Tesla (TSLA) 25 Jan 232022 Q4 Earnings call transcript

Good afternoon everyone and welcome to Tesla's Fourth Quarter 2022 Q&A Webcast. My name is Martin Viecha, VP of Investor Relations and I'm joined today by Elon Musk, Zachary Kirkhorn and a number of other executives.

Our Q4 results were announced at about 3:00 P.M. Central Time in the update deck we published at the same link as this webcast.

During this call, we will discuss our business outlook and make forward-looking statements. on and based today. as are comments our expectations predictions of These

our with events materially uncertainties, risks in differ results including recent to mentioned Actual could of due or SEC. the a number those most filings and

call, queue. During to limit Please the one of to button follow-up. yourself raise one please hand the and join portion Q&A use session today’s question the question

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

Martin. you, Thank

It going just an fantastic through the our It on recap. ever a Tesla. an amazing honor, did -- XXXX year of work was every for talented incredibly course, people. XXXX an group was It's Team year best to So level. such of with job.

highest we million I a So, carmaker, and carmaker. in think maybe X.X over among delivered XXXX, any among any volume margin, cars the achieved XX% operating

While $XX.X doing income billion in in cash and $X.X net so, flow. generated free billion we

despite an forced Importantly, while records the that -- delivery many high due to fact team year challenges. was achieved Tesla shutdowns, rates, and challenging the XXXX interest very these incredibly

worth noting that difficulties. in massive of team it's to records these the face achieving Credit the for were that. all So,

production. seeing that far at -- strongest from The demand. to far about been orders the to than ever so year-to-date of concern orders We in Thus put are most almost I history. getting investors rest. January, currently Thus we've want the common we've question is seen rate our in twice

a it's in not raised high. of to actually that little say And -- rate are price production, continue response Model I So, orders the Y bit the that. that the mean, to whether will but twice we've

despite think contraction demand we market the a So, probably as in a -- will be automotive we good whole. don’t

matters. really price basically, So,

it. a vast want of but I afford can't to buy think that a Tesla car, there's people just number

really a these difference so changes price average the consumer. And for make

And glad it's how who cars things for able think is. are do always a many they money, goal at And -- as forget I'm so. are of considered. about for that who we're sometimes affordable all our possible, well so good I make important to And Tesla to thing, sort so have that to it's a -- people people those affordability as yes, of lot been

is good latest so cost roughly growth control and to and America. yeah. We're we deployed huge Austin respect very production whole of milestone the to commensurate self-driving consumer production, is the only also in actually test progress With can cost making the the North Beta as now, any This for seeing Beta XXX,XXX on drop expect, you'd in we're Autopilot, with for a streets in city as way FSD as customers autonomy. autonomy AI-powered Berlin

FSD very we're safety it's stuttering improvement of at -- about of shows highways. And XXX system currently outside data in published clear. that miles our statistics, safety here, And million

So we excellent. have not the Beta not safety FSD were would released statistics if the

batteries, XXX year, rate cells week Nevada announced yesterday. reached production gigawatt-hours X,XXX we're last XXXX end as at and the cars increasing by for Regarding of at cells capacity another of Giga XXXX a

to to get X,XXX cells and gigawatt-hours self internally produced excess use well to goal Our continue in providers. is long-term cell of the of

clear, providers. cell to other So to will be we use continue

time. ion for batteries quasi-infinite Just be and is quite for lithium demand will that the some

cells. feel a internally both we using So and faster produced we can scale suppliers lot

low-cost and an high got energy making density. plan the amazing we've And for cell XXXX

the sun the wind the item because the and storage time store all wind to stationary solar solar obviously electric and growth the That's blow vehicles, also the all saw doesn't and accelerate. record key with that the a is doesn't sustainable energy worth is wind, time. third to future from storage continuing that and are remembering energy pillars energy and shine of So three obviously, always

to it have you over, things, So those convert sustainable of three situation can actually. many times a all fully you

I humanity, path a is on our future we path like a to humanly as goal that -- So fully as for to much sustainable progress there to clear and that accelerate possible. just it at would make Tesla is

we it rate to expect up So ramping at Megapack bit production. output. were a than And so quite legal yeah, we a our faster grow

believe conclusion, taking for we we industry's the keep operating cars are in margins. that we to a keep can. pushing and many while as growth retaining selling volume strong So view making want as can best We we

the best record-breaking Day. once at we our But employees for most year. about want plans our I another manufacturing all before, thank really, Xst delivering Congratulations, upcoming As again will long-term talk we mentioned to lastly, important guys. strength. Investor the And be more technology manufacturer. many of to March we'll times be And want our

I has opening Elon. well. some think And remarks Thanks, Zach as

Martin. Thanks, Yes.

