Tesla Q2 Earnings Call Reveals 455,000 Model 3 Reservations, Musk And Straubel Already Have Tesla Solar Roof

3 months ago by Domenick Yoney 37

Tesla Model 3 (wallpaper 2,560x)

The Q2 earnings call was full of surprises. 

Like every financial quarter previous, this latest Q2 2017 report is Tesla’s most important.

Tesla 2017 Q2 Earnings: Revenue Beats Expectations, Bullish Outlook Continues

Having just officially launched the Model 3, investors want to know how things have been going and what expectations for future profit (or loss) they should have. As usual, various financial analysts get an hour or so after the official release of the 2nd quarter’s earnings report to pepper CEO Elon Musk and a handful of other executives with questions to help them divine just that. As always, we listen in to get, in analyst-speak, more color and granularity on aspects of the bigger picture and, hopefully, pleasant surprises. This 2017 2nd quarter call did not disappoint.

Tesla Solar Roof customer installation

Model 3 Reservation Correction

The big news is a correction from CEO Elon Musk. While addressing a question about the Supercharger network, he suddenly diverted to say that he had misspoke on Friday when he had told some journalists that the company had 500,000 Model 3 reservations in hand. In fact, that number should have been 455,000. Altogether, they had received as many as 518,000 bookings, but after factoring in 63,000 cancellations over the past year, the net number is somewhat lower. Still, I think most would agree this new number is not too shabby.

When we reported the 2Q earnings earlier today, we mentioned that we had expected some amount of churn in the days following the handover event — that is to say, a number of people would drop their reservations while others would make new ones. But, while the report mentioned the company had received 1,800 new Model 3 reservations a day, we didn’t realize that this was a net number, meaning this was the number of new reservations after accounting for dropped ones. So again, not too shabby.

Solar Roof Installed

Tesla Solar Roof customer installation

Our next surprise was yet another detail left out of the earlier report. While we told you that some employees had already received their shiny new Tesla solar roof, we did not realize that two of those installations involved the homes of Chief Technical Officer JB Straubel and Mr. Musk himself. In retrospect, this makes total sense, but it wasn’t highlighted in the earnings report. What was included, though, were actual pictures of a renovated roof. As you can see (above and left), it looks pretty decent. More so when you take into consideration, as Musk noted during the call, that these weren’t professional photographer images, but rather, something sent over from someone’s phone.

*Note: we’re pretty positive this is not an image of Elon Musk’s home.

Model Y News

Yet another admission made by Musk concerned the Model Y. The entrepreneur shocked a lot of people during the 2017 Q1 earnings call when he said that the Model Y would not be built on the Model 3 platform as anyone in their right mind might expect. Nope. It was going to get its own new platform. Well, thankfully his staff had a long chat with him afterwards and talked him off that ledge. Now, he says, the electric crossover will indeed share the Model 3 architecture. Sure, it will be evolved somewhat and have a different sort of wiring harness (as will the future Model 3, no doubt — Tesla is constantly making physical improvements to all its product) than today’s cars, but to speed the path to production and save a lot of cost, sanity will prevail and it will be a shared platform.

Another little tidbit about the 2019 Model Y? It may not be called the Model Y. To change it would ruin that whole S3XY nomenclature joke, but Musk cast a shadow of doubt in our minds when talking about the upcoming car after following up mention of its name with the aside, “…if it’s called the Y…” Who knows what will happen for sure, but in case it changes, well, you heard it here first.

Additional Info

There were a number of other noteworthy points made that the Tesla-curious may find interesting, so let’s quickly address some of those.

  • July orders for the Model S and X were up 15% in July, slapping at rumors of falling demand.
  • Musk hopes to have substantial portion of the batteries for that 100 MW/129 MWh energy storage system in South Australia shipped down under in time for the International Astronautical Congress taking place in Adelaide at the end of September.
  • Tesla now employs 33,000 people.
  • Gigafactory 2 in Buffalo, New York will be a “powerhouse of output,” while planning for Gigafactories 3,4,5, and 6 is underway, with announcements coming by the end of the year. Expect to see one Europe as well as China, though no significant expenditure yet.
  • Musk claims 80% of journalists who test drove the Model 3 said they would buy the car (Note to self: ask for raise), while 15% more would consider it.
  • The forecasted 25% margin on Model 3 would only happen a few months after reaching the 5,000-a-week level, but it would 100% for sure happen in 2018.
  • Despite their appearance in the press, solid state batteries are unlikely to appear in a production vehicle any time soon. He does have hope for a battery breakthrough of a specific type (which, he wouldn’t say), but it won’t be ready for prime time any time soon.
  •  Unlikely to do another equity raise, have sufficient cash flow now, as well as untapped room on lines of credit.
  • There is some cross collaboration with SpaceX, most recently with an aluminum casting situation.
  • Tesla has tested batteries that can charge in 15 minutes, but the trade off is cost and energy density. Expect improvements, but company is sticking with low-cost, high-energy density strategy.
  • The LA to NY autonomous road trip is still set for the end of this year, though Musk admits he may end up with egg on his face.

