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Tesla (TSLA) Q1 2020 Earnings Call [Live Updates]

by Ma. Claribelle Deveza April 29, 2020

Tesla-Q1-2020-Earnings-Call

Tesla (NASDAQ: TSLA) Earnings Call began a few hours after the EV automaker released its Q1 2020 Shareholder's Letter. TSLA reported slightly surpassed Wall Street estimates, posting an EPS of US$1.24 and a US$5.9 billion revenue for the first quarter of this year. TSLA stock was at US$800.51 at the market close and went up over US$870 after the company's Shareholder's Letter was released.

 Q1 2020 Earnings Call Minutes

Elon Musk

  • Q1 ended up being a strong marker.
  • Produced more Model Y in the first quarter than the Model 3 in the first two quarters in early production.
  • Talks about Autopilot update on Traffic Lights and STOP signs. He expects more data to be gathered when everyone starts driving again. Data will help Tesla vehicles turn easier. He expects Tesla Autopilot to drive people from their homes to work with ease by the end of the year.
  • Increased the Model S and X range. Will redo EPA range for Model S as soon as possible. Musk notes that the true range of the Model S is 400 miles. Tesla will continue to improve handling, driving experience, etc.
  • Model Y castings are pushing the envelope in terms of vehicle structure. "It's better in [every] way, essentially." Model Y heat pump gives it a better range. "It is especially excellent at lower temperature driving." Musk reports that feedback on the Model Y has been positive. Tesla is confident that the Model Y is its best car ever. Model Y production in China and Europe will bring costs down. 
  • Tesla investments are up. 

Zack Kirkhorn

  • Shanghai Model 3 capacity almost meets Fremont factory levels. China subsidy removal did not affect Giga Shanghai sales, the factory is still experiencing backlogs. 
  • Free cash flow was impacted by Fremont factory shutdown. Tesla is working hard to deliver cars that it was unable to deliver in the first quarter. It is actively trying to resume productions as soon as possible. Online orders have remained steady. Tesla has taken steps to minimize "non-critical" expenses. 
  • Thanks Tesla team for success in Q1 2020.

Answers To Institutional Investor Questions

FSD

  • Tesla will offer FSD subscription service, probably towards the end of the year. Elon Musk says that FSD is an investment that "people will not regret doing."
  • Kirkhorn says that FSD will increase the value of their vehicles over time. "Our overall goal is to maximize customer happiness," said Elon Musk. 

China Subsidies

  • "We will be reducing the price of the Model 3 SR+," said Elon Musk. Tesla is rapidly reducing the price to produce the Model 3.
  • Kirkhorn says MIC Model 3 production in Giga Shanghai is already lower than Fremont and there's still room for further reductions.

Tesla Battery Day

 "I think it will be one of the most exciting days in Tesla history," said Elon Musk. Tesla is looking at the third week of May, either in California or Texas.

 Commercialization of FSD

  • Tesla takes half of US$7,000 price as revenue and the rest goes to deferred revenue. It will increase over time as features are released. "This will be the most powerful gross revenues of all time," said Kirkhorn. 
  • Great potential for deferred revenue, said Elon Musk.

Answers To Retail Investor Questions

Next Giga Factory 

  • "I think we'll announce the next Giga, possibly as soon as a month," said Elon Musk. "It will certainly be within three months." He is uncertain how many Gigafactories there will be in five years. 
  • Kirkhorn adds that Tesla Gigafactories have become bigger and produce multiple products. 

Solar Roof Ramp

  •  Musk says Tesla was gaining momentum with Solar Roof at the beginning of the year before the pandemic. It has slowed down, but Musk is confident that by the end of the year, Tesla could be installing about 1,000 a week--depending on seasons. Tesla has already demonstrated the ability to install 1,000 Solarglass Roof a week.
  • "Demand is good, production is good, so it's really all about the install," said Musk.
  • Tesla is also thinking of working with other companies to help install. There is a lot of interest outside of North America, particularly in China.

Tesla HVAC System

  • "I'm personally excited to build an HVAC system," said Elon Musk. He wants to build systems that can expel viruses, fungi, etc. "These are all things we've achieved in our cars." 
  • Tesla has to concentrate on the new vehicles, new Gigafactories, and solar roof first.
  • Musk says that Tesla is seeing "tremendous" demand for stationary storage, more than it can supply in 2020--at least.

Answers To Analyst Questions

Adam Jonas - Morgan Stanley

  • There are ups and downs to Tesla's liquidity in the next 18 months, says Kirkhorn. But overall, Tesla is pretty comfortable. 
  • Elon Musk does mention that Tesla is a bit concerned about Fremont factory's continued shutdown. "Tesla will weather the storm," said Musk. He points out that many businesses and suppliers have felt the effects of the extended lockdowns.

Emmanuel Rosner - Deutsche Bank

  • Model Y has a higher ASP, said Kirkhorn, which helps with the higher gross margin. He points out the commonalities between Model 3 and Model Y in terms of parts and production. 
  • Elon Musk asserts that Tesla is taking costs out of the car to make it better. For five-seater Model Y, the cost could be comparable to the Model 3.

Ben Kallo - Baird

  • Tesla is looking for competitive technology and pricing for its battery cells. More on that during Tesla Battery Day. 
  • Elon Musk's talks about Mizuno's addition to the board. Mizuno's past relationship with Panasonic had nothing to do with his placement on Tesla's board. "He will bring a broader, more global view to the board," said Musk.

Gene Munster - Loup Ventures 

  • Elon Musk goes through each stage that FSD features must pass before reaching wide release.
  • Tesla FSD still needs to improve at navigating complex intersections and turns. Tesla is also working on FSD navigating through gatherings with a high volume of people. Tesla will continue to work on FSD's reliability.
  • Musk says that people could see Robotaxis by next year.

Pierre Ferragu - New Street

  • "We saw strength in gross margins," said Kirkhorn. He specifically mentioned strength in Model S and Model X gross margins. Kirkhorn seemed positive that gross margins would improve once the effects of the current pandemic have passed. 
  • Tesla is focused on cell investment, which will help increase battery storage capacity. 

Featured Image Credit: teslamade/Instagram

Legal Disclaimer --

This article is for informational purposes only. You should not construe any such information or other material as an investment, financial, or other advice. Nothing contained in this article constitutes a solicitation, recommendation, endorsement, or offer by Ma. Claribelle Deveza, Tesmanian, or any third party service provider to buy or sell any securities or other financial instruments in this or in any other jurisdiction in which such solicitation or offer would be unlawful under the securities laws of such jurisdiction.

Ma. Claribelle Deveza holds zero share of Tesla, Inc., and currently (at the time of this article's publishing) holds zero options or securities in Tesla Inc. and/or its affiliates.




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