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Tesla (TSLA) Q3 2024 earnings results and conference call transcript

Tesla is out with the company's Q3 2024 earnings release. Check out all of the details and the call transcript here.

Asif Khan

October 23, 2024 1:35 PM

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Tesla is out with the company's Q3 2024 earnings results, and the stock is reacting to the news in after-hours trading. The EV company reported adjusted earnings-per-share (EPS) of $0.62/share and revenues of $25.18 billion. Earnings missed the EPS whisper number of $0.65/share, but did come in above analysts' consensus EPS estimate of $0.58/share. Revenues also missed Wall Street analyst estimates of $25.4 billion.

Listen to the Tesla (TSLA) Q3 2024 earnings call

Tesla (TSLA) Q3 2024 Earnings Release

Check out the full TSLA Q3 2024 earnings report on the Tesla Investor Relations website.

Highlights

Profitability

• $2.7B GAAP operating income in Q3
• $2.2B GAAP net income in Q3
• $2.5B non-GAAP net income in Q3

Cash

• Operating cash flow of $6.3B in Q3
• Free cash flow of $2.7B in Q3
• $2.9B increase in our cash and investments in Q3 to $33.6B

Operations

• Operations Increased AI training compute by over 75% in Q3
• Cybertruck became the third best-selling EV in Q3 in the U.S. (behind only Model Y and Model 3)
• Over two billion miles driven cumulatively on FSD (Supervised) as of Q3 with more than 50% on V12

Summary

We delivered strong results in Q3 with growth in vehicle deliveries both sequentially and year-on-year, resulting in record third-quarter volumes. We also recognized our second highest quarter of regulatory credit revenues as other OEMs are still behind on meeting emissions requirements.

Our cost of goods sold (COGS) per vehicle5 came down to its lowest level ever at ~$35,100. In order to continue accelerating the world’s transition to sustainable energy, we need to make EVs affordable for everyone, including making total cost of ownership per mile competitive with all forms of transportation. Preparations remain underway for our offering of new vehicles – including more affordable models – which we will begin launching in the first half of 2025. At our "We, Robot" event on October 10, we detailed our long-term goal of offering autonomous transport with a cost per mile below rideshare, personal car ownership and even public transit.

The Energy business achieved another strong quarter with a record gross margin. Additionally, the Megafactory in Lathrop produced 200 Megapacks in a week, and Powerwall deployments reached a record for the second quarter in a row as we continue to ramp Powerwall 3.

Despite sustained macroeconomic headwinds and others pulling back on EV investments, we remain focused on expanding our vehicle and energy product lineup, reducing costs and making critical investments in AI projects and production capacity. We believe these efforts will allow us to capitalize on the ongoing transition in the transportation and energy sectors.

Revenue

Total revenue increased 8% YoY in Q3 to $25.2B. YoY, revenue was impacted by the following items:

• Growth in vehicle deliveries (+)
• Growth in Energy Generation and Storage and Services and Other (+)
• Higher FSD revenue recognition YoY for releases related to Cybertruck and certain features such as Actually Smart Summon (+)
• Higher regulatory credit revenue (+)
• Reduced S3XY vehicle average selling price (ASP) (excluding FX impact), due to mix, pricing, and attractive financing options

Profitability

Our operating income increased YoY to $2.7B in Q3, resulting in a 10.8% operating margin. YoY, operating income was primarily
impacted by the following items:

• Lower cost per vehicle, including lower raw material costs, freight and duties and other one-time charges (+)
• Growth in Energy Generation and Storage and Services and Other gross profit (+)
• Higher FSD revenue recognition YoY for releases related to Cybertruck and certain features such as Actually Smart Summon (+)
• Growth in vehicle deliveries (+)
• Higher regulatory credit revenue (+)
• Decrease in operating expenses including cost-reduction efforts (+)
• Reduced S3XY vehicle ASP (-)

Cash

Quarter-end cash, cash equivalents and investments in Q3 was $33.6B. The sequential increase of $2.9B was primarily the result of positive free cash flow of $2.7B.