So volatile year as year. thank also and say mentioned, the a during was Elon a our Tesla. to for also for suppliers want XXXX support your terrific team Tesla quite I congratulate to you

Operating increased doubled, XX% remained increased cash XX%. full a revenue margins income basis, over free our year On flows industry-leading. and over

percentage as continued further. to we of non-GAAP efficiencies overhead on Additionally, make improved a revenue as progress OpEx

For price XXXX, are rising alone the managing ASP cars US Note had margin COVID as and US, the specifically, in that reductions, rates rate of sequential and through the in tax the in rising we impacts increased in interest by QX nearly our around interest annual a was by credit XX%. consumer China, effectively impacted uncertainty environment.

by factors. unit COGS a basis, primarily three increased has Additionally, per on driven year-over-year

previous materials lithium in and First prices is length inflation by and at raw discussed calls. led

factories. Second, through we the cell of ramp of are our Berlin and early working Austin production in-house inefficiencies and

more last year a Third, cost X. Y, carries Model our to heavily towards vehicle the has premium slight Model which moved mix over

impacts, work made we've in a progress reductions, in include of with on continued years. balanced execute our controllable cost line these the to regionally improvements we've to offsetting towards Tesla move Partially These prior gradually vehicles. build continued

strongest in had led metrics, both all Energy retail steady across year business storage. commercial The yet by and its improvement

costs, believe improve business grow much we and are trajectory. good this a we While work on to remains

cost. aggressively and key strength I are As to three points we moving There our here. leveraging XXXX, make wanted are forward look towards we

First, mentioned, products our as customer Elon on interest remains demand, in high.

while our is to on the strength reduction, to margins. improving Second, we're retain method volume, which operating increase plans rapidly steady in effective most our efficiency, on holding overhead cost

we're highest. cells, and particular, accumulation efficiencies in improvements factories expedites, we premiums, cost part Austin, increases example. productivity are attacking in-house for and unwinding But material cost years the our includes an are new other where of This as and in buffers, accelerating overheads multiple instability. Berlin In of every logistics, created of COVID-related area

our view strong cost towards margin from journey we've impact this operating on there structure. suppliers will our a with As transitions an the be partnership inflationary as deflationary products Thus, world a the with near longer-term term. environment, In on that, a priced we expect to in an well.

margins healthy year. course and our believe However, remain industry-leading the we of over will the

development we bringing continuing in-house market, Third, Cybertruck forward expanding business. plans to growth includes Thank vehicle month. of cell the is these our to to in you. Day on and platform, ensure a Investor prioritized are discussing detail in of our funding production, footprint looking our expansion We're This next-generation map. for road of energy our long-term manufacturing more

much, Zach. Thank you very

questions. Let's now to go investor

This trends they demand compare so I at the Tesla a rates? question in quarter. production is, and Can of this current raised how came analysts you fourth think… half rate net far year than that claiming are orders, to in first has on The concerns. order production cancellations, some of less elaborate

We already answered question. that

exactly. Yes,

Demand production, a small are far exceeds actually and as some price result. making we increases

Thank you.

of in The similar early terms reductions price second XQ question a one been specifically in initial in is reaction XXXX, We've has that levels? the order What vein. answered to well. global as intake

expect next one. Model to year production X per the kilowatt-hour from will manufacturing much a packs? autos $XX and next take earn to advantage in does let's these be coming Tesla The So to energy credits is, question Model of Y, long-range So how credits? and and the for go cells investor products battery full advanced $X,XXX for it's able Tesla

I'll bit will to expect Long add -- we say the I value very a Zach term, it, significant. these about some. of be these credits little then think

X,XXX a math to of gigawatt-hours, very can do or were anyone hundred a year production even your it's gigawatt-hours significant. we the few You get if

upon the manufacturing, Panasonic case So domestic credits. -- manufacturing. of the And splitting the domestic credits do of rely but we're value in the

