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Elon Musk Exults in Tesla’s Phenomenal Achievement

Martin Viecha

Good afternoon, everyone, and welcome to Tesla’s fourth-quarter 2023 Q&A webcast. Our Q4 results were announced at about 3 p.m. Central Time in the update that we published at the same link as this webcast.

During this call, we will discuss our business outlook and make forward-looking statements. Actual events or results could differ materially due to a number of risks and uncertainties, including those mentioned in our most recent filings with the SEC. [Operator instructions] But before we jump into Q&A, Elon has some opening remarks.

The Triumph of Tesla’s Growth

Elon Musk — Chief Executive Officer and Product Architect

Thank you. So, the Tesla team did an incredible job in 2023. We achieved a record production and deliveries of over 1.8 million vehicles, in line with our official guidance. And in Q4, we’re producing vehicles at an annualized run rate of almost 2 million cars a year. This was a phenomenal achievement. Looking at just the Fremont Factory alone, we made 560,000 cars. This is a record. In fact, it’s the highest-output automotive plant in North America.

Market Success and Business Expansion

Model Y became the best-selling vehicle globally as predicted, with over 1.2 million units delivered. The energy storage business delivered nearly 15 gigawatt hours of batteries in 2023, compared to 6.5 gigawatt hours the year before. Free cash flow remains strong at 4.4 billion in 2023 in spite of record spending on future projects. Now, this brings us to 2024.

Tesla’s Forward-Thinking Innovations

There’s a lot to look forward to in 2024. Tesla is currently between two major growth waves. We’re focused on making sure that our next growth wave driven by next-gen vehicle, energy storage, full self-driving, and other projects is executed as well as possible. For full self-driving, we’ve released version 12, which is a complete architectural rewrite compared to prior versions. This is end-to-end artificial intelligence.

Advancements and Future Visions

So, see, the new Model 3 is now available globally. While the car looks similar, a lot of work has gone into the vehicle to make it better in every way. It is significantly quieter, more refined, better equipped, has longer range, and many other improvements. And we’re very far along on our next-generation low-cost vehicle. Several years ago, I said the perhaps the most important competitive characteristic of Tesla in the future will be manufacturing technology.

Tesla Announces Record Year with Focus on Future Growth

Next-Generation Vehicle Manufacturing Plan

Elon Musk revealed that Tesla’s next-generation vehicle, to be manufactured at the Gigafactory in Austin, Texas, is a groundbreaking endeavor. Musk stated that the first manufacturing location for this vehicle will be in Texas, with plans to expand to other locations globally. The futuristic manufacturing line is expected to incorporate new and revolutionary technology, making it a significant engineering feat for the company.

Financial Performance in 2023

Despite the challenges posed by high-interest rates and increased inflation in 2023, Tesla reported a record year in production and deliveries for its auto and energy business segments. The company generated over $96 billion in revenue and ended the year with a robust free cash flow of $4.4 billion. Consequently, Tesla accumulated more than $29 billion in cash and investments. The company’s GAAP net income for 2023 was impacted by a one-time, noncash benefit of $5.9 billion related to the release of a valuation allowance on certain deferred tax assets.

Auto and Energy Business Performance

Tesla’s auto business witnessed improvements in per unit costs, leading to sequential growth in auto gross margins. The company continues to focus on cost reductions, although it acknowledges the inherent challenges stemming from external factors like tariffs and local incentives. Additionally, Tesla emphasized the importance of customer education, as approximately 90% of its vehicle buyers in 2023 had not previously owned a Tesla. The company plans to invest in digital campaigns and customer acquisition activities to further drive demand.

On the energy front, Tesla’s energy storage business experienced significant growth, with deployments more than doubling and revenues increasing by over 50% in 2023. The company expects this business segment to surpass its auto business in terms of growth rate in 2024. Tesla’s services and other businesses also began contributing meaningfully to its overall results, indicating a diversified revenue stream for the company.

Future Growth Initiatives and Investments

Tesla aims to continue growing its output, reducing costs, and increasing investments in future growth initiatives for the year 2024. The company anticipates a capital expenditure of over $10 billion for 2024, signaling its commitment to laying the groundwork for the next phase of growth. Furthermore, Tesla expressed gratitude to its stakeholders, including investors and suppliers, for their support in the company’s journey.

