Transcription
Everyone talks about Tesla's future: Robo taxi, Optimus, AI. But here's why Tesla is already a great investment today. Behind the hype, Tesla is a financial powerhouse. Record quarterly revenue, $28.1 billion, up 25% in one quarter. Lifetime revenue now over $500 billion. Gross profit margin 18% with $100 billion total gross profit to date. Even services and others is now lifetime profitable. Tesla's not just dreaming big. It's a well-oiled money machine built on fundamentals, ready to fuel the next phase of exponential growth.
We've got Cern Basher here, a chartered financial analyst running his own investment advisory firm called Brinley Advice, providing wealth management services. Welcome, sir.
>> Hi Herbert. It was a strong third quarter, and I'm excited about the future for Tesla.
[Music]
First of all, thank you so much, sir. And I know that you put in a lot of work after these quarterly financial decks drop. You put together these slides. We've got 66 slides that you put together. I just... it's unbelievable. But what is important, what you did, I think, were certain, uh, many of them, many of them are important slides to look at. They show you the story. You'll tell us a story of what's going on. But, uh, it's a really good one, right? Tesla is making cash. They have cash flow. They're hitting records in certain places, in many places, and then they're a healthy business. And then they're investing it. They're investing it back into the new businesses, and yet they keep becoming healthy. They're still a healthy business. And so, can you just start us off with, before we get to the deck, like, in your, in your investment advice, and when you look at investments, why, why is this company standing out?
Well, let me just sort of step back for a second and just sort of say that as long-term investors, it's important to look over the long term. So, this is one of the reasons that I do charts like this that we're about to see is looking at, at long time periods.
>> I get it.
For Tesla, for me, it's very clear that this company is building for something that's a much bigger future than what these charts currently show. And as we, as we go through the charts, we'll see how impressive it is already. But like they say, you ain't seen nothing yet.
>> I mean, I have seen them because you've done forecasts. Other shows we've done, we did forecast, but, uh, yeah. Right. This is they're going to prove that proof is in the pudding, right?
Yeah. All right, let's go.
So, this is kind of a neat chart, and it's in some ways kind of a weird one, and you know, it's kind of silly, but it is also kind of important. It's a milestone. The company has crossed half a trillion dollars in revenue. Now, any company that you graph its revenues like this, you're going to have a chart like this if, if the revenue is growing over time. So, it's kind of strange in that regard, but still, half a trillion dollars in revenue for Tesla, um, you know, cumulative revenue. This is, this is impressive, and this is just getting, they're just getting started at this point. The next half trillion will come much faster than the first half trillion. We'll get to the point where we're probably doing a trillion dollars in revenue a year and then more.
>> Yeah. Pretty, pretty soon. Uh, with robot taxi and of course with the bots. Yeah. You've shown that.
>> Yeah. Now, if you look at it, uh, over trailing 12 months, this is one way to look at trends. You can see that revenues have flatlined, really, for the last, call it, two and a half years. So, it's easily, easy to get despondent about the company. A lot of people that are negative about Tesla will point to a chart like this and say, "Well, look, the company's done nothing for two and a half years. Why would you pay so much for this company?" Well, that's all well and good, but the valuation of a company is always forward-looking, not backward-looking. Backward-looking, I think, gives you some perspective of where the company's come from, but it doesn't necessarily really tell you too much about where they're going unless you're looking at the right backward-looking information, which we'll cover today. So, you know, obviously, we would prefer that the chart continued to go up to the right, you know, higher for the last couple of years, but that, that hasn't been the case.
>> Yeah. And this is revenue. So, we're going to get to investments. We're going to get to the new businesses, but this is car business revenue is flat. We know what happened to the economy in the macro. But still, it was disappointing for many people who thought that there was going to be 50% growth forever on electric vehicles.
>> And yet, electric vehicles are making progress in the world. Uh, they're becoming a larger share, uh, worldwide in all markets. Um, so, you know, that, that, that's been good, even though Tesla has had some challenges with respect to their total revenues.
>> But what's interesting, I think, and you'll show it to us, is that Tesla's still making money. So, they have this philosophy, don't they? Right. That's what the numbers show you. That even though revenue is flat, they're not trying to, they could, if they wanted to, boost it, but they're really more important about margins. Money. Cash, cash, cash is critical. Having a healthy business and preparing to invest that into the future is what I think what they were really doing.
>> That's right. This is the same information, but looking at the rate of change in the trailing 12-month revenue. And you can see that this has fluctuated between zero and 120% year-over-year growth. Future growth is coming. Okay, we've just gone through a period where essentially that we've had no growth, uh, since second quarter of 2024, right? But this won't always look like this. Uh, things will improve. Uh, the company will start growing its revenues again.
>> Yeah. This is a good way to look at it. Okay.
>> And then on the next slide is just the quarterly revenue. This was a record quarter, and as you pointed out, is 20... Did you say it was 25% increase? I'm not sure it was quite that much, but it was a very strong quarter in terms of growth sequentially from the prior quarter. Uh, $28 billion or so in revenue.
>> Yep. 25% up in one quarter. $28.1 billion. Correct.
>> This is your numbers. You're the one that said it in your tweet.
>> There you go. Okay. Sorry, I'd forgotten the percentage, but you can see that that, you know, certainly the, the prior two quarters were a little bit low, so that we're catching up a little bit.
>> Gotcha. And this is the pull forward, too, of course. Yeah. Just to be clear.
>> And then the year-over-year change in the trailing 12-month net income. So, looking at bottom line profit. Now, we've gone from revenue all the way down through the income statement to the bottom line. And even though they had 0% year-over-year growth in revenue, they had, uh, high 30s growth in net income year-over-year. So, they're doing something right. This goes to show that companies can grow their profitability sometimes without growing revenue.
>> There you go. That's it. And that's efficiency is improving, right? Their ability to...
>> That's right.
>> ...just lower their cost of goods but maintain your revenue.
>> Yeah.
>> Yeah. And we've got a couple of businesses in Tesla, and the energy and the services and other business now that are contributing meaningfully to profits. This is the cumulative gross margin. This is kind of the first line of profitability for a company. It's taking revenue minus the cost to produce that revenue. It doesn't factor in all business expenses, but just the cost for those different products. And you can see over the lifetime now of Tesla, they've produced over $100 billion in cumulative gross profit with $5 billion just this quarter, which is, I think, the third highest quarterly gross profit of the company so far.
>> Why do you do cumulative? Like, some people think that cumulative is a useless number. It just puts it in perspective in terms of, you know, half a trillion in revenue and $100 billion, so 20% of that in gross profit. A lot of people, I think, suffer from misconceptions that Tesla isn't very profitable. They haven't, you know, they wouldn't have made money if it wasn't for this, that, or the other thing. And it's just like, well, here's just some perspective for you. The company has been making consistent progress over time.
>> There you go. Okay. I got you. Now, that's the point.
>> Uh, this is a quarterly gross profit. You can see we've had quarters before where the company made more than $5 billion in gross profit, but this was, I think, the fourth largest one. Um, so, you know, a strong quarter. I think a lot of people sort of said, "Oh, the quarter was me, you know, wasn't really much of anything." It's like, well, no, actually, this is a pretty strong quarter for Tesla, top, top four.
