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The following is the 4q20 earnings conference call musk said Tesla is currently the leader of China’s electric vehicle market From Tesla recommended by recordtrend.com. And this article belongs to the classification: New energy vehicle industry, Smart car, Automobile industry.
January 28, 2021 – Tesla (NASDAQ: tsla) released its fourth quarter financial statements as of December 31, 2020 on Thursday. According to the financial report, Tesla’s total revenue in the fourth quarter was US $10.744 billion, up 46% year-on-year; the net profit attributable to Tesla was US $2.7 billion, up 157% year-on-year.
After the financial report was released, Elon Musk, CEO of Tesla, Zach kirkhorn, CFO, and Martin viecha, director of investor relations, attended the financial report conference call and answered analysts’ questions on the spot.[in the fourth quarter, Tesla’s revenue exceeded expectations, but its profit was lower than expected, and its share price fell by more than 4%]
The following is the record of the financial report conference call:
Analyst: what hindered Tesla from becoming a leader in the solar industry?
Elon Musk: in fact, the month on month increase of solar energy last year was very large, and its performance in the fourth quarter of 2018 was the best. In fact, we think Tesla will become an industry leader in the field of solar energy, and it can go further. We still need to put the whole company’s energy into the production of model 3 in the next few years. In fact, we have invested all the manpower of solar energy in the field of cars. However, we are also turning our attention to solar energy, because the growth is quite fast. It won’t take long for Tesla to take the lead in solar power.
Zac kirkhorn: another important part of our strategy for the solar business is to strive for a leading position in the cost structure of the industry so that we can have pricing power. This is what we have achieved in the past year. As Elon Musk mentioned, it’s very important for us to take the lead in pricing, and then we can take the lead in the industry.
Elon Musk: it’s important that we integrate Tesla’s Powerwall home battery with solar energy by the end of this year. We have a great strategy, and as Zach mentioned, we focus on saving time, cost and resources, and will eventually make progress.
Analysts: can owners transfer the FSD automatic driving system to their new cars? Will this help foster customer loyalty and boost sales?
Elon Musk: we’re not thinking about that right now. We are indeed considering increasing the price of cars equipped with FSD fully automatic driving system. Consumers and stock markets underestimate what extent FSD fully automated driving systems will be used. At present, we do not consider the possibility of transferring FSD fully automatic driving system. We will introduce the membership system in the next month or two.
Analyst: what’s the progress in dry cell electrodes? On battery day, Elon mentioned that the output is quite low.
Senior vice president of Engineering drew bagrino: Yes. Our in-house manufacturing system mentioned on battery day that we will adopt new production processes and equipment. We predict that there will be some technical challenges and unknown conditions in increasing production. However, our team has solved all the existing problems and will further improve the production capacity. At the same time, our engineering team is also further improving the design of “4680 battery”, and our further mastery of relevant knowledge also makes us more confident to achieve the cost target. In terms of production capacity, we have the equipment that can produce 10 megawatt hours of products in total, the relevant personnel are basically recruited, the material supply chain is basically in place, and the team is ready to finally achieve full capacity production this year. We are very confident in the design, production process and equipment of “4680 battery”. We will have the opportunity to achieve the target of 100 MW / h product by 2022.
Analyst: Why are you confident that you will reach the fifth level of automatic driving in 2021? Why is Dojo not a necessary condition for achieving this goal?
Elon Musk: our confidence is based on our understanding of the technology roadmap and our experience in the iteration process. Now there is no need for the car to fully realize the point-to-point automatic driving in the case of complex road conditions. This is not only to improve its performance and reliability, but also to achieve 99.9999% security. Instead, it has to perform twice or twice as well as humans. This business is developing rapidly, we have obtained a lot of training data, and the software performance has been greatly improved. We also made labeling software, which is quite challenging. We are developing towards video labeling, and the data training of video labeling will make further progress in the medium term.
