com don’t support that at all.

      Manufacturing cars is very complex and Tesla doesn’t have a ton of experience. But it has to meet deadlines. Tough row to hoe.

      1. Pushmi-Pullyu says:

        Another Tesla bashing comment from DonC.

        Tesla reports, publicly, the amount of money it spends on in-warranty service and repairs. The endless claims of Tesla bashers that Tesla cars need service and repairs more frequently than other, similarly priced cars, fails a reality check. Fails it rather badly!

        The Tesla bashers know this, yet keep repeating the same rubbish. It’s what they do.

      2. evcarnut says:

        Give them some time to grow & mature…Tesla is still in its infancy stage. They’ve Done Truly AMAZING things in such a small time span, Considering they were a start “FROM SCRATCH” Car company that popped up out of Nowhere. They built powertrains for Mercedes & Toyota while they were taking baby steps . ((Not your average Bear))..I HAVE HUGE RESPECT FOR THESE GUYS . They will not become your run of the mill car company..They have Big Plans that they will! carry through…..

    4. Pushmi-Pullyu says:

      “Is it common among auto mfgrs to have these types of production glitches in new models… Or is it another sign of Tesla’s inexperience…?”

      I certainly don’t claim to be an expert on this subject, by any means. But based on what I’ve read over the past several months, I think it’s a combination of two things:

      (A) Most auto makers don’t sell directly to the public. They start a MY (Model Year) production and accumulate some units before shipping them off to dealers. That delay allows them to tweak early production units without having to admit to the public that they had to go back and fix problems.

      (B) Yes, Tesla is still a relatively new auto maker, and still has some learning to do with regards to quality control, as well as spotting problems and fixing them before they actually go into production.

      To summarize: All auto makers have these kinds of problems when starting production of a new model, altho experience helps reduce their frequency. Tesla’s problems are more visible, both because they sell directly to the public and because Tesla Motors is more transparent than other auto makers. (And again, that’s my opinion, not fact.)

  4. wavelet says:

    “To the best of our knowledge, you don’t have to worry about the Gigafactory as a constraint to Model 3 . . . It does not appear to be anywhere near the critical path for model 3.”
    That sounds like a mis-quote. Musk has said that the gigafactory is absolutely required to produce Model 3 at the announced price (that is, so they can hit the required $/kWh numbers). So it’s certainly in the critical path, even if currently they don’t see any issues completing the GF on time & budget.

    Re advertising, I’m pretty sure they’ll do actual advertising for the Model 3, as soon as production capacity ramps. They pretty much have to. Despite what it seems to EV fans, the majority of the car public has never heard of Tesla. While I don’t think they’ll do big-profile TV / Magazine ads, I’m sure they’ll do online ads, which work well with the online sales model anyway.

    1. Pushmi-Pullyu says:

      wavelet said:

      “Musk has said that the gigafactory is absolutely required to produce Model 3 at the announced price (that is, so they can hit the required $/kWh numbers). So it’s certainly in the critical path…”

      I puzzled over that, too.

      I am guessing that what Musk meant, altho if so he didn’t express it very clearly, is that the planned, and projected, rate of progress on building Gigafactory 1 is faster than necessary to ensure the necessary supply of batteries for the Model ≡. That is, the Gigafactory will probably be complete and working at full production capacity before Model ≡ production nears its planned maximum.

      In other words, if my interpretation is correct, Musk doesn’t think it’s a critical supply constraint because there will be some margin of excess Gigafactory 1 battery supply, beyond what the Model ≡ needs. That excess capacity will be used by Tesla Energy, and possibly outside customers.

      1. Priusmaniac says:

        Perhaps it is more straightforward that the Model 3 cells can already be supplied now from another factory if necessary and that the Gigafactory will only improve the cost but not be critical to make the Model 3 even if it means a lower margin in the beginning.

        1. Pushmi-Pullyu says:

          The Gigafactory 1 project has two goals:

          1. To produce li-ion cells in sufficient quantity to support Tesla making as many as 500,000 long-range BEVs per year; far more than any other auto maker. Note this volume is said to be equal to the entire global output in 2013.

          2. To lower the per-kWh cost of those cells to the point that Tesla can make a profit on the Model ≡.

          Now I could be wrong, but I don’t think either of those could be achieved by Tesla buying batteries from some other source. I suppose it’s possible #2 could be achieved by LG Chem, with their new lower-cost cell chemistry, but only if that’s compatible with the type of cells Tesla uses in its cars. I don’t think #1 is possible from any source other than Gigafactory 1. LG Chem already has a growing list of customers for its new cells, and its current production is far below Panasonic’s.

