Tesla (TSLA) 31 Jan 192018 Q4 Earnings call transcript

Good day, ladies and gentlemen, and welcome to the Tesla, Inc. Q4 2018 Financial Results and Q&A Webcast. 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. [Operator Instructions] As a reminder, this conference is being recorded. introduce for to call, like would your today's host Mr. I Relations. Senior Director Viecha, of Martin Investor Mr. Viecha, may you begin.

joined Musk, Sherry, Welcome a quarter I'm to you, number Tesla's by Thank and fourth XXXX good of other Q&A Ahuja Straubel, Deepak J.B. afternoon, executives. everyone. today and Elon webcast.

Pacific at QX link the Our p.m. as were update the this at announced in results same letter X webcast. about Time we published

to Elon? a based the in materially SEC. statements. and has on will we jump including with our our But Instructions] outlook These those discuss Elon as before comments we forward-looking today. results are number mentioned predictions of risks During events this [Operator into call, of our filings and business remarks. most expectations due and opening or recent Q&A, make Actual could uncertainties, some differ

the Thanks, best-selling battery for the Thanks challenging in considering most electric year Martin. last in share work successful. fact, achieved XX% of the XXXX. Model vehicles, incredible became market was of year. team, year sales history, most U.S. the an to when U.S. also vehicle Tesla in in X Last the definitely And but Tesla Tesla premium the the

well I year. combined the think U.S. point appreciated. is in of sales All not this other vehicles last XX% electric perhaps were in

think I that's So not so bad.

Every team. did all prior make many and We I've year-over-year, also Tesla every almost cleanest delivered our ever if we exponential year-over-year, seen. Tesla as about years - combined, prior year. basically is we doubled as years. in is - in the as sales We've last which achievement fleet cumulative cars did all vehicles vehicle deliveries it year, also the The made you we tremendous by year production track

object not of large is a manufactured is I manufactured anything least that I'm faster. object, Martin, or grown complex maybe a - to this for are aware a the for a complex in very history like car at you…? fastest think So especially has see thing unusual that

not I'm sure.

not T I was think Model a I'm bit slower, XXX% sure. but little

we exponential continue. And expect Okay. to that

being the nutty. deliveries So year. if about global with with times, in could year - global expecting than XX% be than we're to recession lot it more of - even there's higher even deliveries be And this economic this the a - recession, even this year see to that. pretty But there's if a is tough XX% face - a growth last

paying more our This for company in cash. For QX, hand on time in by we of $X.X will achieved cash quarter our second GAAP the than bond first convertible the March. EMEA] settle we and million, the $XXX have enough even of profitability, that cash increased to the billion [ph] history, mature after with we total [in means debt

fourth remains strong this operating the but amazing in our the In X.X%. margin are addition, Operating not XXXX was Tesla. usually the going an at to quarter lower is in be Tesla. for year with margins industry, automotive case

XX% could XX%. one expecting is operations. automotive a for but priorities this crazy our growth more want a lot As is XX%, we to of think increase quarter improving major mentioned, reasonable that are note that's than Perhaps I service I by I But to very number. sales industry. be the

we Europe pretty and the - to that customers. to and get That's to make Europe out to have and [indiscernible] whole get far we're California roll customer. to make So I it's we improving process, China the good really, from I in think this priorities service my And what cars the [indiscernible]. have quarter, number standpoint, and one. logistics to get exciting are to delivery sure the very for China obviously from car gate to factory think America. We're about when my with North going That's going from it

So good. by going and we've think QX. this to being profitable say - working for in think I I'm but point, of forward. all at that QX it's a be every lot, about going in I being we're I'd Not profitable optimistic and chain, I'm logistics aspect optimistic about quarters

So your mortar, easier get new that and and to Mobile be love up the and XXX something It's items, make our worldwide customers let's And the Service well. service functionality for out increased don't so to dropped And a paperwork - and going car The having of because can very XXX. an to that. or people most of bricks like a yourself with seamless to center total off or rapidly. more invisible. really for It customer picked - locations, want we car appointment, instead any Tesla was see, also anything make we just fleet bringing XX into bring hire you satisfaction, rapidly, of service appointment we've it an locations do or send up results and to fleet couple having because XX opened higher we're top say service increasing call you've is our scale the appointment. deploy taps, open as App of App, it. home it and we the make fix service, and you we're appointment, to to the from actually Mobile Tesla actually can and we service you one vehicles, to to an work also make frequently made need requested can the And it your vans and can vehicles. store you our Service we without service

roll coming rolled But to that's improvement three It two add that we're and you out satisfaction. it So thing up just can going so to picked all, - already or if that a the to car service wrong, the failure, or something before a tire weeks have already the something not way. detects be be want notified going customer a service the you service even Tesla tow request we're out big ago. their to delivered. you next on prefer center truck, to and That's a - car - if has a unit at are that The and services, and come flat on truck a is car has car loader, a to even there a loader a your has halt, tow a the stop. way drive come like before emergency if we'll car is,

you be improving have I cancel happiness. it. immense think in this tap center [Indiscernible] to screen it the call will and to customer

like if So to happen. you it going you want. can just cancel it's - have automatically to We

parts also cancel. just We're You press improving distribution.

