Tesla (TSLA) 2 Nov 172017 Q3 Earnings call transcript

Good day, ladies and gentlemen, and thank you for your patience.

You've joined the Tesla Motors Third Quarter 2017 Financial Results Q&A Conference Call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will be given at that time.

As a reminder, this conference maybe recorded. to Investor call Relations, like host, to now of VP Mr. would turn over the your I Jeff Evanson. Sir, you may now begin.

Thank webcast. by afternoon, quarter Deepak you, everyone. Welcome McNeill. Jon to good Latiff, Tesla's Ahuja; and XXXX I'm Musk; Elon Q&A today joined JB Straubel; and third

third were in previously Our the published we letter quarter webcast. same the results at link announced update as this

of These predictions discuss of During business those outlook to as statements. we and recent forward-looking most our on will due our in with Actual mentioned results comments call, risks or based the this make are materially including events could SEC. today. expectations and filings our and differ uncertainties number a

one follow-up, we to question-and-answer queue. in get portion so the today's everybody the limit of and yourselves please can During question call, to one

has into we jump Before Q&A, the opening Elon? remarks. some Elon

in deliveries most really a to start was be To going Model thought delivered constraint quite in really so and to go for by profound problem I'd years had of orders I by was vehicles. the the ago will we I milestones expect into call deliveries five put doing a really wherever only delivered a we from I now the them things of I like has which five even last so and thing cumulative biggest and well. one well, of Tesla, I'm should predicted Tesla. an grown one order I'm production (X:XX) to factor deliveries the always are think Gigafactory years we that actually. like quarter, to have – call, zero. that amazing at a Gigafactory XXX so, surpassed sorry, the here. wherever move my I We Model now don't answer would that But you desk record company's some the units skeptics later inception I'd X, million believe Tesla we're from some thing the the had but net bit to so off So, acknowledging at X.XX right – I lead in two a that's suspect One is issues pretty where one that cars, – I'm and this are the close the and five out beyond move magnitude why front lines the yes from is of S XXXX really Model I that since myself for magnitude. fleet is surpassed of I from I possibly ask units for where actually – for that's minute, to desk, would have now. of say and cold, XXXX company, of cumulative into delivered important to the there, perspective, least Tesla go I years. X XXX,XXX because orders

pessimistic. So perhaps future valid assumptions consider the whether for they're and your or

make chain and to among slowest of thousands the There week. no in our We've of as with problems and continue the or processes significant thousands. we X, progress process creating bottlenecks. are supply as will processes. least Model production for So Model are there our X, fast those move each Obviously, any had we lucky

there're parts, to more to so of there's necessary accurate, of tens be fact, XX,XXX processes the unique car. In produce thousands

elements mixture. lucky will least competent and as fast that of We the move least as

area. into a biggest incredibly majority overview, the So while the are vast problem business there some do deep give problem are well, areas. I the going After dive I'll

Model to achieve X now some vehicles based bottlenecks, of So, X,XXX of the worst into in XXXX, sometime by we production what know March. we've details the week of so as per on late expect QX we rate really probably gotten a

how things but that in out in of of think unit X difficult of further is per program. understand X,XXX the small to It's It's in a relatively things grand we to week so many our XX-year our unit present the a that a calculation, actually Model worth months to excess to some optimization that we're well clear manufacturing the capability the the and XX-year fully the about beating shift, do of this capabilities choke path far X,XXX production we're them. just making unit (X:XX) The try CapEx that. areas with the bottlenecks. is almost immaterial. no grand module optimistic things scheme of really value few noting week. assembly. we And meet this car Model these by Model a understand reach shortening talking scheme have estimate net far, we constraint S, a lines some it's And a we're I is X,XXX than at easier weapon. the of factory, program, and capability, in actually seeing of to And We much done will fast. design the X intent be in and being primary and in go and turning not robots build path, manufacturability little the to that but really, X. this accurate, Model processes to so it close just no, design production the I'm up be vastly remarkable Speed saying intensifying ultimate out very easier is additional cases points is to than by XX,XXX a can a no, is units (X:XX) its robots, is It's battery adding something really,

of installed, and four through bit zones what the zones elements particular, Because it four subcontractor, is, We've atoms four did but zones are module was very a XX then the here elements on Zone a a area. production the two and managed software mechanical a of dive and the to of getting reallocated man constantly, complex production. long three and constraints, in scratch, in be JB not all a the realize on. fundamentally There until with are to weeks, module electromechanical software was need we module subcontractor, many zone zone place we fixing little degree our ball, manufacturing XX fabricated deep many this still one The one. to to and rewrite integration quite goes are there's working a is ball shape, that. and manufacturing to go. working the best been those good the rewrite unfortunately, electrical So zones. We four major redo and about spent where dropped lot in of years two not. is had two engineers really that from way zone than two many This systems longer, a of which has and of is more has to unfortunately recently, of we line, software had and a I (XX:XX) software. to external rebuilt night far and the on and in the and late to of dropped Gigafactory

