In case you missed Tesla’s recent Q3 earnings and Q&A, In this post, I’ve hand-picked a few of the important questions and answers which might be a good read, especially if you’re a Tesla fan, own the stock or planning to invest in the company’s future.
You can find the complete list of questions and answers here.
I’ll branch out this article into two parts, the question’s asked (including the name) and Tesla’s answers (including the names). Not every question that was asked is being answered, it was only a selected few which was considered. Let’s get started.
Question 1
EMMET P. ASKS
You recently referred to Tesla as a conglomerate of start-ups. Other than manufacturing Electric Cars, what do you suppose will be the most valuable business units within Tesla over the next 5-7 years?
Could you envision any of them ever spinning out from Tesla?
TESLA ANSWERS:
(Elon Musk):
Well, yes, as I think about this today, I mean Tesla is probably — there’s in excess of a dozen start-ups effectively in Tesla. Every major product line is a start-up. Every big new plant is a start-up. And sometimes, frankly, we have to learn the lesson a few times before it sinks in.
But even things like service and sales are start-ups. Other car companies, OEMs, don’t own their sales and service. So we have to create our service network. We have to create our sales and delivery network.
We have to do this in, I don’t know, 40 countries, multiple languages.
Something that people don’t really even know much about is our internal applications team that writes the core technology that runs the company. We are not dependent on enterprise software. For those who understand what this means, this is a very big deal.
And my hat is off to the great work of the internal applications team.
They are like the nervous system, the operating system of the company, the Tesla operating system, extremely fundamental.
Obviously, insurance is substantial. So insurance could very well be, I don’t know, 30%, 40% of the value of the car business, frankly.
And as we’ve talked about before, with a much better feedback loop, instead of being statistical, it can be specific. And obviously, somebody does not have to choose our insurance. But I think a lot of people will. It’s going to cost less and be better, so why wouldn’t you? And the 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. Designing and making our own power electronics for the grave unit, designing, manufacturing our own motors. Chargers, the Supercharger network is a start-up.
The thing, I think, that people just don’t really understand about Tesla is that it’s a whole chain of start-ups. And they’re like, well, you didn’t do that before. Yes, but we’re doing it now. I mean I think, so far, we have not — we’ve maybe been a bit slow with some of the start-ups, but I don’t think we’ve had any of them fail.
So, so far, so good. No plans to spin anything out. That just sounds like added complexity.
Question 2
AMITH F. ASKS
What are the remaining constraints to be solved for Solar Roof installations to ramp significantly?
TESLA ANSWERS
[Carl Peterson — Director of Engineering]
Yes. I’m Carl Peterson. I’m on the Solar Roof engineering and installation. The biggest constraint right now in the Solar Roof ramp is getting enough installers on board and trained and experienced.
We’ve made a lot of progress on this in Q3, and we’re continuing to hire.
The next opportunity is improving the material flow on the job site. We’ve talked about this a lot in the factory as well that setting up the right packaging, kitting so that every installer on the roof has the parts they need at their fingertips.
Also, we’ve had a great response from third-party roofing contractors as they’re ramping up installations for Solar Roof on their customer homes, which is a big source of future growth.
[Martin Viecha — Senior Director of Investor Relations]
Thank you, Carl.
[Elon Musk — Chief Executive Officer]
Yes. I mean here’s the way to think about that product, in my opinion. You have to say, I think, what do you want the world to look like?
When you look around the neighbourhood in the future, a decade from now, what do you want? What products are going to make your life better?
What future do you want?
And I think a future where we’ve got beautiful roofs generating energy that is tough and 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 obvious next year.
Question 3
ROBERT M. ASKS
Is Tesla planning to start 4680 cell production at Giga Berlin at the same time as to vehicle production?
Can Tesla share more information on what products will use the battery cells from the pilot line in Fremont?
TESLA ANSWERS
[Elon Musk — Chief Executive Officer]
Yes. Drew, do you want to take that?
[Drew Baglino — Senior Vice President, Powertrain and Energy Engineering; Vice President, Technology]
Sure. Yes, we will incorporate 4680 design solutions into many applications in time across both energy and vehicle.