And there you have it: the earnings call for Q2 of 2017.

Let us know in the comments which of these developments you find most interesting.

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37 responses to "Tesla Q2 Earnings Call Reveals 455,000 Model 3 Reservations, Musk And Straubel Already Have Tesla Solar Roof"

  1. Faster Charging: A123 Systems Batteries could fit that Need, today, with their newer 26650 Cells, at 2.5 Ah, are – as he said – Lower Energy Density, but could take High Power and Charge Rates! Just that a Tesla’s Range might me much Less in that same space! Maybe 150-200 Miles, tops!

    Next: A Video of the Model 3 Production Process, Soon Please, Elon!

    1. Chris O says:

      Porsche seems to think it can have its cake and eat it too: 15 minutes charging ánd long range.

      We’ll see.

  2. georgeS says:

    good additional info. I was hoping for some news on the Semi.

  3. Kbm3 says:

    Time to start sending sympathy notes to all of the shorts. What a fantastic earning’s call.

  4. Pushmi-Pullyu says:

    “…the company had… 455,000… Model 3 reservations in hand. Altogether, they had received as many as 518,000 bookings, after factoring in 63,000 cancellations over the past year, the net number is somewhat lower.”

    But-but-but — the Tesla bashers keep assuring us, over and over, that the net number must be far lower than 400,000, because of all the cancellations they keep telling us people are making! What, can it possibly be that what they keep saying is untrue? I’m shocked, SHOCKED I say! 😀

    “Musk… shocked a lot of people during the 2017 Q1 earnings call when he said that the Model Y would not be built on the Model 3 platform as anyone in their right mind might expect. Nope. It was going to get its own new platform. …but to speed the path to production and save a lot of cost, sanity will prevail and it will be a shared platform.”

    If I wanted to be snarky, I could say that it’s nice to see Elon has come to at least one of his senses. Oh, what the heck… I’ll be snarky. 😉

    “Note: we’re pretty positive this is not an image of Elon Musk’s home.”

    Does he own only one? I’d be surprised if that’s so.

    “…we had expected some amount of churn in the days following the handover event — that is to say, a number of people would drop their reservations while others would make new ones. But, while the report mentioned the company had received 1,800 new Model 3 reservations a day, we didn’t realize that this was a net number, meaning this was the number of new reservations after accounting for dropped ones.”

    I was hoping this would be the case: That the publicity over the event would attract more new reservations than disappointed would-be buyers dropping them.

    Go Tesla!

    “The forecasted 25% margin on Model 3 would only happen a few months after reaching the 5,000-a-week level, but it would 100% for sure happen in 2018.”

    I’m still mystified as to how Tesla, which originally forecast a 15% gross profit margin for the TM3, is now claiming they’ll achieve as big a profit margin on this lower-cost, higher-volume car as they do on the Model S.

    Perhaps with the “alien dreadnought” touchless production line that Elon envisions for a couple of years down the road, that might be achievable. But to do this so soon, in 2018? Really?

    But then, I’m not a “financial guy”. Perhaps between the economy of scale, which should lower the unit price for TM3 parts, and the higher than expected price for TM3 options, maybe a 25% gross profit margin is a realistic number?

    I would think that Tesla would aim for a lower profit margin on the TM3. Isn’t it usually the case, when a company offers a lower-priced product, that the goal is lowering the price to achieve higher volume of sales, and thus greater total profit? Perhaps someone who is a “financial guy” can explain what appears to me to be a discrepancy here.

    “Despite their appearance in the press, solid state batteries are unlikely to appear in a production vehicle any time soon. He does have hope for a battery breakthrough of a specific type (which, he wouldn’t say), but it won’t be ready for prime time any time soon.”