>> And the gross profit wouldn't be, uh, is is that, uh, because of the pull forward also?
>> Yeah. I mean, certainly, right? If you sell more vehicles, if those sales are profitable, then then the gross profit will be will be higher. I think it, it remains to be seen how much of a pull forward there actually is. I think Q4 actually could be surprising on the upside. Uh, this is gross profit margin. So, the gross profits over the revenues, and you know, 18%. Um, it's been higher, it's been lower. Uh, pretty good for mostly an auto company. And as we know, as we've discussed, you know, 100 times before, this company is transitioning from an auto company to really an AI-powered company. Uh, Robo Taxi and Optimus ultimately will drive this business, and you're going to see gross margins rise significantly over time as they ramp those businesses.
>> And, and I, I think that, uh, you know, even the auto business will turn into higher profit margin, uh, depending on where you put in the FSD. But just in general, I think they're going to turn auto right into a subscription business.
>> And not just a one-time sale. They're going to bundle, uh, everything into it. You just have a, you know, low monthly fee, and you've got everything you want, plus the car drives itself. And so the margins for that will just increasingly, right? You'll, you'll, you'll buy more premium connectivity. You'll get, you'll have an entertainment package. All of that will add to 80% plus margins, not just the car sale, right?
>> Yes. At some point. And the other, the beautiful thing now about as we head into that world of autonomy, Tesla becomes its own largest customer.
>> Right. What happens to auto when that happens?
>> Well, well, it'll be interesting to see how they end up reporting that. Um, you know, and what, what do they sell their own vehicles to themselves at, right? Is they book a profit in autos and then share that as a cost on on a different business unit somewhere else?
>> Um, you know, internally, they should be doing that. So, it'll be interesting to see how they end up handling it.
>> Wow. Okay. We're getting close. We're going to find out.
>> Yeah. Uh, SG&A expenses this quarter, uh, ticked up quite a bit. And we've learned subsequently that there was some higher legal costs, a higher compensation costs for, sort of, their, their AI employees, AI-focused employees, and a few other things. $25 million, I think, for higher costs they said related to the annual meeting. And it's probably related more to the proxy and the and the special committee work. So, it was the highest ever in terms of SG&A expenses. We should expect this to grow over time. Tesla is a growing company, and they're adding to their. But there were definitely some sort of one-time items in this in this number. I marked in, in sort of a darker orange here. There was another quarter in the past in 2021 Q4 where SG&A went up a lot. And that was, uh, some, uh, cost associated, I think, with Elon exercising some stock options, uh, some taxes, perhaps, that might may have impacted that that the company had to pay. So, I, I think that next quarter, we'll probably see the SG&A number come back down a little bit again.
>> Yeah. And, and most of those one-offs. Yeah, that's what we're thinking.
>> Yeah. And here's the actual comment from the from the 10-Q. They had a $168 million increase in operating expenses, including legal charges, $151 million higher increase in employee and labor costs, um, $38 million increase in stock-based compensation, and $25 million increase in marketing expenses, they said there. But on the call, they talked about, um, the cost of, I think they said something about the annual meeting.
>> Yeah.
>> Which again, is probably related to the special committee and the proxy efforts. That makes more sense.
>> Yeah.
>> Than the others who had other ideas of what that could mean.
>> You know, maybe more bots being pres, you know, shown. And doesn't make sense, doesn't it?
>> Yeah. Now, this is an interesting chart, and this is going to be really fascinating to watch going forward. But this is operating expenses as a percent of revenue. So, ideally, you want these as low as possible. And you can see from about 2016, where they peaked at about 40% of revenue, that they came way down, and they got serious operating leverage, and those expenses went all the way down to below 10%, I think about, uh, 8%, maybe 7% at its lowest. And in the last couple of years, they've ticked back up again as the company has been making investments in in their, in their, you know, FSD and and Optimus and so on. At some point, once those businesses start to ramp, this should start to turn down again. And you can see actually, if you look at the quarterly numbers, which are the gray bars, whereas the red line is the last 12 months, it kind of smooths out the quarterly numbers. But if you look at the gray bars, you can see the last two quarters, it's ticked back down a little bit again. Uh, partly this is related to sort of how much capacity is the company using? Are they operating efficiently? It's a nice measure looking at that. So, there's some encouragement here that things may start to turn down again. We'll have to see, but certainly as they ramp robo taxi and eventually Optimus, these numbers should go much lower.
>> No. Well, no, actually, that's what I'm going to say. It's like, actually, isn't it a good thing if you see it go up? Like, going up means that they're preparing for rollout of a brand new product. Let's say if you're going to roll out robo taxi, you need more superchargers. You need more service centers. You need to convert those service centers to be able to handle 24/7 robo taxi drop-offs. You need robo taxi maintenance. Now, of course, you know, they're slowly getting just Austin and others, so it may not show up now, but as they roll out to 10 metro areas in December, the cost of robo taxi rollout, it's going to be high, right? The cost of the app. Is that where most of this would, shouldn't it show up? Like, so when you see a pop like this, that means, hey, the business is actually coming.
>> What shows up here really is R&D and the SG&A expenses. So, some of that obviously is investing for the future. Absolutely. Yeah. If this was going up and you didn't have the expectation that they're going to be starting a new business line, then you would start to ask questions about why is the operating leverage decreasing.
>> I want it to go up. I don't want it.
>> Yeah. In the short term, it's fine. It's not indicative of any kind of problem. All right. Cumulative operating income, uh, since, uh, Q3 2012, is now approaching about $40 billion. And you can see that in the early days, the company, uh, lost money. And for a while, they lost an increasingly large amount of money, right? That the line started to dip down faster and faster and faster, right? And at one point, they lost about $5 billion in operating income. And they dug themselves out of that hole. It took, it took a little while, about three years. And since then, it's been much more vertical in terms of profitability, and they're now up to almost $40 billion in cumulative operating income. So, it just sort of shows when a company hits that sort of sweet spot, when they're operating at a point where they can make money, how quickly it can add up.
>> This is, uh, 2018. That's operating hell. This is when Elon was, he had that photo of himself going bankrupt.
>> Right.
>> He was sleeping in the factory. That photo of him, and he was in, just in the worst shape of his life, or the worst period of his life. He thought that Tesla might go bankrupt. Truly, this truly was like this was the point. Remember how every time you have these Tesla Qs saying Tesla's going to go bankrupt?
>> Well, this was actually kind of true. It could have, because Model 3 ramp-up was just hell. He fixed it. And once you, you see this is his, his input, once you fix it, boom, you solve the problem.
>> Some people consider this to be the valley of death that you've got to walk through the valley of death and to get to the other side. And the faster you get through it, the better. And unfortunately, if you look at Ford's EV division results, this valley of death is getting deeper and deeper. It's a becoming a canyon of death for them.
>> And you, you'll compare it to Rivian, C, and cash flow. We'll, we'll get there. I can't wait to get to that slide. We'll get there soon. Okay. And then this is operating profit margin. You can see for years it was negative. Uh, peaked out at about 20% briefly there during, during sort of the pandemic years when, uh, EV prices were super high. And now, uh, you know, it's bouncing around a little bit, but it's about 8%. Which for an automaker, not so bad. This is cumulative net income.