And we can use our pilot production facility in Fremont to support the new factory in Berlin as it ramps.
Question 4
If meeting your long-term volume targets requires price reductions that preclude you from achieving your LDD% stated margin targets for the auto business, will you still reduce prices accordingly?
TESLA ANSWERS:
[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 any given product is too expensive, and people don’t have enough money in their bank account, they simply can’t buy it no matter what the value proposition is.
So it is important to lower the prices in order to — such that people can literally just have enough money to buy it. I do not think we lack the desire for our product, but we do lack affordability.
And so we have to improve the affordability of our products so they are not out of reach of people. We want to bring them more to reach over time but also improve our cost of production.
Obviously, we get hopefully a little bit better every year, sometimes a lot better. And in terms of margins, all of these margins are going to look pretty comically small when you factor in autonomy.
(Zachary Kirkhorn — Chief Financial Officer)
Yes. Two things I’ll add to that.
Without a doubt, I mean, we’re moving forward to push as much volume as we reasonably can. So Elon talked to earlier kind of how the S-curve and the timeline of incremental factories look like. And so we’re moving full speed ahead with as much volume as we can reasonably move forward with.
The second comment I’d make is, if you just look at the journey of the company over the last 1.5 years, we have grown volumes and grown gross margins despite a number of price reductions over that period of time, and we have cut OpEx fairly stable during that period of time as well.
And so the key is what Elon mentioned here. I mean we have to improve the affordability of the vehicle. We have to also continue to make progress improving the cost structure of not only COGS but of OpEx, which we’ve demonstrated over the last 1.5 years,
I think, quite successfully, and improve the value of the vehicles at the same time. So in addition to reducing the cost of the car, we’re making the cars better. And that’s the formula to sell the volume. That’s what we’re focused on.
Question 5
Manufacturing is hard. Delays happen.
What contingencies do you have in place to ensure that bottlenecks you might encounter while ramping internal cell production will not preclude your ability to hit your Y production volume targets in Berlin and Texas?
TESLA ANSWERS
[Elon Musk — Chief Executive Officer]
Yes. So I think it’s — we’re trying to de-risk 2021 so that there’s almost no dependency on our internal cell production. It’s very, very small.
The internal cell production will help us ramp in ’22, but we’re 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 was one of the reasons why we located our pilot production facility here in Fremont, so we can rapidly iterate on manufacturing scale-up challenges, provide rapid feedback to the design of both the product and the equipment.
[Elon Musk — Chief Executive Officer] Yes.
And our pilot line is pretty big as pilot lines go.
It’s — it will be in the top 10 cell factories on Earth, I believe.
[Drew Baglino — Senior Vice President, Powertrain and Energy Engineering; Vice President, Technology] Yes. That’s true.
[Elon Musk — Chief Executive Officer] sub-scale one, yes, so…
Question 6
As a bridge to the ride-hailing network, could you leverage the insurance product to give customers the ability to rent out their vehicle via the app, thereby enabling the car to make money for them?
[So basically a proprietary version of Turo].
TESLA ANSWERS
[Elon Musk — Chief Executive Officer] I think we’re going to focus on enabling the robotaxi system.
So you can just basically — like that’s a sub — that’s just really quite a small subset of the overall robotaxi or robocar thing, where you can have the car be autonomous for you.
You can have the car be — share with friends and family. You can add or remove it from the network. You can have it be entirely in the network. I mean if you’re an Uber or Lyft driver, you could be managing a fleet of 10 cars. This sort of seems like a shepherd tending the flock type of thing.
It’s like you just get more, way more leverage. So I think that’s sort of — we could do that.
It wouldn’t be very difficult, but we’re going to just be focused on just having an autonomous network that has sort of elements of Uber, Lyft and Airbnb. Yes.
Question 7
RAJ B. ASKS
Would FSD ever be able to be transferred to our next vehicle or pay a transfer fee?
It would add to brand loyalty. The same way gaming companies and cell phone companies keep you in their ecosystem by letting you transfer purchases to upgraded hardware
TESLA ANSWERS
[Elon Musk — Chief Executive Officer]
Yes. I think we’ll give it some thought.
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