Tesla Earnings Call Transcript Q1 2014 – Complete Conference Call

Brian A. Johnson Barclays Capital: In any sense of quantification the orders or the deposits, or the wait times in China?

Elon Musk: Aaa, we’re actually really trying to get the wait times down in China. That’s sort of…it’s really quite a long wait time. Amm, in fact, the only source of unhappiness that I encountered in China was that some customers who are in some of the mid-sized cities are…are unhappy that we’re delaying their deliveries, because…aaa…it will take us a bit longer to get the service and Supercharger access, but service is a necessary requirement, you cannot have a service center be like by five hundred miles away from subway sub-dealers. Amm, so that…that’s the…that…that’s our big – our biggest issue in China is like customer unhappiness they’re not getting their cars soon enough. Amm, and I think the wait time is quite long in some cases, like four months or five months or something like that. Amm, yes.

Brian A. Johnson Barclays Capital: Thanks.

Jeffrey B. Straubel: Thanks Brian.

Operator: Our next question comes from Andrea James with Dougherty and company, your line is open.

Andrea James – Dougherty & Co: Thanks for taking my questions. Amm, your R and D expense is ramping pretty significantly sequentially in Q two, and I was wondering if you could talk about what components make up the R and D increase. And then also, in line with that, how are the costs to bring the Model X to market kind of tracking against your earlier expectations?

Jeffrey B. Straubel: Yes, hi James. Amm, our R and D expenses went up exactly as planned in Q one. And…and it’s primarily driven by all the aaa…aaa engineering design and testing work that’s going on, on our new product development. It’s the Model X, as well as what we’re doing to get the Model S ready for China and other markets.

Elon Musk: Yeah, for examples there is like right hand drive.

Jeffrey B. Straubel: Exactly.

Elon Musk: Japan localization or China localization, U.K.

Jeffrey B. Straubel: Right.

Elon Musk: I think Hong Honk that kind of thing.

Jeffrey B. Straubel: Right, it’s more driven by those expenses rather than just headcount increases and so these are the…the technical expenses that you typically see before the launch of new products.

Elon Musk: Yes, I should said that aaa…so…yeah…some of that is also that’s we wanted to do ongoing improvement to the Model S. Amm, that…as times go by we’ve made hundreds of small improvements to the car amm…and like all of these people wouldn’t necessarily notice, but I think collectively they add up to an improved experience with the car. Amm, so we’ve made some improvements in the seat comfort for example amm…and aaa…you know here and there in fit and finish, aaa…we’re modifying the rear door. So it can open wider so rear…rear ingress-egress is improved. Amm, there is a whole bunch of things.

Jeffrey B. Straubel: Software improvements could be continually made…

Elon Musk: (unclear) very exciting software updates that are going to come…aaa…come out in the next few months that…amm…will improve the experience of the whole suite of customers out there. Amm, and amm…if anyone ever ask me about that I’m looking to say what they are, so just…just broader information as it is, but…amm…I mean customers…customers can certainly look forward to some…some really awesome functionality improvements…aaa…in their exiting car.