Tesla Q1 2017 Earnings Call — The Good Outweighs The Bad
The Tesla Q1 2017 earnings call started off with bad news. The company announced it lost $397 million in the first quarter, compared to $282 during the same quarter last year. But by now, we know that losses are a good thing in the tech world because they mean sunnier days are ahead. And when it comes to spreading sunshine, Elon Musk is the established master. Here are some highlights from the conference call on May 3.
Model 3 Production On Schedule
Tesla told investors that everything is coming along well with the Model 3 production process. “Model 3 vehicle development is nearly complete as we approach the start of production. Release Candidate vehicles, built using production-intent tooling and processes, are being tested to assess fit and finish, to support vehicle software development and to ensure a smooth and predictable homologation process. Road testing is also underway to refine driving dynamics and ensure vehicle durability.” That road testing has led to several photos pre-production cars captured driving on public roads, including the white Model 3 with the glass roof sighted earlier this week.
The company is sticking to its projections of 5,000 Model 3 cars a week by the end of this year, rising to 10,000 cars a week in 2018. “We recently powered on our newest Schuler press line, and have started the commissioning process. This will allow sufficient time to install and tune die sets ahead of volume production. Paint shop preparation has been completed and installations of our dedicated Model 3 body welding and general assembly lines are progressing well. Equipment installation is also underway for volume manufacturing of cells, modules, battery packs and drive units at Gigafactory 1.”
Enhancing The Customer Experience
With so many more Tesla automobiles on the road, the company is investing heavily in its sales, service, and charging infrastructure. It will double the number of Supercharger locations worldwide before the end of the year. “We intend to build larger sites along the busiest travel routes and broaden the number of charging locations in urban centers to make charging ubiquitous and convenient for everyone.”It is also adding 100 new, larger sales and service facilities this year. The retail stores will now include dedicated areas for solar power sales as Tesla transitions away from an outside sales force. Service centers will feature more bays to handle the expected increase in demand.
Tesla cars are designed so that many repairs can be done remotely by over the air updates. “Using remote diagnostics, our service technicians are increasingly able to identify repair needs in advance of meeting with customers and even before customers notice issues. This has helped reduce repair times by 35% this year. Our goal is to reduce repair times even further.”
Mobile Repairs And Delivery Hubs
The cars are also designed so that most physical repairs can be done without raising the car into the air on a hydraulic lift. To leverage that advantage, Tesla is expanding the use of mobile repair trucks and plans to add 100 of them in the second quarter alone. “Our mobile strategy scales quickly, is capital efficient and lowers cost because proactive service and scheduling more than offset technician drive time to the customer. Best of all, mobile service saves Tesla customers the time traveling to and from a service center.”
Tesla will begin opening the first company owned body repair facilities later this year and expand its network of existing Tesla certified privately owned body shops.
Building 500,000 cars a year is one thing. Getting them into the hands of customers smoothly and efficiently is something else entirely. Tesla has begun using “delivery hubs” in Los Angeles. San Francisco, Hong Kong, and Beijing. The company says, the hubs provide “an exciting reception for new customers and support much higher delivery levels, so we plan to expand this customer experience to more cities.”
Electrical Storage Growing
Musk is fixated on converting the world from fossil fuels to renewable energy, but renewable require grid scale energy solutions to be effective. Tesla is moving forward aggressively on that front, thanks to Gigafactory 1 getting up to full production of lithium ion battery cells. It says it added 150 megawatts of new solar power generation capacity in the first quarter and 60 megawatts of energy storage, most of it on the island of Kauai.
“We plan to start pilot manufacturing of Solar Roof tiles in Q2 at our Fremont facility. Shortly thereafter, production will transition to Gigafactory 2 in Buffalo, New York. Our partner, Panasonic, will provide capital and operational support to manufacture photovoltaic cells, thus enabling high volume integrated tile and PV cell production at a single facility.”
The Model 3 Is Not Your Father’s Model S
There is a feeling that some customers are putting off buying a Model S and are waiting for the Model 3 instead, believing it will actually be an updated, more refined version of the Model 3. People still expect car models to be updates every five years or so and the Model S is now in its fifth year of production. Once again, Tesla is going to great lengths to convince people that the Model 3 is a completely different kettle of fish.
“Moving past Q2, particularly as Model 3 becomes available, one of our challenges will be to eliminate any misperception about the differences between Model S and Model 3. We have seen a belief among some that Model 3 is the newest and more advanced generation of Model S. This is not correct. Model S will always have more range, more acceleration, more power, more passenger cargo room, more displays (two), and more customization choices, and Model S, X and 3 will all have equivalent Autopilot functionality. We will continue to clearly communicate these distinctions to avoid any misperceptions.”
The Tesla Semi
CleanTechnica, our sister site, reports that during the Q&A session after the earnings call, Musk and Tesla CTO JB Straubel revealed that the upcoming Tesla Semi will probably use the same drive motors that will power the Model 3. How can that be? Simple. Add one to each wheel for a total of up to 1,500 horsepower. Using the same motor will significantly reduce production costs and promote economies of scale that will benefit both the Model 3 and the Tesla Semi.
The company continues to believe it will deliver between 47,000 and 50,000 cars in the first half of 2017 but declined to make that projection official. It says it will offer an update on its expectations for the year once Model 3 production actually begins. For those who know the difference between GAAP and Non-GAAP, all the numbers are available for scrutiny in the official Tesla Q1 earnings announcement.