Tesla held its Q4 2019 Earnings call sometime after the market closed on January 29. It released its Shareholder Letter after the market closed, reporting an EPS of US$2.14 and US$7.3 billion of revenue for Q4 2019. Needless to say, TSLA surpassed Wall Street's estimates.
Q4 2019 Shareholder Letter Highlights
In the Q4 2019 Shareholder Letter, Tesla stated that it will "comfortably" exceed production of 500k units in 2020. Production of the Model Y in Fremont is ahead of schedule, confirming the community's forecast thus far. Tesla managed to increase the Model Y all-wheel drive's EPA range to 315 miles from 280 miles as well.
Due to strong demand in China, Tesla will increase it's Model 3 capacity with existing facilities. Meanwhile, production for the Model Y will start by 2021 in Gigafactory 3. The company expects Model Y capacity to be equivalent to the Model 3 in China.
As for Tesla Energy, the company reported energy storage deployment reached 530MWH in Q4.
Live Updates from the Earnings Call
[15:38 PT] After Martin Viecha made introductions, Elon Musk talked about the strong demand for Tesla vehicles. He stressed how significant it was to reach such strong demand without advertising. He congratulated the Giga Shanghai team for their hard work. He confirmed that Tesla broke ground on Model Y production in China.
Musk reported that initial production on Model Y started this year as reflected in the Shareholder's Letter. He also talked about the Cybertruck. "The demand has been incredible," he said. "I think we'll make as many as we can develop for as many years....I think the product is better than people realize."
In 2019, Musk said Tesla managed to make a billion-dollars in free cash flow while building Giga Shanghai in China. He thanked the Tesla China team for their efforts and hard work. He concluded that Tesla will be concentrating on the Model Y, next-gen Roadster, Solarglass Roof, and its Gigafactories among other projects in the future.
[15:43PT] Zack Kirkhorn shared that Tesla was able to reach positive GAAP income in both Q3 and Q4 in 2019. He announced that Model Y deliveries were expected later this quarter. Tesla expects a one or two-week delay for production in Giga Shanghai because of the coronavirus.
Topics Discussed
Solarglass Roof
Elon Musk shares that there strong demand for the Solarglass roof. "We see a lot of interest and it's just a question of refining the installation process" and getting the crew to do it, Musk said. "It's a question of if people want a live roof. It's the future we want." Musk said it will be a major product of Tesla.
Tesla Network, Robo-Taxi
Elon Musk says that it would make sense to have drivers at first, especially as Tesla attempts to acquire the necessary regulatory approval for its FSD suite. He also confirmed Tesla may have Supercharging in airports.
Tesla Insurance
Kirkhorn says that Tesla is working on expanding the company's insurance to other states and adjusting the price of the insurance being offered in California. Elon Musk confirms that there will be a discount for Tesla Insurance if owners use Autopilot.
FSD
"We might be feature-complete in a few months," said Elon Musk. He explains that it isn't evident how much work goes into Autopilot and Tesla's FSD's development. He says that the apparent progress Tesla mad with FSD and Autopilot may be surprising to people, but laboring work has been done for progress.
Investors vs. Analysts
At one point in the call, a question was asked pointing out that retail investors are often more insightful than analysts. It's a subtle dig for sure, but also quite true.
Gigafactory 3
Kirkhorn: "The Shanghai factory has been quite a remarkable capex experience." He mentions the layout of GF3 helps keep costs low for the Shanghai facility.
Elon Musk talks about the inefficiency of making cars in California and then shipping them to different continents. He explains that different continents have varying rules and designs according to the region's laws and norms, so Tesla Fremont was making the same car with different tweaks. Gigafactory 3 has helped with efficiency in terms of delivery and production because the MIC Model 3 was made for China with its laws and regulations in mind.
Raising Money
A question was raised whether it was wise to raise money now, especially with TSLA stock at record highs. "We're spending money efficiently," said Elon Musk. Kirkhorn agreed with Elon Musk that Tesla isn't holding back on growth and is smart about how it spends money now.
Starlink Connectivity
Adam Jonas of Morgan Stanley asked if Tesla vehicles could connect to Starlink. Elon Musk reiterated that Tesla vehicles would need a dedicated antenna to connect to the satellite-based internet service.
Cybertruck
Gene Munster of Loup Ventures asked about the Cybertruck's demand and the cost of production. Elon Musk stated that Tesla is mainly focused on battery production in relation to the Cybertruck. He explains that this is the reason Tesla hasn't accelerated the production of the Tesla Semi. He stressed how challenging battery production and design could be for anyone and how it must be done with care. "This is very fundamental and extremely difficult," he said.
Model 3 vs. Model Y
John Sager from Evercore asks for specific differences between the Model 3 and Model Y. He also asked if Tesla was concerned about whether the Model Y could hurt the demand of the Model 3.
Elon Musk said Tesla is not too concerned about the Model Y cannibalizing the Model 3, as the emergence of the Model X did not compromise the Model S at all. Kirkhorn adds that Model Y is expanding as the Model 3 is expanding.
Price Reduction in China
Collin Rusch with Oppenheimer asked about the price reduction in the MIC Model 3. Both Elon Musk and Kirkhorn stressed Tesla's goal to make an affordable vehicle.
Rusch asked about Tesla's Powertrain. "Our Powertrain is pretty good," said Elon Musk. He reminds everyone that the Plaid Powertrain is coming out soon and refers to it as "alien technology."
Capacity
Pierre Ferragu with New Street Research points out that even legacy automakers have a hard time to reach optimum capacity. Ferragu asks how Tesla plans to reach the company's capacity goal.
Elon Musk stresses the importance of battery cell production. "We are super deep in cell production."
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