Investor's Corner
Tesla Q1 Earnings Call: Tidbits You May Have Missed
Tesla Fremont factory captured via drone [Source: Stephen Powelson]
Tesla reported Q1 financials yesterday which was unusually full of several surprises and all pretty positive for Tesla bulls.
Aside from learning that Elon Musk has set up camp at the Fremont factory and has a sleeping bag near the end of the Model X production line, the Tesla CEO also revealed several unique tidbits during the Q1 conference call.
The Tesla Fleet
Elon was asked what kind of advantage is the “fleet”? He answered that: “data is everything. Teslas drive million of miles per day. We will likely need an even larger amount of data: billions of miles per day. Once high volume statistics are available, we will be able to replace humans to improve on the number of fatalities.” Interestingly Elon stated that Tesla does not have a goal to forbid manual driving, but autonomous safety should always aid in avoiding accidents. But people that like to drive manually (i.e., people like me that like to set up “launch mode” while waiting on traffic lights) should be allowed to drive as they please [I know I’ll get comments for saying this :-)].
Model 3
A very interesting new piece of information was the July 1, 2017 deadline for suppliers of Model 3 parts. Elon said that “one always needs a deadline, even if July 1 for SURE will not be met, as something is always late.” The model 3 will be the first car designed to be easy to make. When asked if there is any recourse against suppliers that fail commitments Elon said that Tesla will meet with the Team of each supplier, not just the CEO. And they will get commitments from what he called the “A-Team” of each supplier.
When asked if Tesla will need more capital this year, Elon stated that he does not want to rely on Model 3 reservations for capital. So there will be a need of a combination of capital & debt.
Regarding the demographic of Model 3 reservation holders, Elon disclosed that 93% of reservation holders are new Tesla customers, while 7% are owners. And unexpectedly the Model 3 announcement actually increased demand of Model S vehicles.
New plant(s) and Gigafactories?
The issue of the need for additional plants for Model 3 was raised by several brokers. Elon responded that manufacturing in Europe and Asia would be more efficient, but Tesla would not raise new funds for a new factory until Fremont was at capacity, possibly at 1M vehicles / year. One big “new” unexpected item in this regard was the prediction that Tesla would deliver 1M vehicles in 2020. And also unexpected was that Elon believes this is feasible in Fremont. On the other hand Elon asked himself “but is it wise? Probably better to localize production by continent”. Similarly Elon was asked if Tesla would need a second Gigafactory for Model 3 delivery. He answered that Tesla can continue to expand and not steal from Tesla Energy to deliver Model 3.
Production numbers
Elon disclosed that current production is at about 2,000 vehicles / week, with 40% Model X and 60% Model S. He admitted also that “Model X is the most difficult car to manufacture EVER.”
The new production goal in 2018 is now 500K vehicles, 2 years earlier than originally expected, due to high Model 3 demand. The “S ramp” to that number is very difficult to predict, especially the early exponential part. He then opened his “crystal ball”: he actually predicted “maybe 100-150K Model S & X, 300-400K Model 3. Hard to say.”
Related: Tesla 2016 Q1 Earnings
Tesla stock (NASDAQ: TSLA) closed at an all-time high on Tuesday, jumping over 3 percent during the day and finishing at $489.88.
The price beats the previous record close, which was $479.86.
Shares have had a crazy year, dipping more than 40 percent from the start of the year. The stock then started to recover once again around late April, when its price started to climb back up from the low $200 level.
This week, Tesla started to climb toward its highest levels ever, as it was revealed on Sunday that the company was testing driverless Robotaxis in Austin. The spike in value pushed the company’s valuation to $1.63 trillion.
Tesla Robotaxi goes driverless as Musk confirms Safety Monitor removal testing
It is the seventh-most valuable company on the market currently, trailing Nvidia, Apple, Alphabet (Google), Microsoft, Amazon, and Meta.
Shares closed up $14.57 today, up over 3 percent.
The stock has gone through a lot this year, as previously mentioned. Shares tumbled in Q1 due to CEO Elon Musk’s involvement with the Department of Government Efficiency (DOGE), which pulled his attention away from his companies and left a major overhang on their valuations.
However, things started to rebound halfway through the year, and as the government started to phase out the $7,500 tax credit, demand spiked as consumers tried to take advantage of it.
Q3 deliveries were the highest in company history, and Tesla responded to the loss of the tax credit with the launch of the Model 3 and Model Y Standard.
