Tesla, Inc.

Ladies and gentlemen, thank you for standing by, and welcome to TESLA's Q1 2020 Financial Results and Q&A Webcast. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star 0. I would now like to hand the conference over to your speaker, Mr. Martin Vieca, Senior Director for Investor Relations. Please go ahead, sir.

Thank you, Sherry, and good afternoon, everyone. Welcome to Tesla's first quarter 2020 Q&A webcast. I'm joined today by Elon Musk, Zachary Kirkhorn, and a number of other executives. Our Q1 results were announced at about 1 p.m. Pacific time in the update deck we published at the same link as this webcast. During this call, we'll 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 one now if you would like to join the question queue. Before we jump into Q&A, Elon has some opening remarks. Elon?

Thank you. So Q1 ended up being a strong quarter despite many challenges in the final few weeks. This is the first time we've achieved positive gap net income in a seasonally weak first quarter. Even with all the challenges, we achieved a 20% automotive gross margin, excluding regulatory credits, while ramping to major products. What we've learned from this is that we've actually learned a lot here. After the Model 3 ramp from three years ago, Our new products get ramped faster and become profitable sooner. In Q1, we produced more Model Ys in the first quarter than Model 3s in Fremont in the first two quarters. Thus far, the Model Y ramp has been even faster than the Giga Shanghai ramp in Q1. Most surprisingly, in other words, we are ahead of the schedule that we were ahead of already. Most surprisingly, Model Y was profitable already in its first quarter of production, something we haven't achieved with any product in the past. Regarding autopilot, we released a new software update for traffic lights and stop signs to early access users in March and to all US customers with the full self-driving package just last week. Our cars will now automatically stop at each stop sign or traffic lights until the driver gets a confirmation to proceed. I should say that the car is actually capable of much more than this, but we are only exposing functionality that we feel quite good about and where we feel that it is probably a safety improvement. We are collecting data from over a million intersections every month at this point. This number will grow exponentially as more people get the update and as more people start driving again. Soon we will be collecting data from over a billion intersections per month. All of those confirmations are training our neural net. Essentially, the The driver, when driving and taking action, is effectively labeling reality as they drive and making the neural net better and better. I think that this is an advantage that no one else has. We're quite literally orders of magnitude more than everyone else combined. I think this is difficult to fully appreciate. It's the reason that it's very difficult to have a search engine that competes with Google because everyone is training Google all the time with their searches. So when you search for something and you click on a link, you're training Google every time you do that. It's just very difficult for any new search engine to compete on that basis. So all those confirmations are training on neural net, and soon cars will be able to drive through an intersection without a confirmation, as well as to make turns, and we really feel we're I feel extremely confident that it will be possible to do a drive from your home to your office most of the time with no interventions by the end of the year. So we can almost do this already with the leading-edge alpha builds that are driving in the car. So, let's see, on other technology fronts, we increased the range of Model S and X, yet again, this time to 391 miles for Model S and 351 miles for Model X. And it should be said that, actually, the real Model S range is 400 miles. But when we did the last EPA test, unfortunately, EPA left the car door open and the keys in the car. and they did this overnight. And so the car actually went into waiting for driver mode and lost 2% of its range. And as a result, it had a 391 test. As soon as the EPA reopens for testing, we'll redo the test and we are extremely confident that we will achieve a 400 mile or greater range with the Model S. But to be clear, the Model S, for the past two months, the true range of the Model S for the past two months has been 400 miles. And, of course, we're not stopping there. We'll always continue pushing for improved range over time and improving handling, acceleration, and all the little details that make a Tesla special. For Model Y, we introduced a revolutionary two-piece rear underbody casting that we're going to be making a single-piece casting later this year. meaning essentially the rear third of the body is cast as a single piece, which is no casting of this size of complexity has ever been done before. In fact, there isn't even anything that is on par with the two-piece casting for the Model Y. So we're really pushing the envelope on vehicle structural engineering and manufacturing. I'm very excited about this approach as it allows us to reduce the weight, the cost, and improve It's better in every way, essentially. For Model Y, we also introduced a revolutionary new heat pump, which allows the car to have a higher range. So the Model Y has remarkable range on par with, in fact, slightly better than, I guess, the Model 3. And just despite being a bigger car, that weighs more. And the heat pump is a key contributor to that. It is especially excellent at low temperature driving. And the feedback we're getting from customers who have received the Model Y thus far has been universally positive. We're confident this product will be our best-selling product ever. In conclusion, and just looking forward, I guess this is a forward-looking statement, we are absolutely continuing our Model Y capacity expansion at full speed at both Giga Berlin and Giga Shanghai, and here in Fremont when they will let us continue. Localized production in China and in Europe will bring the cost down, making our parts even more competitive over time. While many other companies are cutting back on investment, we are doing the opposite. We are absolutely pedal to the metal on new products and expanding the company. And we're really looking forward to being in sometime next year a truly global manufacturer with major factories in North America, China, and Europe, and a capacity of well over a million units a year. So there's a tremendous amount to look forward to, and we can't wait to tell you what's going to happen. Thank you.