Tesla, Inc.

This is the operator. Today's conference is scheduled to begin shortly. Please continue to stand by and thank you for your patience. © transcript Emily Beynon Pardon me, this is the operator. Today's conference will begin momentarily. Thank you for your patience and please continue to stand by. Thank you. Thank you. Ladies and gentlemen, thank you for standing by. Your conference call will begin momentarily. Thank you for your patience and please continue to stand by. Thank you. Thank you. Thank you. And pardon me, this is the operator. Our conference will begin momentarily. Thank you for your patience. Thank you. Thank you. Good day, ladies and gentlemen, and thank you for standing by, and welcome to the TESLA first quarter 2021 results and Q&A website. At this time, all participants are in a listen-only mode. After the presentation, there will be a question and answer session. Please be advised that today's conference is being recorded. If you require any further assistance, please press star zero. I will now hand the conference over to your speaker today, Martin Vieca, Senior Director of Investor Relations.

Thank you, Carmen, and good afternoon, everyone. Welcome to Tesla's first quarter 2021 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 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 join the question queue. But before we jump into Q&A, Elon has some opening remarks. Elon?

Great. Thank you. Q1 2021 was a record quarter on many levels. Tesla achieved record production, deliveries, and surpassed a billion dollars in non-GAAP net income for the first time. And we've seen a real shift in customer perception of electric vehicles, and our demand is the best we've ever seen. So this is, we're used to seeing a reduction in demand in the first quarter, and we saw an increase in demand. That exceeded the normal seasonal reduction in demand in Q1. So Model 3 became the best-selling midsize premium sedan in the world. In fact, I should say the best-selling luxury sedan of any kind in the world. The BMW 3 Series was for the longest time the best-selling premium sedan. It's been exceeded by the Tesla Model 3. And this is only three and a half years into production and with just two factories. For Model 3 to be outselling its combustion engine competitors, I think this is quite remarkable. In the past couple of quarters, we delivered roughly a quarter million Model 3s, which translates to an annualized raise of half a million per year. When it comes to Model Y, we think Model Y will be the best-selling car or vehicle of any kind in the world. probably next year. I'm not 100% certain next year, but I think it's quite likely. I'd say more likely than not that in 2022, Model Y is the best-selling car or truck of any kind in the world. With regard to full self-driving, full self-driving beta continues to make great progress. There's definitely one of the the hardest technical problems that exists, that's maybe ever existed. And really, in order to solve it, we basically need to solve a pretty significant part of artificial intelligence, specifically real world artificial intelligence. And that sort of AI, the neural nets need to be compressed into a fairly small computer, a very efficient computer that was designed, but nonetheless, you know, a small computer that's using on the order of 70 or 80 watts. So this is a much harder problem than if you were to use, say, you know, 10,000 computers in a server room or something like that. This has got to fit into a smallish brain. And this... I think with the elimination of radar, we're finally getting rid of one of the last questions. Radar was really, it was making up for some of the shortfalls of vision, but this is not good. You actually just need vision to work. And when vision works, it works better than the best human, because it's like having eight cameras, it's like having eyes in the back of your head, the sides of your head, and and three eyes of different focal distances looking forward. And processing it at a speed that is superhuman. There's no question on my mind that with a pure vision solution, we can make a car that is dramatically safer than the average person. But it is a hard problem because we are actually solving something quite fundamental about artificial intelligence. We basically have to solve real world vision AI. And we are. And key to solving this is also having just a massive data set. So just having well over a million cars on the road that are collecting data from very sort of corner case rare situations. Yeah, it's sort of like So many weird things in the world, like a truck carrying a truck, or a car with a kayak on the roof, where the kayak has a little weight dangling from the front of the kayak in front of the car. And yet the car must ignore this and just look at the road. So it's really quite tricky, but I am highly confident that we will get this done. So yes. This quarter, and I think we'll continue to see that a little bit in Q2 and Q3, so Q1 was had some of the most difficult supply chain challenges that we've ever experienced in the life of Tesla. Insane difficulties with supply chains with parts over the whole range of parts. Obviously, people have heard about the chip shortage. This is a huge problem. But then in addition to that, for example, We had quite a bit of difficulty scaling drive unit production in China because we were unable to get critical engineers there because of COVID quarantine restrictions, which meant that Tesla Worldwide was dependent on drive units made at our factory in Nevada. So that was a very challenging situation. mostly out of that particular problem. But that's just two of many challenges. So the team's really good, done an incredible job dealing with really severe supply chain shortages. So let's see, with respect to the Model S and X, there were more challenges than expected in developing the Plaid Model S, what's called the Palladium program, which is the new version of Model S and X, which has a revised interior and a new battery pack and new drive units and new internal electronics and has, for example, a PlayStation 5 level infotainment system. There's just a lot of issues encountered ensuring that the new battery was super safe was quite hard. There was more energy in a smaller case. So it took quite a bit of development to ensure that the battery of the new SX is safe. And we're trying to get all the in the car slowly. for the past few months, but we're just stacking them up in the yard and just making refinements to the cars that we build. But we do expect to ramp Model S production. It's not delivering them probably next month. And then to be in sort of fairly high volume production for the S and Q3 and to start delivering Model X and Q3 as well. So, I think as we ramp up, I think probably the demand for the new SX will be quite high. So, it's really just going to be a question of ramping supply chain and internal production processes. So, probably we're going to aim to produce over 2,000 SX per week, perhaps, if we get lucky, upwards of 2,400 or 2,500. This, again, is contingent on global supply chain issues, which are just a lot of factors outside of our control here. But I do think these things will get sold, so it's just a matter of time. And then we'll be doing a little over 2,000 SX per week. It's a great car. It actually costs us less to produce, a little bit less to produce. But it is a superior product. So in conclusion, there's a lot to be excited about in 2021 and 2022. We're building factories as quickly as we can. Both Texas and Berlin are progressing well. We expect to have initial limited production from those factories this year and volume production from Texas and Berlin next year. At the same time, we're continuing to ramp production of Model Y in Fremont and Shanghai. In the background, we're continuing work, developing work on the semi-cybertruck, the roadster, and other products. Thanks to everyone at Tesla who made this year a huge success. Now on to questions.