Tesla’s 2Q 2015 Conference Call

Tesla is hosting their Second Quarter 2015 Financial Results Q&A Conference Call today at 5:30 pm EDT / 2:30 pm PT. Stay tuned here for live updates from the call, or listen live on Tesla’s website.

  • 5:30: Call is starting.
  • 5:32: Merrill Lynch –  How many units sold through preowned program?
  • 5:33: Deepak – We are selling pre-owned cars faster than the trade ins are coming in.
  • 5:34: Deepak – We accept a trade-in only when a customer is buying a new Model S.
  • 5:35: Merrill Lynch – How will the referral program be more cost effective?
  • 5:36: Elon – Not exactly cost effective. Transitioning the cost to sell to the customer. There might be some dual expense right now.
  • 5:37: Merrill Lynch – Will the credit line be enough in the near future or will there need to be a capital raise?
  • 5:38: Deepak – We only pulled down $50 Million on the credit line. We feel very comfortable with the cash levels right now.
  • 5:38: Elon – In the absence of additional capital, we have on order of a billion dollars on hand.
  • 5:39: Deutsche Bank: Why the drop in projection from 55k this year to 50k-55k?
  • 5:40: Elon – Model X going to be quite a challenging production ramp.
  • 5:42: Elon – Production rate may be as high as 2000 in some weeks next year. 1600-1800 per week on average.
  • 5:43: Deepak – Dollar has had a huge impact from Q1 to Q2. Still looking to be at 25% margin and better on S/X combined net year.
  • 5:44: Elon – Well over a billion dollars of Powerpacks and Powerwalls reserved so far. Probably will be all of 2016’s production if reservations materialize into real orders.
  • 5:46: Global Equities Research – Do we have a ballpark number in validation Model X units that will need to be produced before product will go into production?
  • 5:47: Elon – We have produced several Model X units so far on the factory line, but this is a complex process. Each week we’ll produce more X’s on the line with greater part maturity. Production units will come at the end of net month.
  • 5:49: Elon – Early access customers will get Autopilot on August 15. Wide release 1-2 months later depending on success.
  • 5:50: Global Equities Research – Any production downtime next year? Will Model 3 production line be isolated from S/X line?
  • 5:51: Elon – Maybe 1-2 weeks next year for product improvement. Model 3 will not affect S/X production in 2016, but maybe in 2017.
  • 5:52: Elon – Model X may be the hardest vehicle in the world to build but it is an amazing vehicle that’s going to blow people away.
  • 5:55: Deepak – Will certainly be free cash flow positive in 1Q 2016
  • 5:55: JP Morgan – What do you project to be the mix in stationary storage customers?
  • 5:56: J.B. – Surprised how strong the Powerwall demand will be. Might be 70% Powerpack though. Too early to tell.
  • 5:57: Elon – Hard to tell because Powerpack customers will probably order more units (5-10) than Powerwall Customers (2-3).
  • 5:58: Elon – You could theoretically shut down half the word’s power plants with only stationary storage, even without renewables.
  • 6:01: Elon – Powerpack makes sense everywhere. Powerwall dependent on certain factors.
  • 6:01: Elon – We want to set the expectation that Autopilot will be like that in a plane, the expectation that the pilot will still pay attention to what the vehicle is doing. Autopilot will get better with time. Initial release will not be the final release.
  • 6:04: Goldman Sachs – What is keeping you from hitting 2000 units per week next year?
  • 6:05: Elon – We don’t want to set high expectations and the only way for us to feel good about our future is if we beat those high expectations. Winning needs to feel like winning. Could we do 2000? Aspirationally, yes. Do we want to commit to that? Ideally not.
  • 6:07: CLFA – Are you targeting mix to be 50/50 between S and X in 2016?
  • 6:08: Elon – We will try to push production more towards X initially because customers have been waiting so long, so it could be 60/40 S/X initially.
  • 6:09: Elon – Factory capacity will be 1000 X’s and 1000’s S’s per week. Factory capacity is obtainable but hard to maintain. Actual production is based on possible real world problems.
  • 6:11: CLFA – What are you doing differently in China and could those solutions be used elsewhere?
  • 6:12: Elon – You need to get a plate to drive in China and they are hard to get. We’ve been successful in getting EV plate exemptions everywhere in China except Beijing. Think we’ll figure out Beijing soon. Still at a low stage of product recognition/confidence maturity in Asia. Just because people love it in CA, doesn’t mean they automatically love it in other places.
  • 6:14: Elon – As we’ve spent more time on the Gigafactory, we’ve found that we’ve been able to improve the space efficiency and overall efficiency of the factory. Think we could potentially do more output in the same space.
  • 6:16: J.B. – Ultimate production at site could be much higher than we imagined it initially would.
  • 6:16: Barclays – Where is the competitive advantage of Tesla’s stationary storage options
  • 6:18: J.B. – A lot of people in this market only sells you one piece. We’re selling all the pieces together in a turnkey solution.
  • 6:19: Elon – Plug and play works even at the megawatt scale.
  • 6:21: Barclays – Will Model S margin be 30% in Q4
  • 6:22: Deepak – Dollar has had some impact. Focus has been on Model X so some S cost improvements have been delayed. Still setting aside exchange, we’re seeing a trend towards higher margins.
  • 6:23: Elon – Probably won’t get 30% in Q4 but perhaps in 2016 depending on macroeconomic conditions.
  • 6:24: Elon – Over 100,000 reservations placed for Powerwall and Powerpack.
  • 6:27: Elon – Battery margins could be 15% in the early days. Think it will rise to around 25%.
  • 6:29: Elon – Aiming for configurations in 2-3 weeks for the Model X. Live on website by end of month.
  • 6:30: Elon – We’re still confident in half a million cars in 2020. We might even be able to exceed that.
  • 6:32: Elon – Speculation – In 3-5 years, looking to localize production in certain markets. That’s how we might be able to go beyond 500k. 500k number is based on the Fremont factory alone.
  • 6:33: Elon – Can’t comment on raising capital.
  • 6:34: Elon – Pace of production dependent on slowest supplier. If we knew in advance which one it would be, we would take action.
  • 6:37: Retooling in factory was for X. For Model 3, biggest thing is going to be the paint shop.
  • 6:40: The status of the CFO search – currently reviewing “interesting candidates”
  • 6:42: Search for head of Europe sale continue
  • 6:43: Elon reiterates that he looks forward to other manufacturers making EVs, but he is not impress by current program – although he likes some future programs

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