Fetch Earnings Transcripts
curl --request GET \
--url https://api.wokelo.ai/api/enterprise/company/earnings-calls/ \
--header 'Authorization: Bearer <token>'import requests
url = "https://api.wokelo.ai/api/enterprise/company/earnings-calls/"
headers = {"Authorization": "Bearer <token>"}
response = requests.get(url, headers=headers)
print(response.text)const options = {method: 'GET', headers: {Authorization: 'Bearer <token>'}};
fetch('https://api.wokelo.ai/api/enterprise/company/earnings-calls/', options)
.then(res => res.json())
.then(res => console.log(res))
.catch(err => console.error(err));<?php
$curl = curl_init();
curl_setopt_array($curl, [
CURLOPT_URL => "https://api.wokelo.ai/api/enterprise/company/earnings-calls/",
CURLOPT_RETURNTRANSFER => true,
CURLOPT_ENCODING => "",
CURLOPT_MAXREDIRS => 10,
CURLOPT_TIMEOUT => 30,
CURLOPT_HTTP_VERSION => CURL_HTTP_VERSION_1_1,
CURLOPT_CUSTOMREQUEST => "GET",
CURLOPT_HTTPHEADER => [
"Authorization: Bearer <token>"
],
]);
$response = curl_exec($curl);
$err = curl_error($curl);
curl_close($curl);
if ($err) {
echo "cURL Error #:" . $err;
} else {
echo $response;
}package main
import (
"fmt"
"net/http"
"io"
)
func main() {
url := "https://api.wokelo.ai/api/enterprise/company/earnings-calls/"
req, _ := http.NewRequest("GET", url, nil)
req.Header.Add("Authorization", "Bearer <token>")
res, _ := http.DefaultClient.Do(req)
defer res.Body.Close()
body, _ := io.ReadAll(res.Body)
fmt.Println(string(body))
}HttpResponse<String> response = Unirest.get("https://api.wokelo.ai/api/enterprise/company/earnings-calls/")
.header("Authorization", "Bearer <token>")
.asString();require 'uri'
require 'net/http'
url = URI("https://api.wokelo.ai/api/enterprise/company/earnings-calls/")
http = Net::HTTP.new(url.host, url.port)
http.use_ssl = true
request = Net::HTTP::Get.new(url)
request["Authorization"] = 'Bearer <token>'
response = http.request(request)
puts response.read_body{
"status": "success",
"data": [
{
"transcript_title": "Tesla, Inc. - Q4 2023",
"transcript_name": "Tesla, Inc., Q4 2023 Earnings Call, Jan 24, 2024",
"ticker": "NASDAQ:TSLA",
"transcript_url": "https://wkarticles.blob.core.windows.net/finnhub/snp_transcript_3003051",
"date": "2024-01-24",
"year": 2023,
"quarter": 4,
"transcript_data": {
"date": "2024-01-24",
"participant": [
{
"name": "Adam Jonas",
"role": "Analysts",
"pro_id": 29412103,
"job_title": "MD & Head of Global Auto & Shared Mobility Research",
"description": "Analysts",
"company_name": "Morgan Stanley, Research Division",
"transcript_person_id": 118469
},
{
"name": "Colin Langan",
"role": "Analysts",
"pro_id": 710566519,
"job_title": "Senior Equity Analyst",
"description": "Analysts",
"company_name": "Wells Fargo Securities, LLC, Research Division",
"transcript_person_id": 480193
},
{
"name": "Dan Levy",
"role": "Analysts",
"pro_id": 214533139,
"job_title": "Senior Analyst",
"description": "Analysts",
"company_name": "Barclays Bank PLC, Research Division",
"transcript_person_id": 253177
},
{
"name": "Drew Baglino",
"role": "Executives",
"pro_id": 621069668,
"job_title": "Former Senior Vice President of Powertrain & Energy Engineering",
"description": "Executives",
"company_name": "Tesla, Inc.",
"transcript_person_id": 393478
},
{
"name": "Elon Musk",
"role": "Executives",
"pro_id": 27546373,
"job_title": "Co-Founder, Technoking of Tesla, CEO & Director",
"description": "Executives",
"company_name": "Tesla, Inc.",
"transcript_person_id": 175883
},
{
"name": "Lars Moravy",
"role": "Executives",
"pro_id": 712755131,
"job_title": "Vice President of Vehicle Engineering",
"description": "Executives",
"company_name": "Tesla, Inc.",
"transcript_person_id": 482177
},
{
"name": "Martin Viecha",
"role": "Executives",
"pro_id": 588894062,
"job_title": "Former Vice President of Investor Relations",
"description": "Executives",
"company_name": "Tesla, Inc.",
"transcript_person_id": 370659
},
{
"name": "Pierre Ferragu",
"role": "Analysts",
"pro_id": 558629883,
"job_title": "Global Team Head of Technology Infrastructure",
"description": "Analysts",
"company_name": "New Street Research LLP",
"transcript_person_id": 356336
},
{
"name": "Vaibhav Taneja",
"role": "Executives",
"pro_id": 608950986,
"job_title": "Chief Financial Officer",
"description": "Executives",
"company_name": "Tesla, Inc.",
"transcript_person_id": 595078
}
],
"transcript": [
{
"name": "Martin Viecha",
"speech": "Good afternoon, everyone, and welcome to Tesla's Fourth Quarter 2023 Q&A Webcast. My name is Martin Viecha, VP of Investor Relations, and I'm joined today by Elon Musk, Vaibhav Taneja, and a number of other executives. Our Q4 results were announced at about 3:00 p.m. Central Time in the update deck we published at the same link as this webcast.\r\nDuring this call, we will discuss our business outlook and make forward-looking statements. These comments are based on our predictions and expectations as of today. Actual events or results could differ materially due to a number of risks and uncertainties, including those mentioned in our most recent filings with the SEC. During the question-and-answer portion of today's call, please limit yourself to 1 question and 1 follow-up. [Operator Instructions] But before we jump into Q&A, Elon has some operating remarks. Elon?",
"session": "Presenter Speech",
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"name": "Elon Musk",
"speech": "Thank you. So the Tesla team did an incredible job in 2023. We achieved record production and deliveries of [ about ] 1.8 million vehicles, in line with our official guidance. And in Q4, we're producing vehicles at an annualized run rate of almost 2 million cars a year. This is really a phenomenal achievement. Looking at just the Fremont factory alone, we made 560,000 cars. This is a record. In fact, it's the highest output of automotive plant in North America. And people are often surprised that the highest output factory -- car factory in North America is in the San Francisco Bay Area. It's a little counterintuitive perhaps.\r\nAnd it's really had an incredibly positive impact on that entire area. What would have been a run-down strip mall is the highest productivity car plant in the Americas. Think about that. It was derelict when we got it, and now it's the most productive plant in this entire part of the world. And it's enriched the community in so many different ways. It's really a gem. So I'm super proud of the people that work there.\r\nModel Y became the best-selling vehicle globally, as predicted, the best selling vehicle of any kind, not just electric vehicles, with over 1.2 million units delivered. The energy storage business delivered nearly 15 gigawatt hours of batteries in 2023 compared to 6.5 gigawatt hours the year before, so tremendous year-over-year growth, triple digits. And yes, I think we'll continue to see very strong growth in storage, as predicted. I said for many years that the storage business will grow much faster than the car business, and it is doing that.\r\nFree cash flow remained strong at $4.4 billion in 2023 in spite of record spending on future projects. So we had record CapEx expenses as well as record R&D. This brings us to 2024. There's a lot to look forward to in 2024. Tesla is currently between 2 major growth waves. We're focused on making sure that our next growth wave driven by next-gen vehicle, energy storage, full self-driving and other projects is executed as well as possible. For full self-driving, we've released version 12, which is a complete architectural rewrite compared to prior versions. This is end-to-end artificial intelligence. So [indiscernible] basically, photons in and controls out.\r\nAnd it really is quite a profound difference. This is currently just with employees and a few customers, but we will be rolling out to all who -- all those customers in the U.S. who request full self-driving in the weeks to come. That's over 400,000 vehicles in North America. So this is the first time AI has been used not just for object perception but for path lending and vehicle controls. We replaced 330,000 lines of C++ code with neural nets. It's really quite remarkable.\r\nSo as a side note, I think Tesla is probably the most efficient company in the world for AI inference. Out of necessity, we've actually had to be extremely good at getting the most out of hardware because Hardware 3 at this point is several years old. So I think we're quite far ahead of any other company in the world in terms of AI inference efficiency, which is going to be a very important metric in the future in many arenas.\r\nSo see, the new Model 3 is now available globally, so we did an update in Model 3. While the car looks similar, a lot of work has gone into the vehicle to make it better in every way. It is significantly quieter, more refined, better equipped, has longer range and many other improvements, and I recommend taking it for a test drive. If you have not driven a Model 3 in a long time, you should really try the new one. So steady improvements.\r\nAnd we're very far along on our next-generation low-cost vehicle. This is an earnings call, not a product announcement. So there'll not be many questions that try to ask us about new products coming, but we reserve product announcements for product announcements, not earning calls. But we're very excited about this, and this is really going to be profound, not just in its design of the vehicle itself but in the design of the manufacturing system. This is a revolutionary manufacturing system, significant -- far more advanced than any other automotive manufacturing system in the world, like by a significant margin.\r\nSeveral years ago, I said the -- perhaps the most important competitive characteristic of Tesla in the future will be manufacturing technology. And you will really see that come to bear with our next-gen vehicle. The first manufacturing location for this will be at our Gigafactory and headquarters in Austin, Texas. And then we'll follow that up with other locations around the world, probably our built in Mexico will be second, and then we'll be looking to identify a third location perhaps by the end of this year or early next outside of North America.\r\nIn conclusion, we had a great year with record production, record deliveries and a strong free cash flow in spite of a very high interest rate environment. And we are focused on exciting new projects that will, I think ultimately, if we execute on all these things, and it is very hard to do all these things, not a sure thing, but I do see a path where Tesla could 1 day be the most valuable company in the world. I do want to emphasize that is not an easy path, a very difficult one, but it is now a set of possible outcomes. And previously, I would not have thought it is in possible outcome.\r\nAnd thank you again to all of our investors, our employees, and our suppliers for a strong year and looking forward to a great 2024 and years to come. Thank you.",
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{
"name": "Martin Viecha",
"speech": "Thank you. And our CFO, Vaibhav, has opening remarks as well.",
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"name": "Vaibhav Taneja",
"speech": "Thanks, Martin. Good afternoon, everyone. As Elon mentioned, we had a record year in terms of both production and deliveries for our auto business as well as record deployments in our energy business. This was achieved despite 2023 being a challenging year in terms of higher interest rates and higher inflation. Big thanks to our customer for being with us through this challenging period. I would also like to thank whole Tesla team for their resolve and dedication throughout.\r\nIn terms of our 2023 financials, we ended the year with over $96 million of revenue and generated $4.4 billion of free cash flow to end the year with over $29 billion of cash and investments on hand. Our 2023 GAAP net income was impacted by the recognition of onetime noncash benefit of $5.9 million from the release of valuation allowance on certain deferred tax assets. This was due to our recent history of sustained profitability and is similar to several other companies who have recently gone through a similar change in their accounting.\r\nAccordingly, starting with Q1, our booked tax rate will now be more in line with other companies in the S&P 500. In our vehicle business, we continue to see improvements in our per unit cost despite us being in the early phase of Cybertruck era. As a result, our auto gross margin improved sequentially. That said, predicting auto gross margins is extremely challenging since there are many moving parts to this equation, some of which are out of our control, like the change in tariffs or local incentives, to name a few. While the teams are focused on cost reductions, we are approaching the limits within our current platforms.\r\nOn the demand front, as promised, we made investments in digital campaigns in 2023. We fully appreciate the importance of customer education as we are still in the customer acquisition phase. Our data suggests that around 90% of our vehicle buyers in 2023 never owned a Tesla before. We are being creative in figuring out ways to bring in new customers and educate them about the benefits of owning a Tesla versus gas-powered vehicles, the key among them being total cost of ownership. This concept is mostly overlooked for just the upfront cost. We will be in evaluating our campaigns, curating the content and optimizing spend accordingly to support the overall demand.\r\nThere are 2 additional things I would like to mention as it relates to the U.S. market. First, for customers who qualify for buying credit, we now offer that as a point-of-sale benefit for Model Y, which means an immediate reduction of $7,500 at the time of purchase to the end customer. Secondly, we continue to offer very attractive lease rates for Model 3 and Y using our partner leasing program. Note that the sales under this program are recognized as upfront revenue and reported within automotive sales.\r\nOur energy storage business had another record year, with deployments more than doubling and revenues increasing by more than 50%. This business is poised to again surpass our auto business in terms of growth rate in 2024. This has been in the works for quite some time with us laying the foundation a few years back by building our Megafactory in metro. I would like to thank the whole Tesla energy team for their efforts to make this a reality.\r\nOur services and others business also started contributing meaningfully to our results, and our fleets -- as our fleets grow as we expect the fleet-based revenues from supercharging, used cars and services to continue to increase. For 2024, our focus is to continue growing our output, continuing our cost reduction efforts and increasing investments in our future growth initiatives. Accordingly, we are currently expecting our capital expenditure for 2024 to be in excess of $10 million. We believe this would be critical in helping us lay the foundation for the next phase of growth.\r\nOnce again, I would like to thank everybody at Tesla, our investors, and our suppliers for being with us in this journey. We can open it up to questions, Martin.",
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"name": "Martin Viecha",
"speech": "Thank you, and let's go through investor questions. Question number 1 is from Michael. Given that you moved the start of the next-generation compact vehicle production to Austin, has the time line improved so that we might see the next-generation platform vehicles in 2025?",
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"name": "Elon Musk",
"speech": "We -- I won't certainly say things with -- that should be taken with a grain of salt since I am often optimistic. But I don't want to blow your mind but I'm often optimistic regarding time. But our current schedule shows that we will start production towards the end of 2025, sometime in the second half. That's just what our current schedule says. There's a lot of new technology, like a tremendous amount of new revolutionary manufacturing technology here.\r\nThe reason I want to put this new revolutionary manufacturing line at Giga Texas was because we really need the engineers to be living on the line. This is not sort of off-the-shelf just works type of thing. And it's just a lot easier for Tesla engineering to live on the line if it's in Austin versus elsewhere. But we are currently expecting to start production second half of next year. That will be a challenging production ramp, like I can't emphasize, we'll be sleeping on the line practically. In fact, not practically, we will be.\r\nBut I am confident that once it is going, it will be head and shoulders above any other manufacturing technology that exists anywhere in the world. It's next level. So it's always difficult to predict what that S curve of manufacturing looks like. So we start off real slow and then it grows exponentially. And predicting that intermediate S curve is difficult, but -- so I don't know. It's hard to say what the unit volume would be next year. We're not going to make any predictions on that front, but it does seem quite likely that we will start production next year.",
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"name": "Martin Viecha",
"speech": "Thank you. The next question is from Michael again. What has been the barrier to ramping 4680 cells into multimillion cells per week rate? And when do you expect to get there? Drew?",
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"name": "Drew Baglino",
"speech": "Yes. First, I just want to allay any concerns regarding 4680 limiting the Cybertruck ramp because I've seen some people commenting about that. Today, 4680 production is ahead of the ramp with actually weeks of finished cell inventory. And the goal is to keep it that way, not only for Cyber but for our future vehicle programs. And as Elon said, it is an S curve here too, like it's hard to predict these things. But I'm just describing our goals.",
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"name": "Elon Musk",
"speech": "It's a hard problem, like there are entire companies where all they do is make battery cells. That's like all they do, indeed. We do a lot of other things. And we've got a lot of breakthrough technologies that take time to figure out. It's not just that it's a 46-millimeter diameter by 80-millimeter cell. That's just the dimensions. There's tremendous amount of new technology in the cell itself.",
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"name": "Drew Baglino",
"speech": "And manufacturing technology.",
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"name": "Elon Musk",
"speech": "Yes, exactly.",
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"name": "Drew Baglino",
"speech": "And just regarding what the team was able to do in Q4, Texas successfully swapped line 1 from the model line design of the cells, the Cybertruck [indiscernible] which was the 10% cell energy increase I've mentioned before. And as with any major new product introduction, the factory and engineering teams collaborated to ensure quality of the new design and the process changes as their first priority. And now our focus returns to cost and production ramp in Q1.\r\nAnd in terms of what we're doing, we're currently running 1 production line, 1 assembly line, using 2 assembly lines in addition for yield and rate improvement trials, and we have a fourth in commissioning and 4 more will be installed starting in Q3 this year. So definitely, this is a big year for ramping for",
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"name": "Elon Musk",
"speech": "We also do want to emphasize that we also expect to ramp orders from our suppliers. So this is not about replacing our suppliers. It's about supplementing our suppliers. So we are very appreciative of our suppliers. Panasonic, obviously, is our longest supplier. They're an amazing company. We've got CTL. We've got LG and BYD.",
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"name": "Martin Viecha",
"speech": "Thank you. The next question is from Adam. Should retail shareholders be concerned that Elon has stated -- should retail shareholders be concerned that Elon has stated that he is uncomfortable expanding AI and robotics at Tesla if he doesn't have 25% of voting?",
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"name": "Elon Musk",
"speech": "Yes. I guess let me explain what my concern is here, which is that I see a path to creating an artificial intelligence and robotics [indiscernible] of truly immense capability and power. And my concern would be, I don't want to control it but if I have so little influence over the company at that stage, that I could sort of be voted out by some sort of random shareholder advisory firm.\r\nWe've had a lot of challenges with institutional shareholder services, ISS, I call them ISIS, and Glass Lewis, which there's a lot of activists that basically infiltrate those organizations and have strange ideas about what should be done. So I want to have enough to be influenced -- like if we could do a dual-class stock, that would be ideal. I'm not looking for additional economics. I just want to be an effective steward of very powerful technology.\r\nAnd the reason I just sort of roughly picked approximately 25% was that, that's not so much that I can control the company even if I go bonkers. And if I'm like mad, they can throw me out, but it's enough that I have a strong influence. That's what I'm aiming for is a strong influence but not control. There's some way to achieve that, that would be great.",
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"name": "Martin Viecha",
"speech": "The next question is what is your expectation for automotive gross margin ex regulatory credits for the full year?",
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"name": "Vaibhav Taneja",
"speech": "Like I said in my opening remarks, we're focused on reducing the cost of our vehicles. This is very extensive and involved exercise, whereby we look at not just the component cost down -- but down to the packaging used to get materials to the production floor. Each element of the cost is scrutinized to optimize further. A few pennies saved at the subcomponent lever, whether through engineering redesign or from many other things which I mentioned, these do cost reduction. This is a constant exercise and we just have to chase down every penny possible. We have a strong team which is hyper-focused on this. However, this is a very difficult thing to predict precisely because there are a lot of...",
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"name": "Elon Musk",
"speech": "We don't know. We don't have a crystal ball so it's difficult for us to predict this with precision. If the interest rates come down quickly, I think margins will be good. And if they don't come down quickly, they won't be that good. Yes. It's always important to remember that the vast majority of people buying a car is about the monthly payment. It's not that people don't want -- we have tons of -- we have lots of people want to buy our car but simply cannot afford it.\r\nAnd that -- as interest rates drop and [indiscernible] payment drops, then they're able to afford it and they buy the car. It's pretty straightforward. And there are no tricks around to get around this.",
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"name": "Martin Viecha",
"speech": "The next question is, does the company anticipate 50% volume CAGR to be realized in either 2024 or 2025? If not, why not?",
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"name": "Vaibhav Taneja",
"speech": "As we have said in our prior guidance, there will be periods where we won't be growing at the same rate as before. We are between 2 major growth waves. The first 1 began with the global expansion of Model 3 and Y. And we believe the next 1 will be initiated with the next-generation platform. In 2024, our volume growth will be lower, as we have said, because we're trying to focus the team on the launch of the next-generation vehicle.",
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"name": "Martin Viecha",
"speech": "All right. Thank you very much. The next question is from Michael. When will Tesla start construction on the Giga Nevada expansion and Giga Mexico? And when can we expect each of these to produce their first products such as 4680 cell semi and the next-gen vehicles?",
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"name": "Drew Baglino",
"speech": "We have recently broken ground the next phase of Giga Nevada expansion to incorporate semi and other projects. But as said earlier, as regarding Mexico, we want to first demonstrate success with the next-generation platform in Austin before we start construction. Therefore, we have started the long lead work to get the basics ready and plan to follow our recipe from the 3, Y ramp with Shanghai, where we started with learnings from Fremont and ramped really quickly.",
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"name": "Elon Musk",
"speech": "Yes, exactly. It's important to emphasize that I mean, Model 3 production was 3 years of hell, honestly before. Some of the really worst years in my life, frankly. This mental scar tissue from that -- from those 3 years as do many. But then -- and then Model Y was somewhat of a variant on Model 3 so a much easier situation. And then we're able to actually do an improved -- slightly improved versions of -- in some cases, significantly improved versions of the Model Y production line in Shanghai and Berlin.\r\nAnd that's the right -- I think the sensible way to go about things is kind of figure out the core technology of the manufacturing line and then replicate it with improvements throughout the world.",
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"name": "Martin Viecha",
"speech": "The next question for Michael is, has there been any progress made with an FSD licensing agreement with another company?",
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"name": "Elon Musk",
"speech": "I really think lots of car companies should be asking for FSD licenses, but -- and we have had some tentative conversations, but I think they don't believe it's real quite yet. I think that will become obvious probably this year. And I do want to emphasize that if I were a CEO of another car company, I would definitely be calling Tesla and asking to license in terms of full self-driving technology. It's definitely the smart move.",
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"name": "Martin Viecha",
"speech": "Thank you. The next question from Siddhart. What is the time line for Optimus first production of volume production line? And what are the barriers to getting there?",
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"name": "Elon Musk",
"speech": "Optimus obviously is a very new product, an extremely revolutionary product and something that I think has the potential to far exceed the value of everything else at Tesla combined. And when you think of an economy, economy is productivity per capita times capita. No wonder there's no limit to capita. There's no limit to the economy. And the technologies that we've -- the AI technologies we've developed for the car translate quite well to a humanized robot because the car is just a robot on 4 wheels.\r\nTesla is arguably already the biggest robot-maker in the world. It's just a 4-wheeled robot. So Optimus is a robot with a human robot with arms and legs. Just by most sophisticated humanoid robot that's being developed anywhere in the world. I think we've got a good chance of shipping some number of Optimus units next year. This is a brand-new product. A lot of uncertainty when you have -- when there's a lot of uncertainty in your uncharted territory, it's obviously impossible to make a percentage prediction.\r\nBut we will be updating the public with progress on Optimus every few months. And you can see that it's advancing very quickly. I was in the Optimus lab actually until late last night, like night or something, if I Optimus lab. The team is doing amazing work. That's obviously the case where we want to make sure that Optimus is safe, especially at scale. And that there's no -- it should be impossible for any centralized control to upload malware to a humanoid robot. So we're going to want to -- localize shut off that cannot be updated from the -- from a central server. That's the case where we really update extreme thought to safety. But like I said, I do think it has the potential to be the most valuable product of any kind ever, by far.",
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"speech": "Just to comment on the barrier. I think the barrier, and we've talked about this, is like getting it to actually do something useful, like we can get it to walk around, we can get it to do things, but it's like that utility part.",
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{
"name": "Elon Musk",
"speech": "It can already do some useful things.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
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},
{
"name": "Drew Baglino",
"speech": "But like, you know, to making millions of these things, it's like utility. You got to get to utility.",
"session": "Answer",
"person_id": 393478,
"person_company": null,
"component_order": 29
},
{
"name": "Elon Musk",
"speech": "Yes. A smart robot that can do -- that's capable of doing generalized tasks is what it will be. And in terms of doing moderately specialized tasks, it can already do that and it'll just get better through the course of the year. As we improve the technology in the car, we improve the technology in Optimus at the same time. It runs the same AI inference computer that's in the car, same training technology. I mean, we're really building the future. I mean, the Optimus lab looks like the set of Westworld. But admittedly, that was not a super Utopian situation.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
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},
{
"name": "Drew Baglino",
"speech": "Yes, not the best reference.",
"session": "Answer",
"person_id": 393478,
"person_company": null,
"component_order": 31
},
{
"name": "Elon Musk",
"speech": "Yes. The creators of Westworld, Jon Nolan, at least Jon Nolan, friend of mine actually. I invited him to come see the lab. I think come hopefully soon. It's pretty well especially the sort of subsystem test stands, where you just got like 1 leg on a test stand just doing repetitive exercises and 1 arm in a test stand, pretty wild.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
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},
{
"name": "Drew Baglino",
"speech": "We're not entering Westworld anytime soon.",
"session": "Answer",
"person_id": 393478,
"person_company": null,
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},
{
"name": "Elon Musk",
"speech": "Right, right. We're going to take safety very, very seriously.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 34
},
{
"name": "Martin Viecha",
"speech": "Thank you. The next question from Narmin is how many Cybertruck orders are in the queue? And when do you anticipate to be able to fulfill existing orders?",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 35
},
{
"name": "Unknown Executive",
"speech": "First of all, I want to thank all of the Cybertruck [indiscernible] for their patients. The reservation to order conversion rate so far has been very, very encouraging. If the trend continues, as it very likely to be, we will soon sort out all the builds in 2024. And also, we have new orders coming after the launch. networks keep growing. So we're now all hands on deck focus on ramping so we can fulfill all the demands in a away time.",
"session": "Answer",
"person_id": 182536,
"person_company": null,
"component_order": 36
},
{
"name": "Elon Musk",
"speech": "Yes, it's important to emphasize that this is very much a production constrained situation, not a demand constrained situation. And obviously, we could dramatically raise the price but that doesn't feel right to us to sort of gouge people for early delivery. But really the demand is off the hook. As long as we have the price is affordable, I mean, I see us ultimately delivering on the order of 0.25 million, something like 0.25 million Cybertruck a year in North America. But maybe more, but give or take, roughly on that time frame. And it's -- I mean, it sure is a head turner.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 37
},
{
"name": "Unknown Executive",
"speech": "Definitely is. Anywhere you go, people look at you. They give you thumbs up.",
"session": "Answer",
"person_id": 182536,
"person_company": null,
"component_order": 38
},
{
"name": "Elon Musk",
"speech": "Yes. It's like finally the future looks like the future. It's just that with the other trucks on the road there, which -- and there are some very good trucks on the road. But if you were to switch out the brand name, you wouldn't hardly know which company made them. But you definitely would know the Cybertruck. It's our best product ever.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 39
},
{
"name": "Martin Viecha",
"speech": "All right. Thank you. The next question is, can we get Tesla energy volumes reported in the production and delivery release?",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 40
},
{
"name": "Drew Baglino",
"speech": "Yes. We will strive to do so starting from this quarter. And just a brief update from a business perspective. Megapack continues to see strong demand signals globally, driving consistent growth trajectory through '24 and '25. We want to thank all of our partners who put their trust and the Megapack team to execute on critical infrastructure around the world. And I would like to personally thank the Megapack engineering and production teams for their strong 2023 execution. Lathrop continues to ramp through 2024 with the operation of a second final assembly line to double capacity from 20 to 40 gigawatt hours by the end of the year.",
"session": "Answer",
"person_id": 393478,
"person_company": null,
"component_order": 41
},
{
"name": "Martin Viecha",
"speech": "Thank you. And the last investor question is from Siddharth. What are the preliminary results on the return on investment of your ads and education campaign? Given that many people still lack awareness the Tesla average price is less than the average non-luxury car price of $45,000, will you expand educational ads?",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 42
},
{
"name": "Unknown Executive",
"speech": "As Elon mentioned, the ultimate solution to increase EV adoption is really address the affordability issue. But at the same time, we do aware there's awareness issue as well. So in Q4, we ran a series of digital campaigns, very targeted digital campaigns across different deals and different channels. The target of these tests is really just to drive awareness and ultimately measure the return on investment on those digital channels.\r\nAnd the messaging we're driving is really focused on our product and also try to address some of the misconception of the EV, such as safety, affordability. And 1 particular awareness campaign where you run -- in Texas, we reached the audience about 10 million unique viewers and generally close to 0.5 million visits to our website. A large number of distributors are first-time visitors to our site. The traffic through these digital channels actually very similar to those organic traffic come to our website. So going forward, we're just going to keep exploring different channels and doing our trials to get a better understanding of the effectiveness of this digital campaign.",
"session": "Answer",
"person_id": 182536,
"person_company": null,
"component_order": 43
},
{
"name": "Vaibhav Taneja",
"speech": "But I would also like to caution that we will be very careful that we don't want to overspend on this side. We want to make sure people are aware, but we'll -- that's where we'll keep tweaking our methodology about how and where we spend the money because we understand the importance of increasing awareness, but at the same token, we don't want to spend a lot of money on just creating awareness.",
"session": "Answer",
"person_id": 595078,
"person_company": null,
"component_order": 44
},
{
"name": "Elon Musk",
"speech": "Yes. I mean, some geographies where our market share is remarkably low, like Japan, for example. Now we obviously need to make sure that we have Superchargers in the right locations and the service centers are there and the product works well in Japan, but Japan is the third largest car market in the world of any country. And we should at least have a market share proportionate to say other non-Japanese carmakers like Mercedes or BMW, which we do not currently have. So I think that's the case. And when I talk to friends of mine in Japan, there is like quite a lack of awareness of Tesla. So that's a case where we definitely need to increase awareness and countries and regions where there is, yes, not much awareness.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 45
},
{
"name": "Martin Viecha",
"speech": "Thank you. Let's go to analyst questions. The first question comes from Pierre Ferragu from New Street Research.",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 46
},
{
"name": "Pierre Ferragu",
"speech": "Okay. Well, it's really tough to find the unmute button on Teams. Sorry for being late. So yes, my question would be on like the cost reduction. You've talked about it already a lot. And if I look at it over the last, like, 5, 6 quarters on average, the cost per car has been coming down like more than 2% sequentially on average. So that means you are like on a trajectory of COGS per car going down 10% a year. So that's probably like unheard of in the auto industry. I don't think any car manufacturer ever achieved that.\r\nBut that's very, very mundane and very -- it's a good performance, but it's a very normal performance in a lot of other manufacturing industry like microelectronics or consumer electronics. And so I'd love to hear your thoughts about whether you consider yourself closer to the latter to like a micro experience business, where you have this ability to actually always improve costs, you have more control how things are pulled together into your cars, and you see yourself sustainably taking costs down with that kind of pace. Or do you think your ability to take down cost is actually going to become more like in line with the rest in the industry over time?",
"session": "Question",
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"person_company": null,
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},
{
"name": "Vaibhav Taneja",
"speech": "Yes. I think I've covered this in a pretty detail, even in my opening remarks and in a previous question, but to just further clarify, we are constantly looking for what we can do to reduce costs. Like I said, it's a game of pennies and we've talked about it before as well. And the team is constantly going and checking where can we reduce the cost further. And do I believe that we will have the same pace which you've seen over the past few years? Probably not because remember, we were coming out with a period wherein commodity prices were rising. So then we did see benefits coming from that.\r\nSo those are more or less taken care of, but there is more which we're still chasing. And I would say a big kudos goes to the team out here at Tesla, both the engineering team as well as the supply chain team because every time we give them a challenge, they go gangbusters to try and figure out whatever they can to take out further costs.\r\nBut yes, I would -- like I said, I would want to caution that do not project the previous cost reduction at the same pace completely in future because with our current platform, we are getting to a place wherein there are limitations.",
"session": "Answer",
"person_id": 595078,
"person_company": null,
"component_order": 48
},
{
"name": "Drew Baglino",
"speech": "Yes, the increased scale also sort of helps us there. As we introduce new products, we have the opportunity to go renegotiate existing suppliers for better pricing. We're looking at every penny like Vaibhav and Elon mentioned. Just to give you an example, our inbound logistics cost has come down by 22% year-over-year. And this is because of optimization on using returnable packaging as opposed to cardboard, which is even better for the environment.\r\nOptimizing trucking routes, negotiating better pricing with shipping companies, with tripping companies, going with the full truckloads and just doing that sort of -- the bigger we become, the more we put far into these things and the more efficient we become as a result of it. So those work streams are going to continue.",
"session": "Answer",
"person_id": 393478,
"person_company": null,
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},
{
"name": "Unknown Executive",
"speech": "And we are also getting into the tiers of supply chain to see where there are opportunities. Getting to the Tier 2s, Tier 3, Tier 4 levels and then negotiate those pricing as well get more efficiency out of the system.",
"session": "Answer",
"person_id": 182536,
"person_company": null,
"component_order": 50
},
{
"name": "Drew Baglino",
"speech": "And then on the design side, we're not static, right, like especially in areas where the technology is still improving rapidly. Power electronics is a great example. We continue to bring improvements there that are like fundamentals sort of driven from the device up that result in cost reductions generation over generation. And they don't only go into the new vehicles, they come to the old vehicles as well. So that's closer to what you were talking about with like the microelectronics space. Some of that exists in the vehicle.",
"session": "Answer",
"person_id": 393478,
"person_company": null,
"component_order": 51
},
{
"name": "Lars Moravy",
"speech": "And certainly, our car is more computer than car in many ways and has a lot of new tech over the last 100 years of automotive production everyone [indiscernible] pennies from.",
"session": "Answer",
"person_id": 482177,
"person_company": null,
"component_order": 52
},
{
"name": "Elon Musk",
"speech": "We have a crazy amount of compute in that car as compared to anywhere else. It's like orders of magnitude.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 53
},
{
"name": "Drew Baglino",
"speech": "And we get to ride that down, right?",
"session": "Answer",
"person_id": 393478,
"person_company": null,
"component_order": 54
},
{
"name": "Elon Musk",
"speech": "Maybe 1,000 times more. I don't know, it's some [ 90 ] number.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 55
},
{
"name": "Drew Baglino",
"speech": "I mean, like if I just look at the main microcontroller that makes the motor go, for example, like when I think about what that cost when we stuck it in a Roadster in 2006, cost now, there's no comparison. So we've definitely been riding that electronics cost wave.",
"session": "Answer",
"person_id": 393478,
"person_company": null,
"component_order": 56
},
{
"name": "Lars Moravy",
"speech": "And then even on the like what you call traditional vehicle side, we do things that no other automakers do to bring costs down through breaking down the way structures are built and the way we put our cars together. And I think that mindset that we have is very much closer to the microprocessor power electronics industry than the automotive industry.",
"session": "Answer",
"person_id": 482177,
"person_company": null,
"component_order": 57
},
{
"name": "Martin Viecha",
"speech": "Pierre, do you have a follow-up?",
"session": "Answer",
"person_id": 370659,
"person_company": null,
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},
{
"name": "Pierre Ferragu",
"speech": "Yes, a quick one. It's -- you mentioned this like phase in which you are between 2 big growth period. I'd love to hear you about what you consider the size of your addressable market with the portfolio you have today, like the 3, the Y, the X, and the S. What's your estimate of your addressable market? You're shipping like probably about like a 2 million unit run rate today. And given the price points of these cars, what kind of market share of what you addressed with this car do you think you've already achieved today?",
"session": "Question",
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},
{
"name": "Elon Musk",
"speech": "I don't know if we have -- I actually don't think we have a firm idea that's -- it's hard to say exactly.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
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},
{
"name": "Vaibhav Taneja",
"speech": "Yes, this -- I wouldn't say there's -- I mean, one way to think about it is look at the automotive industry as well. EVs still contribute a very small market share. So yes, our goal is to try and take as much market share out of that pie. But do I have a specific number to give you? I don't think we can say that with certainty.",
"session": "Answer",
"person_id": 595078,
"person_company": null,
"component_order": 61
},
{
"name": "Drew Baglino",
"speech": "And it's a growing pie as well. It's like it's 9% today but it could be 20% in a couple of years or in the future.",
"session": "Answer",
"person_id": 393478,
"person_company": null,
"component_order": 62
},
{
"name": "Lars Moravy",
"speech": "And certainly, like the way we've looked at it, and we've always said this, it's not about how many EVs you can sell, it's how many great cars you can sell, how many vehicles you can sell, and that market's $100 million a year and we're barely 2% of that. I still think there's 98% more to get.",
"session": "Answer",
"person_id": 482177,
"person_company": null,
"component_order": 63
},
{
"name": "Elon Musk",
"speech": "I mean, it's worth noting that if you look at, say, the average selling price of the other top-selling vehicles in the world, they are much lower priced than Model Y. So like a Toyota RAV4, Corolla, Honda Civic, that kind of thing, they are much lower priced than ours. So people are really stretching their wallets to be able to afford a Tesla. It's quite a difficult thing for them to do. And remarkable that it's the best-selling car in unit volume despite being much more expensive than other high-volume cars.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 64
},
{
"name": "Martin Viecha",
"speech": "Thank you. Let's go to the next analyst. The next question comes from Adam Jonas from Morgan Stanley.",
"session": "Answer",
"person_id": 370659,
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},
{
"name": "Adam Jonas",
"speech": "So I can't wait to see the Optimus lab. I'm sure everybody on this call feels the same way. Your last AI Day, Elon, was September 2022. Can we expect a Tesla AI Day this year? It seems like a lot has changed in that Is this year the time?",
