Okay, welcome guys.

Hello, everyone, thank you for joining me here today.

I'll be your kind of post moderator, Ben Sullins.

I have a show called Teslanomics,

if you guys are new here and unfamiliar.

For everyone else that does know, that is in Crowdcast.

Make sure to go ask your questions,

up vote questions, and all that.

I do have, we will be restreaming the broadcast,

once it begins, which is set for 2:00, 12:00,

sorry 2:30.

I have it in the back of my ear,

so I'm waiting for them to come on.

So, when that happens you know that's where,

that's what we'll jump over to,

and I'll kind of be quiet during the duration of that,

but Tesla just did release the new update letter.

And so, I just wanted to go

through some of those talking points with you real quick.

First and foremost let me just take a look and see,

what it has, too, too, too, too.

I had it in the other screen.

There it is, okay, Tesla second quarter update 2018,

Q2 automotive gross margin increased to 20 percent

20.6 percent GAAP and 21 percent non GAAP.

I think that's pretty amazing.

Those were some of the things that we

really needed to be looking for

was an increase in the margin,

because that is where, how they're gonna actually end up

being profitable down the road.

Next, you have the Model 3 gross margin,

turned to slightly positive in Q2,

expecting roughly 15 percent in Q3,

so that's good, that's the direction that we want

the margin and everything to be headed,

because that will lead to profitability.

Then you have the next bullet

here on the update letter

expecting to produce 50 to 55,000 Model 3s in Q3.

Delivery should exceed that.

So, if you just go back a year ago,

and see what they were doing,

it's pretty, it's pretty wild,

to see kind of how far they've came,

how far they've come on this.

So, that's just an astounding number

if you've been with Tesla for a while,

and you know kind of

what they're normally producing.

So, there you go.

They did a major cost restructuring in Q2,

and they have $2.2 billion of cash

and cash equivalents at the end of Q2,

and they're expecting to grow in Q3 and Q4.

So, remember that's the big equation right?

If you run out of cash that's where things will go bad.

So you can, you know you can be taking on date.

You can be spending and expanding your business,

and doing all these things

as long as you still have cash in the bank,

which you're getting from either financing operations,

or you know divesting some of your assets,

which doesn't typically happen.

So, the last bullet on the update was a CAPEX projection

in 2018 adjusted to less than $2.5 billion,

meaning that they're gonna be spending less money

on new things that they need to do

to kind of scale this and grow.

So, some other notes that I thought were interesting.

The Model 3 according to their letter here

in July of 2018 the Model 3 not only had

the number one market share position

in its segment in the US,

it outsold all other mid-size premium sedans combined,

accounting for 52 percent of the segment overall.

The popularity of the Model 3

is a true testament to the product.

Based on trade ins they've received so far,

they can see that the total addressable market

for the Model 3 is much larger

than mid-sized premium sedans.

We are drawing customers from many other segments

including non premium sedans and hatchbacks.

So, the reason I bring that up,

because I think that is extremely interesting,

because what I think, what you're gonna see,

is you're gonna see a lot of people that weren't BMW

or premium car owners already coming into this space,

and you know this would be the most expensive one

that they'll ever purchase.

So, that's what they mean

by expanding the market segment,

and I think that's tremendous.

They went on to talk about how some of the things,

these things are produced,

and one of the things that they're talking about here

are that they're now producing,

or they have multiple times in July

achieved 5,000 per week milestone.

We will now continue to increase that further

with our aim being to produce 6,000 Model 3 vehicles

per week by late August.

We then expect to increase production

over the next few quarters beyond 6,000 per week

while keeping additional CAPEX limited.

So, that's the thing, right?

If you just wanted a big number

of how many can you actually,

how many cars can you actually produce?

Then yeah you could just kind of

just keep having that number go up and up and up and up

by spending more.

So, what they're saying is that they're gonna try to do it

in a capital efficient way,

meaning not spending much more money,

but still increasing production,

so that way they'll you know

be a kind of a bigger margin on those dollars coming in.

Now they also state that they aim to increase production

to 10,000 Model 3s per week as fast as we can.

Notice they took off the date

of when that might be possible.

I and many others still believe that this will be something

that we'll see in 2019 maybe,

but not something that you're gonna see

very, very kind of soon.

