Yesterday Tesla held its second quarter earnings call. Although Elon Musk has previously said he wouldn't be on earnings calls in the future, he did make this one.
As with previous earnings calls, plenty of data and statistics were revealed relating to production, future products, and FSD Beta.
Below is a recap of the entire event, including the Q&A session. The recap was originally posted to dburkland.com.
You can also listen to the earnings call below. The call begins at the 11 minute mark.
Opening remarks from Elon Musk
Unique quarter for Tesla due to Shanghai shutdown
Production records achieved in Fremont & Shanghai
Set up nicely for record breaking 2nd half of 2022
Past years have thrown several force majeure at Tesla yet the team continues to overcome
Giga Berlin Production Ramp continues with 1000 cars / week in June, Giga Austin to follow with the same number in the next few months
Still making cars w/ 2170 cells in parallel and important to note they aren’t dependent on 4680s and will still hit their production numbers
FSD Beta deployed to over 100,000 owners
5-6 years ago they set out to be the best manufacturer in the world
Pro-manufacturing mindset has given them a competitive edge
Currently make the largest castings in the world
As a result of improved manufacturing processes in Berlin & Texas, Tesla has reduced body welding robot count by 70% per unit of capacity
Body shop is roughly 3x smaller as it would be otherwise
New vehicle bodies are lighter, cheaper, and quieter thanks to reduction in NVH
Another level of simplicity and improvements are coming with Cybertruck (as well as future products coming down the road)
Intelligent seat belt tensioning based on vision system recently released, first in the industry to do this
Can also adjust the airbag deployment as well
Delivered via OTA update
Will have profound impact on passenger safety
Compatible for all HW3-equipped Teslas
Cybertruck
Production still expected to start middle of 2023
“Best product ever” -Elon
FSD Beta
Planned to be released to all North American customers by end of 2022
FSD will then be released to other geos such as Asia and EU soon after pending regulatory approval
Opening remarks from Zach Kirkhorn
Made substantial progress in almost every area of the business
New production records reached in existing factories and new ones actively ramping
Highest solar production volumes in years
Temporary shutdown had noticeable impact to vehicle margin
Factory ramping also associated with negative impact on vehicle margin
Inflation, commodities, and logistics continue to be headwinds
Resource constrained on Powerwall and Megapack which should be resolved in the 2nd half of 2022
Austin & Berlin operating costs are going down as production ramps up
Tesla sold 75% of Bitcoin holdings
They did so as they were uncertain when COVID lockdowns in China would end
As a result they wanted to maximize cash position
They are still interested in Bitcoin and have not yet sold any Dogecoin
Highest operating margins ever at 14.6%
Still targeting 50% of growth and still within reach
Q&A
Chinese EV Manufacturers & Software Innovation
Elon believes Tesla China is the best EV manufacturer in China
Chinese car companies will be a force to be reckoned with going forward
Tesla has respect for Chinese automakers but believes they have whats necessary to compete
Unified Vector Space
Unified Vector Space would be if instead of knitting together dynamic & static objects w/ C++ you knit them together at the NN level (meaning you no longer need to reconcile them in C++ heuristics)
Architecturally better way
Slight improvement in efficiency of FSD stack and something they want to get to
Nirvana situation would be to have surround video auto labeling for all static & dynamic objects as well as surround video inference w/ spacial memory
Elon believes they have a unified vector space by the end of 2022
Elon is also very confident that Tesla will improve the frame rate as they delete legacy NNs and further optimize the FSD software stack
The goal is to get FSD Beta to operate at 36fps for all 8 cameras compared to the current 24 frames which will reduce latency when reacting to a dynamic environment
Inflation & Future Price Reductions
They do not control so therefore Elon says take w/ grain salt but thinks inflation to decrease by end of 2022
Carbon, steel, aluminum, etc are trending down in cost which should see impact later in 2022, early 2023
Processing of lithium is insanely costly
Elon again encouraging entrepreneurs to enter the lithium business as there are, “software margins”
“License to print money” -Elon
Bitcoin
Cryptocurrency is not something Tesla thinks about a lot according to Elon
Main goal is production and addressing climate change by making sustainable energy & transport a reality
4680s
Structural pack is a monumental step forward from a physics perspective and is the way to go
Gained perspective through entering production w/ structural pack Teslas which proved their hypotheses
Cost improvements are thanks to solving technical issues and scale
They have saved 4-5kg in mass from the early cast Model Y underbodies since their initial production