"session": "Question",
"person_id": 118469,
"person_company": null,
"component_order": 66
},
{
"name": "Elon Musk",
"speech": "Yes, good question. We have found that when we do these AI Days, some of our competitors literally look at what we do on a frame-by-frame basis.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 67
},
{
"name": "Adam Jonas",
"speech": "They do.",
"session": "Question",
"person_id": 118469,
"person_company": null,
"component_order": 68
},
{
"name": "Elon Musk",
"speech": "And then we find these things being copied.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 69
},
{
"name": "Drew Baglino",
"speech": "Same thing with Battery Day.",
"session": "Answer",
"person_id": 393478,
"person_company": null,
"component_order": 70
},
{
"name": "Elon Musk",
"speech": "Same thing with Battery Day. So we have to be a little cautious about revealing the exact recipe of the secret sauce. But I think some kind of update would be good to do. I'll talk it over with the team. And yes, I think we might do something later this year. I may go with these AI Days as recruiting. So yes. And to sort of change the perception of Tesla as people think of Tesla as a car company when they should be thinking of Tesla as an AI robotics company.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 71
},
{
"name": "Adam Jonas",
"speech": "Maybe as a follow-up, Elon, I'd love your thoughts on the topic of China-based OEMs expanding into Western markets as that -- as the China market kind of gets saturated and there's a tremendous growth in the supply. How much success should Tesla investors allow for this competition to achieve in Western markets? And can you envision a scenario where Tesla could partner with a Chinese OEM to help accelerate sustainable transport in markets like Europe and the United States?",
"session": "Question",
"person_id": 118469,
"person_company": null,
"component_order": 72
},
{
"name": "Elon Musk",
"speech": "Well, our observation is generally that the Chinese car companies are the most competitive car companies in the world. So I think they will have significant success outside of China, depending on what kind of tariffs where trade barriers are established. Frankly, I think if there are not trade barriers established, they will pretty much demolish most other car companies in the world. So they're extremely good.\r\nWe don't see an obvious opportunity to partner. Certainly, we're happy to -- except on the Supercharger front, we're obviously happy to give any electric car company access to our Supercharger network. We're also happy to license full self-driving, perhaps license other technologies and anything that could be helpful in advancing the sustainable energy revolution.",
"session": "Answer",
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{
"name": "Martin Viecha",
"speech": "Thank you. And the next question comes from Dan Levy from Barclays.",
"session": "Answer",
"person_id": 370659,
"person_company": null,
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{
"name": "Dan Levy",
"speech": "First, I'm wondering if you can just walk through some of the gating factors required to unlock your next-gen platform. You talked about a number of cost initiatives back at the Investor Day a year ago, things in manufacturing and powertrain. Maybe you can just give us a sense of where these initiatives stand. And do you believe -- we know that there's a number of new features and technologies in Cybertruck, things like 48-volt architecture really employing your 4680 batteries. To what extent do you think Cybertruck is really a proving ground for next-gen platform and is really going to be a gating factor to unlocking cost reductions needed for the next-gen platform?",
"session": "Question",
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{
"name": "Lars Moravy",
"speech": "Yes. I don't think that anything in Cybertruck should be considered gating for the next-gen platform. We're obviously doing a lot of manufacturing innovations for a next-generation vehicle. When you do something at that scale, you have to prove it out. You don't just throw it on the line and just build it. So we're going through those validation phases for all those new manufacturing technologies now. Sure, 48-volt was definitely something we wanted to carry forward, and it's something we hope the industry adopts as well. We're also open to partnering, if everyone wants to do that.",
"session": "Answer",
"person_id": 482177,
"person_company": null,
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},
{
"name": "Elon Musk",
"speech": "But people really know that this is like inside-baseball thing, but man, it's high time that the [indiscernible] moved from 12 -- the random number of 12 to 48.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
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},
{
"name": "Lars Moravy",
"speech": "Number [ 40. ]",
"session": "Answer",
"person_id": 482177,
"person_company": null,
"component_order": 78
},
{
"name": "Elon Musk",
"speech": "Yes. Well, it's much less random.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 79
},
{
"name": "Lars Moravy",
"speech": "Slightly less random based on human injury.",
"session": "Answer",
"person_id": 482177,
"person_company": null,
"component_order": 80
},
{
"name": "Elon Musk",
"speech": "But I mean, dramatically reduces the amount of copper you need in the vehicle and moving to sort of higher bandwidth communications, sort of Ethernet level of communications opposed to [indiscernible] which is pretty slow. So it's really just bringing cars to the...",
"session": "Answer",
"person_id": 175883,
"person_company": null,
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},
{
"name": "Lars Moravy",
"speech": "The 21st century.",
"session": "Answer",
"person_id": 482177,
"person_company": null,
"component_order": 82
},
{
"name": "Elon Musk",
"speech": "Yes, pretty much. So certainly -- it's like normal for a laptop.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 83
},
{
"name": "Lars Moravy",
"speech": "Certainly bringing that like is an evolution in our architecture of the vehicles but it's not gating by any means. The gating work is just to finish the design and manufacturing of the car, test them out and get them going.",
"session": "Answer",
"person_id": 482177,
"person_company": null,
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},
{
"name": "Drew Baglino",
"speech": "Yes, programs and execution, right? Right. So it's talking about like tooling lead time manufacturer, factory lead time and executing this program.",
"session": "Answer",
"person_id": 393478,
"person_company": null,
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},
{
"name": "Elon Musk",
"speech": "There's a lot of specialized machines that make the machine for our next-gen vehicle. So these are not machines you can just order from anyone. They actually have to design a machine that has never existed to build a car in a way that has never existed.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 86
},
{
"name": "Drew Baglino",
"speech": "Yes. So you don't just have like a design validation phase but you have an equipment design phase as well.",
"session": "Answer",
"person_id": 393478,
"person_company": null,
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},
{
"name": "Elon Musk",
"speech": "It doesn't make it very hard to copy us because you have to copy the machine that makes the machine that makes the machine.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 88
},
{
"name": "Drew Baglino",
"speech": "talk about tiers.",
"session": "Answer",
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"person_company": null,
"component_order": 89
},
{
"name": "Elon Musk",
"speech": "Yes, yes, exactly. Manufacturing exception. So I do think it's quite a powerful sustainable advantage because there just is no place to go to order the machines that make our next-gen car that don't exist.",
"session": "Answer",
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},
{
"name": "Dan Levy",
"speech": "Great. As a follow-up, your release does not mention Dojo. So if you could just provide us an update on where Dojo stands. And at what point do you expect Dojo to be a resource in improving FSD? Or do you think that you now have sufficient supply of NVIDIA GPUs needed for the training of the system?",
"session": "Question",
"person_id": 253177,
"person_company": null,
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},
{
"name": "Elon Musk",
"speech": "I mean, the AI part of your question is -- that's a deep one. So we're obviously hedging our bets here with significant orders of NVIDIA GPUs. GPU is the wrong word, the is for you. There's no -- you can't like produce graphics, so that's not a graphic [indiscernible] neural net, something like that. And yes, GPU's a funny word, like vestigial.\r\nAnd a lot of our progress in self-driving is training-limited. Something that's important with training, it's much like a human. The more effort you put into training, the less effort you need in inference. So just like a person. If you train in the subject is sort of classic 10,000 hours, the less mental effort it takes to do something. If you remember when you first started to drive how much of your mental capacity it took to drive. It was -- you had to be focused completely on driving. And after you've been driving for many years, it only takes a little bit of your mind to drive, and you can think about other things and still drive safely.\r\nSo the more training you do, the more efficient it is at the inference level. So we do need a lot of training. And we're pursuing the dual path of NVIDIA and Dojo. But I would think of Dojo as a long shot. It's a long shot worth taking because the payoff is potentially very high but it's not something that is a high probability. It's not like a sure thing at all. It's high-risk, high payoff program. Dojo is working and it is doing training jobs. So -- and [indiscernible] it up.",
"session": "Answer",
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{
"name": "Lars Moravy",
"speech": "And we have plans for Dojo 1.5, Dojo 2, Dojo 3 and whatnot. So I think it's got potential.",
"session": "Answer",
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{
"name": "Elon Musk",
"speech": "I can't emphasize enough, high risk, high payoffs. So I think it still makes sense, given the -- even if it's a low probability of success for the -- I think I'm belaboring the subject. It's a very interesting program. It has the potential for something special. There's also our inference hardware in the car. So we're now -- what's called Hardware 4 but it's actually version 2 of the Tesla-designed AI inference chip.\r\nAnd we're about to complete design of -- the terminology is a bit confusing. About to complete design of Hardware 5, which is actually version 3 of the Tesla-designed chip because the version 1 was mobile version 2 was NVIDIA and then version 3 was Tesla. And we're making gigantic improvements from 1 -- from Hardware 3 to 4 to 5.\r\nI mean, there's a potentially interesting play where when cars are not in use in the future, that the in-car computer can do generalized AI tasks, can run a sort of GPT4 or 3 or something like that. If you've got tens of millions of vehicles out there, even in a robotaxi scenario, whether in heavy use, [indiscernible] used 50 out of 168 hours, that still leaves well over 100 hours of time available -- of compute hours. Like it's possible with the right architectural decisions that Tesla may, in the future, have more compute than everyone else combined.",
"session": "Answer",
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"name": "Martin Viecha",
"speech": "Thank you. And the next question comes from Colin Langan from Wells Fargo.",
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{
"name": "Colin Langan",
"speech": "As we're thinking about going to 2024, the press release talks about; hitting 36,000 or slightly above in Q4. And the comments on the release talked about approaching the aperture limits, and it sounds like you're continuing to try to little that away, but that sort of implies there's not much left.\r\nIn addition, you have the hourly wage increase, I guess, will add to next year. And I thought you said raw material costs are kind of -- that benefit is sort of almost played out. So is there an opportunity to continue to go below the [ 36 ] Or should we kind of be modeling that it kind of stays at this level into '24?",
"session": "Question",
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"name": "Vaibhav Taneja",
"speech": "We are definitely aware of the cost increases, which are coming through because of the wage increases. But like I said, we keep looking at other cost opportunities and try and figure out where else can we out. So there is definitely more opportunity to bring down costs further. I won't specifically guide to a number which we will try and get to, but there's definitely more opportunity there.",
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{
"name": "Drew Baglino",
"speech": "Yes, we're chasing lots of cost opportunities on the design side still for 2024, north of 8 figures is what we're worth, just in my organization and large is got. And then from a commodities perspective, it's such a long cycle time through the whole material supply chain that even with what we've already seen to this point, there's more to come on commodities reductions.",
"session": "Answer",
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{
"name": "Vaibhav Taneja",
"speech": "And there's still some tailwind left on the in aluminum and steel.",
"session": "Answer",
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{
"name": "Drew Baglino",
"speech": "Yes. And battery [indiscernible]",
"session": "Answer",
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{
"name": "Elon Musk",
"speech": "It boggles my mind to think that if we make a 1% improvement in cost, that's $1 billion. So it's like on average, if we reduce the cost by $0.01, $1 billion. What? I mean, we started off that long ago that we're only making like 10 cars a week. And yes, where does it lead ultimately? Yes, with good execution. Like I said, it's not a slam dunk, but with -- if we execute very well, I think Tesla could be the most valuable company on.",
"session": "Answer",
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"name": "Martin Viecha",
"speech": "Thank you. Colin, do you have a follow-up question?",
"session": "Answer",
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{
"name": "Colin Langan",
"speech": "Just a quick follow-up. In the commentary, you mentioned the taxes would go to the S&P 500 level. I think you've been trending slightly below 10%. S&P, I think it's typically 25%-ish. Is that going to -- should we expect that to jump right up next year when we're modeling next year? Or would it be like a gradual change over the next few years? And any cash impact from that tax change as well that we should be considering?",
"session": "Question",
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{
"name": "Vaibhav Taneja",
"speech": "Yes. So there's no impact on cash taxes from the release of the valuation amount, which I spoke about. What it does is it's how you account for taxes on your books. So it's basically an accounting change wherein there are certain jurisdictions because we had enough NOLs, et cetera, where we didn't have to accrue book taxes. Now that the valuation allowance has been released and we have recognized deferred tax assets on the books, that means your tax rate immediately goes up.",
"session": "Answer",
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{
"name": "Martin Viecha",
"speech": "Okay. I think that's all the time we have for today. Thank you so much for all of your questions, and we'll speak to you again in 3 months. Thank you. Bye-bye.",
"session": "Answer",
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{
"name": "Elon Musk",
"speech": "Thank you.",
"session": "Answer",
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"person_company": null,
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}
],
"title": "Tesla, Inc., Q4 2023 Earnings Call, Jan 24, 2024",
"quarter": 4,
"year": 2023
}
},
{
"transcript_title": "Tesla, Inc. - Q3 2023",
"transcript_name": "Tesla, Inc., Q3 2023 Earnings Call, Oct 18, 2023",
"ticker": "NASDAQ:TSLA",
"transcript_url": "https://wkarticles.blob.core.windows.net/finnhub/snp_transcript_3078546",
"date": "2024-04-03",
"year": 2023,
"quarter": 3,
"transcript_data": {
"date": "2024-04-03",
"participant": [
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"role": "Analysts",
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"description": "Analysts",
"company_name": "Wells Fargo Securities, LLC, Research Division",
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"role": "Executives",
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"description": "Executives",
"company_name": "Tesla, Inc.",
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"description": "Executives",
"company_name": "Tesla, Inc.",
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"company_name": "Tesla, Inc.",
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"description": "Analysts",
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"transcript_person_id": 356336
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"transcript_person_id": 595078
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"transcript": [
{
"name": "Martin Viecha",
"speech": "Good afternoon, everyone and welcome to Tesla's Third Quarter 2023 Q&A Webcast. My name is Martin Viecha, VP of Investor Relations, and I'm joined today by Elon Musk, Vaibhav Taneja and a number of other executives. Our Q3 results were announced at about 3:00 p.m. Central Time in the update that we published at the same link as this webcast. During this call, we will discuss our business outlook and make forward-looking statements. These comments are based on our predictions and expectations as of today. Actual events or results could differ materially due to a number of risks and uncertainties including those mentioned in our most recent filings with the SEC.\r\nDuring the question and answer portion of today's call, please limit yourself to one question and one followup. [Operator Instructions] But before we jump into the Q&A, Elon has some opening remarks. Elon?",
"session": "Presenter Speech",
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{
"name": "Elon Musk",
"speech": "Thanks, Martin. So just a Q3 recap. Our last quarter was impacted by down time for global factory upgrades that will help us reduce cost per vehicle as well as increase production. We remain focused on 3 main objectives which is the cost reduction of our products, investments in artificial intelligence, and other growth projects like Optimus. And continued free cash flow generation. Regarding vehicle cost, our team was able to reduce the cost per vehicle further in Q3 despite headwinds from factory idle costs and ramp-up of new factories, and we believe there's still meaningful room for improvement there. \r\nRegarding Autopilot and AI, our vehicle has now driven over 0.5 billion miles with FSD Beta, Full Self-Driving Beta, and that number is growing rapidly. We recently completed a 10,000 GPU cluster of H100s. We think probably bringing it into operation faster than anyone's ever brought that much compute per unit time into production since training is the fundamental limiting factor on progress with full self-driving and vehicle autonomy. \r\nWe're also seeing significant promise with FSD Version 12. This is the end-to-end AI where it's a photon count in, controls out or really you can think of it as there's just a large bit stream coming in and a tiny bit stream going out, compressing reality into a very small set of outputs, which is actually kind of how humans work. The vast majority of human data input is optics, right from our eyes. And so we are, like the car, photons in, controls out with neural nets, just neural nets in the middle. It's really interesting to think about that. \r\nWe will continue to invest significantly in AI development as this is really the massive game changer, and I mean, success in this regard, in the long term, I think, has the potential to make Tesla the most valuable company in the world by far. If you have fully autonomous cars at scale and fully autonomous humanoid robots that are truly useful, it's not clear what the limit is. \r\nRegarding Energy Storage, we deployed 4 gigawatt hours of energy, of storage products in Q3. And as this business grows, the energy division is becoming our highest-margin business. Energy and service now contribute over $0.5 billion to quarterly profit. \r\nThe Cybertruck, I know a lot of people are excited about Cybertruck, I am too. I've driven the car. It's an amazing product. I do want to emphasize that there will be enormous challenges in reaching volume production with the Cybertruck and then in making a Cybertruck cash flow positive. This is simply normal for -- when you've got a product with a lot of new technology or any new -- brand-new vehicle program, but especially one that is as different and advanced as the Cybertruck, you will have problems proportionate to how many new things you're trying to solve at scale. So I just want to emphasize that, one, I think this is potentially our best product ever, and I think it is our best product ever. It is going to be -- require immense work to reach volume production and be cash flow positive at a price that people can afford. \r\nOften, people do not understand what is truly hard. That's why I say prototypes are easy, production is hard. People think it's the idea or you make a prototype, you design a car. And as soon as designing a car is -- it's not just anyone can do it. It does require taste. It does require effort to design a prototype. But the difficulty of going from a prototype to volume production is like 10,000% harder to get to volume production than to make the prototype in the first place. And then it is even harder than that to reach positive cash flow. That is why there have not been new car start-ups that have been successful for 100 years apart from Tesla. \r\nSo I just want to temper expectations for Cybertruck. It's a great product. But financially, it will take, I don't know, a year to 18 months before it is a significant positive cash flow contributor. I wish there was some way for that to be different, but that's my best guess. \r\nSo really, the demand is off the charts. We have over 1 million people who have reserved the car. So it's not a demand issue, but we have to make it, and we need to make it at a price that people can afford; insanely difficult things. \r\nIn conclusion, we continue to focus on ramping production while maintaining a positive cash flow, and we continue to target and expect to have around 1.8 million vehicle deliveries, as stated earlier this year. The Tesla AI team is, I think, one of the world's best, and I think it is actually by far the world's best when it comes to real-world AI. But I'll say that again: Tesla has the best real-world AI team on earth, period, and it's getting better. \r\nAnd lastly, I wanted to thank all of our employees who are making a lot of extra effort during uncertain times. Thank you very much for your hard work and the impact that you're making.",
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"name": "Martin Viecha",
"speech": "Thank you very much, Elon. And our CFO, Vaibhav, had some opening remarks as well.",
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"name": "Vaibhav Taneja",
"speech": "Thanks, Martin. Vehicle deliveries in Q3 outpaced production, and we had yet another record quarter of profitability in our energy business. Congratulations to the Tesla team for their continued focus on operational excellence as we navigate through a period of economic uncertainty, higher interest rates and shifting consumer sentiment. \r\nAs Elon mentioned, our Q3 operational and financial performance was impacted by planned downtimes for our factory upgrades. This was necessary to allow for further factory improvements and production rate increases. Despite those factory shutdowns, our cost per vehicle decreased to approximately $37,500. We saw sequential decreases in material costs and freight. Reducing the cost of our vehicles is our top priority. \r\nOn the operating expenses front, R&D expenses continue to rise due to Cybertruck prototype builds and pilot production testing, combined with spend on AI technologies like full self-driving Optimus and Dojo. We have and will continue to make investments in these areas and hence, our capital expenditure and R&D will continue to grow in the near term. \r\nHowever, our focus is to continue making investments through positive cash flow from operations. This year itself we have generated operating cash flows of approximately $8.9 billion and free cash flows of approximately $2.3 billion. \r\nOur other businesses are becoming more prominent on a stand-alone basis, with Energy business leading the charge primarily from the growth in megabyte deployments. Our Services and Other businesses, on a year-on-year basis, also continued to show positive momentum as we benefit from our growing fleet. \r\nAs regards our pricing strategy, in addition to what we have shared before, I want to elaborate that most car buying happens with one or other form of financing. And hence, we also view pricing in terms of monthly costs for the customer. And therefore, as interest costs in the U.S. have risen substantially, it has required us to adjust the price of our vehicles to keep the monthly cost in parity. We've tried to offset such adjustments via our focus on reducing costs. However, there is an inherent lag in cost reductions, which in turn impacts margins. \r\nTo that extent, we recently announced a partner vehicle leasing program in the U.S., whereby you can get our Standard Range Model Y for as low as $399 a month. \r\nIn conclusion, as we navigate through a challenging economic environment, we're focused on reducing costs, maximizing delivery volumes and continue making investments in the future, in particular, AI and other next-generation platforms. We believe this strategy positions us well for the long term. Once again, I would like to thank the Tesla team for their efforts in the last quarter.",
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"name": "Martin Viecha",
"speech": "Thank you very much. And now let's go to investor questions. The first investor question comes from Craig. How many Cybertruck deliveries do you anticipate for 2024?",
"session": "Answer",
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"name": "Elon Musk",
"speech": "I scruple to make an accurate guess at this point, going back to what I said earlier that the ramp is going to be extremely difficult. And like I said, there's no way around that. If you try to make -- if we just try to do some copycat vehicle design, of which there are literally 200 models that are slight variations on a theme in the combustion engine world, just distinctions without a difference, then it's really not that hard. But if you want to do something radical and innovative and something really special like the Cybertruck, it is extremely difficult because there's nothing to copy. You have to invent it, not just the car but the way to make the car. \r\nSo the more uncharted the territory, the less predictable the outcome. Now I can say that -- if you say, \"Well, where will things end up,\" I think we'll end up with roughly 0.25 million Cybertrucks a year, and -- but we're not -- I don't think we're going to reach that output rate next year. I think we'll probably reach it sometime in 2025. That's my best guess.",
"session": "Answer",
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"name": "Martin Viecha",
"speech": "Thank you. The second question is can you provide a progress update on the 4680 cell, particularly progress towards performance improvements and cost savings outlined on Battery Day?",
"session": "Answer",
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"name": "Drew Baglino",
"speech": "Sure thing, Martin. 4680 cell production in Texas increased 40% quarter-over-quarter. Congrats to the Texas team for producing their 20 millionth cell off of line 1. Texas is now our primary 4680 facility. We're heavily focused on quality. Scrap is down 40% quarter-over-quarter. With the increased volume and yield improvements, cell costs consistently improved month over month within the quarter, although we have a lot more work to do to achieve our steady-state goals. And that is our priority. \r\nThe Cybertruck cell, with 10% higher energy than our Model Y cell, started production on line 2 in Texas. This quarter, we convert to building 100% Cybertruck cells to simplify and focus the factory as we ramp all 4 lines in Phase 1 over the next 3 quarters. Phase 2 of the Texas 4680 facility is currently under construction. The additional 4 lines incorporate further capital efficiencies over Phase 1, and our target is for them to start producing in late 2024. \r\nLastly, in Kato, we're retooling to enable large-scale pilot runs of our next-generation cell designs. Kato's long-term goal is to be the launch pad for new cells, one generation ahead of our mass production facilities, enabling faster iteration and smoother ramp-ups of new designs.",
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"name": "Martin Viecha",
"speech": "Thank you. The next question from Institutional Investor is, could you please provide an update on capacity expansion plans for company's factories in Berlin and Austin and the opening schedule of Gigafactory in Mexico?",
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"name": "Unknown Executive",
"speech": "Berlin and Austin factory, the current priority is actually to maximize the output from our existing lines by laser focusing on efficiency improvements. As always, maintaining a high quality and reducing per unit cost will be as critical as growing the production volume. For Mexico, we are working on infrastructure and factory design in parallel with the engineering development of the new production that we will be manufacturing there. That's what I can share for that.",
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"name": "Elon Musk",
"speech": "In Mexico, we're laying the groundwork to begin construction and doing all the long lead items, but I think we want to just get a sense for what the global economy is like before we go full tilt on the Mexico factory. I am worried about the high interest rate environment that we're in. It's -- I just can't emphasize this enough that the vast majority of people buying a car is about the monthly payment. And as interest rates rise, the proportion of that monthly payment that is interest increases naturally. So that's -- if interest rates remain high or if they go even higher, it's that much harder to -- for people to buy the car. They simply can't afford it. \r\nSo -- and we are tracking, I believe, at this point for Model Y to be the best selling car on earth, not just in revenue but in unit value. If you compare that to the other vehicles that are #2 and #3 and whatnot, they cost much less than our car. So we're just hitting the law of large numbers situations here. \r\nI know people want us advertising. We are advertising. I think there is something to be gained on the advertising front. I don't think it's nothing. But informing people of a car that is great but they cannot afford doesn't really help. So that is really the thing that must be sold, is to make the car affordable or the average person cannot buy it for any amount of money. They simply can't afford it. They can't afford it, so this is a big deal.",
"session": "Answer",
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"name": "Martin Viecha",
"speech": "Okay. Thank you very much. The next question is, when do you expect Model 3 Highland to be available in the U.S.? I just wanted to address that, unfortunately, we don't answer product-related questions and timings on earnings calls. So let's go to the next one. \r\nCurrent sell-side consensus assumes that Tesla will deliver 2.3 million vehicles in 2024, representing 28% growth versus 2023 guidance. Is this growth rate achievable without any mass-market launches in 2024? And when does Tesla expect to return to its 50% long-term CAGR?",
"session": "Answer",
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{
"name": "Vaibhav Taneja",
"speech": "Thanks for the question. When we look at 2024, there are a lot of moving pieces. Elon just talked about what is happening in the macroeconomic environment. So we're focused on growing our volumes in a very cost-efficient manner and are carefully reviewing all our options, and we'll be able to provide a much more meaningful update at our next earnings call.",
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"name": "Elon Musk",
"speech": "Yes. I mean at the risk of stating the obvious, it is not possible to have a compound growth rate of 50% forever or you will exceed the mass of the known universe. So -- but I think we will grow very rapidly, much faster than any other car company on earth by far.",
"session": "Answer",
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"name": "Martin Viecha",
"speech": "Thank you. Next question is, do you have an approximate time line in mind for the robotaxi, driven or nondriven? What excites you most about how this project is progressing?",
"session": "Answer",
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"name": "Elon Musk",
"speech": "Well, the robotaxi is, I guess, certainly nondriven. The -- I guess, I am very excited about our progress with autonomy. The end-to-end, nothing but net, self-driving software is amazing. I -- drives me around Austin with no interventions. So it's clearly the right move. So it's really pretty amazing. And obviously, that same software and approach will enable Optimus to do useful things and enable Optimus to learn how to do things simply by looking. So extremely exciting in the long term. \r\nAs I've mentioned before, given that the economic output is the number of people times productivity, if you no longer have a constraint on people, effectively, you've got a humanoid robot that can do as much as you'd like, your economy is twice the infinite or infinite for all intents and purposes. So I don't think anyone is going to do it better than Tesla, not by a long shot. Boston Dynamics is impressive, but their robot lacks the brain. They're like the Wizard of Oz or whatever. Yes, lacks the brain. And then you also need to be able to design the humanoid robot in such a way that it can be mass manufactured. And then at some point, the robots will manufacture the robots. \r\nAnd obviously, we need to make sure that it's a good place for humans in that future. We do not create some variance of the Terminator outcome. So we're going to put a lot of effort into localized control of the humanoid robot. So basically, anyone will be able to shut it off locally, and you can't change that even if you put -- like a software update, you can't change that. It has to be hard-coded.",
"session": "Answer",
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"name": "Martin Viecha",
"speech": "Thank you. The next question is, why was the price dropped on FSD if it is getting better and robotaxi is expected so soon?",
"session": "Answer",
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"name": "Elon Musk",
"speech": "Well, we just wanted to make it more affordable as more people try it. Yes. I think, over time, the price of FSD will increase proportionate to its value. So we'd regard the current price as a kind of a temporary low.",
"session": "Answer",
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"name": "Martin Viecha",
"speech": "The next question is, again, on FSD. Mercedes is accepting legal liability for when its Level 3 autonomous driving system, DRIVE PILOT, is active. Is Tesla planning to accept legal liability for FSD? And if so, when?",
"session": "Answer",
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{
"name": "Elon Musk",
"speech": "Well, there's a lot of people that assume we have legal liability, judging by the lawsuits. We're certainly not being let off the hook on that front, whether we'd like to or wouldn't like to.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 19
},
{
"name": "Unknown Executive",
"speech": "I mean I think it's important to remember for everyone that Mercedes' system is limited to roads in Nevada and some certain cities in California. It doesn't work in the snow or the fog. It must have a lead car and marked lanes, only 40 miles per hour. Our system is meant to be holistic and drive in any conditions, so we obviously have a much more capable approach. But with those kind of limitations, it's really not very useful.",
"session": "Answer",
"person_id": 182536,
"person_company": null,
"component_order": 20
},
{
"name": "Elon Musk",
"speech": "Now I think some people understand the profundity of the Tesla AI system, mostly, but very, very few. It's basically baby AGI. It has to understand reality in order to drive, a baby AGI.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 21
},
{
"name": "Martin Viecha",
"speech": "Thank you. The next question on Optimus, will Optimus be working on Gigafactory lines next year? If so, how many would you guess will be deployed?",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 22
},
{
"name": "Elon Musk",
"speech": "I think at this point, we are not ready to discuss details of the Optimus program, but we will make -- provide periodic updates online. So as you can see, we're -- Optimus, a year ago, could barely walk and now it can do yoga. So a few years from now, it can probably do ballet.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 23
},
{
"name": "Martin Viecha",
"speech": "Sounds good. And the last question from Investors is neural net path planning represents a significant advance in capability and safety for FSD. What steps is Tesla taking to make this technology available outside the U.S.?",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 24
},
{
"name": "Elon Musk",
"speech": "Yes, our approach has been to try to get it -- like, the more places we're trying to make it work, the harder the problem is. So the reason we don't do it in all countries simultaneously is that it would take much longer to make it work anywhere at all. So that's why it's currently just North America. And also for most parts of the world, you have to get approval before deploying things, whereas in the U.S., you can deploy things at risk or at least you can take liability for what you're deploying. So it's a -- whereas most countries require some sort of extensive approval program. So we only want to go through that extensive approval program when we think it's kind of ready for prime time in that country. \r\nI apologize it's not out in those countries, but we keep finding ways to make it better. And it really -- it needs to drive such that it exceeds even the unsupervised, significantly exceeds the probability of injury of a human or significantly better, a lower probability of injury than a human by far. I think we're tracking to that point very quickly. \r\nObviously, in the past, I've been overly optimistic about this. The reason I've been overly optimistic is that the progress tends to sort of look like a log curve, which is that you have kind of rapid initial improvements that if you were to extrapolate that sort of rapid, fairly linear rate of improvement, you get to self-driving quite quickly, but then the rate of improvement curves over logarithmically as well as the asymptote. That's now happened several times. I would characterize our progress in real world AI as a series of stacked log curves. I think that's also true in other parts of AI, like [ LOMs ] and whatnot, a series of stacked log curves. Each log curve gets higher than the last one. So if we keep stacking them, we keep stacking logs, eventually, we get to FSD.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 25
},
{
"name": "Martin Viecha",
"speech": "Thank you. Let's now go to analyst questions. The first question comes from Will Stein from Truist.",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 26
},
{
"name": "William Stein",
"speech": "We learned earlier on the call, it sounds like you don't think the truck will ramp to significant volume until its third year of production. Should we have a similar anticipation for the ramp of the next-gen platform? Or is there any reason that we should be maybe more optimistic or pessimistic about the ramp profile there?",
"session": "Question",
"person_id": 256580,
"person_company": null,
"component_order": 27
},
{
"name": "Elon Musk",
"speech": "Yes. I mean, to be clear, it's not really the third year of production. It's kind of like the 18th month of production is roughly my guess. So it's just that they happen -- it will happen if not the -- it starts this year, spans next year and gets to 2025. So technically, there are 3 calendar years in there, but there's actually only 18 months, not 3 years. I would be very disappointed if it took us -- and that would be shocking if it took us 3 years. But 18 months from initial deliveries to have -- to reach volume and reach prosperity with an immense -- I can't tell you how much -- the blood, sweat and tears level required to achieve that is just staggering. I have been through it many times. And here we go again.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 28
},
{
"name": "William Stein",
"speech": "A similar path for the next-gen platform?",
"session": "Question",
"person_id": 256580,
"person_company": null,
"component_order": 29
},
{
"name": "Drew Baglino",
"speech": "I mean there's like unique complexity to Cybertruck.",
"session": "Answer",
"person_id": 393478,
"person_company": null,
"component_order": 30
},
{
"name": "Elon Musk",
"speech": "Yes. I mean Cybertruck is...",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 31
},
{
"name": "Drew Baglino",
"speech": "Hence, the 18 months.",
"session": "Answer",
"person_id": 393478,
"person_company": null,
"component_order": 32
},
{
"name": "Elon Musk",
"speech": "Yes. I mean we dug our own grave with Cybertruck. Nobody, in general, probably nobody digs a grave better than themselves. And so it is -- Cybertruck is one of those special products that comes along only once in a long while. And special products that come along once in a long while are just incredibly difficult to bring to market, to reach volume, to be prosperous. It's fundamental to the nature of the newness. So now the sort of high-volume, low-cost smaller vehicle is actually much more conventional.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 33
},
{
"name": "Unknown Executive",
"speech": "Yes. In terms of like the technologies we're putting into it, we didn't have to invent how to bend full hard stainless steel or have mega 9,000-ton castings or the largest hot stamping in the world or new -- high voltage level architecture. It's learning from everything we've done, so we hope it will ramp faster than the technology...",
"session": "Answer",
"person_id": 182536,
"person_company": null,
"component_order": 34
},
{
"name": "Unknown Executive",
"speech": "We also went through the ruthless simplification exercise.",
"session": "Answer",
"person_id": 182536,
"person_company": null,
"component_order": 35
},
{
"name": "Unknown Executive",
"speech": "Yes we did. Significantly less parts. You're only as [ simple ] as the least part. If you had less of those, that means you could probably do [indiscernible]",
"session": "Answer",
"person_id": 182536,
"person_company": null,
"component_order": 36
},
{
"name": "Elon Musk",
"speech": "Yes, exactly. I mean that is so...",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 37
},
{
"name": "Unknown Executive",
"speech": "So pretty revolutionary in how we're going to build it.",
"session": "Answer",
"person_id": 182536,
"person_company": null,
"component_order": 38
},
{
"name": "Elon Musk",
"speech": "It is. Yes, it's a -- their manufacturing approach for the higher volume small vehicle is revolutionary. It's not revolutionary quite in the same way as the Cybertruck. I think it will be quite a fast ramp. So as I was saying, we're doing everything possible to simplify that vehicle in order to achieve any units per minute level that is unheard of in the auto industry.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 39
},
{
"name": "Drew Baglino",
"speech": "Yes. I mean, a single location makes it easier to automate. It also makes it lower cost. Yes, that's intrinsically lower cost.",
"session": "Answer",
"person_id": 393478,
"person_company": null,
"component_order": 40
},
{
"name": "Elon Musk",
"speech": "Yes. Let's be clear, it will be cool, but it's utilitarian. It's not meant to be -- fill you with awe and magic. It can get you from A to B. It will be still beautiful, but it's a utility.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 41
},
{
"name": "Drew Baglino",
"speech": "That's not 14 inches of [ travel on its ] suspension, as an example.",
"session": "Answer",
"person_id": 393478,
"person_company": null,
"component_order": 42
},
{
"name": "Elon Musk",
"speech": "Yes. So I mean, the Cybertruck has a lot of bells and whistles.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 43
},
{
"name": "Martin Viecha",
"speech": "All right. Thank you very much. Let's go to Pierre Ferragu from New Street Research.",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 44
},
{
"name": "Pierre Ferragu",
"speech": "Hey, can you hear me fine, yes?",
"session": "Question",
"person_id": 356336,
"person_company": null,
"component_order": 45
},
{
"name": "Martin Viecha",
"speech": "Yes.",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 46
},
{
"name": "Pierre Ferragu",
"speech": "I have first like a follow-up question on FSD and pricing and adoption. So I agree with you that as FSD improves, we should see its value increasing. But I guess like the ultimate values of FSD, which is to be able to handle like a robotaxi is not going to necessarily interest everybody, and you have a bit of a degraded version that would be like a chauffeur service where the car drives by itself, but you still have to be in the car and around. And then there is like the hands-on, eyes-on version of the service. And I guess, there should be like much lower cost, lower feature kind of variance of the service that could have a very large penetration on your installed base and a more expensive one that would remain at a lower penetration level. So I'm just wondering if you're taking that. \r\nAnd last but not least, like the simplest version of FSD available are going to work from a technical perspective, probably before like the ultimate robotaxi version can work, if ever. And so I'm wondering how you take that into account and how you're thinking like the financial contribution of FSD over time and whether you could evolve your pricing along that kind of tiers to increase adoption?",