>> Yeah. Let's, let's pause there for a second because for an automaker, for an EV automaker, this is the only company that's making any kind of profit margin or...
>> Outstanding for an EV automaker. Yeah.
>> Yeah. That's what I was going to ask. Is operating profit margin one of those numbers that you can actually manipulate a little bit on the b, on the books?
>> Yes and no. I mean, I think it's a pretty good measure over time. I mean, maybe there's some short-term quarterly things that impact this, but if you're looking at trends, it's pretty hard to manipulate it.
>> Yeah. So...
>> I mean, ultimately, the best number is cash flow, and that's the one we'll focus on coming out there. But...
>> So, but I mean, the point is that show me another automaker out there that has operating profit margins, specifically electric vehicles. I'm talking...
>> Yeah. And the next one is kind of redundant, but if we look at net income, cumulative net income approaching $40 billion, pretty similar to the operating income, uh, very similar chart. Uh, here you're kind of factoring in, in taxes, tax impact of things. This big jump here that you see, uh, I think it was Q4 of 2023, there was a big deferred, uh, tax impact that basically allowed them to print almost $8 billion in net income in one quarter.
>> Mhm.
>> Uh, that was some deferred, deferred tax benefits. But, um, again, pretty, pretty similar for Tesla to the operating income number.
>> Now, this is a company again investing for the future, right? So, to look at that, what are they spending in capex and what are they spending in R&D? Capex tends to be a little bit more volatile than R&D. R&D is more the cost of people. Capex is actually the spending on property, plant, equipment, and and computers and stuff like that. Right.
>> Yeah.
>> Construction. Um, so that bounces around a little bit. And you can see that for, you know, it's, it's, both of them are still growing and quite impressively so. And if you, on the next slide, if you put the two together, you can see it more clearly, uh, that this quarter was the, I believe, the fifth highest spend in terms of R&D and capex combined. Yeah, I mean, this is great. I mean, the last two years, AI boom happened, and, uh, many of us were like, just screaming, Tesla needs to invest more than $10 billion per year, buy those computers, build those data warehouses, you know, hire those AI people. And they did. They have Cortex One, and now Cortex Two. These are the largest supercomputers in the world, just short of what Colossus XAI is able to do. But, you know, like, they're doing it right. They're investing. And like, I mean, we know Elon knows what he's doing. So, I'm not questioning him, except that, you know, as an investor, it's like, please invest as much as you can.
>> Yeah. And, and $4 billion a quarter is spending something like $45 million a day.
>> I see. And, you know, the other thing too, is, uh, right in the Q3 financials, or no, uh, the CFO, Vivek, said, we spent $9 billion in R&D, uh, and, and we're going to increase that substantially. He warned he's going to increase it substantially. And I'm like, that is such good news. That is good news.
>> And it's interesting too, the thing you'll note here, is if you look at Q1 from this year, both, uh, particularly capex was down, right? That's kind of an outlier on this chart in recent, recent years. And, you know, this is, this is good business management because that was kind of a tough quarter, right? They're doing the changeover in the Model Y. Wasn't a whole lot of sales. So, why put yourself into a massive negative free cash flow situation? Why not defer capex a little bit if you can?
>> I see.
>> Right. And push it off into quarters when you've got the, the revenue and the earnings to support that. So, you know, that, that was smart, I think, on Tesla's part.
>> Very disciplined.
>> And I heard on the conference call that now Elon feels confident now in spending the money on building manufacturing capacity, and he hadn't felt that way before. So, I thought that was very encouraging.
>> I think so. They're going to build, build more factories, more data warehouses, more, uh, infrastructure for a robo taxi, and of course, bots. And I think that that's the reason I keep saying it's such a good thing is because it just shows you, if, if the company's okay, if you look at the story of Tesla, they're not, they're a very smart company. They, they're very careful about margins and cash, and, you know, you know, Elon cares about expenses so much that he won't spend money unless he feels confident. And that's for me, it's like, okay, when you see this company starting to spend, that means everything's going right. If Robo Taxi was having some issues, there are some concerns, they wouldn't be in hiring a hundred people, uh, for roles that are, right, which is, they just had job openings for 100 people.
>> Yeah.
>> And that's just another signal that says, okay, they do, they're feeling very confident that this is a real business.
>> Definitely. Yep. And then the next chart, if you look at capex, R&D, in total cumulative now, we're over $80 billion spent on both of those. Again, this is a, this is the first indication that you've got a company building for the future. Now, you could easily spend capex money on capex and R&D and not get any return on it, right? There's plenty of companies that have done that. But Elon has shown an ability to extract a lot of value out of the money that he spends, and he has a track record of showing that he produces results. So, for me, this is a nice indication that they are building for a bigger future. They're spending money, right? They're continuing to do so. And so, you know, the revenue is not there yet, but it's coming. You have to start somewhere. And this is where you start, right? You have to build it before, before the product shows up. This is comparing operating cash flow to capex. So, ideally, you want operating cash flow to support the money that you're investing in capex. And if you look at this chart, in recent years, the green line is higher than the blue line. So, therefore, operating cash flow is more than capex. There's one exception there in Q1 of 2024. Wasn't the case. But for the most part, they're able to fund their capex through the operating cash flow of the business. That's really good. And again, for a pure EV maker, it's actually pretty impressive.
>> Yeah, you can say that again. Hey, they can fund their, their business and investments, and this is investments through their own cash because that means that they don't need to reach out to R&D. Imagine if you're starting a startup. Uh, I'm gonna build a new robot company, or I'm gonna build a new, uh, autonomous company. You need to have cash. So, you need to invest it. So, but if you are a company that's producing cash from another business, you can invest these. Uh, it's, it's like self-investment. It's fantastic.
>> If Tesla had to go to the market to raise capital every time they wanted to invest money in capex, that would be an issue. They don't need to do that. They're at this point self-funding, right? With $41 billion of cash on the balance sheet, etc. They, they've got a nice cash cushion, but the business itself is more than supporting the, the capex spend. Okay. Free cash flow. This is really the only thing that matters.
>> Yes.
>> Uh, this is where accounting shenanigans really, it's hard to really have any accounting shenanigans at this level. Ultimately, the value of a company isn't the value of the free cash that it produces. And this was a record quarter of free cash flow. Now, there was some, you know, some onetime things for sure. Um, maybe we see a bit of a pullback in this in Q4, and that's fine. But the fact remains that this company has been, for the most part, free cash flow positive every quarter now since, you know, basically 2020, really, really since the pandemic, right? Where that took free cash flow down in the first quarter of 2020. It's been free cash flow positive every quarter except for one.
>> Yeah. Wasn't it, uh, Jeff Bezos who said very clearly, he said that if you're looking at any company, you look at their financials, the one thing you want to look at is free cash flow because that's one that you can't manipulate. It's not something that's, you know, on the books and all that. So, if you look at the free cash flow of, uh, BYD, of GM, of Ford's EV business, uh, uh, sorry, Volkswagen, it's like they're, $11 negative $11 billion. And you can't free cash flow, that's cash going out the business. It's like, no matter what you, you say, income profitable, really are you freely profitable? How did you come up with that number? But cash is one that you go, okay, if cash keeps flowing out the business, at some point they need to raise money, or they have to fire people, cut factories, not build. Yeah, this shows you that this company's making money, real cash. Yeah, it's important.