parts past We centers. having parts to meant error our service strategic which them service about basically So it not located the I at think very take would we have come the made a will had in requested, because impossible simple, warehouses, in was a the car, they a could servicing - on be in, even come to repair the if turnaround basically parts would car then days. this they're service fast center, distribution

So body our It for rear our simple front we're XX the do to the going - common fascia, work we in make - Also, should to a service order stock centers have a at sense in the it's fast. it But service or to to to front located parts or basic common sense replace have makes just centers. service and it's in essentially prestock possible rear or eight - it's that it to minutes. to should fascia even going all minutes I colors. eight XX at get so minutes be to to or in like parts if centers, matter. your be mean, like minutes, lightning able whatever, be the car serviced

in fascia weeks So unusual replace XX this at unless and not color, shop you have can your is an body stuff. XX, literally minutes, a we like,

Model XX% so Model the the Model ensign are think Three is like [indiscernible] theory parts of in of Y In products, to Model in I was what ensuring S, whereas was is, X. it's with our X I the Y new low. in think, vehicle vehicle and for risk it it ever cars. will to quite Y. be the likely we've it's Nevada. than terms going It's limited. completed - also again, versus Gigafactory And - of CapEx with we're in Model got the of work special Y, Model the next we just production a incredible art. sort one It maybe Model per where commonality X it the is like quarters and S contrast Fabergé and - of common Model XX% But X, with it's X. sort shouldn't. probably the is of probably of a about was right fact, the is most Model be the put maybe art. Y, it production lower Model to common But common Model nothing with Model This with the made It's much the to of And part - in an main work Model S Y is egg - of only Model a X, of Model

it Batteries come out and there. will and go be powertrains the into So just will right straight vehicle.

it's risk our plan. for Y execution thing, I and our reduces not would it, - California and quite double. will reduces cost to of - the XX% having type also a be I than of worldwide Model is the SUV popular It's but as transfer vehicle. from of Model the is will that X, the So sure Nevada. default to the The maybe Y be parts likely, higher expect even Model [indiscernible] probably understand could segment midsized be - it's most

paint, volume in of Shanghai, this to we X. a assembly, we'll production. our Model see module of higher So vehicle saw expect we a assembly body general earlier line. be the And and of construction production and the Xs That's complete using than Gigafactory this probably year, by Y producing month, final end

up of Gigafactory, those basically lightning. fast. will it - be to Shanghai would like this extremely of are going progress I the factories So daily be like go updates get and

vehicles least should the So production for end of end at quite rate to that's confident feel we of the volume this the or at by the achieve by it. year. can year. And Shanghai it our that the control, close the that I very point, allow in to are we think in get XX,XXX And factories that week us to yes, a do

great. Okay,

first investors questions to the from going have say.com. who we're our submitting take been their So on questions retail

been which spoke already about submitted that question length service, been has I the at you think about. So has

So let's go question. second the to

now X S and would line? demand Is question at annual units do of target feeling about impact product its on even how Model second still considering realistic a be, ASP the Y see to XXX,XXX XX,XXX X, to you and demand annually? And continue are you The demand? right Model XXX,XXX XXX,XXX across for

I it's economy, just of something on guess, best Model is for guess, is year. a demand - my a I a best this worldwide my of units guess X XXX,XXX mean, That's strong order something or the into best for X for Model a my XXX,XXX in of demand worldwide the the in guess then be economy XXX,XXX XX% economy. order Model under something strong a goes think recession, less. But something still could of I that think in a is If X. in demand even recession,

For and X, the product and then out. of relative model differentiation XX Y X eliminate did and we S and S [indiscernible] that's X coming to

be I think likely the X but in total think could we flow slight a from very cash S to net see decline and I vehicles, is similar.

flow X. net no in for major change cash probably S and So

see When question will an update to Tesla self-driving best What's full please the self-driving case line share Okay. Network customers The full a Alex is, time development? for go live? to Tesla from and can on start next Network you features?

Sure.

