Tesla Inc Earnings - Q1 2025 Analysis
Positives
- Tesla hit a record gross profit for the energy storage business in Q1.
- Tesla derisked things like corrosion of uncoated aluminum structures, the ceiling across the seams of the vehicle, and when you marry several components, and has proven that it's going to be just as safe as every other car the company builds.
- Tesla took the best-selling car of the last two years and ramped up all four of its global factories in Q1.
- Tesla's energy storage business achieved the highest gross profit in Q1.
- Tesla mitigates global economic risks like tariffs and political biases by regionalizing parts supply near its factories in North America, Berlin, and Shanghai.
Q&A Highlights - Q1 2025
Analyst asked about Tesla's approach to addressable market and why some people still choose to buy traditional cars instead of Tesla's electric vehicles.
Elon Musk explained that in the future, most people will not be buying cars, and that Tesla's goal is to provide a smartphone-like experience with autonomous driving capabilities. He compared the current state of the automotive industry to the early days of the smartphone market, where manufacturers tried to create too many variations of flip phones instead of focusing on one revolutionary product.
Analyst asked about the public version of Tesla's FSD software and what needs to be done to get it to a level where it doesn't require supervision.
Ashok Elluswamy explained that Tesla is working on a number of items to address the intermittent human interventions required by the public version of the FSD software. The team is focusing on solving all the issues faced by customers in Austin, where the initial launch city helped them focus on solving all the issues. They are also working on redundancy issues, such as ensuring that if one of the computers goes down, the system doesn't throw the red hands and ask the driver to take over. The team is working through a long tail of unusual interventions, which are rare but still need to be addressed.
Analyst asked about the company's supply chain and how it will be affected by tariffs.
Elon Musk responded that the company has already taken steps to localize its supply chain and is working on increasing localization to reduce supply chain risk. He noted that they are still debating the exact number of vehicles to start with on day one, but it will be a small number to carefully monitor and scale up rapidly.
Analyst asked about the launch of Tesla autonomous drive and whether it will be available in Austin by the end of June.
Travis Axelrod responded that the company is still debating the exact number of vehicles to start with on day one, but it will be a small number to carefully monitor and scale up rapidly. He noted that the company wants to pay close attention to the first time this happens and that they will be able to end of June just go to Austin and order a Tesla autonomous drive.
Analyst asked about the possibility of a multi-tiered pricing approach for unsupervised FSD, similar to the approach used for autopilot versus FSD in the past.
The company is considering a multi-tiered pricing approach for unsupervised FSD, but has not made a decision yet.
Analyst asked about concerns regarding sun glare, fog, and dust affecting autonomous vehicles' camera performance.
Elon Musk explained that the company uses a direct photon count approach, which does not wash out the image like traditional post-processing methods. This approach allows the vehicle to drive straight at the sun and see in the blackest of night, as well as in fog. The company's approach also allows the vehicle to see better than the average person in foggy conditions.
Analyst asked about the camera's ability to detect direct glare.
Elon Musk confirmed that the camera is capable of detecting direct glare.
Analyst asked about the expected price and design of the upcoming Model Y.
Vaibhav Taneja stated that the focus is on affordability and using existing lines, and Lars Moravy added that the company's intent is not to make a worse car than any they have ever produced, and the upcoming models will be built on existing lines and resemble current cars, but will be affordable and available for purchase.
Analyst asked about the impact of tariffs on Tesla's business and when things might start breaking if the announced tariffs remain in place.
Elon Musk stated that the company is not the President and that he has made his opinion clear to the President, but the decision ultimately lies with the President. He is hopeful that the President will observe whether his predictions are more accurate than others and weigh his advice differently in the future. He also stated that he is an advocate of predictable tariff structures and generally, he is an advocate for free trade and lower tariffs.
Analyst asked about Tesla's position in the development of physical AI, specifically on humanoids and drones, compared to China.
Elon Musk stated that China is currently in a very strong position when it comes to manufacturing drones, as they manufacture about 70% of all drones and have almost 100% of the drone supply chain dependency on China. He also stated that the United States should shift more of its people and resources to manufacturing, as they currently cannot manufacture their own drones. He also stated that Tesla is the leader in humanoid robots, with SpaceX and Tesla being number one, and that Chinese companies are likely to rank two through 10 on the leaderboard.