          Even if Tesla could get a sufficient supply of cells from another source, unless the cost would be nearly as low, Tesla would have no incentive to put the Model ≡ into production. Tesla isn’t in business to lose money, despite what the anti-Tesla bashers keep saying!

          1. Priusmaniac says:

            On volume, the first production of Model 3 is going to start progressively not at 500000/year at once, so Panasonic can certainly supply from other sites for the very beginning. Tesla also had contacts with other producers which could also serve as an interim.

            On the profit side, sure the Gigafactory scale will allow lower production costs but it must also not be exaggerated. We are not talking of halving the cost compared to another state of the art production plant of smaller scale. It will be more in the 20% perhaps 30% when at full output. The battery is an import cost item but even so sparing 20% on the cells is not going to make the Model 3 go from 20% gross margin to a zero or even a negative gross margin. It will more likely make the start margin 10 % instead of 20%. In any case even with the Gigafactory, it takes some initial sales to make real profits on a brand new car whatever the car even a standard gasoline car. There is always an initial new model start capital that can only be recouped after at least a few thousand. It sits in the retooling, the robot reprogramming, the plastic molds, the workers new model training, new steel press molds, new crash tests and so on. So the Model 3 VIN 1 up to VIN 1000 is going to be at a loss for sure whatever battery is used wherever it is produced. VIN 1 could even have a zero cost battery that it still would not recoup the initial investment. A VIN1 actual cost is certainly a factor 100 above the sales price, at contrary a VIN 1000000 will have a cost bellow sales price, so margin is never fixed but rather an asymptotic curve that start extremely negative, rises very fast and then gradually becomes almost horizontal somewhat higher than the planned initial margin, making it possible the recoup the initial cars super high price to still be on target with the actual set initial margin. Of course it is responding dynamically according to market demand and production costs.
            The conclusion is that the Model 3 first start doesn’t really need Gigafactory start since the first cars have skyrocket production costs anyway, with or without it. Of course when the numbers start to increase and margin curve start to settle, having the Gigafactory running will become much more important to reach the set global target margin.

    2. Pushmi-Pullyu says:

      wavelet said:

      “Re advertising, I’m pretty sure they’ll do actual advertising for the Model 3, as soon as production capacity ramps. They pretty much have to. Despite what it seems to EV fans, the majority of the car public has never heard of Tesla. While I don’t think they’ll do big-profile TV / Magazine ads, I’m sure they’ll do online ads, which work well with the online sales model anyway.”

      You have summed up my own thoughts pretty well, so thanks.

      Musk is quoted as saying: “I think I could see us doing advertising where the ad is interesting, entertaining and people don’t regret seeing it, which unfortunately is not the case with most advertising.”

      This reads to me like initial idealism from a businessman; idealism which isn’t likely to survive contact with reality for long. I’m reminded of George Lucas originally claiming he would license only “quality products” as Star Wars tie-in merchandise. Well, I don’t consider (to give just one example) a cheap, throwaway plastic container in the shape of a lightsaber, filled with cheap candy, to be a “quality product”. Maybe Lucas disagrees? 😉

      Here’s my prediction: By 2021, if not sooner, we’ll see Internet banner ads for the Tesla Model ≡.

    3. Wavelet, as to “To the best of our knowledge, you don’t have to worry about the Gigafactory as a constraint to Model 3 . . . It does not appear to be anywhere near the critical path for model 3.” – it looks like you took that a bit out of context or something, based on how I would read it.

      How about this variant (by my translation of it) “As the Model 3 Production Plan currently is for starting up production in late 2017, based on what we see as a trend in progress on the Gigafactory 1 – both building and internals getting implemented by us and Panasonic, we see no issues from the Gigafactory holding up the start of production of the Model 3!”

      1. wavelet says:

        I’m sure that’s what he meant, but that still leaves the GF in the critical path. “X is in the Critical path for Y” means simply that X is required to do Y, not “X can’t be done” or “X can’t be done in time”, or “X is at risk of not happening”. It doesn’t say anything about X itself, only the relationship between X and Y.

        Since Musk has been around tech companies for a very long time, I’m sure he knows what it means and wouldn’t use it wrongly. That’s why I think it’s a misquote.

        1. Pushmi-Pullyu says:

          Hmmm, no, apparently the term “critical path” doesn’t mean what either you or I thought it meant; it applies only to the timeline, not to the ability to get things done. Looks like Musk used it correctly, despite what we thought.