now to detailed fix we side, necessary plus understanding two. one is what the zone and zone very of a have On

zone three the effective for design times new and design. than is car one more a have also two We that about

two, – three will design, at Line are effectiveness as be X, Lines when be put and combined. be three essentially will three of we triple will which lines the in there of the new are – as So and other identical. one, good the module production. lines

not amount time something thought was were this automotive production takes that we're what will This was modules, incredibly in some not. having is told normal still There's our about be lightning it a but some in but, necessary a fix to future to time. just good the of efficient good is future shape. very and like we of unfortunately, really So like in industry. confident compared by that path supplier amount moving constraint in finite of shape, was the of We it

progress. basically very his at am I this (XX:XX) in also the Germany, on line, Grohmann (XX:XX) working I U.S. making Gigafactory. the large personally classified Automation said, – and where Tesla the personally a team in like and So from spending issue, that automation can. life now has machine, group and is Tesla's JB U.S. Grohmann And Tesla Tesla internal have rapid we I from been that And

the that's on dive deep of sort front. So that

firing The can't Tesla you journalistic layoffs other ridiculous. And as articles written annual thing performance I company against have a order need articles these guy. our having annual should despite a equal want other Every world, integrity. there's much really the to car are lack of review, employees to of mention, standard, far about and big than there to of effect a in themselves in be reviews. high are who for standard journalist skill lot an has performance ashamed survive extremely of the guy this little (XX:XX), to Tesla car levels companies, larger which companies; we higher have and In be any

have you obviously. one's little equal crush guy's and two of If smaller, the the guy, much ability boxers going to big

have to why is lot a going he and heck better guy – little or of skill, So is more that clobbered. (XX:XX)

because, die. annual Despite So the mean believe They're only that we in people our is people. not we make will high to why of our didn't being that, not if reviews, They're standards are high high. X% they're performance because high, grade. in

but GE, year, of out performance know very I about no had percentage. they XX,XXX. if every employees do, what. a their policy XXX people they of certainly a firing XX% for that's of So is time long This matter a still don't low

performance the to you to Tesla's If be would stack companies, other later low. compared were releases number

of that whatsoever (XX:XX) to Shame. then But thousand a editors base were low for compared half promoted, would almost articles of reason provide that play had to not that. stood and integrity, article the those number meaningless other actual lower they because in X% it was So Tesla forget they'll be employees include where is performance-based also, companies. article, read, employee the and any course, reasons, fires these promotions manufacturing. were several would've reported only because any remarkably so Right. a And for context journalists with its they

questions. think, I let's to move

the go Okay, queue, let's please. to Latiff, question

comes of James Our the Consumer first Albertine Edge. line of question from

Your line is open.

on the and the the zones a – today of you for aside, get of and bottlenecks. just then Thank perspective ask you where I the production basis an so the to does you with trajectory or where X? by be week into an to can Great. good and Model the change does How everyone. margin can a wanted to expect per idea as it us dive you change end Thanks. And the tell the ramp? we afternoon are on maybe XXXX, deeper Elon, and this from you doing trajectory respect thank

much too into number. the want it's The so is reason into I exponential, week tricky go the much like ramp The alleviate don't curve is it. stuff. step means to read a constraint, suddenly to it week as people production because higher a you like a by jumps just

although so, but over uncertainty sort a a too staggered is the if zoom you number of with week right to looks QX, end out, of now it week to that like increases. precision. any at I'd with little give production exponential state And much ramp there's that

But feel I confident in about of sooner. climb like really, we're vertical do a end Now the QX, here. maybe

So say. Yeah. hard it's really to

change And then projections here. It not long-term... point, in your any the terms also of Deepak of to our earlier does

Yeah.

gross ...target margin.

Right.

These short-term issues. are all

of the (XX:XX) Yeah. will thousands. advanced. in the be it end Yeah. the mean, by well It's I year,

into I'm the thousands sorry, well per...

to year. of hard But changes. Yeah. would by, move And by like, weeks, where literally, say. or exactly, you if three In the the two it's thousands giant see calendar you end the the

So exponential the somewhat arbitrarily quarter-to-date that of will sort in curve. fall

different matter number weeks a tend a few linear instead in a to an a (XX:XX) of basis very which would even of extrapolate So people exponential. on show

what In exponential people fact, wouldn't most know is.

is So really to on straight-line exponential. very steep extrapolation, a (XX:XX) be tends but a it

Yeah. S-curve. an really it's So

then slow at exponential the it ramps off of the or does So We're possible. linear middle Model an target on the sort And XX% and It chain go right starts and higher it sort rapidly of start it asymptotes or factory very off whole confident target capacity. a of margin a for really production basis. in really to Deepak, number of long-term I yeah, capacity, trying production for highly X. (XX:XX) mean... supply given then

elements Yeah. the depreciation these in of few None last material modifying projections a or the months other of cost as to our changed legal target. overhead manufacturing, our terms of or result and have or

Okay.