- have highway. have already we We self-driving capability on full

the comes cars is allow to in will capability in stock regulators passing another, including on the we that think over from cases. car like corner So probably ramp, quite going stop the few on highway then we of to make But from care and the goes kept stock we it's it. talking a - sublime then just that for to be full there. and exit, one weeks, - took where exit. update there to and the of we option ramp like time, any approve takes that it, of interchange an And we'll slower sure be have the self-driving highway interchange example. strange In from confirm markets which passes U.S., cars, really you regulators highway after if And pushing will a believe from of all removing and confirmed approve change case takes exit highway will

to quite will have So it's hard. the to really that is next full traffic experience. part really Then profound self-driving lights. be It's - of

with all can is Traffic will you times. recognized geocode pretty be of gets it's mall sort - tricky kind is of because that essentially lots of parking one. you're at a then next So a tricky. underground multiple in complex thing like easy And and parking stop those lot lot like streets navigating levels, the and traffic lights if are on pedestrians and and intersections and really what

Summon, the enhanced that also probably to things see car the mode. traffic development the recognizes all and being names. navigate It's getting a lots, just advanced question stop development mode, or lights and development lights you'll I month. and of fairly With basically the complex just of in And the soon, recognizing release indications the up coming mode. traffic really your mentioned signs in of It reliability able all first functionality has several that's parking car to of does next in

XX.XXX%, now, but need extremely reliable. it like I guess right be I we So don't to good XX% really know, like,

will we towards that. year, think when safe full for and regulators probably - the this to want the So for will up it's capability they It's end to and - of then be to approve decide it's when self-driving? there

Okay.

Let's do you go S and Model cells? if which battery will question, improvement X What Tesla switch range the expect? next percent to and to XXXX when is,

XXXX have and switch no plans to S We to developments. product comment huge X on and can't

Okay.

Tesla question where be products? So produced? on Model Semi time these maybe retail share which Y will Can last from was, ramp the production of a expected we'll take investors, line you and

we but obstacle will As that's and encounter it's - also - And think, that we're I likely default Gigafactory, the the at earlier, plan some fast, we produced unless Model proceeding towards. that's CapEx. mentioned low Y, most risk be low

Y, ramp shape difficult production the probably next that's mean, and S-curve. But low In Model of there's predict the any very of terms to - up probably I time initial like year. it volume, always of then production to system, that takes

between in - from production year difficult it's next year, of ramp. volume, next of it feel of year, there with to with low of but year low next will beginning we confident exponentially saying Model to very break Y be in So end the growth volume by starts always beginning end that of last

So expectation Y. that's for our

if want to we're don't on Semi, - you I For know comment that, Jerome.

start next well. to as want I year

Yes.

But be first be the will will is our this Jerome. Well, first usage. units for - units own

move and in delivering the use we'll and the our customers. own how then depends location, outside So for usage trucks many start to to vehicle parts different we'll

unique, pickup Yes, that's we truck, that Tesla anything good. And It to else. will be then unveil might summer. ready the this unlike be something quite

Okay. Fantastic.

from So participants questions operator, start can we on the taking call.

question Instructions] you Our Ryan from Brinkman Thank [Operator first comes with JPMorgan.

Thanks my taking question. for

your about the the operating you've Gigafactory forward? in spent in that source And might flows, still thinking? provide lands the of you've this is you any of spoken capital? the on be Is Shanghai to the facility can terms think that us discuss past of funds there locally guidance in for I think that that raise you the classification kind project? raise I - to terms can about how for cash in able think CapEx China. potential to amount And for you going what

here. Deepak Yes,

The the a right. XX-year lease the purchase China. is with of government You're of land

So it's lease, from that CapEx, cash but not shows as operations. it's up operating flow

However, it. the will we is own equipment, that and we our CapEx invest fully

still to And that at based share from have of capital a expenditures. point. pretty get is in we've letter, And interest. the the majority expect capital the lot and then dialogue details we of we that that So And finalize local as hope rates to attractive for on up The had. we banks. plan, spending indicated show that as will funding China there's

capital something the something get in be about - was a Yes. do China, compelling of and to billion that interest order to the the financing saying, Shanghai, a Deepak in CapEx debt competitive $X.X as as ballpark I rates in probably in extremely to expect vehicle And figure, we on X,XXX very ballpark it's mean, rates, not figure. really company. drain [indiscernible]

These of scheme the not Yes. the things. world, $XXX a in of million money amount them, and the is banks biggest on for large are

Thank you.

with Ventures. Gene from Our next Loup comes question Munster

if owned not is but company. any the industry to Sorry - this as obvious Tesla - how the in first perhaps of facility in manufacturing any everyone you’ll significant is it's wholly for China maybe understand you're has automotive automotive

allowing and the very profound, government to do is this So we're Chinese us of this. appreciative

to for I open think that. it I us is the in symbolic allowing [indiscernible] of And - so know, the of note a if government and appreciation significant very you market. [indiscernible], a It's like do it Chinese thing.

