Tesla, Inc., Q4 2023 Earnings Call, Jan 24, 2024 - NasdaqGS:TSLA

NasdaqGS:TSLA

The "Unknown Executive" provides several updates and insights during the Tesla, Inc. Q4 2023 Earnings Call. Here is a detailed list of the statements made by the Unknown Executive:

1. Cybertruck Orders and Fulfillment:

   • Update on Cybertruck Reservation Holders: Thanks reservation holders for their patience.
   • Reservation to Order Conversion Rate: Encouraging conversion rate so far.
   • Fulfillment Timeline: Anticipates sorting out all 2024 builds soon.
   • Growing Demand: New orders continue to come in, leading to growing order numbers.

2. Cost Reduction and Efficiency:

   • Inbound Logistics Cost Reduction: 22% year-over-year decrease due to optimization strategies like using returnable packaging, optimizing trucking routes, and negotiating better pricing with shipping companies.
   • Supply Chain Optimization: Going deeper into the supply chain, negotiating with Tier 2, Tier 3, and Tier 4 suppliers for better pricing.
   • Automotive Industry vs. Microelectronics: Tesla's approach is closer to the microelectronics industry in terms of cost reduction and innovation.

3. Next-Generation Platform and Manufacturing Innovations:

   • Cybertruck and Next-Generation Platform: No aspect of Cybertruck is considered gating for the next-generation platform.
   • Manufacturing Innovations: Validation phases for new manufacturing technologies are ongoing for the next-generation vehicle.
   • 48-Volt Architecture: Open to partnering with the industry on adopting the 48-volt architecture.

4. Addressable Market and Portfolio:

   • Growing Pie: The electric vehicle market is growing, with EVs currently representing 9% of the market but expected to reach 20% in the future.
   • Addressable Market Size: The global vehicle market is 100 million units per year, with Tesla currently holding 2% of that market.

These statements provide insights into various aspects of Tesla's operations, including production, cost reduction, and market positioning.

Martin Viecha, Vice President of Investor Relations at Tesla, made several statements during the Q4 2023 Earnings Call. Here is a detailed summary of his comments:

Opening Remarks

• Introduction:

  • Welcomed everyone to Tesla's Fourth Quarter 2023 Q&A Webcast.
  • Introduced himself as the VP of Investor Relations.
  • Mentioned that he was joined by Elon Musk, Vaibhav Taneja, and other executives.
  • Noted that Q4 results were announced at about 3:00 p.m. Central Time in the update deck published at the same link as the webcast.

• Forward-Looking Statements:

  • Reminded listeners that the call would include discussions of business outlook and forward-looking statements.
  • Stated that actual events or results could differ materially from predictions and expectations due to risks and uncertainties, including those mentioned in Tesla's most recent filings with the SEC.

Transition to Elon Musk's Remarks

• Elon Musk's Operating Remarks:
  • Passed the call to Elon Musk for his operating remarks.

Questions and Answers

• Next-Generation Compact Vehicle Production Timeline:

  • Asked if the timeline for the start of production for the next-generation compact vehicle had improved to possibly see the vehicles in 2025.
  • Listened to Elon Musk's response regarding the current schedule and the revolutionary manufacturing technology.

• 4680 Cells Ramp-Up:

  • Asked about the barriers to ramping 4680 cells to a multimillion-cell-per-week rate and when Tesla expects to reach that rate.
  • Listened to Andrew Baglino's explanation and Elon Musk's comments on the complexity of battery cell production.

• Elon Musk's Voting Concerns:

  • Asked if retail shareholders should be concerned about Elon Musk's statement regarding his discomfort with expanding AI and robotics without having 25% of voting rights.
  • Listened to Elon Musk's explanation about his concerns and the need for a strong influence over powerful technology.

• Automotive Gross Margin Expectations:

  • Asked for expectations on automotive gross margin excluding regulatory credits for the full year.
  • Listened to Vaibhav Taneja's response about the focus on reducing vehicle costs and the difficulty in predicting margins precisely.

