In case you missed Tesla’s recent Q3 earnings and Q&A, in this article I have selected some of the important Q&As that might be a good read, especially if you are a Tesla fan, own shares, or are considering investing in the company’s future.
You can find the full list of questions and answers here.
I will divide this article into two parts: the question asked (including the name) and Tesla’s answers (including the names). Not all questions asked were answered, only a few were taken into account. Let’s get started.
Question 1
You recently called Tesla a start-up conglomerate. Besides electric car manufacturing, what do you think will be the most profitable business units within Tesla over the next 5-7 years?
Could you imagine any of these coming out of Tesla?
RESPONSES FROM TESLA:
(Elon Musk):
Well, yes, thinking about it today, I mean Tesla probably is – there are actually over a dozen startups at Tesla. Every major product line is a start-up. Every big new factory is a start-up. And sometimes, frankly, we have to learn the lesson several times before we understand it.
But even things like service and sales are start-ups. Other car manufacturers, the OEMs, do not own their sales and service. So we need to create our service network. We need to build our sales and delivery network.
We have to do it in, I don’t know, 40 countries, in multiple languages.
Something people don’t really know is our internal applications team that writes the core technology that runs the business. We don’t depend on enterprise software. For those who understand what this means, this is a very big deal.
And I take my hat off to the excellent work of the internal applications team.
They’re like the nervous system, the operating system of the company, the operating system of Tesla, extremely fundamental.
Obviously, insurance is important. So insurance could very well represent, I don’t know, 30 to 40% of the value of the auto business, frankly.
And as we said before, with a much better feedback loop, instead of being statistical, it can be specific. And obviously, no one is obliged to choose our insurance. But I think a lot of people will. It will cost less and taste better, so why shouldn’t you? And this whole autonomy thing is a start-up.
The computer chip was…designing our computer chips was a start-up. Obviously, cells are a start-up. Design and manufacture our own power electronics for the funeral unit, design and manufacture our own motors. Chargers, the Supercharger network is a start-up.
What people don’t really understand about Tesla, I think, is that it’s an entire chain of start-ups. And they say, well, you haven’t done that before. Yes, but we are doing it now. I mean, I think so far we haven’t – maybe we’ve been a little slow with some start-ups, but I don’t think we’ve seen any of them fail.
So, so far, so good. There are no plans to run anything. It just seems like added complexity.
Question 2
AMITH F. REQUEST
What constraints remain to be resolved for solar roof installations to scale up significantly?
RESPONSES FROM TESLA
[Carl Peterson — Director of Engineering]
Yes. My name is Carl Peterson. I am on the engineering and installation of the solar roof. The biggest constraint at the moment in solar roof railing is recruiting enough trained and experienced installers.
We made a lot of progress in this area in the third quarter and we continue to hire.
The next opportunity is to improve the flow of materials on the job site. We talked a lot about this at the factory as well, about having the right packaging and kit in place so that every installer on the roof has the parts they need on hand.
Additionally, we have received excellent response from third-party roofers as they scale up solar roof installations on their customers’ homes, providing an important source of future growth.
[Martin Viecha — Senior Director of Investor Relations]
Thanks, Carl.
[Elon Musk — Chief Executive Officer]
Yes. I mean, here’s the way to think about this product, in my opinion. You have to say, I think, what do you want the world to look like?
When you look at the neighborhood in the future, ten years from now, what do you want? What products will improve your life?
What future do you want?
And I think a future where we have beautiful roofs that generate energy that are strong, resilient and better in every way than a regular roof and alive with energy, that’s the future we want. Solar Roof is a killer product.
This will become evident next year.
Question 3
ROBERT M. REQUEST
Is Tesla planning to start production of 4680 cells at Giga Berlin at the same time as vehicle production?
Can Tesla share more information about the products that will use the battery cells from the Fremont pilot line?
RESPONSES FROM TESLA
[Elon Musk — Chief Executive Officer]
Yes. Drew, do you want to take this?
[Drew Baglino — Senior Vice President, Powertrain and Energy Engineering; Vice President, Technology]
Of course. Yes, we will eventually integrate 4680 design solutions into many energy and vehicle applications.
And we can use our pilot production plant in Fremont to support the new Berlin plant as it starts up.
