Good morning, good afternoon and good evening wherever you are in the world, welcome to EV News Daily for Thursday 25th July 2019. It’s Martyn Lee here and I go through every EV story to save you time.
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TESLA Q2 EARNINGS REACTION
The headline is that Tesla missed expectations. Not yours, or mine, but a random group of people whose job it is to make predictions. So any negative story you see in the next 24hours, just check it’s not based on Tesla ‘missing’ anything, because by all accounts that was a great set of results.
Those on the call:
Martin Viecha – Senior Director of Investor Relations
Elon Musk – Co-Founder & Chief Executive Officer
JB Straubel – (Former) Chief Technical Officer
Zachary Kirkhorn – Chief Financial Officer
Jerome Guillen – President, Automotive
Drew Baglino – Vice President of Technology / (New) CTO
The production rate of Model 3 continued to improve gradually throughout the quarter, breaking a monthly record in May and then again in June. All manufacturing equipment in Fremont has demonstrated capability of a 7,000 Model 3 vehicles per week run rate, which we continue to work to increase. We aim to produce 10,000 total vehicles of all models per week by the end of 2019.
Model S and Model X production continues to run on a single shift schedule, and we produced over 14,500 vehicles in Q2. Our deliveries increased sequentially to 17,722 as we continue to prioritize inventory reduction (working capital management). As a result, our total new car inventory levels have fallen to just 18 days of sales (including vehicles in transit, on ships and company owned vehicles), compared to the industry’s typical US inventory level of ~70 days of sales.
Preparations for Model Y production in Fremont began in Q2. Due to a significant overlap of components between Model 3 and Model Y, we are able to leverage existing manufacturing designs in the development of the Model Y production facilities.
Additionally, we are making progress managing Model Y cost with only a minimal cost premium expected over Model 3. Due to the large market size for SUVs, as well as higher ASPs, we believe Model Y will be a more profitable product than the Model 3.
As a result of this growth and operational improvements, we generated $614 million of free cash flow (operating cash flow less capex) in Q2. Combined with our public offering of equity and convertible bonds (net proceeds of $2.4 billion), we ended the quarter with $5.0 billion of cash and cash equivalents, the highest level in Tesla’s history.
JB Straubel – in a summary from electrive: “In his position as Senior Advisor, Staubel says he will continue to work on some of Tesla’s current projects. In particular, he mentioned “new technologies and innovations” . While Musk was the investor and innovative businessman behind Tesla, Straubel was regarded as the leader behind the battery technology – to this day, Tesla is known to rely on round cells instead of the usual pouch or prismatic cells. Musk said that if he hadn’t eaten lunch with Straubel in 2003, “the company would basically not exist.””
Cash – “Tesla generated $614 million of free cash flow in Q2. Combine that with the $2.4 billion raised in a public offering of equity and convertible bonds and the company ended the quarter with $5 billion.
101 Vehicles added to Mobile Service fleet and 25 new service centre locations.
“Last quarter we delivered more than 95,000 vehicles, which is a record for Tesla. To put that in perspective, it’s nearly an 80% increase in deliveries compared to the second quarter of last year. I mean it’s sometimes hard for people to appreciate when you have a large manufactured item with a complex double supply chain, just how difficult that is. I’m incredibly proud of the Tesla team for being able to do that.
Model 3 was once again the best-selling premium vehicle in the U.S., outselling all of its gas-powered equivalents combined. In Europe, Model 3 is approaching sales levels of its established premium competitors, and it was awarded a five-star rating from Euro NCAP earlier this month. This is in addition to Model 3 receiving an overall five-star rating in the U.S. from NHTSA and including earning five stars in every category and subcategory and achieving the lowest probability of injury of any vehicle ever tested.
Motor Trend also recently selected Model S as the best vehicle they have ever tested in their 70-year history across all other cars. So, Motor Trend, which is arguably the leading authority in evaluating vehicles, the Motor Trend Car of the Year is the most coveted award. It’s pretty incredible that they would say that Model S in their entire 70-year history is the best vehicle they have ever evaluated.
We’ve also issued numerous software updates and improvements that have made Model S and Model X faster, safer, and added dozens of new features. Just like Model 3, Model S and X have the hardware needed for future full self-driving capability.
