Autonomy Will Make Tesla a $ 500 Billion Company

Citigroup and Goldman Sachs, who subscribe to Tesla's latest effort to raise $ 2 billion in additional funds, held a "general call for investors" on Thursday, during which CEO Elon Musk and Chief Financial Officer Zach Kirkhorn responded to brokers' questions regarding their plans for the electric vehicle manufacturer.

According to two guests who attended the call, CEO Elon Musk announced early Tesla 's self – driving strategy, extending his remarks, as well as other leaders, to the company. a recent event for investors that the company had dubbed "Independence Day".

Musk told investors that self-driving would turn Tesla into a company with a market capitalization of $ 500 billion, these people said. Its current market capitalization is approximately $ 42 billion. He also said that the current value of Teslas will increase as self-driving capabilities will be added via software, and that their value will reach $ 250,000 in the next three years.

The call was launched while the company was seeking to mobilize $ 650 million in shares and $ 1.35 billion in convertible bonds. The deposits indicate that Tesla plans to use capital for general purposes. Musk said Tesla would be able to finance its business needs through its cash flow, but that it was wise to have a buffer in the event of a recession or low car demand in the world.

Kirkhorn reminded investors during the phone call that Tesla's outlook for the second quarter had not changed. The company still plans to deliver between 90,000 and 100,000 vehicles in the second quarter, and between 360,000 and 400,000 vehicles in total this year.

On an unadjusted basis, Tesla lost $ 702.1 million, or $ 4.10 per share, in the first quarter of 2019. Shares of the company rose more than 4% on Thursday after the year. announce the new application for funding, but remain down more than 25% dating.

According to the two investors who heard the call, Mr Musk described Tesla 's existing business areas in the fields of electric vehicles, solar energy and storage. energy, providing valuable support for Tesla's activities in a new driverless era.

He added that even though Tesla drivers must keep their hands on the steering wheel today, it will become less so over time. Musk said that competitors such as GM's Cruise and Waymo Alphabet can not catch up, as Tesla today has a fleet of connected cars and a proprietary chip.

The hundreds of thousands of Teslas already on the road are constantly collecting data and sending it back to Tesla's servers, helping the company to improve and advance its autopilot and autonomous driving systems. At the same time, the company 's standalone computers, on which it began working about three years ago, are exclusive to Tesla and would use less energy in the vehicle than competing offerings such as Nvidia.

Musk reiterated that, since Teslas can be upgraded "by air" with new features and software-enabled features, its value will increase, unlike almost every other car on the market. A Tesla will be worth $ 150,000 to $ 250,000 in three years, he said. He also said that a complete upgrade to self-driving would increase the value of any Tesla by a half-order of magnitude, or five times.

Tesla expects to have a million vehicles on the road next year capable of functioning as "robo-taxis," said Musk, reiterating statements made during the day of autonomy and when calling the first quarter results of the company. Each car should be able to perform 100 hours of work per week for its owner, which would bring him money in the form of robo-taxi, he told investors.

Some investors and analysts have expressed skepticism about the robotic taxi plan and Tesla's self-driving strategy in general.

For example, in a note to investors after the day of autonomy, Cowen analyst Jeffrey Osborne writes, "We are seeing a considerable technological and execution risk in the shift in strategy from from a simple electrification to a Tesla solution, which also outshines Nvidia in hardware, Google in the software and create a better driving service than the current leaders. "

He added in the note: "The robotaxi plans of the Tesla network appeared to be half-melted, as the company appeared to have no answers or even to have a fairly fundamental question about pricing, insurance liability or requirements. regulatory and legal requirements. "

At Thursday's investor call, according to the auditors, Musk and other Tesla officials declined to give details on more pragmatic issues such as the current state of the company's order book. the company and the measures taken to remedy Tesla's maintenance and repair problems. , the revenue that Tesla hopes to generate through regulatory credits for the rest of the year and that will supply battery cells to Tesla in Asia when it begins manufacturing models 3 in Shanghai.

One person asked what Tesla could do to improve its gross margins compared to the around 20% reported in the first quarter of 2019. The company had previously promised that it could reach 25% of its margins.

Musk told investors that Tesla would try to improve the efficiency of its supply chain, but would feel good with gross margins of about 20%.

But he also tried to bring the conversation back to self-reliance, calling it a fundamental value factor for Tesla, and urged investors to put an end to the agitations at the margins of the vehicles.

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