Tesla’s Q1 resuts were weak which was already expected given the earlier announment of vehicle deliveries. They did say they expect Q2 to be a lot better given that they had to deal with so many unique challenges in Q1 (shipping through the red sea, power sabotage at the Germany plant, etc.)
But on the call, most everything I heard gave me increasing confidence in the future of this company and as an investment. The market seems to agree as the stock is up about +11% after hours…granted the stock has sunk to a very low level in recent weeks so it is still well below where the shares traded not that long ago.
Keep in mind I already own a good sized stake in TSLA and I fully expect it will be a multi-year investment as their various areas of new business play out
I would highly recommend anyone that owns the stock or is considering it, listen to their earnings call. It is a lot more listen-able than many other earnings calls. They don’t waste your time (or theirs) re-reading most of the same information that is already in the press release. Elon makes some brief comments upfront and then they start taking questions, several of which are submitted ahead of time by normal investors.
A few notes I jotted down while listening (note that the “quotes” may not be verbatim but should be very close to what was said)
Tone
Ovearall, Elon seemed very happy and upbeat throughout the call, even cracking a few jokes. It was a 180 degree contrast to the way he sounded a few quarters ago when just before the first cybertruck deliveries.
New Lower Cost ($25k) Model
The rumors that Tesla would be abandoning a lower cost model automobile appear to have been unfounded. They actually said they are moving up the expected rollout of a new lower priced model, originally estimated for the second half of 2025, to most likely occur in the first half of 2025. They say they are able to move up the production by utilizing the existing configuration of production lines for the new model, rather than having to reinvent the production line as had previously been contemplated.
Cybertruck prouction has just reached 1,000 units per week in April, which I believe is better than most estimates.
Competitors and Supplier Pricing
Elon stated that Tesla believes that vehicle battery orders from their competitors have been dropping dramatically recently. Tesla therefore is currently getting much better pricing as a result of the suppliers’ excess capacity.
He did go on to say that this disconnect between supply and demand is likely to correct itself before too long, but will have a positive impact on their cost of goods in the near term.
Reorganizing the Company Structure
They didn’t provide many details but touched on the company reorganizing itself as it prepares for future areas of expected growth. One item they did mention is that Elon believes it has become way too complicated and time consuming to simply order a Tesla vehicle. He thinks they can and should get to a place where a person can order a Tesla car in “under a minute”.
Autonomous Driving and Robotaxi
Elon made what I thought was a great analogy comparing future autonomous driving and robotaxi to the way that elevators evolved in the past. There was a time when all elevators had an operator that was responsible for moving the elevator from floor to floor and opening and closing the door at the right time. He noted that sometimes the operator could be tired or not feeling well, or simply not as focused as they should be and it could result in people getting injured if the door opened at the wrong time or the elevator moved when it should not. But today, you just press a button and “it just works”. You don’t have to worry about doors opening a the wrong time or the elevator moving when it shouldn’t. We trust that it is programmed to do the right things at the right time.
Of course there are many more variables in a vehicle operating autonomously, but the Tesla team expects that there will be a day in the not too distant future where people summon a car from their phone and it takes them where they need to go and “it just works”. Elon joked that they are “putting the auto in automobile”.
They expect that they are going to manage and run the robotaxi fleet and said to think of it as a combination of Uber and Airbnb. The uber side relates to vehicles that Tesla will own and use in the robotaxi fleet, utilizing them as much as practical. They will also enable people that own Tesla vehicles to opt into allowing the vehicle(s) that they own to be used for robotaxi rides when the owner does not need to use the car. The owner would be able to click a button on the app whenever they want the car to go into service (and I’m sure the owner would collect fees for the car’s use as a robotaxi) and then they could summon the car back whenever they want to use it again (I’m sure once it has completed any in-progress ride). This is the airbnb aspect where they compared it to someone renting out their home or apartment on Airbnb when they don’t plan to use it and not rent it out whenever they want to use it themselves.
They aren’t concerned about regulations and laws allowing full self driving when the system is ready. They mentioned that other competitors (e.g. Waymo) had already been working through some of this which is very helpful to Tesla. They commented that if the data shows that fully autonomous vehicles get into accidents and result in injuries and fatalities at significantly lower rates than human driven cars, then regulations preventing them from operating in certain jurisdictions will result in accidents and injuries and they fully expect, by the time, they are needed, it will not be a major hurdle to get local cities on board.
Licensing of Full Self Driving
Elon said they are currently already in discussions with “one major automaker” regarding licensing FSD, which I believe is new news and really good to hear as this would be a very high margin, potentially very profitable line of business if they can get a few big automakers to license the self driving from Tesla.
He later said there is a “good chance we sign a deal this year. Maybe more than one” but he went on to describe that, even when FSD is ready, it is estimated it could be 3 years before they really start using it given the time it will take for the cameras to be integrated with the licensee’s vehicle models.
Use of Idle Excess Vehicle Compute
There was an interesting discussion, which later went on a bit further after an analyst follow up query at the very end of the call, where Elon noted that he is thinking about ways to potentially utilize and monetize compute power within worldwide Tesla vehicles when the cars are at rest parked or being charged. This, I imagine, would be similar to the airbnb situation above for loaning your car to Tesla’s robotaxi fleet, but not for ride share services, but instead to opt in your car when not using it, for the monitization of the excess compute power in the car (assuming there is enough electrical power charge that won’t be needed for driving right away).
He said, as the number of Teslas on the road expands (he is envisioning there being “tens of millions” of them out there in not too many years and he’s thinking there will be much more compute power in the vehicles in coming years than already exist in today’s models), it would be a waste of a huge amount of usable compute power to just have them sit idly in a garage for so many hours at a time.
Elon compared it to Amazon’s AWS example, where they originally built their servers for a particular use, mostly for use with their own business, and eventually realized they had, and could create more, excess compute which could be sold to others and is now the most profitable part of their business. So he thinks about whether it’s realistic for the excess compute power in the vehicles to be monetized by doing something useful. He wondered aloud if there may be a day when the combined idle compute power of Tesla vehicles parked could exceed more than the total compute power of any individual company.
Obviously I wouldn’t put any value or high expectations that this will become a reality anytime soon. I suspect people would even be wary of their car’s computer being used for who knows what could cause it to get a virus and become unusable when they need it, etc. But’s it’s interesting to hear the thought process and the types of things being considered as ideas for the future.
Optimus Humanoid Robots
Elon reiterated what he has said in the past that he thinks Optimus could one day be more valuable than the rest of the Tesla company combined. He estimated that they could have Optimus robots performing productive tasks in their own factories by the end of this year and may be ready for external sales by the end of 2025.
Wrap Up
That’s all I noted. I totally get that this company is not going to be for everyone. There are mountains of execution risks in order to get any of their growth areas to generate the type of profits that I’m hoping for. But I do think this company will continue to change the world and find ways to do it profitably. I don’t know how much is going to really happy over the next 12 months or so, but I know I want to be an owner when it does, and I expect the story will be great to follow over at least the next 3 to 5 years, and probably well beyond.
-mekong
Tesla will be buying 50,000 additional Nvidia H100s by year-end 2024, increasing its current stock of H100s from 35,000 to 85,000. (Tesla has vastly excellerated the advancement in achieving Full Self Driving- As mentioned in prior post, ”You need to see it to believe it.”