          Quoting from Business Dictionary.com:

          critical path

          Longest sequence of activities in a project plan which must be completed on time for the project to complete on due date. An activity on the critical path cannot be started until its predecessor activity is complete; if it is delayed for a day, the entire project will be delayed for a day unless the activity following the delayed activity is completed a day earlier.

          Read more: http://www.businessdictionary.com/definition/critical-path.html#ixzz40QgAPg8O

  5. Pushmi-Pullyu says:

    A big THANK YOU! to Teslamondo. This is one of the most informative articles regarding the company’s strategies that I’ve read in some time.

    I do take take issue with this:

    Elon Musk reportedly said: “One additional note is that Tesla does not advertise. We don’t pay for any endorsements.”

    This appears to be factually incorrect. Tesla’s referral program, giving $1000 to those who encourage others to buy a Model S, certainly qualifies as paying for endorsement. Now, if Tesla has discontinued that, and I seem to recall they did discontinue the direct payout to existing Model S owners, at best that quote is true only in letter, not in spirit. The only reason they discontinued that was because, according to some U.S. State laws, it’s illegal to have people who are not employees act as salesmen for the company. At least, that’s my understanding and recollection; I hope that’s all correct.

    1. Well PmPu, the – “We don’t pay for any endorsements” still remains true in the sense – than no one go paid – ‘Just’ for saying that Tesla is Great, they only got paid when a sale was transacted, and the usual ‘Endorsement’ is isolated from sales relevance, because – when was the last time you bought product that was ‘Endorsed’ and they asked you if you bought it because of said endorsement!

      Point Being – People who endorse products usually get paid, simply for putting their name, face, voice, to the product, and often a lot larger than just a few $1,000, I would expect. A Royalty – is closer to what Tesla Offered – or – a Head Hunter/Finders Fee!

      Even paying to exhibit at EV Fest – an EV Show I have helped develop since 2010, and ran since 2011 – would be considered by them to be advertising (and maybe a show that is so much smaller than a typical Auto Show with All brands, as the snow name suggests, ICE Only Cars are not the focus), and as a result – I have yet to have them come on board corporately – it has always been individual owners that supported the show.

      I will note that the Model X is currently on Display up here in Toronto, at the CAIS – Canadian International Auto Show, though – so – in a sense – they are advertising! (They also pulled from the NAIAS in Detroit – saying – They sell cars and since they can’t in Michigan – they see no reason to be there! In other words – likely little to no return on their rather large show investment in Detroit! Plus – it put Michigan on notice!)

      1. Pushmi-Pullyu says:

        Robert Weekley said:

        “Well PmPu, the –- ‘We don’t pay for any endorsements’ still remains true in the sense – than no one go paid –- ‘Just’ for saying that Tesla is Great, they only got paid when a sale was transacted…”

        That appears to be a distinction without a difference. Whether they got paid before the sale, or afterward, doesn’t alter the fact that they were paid for a personal endorsement and referrral.

        “…and the usual ‘Endorsement’ is isolated from sales relevance, because -– when was the last time you bought product that was ‘Endorsed’ and they asked you if you bought it because of said endorsement!”

        There’s no isolation involved when Tesla gives the person recommending the Model S $1000 as a “thank you” for the referral! Again, you appear to be trying to make a distinction where no real difference exists.

        “Point Being – People who endorse products usually get paid, simply for putting their name, face, voice, to the product, and often a lot larger than just a few $1,000…”

        Either they were paid by Tesla to promote sales, or they were not. You’re improperly trying to blur the issue by denigrating the amount. Even if it was only $1, it would still be paying someone other than a Tesla employee for endorsement and referral.

        “Even paying to exhibit at EV Fest… would be considered by them to be advertising…”

        Well of course it’s advertising. When Tesla sponsers an event to show off a new product (Model X) or service (Supercharging), that’s also advertising. The question isn’t whether or not Tesla is gonna do advertising; it’s already doing that. The question is whether or not — and when — Tesla is gonna do mass media, paid advertising.

        Elon Musk made that distinction clear when he said (or at least, is quoted as saying): “So if we do mass media [advertising], it’s more likely that somebody could buy the car.”

  6. TomArt says:

    Advertising might be necessary at some point, but I can’t imagine that it would be any time soon. The Model S market share in the full-size luxury sedan segment is very impressive. I would be shocked if MX fell short of MS’s market performance.

    In other words, production-constrained sales of MS and MX will continue for the foreseeable future.

    The MIII of course is the question here. It very well could be as popular in luxury mid-sized sedans as the MS has been in its class. If MIII market share gets anywhere close to MS’s current market share in their respective segments, then MIII sales will remain production constrained for the foreseeable future. No advertising necessary.