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Live Blog 2012 Shareholder's Meeting June 4, 2013

Live Blog 2012 Shareholder's Meeting June 4, 2013

Summary of

BIG ANNOUNCEMENTS

1. Product architecture 7 years with refresh at 3 years and redesign at 7.
2. GEN III will have the form-factor of the Model S and will try to have autopilot.
3. Gross Margins on Gen III will be lower than the 25% projected for Models S and X in order to increase market share and improve affordability.
4. minimum 40,000 units/year demand
5. going from 34 Stores and Galleries to 50.
6. Lot of opportunity in middle America
7. Will have 70 service centers which will soon show up, prior to opening, on teslamotors.com
8. Model X doors will have pinch strips and proximity sensors.
9. End of 2016 will premier Gen III
10. Elon thinks there should be an incentive program for Tesla owners who "sell" cars to their friends.
11. Quick charging is the final announcement and there will be a LIVE DEMONSTRATION on June 20.
12. 120kw charging speed is not the end of the improvements to Supercharging.
13. Zero rent or tiny rent for Supercharging.
14. Expand sales, service and supercharging to rest of world middle of 2014

SamO | June 4, 2013

Standing room only.

Lisa Brenton has been appointed as an inspector of elections. Computer Share has certified the proxy materials.

SamO | June 4, 2013

90% quorum online already, so vote was superfluous.

SamO | June 4, 2013

Elon's presentation will now begin.

SamO | June 4, 2013

We wil try to adjourn around 4pm

SamO | June 4, 2013

Elon has a VERY short haircut.

SamO | June 4, 2013

I think things have gone "pretty well". (laughter from audience)

SamO | June 4, 2013

Many chose unwisely to short our stock. I presume those people are not here today. (laughter from audience)

SamO | June 4, 2013

Elon discusses the Model S bought by Consumer Reports. Funny how they didn't break down once. (laughter from audience)

SamO | June 4, 2013

The reason we didn't get a 100, not to quibble, but CR said there was a problem with rapid travel and availability of charging.

We are going to address those issues.

SamO | June 4, 2013

$760,000,000 in Cash* is on the screen behind Elon.

SamO | June 4, 2013

"even if you are flying at treetop level, you don't have a lot of margin for error"

SamO | June 4, 2013

US demand 15,000 units/year demand
30,000 overall world unit/year demand

SamO | June 4, 2013

Cars will be on boat in June, delivery in July.

Q4 shipments to Asia.

Extrapolate world demand at U.S. levels x3
minimum 40,000 units/year demand

SamO | June 4, 2013

First thing Tesla owner's do when they meet him is to tell him how many cars they have sold.

SamO | June 4, 2013

By end of this year going from 34 Stores and Galleries to 50.

SamO | June 4, 2013

Even bigger expansion in the service center side.

The biggest obstacle is people who ask if there is a service center nearby.

Need to do something about the 405

Bob W | June 4, 2013

Live video feed here:

http://www.teslamotors.com/2013shareholdermeeting

(Rewind "DVR" button visible at bottom if you hover over screen).

SamO | June 4, 2013

There is a lot of opportunity in the middle of the country. Sometimes people underestimate real demand in the middle of the country.

[Now showing the Supercharger video]

SamO | June 4, 2013

Thanks @BobW

Should have included the link.

SamO | June 4, 2013

One of the things we raised capital for was Superchargers.

References taking a road trip to NYC at the end of the year with his 5 kids. References Chevy Chase Vacation movies (audience laughter).

Mel. | June 4, 2013

SamoSam, thank you

SamO | June 4, 2013

Model S Deliveries >21,000
Q4 gross margins 25%
Showrooms ~50
Service Centers ~75

SamO | June 4, 2013

Model X still late 2014

Addressing the Minivan and SUV markets

Falcon-wing door has the smallest opening where you can open a door.

There will be a pinch-strips and won't squash the finger. Will have proximity sensors, so you don't have to worry about it hitting the roof of your garage.

SamO | June 4, 2013

If you are shorter than 6'3"-6'4" you will be able to stand up in the second row.

SamO | June 4, 2013

Second major innovatoin is intelligent AWD. Can direct power at the millisecond level. Adjusting the torque from front to rear.

If you went over ice or oil, you would be able to distribute power just in time. Unlike a mechanical linkage which has significant latency.