>> And again, the free cash flow is the operating cash flow less the capex. So, this is including the investments that the company's making in its own business.
>> Oo.
>> They could have made more money. They could have invested more.
>> Yeah. If they didn't spend any money on capex, right, this, these numbers would be higher.
>> Wow.
>> Right. So, the free cash flow for Tesla would be astounding if they weren't investing any money in capex. Now, you have to invest in capex because you're building for the future.
>> Yeah.
>> But that, that's one way to, to kind of juice free cash flow is to cut your capital spending. Tesla hasn't done that.
>> No. In fact, that's why now you want low free cash flow because you're putting back in your money. Okay. Interesting.
>> Cumulative free cash flow now approaches $20 billion. Uh, so similar to the other charts in terms of this, this shape. Um, and this was the, I believe, the highest free cash flow quarter, uh, in Tesla's history. And then AJ, I think, did an amazing job here of pointing this out. So, Tesla's cumulative free cash flow of $20 billion, uh, juxtaposed with Rivian, that's now lost $22.8 billion. Every pure EV maker that AJ tracks has lost billions and billions of dollars. None of them have turned the corner like Tesla did. Uh, Lucid is at the point where Tesla turned the corner in its life cycle, but Lucid's showing no sign yet of turning the corner. Rivian, still a little bit younger company, but they've lost more than twice as much as Tesla ever did. At one point, Tesla was down about $10 billion, and they've made $30 billion since then, and now a positive $20 billion. This is how brutal the EV business is. We've already got two rest in peace signs on this chart: Verde and and Canoo. And more to come, I'm sure.
>> Yeah. Unfortunately, we can't make this chart bigger, but it's a great page, Robert. There's a larger version.
>> Good. That didn't have told me earlier. Okay. All right. So, this is a chart made by AJ, which is fantastic. Thank you to him. Follow him at Alj. Hello, Joe. And, um, this is free cash flow history. So, at the very beginning here, all of these EV makers, uh, he puts it at the very beginning, let's say the date that they started, so that you can kind of see how long did it take, how long did it take Tesla to finally turn the corner. It looks like it's eight or nine years after existing, they did turn a corner. But it's less important about the, the years. What more important is whether or not, how much money did they spend? And so, here they spent $10 billion, and then Tesla flipped over. But look at Rivian. Rivian's already at $20 billion and going down further. How much, how long can you keep getting investment? I mean, maybe Lucid, somebody, you know, Saudi will just say, whatever, we'll keep putting $20, $30, $40, $50 billion until you turn the corner. But yeah, this is how you die. Just some, some at some point, your investors go, I'm not going to keep throwing money at something that keeps not profitable.
>> Yeah. And unfortunately, uh, you know, Ford, to give them credit, they actually show us their EV division, whereas other car companies don't. So, Ford's on this chart, and Ford has had the most rapid amount of money losing of any EV maker ever. They're losing money faster than Rivian ever did.
>> Oh, really?
>> Right. If you look at Ford there, it's about year four, they've lost, um...
>> What's the number?
>> $14.1 billion. And at the same point in time for Rivian, they were probably down about $9 billion at that same point in time.
>> M.
>> So, Ford has dropped or lost more money faster than anybody else has in this business. Um, it's hard, it's hard to be, you know, to outperform Rivian in that regard, but they have.
>> Yeah. And that's why we don't have like BYD or the Chinese, uh, EV makers. He doesn't have the data.
>> And I'm sorry, I think I may have got my lines crossed. I think I said that Lucid's at the point where Tesla turned. That actually, I think is probably Neo. Yeah.
>> They're down about $10.7. Uh, Lucid, those lines cross there. That's why it confused me. Lucid's down about $13 billion and showing no signs of turning the corner yet.
>> Okay. Even worse.
>> Yeah.
>> Wow. Those are great slides. Those are important slides.
>> So, Tesla has, uh, three business units, right? Auto is in red. Uh, green is energy, and services and other is yellow. And on this chart, I showed regulatory credits separately as kind of its own separate business unit. And so, you can see that the green bars, the regulatory credits, you know, pretty small. And the green and the yellow are getting bigger and bigger over time. Um, and then another way to look at it is to common size all this on the next page and look at percentages. And you can see that over time, the yellow and the green is becoming a larger and larger share of the total revenue. And right now, it looks like the auto business is around 73% of the total revenue this last quarter. Two quarters ago, it was under 70%, but that was a low quarter for autos.
>> Yeah, it's a great slide. I mean, it shows you that energy, which is green, uh, is growing, and it's like, you can actually see it, and it's actually a significant part of the total revenue. So, that shows you that it's no longer the, you know, just a side business. It's becoming a big business. And eventually, that green bar will be as big as the red bar, or where it is now, right, where the red bar is now. In fact, some people think it'll cross over. And then the other point, I think, is the blue, which is regulatory credits. People think, "Oh, that's where Tesla makes all their money, and they're supported and funded by that." And no, they're tiny.
>> Yeah.
>> Now, if you look at it, though, from a gross profit perspective on the next page,
>> The blue suddenly looks bigger because I'm basically saying that all that revenue is is gross profit in the case of red credits.
>> So, the blue is a share of the total here is bigger. But still, you can see as the blue has shrunk a little bit in the last couple of quarters, that the green and the yellow have made up for it. Particularly, we've seen a lot of growth in the yellow in the last couple of quarters in terms of gross profit. So, that's that third business that everybody really doesn't focus on is starting to contribute in a somewhat meaningful way to profit. And then if we look at the next page,
>> We're still debating what's, do you know already what's in services? Uh, some people thought it was...
>> It's what you think it is. It's servicing the vehicles, right? It's the supercharging network. It's Tesla insurance. It's used car sales. It's Tesla Diner. It's the Tesla Shop. It's basically everything but energy and selling cars. Uh, Robo Taxi, by the way, for now, is in the services and other business. So, that actually doesn't help. That would be a drag on the numbers in terms of profitability. And yet, that business has actually improved from a profitability standpoint. We'll see here in a second. Um, this one is just focusing on autos and revenue and and energy if they were the only two business units, just to show people how, uh, energy is growing. You can see that from a gross profit perspective in Q2 2022, energy, you know, uh, contributed some profit, and since then, that green slice is getting larger and larger and larger. The autos have fluctuated a little bit, but the energy part is getting bigger and bigger.
>> And it's very easy to see the red green line is going to double in size because they've doubled the factories.
>> That's right.
>> And then the third factory is going to come online too, and then the fourth factory. And so people go, "What?" You know, oh, I can see energy growing maybe 20, 30% per year. I can see that. But then they don't realize, well, what happens when they double factories? That means you double everything.
>> Yeah.
>> This is going to grow fast.
>> Yeah. And hopefully, maybe there's even some more economies of scale. This is looking back now at all four of the quote unquote business lines, including red credits. And you can see that autos now is about, I think, about 64% of the total, from a gross profit. So, it's about 73% of revenue. That's 64% of profit.
