I am not a Tesla shareholder, so listening to Elon Musk on the Tesla Q1 2018 conference call was absolutely enthralling to me. You can tell he is really tired of all the Chicken Little’s screaming “the sky is falling!” With mostly good humor, a few stiff interjections, and a hang up, he made plenty of news in the conference call. He gave a very short intro, basically saying that he is finally pleased with production of the Model 3.
Things at the Gigafactory are finally humming along well after they got complacent about their core technology. Currently, they are producing 3,000 Model 3 battery packs per week. This was achieved without substantial capital expenditure. Three weeks prior to the conference call, it was taking 7 hours to build a battery pack. As of May 2, it was taking only 17 minutes.
During a single peak hour, they were producing batteries at a rate of 5,000 per week. Musk estimated it would take a month or two to reach that rate on a permanent basis.
After a few questions asking about specific timelines, Musk indicated he had had enough with these boring questions, and decided to take questions from the YouTube audience instead — well, from a retail investor and YouTuber who was representing 150 TSLA shareholders who hold 63K+ shares ($18M+ of the stock). Musk stated that he was not interested in giving constant updates to help day traders, and said he was not here to convince people to buy the stock. He blatantly said if you are worried about volatility, do not buy Tesla stock.
I have seen way too many articles suggesting Tesla would need another capital raise, and Elon flatly refuted that publicly. Not only did he say it wasn’t needed, he emphasized that he didn’t want to do that in 2018 either — not going to happen. His exasperated tone indicated he may have been thinking something like, “How many times do I have to repeat no, we do not need a capital raise? Don’t act like I never told ya!”
I am not the only one who thought this brutal truth-telling was refreshing. Surprisingly, CNBC host Jim Cramer was ecstatic at Musk’s perceived recklessness. He described that as exactly how a big CEO or hedge fund manager should behave. Basically, he exclaimed that Musk should maintain an “if you cannot stand the heat, get your ass out of the kitchen” attitude.
After the few pestering questions from those who had been listening to the Chicken Littles too much, Musk got to the YouTuber, Gali or Galileo, who asked at least 5 questions — the rest had only been allowed 1 question with 1 follow-up. I have actually seen a few of Gali’s YouTube videos and remember them being insightful. Here is his channel, by the way.
A Tesla critic might say Musk was just looking for softball questions. Fair enough, but I see it from a kinder angle. Musk is working insane hours. He has stated Tesla should be producing 5,000 Model 3’s per week by the end of June. To him, trying to get a detailed timeline is a fruitless question.
You really have to understand Musk’s psyche. He does not care about the money. He cares about the product, and its impact on the customer and the planet. The Tesla team has been working incredibly hard, and Musk feels they have achieved a tremendous amount.
It is clear he wants to share that with the public. Musk likes solving problems and tries to only devote around 1% of his time to public speaking (maybe not counting tweeting). Musk is dedicated to maximizing his time. Heck, when he decided to try dating again, he thought to himself something like, “about 10 hours a week for a girlfriend should be about right.”
Tesla is really pushing the envelope with innovation. When you do that, clear timetables are impossible to provide. Musk has been getting constant criticism for not being on time. From my perspective, he was not going to put his neck on the chopping block again (at least not in this fashion, ironically). He laid out a rough estimate and that is just going to have to do for now.
Musk said the major bottleneck was final assembly but noted that speeding up production was “not brain surgery.” The solutions are straightforward and are just a lot of work. Some processes cannot currently be automated in an efficient fashion. For now, those processes will be taken over by human labor. Sometime around June, they will shut the line down, and certain processes may be able to be automated at that point.
Musk declared his employees have numerous good ideas, and it was just going to take time to solicit them and implement them. Musk specifically pointed out vehicle production is all about the software, and that Tesla is the best automaker at software — by far.
Interestingly, Tesla is still redesigning Model 3 parts to make for ease of manufacturing. This has been a focus of the Model 3 for years, but they continue to iterate. Musk further explained how this process of trial and error would be applicable to future Model Y production.
Of late, the headlines have been that Tesla way over-automated the Model 3 line. After listening to the call, such a statements seems to be a gross oversimplification. Musk did not provide extreme details, but a more nuanced explanation he seemed to provide is that they tried to automate too much at once and there is still a good chance that automation can be increased progressively.
There was plenty more positive news made during the call (and after it), so stay tuned for further updates.
For now, if you are sick of the Tesla haters, rock out to Kanye and Don’t Panic about the stock price.
PS: I do feel a bit ridiculous for using “claps back” in title, but I finally just learned what the term means after hearing that phrase often. It is really the perfect phrase for what happened in the conference call.
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