Tesla call transcript: The capacity of the new factory is ramping up, and Tesla will deliver 1.5 million vehicles in 2022

Highlights:

1. The epidemic has led to a lack of production time of several weeks (almost a month) in the Shanghai factory, and the Q2 production may be slightly lower than that of Q1 (180,000 vehicles), but the Q3-Q4 will be greatly improved. Full-year production is expected to reach 1.5 million units (worldwide).

2. The Berlin and Texas plants will start production in late March and April, respectively, and the commissioning costs will be incorporated into the future automotive COGS; the focus of the expansion will be on the Texas plant.

3. It is expected that this year's Q3-Q4 Texas plant will take the lead in mass production of the Model Y equipped with the 4680.

4, supply chain challenges have always existed, rising raw material prices, inflation, etc. have an impact on the cost structure, Tesla has to adjust product pricing to alleviate. In the future, we will continue to pay attention to the decline in manufacturing costs.

5, the energy storage business is seriously affected by the macro environment, chip shortage; solar system supply is very tight.

Tesla (TSLA. O) In the early morning of April 21, Beijing time, Changqiao U.S. stocks released a comprehensive and unexpected 2022 quarterly report after the market, Andyo Dolphin Jun made a comment for the first time, referring to the "New Energy Thunder Array, Tesla Stride Meteor Continues to Cow", this article is the company's performance briefing minutes, covering the recent outlook, production capacity, 4680 battery and FSD progress, etc., first on the main points, see below for details:

Core takeaways

1. Delivery volume and target: 310,000 vehicles will be delivered in 2022Q1, nearly half of which will be equipped with LFP batteries. This year's full-year growth target is 50-60% (corresponding to 1.4-1.5 million deliveries), and the ultimate long-term goal is to achieve annual production and sales of 20 million units.

2, the impact of the Shanghai shutdown and the annual production expectations: the epidemic has caused the Shanghai factory to lack production time of several weeks (almost a month's volume), and the Q2 production may be slightly lower than Q1 (180,000 vehicles), but the Q3-Q4 will be greatly improved. Full-year production is expected to reach 1.5 million units (worldwide).

3, price and gross margin: most of the vehicles delivered in the first quarter are booked at the previous price, and the increase in the order price after the price increase is reflected in the subsequent quarters. At the same time, the price increase letter covers the expectation of raw material price increases this year, ensuring that the rise in raw materials in the third and fourth quarters will not damage the company's profitability. Commissioning costs at the Texas and Berlin plants began to enter production costs in the second quarter, and inefficiencies in the early stages of production would also affect gross margins in the second quarter.

4, 4680 battery progress: the current Berlin factory is still using the 21700 battery, it is expected that this year's Q3-Q4 Texas plant will take the lead in mass production of the Model Y equipped with 4680.

5, lithium mining: Tesla obtained a piece of land of lithium mining rights, but the actual mining involves regulatory approval and other processes, it takes a certain amount of time to achieve, Tesla is considering what kind of innovative equipment and facilities to mine.

6, material recycling: Tesla currently recycles about 50 tons of battery materials per week, and this value will become more considerable over time. Tesla's recycling efforts include not only batteries, but also recycling large amounts of aluminum from the scrap of traditional cars and ordinary wheels.

7. Robotaxi: Tesla can provide consumers with the lowest cost of transportation per mile through Robotaxi and FSD, and the cost of taking Robotaxi in the future may be lower than that of subsidized bus or subway tickets.

8, 800V architecture applications: high voltage does have some advantages, but the cost is very high. 800V architectures may be used in the future, but it will take enough scale to reduce costs and make this transition worthwhile. Cyber truck and Tesla Semi are candidates for the 800V architecture, but for Robotaxi, the 800V advantage is essentially zero.

The following are the details of the performance statement:

First, the near-term outlook

Production will begin at the Berlin and Texas plants in late March and April, respectively, with commissioning costs incorporated into future automotive COGSs, and lower production efficiencies starting to affect gross margins in the second quarter.

The pricing of cars delivered in the first quarter is usually set in previous quarters and is lower than the cars currently ordered. The backlog of orders has a higher average selling price, which will help improve the situation.

