Tesla Full Self Driving in 2019Q2 and ride sharing via hybrid Airbnb-Uber model
Current Advanced Autopilot
Tesla will soon rollout the team’s most advanced Autopilot feature called Navigate on Autopilot. In their last release, they launched a new set of neural network that provides a view of everything happening around the car. With Navigate on Autopilot, they’ll use information to understand exactly where the car is on the highway system and to automatically change lanes, handle forks and take high curvature exits to follow a nav route.
Initially, it will require drivers to confirm lane changes using the turn the signal, before the car moves into an adjacent lane. Future versions will allow customers to wave the confirmation requirement they choose to. One area that they are really excited to build on this improvement is active safety. With the advancement in neural networks, covering 360 degrees of view around our car, they can provide a level of constant vigilance that humans just can’t.
Ultimately, this shall allow us to warn, even intervene for an enormous percentage of modern accidents and to ship these improvements as software upgrades to our existing customers.
The Hardware 3 design is continuing to move along. Over the last quarter, they’ve completed qualification of the silicon, qualification of the board. They started the manufacturing line, in qualification of the manufacturing line. They’ve been validating the provisioning flows in the factor. They built test versions of Model S, X and 3 in the factory to validate all the fit and finish of the parts and all the provisioning flows. They’re still on track to have it ready to go by the end of Q1, 2019. It is roughly 1000% increase in processing capability compared to the current hardware. A giant improvement despite costing about the same. Cost, volume and power consumption are approximately the same as the current hardware, but it’s a ten-fold improvement in frames per second.
The simple change of upgrading the computer will take less than half-an-hour in service to upgrade the computer. Anyone will be able to upgrade their computer to full self-driving capability or upgrade their car to full self-driving capability with a simple service visit.
Tesla expects all cars with a Hardware 2 sensor suite, basically, anything made in the last roughly two years will be upgradeable to full self-driving.
Andrej Karpathy is the director of AI here at Tesla. This upgrade allows Tesla AI to not just run the current neural networks faster, but more importantly, it will allow us to deploy much larger, computationally more expensive networks to the fleet. The reason this is important is that, it is a common finding in the industry and that we see this as well, is that as you make the networks bigger by adding more neurons, the accuracy of all their predictions increases with the added capacity.
Elon talked a bit about the kind of long-term future. They absolutely see the future as kind of – as sort of a shared electric autonomy. So that you’ll be able to do ride-hailing or share your car anyway, sort of long-term model that’s some combination of like Uber, Lyft and Airbnb. There will be Tesla dedicated cars for ride-hailing and there will be – and any customer will be able to share their car at will, just like you share your house in Airbnb. So it’s a combination of those two models. Elon Musk thinks, it’s pretty obviously where things are headed long-term.
The advantage that Tesla will have is that they will have millions of cars in the field with full autonomy capability, and no one else will have that. So Elon thinks that puts Tesla – that will end up putting us in the strongest competitive position long-term.
The Tesla company-owned fleet will just be where there aren’t enough customer cars to be loaned out. If a particular city does not have enough customers loaning cars, then Tesla will supplement with a Tesla own fleet. This is the self-driving combination of Uber and Airbnb.
Tesla will charge something probably comparable to Apple App store. Tesla will charge 30% or something in order for somebody to add the cars to fleet. Elon thinks that’s like a pretty sensible way to go.
Profitable quarter and Europe and China will be big for 2019
The full transcript of the earnings call is available.
Tesla delivered a total of 84,000 vehicles globally, which is more than 80% of the vehicles that we delivered in all of 2017. In fact, they delivered more cars in this quarter than they did in all of 2016, in a single quarter.
Model 3 became the best-selling car in U.S. in terms of revenue and the 5th best-selling car in terms of volume.
They expect to produce and sell even more Model 3s in Q4. And expect that trend to continue into Q1. And we’re excited to bring Model 3 to Europe and China early next year, given that the market for mid-sized premium sedans in those regions is even larger than in North America.
Q3 2018 was a truly historic quarter for Tesla. Model 3 was the best-selling car in the US in terms of revenue and the 5th best-selling car in terms of volume. With average weekly Model 3 production through the quarter (excluding planned shutdowns) of roughly 4,300 units per week, we achieved GAAP net income of $312 million. We also delivered on our internal cost efficiency targets, leading to GAAP Model 3 gross margin of more than 20%, which exceeded our guidance. Finally, our total cash increased by $731 million and we had free cash flow (operating cash flow less capex) of $881 million despite less than 10% of that amount coming from key working capital items (payables, receivables, and inventory).
In order to significantly increase the affordability of Model 3, we have decided to accelerate our manufacturing timeline in China. We are aiming to bring portions of Model 3 production to China during 2019 and to progressively increase the level of localization through local sourcing and manufacturing. Production in China will be designated only for local customers.
We recently started releasing Version 9.0 of our vehicle software, which marks our biggest software upgrade in the last two years. Our Autopilot software is now much improved, and, as a result, we can start adding new functionality that was not possible in the past. The main functionality we added to our early access users is “Navigate on Autopilot” where on most controlled-access roads such as highways, any Tesla vehicle made from October 2016 with Enhanced Autopilot will be able to automatically change lanes with driver confirmation, transition from one freeway to another, and ultimately exit the freeway when approaching the final destination. We also enabled long-awaited dashboard camera functionality as well as some Atari games when a vehicle is parked. This new software architecture will enable us to accelerate deployment of new Autopilot and Self-Driving features in the future.