And have have related is, have? have? renewable don't the of Stanley that this Waymo Is term? Is Waymo then term? you about the important separately, it question they separately how Morgan the do recently And longer parts energy? what is the timing story foundational one and billion. in $XXX autonomy story you is the And longer opportunity. nice I what my at Question Tesla they to the autonomous don't really have? of so driving - kind valued of is to and EVs that Or have do

[Indiscernible] the humanity. the and potential energy sustainable of risk is the the Tesla, The why fundamental like relevance, acceleration to acceleration what's down of is next goodness two autonomy. this of for so because yes, absolutely Tesla, sustainable of point energy things: Tesla, comes of

that thing. But to of and millions to of lives, potential So far that also, save is injuries autonomy. away, has most and actually, serious tens by of is, millions very the they you of time terrible their important This the public things you're so important in traffic. time - drive, spend can if that people doing instead don't being road, back, they can have enjoy give you the on

we somewhere on XXX,XXX feel order road, with this a I camera clips the has, customer one video we have, sensor [ph] our that it's point, at that think the strategy, which else there an vehicles intervention. have advantage when extremely is of XXX-degree no uploads, and radar, So about important. ultrasonics, technical is, confident suite, with always connected in the especially We [submission]

effectively, So massive, we fleet. training a massive have

we up better. miles difference the with months now, they're they're X road from - and now, year - have combined, - - the of anyone generous, the probably not that. amount this go you from else from to on that if Tesla training increasing. just probably systems is we'll be A And I'm have with the Our the sure add probably drive everyone how training competes has. that the we'll X%, being certainly million every time XX customers vehicles car, I'm of

you. Thank

Our next question...

Sorry, question? do follow-up follow-up Okay, you no have question. a

Okay.

Let's the participant. next go to

Thank you.

Our next question with is from Oppenheimer. Colin Rusch

Thanks a little through guidance the so sell for as dispersion talk as geographic expecting for much. Can other you're Model about XXXX, models? where well the bit to you the Xs the

we Well, clear letter. actually. I in Yes, think did, it's our

in showing for indicated And will We in and in we we potential delivering premium chart also America, Europe North those market the shared start QX, markets bigger. sedans even Xs be Model Asia, and could a China. Europe size midsized suggesting

I the gives some at where good of to point other be. drive a to right-hand we'll sense version the that go we'll And think So launch markets.

Yes. Maybe something year. of Model in this that XXX,XXX the to order Xs, XXX,XXX like

that little next terms internally? road for then couple and And quarters your expectation magnitude map model the is post-factory, in what talk you a in in and rework reduction that of bit the reducing just of your on order can of Okay. cost about the

answer that? to want you do Jerome,

carefully both our incidents in and supply is here Model that or manufacturing This And week-over-week, field is the week. and Gigafactory, in and the And as manufacturing closely. is also to fewer take S then chain track Fremont quarter-over-quarter. number the review the improving very improving X at well. we of engineers team. assemble Actually, Well, the quality quality the the every hours, X the and the we Jerome. and with week-over-week, We

to So service, cars there fewer and are fewer be yes. need for in

we'll try car going. breaks And that There's So keep the we'll down. in sure no end never make sight. to

adjustment Xs and and than like about said done. some - and that rectification. confusion like line, to like - slight Yes, gaps off is that more I nothing all thing, I that Like some drawer Model kind the drive of that's the there's for think of that's gaps happens panel all There's come us that.

next with UBS. Colin Our question comes Langan from

Thanks my for taking question.

know think around of demand XXX,XXX, well. January. a weak that about is comments on be? to what true the said you in if least, the mean, already on of normal as follow-up color to that price you there's already the I chatter expecting XXX,XXX in Because a demand. lot - midrange, you're that's don't is any at Just think, I I

- mean, are factors I at here. Yes. play multiple there

seasonality new a of First car Most automotive a buy do of people lot purchases. in to of blizzard. all, there's a the not middle

all the those January yes, is the I early confident any the pull seasonally low in from So and and the significantly highest to world incredible tends picks the car obviously up demand. with credit. have But of right February The demand so there's Model very the time frame. to In around there's feel then happiness a be about tax mid-March customer factors. - car we forward and probably now, X I U.S., level of think And think. I

so like, nobody to their tell car. can And you wants sell basically,

target where But is, the I mentioned we're range? price think, in that a past, you long-term or mid-$XX,XXX. the thinking Is point

really is this a guess. Yes, just

at I $XX,XXX, be is on at totally volume, a an clear, some huge guess, not it. something. expect, I'm ball average it's or I crystal this of not would volume probably But want certain that like to probably So level. got I

as a just And follow-up.

to the Because year, a battery start. you're but there's the you have supplier a You battery online But, commented be I articles - to do of looking the when supplier? different that you it kind by suppliers. of end lot of China production is mean, seems that close expect to supposed battery at

the pack. things: the three module cell, the really and there's Well,

the making and We module be the pack. will

we cells produced locally really question and [ph] And any the combination [high supply XXXX to we supply. confident hit feel use cells produced And of produced our we density] be have cell a just units. to And expect cells chemistry. a X,XXX it's sufficient in of Nevada essentially in in to and So can China. a Japan at Gigafactory

with Bank. Rosner question comes Emmanuel next from Our Deutsche

First, for thoughts XX% And I first in of had I Model just of half ask think some do the wanted your you at in are point, terms the this - to What latest it introduction? of short-range in X. to the clarify, about maybe mind to timing you year. deliveries when the at the of and assume margin X XX%, up number outlook short-range get you're some sort a then target of range, year? Model XXXX, talking lower that about during X point for you're to does that the introducing the Model the to

call it's Well, range, but the it by by Tesla's range you standards. could manufacturers' standard long but it's maybe standards, short other