Outlook on Next-Generation Vehicle Production

When questioned about the timeline for the production of the next-generation vehicle, Musk revealed that Tesla plans to commence production by the second half of 2025. He emphasized the innovative nature of the manufacturing technology and the challenges associated with the production ramp. Musk stated that the company’s engineers will need to live on the line due to the revolutionary nature of the manufacturing process.

While acknowledging the difficulty in predicting production volumes, Musk expressed confidence in the eventual success of the manufacturing technology and its potential to outperform existing standards. Despite the uncertainties, Tesla remains optimistic about commencing production next year.

Ramping 4680 Cells into Multimillion Cells per Week

When quizzed about the barriers to ramping 4680 cells into multimillion cells per week, Tesla remained tight-lipped on the specifics, with an unidentified speaker addressing the query. The response did not provide detailed insights into the challenges or expected timeline for achieving the ramp-up.

Deconstructing Tesla’s 4680 Challenge and Future Outlook

The 4680 Production Challenge

Recent speculation about the 4680 cell production posing potential limitations to the Cybertruck ramp has been promptly addressed by Tesla’s Chief Executive Officer and Product Architect, Elon Musk. Musk assured that the 4680 production is not only ahead of the ramp schedule but also maintains a weeks-long finished cell inventory. This surplus bodes well not only for the Cybertruck goals but also for future vehicle programs. Drawing an analogy to an S-curve, Musk emphasized the unpredictable nature of such transitions, attributing the complexities to the new technologies and manufacturing techniques integrated into the 4680 cell.

Challenges and Breakthroughs

Elon Musk further delineated the challenges faced and triumphs achieved, highlighting the successful transition of the Model Y cell design to the Cybertruck design, which culminated in a substantial 10% increase in cell energy. The intricacies of such a transformation are underscored by the collaborative efforts of Tesla’s factory and engineering teams, with a renewed focus on cost and production ramp for the first quarter of the year. The ongoing trials for yield and rate improvements, along with forthcoming installations, signal a pivotal year for the 4680 ramp.

Supplier Relations and Shareholder Concerns

Amidst the discussion, Tesla’s assurance of a supplemental, rather than a replacement, role for suppliers stands out. Musk expressed gratitude towards longstanding suppliers, acknowledging their significance in Tesla’s journey. The conversation took an intriguing turn with queries regarding Elon Musk’s discomfort in expanding AI and robotics at Tesla without a minimum 25% voting influence. Musk elucidated his apprehensions, underscoring the need for influential stewardship over impactful technology while avoiding absolute control.

Financial Prospects and Growth Waves

The financial terrain of Tesla was not left untouched, with Chief Financial Officer Vaibhav Taneja outlining the formidable task of cost reduction and the reliance on fluctuating interest rates. The critical role of interest rates in making Tesla’s cars more accessible to a broader market was highlighted. Taneja also hinted at the intermittent growth periods in Tesla’s trajectory, plotting a course from the global expansion of Model 3 and Y to the upcoming launch of the next-generation vehicle in 2024.

Expansion and Future Projections

Tesla’s expansion plans were unveiled, with the commencement of Giga Nevada’s next phase and the inception of Giga Mexico looming on the horizon. These strategic developments are set to encompass the production of 4680 cells, semi-trucks, and next-generation vehicles, a harbinger of Tesla’s unwavering pursuit of innovation and expansion.

Tesla’s Optimus is the Future of Robotics, CEO Elon Musk Explains

Tesla’s chief executive officer, Elon Musk, recently provided key insights into the company’s upcoming projects including the Optimus humanoid robot and the highly awaited Cybertruck. During an earnings call, Musk discussed the progress of the next-generation platform, comparison between Model 3 and Model Y productions, the potential of full self-driving (FSD) technology licensing, and the challenges and promising potential of the Optimus humanoid robot.