Okay.

Yeah.

let's so lot All we in to next question, a right, the have of queue, people move please. on

you. Thank

comes from Adam next Our Morgan of Jonas question Stanley.

line Your open. is

everybody. Thanks

hell cold, coming Just but or mean, mean, one it right Model Elon, question, solving it now? described a are getting problems X one production more Model X, up? hot? how we follow-up. launch than is you And are the in hotter have hot hell. you as less I I is

each really, We're is the close level but I emphasize and level be level and when level to Well, to now in I you, X we're or I I more we're of realized level kind now level to X, X. depressed think then (XX:XX) level could worst, level what X, about probably we're weeks let's mean, ago we means say I X. to we X in was by clear exiting okay? sort can X see X in really now tell a like a got I have X I path of sunshine. that thought

right feel I really so And pretty optimistic now.

obvious work down pretty in it. I what And Sunday quite need X:XX If dumps. to you would and AM me calibration to was a now quite have (XX:XX) diagnose It's morning get sort do. line I matter we helping X But of X seven have ago, been working do it's of personally just the pessimistic module a talked week to on there, robot I zone to days at a issues. weeks

is JB I than few it whole I'm doing to take he The expected. we And are we're longer team on can. on it, a it. us everything it, is got going we on So everything we've doing it's months covered, can.

Got it.

Just for one Deepak. follow-up

loan XXXX On issues cash structure this of help delay be that the a due permanent cap the to nature? issuance meant related things secured the last some near-term bonds is fund of August, part it X the of was more Model Thanks. absorption a bridge or to the and from to

debt us eight-year It that on timeframe. is do that tenure banks the an offering and for give capital that

Latiff. right, All

next please. the to question, go Let's

from The next Frank of Baird. Tyler comes question

Your line is open.

manufacture volume Hey. about basically trying XX the give near to have lot times sense It's easier the the that in just three from Elon, X Kallo and S to X. guys you difference than in about the compared get talked us the to to the the volume manufacturing Ben I Baird. Model a Could Then being follow-up. of a the term? you're a you

more with vastly There's X. automation Model Yes.

up labor. the make one it's really harder tricky is to thing for work, automation and with when doesn't Now it that men

of it doesn't we works machine So a either automated, less With with labor because limping to and Model production. be quite could short severely hours we was it's high scale (XX:XX) X, S or X, up get lot that a tends and level it on or the achieve output. along or

to yes, So I add? mean, JB do you want

is were bring that think whole are. but you spot that build much part to That's it's realize and I automated, on difficult on. online. the us intensely to targets. what we does margin lets easier the design also cost But of is where The the automation which become

Yeah.

perhaps he And the line, Doug is can on (XX:XX).

(XX:XX) few a maybe cite examples.

typical robot car. is of of a call stations the to average industry for Sure. general it The one-fourth the a we a station work number is used of number assembly build actual on in car a what about which to pitch for

taken those we way we've does JB time the simpler. make manufacturing subassemblies the it and is fairly requires designed said, as and stations do automated make work. each But to and So much engineering for it and of care

guess my that I on follow-up's point.

or fixed, you requirement or the above? you of all what in or man for to in like time this, number or is is the at certain through working have So, software it this go it I'm hours that configuring right robots, to a throwing automation, it get into are assembly is of a the in things you're people thinking that it it the fix now, of battery know the too

and fixing manufacturing of the machines, have huge Yeah, like, part there's, production occasionally where operation. a broken to then a manual a some a have amount we're is people permanently process machine we of the to and at throwing then bypass

the Until we automation. fix

a until be. a software where manual the is bypass fix may system not or or that's because – a is Yeah, case really machine it's but we right for inefficient the designed automation, to the really whatever not really the (XX:XX) machine

just It's an extremely...

Got it.

not than combined machine we up software different complicated a and extremely do It's what – car. mechanical, brand-new challenges. that electrical, with bringing

Yeah.

a of And the... lot

harder integrated than system a the or supplement very with S X is automated tightly manual It to as system. because designed is

So machine for make manual supplement or unwieldy it's working to up activity. a very with try to not

like you to stuff, to going be So, but we were until if lot it's and think could slower, then had a well, like super going cells spreadsheet – – is fast. a a of be automated couple spreadsheet your the a still it's spreadsheet and do you manually last cell calculated, the it's in yeah,

All right.

go to... Let's

guys. you, Thank

please. question, next ...the

Nomura comes question Shah from of next Romit Instinet. Our

Your line is open.

