preached today at the annual Tesla shareholders meeting, with services at the house of Musk yielding mostly positive portents.
Vegan seat covers, auto-pilot rollout timing, and Powerwall specifications appear to be the major issues on the minds of Tesla shareholders, judging by the questions posed. Matters of finance, production and sales were not addressed in detail at this forum.
Model X and Gigafactory on track, battery swap DOA
The Model X SUV is on track for deliveries in the third quarter of this year, and the Gigafactory will be ready for battery-pack production by the middle of 2016, according to Musk. He said, "I am looking at the latest iteration of the Model X every week. And it really is -- it’s turning out to be a really great car. I think the Model X may arguably be a better SUV than the Model S is as a sedan."
The battery swap program appears to be a non-starter. Musk said, "Yes, we have basically the LA-to-San-Francisco pack-swap capability in place. And I believe all Model S owners in the California area have been invited at this point to try it out. And what we’re seeing is just a very low take rate. [...] So, we did an initial round of invitations...like, 200 invitations. And I think there were a total of four or five people who wanted to do that, and they all did it just once. So, OK, it’s clearly not very popular. He added, "And based on what we’re seeing here, it’s unlikely to be something that’s worth expanding in the future."
Musk also noted that Deepak Ahuja, CFO since 2008, is planning on retiring.
Major battery business will be with utilities, not consumers
Despite the hype around the residential battery pack, Musk noted, "We expect most of our activities to be with the Powerpack, not the Powerwall. So it’s probably 80 percent, maybe more than that, of our total energy sales that are likely to be at the Powerpack level to utilities and to large industrial customers. And that’s where the economics are very compelling, because there is an important difference between price and cost. The cost to the utilities of between day and night is quite substantial, because the power usage is often sort of 2:1, at least, if not greater than 2:1, sometimes substantially greater than 2:1, between peak day usage and trough night usage."
Regarding the home battery, he said, "We actually took some of the negative feedback to heart. And I am very happy to announce that we’ve dramatically increased the power capability of the Powerwall. So it’s actually going to go from having 2 kilowatts steady, 3.3 kilowatts peak to a 7-kilowatt power, 5-kilowatt steady. Price is unchanged. So, [we] basically more than doubled the power output of the Powerpack, and the price is going to stay the same."
Musk added, "We’re going to prioritize delivery of the Powerwall to people who have an existing solar installation or are getting a solar installation, because the solar installation comes with an AC-to-DC inverter, which means you don’t need to buy an additional AC/DC inverter for the Powerwall, and because that cost is already there with your solar system." He continued, "We’re also going to be prioritizing delivery of the Powerwall to partners that minimize the costs to the end user, so the net result is we’re expecting people to be able to purchase and install the Powerwall for about $4,000. That’s basically $3,500 for the Powerwall with the increased power capability and then $300 to $500 for installation, labor and cost -- that’s the expectation." He suggested that the cycling application is not suitable for the U.S. residential market but makes great economic sense in Germany or Australia.
More reflections from Musk
"It’s really unprecedented for a car company to grow, to have this level of percentage growth. I’m going to try to maintain it for as long as possible, but...as I’ve said before, it seems likely that we’ll be able to maintain a roughly 50 percent average growth rate per year for several years to come."
"This year, we introduced the dual-motor all-wheel drive. And I think, actually, I’d like to admit...in introducing it, we probably didn’t do an ideal job of explaining that 'dual-motor' meant 'all-wheel drive.' So...there are two motors and they’re connected to the four wheels, but that connection was not clear for a lot of potential customers."
"We also introduced autopilot, initially starting with the hardware suite, and now we’re gradually updating the software. So the current autopilot version 1 hardware consists of a forward radar, a camera, a forward camera, and 360-degree ultrasonics that go out to about 5 meters, or roughly 16 feet, around the car. So that allows us to do what we call...'highway autopilot,' as well as some cool features like auto-park and being able to summon the car on private property. I am actually...testing the latest version of autopilot every week. In fact, I have typically two or three builds per week that I’m testing in my car."
"We also introduced the dual-motor 70-kilowatt-hour car. [...] That’s been very well received by customers; We’re seeing upward of one-third of customers choose the 70D."
"So, this is sort of interesting: In terms of looking at the North American market share of high-end premium sedans, we’re actually the number-one seller."
"Regarding SpaceX going public: I’m trying to build a city on Mars. [...] I think it would not be super-loved by the public markets. I’d expect with SpaceX...that we will probably go public once we have regular flights to Mars."
Several shareholders expressed interest in the company building a "vegan" Model S that eschews leather seat covers. I would suggest that leather seat covers are surely not the only animal products in this or any car. Musk just appeared in New Orleans at the annual EEI conference to ease the worries of the electric utilities. He is now considering an appearance at next year's PETA conference.
Baird has set a $335 price target for Tesla shares.
***Thanks to Seeking Alpha for the event transcript.