Additionally, analysts have announced high expectations this week for the company on Wall Street as Robotaxi continues to be the focus. With autonomy within Tesla’s sights, things are moving in the direction of Robotaxi being a major catalyst for growth on the Street in the coming year.
Elon Musk
Tesla needs to come through on this one Robotaxi metric, analyst says
“We think the key focus from here will be how fast Tesla can scale driverless operations (including if Tesla’s approach to software/hardware allows it to scale significantly faster than competitors, as the company has argued), and on profitability.”
Tesla needs to come through on this one Robotaxi metric, Mark Delaney of Goldman Sachs says.
Tesla is in the process of rolling out its Robotaxi platform to areas outside of Austin and the California Bay Area. It has plans to launch in five additional cities, including Houston, Dallas, Miami, Las Vegas, and Phoenix.
However, the company’s expansion is not what the focus needs to be, according to Delaney. It’s the speed of deployment.
The analyst said:
“We think the key focus from here will be how fast Tesla can scale driverless operations (including if Tesla’s approach to software/hardware allows it to scale significantly faster than competitors, as the company has argued), and on profitability.”
Profitability will come as the Robotaxi fleet expands. Making that money will be dependent on when Tesla can initiate rides in more areas, giving more customers access to the program.
There are some additional things that the company needs to make happen ahead of the major Robotaxi expansion, one of those things is launching driverless rides in Austin, the first city in which it launched the program.
This week, Tesla started testing driverless Robotaxi rides in Austin, as two different Model Y units were spotted with no occupants, a huge step in the company’s plans for the ride-sharing platform.
Tesla Robotaxi goes driverless as Musk confirms Safety Monitor removal testing
CEO Elon Musk has been hoping to remove Safety Monitors from Robotaxis in Austin for several months, first mentioning the plan to have them out by the end of 2025 in September. He confirmed on Sunday that Tesla had officially removed vehicle occupants and started testing truly unsupervised rides.
Although Safety Monitors in Austin have been sitting in the passenger’s seat, they have still had the ability to override things in case of an emergency. After all, the ultimate goal was safety and avoiding any accidents or injuries.
Goldman Sachs reiterated its ‘Neutral’ rating and its $400 price target. Delaney said, “Tesla is making progress with its autonomous technology,” and recent developments make it evident that this is true.
Investor's Corner
Tesla gets bold Robotaxi prediction from Wall Street firm
Last week, Andrew Percoco took over Tesla analysis for Morgan Stanley from Adam Jonas, who covered the stock for years. Percoco seems to be less optimistic and bullish on Tesla shares, while still being fair and balanced in his analysis.
Tesla (NASDAQ: TSLA) received a bold Robotaxi prediction from Morgan Stanley, which anticipates a dramatic increase in the size of the company’s autonomous ride-hailing suite in the coming years.
Last week, Andrew Percoco took over Tesla analysis for Morgan Stanley from Adam Jonas, who covered the stock for years. Percoco seems to be less optimistic and bullish on Tesla shares, while still being fair and balanced in his analysis.
Percoco dug into the Robotaxi fleet and its expansion in the coming years in his latest note, released on Tuesday. The firm expects Tesla to increase the Robotaxi fleet size to 1,000 vehicles in 2026. However, that’s small-scale compared to what they expect from Tesla in a decade.
Tesla expands Robotaxi app access once again, this time on a global scale
By 2035, Morgan Stanley believes there will be one million Robotaxis on the road across multiple cities, a major jump and a considerable fleet size. We assume this means the fleet of vehicles Tesla will operate internally, and not including passenger-owned vehicles that could be added through software updates.
He also listed three specific catalysts that investors should pay attention to, as these will represent the company being on track to achieve its Robotaxi dreams:
- Opening Robotaxi to the public without a Safety Monitor. Timing is unclear, but it appears that Tesla is getting closer by the day.
- Improvement in safety metrics without the Safety Monitor. Tesla’s ability to improve its safety metrics as it scales miles driven without the Safety Monitor is imperative as it looks to scale in new states and cities in 2026.
- Cybercab start of production, targeted for April 2026. Tesla’s Cybercab is a purpose-built vehicle (no steering wheel or pedals, only two seats) that is expected to be produced through its state-of-the-art unboxed manufacturing process, offering further cost reductions and thus accelerating adoption over time.
Robotaxi stands to be one of Tesla’s most significant revenue contributors, especially as the company plans to continue expanding its ride-hailing service across the world in the coming years.
Its current deployment strategy is controlled and conservative to avoid any drastic and potentially program-ruining incidents.
So far, the program, which is active in Austin and the California Bay Area, has been widely successful.
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