"session": "Question",
"person_id": 356336,
"person_company": null,
"component_order": 47
},
{
"name": "Elon Musk",
"speech": "Yes. I mean, a fully autonomous vehicle, I think, Pierre, the sort of the economics of an autonomous vehicle are truly astounding in a positive way. When you look at passenger vehicles today, they only get about 10 to 12 hours of usage per week. That's -- if you drive 1.5 hours a day on average, that's roughly 10 hours a week out of 168 hours. And then there's -- also you're going to have parking and insurance. You've got to take care of the car. It's like there's a lot of overhead.\r\nSo I mean, yes, it's like the economics of the system are just insanely positive given that the car -- like, all of the cars we're making and have made for a while, we believe, are capable of full autonomy. So then if you're able to, say, increase the utility of that car by a factor of 5, which only means that you've -- it's being used for maybe 50 hours a week out of 168. So you'll still notice -- you're still assuming -- that still assumes less than 1/3 of the hours of the week it is doing something useful. You've increased the value of that by 5, but it still costs the same. Like, you have something -- then we're a hardware company with software margins.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 48
},
{
"name": "Martin Viecha",
"speech": "Pierre, do you have a follow-up?",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 49
},
{
"name": "Pierre Ferragu",
"speech": "Yes. I have a few on a different topic for you that I have, if that's okay. It's about like your gross margin in the quarter. Could you give us a sense of, like, in how the gross margin evolved sequentially? How much was the impact of idle cost? How much was, like, the sequential benefit, I imagine, of production ramping at Berlin and Austin? And then I saw, like, this massive jump in Energy Storage, a very strong positive surprise. So if you can give us the background on that and tell us how we should think about that gross margin going forward.",
"session": "Question",
"person_id": 356336,
"person_company": null,
"component_order": 50
},
{
"name": "Vaibhav Taneja",
"speech": "Thanks for the question. So in terms of -- we have a few different aspects of your question. So for -- if I just look at from a Q3 perspective, obviously, factory idle time had an impact. It did impact by -- and I won't give you the exact percentage, but it had a decent impact for the quarter. And when you look at the other pieces, which we are trying to do, we did see certain of our other factories ramping up pretty well, right? And they actually contributed pretty well to the margin for this quarter. In fact, one of the factories came pretty close to in terms of per unit cost to where we are for our other established factory, which is Fremont. So that was a positive in the quarter. \r\nWhen it comes to energy margins, Megapack deployment was the key driver there. And that product has done well. On the cost curve also, we've been able to do a lot there. But I do want to caution that Megapack deployments are a bit lumpy. So yes, we had a great quarter this period. But depending upon where we are trying to deploy that product in different markets, you would see periods where there would be downward pressure on deployment because of us trying to get the product to that base way...",
"session": "Answer",
"person_id": 595078,
"person_company": null,
"component_order": 51
},
{
"name": "Unknown Executive",
"speech": "Yes, the product in transit. Yes.",
"session": "Answer",
"person_id": 182536,
"person_company": null,
"component_order": 52
},
{
"name": "Vaibhav Taneja",
"speech": "Yes.",
"session": "Answer",
"person_id": 595078,
"person_company": null,
"component_order": 53
},
{
"name": "Martin Viecha",
"speech": "Okay. Thank you very much. Let's go to Rod Lache from Wolfe Research.",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 54
},
{
"name": "Rod Lache",
"speech": "Really nice to see the rate of vehicle cost improvement despite the downtime that you took. You've taken now about $2,000 out of the average vehicle costs over the past year. Can you give us maybe a sense of the rate of improvement that you see from the changes that you alluded to, the factory changes you alluded to? Is there a way maybe to convey the speed of improvement on your existing product from here? And then related to that, can you share the timing of your next gen -- the lower-priced product that you talked about earlier this year?",
"session": "Question",
"person_id": 370532,
"person_company": null,
"component_order": 55
},
{
"name": "Vaibhav Taneja",
"speech": "Yes. So just in terms of product margins, there are lots of puts and takes when you look into this. There are certain things which we control, and there are certain things which we don't control. We get -- we expect that we'll get some benefits from our cost reduction efforts, which are all underway. But on the other hand, we just finished our factory upgrades late in Q3. Some of these factories are still in the early ramp phase in Q4. We're still not up to where we want those factories to be. So they will impact in the near term. Plus, like Elon mentioned, we're going to be ramping Cybertruck, which is going to be another headwind, which we will be dealing with. \r\nOn top of all that, there's overall uncertainty in the macroeconomic environment, which even makes it harder to predict precisely as to where we land. But yes, this is something which -- it's an evolving thing which we're observing every day and reacting to it on a daily basis.",
"session": "Answer",
"person_id": 595078,
"person_company": null,
"component_order": 56
},
{
"name": "Drew Baglino",
"speech": "I would just say that on the cost reduction efforts, like we are not -- we are unflagging in our pursuit of additional cost downs for 2024. We do have a good pipeline of them and work on both the engineering side and the factory operations side. And our intention is to like maintain or exceed the trend that you saw. We're trying as hard as we possibly can.",
"session": "Answer",
"person_id": 393478,
"person_company": null,
"component_order": 57
},
{
"name": "Rod Lache",
"speech": "The timing of the next-gen product, can you share that?",
"session": "Question",
"person_id": 370532,
"person_company": null,
"component_order": 58
},
{
"name": "Elon Musk",
"speech": "Not at this time.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 59
},
{
"name": "Rod Lache",
"speech": "Okay. And just as a follow-up, obviously, price is also a driver of demand, but that's obviously not happening in a vacuum. And you mentioned that -- I think you mentioned at some point during this call that you're also maybe hitting the law of large numbers on some of your products. Can you just share how you're thinking about price elasticity just at this point in this macro environment, and any thoughts along those lines?",
"session": "Question",
"person_id": 370532,
"person_company": null,
"component_order": 60
},
{
"name": "Elon Musk",
"speech": "I think that there's very significant price elasticity. I mean to be totally frank, if our car costs the same as a Rav4, nobody would buy a Rav4, or at least they're very unlikely to. It's worth noting that a lot of these incentives like the tax credit and whatnot, they're actually very difficult for the average person to access because they -- most people do not have $10,000 or even $7,500 burning a hole in their bank account. A lot of -- a large number of people are living paycheck to paycheck and with a lot of debt. They've got credit card debt, mortgage debt. So yes, it's -- that's reality for most people. It's sometimes difficult for people who are high income earners, and when I say high, it'd be like someone who's earning over $200,000 a year, to understand what life is like for someone who is earning $50,000 or $60,000 or $70,000 a year, which is most people.\r\nSo like, for a lot of people, like, this tax credit just -- they can't front $7,500 for 18 months or even 6 months to -- for the tax credit, and they actually don't, in some cases even have that [ an ancillary $7,500 ] in taxes. So it's really just the vast regard to people is how much money do they have to pay immediately and how much per month. That's it. You can stop right there. And our car is still much more expensive than a Rav4 when you look at it that way.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 61
},
{
"name": "Vaibhav Taneja",
"speech": "One other thing which I'll add, when you look at car buying in general, we're trying to get to the next set of EV adopters.",
"session": "Answer",
"person_id": 595078,
"person_company": null,
"component_order": 62
},
{
"name": "Elon Musk",
"speech": "Not an EV adopter, just who wants a great car.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 63
},
{
"name": "Vaibhav Taneja",
"speech": "Exactly.",
"session": "Answer",
"person_id": 595078,
"person_company": null,
"component_order": 64
},
{
"name": "Elon Musk",
"speech": "It's not -- so now you get things like -- honestly, I would say, like, it somewhat correlates with the why doesn't everyone work from home crowd. I'm like -- I mean this is like some real Marie Antoinette vibes from people who say why isn't everyone working from home? Like, what about all the people that have to come to the factory and pull the cars or all the people that have to go to the restaurant and make your food and deliver your food. It's like what are you talking about you -- I mean, how detached from reality does the work-from-home crowd have to be while they take advantage of all those who do -- who cannot work from home? So I mean, you have to say, like, \"Why did I sleep in the factory so many times?\" Because it mattered. \r\nSo I just can't emphasize again how important cost is. It's not an optional thing for most people. It is a necessary thing. We have to make our cars more affordable that people can buy it. And I keep harping on this interest thing, but I mean it just raises the cost of the car. I mean we're looking at it in an internal analysis, which I know we -- we think is more or less on track that when you look at the cost -- or the price reductions we've made in, say, the Model Y and you compare that to how much people's monthly payment has risen due to interest rates, the price of the Model Y is almost unchanged.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 65
},
{
"name": "Vaibhav Taneja",
"speech": "If you factor in the changing interest rates.",
"session": "Answer",
"person_id": 595078,
"person_company": null,
"component_order": 66
},
{
"name": "Elon Musk",
"speech": "Yes, which is -- this is what I'm trying to say. The thing that matters is the monthly pay. It's how much money do they have to put down and do they literally have that in their bank account or their check balance? And then what is the monthly payment? And it doesn't matter how -- if that monthly payment is principal interest or whatever, it's just a number, and that number has to not cause their bank account to go negative. \r\nAs it -- so going from near 0 interest rates to kind of the current very high interest rates, the actual monthly payment is basically the same. It's just a bunch more of it is going to interest. And there are some incremental challenges beyond that, which is the difficulty of getting credit at all has increased. And so there are a number of people who simply cannot get credit, period. Even if they've got a job and everything is solid, the banks are a little gun-shy on handing out credit given that a bunch of them kicked the bucket earlier this year.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 67
},
{
"name": "Drew Baglino",
"speech": "Yes. There's also just fewer options. Even if they hand out credit, there's fewer banks to go to.",
"session": "Answer",
"person_id": 393478,
"person_company": null,
"component_order": 68
},
{
"name": "Elon Musk",
"speech": "It's like does your bank still exist? Well, if your bank does not exist, you have to establish a relationship with a new bank. And so a lot of regional banks have died, and I mean even Credit Suisse, I mean, geez, that was a shocker. You've got a 160-year-old-ish Swiss institution that doesn't exist anymore. That's mind-blowing. And I think there's still quite a few shoes to drop on the bad credit situation. I mean commercial real estate obviously is in terrible shape. Credit card debt has been rising significantly. The credit card interest rates are usurious. It's over 20% interest rates, meaning like -- which over time just becomes obviously extremely punishing. Because if somebody's paying 20% interest on their credit cards, it means they cannot pay them off. And if you cannot pay them off and you're still accruing interest at 20%, you're at best headed to a bad place.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 69
},
{
"name": "Martin Viecha",
"speech": "Thank you. Let's go to next question from George from Canaccord.",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 70
},
{
"name": "George Gianarikas",
"speech": "Just to focus on the cost per vehicle coming down in future quarters as you discussed in your written remarks, I'm curious as to what the levers of that could be. Is it more scale, more factory utilization? Is it material cost reductions? Are there things like Gigacasting? I mean can you just kind of give us some data points to give us confidence that that's going to come down over time?\r\nAnd if I can sneak one in, please, there are press reports, and I know how perilous it is to believe some of these, but they say that you've included radar as an option in some Model Ys in China. And I'm just here to ask if that's true. And if so, why?",
"session": "Question",
"person_id": 547012,
"person_company": null,
"component_order": 71
},
{
"name": "Elon Musk",
"speech": "We've not included radar. We have radar as -- a Tesla-designed radar is an experiment in Model S and X. That's it. We'll see whether that experiment is worth it, but there are no plans to integrate radar into 3 or Y. Just as humans drive well, and in fact, an excellent human driver can drive with amazing safety simply with their eyes, the car will far exceed the average human safety just with visual, far, far, far. Because, I mean, the car is looking at all directions at once, and we don't have eyes on the back of our head. So -- and the computer never gets tired and never gets distracted, get drunk, hopefully. \r\nAnd so radar is -- what really matters is how much does it affect the probability of an accident. And in order for the radar to be effective, you have to be able to do radar-only braking or you have to do actions that are radar only. Otherwise, you get this disambiguation problem between vision and radar. That's why we actually turned off the radar in cars historically that we had chipped. All 3 and Y used to have radar, but we turned it off because the radar actually generated more noise than signal. Now the Tesla-designed radar is a high-resolution radar that has some potential to be useful, but the jury is still very much out on whether that is, in fact, the case.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 72
},
{
"name": "Unknown Executive",
"speech": "On the cost question, I guess, from the vehicle side, like as Drew mentioned earlier, we are always trying to engineer our products to be cheaper to make and more efficient to make. That comes obviously on the engineering side as we come up with new innovations but as well on the supply chain side with our partners, we work with them to automate some of their lines, remove their bottlenecks and their high cost as well. On the logistics side, getting parts to the factory. It's not like a one thing. You just have to attack cost everywhere, and we do it ruthlessly at all times.",
"session": "Answer",
"person_id": 182536,
"person_company": null,
"component_order": 73
},
{
"name": "Unknown Executive",
"speech": "And operations efficiency. All of the above.",
"session": "Answer",
"person_id": 182536,
"person_company": null,
"component_order": 74
},
{
"name": "Vaibhav Taneja",
"speech": "Yes. I would say there's a whole laundry list of things, which we are chasing. We internally call it the cost attack where we are literally going line by line and saying how can we make it better. And it's a grind.",
"session": "Answer",
"person_id": 595078,
"person_company": null,
"component_order": 75
},
{
"name": "Elon Musk",
"speech": "It's like Game of Thrones but with pennies. I mean at first approximation, if you've got a $40,000 car, and roughly 10,000 items in that car, that means each thing, on average, costs $4. So in order to get the cost down, say, by 10%, you have to get $0.40 out of each part on average. It is a game of pennies.",
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"name": "Unknown Executive",
"speech": "We play it willingly.",
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"name": "Elon Musk",
"speech": "Yes. We've done it many, many times. And even something as simple as like a sticker, like, there's too many stickers internally in the car that nobody ever sees. There's something as simple as a QR code. You may think, well, putting a QR code on a part, why don't just put them on there. It's like, well, are we actually going to use that QR code?",
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"name": "Unknown Executive",
"speech": "Costs $0.01.",
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{
"name": "Elon Musk",
"speech": "Yes. Exactly. And then inevitably, sometimes the QR code doesn't go on properly or you can't read it properly, and it stops the line.",
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{
"name": "Unknown Executive",
"speech": "Costs more than $0.01.",
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{
"name": "Elon Musk",
"speech": "Yes. Absolutely. So chipping away, with -- I mean it is trying to -- it does feel like digging a tunnel with a spoon at times.",
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{
"name": "Unknown Executive",
"speech": "Like very much escaping prison.",
"session": "Answer",
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"name": "Elon Musk",
"speech": "Yes.",
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{
"name": "Vaibhav Taneja",
"speech": "On top of it, like we said, we did some factory upgrades, so we expect volume to go up. That would also bring some cost savings from higher production. But then on the flip side, we're going to be ramping a new product like Cybertruck, which we talked about. So yes, so those are the real puts and takes which we are working through.",
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"name": "Elon Musk",
"speech": "Yes. But there's not like some -- accidently, some brick of gold that we've got, unfortunately. And it's -- we're trying to be very rigorous about improving the quality and capability of the car because -- it's like, any fool can reduce the cost of a car by making it worse and just deleting functionality and capability. That's why I'd call this, sort of any fool that -- like, if you want to like lose weight and you said, \"Well, I need to lose 15 pounds right away,\" well, you could chop your arm off, but then you're sitting here with one arm, and you're still fat. So like...",
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"name": "Unknown Executive",
"speech": "You got to work out.",
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"name": "Elon Musk",
"speech": "Yes, you actually have to eat less food and work out. That's the actual way.",
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{
"name": "Unknown Executive",
"speech": "And you need doctor's advice.",
"session": "Answer",
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"name": "Elon Musk",
"speech": "Yes. It's not super fun because food is delicious. And personally, I'm not -- I don't love working out. I know some of you do. I wish I did, but I don't. Unless moving the mouse consists of working out, in which case, I love moving the mouse.",
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{
"name": "Martin Viecha",
"speech": "All right. Let's go to Colin Langan from Wells Fargo. Colin?",
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{
"name": "Colin Langan",
"speech": "Sorry about that. Do you hear me now?",
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"name": "Elon Musk",
"speech": "Yes.",
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{
"name": "Colin Langan",
"speech": "You said in the commentary that you're not going full tilt on the plant in Mexico until there are signs that the economy is strong. Can you continue at a 50% CAGR without that plant? And where would that come from? And any color on what you mean of sort of not going full tilt? Could that plant get delayed indefinitely? Or what are you kind of talking about?",
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{
"name": "Elon Musk",
"speech": "No, we're definitely making the factory in Mexico. We feel very good about that. We've put a lot of effort into looking at different locations, and we feel very good about that location, and we are going to build a factory there and it's going to be great. The question is really just one of timing. And it's going to be a broken record on the interest front. It's just the interest rates have to come down. Like, if interest rates keep rising, you just fundamentally reduce affordability. It is just the same as increasing the price of the car. So I just don't have visibility into -- if you can tell me what the interest rates are, I can tell you when we should build the factory. We're going to build it. And I mean we think we'll start the initial phases of construction next year. \r\nBut I am still somewhat scarred by 2009 when General Motors and Chrysler went bankrupt. So -- while that's now 14 years ago, it's -- that is seared into my mind with a branding iron because kind of Tesla was just hanging on by a thread during that entire time and with -- I mean, we closed our financing round 2008 at 6 p.m. December 24, Christmas Eve. And if we had not closed that financing round, we would have bounced payroll 2 days after Christmas. So we actually closed that round at the last hour, at the last day that it was possible. Stressful, to say the least, and then barely made it through 2009. So I'm like I want to just -- I don't want to be going at top speed into uncertainty. A lot of wars going on in the world obviously as well, so...",
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{
"name": "Unknown Executive",
"speech": "And we have room here, like in Giga Texas. You said we still have room in this building. It's not full with Cybertruck and the line. There's plenty of growth opportunities still to have inside the building where our team already is.",
"session": "Answer",
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{
"name": "Elon Musk",
"speech": "We also have 2,000 acres here.",
"session": "Answer",
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{
"name": "Unknown Executive",
"speech": "There's also one for...",
"session": "Answer",
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{
"name": "Elon Musk",
"speech": "We're actually only occupying a tiny corner of the land that we own. So we could technically do all the scaling just here. So I mean personnel is our biggest challenge, in that the greater Austin area only has -- generously, the greater Austin area only has 2 million people. So people are moving here and they're willing to move here, but there is somewhat of a housing crisis. They got to live somewhere, so yes. \r\nSo I don't know, I mean I'm just curious -- like I just -- I'm not saying things will be bad. I'm just saying they might be. And I think -- like, Tesla is an incredibly capable ship, but we need to make sure like as -- if the macroeconomic conditions are stormy, even the best ship is still going to have tough times. The weaker ships will sink. We're not going to sink. But even a great ship in a storm has challenges. Now that storm will apply to everyone, not just us and not just the auto industry. It will apply to everyone, I think, apart from necessary sort of staples like food and stuff. But -- so I just -- I don't know. If interest rates start coming down, we will accelerate.",
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{
"name": "Martin Viecha",
"speech": "All right.",
"session": "Answer",
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{
"name": "Elon Musk",
"speech": "If anybody's got any good guesses on this, I'd love to be less wrong. And I apologize if I'm perhaps more paranoid than I should be because that might also be the case. Because I am -- I have PTSD from 2009, big time. And 2017 through '19 were no picnic, either. That was very tough going. So the auto industry is also somewhat cyclic because people tend to hesitate to buy a new car and if there's uncertainty in the economy. So car companies do very well in good economic times and they don't do as well in tough economic times. So it's just -- whereas if somebody is selling bread, then I think people will still need to eat bread. Yes, we need bread. We need it for all of time. But a new car, you don't have to have right this minute.",
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{
"name": "Vaibhav Taneja",
"speech": "Especially if there are wars going on and then that impacts your sentiment.",
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{
"name": "Elon Musk",
"speech": "Yes. I mean people are reading about wars all over the world at this -- buying a new car tends to not be front of mind.",
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{
"name": "Martin Viecha",
"speech": "All right. Unfortunately, that's all the time we have today. Thank you very much for all of your good questions, and we'll see you again in 3 months. Thank you very much.",
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"title": "Tesla, Inc., Q3 2023 Earnings Call, Oct 18, 2023",
"quarter": 3,
"year": 2023
}
},
{
"transcript_title": "Tesla, Inc. - Q2 2023",
"transcript_name": "Tesla, Inc., Q2 2023 Earnings Call, Jul 19, 2023",
"ticker": "NASDAQ:TSLA",
"transcript_url": "https://wkarticles.blob.core.windows.net/finnhub/snp_transcript_2854174",
"date": "2023-07-19",
"year": 2023,
"quarter": 2,
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"transcript": [
{
"name": "Martin Viecha",
"speech": "Good afternoon, everyone, and welcome to Tesla's Second Quarter 2023 Q&A Webcast. My name is Martin Viecha, I'm VP of Investor Relations, and I'm joined today by Elon Musk, Zachary Kirkhorn and a number of other executives. \r\nOur Q2 results were announced at about 3 p.m. Central Time in the update deck we published at the same link as this webcast. During this call, we will discuss our business outlook and make forward-looking statements. These comments are based on our predictions and expectations as of today. Actual events or results could differ materially due to a number of risks and uncertainties, including those mentioned in our most recent filings with the SEC. [Operator Instructions] But before we jump into the Q&A, Elon has some opening remarks. Elon?",
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"name": "Elon Musk",
"speech": "Thank you, Martin. So just a Q2 recap. In Q2, we achieved record vehicle production and deliveries and record revenue of about $25 billion in a single quarter. And Model Y became the best-selling vehicle of any kind globally in Q1, surpassing the likes of Corolla and Gulf. So it was the #1 vehicle of any kind, including vehicles that are sold at a far lower price. This is, I think, an incredible achievement by the Tesla team, and just a huge thank you to our customers for their support. \r\nSo this came in spite of high interest rates and a lot of macro uncertainty. And nonetheless, we managed to achieve operating margin of about 10%. We continue to target 1.8 million vehicle deliveries this year, although we expect that Q3 production will be a little bit down because we've got summer shutdowns to -- for a lot of factory upgrades. So just probably a slight decrease in production in Q3 for sort of global factory upgrades. \r\nIn the long-term economy we think is going to just drive volume through the ceiling next level. And sort of future robotaxi products, the dedicated robotaxi products, we think, have a quasi infinite demand. So -- and the way we're going to manufacture the robotaxi is also itself a revolution. So it's revolutionary sign made in a revolutionary way. It will be, by far, the highest units per hour of any vehicle production ever. So very excited about that. \r\nWith respect to Autopilot and Dojo, in order to build autonomy, we also need to train our neural network with data from millions of vehicles. The more -- I mean, this is proven over and over again. The more training data you have, the better the results. And I mean, there are times where we see basically in a neural net basically, it is sort of at a million training examples, it barely works at 2 million, it slightly works at 3 million. It's like, wow, okay, we're seeing something. So then you get like 10 million training examples, it's like -- it becomes incredible. So there's just no substitute for a massive amount of data. And obviously, Tesla has more vehicles on the road that are collecting this data than all other companies combined by, I think, maybe even an order of magnitude. So I think we might have 90% of all -- a very big number. \r\nSo the success in AI and dev is a function of talent, sort of unique data and computing resources. And we have outstanding capabilities in all 3 arenas. And I really just don't know how anyone could do what we're doing, even if they had our software and had our computer, if they did not have the training data. \r\nSo sticking at which our Dojo training computer is designed to significantly reduce the cost of neural net training. It is designed to -- it's not optimized for the kind of training that we need, which is a video training. So we just see that the need for neural net training, again, talking in quasi kind of things is just enormous. So I think having -- we expect to use both NVIDIA and Dojo, to be clear. But there's -- we just see a demand for really advanced training resources. And we think we may reach in-house neural net training capability of 100 [ exoblocks ] by the end of next year. So today, over 300 million miles have been driven using FSD beta. That 300 million-mile number is going to seem small very quickly. It will soon be billions of miles and tens of billions of miles. And that FSD will go from -- from being as good as a human to then being vastly better than a human. We see a clear path to full self-driving being 10x safer than the average human driver. So -- and between autopilot, Dojo computer, our inference hardware in the car, which we call sort of hardware [indiscernible] but it's really dedicated. It's a high efficiency inference computer that's in the car and our Optimus robot. It's really at the cutting edge of AI movement. \r\nWith regard to our Cybertruck, we continue to build release candidates of the Cybertruck on our final production line in Austin. I'm actually here in Austin at the Gigafactory. This is the first truck that we're aware of that will have 4-door over a 6-foot bed and will fit into a 20-foot garage. So it's the biggest on the outside, but it's even bigger on the inside. So it's -- I think that's -- one of the elements of good design is it should feel bigger on the inside than it looks on the outside. And this is no small car, but we -- we're really cared about the exterior dimensions of the Cybertruck down the last millimeter. So just trying to get right the middle of the goldilocks zone, not too big, not too small, and then really maximize the utility of the volume. And we can't wait to start delivering it later this year. \r\nSome other highlights. Our global Supercharging network now stands at over roughly 50,000 connectors and over 5,000 locations. As I think a lot of people are aware, the Tesla charging standard, which we made open source, and it's now called the North American Charging Standard, we're deeply honored that Ford, GM, Mercedes and many other OEMs have signed up to use our connector and gain access to our charging network. We strongly believe in helping the other car companies to accelerate the EV revolution and just trying to do the right thing in general. So that's some goal there. \r\nThen it's -- I think I want to emphasize like very strongly. This is a very important point, is that Tesla, just as with the North American charging standard, although we're not licensing, we're just making it available. But we are very open to licensing our full-self driving software and hardware to other car companies. And we are already in discussions with only just early discussions with a major OEM about using Tesla FSD. So we're not trying to keep this to ourselves. We're more than happy to license it to others. \r\nAnd lastly, our new lithium refinery and cathode facility are progressing well. Now in conclusion, we continue to focus on making as many cars as we can while maintaining healthy financials. Our artificial intelligence development is obviously entering a new era, and we're incredibly excited about what's to come. Our other businesses such as Megapack, Supercharging service and whatnot all started to become a meaningful contributor to overall profitability this quarter. And then lastly, I'd just like to profusely thank all of our employees who are making a lot of extra effort during uncertain times. Thank you very much for your hard work and the impact you're making.",
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"name": "Martin Viecha",
"speech": "Thank you very much, Elon. And I think Zach has some opening remarks as well.",
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"name": "Zachary Kirkhorn",
"speech": "Yes. Thanks, Martin. As Elon mentioned, Q2 was another record quarter of production and deliveries as well as records in profit for energy and services and other businesses. Congratulations again to the Tesla team on the continued progress. As we navigate through a period of economic uncertainty, rising interest rates, volatility and consumer confidence and regulatory change, I want to comment on our financial approach. \r\nFirst, the single most important priority is to ensure we are continuing to invest heavily in the core technologies that will drive the long-term value of the business. This includes increasing spending on AI-related technologies such as full-self driving, Optimus and Dojo as well as new products such as Cybertruck, our next-generation platform in the semi, as evidenced by the continued growth in our R&D spend. This also includes continuing our investments in capacity expansion, not only in our vehicle factories, but also our Supercharging network service, internal applications and battery processes as we continue with meaningful capital expenditures to lay this foundation for the future. \r\nSecond, we continue to work towards our goals of maximizing volumes on both our vehicle and energy business, but most importantly, doing so in a way that generates the capital to continue our pace of R&D and capital investments. This requires a strong focus on per unit COGS reductions in each of our key businesses as well as working capital improvements on raw materials, work in process inventory and customer AR, all of which progressed appropriately in Q2. \r\nIf we look specifically at our automotive business, our gross margin showed a modest reduction and remained healthy, despite action taken to further improve vehicle affordability early in the quarter. We recognize -- we realized per unit cost improvements in nearly every category, including material cost and commodities, manufacturing costs and logistics while also continuing to rapidly increase the build rate in our Austin and Berlin factories. \r\nFor our Energy business, we improved margins and gross profit driven by cost reductions in deal economics, particularly with Megapack. As a reminder, storage volumes are typically volatile sequentially based on the types of projects and their specific revenue recognition milestones. \r\nAs we look forward to the rest of the year, I want to reiterate Elon's comments on Q3 volumes driven by planned downtimes for factory upgrades. These upgrades will also carry some amount of factor idle cost. However, we are working to minimize as much as possible. It's also important to keep in mind the uncertainty in the macro environment, which can impact our execution positively or negatively in the near term. Regardless, we continue to remain dynamic with a focus on fundamental efficiency and a long-term outlook. Congratulations again to everybody on a great quarter.",
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"name": "Martin Viecha",
"speech": "Thank you very much, Zach. And let's go to investor questions. The first question on licensing FSD we've already answered. So let's go to the second one. The second question is, what is the status of 4680 cells? How far are you from the specs you laid out on Battery Day? When do you expect to achieve what you laid out on Battery Day?",
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"name": "Drew Baglino",
"speech": "Yes. First, I'll just start with a little bit of a production update. So in Texas, 4680 cell production increased 80% Q2 over Q1, and the team surpassed 10 million production cells produced here in Texas. So congrats to the team for that. Their focus on yield reduced our scrap bill by 40% quarter-over-quarter, and that resulted in a 25% reduction in cell COGS. \r\nHere in Texas, we're preparing to launch our Cybertruck cell, which is 10% higher energy density than current production. That was accomplished through process and mechanical design optimization. As we scale Cyber Cell production through the end of the year and early next, we should be in a comfortable place on cost per cell. \r\nAgainst our battery energy density targets, the Cyber Cell is at our expectations on a like-for-like electrochemistry basis. We're yet to integrate silicon or in-house cathode production, both reviewed on Battery Day, which do bring significant further energy density and cost improvements, but that is a topic for another day. \r\nLastly, it is important to remember that most of what we focused on a Battery Day was the Tesla-engineered 4680 production system and the improvements we strove to achieve on equipment, factory density, capital cost and utility cost reduction, all of which we are realizing in our Texas scale up to date.",
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"name": "Martin Viecha",
"speech": "Thank you very much. The next question is, can you talk more to the upcoming Tesla Energy products and how your thinking has evolved on the revenue model? Given Tesla's AI capabilities, how do you see the long-term mix between hardware margin and recurring software margin from Autobidder as this segment accelerates?",
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"name": "Drew Baglino",
"speech": "We can't comment on future product road map, but I can provide a quick energy and Q2 update. Megapack continues to show strong demand globally with Lathrop ramping successfully to meet our contracted projects in 2023. As stated last quarter, Megapack margins are in a reasonable place in line with our target market -- vehicle target margins. \r\nThe second final assembly line at Lathrop is progressing on schedule, eventually doubling Lathrop capacity ahead of our full factory ramp in 2024. We have several exciting large projects in construction or nearing completion, including the KES project in Hawaii, the Riverina project in Australia, several products in California and one here at Gigafactory, Texas that we'll tour today, actually. We want to thank our customers, utilities and grid operators for trusting us with these projects. \r\nOn the Autobidder question. We continue to grow Autobidder contracts in wholesale markets like Australia, Texas, U.K. and California with over 6 gigawatt hours under Tesla's dispatch next year. In the U.K., our projects performed best in the industry in Q2. Autobidder does have software margins and is an enabler for hardware sales, but it's a relatively small contributor to revenues, given how much deployment growth on the Megapack hardware side is occurring. It's important to remember that this large project -- these large capital projects have lifetimes of 20 years of recurring revenues on an annualized basis relative to upfront CapEx are small. \r\nOn the residential side, we have some fun things happening. We recently surpassed 0.5 million Powerwalls installed. Just this week, we are launching charge on solar, which allows Tesla Powerwall and vehicle customers to charge their vehicles using their excess solar and drive only on the sunshine that hits their roof. Yesterday, we began paying customers in Texas for participating in our virtual power plant to provide grid support to ERCOT. We expect these credits to lower our median customer's annual bill by 1/3 and to increase these credits over time as ERCOT expands market access. And today, we are expanding Tesla electric enrollment to new Model 3 owners in Texas, followed by all Texas vehicle customers over the rest of the quarter. \r\nUnfortunately and somewhat similar to Tesla Insurance, bringing Tesla electric and BPP capabilities to our customers requires working through a fractured regulatory environment on a jurisdiction-by-jurisdiction basis. In the long run, the value of residential energy software and hardware will be driven by the level of market access that utilities, market operators and regulators permit. \r\nFor Powerwall that's eligible to provide the full stack of energy services, like peaker capacity and system offering, such as in Australia, we can more than double the value of ownership relative to a typical system today.",
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},
{
"name": "Martin Viecha",
"speech": "Thank you very much. The next question is, could you quantify the benefits to COGS per unit from the IRA battery manufacturing incentives; and secondly, battery raw material declines year-to-date?",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 8
},
{
"name": "Zachary Kirkhorn",
"speech": "All right. I can take that. On the first part of the question for IRA manufacturing incentives, we provided previous guidance that we expect these to be for the course of this year in the range of $150 million to $250 million per quarter. We are staying within that foundry as we guided previously, so that was the case in Q2 as well. I will note, and I think we've mentioned this before, that this includes a 50-50 sharing of credits for qualified cells from our long-term battery partner, Panasonic. \r\nOn the commodity side, we are continuing to see improvements there, as we've discussed previously. Lithium is the most notable improvement so far. I think I commented on this on the last call, because typically, we see this coming about a quarter before it actually is realized in our financials. And also just as a reminder, we're not fully exposed to the price of lithium. Our supply chain team has done a terrific job in partnership with another -- a bunch of other companies to put in place some long-term agreements here, but we do have some exposure that moves up and down. \r\nWe're also seeing benefits in aluminum and steel, which I think is great. Not as large as the lithium impacts, but they contribute nonetheless. So if we add up the total impact of this in Q2 relative to prior quarter, it's about the same size and magnitude as the IRA benefits that we also received. \r\nJust to put this in context, as you look at COGS per unit sequentially from Q1 to Q2, I think there's 2 things to keep in mind there. The first is that our mix for deliveries increased quite a bit from Q1 to Q2. So as you think about fundamental cost reductions, it's important to adjust for that. And then secondly, as we continue to work on reducing our Austin and Berlin cost, which we did quite a bit of that from Q1 to Q2, these factories are still slightly above Model Y production costs elsewhere. And in the quarter, our mix of Austin- and Berlin-related builds increased. And so that's something to consider as you model out the impact on -- from Q1 to Q2 in terms of COGS per unit. I do want to ask Karn if there's anything else on the commodity side or just more generally, you want to add here?",
"session": "Answer",
"person_id": 385023,
"person_company": null,
"component_order": 9
},
{
"name": "Karn Budhiraj",
"speech": "Yes. As you mentioned, Zach, we've naturally been a little bit hedged from the lithium position because of the long-term contracts we have in place. But we have seen reduction in pricing across the board for all commodities that specifically go into batteries such as nickel, cobalt and graphite. And the reductions in pricing translate into thousands of dollars when you look at it from a per-vehicle impact. We're taking advantage, expect some of those fixed price contracts through the end of the decade. So it's a playbook that we'll continue to kind of go back to as we look to the future.",
"session": "Answer",
"person_id": 568567,
"person_company": null,
"component_order": 10
},
{
"name": "Martin Viecha",
"speech": "Thank you. The next question on FSD. Have you considered allowing FSD transferability as a lever to allow existing customers to upgrade to a new Tesla instead of being locked into an existing car due to the price of FSD?",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 11
},
{
"name": "Elon Musk",
"speech": "Yes, this is a question we get asked a lot. So we're excited to announce that for Q3, we will be allowing transfer of FSD. This is a onetime amnesty. So it needs to be -- you need to take advantage of it in Q3, but -- or at least place the order in Q3 within reasonable delivery time frames. So yes, yes, yes, I hope this makes people happy. [indiscernible] This is a onetime thing.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 12
},
{
"name": "Martin Viecha",
"speech": "Right. The next question, when will we give more information about the Cybertruck orders, estimated delivery schedules, pricing and specifications?",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 13
