Our delivery and logistics systems continued to progress in Q4, but there remains room for more improvement.In order to reduce
vehicle transportation time and improve the timeliness of scheduled deliveries, we have purchased and are continuing to purchase our
own car-hauling truck capacity for vehicle shipments.This gives us far more control while lowering costs and improving customer
satisfaction.
In the past two years, Tesla vehicles have accounted for all of the electric
vehicle (EV) volume growth in the US.Even with the radical EV growth in the
second half of 2018, EVs still account for just 2% of the total US market, and
there remains a substantial opportunity for EVs to continue to gain market
share in the US and globally.Consumer purchases have demonstrated that
EVs are becoming a preferred option, as EVs in Q4 2018 outsold hybrid electric
vehicles (HEVs) in the US for the first time in history.
EV sales in the US
Model 3 trade-ins by vehicle type
The appeal of Model 3 continues to go far beyond the mid-sized premium
sedan market.Our trade-in data suggests that consumers are significantly
changing their purchasing habits in order to buy a Model 3. Of all trade-ins
we’ve ever received from customers buying a Model 3, only 17% are other
mid-sized premium sedans.Perhaps more surprisingly, almost 60% of these
trade-ins are non-premium vehicles.We are also seeing that a significant
number of Model 3 buyers are trading down in size from a larger car or a
SUV to a Model 3.Designed from the ground up to be electric, Model 3 has
more interior space than its gas-powered equivalents.Interestingly, Model S
accounted for only a small portion (4%) of total Model 3 trade-ins.
In Q4, we delivered 63,359 Model 3 vehicles to customers in North America.
In January 2019, we started to produce Model 3 vehicles for Europe and
China, and the car is now fully certified for sale in these markets.The market
opportunity for Model 3 in Europe and China exceeds North America based
on the most recent sales of mid-sized premium sedans.Model 3 was
designed from the outset for a global market, and shares more than 98% of
its parts in common across its regional variants.
Model 3 vs other premium sedans in 2018
In January 2019, we started construction of Gigafactory Shanghai.Local manufacturing is an essential component of our ability to
provide to customers in the region a truly affordable version of Model 3.Most other mid-sized premium sedans in China are locally
produced, which allows them to have a lower average selling price.In the initial phase of Gigafactory Shanghai, we expect to have
stamping, paint shop, body joining, and general assembly shops in operation by the end of 2019.This accelerated timeframe should be
possible due to the radical simplification of our manufacturing layout and processes compared to our first-generation production line in
Fremont.Higher-spec models such as our long-range all-wheel drive (AWD) and Performance versions will continue to be shipped to
China from the US.
In Q4, we delivered 27,607 Model S and Model X vehicles to customers.For the full year, we delivered 99,475 Model S and Model X
vehicles, which was in line with our guidance.We recently stopped taking orders for the 75 kWh versions of Model S and Model X and
will focus on the longer-range versions of these flagship products instead, with the recent introduction of a 310 mile range base Model S
and 270 mile range base Model X.Over the years, we have been gradually simplifying options for Model S and Model X by
standardizing options such as the air suspension, AWD, premium package, and glass roof.This is yet another step towards increased
standardization, which results in significantly lower manufacturing cost.Additionally, we believe this will provide more differentiation
between Model S and Model 3.As a result of this change and improving efficiencies in our production lines, we have reduced Model S
and Model X production hours accordingly.Last year alone, Model S and X production efficiencies improved 15%.Our objective is to
continue to achieve further efficiencies, which will reduce the manufacturing cost while providing us the flexibility to increase output as
necessary.
Our Autopilot team recently publicly launched “Navigate on Autopilot”, a feature that allows, on most controlled-access roads such as
highways, any Tesla vehicle with Enhanced Autopilot to change lanes, transition from one highway to another, and ultimately exit the
highway when approaching the final destination.We expect to increase the functionality of Autopilot to navigate increasingly complex
environments and situations.
During Q4, we opened 27 new store and service locations, resulting in 378 locations worldwide at the end of the quarter.Our largely
electrified Mobile Service fleet continued to grow further to 411 service vehicles on the road at the end of Q4.In 2018, the total Tesla
vehicle fleet grew by 85%, mainly due to the steep Model 3 production ramp.We see upgrading our service capacity and improving
customer service as a top priority at the moment.Where needed, our service centers are moving to two-shift operations in order to
double service capacity quickly, and we are simplifying processes in order to increase service throughput.We are also increasing the
functionality of the Tesla App for scheduling service in order to improve responsiveness and convenience for our customers.
Furthermore, we are changing our parts distribution approach to ensure that spare parts are available in a timely manner at all our
service centers globally.
In Q4, we opened 69 new Supercharger locations for a total of 1,421 Supercharger stations globally.In 2018, we opened 293
Supercharger locations, many of which have 20 to 50 stalls per location.To date, we have approximately 12,000 dedicated
Supercharging connectors and over 21,000 Destination Charging connectors globally.In addition to our continued investment in global
charging infrastructure, our engineering team is finalizing plans for the rollout of our V3 Supercharger technology early this year, which
will enable significantly faster charge times.We anticipate V3 to not only provide a better customer experience for Tesla vehicle
owners, but to also significantly lower Tesla’s operational and capital expenditures.
ENERGY PRODUCTS
While 2018 was predominantly the year of Model 3, our Energy business also reached a significant milestone.In 2018, we deployed
1.04 GWh of energy storage, nearly tripling our energy storage deployments compared to 358 MWh deployed in 2017.In Q4, energy
storage deployments reached 225 MWh, a decrease of 6% sequentially, and up 57% compared to Q4 2017.A new manufacturing line
made by Tesla Grohmann is further increasing production of Powerwall and Powerpack modules at Gigafactory 1.With a better supply
of cells and new manufacturing equipment, we are aiming to more than double energy storage deployments to over 2 GWh in 2019.
Through various operational efficiencies, our average sale-to-installation time also decreased by about 50% in 2018.
GWh of energy storage deployed
We see growth opportunities for Powerwall not only in North America, but also
in Australia and Europe where electricity rates are high and solar panels
combined with Powerwall units will help reduce electricity bills.South
Australia has recently initiated a Virtual Power Plant program where the plan is
to install 50,000 interconnected Powerwall units that will provide increased
grid reliability and lower cost for all customers.The profitability of our energy
products continued to improve partially due to the increased efficiency of
Powerwall installations.Each Powerwall is an internet connected device,
enabling us to continue