Plan is to reduce mass of castings and to include more parts (and to adapt vehicle to work better with castings)
Cybertruck will be another big step in this area
Making progress on 4680 production ramp but continuing to leverage supplier cells (2170s) to ramp Giga Berlin & Texas
Total production ramp of 4680 packs to 1000 per week by end of the year (preferably earlier)
Q2 @ Kato fully automated powder conveyance for the dry anode electrode tool there unlocking major improvements in production & yields too
Production as a result has increased 35% MoM since March and yields throughout factory are already at targets or trending towards them
Took learnings from Fremont cell & pack lines and built optimized lines in Giga Berlin & Texas
Cell design was revved to unlock higher performance and manufacturing simplicity
Lines were fully integrated and insourced additional content
As a result new challenges for ramping in Giga Berlin & Texas
Last quarter cell equipment was fully installed at Giga Texas and they have since produced their first commissioning car sets of 4680s cells
The target for Texas is to begin mass producing 4680 cells in Q3 2022 with the goal of being able to exceed the weekly cell production capacity of the Kato battery plant by end of 2022
Priority with 4680s initially is simplicity and scale, Tesla was not aiming to include all of the bells & whistles right off the bat
As manufacturing goals are achieved they plan to layer in new material technologies into their structural packs (and increase range as well)
Currently in regards to 4680s Tesla’s main focus is to remove low hanging issues that would prevent further production ramp
Dry electrode anode & cathode are included in the current 4680 process which makes things harder to ramp (yet they continue to achieve success here)
Once mass production achieved they plan to quickly iterate w/ an increase in energy density and overall performance soon thereafter
Tesla cell production will continue to compliment production volumes from suppliers
Fundamental rate limiter for transition to sustainable energy is rate of li-ion battery pack production
Not due to scarcity of raw materials, refining lithium in ultra high purity is quite difficult and requires massive amounts of machinery
Super difficult to create anode and cathode
Elon believes 2/3 of batteries in the future will be iron phosphate, maybe some with manganese
Tesla is actively working with suppliers to ramp as quick as possible
Tesla is taking action by building their own Cathode plant at Giga Texas as well as taking the plunge into lithium refinement
FSD Development Progress & Andrej Departure
While Andrej Karpathy will be missed (recent departure), Elon remains very bullish on current team of 120 people in software / AI group and believes that they will solve FSD by end of 2022
No major setbacks or delays in FSD timeline should occur as a result of Andrej’s departure
Elon believes they will raise FSD price just before they go to wide beta (targeted for end of 2022)
Value of FSD is extremely high and not well understood by most people, Elon thinks its ridiculously cheap if promises of performance materialize
Semiconductor Supply Chain Constraints
Tesla procures about 1600 unique pieces of silicon from 43 different companies
Supply chains are more stable w/ latest generation of chips
Chips from the analog & mixed signaling space still remain a challenge from a supply chain perspective
Supply chain line of sight continues to match planned outputs for both factories (no constraints)
Long term contracts already in place for key battery materials and so there are no concerns about future constraints
Tesla does not plan to manufacture their own chips however they continue to work with suppliers to ensure future product goals are achieved
Chip shortage forced Teslas to delete redundant chips and update software accordingly (big positive in hindsight)
Cybertruck
Deliveries to begin by the middle of 2023
Vehicle Demand
Vehicle demand not an issue for Tesla for the foreseeable future
No sizable macro impact on demand
Difference between value in money and affordability and why you can’t just keep increasing prices
Elon feels that they have raised prices to “frankly embarrassing levels”
Supply chain and inflation are main culprits for price increases
Elon is hopeful Tesla can reduce prices soon
Elon thinks its achievable to produce 40,000 vehicles per week by end of 2022
Teslas has already produced 30,000 vehicles per week many times, 40,000 vehicles per week is definitely in reach
Plan is to get Giga Berlin & Texas to ramp to 5,000 vehicles per week by end of 2022 and 10,000 vehicles per week by end of 2023
Elon reaffirms that Tesla does not have a demand problem but instead a production problem
Elon’s Role At Tesla
If there is only good news Elon won’t plan to join the future earnings calls
Elon is committed to working at Tesla as long as he can continue to help advance the company
AI
Elon didn’t want to steal thunder from AI day so he will save the news / updates regarding Dojo & Optimus for then
You can follow Dan Burkland on Twitter at @DBurkland.