},
{
"name": "Elon Musk",
"speech": "Demand is so far off the hook you can't even see the hook. So that's really not an issue. I do want to emphasize that the Cybertruck has a lot of new technology in it, like a lot. It doesn't look like -- it doesn't look like any other vehicle because it is not like any other vehicle. So -- and the production ramp will move as fast as the slowest and least likely elements of the entire supply chain and internal production. So I wouldn't expect -- I hope it's smooth. We're certainly better at production ramps that -- we've got a lot of experience with the production ramps. But first order approximation, there's like 10,000 unique [indiscernible] and processes in the Cybertruck. And if any one of -- it will go as fast as the least lucky, least well-executed element of the 10,000. So it's always difficult to predict the ramp initially, but I think we'll be making them in high volume next year, and we will be delivering the car this year.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 14
},
{
"name": "Martin Viecha",
"speech": "Thank you. The next question is critics of Gigacasting contended that process makes vehicles harder and more costly to repair, essentially pushing costs on to the customer. Can you share some details about the initial repair experience with Gigacast vehicles?",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 15
},
{
"name": "Elon Musk",
"speech": "That must be why everyone's copying us.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 16
},
{
"name": "Lars Moravy",
"speech": "Thanks, everyone. This is Lars. I mean, that's like simply not true. There's a misconception that traditional bodies are easy to repair, but they are made up of multiple materials and multiple joining methods. Spot welds and rivets have to be drilled out. Panels and structural adhesives have to be chiseled down. Dried adhesive has to be removed. Stains, cut, blah, blah, blah.",
"session": "Answer",
"person_id": 482177,
"person_company": null,
"component_order": 17
},
{
"name": "Elon Musk",
"speech": "It's a crazy patch of a quilt.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 18
},
{
"name": "Lars Moravy",
"speech": "Yes. And so putting that back together means time and money. Using an example of replacing a rear cast rail in the Model Y. To do that versus like what we replaced it with from Model 3, it's 10x cheaper and 3x faster to do it with the cast rail. Design team works with our collision repair team since we're a closed loop on this with insurance, and we design specific parts that make it easier and faster to repair. And we have an incentive to do that because we have our own insurance and our own body shops. We expect that we'll continue to do this, and collision repair will continue to become cheaper and faster over time. And we already make this available to all body shops or our Tesla-approved body shop training.",
"session": "Answer",
"person_id": 482177,
"person_company": null,
"component_order": 19
},
{
"name": "Elon Musk",
"speech": "Yes, closing loop on collision repair and factoring that into design is a big deal. .",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 20
},
{
"name": "Lars Moravy",
"speech": "It's crucial. I don't think anyone else can do it with that ecosystem that we have so.",
"session": "Answer",
"person_id": 482177,
"person_company": null,
"component_order": 21
},
{
"name": "Elon Musk",
"speech": "Yes. And we are actually able to change the details of the casting with inserts, and we actually do that all the time. So -- because the answer is actually wear out and need to be replaced anyway. So we can actually make design changes to be inserts and tweak the castings. But the cast rear body or front body is lighter, cheaper, better noise vibration, harshness much easier to manufacture.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 22
},
{
"name": "Lars Moravy",
"speech": "It's better in every way.",
"session": "Answer",
"person_id": 482177,
"person_company": null,
"component_order": 23
},
{
"name": "Elon Musk",
"speech": "And that's why so many other car companies are copying us.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 24
},
{
"name": "Lars Moravy",
"speech": "Probably.",
"session": "Answer",
"person_id": 482177,
"person_company": null,
"component_order": 25
},
{
"name": "Elon Musk",
"speech": "Well, they certainly put out a lot of press releases about it. I think it's basically going to be how all cars are made in the future.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 26
},
{
"name": "Martin Viecha",
"speech": "Thank you. Next question, how many Optimus bots have been made? And when will they be able to start performing useful tasks?",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 27
},
{
"name": "Elon Musk",
"speech": "10 million. Yes. I think we're around 5 or 6 bots. I think -- there's a -- we were -- look, 10, I guess. Depends on what -- how many are working and what phase. But it's sort of -- yes, there's more every month. The things -- a lot of interesting things, a lot of interesting things about the Optimus bot. We found that there are actually no suppliers that can produce the actuators. There are no off-the-shelf actuators that work well for [indiscernible] robot at any price.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 28
},
{
"name": "Drew Baglino",
"speech": "Certainly not compelling.",
"session": "Answer",
"person_id": 393478,
"person_company": null,
"component_order": 29
},
{
"name": "Elon Musk",
"speech": "Yes, there's not a [indiscernible] robot that can do something at -- the things that human could do. So we've actually had to design our own actuators that integrate the motor or the power electronics, the controller, the sensors. And really, every one of them is custom designed. So -- and then, of course, we'll be using the same inference hardware as the car. So -- but we are -- in designing these actuators, we're designing them for volume production. So they're not just lighter, tighter and more capable than any other actuators where that exists in the world. But it's also actually manufacturable. So we should be able to make them in volume. \r\nThe first Optimus that is -- that we'll have all of the Tesla designed actuators, sort of production candidate actuators integrated and walking should be around November-ish. So -- and then we'll start ramping up after that. In terms of when we'll be able to do some useful things, like we'll first be trying this out in our own factories and just proving out its utility, but I think we'll be able to have it do something useful in our factories sometime next year. I would be -- yes, I'm pretty confident of that. So yes, it's going well. \r\nI should say another cool thing about Optimus is that there's -- just in the U.S. alone, there are 2 million amputees. And I was just talking to the Neuralink team. And by combining a Neuralink implant and a robotic arm or leg for someone that has had their arm or leg or arms and legs amputated, we believe we can give basically a cyber body that is incredibly capable. $6 million men in real life. [indiscernible] costs $6 million. $60,000 man. Seems that was impressive, but it will actually -- so that actually could be a really -- I think, would be incredible to potentially help people around the world and give them a robot arm like that is as good, maybe long term better than a [indiscernible] going.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 30
},
{
"name": "Martin Viecha",
"speech": "Thank you. The next question is, how has the order intake trended relatively to production levels during Q2? And how has it trended in the quarter-to-date period? Conceptually, how does Tesla decide when is it appropriate to reduce prices or at other sales incentives to increase demand?",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 31
},
{
"name": "Elon Musk",
"speech": "Yes. I guess demand has roughly tracked production. So -- which is what we aim for is we look at something that we have that really -- I think no other carmaker has is that we have real-time demand and real-time production, like so 7 days a week. I get an e-mail -- order generated e-mail, chose output from all factories and orders globally. So it's like a real-time finger on the pulse of earth basically. And we're just, of course, according to what the mood of the public is. \r\nBut buying a new car is a big decision for vast majority of people. So any time there's economic uncertainty, people generally pause on new car buying at least to see what happens. And then obviously, another challenge is the interest rate environment. As interest rates rise, the affordability of anything bought with debt decreases. So effectively increasing the price of the car. \r\nSo when interest rates rise dramatically, we actually have to reduce the price of the car because the interest payments increased the price of the car. So -- and this is -- at least up until recently, it was, I believe, the sharpest interest rate rise in history. So we had to do something about that. And I don't have a crystal ball for the global economy. I really appreciate it. If I could borrow that crystal ball.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 32
},
{
"name": "Unknown Executive",
"speech": "[indiscernible]",
"session": "Answer",
"person_id": 182536,
"person_company": null,
"component_order": 33
},
{
"name": "Elon Musk",
"speech": "Yes, exactly [indiscernible]. It should be not on Twitter. So I mean, one day, it seems like the world economy is falling apart. And the next day, everything is fine. I don't know what's going on. It'd be totally fine. I wish I did. So I mean that's why I say like I was on Twitter, I posted like just really advising because I care a lot about the small shareholders, especially ones that have stuck with us through thick and thin. I love you, guys. And so we can't control these macro shocks or the thematic depressive nature of the stock market. So that's why I recommend against margin loans in times that are turbulent. If times are not that turbulent, actually a module can be a smart move within reason. But we're in, I would call it, turbulent times. Like I have very high confidence in the long-term value of Tesla. Like I see it -- I really see a path to a 10x [indiscernible] -- call it a 5x increase in the value of the company, maybe a 10x. And where things go along the way, the trials and tribulations and the mood of the markets, one cannot predict. And so the old adage of buy and hold is right. For an investment advice, I see like identifying a company as products you love. See if they -- does it seem like they'll continue to make good products or great products? Buy that stock and hold it. That's it. You all win. \r\nThe reason companies exist is to make goods and services, ideally great goods and services. They don't exist for any other reason. They shouldn't. So that's why you should buy the stock of a company that makes -- has a great future pipeline. It's common sense, actually. And then generally, if you see -- if you provide your confidence about what that company's products or services are when the market panics, buy; and when the market is overly exuberant, you can sell. I'm not recommending yourself [indiscernible] but yes, buy low, sell high. \r\nWarren Buffett actually, I think has a saying -- I'm paraphrasing here, but a publicly traded company like is like imagine living in your house and some crazy manic-depressive guy comes and stands outside your house and yells property prices at you. So it's a different price every day. But the house is still the same house. So this is a tough market. Credit that to Warren Buffett.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 34
},
{
"name": "Martin Viecha",
"speech": "Thank you. Let's go to the next question. With the emphasis of price cuts to drive volume growth eating into automotive gross margin, can investors expect to see automotive gross margin stabilize or even rise due to efficiencies outpacing the cuts? And if so, when?",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 35
},
{
"name": "Elon Musk",
"speech": "Where's that crystal ball again? If I may, look, the short-term variances in gross margin and profitability really are minor relative to the long-term picture. Autonomy, we'll make all of these numbers look silly. I'd recommend looking at ARK Invest. I think their analysis is very good. It's the best, I mean, and generally, Fintwit or like the finance, Smart Finance on Twitter, follow their accounts. They're great. So that's, in my opinion, where you'll get the best info. So I strongly believe Tesla is a big long-term investment. And that's when things go up and down, in fact, the market panics, buy; if the market is a little too exuberant, sell at the time. But just generally, like I feel -- I'm confident we'll deliver over long term, but can't control short term. So -- and the autonomy is really where it's at. I mean, Zachary?",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 36
},
{
"name": "Zachary Kirkhorn",
"speech": "I fully agree with you. I mean I think the only thing in the short term that matters is what I said in my opening remarks, which is are we generating enough money to continue to invest. And the portfolio of products and technologies that the technical teams are investing in right now, this is intense. It's intense in terms of investment, it's intense in terms of potential.",
"session": "Answer",
"person_id": 385023,
"person_company": null,
"component_order": 37
},
{
"name": "Elon Musk",
"speech": "Frankly, I think it's ridiculous that we have positive free cash flow in a capital-intensive business, while investing massive amounts of money in new technology. That is super hard.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 38
},
{
"name": "Drew Baglino",
"speech": "And vertical integration. It's not even just like new products, but also...",
"session": "Answer",
"person_id": 393478,
"person_company": null,
"component_order": 39
},
{
"name": "Elon Musk",
"speech": "Yes. We actually make our ship. [indiscernible] others but. Question. Cool.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 40
},
{
"name": "Zachary Kirkhorn",
"speech": "And so at least from my perspective, what matters is continuing to generate the cash to invest. That means continuing to be hyper focused on near-term cost reduction. Is everything we do in near-term cost reduction provides capital to reinvest? Hyper focus on working capital management, which we've made quite a bit of progress there on the raw materials and [indiscernible] side of that. We've been very focused on accounts receivables as well to ensure that we can continue to reinvest the cash. This is what we're focused on. And so there's a set of this that we control. We have a pipeline of cost reductions. We are getting tailwinds in the commodity space right now, as Karn mentioned, that's helpful. \r\nVariability around average selling prices goes back to Elon's point. We don't control interest rates. We don't control macro consumer sentiment. But we have an obligation to be responsive to that to ensure that we're matching supply and demand and keeping things balanced. And so this is how we're managing the next handful of quarters. Soon enough, these quarters will be behind us. They won't be part of the present value of future cash flows of the business. And so we want to make sure we keep that view and make sure that the long term business is exactly the way that we want it to be.",
"session": "Answer",
"person_id": 385023,
"person_company": null,
"component_order": 41
},
{
"name": "Elon Musk",
"speech": "[indiscernible]",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 42
},
{
"name": "Martin Viecha",
"speech": "All right. Thank you very much. And now let's go to analyst questions. The first question comes from Dan Levy from Barclays.",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 43
},
{
"name": "Dan Levy",
"speech": "I wanted to start first with a question about your efforts in AI and Dojo. It's pretty clear it sounds like you're accelerating your focus. Can you maybe provide us with a sense of what the process is of refining a product? Is it more machines? And maybe you could give us a sense of when the payout starts to -- when you start to see the payout and what the resource outlay is, what should we expect on the OpEx front as a result of this?",
"session": "Question",
"person_id": 253177,
"person_company": null,
"component_order": 44
},
{
"name": "Elon Musk",
"speech": "Sorry. Are you saying how much are we going to spend on Dojo or?",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 45
},
{
"name": "Dan Levy",
"speech": "Yes.",
"session": "Question",
"person_id": 253177,
"person_company": null,
"component_order": 46
},
{
"name": "Elon Musk",
"speech": "R&D and Dojo?",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 47
},
{
"name": "Dan Levy",
"speech": "Yes.",
"session": "Question",
"person_id": 253177,
"person_company": null,
"component_order": 48
},
{
"name": "Elon Musk",
"speech": "Well, we're not going to be open loop on our Dojo expenditures. So -- but I mean, I think we will be spending something north of $1 billion over the next year on [indiscernible] through the next year, it's well over $1 billion in Dojo. And yes, so I mean we've got a truly staggering amount of video data to do training on. And this is another thing I like. In order to copy us, you also need to spend billions of dollars on training compute. I mean it's like -- and it's also hard to -- you need the data, and you need a training computer. It's like -- think, well, things needed to actually achieve this at scale toward generalized solution for autonomy. It's -- this is one of the highest problems ever. \r\nYou see a lot of AI companies doing LLMs and whatnot. I would say if they're so great, why can't they make a self-driving car? Because it's harder. That's why. So -- but I do think -- I think there's some great AI companies out there. But just fundamentally, the staggering amount of data we've got to process, it's got to be processed somehow. And custom silicon is the best way to do that. \r\nSo that's what Dojo is designed to do is optimize for video training. It's not optimized for LLMs. It's optimized for video training. With video training, you have a much higher ratio of compute-to-memory bandwidth. So whereas LLMs tends to be memory bandwidth choked. So that's it. I mean -- but like I said, we're also -- we have some -- we're using a lot of NVIDIA hardware. We'll continue to use -- we'll actually take NVIDIA hardware as fast as NVIDIA will deliver it to us. Tremendous respect for Jensen and NVIDIA. They've done an incredible job. \r\nAnd frankly, I don't know if they could deliver us enough GPUs, we might not need Dojo, but they can't. So they've got so many customers. They've been kind of to, nonetheless, prioritize some of our GPU orders. But yes, the sheer magnitude of video training -- because like I said, we're not trying to just get as good as human. We want to get to 10x better than human, maybe 100x better than human. \r\nRight now, I believe there's something on the order of 1 million automotive deaths per year. And then if you say permanent serious injuries, I think it's probably closer to 10 million per year. And -- so it matters if you're twice as good as human, 10x -- like 10x better than human would still mean 100,000 deaths and 1 million severe permanent injuries. So it's like, okay, we would rather be 100x better. So there's really -- it's a [ match of 9s, ] and we want to achieve as perfect safety as possible. And that's truly mind-boggling amounts of video and computer needed for that. So -- and then I do think there's other applications for Dojo, but we just desperately need it for video training.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 49
},
{
"name": "Zachary Kirkhorn",
"speech": "Just to add to what Elon mentioned. So the numbers that he mentioned are between R&D spend and capital spend. And this is moving quickly. And so we provide a 3-year outlook on our capital expense. We are considering these expenses in that outlook. And as that moves up and down, we'll continue to update our guidance in the Q.",
"session": "Answer",
"person_id": 385023,
"person_company": null,
"component_order": 50
},
{
"name": "Elon Musk",
"speech": "Yes. I want to say the fundamental rate limiter on the progress of full self-driving is training. That's -- if we had more training compute, we would get done faster. So that's it.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 51
},
{
"name": "Zachary Kirkhorn",
"speech": "And it's just difficult to predict how quickly we can execute on it.",
"session": "Answer",
"person_id": 385023,
"person_company": null,
"component_order": 52
},
{
"name": "Dan Levy",
"speech": "Great. Thank you. Just as a follow-up, I recognize there's incredible macro uncertainty right now, but you're sticking with your near term, your volume target of 50% CAGR. As we just think about sort of in the year ahead, Cybertruck is going to be some contribution. There's going to be some help from further EV penetration growth. But to what extent are you willing to sacrifice on pricing to keep that 50% volume CAGR intact? Or are you thinking differently about margins versus your prior commentary of willing to sacrifice on margins to get more share?",
"session": "Question",
"person_id": 253177,
"person_company": null,
"component_order": 53
},
{
"name": "Elon Musk",
"speech": "It started by getting more share. It's just that you can think of every car that we sell or produce that has full autonomy capability as actually something that in the future may be worth as much as 5x what it is today. Because average [indiscernible] vehicle is doing like maybe 10 hours of driving a week. If sort of -- if this says 1.5 hours a day on average, that's 10 hours a week-ish. If you've got on autonomous -- if the vehicle is able to operate autonomously and use either dedicated autonomous or partially autonomous like Airbnb, like maybe sometimes you allow your car to be used by others. Sometimes you want to use it exclusively just like Airbnb -- doing Airbnb with a room in your house. The value is just tremendous. So I think it's sort of, it would be -- I think it -- it does make sense to sacrifice margins in favor of making more vehicles because we think in the -- not just in the future, but they will have a dramatic valuation increase. I think the Tesla fleet value increase at the point in which we can upload full self-driving and is approved by regulators will be the single biggest step change in asset value maybe in history.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 54
},
{
"name": "Martin Viecha",
"speech": "Thank you. Let's go to the next analyst. The question comes from Emmanuel Rosner from Deutsche Bank.",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 55
},
{
"name": "Emmanuel Rosner",
"speech": "Two questions from me as well. First, following up on the autonomy. So before you start launching these dedicated robotaxi vehicles on existing vehicles, you're improving FSD incrementally. What is your latest targeted timing to essentially release a non-beta version or an eyes-off version that would trigger much higher take rates? \r\nAnd would Tesla benefit from lowering the price of FSD?",
"session": "Question",
"person_id": 376728,
"person_company": null,
"component_order": 56
},
{
"name": "Elon Musk",
"speech": "Well, obviously, as people have sort of made fun of me and perhaps quite fairly have made fun of me, my predictions about achieving full self-driving have been optimistic in the past. The reason I've been optimistic is what -- it tends to look like is the -- we'll make rapid progress with a new version of FSD, but then it will curve over logarithmically. So first, logarithmic curve looks like just sort of fairly straight upward line, diagonally up. And so if you extrapolate that, then you have a great thing. But then because it's actually logarithmic, it curves over, and then there have been a series of stacked logarithmic curves. \r\nNow I'm the boy who cried FSD, but I think we'll be better than human by the end of this year. That's not to say we're approved by regulators. And I'm saying that would be in the U.S. because we've got to focus on one market first. But I think we'll be better than human by the end of this year. I've been wrong in the past, I may be wrong this time. \r\nAnd the price of FSD -- so the way I think is the price of FSD is actually very low is not high. When you go back to what I say here, the value of the car increased dramatically if it is actually autonomous. [ $15,000 ] is actually a low price, not a high price. And we will offer -- and we -- I think we do sort of offer FSD as a sort of monthly subscription, although most people don't know that. So I'd recommend like maybe trying it out as a monthly subscription so you don't have to go with the [ $13,000 ] thing. But I think yes, yes -- obviously, if the car is worth several times, it's original price, $15,000 is actually a low price for FSD.",
"session": "Answer",
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{
"name": "Martin Viecha",
"speech": "And the next question comes from William Stein from Truist.",
"session": "Answer",
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{
"name": "William Stein",
"speech": "Great. I'd like to ask about -- to stick on this AI topic. We've read with great interest the developments in Dojo today, and you've spoken about FSD, but you've also -- Elon, you started this x.ai company. And for investors that think that there might be quite a bit of value in the AI features and products of Tesla, it might be concerning to see you pursuing another endeavor where AI is the focus. So can you talk about how x.ai might overlap, might perhaps compete with Tesla or in other ways, perhaps it enhances the value of what Tesla does.",
"session": "Question",
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{
"name": "Elon Musk",
"speech": "Yes, I think we'll actually enhance the value of Tesla. There were just some of the world's best AI engineers and scientists that were willing to join a startup, but they were not willing to join a large sort of relatively established company like Tesla. So it was like that's actually how it got started. I was interviewing a few people and they're like, no, we want to do a startup. I was like, and that's well, I can't convince them to join Tesla. So -- so it's like, okay, well, better to start up that [indiscernible] then go work somewhere else. That's kind of the genesis of xAI. \r\nAnd xAI is focused on sort of AGI. Yes. So it's -- like I said, I think there will be some value that xAI brings to Tesla. Also some of the best -- for the very best people in the world, they really just want to work on interesting problem. So if you take, say, a material science group, really what convinced the Charlie Colman to leave Apple, where he was very happy and well compensated, and both at -- in both -- where we think is the best material science group in the world, was that he got to work at both Tesla and SpaceX. He wasn't willing to leave Apple if it was just Tesla, but he's willing to do it if it is Tesla and SpaceX. So sometimes you get the best talent in the world if that's the kind of thing you need to do. And that actually has been very beneficial to Tesla.",
"session": "Answer",
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{
"name": "William Stein",
"speech": "If I could squeeze one more mundane question in. I wonder if you think you can hit the 1.8 million unit number with current pricing? Or do you anticipate needing to continue to lower prices because it seems like they've stabilized. The trends have stabilized in the last maybe 1.5 months. Should we expect sort of continued decreases or more stabilization for the rest of the year?",
"session": "Question",
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{
"name": "Elon Musk",
"speech": "Sure. We have sort of -- we started the referral program, which I think will be quite effective. As Zach was saying earlier, we don't control the macroeconomic conditions. So if interest rates continue to rise, that reduces the affordability of cars. And for a lot of people, they're really [indiscernible] just really breaking even every month. In fact, if you look at the rise in credit card debt, they are, in fact, not breaking even every month. Credit card debt is looking scary. So we just don't control the market conditions. If market condition is stable, I think prices will be stable. If they're not stable, then we would have lower prices. Yes.",
"session": "Answer",
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{
"name": "Martin Viecha",
"speech": "Thank you. Let's go to Colin Rusch from Oppenheimer.",
"session": "Answer",
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{
"name": "Colin Rusch",
"speech": "As you're building out Dojo and implementing what truly is going to be a highly complex set of software, can you speak to the maturity of the operating system and how much outsourced software you're expecting to use in that system?",
"session": "Question",
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{
"name": "Elon Musk",
"speech": "This is a custom software stack. So -- but it is designed such that you can run at a high level, PyTorch and JAX. So -- but then we have to customize it to actually run on a custom silicon. So the software stack is a combination of open source software and then Tesla software all the way to the bare silicon, which is the case for the inference computer in the car.",
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{
"name": "Colin Rusch",
"speech": "Okay. That's super helpful. And then can you speak to how you're managing some of the geopolitical risks relative to your capacity expansion? Obviously, as you guys continue to grow at this rate, you're going to be putting some folks out of business. And there's going to be some impacts around regional economy. So I just want to understand how you're thinking about that in terms of some of your CapEx plans and how you're managing some of those relationships with different countries and regions.",
"session": "Question",
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{
"name": "Elon Musk",
"speech": "Well, this is a period of unusual geopolitical risk. So I think we're -- the best we can do is have factories in many parts of the world such that if things get difficult in one part of the world, we can still keep things going in the rest of the world.",
"session": "Answer",
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{
"name": "Martin Viecha",
"speech": "Thank you. The next question comes from Mark Delaney from Goldman Sachs.",
"session": "Answer",
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{
"name": "Mark Delaney",
"speech": "Tesla has been making progress reducing costs and did so again last quarter. Can you give an update on when you think automotive COGS per vehicle could be under the historical $36,000 per vehicle level? And what are the key puts and takes to get there?",
"session": "Question",
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"name": "Zachary Kirkhorn",
"speech": "This is -- I think I was asked this in the past. This is very difficult to forecast. There's a series of costs that we manage. The series of cost in which we don't control. And so particularly on the commodity side, where labor cost go, et cetera, it's just hard to say.",
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{
"name": "Elon Musk",
"speech": "Yes. And we saw very inflationary -- like strong inflationary pressures for a while last year. And now -- which obviously makes it very difficult to reduce COGS. And now we're seeing what seems to be deflationary pressures, certainly deflationary -- deflation isn't pressure. But we're seeing commodity prices dropping as was mentioned, as Karn mentioned a moment ago. I mean, I don't know, what do you think? I mean, basically, the trends seem to be deflationary at the commodity level.",
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"name": "Karn Budhiraj",
"speech": "Definitely. There's that. And then there's also the unit economics improve as volumes grow. That's the other thing we're seeing. As we're becoming a bigger and better part of a lot of suppliers, the economies of scale come into play. There's equipment depreciation that comes into play equipment that was commissioned 5 to 7 years ago. That used to be a part of the piece price. That's completely amortized. So we'll see situation where piece price comes down because that equipment contribution has gone away. \r\nAnd then just we continue to have this mentality of continuous improvement in terms of labor, reducing labor, improving automation, and just continue to get better at what we do. So we have seen -- I think every quarter, we have seen an improvement. Of course, the commodities spiked up and down. Just in general, the trend is towards being more efficient.",
"session": "Answer",
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"name": "Zachary Kirkhorn",
"speech": "Yes, I'm totally agreeing.",
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{
"name": "Elon Musk",
"speech": "Yes, lithium prices weren't absolutely insane there for a while.",
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{
"name": "Zachary Kirkhorn",
"speech": "Yes. And they're recovering now.",
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{
"name": "Karn Budhiraj",
"speech": "Cobalt the way it used to be.",
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{
"name": "Zachary Kirkhorn",
"speech": "Yes. And we're still early in the ramp -- well, not early in the ramp, but early in the cost down curve of Austin and Berlin. And so it takes time to work the cost out it. First, it's a focus on ramp, ramp it brings cost down...",
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{
"name": "Elon Musk",
"speech": "And quality costs.",
"session": "Answer",
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{
"name": "Zachary Kirkhorn",
"speech": "Yes. And then once that stabilizes, we can divert bandwidth to cost reduction. And so Austin and Berlin saw quite a decent amount of cost reduction on a fundamental basis from Q1 to Q2. We'll continue to do that work, that will be helpful. And so we're just going to keep chipping away at it.",
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{
"name": "Unknown Executive",
"speech": "Packaging is a big element to that.",
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{
"name": "Elon Musk",
"speech": "Yes. Just takes [indiscernible].",
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{
"name": "Zachary Kirkhorn",
"speech": "Logistics is normalizing, which is great.",
"session": "Answer",
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{
"name": "Unknown Executive",
"speech": "[indiscernible] utilization, something that the team has been very focused on. So every bit of it.",
"session": "Answer",
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{
"name": "Zachary Kirkhorn",
"speech": "Yes, and it's hard...",
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{
"name": "Elon Musk",
"speech": "Logistics is underappreciated. Yes, so I was saying guys like valves and with tactics as one with logistics.",
"session": "Answer",
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{
"name": "Unknown Executive",
"speech": "Yes. And we've made tremendous improvements in cost in all fronts on expect costs. We have done pre-pandemic expect cost levels now, and our goal is to go further down.",
"session": "Answer",
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{
"name": "Zachary Kirkhorn",
"speech": "Yes. So when we look at our progress from Q1 to Q2 on cost, the way that we look at internally normalized for the impacts of mix shift with Austin and Berlin being a higher percentage of our mix, normalized for S and X being a higher percentage for mix in Q2 versus Q1. The sequential cost reduction, it might be the largest we've had in a while. So I think it's great work on behalf of the Tesla team, and we just got to keep it up.",
"session": "Answer",
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{
"name": "Elon Musk",
"speech": "Yes, it's a game of pennies. So Game of Thrones with pennies.",
"session": "Answer",
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{
"name": "Martin Viecha",
"speech": "Mark, do you have a follow-up question? I think you're muted.",
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{
"name": "Mark Delaney",
"speech": "Yes. Maybe you could put a finer point on the downtime impact that you spoke about in your prepared comments in terms of production impact and then also to what extent there's a margin impact from those factory upgrades that you're planning this quarter?",
"session": "Question",
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{
"name": "Zachary Kirkhorn",
"speech": "Yes, the downtime -- we don't know exactly the number of cars impacted because kind of the way that we go into downtime Windows for upgrades is we set aside a period of time, but then the team is challenged to go as quickly as possible so that we can get the factories up and running again and minimize that. It's not profound reduction. Hopefully, it's small.",
"session": "Answer",
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{
"name": "Elon Musk",
"speech": "I think we're getting too much into the weeds here. I mean like we're asking for a level of precision that is not possible to answer. So let's move on.",
"session": "Answer",
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{
"name": "Martin Viecha",
"speech": "Yes. I think this is unfortunately all the time we have for today. So we'll speak to you all in the next 3 months. Thank you very much.",
"session": "Answer",
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{
"name": "Elon Musk",
"speech": "Thank you.",
"session": "Answer",
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],
"title": "Tesla, Inc., Q2 2023 Earnings Call, Jul 19, 2023",
"quarter": 2,
"year": 2023
}
},
{
"transcript_title": "Tesla, Inc. - Q1 2023",
"transcript_name": "Tesla, Inc., Q1 2023 Earnings Call, Apr 19, 2023",
"ticker": "NASDAQ:TSLA",
"transcript_url": "https://wkarticles.blob.core.windows.net/finnhub/snp_transcript_2782075",
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"transcript": [
{
"name": "Martin Viecha",
"speech": "Good afternoon, everyone, and welcome to Tesla's First Quarter 2023 Q&A Webcast. My name is Martin Viecha, VP of Investor Relations, and I'm joined today by Elon Musk, Zachary Kirkhorn and a number of other executives. Our Q1 results were announced at about 3:00 p.m. Central Time in the update deck we published at the same link as this webcast. \r\nDuring this call, we will discuss our business outlook and make forward-looking statements. These comments are based on our predictions and expectations as of today. Actual events or results could differ materially due to a number of risks and uncertainties, including those mentioned in our most recent filings with the SEC. [Operator Instructions] But before we jump into Q&A, Elon has some opening remarks. Elon?",
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"name": "Elon Musk",
"speech": "Thank you, Martin. So just a Q1 recap. Model Y became the best-selling vehicle of any kind in Europe and the best-selling non-pickup vehicle in the United States. And this is in spite of a lot of challenges in production and delivery. So it's a huge credit to the Tesla team for achieving these great results. The -- it is worth pointing out that the current macro environment remains uncertain. I don't think I'm telling anyone anything, I think people already know, especially with large purchases such as cars. And while we reduced prices considerably in early Q1, it's worth noting that our operating margin remains among the best in the industry. We've taken a view that pushing for higher volumes and a larger fleet is the right choice here versus a lower volume and higher margin. However, we expect our vehicles, over time, will be able to generate significant profit through autonomy. So we do believe we're like laying the groundwork here and that it's better to ship a large number of cars at a lower margin, and subsequently, harvest that margin in the future as we perfect autonomy. This is an extremely important point. \r\nLet's see. Regarding the Cybertruck, we continue to build Alpha versions of the Cybertruck on our pilot line for testing purposes. It's a great product, and we're completing the installation of the volume production line at Giga Texas, and we're anticipating having a delivery event, a great delivery event probably in Q3. As with all new products, it will follow an S curve, so production starts out slow and then accelerates. So the Cybertruck is no different. So it's -- there's [ press ] amount of demand for the product, obviously. And it is my view, a fantastic product, a hall of [ famer ]. But as with all new products, it takes time to get the manufacturing line going. And this is really a very radical product. It's not made in the way that other cars are made. \r\nSo with regard to Megapack, we're making great progress. Our energy storage deployment reached nearly 4 gigawatt hours in Q1. This is, by far, the strongest quarter ever. And this growth was achieved thanks to the ongoing ramp at our Mega factory in Lathrop, California. There's still some way to go to reach the [ full ] rate of 40 gigawatt hours per year. And then we additionally announced the start of a new Mega factory in Shanghai. So we're -- as we've expected, the stationary storage growth actually will significantly exceed the vehicle growth. \r\nRegarding Autopilot and Full Self-Driving. We've now crossed over 150 million miles driven by Full Self-Driving beta, and this number is growing exponentially. We're -- I mean, this is a data advantage that really no one else has. Those who understand AI will understand the importance of data -- of training data and how fundamental that is to achieving an incredible outcome. So yes, so we're also very focused on improving our neural net training capabilities as is one of the main limiting factors of achieving full autonomy. So we're continuing to simultaneously make significant purchases of NVIDIA GPUs and also putting a lot of effort into Dojo, which we believe has the potential for an order of magnitude improvement in the cost of training. And it also -- Dojo also has the potential to become a sellable service that we would offer to other companies in the same way that Amazon Web Services offers web services, even though it started out as a bookstore. So I really think that, yes, the Dojo potential is very significant. \r\nIn conclusion, we're taking a view that we want to keep making and selling as many cars as we can. Despite this being an uncertain macro environment, this is a good time to increase our lead further, and we'll continue to invest in growth as fast as possible. Once again, I'd like to give a huge thanks to all Tesla employees worldwide who are doing an incredible job again. And yes, super appreciated.",
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"name": "Martin Viecha",
"speech": "Thank you very much. And Zach has some remarks as well.",
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{
"name": "Zachary Kirkhorn",
"speech": "Thanks, Martin. I want to start by congratulating the Tesla team for record vehicle production and deliveries. And I also want to congratulate our energy storage team for record volumes as well. \r\nThere's 3 main points I want to make. First, automotive gross margin and operating margin reduced sequentially. But as Elon mentioned, these remain at healthy levels. In particular, automotive gross margin was impacted by a few factors since our discussion on the last earnings call, which include additional action taken in the second half of the quarter to improve vehicle pricing and onetime items, most notably warranty adjustments on older S and X vehicles as well as increased deferred revenue for certain Autopilot features as we transition technologies. \r\nProgress on vehicle cost reduction continued in Q1 with meaningful improvements on logistics and the beginnings of some commodity cost reductions starting to be realized. Per unit cost for Austin and Berlin improved as well, driven by record volumes. However, these factories still provide a margin headwind and will likely continue to do so until after we reach and stabilize at our intended volumes. Note that Q1 was our third quarter in our multi-quarter plan to move to a more regionally balanced mix of build and deliveries. As I've mentioned previously, this results in lower deliveries and production within a quarter due to a higher volume of cars in transit at the end of the quarter and has an associated impact on quarter-ending free cash flows. This was particularly prevalent in Q1 for S and X as we begin exporting cars for international deliveries. \r\nSecond, our storage business is starting to take shape, and this is exciting to see after many years of investment and focus. This business is growing as a percentage of the businesses of the company's revenue and reached its highest level yet in Q1, driven by an increasing rate of deliveries for our Megapack products. We are also making progress on storage profitability, generating our highest gross profit yet in the quarter. \r\nThird, I want to reiterate the philosophy by which we're operating the business this year. Our approach is to grow volumes as quickly as possible in both our vehicle and energy businesses. We plan to continue to invest heavily into our future plans, which include the Cybertruck next-generation platform, in-house cell production, energy storage business and our autonomy and AI-enabled products. And we plan to do this while keeping the business financially healthy and industry-leading. To accomplish this, we need to remain focused on cost efficiency and working capital and in particular, unwinding the strategic inventory buildup left over from the pandemic. \r\nI want to conclude by thanking the Tesla team again as well as thanking our suppliers and our customers.",
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{
"name": "Martin Viecha",
"speech": "Thank you very much. And let's go to investor questions on say.com. The first one is what is the process to make auto pricing adjustments? What variables do you consider? How frequently do you review pricing?",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 4
},
{
"name": "Zachary Kirkhorn",
"speech": "Do you want to take that, Elon, or do you want me to take that?",
"session": "Answer",
"person_id": 385023,
"person_company": null,
"component_order": 5
},
{
"name": "Elon Musk",