Question 4
If achieving your long-term volume goals requires price reductions that prevent you from achieving your stated LDD% margin goals for the automotive sector, do you still reduce prices accordingly?
RESPONSES FROM TESLA:
[Elon Musk — Chief Executive Officer]
Well, we want to make our cars more affordable, and it’s really important to separate our affordability from value for money.
If the car is too expensive or a given product is too expensive and people don’t have enough money in their bank account, they simply can’t buy it, regardless of the value proposition.
So it’s important to lower the price so people can literally have just enough money to buy it. I don’t think we lack desire for our product, but we lack affordability.
So we need to make our products more affordable so that they are not beyond the reach of people. We want to make them more accessible over time but also improve our production costs.
Obviously, we hope that we will get a little better every year, sometimes a lot better. And in terms of margins, all those margins are going to look pretty ridiculously small when you take autonomy into account.
(Zachary Kirkhorn — CFO)
Yes. I will add two things to this.
Without a doubt, I mean, we’re moving forward to increase as much volume as we reasonably can. So Elon explained earlier what the S-curve and the timeline of incremental factories look like. So we move forward at full speed with as much volume as we can reasonably move forward.
The second comment I would make is that if you just look at the company’s journey over the last 1.5 years, we have grown volumes and gross margins despite a number of price reductions over that period, and we have also reduced OpEx fairly steadily over that period.
And so the key is what Elon mentioned here. I mean we need to improve vehicle affordability. We must also continue to make progress in improving the cost structure of not only COGS but also OpEx, which we have demonstrated over the last 1.5 years,
I think, very successfully, and at the same time improve the value of the vehicles. So, in addition to reducing the cost of the car, we improve the cars. And that’s the formula for selling volume. This is what we focus on.
Question 5
Manufacturing is difficult. Delays happen.
What contingency measures have you put in place to ensure that any bottlenecks you may encounter when ramping up internal cell production will not hinder your ability to achieve your Y production volume goals in Berlin and Texas?
RESPONSES FROM TESLA
[Elon Musk — Chief Executive Officer]
Yes. So I think that’s the case: we’re trying to de-risk for 2021 so that there’s almost no reliance on our internal cellular production. It’s very, very small.
In-house cellular production will help us ramp up in 2022, but we are not dependent on it for 21.
[Drew Baglino — Senior Vice President, Powertrain and Energy Engineering; Vice President, Technology]
And to de-risk the manufacturing system itself, that’s one of the reasons we located our pilot production facility here in Fremont, so we can quickly address manufacturing scaling challenges and provide rapid feedback on product and equipment design.
[Elon Musk — Chief Executive Officer] Yes.
And our pilot line is quite large in terms of pilot lines.
It will be one of the 10 largest cell factories on Earth, I believe.
[Drew Baglino — Senior Vice President, Powertrain and Energy Engineering; Vice President, Technology] Yes. It’s true.
[Elon Musk — Chief Executive Officer] subscale, yes, then…
Question 6
As a bridge to the rideshare network, could you leverage the insurance product to give customers the option to rent their vehicle through the app, allowing the car to earn them money?
[So basically a proprietary version of Turo].
RESPONSES FROM TESLA
[Elon Musk — Chief Executive Officer] I think we will focus on activating the robotaxi system.
So basically, you can just – like it’s a sub – it’s just a very small subset of the overall robotaxi or robocar thing, where you can have the self-driving car for yourself.
You can leave the car — share it with friends and family. You can add or remove it from the network. You can have it entirely in the network. I mean, if you’re an Uber or Lyft driver, you could manage a fleet of 10 cars. It is somewhat like a shepherd tending the flock.
It’s like you get more, much more leverage. So I think it’s kind of – we could do it.
It wouldn’t be very difficult, but we’ll just focus on a standalone network with elements of Uber, Lyft, and Airbnb. Yes.
Question 7
RAJ B. REQUEST
Could FSD ever transfer to our next vehicle or pay a transfer fee?
This would add to brand loyalty. Similar to how gaming companies and cell phone companies keep you in their ecosystem by allowing you to transfer your purchases to upgraded hardware.
RESPONSES FROM TESLA
[Elon Musk — Chief Executive Officer]
Yes. I think we’ll think about it.