When upgrading all transportation networks to the level based on video data, the relevant performance is excellent. This is a hot topic. Video labeling software can make labeling more efficient. And auto labeling is our dream. We’ve put a lot of effort into improving the performance of our tagging tools.
And Dojo, the training supercomputer. We think it might be the best neural network training computer in the world. We may also launch Dojo for those who need neural network training. We don’t want to monopolize this technology. It is very important for us to train a large amount of video data to make the performance twice, twice or 20 times better than that of human beings.
Analyst: in megawatt hours, what is Tesla’s current “4680 battery” production capacity? So what level will this figure reach in the middle and end of 2021?
Elon Musk: the production target of “4680 battery” is 100 MWh in 2022. And the production capacity will increase substantially, and our goal is to achieve 200 MWh / a production capacity.
Zach kirkhorn: according to the S-shaped production curve, the production may not keep up with the previous month, but it will advance by leaps and bounds the next month. We are trying to improve our production curve as much as possible.
Elon Musk: we don’t see any barriers.
Analyst: Tesla used to be famous for its excellent customer service, but now users can’t even make customer service calls, and customer service is pushed to a few weeks later. What does Tesla do to improve the service experience?
Jerome Guillen, President of automotive operations: we think that the best service is not to need service. Therefore, we devote great efforts to improve the quality and reliability of the car. In the past two years, the frequency of users contacting customer service has been reduced by one-third. Users do not need to contact customer service so frequently. This is our real ultimate goal. If we really need customer service, we want to make it as easy as possible. Our initiatives include increasing mobile services, which account for 40% of all services in North America, and we hope to increase that to 50% this year. 50% of the customer service process takes less than two hours. We want to solve the problem of the vehicle very quickly, so that the user can get the vehicle back quickly.
In terms of customer service appointment, it is still in the process of further improvement. We actually have 140 customer service centers in North America. Among them, 100 can provide booking service within 10 days. We will further ensure that all customer service centers can provide short-term booking service. Zach kirkhorn mentioned that we are accelerating the expansion of customer service centers. In North America, we opened 11 new customer service centers in December last year. In the first half of this year, we plan to open 46.
In the area of customer service calls, we will focus on software. We hope that all communication will be conducted on the software, that is, Tesla’s app, and the use of customer service calls will be avoided as far as possible. App is much easier to use than the phone. It can also be used in the car. It can directly book related services. It has all the historical records of the communication between the user and the customer service team. It can send photos and process payments. It doesn’t need to input credit card information. It can update related services. More functions will be launched later. By then, everyone will be satisfied with the app. It will also help you navigate directly to the location of the technician in charge of your vehicle, calculate how long it will take him to get to your location, and understand the situation. We invest a lot of resources in app. I think other companies should do the same. This is our future!
Analysts: what key stages of achievement do we need to achieve for the FSD fully automated driving system to achieve the level of fourth, fifth level automatic driving that can be shared by commercial vehicles?
Elon Musk: as I mentioned earlier, we need to upgrade all neural networks to video neural networks. To achieve this goal, we need to collect video materials, and also have to be surround panoramic video. At the same time, we have to set up eight cameras and shoot eight videos at the same time. You have to label the content of these videos, and then let the video neural network control the vehicle. From no video neural network, to single shot single frame neural network, and then to multi shot, plus time coordinates, finally form the video neural network. In fact, we have to finish the work we should do. On the basis of the internal test version of FSD released by us, there will be great progress, and we will let more people join in. In my opinion, the future route is very clear. It will be safer than human driving.
Analyst: does Tesla plan or consider authorizing related software applications to other OEMs, especially the FSD fully automated driving system and automated energy trading platform AutoBidder?
Elon Musk: we are open to licensing software to other vehicle manufacturers. We have had a preliminary discussion on the issue of authorizing autopilot to assist in driving, and we are very happy to do so. However, we need to do more work to prove that Tesla autopilot is capable of automatic driving, which should be achieved this year. We are certainly happy to share it with other car companies. We don’t want to share it alone.