So expect fixed standard working our the we're - sometime guess. but costs, just is our of rough, year of middle - range probably yes, introduce we improve in rough our And hard to a production, costs, costs Model costs X overhead general. this to the

past while a year, financial us difficult, I discipline. has think extremely this to driven high of level

passing I week. how think getting better we're smarter we with each spend Yes. we're about and money, way

- that's you're you the at the correct? to XX% - to And margins at that reach this Model gross some or be just - and year year standard lower-end X, Model range X. Is point so or despite clear, introducing the targeting expect some this on point

Yes.

would my side. follow-up And, be Okay. on I demand the guess,

So year. increase talking you're this XX% about

it a few higher this. said You than could times that be

question understood previous XXX,XXX just you mentioned the in well. XXX,XXX, if I I to think

like what feels sort of year lot just drives imply times fourth the quarter of which rate, XX% So what would like you growth run basically is it it's that's - cautious it's just not Because the what the of versus for letter? a really but accomplished. in four full the sort outlook your

the the this especially introduced So, you XXXX, demand I version? we guess, how cheaper for about do - total if think

the Shanghai Well, need online. to bring we factory

getting the for that's a biggest to driver XXXK plus think I year.

car never into eligible going costs. lot A dependent of just EV Our We've higher-cost labor any China. on of got very duties. We've for the we've been here. expensive tax credits. got sort And is of We've incentives. got people transport import

crazy incentives. affects we because that or price to in Tesla. It's incentive, vehicles. In any the market so companies many fact, the there's [indiscernible] EVs, least are biggest had is which countries we that for never And caps pretty subsidies EV for access have which on we've the China, have incentives tax EVs, - put

- be XXk in affordable. for to need rate the be it it's is, X is enough So the demand in and money account. It's Model people going high. other the have bottom demand that made sounds coming have can China They line demand don't insanely to with don't But The that's just The that. But, reducing just cars their Shanghai really, factory for like It's affordability. money is years. it eligible achieve - to the for we inhibitor is the do the car. is more to the extraordinary. affordable, literally nothing buy got desire. like bank If in car be

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

the it wondering and about wondering, think and to should we're concerned was how we potential about to should expect recession, you tell expect would XXXX, us present was get Tesla what we How CapEx I all do cash? have I what How Deepak, you how south How so your XXXX. - So, How a as manage you about on you in then for if you XXXX? you recession volume pricing? your to manage you do follow-up do turn manage And do gross land? margin I things Jerome. in react your

to conversations do alluded of of reduce that discipline? - how Elon And business the how is, of our - we free time? a on continue cost. I answer. we Jerome some financial kind the scenarios we way good believe think. did do Yes, shot just focusing we to just here That and any high question, contingency and the with have very good we that, a in a broad volumes But do of at pricing, for are level, do level our is really and me - and And highest being I that so for if which not the generate to profitable theme is even tight chance of And think it's flow. cost lower prepared pricing be trying cash a Jerome, all of very here to we the run

So be to way that's the best manage business, frugal. the

this, improvements don't small actually by our and despite costs subconsciously. fixed getting price Model of the broken wouldn't be lower while to ways. notice costs because costs, is And achieve they want But lower explicitly, in making mission be to is to Yes, the sustainable appreciate I us better you reducing about those would our slight and record costs, costs, variable getting X, product way, of costs a financially to what allows - it's degrees the but costs down, emphasize, want hundreds environmental by costs, I and sustainability.

So about this. question. absolute to be we There's have no clear

aspect of we've is other efficiency. doing this, Elon, capital well, extremely which The been

We with a dramatically Model are Y. returns cut kind it we learnings got. in we just talked what that efficient letter incorporating, There we and the about are on X just back the want on for so X we and had did it We and capital Model are manner. it Shanghai. in to Gigafactory We we many beat spending the and we Model of very talked have about for spending expense,

that's Internally, but we Y unit will Shanghai than Absolutely. did a and that of less for believe, Model too good think be we're factory for half production X. be but we our for it half. less than definitely confident Model might of quarter I what mean, CapEx to per it's probably

with Tamberrino next Sachs. question comes Our Goldman from David

at and seeing X? orders the what China European that to what that of in the up is saw How so but around, taking shaping far. U.S. are some it. want with numbers get guys you launch There on thrown to are orders is look relative a obviously from order I thing profile the just understand First you you're