    Maybe he’s talking about Ionic Materials’ solid state “plastic battery”, as seen on PBS’s “Nova”, in the episode “Search for the Super Battery”? That does have me excited, but I fully realize that even when there is such a breakthru, that doesn’t necessarily mean the tech can be made and sold profitably, and the path to commercial production for a truly breakthru tech like this usually is a long one, on average about 5 years when it does succeed. Patience, Grasshopper!

    However, let’s not overlook the near-certainty that Elon’s motive in mentioning this is merely to fight against any Osborne-Effect-like case where people would be tempted to wait until something better than the TM3 appears before making a buying decision. True or not, it’s propaganda. The path to commercialization isn’t always five years; it could be much quicker, and some battery developers are in stealth mode.

    But, to support Elon’s point: Even if the holy grail of EV batteries were to be offered for sale in quantity tomorrow, it would still take at least a couple of years, and likely longer, before we’d see any production EV using them. Compelling PEVs (Plug-in EVs) are built around the battery pack, so if you change that, you have to design a whole new car.

    “Tesla has tested batteries that can charge in 15 minutes, but the trade off is cost and energy density. Expect improvements, but company is sticking with low-cost, high-energy density strategy.”

    No surprise there. Having invested billions of dollars in the new 2170 cells, Tesla isn’t likely to abandon them without a very compelling reason.

    “The LA to NY autonomous road trip is still set for the end of this year, though Musk admits he may end up with egg on his face.”

    I’m highly skeptical of this happening. Tesla may well develop its autonomous driving software to the point that it thinks a car can perform this along a route very carefully planned, a route scanned in advance to a highly detailed degree, but getting regulatory approval from all those States and/or the Federal government… that’s likely going to be a bigger hurdle.

    But please note I’m not predicting it won’t happen. There was recently a very positive development with the Feds in effect telling the States “Don’t hold back development of self-driving cars!” So… it’s possible, however unlikely I think it may be.

    1. Ambulator says:

      My guess is Tesla reviewed their spreadsheets and realized that a 15% margin was not enough. This might be a partial reason for the high option prices. (Not that they are that bad.)

      1. Nix says:

        It is just like the Model S. Higher gross profits in current cars fund future cars. Model Y is funded on higher S/X/3 profits.

        1. Pushmi-Pullyu says:

          Well, it will be nice when Tesla finally starts regularly reporting a net profit for most quarters. Then we’ll see a dropoff in the number of people posting “Tesla isn’t profitable”, just like the chorus of people shouting “Amazon.com isn’t profitable!” was suddenly silenced just a year or two ago.

          If targeting a 25% profit margin on the TM3 will help Tesla get there sooner, then more power to Tesla.

          But of course, the Tesla haters will find some excuse to keep bleating “Tesla isn’t profitable!”

    2. Andras says:

      The reason of 25% margin might be that there are too many reservations right now. Why would they lower the price? To have even more? Wait until they have cleared the backlog.

      1. arne-nl says:

        Yup, that’s the simple explanation.

        And remember, they have a lot of past losses to make up for.

    3. Gasbag says:

      The 15% that you are referencing was in regard to the base price, $35,000. The 25% is Re ASP.

    4. Chris O says:

      If your comment is longer than the article than that’s a clear sign that its time for some introspection.

      -Do you really think that what you have to say is so important to others that they are going to want to spend the time to read a small essay rather than a pointed comment?

      – wouldn’t you say that a very dominant presence is basically a form of forum abuse?

      -so maybe it’s time for you to start your own blog?

      1. Cliff says:

        wow. did it upset you so much to use the scroll wheel?

      2. TomBrown says:

        Give him a break. This article was full of big news from Tesla. Half the response was quoting the article anyways. What matters is PP comes from a good place and wants our civilization headed in a truly sustainable direction.

        PP would make a good blog I’m sure of it but that’s a whole other level of dedication. These EV articles don’t feel complete until there’s a thoughtful/ respectful/ perfectly spelled and punctuated response from PP in there!

  5. Benz says:

    The real big news will be later this year regarding the location of the 4 new Gigafactories.

  6. Dragon says:

    I think the solar roofs don’t look “pretty decent”, they look pretty awesome. Definitely a good way to capture a market segment that has money to burn but if it doesn’t look good, they won’t do it.