so on Great. conference is get they're level NVIDIA need think something you a their I Elon just Thank saying you do to X Autopilot to and to the that's more curious recently, a autonomous what significant, perspective autonomy and come the just technology competitiveness NVIDIA the about hardware using We're along at your really that the is congratulations ask and powerful actually by about and lines to in seems advance they Autopilot? hardware to than just a wanted and can talk is milestone. solution hosted board The improvement lot was today version you just of capabilities. you year-over-year you up XXx I newest if NVIDIA those from Tesla could and according

level be I with autonomy, it's autonomy of will what – quite question all, be we current autonomy we regulators. confident feel approximately able I that hardware. achieve autonomy and to acceptable human not full to But The of computing but with the with just level hardware. Well, can the is, full reliability, will level full human think first achieve current what that

autonomy can significant say, to on to say on they front. in some I'm hardware. approximately XX% I but And yeah, full anything require hardware we're we human order level I know have more ready may we'll not very for safer, just think soon, front that But needs sure to that's get that XXX% now. confident it to human engaged. the safer, may say I know. They above to be margin feel optimistic our safer, current XXXX% regulators with not be But a don't I'm capability Now – either.

greater a have signed replace computer with power, which push plug turn would the will one, option. the we But confident area, in by with necessary option, certain For that if any of, capability, is old is sort requirements we'll for that that, we feel than customers is the full regulatory the competitiveness lot. that does one software computer our upgrade that – in The it the are to that, order that meet up say out unplug new hardware strategy. of strategy a in. our hardware of we other better I something

for And give X you Model that Okay. ask, us I the Can could if actual what balance balance was? strengthened. deposit that said you

car specific for We don't – see We combined can give number, just on sheet of you our balance which customer deposits. give for deposits the balance line. by

the let's question, Latiff, to next please. go Okay.

Yeah.

from our John of comes So Murphy question Merrill next Bank of America Lynch.

question please. Your

Good afternoon.

of a you like, of them next fourth a might how given be think relatively whatever there's two cash which complexity. Model flow is – plus to billion able what the you mean, sell would so trying I'm understandable, inventory be about on we out quarterly quarter? similarly what Deepak, you X, understand, it that I saw the finished just first to to in sell it question quarter think obviously, the might for the would better? just much quarters, the third sounds on delays some $X.X quarter, that fourth Just we and out goods is in in here the would of bit for as I'm just flow inventory, curious about cash quarter. the we

cycle also cash suppliers later will the this And firstly, – is virtuous we the we working increase as significantly next flow X X couple pay capital Well, start continue quarters. our this Model quarter, our we that or of CapEx Model going collect all CapEx. the over because it's to pay next operations over few to than or as ramp X, provides the up from cash to related remaining effectively improve our our Model is positive flow we customers, us, of payments off, and quarters, decline from

the should two next improving there quarters, So be quarters. three an trend over

to this and is sounds But it than fair, as bit far a production uncertain Deepak, you more mean, as I be thought little like before, delivery.

kind what inventory generate So of can the right out I'm just now? trying to you you of that understand, hold cash

Yes.

So in spend important these given come is, firstly, what's our also, X, and how our delays, is down to prudent it to S short-term on going inventory we we money. is have and be –

and fleet. And with the are our managing CapEx of in to so we OpEx be our growth growth line

example, service for so, related And or to our Superchargers. centers CapEx or stores

slowing that be and the to cargo We are logical line, in (XX:XX) that's for down of fleet.

in actions those will come helping terms all So of cash. through us conserve

with later. Okay. you. follow-up I'll detail Thank

All right.

you. Thank

Ryan of next JPMorgan. question from Our Brinkman comes

Your is open. line

taking for question. Thanks Great. my

in with Just can were XXXX, beyond XQ the XXXX? at what's or could the what's from the you'd Is target units week to XQ versus with ramp-up But before, happening investors I from X week clear, like XXX,XXX guidance it per regard do vehicles. it's the XQ. think reading – that see from of XXXX. now happening hit with now estimating previous I it's XX,XXX over letter, of end if the you some the – to less XQ per point at the think X,XXX that, production, Model of I

know, If in would over more what middle, you the XXX,XXX. reasonable be you'd Xs that get built But you Model toward now a based it for expectation, could hit the XXXX? do do what upon

XX,XXX confident if to so units drive standpoint. on you we can a a are until then it how we takes you significant be a from implement. X, that's of are upon sustained number of X, to call Model cash units confident mean, the week from too is want make Model But get bit extrapolate a (XX:XX) long do I about mean, flow we to question QX, a to which towards (XX:XX). that's It's end early X,XXX I for CapEx where

much to the push existing... figure we how we from And can the want out X,XXX up

That's true. Yeah.

from figure CapEx. learn do redesign over the do more next out, And those, then spend how efficiently whatever (XX:XX) our and we we

right to the it's thing do. So,

exactly. Yeah,

mentioned X,XXX week, some of X,XXX capable that and we a just more or As path the very units maybe finding than parts line earlier, are of we're by clearly shortening that, length, chokepoints robots speeding up where some robots, adding a the of processes, can few time. much redesigns, the minor exist, it's you how improve and cycle simplifying remarkable some part the

So...

