Decoding Tesla’s Q3 Financial Results | 22 Oct 2020

Show #914

 

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Tesla (TSLA) has just published their financial results and also the shareholders letter for Q3 2020. Plus then then have a conference call to discuss it.

 

And I'll say now, remember (although who could forget) this is all against a backdrop of a global pandemic.

 

The earnings call featured:

Martin Viecha -- Senior Director of Investor Relations

Elon Musk -- Chief Executive Officer

Zachary Kirkhorn -- Chief Financial Officer

RJ Johnson -- Global Head of Commercial Energy

Drew Baglino -- Senior Vice President, Powertrain and Energy Engineering ; Vice President, Technology

Carl Peterson -- Director of Engineering

 

 

fifth consecutive quarterly profit

 

record revenue of $8.8 billion (up from 6.3 billion last year)

 

cash of $14.5bn (recent capital raise of $5bn)

 

Revenue from the sale of regulatory credits made up $397 million. 1.18 billion so far this year

 

2020 target of 500,000 vehicles - "Achieving this target depends primarily on quarter over quarter increases in Model Y and Shanghai production". They need to deliver over 181,000 vehicles this quarter.

 

840,000 to 1 million vehicles next year "in the vicinity". That would be upt o100% increase. The revenue allows them to invest more.

 

Cybertruck orders will be delivered in 2022, or toward the end of 2021 the earliest.

 

SBC (stock based compensation) expense increased to $543M (driven by 2018 CEO award milestones)

 

Tesla: "“The third quarter of 2020 was a record quarter on many levels. Over the past four quarters, we generated over $1.9B of free cash flow while spending $2.4B on new production capacity, service centers, Supercharging locations and other capital investments. While we took additional SBC expense in Q3, our GAAP operating margin reached 9.2%. For the trailing 12 months, we achieved an operating margin of 6.3%. We expect our operating margin will continue to grow over time, ultimately reaching industry-leading levels with capacity expansion and localization plans underway.”

 

But I want to start with this quote. It's profound, it's a laser focus on what they do. This IS their blueprint or ethos. I still see people online asking the questions how are you going to stimulate demand. For the last 10 years critics have said "but they'll struggle when other automakers start": "In addition to reducing the cost of the car, we're making the cars better. And that's the formula to sell the volume. That's what we're focused on."

 

 

ELON'S OPENING STATEMENT

The importance of one million cars providing a feedback loop for corner case situations (aka Google).

Because of the nature of spool up a new plant with new technology, it will start off very slow at first.

 

FINANCIAL

Could be spending 5bn a year on capital expenditures. This Q was 1bn capex.

 

CELLS

350 kilowatts for charging on their cars. Right now the max is obviously 250kW.

The pilot line in California will export 4680 cells to Germany for the Model Ys. Annual rate of 10GWh.

 

ANNUAL CAPACITY

Shanghai - 250,000 vehicles based on just Model 3

Fremont - 590,000 for S3XY

 

CREDITS

As Reuters explains: "Pollution credits became a more meaningful source of revenue for Tesla about a year ago when California and other U.S. states increased the mandatory share of zero-emission vehicles sold per manufacturer."

 

FREMONT

"We have recently increased capacity of Model 3 / Model Y to 500,000 units a year.

In order to do this, we restarted our second paint shop, installed the largest diecasting machine in the world and upgraded our Model Y general assembly line.

Production should reach full capacity toward the end of this year or beginning of

next year. "

 

SHANGHAI

Not from Tesla themselves but Shanghai contributed ~34,000 Model 3's in Q3

"“We are currently building Model Y capacity at Gigafactory Shanghai, Gigafactory Berlin and Gigafactory Texas, and remain on track to start deliveries from each location in 2021”"

"Model 3 production capacity has increased to 250,000 units a year. We reduced the price of Model 3 to 249,900 RMB after incentives, making it the lowest-price premium mid-sized sedan in China. This was enabled both by lower-cost batteries and an increased level of local procurement. As a result of this shift in cost and starting price, we recently added a third production shift to our Model 3 factory. "

 

BERLIN

Construction of the Gigafactory in Berlin continues to progress rapidly. Buildings are under construction and equipment move-in will start over the coming weeks. At the same time, the Giga Berlin team continues to grow. Production is expected to start in 2021..

We are not dependent on internal cell production in 2021.

"GigaBerlin will see our first battery line at scale"

 

TWEET TESLA IS A CORRELATION OF STARTUPS

@elonmusk: "“Tesla  should really be thought of as roughly a dozen technology startups, many of which have little to no correlation with traditional automotive companies.”"

 

He sees a product line and a factory as a startup. So S,3,X,Y,C,R,S is 7 from vehicles. Nevada, Fremont, Shanghai, Berlin, Austin, Buffalo. Plus car insurance, solar and storage.

 

Elon sees it as Autonomy, Chips, Service, Sales, Drive Units, Superchargers, Insurance ("Could be 30-40% of the automotive business.")

 

Startups are never "finished". They ship a new build every week, for instance.

 

CYBERTRUCK

"I was in the studio last Friday with Franz and the team looking over some improvements on the Cybertruck. There are a lot of small improvements compared to what was unveiled. I think it’s going to be better than what we showed."

 

Production depends on Austin: "It’s dependent on completing that factory and there are some new technologies with the high hardness exoskeleton. This has never been done before so there will probably be some challenges."

 

SEMI TRUCK

“We continue the development of the Semi. And in particular, Megachargers, we realized that the 350-kW or so that we are looking for cars is not going to be enough for Semi. So we’re looking for something much more powerful than that, that can achieve essentially charging the Semi during a break, between your driving time so that you can drive until the next break. So there is no usable or efficient time wasted for charging the Semi. We’re working with other parties to make sure that there is a standard infrastructure that will be able to be deployed for all customers. Yes. That’s probably all I can say at this point. Just we’re not working in isolation. We have to invent it because it doesn’t exist. But we’re trying to invent something that could be helpful for everybody”

 

Sounds like CharIN to me.

 

ROADSTER

Zero mention. It's a branding exercise, if/when they make it. As irrelevant to the bottom line as S & X.

 

 

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