Second, expanding production capacity is the core of decision-making

In the past two months, Tesla has begun delivering Model Y from gigafactories in Texas and Berlin (with a negligible impact on first-quarter gross profit). At the same time, a lot of energy has been invested in in-house battery production, raw material procurement and supplier diversification.

Q: Giga Nevada's capacity expansion plans?

There are plans to expand the site, but the focus of the expansion is on the Texas facility for now.

Q: Model 3 European localization plan?

New factories need to minimize complexity based on the proximity of the user to the factory, providing vehicles to users from the most suitable factory, such as the Berlin plant and the Texas plant focusing on model Y. 5,000 units per week after 12 months.

Q: How is the capacity ramping up at the Berlin plant and the Austin plant? Compared to the Shanghai factory?

The Shanghai factory provides a lot of experience, but due to the difference in casting parts and 4680 battery processes in the new factory, the experience of the Shanghai factory cannot be copied, and many need to be adapted to local conditions.

Q: What is the impact of the shanghai plant shutdown?

The epidemic has caused the Shanghai factory to lack production time of several weeks (almost a month's volume), and the Q2 production may be slightly lower than Q1, but the Q3-Q4 will be greatly improved. Full-year production is expected to reach 1.5 million units.

Q: How is the current improvement of the factory being promoted?

The cost of cars in factories such as Shanghai has been reduced. Through a large number of expert analysis, after a variety of ways to improve, the cost reduction has made great progress. But logistics has many additional costs, and the whole process also requires the integration of many resources.

Q: If the epidemic situation in Shanghai remains severe and it continues to be contained, will it have an impact on production in other regions?

A: Yes, some chinese-sourced parts are supplied globally, which will affect production elsewhere. But all the signs are that the Shanghai factory has resumed production at a fairly high level, as are our suppliers, so it's not a big problem.

Third, supply chain challenges have always existed

In addition to chip shortages, the recent outbreak in Shanghai has also put pressure on supply chains and factory operations. In addition, rising raw material prices, inflation, etc. have an impact on the cost structure, and Tesla has mitigated it by adjusting product pricing. In the future, we will continue to pay attention to the decline in manufacturing costs.

Q: What are the risks and impacts of rising raw material prices?

It depends on how the raw material price changes next, and the combination of materials used. Tesla's price increase decision is based on a comprehensive consideration of the cost of raw materials, logistics and other aspects in the coming period. The impact of raw material costs accounts for 10-15%, the indirect impact of raw material factors in China is more obvious, the impact of raw material prices is lagging behind, we communicate with suppliers to adjust prices comprehensively to ensure that the pricing strategy is appropriate.

Q: How to deal with the increase in raw material prices? Is there stock?

The idea of having a safety stock has been signed with a long-term contract with the supplier, but not permanently. After the expiry, a comprehensive consideration of costs and how to make the global transition to sustainable energy faster;

The short-board effect of the supply chain is prominent, such as lithium and nickel is a short board, even if they mine themselves, they also need to consider the situation of the whole industry; for static energy storage solutions, turn to iron machine solutions, iron is very rich, and energy density requirements should not be.

Q: How long does it take before the supply of raw materials is restored? Are mining planned?

Mining sounds easy, but it actually involves processes such as regulatory approvals, and Tesla is considering what kind of innovative equipment and facilities to mine.

Musk believes that tesla needs to study the macro tonnage of raw materials more closely at the levels of 500, 10 million, 20 million and so on. A number of lithium-related announcements will be released in the coming months.

Tesla is also currently recycling about 50 tons of battery material per week, and that value will become more substantial over time. Musk emphasized that Tesla's recycling efforts are not just batteries, but also recycle large amounts of aluminum from the scrap and ordinary wheels of traditional cars.

Q: What is the impact of raw material costs on vehicle costs?

Try not to adjust pricing. Macroeconomic uncertainty and corporate competition will drive prices upwards. Efforts are being made to address the problem of raw materials in order to achieve sustainable energy, including the development of alternatives and the improvement of the production of existing raw materials.

Q: What are the considerations for price increases?