So is autobidder, an automated energy trading platform. Our goal is not to build a closed platform, we will allow other companies to use our super charger super charging network, autobidder, etc.
Analysts: product, user preferences and FSD related strategies for automatic driving systems, what are the differences between China and other parts of the world? What different measures need to be taken to occupy China’s electric vehicle market share?
Elon Musk: we are the leader of China’s electric vehicle market. We must have done something right. However, I must admit that only 1% to 2% of China’s users choose the FSD fully automatic driving system, which is much lower than that in other parts of the world. We will do well in China’s FSD fully automatic driving system, and the sales volume will be higher accordingly. Chinese users are more cautious and pay more attention to details. I am very confident that as long as the FSD fully automated driving system works well in China, sales will naturally go up. I hope that sales will rise at the end of the year.
Analyst: can we say that the company’s long-term revenue is closely related to the profit per unit battery load? The target of 3 trillion watt hours mentioned on battery day means that if your target is to sell 20 million vehicles, and according to the corresponding battery capacity, half of the battery capacity will be in the form of inventory?
Elon Musk: right. The most fundamental limiting factor of electric vehicles is the capacity of the battery. Our development can’t beat the capacity of the battery factory. At present, Tesla has greatly improved the efficiency of the vehicle, that is to say, even with the standard mileage battery pack, the actual mileage is also improved to a certain extent.
Model 3 can reach 200 or dozens of miles. In addition, through the improvement of other details, it is also equipped with a standard mileage battery pack, which will reach 300, that is, about 500 km.
But fundamentally, growth depends on battery production. Of course, many companies want to sell their batteries. But why did Tesla make its own batteries? We want to promote growth. We’re not trying to crush our battery suppliers. In fact, Tesla hopes to purchase more batteries from battery suppliers, and our suppliers also know this. Whether it’s catl (Ningde era), Panasonic or LG, we very much hope that they can improve their production capacity and we can purchase as much as they produce. Obviously, there are price restrictions, because we still want the car to be affordable to as many people as possible. What I want to make clear is that we don’t make our own batteries because we want to get rid of suppliers. We want to make up for the capacity vacancy that suppliers can’t or don’t want to fill.
As battery production promotes vehicle sales, the increase in vehicle sales will further double the revenue of the automatic driving business. This is Tesla’s long-term goal, which will also bring value to the company.
Analyst: about “4680 battery”, how are you progressing in the development of cybertruck pickup? Do you plan to deliver cybertruck pickup in 2021?
Elon Musk: we have basically completed the engineering design of cybertruck pickup. We don’t stop at the stage of design any more. The part of design is done. We will be ordering equipment for cybertruck pickup soon. We’re going to use bigger Tesla developed equipment to produce the rear body of the cybertruck pickup, because it’s obviously bigger, the body is longer, and the load will be heavy.
Therefore, we will use an 8000 ton die casting machine for the rear body casting, while model y only uses a 6000 ton die casting machine. The 6000 ton die casting machine is the largest die casting equipment in the world. 8000 tons is much bigger than that. This model will be unparalleled. If we are lucky, we will be able to deliver some products by the end of this year, but I expect mass production in 2022.
Analyst: can you talk about the regulatory environment of the FSD fully automatic driving system? What’s the progress so far? Obviously, it seems hard to say, and you are in their way. We’d like to hear how well you’re communicating with them? What will be the impact of this year and next year on the promotion of FSD fully automatic driving system?
Zach kirkhorn: what we’ve seen in the United States is that this area is very diverse. But on the whole, they are not limiting the rules. It’s that we need to do a lot of work to show regulators the high reliability of our products.
Analyst: another question is about the inflation in the raw material market. At present, there are a large number of basic raw materials with low interest rates. What is your current supply chain like? How do you avoid the cost of raw materials?
