Featured Image Credit: Mark Vletter/Flickr [CC BY-SA 2.0]

Tesla (TSLA) Earnings Call began a few hours after the EV automaker released its Q2 2020 Shareholders Letter. TSLA report exceeded Wall Street estimates, posting an EPS of Adj US$2.18 and a US$6.04 billion revenue for the first quarter of this year. 

TSLA stock closed at US$1,152.92.33, up +1.53% from the previous day. As soon as Tesla released its Q2 2020 Shareholders Letter, the stock shot up by almost 4% to US$1,649.00. Its market cap is now US$295.337 billion.

Q1 2020 EARNINGS CALL MINUTES

Elon Musk

• Musk thanks the Tesla team for their performance and work during the second quarter.
• He announces profit for the fourth consecutive quarter.
• Next Gigafactory will be in Texas. It will be open to the public. Musk calls it an "ecological paradise."
• Fremont will do Model S and X for the United States
• Will consider Tulsa for future expansion down the road.
• Tesla adjusted the pricing of the solar retrofit.
• Telsa solar now cost US$1.49 per watt.
• Tesla Model S has an EPA certified range of 400 miles.
• Reminder that Battery Day is coming soon. "I think it's really going to surprise people by how much there is to see," Musk said. 

ZACK KIRKHORN

• Thanks the Tesla team. 
• Net income achieved for the fourth consecutive quarter. 
• Automotive margins reduced sequentially from 20% to about 18%.
• Recognized US$48 million for deferred revenue for FSD improvements
• Megapack product achieves profitability in Q2 

ANSWERS TO INSTITUTIONAL INVESTOR QUESTIONS

Future Road Map For Tesla

• Elon musk says its reasonable to consider making a compact vehicle in the long run. "But I do think there's a long way to go with the 3 and Y...I think we'll do the obvious things."

FSD & Autopilot

• "By far FSD is just overwhelmingly the most important thing," says Elon Musk. He says Robotaxi fleet could be the biggest asset value to Tesla.
• Elon Musk considers what people could do inside their cars once full FSD rolls out.
• Kirkhorn talks about some games and other fun features Tesla is considering to introduce to owners.
• 2D to 4D transition would be the next milestone Tesla is trying to achieve. "...probably roll it out later this year," says Musk.

Alien Dreadnought

• Musk says Tesla is making progress towards it. Tesla is changing the design of the Model Y in Berlin.
• Musk emphasizes that vertical integration is important for the alien dreadnought.
• Tesla is mainly focusing on CAPEX efficiency. 
• Tesla invites people to join the manufacturing team. 

Giga Texas Production

• It might be Tesla's biggest "factory" but none are being made there now, Musk says, answering a question about Giga Texas production. It has the potential to make "a lot" in the future.

ANSWERS TO RETAIL INVESTOR QUESTIONS

Tesla Energy

• Three requirements for sustainability: 1) EVs, 2) batteries, and 3) solar
• Autobidder is basically Autopilot
• The real limit to Energy is cell production.
• More on Battery Day

Tesla Semi Volume Production

• Tesla Semi volume production will still start next year.  
• Tesla Semi will have "unique technology."

Possible Battery Constraints

• Musk asks mining companies to mine more nickel. Offers a giant contract from Tesla if they mine nickel efficiently and in an "environmental way."

Tesla Insurance

• Tesla is working hard on its insurance product.
• Kirkhorn says its a standard insurance product. 
• Tesla wants to use the data from the car to assess the premium for individual drivers.
• Tesla chose to delay Tesla Insurance to improve its telematics product.
• Tesla hopes to roll it out in a handful of states by the end of the year.
• Musk's asks "high-energy" actuaries to join the Tesla Insurance team.
• A form of Tesla Insurance could be offered for the company's ride-hailing network

ANSWERS TO ANALYST QUESTIONS

Dan Levy from Credit Suisse

Question: Update on gross margin in China, and gross margin of Model Y vs. Model 3? What is your strategy with different gigafactories?

• Kirkhorn: Profit in gross margins in Giga Shanghai. China factory is not fully operational.
• Kirkhorn: Model Y has been profitable, and a significant margin increase in Q2. 
• Musk: Locally sourcing parts for Giga Shanghai has made a massive difference in profit margin.
• Both Berlin and Shanghai have many eager local suppliers

A.M. Sacconaghi from Sanford C. Bernstein & Co.

Question: You mentioned you were pleased with PTI margin progress and expected to achieve industry-leading operating margins in time. Could you shed more light on that? What market(s)? How much will EV tax credits contribute to that margin?

Follow-Up Question: How do you think about the tradeoff between the mission of the company (trying to make cars more affordable and broader) and also trying to achieve best margins in the industry?

• Kirkhorn: "We don't manage the business with the assumption that regulatory credits will contribute...in the future."
• Kirkhorn: Operating expenses continue to go down. And Tesla continues to see efficiencies in terms of customer interaction.
• Musk: "It is important to make the car affordable...The thing that bugs me right now is that our cars are not affordable enough. We need to fix that." However, Musk emphasized the importance of maintaining profitability but balancing that with maximizing growth to make the vehicles affordable.

Emmanuel Rosner from Deutsche Bank

Question: Could you please characterize the current near-term demand for your vehicle?

• Musk: There is no demand problem. It's more of a production and supply chain issue. 

 Philippe Houchois from Jefferies

Question: You mentioned the constraint to growth is battery capacity. Will you be able to source batteries in Europe for production in Berlin?

• Musk: Giga Berlin will have local cell production in relation to its vehicles it produces.