Tesla, Inc.

Good day, ladies and gentlemen, and welcome to the TESLA Q3 2018 Financial Results and Q&A Webcast. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session, and instructions will follow at that time. If anyone should require assistance during the conference, please press star then zero on your touch-tone telephone. As a reminder, this conference is being recorded. I would now like to introduce your host for today's conference, Mr. Martin Vieca. Senior Director of Investor Relations. Mr. Rieke, you may begin.

Thank you, Sherry, and good afternoon, everyone. Welcome to Tesla's third quarter 2018 Q&A webcast. I'm joined today by Elon Musk, J.B. Straubel, Deepak Ahuja, and a number of other executives. Our Q3 results were announced at about 1 p.m. Pacific time in the update letter we published at the same link as this webcast. During this call, we will discuss our business outlook and make forward-looking statements. These comments are based on our predictions and expectations as of today. 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. During the question and answer portions of today's call, please limit yourself to one question and one follow-up. Please press star 1 now if you would like to join the question queue. But before we jump into Q&A, Elon has some opening remarks. Elon?

Thanks, Martin. So I'll make some opening remarks, and then we're going to talk about vehicle safety, autopilot, and factory safety. And we have a number of people from Tesla here to elaborate on that. So I think there's just a lot going on that people would find interesting. But I want to start by thanking all of our customers, employees, and shareholders. This was an incredibly historic quarter for Tesla. Model 3 production stabilized. We delivered a total of 84,000 vehicles globally, which is more than 80% of the vehicles that we delivered in all of 2017. In fact, we delivered more cars in this quarter than we did in all of 2016 in a single quarter. Model 3 became the best-selling car in the US in terms of revenue and the fifth best-selling car in terms of volume. We saw higher revenues and significantly better profitability in our energy business. In fact, I think for solar, it may have been the best quarter ever for solar. We achieved GAAP net income of over $300 million, increased cash and equivalents by $731 million, and achieved a greater than 20% gross margin for Model 3. Moreover, we expect to again have a positive net income and cash flow in Q4, and I believe our aspiration certainly will be for all courses going forward. I think we can actually be positive cash flow and profitable for all quarters going forward, leaving aside quarters where we may need to do a significant repayment, for example, in Q1 next year. But I think even in Q1, I think we can be approximately flat in cash flow by end of quarter. This quarter was made possible by the incredible execution of our employees across the board from sales, production, delivery, service, energy, engineering, finance, and all of our G&A teams. really every part of the business executed incredibly well. I want to thank everyone again for the incredibly hard work. I especially want to thank customers who helped. It's like I've never even heard of this. Maybe this has happened before, but I've never heard of a case where a company's customers actually cared about the future of the company so much that they volunteered their time to help a company succeed. I think that's... That's amazing. Just don't see that anywhere. So, yeah, it really chokes me up, actually. This quarter, we started rolling out version 9 of our software, which is our biggest software upgrade in two years, and Model 3 received a five-star safety rating in every category and subcategory. It got the lowest probability of injury of any car that the U.S. government has ever tested. Looking ahead, we expect to produce and sell even more Model 3s in Q4 and expect that trend to continue into Q1. And we're excited to bring Model 3 to Europe and China early next year, given that the market for midsize premium sedans in those regions is even larger than in North America. I've said before that we must prove that Tesla can be sustainably profitable. This quarter was an important step towards that, and I'm incredibly excited about what lies ahead. So this is, yeah, just so proud of the Tesla team, our customers, really appreciate the support of our long-term shareholders. And yeah, I just want to say on behalf of the Tesla team, we're just super appreciative of your support through what has obviously been a very difficult time. All right, now let's move to, let's start off with vehicle safety. Madan, who's a lead vehicle safety engineer. Been with the company for a long time. I don't know how many years has it been that we've been working together.