Jerome Gillen (Jerome Guillen): with regard to the supply chain, the priority now is to deal with the disruption of transport in the context of COVID-19, especially between Asia and North America. We also attach great importance to pricing, and we are closely monitoring the prices of all components. We are in the process of signing a series of long-term agreements with preferred suppliers to ensure that not only the volume is sufficient to maintain growth, the compound annual growth rate is 50%, but also a good price based on reasonable risk sharing.
Analyst: there are two questions. One is about 2021 and the other is about capital. What will be the situation with regard to the regulation of credit sale? In addition, you have raised a lot of capital in 2020. In addition to using it to pay the relevant fees of the due loan, where will you use it? Can you tell me more about the areas in which you will use your high liquidity instead of the areas in which you will not use it? I mean, to what extent can high liquidity enable you to speed up the progress of capacity building or vertical integration, so as to speed up the process of comprehensive self driving function?
Zach kirkhorn: it’s not always hard to predict in terms of regulation and credit sales. The sales of regulatory credit in 2020 will eventually be higher than our expectation, so it is difficult to predict. In the long run, the sale of regulatory credit will not become an important part of our business, and we will not plan around this business. This area may or may not be strong in the next few quarters. Most of the regulatory credit sales in the fourth quarter were not planned before this quarter. These are also scattered businesses. I also want to give you more relevant information, but this is quite difficult to predict.
In terms of capital, we are considering several aspects. As I mentioned earlier, debt reduction is an important issue that we are concerned about at present. We can’t choose the early debt conversion. In the fourth quarter of last year, we had about $2 billion in debt conversion. Currently, we expect to reduce debt by $1.4 billion in the first quarter of this year due to the early debt conversion or convertible bond conversion. Debt is likely to continue to rise, so debt reduction is important. This is also conducive to reducing interest expenses.
We also invest that money in our future capabilities. We didn’t have a chance to do it in the past, but what we can do now is we can build capacity, especially in the factories in Austin and Berlin. We are not slowly increasing production capacity, but thinking about what level we want its final production capacity to reach, and making investment with this as the goal. So in terms of capital efficiency, it’s an important component, and we’ve never had a chance to do that before. It’s great to have enough liquidity to focus on this area.
The expansion of service is very important for the company’s future strategy. As mentioned in the financial report of the fourth quarter, the scale of service centers and mobile services increased significantly from the third quarter to the fourth quarter, and also increased a lot compared with the first half of this year. Now we can invest in this field, and we can also invest in the super charging network to prepare for the future demand, which will make us pay a higher cost in the short term, but it is a right thing for our users and our company itself.
Analyst: you mentioned that you want to increase the number of batteries purchased from suppliers. Does this require them to have the ability to manufacture “4680 battery”?
Elon Musk: No, No. Although we are communicating with them about the production of “4680 battery”, it is not necessary. For example, the new model s uses 18650 batteries. “4680 battery” is just a little more advanced. We will continue to use the existing batteries in the next few years.
However, we will gradually replace the old battery model, and switch to a relatively consistent battery model. But this does not mean that we have such requirements for suppliers. The better solution is that we have the ability to deal with multiple models of batteries ourselves, rather than asking our suppliers to provide a specific model. Of course, in the long run, it is definitely more advantageous to use a certain kind of battery.
Analyst: about increasing production, one is investment and the other is qualified human resources. Do you have any obstacles to restrict growth?
Elon Musk: this will hinder the development of a certain area or limit the growth rate. This will not affect the final scale, but it will affect the speed at which we can gather more talents and train them in the right fields. If you have a 20000 employee factory, you can’t hire 20000 employees immediately. They’re usually doing other things. They have to get out of anything they’re doing or move in from somewhere else. Therefore, it will take some time.
We do believe that we can maintain an annual growth rate of more than 50% for many years to come.
Analyst: Elon, in 2018, you tweeted about electric trucks and how interesting it would be to work with Daimler and sprinter. We haven’t heard any follow-up since then. But at the same time, we see many well-known start-ups very active in the field of electric trucks and the last mile. You said that you have a lot of related projects in progress, can you talk about the latest views on this market? Are you still interested in this piece?