Targeting Success: The Next-Generation Platform

Musk announced plans to demonstrate the success of the next-generation platform in Austin before commencing construction in Mexico. The company has initiated the long-lead work to prepare the groundwork, echoing the strategy employed in the successful ramp-up in Shanghai. The CEO emphasized that the Model 3 production journey was a relentless struggle but paved the way for a more streamlined experience with the Model Y production line.

Unlocking Future Potential: Full Self-Driving (FSD) Technology Licensing

Musk highlighted Tesla’s readiness to engage in FSD technology licensing agreements with other car manufacturers. He expressed his belief that car companies should be seeking FSD licenses and noted ongoing but tentative discussions with interested parties. The CEO underlined the vast potential of Tesla’s FSD technology and encouraged other companies to consider licensing it as a strategic move.

Revolutionary Robotics: Optimus and Its Impending Impact

Musk delved into the advanced capabilities of the Optimus humanoid robot, labeling it as a potential revolutionary product. Drawing parallels between the production of cars and humanoid robots, Musk stressed that Optimus has the potential to outperform all other Tesla products combined. He expressed optimism about the prospect of shipping a number of Optimus units next year and outlined the accelerated progress in the Optimus lab.

While acknowledging uncertainty due to the uncharted territory, Musk assured regular updates on the progress of Optimus. He underscored the critical importance of safety, emphasizing the need to prevent centralized control from uploading malware into the humanoid robot. Despite the challenges, Musk expressed confidence in Optimus’s potential to become the most valuable product ever.

Cybertruck Surge: Meeting Demand and Production Constraints

Addressing the high demand for the Cybertruck, the Tesla team expressed gratitude for the patience of reservation holders. They revealed encouraging reservation-to-order conversion rates, hinting at a potential sellout of all builds by 2024. The team has shifted focus to ramping up production to fulfill the increasing orders and reduce wait times.

Musk clarified that the situation is production-constrained rather than demand-constrained. He ruled out the option of raising prices to expedite delivery, placing emphasis on affordability. The CEO forecasted the company’s ability to deliver approximately a quarter million Cybertrucks annually, underscoring the remarkable demand for the futuristic electric pickup truck.

Tesla’s forward-looking vision, as elucidated by Musk, portrays a company determined to push the boundaries of innovation, from production ramp-ups to groundbreaking ventures in robotics and electric vehicles. As Tesla forges ahead, maintaining a delicate balance between meeting surging demand and ensuring affordability remains a pivotal aspect of its strategic direction.

The Future of Tesla: Inside the Latest Financial Conference Call

An Insightful Discussion

Elon Musk, Tesla’s Chief Executive Officer, and Product Architect, and Vaibhav Taneja, the Chief Financial Officer, recently engaged in a thought-provoking financial conference call with investors. The call, which touched on various aspects of Tesla’s business, provided illuminating insights into the company’s future endeavors and challenges.

Revolutionizing Awareness Campaigns

Tesla’s efforts to increase awareness about its products were a focal point of the discussion. Both Musk and Taneja highlighted the company’s digital campaigns and the need to address challenges related to affordability and awareness. Taneja emphasized the importance of strategic spending to raise awareness while cautioning against overspending. Musk drew attention to regions like Japan, where Tesla’s market share remains low due to a lack of awareness, underscoring the necessity of tailored efforts to improve visibility in such markets.

Cost Reduction and Innovation

The conversation also delved into Tesla’s ongoing efforts to reduce costs. Analysts praised the company’s consistent trajectory of reducing cost of goods sold (COGS) per car, drawing parallels to the pace of cost reduction seen in other industries. Taneja credited Tesla’s engineering and supply chain teams for their relentless pursuit of cost reductions, acknowledging the challenges posed by fluctuating commodity prices. While he expressed confidence in the team’s capabilities, he cautioned against extrapolating the previous pace of cost reductions into the future.

Global Expansion and Market Penetration

The discussion shed light on Tesla’s plans for global expansion and market penetration. Musk underscored the significance of establishing a stronger presence in regions with low market shares, such as Japan. His observations reflected a keen understanding of the need for comprehensive strategies tailored to each market’s unique dynamics.