-- not gigantic, be but very think credits the in significant it of could we will the it -- gigantic this think future. value will be be year I So probably it

just to Tesla what to Yes, some and boundaries this for we're on input of terms add expecting impact year. in

year year and over at $XXX the as of So think, amounts our per million updates quarter moment. will different order are regulations the is continues credit. the to on different influx there But still be to so The this grow. the course growing we just understanding our products, think of volumes million best and we this here $XXX of get

this move more is And what we're trying onshore to package incentive doing anyways. Tesla's is is, part incentivize part here, of to work plans mentioned, States, the as United which Elon of which the is in manufacturing

pretty so think advantage And the years to coming this. positioned over of I well take we're

this our But is, is adoption what improve of the then customers. goal incentive package of also part from to

these improve our points forward. about also are price what products we so And in the going as incentives want to to use affordability think we

to thinking some only extent which receive credit sure we are to would weeks of credit, to we're also that benefit make US, benefit that And from the looking the that subject but -- the $X,XXX ago Tesla our on is in MSRP to assuming the so car caps. caps at to were about customers announced, changes couple and currently what income side, received a pricing as able we per not of were tax be the consumer-facing that this the

and this want is we which the mission energy, sustainable goal accelerate bill. use of also So this to to our

is, The $XX,XXX after after will automotive that and do all from the price next very around price margins leasing price selling price average you gross analyst question see you selling expectations drop margin, Thank and Where Tesla excluding below released XX% investors average and gross credits, cuts, models. cuts? much. across recent

Yes, Zach. go ahead,

jump I'll in on Yeah, this.

how of So there I'll the a what's about will but in for lot share year our a forecast moment. unfold, certainly is uncertainty current

here, metrics we'll and upon are models. that of all gross $XX,XXX stated so ASP automotive then believe leases that rent credits and the we XX% based So be both margin, in above across question, these the metrics excluding

comments other this. to two make so And want on I

ASP the reduction a the large not QX. tactically sequential QX in is as just changes as Just on reduction configurator as ASP prices. to from reminder, And

had place customers price delivering a so XXXX. been that But QX, backlogs we cars that used are to programs As so various of much that for book, in had long there in given that QX ASPs. we're lowered at in lower also, we backlog then

that make The management as margin what our on focused wanted most is. a comment we're to second here here, I operating is team

than faster the we're And so business as to the our particularly focused important, here, become other efficiency leverage and right areas metric of energy as vehicle operating business is growing on for improving operating more think which margin. the focused on us business, we the heavily of be overheads, is

make to because wanted I to investor sure that now. so that primarily that I well, And we're is what as with shared managing community the

Yes.

of but from of retail smart that Something is enabled the investors self-driving getting every rapidly. just don't some car, maybe that have and obviously full very has these I we understand, to better is a a self-driving others sell think ability, lot uploading time software full think I it the --

tremendous X. -- only percentage have all of that's a potential small those So few because exceptions don't actually a with Hardware cars, cars a of mean, I upside

XXX% can of in self-driving biggest asset essentially fully the history. So as when That increase the the of full means And the is value were there's that capability then be grows. value sold grows margin. autonomous value a in fleet. autonomous, be might at that of anything becomes it millions Yeah. that it gross increase cars And

you. Thank

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let me check Well, my Twitter account.

people, but very I'm to It acquisition. popular my people, Okay, reasonably interactive the I'm not Twitter so think, with most that million grow count of account, It continues for That media the popular. the in social followers. might suggests for vast rapidly. certainly on XXX I some majority way Twitter, the maybe that's got I've the world, and follow actually speaks itself. be account, predated

has drive make with incredibly really for or out Twitter more Tesla. would I is kinds, actually it driving to as for powerful and their and accounts are So an will use Tesla. there demand of tool them all Twitter just Twitter And encourage to of automotive informative, help companies I sales in that entertaining, ways it use and otherwise, interesting think

So the net value few a are people gigantic, apart from of Twitter, is complaining, obviously.

you. Thank

to the are current of detailed roadblocks? the next provide ramp. Please do vehicles What scale And Let's you explanation a question. XXXX you where when a week? on a -- expect XX,XXX to are go the to year

Martin. Thanks, Yeah.

