Tesla (TSLA) 2 Aug 182018 Q2 Earnings call transcript

Good day, ladies and gentlemen, and welcome to the Tesla Q2 2018 Financial Results and Q&A Webcast Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session, and instructions will follow at that time.

As a reminder, this conference may be recorded. I would now like to introduce your host for today's conference, Mr. of Director Senior Viecha, Investor Relations. Martin Mr. may you begin. Viecha,

us Ahuja, Bowers, good our Thank Q&A to Welcome VP with much, our Engineering; Pete Trucks; Bannon, VP of Autopilot Straubel, webcast. Sales; of Director Head Silicon Karpathy, and you Shiree, afternoon, our Deepak JB we Tesla's also Musk, joined of Andrej by Guillen, everyone. Ren, our Jerome today our of very I'm Elon Robin of Director second Engineering. quarter have and team here, AI; Stuart and XXXX

Pacific were in at Our at this QX results announced link same Update about webcast. published X:XX we PM Time Letter as the the

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

portion please question-and-answer today's the call, up. to limit one and follow of During question one yourself

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

for Thank you Hi. joining.

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force a roughly where recession interrupts it big supply there's severe a provided but that's majeure that a or the is a economy we're in, there's majeure every on positive positive. and we always just something, that – if quarter big is there's cash from not GAAP flow today not confident – the comfortable chain, I or feel achieving that back positive reasonably good event force event we possible, be That's or quarter big obviously, But where Now paid loan. may back it pay here income absent may quarters, cash would we a out. big because be and occasional loan that, there where flow a there be a

be to bring out if it's in super little the And in I the we set thank be the like would their our been customers asked of great, here in to sound I've us really excited. In today going Tesla we sorry of the super yeah, more really about future support. for for body working the future. Tesla got been work great incredible It's So, and crazy mean, team never I faith leaders once our customers tired. yeah, shop Without again, team And, by and, products Tesla I their here. and a their want We've the good to a three lately, but particular people the executive number product, exciting here. put team of the yeah, at key like, I the who excited not Autopilot of buying some Tesla. people. have

go I if and to what future. So, of say working you're see the to think could a Tesla in about from on, introduce leaders here about what Autopilot bit themselves you're excited

anything. spot put or I the guys on you if Sorry

operations very making we're radical about about fruition. for three think enables Bannon And self-driving a full is Pete second the then the to software magnitude pretty a autonomy. we chip division I But order designed the way technology Tesla coming about existing think Tesla like really core Pete going to and to advances is with years talk finally we've in technology to computer working easy that second importantly replace. the for talk frames And and per I really the plug-in of beyond to it's key per And is replacement let been that. vehicle a I'll lot that. an said, as it. or that. be in to think this on improvements

So, let Pete. then Andrej, like off and Stuart, me start

I'm Hi. Stuart. Okay.

need by way. talk You the to louder

talk we'll loud. extra Yeah,

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now, that's and going a in lot to kind that wants the route the understand take (XX:XX) user hand for in, route is is is attempt the ultimately to the So that to stay automatically lane travel vX, of user understand change to right back car control. control to is and what which our user solution Autopilot lanes, of on sort which the off-ramp of on-ramp focus

navigation. Integrated

is tip by the So, the if pretty will you you Model a or are. for you're feature. or just to little you'd driving like depending X, and That's your you just S automatically Navigate home if it button drag down, (XX:XX) work, or navigate upon tap where a way, X cool

focus now. also features. on We're digging So, yeah, right that's part of of in some the safety kind new

me, coming seeing the most team two probably the over the think the from just is which built that's exciting last out I thing is foundation for years. been

and us engine. understanding world, sense very, and will quickly to of new this vehicle. all happening there set really talk That on we're Andrej we've think perception safety of data in of have work make that of the the lot I sort vision a some extremely starting of about we done what's think I that see very allowed the around to only top a build with has features high

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Pete is This Bannon. Hi. My team...

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and So, Andrej this team what I think future. do we're with to be in all will hardware able really about the excited his

it excited, and like the on He one was said, I one it it's and Tesla, up gave I this hardware think access to afterwards, so of, come he of capable really really to last worked hardware people want story how me. this exciting. and about it and little month researchers to exciting. he was excited to X to his going explaining was this out said, and at to came think Hardware a are just have I try anecdotal so then talk exploiting is and because team to work I'm what

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maybe everyone people some know just not Pete, your actually, does. but Yeah, about – background,