Okay. Actually, that's helpful.

Yeah.

Maybe just as a follow-up...

ahead. go No,

is kind be you that? ability preference to I see XXX,XXX this maybe for rate? the have was going XX% reduced do to long to production Model longer run restrained, to margin going continue related level help example, for the higher-margin, Oh, I also at just to say, X, margin I differently when of with feel higher as variance And as any discussion all? XQ. for the doing of you ability the is to the trim outlook do to mean, do you're the any gross about, But

We those short-term overall, and but doesn't long-term can reinforcing X prognosis again, and get on I'm all are there, Model issues, it gross fine-tune margin. these our this – change things our when we

Great. Okay.

questioner, Latiff, to right. the please. go let's next All

Our comes Piper Potter of Alex question next from Jaffray.

please. question Your

that it? somebody put the you presumably you're the production that as are to due much. trying bottlenecks to guess, was I incurring I is to ultimately guess, wondering, thanks ball, time Yeah, extent fault, these the your it costs worth very dropping claw subcontractor, the back some else's of I

Yeah.

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back up able cash claw flow. We certainly lost be revenue, will free not but lost for to it make some amounts, will

some not that it's yeah, to matter going much. – amount, So but

the The to goal is fix problem. right now

exactly. Yeah,

wondering, you that? And I Fair to to one issue taking mix. due measures trim bit if little referenced margin the enough. X and you could what gross S talk that the Okay. Was about was. maybe headwind address you more a and on corrective explicitly guess, other what then a

answer Yes. Jon can that.

can I Jon, piece is this Yes, this. address of a

price it result the large was reduced chunk And We've the of cars trims. So that, And move S. them a of discontinued Model has XX-kilowatt range as XXX-kilowatt to in pack. out. XXX-mile were battery pack, a a in as which inventory, we introduced those discontinued we

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more sold we margin the we so well. And in as gross XX-kilowatt that had impact cars a mix than predicted, and

demand and increasing into as we increase is as mix Given product. pack roll letter, then is into – the shift the margins to QX. continues XXX-kilowatt towards occurring it for the QX more that and in We'll see we indicated

the – the QX. heart in we strong production us QX in into So of about XXX-kilowatt really demand and debottlenecking success discontinuation is really rolling this the that the was of talked

Yeah.

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Yeah.

the value. So respond increased market the really did to

Yes.

came deliveries of up QX the in in went down, all U.S., And share for our X. S it and our Yeah. so market

Yeah.

S both? & X

right. That's

Yeah.

Compared to QX.

breakdown of saw letter to and X,XXX and kind (XX:XX) quarterly from week did production on our very We some about inventory. the X. to and question X,XXX, reduced And why that S just from we units of sort reduce I didn't in about sort S a we articles of of It's order earnings it X, much.

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chain, so all – units whole want and week. sized a And it's I -- everything just to like supply to the X,XXX appreciate

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QX be deliveries than X expect reduce in S achieve Model inventory, we to higher that. sales and QX. to But So and to

question next please. Okay,

of Next Bank. Deutsche Lache Rod question comes from

Your line is open.

Hi, everybody.

you a maybe units we about to spending question be increase Just there've year. week. had to high be in XX,XXX should facility about reports been level how going per capital thinking some capital deploying assembly China. some obviously also a in next And sounds about like investing you're another to It at

expected to versus in lower CapEx So still your be XXXX? is XXXX

But capital next that plan. better that. make may and you speaking, think elements better XXXX I leave Rod, question in our the the to if for our to provide So, hold broadly China on, when terms of I'll quarter guidance in to on we it on clarity for spend Elon full the factory, be different comments we give

similar, it's suspect XXXX. to and I honestly, comparable

obviously – that – so. strategic a or we it's have sense, lower where but Do it some Yeah, do can of move it somewhat lower and and sense we makes it's lever higher we – wherever some makes choice. to so have growth? CapEx We – higher can growth CapEx

to to As we spend scale money I we before we make mentioned what it. earlier know though on sure want

line now, for duplicate CapEx So simply accelerate out decisions right those production we lines a the Model lines we'd If than make them kind X, duplicated, making be figuring and we're we'd production of which dark. need can be far rather it. be accelerated the were production which to – shooting to in

Yeah.

Yeah.

