Key Takeaways from Tesla’s Q2 2022 Financial Results Webcast

Tesla accompanied its Q2 2022 Financial Results with a forward-thinking webcast led by Elon Musk and key executives that shined a new light on Tesla’s sustained production, updates, and growth.

Key Presentation

• Q2 2022 was one of Tesla’s strongest quarters yet, with production records achieved at Fremont and Shanghai despite shutdowns.
• Supply chain nightmares continued, but the second half of the year should be record-breaking on all fronts.
• Production ramp at Berlin is progressing, with 1,000 cars/week achieved in June. Giga Texas should achieve a similar milestone within the next few months.
• 2170 cells are still being used for a majority of vehicles. There are already enough cells to support vehicle production through the end of the year. 4680 won’t be important until next year.
• Giga Texas has second-generation manufacturing equipment for 4680 cell production, joining Giga Fremont and Shanghai.
• Full Self-Driving Beta with city driving capability has been pushed to over 100,000 owners.
• The Full Self-Driving Beta has traveled over 35 million miles, which may already be more than all other autonomous solutions combined.
• Tesla has been making significant advancements in manufacturing processes: the automaker creates the world’s largest castings that are both cheaper and light, effectively reducing body welding robot count by 70% at Austin and Berlin.
• There will be further simplicity and manufacturing improvements with Cybertruck and future yet-to-be-unveiled products.
• Tesla Vision can see that a collision is about to occur with 100% probability, adjusting seatbelts and airbag deployment. This enables a tension seatbelt feature that can tighten with impending detected collision rather than impact like typical automotive systems.
• Tension seatbelts are coming in an over-the-air update that will provide enhanced safety to all cars with compatible hardware.
• Cybertruck is expected to enter production in the middle of next year, and is destined to be Tesla’s best product ever.
• A second AI Day event will be held later this year.
• GAAP automotive margin declined temporarily to 27.9%.
• Giga Shanghai shutdowns negatively impacted GAAP margins due to idle time and factory startup costs.
• Ramp efficiencies of new Gigafactories are also comparatively expensive.
• The Energy business is achieving new records, selling significantly more solar panels in the past quarter.
• Tesla’s cash position was maximized, including a nearly billion-dollar sale of Bitcoin, due to production uncertainties.
• A previously-undisclosed holding of Dogecoin was unaffected.
• Nonetheless, Tesla achieved one of its highest operating margins at 14.6%.
• Record-breaking third and fourth quarters are likely.
• Margins will increase once Giga Berlin and Austin achieve a volume ramp next year.
• 50% growth continues to be the target for this year.

Investor Q&A

• Tesla has a lot of respect for the car companies in China, which are overtaking the automaker as the top producer of electric vehicles.
• More improvements to be made to neural nets, with a frame-rate of 36fps targeted simultaneously across all eight cameras — comfortably above the 24fps cinematic standard.
• Tesla will stop increasing car prices once inflation calms down; however, the automaker is only planning to slightly decrease pricing for the foreseeable future. Elon’s prediction is that inflation should normalize by the end of the year.
• Most commodities are trending downwards by the end of this year. Lithium is becoming expensive, and Musk is continuing to urge entrepreneurs to enter the lithium refining business.
• Cryptocurrency serves no purpose to Tesla’s mission of accelerating the adoption of sustainable energy. Bitcoin is like a “sideshow to the sideshow.”
• Structural battery pack is akin to an AA architecture. It will become a significant improvement compared to electric vehicles holding a battery essentially as cargo.
• Tesla’s previous head of AI was writing all the code himself, thus his departure is causing progress to temporarily hit a grinding halt.
• 120 people in the AI group that are “extremely talented,” with Musk still confident that Tesla will solve Full Self-Driving this year.
• New ramp challenges to cover in Austin and Berlin related to 4680 cell production.
• Tesla procures 1,600 unique pieces of silicon from over 40 different suppliers.
• There are long-term contracts for battery metals, thus Tesla’s only foreseen concern is Covid shutdowns.
• Inflation-related increases in Q3 won’t be as dramatic as Q2.
• Cybertruck to optimistically begin deliveries in the middle of next year.

Analyst Q&A

• Priority on scale with current 4680 production ramp. Once that’s achieved, Tesla will develop new battery material technologies and longer-range battery packs.
• Dozens of minor issues impacting the 4680 production ramp, including a new revolutionary process that will be solved to enhance energy density and reduce the cost of the battery cell.
• The fundamental rate limiter for a transition to sustainability is the production output of lithium-ion battery cells.
• Lithium is one of the most common elements on earth. However, refining it is quite difficult and requires large machinery.
• Speculatively 2/3 of batteries will be iron phosphate or iron phosphate with manganese in ten years.
• Iron is the most common element on earth, even more copious than oxygen.
• Tesla is working on a cathode facility, as well a lithium refining ‘activity’. “If suppliers won’t solve these problems, then we will.”
• The main issue is one of production rather than demand, as Tesla’s vehicle lineups faces extremely long lead times.
• Regardless Tesla won’t raise costs to an extremely high level, as a lack of affordability will “drive demand off a cliff.” Current pricing is already at embarrassingly high levels, according to Musk.
• 40,000 vehicles/week capacity achievable by the end of the year.
• Confident that production will reach 5,000 cars/week each at Giga Austin and Berlin this year, then 10,000 cars/week by the end of next year.
• Price increase for Full Self-Driving planned for the end of this year coinciding with a wide beta release.
• Value of Full Self-Driving is extremely high, and not well-understood by most people.
• Tesla wants to fulfill orders as quickly as possible, and is taking steps to reduce its backlog.
• Daily orders from around the world, even with long lead times.
• Elon Musk will work at Tesla for as long as he can advance the cause of sustainability and autonomy.
• Exciting news coming on AI Day, “further along” than anticipated.
• Tesla has no ambitions to produce chips, as it’s not necessary.
• Suppliers went above-and-beyond, “thanks very much.”
• Much of Tesla’s silicon is nonetheless custom-designed.
• Re-writing software alleviated chip shortage concerns, and even led Tesla to reduce the number of chips in a car by increasing efficiencies and using one chip for the function of two. This lowers cost and increases reliability.

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