Pete's – the about you've Talk it a great – So humble yeah. would guy, if but just to you before. super like just could be done stuff

iPhone and designing of on Fellow Let's designs in I've on refrigerator-sized, XS. in performance see. smaller was then processor and were Hardware working Equipment smaller Tesla years. I that's a Digital when car a for Verification into that Semi, eight to be computers helped which came that went little XX-bit into was since. started been part went team the Apple. then I performance XX-bit then XXXX, I solution I and the ARM rest which iPhone acquired the at accelerator and at architect in design the ever Hardware working on ARM And And neural Architecture led first built of modeling I a the I designed of processor the world network VP Apple working Corporation Intel will back I for and they improvements year. later, of was the X and designed the team years two at the the at the next PA while, X. that worked first X

some Yeah, may it principles order of better anything to else exists. essentially, Tesla magnitude an able why AI that Yeah. worth of be or is that than for AI details, the achieve articulating the chip, explain design the car computer, processing

Sure.

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and Our do get a – NVIDIA, current bus. big hardware, I'm a it's which the of fundamentally choked emulation fan GPU, they using also you mode, great stuff. on an then But

So, the the the of of being the GPU and CPU transfer one up between system. ends the constraints

bag and designed of team this this, to operation. to come with the current the for think the as computer like over anyway. been on a of semi-stealth specifically the to create Pete X,XXX and So, of do out Tesla can But basically effect whereas computer by (XX:XX) to frames job hardware rough mode a three cat's autonomous world's years and the the able fail-over. a most the the do incredible we're this, advanced NVIDIA's and sort with frames second redundancy is full is an the bag we've going out to, able And to XXX cat second, net two his last for time probably because but – it's I let it's

be to chip that an it's our we're amazing as quickly So, possible. to size in of and looking design and going investment team our as the increase

that would why easy world, best replacement, think this and but same build costs And even aces this that we processing out be net. to more. that's I needs to at order the it anticipate magnitude, want our to in are it. neural and resolution the of primary the in take All done. run can made we all get it more you replaced, the have complex and the computer, current which we we cameras of I hardware that out as full is computer some think the and to plug on next. have an be the all we with If the connectors That's compatible and switch one you

that. So for Thank doing it's kick-ass. super you

You're welcome.

wanted thanks nets that Thank for the this. I of guys you software. three Thanks introduce making Tesla I key respect huge arena. your for doing that you. are doing the it's to making you be and team's Tesla in people and for Anyway, and at this basically have because what of admiration and successful will

question. go Shiree, to Thank first the let's you, Elon.

you. Thank

question Sacconaghi Tony first from with Our Bernstein. comes

Thank Yes. follow-up, please. I and question you. have one one

That's points of articulate if First, wondering this gross And in X and next looks for basis gross just a improvement Model I'm can quarter. help go more out X car from you like on looks and it of & up that margins, then, drove per margins that kind maybe forces $X,XXX XXX sequentially sort were you're like relatively that. us it cost maybe S the timeframe. importantly, maybe about maybe a gross margins what to to XX% quarter short calling X% wondering what drive understand about I'm can you

absolutely. Yeah,

First manners sort no excuse. it I'd gotten some have on violating there's being prior polite impolite that Certainly, my Honestly, to not rule there's for excuse apologize are no sleep been XXX-hour in I apologies think nonetheless, There reasons of of bad call. the for weeks. regard. I for My But, working excuse. really I'd I that the in like all, own call. being XXX-hour, was and still prior and no for on

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Yeah.

continue achieve on and in journey mix to just sell the to as grow also more And improved to we those increase. our stabilize efficiencies cars we're and these as will margins And somewhat as cost, benefits achieve we continues gross efficiencies. and levels we run going more production from the with All-Wheel performance Drive QX long even continue

which trend essentially at choose or good Yeah, We're least all Dual half the this I will seeing All-Wheel don't Motor to you roughly if give continue. of we're Drive But know information a customers that is actually of. option, all we trying positive quite surprise. know the

mix add Yeah, to probably terms want. in it's that. been of heartening what Robin can customers to see more the

Yeah.

from our starting and the we end configurator excitement we of opened customers. So, reservation orders, June invited tremendous saw from when existing response and

As orders see actually and mentioned, the car drives. wheel the performance than Dual for we rear Motor cars All-Wheel combined Drive Deepak just more

like continued a seeing now. to this should thing Yeah, assumed are It's we want to thing. be Yeah. don't just say the be we

Correct.

early we – to a want Another we the people thing since July, who the actually demand coming reservation. seeing an point out that public from are currently not configurator opened is increased I do are to we hold general in

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test strong we cars our Elon's increase orders drive test going example, is believe coming drive population. give the as had ago, to demand only that So, eight you the we to point stores from non-reservation weeks To earlier. having three especially an we increase dramatically

Now drive stores cars. having we have over XX test

Okay.

you gets this the mentioning sort like China little relationship raised next of in in and awesome of in done along government. work and China in and Tom right that stuff. and done that members telling really was great worth bits other running the the also to to – a information worldwide role making Shanghai has Robin some sales. been on having doing just a has Grace and (XX:XX) Nice It's was an interesting (XX:XX) with establishing Robin Anyway, Robin I'd instrumental – factory sure great with and me. of have job level was been and our China team born just in

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Next question?

you. Thank

Our Markets. comes Joseph with Capital next from Spak RBC question

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Yes. Yeah.