Outlook

Volume

Our company is currently between two major growth waves: the first one began with the global expansion of the Model 3/Y platform and we believe the next one will be initiated by advances in autonomy and introduction of new products, including those built on our next generation vehicle platform. Despite ongoing macroeconomic conditions, we expect to achieve slight growth in vehicle deliveries in 2024. Energy storage deployments are expected to more than double year-over-year in 2024.

Cash

We have sufficient liquidity to fund our product roadmap, long-term capacity expansion plans and other expenses. Furthermore, we will manage the business such that we maintain a strong balance sheet during this uncertain period.

Profit

While we continue to execute on innovations to reduce the cost of manufacturing and operations, over time, we expect our hardware-related profits to be accompanied by an acceleration of AI, software and fleet-based profits.

Product

Plans for new vehicles, including more affordable models, remain on track for start of production in the first half of 2025. These vehicles will utilize aspects of the next generation platform as well as aspects of our current platforms and will be able to be produced on the same manufacturing lines as our current vehicle line-up.

This approach will result in achieving less cost reduction than previously expected but enables us to prudently grow our vehicle volumes in a more capex efficient manner during uncertain times. This should help us fully utilize our current expected maximum capacity of close to three million vehicles, enabling more than 50% growth over 2023 production before investing in new manufacturing lines.

Our purpose-built Robotaxi product will continue to pursue a revolutionary “unboxed” manufacturing strategy

Tesla (TSLA) Q3 2024 Earnings News Highlights

Check out all of our Tesla news coverage:

• Listen to Tesla's (TSLA) Q3 2024 earnings call here
• Tesla (TSLA) Q3 2024 earnings results beat EPS expectations on slight revenue miss
• Tesla (TSLA) claims the company will begin launching more affordable models in 2025

Tesla (TSLA) Q3 2024 conference call transcript

Tesla's earnings results conference call is set to kick off at 5:30 p.m. ET. Keep an eye on this article for a transcription of the earnings call right here.