XXXX. to I significant expect respect China CapEx be wouldn't in won't any XXXX. material It But China, on in until

Okay.

three to but able this market only (XX:XX), making and for be is – cars be really the probably countries years S the intent, years like would and but other X, is production it Model primarily three serving provide sort China Y really market sort Chinese so. Model the to some make and rough just about is in X region start Model it's of probably it's the of be Model of in – won't it's and something way a say the be like plant affordable that's China, Model target and Model don't the we'll of local out, to and X, China but perhaps making a The in

something about China? suggesting I And just earlier have of And clarify also sized production wanted points. three-month Were kind objective your in that two that's Is Model to comment when exponential. to X clarify to you goes your that... the exactly of

now. Exponential, right

you number Is I few the off yeah are or you week mean say that a a you'll but per to that why to year-end? did thousand of getting by total of end by thousand the in this guess, produced few – low year a have already

no. exponential. that Again, because it's of no, being tricky Oh, really

If per in But like few the or something units week move QX. I you'd of few thousand the what a you gigantic minus meant a date were weekly see differences to is calendar at plus by end output. weeks,

Okay.

okay, said if say, few you yeah, about after (XX:XX), But what weeks there's definitely. a QX? I'd

– that very going very, very, just to very rising sharply at it's be time. So,

giving Elon going just He's To giving... are is be provide clear, guidance. not to – you

guess. my is This

Exactly.

it's vertical will here, (XX:XX) It climb be one to the next like – moment from (XX:XX).

It confidence fourth high sounds on like the you'll quarter be earnings call. some able pretty provide to update

Yes.

For sure. Yes. Absolutely.

Yeah.

have feedback for we'll we mentioned... with the you announcements, Even as some deliveries

Great. Okay.

good earnings the understanding very Yeah. QX on clarity high We'll and call. have

this type then is project? Fremont And China the a Okay. size, of

year. sure it's not mean, vehicles exactly is – hundreds a the something least maybe couple in at year, of I'm it's vehicles per hundred thousands I thousand the of a it more. where of in

you. Okay. Great. Thank

out right. all Thanks. get That's All will of him. you

please. question, Next

next of question Toni Bernstein. from comes Our Sacconaghi

is open. line Your

Yes. the trade-off. frankly, you. capital doing and trade-off talk a Tesla's I you think as potential I that possible please. a And talked of about cetera. growth to et first time much you I've advantage, just and the a electrification, between about follow-up, it's as Thank have this lead really first-mover spending. to Elon, Usually, quite sort as heard about that move been establish to quickly all question

even is capital of concern the the all-out raise trying have there that that going cash is in out that too quickly? is of the why decision, guess, decision? I a at is too to Is run question. to of that do and cash? might terms And much, you growth, What's the in Is concern hesitancy effectively? more about bandwidth a for organization concern a that root using a So

want it's we to sense that bit continuing to think I both. all it's of a addition be of certain fiduciary a crazy. through to like mean to responsibility for prudent that as that I in us we in would grow. have we say of are Certainly, probably growing just

So...

I the growth auto for mad are mean industry. these substantial rates (XX:XX)

Model T, Model some Tesla is rate which the growth the to think faster T than in made a Ford and relative about growth I comparison rate of era, of we're talking the we history. fastest in

are rates. growth nutty So these

It's time really this. about first we've not the thought

Yes.

year. recall at be that. crazy even talked I been And our to will And We the this next think it's have exact growth compared every year like numbers, I it X,XXX, XX% rate, in year. don't the XX%, but about

So be growth extraordinary. rate to continues

Yes. Yes.

coming continues be years I rate something volume mean, as largest Tesla that world growth Our continues be like in if like it car the to anything will that, by the well. that company the in

it twice Model rates so the half helpful, growing we're demand we build, the rate Model as accelerates I but are time, mean, it demand only with not Toni, product introductions X S reached new so of in may be accelerating grow. we too.

Model exactly, will five Model X – Yeah, be it will be it times call S... times I'd five

the look of and you downward. bit magnitude a timing order if at it's Yeah. shifts And

Yeah.

I question guess, is... the

(XX:XX).

to punctuate talked cash you're once on a Model more, be little you've soon But to the pretty the flow close really about volume perhaps to going generative you X. bit get

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don't positive get possible? just sort cash you as want reconcile there to to to of as And operating to is why I'm any flow, get struggling so, to difference that view? get scale, Otherwise volume, quickly in

can trying to will as then are we as get work and clear, fast to can to be to X,XXX, get we we fast to as we as Just XX,XXX.

Yes.

