These are the main take away from Tesla earnings call

The current big narrative on cars is the shift from fuel energy to electrical. Within this scenario, Tesla is not only ahead of the pack, it is still marching faster and digging the gap with legacy car manufacturers thanks to vision but more importantly to hands-on execution. In 2021, Tesla has moved from concept and vision to reality and execution: a manufacturing company that makes money.

Semi-conductor shortages and port congestion have been real industry shocks for most car makers and eventually a bonanza for Tesla. Just like Apple, Tesla has been able to be supplied and to soften the blow. “So, last year, we spent a lot of engineering and management resources solving supply chain issues: rewriting code, changing our chips, reducing the number of chips we need, with chip drama central”. Battling with supply chain challenges, Tesla managed to grow output by 90% and achieved a 600 bp improvement in Gross Margin.

The supply chain shock brought the focus back at the plant level and new product launches have been delayed as management focuses all its resources on output and delivery. In 2022, Tesla indicates that they can grow another 50% within existing capacity without any new models.

Tesla indicated three growth avenues in the future that go well beyond EV

• Full Safe Driving is expected to show “profound improvements in the next few months”. In a typical announcement, Elon Musk indicated that he would be shocked if we do not see Full Safe Driving (FSD) safer than human this year.
• The rising role of Robot taxis: EM stressed that asset use could jump fivefold from the current level of 12 hours per week to 60 hours without additional cost. Additionally, the fleet would be kept self-driving by software updates.
• In house humanoid robot Optimus: Elon Musk said that Optimus could become more important than the vehicle business over time.
• New battery and battery infrastructure

The current narrative is straightforward: Tesla makes electrical car and makes money making car. It focuses on its supply chain. They don’t have R&D centres; they fix problems and scale up keeping an eye on profitability. They are profitable now despite huge supply chain issues. Their 80X PE is not for the faint hearted. Earning can easily double in 2022 and robots, battery infrastructure, self-driving and robot taxis offer upside optionality. The more important point is software everywhere: inside the car, outside the car with FSD or robots. Tesla looks very much like Apple in 2008 when they launched the iPhone. Then, the consensus was that it was just another cell phone that would compete with Ericsson, Sony, Nokia.

Twelve years down the road, most of the cell phone players are gone or irrelevant. The cell phone was the Trojan horse that established Apple software and services as a global dominant player and a real money machine. The combination of fine manufacturing and execution, vision and software can be powerful. Musk comments during Tesla last earnings presentation sounds very much like a combination of Steve Jobs and Tim Cook.



Will Tesla do to the car industry (or shall we say the mobility market) what Apple did to communication? The real narrative is that Tesla is acting as a car company and is morphing in a technology platform. Considering Tesla valuation and its $900bn market cap, it is very difficult to make any investment decision in the current market environment. The point is that assuming that the level of hands-on execution and financial discipline seen in 2021 is maintained, Tesla growth story is in its very early innings.