The 2020 Q2 earnings call shared some of the next big things for Tesla and there is a lot to be excited about. With new factories, new vehicle models, update on Tesla Energy, Battery Day, Full-Self-Drive, and Insurance here is a lot to unpack from last week’s Q2 2020 earnings call.
Texas Gigafactory – “Build a better factory for less money in less time”
Austin Texas Factory will be the largest factory, along the river and will be an “Ecological Paradise” I’m eager to see what was meant by this statement. Will the factory be fully sustainable and become part of a sustainable city? This factory will manufacture the Tesla Cybertruck, Semi, Model 3, and Model Y. The Alien Dreadnought 0.5 is the software approach to factory design such that each iteration is significantly better than the last. The goal is to automate as much as possible so that “If we are going to ask someone to do something it will be useful and respectful of their time” This additional effort to improve the machine that makes the machine is critical to improved pricing as there are an “order of magnitude more improvement opportunities in manufacturing than in product design.”
Tesla Energy – “Bigger than Automotive”
Many industries beyond transportation require energy, so it follows that Tesla Energy will become more important over time. Autobidder provides “grid stabilization at the millisecond level”. This will maximize the efficient use of sustainable energy options such as wind and solar. The Megapack as well as the installation in Australia have achieved significant success with Autobidder. On the solar side, Tesla Solar has the lowest cost in the US at $1.49/W. Elon Musk said to expect further improvements before the end of 2020.
Battery Day – “You will be surprised by how much there is to see”
Cell production at an affordable price is the fundamental scaling constraint for Tesla. As such, Tesla has invested at every step “from mining, refining, cathode, anode, formation”, etc. to optimize these processes. On Battery day, expect a lot more information on these investments and work with partners such as Panasonic, CATL, LG. The most critical material is nickel. Elon called for everyone to “Mine More Nickel”. Tesla has confirmed they will use an alternative chemistry, Lithium Iron Phosphate (LFP), to continue to grow in spite of this resource limitation. Nickel based batteries provide capacity and range for the SEMI and long distance models. LFP will be suitable for passenger vehicles. Ultimately expect ~300 mile range to be the standard in the US. The 1 million mile battery and Vehicle to Grid (V2X) technology will likely be confirmed.
Full Self Drive – “From 2-D to 4-D”
Human error causes over 90% of all traffic accidents. Eliminating human control should significantly decrease in the number of deaths and injuries. Experts believe that AI will never surpass human drivers. “The people most wrong about AI are those that are really smart because they can’t believe AI could be smarter than them”. If a computer is 99.9% less likely to cause an accident is that enough to change regulations? It becomes a question of how many 9’s better than humans is enough. Autopilot essentially uses 2-D pictures to determine what to do. By comparison, the FSD uses 3-D video over time to predict what will happen next (4-D).
California Insurance is v0.9. Telematics will be like Tesla Insurance v2.0. The monthly cost will be based upon the individual probability of a crash. Tesla vehicles provide more data than any other vehicle this creates a unique advantage. Linking the manufacturer to insurance provides the opportunity to design common replacement parts to cost less while being easier to repair/replace. No other auto maker, service center, or insurance company is trying to reduce the costs to the customer. This provides further competitive advantage to Tesla. Elon stated the latest version of insurance product is nearly complete, applying for approval, and will likely be approved in additional states by the end of 2020. “When ride-hailing is ready, so will Tesla Insurance”.
“Our Cars are not Affordable Enough and we need to fix that”
Tesla is actively passing on cost savings to customers instead of increasing profitability. This had more to do with the need for more affordable options than any issue with demand. Elon indicated that one of the next vehicles will be an affordable commuter car . I expect that this will be a 1-2 person vehicle with 200 mile range using LFP batteries as part of the robo-taxi fleet. Each of these vehicles would be considerably smaller than the average vehicle on the road, reducing typical rush hour congestion. The other vehicle will be a larger passenger transport, likely to be used in the Boring Company hyperloop.
Master Plan – v3.0
With all of these advances it seems that Tesla is nearing completion of the Master Plan Part Deux. I expect the next big thing to see from Tesla will be version 3.0 of the Master plan. Perhaps this will focus on the Alien Dreadnought, a Tesla house, and greater sustainability?
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