>> So, it's no longer a car company.
>> Well, it's, I mean, majority still, for sure, like, you know, two-thirds is a car company, but the other businesses are starting to become larger and larger. Just wait until we get robo taxi on here when they start breaking that out and we can track that. That's going to be, and I've done that in some of my models. But, um, here's gross margins versus net margins. So, gross margins of 18% companywide, net margins, depending on how you look at it, whether it's net margin or operating margin, 6.3 or 5.8%. Okay, so not a whole lot to share there other than that's what it is for now. And then this is auto gross margins with and without the red credits, depending on how you like to look at that. So, with the regulatory credits, 17%, and without, 15.4%, which is an improvement, uh, last couple of quarters have improved over the low, uh, first quarter. So, hopefully, we turn the corner on that for the auto business.
>> Again, people are laughing. Look at the, how much the auto, the gross margin fell from the height of the co...
>> But hey, dude, it's 17%.
>> It's an auto business.
>> Yeah.
>> Uh, it's like, yeah.
>> Yeah. At 30%, you're in like, probably Ferrari territory. And so, you know, that's great while it lasts, but it's not going to last.
>> Yeah. I'm not so worried about the auto gross margins. This is just a means to an end to these two major businesses that we're about to launch.
>> This next chart, I think, is quite a nice one in terms of showing the progression of gross margins for their three business lines over time. Autos and blue, uh, 15.4. Now, green is energy, 31.4%. So, more than double the gross margin profitability of autos, which is amazing because it's just batteries in a box. I mean, obviously, it's more than that. It's, there's a lot that goes into those systems, but, you know, at, at its most basic essence, it's just batteries in a box. And then the services and other is kind of been a surprise, 10.5% margins, is actually pretty decent.
>> And it's starting to contribute in a meaningful way to profitability. And look, look where it came from. It was down 40% at one point, negative 40% gross margins.
>> And this is where Elon said, then he said that, uh, he has to decide if you have a battery, where do you put the battery? Do you put it in a car or do you put it in a stationary battery?
>> And if you're making 30% on your just stationary and cost, it takes you less, you know, effort to make it, and it's easier to sell all that, make that. Yeah. But...
>> A couple of things there though, too, is the batteries going in the storage are typically different than the batteries in the cars. So, that's kind of nice. You don't have to make that choice as much, right? And then secondly, the thing to point out too with energy is there's an AI component to that too with AutoBidder. And Tesla doesn't really disclose much if anything about that, but my suspicion is that that is starting to drive those gross margins higher.
>> Even more. Yeah.
>> Even more over time. So, while the, Um, this is looking at average selling prices for cars versus the cost to make. So, we started at $70,000, right, in Q3 of 2018, and we're down now to an average selling price per car of about $42,000. The cost to make has gone from about $55 down to about $35 since 2018. Pretty, pretty amazing.
>> Yeah, this cost to make, they keep working on it, but it's going to be flat the last quarter, last year.
>> Yeah. The difference in these two lines is the profitability of selling a car. And on the next page, you can see that quarter by quarter. At one point, Tesla made over $15,000 by selling a car. And this last quarter, it was $6,150.
>> Yeah. So, they make $6,000 per car.
>> Yeah. This is gross profit, by the way, not net.
>> Oh, really? Okay. We'll see what they really make. But I mean, I mean, if that's, that's all you make, $6,000 per car, right? It's like, geez, you can make a lot more money with robo taxi.
>> Yeah. You...
>> And that's why it's, it's a fundamental business model change that we're looking at here in the next, next few years. Um, this is just looking at quarter to quarter of the change in the average selling prices. Sometimes it's up, sometimes it's down. Uh, there's, there's different mix shifts here, you know, depending on if they're selling Model Y's or Cybertrucks or whatever. So, there's all kinds of things going on here. Uh, Jeff Lutz, I'm sure, would love to pick this apart, but you can see that, uh, in the last quarter, basically the average selling price, uh, dropped by about $9. Herbert, when I shared this chart in the live stream, there was actually an error in the last couple of boxes. So, this is the corrected version.
>> Yep. This is great. Okay.
>> And then the next one is the, uh, cost of goods sold, the cost of making a vehicle. And you can see the quarter to quarter changes. So, it's trending down over time, but sometimes there are, you know, there are blips where things go up. Um, and then the third chart in the series is the, is the profitability. This is another way of looking at it in terms of the quarter to quarter changes. Okay, let's talk about Tesla's energy business a little bit closer. This is quarterly revenue, record revenue for energy approaching $3.5 billion in Q3. This business tends to be a little bit lumpy, so we, we should expect some ups and downs. I have no idea whether Q4 will be higher than Q3. Could be lower, but over time, it's going to trend up.
>> But isn't there a com, uh, there's competition coming that there is, uh, the prices of, well, that'll turn into margins, right? But the price of lithiums.
>> Yeah.
>> Right.
>> We'll get back to that in just a second. This is the services and other business, and really strong increase in revenue this quarter to about three and a half billion. So, the revenue of energy and the revenue of services and other right now is about the same.
>> And it's funny, no one talks about services and other.
>> Yeah. No.
>> Right. It's like it doesn't exist.
>> Mhm.
>> In terms of its contribution to the company. This is putting two together. Imagine the business that was energy and Tesla services and other, supercharger business, and used cars and vehicle service. If that, if that company existed as a standalone business, it did $7 billion in revenue last quarter. About $28 billion a year revenue company. You know, it would be interesting to, if you take that and go, how many, where does that fit in the Fortune 500?
>> Yeah, good question. It would be a decent sized business. And look at the growth. This is cumulative gross margin for energy. $7 billion in total gross margin. Pretty impressive.
>> Mhm.
>> Never really went through that big dip like the EV business did, right? Where they lost tons of money. They kind of always made money. There were a few quarters there where they were losing some money, but never went into a big hole. But then the business really hit its stride and it's taken off. They had a billion dollars in gross profit last quarter in energy.
>> I love these slides. Love the, uh, they're all like this.
>> Well, it just gives you some perspective, doesn't it? Right. Just to be able to look at multiple years, multiple quarters, um, from a margin perspective in energy, that they had good margins initially, a little lumpy, up and down, and then now you can tell that they've really got a better handle on this business, much more consistency. And again, the AI part of this, the AutoBidder part, may be contributing to that in a meaningful way. Now,
>> 31.4 is probably the highest percentage of gross margin we're going to see, do you think? I mean, they're not, you know, at one point, some of the Tesla retail people were going, "Ah, Tesla, I think the margin's going to be 50%." And then Elon or Tesla came out and said, "No, it's going to be around 30%." And here we are.
>> Yeah. For selling the boxes, yes, but the margin on AutoBidder should be like 90%.
>> Okay. So, the question, how big does that become in relation to the total revenue? So, I'm, I'm curious to see long-term what the margins can be in this business. I think they're headed higher over time. Not from selling the boxes again. I think margins could go down on that over time.
>> Yes.
>> But the AI part, if that contributes a larger and larger part of the revenue on that on that deployed fleet, that's where this business, I think, gets really interesting from a profitability standpoint. But Tesla hasn't shared much of anything about that. No.
