TSLA Q2 2018 Earnings

Call Details

• Call Title: Tesla, Inc. Q2 2018 Earnings Call
• Date: August 1, 2018 at 9:30 PM UTC
• Management Team:
  • Elon Musk (CEO)
  • Deepak Ahuja (CFO)
  • Robin Ren (Head of Sales)
  • Jerome Guillen (President of Automotive)
  • Andrej Karpathy (Director of AI)
  • Stuart Bowers (VP of Engineering)
  • Pete Bannon (Director of Silicon Engineering)
  • Martin Viecha (VP of Investor Relations)

Call Summary

Financial Performance

• Tesla reported a Model 3 production run-rate of roughly 5,000 units per week in July.
• Tesla produced 7,000 combined Model 3, Model S, and Model X vehicles in the last week of June.
• Model 3 gross margin turned slightly positive in Q2 according to the prepared commentary.
• S and X gross margins showed sequential improvement described as roughly 500 basis points by an analyst on the call and affirmed qualitatively.
• Tesla reported a multi-quarter path where Model 3 gross margin is expected to expand materially with explicit targets discussed for upcoming quarters.
• Tesla reported the first 24-hour period with over 800 Model 3 bodies produced as a body-line output milestone.

Guidance

• Tesla expects an average run-rate in Q3 of at least 5,000 Model 3s per week combined with at least 2,000 Model S and X per week, implying ~7,000 cars per week on average in Q3.
• Tesla stated confidence in being GAAP income positive and cash flow positive for each quarter starting Q3, subject to no force majeure or severe macro shock.
• Tesla discussed a Model 3 gross margin path moving from slight positive in Q2 to roughly 15% in Q3 and a longer-term target of about 25% as part of the ramp commentary.
• Autopilot V9 early access was targeted at approximately four weeks from the call, with broader release expected in September.
• Tesla intends to install hardware 3 as a drop-in replacement across fleet vehicles with an order-of-magnitude frames-per-second improvement versus prior NVIDIA-based hardware, cited as ~2,000 fps versus ~200 fps.
• Gigafactory Shanghai CapEx to reach ~250,000 vehicle annual capacity was estimated at roughly $2B as a planning figure subject to further definition.