Best guess, 2019.

Could be even even kind of beyond that.

So, they also said that they are trying to get GA3,

which is the main general assembly line in Fremont

to produce 5,000 Model 3s per week,

and then GA4 the one out in the tent,

would be in addition to that.

So, that means that there are

some changes that they need to do.

And so, I'll just bring that up here it says,

to address the short-term issues with GA3, we built GA4

to help us reach our 5,000 units per week target earlier,

and ultimately to push us past that point.

We were able to build the GA4 quickly,

due to the design simplicity of the Model 3 architecture,

and because it's a tent.

Okay, the layout and processes of GA4

are similar to those of the Model S and X assembly line,

while the quality and cost of production are roughly equal

to those of GA3.

General assembly excluding the cost of components

accounts for approximately three percent of Model 3 cost.

The rest of our manufacturing processes

remain highly automated,

including stamping, body, welding, paint shop,

powertrain assembly, and battery pack assembly.

I thought that was pretty crazy to see that it,

that it's only three percent of the overall cost.

To me, I just, it seems like the assembly of it

is such a huge part of the process.

Yeah, it's wild to that that only accounts

for that small percentage there.

So, they also stated in this that

they're now selling the performance Model 3,

which you've seen a lot of,

you've heard a lot of, and that the,

at the end of July, Gigafactory 1 battery production

reached an annualized run rate

of roughly 20 gigawatt hours,

making it the highest volume battery plant in the world

by a significant margin.

Consequently, Tesla currently produces more batteries

in terms of kilowatt hours

than any other car makers combined.

I don't know if that's a big achievement.

Not many other car makers are purely electric

and selling at this high volume.

It just doesn't, it's just not happening.

so you know, that, I don't know.

Yeah, you're the best of you know,

the only one in the industry.

So in Q2, they said that we've produced a 53,339 vehicles

and delivered 22,319 Model S and X vehicles,

and 18,449 Model 3 vehicles,

totaling 40,768 deliveries.

Now remember, they were able to push out

the 200,000th car being delivered to Q3,

so that was a big milestone,

because now that means the tax credit at least in the US

is gonna be extended.

So, that's a big news,

and I think we're gonna see even bigger stuff

happening in Q3,

because a lot of people kind of be you know,

basically saying that they're sandbagging

on their deliveries in order to maximize that,

which makes makes a whole lot of sense.

Now, there's some comments here about the energy side.

They said while we are largely focused

on the Model 3 ramp in Q2,

our energy business grew as well.

Demand for our energy storage products

remain significantly above our production rate,

even as we gradually add capacity.

Overall, we expect our energy business revenue

to improve in the second half of this year.

And I bring that up, because I know a lot of people

are waiting on the energy products.

So, it's good news that that stuff is happening,

and that the people I've spoken to a Tesla about this

all agree that it's, you know,

it's important for them and it's going up,

and they're working on it.

So, if you have a power wall,

you're waiting on a power wall, something like that,

I think you know hopefully

we'll start to see some deliveries

and some changes to that down,

down in the future here.

Okay, so that kind of ends the update letter there.

There's a lot more tidbits in there,

but well of course we're gonna,

we're gonna get into the call here.

And so, let me switch over and just make sure.

I'll take some questions now from Crowdcast

while we're waiting.

And guys, give me a thumbs up if the audio and video,

and everything looks good.

I am on a new set up here with crazy high performance,

so it should be should be pretty solid.

And then of course like I said,

I have the actual webcast in my ear,

so as soon as that starts,

or you know even a couple minutes before,

I'll switch over and then I'll shut up,

so he doesn't have to listen to me yammer.

Okay, let's see.

Going to the questions on Crowdcast.

Liz asked, have you heard when the autopilot self-driving

beyond level two is planned?

I don't think that you're gonna see that anytime soon.

I think that honestly autopilot

or self-driving beyond level two

is something maybe five years from now

will actually be a reality.

There may be little nuances and additional features,

but I think you'll still see a hands on system

that requires the driver to pay attention

and isn't truly beyond level two.

Level three I think is actually kind of a scary one,

so I'm a little mixed on that.

I think what we ought to do

is to jump to level four, level five.