• Volume Compound Annual Growth Rate (CAGR):

  • Asked if the company anticipates achieving a 50% volume CAGR in 2024 or 2025.
  • Listened to Vaibhav Taneja's explanation about the transition between growth waves and the focus on launching the next-generation vehicle in 2024.

• Giga Nevada Expansion and Giga Mexico Construction:

  • Asked when Tesla would start construction on the Giga Nevada expansion and Giga Mexico and when each facility would produce its first products.
  • Listened to Andrew Baglino's update on the Giga Nevada expansion and the approach to Giga Mexico construction.

• Full Self-Driving (FSD) Licensing Agreement:

  • Asked if there had been any progress made with an FSD licensing agreement with another company.
  • Listened to Elon Musk's response suggesting that other car companies should consider licensing Tesla's FSD technology.

• Optimus Production Timeline:

  • Asked about the timeline for Optimus's first production volume production line and the barriers to reaching that milestone.
  • Listened to Elon Musk's response about the potential of Optimus and the focus on ensuring its safety.

• Cybertruck Orders and Fulfillment:

  • Asked how many Cybertruck orders were in the queue and when Tesla anticipated fulfilling existing orders.
  • Listened to an executive's response about the encouraging reservation to order conversion rate and the focus on ramping production.

• Tesla Energy Volumes Reporting:

  • Asked if Tesla could report energy volumes in the production and delivery release.
  • Listened to Andrew Baglino's commitment to strive to do so starting from that quarter and his update on the Megapack business.

• Ads and Education Campaign ROI:

  • Asked about the preliminary results on the return on investment of Tesla's ads and education campaign and if Tesla planned to expand educational ads.
  • Listened to an executive's response about the digital campaigns' targets, effectiveness, and future plans.

• Closing Remarks:

  • Thanked everyone for their questions and participation in the call.
  • Noted that the next earnings call would be in three months.
  • Ended the call by saying, "Thank you. Bye-bye."

Throughout the call, Martin Viecha facilitated the Q&A session, introducing questions and transitioning between speakers.

Elon Musk provided several updates and insights during the Tesla, Inc. Q4 2023 Earnings Call:

1. Tesla's Performance in 2023:

   • Tesla achieved record production and deliveries of about 1.8 million vehicles in 2023, in line with official guidance.
   • Fremont factory produced 560,000 cars, making it the highest output automotive plant in North America.
   • Model Y became the best-selling vehicle globally, with over 1.2 million units delivered.
   • Energy Storage business delivered nearly 15 GWh of batteries in 2023, showing triple-digit year-over-year growth.

2. Financial Performance:

   • Free cash flow remained strong at $4.4 billion in 2023, despite record spending on future projects.

3. Full Self-Driving (FSD):

   • Released version 12 of FSD, which is a complete architectural rewrite, using end-to-end artificial intelligence.
   • FSD version 12 is initially available to employees and a few customers but will be rolled out to all customers in the U.S. requesting FSD in the weeks to come.
   • Replaced 330,000 lines of C++ code with neural nets in FSD.
   • Tesla is possibly the most efficient company in the world for AI inference, which will be an important metric in the future.

4. Model 3 Updates:

   • The new Model 3 is now available globally with significant improvements in quietness, refinement, equipment, range, and other aspects.

5. Next-Generation Low-Cost Vehicle:

   • Far along on the development of the next-generation low-cost vehicle, which will be revolutionary in its design and manufacturing system.
   • The first manufacturing location for this vehicle will be at the Gigafactory and headquarters in Austin, Texas, followed by other locations, including Mexico and potentially a third location outside of North America.

6. 4680 Cells Production:

   • Production is ahead of the Cybertruck ramp, with weeks of finished cell inventory.
   • A challenging production ramp is expected for the 4680 cells, but the goal is to keep production ahead of the ramp.
   • Tesla expects to ramp orders from suppliers, emphasizing that the company values its suppliers and aims to supplement rather than replace them.

7. AI and Robotics at Tesla:

   • Concerns about the control of AI and robotics at Tesla if he doesn't have a 25% voting stake.
   • Sees a path to creating a powerful AI and robotics juggernaut and wants to maintain a strong influence but not control over the company.