"speech": "My apologies. Sorry, I was on mute. Yes, I think this is not something that we can really talk about. It's just -- we do our best to evaluate the production output, macroeconomic conditions, and we make a decision. But it's -- unless there's something you'd like to add, Zach.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 6
},
{
"name": "Zachary Kirkhorn",
"speech": "I think that's right. I mean, as a team, we review where we stand globally on a weekly basis and certainly, I can't get into the details of the reasons why certain decisions are made. But it is something that's very actively managed by a subset of the leadership team.",
"session": "Answer",
"person_id": 385023,
"person_company": null,
"component_order": 7
},
{
"name": "Martin Viecha",
"speech": "Thank you. The second question is, do you still believe Tesla Energy will be bigger than auto? And when will you provide more formal guidance on Megapack and overall Tesla Energy?",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 8
},
{
"name": "Elon Musk",
"speech": "Yes, I should just clarify like bigger than auto from the standpoint of like total gigawatt hours deployed. So it's possible automotive revenue may be higher, but gigawatt hours I think will be probably higher with stationary storage. If you just look at the -- what's needed to transition the world to a sustainable energy economy, there is more stationary energy storage needed than there is mobile energy storage. So -- and we are seeing growth of our stationary storage well in excess of automotive. So that is in line with expectations.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 9
},
{
"name": "Zachary Kirkhorn",
"speech": "Yes. And on the guidance part of the question, and maybe, Martin, we can combine this with the next question, which is on guidance for margins, just have a single comment there. I think we are -- we will get to the point where we, as a company, provide guidance on the storage business. I say storage is a combination of both the Megapack business and the -- business. Relative to total revenues of the company, it's still fairly small. And the business has a lot of volatility currently, both in terms of volumes as well as financials just given the small volumes and kind of diversification of the customer pool there. But as this business grows and smooths out, I don't think we're that far away from it. I think including these volumes on our day 2 production and deliveries release is something that we'll start doing and then we can talk more formally as a business about our expectations over the coming year. I think it will be a few more quarters before we get there.",
"session": "Answer",
"person_id": 385023,
"person_company": null,
"component_order": 10
},
{
"name": "Martin Viecha",
"speech": "Thank you. The next question, as you said, was already answered, so let's go to the battery question.",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 11
},
{
"name": "Zachary Kirkhorn",
"speech": "Sorry. Just one other thing I wanted to mention on margin. While we're not providing specific guidance there, I mean, just to set expectations of where we think this business will go in terms of margins, probably generally in the ballpark of what we've seen historically on the vehicle business. We generally look to mid-20% gross margins for any program that we launch. And so we're not there yet on this business, but that's what we're working towards.",
"session": "Answer",
"person_id": 385023,
"person_company": null,
"component_order": 12
},
{
"name": "Elon Musk",
"speech": "We're hopeful to get there later this year, but that's not a promise. That's an aspiration.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 13
},
{
"name": "Martin Viecha",
"speech": "Thank you. The next question is, how well are 4680 cells meeting the expectations described on the Battery Day? How long will it be until the cells meet those goals? Drew?",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 14
},
{
"name": "Drew Baglino",
"speech": "Yes. So on Battery Day, we established a cost-down road map through 2026 across 5 areas of effort. There was the cell design we discussed, [ anode and ] cathode materials, the structural pack concept and the cell factory itself, and we've been making progress across all of these aspects since then. For the cell factory, the Texas 4680 factory are partway through building and commissioning and selling and operating will be 70% lower CapEx per gigawatt hour than typical cell factories when fully ramped, in line with what we described on Battery Day. And we're continuing to further pursue densification and investment reduction opportunities in future factory build-outs like in Nevada. \r\nOn the cell design, we're in production with not only the first generation tablet cell we unveiled in Battery Day, but a second more manufactural version in Texas today. On the cathode materials side, we have a number of activities underway per the Battery Day road map. For lithium, our Corpus Christi Lithium refinery breaks ground this May. Our goal is to start commissioning portions of the facility before the end of the year. The refinery uses the sulfate-free spodumene refining process with reduced process costs, no acid or caustic reagents, lower embodied energy. It actually produces a beneficial byproduct that can be repurposed in construction materials. We discussed all of these concepts on Battery Day. Same with cathode precursor, we've successfully demonstrated lower process cost, 0 waste water precursor process that we described on Battery Day at both lab and pilot scale and are in the detailed design phase for incorporating this technology into the front end of our Austin cathode facility. \r\nOn cathode production, we are 50% equipment and 75% utilities installed at our new cathode building in Austin with our goal to begin dry and wet commissioning this quarter and next quarter with a target to produce first material before the end of the year. Structural pack, we saw big improvements with pack manufacturing with the 4680 cell and the structural pack concept, 50% lower CapEx and 66% smaller factory for the same output in gigawatt hours per year. We do believe structural as a concept is a good one. It's simpler. We'll continue to structurally load the cells and use the pack as the floor of the vehicle while iterating the design to closer to B-level execution of this A-level architecture in future programs. \r\nAnd zooming out for the 4680 team, Q1 was all about cost and quality. We made significant improvements in both areas. Texas production increased 50% quarter-over-quarter through yields increased 12% and [ CATO ] peak rate increased by 20% and [ 3 ] yields improved by 20%. Altogether, the team accomplished a 25% reduction in COGS over the quarter, and we are on track to achieve steady-state cost targets over the next 12 months. And going forward for the rest of the year, the priority, one, is yielding cost for the 4680 program as we steadily ramp production ahead of Cybertruck next year.",
"session": "Answer",
"person_id": 393478,
"person_company": null,
"component_order": 15
},
{
"name": "Martin Viecha",
"speech": "Thank you very much. The next question is, what do you anticipate 2023 automotive gross margins ex credits will be at the company's current pricing levels?",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 16
},
{
"name": "Zachary Kirkhorn",
"speech": "Yes, I can start off on this one. This is a difficult environment to make a projection like this. There's a lot of macro uncertainty. There's also headwinds and tailwinds. And this is basically a question I think that's asking about viewpoint and where costs will go. And within costs, there's a set of costs in which we do control the set of costs in which we're kind of subject to what's going on in the macro world. Within the bucket of things we control, the most of the cost down that we're working on is around ramping our Austin factory, stabilizing that and then doing the cost optimization work once we get to our intended volumes there. And a part of the cost journey in the Austin factory is, as Drew mentioned, the 4680 cells, which is an input into our Austin COGS. And so as the 4680 program improves over the course of the year on cost, as Drew mentioned, and then the noncell portion of the factory improves, then we see a pretty good trajectory in the Austin facility. \r\nA similar story exists in the Berlin factory. It does not have 4680 as an input, but for that factory, the journey to complete localization is still ongoing. And so over the course of this year, as volume increases, more localization occurs, we do see a good path to cost reduction in the Berlin factory as well. In existing factories, do we talk about this on every call, so I don't need to rehash it, but the expectation is that every existing factory improves all of their key metrics, and we continue to see the progress there. \r\nThere's also a handful of other costs in which we have influence, but the philosophy here is that we're aggressively going across every cost bucket that we can. Within the world that we don't control, the 2 major costs there being logistics, which fortunately is moving in our favor, and I think our supply chain team has done a great job both on logistics optimization and taking advantage of reduced spot rates where they can. So thank you to our supply chain team. \r\nAnd then there's the commodities world, which has been a huge page point in our cost structure over the last, say, 2 years or so, and we're still kind of at the maximum of pain for commodities in our cost structure. It kind of maximize -- max down in the second half of last year. We did start to see, in Q1, a little bit of improvement. We think there'll be a little bit more improvement in Q2, but...",
"session": "Answer",
"person_id": 385023,
"person_company": null,
"component_order": 17
},
{
"name": "Elon Musk",
"speech": "The [ team ] has dropped a lot. It's worth mentioning that the price of lithium has dropped significantly.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 18
},
{
"name": "Zachary Kirkhorn",
"speech": "Yes. And that's the piece that we expect to see more impact on in Q2. And generally, as a company, we do expect commodity prices to come down and have a more meaningful impact in the second half of the year. So this is our approach. How that nets out, I mean, just a lot of risk, and we'll have to see how the year progresses.",
"session": "Answer",
"person_id": 385023,
"person_company": null,
"component_order": 19
},
{
"name": "Martin Viecha",
"speech": "Thank you. The next question is, how has global order intake tracked since the most recent round of price cuts?",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 20
},
{
"name": "Elon Musk",
"speech": "I think the overall thing we can say is that orders are in excess of production.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 21
},
{
"name": "Martin Viecha",
"speech": "Thank you. And maybe the last question from investors, can you give updated specs and pricing for Cybertruck and any new features that will make it to production?",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 22
},
{
"name": "Elon Musk",
"speech": "Well, I think we'll save that for the Cybertruck handover, which will hopefully be around the end of Q3 this year. And one thing I am confident of saying is that it's an incredible product, it's a hall of famer, I think. And a product like this only comes once in a long while. So it will not be disappointed at all. It's amazing.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 23
},
{
"name": "Martin Viecha",
"speech": "Great. Thank you very much. And let's go to analyst questions. We'll start with Alex Potter from Piper Sandler.",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 24
},
{
"name": "Alex Potter",
"speech": "Can you hear me? .",
"session": "Question",
"person_id": 140104,
"person_company": null,
"component_order": 25
},
{
"name": "Martin Viecha",
"speech": "Yes.",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 26
},
{
"name": "Elon Musk",
"speech": "Yes.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 27
},
{
"name": "Alex Potter",
"speech": "Okay. Perfect. So first question was on Lathrop. Obviously, that's -- it's great to see the growth there. Just wondering when you think that facility might be closer to full utilization? Are you just sort of deliberately working your way up the S curve there? Demand, obviously, isn't the limitation. So what are what are the steps, I guess, to unlocking full utilization there?",
"session": "Question",
"person_id": 140104,
"person_company": null,
"component_order": 28
},
{
"name": "Drew Baglino",
"speech": "Sure. There are some plastic factory aspects of what's going on in Lathrop. We actually had 2 phases of the CapEx there. We [ placed ] some of the general assembly parts of the facility. But in addition, we also have ramps with our suppliers that we are following, so both on the sell side and on the power electronics side. And we will see that unlock in the latter half of this year with inputs. So the overall facility was phased with the second phase of CapEx coming online towards the end of this year.",
"session": "Answer",
"person_id": 393478,
"person_company": null,
"component_order": 29
},
{
"name": "Alex Potter",
"speech": "Okay. Great. And then I guess my second question is on your ability to serve other markets out of Shanghai. Obviously, the facility in Berlin should be opening up your ability to, I guess, allocate more vehicles to Southeast Asia, Australia, other areas. I'm just wondering what other regions do you think you're maybe not yet serving effectively? What are your time lines for addressing some of those gaps in your regional exposure?",
"session": "Question",
"person_id": 140104,
"person_company": null,
"component_order": 30
},
{
"name": "Elon Musk",
"speech": "Yes. That's a good question because there are still many parts of the world that we do not yet serve with respect to vehicles especially. So we do expect to open up new markets around the world. And while those markets are not necessarily individually gigantic, they do add up to add a whole bunch of markets. They do collectively sum up to something significant. So it's high time that Tesla operates cars to the rest of the world, and that is something that we intend to do.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 31
},
{
"name": "Martin Viecha",
"speech": "Okay. Thank you very much. Let's go to the next analyst, George from Canaccord.",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 32
},
{
"name": "George Gianarikas",
"speech": "I was wondering, first, if you could discuss your FSD take rates and whether you've seen any significant positive or negative change there? And also, given that you've reduced the prices for your vehicles, do you think you need to do that for FSD as well?",
"session": "Question",
"person_id": 547012,
"person_company": null,
"component_order": 33
},
{
"name": "Elon Musk",
"speech": "Well, I can kind of answer the details on the FSD take rate, but the -- it's a tricky pricing question because the value of a car that is autonomous is enormous. So in a way, the price right now is an option value on an autonomous vehicle. And that value is -- will ultimately be very significant. And it's really -- yes. I mean, for those that are using the FSD beta, I think you can see the improvements are really quite dramatic. There'll be a little bit of 2 steps forward, 1 step back between releases for those trying the beta. But the trend is very clearly towards full self-driving, towards full autonomy. And I hesitate to say this, but I think we'll do it this year. So that's what it looks like. Yes.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 34
},
{
"name": "George Gianarikas",
"speech": "Maybe on the dramatic change we've seen in EV-related commodity prices. Do you think it's a reflection of any recent overcapacity in mining and refining? Or is that sort of a coincident indicator on global EV demand? And how do you expect those prices to kind of track over the next several quarters?",
"session": "Question",
"person_id": 547012,
"person_company": null,
"component_order": 35
},
{
"name": "Elon Musk",
"speech": "Man, I wish I had a crystal ball to answer your question. I don't know if we can provide a question that would -- with -- that would have any value really. I think we're in uncertain times. And if somebody got a crystal ball they can lend me, I'd really like to borrow it. But these are uncertain times. My guess is this it's economic stormy weather for about a year or so. And then if we hold roughly 12 months and then -- but this is my guess. It's just pure speculation. Stormy weather for about 12 months. And then provided there are no major geopolitical wildcards that show up, that things start getting sunny around spring next year.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 36
},
{
"name": "Drew Baglino",
"speech": "The only thing I would say on the -- like EV materials markets. They're not all super liquid and some of them, for example, like less than -- like single-digit percentage of the market has actually traded on the spot market. And not only are they not super liquid, there's not -- like storage isn't particularly fast for all of materials. So like small mismatches in supply and demand drive, like large price wins, not really real price wins, but just like temporarily large price swings. So it's hard to read into those price wings. I don't know, Karn, if you want to add anything.",
"session": "Answer",
"person_id": 393478,
"person_company": null,
"component_order": 37
},
{
"name": "Karn Budhiraj",
"speech": "Yes. Well, this is Karn, by the way. We are seeing, as Elon mentioned, quite a bit of softening in the lithium carbonate market. This was -- 6 months ago, we were trading at like $85,000 a ton, and today's spot price is about 26%. So there's been a dramatic decrease in that. Of course, we were able to take advantage of low lithium pricing earlier on with fixed price contracts. And we find that this is going to be another opportunity -- opportune moment to basically extend that into the later half of the decade. But we -- at the quantities we're procuring, we're not as impacted by the spot market because we have those contracts in place, and we're just going to be going and doing more of that. The other thing that's happening is because of the price spike, a lot of the companies that are in this business are becoming more ambitious about finding more upstream resources and exploring locations in Africa as well as South America. So that's also helping the macro situation with pricing.",
"session": "Answer",
"person_id": 568567,
"person_company": null,
"component_order": 38
},
{
"name": "Elon Musk",
"speech": "Yes. But just on the lithium front, to emphasize, the choke point is more -- much more on refining capacity than it is on mining. The theme is actually -- is very common throughout the world, including in the U.S. and really never -- it's just a very common element on earth, it's lithium. So it's much more a question of where is the refining capacity and can the refining capacity keep up? That's really what matters more than where is the lithium ore. It's everywhere basically. \r\nI think that same question also extends to refining of the cathode and to some degree, refining of the anode. And this is why we, at Tesla, we're building our lithium refinery capability at Corpus Christi and our cathode refinery outside Austin. \r\nIt's worth noting, I hope other companies do the same thing. We will have, by far, the most lithium refining capability and the most cathode refining capability in North America, I think, probably more than everyone else combined by a lot. So can other people please do those work? That would be great. We're begging you. We don't want to do it. Can someone please? Like instead of making a picture-sharing app, please, we're trying, lithium, mining and refining, heavy industry, come on.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 39
},
{
"name": "Zachary Kirkhorn",
"speech": "It's fun. It's actually fun.",
"session": "Answer",
"person_id": 385023,
"person_company": null,
"component_order": 40
},
{
"name": "Elon Musk",
"speech": "Yes, yes. Exactly. For real.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 41
},
{
"name": "Zachary Kirkhorn",
"speech": "Tesla -- we're here, ready to buy.",
"session": "Answer",
"person_id": 385023,
"person_company": null,
"component_order": 42
},
{
"name": "Elon Musk",
"speech": "It's [indiscernible] Tesla is not famous because we want to do it. We have a lot of fish to fry, obviously, but we're doing it because others aren't doing it, and we wish others would do it.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 43
},
{
"name": "Martin Viecha",
"speech": "Awesome. Thank you very much. Let's go to Emmanuel Rosner from Deutsche Bank.",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 44
},
{
"name": "Emmanuel Rosner",
"speech": "Can you hear me?",
"session": "Question",
"person_id": 376728,
"person_company": null,
"component_order": 45
},
{
"name": "Martin Viecha",
"speech": "Yes, we can. Yes.",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 46
},
{
"name": "Emmanuel Rosner",
"speech": "Maybe a first question for Elon, on your pricing strategy. So if I understand your message, you're saying Tesla feels it's worth maximizing the volume, increasing the size of the fleet as fast as you can because you'll be able to monetize this over the life cycle of the vehicle. Could you be a little bit more specific around ways you would be able to monetize sort of like this existing fleet in the future. Obviously, I think autonomous seems to be a big piece of it, but my understanding was that robotaxi would probably be for the next-generation vehicle, not the existing ones. So I guess in which ways would you monetize it?",
"session": "Question",
"person_id": 376728,
"person_company": null,
"component_order": 47
},
{
"name": "Elon Musk",
"speech": "Sorry, the robotaxi terminology can be a bit confusing because that's sort of like a generic term for our next-generation vehicle. And we obviously are working on next-generation vehicle. That's going to be very compelling. This is just not the time to talk about it in details product. So we internally call it robotaxi. But really, all of the vehicles that have hardware 3, which is the vast majority of our fleet, we believe will achieve full autonomy. So there will be a like a Model 3 or Model Y would be a robotaxi, a robotic taxi. So yes, that's -- to the best of my knowledge that we believe the current hardware can achieve full autonomy.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 48
},
{
"name": "Emmanuel Rosner",
"speech": "Understood. And then maybe a question for Zach back on the automotive gross margins. So I think, I guess, a few months ago, even after major price cuts, you felt pretty strongly that 20% automotive gross margin was still probably a reasonable floor. Obviously, the macro has gone worse and additional price cuts have happened. Is there anything else that has changed in terms of the outlook? Is it just the macro deteriorating? Is it the competitive landscape? Anything else that's sort of like makes you think differently around the full year? And is there a way, therefore, to frame a floor?",
"session": "Question",
"person_id": 376728,
"person_company": null,
"component_order": 49
},
{
"name": "Zachary Kirkhorn",
"speech": "Yes. About half of the miss against that previous conversation last quarter is attributed to adjustments we made in pricing in the second half of the quarter. I mean, I guess you could argue that, that lowers the floor in a sense. We've also made pricing adjustments so far this quarter. So that brings it down further. About the other half of the miss in Q1 was attributed to things that are nonrecurring. So I mentioned these in my opening remarks. It's a warranty adjustment for cars that were previously produced but not part of the pedigree of cars we're building now and some autopilot-related deferrals as we make some technology changes here that this deferral should get recognized once some of the software catches up. So those 2 things are not repeating. So hopefully, that helps answer your question.",
"session": "Answer",
"person_id": 385023,
"person_company": null,
"component_order": 50
},
{
"name": "Elon Musk",
"speech": "Yes. I mean there's really 2 macro factors that are tricky. The biggest being the interest rate. So if there's a very high Fed rate or interest rates are very high, that -- that is -- every time the Fed raise the interest rates, that's equivalent to increasing the price of a car. It makes the cars less affordable because people are able to buy cars as a function of what they can afford on a monthly basis. So that's -- so it's just almost directly equivalent to a price increase, is there any kind of interest rate increase. \r\nThen the other factor is whenever there is uncertainty in the economy, people will generally postpone new -- big, new capital purchases like a new car. This is a natural human reaction. So if people are reading about layoffs and whatnot in the press, they're like, well, they might be worried about -- they might be laid off. So then there'll be naturally a little more hesitant than they would otherwise be to buy a new car. Now this is just the nature of the auto industry. But there is -- there will be a trans amount of pent-up demand for new cars. So it goes through cycles.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 51
},
{
"name": "Martin Viecha",
"speech": "Thank you. Let's go to Ben Kallo from Baird.",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 52
},
{
"name": "Ben Kallo",
"speech": "When you talk about [ manifest ] supply, you talked about Dojo being a product that you can sell outside of Tesla. How do we rank all the things you have going on and then in the economic environment? I mean, like heat pumps and everything else you have going on versus investing in the vehicle business? Or is that not the right way to look at it?",
"session": "Question",
"person_id": 160874,
"person_company": null,
"component_order": 53
},
{
"name": "Elon Musk",
"speech": "I'm not sure I fully understand your question, but I'd look at Dojo as like kind of a long-shot bet, but if it's a long chart bet that pays off, it will pay off in a very, very big way. But potentially, yes, potentially in a very, very big way. Like in the multi-hundred billion dollar level. But I think it's like still put it in the long shot category, but long shot with a multi-hundred billion dollar potential outcome. And -- so it's a bet worth making, but not one you can sort of say like or take it to the bank type of thing. Although these days take it to the bank, it's maybe not as secure as it used to be. \r\nSo obviously, we're big believes in heat pumps. And that is on all this that over time is to do a really good heat pump for homes and commercial offices and stuff. And we have the technology that's really good. But it's still -- it's a back burner item. Our focus is very much on vehicles, autonomy, stationary storage, basically solving sustainable energy and solving autonomy, which would be like -- solving autonomy, if we're able to have a fleet of several million vehicles that with a software update can be potentially worth several times their original value, that's -- that will be -- if that happens, that will be the -- and I think it will happen, that will be the biggest asset value increase in history, I think.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 54
},
{
"name": "Ben Kallo",
"speech": "[indiscernible] pricing, but a lot of pundits talk about the pie and losing share or gaining share. But how do you guys look at pricing versus the [ BBs ] or price vehicles? Or does that not come into the equation? Sorry to ask about pricing again.",
"session": "Question",
"person_id": 160874,
"person_company": null,
"component_order": 55
},
{
"name": "Elon Musk",
"speech": "No, it's really just like -- every day, we get a daily real-time update of how many cars were ordered yesterday, how many cars were produced yesterday. We must have -- if there's a company that's got more real-time data than Tesla -- I'm not sure there's any company on earth that has better real-time data than Tesla, except maybe SpaceX Starlink. So -- because like we don't have to -- for the other car companies, they will make the cars, send them to the dealers, then the dealers will sell the cars. And then it takes quite a long time for them to get the data back to actually figure out how many cars were sold. Whereas we know how many cars were ordered yesterday throughout the world. So our fingers on the pulse is real time and does not have latency, whereas the other car companies have a lot of latency in their data. \r\nAs does the government, the government has a lot of agency in their data. So we're just looking at and saying, okay, what does it take to achieve a clearing price for our vehicle production? And then we'll make a pricing change, and we see what happens immediately and adjust course. So we're adjusting course -- and we're thinking about it literally every day, 7 days a week. Every 7 days, we [ collect ] that e-mail and so is the rest of the team. And we try to make the lease down decision that we can. And on balance, I think our decisions are pretty good. Sometimes they'll be down, but on average, they're, I think, better than the rest of the industry.",
"session": "Answer",
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{
"name": "Zachary Kirkhorn",
"speech": "Just to add on the question about EV market share or ICE. This comes up a lot. I think a lot of the public debate is around this concept of EV market share. We don't look at it that way. I mean we look at it as [indiscernible] it's a car market and not an EV market. And actually, the mission of the company requires internal combustion engine cars to be switched over to electric vehicles. So that's what we pay attention to.",
"session": "Answer",
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{
"name": "Martin Viecha",
"speech": "Yes. I've said that last time, too. We got -- you guys got to stop looking at it as the EV market. It's how many cars are we selling. Just start looking at it that way.",
"session": "Answer",
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{
"name": "Elon Musk",
"speech": "All cars will be EVs. It's going to -- I've said this for a long time. We'll look back, I don't know, assuming civilization is still around in 20 years, we'll look back on internal combustion engine vehicles the same way we look back on external combustion engine vehicles, which is like the steam engine. A steam engine is an external combustion engine vehicle. And there's still a few around. They're kind of quirky and kind of cool collectors' items. That's how gasoline cars will be in the future.",
"session": "Answer",
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{
"name": "Martin Viecha",
"speech": "Thank you. Let's go to Colin Rusch from Oppenheimer.",
"session": "Answer",
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"person_company": null,
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},
{
"name": "Colin Rusch",
"speech": "Can you talk a little bit about how much of the actual cost structure is variable on these vehicles? And if you could give us a range on pulse or minus the lithium cost within those contracted volumes that you're seeing?",
"session": "Question",
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{
"name": "Elon Musk",
"speech": "Well, I think -- again, we'd really love to have a crystal ball here, but we don't have it. Depending on what time scale you're looking at, most of the car is variable. So most car cost is variable. So -- and probably, if I were to guess, I think we will see improved costs from suppliers yes, I think we will -- that is our expectation.",
"session": "Answer",
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{
"name": "Drew Baglino",
"speech": "And we're already starting to see that, Elon, I think you had mentioned before that we anticipated a crash in the lithium prices and some of that has flowed through by way of lithium carbonate reductions into battery cost. And the same thing will happen with lithium hydroxide. The length of the supply chain matters also because what we're talking about is very far upstream. So by the time it makes sense that [indiscernible]. It will be several months. But beyond just the commodity pricing, as Zach mentioned earlier, we're also very focused on other metrics that make production very efficient. So for example, detention and demurrage air expedites. I think our air expedites are down 90%. Detention and demurrage is down 93% from the peaks. That can be hundreds of thousands of dollars per vehicle. So we're sort of attacking all vectors and becoming very efficient.",
"session": "Answer",
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{
"name": "Colin Rusch",
"speech": "Okay. And then my follow-up is really around stationary storage demand on the utility scale. I mean, obviously, there's a gigantic queue for interconnection in the U.S. And can you talk about the volume of quotation you're seeing at this point around stationary storage for the renewables queue on a global basis? And how much of that is converting into actual sales?",
"session": "Question",
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{
"name": "Elon Musk",
"speech": "Drew, do you want to take that?",
"session": "Answer",
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{
"name": "Drew Baglino",
"speech": "I mean -- yes, I don't -- that's also not exactly how we look at it, really. We're not like -- yes, we're not engaged in the interconnection queue. Like we're focused on ramping Megapack as quickly and efficiently as we can, and we have visibility into the pipelines of a variety of different renewable energy and just pure stationary storage developers and we also develop our own projects. And we're mostly just -- we're being selective in trying to pick the products -- the projects that best fit our mission and our objectives.",
"session": "Answer",
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{
"name": "Elon Musk",
"speech": "Yes. This -- again, this is not a product call, but we'll have something -- I mean, this -- we're making improvements on many fronts, including Megapacks. So I think some of those improvements will improve the speed at which you can connect the Megapacks to the grid.",
"session": "Answer",
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{
"name": "Martin Viecha",
"speech": "Thank you. The next question is from Mark Delaney from Goldman Sachs.",
"session": "Answer",
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},
{
"name": "Mark Delaney",
"speech": "Do you still see 2 million units as an upside case for volume this year? And is the gating factor for reaching 1.8 million or 2 million units in 2023 still supply chain, as was mentioned on your last conference call? Or is it more about [ the end of this month? ]",
"session": "Question",
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{
"name": "Elon Musk",
"speech": "Well, if you have a crystal ball you can lend me, back to the crystal ball situation. These are volatile times. From a production standpoint, if things go well, we've got a shot at 2 million vehicles this year. But that's an upside case. And we feel comfortable with 1.8 million. And we'll see how this year unfolds.",
"session": "Answer",
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{
"name": "Mark Delaney",
"speech": "That's helpful. And then the company had spoken at the Investor Day and then for the past conference calls about opening up its vehicle charging network. Can you speak to some of the feedback you've been getting from both Tesla owners and non-Tesla owners? And how the ramp of the charging network may progress from here?",
"session": "Question",
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{
"name": "Elon Musk",
"speech": "Drew, do you want to take that?",
"session": "Answer",
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{
"name": "Drew Baglino",
"speech": "Yes. So as you may have seen, we opened our first [indiscernible] post in Europe and our [ Magic Dock ] in North America. And that is indicative of the direction we're heading with universal compatibility for all vehicles no matter where the charge port, et cetera, in all major markets, and we're going to continue to roll out those sort of improved offerings as we build new stations. We're always balancing like our ability to serve our own customers with our ability to serve new customers when doing that. I think we've been able to balance it rather well. For example, in Europe, 50% of all of our supercharging stations are open to all EVs, and we've been able to do that without any increase in wait times at all for anybody. So we're going to continue to take a similar approach as we do this in North America and China over the coming quarters.",
"session": "Answer",
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{
"name": "Martin Viecha",
"speech": "Okay. Thank you very much. Let's go to Rod Lache from Wolfe Research.",
"session": "Answer",
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{
"name": "Rod Lache",
"speech": "I just wanted to first just follow up on your comments in your letter about leveraging your cost position as others struggle with unit economics and also taking into account the lifetime revenue, actually in a way that most other automakers will never see just given your service network and supercharging and other attributes. Can you just maybe give us a sense of how far you'd be willing to take this? Are there brackets around the range of initial margin that you'd be comfortable with? And again, any color that you might provide on the updated range of margins that you'd expect in the auto business?",
"session": "Question",
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{
"name": "Elon Musk",
"speech": "I think we may have answered this question or tried to ask this question a few times. But it's difficult to say what the margin will be. It depends on what the macroeconomic environment is like. So for example, if the Fed were to lower the rates, that would be super helpful for demand. If they raise them, that just raises the interest costs that buyers have to pay for to buy a car. So it reduces affordability and therefore, reduces demand. So it's -- but if -- like if we look past, say, this year or like go sometime next year, middle of next year, so I think things are looking really -- I think, like I said, [indiscernible], if there's some major geopolitical wildcard that turns up. But in the absence of that, I think I would be very optimistic about middle of next year, end of next year.",
"session": "Answer",
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{
"name": "Zachary Kirkhorn",
"speech": "Just to add to Elon's comments, just 2 other points. What's really important for us this year in addition to just managing the day-to-day of the business but is also investing in, as Elon mentioned, what 2024 and 2025 will look like. And so using the cash generated from the sale of products today and reinvesting that, this is very important for us. And I think that what happens to margins over the next couple of quarters that only matters in the context of of what that means for our ability to reinvest into 2024 and 2025. And we have a lot of space before that becomes something that we have to revisit our investment plans. And so we're planning to keep the business healthy. But I just want to caution folks about reading too much into what happens over the near term here because we're very focused as a company on making sure that when we exit this macroeconomic situation, this company is positioned in the best possible way.",
"session": "Answer",
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{
"name": "Elon Musk",
"speech": "Yes, exactly.",
"session": "Answer",
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{
"name": "Rod Lache",
"speech": "Just to elaborate on that point though, the revenue the long-term lifetime revenue that you're targeting from each vehicle is massive. So if you took that to the extreme, it would seem that you'd be comfortable with a relatively low initial margin. Am I misinterpreting that? Or is that exactly right?",
"session": "Question",
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{
"name": "Elon Musk",
"speech": "Correct. That's exactly right.",
"session": "Answer",
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{
"name": "Rod Lache",
"speech": "Okay. And the -- normally, in a recession, when consumers feel less financially secure, actually price elasticity deteriorates. Just based on your pulse taking of the consumer, do you have a view on elasticity of demand?",
"session": "Question",
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{
"name": "Elon Musk",
"speech": "Well, I can't emphasize enough the whole -- just fundamental question of affordability. For most people, their ability to buy a car is a function of can they make monthly payment or not. And so like I said, if interest rates are really high, like they are right now, then in some cases, people can't get a loan at all. So it's -- I think probably banks are pretty -- not leaning forward in providing loans, I expect, these days. So that's -- like there is -- there is quite a powerful story here when you -- going back to something as alluded to a moment ago -- I mentioned a moment ago that Tesla is in a uniquely strong strategic position. Because we're the only ones making cars that technically, we could sell for 0 profit for now and then yield actually tremendous economics in the future through autonomy, no one else can do that. I'm not sure how many people will appreciate the profundity of what I've just said, but it is extremely significant.",
"session": "Answer",
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{
"name": "Martin Viecha",
"speech": "Thank you. Let's go to Adam Jonas from Morgan Stanley.",
"session": "Answer",
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{
"name": "Adam Jonas",
"speech": "So first, Elon, good luck with tomorrow's launch of Boca Chica. Break a leg.",
"session": "Question",
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{
"name": "Elon Musk",
"speech": "Thanks. You can't have too much luck in the rocket business, that's for sure.",
"session": "Answer",
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"person_company": null,
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{
"name": "Adam Jonas",
"speech": "Incredible. So now that you've gotten to know the Twitter architecture kind of intimately well over the past 6 months, what can you tell Tesla stakeholders about how an X.com or Super App could be potentially accelerative to Tesla's business model?",
"session": "Question",
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{
"name": "Elon Musk",
"speech": "Well, I don't know. I guess it could make it potentially make it easier to buy cars. So -- We've string somewhat off topic here because I think there's some benefit. I think probably there's some benefit, yes.",
"session": "Answer",
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{
"name": "Adam Jonas",
"speech": "I get it, Elon,. So just as a follow-up on manufacturing, you're a student of history. And you'll note that back in 1913, Henry Ford introduced the moving assembly line in Highland Park, Michigan. And the price of a Model T, which had already been undercutting cars around the time, fell another 70% or 80%, and hundreds of rival car companies went bust. I'm wondering if history is repeating itself here, Elon, and that the recent pattern of cuts with you is way ahead of the cost curve compared to competition? Is this -- it seems like it's a calculated strategy, not just in reaction to competition or changing supply demand in the market, but your -- could we catalyze some Darwinian forces in the EV market?",
"session": "Question",
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{
"name": "Elon Musk",
"speech": "Well, I mean, we're not trying to say, take pricing actions in order to be deliberately -- to deliberately undermine competitors or anything like that. We really don't think about competitors that much. We just look at, do people like our cars, how can we make the product better, can they afford our cars? And the sort of the things like improving service and whatnot. But actually, we do have this unique strategic advantage that we have -- we're making a car that if autonomy pans out and we think it will, where that asset is actually will be worth a hell a lot more in the future than it is now. So it is taking to be possible to sell it at 0 profit, but still have the net present value of future cash flows associated with that asset very significant.",
"session": "Answer",
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{
"name": "Drew Baglino",
"speech": "And service and charging and insurance and all of these other ongoing revenue streams that other companies don't have.",
"session": "Answer",
"person_id": 393478,
"person_company": null,
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},
{
"name": "Elon Musk",
"speech": "Yes.",
"session": "Answer",
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},
{
"name": "Lars Moravy",
"speech": "Certainly, we want all EVs to succeed, too. We just want to say that we're not like some malicious attacks to try to [ discredit ] everybody.",
"session": "Answer",
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{
"name": "Elon Musk",
"speech": "Definitely not. We're like opening up superchargers. We've made our patents available for free. So it's like -- we're trying to be helpful here. So we're not out to destroy competitors or anything like that. We're trying to help competitors, frankly, in any way we can.",
"session": "Answer",
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{
"name": "Martin Viecha",
"speech": "Thank you. Let's go to Dan Levy from Barclays.",
"session": "Answer",
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},
{
"name": "Dan Levy",
"speech": "First question, you're ramping supply at Austin and Berlin. So I wanted to understand just how critical it is to further increase volume at those plants just to get the vertical integration benefits in the face of the sort of market with some demand questions. And just broadly, should we -- I mean, historically, you've been operating at the pace at which your supply allows you to produce as opposed to gauging to demand. Should we generally expect that you're going to continue to produce at your -- whatever the max capacity that you're allowed within your supply constraints, regardless of what the broader economic environment is just to continue to get that volume out there?",