seems as on the a I end of that do China quarter It's biggest and good. enough. cars fast massive It's actually we and mean, challenge. water. get we is, our it Europe don't cars think there get have do of on and with I cars number a it before That's the not reaches share made customers demand. how boat the we our how such

that, orders for think I've thousands and levels order is like like for above, So I better Europe than XX,XXX China Elon? seen single-digit

a Norway trying, China really made, we is with as possible. cars those guess doing on - out. right fast and as whole all Belgium China ship X. we how our - in making even as to fast now, happen I the possible, cars them them for And Europe. going focus - We with the The and over In I point as don't I get our cars ship get Zeebrugge as yes, not is, get what's in China, fast absolutely. as okay, it's Drammen to Model trade like, do possible then to get it's should Yes, we factory respect - were That's mean, - get get customers only we're as negotiations. we as to to to possible. them also fast those for

a of possible. demand those - facto China we very about. trade clear. especially tariff of get war. the one that's But to of sort there's go negotiations it's as important need well, to get gen We cars them a thinking soon on So the And not the we're de is there to as really truce things hope sort the not but while

don't what where thread, reservation you just XXX,XXX, it's were at I know Then that. and it count, do I started possible see deposit to demand us $XXX to what lastly you an still again ask Is of this think update? but why I interesting, really number know. want on think base that are on is much a seeing half price want relevant but million. just trying this to I point waiting I And model delivering. because that would customer came think Okay. people in incremental if, you you're Explain lower I XXk to give we're over there you for think you understand there's demand all that on to That that's come out. be say, over confirm just how based the those

you do to... So Deepak, want

I not mean, I think are Yes, for reservations us. relevant

focused really orders. are We on

customers do waiting think tells are but cars, we Now for those still, have still lot it's backlog reservations the of share which large a to number. us appropriate I don't a reservations that

being preorders. like game like - you like It's - start like some stops the then preorder game like out or and just are video product. number, here shipping important a Reservations that's once there's come

in I of Model my year the said XXX,XXX guess economy on on strong I for is order is think somewhere as a - in on demand probably units order the X.X XXX,XXX X million. is - a and or a of yes, So is even earlier, the recession order

from comes question next Our Daniel Ives Wedbush with Securities.

the my seeing logistics but is first of and strong, expected the stronger And especially a in Europe terms What in Obviously, what region, - just of looks certain countries? is Europe. surprised driving you around So you demand question maybe is than terms quarter, that? at in you with you're delivery think can about onboard maybe talk deliveries opportunities coming it from your the in challenges do you perspective. what in

thinking getting America, about having It's there service cars the on almost and put Well, a then zero in now. front demand of there's time North at cars like right before in we're - a in rise of tariffs. and really really a cost potential the said, product China getting not reduction water for quarter then in yes. and I That's improving that and there really mind ton

maybe fast your forward, on do months? can just a XX, let's advantage competitive be can that China other how go say, maybe look important that a mean, at just envision trying in - when Gigafactory tracks? to maybe just you And some is, XX we will that - as how obviously build-out versus automakers talk follow-up just the in and quick you about you I

literally trips updates. to I very good team will to I'm - working really it significant be of I And get and quite quite it's make fundamental building a several I closely to think China year. daily this the a the advantage, with Tesla, the factory. expect future

deal about only So XX% Phase and super here. it's X a Phase will talking is Gigafactory big X we just about be. ultimately the think we're what of

a appreciative the the deal. getting lot So government. we're we're a And of which support Shanghai major major, and of, national major, very from government, it's

Sacconaghi next with Toni Our Bernstein. from comes question

when powertrain costs, can and of $XX,XXX how need you you the way, demand between if just really that X, are down is costs more about getting no it are parity? not powertrain internal higher longer a about to combustion And cars. the affordability that for the drive said in And price at is higher as for the cars. Model efficient have now? please. factor? and of and - to on is the $XX,XXX talk is the So structural, much it that as for engine Model talked a that repeatedly getting around structurally maybe I'm else driver differential costs is bigger EVs and Tesla X is lower right - everything And think You've about Model and the which, they I where elasticity lower Or another in meaning turn, wondering drives manufacturers than being difference causing that is other price today or do follow-up, is X the

It's both, vehicle powertrain. the it's the and both, both

half opportunities I my half and the here, So split between yes. in time Gigafactory and and there is both,

I it's or is But point that reduction combustion cost not is yes, a engine. but is there cost bigger point an is bigger that, higher our gas-powered think the internal the opportunities than out,

expensive well engine. with are as as Toni what meant together, than the in as battery think powertrain the an more I battery pack pack, is

That's true.

