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Key Takeaways from Tesla’s Q1 Earnings Call

By Mohit Oberoi, CFA - Published 5 Months ago. 0 Comment
Key Takeaways from Tesla’s Q1 Earnings Call
  • Tesla reported its Q1 2020 earnings on April 29 and posted better than expected results. The company posted a net profit for the third consecutive quarter.
  • In this article, we’ll look at the key takeaways from Tesla’s Q1 earnings call.

 

Key takeaways from Tesla’s Q1 earnings call

In its Q1 earnings call, Tesla said that it shipped higher prices variants of Model Y in the first quarter and expects Model Y margins to be soon near Model 3 levels. Model Y is profitable from Day 1.

 

China made Model 3 margins are almost at par with Freemont. The company has lowered Model 3 prices in China to qualify for the subsidy. There’s still scope to reduce costs and expand margins even with lower prices. Also, better fixed cost absorption would help in expanding margins.

 

Elon Musk called for more infrastructure investments in the United States and termed China’s infrastructure better than the US. Tesla does not see an impact from the withdrawal of federal tax credit in the US. Beginning this year, Tesla cars don’t qualify for the tax credit in the US.

 

Elon Musk during Tesla’s Q1 earnings call

Elon Musk lashed against the shelter in place orders in the United States and called then undemocratic. The company’s Freemont plant is shut due to the shutdown orders.

 

Musk now sees a 40% CAGR for Tesla over the long term. Previously, he forecast a 50% growth. During Tesla’s Q1 earnings call, Musk compared ordering car the traditional way to a root canal surgery. According to Musk, if one is fast, he can order a Tesla car in 90 seconds.

 

Tesla’s financial position

The company had $8.1 billion in cash and cash equivalents at the end of Q1. During the Q1 earnings call, Tesla said that it has expanded Model S range to 400 miles and the new range would reflect in EPA results when testing resumes. The company is not cutting on Capex like other automakers but is cutting down on some expenses.

 

Tesla solar is still hampered by shutdowns. Tesla expects a run rate of 1,000 weekly installations possibly by the end of the year. During the Q1 earnings call, Tesla also said that stationary storage demand exceeds supply.

 

Autopilot and FSD

FSD (or full self-driving) subscription may be coming later this year. Currently, it is sold for $7,000 in North America and half revenue is deferred. Elon Musk said during Tesla’s Q1 earnings call that the next Gigafactory would be announced within three months in the US. Robotaxi and Network App might be coming in some markets next year. Musk called Autopilot a competitive advantage during Tesla’s Q1 earnings call and compared it with Google search engine.

 

David Einhorn, the well-known Tesla stock short-seller, has however questioned the accounting policies. He has especially questioned high account receivables and stable gross margins despite the headwinds.

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