Tesla Q2 2023 Earnings Call Notes

Tesla Q2 2023 Earnings Call Notes

Tesla Q2 2023 earnings call

In the Tesla Q2 2023 earnings call, the company highlighted its continued efforts in reducing costs, with automotive COGS per vehicle targeted to be below the historical $36,000 per vehicle level.

They emphasized a focus on continuous improvement, labor reduction, and automation to achieve cost efficiencies.

The new factories in Austin and Berlin are still early in the cost-down curve, with a current focus on ramping up production before diverting bandwidth to further cost reduction.

Logistics improvements were also mentioned as a contributing factor to cost reduction efforts.

However, the impact of downtime for factory upgrades on production and margins remains difficult to quantify.

Overall, Tesla remains optimistic about its long-term prospects, particularly in the areas of full self-driving and AI development, while acknowledging the challenges posed by macroeconomic uncertainties.

We summarized the entire call below with our notes.


Tesla Q2 2023 Earnings Call Notes

  • Q2 Recap:
    • Achieved record vehicle production and deliveries.
    • Record revenue of approximately $25 billion in a single quarter.
    • Model Y became the bestselling vehicle globally in Q1.
    • Operating margin of about 10% despite high interest rates and macro uncertainty.
  • Long-Term Focus:
    • Autonomy is expected to drive volume significantly higher.
    • Dedicated robotaxi products with quasi-infinite demand.
    • Dojo training computer designed to reduce neural net training cost.
    • Expects in-house neural net training capability of 100 exaflops by the end of next year.
    • Full self-driving aiming to be 10 times safer than human driving.
  • Cybertruck and Charging Network:
    • Continues building release candidates of Cybertruck in Austin.
    • Cybertruck designed to be big on the inside and fit in a 20-foot garage.
    • Global Supercharging network with over 50,000 connectors and 5,000 locations.
    • Tesla’s charging standard adopted by Ford, GM, Mercedes, and others.
    • Open to licensing Tesla’s full self-driving software and hardware to other car companies.
  • Financial Approach:
    • Focus on investing in core technologies and R&D, including AI, full self-driving, and new products.
    • Maximizing volumes in vehicle and energy business while maintaining healthy financials.
    • Working on cost reductions and capital investments.
    • Automotive gross margin showed modest reduction, but remained healthy.
    • Energy business saw improved margins and gross profit.
  • Outlook:
    • Q3 production may slightly decrease due to factory upgrades.
    • Remaining dynamic with a long-term outlook amidst macroeconomic uncertainty.

Q&A Session Summary:

  • Status of 4680 cells: 80% increase in production Q2 over Q1 in Texas, Cybertruck cell with 10% higher energy density, working towards battery energy density targets, further improvements expected from silicon and in-house cathode production.
  • Tesla Energy products: Strong demand for Megapack globally, progress in large projects, Autobidder contracts growing in wholesale markets, Powerwall installations surpassing 0.5 million, launching Charge on Solar, paying customers in Texas for participating in virtual power plant, expanding Tesla electric enrollment to new Model 3 owners in Texas.
  • Benefits to COGS from IRA battery manufacturing incentives and battery raw material declines: IRA benefits in Q2 as expected, reductions in lithium, aluminum, and steel impacting COGS, working to extend fixed-price contracts on commodities.
  • FSD transferability: Allowing FSD transfer in Q3 as a one-time amnesty.
  • Cybertruck information: Demand is high, the production ramp depends on the entire supply chain and internal production, many new technologies in the Cybertruck, high-volume production expected next year with deliveries starting this year.
  • Gigacasting critics: Gigacast vehicles are not harder or costlier to repair; traditional bodies require more complex repair processes.
  • Optimus bot progress: Around 5-6 bots made, using custom-designed actuators, first Optimus bot with all Tesla-designed actuators expected around November, usefulness in Tesla factories expected next year.
  • Order intake and pricing decisions: Demand has tracked production, real-time monitoring of demand and production, price reductions and incentives depend on economic uncertainty and interest rates.
  • Automotive gross margin: Short-term variances in gross margin and profitability are minor compared to the long-term picture, autonomy will have a significant impact on Tesla’s future.
  • Generating cash to invest: Focus on generating cash for continuous investment in new technology and products, hyper-focused on near-term cost reduction and working capital management, responding to macroeconomic factors.
  • Dojo AI: Tesla plans to spend over $1 billion on Dojo in the next year for video training and optimization, aiming to achieve full self-driving capabilities by the end of the year.
  • Volume Target: Tesla aims for a 50% CAGR in the near term, willing to sacrifice margins to make more vehicles with full autonomy capabilities, believing that the value of fully autonomous vehicles will increase dramatically in the future.
  • x.ai: The separate AI company xAI, started by Elon Musk, complements Tesla by attracting top AI talent that prefers working in startups and focusing on AGI (Artificial General Intelligence).
  • Pricing and Production: Tesla intends to stabilize prices if market conditions remain stable but may lower prices if macroeconomic conditions change.
  • Dojo Operating System: Dojo uses a custom software stack combining open-source software with Tesla software for the custom silicon used in the system.
  • Geopolitical Risks: Tesla is mitigating geopolitical risks by having factories in multiple regions, ensuring operations can continue if difficulties arise in one area.
  • Automotive COGS: Tesla has been making progress reducing costs and aims to achieve a level below the historical $36,000 per vehicle, but it’s difficult to forecast due to various factors.
  • Cost Reduction: The company is focused on continuous improvement, reducing labor, improving automation, and achieving economies of scale as volumes grow to reduce costs.
  • Austin and Berlin: The new factories in Austin and Berlin are early in the cost-down curve, and the focus is currently on ramping up production before diverting bandwidth to cost reduction.
  • Logistics: Logistics is underappreciated but has seen improvements, contributing to cost reduction efforts.
  • Downtime Impact: The impact of downtime for factory upgrades on production and margins is difficult to quantify, as the team tries to minimize downtime during upgrades.

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