Yeah, We we through don't But it. strategic of think think timing. do we it trade-offs, we and in wouldn't terms it. just were saying I saying would the were through think make we'd

(XX:XX)

(XX:XX) time interpretations I mean sort of scales. of like

X XX,XXX, take well, we it's or XX XX like, the months months? us, have to be – For months, growth should

enough. Fair Okay.

these other flash-in-the-pan timescales for like manufacturers. So are

Right.

were XXXX%, gone the margins can If X they volume us and Okay. that worse separate so a and topic, just quarter? promotional quarter were and or do you the helped one-time most Model favorable, fallen similar up could of Model activity given Model Model the like Model on they think maybe next S this back for I has must help better snap S they margins, what and you margins X mix this have S unless gross X gross And shift Model follow gross on look and, X why is understand Model wouldn't be stuff materially, the drive than to minus quarter?

see part of off completely is continues analysis your firstly, mix that the mean, from we internally, QX. what I that and we in Yeah, saw, shift

because so we're were will largely ship we QX placed in orders in Yeah, custom that largely those QX. orders,

X we to improvement, shift, continue which as efficiencies on continue time, margin. have that full in S then see work and confidence to and And Model Model gross mix takes also achieve and we will

know, cars you models... (XX:XX) are and in in some, (XX:XX) The sold Yeah. being particularly rundown QX inventory older

loaners. Service

or a ...the get vehicle, should average the has service two to I margin. point than mid-XXs, those custom loaners, grow mean, gross slightly like and that less on a essentially, in it order yeah, effect lower, QX. But back

Okay. Thank you.

please. question Next

question next from comes Brian of Our Johnson Barclays.

Your line open. is

something the of but infrastructure? for up like and million, the then million. cost just what's to $XXX were Thank questions service revenues often revenue lot you drivetrain $XXX on Looks costs change, other about PP&E asked. Yes. were a of and business, business, you. left the the about, actual Want service vehicles not year-over-year service of expenses talk down loaner drill and up the that the between actual Could expense, line, drivers we the have the been of people talk just outsource CPO the

Yes.

is, Model service see increasing there the and both Model in wanted get we you S Model in of the infrastructure PP&E out and X. what fleet we're demand front X think I also for to increase as size,

get a the four quarter. XXX plan to location every road. opened on demand, that probably QX. mobile we vehicles in we that double this So about that to just we ahead And you And of saw days put

you of is that, see, PP&E. lot what a so And

in last about us, million mostly business. CPO – you Model $XXX and us; reliability fact, little a last terms that's of In you the about for revenue year drivetrain very mentioned, The The we the that the Model X to now. CPO that or asked behind of and S business. for was see issue improve, business, drivetrain, continues quarter

to all grow run We $X billion XXXX. that of business for – to billion or rate expect $X

the do infrastructure service that that so same we refurbishment. same And at we're do – in is cars. own we're business the servicing running And time. CPO growing We rapidly that the those our

of bit cost well. into little line that a see you as that So

my be is, How get those second the talked you cars can loaner for the Mr. follow-on us on produce, that? loaner the through to transferred those accounting Deepak, the in quarter, into XXX probably, they're when PXXXD Musk are when And fleet? while sold, going depreciated do Okay. for depreciation And they you what's fleet? about example, walk in

as recognized gets inventory, capitalized are in depreciation the They Yes. sold, those get cars because when COGS. cars And to are cars salable. related these these

Okay.

in So centers? it's the the not service cost of

No.

Right.

Okay. Thanks.

question, Next please.

of RBC Markets. comes next The Capital from Spak Joseph question

Your please. question

thank Hi, you.

be if You talk assembly, obviously, also wondering final mentioned a get some final bit And and constraints little different run your in of think discrepancy there is elsewhere. between at to the is same And year-end to you then, given still makes sense everything a you parts going welding. level? about going could to was rate, Or constraints sort as entire be do the welding you of line? bodyshop, roughly I assembly.

take on? like to you would that Doug,

video, or – by you another... Well you with specifically respect to the about are rate is controlled have welding, the asking do

In it the I'm listed bodyshop a letter, said constraint. sorry. welding, it as

Yeah.

Yeah. (XX:XX).

one it the of of line. complex is same level but more parts as It's assembly overall of not constraint the the Gigafactory, not No, it same constraint. the is the

overall building the reach crash highest But ramp more concentration of every And is it in at building and rest The significantly. of well. We've bodies our again, that just results production in same in we're But up driven that testing anywhere to day. as It's we're line. by of production goals, fantastic are them. the coming robots production quality. overall And curve. more sheer not the the our excellent robots ahead We're of the had number bodyshop. has to it's level of it's the constraint of So modules. really

this real-world question. then, it on you would And But were as from confident that amount ago Elon, call, year of capital a to comment? follow-up a little views less you than the any you require of on capital. a I said that X or a the a to on go would you Okay. with to put XX different be think fair bit going could I'm you point X finer have that some if if from and X, wondering have now experience ramp,

first that significant will to we feel the more I even CapEx next phase of be actually strongly mean, phase. our compared Yeah. on the efficiency

Yeah, absolutely.

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to see And robots lot be strobe critical a we're it. going to the the what and obviously a designing of to need should efficiency. internally. You incredibly makes And that's robotic light CapEx elements

(X:XX:XX) to So just respond cases. are some current too slow yes, because in suppliers

you we to more in obviously couple do queue Elon, going so not everybody. have the more? Okay, to we're to a XX get take want just questions

Sure.