• Call starts at 5:32 p.m. EDT
• Elon Opening Remarks recap results
• Tesla has achieved record deliveries
• If you look at EV companies worldwide, no other EV company is profitable, or EV division is profitable
• It is notable that Tesla is profitable despite a difficult environment
• Produced 7 millionth vehicle yesterday
• Energy storage business is growing like wildfire
• On October 10, we laid out our vision of an autonomous driving future
• Humanoid robots walking among people
• 20 Cybercabs and 30 Model Y vehicles at the We, Robot event
• No incidents at the entire events
• Cybercab had no steering wheel or brake pedals
• No way to intervene, but went by smoothly
• Elon reiterates early 2025 delivery target for new affordable Tesla vehicles
• Elon estimates 20-30% vehicle growth in 2025
• Cybercab reaching volume production in 2026
• 4680 cell is close to being the most competitive cell
• If we execute well, the 4680 will be the most cost competitive cell in North America
• We will continue to buy cells from a lot of our competitors
• We are obviously substantially increasing our vehicle and stationary storage output
• Most of the cells will come from suppliers
• Good news that the Tesla internal cell is tracking to be most competitive
• With respects to autonomy, week to week improvements in the miles/intervention
• FSD 12.5 release in Cybertruck combines code into a single stack for highway and street driving
• Release of Actually Smart Summon (ASS), we try to have a sense of humor at Tesla
• Version 13 of FSD is coming soonish
• Improving miles/intervention is a key focus
• Both Elon and the CFO are hyping the v13 improvements
• Elon is muttering about stuff...
• Model 3 and Model Y look fairly normal... Cybertruck and Cybercab don't
• We want to expose autonomy to more people
• Every time we have a significant update to FSD, we will open up to a one-month trial
• No need to wait for Robotaxi or Cybercab to experience FSD
• Tesla employees in the Bay Area are using the rideshare app with a safety driver
• Should be rolling out in Texas and maybe California
• Tesla becomes more than a vehicle and battery manufacturing company at the point that FSD truly ships
• 1 crash/700k miles for Supervised FSD right now
• We are currently not training compute constrained
• With Optimus, we showed a massive improvement at the We, Robot event
• Much better at tactile sensing
• Feel confident saying we have the most advanced humanoid robot
• All the ingredients to be able to scale for humanoid robot production
• Tesla has the AI and production capabilities to build Optimus at scale
• I think Optimus will ultimately be the most valuable product ever made
• Storage is doing well, production of pack factories is still ramping
• It won't be long before we are shipping 100 GWh per year at Tesla
• Will ultimately grow to over multiple terrawatts/hr per year over time
• Elon might have Grok assess his latest Tesla master plan
• Elon is rambling about human civilization
• "We've got a long way to go"
• Tesla will become the most valuable company in the world
• Probably by a long shot
• Thanks Tesla team
• Opening Statement comes to its merciful end
• CFO is here to read the press release to us
• CFO mentions that it is a challenging economic environment
• Elon chimes in saying that a decline in interest rates will increase automotive demand
• Interest rates have kept consumers from buying cars according to CFO
• Energy deployments fluctuate based on customer schedules
• Expect energy storage to sequentially grow in Q4 2024
• Deployments will cause a fluctuation in margins as packs get delivered
• On Automotive margins, one other thing that I want to share is that we will continue to keep whatever we can while squeezing out costs
• We are capable of lowering costs
• Decreasing COGS of the vehicle is something they claim they are good at doing
• We have started using the GPU cluster in Texas during the quarter
• Being very judicious on our AI compute spend
• Future is incredibly bright
• Say questions begin
• Focus on lowering costs of Model Y and 3 right now
• Cybercab will be a sub $30k car with tax credits, says Elon
• Elon says that there will not be a $25k EV without FSD
• Everything is going to be electric/autonomous
• Should be blindingly obvious that this is the future
• We've been shouting this from the rooftops for years
• All (most) vehicles we have made are capable of autonomy
• We make 35k cars a week, Waymo only has a thousand
• "Our cars look normal" - Elon... ?
• He has gone all in on autonomy
• The hottest Tesla product will be the factory
• We're rapidly evolving our manufacturing technology
• Having a regular $25k vehicle without FSD would not make sense
• Cost per mile is what matters
• Cybercab is not going to have a steering wheel or pedals
• The company has expanded existing service centers and bolstered mobile tech hiring
• We make the cars and we services the cars, compared to the traditional OEM model where the dealers make money from service
• We are incentivized to reduce the servicing cost
• Fundamental technology advantage for Tesla when compared to competitors in the auto industry
• Investor question on Tesla Semi
• Progressing on Tesla Semi factory in Reno
• On track to start pilot builds in 2025, with volume in 2026
• Elon: I don't think we are going to be demand limited
• We've ridiculous demand for the Semi
• Fundamentally, the cost per mile for a Tesla Semi is better than a diesel track
• Pepsi actually said last week that truck drivers don't want to go back to diesel
• It's fun and easy to drive
• And it hauls ass