"session": "Question",
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},
{
"name": "Elon Musk",
"speech": "So that is -- yes, I mean, there could be like obviously a macro shock that is so severe that people just stop buying cars for some reason. But in the absence of that, we will continue to grow output at a rapid clip.",
"session": "Answer",
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"name": "Dan Levy",
"speech": "Great. And then just on the margins associated with Austin and Berlin. You mentioned Austin want to have the margin drag until you reach intended volumes. I don't know if you can disclose what those volumes are. And then maybe you could just remind us of what the margin profile of Austin and Berlin will look like versus Shanghai once you get the vertical integration benefits in place?",
"session": "Question",
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{
"name": "Elon Musk",
"speech": "Well, probably [indiscernible] have be quite as good as Shanghai. Shanhai Is hard to -- has a very efficient cost structures, obviously, our lowest cost structure in the world. But we do expect to be -- make significant improvements in Austin and Berlin and continue to make improvements in Fremont as well. So...",
"session": "Answer",
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},
{
"name": "Unknown Executive",
"speech": "We've increased -- this is [indiscernible]. We increased our localization efforts. So that will then drive down our days and on-hand requirements. We've made 10% quarter-over-quarter improvement in days and on-hand. So we'll continue that as a localization improves.",
"session": "Answer",
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{
"name": "Martin Viecha",
"speech": "Okay. Thank you very much. And our final question comes from Philip Houchois from Jefferies.",
"session": "Answer",
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{
"name": "Philippe Houchois",
"speech": "It's slightly longer term. I completely agree with your comments that we should look at Tesla in terms of auto market share and not EV market share. But I'm just wondering, as you build up the market share globally, is there a limit to the direct selling business model as you practice it? And should we think about -- going forward, you need to look into the agency or using importers to basically develop market share more smoothly, I guess, globally? And so in other words, is there kind of [ fell by date ] for the direct business model as you -- today?",
"session": "Question",
"person_id": 323442,
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},
{
"name": "Elon Musk",
"speech": "Seems to be working well so far.",
"session": "Answer",
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},
{
"name": "Philippe Houchois",
"speech": "Because we hear different feedback from customers who miss the human interaction or unhappy with the service, and I'm just wondering if you're seeing some growth pains in there that would lead you to change. You're not seeing that?",
"session": "Question",
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{
"name": "Elon Musk",
"speech": "Well, I mean, there are -- since we're always going to have some growing pains where at times -- and it depends on which geography we're talking about where sometimes service is behind sales, sometimes it's ahead of sales. This is -- I mean Telsa's growing, I believe, faster than any company in history that makes a large complex manufactured object. So these are -- as you try to max -- it's always difficult to match exponentials. So -- but I think it is helpful to have the feedback loop with a service because that means we feel the pain of service, and then we can address the design to make the car need less service. And I think that gives us the right incentive structure like because the best service is no service. The car doesn't break. And whereas if you have, say, a dealer network that is reliant upon services revenue, then you arguably have a misalignment of incentives where they're making money on service. But actually, we want to -- the best thing for the consumer is the car doesn't need servicing so.",
"session": "Answer",
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{
"name": "Philippe Houchois",
"speech": "Yes. And then last one, if I can follow up. Have you worked out, I mean, for many of your traditional competitors? A fair amount of profits for them comes from selling spare parts and servicing, and you don't have that in your profit structure. And have you looked at the deficit you have compared to your peers?",
"session": "Question",
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{
"name": "Elon Musk",
"speech": "Yes. Actually, this one -- assuming I could wax on about for a while because really, people didn't understand that the best short-selling argument against Tesla for the longest time was the fact that Tesla does not have an existing fleet and that the auto industry, the reason incumbents succeed and newcomers fail, the biggest reason is that the incumbents have a large fleet, and they're able to sell new cars at close to 0 margin and then sell spare parts at a very high margin, sort of razors and blades type thing. And so the only way to actually succeed for a newcomer to succeed is to have a product that is so compelling that people are willing to pay a premium over the incumbent product. And in the absence of electrification and autonomy, I don't think a newcomer can succeed.",
"session": "Answer",
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{
"name": "Martin Viecha",
"speech": "Thank you very much, everyone. Unfortunately, that's all the time we have for this quarter. We'll see you again in 3 months from now. Thank you.",
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],
"title": "Tesla, Inc., Q1 2023 Earnings Call, Apr 19, 2023",
"quarter": 1,
"year": 2023
}
},
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"transcript_title": "Tesla, Inc. - Q4 2022",
"transcript_name": "Tesla, Inc., Q4 2022 Earnings Call, Jan 25, 2023",
"ticker": "NASDAQ:TSLA",
"transcript_url": "https://wkarticles.blob.core.windows.net/finnhub/snp_transcript_2721581",
"date": "2023-01-25",
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{
"name": "Martin Viecha",
"speech": "Good afternoon, everyone, and welcome to Tesla's Fourth Quarter 2022 Q&A Webcast. My name is Martin Viecha, VP of Investor Relations, and I'm joined today by Elon Musk, Zachary Kirkhorn and a number of other executives. Our Q4 results were announced at about 3:00 p.m. Central Time in the update deck we published at the same link as this webcast.\r\nDuring this call, we will discuss our business outlook and make forward-looking statements. These comments are based on our predictions and expectations as of today. Actual events or results could differ materially due to a number of risks and uncertainties, including those mentioned in our most recent filings with the SEC. [Operator Instructions] But before we jump into Q&A, Elon has some opening remarks. Elon?",
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"name": "Elon Musk",
"speech": "Thank you, Martin. So '22 -- just going through the '22 recap. It was a fantastic year for Tesla. It was our best year ever on every level. Team did an amazing job. It's an honor, of course, to work with such an incredibly talented group of people.\r\nSo in 2022, we delivered over 1.3 million cars and achieved a 17% operating margin, the highest among any volume carmaker, I think maybe among any carmaker. While doing so, we generated $12.5 billion in net income and $7.5 billion in free cash flow. Importantly, the Tesla team achieved these records while -- despite the fact that 2022 was an incredibly challenging year due to forced shutdowns, very high interest rates and many delivery challenges. So it's worth noting that all these records were in the face of massive difficulties. Credit to the team for achieving that. \r\nThe most common question we've been getting from investors is about demand. Thus far -- so I want to put that concern to rest. Thus far in January, we've seen the strongest orders year-to-date than ever in our history. We currently are seeing orders at almost twice the rate of production. So I mean, that -- it's not to say whether that will continue [indiscernible] but the orders are high. And we've actually raised the Model Y price a little bit in response to that. \r\nSo we do -- we think demand will be good despite probably a contraction in the automotive market as a whole. So basically, price really matters. I think there's just a vast number of people that want to buy a Tesla car but can't afford it. And so these price changes really make a difference for the average consumer. And sometimes for those -- for people who are well -- who have a lot of money, they sort of forget about how important affordability is. And it's always been our goal at Tesla to make cars that are affordable to as many people as possible so I'm glad that we're able to do so. And yes, so I think it's a good thing, all things considered. \r\nWe're also making very good progress on cost control. And we're seeing the cost production in Berlin and Austin drop commensurate with the growth in production, as you'd expect, so yes. With respect to Autopilot, as of now, we deployed whole self-driving beta to [indiscernible] city streets to roughly 400,000 customers in North America. This is a huge milestone for autonomy as FSD Beta is the only way any consumer can actually test the latest AI-powered autonomy. And we're currently at about 100 million miles of FSD outside of highways. \r\nAnd our published data shows that improvement in safety system -- stuttering here, safety statistics, it's very clear. So we would not have released the FSD Beta if the safety statistics were not excellent. Regarding batteries, production rate of 4680 cells reached 1,000 cars a week at the end of last year, and we're increasing capacity for 4680 cells by another 100 gigawatt-hours as announced at Giga Nevada yesterday. Our long-term goal is to get to well in excess of 1,000 gigawatt-hours of cells produced internally and continue to use the self cell providers. So to be clear, we will continue to use other cell providers. Just that the demand for lithium ion batteries is quasi-infinite and will be for quite some time. So we feel we can scale a lot faster using both suppliers and internally produced cells. \r\nAnd we've got an amazing plan for making the 4680 cell low-cost and high energy density. So energy storage also saw record growth and with that is continuing to accelerate. That's always worth remembering that the 3 pillars of a sustainable energy future are obviously electric vehicles, solar and wind, and the third key item is stationary storage to store the energy from solar and wind because obviously, the sun doesn't shine all the time and the wind doesn't blow all the time. So you have those 3 things, you can convert all of it to a fully sustainable situation many times over, actually. \r\nSo I would like to just make it clear that there is a path to a fully sustainable future for humanity, and we -- our goal at Tesla is to accelerate progress on that path as much as humanly possible. So yes, so we were ramping up Megapack production. And we expect it to grow at a rate quite a bit faster than our legal output. \r\nSo in conclusion, we are taking a view that we want to keep making and selling as many cars as we can. We believe we can keep pushing for strong volume growth while retaining the industry's best operating margins. As we mentioned many times before, we want to be the best manufacturer. But really, manufacturing technology will be our most important long-term strength. And we'll talk more about our upcoming plans at the March 1 Investor Day. And lastly, I want to once again thank all of our employees for delivering another record-breaking year. Congratulations, guys.",
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"name": "Martin Viecha",
"speech": "Thanks, Elon. And I think Zach has some opening remarks as well.",
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"name": "Zachary Kirkhorn",
"speech": "Yes. Thanks, Martin. So as Elon mentioned, 2022 was a terrific year for Tesla. I also want to congratulate the Tesla team and also say thank you to our suppliers for your support during quite a volatile year. On a full year basis, revenue increased over 50%. Operating income doubled, free cash flows increased over 50% and our margins remained industry-leading. Additionally, we continued to make progress on overhead efficiencies as non-GAAP OpEx as a percentage of revenue improved further.\r\nFor Q4 specifically, sequential and annual margin was impacted by ASP reductions as we are managing through COVID impacts in China, uncertainty around the consumer tax credit in the U.S. and a rising interest rate environment. Note that in 2022, rising interest rates alone had effectively increased the price of our cars in the U.S. by nearly 10%. \r\nAdditionally, COGS per unit has increased on a year-over-year basis, driven primarily by 3 factors: first is raw materials and inflation led by lithium prices and discussed at length in previous calls; second, we are working through the early ramp of inefficiencies of our Austin and Berlin and in-house cell production factories; third, our vehicle mix over the last year has moved more heavily towards Model Y, which carries a slight cost premium to Model 3. \r\nPartially offsetting these impacts, we've continued to execute on Tesla controllable cost reductions, in line with the progress we've made in prior years. These improvements include our continued work to gradually move towards a regionally balanced build of vehicles. The energy business had its strongest year yet across all metrics, led by steady improvement in both retail and commercial storage. While much work remains to grow this business and improve costs, we believe we are on a good trajectory. \r\nAs we look towards 2023, we are moving forward aggressively leveraging our strength and cost. There are 3 key points I wanted to make here: first, on demand, as Elon mentioned, customer interest in our products remains high; second, on cost reduction, we're holding steady on our plans to rapidly increase volume while improving overhead efficiency, which is the most effective method to retain strength in our operating margins. In particular, we're accelerating improvements in our new factories in Austin, Berlin and in-house cells, where efficiencies are the highest. But we are attacking every other area of cost and unwinding cost increases created for multiple years of COVID-related instability. This includes logistics, expedites, accumulation of material buffers, part premiums, productivity and overheads as an example. \r\nAs the world transitions from an inflationary to deflationary environment, we expect a strong partnership with our suppliers on this journey as well. In that, we've priced our products with a view towards a longer-term cost structure. Thus, there will be an impact on operating margin in the near term. However, we believe our margins will remain healthy and industry-leading over the course of the year. \r\nThird, we are continuing to ensure funding is prioritized for our long-term road map. This includes expanding in-house cell production, bringing Cybertruck to market, development of our next-generation vehicle platform, expansion of our manufacturing footprint and growth of the energy business. We're looking forward to discussing these plans in more detail on our Investor Day in a month. Thank you.",
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"name": "Martin Viecha",
"speech": "Thank you very much, Zach. Let's now go to investor questions. The first question is, some analysts are claiming that Tesla orders, net of cancellations, came in at a rate less than half of production in the fourth quarter. This has raised demand concerns. Can you elaborate on order trends so far this year and how they compare to current production rates? I think...",
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"name": "Elon Musk",
"speech": "We already answered that question.",
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"name": "Martin Viecha",
"speech": "Yes, exactly.",
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"name": "Elon Musk",
"speech": "Demand far exceeds production, and we actually are making some small price increases as a result.",
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"name": "Martin Viecha",
"speech": "Thank you. The second question is in a similar vein. What has the initial reaction been to global price reductions in early 1Q 2023, specifically in terms of order intake levels? We've answered that 1 as well. \r\nSo let's go to the next one. The next investor question is, will Tesla be able to take full advantage of advanced manufacturing production credits for battery cells packs? So $3,700 per long-range Model 3 and Model Y, it's $45 a kilowatt-hour for autos and energy products and how much does Tesla expect to earn in the coming year from these credits?",
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"name": "Elon Musk",
"speech": "I'll say a little bit about it, then I think Zach will add some. Long term, we expect these -- the value of these credits to be very significant. You can do the math if we were to get anyone your 1,000 gigawatt-hours [ a year ] of production or even a few hundred gigawatt-hours, it's very significant. So -- but the credits do rely upon domestic manufacturing. And in the case of Panasonic domestic manufacturing, we're splitting the value of the credits. So it -- the value of credits this year will not be gigantic, but I think it could be gigantic -- we think it probably will be very significant in the future.",
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"name": "Zachary Kirkhorn",
"speech": "Yes, just to add and input some boundaries on what we're expecting in terms of impact to Tesla for this year. So different products, we think, will get different amounts of credit. The regulations here are still in flux and there continues to be updates so this is just our best understanding at the moment. But we think on the order of $150 million to $250 million per quarter this year and growing over the course of the year as our volumes grow. \r\nAnd part of the work we're doing here, which is part of what this incentive package is trying to incentivize is, as Elon mentioned, to move more manufacturing onshore in the United States, which is Tesla's plans anyways. And so I think we're pretty well positioned over the coming years to take advantage of this. \r\nBut then also part of what the goal of this incentive package is, is to improve adoption from our customers. And so we also want to use these incentives to improve affordability as we think about what the price points are in our products going forward. And so as we're thinking about our pricing changes in the U.S. a couple of weeks ago that we announced, we were looking at what the credit benefit to Tesla would be to make sure that customers are able to receive the benefit not only from this that were received to some extent but also on the consumer-facing side, which is currently $7,500 per car of tax credit, assuming that -- subject to the MSRP caps and the income caps. So we want to use this to accelerate sustainable energy, which is our mission and also the goal of this bill.",
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"name": "Martin Viecha",
"speech": "Thank you very much. The next question from investors is, after recent price cuts, analyst released expectations that Tesla automotive gross margin, excluding leasing and credits, will drop below 20% and average selling price around $47,000 across all models. Where do you see average selling price and gross margins after the price cuts?",
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"name": "Elon Musk",
"speech": "Yes, go ahead, Zach.",
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"name": "Zachary Kirkhorn",
"speech": "Yes, I'll jump in on this. So there is certainly a lot of uncertainty about how the year will unfold, but I'll share what's in our current forecast for a moment. So based upon these metrics here, we believe that we'll be above both of the metrics that are stated in the question, so 20% automotive gross margin, excluding leases and credits and then $47,000 ASP across all models.\r\nAnd so 2 other comments I want to make on this, just tactically on sequential ASP changes from Q4 to Q1. And just as a reminder, the ASP reduction is not as large as the reduction in configurator prices. As in Q4, we had backlog customers that we're delivering cars to at a lower price book, given that backlogs had been so long for so much of 2022. But then also, there are various programs in place that we used in Q4 that lowered ASPs. \r\nThe second comment I wanted to make here is that as a management team here, we're most focused on what our operating margin is. And so as other areas of the business become more important, particularly the energy business, which is growing faster than the vehicle business and as we're heavily focused on operating leverage here, improving efficiency of our overheads, we think the right metric for us to be focused on is operating margin. And so I wanted to make sure that I shared that with the investor community as well because that is what we're primarily managing to now.",
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"name": "Elon Musk",
"speech": "Yes. Something that I think some of these smart retail investors understand but I think a lot of others maybe don't is that the -- every time we sell a car, it has the ability, just from uploading software, to have full self-driving enabled and full self-driving is obviously getting better very rapidly. So that's actually a tremendous upside potential because all of those cars, with a few exceptions -- I mean, only a small percentage of cars don't have Hardware 3. \r\nSo that means that there's millions of cars were full self-driving can be sold at essentially 100% gross margin. And the value of it grows as the autonomous capability grows. And then when it becomes fully autonomous, that is a value increase in the fleet. That might be the biggest asset value increase of anything in history. Yes.",
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"name": "Martin Viecha",
"speech": "Thank you. Let's go to the next investor question. Since Elon started political influencing, polls from Morning Consult and YouGov show...",
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"name": "Elon Musk",
"speech": "YouGov, [indiscernible]",
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"name": "Martin Viecha",
"speech": "Show Tesla brand favorability declining in 2022 and division among partisan lines. Such brand damage can impact demand. Does Tesla track favorability? And how will any brand image be mitigated?",
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"name": "Elon Musk",
"speech": "Well, let me check my Twitter account. Okay, so I've got 127 million followers. It continues to grow very rapidly. That suggests that I'm reasonably popular. It might not be popular the way with some people, but for the vast majority of people, my follow count speaks for itself. I'm the most interactive account -- social media account, I think, maybe in the world, certainly on Twitter, and that's actually predated the Twitter acquisition. \r\nSo I think Twitter is actually an incredibly powerful tool for driving demand for Tesla. And I would really encourage companies out there of all kinds, automotive or otherwise, to make more use of Twitter and to use their Twitter accounts in ways that are interesting and informative, entertaining, and it will help them drive sales just as it has with Tesla. So the net value of Twitter, apart from a few people are complaining, is gigantic, obviously.",
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"name": "Martin Viecha",
"speech": "Thank you. Let's go to the next question. Please provide a detailed explanation of where you are on the 4680 ramp. What are the current roadblocks? And when do you expect to scale to 10,000 vehicles a year -- a week?",
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"name": "Drew Baglino",
"speech": "Yes. Thanks, Martin. First, I just want to say congrats and thanks to the Tesla 4680 team for achieving 1,000 a week in Q4. It was no small feat. Definitely a result of more than a couple of years of hard work. As far as where we stand in Texas, 1 of 4 lines are in production, with the remaining 3 in stages of commissioning and install. Really, our 2023 goal as a 4680 team is to deliver a cost-effective ramp of 4680s well ahead of Cybertruck. \r\nFocus areas are dialing in and improving the quality of the high-volume supply mechanical parts and driving factory process yields up as much as possible. Between 2 of those things, if we had achieved those key goals, we'll be well set up to -- for a major 4680 year in 2024.",
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"name": "Martin Viecha",
"speech": "Thank you. Next investor question is Elon said previously that FSD Hardware 4 will most likely come first in Cybertruck. Is that still the current plan? Do you expect there to be an upgrade path for Hardware 3 cars to Hardware 4?",
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"name": "Elon Musk",
"speech": "Yes, Cybertruck will have Hardware 4. And to be clear, for 2023, Cybertruck will not be a significant contributor to the bottom line but it will be into next year. So it's an incredible product. I can't wait to drive it personally. It will be the car that I drive every day. I actually just I'm wearing the T-shirt with this matched glass. And it's just one of those products that only comes along once in a while, and it's really special. \r\nSo yes, so with respect to upgrading cars on Hardware 3, I don't think that will be needed. Hardware 3 will not be as good as Hardware 4, but I'm confident that Hardware 3 will so far exceed the average -- the safety of the average human. So [indiscernible] like how do we get ultimately to, let's say, for argument's sake if Hardware 3 can be, say, 200% or 300% safer than human, Hardware 4 might be 500% or 600%. It will be Hardware 5 beyond that. \r\nBut what really matters is are we improving the average safety on the road. But it is the cost and difficulty of retrofitting Hardware 3 with Hardware 4 is quite significant. So it would not be, I think, economically feasible to do so.",
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"name": "Martin Viecha",
"speech": "Thank you. The next question is for Zach. Zach, when do you think Tesla Insurance will become big enough revenue source to warrant providing more details in the financials of the business so investors can compare it to other insurance companies?",
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"name": "Zachary Kirkhorn",
"speech": "Yes. I think it's probably going to take some time before this business is large enough for specific financial disclosures. But I'm happy to provide an update on where we stand in the business. So we're currently at a $300 million annual premium run rate as of the end of last year. We're growing 20% a quarter so it's growing faster than the growth in our vehicle business. \r\nAnd in the states in which we're operating, on average, 17% of the customers in the states are using a Tesla Insurance product. And that number continues to tick up as we spend more time in markets. And we see most of the adoption occurring when folks take delivery of a new car, as they're setting up insurance for the first time as opposed to going back and switching when they already have insurance set up. So there's an inherent stickiness in the Insurance business.",
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"name": "Elon Musk",
"speech": "No, go ahead.",
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"name": "Zachary Kirkhorn",
"speech": "No, I was just going to say, just as a broader reminder on kind of the motivation for starting this business, it was to improve and still is to improve the total cost of ownership of our cars, given that we're seeing high premiums of insurance from third-party companies. And that remains our priority here. We'll obviously run this as a healthy business, but we want to make sure we keep our costs low and insurance stays affordable to our customers.",
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"name": "Elon Musk",
"speech": "Yes. And so there are 2 really important side benefit to our Tesla Insurance that are worth mentioning, one of which Zach alluded to, which is that just by Tesla operating insurance for our cars at a competitive rate, that makes the other car insurance companies offer better rates for Teslas. So it has a bigger effect than you think because it improves total cost of insurance costs even when they don't use Tesla Insurance, because now the guy goes up to the world have to compete with Tesla and cannot charge outrageous insurance for Teslas. So it's great. So it has an amplified effect, very important. \r\nThen it is also giving us a good feedback loop into minimizing the cost of repair of Teslas for all Teslas worldwide because we obviously want to minimize the cost of repairing at Tesla if it's in a collision and for Tesla Insurance. And previously, we didn't actually have good insight into that because the other insurance companies would cover the cost. And actually, the cost, in some cases, were unreasonably high. \r\nSo we've actually adjusted the design of the car and made changes in the software of the car to minimize the cost of repair, obviously minimize -- first, the best repair is no repair, avoid the accident entirely, which since every Tesla comes with the most advanced active safety in the world, whether or not you buy full self-driving, you still get the intelligence of full self-driving for active safety, active collision prevention. So it's giving us this really good feedback before, again, reducing cost -- total cost of ownership and also just figuring out how to get -- if somebody's cars in an accident, most accidents are actually small. They're like a broken fender or scratched side of the car or something like, the vast majority of accidents. \r\nBut we're actually solving how to get somebody's car repaired very quickly and efficiently and back in their hands. And like I said, those improvements actually apply then to old cars. And we're making just to emphasize another key point because some of these points might be like, so I apologize for being repetitive. \r\nBut it's remarkable how small changes in design of the bumper and improving -- obviously improving the logistics of spare part, providing spare parts needed for collision repair, have an enormous effect on the repair cost. So if you're waiting for a part to get repaired and that part takes a month, now you've got a month of having to rent another car. It's extremely expensive. And of course, you're missing the car that you love and the 1 you actually want to drive. So this has actually a very significant effect on total cost of ownership and customer happiness.",
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"name": "Martin Viecha",
"speech": "Thank you. The next question from investors is, is Cybertruck production still on track for midyear?",
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"name": "Elon Musk",
"speech": "We do expect production to start, I don't know, maybe sometime this summer. But I always like a downplay at the start of production because the start of production is always very slow. It increases exponentially, but it's always very slow at first. So I wouldn't put too much stock in start of production. It's kind of when does volume production actually happen, and that's next year.",
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"name": "Drew Baglino",
"speech": "Yes, that's on. Like just to emphasize on that, we've started installation of production equipment here in Giga Texas, castings, GA, general assembly, body shops. We built all our beta vehicles, some more coming still in the next month, but as you said, the ramp will really come 2024.",
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"name": "Elon Musk",
"speech": "Yes, exactly.",
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"name": "Martin Viecha",
"speech": "And the last investor question is with near-infinite global demand for energy storage, where will Tesla build the next Megapack factories? How many are needed on each continent?",
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"name": "Elon Musk",
"speech": "It's a good question. It's not something we -- I think we'll provide an update about that in the future, but it is something we're thinking about very carefully. I really kind of like what is the fastest path to 1,000 gigawatt-hours a year of production. And you'll see announcements come out later this year and next that answer that question.",
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"name": "Martin Viecha",
"speech": "Thank you. Okay. And now let's go to analyst questions. The first analyst question comes from Rod Lache from Wolfe Research.",
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"name": "Rod Lache",
"speech": "Just firstly, it sounds like your 1.8 million unit volume indication for this year is somewhat more supply constrained than demand constrained. Then I have a follow-up on cost. Is that an accurate statement?",
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"name": "Elon Musk",
"speech": "Well, okay. I mean, our internal production potential is actually closer to 2 million vehicles, but we were saying 1.8 million because I don't know, it just always seems to be some force majeure thing that happened somewhere on Earth. And we don't control if there's like earthquakes, tsunamis, wars, pandemics, et cetera. So if it's a smooth year, actually, without some big supply chain interruption or massive problem, we actually have the potential to do 2 million cars this year. We're not committing to that but I'm just saying that's the potential. So -- and I think there would be demand for that, too.",
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"name": "Rod Lache",
"speech": "Yes, thanks for clarifying that. And on the cost side, the numbers that we just saw from you, as you pointed out, were weighed down by the 4680 ramp, the Berlin, Austin Giga things, processes, not at rate. Can you give us a bit of an indication of the headwind that you're absorbing from those things like you did last quarter? \r\nAnd then lastly, on cost, do you think that we can tease out an interesting data point from on where battery costs are headed from this announcement that you just made last night? If I'm correct, it looks like the investment cost per kilowatt-hour is less than half of what I've seen anywhere else, maybe $30 a kilowatt-hour for that capacity.",
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"name": "Elon Musk",
"speech": "I don't think we want to say the specific number, but it's interesting, if you look at the size of the -- of Giga Nevada that is allocated to make 100 gigawatt-hours, is a small fraction of the size that currently makes about 35.",
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"name": "Drew Baglino",
"speech": "Yes. I mean, the goals we've outlaid at Battery Day on the investment required to deploy cell manufacturing, I mean, that's been a key focus of ours and the team is doing a good job hitting the marks on that focus.",
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"name": "Elon Musk",
"speech": "Yes. And it goes back to the point I was making. I said it several years ago, I think Tesla's really the competitive strength that will be, by far, the hardest for other companies to replicate is Tesla being just d*** good at manufacturing and having the most advanced manufacturing technology in the world. And if you've got that sort of advanced manufacturing toolbox, you can apply it to many things and we're applying it now to battery cells. \r\nI should also say that there -- we have other products in development. We're not going to announce them obviously, but they're very exciting. And I think we'll the minds when they -- when we reveal them. Tesla has the most exciting product of any company on Earth by a long shot. And we'll continue to, I think, be in that position. We've got more great ideas. I mean, we know what to do with So the future is very exciting. \r\nAs I said in the last call, there's going to be bumps along the way and we'll probably have a pretty difficult recession this year, probably. I hope not, but probably. And so 1 can't predict the short-term sort of stock value because when there's a recession and people panic and the stock market, then prices of stocks value of stocks can drop sometimes to surprisingly low levels. But long term, I'm convinced that Tesla will be the most valuable company on us.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
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},
{
"name": "Martin Viecha",
"speech": "Thank you. And I think, Zach, there was a question on cost headwind in Q4.",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 41
},
{
"name": "Zachary Kirkhorn",
"speech": "Yes. I mean, our weighted average COGS for the company, if you were to assume Austin and Berlin were at the cost structure of our other factories, it was on the order of [ 2,000 to 2,500 ] of headwinds. So I think from there, you can back into margin impact of those factories as of end of Q4.",
"session": "Answer",
"person_id": 385023,
"person_company": null,
"component_order": 42
},
{
"name": "Martin Viecha",
"speech": "Thank you very much. And let's go to the next question from Pierre Ferragu from New Street Research.",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 43
},
{
"name": "Pierre Ferragu",
"speech": "Zach, actually, I'd like to follow up on the data point you just gave on cost. If I look back at the COGS per car, you guys bottom close to $36,000 in the middle of 2021. And then the number went up as you had to face with inflation in input costs and the ramp of Berlin and Texas. And this quarter, I think we are close to $40,000 and we peaked maybe close to $42,000 at some point last year. And so my question from here is, how much time do you think it takes you to get back to this kind of $36,000, which would mean Berlin and Texas and [indiscernible] all that stuff is normalizing, is that like -- and that would be like a kind of like a 10% decline in the COGS per car? Is that something we can hope to see this year or is that too optimistic?",
"session": "Question",
"person_id": 356336,
"person_company": null,
"component_order": 44
},
{
"name": "Zachary Kirkhorn",
"speech": "The Austin and Berlin ramp in efficiencies and 4680 will make a substantial amount of progress on that over the course of the year, and that's within Tesla's control. We're doing a lot of work on cost reduction outside of that. And we talked about supply chain costs, expedite logistics, attacking everything.\r\nOn the raw materials and inflation side, where lithium is the large driver there and this was a meaningful source of cost increase for us, we'll have to see where lithium prices go. And we're not fully exposed to lithium prices, but I think in general, is what we've seen from our forecast here, cost per car of lithium in 2023 will be higher than 2022. So that's a headwind that would have to be overcome to return back to those levels. So I don't think we'll get there this year but I think we'll make progress. And we'll continue to find ways to offset these raw material costs that we don't have control over. Andrew, is there anything on that?",
"session": "Answer",
"person_id": 385023,
"person_company": null,
"component_order": 45
},
{
"name": "Lars Moravy",
"speech": "Yes. Like on the non-cells raw material, we begin to capture benefits of indexes tapering out, but due to the length of various supply chains, it does take time before this is reflected in our financials. And while alumina is down like 20% year-over-year, steel is about 30% down year-over-year, the global non-cells raw materials market continues to be influenced by geopolitical situations in Europe, high production cost due to labor cost increases and energy spikes and disruptions due to natural disasters like typhoon in Korea 4 months ago, pandemic lockdowns. \r\nSo we believe that meaningful price corrections will ultimately come but it remains uncertain exactly when. In the meantime, we continue to redesign supply chain to make it more efficient and work with our supplier partners to find more efficiencies, streamline logistics and transportation to produce cars.",
"session": "Answer",
"person_id": 482177,
"person_company": null,
"component_order": 46
},
{
"name": "Martin Viecha",
"speech": "Sorry, do you want to go say something?",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 47
},
{
"name": "Drew Baglino",
"speech": "I was going to say, we're also -- our fleet is starting to mature, the 3, Y fleet. And we're gathering a lot of data out of that fleet to understand how we can sort of bring some margin that we didn't know we had out of the product. So over the course of 2023 on the powertrain side, we're actually going to go after sort of some materials where we're paying for more performance than we need or we have more content than we need without impacting reliability at all.\r\nAnd that will actually add up to a pretty significant cost reduction on the powertrain side over the course of 2023. So we're not just sort of relying on supply. We're also doing design actions to bring cost out.",
"session": "Answer",
"person_id": 393478,
"person_company": null,
"component_order": 48
},
{
"name": "Elon Musk",
"speech": "My guess is if the -- if the recession is a serious one and I think it probably will be but I hope it isn't, that would lead to meaningful decreases in almost all of our input costs. So we expect to see deflation in our input costs most likely, which would then lead to, yes, better margin. I'm just guessing here. So this is -- that would be my, I guess.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 49
},
{
"name": "Pierre Ferragu",
"speech": "So as a quick follow-up, Elon, I was thinking about like FSD, and when you look at like the situation today compared to a year ago, it's -- like the progress has been, like, amazing in the quality of the product but also its rollout. And so I was wondering, how much is this like impacting the take rate of FSD today? So do you already see that people are getting more excited by FSD because they see it around them on 400,000 cars and they see the value of the service already? Or is that too early to really see like to expect like an uptick in the take rate?",
"session": "Question",
"person_id": 356336,
"person_company": null,
"component_order": 50
},
{
"name": "Elon Musk",
"speech": "The trend is very strong towards use of FSD. And as you alluded to, the -- with each incremental improvement, the enthusiasm obviously increases. And so I think something that still a lot of people out there don't quite appreciate is that Tesla's, Tesla is as much as a software company as a hardware company, but Tesla is really one of the world's leading AI companies. This is kind of a big deal with AI on the software side and on the hardware side.\r\nWith the Hardware 3 inference computer still the most efficient inference computer in the world despite being, at this point, 5 years old from the design point. And with Hardware 4 coming and then Hardware 5 beyond that where there are significant leaps. And the Dojo computer, we expect to be using that operationally at Tesla later this year. And we're seeing just a lot of world-class AI talent join the company. \r\nThere's also the long-term potential of Optimus where we're able to use our expertise in electric motors and power electronics, batteries and advanced manufacturing to be able to make a humanoid robot that is actually useful and can be made at high volume with exceptional capabilities because of the AI that where we take the -- because the car is like a robot on 4 wheels and Optimus is a robot on legs. \r\nBut the -- as we get closer and closer to solving real-world AI, and we don't see anyone even close to us in achieving this, the value -- I think you appreciate this and a few others do but most don't know what I'm talking about. And so -- but it's -- this is the thing that has order of magnitude potential market cap improvement for Tesla.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 51
},
{
"name": "Martin Viecha",
"speech": "And the next question comes from Alex Potter from Piper Sandler.",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 52
},
{
"name": "Alex Potter",
"speech": "Okay, great. So a quick 1 on FSD. This, I guess, for Zach. Obviously, you unlocked some deferred revenue in the quarter that will translate presumably into higher margins on every incremental sale going forward so long as people opt in for FSD. But was wondering if you're able to disclose the percentage of the $15,000 price that you're not going to be able to recognize as revenue upfront rather than deferred.",
"session": "Question",
"person_id": 140104,
"person_company": null,
"component_order": 53
},
{
"name": "Zachary Kirkhorn",
"speech": "Yes. I mean, the way that we've structured this is a full self-driving package has 2 components. There's enhanced Autopilot, the price of which is listed on the website. We fully recognize that. Then there's an incremental, which is for the additional features of full self-driving offers and we've released a portion of that. \r\nAnd then there's a minority of the total package that's remaining that will be released over time as software updates are there. And in our shareholder letter, in addition to disclosing the dollar amount of the deferred revenue release, we also included in there the dollar value of the balance of unreleased deferred revenue that will be released over time with future software updates.",
"session": "Answer",
"person_id": 385023,
"person_company": null,
"component_order": 54
},
{
"name": "Alex Potter",
"speech": "Okay, great. And then maybe 1 additional question here on the incremental capacity in Nevada, the 4680s that you're planning. That's a lot of batteries obviously, and presumably, you won't be putting all of those in Tesla Semi. So I guess, 2 questions about that incremental capacity. First, is it correct to assume that all of those 4680s are going to be more or less fungible and usable in your entire range of products? And if the answer is yes, then if you had to guess, how do you think that 100 gigawatt-hours would be allocated between your various end markets?",
