Elon Musk Apologizes for Bad Manners on Previous Call.
Each quarter, Tesla CEO Elon Musk and his executive team hold a webcast call with investors and journalists. Last quarter’s installment generated plenty of headlines and controversy when Musk made polarizing remarks such as, “Boring bonehead questions are not cool,” and “We have no interest in satisfying the desires of day traders. I couldn't care less. Please sell our stock and don't buy it."
During this quarter’s call, August 1, Musk offered humble repentance to those he wronged on the previous call.
“First of all, I'd like to apologize for being impolite on the prior call. Honestly, I think there's really no excuse for bad manners and I was violating my own rule in that regard. There are reasons for it in that I'd gotten no sleep and been working sort of 110-hour, 120-hour weeks. But, nonetheless, there's still no excuse.”
After expressing his contrition, Musk jumped right back into sharing valuable information on Tesla’s progress.
In the last week of June, the Tesla team was able to produce 5,000 of the new Model 3s per week, and a total of 7,000 of the Model 3, Model S and Model X vehicles combined. Musk congratulates his team by saying, “That's an amazing jump from only a year ago. We were producing 2,000 vehicles a week.”
Tesla continued to achieve those same numbers in the following weeks of July, and expects them to be fully sustainable barring a major world economic event occurring.
Musk attributes Tesla’s ability to ramp up production to the limitation of the use of automation on the assembly line to where it’s most productive. This is in contrast to their original attempt to implement wide-scale automation. Of problems they faced on the assembly line Musk said, “There (was) a lot of hurry up and wait, where some parts of the production line move well. Then, one part doesn't and you have associates waiting around with nothing to do.”
Tesla is aiming at one million vehicles produced by 2020 and Musk predicts a minimum of 750,000.
Model 3s aren’t yet available to test drive in most North American stores. Tesla plans to make both versions of the Model 3s — “performance” and “rear-wheel drive” — available for test driving in all North American stores in the near future.
Tesla reports over 60,000 test drive requests for the Model 3 in the U.S. alone since early July. Tesla expects this number to increase as publicity and word of mouth for the new model does.
Sales and Finances
On this webcast, Musk and the rest of the Tesla team announced they expect to become sustainably profitable from quarter three forward. He attributes this anticipated increase in profitability to improved production times: “As we address those slow parts and as we improve efficiency, then gross margin and so the profitability per car just improves dramatically.”
Musk also said Tesla will be trying to get improve production to 10,000 cars per week as quickly as possible.
Tesla also has good news to share with their investors. The Model 3 market share has surpassed all competitor premium midsized sedans combined. This means Model 3’s market share is now a majority of all premium midsized sedan sales. Musk boldly predicts this trend will continue.
Furthermore, Tesla reports the top five non-Tesla traded-ins for a Model 3 January through July 2018 were the Toyota Prius, BMW 3 Series, Honda Accord, Honda Civic and Nissan Leaf.
It is interesting that these customers are trading up and choosing to spend more money on a Tesla than their current car.
Musk, the self-described engineer, took some time to politely reassure dollar-minded investors: “Are we running low on money? … The answer is no.”
Not one to take his eye off the future, Musk was excited to share the progress made by his engineering team: “I think we're making pretty radical advances in the core software technology and the division beyond that.”
He also announced, “And then very importantly the Tesla self-driving chip technology that we've been working on for three years is finally coming to fruition.”
Musk proudly shares the software update his team created and will soon be available to all Tesla owners. Tesla owners will have a plug-in replacement available to them for the existing computer which “costs the same as our current hardware and … we made it easy to switch out the computer … take out one computer and plug in the next. That's it. All the connectors are compatible and you get an order of magnitude more processing.”
Musk also relates improvement made on auto pilot, noting the team’s focus has been on existing safety features, “There’s an advanced dev role that can do things like recognize traffic lights and stop signs and make hard right turns … but, it's not at the safety level that's considered okay for release.”
Musk believes the technology to be extremely powerful for the growth of the company once customers grow comfortable and see the utility in it: “I think we will really start to see some of the breakthrough stuff in about a month or so.”
No matter what Musk creates, there always seems to be more on the horizon.
He gives the world hints of what to expect from Tesla in the medium and long term future, including the infamous Tesla pickup truck that will be able to carry a normal-sized puck up truck: “My personal favorite for the next product is pickup truck, and we are going to just do an amazing pickup truck.”
Musk clues listeners in to the long term designs of the company, “we're going to do the Model Y and compact SUV … the Semi, the next generation bus.” He adds, “We got lots of awesome ideas, and probably the biggest limiter on our growth is how fast can we grow battery production.”
As a discreet brag about Tesla’s growth, Musk explains Tesla will have to train new electricians, “because otherwise there's not enough electrician capacity in the United States and most places in the world to install Powerwalls.”
“Obviously can't grow faster than the number of electricians who can physically install a Powerwall. That's one of the limitations.”
Elon Musk is confident in Tesla’s future: “Long-term we would expect the energy business to catch up to the auto business in size.”
To learn more about the ins and outs of the auto industry and its future, be sure to check out CrossCheck’s Blog.