First, It work. was thanks to I just a say congrats XXXX no QX. feat. week to team the more in years Definitely achieving result couple of X,XXX than hard want a for and of Tesla a of small

where goals, with things, are in those in factory lines key in team XXXX. we stages quality production, yields to XXXXs of cost-effective a a year as stand high-volume ahead and of be up in of process a XXXX areas remaining Really, as up set our well as achieved four of are far Focus improving the had we as As and -- dialing for three Texas, Between in and ramp parts those of deliver XXXX we'll mechanical the major of commissioning install. goal driving much is possible. well to one the if two XXXX supply Cybertruck.

you. Thank

Do Next expect cars path investor first question current that still is Elon Is Hardware in X? plan? upgrade there the you X that an come likely Hardware to to Hardware FSD Cybertruck. will be X for said most previously

to Yes, it line next X. will be contributor significant for but Cybertruck will year. into be And have a be Cybertruck the to XXXX, will bottom not Hardware clear,

it's a wearing personally. an drive one to those matched only car it's drive just this in special. it's the I once So will products the and along product. really can't day. glass. T-shirt of I while, And comes wait just be I actually incredible with that it I'm every that It

exceed needed. not be so I'm X Hardware human. that average good upgrading yeah, the So far cars will safety X with don't Hardware X, on the respect -- be Hardware I that average X, to as so Hardware will will as confident think the of but

X X is we're XXX% be than for might argument's what sake like or X say, So Hardware aiming quite let's beyond be But retrofitting the will safety on XXX%. is do improving and it It say, safer Hardware we of or is the Hardware get XXX% are with really if difficulty that. Hardware X how for we road. ultimately the Hardware cost is to, be, matters significant. average But can XXX% what human, X

think, economically not to feasible so. would it I do So be,

will question other Insurance you in revenue next companies? is details Zach, warrant financials Thank the Zach. providing when compare enough to investors you. The business do of insurance the more Tesla for source think can become big so to it

Yes.

before I But think time specific in it's this probably to take where disclosures. enough business is going on an update financial we to the large provide stand happy for business. some I'm

more states in Tesla faster business. the quarter, of for setting folks And new in we continues up see of occurring back when delivery and when to the as the end which million growth are the run growing on annual in currently states growing And using we're insurance going $XXX our of at adoption average, product. opposed so it's spend up. of markets. the premium as year. number we're in set last up switching as XX% to a So, tick we the a of XX% a insurance rate most customers than they time first operating, have We're vehicle the as in already And car, that they're a Insurance time take

an in inherent there's stickiness the business. Insurance So

go No, ahead.

our the say, given kind to broader of ownership reminder total we're a we starting business, business, motivation companies. healthy of want is sure customers. we obviously to We'll make going was third-party just our and No, of our low and run a premiums high to remains cars, I still it that to as this to improve And insurance priority costs stays but this cost was here. insurance the seeing just keep for of that on from affordable as our improve

Yes.

offer rates Zach is operating one are worth a that side which cars our insurance at the so mentioning, two for are car that, Tesla to, just other for Tesla there of insurance And to companies important which that better our by really competitive Teslas. rate, Insurance benefit makes alluded

it insurance charge don't bigger So when because world you because insurance have has now even to use costs the compete of total Tesla with they the effect Teslas. to cost think outrageous Insurance, guy [ph] for and goes than improves it Tesla up a cannot

So it's great.

So it important. effect, has an amplified very

didn't it Then, minimize of to we obviously is loop feedback of cost into a all the cost. the cases, worldwide, in Tesla if Teslas would cost cost Teslas, insight And unreasonably the of the high. at repairing also good minimizing giving for some companies And insurance a good collision because because us were into Tesla the want it's have and repair cover in Insurance. that, we previously, other for actually, actually

the So which we've of the not design obviously repair, cost the advanced car is actually the the world, safety, car avoid changes you best self-driving repair adjusted active get in to first, collision active accident prevention. repair, safety the full full you of and every entirely, of made the the minimize most still software whether Tesla or no -- of buy the active intelligence in comes since with self-driving, or minimize the

repaired their those actually the solving like then side apply of we're how quickly to of said, and And or car most get efficiently like, old to reducing I just cars something how really cost figuring giving -- to of it's if small. fender before, get They're and or like scratched us also out broken this -- total accidents feedback So very and good cars. actually in a ownership are in somebody's vast hands. again, cost an improvements actually majority the car accidents. But accident, somebody's back