Okay.

question, please, Latiff. Next

The comes Oppenheimer. of Colin question next from Rusch

open. is line Your

And bit little while other. S the that the fleet looks you that sales price? volumes and We're the value the one was X you it Model or seems if also, from coming necessary It about talk what and percentage you felt a it Could loaners add drive of severe to reconcile more the are should with much. lowering implemented then decline. these declines be to like you MSRP so like Thanks could you of Model about able is that bit vehicles? talk to little why ASP trying to a

Yeah.

would it's X%. the I think about I first to question say roughly

of units. total Yeah. as percentage Very low the single-digit service of in a sales loaner terms

Yeah.

Yeah.

Yeah.

was a added price it so It to production really some quite than always intention hour was was S like have saw the As – far reduced reduction that content then then priced that our the as we XXX-kilowatt cars the XXX-kilowatt pack. we prices, Model because constraint artificially on both. high, them And things. one And never really a pack more X of it pack, that high other price to little was bit.

thought we added sure it content split We the what reductions were overpriced, little price Model some where between differentiation. to things would weren't be we have then the quite So X. and a of clear to response a sort some just

have but might we kind little a maybe of where bit, So that's overcorrected it is.

to seen what Model export Okay. mining moving strategy. enforcement to is the maintaining requirements the of practices, we've in And with historically X? growth permanent lines that terms moving China with for restrictions of in Model the important and China strategy supply of motor the X improved the just and the Obviously, for for into then DC the China magnet your environmental how and

we're shipping think demand side electric market the from into building I them China a and think across ocean more anything. vehicle we world. the about largest We're and complete in than the cars

really into in. the supply China cars pulls the we're That's a not to think And what tariffs experience primarily consumers to supply as us I market. forcing said, bigger you that is be much sourcing cars So issue. to materials make that able those to if impact more affordable, Elon or chain bring so than

Okay.

question? Next

of from Rob comes question Cihra next Guggenheim. The

line Your open. is

that storage, year by separate Model And sales constrained Or then, exiting sort guess, Thanks. on is ramp, track? start on is that Is X? into you declining XXXX, on that of just solar as Roof? But recognize biggest a right very can curious expected. much. again. but Or your of changes? I energy past it's moving that function not think its sort when now, had you own wondering Thank I just that Great. growing Solar the similarly focus of the you this is

expect into the they're now, a solar. much efficient do the move be just sort the Yeah. validation right just to demand that's of more sales The Roof going for – solar out. conventional we to it's I is we're we're through We is expect stores, which going of our demand And confident solar high solar And process going working extremely for what rebound channel generation. point Solar demand. stuff, as we And have to tiles. should all

my And house. the there in so they're notice they that even didn't Solar well. that So Roof on tiles I have blend I

roof last is really expected look at to XX XX, good but years. time, So a least a long

And it's months, hard components production that maybe sort of less so there's got six which on try on XX-year testing accelerated about to but do certain six in pack months testing lab to rate we process. roof then at (X:XX:XX) and it can into accelerate lab we to than do the a and

to I road. will those be no this part gets doubt So down It just of business have rolling, a going a the little it's that very a once to the but be behemoth significant takes it while behemoth. get rolling,

we engineering And install customer in to homes. early pilot continue

the continue cadence for We that.

Yes.

in one house. your have You

in house the.... Your

in versus has most the X Yes. the at JB in at (X:XX:XX). track quite we line this still XX And one point, turn year production the to to few final start and others to of a final Buffalo actual And installed on on this of are this production ramping factory. end

Yeah.

separate. production those X, for are areas Model And largely your maybe to the about separation

(X:XX:XX) for the pack size.

versus energy really or vehicles. the complete The that, growing production project storage to well on that's... at the ability Yeah, our storage actually doing is really Australia by complete track actually to – South be

In Puerto Rico.

Puerto rate well. nominal in been Rico Caribbean. running the As That's well the and as doing at elsewhere deployments and in quite

separate. So those are quite

you. Thank

down And the there be road, conflict. will cell some

production have – say think meant of we sure (X:XX:XX) as about really two, sort not into making constraint to that forward (X:XX:XX) a a being fast year to (X:XX:XX) we couple of going and cobalt of nickel... think cell production cell you actually because a I lot out, it's or if years need – cobalt, I

(X:XX:XX) aluminum. graphite, Nickel,

like separator Yeah, (X:XX:XX).

The modules totally the module to cells we're operating into lines assemble that are separate.

Yeah.

that a improving we're but now line in module separate right same and line. this energy totally So X is building the Model for focused instance on the now line quickly

Yeah.

Okay.

quarter. all I next great and look we we the think forward unfortunately, talking have that's, all you your time Goodbye. to today. Appreciate questions to

Ladies conference. Thank and wonderful concludes and you a gentlemen, for participation your today's day. have this