Tesla, Inc.

Good day, ladies and gentlemen, and welcome to the TESLA Q1 2019 Financial Results and Q&A webcast. My name is Cherie, and I will be your coordinator for today. At this time, all participants are in a listen-only mode. Following the prepared remarks, there will be a question and answer session. If you would like to participate in this portion of the call, please press the star, then one key on your touch-tone telephone. If any assistance is needed any time during the call, Please press star then zero and the coordinator will be happy to assist you. As a reminder, this conference is being recorded. I would now like to turn the call over to your host, Mr. Martin Vieca, Senior Director of Investor Relations. Mr. Vieca, you may now proceed.

Thank you, Sherry, and good afternoon, everyone. Welcome to Tesla's first quarter 2019 Q&A webcast. I'm joined today by Elon Musk, J.B. Straubel, Zachary Kirkhorn, and a number of other executives. Our Q1 results were announced at about 2 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 portion of today's call, please limit yourself to one question and one follow-up. Please press star 1 now if you would like to be added to the question queue. But before we jump into Q&A, Elon has some opening remarks.

Elon? Thanks, Morten. On Monday, we hosted our first ever Autonomy Investor Day, showcasing our new in-house designed full self-driving computer. and our AI-based software trained by more than 400,000 Tesla vehicles. All Tesla cars being built today have all the hardware necessary for full self-driving, and over-the-air updates will enable our customers to use the Tesla ride-hailing network fleet and generate income, which, as we said on Autonomy Day a few days ago, we think is somewhere between $10,000 and $30,000 a year. In some cases, perhaps more. We're the only company in the world producing our own vehicles and batteries, as well as our own in-house chip for full self-driving. We're in a position unlike anyone else in the industry. And in 2020, we expect to have a million robo taxis on the road with the hardware necessary for full self-driving. We believe we'll have the most profitable autonomous taxi on the market. Yeah. Last quarter, we experienced a massive increase in delivery volume in Europe, similar to what North America experienced last year, as well as a massive increase in delivery volume to China. As far as challenges go, this was a good one to have because we built vehicles and consumers bought them, but this rapid increase in overseas volume strained our logistics operation and resulted in over half of our global deliveries occurring in the final 10 days of Q1. This was the most difficult logistics problem I've ever seen, and I've seen some tough ones. So I'll say it again, like we literally delivered the half of all vehicles produced, or half all deliveries occurred in literally the final 10 days of Q1. As a result, a large number of vehicles the vehicle deliveries shifted into Q2, which caused Q1 net end count to be negatively impacted. As we said, we could not get the vehicles to customers physically in time. In response to this, we are in the process of regionally balancing our vehicle bills throughout the quarter. This will put much less strain on Tesla, result in a much better delivery experience for customers, and have a very positive effect on our working capital in the middle of the quarter. In Q1, Model 3 was yet again the best-selling premium car in the U.S., outselling the runner-up by almost 60%. It's worth just dwelling on that for a moment, just how absurd this is compared to predictions that were made several years ago. There were literally, to the best of my knowledge, zero predictions that this would happen if you go back just even five or six years ago. An electric car would be the best-selling premium car in the U.S., and we believe over time it will be the best-selling premium car throughout the world. In fact, in Norway in March, we... We set a record for the highest sales of any car, period, ever. And that'd be something similar in Switzerland as well. So these are really incredible achievements by the Tesla team. Since the introduction of standard range and standard range plus, nearly 70% of tradients from Model 3 have actually been non-premium vehicles, where people are actually pay more for a car than they have ever paid for a car. They never anticipated paying this much for a car, but because they want the Model 3 more than they've ever wanted a vehicle, they're willing to pay more to get a Model 3. Keep in mind, global expansion for the Model 3 has just begun, and this segment is vastly larger internationally than it is in the U.S., We're continuing to make significant improvements to our vehicle lineup, including updating the Model S and X production line to accommodate the next generation of powertrains. So we announced this yesterday. We're now in production with the significantly more advanced powertrain for the Model S and X, as well as an upgrade to the suspension system to have active adaptive damping in the suspension system and to enable charging at 200 kilowatts. which is, and there are a number of other small changes. If anyone is thinking about upgrading their Model SRX, this is a great time to do it. And we also introduced a loyalty program where if somebody is an existing Tesla owner and they buy a performance Model SRX, they get the ludicrous upgrade for free. So this is Yeah, as a thank you and appreciation to existing Tesla customers. So they have a longer range. The Model S now has a range of 370 miles. This is actually a range of 370 miles. And Motor Trend test drove the car a few days ago. and drove nonstop all the way from San Francisco to Los Angeles at normal highway speeds. And they said they could have even gone faster. And they were in a headwind as well. So this is pretty remarkable that an electric car can go nonstop between the two biggest cities in California. I mean, I remember back when I was driving gasoline cars, I always had to stop at the gas station. This is literally better than a gasoline car, with rare exceptions. And there's also an increase in power. It accelerates faster. It's just better in every way. And we're able to do this without increasing the size of the battery pack, which is a testament to the powertrain team for being able to improve the efficiency of the powertrain by such a significant margin. So with the recently announced product improvements on Model S and X, as well as continued expansion of Model 3 globally, we expect our order rate to increase significantly throughout the year and commensurate with our production levels. And in terms of other products, I'm very excited about the future for other products, especially for full self-driving, which will fundamentally transform transport as we know it, the Tesla semi-truck, Model Y, improvements to Powerwall, Powerpack, the solar route version 3 on the energy side, and no question in my mind that Tesla has the most exciting product roadmap of any consumer product company in the world. And finally, I want to thank our employees for their incredible work and our customers for their continued support.