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Joe, have do you a question? follow-up

next Our from Albertine comes with question Consumer Edge. James

China for Thanks. with all Model dig Good growth Y, afternoon, the and question. we providing, bit capital your appreciate EU, wanted my though, in you of capital? color been verify Considering believe taking in been a a there. you've you've markets little from back deeper, plan it's the plans. terms to And outside can identified would also to to in thank whether you that discussed factory all prevent raising the And you to spending a this without there notice not a for or is from of raise you do regulator about growth us the How fund going funds? capital

will of I we – expectation any do not that's so. so, any do not raising point, least – doing be not no at equity We at do have to plan

we For in debt, don't think, local money, essentially. banks it's essentially need China, in local loan – it And certainly think, better discipline think a I from be not and better could – but Shanghai China yeah, and our with raise Gigafactory we is the I default we the I to plan use will fund to to to.

very our executing on needs balance CapEx our that debts despite maturing, our sheet. we're still plan operating a and and Yeah, balance healthy sufficiently on self-funded keeps keep an us

Yeah, refi-ing paying – plan debts. our off. them, our we I we is mean don't pay paying mean off start them default I

something convert coming that's a million, For example, million, soon, (XX:XX) there's due that. couple like hundred (XX:XX) a $XXX

that with pay off to expect flow. We cash internally generated

a And still still – balance. cash have be healthy

Yeah.

is to the answer question, there notice other a no And such from regulator.

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to go question, the next Let's please.

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next question Galliers comes Our with Evercore. George from

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Thank you.

comes question Adam Stanley. next with from Jonas Morgan Our

everybody. Hey,

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lot. a Thanks

Okay.

Let's next the to go question.

you. Thank

New question next Pierre Our comes from Research. Street Ferragu with

having Thank on. you me for

working of to Model wanted understanding sure how quarters. impact moving understand you X is important a capital. one on burning stop And the ramp my here, of your important I most So make coming an positive is we going forward, probably cash the in that well part the

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the Deepak But gross it's on here. the there one of benefit versus are our the terms factors. them. mean, I improvement payable Clearly, of capital is the many working collecting in business. difference also, margin cash

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of us our increasing too are volumes half. all businesses the to profitability. are significantly. And SNX help improving other second Our their That's in going

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– ahead. In follow-up terms of EP on Go sorry.

Sorry. What was your question?

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order rough It's yeah. of magnitude correct,

you. Thank Excellent.

Okay.

to question. the go Let's next

you. Thank

comes question Romit Instinet. from next Nomura Our with Shah

to work that now closer all capability technology? of autonomous of self-driving curious, calls question for strengthened much. drive and, developing And And go holding conditions. we I you've been basically Thanks focused I guess suite Elon, road full that this back the if Autopilot looking We've that been Yes. team. kinds very on forward sort I team different that I'm are today on compute my a is has what's previous would coast the the think fully to just paraphrase to said coast? on coast-to-coast you can

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anything reliability for it yeah, to that's end – because many of want released that So lines customers. really, you

want like don't best want as for team functionality. we add the until I got to that? So we've to that feel we Stuart, everything to off take core can you really the

now have challenge for can right no more I and stuff. the utility Yeah, cars The the build of around over safety the this I to I say Elon's today out think a XXX,XXX is reiterate team thing of you is just would question after to we demo point. pushing autopilot big increasing mean, and that. kind There's

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technology much brings. it utility powerful just Yeah, see I think are using and the how it's extremely comfortable people once

it's for is that the difference. very think I significant that future, but a making a on gain potential in contingent really functionality margin

a breakthrough I see some or of really about to month stuff will think the start we in so.

Okay.

to question. go the Let's next

you. Thank

Thank you.

comes of Murphy question John next Bank with America. Our from

Good afternoon.