As we look ahead to the rest of the year and into 2020, we remain focused on launching new vehicle and energy programs further expanding our manufacturing operations and continuing to improve customer service.
We remain focused on international expansion because local production is essential to being cost competitive. By the end of this year, we will — we expect to be producing Model 3s in volume out of Gigafactory Shanghai. And as you can see it from the photos in our quarterly letter, the equipment installation there is progressing well. We also have to finalize a location for our European Gigafactory before the end of the year.
Here at Fremont, preparations for Model Y production has already begun. Since Model Y has high component overlap with Model 3, it should be — we expect it to be a lot easier to ramp. It’s something on the order of three quarters of all the parts are common between Model 3 and Model Y. And we expect the manufacturing costs for Model Y despite additional content to be approximately the same as Model 3.
This quarter, we opened 25 new service locations and added more than 100 mobile service vehicles to our fleet. And although our fleets have a total — Tesla fleet size has doubled in the past 12 months.
Nonetheless, we’ve made massive improvements in service, especially in parts waiting — time to wait for parts and in collision repair, and we’ve in-sourced a great deal of the collision repair activities which has had, I think, quite a good effect on customer happiness. And this will continue in the months to come.
So, it’s a very important milestone, and I think we believe Tesla has – is now at the point of being self-funding, and we expect to be cash flow — free cash flow positive in future quarters with the possible temporary exceptions around the launch and ramp of new product. From a profitability standpoint, we expect to be probably around breakeven this quarter and profitable next quarter, so that’s — I feel pretty confident about that.
And then in terms of deliveries, we expect deliveries to be between 360,000 and 400,000. We expect production to be a slightly higher number than that, and demand to be a slightly higher number than that. So, people often confuse deliveries, production, and orders for Tesla, and they’re actually three different numbers.”
Jerome Guillen on Service: “Yes, as you pointed out the best service is no service. So we’re trying to continue improving the quality of the cars andnd track this daily. Fewer and fewer service visits are required from the most recent cars that we’re building. So we’re on a good trend there. We also need a lot fewer work to finish the cars in the factory. Besides that, we are making more parts for service centers and we ship everything same day, pretty much so that people don’t have to wait for parts, and we accelerate service, and we increase capacity. There’s a lot of improvements that we’ve already implemented and many more on the way. So I am relatively optimistic and I’m happy to help with the service team.”
On Giga Shangai: “”Gigafactory Shanghai continues to take shape, and in Q2 we started to move machinery into the facility for the first phase of production there. This will be a simplified, more cost-effective version of our Model 3 line with capacity of 150,000 units per year – the second generation of the Model 3 production process. Just like in the US, the Model 3 base price of RMB 328,000 is consistent with its gas-powered competitors, even before gas savings and incentives. Given Chinese customers bought well over a half-million mid-sized premium sedans last year, this market poses a strong long-term opportunity for Tesla. We are looking forward to starting production in China by the end of this year. Depending on the timing of the Gigafactory Shanghai ramp, we continue to target production of over 500,000 vehicles globally in the 12-month period ending June 30, 2020.””
On Battery Day: “”Yes, I think for Battery Day, we’re going to do a comprehensive review of cell chemistry, module and pack, architecture, and manufacturing plan that has a clear roadmap to a terawatt-hour per year. The time for this will probably is about six months like maybe February or March next year show and tell.”
MORE TESLA ATTENTION IN AUDI’S AD CAMPAIGN
“Audi is now parking its e-tron and setting up banners and such in front of Tesla stores. More specifically, it’s currently doing so in Germany.” says InsideEVs, who ask: “Correct us if you think we’re wrong, but we honestly feel like this is counterproductive for the automaker, all while inadvertently promoting Tesla.”
GM’S CRUISE TO BUILD LARGEST FAST CHARGER STATION IN US
“GM’s self-driving unit Cruise issued an update on its progress as it looks to achieve large scale deployment in San Francisco, including a scaled buildout of electric vehicle infrastructure.” reports Phil at Electrek: “Cruise’s investment in EV infrastructure will include “the largest EV fast charger station in the country,” CEO Dan Ammann said in a Medium post. There weren’t any further details about that specific plan, however.GM’s Cruise has the world’s largest fleet of all-electric self-driving cars — it uses Chevrolet’s Bolt EV — and Ammann says Cruise owns “nearly 40 percent” of the EV fast chargers in San Francisco, where it is headquartered.”