Looking Towards the Future

Overall, the conference call provided a comprehensive overview of Tesla’s financial strategies, highlighting the company’s commitment to innovation, cost-efficiency, and global market expansion. The insights shared by Musk and Taneja offered valuable perspectives on Tesla’s future trajectory, leaving investors eager to witness the company’s next steps in the ever-evolving automotive industry.

Tesla’s Cost-Cutting Measures and Market Share Expansion

The Art of Efficiency

In a recent discussion, Tesla executives outlined their relentless pursuit of cost efficiencies and scale advantages as they navigate through barriers, undeterred by limitations in the current platform. The company is bent on optimizing every aspect of its operations.

Driving Down Costs

Explaining their approach, the team highlighted reductions in inbound logistics costs by 22% year over year. This achievement came as a result of a series of optimizations, including the use of returnable packaging, route optimization, and negotiating better pricing with shipping and trucking companies. The company’s scale has empowered them to put significant effort into these aspects of their operations, leading to enhanced efficiency.

Continuous Innovation

Tesla’s commitment to improvement extends beyond the logistics realm. In an industry where technology evolves rapidly, the company continuously drives enhancements in fundamental areas such as power electronics. These improvements not only find their way into new vehicles but also benefit older models, underpinning a sustained drive for cost reductions.

Expanding the Addressable Market

As the company contemplates its position in the market, there is a strong recognition that the EV segment represents a relatively small share of the automotive market. Tesla’s goal is to capture as much market share as possible within this growing pie, targeting a much larger portion of a market where they currently hold a 2% share.

Challenges and Prospects

Key executives acknowledged the challenge posed by the higher price points of Tesla vehicles compared to other mass-market cars. Despite this, the company has achieved remarkable success in unit sales, underscoring its ability to attract customers who are willing to stretch their budgets to own a Tesla vehicle.

AI Day and Tesla’s Strategy

As the company ponders the possibility of an AI Day, Elon Musk expressed concerns about competitors closely monitoring and imitating their technological advancements, a situation reminiscent of their experience after Battery Day.

Tesla’s Earnings Call Reveals High-Stakes Innovations and Cost Efficiency Efforts

Eyes on the Road

Tesla’s recent earnings call provided a window into the company’s innovative developments and the pursuit of cost efficiency. Elon Musk, Tesla’s Chief Executive Officer, took center stage during the call, emphasizing the high-risk, high-payoff nature of the company’s endeavors, especially in terms of training self-driving AI and enhancing hardware capabilities.

A Drive to Train

Musk used a relatable analogy to explain the importance of rigorous training for self-driving systems. He likened it to human learning where the more effort put into training, the more efficient one becomes at the task. He drew a parallel to driving, demonstrating how, with extensive practice, the mental effort required diminishes, allowing for multi-tasking.

Highlighting the significance of training, Musk acknowledged the long shot nature of the Dojo program but stressed its potential to yield substantial rewards. He unveiled plans for iterations beyond Dojo 1.5, signifying a commitment to pushing the boundaries of AI training for self-driving vehicles.

Revving Up Hardware Innovations

Besides training, Musk shed light on Tesla’s advancements in inference hardware, detailing the progression from Hardware 4 to the impending Hardware 5. He envisioned the possibility of leveraging idle time in vehicles for AI tasks when not in use, further amplifying Tesla’s compute capabilities.

Fueling Cost Efficiency

The call delved into Tesla’s ongoing efforts to drive down costs. Vaibhav Taneja, Tesla’s Chief Financial Officer, acknowledged impending cost escalations due to wage increases but remained optimistic about identifying additional opportunities for cost reduction. The company’s relentless pursuit of cost-saving measures, from design optimizations to commodities reductions, was reaffirmed throughout the call.

The magnitude of even a marginal cost improvement was underscored by Musk, who emphasized its billion-dollar impact. Concluding the call, Musk expressed ambitious aspirations for Tesla’s future value, hinging on the company’s execution prowess.

Final Word

Tesla’s earnings call painted a picture of relentless innovation and unwavering commitment to efficiency. Musk’s articulation of the company’s trajectory, combined with the insights shared on AI training, hardware evolution, and cost-saving initiatives, offers investors a notable glimpse into Tesla’s future potential.