SamO | June 4, 2013

Handling of a sport's car, looks great, but more functionality than a minivan.

SamO | June 4, 2013

2013
60kwh
EU Version
APAC Version

2014-2015
Model X
RHD
AWD

2016-2017
3rd Gen

SamO | June 4, 2013

End of 2016 GEN III

SamO | June 4, 2013

Q/A Starts

Any plans to add noise to the car?

(oohs and ahhs close to boos, but the lady was old)

Avoid noise pollution. (starting claps)

Sensible thing is that long term you have proximity sensors that direct pleasant sounds toward people and only going where it needs to go.

SamO | June 4, 2013

Q: Why have 2 board members been replaced.

A: One board member was a Daimler replacement.

Abu Dhabi 7% owner transferred to TACA? Then TACA sold at $35, probably not wise. (laughter) I urged them not to but anyway . . .

SamO | June 4, 2013

@Mel

Thanks!

SamO | June 4, 2013

My new year's resolution was to have more fun. Although past years are better in recollection. (laughter) I think there is a steady improvement in the enjoyment aspect.

SamO | June 4, 2013

Net working capital?

We will be great from a cash standpoint. We have a lot of extra cash from the last round, so that gives us the ability, even if we suck at cash management.

Do you compare to metrics to Porsche?

Our CAPEX is likely to be higher than them for sometime to come. That said, on the separate metric of gross margin, we can meet or exceed for Model S and X. For Gen III, the best move is to aim for a smaller gross margin on that vehicle.

I would rather sell the car for less, than to get the higher gross margin.

SamO | June 4, 2013

AWESOME QUESTIONS!!!!

Q: incentive plan for buyers who sell cars to others?

A: There should be. What do you suggest?

Q: Give one year free service for every car sold.

Q: i'm Getting my Model S on the 18th.

Q: You tweet that it might take less time to fill a tank of gas?

A: The recent announcement is NOT all that there is. You should wait for a demonstation LIVE on June 20.

Q: About falcon wing and snow and rain on the roof.

A: The door will shield you from snow and rain. And we do have water channels to move water, unless you have wind, just like a conventional car.

We do have an innovation for carrying skis. This is going to be a car to take to the slopes.

SamO | June 4, 2013

Q: What do we do for people that don't have garages?

A: Cities should implement charging, but people can go to Superchargers and wait for a few minutes.

You notice how terrible gas stations are. How much they suck. But you can't convince people until they've tried charging at home.

SamO | June 4, 2013

Q: Self dirving car last year.

Q: 6 year refresh cycle and peak 1-2 years in. What is the life cycle of the Model S? Where could sales peak.

A: Since we don't have a sales infrastructure. Peak sales will likely to be in year 3 -4. It will take us quite a while to get to South America and a lot of complaints that the car isn't in South Africa (laughter).

4 years from now peak of Model S.

Significant redesign will be at 6th or 7th year and a refresh at year 3.

SamO | June 4, 2013

Q: Will Daimler cars made by Tesla compatible with the Supercharger.

A: We are very open. We will have to ask for some compensation. Some cost sharing on that basis. I always want it to be that the Supercharger is free. Never have to deal with a cost structure like that and take that same approach.

We do not intend to create a WALLED GARDEN. We need to have high-speed charging and we couldn't wait around for other car makers to agree.

They can join, copy or do something better.

SamO | June 4, 2013

Q: NADA and some state dealer associations have declared war. Are the sales projections tempered by these factors?

A: This is terrible. It does make problems. Auto dealers keep saying we should grant them a franchise. Can you give me an example where a startup worked with franchises. No good examples. We have to do this directly.

Our philosophy is NOT TO MAKE A PROFIT ON SERVICE. (laud applause). Dealerships make most of their profit on service so this would not be a good outcome for us.

The biggest challenge is not small dealers but the multi-state giants.

If you look at the opinion poll anywhere in any context "whether people want direct sales" the answer is overwhelmingly YES.

From a low of 86% to a high of 99%.

In the 86% case, the dealers tried to rig the poll, and that was the best they could do. If democracy was working, then there wouldn't be legislation hindering Tesla's selling cars.

They are bragging that they are stopping Tesla from selling. This is a BIG MISTAKE. What's actually going to happen is that customers are going to lead a revolt.

I think customers are going to fight really hard to sell Tesla's products.