HUBJECT AND IOTECHA PARTNER ON EV CHARGING
Hubject, a globally recognized leader in simplifying electric vehicle charging with eRoaming and innovative infrastructure technology and processes, is partnering with IoTecha, a company specialising in providing software and hardware solutions to support EV charging infrastructure.
Together, the two companies will simplify the implementation and deployment of Plug&Charge and Smart Charging systems using ISO 15118 for electric vehicles globally.
With smart charging technology enabled by ISO 15118, utilities can work with city planners, major fleet operators, property owners, and local governments to predict and manage the amount of energy entering electric vehicles when charging. This energy management will help alleviate the strain on the grid caused by the upcoming influx of electric vehicles, reducing the need to create additional expensive infrastructure projects to meet peak demand. Essentially this technology helps to evaluate how the grid stays balanced by incorporating and regulating a number of dynamic variables. These variables can include the needs of EV drivers based on what they are willing to pay, duration at charging station, the amount of charge needed and status of the grid (peak demand, etc.)
BMW DOUBLE BATTERY PRODUCTION CAPACITY IN SPARTANBURG, USA
“BMW has doubled battery production capacity at its Spartanburg plant in South Carolina for the upcoming plug-in hybrid models. The investment amounts to around ten million dollars.” reports electrive: “The high-voltage batteries are to be used in the PHEV offshoots of the X3 and X5, which will also be built in Spartanburg. Production of the X5 xDrive45e is scheduled to start in a few weeks in August. By the end of the year, 120 employees will be working in battery production.”
BMW IX5/INEXT SHOWS PRODUCTION SUV BODY FOR THE FIRST TIME
“BMW currently calls its future electric midsize SUV as iNext, but we have also heard it would be named iX5. What makes perfect sense, considering there will be an iX3. Anyway, we’ll stick with the “official” name to talk about the prototype our spy photographers managed to capture. And we can say we are now in front of the real deal.” reports InsideEVs: “Our photographers managed to compare the iNext to an X5 that was also on the carrier and the electric looks longer and lower. It also presents a larger wheelbase, which could translate into a roomier interior if the electric SUV is not much lower than the Spartanburg-build model. Speaking of the Georgia plant, the iNext will very likely be produced there. Not only because the US is a major EV market, but also because the new SUV will very likely seat over the CLAR platform, which was conceived to be this flexible and accept hybrid and pure electric drivetrains.”
MERCEDES EQS CAUGHT AS THE SLEEK S-CLASS OF ELECTRIC VEHICLES
“Mercedes is indeed planning a range-topping EV that will likely go by the EQS moniker once it will be launched early next decade.” reports Adrian for Motor1: “Spotted up close and personal by our spies, the heavily camouflaged prototype was trying to hide its dramatic shape underneath the disguise, but it’s pretty obvious we’re dealing with something quite special. With a low roofline and a swoopy shape – this isn’t your typical Mercedes as it looks sleeker even than two of the company’s most attractive cars, the CLS and the AMG GT Four-Door Coupe. The door handles don’t stick out from the body, and that’s because the EQS (name not confirmed) will be getting pop-out handles like the next-gen S-Class. Both rear fenders appear to have a cap for refueling, which would indicate the test vehicle is a plug-in hybrid, but we have a feeling one of them is simply there just to throw us off. What looks to be like a closed-off grille points towards an EV that doesn’t need to cool off a combustion engine like a conventionally powered vehicle. There’s some thick camo on the hood and in other places, but the car itself looks like it has the production body. he Mercedes EQS is expected to ride on a dedicated electric vehicle platform known as “MEA” from “Modular Electric Architecture.” Aluminum-intensive, the hardware will accommodate a flat floor structure to maximize the amount of space available inside. Power will reportedly come from dual electric motors – one on the front axle and the other at the rear – to enable an all-wheel-drive layout. We’re expecting more power compared to the EQC, which offers 402 hp”
And thanks to MYEV.com they’ve set us another Question Of The Week. Keep your comments coming in on email and YouTube…
What’s the most constructive way to stop a charged space being ICE’d?
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