A: Our orders are already queued until next year, and the price increase is based on the expectation that supply chain and logistics costs will rise in June-December. 10 to 15 percent of our cost structure is related to raw materials, which have been rising for several consecutive quarters and will not have an immediate impact until the contract expires. But when those contracts expire, we have to renegotiate, and there will be delays. We need to make sure that our pricing doesn't affect our finances because of a sudden increase in raw material costs.

4. 4680 batteries

At cyber Rodeo's opening party, Tesla delivered the first car with a 4680 battery and integral front body casting, and it is expected that later this year (Q3-Q4) the Texas plant will be able to produce a Model Y with a 4680 battery, and the subsequent Berlin plant will also achieve mass production.

Q: How does a vehicle equipped with a 4680 battery cell perform?

The 4680 is expected to be the best replacement battery next year. Texas has the corresponding production facilities, the early stage of the corresponding equipment installation and technical improvements, the current progress, 4080 battery core performance in line with expectations, the future in the endurance and cost reduction has many advantages.

Q: Current and future output of 4680 battery cells?

The 21700 battery is still in use at the Berlin plant, and it is expected that this year's Q3-Q4 Texas plant will be the first to produce a Model Y equipped with a 4680. It is expected that after many problems are alleviated in early 2023, the 4680 production will be further improved.

Fifth, Cybertruck: Mass production in 2023.

Q: How do cyber truck parts compare to conventional trucks?

Cyber trucks are simpler, and if you ignore the battery, Cyber trucks may have 20-30% fewer parts than conventional pickup trucks.

6. FSD

Robotaxi: No steering wheel and no pedals, a lot of innovation involved, designed for Robotaxi services, optimized for FSD, and ultimately achieving a significant reduction in cost per kilometer, with further breakthroughs expected in 2024.

Optimus: Improving production efficiency, optimus is expected to be worth more than cars and FSDs, but there are still problems in the supply chain (shortage of parts, battery production and solar-related raw materials constraints)

Q: What are your expectations for FSD in 2022?

FSD is committed to further improving the vehicle experience, the need for artificial intelligence technology support, such as relying on camera video collection data for training, this year can achieve FSD safety and human drivers comparable to or even surpass. 100,000 people have participated in the FSD program, and we will continue to expand the program. We release a new version approximately every two weeks

Q: What are the future trends of driverless taxis?

Tesla is able to provide consumers with the lowest cost of transportation per mile through Robotaxi and FSD. Musk said that the cost of taking Robotaxi in the future will be lower than that of subsidized bus or subway tickets. The products launched now are small and big for unmanned taxis.

Q: When will we see robotaxi product details?

A: We're going to do a product launch for Robotaxi next year and get into the details, with the goal of mass production in 2024.

Seven, 800V

Q: Why not use the 800V architecture?

Musk believes that high voltage does have some advantages, but the cost is high. 800V architectures may be used in the future, but it will take enough scale to reduce costs and make this transition worthwhile. Tesla Cyber truck and Tesla Semi are candidates for the 800v architecture. But for Robotaxi, the 800V advantage is basically zero.

9. Energy storage and service business

The energy storage business is seriously affected by the macro environment, and there is a shortage of chips; the supply of solar energy systems is very tight.

Q: How is Tesla's insurance business progressing?

Recently launched insurance businesses in 3 U.S. states, including Virginia and Colorado. Texas is the oldest market and needs to learn experiences here. Users are very fond of the insurance business, and hope to further promote the policy in the future, and strive to achieve 80 of the 100 consumers who want to buy in the United States by the end of the year;

Insurance model innovation: hope to use safety points through insurance to influence people's driving behavior;

Software collects data: calculates driving points through data calculations, and then formulates insurance through driving points; insurance has formed a timely feedback loop, which quickly responds to and provides protection after an accident, thereby improving the user experience.

Q: What is the progress of providing charging pile networks to non-tesla vehicles?

The complete liberalization of the charging network requires more capacity, and we hope to have more initiatives in the future. At present, there are corresponding initiatives and promotions in North America, but it is also necessary to solve the problems of connected device compatibility and device fee collection.