>> We all know it exists, but they don't really talk about the performance of AutoBidder and its contribution to the business. So, maybe one of these days, we'll get somebody.
to talk about it. Um, this is amazing too. This is the revenue versus the cost per kilowatt hour deployed in the energy business. The, the uh, orange line there is the cost. It's going down, and of course, the revenue is going down too. Tesla's passing along the cost savings to their customers. Right. So, in the most recent quarter, the revenue per kilowatt hour for the energy business was $2.75. It was $25.00 back in 2017. It's gone down by almost a factor of 10. So, amazing, amazing cost declines. No wonder battery storage is booming, and it'll probably continue to decline over time, which will be great.
>> Yeah. This is a show that you and I did with, uh, Tony SA.
>> Yes.
>> And he was predicting this, and here we are.
>> The cost of energy will decline over time and trend eventually towards zero.
>> And that will make significant changes to society.
>> Yeah.
>> It's foundational. It's fundamental to everything. Yeah. You drive down the cost of energy, and everything becomes possible. Literally everything.
>> Yeah. Okay. Services and other business, again, since inception, this business is now profitable. It had a valley of death. At one point, it had lost, you know, $1.8 billion or so. And they've now dug themselves out of that hole. And this last quarter was a very strong increase of $366 million, pushing above that zero line. And what was, um, and you can see on the next page, the margin percentage. Now, uh, 10.5%. Highest it's ever been.
>> And then, um, you posted something about services and other profit, was it? And then, then Elon reposted it.
>> On the next page.
>> Yeah, there you go.
>> You need to show this. You needed to show this.
>> Well, well, I think it's important, um, not, not, not because Elon reposted it, but because most people don't realize service and other is, from a revenue perspective, as big as energy and is now lifetime profitable and producing 10, 10% margins.
>> Yeah.
>> That, that's a good story. That, that's important to this company. Now, over the long term, no, it doesn't matter. But today, it's, it's excellent news.
>> I mean, there's a reason Elon reposted it. That, that is important. Like, why this part, right? That you pointed out, in case you didn't notice, Tesla's services and other business is now lifetime profitable on a gross margin basis with a record quarterly gross margin. It just, I think it shows that the kind of business person Elon is, the best, probably the best operator in the world, ever, historically, even, because he will take every business line, and he wants them all to be profitable. Like, it matters to him, and, uh, I think that's what that's what this points out, right?
>> Now, some people in the comments have commented, said, well, didn't Elon say that they would run superchargers at cost and service at cost?
>> Right.
>> Right. And, and sure, that may be true, but we've also got insurance in here.
>> Right.
>> We've got used car sales, right? He didn't promise to run the whole services and other business unit at cost. There may be elements of it where they're trying to get at cost or a slight profit, but there are other elements too where they, you know, it's, it's a for-profit business. You try to make money on used car sales, right? And other things that are in here. Hopefully, the Tesla diner is making money. Hopefully, when they sell merchandise, they're making money on that, too.
>> Yeah. I mean, it goes all goes back to the beginning, which is that the more money they can make in any other business that they do, they throw it back into the things that matter, robo taxi and bots, and that's what they fund. They fund it with their own cash. And so, why waste the cash? Every dollar is not just a dollar. It's, it's an exponential dollar because, uh, if you convert that into a robo taxi or or bot.
>> Now, the other thing, and I haven't seen anybody track this yet, but I think this is kind of interesting. So, you look at the services and other business, and you look at the, what I call the quarterly revenue per vehicle. So, I take the total revenue and services and other, which last quarter was about $3.5 billion, and I divide by the cumulative deliveries of about 8.5 million vehicles, and I get to about $400 per car per quarter in revenue that's being generated for Tesla in this business unit. Right? Every quarter, every car that Tesla's ever sold is generating about $400 a quarter in services and other revenue. That's supercharging, that's maintenance, that's, you know, insurance. All the pieces that are in the service and other business unit. So, that's kind of interesting. Now.
>> Very interesting.
>> Yeah.
>> This number, I think, is low because my denominator here, the cumulative deliveries of 8.5 million, there aren't 8.5 million Teslas still on the road. Some have. We've lost some to crashes and other things, right? So, my denominator actually is making this number lower than it really should be. It might be closer to $500 per car per quarter.
>> Yeah. This is where it's, it gets interesting. I think when you can get, um, you got $400 per car per quarter. Yeah. So that's, that's, that's divided by three, right? So that would be like a hundred something dollars per car per month. And I'm just, you know, when, when you get to, when Tesla is able to make, this is revenue though, right? This is not earnings.
>> This is revenue on a gross margin basis. It might be per quarter. Um, well, my point is that Tesla's revenue on insurance and premium connectivity and entertainment package and,
>> FSD, where it depends on where it shows. I think they said that FSD service will now appear in services and other. If that's the case, then, you know, when it gets close to equal to the revenue per vehicle, you, Tesla may decide to just lower the price of the vehicle and make more money on the subscription revenue after it's ongoing.
>> Forever, right?
>> Yeah. This, this could be actually fun to watch this number rise, and you can see the last two quarters it's gone up. Now, that's not necessarily indicative of anything yet, but we'll see.
>> Mhm. Mhm. That's a good one.
>> Another one I think that's kind of fun to look at is the stated production capacity of about 2.35 million vehicles. This comes from the earnings deck. Now, there's some, some components of this where they say greater than than a certain number. So, it's actually greater than 2.35 million. And then I compare it to the, uh, trailing 12 months production to get to a factory utilization percentage, and you can see now that's about 70%. So, Tesla could increase production by that 30% to get to their, you know, quote unquote production capacity, but Elon's talking about increasing production capacity up to 3 million vehicles a year.
>> Um,
>> Yeah, that, the factory utilization, that's the, this is the big question everybody's been asking, like, why everybody thought that they could get to 3 million sooner than two, two years from now.
>> Yeah, it's, it's a lot of work to get there. It's not, not an easy thing to build another million vehicles.
>> Yeah, it's a good slide. It's a good one. Factory utilization. This is around, like, Jeff Lutz, who's an expert in this space, said that you do want to keep your factory utilization percentage to always be around 70%. It's not wrong. In fact, you don't want it to be at 100%. You can't do that, and you don't want to be too low. It's about the right number.
>> Yeah, for sure. You, you can't run the factories flat out all the time, right? The higher the utilization, the more operating leverage and so on that you get. You're spreading out those fixed costs over more and more vehicles. That's good from a profitability standpoint, but there is a limit in terms of how high you can go. Now, you can see at one point in this chart, I'm showing utilization of 100%. Well, I think that's just a function of they didn't really update the numbers for a while, and we stairstepped from basically 1.1 million or so, uh, capacity there up to almost 2 million in one quarter. Obviously, that, that wasn't a stair step. It happened over time.
>> Yep. Understood. That makes sense.
>> I probably should make some adjustment for that and just kind of average those two data points over, over those five quarters, but
>> Mhm.
>> This is what they reported.
>> Yeah. Thank you for putting all these charts together, Sen. This is, um, it's nice to, to, you know, to visually see the things that they've stated and just to understand it better.