• "Maybe too fast"
• The couple hundred we have shipped have the hardware required to deploy FSD
• It will be a massive improvement for driver safety and fatigue
• When will Tesla corporate X and Grok?
• Elon: "We'll keep adding stuff to do in the car"
• Making the screen have more robust options while in an autonomous vehicle
• It's why Cybercab has a great big screen and sound system
• Personal movie theater
• There are some really fun games in the car - Elon
• We are constantly looking at new features consumers are requesting
• Elon mentioned unsupervised FSD in Texas and Cali at the Robotaxi event, how are the regulatory approvals going?
• I would be shocked if we don't get approval next year - Elon
• There should be a federal approval process for FSD tech
• What is the plan for 2025?
• Elon says we talked about this already
• Cheaper models
• Factory ramps
• It's harder to get 20% of the cost out of the car than it is to build the factory and source the parts in the first place
• Elon wants people to make a movie about cost cutting...
• Heroism in getting costs out of things
• Game of Thrones, but pennies
• "There's no other car company that is even trying what we are doing." - Elon Musk
• Touting the machine that builds the machine... again
• CFO says there is a lot going on leading into 2025
• Elon Musk - Tesla is winning on everything we are doing
• There are multiple companies within the company
• What is going on with the Tesla Roadster?
• Elon Musk calls us "long-suffering reservation holders"
• Things like the Roadster are kinda like dessert
• We are working on it
• It has to come behind that things that help society more
• We are close to finalizing the design on that...
• Peter Thiel and Elon are really good friends... barf
• How Robotaxi will roll out?
• CFO rambles about nothing
• Elon - We are not 100% sure
• Hardware 4 is easier to work with
• Takes a lot of effort to squeeze that functionality into hardware 3
• There is some chance that hardware 3 cars won't meet a safety threshold
• We have designed the FSD system to be upgradeable
• The cameras are capable
• We don't actually know the answer to that. - Elon
• Analyst questions
• New Street asks about AI compute ramp, and why you don't feel you are compute constrained? Creating larger models? How are you using your compute? Follow-up about FSD rollout in TX and CA?
• Elon - the nature of real world AI is different from an LLM. 7-9 cameras that create gigabytes of context that are distilled down to a set of control outputs
• You have to then process that in the car with a very small amount of compute power
• It's all doable and it's happening, but it's a different problem than what Gemini or OpenAI is doing
• The inference computer is quite small because we spent a lot of effort on training
• The more you train on something, the less mental workload it takes when you do it
• We can make up for the size of the inference computer with heavy training
• Then there's also petabytes of data coming in, and having to sift to what is most important for training
• As I said, we are not currently training compute constrained
• Simulation is another way to improve training - CFO
• Regarding FSD rollout, states have safety regulations and thresholds that Tesla will adhere to
• We think we will be able to have driverless Teslas doing paid rides next year in TX and CA
• Adam Jonas from Morgan Stanley asks "relationship between Tesla and xAI." Are your two companies competing against each other for your time Elon?
• xAI has been helpful to Tesla AI quite a few times
• Like with scaling up training, installing equipment
• Helping to navigate node failures
• xAI is working on AGI, Tesla is trying to make autonomous cars and robots
• They're different problems
• AI is a broad spectrum - CFO
• We are solving different issues for the most part - CFO
• Tesla is focused on real-world AI, it's quite different than an LLM
• Tesla is the most efficient on inference compute by necessity
• Well-designed Tesla AI chip, but there are different problems
• xAI is because I felt there wasn't a truth-seeking digital super intelligence company - Elon
• xAI has been helpful and will continue to be helpful to Tesla
• What other car company has a world-class chip design and AI team? -  Elon
• Call comes to an end, giving only two Wall Street analysts time for a question
• Call ends at 6:38 p.m. EDT

This article is only meant for educational purposes, and should not be taken as investment advice. Please consider your own investment time horizon, risk tolerance, and consult with a financial advisor before acting on this information.

Full Disclosure:

At the time of this article, Shacknews primary shareholder Asif A. Khan, his family members, or his company Virtue LLC had the following positions:

Long Tesla via TSLA shares

Short Tesla via out of the money TSLA put options

Asif Khan

CEO/EIC/EIEIO

Asif Khan is the CEO, EIC, and majority shareholder of Shacknews. He began his career in video game journalism as a freelancer in 2001 for Tendobox.com. Asif is a CPA and was formerly an investment adviser representative. After much success in his own personal investments, he retired from his day job in financial services and is currently focused on new private investments. His favorite PC game of all time is Duke Nukem 3D, and he is an unapologetic fan of most things Nintendo. Asif first frequented the Shack when it was sCary's Shugashack to find all things Quake. When he is not immersed in investments or gaming he is a purveyor of fine electronic music. Asif also has an irrational love of Cleveland sports.