SamO | June 4, 2013

Q: Will your 3rd Generation look the same as the S.

A: You will see a "strong family resemblance" so the answer is YES.

We want to do some interesting things that go beyond physical look.

Maybe autopilot. Not sure if we will be able to do that in time.

SamO | June 4, 2013

Q: Superchargers will need to change?

A: Yes. We are upgrading from 90 - 120 now.

We are also starting to do stationary storage, battery packs.

You can charge the pack from the Sun. We could potentially go above 120kW without losing the investment in the hardware. More additive.

Long term, even if there is a zombie apocalypse or society crumbled, then even the chargers would work.

SamO | June 4, 2013

Q: Main risks to Tesla and electrifying transport?
A: Affordability. Let's say we could build for 1/2 price, then you'd see huge uptake. And Supercharging infrastructure. We are trying to advance these two as fast as we can.

Like how the first cell phones were expensive but they kept getting better and cheaper. It takes an immense engineering effort.

I'm hopeful we'll be there in 3-4 years.

SamO | June 4, 2013

Q: Where are we with battery tech?

A: 200 miles minimum. We are working with Panasonic and others on new cell electrochemistry that is really optimized for automotive use. I feel pretty optimistic without any miracles occuring.

The potential is there for breakthrough in energy storage technology. In particular we could see a capacitor based architecture. Nothing has the energy density.

Fast charging of a cell phone was lately in the news. But density is far too low. But I am increasingly optimistic but nothing that people are currently aware of.

[JUNE 20?????]

SamO | June 4, 2013

Q: Solar charging on the car?

A: All Superchargers will have a solar carport. You can't generate from that surface area. For most of the week, those bays are empty. Mostly they fill up on Friday and Sunday. We are sizing for peak usage, which occurs quite rarely.

There are a few that we need to quickly expand. Especially GILROY. We are working on that as fast as possible.

We are intending to generate more power at EACH Supercharger.

There will be some in Norway that won't get enough solar. What we will do there is to buy sustainable power (like hydro or geo) so that one way or another the entire network is sustainable.

The ongoing cost of the network is not super expensive. There is the initial capital cost, but if you are generating excess then the connection charge.

Zero rent or tiny rent since we are creating a carport. We are getting priority, but isn't any infringement on the rest stop operator. Instead it is a magnet for high end customers.

Ongoing maintenance is A COST but not much. Way lower than any estimate I've seen. Mostly a capital cost.

As for solar on a car, it verges on always making sense to have the panel on your house to generate power.

SamO | June 4, 2013

Q: Any plans to have a presence in emerging market like Mexico and if you'll stick to direct sales?

A: Most likely we would go direct. I'm not hell-bent on direct sales, but every time someone proposes a dealership, they don't agree to a sales volume.

Expand likely middle of next year.

Getting Amped Again | June 4, 2013

He definitely says Tez-la. South African accent?

SamO | June 4, 2013

Q: Recoupment of revenue from ZEV or other in EU and Asia?
Q: Partner with corporate hospitality entities for hotels?

A: We have worked with hotels for HPWC. Don't need a Supercharger. 20 amp connection is fine for overnight. We need to expand that program.

Since 2/3 volume outside the US, 1/6 of our cars would have ZEV credits. There is no program similar to ZEV anywhere else. ZEVs were instituted to improve the quality of air people breath. People forget that ICE cars are emitting horrible toxins. I don't see ZEVs getting replaced in any way.

SamO | June 4, 2013

Q: How do you continue to build brand image?
A: I don't believe in brand or marketing. I say the stupidest things that can't even be true. My problem is that I say too much.

SamO | June 4, 2013

Q: Combine batteries and super-capacitors.

A: That's a good question. I kept pushing for "that" an ultracapacitor combined with a battery pack? You aren't power limited if you have a large enough pack.

SamO | June 4, 2013

Q: How much to build Superchargers?
Q: Offer share to those that had a $40,000 deposit down?

A: That's a tricky one.
The reason Roadster isn't supported since it doesn't have a DC bypass. AC can go through the onboard chargers or directly to the pack.

SamO | June 4, 2013

Q: As EV market evolves, how do you balance maximizing shareholder value AND seeing EVs everywhere.

A: Those goals are reasonably aligned in the LONG TERM, but maybe not in the short run.

We have to be profitable and have cash flow to pay for the development of long term products.

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