>> I think it's good to have a relatively comprehensive look at the company every now and then, right? And this is what I'm trying to do with this. And this, by the way, is in all of my charts. This is just, just a few of them. This one is kind of interesting. Number of supercharger stalls worldwide is almost 74,000. And that's, you know, a nice growing number. And then if you look at it from a quarterly basis, they added 3,589, uh, stalls or plugs in the quarter. And that was one of the highest quarters. There were two other quarters I think where it was higher.
>> Okay.
>> 3840 in Q4 of 2020. And then I think in about Q, Q3 or Q4 of 2023, those 3787 added. I think they might have switched over to a V4 version or something like that. And, um, that slowed them down a bit, but they've been be able to, uh, increase efficiency of building these. So, I was expecting that number to be a lot higher.
>> Now, it's a phenomenal number of plugs being installed in a quarter. If you think about it, over a 90-day period, you're putting in 35, 3589, right? Uh, that's an average of about 40 a day, right? When you look at it that way, it's a lot.
>> That's a lot.
>> This is, uh, one way to sort of look at how many plugs are there per car out there. Um, this is, so cumulative vehicles delivered versus total supercharger stalls. So, for every vehicle that's out there, sorry, for every stall that's out there, we have about almost 120 vehicles. Not quite. If everybody went to a supercharger at once, there'd be a line 120 vehicles deep, is another way to think about it. Now, that's not a problem because most vehicles charge at home. We don't need a supercharger stall for every vehicle. They're not all showing up at once, right? In my case, I only use superchargers when I'm traveling. Otherwise, I'm just charging at home. So, there's some number here that, that's necessary for the fleet worldwide, and it seems to be, you know, around 120, 110, 120.
>> You don't want it to go too high because then people go there and there'll be lineups.
>> But, so you need the supercharger to keep up. But this does not include, um, other electric vehicle makers who now have access to the same supercharger stations.
>> Well, that, right, that's right. And that may change the math on this a little bit. And if you look, actually, the next chart, this is looking at it kind of on a quarterly basis instead of a cumulative basis. So, in this last quarter, the number of vehicles sold per new plug installed was, call it, 140.
>> So a little bit higher. That kind of flies in the face with what we just said because you think with non-Teslas out there, you would need more plugs per vehicle, you'd think they'd be driving that number below 100, but we haven't seen that yet. Although these last two quarters had a lower number than the prior four. So maybe, maybe they're starting to see that. Anyway, it's, it's just kind of interesting. It doesn't really mean, mean too much. And then the average number of plugs or stalls per station is about nine and a half right now.
>> They're building bigger and bigger stall stations.
>> That's increased quite a bit. Yeah. And you can see a real effort to do that, you know, early days. But yeah, um, this is regulatory credits.
>> Mhm.
>> Uh, now have approached, uh, almost $12 billion. And by the way, these are not going away. Uh, Tesla reports in their, in their 10K, uh, basically a deferred or an unsatisfied performance obligation for this. And it's been reduced by about $1.4 billion, but it's still about $3.4 billion. So, they still are expecting $3.4 billion to come in over the, you know, coming quarters, year, and so on.
>> Mhm.
>> But the, the number was around five, and it was reduced by 1.4. If they expected this to go away, you think the five would go to zero. It didn't go to zero. So, everybody I see talk about this says, "Oh, these, these are going away. It's going to zero." It's not going to zero. It's going down, right? It already has gone down, but it's still going to be a number for Tesla. And basically, this is pure profit. Okay? So, here you can see the trend, downward trend. It was about $400 million this last quarter from a peak of almost $900 six quarters ago. Okay. But this is kind of back to where we were, you know, three or four years ago. Fine.
>> Mhm.
>> Competition is still paying Tesla to build out their infrastructure. That's the way, the way I look at this.
>> That's right. You, you did a show one time and you showed the data, and then you said that if you take a look at all the credits that Tesla's ever got from its competitors.
>> Yeah.
>> They use that money to buy all the data centers, the AI, AI data warehouses or factory, or something like that, isn't it?
>> That's right.
>> That's how I look at it.
>> And I've got an updated number on part of that in a couple slides ahead here. But, um, this is, uh, regulatory credits over 12 months, just to kind of smooth out some of the bumps. And we're at $2.1 billion still over the last 12 months. Uh, in my estimation, this might settle out at about $1.2 billion. It's kind of a go-forward number. Okay. So, not, not nothing. Here's the one of the charts I did is looking at Tesla's capex since 2018. About a quarter of it has been competitor funded. If you took all the red credits, how much are those companies paying Tesla to compete against them?
>> It's about a quarter of what Tesla spent. I don't know of any other business in the world that has this situation. Now, of course, this is not exactly what's happening. The money's just coming in, and Tesla's doing whatever they want with it, but this is one way that I think of this, right? It's, it's a beautiful thing.
>> Mhm.
>> Their competition is paying Tesla to put them out of business faster. And then, just to look at this kind of dynamic over time, um, the capex in red, and the competitor funded capex in blue. Every quarter, they're helping to fund Tesla's capex like clockwork, if you look at it by capex. But if you look at it total, it's not, it's like a meaningless. So, it's, it's, it's, uh, it's not, it's important for Tesla. If they didn't have this, it's not a big deal. Company still survives. But since it's happening, because no one else is doing electric vehicles, they have to, um, you know, the government is trying to promote them to do it, so they have to, you know, buy these Z credits from Tesla.
>> The next slide is data from their 10Q. On the left is how much Tesla has earned since 2021 in terms of their regulatory credits. It's almost $12 billion. The right side is the number that Tesla believes that they're going to earn in the future.
>> And right now, that number is $3.3 billion.
>> Yeah.
>> It was five a few quarters ago.
>> Yeah.
>> So, it's come down. It's not zero. This is something that's interesting for energy. We're not going to dwell on it today because it's very complex, but there's this notion that Tesla Energy has reported revenue that's in green, but they also have deferred revenue, and they have unsatisfied performance obligations. Both of those are are monies that they will receive in the future, and we can track quarter to quarter the growth in those metrics. And so, I produce a metric that I call indicative revenue, where I take the change in both of the numbers and I add it to reported, and I get the yellow bars, and those indicative revenue numbers have been growing faster and higher than the reported revenue. So, it gives a strong indication that, you know, better days are ahead for Tesla energy. Now, interestingly, this quarter, that gap between the yellow and the green bars narrowed a bit. It's too soon to say whether that's indicative of anything in terms of, you know, a weakening energy business. I don't think so, but it's something that we need to watch.
>> Mhm.
>> They did talk about increased competition in this business.
>> Yeah.
>> And then this one shows that on a quarter-to-quarter basis, the yellow bar is typically higher than the green. So, indicative revenue is higher, which is good. This quarter it flipped. It's not the first time it's flipped before. If you go back to Q1 of 2023, that green bar was higher than the yellow, and the next quarter, the yellow bar was super high. So, there's, there's lumpiness in these numbers.
>> Yeah.
>> Yeah.
>> It's when Tesla can recognize revenue for energy. They already said it's lumpy. Sometimes you don't recognize it because they have to install it. They have to make sure to turn it on. So.
>> Yeah, there's a lot of complexity here. The next one is breaking out that unset, the the indicative number, the deferred revenues in blue. And the biggest part of this is that unsatisfied performance obligation. The total of both of these now in Q3 is about $12 billion. It's a massive number.
