Tesla, Inc., Q1 2024 Earnings Call, Apr 23, 2024 - NasdaqGS:TSLA

NasdaqGS:TSLA

The "Unknown Executive" speaks only once during the transcript, providing information related to the Lathrop facility and the Megapack run rate:

1. Lathrop Facility Update:

   • Lathrop is ramping as planned.

   • The second General Assembly (GA) line has been commissioned, enabling an increase in the exit rate from 20 gigawatt-hours (GWh) per year at the start of the year to 40 GWh per year by the end of the year.

   • There is nothing limiting the ramp at Lathrop.

   • Given the longer sales cycles for large projects, order visibility is typically 12 to 24 months prior to ship dates, allowing for planning the build plan several quarters in advance.

   • Thanks global customers for their trust in Tesla as a partner for these projects.

Martin Viecha, the Vice President of Investor Relations at Tesla, made several statements during the Q1 2024 Earnings Call. Below is a detailed summary of his comments:

Opening Remarks

• Introduction: Introduced himself and the call, mentioning that the Q1 results were announced at 3:00 p.m. Central Time in an update deck.
• Forward-Looking Statements: Noted that the call would include forward-looking statements based on predictions and expectations as of the date of the call, cautioning that actual events and results could differ materially due to risks and uncertainties.

Transition to Elon Musk

• Elon Musk's Introduction: Invited Elon Musk to share opening remarks.

After Elon Musk's Remarks

• Vaibhav Taneja's Introduction: Announced that Vaibhav Taneja, the Chief Financial Officer, would also share comments.

During Question-and-Answer Session

• Introduction to Q&A: Initiated the Q&A session by stating that the first question would be addressed to the executives.
• Question 1: 4680 Battery Status
  • Invited Lars Moravy, Vice President of Vehicle Engineering, to answer the question about the status of the 4680 battery, including current output.
• Question 2: Optimus Robot Status
  • Asked Elon Musk about the current status of Optimus, whether it is performing any factory tasks, and when mass production is expected to start.
• Question 3: Regulatory Approval for Unsupervised FSD
  • Inquired about the pathway towards regulatory approval for unsupervised FSD in the U.S. and the appropriate safety threshold compared to human drivers.
• Question 4: Safety Methodology
  • Prompted Ashok Elluswamy, Executive Officer, to discuss the safety methodology.
• Question 5: Official Announcement for $25,000 Vehicle Timeline
  • Addressed Lars Moravy regarding an official announcement of the timeline for the $25,000 vehicle.
• Question 6: Cybertruck Ramp Progress
  • Asked Lars Moravy about the progress of the Cybertruck ramp.
• Question 7: Licensing FSD
  • Inquired whether any legacy automakers had contacted Tesla about possibly licensing FSD in the future.
• Question 8: Robotaxi Unveil
  • Mentioned that Elon Musk had already talked about the robotaxi unveil, and that more information would be available in August.
• Question 9: Next-Generation Vehicle
  • Noted that the topic of the next-generation vehicle had already been discussed.
• Question 10: Semi Scaling Timeline
  • Directed a question to Lars Moravy about the timeline for scaling the Semi.
• Question 11: FSD Transfer Permanent Until Level 5 Autonomy
  • Stated that the company would not make FSD transfer permanent until Level 5 autonomy is achieved.
• Question 12: Megapack Production Ramp
  • Asked an unknown executive about the production ramp at Lathrop and the expected Megapack run rate at the end of the year.
• Question 13: Analyst Questions
  • Transitioned to analyst questions, starting with Toni Sacconaghi from Bernstein.
• Question 14: New Vehicles
  • Acknowledged that the topic of new vehicles had already been covered and prompted Elon Musk to address the follow-up question.
• Question 15: Future Growth
  • Transitioned to Adam Jonas from Morgan Stanley, who asked about the company's degree of confidence in achieving growth above 0% in 2024.
• Question 16: Future Products
  • Transitioned to Alexander Eugene Potter from Piper Sandler & Co., who asked about the potential for Chinese competitors to copy Tesla's future products.
• Question 17: Voting Control
  • Transitioned to Alexander Eugene Potter's follow-up question about obtaining 25% voting control of the company.
• Question 18: OpEx Reductions
  • Transitioned to Alexander Eugene Potter's question about the implications of headcount reductions.
• Question 19: FSD Licensing
  • Transitioned to Mark Trevor Delaney from Goldman Sachs, who asked about the progress of FSD licensing discussions.
• Question 20: Pricing Strategy
  • Transitioned to Mark Trevor Delaney's follow-up question about the company's approach to pricing going forward.
• Question 21: FSD Expansion
  • Transitioned to George Gianarikas from Canaccord Genuity Corp., who asked about the timing of launching FSD in additional geographies.
• Question 22: First Quarter Deliveries
  • Transitioned to George Gianarikas's follow-up question about the impact of supply constraints on first quarter deliveries.
• Question 23: Distributed Inference
  • Transitioned to Colin William Rusch from Oppenheimer, who asked about the approach to distributed inference and what it is unlocking beyond the vehicle.
• Question 24: 4680 Cell Ramp
  • Transitioned to Colin William Rusch's follow-up question about the 4680 cell ramp and when the company might start accelerating incremental capacity expansions.
• Question 25: Next-Generation Vehicle Cost
  • Transitioned to Shreyas Patil from Wolfe Research, who asked about the opportunity to transfer cost savings to new products.
• Question 26: 4680 Cells
  • Transitioned to Shreyas Patil's follow-up question about the opportunity to sell 4680 cells to other automakers.
• Closing Remarks
  • Announced his departure from the role of Vice President of Investor Relations, expressing gratitude for the opportunity and reflecting on his seven-year tenure at Tesla.
  • Mentioned that he would remain with the company for another couple of months.
  • Expressed thanks to the team and shareholders for their support over the years.