of do and do is sort of you an - more And and $XX,XXX aligned costs plus that an $X,XXX And today? think given for $X,XXX you think kind it's you cell of combustion where those that being are electric for for see as internal or how magnitude? going? where is $XX,XXX, of powertrain maybe you sort do lives delta And of pack that getting the just car? think And when pack the it engine much big of vehicle order

less gasoline gasoline, in basically electricity, Europe very on of cheaper. is $XX cost than the how of drives. order of in pretty the in factors upon biggest - in of States, California where significantly. of going a to - it's far The is cost middle say, month of because expensive or depending China, United part except, is Well, especially almost on the to everywhere much and the that somebody electricity cost or It's sort ownership mind so $XXX to of the the bear quite a the bit

that but off important an very a for a top is of electric versus it's The in - gasoline top consider of said, head, on off of my towards the or Xk terms to the this It's calculated cost trending I number, of think Xk the just my So a that's order probably not head. acquisition, car initial car. Xk. probably thing of -

go they'll important important? you? the you you margin the scenarios chance to delivering trade-off? the lower range. have the units talked or volume of So XX% as and intermediate produced that if Is XXXX, margins or standard you And gross to a the XX%, at - Or you is to sort volume year year, the course you or most about What and about to where's do to is then but - have vice for XXX,XXX Okay. trade-off how plan during versa, to demand - have be more on profitability meaning you are get if make out range can make more or is XXX,XXX need cars deliver roll to margins you you willing think you trade-off? standard a the think that of you deliver, to editions the end and will gross ultimately are

if to [does - that higher large at My smaller guess margin. where smaller ends decide it sort cars or a about a a together] is you of given sort of flow, or smaller being margin free decide volume there's or you up of cars amount X.X with the a at cash volume achieve production of

or but We're the already less make think more I it's think I lower rate. to a more second. cars margin, going we're flat a at towards

question next comes Um from with Our Macquarie. Maynard

much lowering to to how and battery now and update just where on sustaining I'm just costs trying factor anticipate you of us where profitability. you be are Can gauge is year-end? this by they'll costs a

the That's but to tell right I'd costs a - like best best cannot highly you knowledge, anyone We proprietary but are we it give they're improving. now have else costs and We're no. to our of lower our than the world. out, do the number. in think We

might it that and of? with your impact Was made how were expectations Panasonic-Toyota you. aware this about JV talk you maybe the something And

will I spoke directly assured this of no the on this, with Tsuga-san Panasonic, Tesla. he and have Head about impact me

question from Research. Dan with Our Galves comes next Wolfe

the offer historically lease you S U.S. When we And and in for X Do can U.S.? about it? X U.S.? talk in Model percentage have been expect you a what of plan the to product leased can

the been leasing we've GAAP financials. on how reluctant on effect of to - its introduce Well, X of Model because

date with zero So it is noting is to that leasing. demand worth

our financials So obviously, it demand but way worse. has looks - it to leasing makes a is improve

we're - now. So of this lease sometime I'm it sure - we right we'll introduce not year don't to the mean, for S percentage is X and that probably. want later introduce What I away. right

because It's at XX%, quarters, that which don't low or] XXs, is artificially bump and like stable stayed it level natural it the up. [some demand around many we - do for many, seems invention

exactly. Yes,

are legit. write-off leasing. - a leases business. important is Tax expects for The usually small - Our for it the

So...

expect you quarter? One, I is And there then two much small is in first profit? is your restructuring quick Okay. a it? of questions. included the have charge How housekeeping a like, expectation just, it that in And

what it's, can is. let's this exactly point, $XX slightly. million, but vary number included difficult At is say, in to that. that that it It's around roughly Yes, say

last Okay. And is... just then the one

go Sorry, ahead.

rather meaningful working than the warehouse more of impact in distributed one be cash What's that? this would Yes, like in last to parts a is, is, the capital that drag? structure change things your the service make parts

about it's we - very just parts. we've silly actually No, been where store our

self-referentially. quite - they're costs just service our of center. going capital lot, direct parts centers, now, will actually either financials. It's in the persistent, Right notice persistent. actually ship a something directly change it's and kind here improve, sort or actually in suppliers actually, speaking actually about you quite So in sending our the to fact and to or smarter to factory It's our just be quite being think, service I even directly from boneheaded, no not working from would of

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to it's queer. it's better. yes, get very going And way So

question next from Our Ben comes Baird. with Kallo

it. I it's question got and Happy have four to one new parts year, Elon.

to talk first for to Number about in there next about can there on top we this what had a hear speech, the public, I about I worry about SpaceX So sort about focusing your that? year? about went Talk have earnings. what years six a about years us of feel to about Tesla. talk seven $X the you workforce whole Elon, that Can with us of talk third at at we you you - be how and storage, can. that order bottom cut same feel you talk but and thing, then add maybe global you two, ever one's with so if part And in you that you can the - wrong that you to some talk about, or we've guidance could economy. should order? everything that $X to consensus, No And can pretty got in we on JV? page is since - line - us are going and Street for like good numbers, that on stationary our

talk mean, consensus really, Ben, can't I and means. what we about that

the your is approach In our answering better the all of best company indication think that that's from here your projections. and certain you analysts fairness, that's are way guidance reflect can the here. providing maybe I question - in and other And the to think of need the we modeling. I the best

anything... there is J.B., Yes.

