After soaring 10% in the day following electric-car maker Tesla Motors (NASDAQ:TSLA) third-quarter results, it's a good time for investors to check in on management's latest thoughts, insights, and expectations. Fortunately, there's plenty of new commentary from management to mull over; management talked with investors and analysts for about an hour during the company's third-quarter call on Tuesday. Here are some of the most intriguing excerpts from the call.
Tesla Energy demand is robust
Tesla's newest segment, Tesla Energy, looks like it's off to a good start. Indeed, the management's positive outlook for the segment prompted the company to transition production for Tesla energy products from its Fremont factory to its still under-construction Gigafactory earlier than planned.
"In early Q4, we relocated production from Fremont to an automated assembly line at the Gigafactory," management explained in the company's third-quarter letter to shareholders. "This positions us for strong growth in 2016, but the Gigafactory pull-ahead will push some Tesla Energy Q4 production and deliveries into Q1."
Tesla CEO Elon Musk expanded further on the extent of demand for its energy storage products during the company's third-quarter call.
[I]f we imagine the most we could possibly make in 2016, we've already sold out of that. Or at least if you were to take even a small fraction of the number of people that have placed orders -- and I assume that those orders are valid -- even if a small portion of those are valid, we would be sold out of all of 2016 production, I mean, well into 2017.
Big capital spending will slow next year
Going into 2015, Tesla planned to spend about $1.5 billion on capital expenditures. But with Tesla planning to spend $500 million in Q4 alone, the company is now on track to spend $1.7 billion on capex this year, or about $200 million more than management was planning for.
Tesla's high level of capital expenditures are concerning -- especially if the company plans to continue to spend at these levels, going forward. Fortunately, management says spending is about to pull back.
[W]e are still in the peak of our Model X investments," said Tesla CFO Deepak Ahuja during the company's third-quarter earnings call. But in 2016 Ahuja said Tesla's CapEx should be "less than 2015."
A decrease in capital expenditures during 2016 would actually be quite impressive. Expects to increase deliveries by 60% plus in 2016, lower capital expenditures as revenue soars would mean Tesla could become free cash flow positive next year.
Tesla's battery advantage
As competition is increasingly admitting to plans to bring more fully electric cars to market, investors will want to know whether Tesla's batteries are superior in any way to new entrants in the space. According to Tesla, they are.
When asked about what Tesla thought about General Motors' recent reference to a battery with a cell cost of $145 a kilowatt-hour and whether this cost looked like a threat to Tesla, management responded confidently.
"In general, we're quite comfortable in our position with the type of cells and the form factors we're using," said Tesla's chief technology officer and battery guru, J.B. Straubel, "and we think that's going to be the best cost positioning and cost roadmap in the future."
Musk added: "I mean we're constantly agonizing about cell cost and pack cost, and we don't think anyone is on a path to be even close to us."
Battery cost is becoming increasingly important as the company's planned launch of its Model 3, a vehicle Tesla plans to price at half of the starting price of Model S, gets closer to its launch and production. Tesla plans to begin selling Model 3 in late 2016.
Overall, management seemed very optimistic about the company's prospects during the call. Of course, investors should take management's comments with a grain of salt, particularly forward-looking ones.