Q3 conference call excerpts

All comments are from Elon Musk unless otherwise noted. Emphasis added.

DEMAND: Demand is not our issue. Production is our issue. And being too perfectionist about future products. Those are legitimate things to be concerned about, but not demand. We have more demand than we can really address. And there are a lot of things, levers, that we could pull to increase that demand, that we’re not pulling.

REPORTING: Part of the reason why we don’t release the monthly deliveries number is just because it varies quite a lot by region, and then the media tend to read a lot of nonsense into deliveries. We’ll have, like, a thousand cars reach a country one month, and none the next month.

MODEL X: We do have the advantage with the X that we have the dual motor powertrain and the chassis — sort of the bottom end of the car — sorted out with Model S. So that takes that part of the risk out of it. But with the falcon wing doors and second row seats . . . we’re adding some very new stuff that’s really not out there, and that never has existed in a way that was useful. I’m confident the demand for the X will be very high once we’re in production. It addresses a different market segment. Some people want and SUV and some want a sedan. It’s about fifty-fifty in the market.

BATTERY TECH: Whatever we build out for the Gigafactory has to work at least at the lab level this year because we’re making monster investments in equipment, and there’s a certain amount of time — a year or two at least from working at the lab level to working at small scale production — and at least a year after that before you can go from small production to mass production. That’s why we’re not worried about being blindsided by some technology at the Gigafactory. If it doesn’t work at the lab right now, there’s no point in worrying about it, because you can’t scale within the time frame . . . Everyone and their mom is approaching us about technology improvement — literally with their mom in some cases. JB Straubel adds: I’d be pretty shocked if there were any major improvements that were close enough to commercialization that we haven’t been aware of or found out about. Back to Musk: My my top advice really for anyone who says they’ve got some breakthrough technology is please send us a sample cell. Okay? Don’t send us PowerPoint. Just send one cell that works with all appropriate caveats. That would be great. That sorts out the nonsense and the claims that aren’t actually true. Talk is super cheap. The battery industry has to have more BS in it than any industry I’ve ever encountered. It’s insane.

COST REDUCTION: We felt comfortable with at least a 30 percent reduction in cost just based on the location and economies of scale. That’s without taking any technology improvement into account, and we’ll certainly do technology improvement. If we can’t get to 30 percent without technology improvements, someone should shoot us, because that would be in complete defiance of economies of scale and obvious cost savings.

PRODUCTION AGITA: Making one of something is quite easy. Making lots of something consistently that’s going last a long time is extremely hard. In fact, it’s way harder to make the machine that’s going to make the machine than to make the machine the first place. … We have Model X alphas done. The beta is being built right now. It would be quite easy for us to make a handful of production units that are scalable and homologated. That doesn’t really move the needle. What really matters is at what point can we get to scaled production of a really high-quality car. And that’s really in the third quarter. And we’ve also learned a lesson in manufacturing that sometimes you have an issue that’s one out of a hundred, but unless you’re making a hundred of something, you don’t see it. You think the car is all good, but randomly one out of a hundred is wrong. But you don’t know necessarily which one out of a hundred, so you have to go look at all hundred cars. It’s really about getting the details right. If you get all the details right, it’s the difference between a diamond with a flaw and a diamond without flaw. It’s damn hard to do that, but that’s what we’re going to do.

CHINESE FACTORY: It’s not going to make sense in the long term to be transporting vast numbers of cars, particularly the Model 3, the more affordable car, across the Pacific to China. It’s going to make a lot more sense to do local production there. So it would be really driven by running out of factory space in California, so we have a choice: Build a factory somewhere other than China, for Chinese consumption, which doesn’t make a ton of sense. When you’re taking about a one-and-a-half ton to two-ton vehicle for a product, it makes sense to build that were it’s going to be used.

MORE ON MODEL X: The Model X isn’t necessary to get to the Model 3, which has been the goal of the company all along. The Gigafactory is certainly needed for the Model 3, and the Gigafactory is going to take us two and a half to three years to build and get to serious production, so we’re kind of making the Model X in the meantime. But it will serve the purpose of creating great cash flow to support the Model 3, and obviously reduce the dilution and amount of capital we’ll need to raise from investors for the Model 3, because it should generate a lot of cash flow. I think the Model X is going to be something special. It’s readily an expensive car but . . . it’s something that should exist.

MODEL 3: That smaller drive unit [in the dual-motor Model S] in many ways is a precursor for the Model 3. Because it represents a significant improvement in cost, and in steady state power, and a number of other factors. It’s a second generation motor, essentially, and that’s a good pathfinder for Model 3 on the powertrain side. And obviously the Gigafactory is very much geared toward the Model 3 pack needs. And then, for the rest of the Model 3 — one easy thing to do would be to make a 20 percent smaller Model S. That would be easy to do, but I think we might be able to do a few more interesting things that just that.

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One thought on “Q3 conference call excerpts

  1. […] more great quotes (there are some really funny ones), I recommend Teslamondo’s distillation of […]


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