    One thing I wonder is how you _limit- power on a solar roof? Many companies won’t let you join the programs that pay you for power generation if you generate a lot more power than you use. I assume most people that cover every square inch of their roof in panels will generate more than they use, so… do they have to leave some inactive? Or are some just dummy panels? I’m guessing the latter.

    1. Nix says:

      Dragon — dummy panels just like you speculated. In most installs, less than half the roofing tiles contain solar cells. They reduce production by reducing the ratio of tiles with cells to dummy tiles.

      1. TM says:

        Yes, and the dummy panels are a lot cheaper than the “live” ones.

    2. Mister G says:

      IMO,if solar roof is consistently generating more power than consumed it would be wise to add additional battery storage that can be used on cloudy, snowy, rainy, eclipsy days LOL, the last one was a joke.

  7. Rick says:

    People sitting on the fence were waiting for this ER. Now they will buy.

  8. Ob1 says:

    When the federal tax subsidy expires the 25 percent gross margin gives Tesla room to reduce price.

    1. Someone out there says:

      Not really. The SG&A, i.e. the cost of running the company is about the same as the gross profit.

  9. TM says:

    Autonomous NY to LA.
    No way was that going to happen.
    Glad to hear he is preparing for Egg.

    1. Loboc says:

      Also need autonomous charging. Not easy to deploy snake or other (wireless?) chargers that quickly.

      The car itself could have human intervention ‘for safety’ just to complete a demo trip. Envisioning some sort of remote control. Like robot contest implementations.

  10. mmezo says:

    The 25% gross margin os not that difficult to achieve if you take the option prices into account. Autopilot and self driving in particular.

    Suppose they don’t make a loss or even earn something modest on the base model (at least in Europe I think they wouldn’t be allowed to sell at loss). Add autopilot and self driving to it, which has a manufacturing cost of 0*, just flipping a software switch,… boom, you already have almost a 23% gross margin (8000$ against 35000$)

    * this is not to say they have not invested and are still investing huge amounts in the autopilot technology RD. Still the cost of adding it to a vehicle is negligible once you have the HW like the base model already has.

  11. Warren says:

    Very good news. Can’t wait to start seeing Teslas on every street corner. We laugh every time we pull into a parking lot with the wife’s 2006 Corolla. The challenge is not to avoid parking near one, but one of the exact same color. 🙂

  12. bro1999 says:

    Tesla burned through $1.6 BILLION dollars in cash during Q2. Holy jebus. Definitely gonna have to raise more capital in the very near future.

    http://www.autonews.com/article/20170803/OEM05/170809855/teslas-1-6-billion-cash-burn-condoned-as-musk-focuses-on-ev-vision

    1. georgeS says:

      Bro,

      from the article:

      “Unlikely to do another equity raise, have sufficient cash flow now, as well as untapped room on lines of credit.”

      Like my father said ; “Easy boy. Hold your horses”.

    2. Get Real says:

      LMFAO, mad bro and all the other shills, shorters and haters’ heads are exploding and that means the progess is unstoppable!

  13. Kdawg says:

    Tesla stock is up 7% today. I guess ppl liked the news.

  14. georgeS says:

    Here’s an interesting report out of EVANNEX re production simplicity of M3.

    “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.”

    1. TomArt says:

      I went online a few days ago to configure a Model S (just for fun, can’t afford one), and the permutations are way lower now – fewer roof options, and packages that were separate are now bundled – for example, the premium package now includes the cold-weather package and the high-fidelity sound package. Very odd, considering Musk’s comments.

  15. DJ says:

    Not gonna lie, as basically everyone I know that had a Model 3 reservation has cancelled already or is now expecting to I am kind of surprised by the # they’re still claiming. I’m sure some of the earlier reservation holders haven’t cancelled yet and that additional people have signed up but if they can keep that # where it is that’s great news.

    1. Mister G says:

      You don’t know me and I’m not cancelling my model 3 reservation…know you can say “I know of one stranger that is not cancelling” LOL

    2. arne-nl says:

      Well, you must have seen me posting at least once here. So you know me….

      And I’m not canceling.

    3. Tosho says:

      You are probably lying…

  16. Murrysville EV says:

    455000 reservations is mighty close to my prediction from May 18, 2016:

    http://insideevs.com/tesla-to-raise-2-billion-373000-people-have-reserved-a-model-3/#comment-852694

    Using the math model I presented then, by August 4, 2017 there would have been 429520 net reservations, putting my prediction within 6% of the actual. 🙂

    Glad I’m still one of them!

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