Tesla (NASDAQ: TSLA) delivered more strong growth during its first quarter. Revenue surged 74% year over year as total vehicle deliveries jumped 109%. Free cash flow also improved, swinging from negative $895 million in the year-ago quarter to positive $293 million in Q1.
Here are interesting topics management covered during the call.
Image source: Tesla.
1. Tesla's upcoming subscription service
Tesla CFO Zachary Kirkhorn said during the company's earnings call that Tesla was working on releasing a subscription to its "Full Self-Driving Capability." This package, which Tesla often refers to as FSD, is an enhanced version of Tesla's Autopilot that currently offers additional driver-assist features and will eventually enable fully autonomous driving, according to Tesla. Currently, FSD costs $10,000, making it difficult for some people to justify purchasing it. By letting vehicle owners get access to this technology via a subscription, it will be accessible to a wider base of people, Tesla management asserts.
"If you look at the size of our fleet and you look at the number of customers who did not purchase FSD upfront or on a lease and maybe want to experiment with FSD, this is a great option for them," Kirkhorn explained. He said that he hopes Tesla will launch the service "pretty soon" -- after it solves a couple of "technical dependencies" regarding its rollout.
2. Surging demand
For the most part, Tesla has always had the luxury of strong demand for its vehicles. This has enabled the company to constant invest aggressively in expansion. Fortunately, this theme persists to this day.
"[W]e've seen a real shift in customer perception of electric vehicles, and our demand is the best we've ever seen," explained Tesla CEO Elon Musk during the company's earnings call. He went on to note that Tesla typically sees a sequential decrease in demand during Q1 due to seasonality but this didn't happen this year.
In addition, Kirkhorn noted that global demand for its vehicles "remains meaningfully higher than production levels," leaving the company supply constrained. "[S]o we're driving as fast as we can to increase our production rates."
Model Y. Image source: Tesla.
3. Could Model Y become the best-selling car in the world?
As Tesla noted in its first-quarter update the Tesla Model 3 is now the best-selling premium sedan in the world. Though Musk certainly sounded happy about the achievement, he has even more ambitious expectations for its newer Model Y, or the company's lower-cost SUV.
"When it comes to Model Y, we think [it] will be the best-selling car or vehicle of any kind in the world and probably next year," Musk said. "So I'm not 100% certain next year, but I think it's quite likely ... that in 2022, Model Y is the best-selling car or truck of any kind in the world."
In summary, the earnings call provides more details about the company's recent execution and its ongoing expansion. Tesla is building new factories and rapidly increasing its production capacity as demand increases. In addition, Tesla has a strong pipeline of products, including the upcoming release of a subscription option for its enhanced driver-assist package. As Musk said during the call, "in conclusion is there's a lot to be excited about in 2021 and '22."
10 stocks we like better than Tesla
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*
David and Tom just revealed what they believe are the ten best stocks for investors to buy right now... and Tesla wasn't one of them! That's right -- they think these 10 stocks are even better buys.
*Stock Advisor returns as of February 24, 2021
Daniel Sparks has no position in any of the stocks mentioned. His clients may own shares of the companies mentioned. The Motley Fool owns shares of and recommends Tesla. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.