Tesla hints at new products and long-range structural battery packs

Tesla has reported a record high 27.9% operating margin, despite a quarter-on-quarter decrease in revenue in the middle of what CEO and co founder Elon Musk has described as “supply chain hell” for the second quarter of 2022.

Its latest report exceeded most Wall Street expectations, with revenues reaching almost $US17 billion and earnings per share of $US2.27 non-GAAP, well ahead of  the $US1.81 expected by Wall Street.

The quarter has ongoing semiconductor supply issues, and shutdowns at Tesla’s Shanghai factory due to China’s continued “Zero Covid” policy. This resulted in around 50,000 cars missing out on production, which has directly affected Australian deliveries for the country’s most coveted electric brand.

Despite the numerous challenges, the EV maker is upbeat in its latest earnings results.

Following news in early July that it had hit a production record in June it noted, “With each of the Fremont and Shanghai factories achieving their highest-ever production months and new factory growth, we are focused on a record-breaking second half of 2022.”

Tesla has now made two million cars at its Fremont factory, as reported here by Riz Akhtar. It now puts its production capacity at 1.9 million a year. And Musk thinks the company may achieve the weekly output needed to achieve that before year’s end.

“We’ve had many 30,000 car weeks already so I think a 40,000 car week is within reach this year,” said Musk.

It’s a far cry from 2018 when Musk tweeted Lex Fridman’s chart showing Tesla had made 360,000 vehicles.

New Tesla products hinted at

Amongst the topics discussed in the earnings call, is the simplification of manufacturing that Musk says will allow the company to delve into new product lines.

Key to this has been the casting process, says Musk, which is used in the Model Y and allows the company to reduce the number of body parts and simplify the assembly process. This has meant a smaller footprint for assembly, also reducing costs.

This has had the added benefit of improving NVH (noise, vibration and harshness), says Musk, and the team revealed that the ongoing casting design iteration process has already reduced mass by 4-5 kilos.

“We reduced body welding robot count by 70% per unit of capacity in Austin and Berlin,” he said.

Musk said it means “a body shop that is roughly three times smaller than what would normally be the case.”

“I should say it’s also lighter, cheaper and has superior noise vibration and harshness. So it’s good on every level.”

“But this journey is not over,” he added. “It will bring … another level of simplicity and manufacturing improvements with Cybertruck and future products that we’re not quite ready to talk about now but I think will be very exciting. to unveil in the future.

Long-range Model Y with 4680 cells?

Another hot topic was the ongoing ramp-up of 4680 cell production, and whether it were true that Tesla is testing a long-range Model Y with perhaps 800km range.

While Musk and team were not drawn on the implied question from analysts, it did confirm a number of related details.

Firstly, that while some Austin customers have received a Model Y with structural 4680 battery pack, the company is still mostly using 2170 cells.

It is focussed on ramping production at its Kato Road facility, which it says is growing consistently at a rate of 35% month-on-month, and 1 kilogram a week is envisioned by the end of 2022.

Cell equipment is also installed in Texas, where it is aiming to exceed Kato output by end of year also.

Musk said, “the focus right now is on the dozens of little issues that inhibit the production ramp of the 4680 cells – some of the more challenging ones have been feeding the anode and cathode material.”

“Because if we weren’t using this revolutionary dry electrode process … when something’s revolutionary, thre’s a lot of unknowns that have to be resolved. So we’re confident of resolving those unknowns, but it’s it’s very, very difficult.

“We’re making rapid progress on that point. So the first order of business is really to get the basics right. Get to high volume and high reliability and then very rapidly iterate to within that to enhance the energy density and reduce the cost of the cell.”

While the team was questioned specifically about certain Model Y recharging behaviours suggesting high or locked range, it would only say that it is “planning to layer in new material technologies and higher range structural packs.”

Put simply, the road to developing revolutionary new products at scale is slowly, slowly.

But Tesla will get there, says Musk.

“I think we’ve said this now for many years, then it is proven true,” said Musk. “Tesla does not have a demand problem. We have a production problem. And we’ve almost always had it with very rare exception. It’s always been a production problem. I think that will remain the case.”