James covered most of the really interesting news from Tesla’s Q3 2015 conference call. If you missed those, they’re here:
- Positive Tesla Model X & Autopilot Reception Increasing Overall Tesla Sales Numbers
- Gigafactory Update — Quarter 3 Conference Call Reveals New Info
- Tesla Q4 Plans & Expectations
- Tesla Q3 Results & Numbers
- Tesla Reveals New CFO & New President Of Global Sales + Service
However, after listening to the full call myself, I noted a handful of extra “tidbits” that I think… aren’t actually tidbits but are really big stories. But I’ll just throw them all in here to be efficient about things….
Drive Unit Improvement Is Huge — Aim Is Life Of 1 Million Miles
An analyst from Credit Suisse asked about improvements on Tesla’s drive unit, from a bigger one it initially used to a newer small one. Expecting a boring answer, we got this from CEO Elon Musk instead: “Yeah, right now we’re actually very happy with the quality of the drive units. I mean, internally, our goal — we changed the goal of the drive unit endurance from being approximately 200,000 miles to being a million miles. Just basically, we want drive units that just never wear out. That’s our goal. And I think we’ve made really good progress in that direction.”
Elon added that the drive units going out now are “excellent,” and then CTO JB Straubel chimed it by adding that they’ve made improvements to the large drive unit. The referenced issues, he said, were just in early drive units. “Today, we hold the same standard on both units that are being built,” he said. Elon got specific by stating that, “there was this one period of time we had … just before we transitioned into automatic grease injection into the spline of large drive unit, we had variation in how much grease was put into the spline, and if not enough grease was put into the spline, it would have premature wear…. But other than that, the large drive unit has been great. ” That getting technical enough for you?
Autonomous Cars Are The Future — Having Cars Without Full Autonomy “Will Be Like Owning A Horse”
Andrea James asked about Tesla’s view for the future of cars — specifically, does Tesla see a future dominated by fully autonomous cars, and “how central is Autopilot to your long-term revenue, profit, and vehicle electrification goals?” Elon confirmed, saying, “Well, I’m actually on record as saying I think that all cars will go fully autonomous in the long term. I think it’ll be quite unusual to see cars that don’t have full autonomy for new car production in the 15- to 20-year timeframe…. And for Tesla it’ll be a lot sooner than that. I actually think that, at the point at which cars are being made that have full autonomy, any cars that are being made that don’t have full autonomy will have negative value. It will be like owning a horse…. You’re really owning it for sentimental reasons. [Elon & others in the room laugh.]”
Self-Driving Ride-Sharing Fleet From Tesla?
On the previous quarterly conference call with Tesla, Adam Jonas of Morgan Stanely asked about the Uber CEO’s offer to buy 500,000 self-driving cars from Tesla if Tesla could produce them, and specifically, whether or not Tesla would consider selling such cars to Uber or would start its own competing service. Elon decided to reply with “no comment.” Adam followed up on the topic again on this call, asking, “Do you see a business case for selling autonomous cars to ride-sharing firms, or can Tesla cut out the middleman and offer on-demand mobility services directly from the company’s own platform?” Elon laughed, somewhat similar to how he had on the previous call, and then said, “I think we would have to say ‘no comment.’ ”
Adam kept interrogating, in a slick way like a detective on your favorite detective show, and he basically pulled out of Elon that they were thinking about such things but didn’t have a plan fleshed out well enough to make any statements about it.
Noting that it was unlike Elon “to punt on strategic questions of a long-term nature,” he asked “is this a dumb question?” Elon laughed again. Adam: “or a funny question?” Elon: “I think it’s quite a smart question, actually, but still no comment.” (Ah, Elon Elon, you just gave a big comment!)
Adam: “Okay, I won’t, I won’t antagonize. Let’s move on. It’s just, it’s odd because you, you normally — I’ve never heard you punt like that, that’s all.” Elon could resist: “Ah, you know….” All Adam needed to keep going: “Is it because of a competitive sensitivity, or, or is it just because the concept itself is too… in flux?” [Pause…] Elon: “Um, I think there’s a right time to make announcements, and this is not that time.” Adam: “Fair play.” Elon: “And nor is our strategy fully baked here — for us to state what — it’s not fully baked. There’s no — we’d prefer to announce something when it’s — when we think we’ve got the full story understood.” Ah, Adam got Elon to break. Not letting up again just yet, “So, saying it’s not fully baked implies there’s something in the oven…” Elon “Kinda need to move on [laughing]….”
Yup, there’s a lot of info in that “no comment” response, no?
A Barclays analyst asked about the capital-intensive nature of the auto business and how Tesla planned to spend capital a few years from now. Deepak Ahuja, Tesla’s soon-to-retire CFO, said, “I think, stepping back, the better way to look at it is that at Tesla our capex spends for what we are achieving in my mind has been really efficient… in the industry.”
Elon: “And it’s worth noting Deepak spent a huge part of his career at Ford, so… you have a good basis for comparison.”
Deepak: “Right… as we look at every year, and as we add incremental capacity, and the capex related to that, we are continuing to increase on that efficiency in terms of capex dollars per unit of production, so… fully agree this is an assets-intensive business… and, uh… the key here in terms of return on investment is how efficient we are with that capital — that’s what we’re focused on.”
Elon: “Yeah, absolutely, we certainly believe in capital efficiency and in getting better with that over time, but we also believe that companies build value by doing hard things — not outsourcing those hard things to other people… cause then they deserve the value.”
Deepak: “That’s a key point.”