On February 22, Tesla announced its financials for the fourth quarter of 2016 and for the entire year. Suffice to say, those betting Tesla will implode shortly were disappointed. Tesla is doing fine, the SolarCity merger is not dragging it down, and the company expects 2017 to mark the time when the company really takes off and soars to ever greater heights.
If you enjoy discussions about GAAP and non-GAAP earnings, CAPEX, and all the other acronyms accounting types like to amuse themselves with, you can read all the relevant financial details in the Earnings Letter Tesla released just before the earnings call began. We’re not here to talk about such things. What we are here to talk about are the unexpected tidbits that always pop up when they hand a microphone to Elon Musk and his merry band of enablers. Let’s start with the news about the Model 3.
No Model 3 Reveal Part Deux?
Shortly after the Model 3 reveal in Los Angeles last year, Elon Musk took to Twitter to announce that Part 2 of the reveal would be even more spectacular.
Tomorrow is Part 1 of the Model 3 unveil. Part 2, which takes things to another level, will be closer to production.
— Elon Musk (@elonmusk) March 30, 2016
Lots of people have been curious about when that might actually happen. Interest has focused on the interior of the car, which is positively spartan compared to most other vehicles. Where is the instrument cluster and the controls? Is that uninterrupted expanse of dashboard just a place holder for what we will find inside the actual cars?
Yesterday, Elon suggested there won’t actually be a Reveal Part 2. “I’m not sure if it’s going to make sense for us to show the final version before start of production or after. So, I think in terms of showing the final version, it’s probably at least a few months away, maybe as far as July itself. It’s going to be pretty close to what I showed at the Model 3 unveiling, but with more polish and refinement and a few more details that are added. So it’ll be better than what was unveiled and I guess in some ways it will be a lot better.”
Gigafactory 2, 3, 4 & 5
Construction of the Gigafactory in Nevada is now well under way and production has begun. It is now churning out battery cells for Telsa’s Powerwall and Powerpack energy storage products and will begin producing cells for the Model 3 battery in March. Both cells have the same 2170 format but use somewhat different battery chemistry so they are optimized for each application. That factory is actually known as Gigafactory 1.
Gigafactory 2 is the factory near Buffalo, NY where Tesla and Panasonic will build solar panels and the solar cells that will be used in Tesla’s new Solar Roof. That innovative take on residential solar — the roof itself is the system — is expected to be available late this year.
Elon has said that the world will need approximately 100 Gigafactories to make all the batteries needed to power the earth with renewable energy but he hopes not to have to build all of them himself. At the earnings call, he did let slip this morsel of information. “We expect to finalize locations for Gigafactories 3, 4 and possibly 5 this year.”
Tesla is ramping up for Model 3 production, adding more Supercharger locations, pushing into new markets in Portugal, Macau, Korea, and Taiwan, and greatly expanding its battery storage business, but that doesn’t mean it is slowing its investments in the future. The location of additional factories has provoked a blizzard of speculation. Recently, a group of coders and Minecraft gamers from Lithuania put together an amazing video designed to convince Tesla to build a Gigafactory in their country.
Supercharger Expansion, Service Center Improvements
In its letter to investors, Tesla said it plans to double the number of Superchargers installed in the United States by the end of this year. More charging stations will be essential to meeting the needs of the thousands of new Model 3 owners it expects to have by the end of this year.
Tesla has suffered some blowback from customers because of long waits to get their cars serviced in some locations. To address those concerns as the number of Tesla drivers increases, Tesla says, “We are on track to reduce the global average wait time for vehicle service to less than one day by the end of the first quarter of 2017.“
It also says that 80% of service calls are for minor repairs and adjustments, many of which can be handled electronically via software updates. Instead of asking customers to come to a Service Center for those items, it will shortly introduce a service in which Tesla repair technicians will come to people’s homes or places of business to handle those issues.
Time Keeps On Slipping Into The Future
Legacy automakers are running as hard as they can to catch up with Tesla, but the Mind of Musk is always three moves ahead. During the earnings call, Jeff Evanson, Tesla VP of Global Investor Relations, revealed that the company is now including the cost of insurance and future maintenance in the price of its vehicles.
“We’ve been doing it quietly, but in Asia in particular where we started this, now the majority of Tesla cars are sold with an insurance product that is customized to Tesla, that takes into account not only the Autopilot safety features but also the maintenance costs of the car. It’s our vision in the future that we’ll be able to offer a single price for the car, maintenance and insurance in a really compelling offering for the consumer. And we’re currently doing that today.”
Musk made it clear that the company is working with established insurance companies to provide the needed coverage, but added it could get into the insurance business itself if the industry does not treat Tesla customers properly. NHTSA has found that Tesla’s semi-autonomous driving systems have already lowered the likelihood of a collision by 40%. “If we find that insurance providers are not matching the insurance proportionate to the risk of the car, If we need to, we’ll in-source it, but I think we’ll find that insurance partners do adjust rates proportionate to the risk of a Tesla.”
Auto manufacturers, car dealers, utility companies, now insurance companies. Is there any industry Musk won’t disrupt in his quest to get the world to drive zero emissions car powered by sustainable, renewable resources?
Earnings call transcript provided by Seeking Alpha.