TSLA Q1 2018 Earnings

Call Details

• Call Title: Tesla, Inc. Q1 2018 Earnings Call
• Date: May 2, 2018 at 9:30 PM UTC
• Management Team:
  • Martin Viecha (Senior Director of Investor Relations)
  • Elon Musk (CEO)
  • J.B. Straubel (CTO)
  • Deepak Ahuja (CFO)
  • Doug Field
  • Robin (Managing Worldwide Sales)

Call Summary

Financial Performance

• Tesla reported significant manufacturing throughput improvements highlighted by sustained battery pack production rates over 3,000 packs per week at the Gigafactory.
• Elon Musk stated that a peak-hour extrapolation would imply a rate of over 5,000 cars per week if sustained.
• Battery pack cycle time improved materially from taking seven hours to make a pack three weeks prior to the call to under 70 minutes at the time of the call.
• Deepak Ahuja reported that at a steady 5,000 cars per week run rate, depreciation per unit is below $2,000.
• Elon Musk expressed confidence about achieving positive GAAP income and positive cash flow in Q3, characterizing it as 'quite likely' but not certain.
• Model 3 was described as nearly the best-selling midsize premium sedan in the U.S. as of April, with a possible market share of around 40% later in the year.

Guidance

• Company reiterated a goal of achieving positive GAAP income and positive cash flow in Q3 and described that outcome as 'quite confident' but not guaranteed.
• Model 3 gross margin trajectory was restated with Q3/Q4 gross margins described as 'highly positive' and a medium-term target of 25% gross margin by next year.
• Deepak Ahuja flagged a 3% to 5% gross margin headwind from recent tariffs, commodity moves, and a weaker dollar combined with temporary extra labor costs.
• Model Y development spend was stated to be non-material in 2018 and 'only start to become significant in 2019.'
• CapEx for the year was characterized as being kept below prior expectations with a statement that the company could spend 'less than $3 billion' and retain discretion to spend as needed.
• Elon emphasized that the company will prioritize operational fixes and targeted automation over heavy new CapEx to hit throughput and margin targets.