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waiting takes car. you're love So, got to drive. a month, part for to you've expensive. that you you part having of rent month another actually the the to one and that a if It's get a now you're missing car And course, and repaired of extremely want

cost So, happiness. has significant on a ownership very this customer total and effect actually of

question Thank from next on track The production mid-year? is, you. Cybertruck is still investors for

this start, production, I sometime to do start first. slow. at summer. is I downplay production start production We the very of always it's because increases always at but credit don't slow the of know, exponentially, It maybe expect like very But, always

I that's So and does stock much too production in wouldn't put It's when next of volume start kind year. production. happen, actually of

Thank but in production We great castings, Giga body we've come next in all general here still of month, on XXXX. GA, just really to said will ramp Like you. the shops. some as built the Elon. beta you that, assembly, coming equipment our That's emphasize installation started Texas, more vehicles,

Yes, exactly.

And Thank you. last demand question global near-infinite investor the for is, energy with storage.

Yes.

next will factories? needed are each How on Tesla build the many Megapack Where continent?

something a announcements in an that And really provide question. fastest we'll and see of X,XXX-gigawatt-hours future, the update is next, thinking good carefully. later I we're year about kind of answer about question. what It's that to year this out production. a is we It's you'll come very that think like path -- I not the but something it

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of Nevada we think the interesting, number, size is want Giga a look don't it's make XXX allocated is to specific but about size gigawatt-hours, the of fraction at that I you to say small XX. that currently the if of the makes –

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along and said probably going we'll year, the difficult way recession there's call, this but not, probably. probably. bumps to in pretty have hope a I be I As the last

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Thank you. Zach, think, And I headwind a on was there cost question QX. in

I other weighted to the for you cost Austin headwinds. average were to at factories, mean, our and of was on structure Yeah. our company, it of COGS were if the assume Berlin the X,XXX X,XXX order of

So I think of of into back factories as from margin impact can of end QX. there, you those

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Yes.

point peaked like I'd data And to went middle at I actually, then close $XX,XXX this on the of to to you last are up we input bottom gave the and and think up close Texas. maybe cost. as in you you car, If face the to and close $XX,XXX look the guys Zach, the back follow in per quarter, some Berlin to of just I ramp XXXX. we COGS point year. And Excellent. on had costs inflation with $XX,XXX number at

this per too or Is all like my something that we $XX,XXX, car? Texas and that input costs mean like the time you to which to a think of you and that be normalizing, see hope optimistic? to in get do here is is so how can takes kind that this stuff much a of is from And that year XX% is, COGS would -- and back question like kind it would decline Berlin

and within Austin that course Berlin We're And cost a of of on The ramp substantial efficiencies progress attacking of expedite XXXX make talked outside chain and doing costs, over we Tesla's the the everything. will supply that. reduction lot on year, logistics, work amount and in that's about a of control.

inflation in source than but where large general, the On we've is cost of our what this lithium and XXXX. cost fully meaningful was go. from there see us, we're to lithium is where be driver think have will prices, side, lithium here, seen in exposed of lithium for to increase the a And we'll per prices and not materials higher car forecast XXXX raw I

have that to levels. those to a that's overcome headwind would be So return to back

think And anything continue So Andrew, don't on have year I that don't find that? make material there I to to costs there we'll but these we'll control raw over. think get offset this we'll is progress. ways we

begin market spikes disruptions global the year-over-year, to in down XX% ago, labor be increases geopolitical to non-cells due typhoon like the due about Like disasters And material, cost is by benefits is does materials natural XX% due reflected production it to we before down year-over-year, steel various but raw energy raw financials. in cost time Korea tapering Yes. continues out, capture high is length our influenced of to while indexes situations Europe, to and this and on the take chains, alumina non-cells in months like four of lockdowns. supply pandemic

believe work cars. transportation logistics remains to produce In it partners and exactly when. it efficient that more redesign supply efficiencies, come chain with meaningful supplier ultimately the price streamline meantime, more to So we continue will but to uncertain corrections and our find to make we

And I… you. Thank Excellent.