Elon Musk: Tesla will definitely produce electric trucks. It should be noted that the most fundamental problem is the limitation of batteries. People without manufacturing experience can hardly imagine how difficult it is to increase production. This is the most difficult thing in the world! It’s relatively easy to make a prototype.
The main reason why we didn’t accelerate the development of new products is that, for example, Tesla’s semi electric truck doesn’t have enough batteries. If you want to put the existing semi prototype into production, it is easy to do. But our batteries are not enough. When we make our own “4680 battery”, we will have enough batteries for semi electric trucks. Semi electric trucks need five times as many batteries as cars, but they don’t sell as much as five times as many cars. Therefore, it is meaningless for us to manufacture semi now. Once we can solve the bottleneck of battery production, it is absolutely meaningful for us to produce semi.
Analyst: OK, thank you! Maybe I can dig into your past. About two years ago, on autopilot investor day, you said you were working on the next generation of Tesla chips. It was about two years later. Any new developments?
Elon Musk: Yes, to be clear, software still can’t fully use FSD function on one computer. I am personally convinced that with the first generation of fully automatic driving computers, people can achieve fully automatic driving with security level 5. For the second generation, we hope its performance is twice as good as that of the first generation, and it can be used with higher resolution cameras. It needs to change a lot of things at the same time. But we didn’t rush out with the second version of the chip. We have made good progress.
If we now launch the fully automatic driving system, Tesla’s FSD chip, the 2 generation, we can easily distract, because the chip will let us backwards quite a bit at the software level, and software is the key way to achieve full automatic driving. So I’m not too worried about that. This is progress, but not the most critical variable. That has to change. Let the software work normally, let all the neural networks become video, this is the key variable.
Analyst: Thank you very much. My first question is about the independent manufacture of your batteries. In addition to increasing production capacity, your goal is to reduce prices or costs by 50% and increase product range by 50% in a few years. So what is the first mock exam time for these goals? What is the specific time to achieve these goals? Perhaps, what is your view on Tesla’s market access mode through keeping low prices?
Elon Musk: we are very confident that we will achieve these goals in three years. Three years, maybe four years, leave us a little room.
Zach cockhorn: Yes. We’ve made progress on battery day, and we’re still on track. I think this may be the best reference for our current cost trajectory.
Elon Musk: Yes. We hope to do better than what we showed on battery day, but we are at least confident of what we showed on battery day.
Analyst: let’s try to smooth out the details first. If I remember correctly, 10 years ago, you said that when Tesla was able to produce cars for the mass market, you would resign as CEO and become chief designer.
Elon Musk: Well, I hope to be CEO of Tesla for a few more years. I think I still have a lot of exciting things to do. I think it’s going to be hard to leave. So I hope to continue to run this company in the next few years.
Obviously, no one has been a CEO now, and people should not rely on the position of CEO. The workload of Tesla’s CEO is unimaginable. I think I can do more – I do more technical work than the average CEO.
So it would be great if I could have more free time instead of working day and night seven days a week. I have to work from getting up in the morning to going to bed at night, and the work intensity is very high.
But I don’t think it’s over yet. We still have a long way to go before we can really accelerate the arrival of sustainable energy. I mean, Tesla’s goal, from the beginning, is to accelerate the development of sustainable energy. However, if you ask how many cars on the road today are electric, the proportion is still very small, about 1%, or less than 1% of the total number of cars in the world.
So there’s a long way to go. Only 1% of cars are electric. Solar still has a long way to go, although we are excited to see the emergence of cost competitive wind, solar and geothermal energy. Of course, we also need a lot of stationary batteries. I mean, basically, the three main directions for sustainable energy in the future are sustainable energy production, from solar, wind, geothermal and hydropower, and so on. I’m not against nuclear power. In fact, I think it’s actually a good thing that nuclear fission is in a well-designed reactor, not affected by bad weather.