Additional Points

• Personal Announcement: Announced that he would be leaving his position at Tesla after seven years to spend more time with his family.

• Gratitude: Expressed gratitude to Elon Musk, the team, and shareholders for their support and collaboration over the years.

• Future Plans: Indicated that he would be available for another couple of months and would be transitioning to a different role, likely as an investor listening to future calls.

During the Q1 2024 Earnings Call, Elon R. Musk, the Co-Founder, Technoking of Tesla, CEO & Director of Tesla, Inc., made several statements and provided insights into various aspects of the company's performance, strategies, and future plans. Here is a detailed summary of his remarks:

Opening Remarks

• Q1 Challenges: Navigated several unforeseen challenges, including the ramp of the updated Model 3 in Fremont. Global EV adoption rates are under pressure.
• Tesla's Strategy: Believes that electric vehicles will ultimately dominate the market despite challenges posed by other OEMs pulling back on EVs and pursuing plug-in hybrids.
• Energy Business Success: Highlighted record profitability for the energy business, particularly in energy storage deployments of Megapack, which reached an all-time high in Q1.
• AI Training Expansion: More than doubled AI training capacity sequentially.
• New Product Roadmap: Updated the future vehicle lineup to accelerate the launch of new models ahead of schedule. Previous estimates for start of production in the second half of 2025 have been revised to early 2025 or late this year.
• Affordable Models: New vehicles, including more affordable models, will use aspects of the next-generation platform as well as current platforms. They will be produced on the same manufacturing lines as current vehicles, allowing for over 3 million vehicles of capacity when fully realized.

Full Self-Driving (FSD)

• FSD V12: Strongly urges people to try FSD V12, describing it as profound and rapidly improving. It has been pushed out to around 1.8 million vehicles, with about half of people using it.
• Subscription Price: Reduced the subscription price to $99 a month to make it more accessible.
• Robotaxi/Cybercab: Announced that a purpose-built robotaxi or Cybercab will be showcased in August.
• Autonomy Roadmap: Expressed excitement about the autonomy roadmap, stating that it is only a matter of time before Tesla exceeds the reliability of human drivers.

AI Compute

• GPU Expansion: Installed and commissioned approximately 35,000 H100 GPUs, which are not traditional graphics processing units (GPUs), and expects to have around 85,000 by the end of the year.
• Training Efficiency: Emphasized the importance of using the GPUs efficiently rather than just focusing on the number of units.

Future Vision

• Electric and Autonomous Future: Stated that the future will be dominated by electric and autonomous vehicles, comparing gasoline cars that are not autonomous to riding a horse and using a flip phone.
• Cybertruck and Beyond: Mentioned that the company is in conversations with one major automaker regarding licensing FSD.
• Tesla as an AI Company: Asserted that Tesla should be viewed as an AI or robotics company rather than just an auto company, and that those who do not believe Tesla will solve autonomy should not invest in the company.
• Voting Control: Addressed the topic of obtaining 25% voting control of the company, stating that even if he were to disappear, Tesla would still solve autonomy for vehicles.

