Conclusion. Our confidence in Tesla’s ability to capitalize on the EV and autonomy opportunity remains unchanged. Our perspective that reaching this EV and autonomous future will take longer than most think, but be bigger than most think also remains unchanged.
Musk commented that Tesla will, “Productize the factory,” adding, “anyone could have made that car (Model T), but not anyone could make River Rouge (Model T production line).”
Updating our Model 3 thinking. We are factoring in comments from Tesla’s Q4’17 Update Letter that call for an increase in capex largely related to retooling for the Model 3 ramp. The company added on the earnings call that part of this capex spend will include, “significant investment in our required up front for the next phase of Model 3 production… Way more than 50% (of the capex) is the Model 3.” We believe retooling could cause a temporary step down in production in the fall of 2018, and as a result, are lowering our Model 3 production target to 168,400 from 182,000. Our revised numbers are in line with Street estimates as of yesterday’s close. Our weekly Model 3 production number exiting 2018 remains unchanged at 7,150 vehicles. Importantly, our 2019-2023 Model 3 numbers remain unchanged.
Link to model here.
Autonomy. One new insight from the earnings call was Musk’s commentary into why Tesla’s vision suite (camera, radar, and ultrasonic sensors) should eliminate the need for LiDAR. The dumbed-down version is Musk believes in taking the “hard path” and using a sophisticated neural net to solve passive object identification with cameras instead of using lidar as a “crutch.” In the long run, he believes this path will not only cost less and look better, but will produce a superior system capable of seeing through rain and sleet, and performing in more complex situations. This is important given that if Tesla is successful in using its vision suite instead of LiDAR, every Tesla produced today will be upgradable to full autonomy with a software update, which would catapult the company into the lead position in the race to autonomy.