8. Automotive Gross Margin:

   • Difficulty predicting automotive gross margins due to various factors such as tariffs and local incentives.
   • Margins will depend on interest rates, with good margins if interest rates come down quickly.

9. Volume Growth:

   • Volume growth will be lower in 2024 as the team focuses on launching the next-generation vehicle.

10. Cybertruck:

    • Demand for Cybertruck is high, and the company is focusing on ramping production.
    • Pricing remains affordable, and the company does not intend to significantly raise prices to prioritize early delivery.

11. Optimus (Humanoid Robot):

    • Optimus is a very new and revolutionary product with the potential to exceed the value of everything else at Tesla combined.
    • The team is working on ensuring Optimus is safe, especially at scale, and addressing the barrier of utility.
    • There's a good chance of shipping some number of Optimus units in the next year.

12. Dojo and Full Self-Driving (FSD):

    • Tesla is hedging its bets with significant orders of NVIDIA GPUs for FSD training.
    • Dojo is a long-shot program with high risk and high payoff potential.
    • Dojo is working and doing training jobs, and there are plans for future iterations of Dojo.
    • Tesla's in-car computer, Hardware 4, is version 2 of the Tesla-designed AI inference chip, and the company is about to complete the design of Hardware 5, which is version 3 of the chip.

13. Future Outlook:

    • If Tesla executes well, it could become the most valuable company in the world, although this is not guaranteed.

Vaibhav Taneja, the Chief Financial Officer of Tesla, provided several updates and insights during the Q4 2023 Earnings Call. Here is a detailed summary of his statements:

1. Financial Performance Overview:

   • Tesla had a record year in terms of production and deliveries for its auto business as well as record deployments in its energy business.
   • Despite the challenges of higher interest rates and inflation in 2023, the company achieved significant milestones.
   • He thanked customers for their support during the challenging period and acknowledged the dedication of the Tesla team.

2. 2023 Financial Highlights:

   • Revenue exceeded $96 billion.
   • Generated $4.4 billion in free cash flow.
   • Ended the year with over $29 billion in cash and investments.
   • GAAP net income included a one-time non-cash benefit of $5.9 billion from the release of valuation allowance on certain deferred tax assets, due to sustained profitability.

3. Tax Rate Update:

   • Starting with Q1, Tesla's booked tax rate would align more closely with other companies in the S&P 500, reflecting the release of the valuation allowance.

4. Vehicle Business Cost Improvements:

   • Tesla continues to see improvements in per-unit costs, despite being in the early phase of the Cybertruck era.
   • Auto gross margin improved sequentially.
   • Predicting auto gross margins remains challenging due to various factors, including changes in tariffs and local incentives.

5. Demand and Marketing Efforts:

   • Tesla invested in digital campaigns in 2023 to educate potential customers about the benefits of owning a Tesla.
   • Approximately 90% of vehicle buyers in 2023 were first-time Tesla owners.
   • The company is creative in finding ways to attract new customers and educate them about the total cost of ownership, emphasizing the benefits over the upfront cost.
   • Tesla will rigorously evaluate campaigns, curate content, and optimize spend to support overall demand.

6. U.S. Market Initiatives:

   • Tesla offers a point-of-sale benefit for Model Y for customers who qualify for the buyer credit, providing an immediate reduction of $7,500 at the time of purchase.
   • Attractive lease rates are offered for Model 3 and Y through a partner leasing program, with sales recognized as upfront revenue.

7. Energy Storage Business:

   • The Energy Storage business had another record year with deployments more than doubling and revenues increasing by over 50%.
   • The business is expected to surpass the auto business in terms of growth rate in 2024, building on the foundation laid by the Megafactory in metro.

8. Services and Other Business:

   • Services and other business started contributing meaningfully to the results.
   • As the fleet grows, Tesla expects revenues from supercharging, used cars, and services to continue to increase.

9. 2024 Focus:

   • Tesla aims to continue growing output, reducing costs, and investing in future growth initiatives.
   • Capital expenditures for 2024 are expected to be in excess of $10 million, critical for laying the foundation for the next phase of growth.

10. Closing Remarks:

    • Taneja thanked everyone at Tesla, including investors and suppliers, for their support on the journey.