"session": "Question",
"person_id": 140104,
"person_company": null,
"component_order": 55
},
{
"name": "Elon Musk",
"speech": "I don't know, this is a bit too much guessing at this point.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 56
},
{
"name": "Drew Baglino",
"speech": "Yes.",
"session": "Answer",
"person_id": 393478,
"person_company": null,
"component_order": 57
},
{
"name": "Elon Musk",
"speech": "But -- yes, Yes.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 58
},
{
"name": "Drew Baglino",
"speech": "I mean, you're right. Not all of the 100 gigawatt-hours are going to go into the Semi trucks, that is correct.",
"session": "Answer",
"person_id": 393478,
"person_company": null,
"component_order": 59
},
{
"name": "Elon Musk",
"speech": "Let's say like -- I alluded to a number of future products. Those future products would use the 4680.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 60
},
{
"name": "Martin Viecha",
"speech": "Thank you. And the next question comes from George from Canaccord Research.",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 61
},
{
"name": "George Gianarikas",
"speech": "So you recently adjusted prices and that may have put many of your competitors in the back foot. In addition to that, capital markets have recently gotten a lot tougher. So with those factors in mind, I'm curious how you see the current competitive landscape changing over the next few years. And who do you see as your chief competitors 5 years from now?",
"session": "Question",
"person_id": 547012,
"person_company": null,
"component_order": 62
},
{
"name": "Elon Musk",
"speech": "Five years is a long time. As with the Tesla order part, AI team, until late last night and just we're just asking guys like, so who do we think is close to Tesla with -- a general solution for self-driving? And we still don't even know really who would even be there just in second. So yes, it really seems like we're -- I mean, right now, I don't think you could see a second place with a telescope, at least we can't. So that wouldn't last forever. So in 5 years, I don't know, probably somebody has figured it out. I don't think it's any of the car companies that we're aware of. But I'm just guessing that someone might be right out eventually, so yes.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 63
},
{
"name": "Lars Moravy",
"speech": "I mean, beyond that, Elon, like in the vehicle space, even though the market is shrinking, we're growing and EVs have doubled almost year-over-year. So like it ever keeps up with the trend of EVs is going to be our competitor. The Chinese are scary, we always say that. But like a lot of people always look at the EV market share, but we always look at it is how much of the total vehicle space do we have, and we're just going to keep growing in that space. There's 95% for us to go get.",
"session": "Answer",
"person_id": 482177,
"person_company": null,
"component_order": 64
},
{
"name": "Elon Musk",
"speech": "Yes. And I don't want to say like -- I think we have a lot of respect for the car companies in China. They are the most competitive in the world, that is our experience and the Chinese market, it is the most competitive. They work the hardest and they work the smartest, that's so for the car companies that we're competing against. And so we guess, there are probably some company out of China as the most likely to be second to Tesla. \r\nWe are -- our team is winning in China. And I think we actually are able to attract the best talent in China. So hopefully, that continues. So yes, [indiscernible] future well, it's going to be great.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 65
},
{
"name": "George Gianarikas",
"speech": "Just as a follow-up, the Inflation Reduction Act has created huge tax incentives for commercial vehicles. You mentioned an incredibly interesting product pipeline. Are there maybe some plans to accelerate commercial vehicle form factors outside of the Tesla Semi to help accelerate EV adoption?",
"session": "Question",
"person_id": 547012,
"person_company": null,
"component_order": 66
},
{
"name": "Elon Musk",
"speech": "Well, I was basically saying that, yes, but I'm not going to give you details because this is -- nice try, nice try. Yes, of course, of course. So to always look at like, what is the limiting factor for new vehicles? Because if the -- for the longest time, we've been constrained on total cell lithium-ion production output. And so people said, like, why not bring this other car to market or that other car to market? Well, it doesn't really help if all you're doing is shuffling around the batteries from 1 car to another. In fact, it hurts because you add complexity but you don't add incremental volume. \r\nSo it's sort of pointless, in fact, like counterproductive to add model complexity without solving the availability of lithium-ion batteries. So as we get -- so we want new product introduction to match where the cells are available or that new product to use those cells without cannibalizing the cells of the other cars. That's the actual limiting factor if we need new models, not anything else really.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 67
},
{
"name": "Martin Viecha",
"speech": "Thank you. Let's go to the next question. The next question comes from William Stein from Truist.",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 68
},
{
"name": "William Stein",
"speech": "You started to answer this earlier but I'd like to ask this question about the AI elements of your business and ask if you could comment on progress around Dojo and Optimus and your anticipation for the likelihood, for example, for the company to disconnect the GPU cluster in favor of Dojo and to have some market achievement an Optimus.",
"session": "Question",
"person_id": 256580,
"person_company": null,
"component_order": 69
},
{
"name": "Elon Musk",
"speech": "Yes. I mean, obviously, with -- just we're still at the early stages, there are big [indiscernible] in any predictions. It's like -- I think easy to predict long term but hard to predict the time in between now and then. But it's -- we think Dojo will be competitive with the NVIDIA H1 at the end of this year and then hopefully surpass it next year. And the key there is -- I think what's the energy usage required for a given amount of -- if you're training a frame of video, how -- what's the energy cost required to do that training? \r\nAnd we think probably we said this already actually at AI Day, so it's not new information, but we do see potential for an order of magnitude improvement relative to GPU, what GPUs can do for Dojo, which is obviously very specialized for AI training. It's hyper-specialized for AI training. It's not -- wouldn't be great for other things but it should be extremely good for AI training. \r\nSo just like if you do an ASIC or something, it's going to be better than a CPU. This is sort of, in some ways, like a giant ASIC. And we're able to -- since we're operating one of the biggest GPU clusters in the world already, the -- we've got a good sense of how efficient the GPU clusters operate and what Dojo needs to do in order to be competitive. But we think that it does have a fundamental architectural advantage because it's designed not to be -- the GPU is trying to do many things for many people. We're trying to do graphics, video games. It's doing crypto mining. It's doing a lot of things. \r\nDojo is just doing 1 thing and that is training. And we're also optimizing the low-level software too. So it had a [indiscernible] level so it's just insanely good at efficient training. And the intra-communication between the Dojo modules is extremely high. It's not going across an Ethernet cable. It's like -- so anyway, the -- we see a path to an order of magnitude improvement in the energy efficiency or per given unit of training. But we also have to achieve that. \r\nAnd so when will it be achieved? It's hard to say but we do see a path to get there. And then also on inference, like once you've got something trained, well, if you want to have a product that's a consequence of that training, that product may not be anything to do with cars. Then the efficiency of inference is extremely important. And we also have, by far, the most efficient inference computer at the -- with the FSD computer in the car. This has potential for products that are even really in automotive.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 70
},
{
"name": "Martin Viecha",
"speech": "Thank you. And William, do you have a follow-up?",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 71
},
{
"name": "William Stein",
"speech": "Yes. It sounds like the 1.8 million units you expect this year is supply, not demand-limited supply, it sounds like by the lithium batteries. If you were to become demand limited, can you talk to us about your propensity to use price and your relatively high industry margins to grow units and share?",
"session": "Question",
"person_id": 256580,
"person_company": null,
"component_order": 72
},
{
"name": "Zachary Kirkhorn",
"speech": "Yes. To be clear, the 1.8 million is not cell supply limited. And I mean, we did address that number earlier in the call if you want to answer.",
"session": "Answer",
"person_id": 385023,
"person_company": null,
"component_order": 73
},
{
"name": "Elon Musk",
"speech": "Yes. It's roughly -- cell supply is roughly matched with that. And [ 1.8 million ] cars, if we get lucky, it could be more. And then the rest would go into stationary storage, the Powerwall and Megapack. So yes.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 74
},
{
"name": "Martin Viecha",
"speech": "Okay. Let's have the final question from Adam Jonas.",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 75
},
{
"name": "Adam Jonas",
"speech": "Elon, first question is, is it time for Tesla to significantly expand the captive finco? I mean, you only have like $4.5 billion of receivables. It's basically nothing compared to other big auto companies. And then I have a follow-up.",
"session": "Question",
"person_id": 118469,
"person_company": null,
"component_order": 76
},
{
"name": "Elon Musk",
"speech": "Zach maybe is best to answer that.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 77
},
{
"name": "Zachary Kirkhorn",
"speech": "Yes. I mean, the way that we've been using captive financing so far is to plug what we believe to be gaps in the market of existing third-party products. And so we have a couple of offerings in Europe. We do loans for our energy business, retail energy business here in the U.S. We do leasing and we do a small amount of U.S. loans that are very targeted.\r\nAnd so we're using captives to support market caps, as I mentioned. So basically, it's a vehicle to support vehicle sales, make sure customers have access. I do think there's opportunity here to continue to grow this. We are growing it slowly here. It is a consumer of cash so we're being cautious on how we do that. But the plumbing is in place to do a lot more here. And I think we'll have to see how things unfold over the course of the year and make decisions real time as to how much we ramp it up versus ramp it back.",
"session": "Answer",
"person_id": 385023,
"person_company": null,
"component_order": 78
},
{
"name": "Elon Musk",
"speech": "I think if we see a severe recession this year, which like I said, hopefully, we don't, in severe recessions, cash is king big time because it's in such short supply. So we want to be cautious about using cash for loans and that sort of thing for cars. I feel we're in a very strong position to get through a recession because we really don't have any debt, and we've got over $20 billion of cash, which is great. The cash is earning a ridiculous return, a good return, so it's like nontrivial. And the interest rate actually in the $20 billion is earning like quite a good amount. \r\nAnd I've made this point on Twitter a few times. I'm sure a lot of people on this call understand the fact -- the basic value of a security is a function of the [indiscernible] rate or we'll see how risk-free it really is but the T-bill rate. So if you've got -- I think the -- I recall correctly, the S&P 500 has a long-term rate of return of roughly 6%. And so I think that needs to be very cautious about having Fed rates that potentially exceeds 6%. \r\nLike if we see deflation, and I think we are seeing deflation, then you would add the deflation number to the \"risk-free rate\" from the Fed. And as that starts to exceed 6%, now you're starting to exceed the long-term return of the S&P 500 and starts to become questionable as to why don't just put your money in a savings account essentially instead of in the S&P 500 if the S&P 500 is variable and the bank interest rate is not? This is -- so basically, the is the risk of crushing the value of all equities. Quite a serious danger.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 79
},
{
"name": "Adam Jonas",
"speech": "And just a follow-up. I don't want to steal thunder from March 1 and in Austin, but how close are we to that step change improvement in BoM cost where you could sell an EV for under $25,000 or $30,000 and actually generate a profit, that kind of real moving assembly line moment in manufacturing? Again, I don't want to steal the thunder but just if you wanted to kind of wrap up with thoughts there, that would be helpful.",
"session": "Question",
"person_id": 118469,
"person_company": null,
"component_order": 80
},
{
"name": "Elon Musk",
"speech": "I mean, I'd love to answer -- I'll probably be asking the same question, but we would be jumping the gun on future announcements.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 81
},
{
"name": "Martin Viecha",
"speech": "Fantastic. Thank you very much, everyone, for all your good questions, and we will see you again in 3 months' time.",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 82
},
{
"name": "Elon Musk",
"speech": "Thank you.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 83
},
{
"name": "Martin Viecha",
"speech": "Thank you. Bye-bye.",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 84
}
],
"title": "Tesla, Inc., Q4 2022 Earnings Call, Jan 25, 2023",
"quarter": 4,
"year": 2022
}
},
{
"transcript_title": "Tesla, Inc. - Q3 2022",
"transcript_name": "Tesla, Inc., Q3 2022 Earnings Call, Oct 19, 2022",
"ticker": "NASDAQ:TSLA",
"transcript_url": "https://wkarticles.blob.core.windows.net/finnhub/snp_transcript_2659286",
"date": "2022-10-19",
"year": 2022,
"quarter": 3,
"transcript_data": {
"date": "2022-10-19",
"participant": [
{
"name": "Adam Jonas",
"role": "Analysts",
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"description": "Analysts",
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"transcript_person_id": 118469
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{
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"role": "Analysts",
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"description": "Analysts",
"company_name": "Wells Fargo Securities, LLC, Research Division",
"transcript_person_id": 480193
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{
"name": "Colin Rusch",
"role": "Analysts",
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"job_title": "MD & Senior Analyst and Head of Sustainable Growth & Resource Optimization",
"description": "Analysts",
"company_name": "Oppenheimer & Co. Inc., Research Division",
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{
"name": "Drew Baglino",
"role": "Executives",
"pro_id": 621069668,
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"description": "Executives",
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{
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"description": "Executives",
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{
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{
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"description": "Executives",
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"transcript_person_id": 370659
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{
"name": "Pierre Ferragu",
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{
"name": "Martin Viecha",
"speech": "Good afternoon, everyone, and welcome to Tesla's Third Quarter 2022 Q&A Webcast. My name is Martin Viecha, VP of Investor Relations, and I'm joined today by Elon Musk, Zachary Kirkhorn and a number of other executives. Our Q3 results were announced at about 3 p.m. Central Time in the update that we published at the same link as this webcast. \r\nDuring the call, we will discuss our business outlook and make forward-looking statements. These comments are based on our predictions and expectations as of today. Actual events or results could differ materially due to a number of risks and uncertainties, including those mentioned in our most recent filings with the SEC. During the Q&A session portion of today's call, please limit yourself to 1 question and 1 follow-up. [Operator Instructions] But before we jump into Q&A, Elon has some opening remarks. Elon?",
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"name": "Elon Musk",
"speech": "Thank you, Martin. So just to do a Q3 recap. Q3 was another record quarter on many levels. We had our industry-leading operating margin reach 17%. And our free cash flow surpassed $3 billion in Q3 and approached $9 billion in the past 12 months. As our factories ramp, we're looking forward to a record-breaking Q4. So it really, knock on wood, it looks like we'll have an epic end of year. So Q4 is looking extremely good. \r\nOn the production ramp, Giga Berlin achieved another milestone of 2,000 cars made in a week with very good quality and is ramping rapidly. Giga Austin or Giga Texas should reach this milestone very soon. And in fact, just yesterday, we extrapolated yesterday's hold rate, it would be 2,000.\r\nOur production of 4680 cells has tripled in Q3 compared to the previous quarter. We are finally gaining rapid traction on the 4680 cell. And its output is growing rapidly, and we expect it to start incorporating in cars and having it be a significant portion of our production in Texas in the coming months. We also have our second generation of manufacturing equipment for 4680 cells in Texas, which continues to show great progress along with our original pilot line in Fremont. The Fremont factory team once again reached record production in Q3. And we intend to keep raising production in Fremont. \r\nRegarding Autopilot, at the end of -- at the end of September, we hosted our second AI Day and [indiscernible] the first prototype of our Optimus robot, released updates on our training computer and high range of improvements of full self-driving software. Our vehicles have now driven nearly 60 miles in full self-driving beta mode, and this number continues to grow exponentially. Our goal with that AI Day was to post recruiting, and we've seen a massive influx of world-class artificial intelligence engineer and scientist resume. So it generated a tremendous amount of interest from some of the best AI researchers in the world. I can't emphasize the importance of this enough because I think finally has become clear to the smallest AI technologists in the world that Tesla is among the very best. \r\nSo this quarter, we expect to go to wide release of full self-driving beta in North America. So anyone who has ordered a full self-driving Beta -- full self-driving will have access to the FSD Beta program this year, probably about a month from now. So -- and then obviously, any new -- anyone who buys a car and purchase a full self-driving option will immediately have that available to them. So the safety that we're seeing when the car is in FSD mode is actually significantly greater than the safety we're seeing when it is not, which is a key threshold for going to a wide Beta. \r\nLet's see with respect to demand. We've got a lot of questions about demand in recent weeks. I can't emphasize enough, we have excellent demand for Q4, and we expect to sell every car that we make for as far in the future as we can see. So the factories are running at full speed, and we're delivering a recovery make and keeping operating margins strong. We are still a very small percentage of the total vehicles on the road. Of the 2 billion [indiscernible] trucks on the road, we only have about 3.5 million. So we're about a long way to go to even reach 1% of the global fleet. \r\nLet's see. Kind of based on my -- what people -- based on many things, but certainly questions I get on Twitter about buybacks. And I think every one of our Board members has gotten questions about buybacks. The -- we've debated the buyback idea extensively at the Board level. The Board generally thinks that it makes sense to do a buyback. But we want to work through the right process to do a buyback, but it's certainly possible for us to do a buyback on the order of $5 billion to $10 billion. Even in the downside scenario next year, even if next year is -- was a very difficult year, we still have the ability to do a $5 billion to $10 billion buyback. This is obviously pending Board review and approval. So it's likely that we'll do some meaningful buyback. \r\nSo in conclusion, while the market teams revolve around the short term, it's very important to focus on the long term. I can't emphasize this enough with investors and I think long-time investors, obviously recognize it with Tesla. We have our sort of local ups and downs, but long-term trend has been extremely good. And several years ago, I said, I think on our earnings call, that I thought it was possible for Tesla to be worth more than Apple, which was then the highest cap company, I think, in the market. At that time, I think it was around $700 billion. And I said required incredible execution, at least some luck, and we didn't only achieve that. Tesla went, in fact, or passed Apple's market cap [ time ]. And now, I have the opinion that we can far exceed Apple's current market cap. In fact, I see a potential path with Tesla worth more than Apple and Saudi Aramco combined. So now that doesn't mean it will happen or that will be easy. In fact, I think it will be very difficult. It will require a lot of work, some very creative new products, manage expansion and always luck. But for the first time, I am seeing -- I see a way for Tesla to be -- let's say, roughly twice the value of Saudi Aramco. I think that's -- I haven't quite seen that yet. I mean this is the first time I've seen that potential. \r\nSo we have an incredible product portfolio. I think we've got the most exciting product portfolio of any company on earth, some of which you've heard about, some of which you haven't. We're in the final lap for Cybertruck. We building a Cybertruck line here at Giga Texas and making a lot of progress in the robotaxi platform design. \r\nAnd then with respect to batteries, we're moving as fast as possible to have -- to achieve 1,000 gigawatt hours a year of production capacity in the United States vertically integrated. And our cap load refining, we're moving a ton to do that. \r\nSo I think it's an incredibly exciting future and really an unprecedented future. None of this would be possible without the incredible team that we have here at Tesla. So I'd like to give a huge shout-out to all of our factory employees, engineers, executives and the whole Tesla team. You guys rock. You're the ones that make it happen. Thank you. Thank you, everyone.",
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"name": "Martin Viecha",
"speech": "Thank you very much. And Zach has some opening remarks as well.",
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"name": "Zachary Kirkhorn",
"speech": "Yes. Thanks, Martin. Just to continue on Elon's theme, I just want to thank and congratulate the Tesla team for achieving record vehicle deliveries, production and storage deployments in the third quarter. \r\nOn automotive profitability, our GAAP operating margin was 17.2%, with automotive gross margin at 27.9%. Operating margin is one of our best yet, with improvements in operating leverage. However, Austin and Berlin ramp costs weighed on our margins, particularly if you compare it to Q1. Removing regulatory credits and Austin and Berlin, our operating margins would have been our strongest yet and auto gross margin would have been nearly 30%. Note that while small and growing, each car we build in Austin and Berlin is contributing positively to profitability. \r\nWe also continue to experience margin headwinds associated with macroeconomic conditions, as we've discussed at length on prior calls. In particular, raw materials, logistics and foreign exchange was a big part of this past quarter. \r\nOn energy profitability, we achieved our strongest gross profit yet for this business, driven primarily by record volumes of our Megapack and Powerwall products. Our free cash flows were also a record despite an increase in cars in transit at the end of the quarter, which has a negative impact on working capital. \r\nSpecifically on cars in transit, as noted in our press release on October 2, we've started to experience limits on outbound logistics capacity which we didn't anticipate. This issue is particularly present for ships from Shanghai to Europe and local trucking within certain parts of the U.S. and Europe. Our historical operating pattern of batch building by delivery region leads to extreme concentrations of outbound logistics needs in the final weeks of each quarter. Just to put this in perspective, roughly 2/3 of our Q3 deliveries occurred in September and 1/3 in the final 2 weeks. As a result, we have begun to smooth the regional builds throughout the quarter to reduce our peak needs for outbound logistics. We expect this to simplify our operations, reduce costs and improve the experience of our customers. \r\nAs we look ahead, our plans show that we're on track for the 50% annual growth in production this year, although we are tracking supply chain risks which are beyond our control. On the delivery side, we do expect to be just under 50% growth due to an increase in the cars in transit at the end of the year, as noted, just above. This means that, again, you should expect a gap between production and deliveries in Q4, and those cars in transit will be delivered shortly to their customers upon arrival to their destination in Q1. Boston and Berlin ramp costs will continue to weigh on margins, although we expect the impact to be less than what we saw in Q3. And as Elon mentioned, we are continuing to build as many cars as possible while also maintaining strong operating margins. Thank you.",
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"name": "Martin Viecha",
"speech": "Thank you very much. And let's go first to the shareholder questions. The first shareholder question is given the stringent battery content and assembly requirements for consumer tax credit eligibility under the Inflation Reduction Act, can you speak to Tesla's ability to meet those thresholds in each of 2023, 2024 and 2025 through your existing and planned supply chain?",
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"name": "Elon Musk",
"speech": "Well, yes, I mean I think just at a high level, I'd say, we do expect to fully meet the IRA's requirements. Do you want to add?",
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"name": "Zachary Kirkhorn",
"speech": "Yes. We view that passing of the Inflation Reduction Act there's a significant boost towards accelerating automation, while also scaling the battery supply chain at large in the United States. We expect Treasury to publish detailed guidance by the end of the year. Until such time, it's difficult to fully determine the eligibility criteria, but we believe Tesla is very well positioned to capture a significant share of that for solar storage and also electric vehicles.",
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"name": "Elon Musk",
"speech": "Yes, I'd like to say, we're -- like I said earlier, we're going to go basically pedal to the metal as fast as humanly possible to get to 1,000 gigawatt hours a year of production in the U.S. vertically integrated.",
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"name": "Martin Viecha",
"speech": "Thank you. Let's go to the next question. The next question is, what updates can you offer on the backlog and the recent order intake trends, especially outside of the U.S. and especially in China?",
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"name": "Elon Musk",
"speech": "Well, it's -- there's definitely -- China is experiencing a reverse of a recession of sorts, which is property market, simply from a property market mostly. And Europe has recession of sorts driven by energy. The U.S. actually isn't -- going North -- North America is a pretty good health. The Fed is raising interest rates more than they should, but I think they'll eventually realize that and bring back down again. \r\nDemand is a little higher than it would otherwise be. But as I said earlier, we are extremely confident of the [indiscernible] Q4, and we anticipate continuing to grow our vehicle production sales deliveries by -- on average 50% a year as far into the future as we can see.",
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"name": "Martin Viecha",
"speech": "Thank you.",
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"name": "Elon Musk",
"speech": "Actually I want to caveat, I should say, growing production by [ 50% ] every year because deliveries -- we're trying to smooth out the deliveries and not have this crazy delivery way at the end of every quarter. So in fact, we're just fundamentally running out of -- there weren't enough boats, there weren't enough trains, there weren't enough car carriers to actually support the wave because it got too big. So whether we like it or not, we actually have to smooth out the delivery of cars intra-quarter because there aren't just enough transportation objects to move them around.",
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"name": "Martin Viecha",
"speech": "Thank you. The next question is, do you still expect 50% annualized growth for the foreseeable future? Is this also true specifically for the Chinese domestic market? Do you expect to need to cut vehicle prices or offer incentives in any market to sustain a demand? Or has demand remained stable? Or is it even rising? There are 3 questions there.",
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"name": "Elon Musk",
"speech": "Well, like I said, we want to sort of focus on a high level on what we think is possible here. We -- to the best of our knowledge, we believe that Tesla will continue to grow deliveries and revenue production at a 50% or greater compound annual growth rate. It might occasionally be a year that is a little less, and then some of years would be maybe a little more or a lot more. In some of our out-year planning, we see potential annual growth rates that are in excess of 50%.",
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"name": "Martin Viecha",
"speech": "Thank you. The next question is, can you tell us more about the product feature road map beyond new models and FSD, and especially for interior and powertrain of existing vehicle models?",
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"name": "Elon Musk",
"speech": "Yes. We could, but who wants? Sorry, guys, we can't like jumping on, on future product announcements.",
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"name": "Zachary Kirkhorn",
"speech": "Committed to continuing [indiscernible].",
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"name": "Elon Musk",
"speech": "Yes, we obviously are -- yes. [indiscernible]. But we'll also be committed to continuous growth. Yes. At Tesla, we've always been committed to continuous improvement. So his friends might have asked me like, when should I buy a car, I'm like now because we just keep improving the cars. Always been the latest Tesla. Yes, there's still the latest Tesla. I don't really -- yes, the -- on the gain, we do have some big technology upgrade like Plaid. And by the way, I think the Plaid Model S and X are the best cars on earth. There's nothing even close, in my opinion. Just try one. Epic.",
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"name": "Martin Viecha",
"speech": "Thank you. The next question is, we keep hearing of dire energy crisis in Germany this winter. What are Tesla's plans to combat power cuts? And will there be any delays in ramp-up in production from Giga Berlin because of this?",
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"name": "Zachary Kirkhorn",
"speech": "Yes, I can take that. I think 2 points on this question. The first is just that based upon everything that we know, we don't see this as a large risk to the company. Even if production did go down for a period of time, this is on near term, it doesn't have any impact on the long term of the company.",
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"name": "Elon Musk",
"speech": "But we don't -- we have no indication whatsoever that we will have to cut our production in Germany.",
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"name": "Zachary Kirkhorn",
"speech": "And we put in place backup plans, and we're working through the supply chain as well. Nearly all of our suppliers are prepared as well. So we'll see how this plays out, but it's not something that we're terribly worried about.",
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"name": "Martin Viecha",
"speech": "Thank you. And the next question is, how is production planning going for the Cybertruck? What is the initial Phase 1 production target? When can we expect an update on pricing and final design?",
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"name": "Unknown Executive",
"speech": "Yes. I mean, as Elon said earlier, we'd be facilities preparations here in Giga Texas for Cybertruck. We're still on track to enter early production in the middle of next year. We started our data builds of all of the battery body in the existing...",
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"name": "Elon Musk",
"speech": "When should I drop my beta?",
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"name": "Unknown Executive",
"speech": "In a few weeks. That's going well, and we continue ramping up through the end of next year and into 2023.",
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"name": "Elon Musk",
"speech": "Great. Yes, the car is going to be sick and sick. That is going to be a hall of famer next level. \r\nSorry, sorry, I took it longer than expected, but there were a few things that got in the way, like insane constant global supply chain shortages like FedEx, which are most majors if they ever other one.",
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"name": "Martin Viecha",
"speech": "Right. Thank you.",
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"name": "Elon Musk",
"speech": "Of course. There's Tesla Semi, of course. So we'll be handing over our first production Tesla Semis to Pepsi on December 1. I'll be there in person. And we will begin ramping up production of the Tesla Semi, which is a max low, heavy -- heavy truck. That's a Class A truck, Class A truck.",
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"name": "Zachary Kirkhorn",
"speech": "No sacrifice to cargo capacity.",
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"name": "Elon Musk",
"speech": "Yes, exactly, very important, no sacrifice to cargo capacity, 500-mile range. Just to be clear, 500 miles with the cargo. Yes, 500 miles with the cargo on level ground. Yes, sure. Not up. It's excellent. But the point is it's a long-range truck and even with heavy cargo. And the number of times people all know you can't -- it's impossible to make a long-range heavy-duty Class A truck. And then I'll ask, well, what are your assumptions about what [ hour kilogram ] and what hours per mile, and they look at me with a blank stare and then say hydrogen. I'm like, no, that's not the answer, but I was looking for numbers literally. It's not a number. It's [indiscernible] table. You obviously don't need hydrogen for heavy trucking [indiscernible] you. \r\nAnd we'll be ramping up Semi production through next year. As I think everyone knows at this point, it takes about a year to ramp up production. So we expect to see significant -- we're tentatively aiming for 50,000 units in 2024 for Tesla Semi in North America. And obviously, we'll expand beyond North America. And these would sell -- I don't want to say the exact prices, but they're much more than a passenger vehicle. So with a few thousand heavy trucks of this nature would be worth several Model Ys.",
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"name": "Martin Viecha",
"speech": "Thank you. The next question is, what is the progress of the 4680 cell ramp? And what factors determine whether vehicles get 2170s versus 4680 cells? And how will that change in the next year?",
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"name": "Zachary Kirkhorn",
"speech": "Yes, ramp is going well, as Elon said. Total output is up 3x quarter-over-quarter, and production is tracking to exceed 1,000 car [ cells ] per week this quarter as we said last quarter. Our focus is now shifting from 100% ramp to cost and further expanding production capacity in North America, as Elon also mentioned. \r\nOn the 2170 versus 4680, in our factories, we really attempt to minimize factory complexity and product changeover while still making sure we get enough new product into the field to learn how it is performing. And that sort of mix is going to shift as 4680 scales here and the overall factory ramp [indiscernible] in Texas.",
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"name": "Elon Musk",
"speech": "Right. Basically, production of 4680 ramp is growing exponentially. And yes, it's going well. We're just looking at this -- just going to be a major back to the future.",
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"speech": "[indiscernible]",
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"name": "Elon Musk",
"speech": "Yes. And like I said, we're -- our goal is to strive towards 1,000 gigawatt hours a year of annualized production in United States alone by Tesla, not including [indiscernible] will be on top of that.",
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"name": "Unknown Executive",
"speech": "We need to get 300 to 400 terawatt hours to accomplish our goal.",
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"name": "Elon Musk",
"speech": "Yes, there's roughly -- to transition to sustainable energy, our price calculation for both stationary and vehicles is 300,000 to 400,000 gigawatt hours or 300 to 400 terawatt hours.",
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"name": "Unknown Executive",
"speech": "So when you're like 1 tower assembling a lot, well it's a lot of terawatt hours to get [indiscernible]",
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"name": "Elon Musk",
"speech": "Yes. And on the cathode side, the [indiscernible] we think will probably be iron and most of the iron -- iron can scale to very, very high tonnage and then some nickel. The exact percentages are hard to figure out, but it's probably be as much iron cathodes as they [indiscernible] more. And then there's the manganese wildcard as well. [indiscernible]",
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"name": "Zachary Kirkhorn",
"speech": "No. And on that note, we're pursuing aggressively North American iron supplies. And how -- yes, we can talk more about that at a future date.",
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"name": "Martin Viecha",
"speech": "Yes. Thank you. The next question is on the Semi truck, which we already addressed. So I'm going to skip to the next one. Can you talk about how Tesla could adjust if we were to enter a prolonged recession, including new product prioritization, investment flexibility, new factory versus factory expansion, service support infrastructure, productivity cost measures and demand stimulation alternatives?",
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"name": "Elon Musk",
"speech": "Well, to be frank, we're very pedal to the metal come rain or shine. So we are not reducing our production in any meaningful way. We're essential not recession.",
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"name": "Zachary Kirkhorn",
"speech": "It's the [ 1% point ] come in.",
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"name": "Elon Musk",
"speech": "Yes, exactly. So I think the public, at large, realizes that everyone's moving towards electric vehicles and that it's foolish to actually buy a new gasoline car at this point because the residual value of that gasoline car is going to be very low. So I think we have to be in a very good spot. But I wouldn't say it's recession proof, but it's certainly risk -- recession resilient because basically, it has people both have large part made the decision to move from gasoline cars to electric cars. \r\nAnd then in transitioning a generation to sustainable, you need certain wind with the stationary battery pack to buffer the power. So you have 24/7 power because the wind doesn't go [indiscernible] travel time. So that also -- we actually see the energy storage business, stationary storage, growing more like 150% to 200% a year, much faster than cars by a lot.",
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"name": "Zachary Kirkhorn",
"speech": "Just to add before you jump in, Martin. Just to echo Elon's point, I mean, I think where our cash balance is, what our forecasted cash generation is, where our margins are as a company, I mean we can withstand quite a lot of downside before we would have to dig into our capital plans, Supercharger expansion, product lineup. \r\nSo the business has done quite well over the last handful of quarters. And this is a real opportunity, I think, for the company to press forward, and most [indiscernible], as Elon has mentioned.",
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"name": "Elon Musk",
"speech": "Yes, we try to model out like, let's say, 2023 is a brutal recession year. Even then, we generate meaningful cash. Once you get out of that for [indiscernible]",
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"name": "Martin Viecha",
"speech": "Great. Thank you very much. And let's go to the last investor question, which is the progression from Tesla's first platform with SMX to the second platform with 3 and Y led to a 50% reduction in cost of goods sold. When do you see Tesla's third platform being released? And what level of cost of goods sold reduction could you achieve?",
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},
{
"name": "Elon Musk",
"speech": "Well, we don't want to talk exact dates, but this is a -- I mean, the primary focus of our new vehicle development team, obviously. But at this point, we've done the engineering for Cybertrucks and for Semi. So it's obviously against what we're working on, which is the next-generation vehicle, which will be probably about the cost of 3 and Y platform. It will be smaller, to be clear. But it will, I think, certainly become -- certainly exceed the production of all our other vehicles combined. \r\nI mean, obviously, we're going to take everything we learned from S, X, 3, Y, Cybertruck and Semi into that platform. But we -- as you've said to us many times, we're on a 2-for-1 target. So [indiscernible] we're trying to get to that 50% number again. It's like, we're going to take 2. If that's exactly what [indiscernible], how are we making 2 cars for the amount of effort that we currently take to make 1 Model 3.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 48
},
{
"name": "Zachary Kirkhorn",
"speech": "Effort costs.",
"session": "Answer",
"person_id": 385023,
"person_company": null,
"component_order": 49
},
{
"name": "Elon Musk",
"speech": "Consider.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 50
},
{
"name": "Zachary Kirkhorn",
"speech": "Half the loss, half the past, half the factory floor space.",
"session": "Answer",
"person_id": 385023,
"person_company": null,
"component_order": 51
},
{
"name": "Elon Musk",
"speech": "We're twice the output. And we do believe this can be done. By the way, I should mention that when I said that probably now that I see a path in extremely very difficult path, incredible execution required, a massive amount of hard work and some luck to get to where Tesla with as much as Apple and Saudi Aramco combined, I wasn't including Optimus.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 52
},
{
"name": "Martin Viecha",
"speech": "Thank you. Let's go to analyst questions next. The first question comes from Adam Jonas from Morgan Stanley.",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 53
},
{
"name": "Adam Jonas",
"speech": "Great. Can you hear me?",
"session": "Question",
"person_id": 118469,
"person_company": null,
"component_order": 54
},
{
"name": "Martin Viecha",
"speech": "Yes.",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 55
},
{
"name": "Elon Musk",
"speech": "Yes.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 56
},
{
"name": "Adam Jonas",
"speech": "So Elon, would you consider vertically integrating into mining? That's my first question.",
"session": "Question",
"person_id": 118469,
"person_company": null,
"component_order": 57
},
{
"name": "Elon Musk",
"speech": "We'll do whatever we have to. Without limiting factor is, we'll do. We do not personally constrain ourselves. We don't particularly integrate just for the hell of particularly integrating. Like if there was a great supplier who's better than us or we think actively is very good, or even where the economics of comparative advantage suggests that we should use that supplier, even if we could beat them, but we could use our resources to do something else that will be more productive, then we would in source in that case. But if we have to go mine, we will mine.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 58
},
{
"name": "Adam Jonas",
"speech": "Okay. Thanks, Elon. My follow-up is 1 terawatt hour of manufacturing in the United States, vertically integrated. I guess my question is what would need to change with U.S. permitting laws to allow that? Kind of what would be your message to this administration or next? And do you think you could do a terawatt hour? What's the going price of that? Can you do that for under $100 billion in the States?",
"session": "Question",
"person_id": 118469,
"person_company": null,
"component_order": 59
},
{
"name": "Elon Musk",