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sense, will that so, forward, those And in carry John. lessons

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to Maybe up point, just one other follow quickly.

really automation, as this think from some a back have is not which like taken people I accurate. walk

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metal So and automated. automation. people And, mixture the as glass actual much of majority plastic that so goes it's car and a vast to There's yeah, producing saying, finished and going car. highly a an from JB raw of that was into is

can ATP? I what follow-up? the mean, grosses XX% I mean, in XQ, you're the XX%. guys think XX% X, ultimate target I bit If sneak Model I gross XX% in sounds look at XQ low-XX,XXX to quick the I is Okay. in one around earlier the are that built it mean, when higher the saying be is are like are they assuming? average we on and ultimately still going prices but transaction you

Yes.

Okay.

is answer simple The yes.

target so Drive, XX% have as having going All-Wheel than alluded mix clearly, ahead lower today, is still we earlier, us. that's and a to but what that Elon ASPs have of richer are we we It'll of to be help, the yeah.

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Thank you much. very Great.

Thank you.

the question. to go next Let's

Thank you.

question from next comes Our Alex with Berenberg. Haissl

like of and is evening, manufacturing rest the on part. really it curve on by point the overcome companies challenges efficiencies. also looks the learning the the manufacturing side the main Thank back here. industry which Tesla would of question. taking two you're what made to like come thanks advancement has lot making? the (XX:XX) Good the for is for already, second of been process a My to for curve one but would describe technology you is everyone, Because with the mean, has of you. the being manufacturing I parts, the how versus question accelerated technology and meaningfully maybe the the pace manufacturing I

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Yeah. Exactly.

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know. I Now

Great.

next the question. go to Let's

Thank you.

question comes from Our Ben Kallo next Baird. with

(X:XX:XX) Elon, sunglasses.

Hello.

Douglas more Adams. Douglas we do Adams. Can

Sure.

else. everything less And

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guys. Thanks,

Great. very much. Thank you

question. Let's to journalist go a

Thank you.

Wall Our next comes with from Tim question Street Journal. Higgins

of Thanks a still plan X XXXX? you. the vehicles calendar year the in call. you total Hi. for Do make for Question of to million

to in I'd million or XXXX. say think it's if it's it's I not going like that million, not a be close. probably so, If yeah. a pretty something be it'd XXX,XXX

pretty million million a somewhere seems million, aiming half XXXX, and between for we're likely. So, a but

do you do that? Where the get capacity to

Shanghai. called place this There's

that, Shanghai important Okay. will for that be goal?

Yeah.

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million Yeah, think and I think do XXX,XXX a actually more vehicles throw probably current half probably so Giga maybe XXX,XXX, We're can I from XXX,XXX, over hundred more, why think going like Shanghai. That's Fremont, couple vehicles – maybe so. we they million with and – it's thousand could think what have somewhere but we given the not I at be than we to more seems Fremont a XXX,XXX, XXX,XXX pretty I Giga, and with XXX,XXX likely a current Nevada. shot know today.

me? Model made tell you'd anyway make where going like Have you're Y, to on you the to decisions any

Not yet.

year this expect you to it Do announce though?

Maybe. Maybe.

Cool.

question, next to the please. go Let's

you. Thank

Thank you.

Thank you.

Our next...

identify I are should before year. Gigafactory do not we Europe that year. hoping to this end say location of It's end but are of before a for the hoping to we the sure the in

you. Got

Thank you.

comes Shahan Zachary question next CleanTechnica. from with Our

Hello.

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judgment. a doing. for use what thanks But you're lot your So

in-depth Well, coverage technology. clean-energy your right. All of you for thank

you Thank Russell Galileo the very much comes retail and represents who the question shareholders. (XX:XX:XX) from last very

think an awesome X the be Really quarter. Congrats produce ramping on Will you I'm on but vehicles maybe any Tesla X, I'm then this the X,XXX Model curious Semi? I synergies with the And to Gigafactory And on proud may between and Model week. have the to a ever at manufacturing shareholder Semi a Tesla X. touched curious.

Oh wow. Interesting questions.

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think some I vendors. this has use do mentioned been other also but before we

Oh, yeah.

Panasonic. (X:XX:XX)

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energy in products. our Exactly,

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storage. we put tripling are soon our in it I perspective, think to

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exactly. Yeah,

and do infrastructure the that. need to You people

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incredibly of kind is mentioned And exciting you one. an indicative... project PG&E It is that

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hour. over X gigawatt is It

right? That's hour. public, gigawatt Yeah,

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up the to scale time at of that and it – big efficiently there's where I do a can – things where we're make go we to actually certain spend think money a actually amount is things like enough, we're faster. takes scale

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be all to time... going the that's think I Okay,

you so Thank Awesome. much.

that's the Unfortunately, we think your next all you all to looking time have much. today. and speaking forward I very to questions you Thank Appreciate quarter.

conference. gentlemen, program. participating you and Ladies does conclude you. today's for Thank thank in This the

day. and You wonderful may a all have disconnect,