>> Yep.
>> Remember, this business on a quarterly basis, energy is doing $3.5 billion in revenue right now.
>> Yep. That's, that was the thing we saw earlier, the rise of energy and how it works. But it's gonna double because they've already, actually, they just haven't recognized the revenue that's it's already in, it's already.
>> It's been contracted. They already, you know, probably started moving, installing it, and, uh, yeah.
>> We don't know which quarter that they can recognize that revenue, but when it does, here's how much. That's a lot. That's, that's, that's a really good number here.
>> Unsatisfied performance obligations.
>> That's great. Now, if you look at the next slide, it looks at the quarterly changes in these numbers. And you can see this quarter, the unsatisfied performance obligations went down for the first time in forever.
>> Mhm.
>> Right. It's always been a quarter, a higher number each quarter. I don't know if that's indicative of contract cancellations or something else. I don't know. It might just be a blip in one quarter. Again, we'll look at Q4 and see how this looks.
>> Mhm.
>> But overall, still very healthy. And, and then finally on this, is short-term versus long-term unsatisfied performance obligations. Short-term is money they're going to realize in the next 12 months.
>> Okay.
>> Long-term is longer than that. And they've got about a 50/50 balance between the two.
>> How do you know this, CER? Where did you get these numbers? They don't.
>> It's all in the 10Q.
>> My god, you dug that deep into the 10Q to find this info.
>> Yeah.
>> No one else has done that, CERN.
>> Some people watch Netflix. I read 10Qs. Dude, we'll have to have a talk afterwards.
>> Yeah, I know. It's a sickness, server.
>> I'm gonna have to hold an intervention. Uh, but actually, we appreciate it. Uh, thank you. This is crazy. I don't know where you got these numbers. Like you said, thank you. But jeez. Wow. Okay. This is very important info. So, this is what's coming sooner than later.
>> It's about five, five billion of unsatisfied performance obligations will hit.
>> About. Yeah.
>> Yeah. It's fantastic info. Okay.
>> Yeah. And then, uh, Tesla's capex, what are they spending money on? Well, there's a bunch of different categories. This is all again in the 10Q. Um, machinery and equipment, that's the light blue. The dark blue is land and buildings. Uh, between the two, that's about $31, $32 billion in those two. Uh, AI infrastructure, the bright green. $6.6 billion now has been invested in AI infrastructure for Tesla. $4.7 billion now balance there. Uh, leasehold improvements. So, for buildings they've leased, work that they've done to improve those properties, $4.2 billion. Computer equipment, hardware and software, $3.1 billion. And then construction in progress of $8 billion.
>> Only one.
>> Or sorry, one quarter.
>> One quarter. This is total. This is lifetime total.
>> Oh, okay.
>> Okay. So, total spend approaching $60 billion. Okay. And if you go to the next page, you'll see the quarter-to-quarter changes, right? So, every quarter, they're spending more money in every category with the exception of the construction in progress, where when the building's completed, it goes out of that account and into the other accounts.
>> Mhm.
>> So, for example, December 2024 is probably Cortex 1. It's complete. It flows out of construction in progress and goes into the AI infrastructure spend. It goes into some of the other categories, is my guess. Or actually, it did. You can see there it's $1.2 billion deduction from construction in progress and a $1.4 billion increase in AI infrastructure. Right? So, the, the red is kind of a temporary account. The other ones are long-term. And you can see this quarter they spent about $670 million on machinery, equipment, and vehicles. And the next biggest one was AI infrastructure at about $450 million. I would imagine that category will continue to increase. So, they've spent about $58.4 billion in capex lifetime, and they've depreciated about $19 billion of that. So, their balance on the books is about $39.4 billion of property, plant, and equipment. Again, this is a company building for the future.
>> Yeah. It's not easy to compete with Tesla.
>> Not, not too many auto companies have that green bar in the middle. The AI infrastructure spend doesn't exist.
>> Doesn't exist.
>> At Ford and GM.
>> And it needs to. So, whenever you hear somebody say, "Oh, we're going to have our own version of, uh, FSD or robo taxi or bots." Okay, where's your data?
>> Where's it going to magically appear from?
>> Where's your data set warehouse? Where's your AI data warehouse? Where's your data? Tesla's been leaving breadcrumbs for years. Here, here's the breadcrumbs. Here's the money they're spending.
>> Quarter to quarter.
>> Where are those competitors spending their money? Show me the numbers. It doesn't just happen out of thin air. Last but not least, the final two slides. Uh, warranties. So, when Tesla sells a car, they have to reserve a certain amount of money for potential problems in the future. Warranty reserve. In this last quarter, they reserved $727 million. And you can see what that looks like compared to other quarters in recent history. But I think a more instructive thing is to look at the next page, which is the warranty reserve per vehicle delivered. And it's about $1,460 last quarter. It's been as high as $1,600. It's been as low as $1,000 in that range. Now, Tesla today has an accumulated warranty reserve of six, sorry, $8 billion on its books. They've set aside $8 billion. So, of the $41 billion in cash on the balance sheet, $8 billion of that is reserved for future potential warranty issues. And many of us think that they've over-reserved. So, at some point, we may see some of that money coming back into the company.
>> I think Tesla's actually pretty conservative here in terms of what they've reserved for. We'll have to see. It's one of those things you just don't know until, you know, over the life of the vehicle whether or not they'll have to spend any money on, you know, on warranties fixing things.
>> I mean, the car, the, the batteries are lasting longer than people realize. The car is actually pretty solid. Services is not that high.
>> So they can do over-the-air software updates to fix quote unquote recalls.
>> Sir, would, would this be the bucket where let's say they go, "We want all hardware 3 cars upgraded to hardware 4 cars?"
>> Potentially, they could pull it from a warranty reserve if they wanted to treat it that way. Um, maybe, maybe not.
>> I don't know.
>> Yeah.
>> Okay. Well, thank you so much, sir. That was amazing. 66 slides. You said you had more slides.
>> There's probably another hundred slides out there, Herbert, that we'll.
>> That you did not show.
>> But, uh, the amount of work you put in is just unbelievable. Um, and we appreciate that so much because there were several slides here that were, all of them are good, important, but there are several that really, because it, all of it tells a story, but several of them really shows you the difference between this company and this company is healthy, and it's not only healthy, but the cash flow is strong. They're investing in huge R&D, and we have not seen anything yet. There's a reason why I've been investing, and, uh, everything's looking good with robo taxi and bots. So, that, and then you've done other shows where you showed that, you know, today we showed, uh, revenue, lifetime revenue, quarterly revenue, yearly revenue for energy, for auto. But in your other charts, we've shown several times now, those eventually become tiny little, even though they're growing, they're going to be going like crazy. Eventually, they, the charts you can show the future, it's like they're tiny compared to what kind of business this is going to become. This is a 100 times bigger business than what we have today, and it's a healthy business. So.
>> Yep.
>> Thank you.
>> Thank you.
>> Final comments.
>> Yeah.
>> Awesome. Thank you, sir. Thanks, everybody. I've created a website that is the most comprehensive resource for the Tesla investor. Please check it out. Simply go to my website at herdomm.com. [Music]