Sorry, something? say do want to go you

know fleet to going X, Y I some say, we're starting fleet. And -- we're data didn't sort out to margin was a we gathering our is we of can fleet also out the how product. of lot that mature, to had we the of understand of bring that

powertrain up we reduction or on actually XXXX that add we paying have course we after cost actually than sort of performance we're all. where course XXXX. a go pretty need, of more need, materials the the to powertrain without to more over So side, And over of the for some than going impacting the content will we're on reliability at significant side

just relying doing of sort design We're cost out. not bring we're actions supply. to on also So

one is, would costs. I serious there almost guess be, but if all isn't, and think My -- will I if a meaningful our recession hope that it is in input it probably Yes. of is to the lead decreases

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So, my this is that -- guess. be would

so much. you, Thank

Elon, the has in and like at So when to as situation been, amazing thinking ago, look a you rollout. progress I quick quality was like, the a its FSD, like today like -- it's compared the about also but follow-up, product, the year of

much this was today? I take so, of the And FSD impacting is wondering, like how rate

on see to rate? of they people or So the to because that service the see see do getting really them and the like, already early already, take uptick more that cars in it is see FSD, value they too are by excited an you around expect XXX,XXX like

would like, software company strong of And kind of very towards This as -- so, quite the the hardware is -- a software increases. hardware enthusiasm improvement, as to, out and but still -- really of people is that there something AI And much you use that lot world's is a with say, side company, a obviously I don't of big a think as Tesla is Tesla alluded the is deal Tesla appreciate I trend incremental The AI the with FSD. each the as one on leading companies. side. on

coming the the be the year. point, With Hardware at at being, years significant X in most operationally beyond to where efficient we are design computer the and five Hardware with X And inference old inference this from Tesla computer, that, computer, later that despite Hardware point. X leaps. And still there this the expect using then Dojo world

and useful There's talent the also because a the able on we high we're world-class be a to manufacturing long-term and or expertise our power make the potential robot motors where advanced the that, and Optimus we're to electric in where of of actually use Optimus company. take lot batteries humanoid electronics, with a and and on join is able -- seeing made capabilities, -- to just AI a So can car at legs. robot four volume exceptional because robot the wheels -- that like is of be robot is AI

in about. -- as and us others closer this solving this, anyone close most But get few value appreciate the we do, even see -- and we don't achieving real-world I a think, and know AI, to what I'm to but talking don't closer the you

has that thing -- this but And cap order the Tesla. potential of it's so market improvement magnitude -- is for

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Yes.

Yes

Okay, great.

I a some so long deferred quarter wondering in Obviously, into presumably you're rather going in as incremental the that translate deferred? on one was will be percentage the than unlocked for FSD. $XX,XXX Zach. higher the as on that sale of So But for This, you able disclose upfront margins price to quick FSD. forward if revenue revenue to people you're going guess, to recognize opt able not every

included revenue the with in that's shareholder a and released the that. remaining two which release, we've there's then we offers of this There's full released full to self-driving Yes. value is that of And website. I balance time the over addition the the released Then we've Autopilot, also mean, additional a the that for deferred amount of our way is in that incremental, of future on minority in of there's updates time of self-driving total that. package over fully software software as And package We revenue a the there deferred are unreleased structured enhanced price will letter, portion has which updates. listed features will recognize be the of the components. be dollar an there. dollar disclosing is

great. additional obviously, you And and Nevada, a here on those That's XXXXs batteries putting of of presumably, won't lot the capacity question you're then planning. be Tesla the Semi. X incremental all in in Okay, maybe that

incremental I questions about guess, So two capacity. that

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do you. have And you William, a Thank follow-up?

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Jonas. final Let's question from the Adam have

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under to and Thanks how actually I could follow-up, Austin, we you for I Again, an to $XX,XXX where sell Elon. to with that just a or close EV don't generate in step manufacturing? and in steal a And Xst profit, thunder Elon. want but kind moment don't assembly in from the steal cost of $XX,XXX wanted Thanks helpful. real are you that improvement March want BoM to of be wrap-up there thunder moving kind that but line would thoughts just if change

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very again for months' good time. everyone, you in we you And Thank all see Fantastic. three will much, your questions.

you. Thank

Thank Bye-bye. you.