Additional Comments

• Head Count Reductions: Commented on the necessity of reducing head count by over 10% to prepare the company for the next phase of growth and improve efficiency.
• Cybertruck Ramp: Provided updates on the Cybertruck ramp, mentioning that the company is ahead of the ramp with cell production and that costs continue to drop rapidly.
• Optimus Robot: Stated that Optimus is able to perform simple factory tasks and that the company expects to have it in limited production in the factory, doing useful tasks, before the end of the year.
• Regulatory Approval for FSD: Noted that other autonomous car companies have helped pave the way through regulatory hurdles, and that Tesla believes there will not be significant regulatory barriers provided there is conclusive data showing the autonomous car is safer than a human-driven car.
• Vehicle Lineup Updates: Mentioned that the company will talk more about the $25,000 vehicle at a later date, emphasizing the importance of solving autonomy and turning on that capability for a gigantic fleet.
• 4680 Cells: Addressed the progress of 4680 cell production, stating that the ramp is relevant to the Cybertruck ramp and that the company aims to exceed supplier costs by the end of the year.
• FSD Licensing: Mentioned that Tesla is in conversations with one major automaker regarding licensing FSD.
• Personal Commitment: Reiterated his commitment to ensuring Tesla's prosperity, stating that he works almost every day of the week and that he will make sure Tesla is prosperous.
• Future Products: Addressed the progress on future products, including more aggressive Giga casting, structural pack unboxed, and a 300-mile range at a $25,000 price point, and expressed confidence in Tesla's competitive position.
• Pricing Strategy: Commented on the company's pricing strategy, stating that Tesla can be free cash flow positive and that the company aims to offer a great product at a great price, making it accessible to people.
• FSD in New Markets: Mentioned plans to release FSD as a supervised autonomy system in any market where regulatory approval can be obtained, including China.
• Distributed Inference: Discussed the potential for using idle compute resources in Tesla vehicles for distributed inference, drawing parallels to Amazon Web Services and the potential for Tesla to leverage its distributed compute resources.
• Battery Production: Addressed the rationale behind Tesla's internal battery production, stating that it was a hedge against cost increases and demand shocks from suppliers.
• Future of Tesla: Strongly recommended that anyone considering investing in Tesla should try FSD V12 to understand the company's value proposition.

Musk's remarks covered a wide range of topics, reflecting Tesla's focus on innovation, technology leadership, and strategic planning for the future.

Vaibhav Taneja, the Chief Financial Officer of Tesla, made several comments during the Q1 2024 earnings call. Here’s a detailed summary of his remarks:

1. Financial Performance:

   • Acknowledged the decline in revenues quarter-over-quarter, attributing it primarily to seasonality, an uncertain macroeconomic environment, and other factors.
   • Noted that automotive margins declined from 18.9% to 18.5%, excluding the impact of Cybertruck.
   • Explained that the impact of pricing actions was largely offset by reductions in per-unit costs and the recognition of revenue from the Autopark feature for certain vehicles in the U.S.

2. Cost Reduction Initiatives:

   • Highlighted that while there were higher costs due to the ramp of Model 3 in Fremont and disruptions in Berlin, these costs were largely offset by cost reduction initiatives.
   • Stated that if Cybertruck and Fremont Model 3 ramp costs were excluded, the revenue from Autopark would have led to slightly improved auto margins.
   • Emphasized the team’s efforts in executing Tesla’s pursuit of efficiency across the business, resulting in normalized Model Y cost per vehicle in Austin and Berlin being very close to that of Fremont.

3. Energy Business:

   • Reported that the Energy business achieved record margins of 24.6%.
   • Expected the energy storage deployments for 2024 to grow at least 75% higher than in 2023, with this business beginning to contribute significantly to overall profitability.

4. Demand Initiatives:

   • Discussed various initiatives to expand demand, including lowering the price of both the purchase and subscription options for Full Self-Driving (FSD), launching leasing specials for the Model 3 in the U.S. at $299 a month, and offering attractive financing options in certain markets.

5. Operating Expenses and Cash Flow:

   • Noted a sequential increase in operating expenses due to AI initiatives, continued investment in future projects, marketing, and other activities.
   • Reported a negative free cash flow of $2.5 billion in the first quarter, primarily driven by an increase in inventory and elevated spend on capital expenditures (CapEx) across various initiatives, including AI compute.
   • Expected the inventory build to reverse in the second quarter and free cash flow to return to positive.

6. Headcount Reduction:

   • Announced a decision to reduce headcount by over 10%, with the savings expected to be well in excess of $1 billion on an annual run rate basis.
   • Mentioned a focus on capital expenditure (CapEx) efficiency and utilizing installed capacity more efficiently.

7. Product Offerings:

   • Praised the updated Model 3 as a fantastic car, highlighting its value and the attractive leasing options available.

Throughout the call, Vaibhav Taneja emphasized the importance of cost reduction, efficiency, and strategic initiatives aimed at improving Tesla’s financial position and driving growth. He also highlighted the company’s commitment to making its products more accessible and appealing to a wider customer base.