Tesla CEO Elon Musk Provides Updates in Q4 Earnings Call
FREMONT, Calif., — Tesla CEO Elon Musk had much to say on today's Q4 earning call. However Musk is known to make bold claims and exaggerate some things, so we'll have to wait and see if Tesla can successfully execute some of its 2019 initiatives.
He opened Wednesday's call by saying that "Last year was definitely the most challenging year in Tesla's history, but also the most successful."
Musk was joined today by Tesla CTO and co-founder J. B. Straubel and CFO Deepak Ahuja, who surprisingly announced his retirement from the company, although Musk said he would remain on an adviser to the company.
Musk said that Tesla's electric vehicles remain in high-demand while reming optimistic about Tesla outlook in 2019. He said that Tesla has hit an 80 percent market share of U.S. electric vehicle sales, with EVs from all other automakers making up the remaining 20 percent. Its a good position for Tesla to be in. Musk added that Tesla made more vehicle last year than in all prior years.
"We expect this growth to reach 50 percent higher than last year in 2019. "That's crazy growth for the automotive industry." Musk said.
In an earning statement, Tesla wrote that every part of the Model 3 production process has demonstrated the ability to produce at an extrapolated rate of 7,000 vehicles per week. By the end of 2019 the automaker expects to be able to produce Model 3 at this rate on a sustained basis.
The Model 3 is the Best Selling Premium Vehicle in the U.S.
The Tesla Model 3
The Model 3 went on to become the best-selling passenger car in the US in terms of revenue in both Q3 and Q4. With nearly 140,000 units sold. The car also became the best-selling premium vehicle (including SUVs) in the U.S. for 2018, beating BMW, Mercedes Benz and Lexus.
Musk said it was the first time in decades an American carmaker has been able to secure the top spot.
To fund the automaker's operations this year, Tesla increased its cash reserves to $3.7 billion and Musk said the company would have no trouble paying its upcoming convertible bond payment of $1 billion, due in March.
Among today's topics was Tesla's operating margins, a key component to Tesla's long-term profitability. Musk said that operating margin are usually lower in the 4th quarter for automakers, however this is not the case with Tesla. Despite experiencing production setbacks in 2018, the Model 3's gross margin remained stable in Q4 at over 20 percent.
"I remain optimistic about Tesla remaining profitable in each quarter going forward." Musk explained to analyst that questioned the company's ability to remain profitable.
Better Service Experience for Tesla Owners
Another part of the company that is often overlooked by analysts is excessive wait times for customers to have their Tesla vehicles serviced. Tesla is an automaker after all, and servicing its vehicles in a timely manner is an important part of customer service.
Musk said that in order to address the many service issues and complaints from Tesla owners, customers will now be able to use the Tesla app to schedule appointment from their smartphone. He added that Tesla will begin also pickuping and delivering customer cars for quicker and more convenient turnaround.
Musk added that future OTA updates will allow Tesla cars to send diagnostic info such as a flat tire right to a service truck. Musk said that the feature will be able to summon help before the driver can even pull over.
Tesla is also using data from Tesla service records to make sure all of the common parts are in stock at local Tesla service centers. "It should be lightning fast." Musk said. Service centers will do basic body work as well, such as replacing bumpers, to eliminate having to make customers wait weeks before a body shop can repair their car.
The Model Y Crossover
Musk also revealed that Tesla completed engineering of the model Y crossover and the sharing of parts with the Model 3 will help streamline production. He said that the Model Y shares 75 percent of its parts with the Model 3 for easier procurement of parts and less factory retooling.
In comparison, the Model X SUV only shares around 30 percent of its parts with the Model S, which made assembling the vehicle more difficult and costly.
Musk believes that the fully-electric Model Y crossover has the potential to be a huge hit with consumers. Tesla expects the Model Y to eventually become more popular than the Model 3.
"The mid-size SUV segment is the most popular style vehicle worldwide." Musk said.
Tesla however already faces competition in the compact electric SUV space, as Audi is set to release its first electric model the e-tron SUV later this year.
In order to build both the Model 3 and Y, Tesla needs to have a second factory up and running. Musk said Tesla's Shanghai factory is going up like "lightning" and should be operational by the end of 2019. Musk also expressed his appreciation to the Chinese government for working with the automaker to speed up construction and provide access to capital.
Tesla Shanghai factory has the first wholly-owned automotive factory from a foreign automaker in China.
A teaser photo of the Tesla Model Y Crossover
Musk said that he aims for Tesla to build 350,000-500,000 Model 3's this year, while lowering average production costs with economies of scale.
Another obstacle for Tesla is the lack of any local incentives to EV buyers in China.
"We have the least access to incentives as a electric automaker" Musk said. "We've never had any subsidies or tax incentives in China. "The demand for the Model 3 is insanely high, it's just too expensive right now. If the model 3 and be made more affordable, we can meet this demand."
Tesla also provided some updates the company's autonomous driving features. Although Musk wouldn't go into too many details, he did say that the advanced summon feature will allow cars to navigate in complex parking garages. The summon features allows a Tesla vehicle to travel autonomous to its owners location when needed.
Musk said autonomy is extremely important to Tesla mission, which is transitioning the world to sustainable energy. The company's second mission according to Musk, is developing advanced autonomous driving vehicles as a way to give people back their time.
When asked about the progress competitors like Waymo are making in autonomous driving Musk was not concerned. He said that all of Tesla vehicles are driving millions of real-world miles are collecting important data used to improve the company's neural nets for self-driving.
"I'm really not sure how anyone can compete with that."
During the close of today's call, Musk was asked about the number of reservation holders of the original 450,000 still holding out for the $35,000 version of the Model 3, which is still not available to buy. In typical Musk fashion, he dismissed it as irrelevant going forward since demand for the car remains so high.
"Reservations are not really relevant, we're focusing on delivering cars."
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