The second thing you need to do is to store a fixed amount of electricity, because most renewables are intermittent. The wind doesn’t blow all the time. The sun doesn’t shine all the time. So you need a lot of batteries. It requires a very long and high cycle life. And then you need electric transportation. If you can do these three things, we will have a very bright future in energy and environment. So there’s a long way to go. So I’m still motivated to do it.
Analyst: I’m glad to see the time update for semi. First of all, since the mileage of a semitrailer is usually predictable, will Tesla’s semi be the first car to be fully autonomous?
Elon Musk: I think it’s very possible. Yes, I’m not sure who will be second, but yes, very likely, yes.
Jerome Guillen, President of automotive operations: the number of hardware parts on semi trucks is no different from that on other Tesla cars.
Elon Musk: Yes. As now, we modify the software parameters of autopilot or autopilot for model 3 and other cars. We’ll just need to notify the FSD brain to do it.
Analyst: so is retraining a part of it?
Elon Musk: No, I think there will be different control functions, because there are some curve designs that you can achieve in ordinary cars, but not in trucks, just like you want to parallel park on the streets of a city. It needs to know its limitations as a giant truck.
Analyst: that makes sense. My follow-up question is, can you help us explain why battery power technology will eliminate hydrogen cell fuel technology?
Elon Musk: Yes. I mean, to be honest, I’ve had this question about regular cars countless times, even in the early days of sports cars, even before they came out. In a way, people say, hydrogen will be a better way to store car energy than batteries. But this is not the case.
Hydrogen is the first in the periodic table and its density is very low. Its density is as low as liquid, just like polystyrene foam. It’s just a liquid very close to absolute zero. So it’s unrealistic that you have to keep it liquid. If you want it to become a lower density high-pressure gas, you need a huge fuel tank, which has to have a high pressure. Basically. If someone said to replace hydrogen with an ultimate chemical energy storage mechanism, I would say propane or something like that, or methane – which is much better than hydrogen. And turning it into a fuel cell will only complicate the situation. This is crazy. We are very confident that we can use batteries to make long-range trucks. If you think hydrogen is OK, for example, in terms of watts per kilogram of available battery per hour, how much weight do you need to walk 500 miles? To what extent does this affect the payload?
Jerome Guillen, President of automotive operations: I agree. We also see that truck regionalization is becoming more and more common. I think it will be perfect, Tesla truck is the best fit, and I’m looking forward to more people participating in it soon.
Elon Musk: but basically, we don’t think there’s any problem in building a long-range truck with batteries. The problem is battery supply, only battery supply. More reading: Tesla: 4q20 revenue of US $10.744 billion, a year-on-year growth of 46%, exceeding expectations alixpartners: China’s electric vehicles are expected to account for 50% of global models in 2020 Guojin Securities: Tesla industry series in-depth report: electric and intelligent fly together Tesla wave is coming (with report) China Travel Federation: Tesla’s new energy sales volume ranks first in May Weilai and other new forces become an important force in the new energy vehicle market. In October 2020, the sales volume of new energy vehicles increased by 119.8% year on year. Four car companies including Tesla sold more than 10000 vehicles. Weilai: 3q19 financial report teleconference record Li Bin said he was not worried about the competition of domestic version of Tesla Model 3. Passenger car market analysis in November 2020. Weilai: summary of 2q20 teleconference. It is estimated that 11000 vehicles will be delivered in Q3 Lower the threshold of renting battery model Weilai: gross profit margin of 3q20 financial report 14.5% Q4 delivery 5600 + second generation platform NT2 is absolutely ahead Li Bin is very confident ideal car: total revenue of 3q20 is 2.511 billion yuan, with a year-on-year growth of 28.9% Weilai: revenue of 3q20 is 4.526 billion yuan, exceeding the expectation Chinese suppliers may be the most competitive suppliers in the world Tesla: 2q20 revenue dropped 5% year on year to $6.036 billion
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