letter the growth that the the think pretty I predicted projections in clearly, stationary be storage the included business, mean, well. I battery in business storage and as should outlines the

mean, about we're it I say So excited I can't detail. more much but

I vehicle lumpy have some more production. it But strong completed except closer for X are last storage in were year. kind of be of our internal stationary year this is so not projections may we stationary mean, hours. and would gigawatt to done We for storage

vehicle storage. Otherwise, done as for of a storage I to time. had have lines, mean, probably we expect long automotive stationary grow, lines. a I as to in convert that battery bit quite a short battery to more So bunch would stationary - we fast twice lines,

continue basically production set to month. every records We

growing. that's So

we And storage up keep the gross and the of production improve profitability as margin scale. and ramping business continue the to

be to a going down business the road. It's gigantic

last the was economy. economy, And question about global

but significant - back for significant recession. recession. to all and that a slightly with And at even if I That's about, cars yes. Sure. order stronger to go remain we a relentless XX And economy what then I in when up. in not do fairly the will be cost Tesla have XX our it be - - mean, is think even is cycles risk the headcount when I'm there the moves about make and reduction affordable next yes, and least recession there's confident of to a over that profitable the months, there's

it. insane the we the reach would - fruition. unrelated reason be to it's the about different Starlink, absolutely has cost SpaceX those - has cars. - to company, way was incredibly make hardcore until programs have The have and for that - only two we a a spartan super projects Starship and think SpaceX to expenditures normally on so side, affordable reduction really to - to SpaceX bankrupt has SpaceX I It's be with

Okay, Great.

we closing for to remarks. time I that's today. for very Thank like some all have you and would much questions, Elon have think your

Yes.

make Deepak retiring. announcement, you but So let's - to the so to The going be is - Deepak see. like well, I'd is

Again.

Yes, from Tesla.

Yes.

right? Deepak, - I you with now Tesla about started it's XX years think ago, been first

close that, - yes. When to

person Tesla be to contribution not you Tesla. but your will years Tesla Zach Deepak Tesla to now few and to a take is tremendous And be adviser he's years... thought nine for that's retirement for has will to right and we retirement over hopefully. will to continue but announcing at XX And hard senior about more as from months Deepak, the and to come the Thank for been Yes, continue almost And serve immediate, Zach. long with years. who probably for a

years. Nine

Yes.

think technology you So and and management had undergrad was [ph] actually a Tesla at Business way. the couple School, Wharton and then Zach years necessary, spent worked which at I of at don't by Harvard then

me told I came back. when that You

Yes, exactly.

if huge words? incredibly over team the the to to and to a well-known [quantity] Zach's talented, know team. has a a like don't And contribution very I of years, has whole the few Tesla you'd So whole obviously and the made Zach, respect say

Yes, will. I

do Or to Okay. you want, Deepak, you? save

Deepak?

again and I and I've here to incredibly of here very and yes. passionate team learned just thank for you been and always by team who be you, inspired at are you, lot Thank okay. by very amazingly be second me much time. first I've could the opportunity Sure, Elon, the very been also the best imagine. from Well, all, you a inspired a for Tesla perseverant, brilliant, I've

experience over time. So It's years so on two I'll a solid a now There We flow, year. excited good to and you many He's chapter, and good great new role, tough new profitability, all foundation. of proven as Zach a has to make this I feel strongly on take Tesla no make a CFO. as And is that. a good Zach quarters have we about challenges are thank worked and he's him many time this this the successful felt was of sure taking change. cash himself everybody be company. really support had to for really with here and his that really

thank you, you, well, Deepak. Elon. Yes, Thank

So my is name Kirkhorn. Zach

brief a myself. background Just on

to the and years a financial about of I with lot that and call. company, X, of to program with of was the from vision on joined time, the attracted when company X, I XXXX talked foundation. feel small and a the S very us in Tesla super operations things starting Throughout major our been So more Energy come, Model to ago we're a Roadster of every just which I've the deep of I and scaling mission company. we've Model strong potential the the business it's ahead nine under

us around and company. products more you huge more a looking the the ensure your flows. and developing amazingly We new launching calls. to passionate the we're debt mission have our technologies, we key of able cash access enough at on efficiency, leadership, on the to - world, support you terrific focus is forward forecasted upcoming programs cash to which service with for cost On team My a and our management personal and the future enable and talented progress our much discussing enable to continue Deepak, thank momentum is earnings to note, and continue to operational achieving mentorship very alongside Tesla obligations which new will to

Great.

Great. Thank much. very you

you to months. We will speak in three

guys. Thanks,

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

wonderful and all have may disconnect, day. a You