"speech": "Well, I mean, I think the message to the government would be that there should be -- I should say, we've actually had conversations with a number of senior government leaders, White House, Congress and whatnot. And the suggestion that we have is that there should be an expedited permitting process for anything which is critical to a sustainable energy future. So it doesn't make sense to put like a coal mine and a sustainable energy battery like lithium mine in the same category. Coal is not of the future, lithium does. And by the way, you can extract lithium with almost no disturbance to the local environment. So it's not actually ugly, nasty find situation. \r\nSo I would recommend expedite permitting would really be helpful. Basically, a fast track environmentally, I think a sense fast track things that are important for the environment and the [indiscernible]. That seems logical. And the reception has been positive. So we'll see if something happens with that. \r\nI think probably on this earnings call, we're not ready to go into financial details of the -- what will take to get there. But what we are seeing is practical improvements as we redesign the whole supply chain and all of the elements that go into battery cell. We're figuring out dramatic efficiencies. And I think we'll -- net result which would be that the capital required to achieve that level output will be much less work than [indiscernible].",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 60
},
{
"name": "Martin Viecha",
"speech": "Thank you very much Let's go to the next question from Colin Langan from Wells Fargo.",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 61
},
{
"name": "Colin Langan",
"speech": "Can you hear me now?",
"session": "Question",
"person_id": 480193,
"person_company": null,
"component_order": 62
},
{
"name": "Martin Viecha",
"speech": "Yes, we can hear you.",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 63
},
{
"name": "Colin Langan",
"speech": "Okay. Sorry about that. Any update on full self-driving? I think you had said a couple of quarters ago, would be available by the end of the year. Is that still possible? Is it -- would it still be like a Level 4 or Level 5 that you're talking about? And are there any sort of regulatory hurdles you'd have to think about?",
"session": "Question",
"person_id": 480193,
"person_company": null,
"component_order": 64
},
{
"name": "Elon Musk",
"speech": "We -- as I said earlier, we're expecting to release the full self-driving software to anyone who orders the package by the end of this year. So a separate matter as to will it have regulatory approval. It won't have regulatory approval at that time. But the call we'll be able to take you from your home to your work, your friend's house, the -- to the grocery store without you touching oil. So it's looking very good.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 65
},
{
"name": "Colin Langan",
"speech": "And it would mean like Level 4, Level 5 kind of traditional definition you're talking about?",
"session": "Question",
"person_id": 480193,
"person_company": null,
"component_order": 66
},
{
"name": "Elon Musk",
"speech": "Well, there's this debate is like what's the -- what are the interventions per mile and maybe safety interventions per mile. Like we're not saying that that's quite ready to have no one behind the wheel. It's just that you will almost never have to touch the control, vehicle controllers. \r\nSo like when I came to Giga Texas from Brent's house, I never touched any controls to already here. And then there is a longer process of like called the 9s of like how many 9s reliability do you need before you could really be comfortable saying that the car could drive with no one in it. And that's some subjectivity as to how many 9s you need. But I think we'll be pretty close to having enough 9s that you're going to have no one in the car by the end of this year. And certainly, without a question, that's whatever in my mind next year. I think we'll also have an update next year able to show to regulators that the car is safer much so than the average human.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 67
},
{
"name": "Colin Langan",
"speech": "Got it. And just as a follow-up. You mentioned in the prior questions about IRA. I mean it sounded like you thought you could get -- can you get all of it? I mean, because my interpretation is like the production credits, battery component credits for buyers seems very likely for you guys. Is the sourcing part of it possible? Because that seems like a pretty tough hurdle given how much has to be sourced from the U.S.?",
"session": "Question",
"person_id": 480193,
"person_company": null,
"component_order": 68
},
{
"name": "Unknown Executive",
"speech": "Yes. So we have a cross-functional team that's looking very closely. As you mentioned, the sourcing threshold increases by the year. So we're looking at all options and also getting some clarification from treasury. That's -- it's important to say that's only a fraction of the other credits. We do manufacture ourselves in the U.S. We manufacture the modules in the U.S. So that's a pretty [indiscernible]. So yes, we feel confident that we'll have a path as these incentives as the threshold sort of increases by the year.",
"session": "Answer",
"person_id": 182536,
"person_company": null,
"component_order": 69
},
{
"name": "Elon Musk",
"speech": "Yes. We'll meet those thresholds..",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 70
},
{
"name": "Martin Viecha",
"speech": "Thank you. The next question comes from Colin Rusch from Oppenheimer.",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 71
},
{
"name": "Colin Rusch",
"speech": "The operating leverage has been pretty impressive here. And I'm curious about areas where you could invest in an incremental way, whether it's on the R&D side or on the sales side to accelerate growth or cost reduction? Or should we be thinking about this level of spend on a go-forward basis and some significant operating leverage as you scale up from here?",
"session": "Question",
"person_id": 310676,
"person_company": null,
"component_order": 72
},
{
"name": "Zachary Kirkhorn",
"speech": "I mean our operating leverage has improved quite a bit. It's the lowest this quarter, I think, ever, and by a decent amount. OpEx as a percentage of revenue. I mean, our forecast is that it will keep reducing. I mean I think the way to think about it is our total amount of operating expenses will slowly tick up as the company grows. It's very hard to keep it flat with the rapid growth of the company, but it's growing much slower. So some amount of growth there, but the top line of the business is growing so quickly. So I think there continues to be enormous opportunity to improve the overhead efficiency of the business, and we're seeing it.",
"session": "Answer",
"person_id": 385023,
"person_company": null,
"component_order": 73
},
{
"name": "Elon Musk",
"speech": "Yes. Look, we are in the -- at least for now, quite in a good position of we're investing in everything we can think of to possibly invest in, and we're still generating cash. So I guess it gets a pretty good place to be.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 74
},
{
"name": "Zachary Kirkhorn",
"speech": "Yes. I mean, how many R&D programs are we running in parallel right now?",
"session": "Answer",
"person_id": 385023,
"person_company": null,
"component_order": 75
},
{
"name": "Elon Musk",
"speech": "People don't even know old R&D so per day. There are some of it, but a bunch of it.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 76
},
{
"name": "Zachary Kirkhorn",
"speech": "I also don't think cash is a good gauge of how much R&D you're doing.",
"session": "Answer",
"person_id": 385023,
"person_company": null,
"component_order": 77
},
{
"name": "Elon Musk",
"speech": "No. It isn't because like it's not like -- it's not like engineers, they're not generic. So it's just like if you could you spend $5 billion or $10 billion, that will like -- that your actual R&D is useful product ship will be proportionate to that. It's just not true. Engineers on coming with some assembly line like cookies or something.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 78
},
{
"name": "Zachary Kirkhorn",
"speech": "Until we get optimistic.",
"session": "Answer",
"person_id": 385023,
"person_company": null,
"component_order": 79
},
{
"name": "Elon Musk",
"speech": "Get optimistic. Don't change things. What matters is where are the most brilliant people working. And Tesla remains the -- Tesla and SpaceX are 2 companies where the smartest engineers want to work.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 80
},
{
"name": "Zachary Kirkhorn",
"speech": "I mean like we don't have to spend billions of dollars to invest in the future and invent the future. Engineers are also cost conscious. And we don't just burn the money out the window when we're trying to do R&D. I would stop looking at like R&D as a cash investment for [indiscernible]...",
"session": "Answer",
"person_id": 385023,
"person_company": null,
"component_order": 81
},
{
"name": "Elon Musk",
"speech": "I think Tesla is frankly worth an infinite number of dollars above inch. Both you could have like a -- almost the number of credit shares and they would not be able to do work [ 1 week ] Tesla we can do. You can't make it up in volume.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 82
},
{
"name": "Martin Viecha",
"speech": "Okay. Thank you very much. Let's go to the next question from George at Canaccord.",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 83
},
{
"name": "George Gianarikas",
"speech": "I think you would -- at your Annual Shareholder event, where Elon mentioned that the prices of many of the materials used in your production have started to come off the boil. If that continues, does that give you an opportunity to adjust prices globally after several increases?",
"session": "Question",
"person_id": 547012,
"person_company": null,
"component_order": 84
},
{
"name": "Elon Musk",
"speech": "Well, we're looking at the prices of -- [indiscernible] prices closely. I mean, obviously, anyone can just Google what the price of future price of copper or steel is going to be. It's just like one Google Search away. And everyone can see that the commodities look on a go-forward basis are on a dropping a lot. But in electric vehicles, things like battery-grade lithium are still crazy expensive. So we've got a mixture of things where prices are dropping and things where prices are increasing.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 85
},
{
"name": "Unknown Executive",
"speech": "I would say quarter-over-quarter, steel, aluminum has stopped anywhere between 17% to 20% at the same time on the battery side.",
"session": "Answer",
"person_id": 182536,
"person_company": null,
"component_order": 86
},
{
"name": "Zachary Kirkhorn",
"speech": "And cost of shipping has come down tremendously. Like last year, the cost of a container on the spot market from Shanghai got as high as $20,000. And now it's $3,500, $3,600. It's that kind of reality. We're seeing deflation in a lot of commodities with a few exceptions as Elon mentioned on batteries.",
"session": "Answer",
"person_id": 385023,
"person_company": null,
"component_order": 87
},
{
"name": "Elon Musk",
"speech": "There's more deflation than inflation.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 88
},
{
"name": "Zachary Kirkhorn",
"speech": "Definitely.",
"session": "Answer",
"person_id": 385023,
"person_company": null,
"component_order": 89
},
{
"name": "Elon Musk",
"speech": "And again, this is publicly available information. Anyone could just Google it. And I think Cathie Wood at Ark Invest is -- I'm going to make this point over and over again, to the Fed and the Fed is not listening because they're looking at the rearview mirror instead of looking out the front windshield.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 90
},
{
"name": "Zachary Kirkhorn",
"speech": "Yes. Just to add a little bit more context. So commodity increases were the highest in Q3 that we've seen over the last 2 years. And so when indexes change, it does take time before they fully reflect.",
"session": "Answer",
"person_id": 385023,
"person_company": null,
"component_order": 91
},
{
"name": "Elon Musk",
"speech": "Yes, there's latency.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 92
},
{
"name": "Zachary Kirkhorn",
"speech": "Yes, there's latency.",
"session": "Answer",
"person_id": 385023,
"person_company": null,
"component_order": 93
},
{
"name": "Elon Musk",
"speech": "That's why I say that the best decisions make sense if you're looking through the rearview mirror, but not if you look out the windshield. And windshield got front windshield.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 94
},
{
"name": "Zachary Kirkhorn",
"speech": "Yes. And so what -- at least of what we know so far, the peak on the commodity side in Q3, I say peak, hopefully, it stays the peak, hopefully, it starts to come down. There is a small amount of production that we're seeing going into our Q4 cost structure from steel and aluminum primarily, but it's less than 10% of the total increases we've seen so far. \r\nSo we're optimistic here based upon what we're seeing on the indexes for some of our cost structure. So this will start to come in over time. But I just want to set expectations that there's not some windfall of cost reduction in this space coming in Q4, maybe some as we go into next year.",
"session": "Answer",
"person_id": 385023,
"person_company": null,
"component_order": 95
},
{
"name": "Elon Musk",
"speech": "Yes. We'll probably see some cost reduction in 2023. I'll be surprised if we did not.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 96
},
{
"name": "George Gianarikas",
"speech": "And just as a follow-up, this is for Elon. With your pending acquisition of Twitter and your stakes in SpaceX and Neuralink and Tesla, how much would the combined companies benefit from operating under a single super structure, if at all, like a Google Alphabet?",
"session": "Question",
"person_id": 547012,
"person_company": null,
"component_order": 97
},
{
"name": "Elon Musk",
"speech": "It starts [indiscernible] what the overlap is. It's not 0, but it's -- I think we're reaching. I'm not worried about it. I'm not an investor. I'm an engineer and a manufacturing person and a technologists. So I actually work and design and develop products. And that's what I do. So it's not a -- we're not going to have a portfolio sort of investments over it. \r\nSo I don't know. I don't see an obvious sort of some get combined under an umbrella, at least right now. So I am excited about the Twitter situation because obviously another part in incredibly well. And I think it's massive that this sort of languished for a long time, but has an incredible potential. Although, obviously, myself and the other investors are obviously overpaying for Twitter right now. The long-term potential for Twitter, in my view, is, in order of magnitude, greater than its current value",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 98
},
{
"name": "Martin Viecha",
"speech": "Let's go to the next question from Pierre Ferragu from New Street Research.",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 99
},
{
"name": "Pierre Ferragu",
"speech": "Can you hear me, guys?",
"session": "Question",
"person_id": 356336,
"person_company": null,
"component_order": 100
},
{
"name": "Martin Viecha",
"speech": "Yes, we can hear you now.",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 101
},
{
"name": "Pierre Ferragu",
"speech": "Great. I'd love to have another update on 4680, Drew. So last time we talked about it, there were -- was it was a question about like scaling up with manufacturing and there were still a few things to get right. Is it fair to say that now you are at scale, and it's just a question of logistics to get bigger? So that's question number one. \r\nAnd then question number two, on the kind of like innovation and cost reduction and efficiency improvements kind of path that you described at the battery day, where are we today? And how much time is it going to take to deliver all the potential you outlined then?",
"session": "Question",
"person_id": 356336,
"person_company": null,
"component_order": 102
},
{
"name": "Drew Baglino",
"speech": "Well, I'll take the second question first. At Battery Day, we showed a time line out to 2026 for all of the ideas we had proposed and had shared with everybody then.",
"session": "Answer",
"person_id": 393478,
"person_company": null,
"component_order": 103
},
{
"name": "Elon Musk",
"speech": "And yes, I'd be surprised. I think we'll do better than that.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 104
},
{
"name": "Drew Baglino",
"speech": "Yes. I mean, but just that's the rough -- just give you all -- it's in that order. It's not like a month. It's not 6 months. It's 6 years. And we are executing on all of those different ideas pretty aggressively in parallel with the OpEx that -- some people think isn't enough, but we're getting it done.",
"session": "Answer",
"person_id": 393478,
"person_company": null,
"component_order": 105
},
{
"name": "Elon Musk",
"speech": "I mean I'm not turning down POs.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 106
},
{
"name": "Drew Baglino",
"speech": "Yes, yes, yes. We're great talent, like we find someone awesome, we bring them into the company. And people shouldn't believe we are turning people away.",
"session": "Answer",
"person_id": 393478,
"person_company": null,
"component_order": 107
},
{
"name": "Elon Musk",
"speech": "Yes. I mean, it's a hot pond but we're solving it. And I think -- we still feel confident that 4680 will be the most competitive battery cell in the world.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 108
},
{
"name": "Drew Baglino",
"speech": "And it's the whole system around it, right? It's not necessarily a specific form factor. It's the attention to detail on how to bring costs out of the manufacturing process -- or remove processing steps.",
"session": "Answer",
"person_id": 393478,
"person_company": null,
"component_order": 109
},
{
"name": "Elon Musk",
"speech": "And all the way down from the mine to the cell.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 110
},
{
"name": "Drew Baglino",
"speech": "Yes, exactly.",
"session": "Answer",
"person_id": 393478,
"person_company": null,
"component_order": 111
},
{
"name": "Elon Musk",
"speech": "Many steps along the way.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 112
},
{
"name": "Drew Baglino",
"speech": "Yes. And for those who watched the YouTube videos, like our on-site cathode facilities coming together, I'm really excited about that, which is a part of the plan that we discussed on Battery Day.",
"session": "Answer",
"person_id": 393478,
"person_company": null,
"component_order": 113
},
{
"name": "Elon Musk",
"speech": "We're possibly lithium refinery.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 114
},
{
"name": "Drew Baglino",
"speech": "In Corpus Christi. So we're making -- putting our money where our mouths are and all the various efforts that we discussed on Battery Day. \r\nOn the technical challenges and the ramp question, which is your first question of 4680, no ramp is ever easy even at the end when you're 80% to the end, like it's still very challenging to get to the end. And that sort of leaning out of yields, the final cycle time to achieve target -- you mentioned logistics. It's not something that we're specifically focused on, I guess, but eventually could be a problem as we're talking about hundreds of gigawatt hours at different sites across the United States. But I would never sit here and say we have no challenges remaining, but we've made a lot of progress reducing technical risk in many areas. Cycle times have dramatically improved. Yield has dramatically improved. And just walking the line here in Texas, like Martin was walking it yesterday, made some comments to me. You really see the acceleration around you. And we've made a ton of simplifications moving from the Fremont factory to Texas, and it's coming to play in speed of ramp here. And of course, that's on 1 line of many here in Texas. So it's not like factory to factory. It's a multiplication of both simplicity and scale. So yes, we're excited about where it's headed.",
"session": "Answer",
"person_id": 393478,
"person_company": null,
"component_order": 115
},
{
"name": "Elon Musk",
"speech": "Yes. And I think, once we are fully integrated, I think we still do see a path to hold roughly $70 kilowatt hour cell -- $70 per kilowatt hour cell before any incentive.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 116
},
{
"name": "Drew Baglino",
"speech": "Before incentive.",
"session": "Answer",
"person_id": 393478,
"person_company": null,
"component_order": 117
},
{
"name": "Elon Musk",
"speech": "Before incentive. Yes.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 118
},
{
"name": "Martin Viecha",
"speech": "Thank you. And the next question comes from Toni Sacconaghi from Bernstein.",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 119
},
{
"name": "Toni Sacconaghi",
"speech": "Yes. I just wanted to follow up on the 4680 cells and where we are seeing them deployed today. So are those in the Semis that are being delivered on December 1? Are we seeing them in Model Ys that are being produced out of Austin? And is -- do you anticipate 4680 being a gating factor for Cybertruck ramp later this year? And how do you balance the need for 4680 across Semi, Cybertruck and potentially Model Y in 2023? And I have a follow-up, please.",
"session": "Question",
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"name": "Elon Musk",
"speech": "Wow. Okay. The Semi doesn't use 4680s. Yes. We are making Model Ys. Some of the Model Ys coming out of Giga Texas are 4680. And I think, Drew, the car you drive around is 4680 Model Y?",
"session": "Answer",
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"name": "Drew Baglino",
"speech": "Yes. 10,000 miles.",
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"name": "Elon Musk",
"speech": "10,000 miles. Pretty good.",
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"name": "Drew Baglino",
"speech": "No problems yet. Yes. Structural back, structural pack.",
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"name": "Elon Musk",
"speech": "Yes. So -- and yes, I mean, and our output 4680 is growing exponentially. So -- but it's worth bearing in mind like there are entire highly competitive companies that are very smart that all they do is make battery cells. This is simply 1 segment of Tesla. So Yes. So it's not a total [indiscernible].",
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"name": "Drew Baglino",
"speech": "No, there aren't -- there are challenges still ahead that we have not yet surpassed. No doubt.",
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"name": "Elon Musk",
"speech": "We don't anticipate this being anything like Cybertruck or anything else.",
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{
"name": "Martin Viecha",
"speech": "Okay. And the last question comes from William Stein from Truist.",
"session": "Answer",
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{
"name": "William Stein",
"speech": "I guess I'll go at one that I asked last time, Elon, which is your expectation for the likelihood of commercial success in each of the 3 major AI endeavors? FSD sort of as imagined without a driver, the training computer and, of course, Optimus?",
"session": "Question",
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"name": "Elon Musk",
"speech": "We'll achieve full self-driving full time -- that occurring is 100%. And I think we'll -- we're almost there. And then, of course, we've got to prove it to regulators and get the regulatory approvals, which is outside of our control. But anyone who's driving full self-driving cars, full self-driving Beta in the car, you can see the rate of improvement. You can just experience for yourself that we are, in fact, getting there. In fact, we almost are there. And so we're probably achieving that 100%. \r\nThe Optimus, probably of that being a successful product, I think, also extremely high given enough time, 100%. \r\nDojo, just maybe more of a question around Dojo. Like can we be competitive with NVIDIA GPUs even as somebody continues to rapidly evolve their GPUs? So the jury is out on Dojo. There's a team [indiscernible] outperform NVIDIA for neural training. The jury's out, we will probably -- I don't know, next year, if that's true or not. But we think we're probably -- we think it's -- this is -- the architecture of Dojo is the right architecture to win. Yes. It depends on how well we execute in that architecture.",
"session": "Answer",
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{
"name": "Martin Viecha",
"speech": "Thank you very much. I think, unfortunately, it's all the time that we have today. So thank you so much for your great questions and look forward to talking to you in about 3 months from now. Thank you, and have a good day.",
"session": "Answer",
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"name": "Elon Musk",
"speech": "Thanks, everyone.",
"session": "Answer",
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"title": "Tesla, Inc., Q3 2022 Earnings Call, Oct 19, 2022",
"quarter": 3,
"year": 2022
}
},
{
"transcript_title": "Tesla, Inc. - Q2 2022",
"transcript_name": "Tesla, Inc., Q2 2022 Earnings Call, Jul 20, 2022",
"ticker": "NASDAQ:TSLA",
"transcript_url": "https://wkarticles.blob.core.windows.net/finnhub/snp_transcript_2601728",
"date": "2022-07-20",
"year": 2022,
"quarter": 2,
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"transcript": [
{
"name": "Martin Viecha",
"speech": "Good afternoon, everyone, and welcome to Tesla's Second Quarter 2022 Q&A Webcast. My name is Martin Viecha, VP of Investor Relations; and I'm joined today by Elon Musk, Zachary Kirkhorn and a number of other executives. Our Q2 results were announced at about 3:00 p.m. Central Time in the update deck we published at the same link as this webcast. \r\nDuring this call, we will discuss our business outlook and make forward-looking statements. These comments are based on our predictions and expectations as of today. Actual events or results could differ materially due to a number of risks and uncertainties, including those mentioned in our most recent filings with the SEC. [Operator Instructions] But before we jump into Q&A, Elon has some opening remarks. Elon?",
"session": "Presenter Speech",
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"name": "Elon Musk",
"speech": "Thank you, Martin. So just as a Q2 recap, Q2 was a unique quarter for Tesla due to a prolonged shutdown of our Shanghai factory. But in spite of all these challenges, it was one of the strongest quarters in our history. Most importantly, in June, we achieved production records in both Fremont and Shanghai. And as a result, we have the potential for a record-breaking second half of the year.\r\nI do want to emphasize this is obviously subject to force majeure, things outside of our control. The past [ few ] years have been quite a few force majeures, and it's been kind of supply chain hell for several years. Credit to our awesome Tesla supply chain team for overcoming and difficult challenges. And huge thanks to the Tesla Shanghai factory team who sacrificed a lot to get the factory back up and running in June and achieve a record output. \r\nSo also making good progress with production ramp with Berlin. We achieved an important milestone of 1,000 cars a week in June. And we're expecting -- sorry, our Giga Texas to exceed the 1,000-vehicle per week milestone and hopefully in the next few months. To be clear, we're currently making the cars with the 2170 cells, and Drew Baglino will address some of the 4680 questions later in this call. But it is worth emphasizing that we have enough 2170 cells to satisfy all vehicle production for the remainder of the year. \r\nSo we're not dependent on 4680. 4680 will be important next year but it is not important for this year. That said, we have installed the second generation of manufacturing equipment for 4680 cells in Texas. And even at our established factories like Fremont and Shanghai, we continue to expand capacity. \r\nRegarding Autopilot, we have now deployed our FSD beta with City Streets driving capability to over 100,000 owners. They're very happy with the capability of the system and we'll continue to improve it every week. We've now driven over 35 million miles with FSD beta. That's more autonomous miles than any company we're aware of, I think probably more than -- it might be more than any -- all other companies combined. So -- and that mileage is growing exponentially. \r\nWith regard to manufacturing and technology, about 5 or 6 years ago, we said we wanted to become the best manufacturer in the world and that is somewhat counterintuitively, to some people, will actually be, I think, our strongest competitive advantage. We're super pro-manufacturing here at Tesla. And in general, we want to encourage other companies to be super pro-manufacturing. And in general, I think it is a very important thing to do. \r\nWe need to make stuff and make it efficiently and that's manufacturing. So we've made a lot of advancements in manufacturing processes. As we now show in the shareholder deck, thanks to our -- the large castings, we make the world's largest castings. We reduced body welding robot count by 70% per unit of capacity in Austin and Berlin. So that's, call it, roughly a body shop that is roughly 3x smaller than would normally be the case. And I should say it's also lighter, cheaper and has superior noise vibration harshness. \r\nSo it's good on every level. But this journey is not over. We'll bring another level of simplicity and manufacturing improvements with Cybertruck and future products that we're not quite ready to talk about now but I think will be very exciting to unveil in the future. \r\nOur safety team also introduced a feature that tension seat builds, if the vision system detects imminent collision, which has never been done before. So you can imagine that if you have a seatbelt that only tensions upon impact, you have very little time to tension the seatbelt. If you've got to be -- the car has got to be crunching to trigger the seatbelt tensioner. But because we have vision, we can actually see that a collision is about to occur with 100% probability before it actually happens. \r\nAnd so we can tension the seat belts, and we can even adjust the airbag deployment because we can see, not just feel. This is a fundamental safety advantage that Teslas are now able to offer. And there's also an over-the-air update, so this is something that will be in place in all cars that have at least AP3 hardware. \r\nIn conclusion, we exited Q2 with a strong production rate than ever before. Our team continues to focus on Cybertruck production readiness and some future platform design. We are expecting to be -- still expecting to be in production with the Cybertruck in the middle of next year. And we're very, very excited about that product. I think it might actually be our best product ever.\r\nLet's see. FSD beta is on track to be released for all of North American customers before the end of this year. And hopefully, if we get regulatory approval, we'll also be releasing it hopefully in Europe and some other parts of the world.\r\nWe're hosting our AI Day in a few months. I think people will be amazed at what we're able to show off in AI Day. So basically, there's a tremendous amount to look forward to in the second half of this year. And I want to thank all of our employees and suppliers for their super hard work during these challenging times. Super appreciate it. Thank you.",
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{
"name": "Martin Viecha",
"speech": "Thank you very much. And Zach has some opening remarks as well.",
"session": "Presenter Speech",
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"name": "Zachary Kirkhorn",
"speech": "Yes. Thanks, Martin. I want to start by congratulating the Tesla team on an excellent execution during the second quarter. Although our production volume reduced sequentially due to COVID-related shutdowns in Shanghai, we made substantial progress in nearly every area of the business, and in particular, our global vehicle production rate as we exited the quarter.\r\nOur Fremont factory, supported by our Reno team, reached new production records. The Shanghai factory resumed full production, and our new factories in Austin and Berlin are progressing well through their initial ramps. Additionally, our energy business achieved record gross profit with the highest solar volumes in many years. I want to personally thank the entire Tesla team, as I know many of you are listening. You've embodied a remarkable and relentless pursuit of excellence in support of our mission. I also want to thank our suppliers for their support during another complicated quarter. \r\nOn GAAP automotive gross margin, it declined sequentially to 27.9%. The temporary decline in Shanghai production volume meaningfully impacted margin, including idle capacity and factory restart costs and also had implications on the mix of regional deliveries. Additionally, as discussed on previous calls, we are working through the ramp inefficiencies of our new factories, which are progressing well but have had an impact on margin as those factories come online. While we continue to see a benefit from higher pricing flowing through, which experienced some foreign exchange-related headwinds, our cost structure continues to experience cost increases from inflation, commodities and logistics. \r\nThe energy business progressed well in Q2, aided by alternate solar supply coming online and progress on unit economics. Our storage business remains component-constrained on both Powerwall and Megapack, which we hope will alleviate to some extent in the second half of the year. We are greatly appreciative of the patience and flexibility shown by our customers while we work through these challenges. \r\nWithin operating expenses, Boston and Berlin-related start-up costs have wound down as these factories have moved into production and their costs are now reflected in automotive COGS. Additionally, we converted a majority of our Bitcoin holdings to fiat for a realized gain, offset by impairment charges on the remainder of our holdings, netting a $106 million cost to the P&L included within restructuring and other. We also incurred restructuring charges related to targeted staffing reductions.",
"session": "Presenter Speech",
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"name": "Elon Musk",
"speech": "Yes, actually, it should be mentioned that the reason we sold a bunch of our Bitcoin holdings was that we were uncertain as to when the COVID lockdowns in China would alleviate. So it was important for us to maximize our cash position, given the uncertainty of the COVID lockdowns in China.\r\nWe are certainly open to increasing our Bitcoin holdings in future, so this should not be taken as some verdict on Bitcoin. It's just that we were concerned about overall liquidity for the company, given COVID shutdowns in China. And we have not sold any of our Dogecoin.",
"session": "Presenter Speech",
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{
"name": "Zachary Kirkhorn",
"speech": "We still have it.",
"session": "Presenter Speech",
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{
"name": "Elon Musk",
"speech": "We still have our Dogecoin.",
"session": "Presenter Speech",
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{
"name": "Zachary Kirkhorn",
"speech": "Despite these challenges, we were still able to achieve one of our strongest operating margins of 14.6%. Our free cash flows were impacted by working capital related to the Shanghai factory shutdown. However, we expect this will show as a benefit in Q3 as our working capital-related cash flows restabilize. \r\nAs we look ahead and as Elon mentioned, we are positioned for a record-breaking second half of the year. We're quite excited about this. A couple of things to keep in mind as we progress. Austin and Berlin ramp inefficiencies will continue to weigh on our margins for the balance of the year. However, the impact should reduce as we increase ramp.\r\nSecond, as we've mentioned before, we expect to continue to see recognized global pricing to increase as our backlog flows through. However, macroeconomic-related cost increases will also continue to be part of our story. And finally, despite losing more builds in Q3 than expected, we're still pushing to reach 50% growth this year. This target has become more difficult but it remains possible with strong execution. And as Elon mentioned, no more force majeure events for the balance of the year.",
"session": "Presenter Speech",
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"name": "Elon Musk",
"speech": "Yes, a lot of force majeure in the last several years, that's for sure.",
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{
"name": "Zachary Kirkhorn",
"speech": "Thank you.",
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"name": "Martin Viecha",
"speech": "Thank you very much. And now let's go to the questions from investors. And the first question is, Chinese EV manufacturers seem to be doing a better job than their Western competitors, excluding Tesla, at innovating in software and design. How can Tesla make sure the company is staying ahead of those manufacturers, both within China and outside of China?",
"session": "Answer",
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"name": "Elon Musk",
"speech": "Well, the -- right now, the best Chinese EV manufacturer is Tesla train. We're actually doing the best, thanks to our incredible team in China. But I have a lot of respect for the Chinese, our manufacturers and EV manufacturers in particular. I think they will be a force to be reckoned with worldwide. They're very -- they're smart and they're hardworking. And I think anyone who is not -- any company that's not as competitive as them will obviously suffer a share decline. So obviously, we have a lot of respect for the current companies in China and then their capabilities, yes.",
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"name": "Martin Viecha",
"speech": "Thank you. The next question is, when will Tesla have a unified vector space for both static and moving object network? Will this be a [ V11 ] or later version? If the latter, can you explain what makes it a difficult problem in layman terms?",
"session": "Answer",
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"name": "Elon Musk",
"speech": "Okay. This will be understood by 0.01% of the audience, I think. I suppose people want to find out what a unified factory space would actually mean. It essentially would be if you can take -- if instead of netting together static and dynamic objects in C++, if they could be net together at the neural net level, then you don't need to reconcile them within C++ heuristics. \r\nThat is an architecturally better way to -- that's the most desirable outcome. It's -- I think it's probably not necessary to achieve full self-driving, but it would be a slight improvement in the efficiency of the self-driving. And it's certainly something we want to get to. Yes. The sort of nirvana situation is you have surround video/auto labeling of all static and dynamic objects. And you have then surround video inference with spatial memory as well. \r\nThen that's -- I mean, I think we're almost certainly there before the end of the year. Yes, I'm not sure how many you would understand that. But I should say also, we are also confident of improving the frame rate as we some of the legacy neural nets, we think we might be able to get to the frame rate of what the -- of [indiscernible] camera is maybe up to 36 fps, which is actually a lot of frames, considering its [indiscernible] cameras. It's certainly comfortably above 24 frames, which is basically the movie frame rate of movies.",
"session": "Answer",
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"name": "Martin Viecha",
"speech": "Thank you. The next question is Elon recently tweeted about lowering prices once inflation cools down. Can you elaborate on what do you mean by cooling down and how aggressively the company will lower prices? More broadly, how do you think about the auto pricing long term?",
"session": "Answer",
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"name": "Elon Musk",
"speech": "Yes. So since we have -- there's a quite a long wait when somebody orders in a car, in some cases, 6 months; in some cases, it could be up to a year. We have to anticipate what the probable inflation rate is over that period of time. So that's what we're trying to do. When we -- when or if we see indications that the inflation rate is declining, then we would not need to increase our car prices. It's possible that there could be a slight decrease in car prices, but this is fundamentally dependent on macroeconomic inflation. It's not something we control. \r\nIf I were to guess, and I would take this with a grain of salt, I think inflation will decline towards the end of this year. We're certainly seeing prices of commodities trending lower. Yes. But take it with a grain of salt. This is -- making economic prognostication is fraught with error. I don't know if you guys want to -- do you want to say anything about...",
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"name": "Drew Baglino",
"speech": "Yes. We're certainly seeing, I mean, it's kind of a whole spectrum. On the battery metal side, for example, the price of lithium has really shot up. We used to be $11 a kilogram to more than $80 a kilogram. But it's -- not every situation is that bad so it's kind of a spectrum.",
"session": "Answer",
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{
"name": "Unknown Executive",
"speech": "Carbon steel, aluminum, [indiscernible] carbon steel and aluminum has started trending down. We will see the benefits of it only probably later part of this year or early next year.",
"session": "Answer",
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"name": "Elon Musk",
"speech": "Yes. But I think that's just like for most commodities, we're seeing a downward trend towards the end of this year or next year. Some commodities, the pricing of lithium is insane. I would like to, once again, urge entrepreneurs to enter the lithium refining business. The mining is relatively easy. The refining is much harder. \r\nSo lithium is actually a very common -- sort of very -- like lithium pretty much everywhere. But you have to refine the lithium into battery-grade lithium carbonate and lithium hydroxide, which has to be extremely high purity. So it is basically like minting money right now. There's like software margins in lithium processing right now. So I would really like to encourage, once again, entrepreneurs to enter the lithium refining business. You can't lose. It's licensed to print money.",
"session": "Answer",
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"name": "Martin Viecha",
"speech": "Thank you. The next question is you made the right economic call before most on inflation when you diversified into Bitcoin. It has since shown it's not much of a hedge in the real-world test the last few months. How do you think about it as an asset over long term? And what do you need to see to change your view?",
"session": "Answer",
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{
"name": "Elon Musk",
"speech": "Well, Tesla is -- Tesla's goal is to accelerate the advent of sustainable energy. We're not really -- cryptocurrency is a sideshow to the sideshow. We're not a -- cryptocurrency is not something we think about a lot. We think a lot about scaling production and accelerating the advent of sustainable energy, which the record heat waves around Earth, so to emphasize the urgency of that transition. \r\nSo that is what we're trying to do is make electric vehicles and solar and stationary storage battery packs. But the 3 pillars of a sustainable energy future, which is like solar and wind for energy generation, stationary battery packs for storage of the solar energy because of its intermittency and then electric vehicles, the third pillar. And if those 3 things are solved, we have a sustainable future for civilization. \r\nAnd the fundamental good of Tesla and the reason we're doing this, so certainly, my primary motivation here is to have the day of sustainable energy comes sooner. That's our goal. We're neither here nor there on cryptocurrency.",
"session": "Answer",
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"name": "Martin Viecha",
"speech": "Thank you. The next question on 4680. Elon noted that 4680 plus structural pack is not yet optimized. Can you please share the general path of 4680 in structural packs in terms of cost efficiencies when compared to the traditional 2170 pack? Will cost improvements be mostly due to scale or do we need to solve some technical issues?",
"session": "Answer",
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"name": "Drew Baglino",
"speech": "Yes, do you want to do the architecture?",
"session": "Answer",
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"name": "Elon Musk",
"speech": "Yes. So structural pack where we get dual use of the battery cells as structure and as energy storage in the same way that an aircraft gets dual use of the wing as a fuel tank and as a wing is, I think, unequivocally, from a physics standpoint, the superior architecture. It's the A architecture. \r\nNow because it is new, we'll start off getting, I don't know, aspirationally a C within an A architecture. But the potential is there for to get radically better and then unequivocally better than a battery pack, which is carried like a sack of potatoes.",
"session": "Answer",
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"name": "Drew Baglino",
"speech": "Yes. And we've gained the perspective through putting our first structural pack in production that it is actually the A architecture. Like before we did that, it was a hypothesis that was backed with -- I got a lot of modeling and first principles analysis. And now we've actually built and are more confident in that assertion.",
"session": "Answer",
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"name": "Elon Musk",
"speech": "Yes. So exactly. So the structural pack, even the C and the A architecture is beating the nonstructural pack. And so over time, it will, with further refinement, be substantially superior to that is carrying a battery pack as though it is cargo. And this is like -- it's very much very analogous to the early days of aviation where fuel tanks were initially carried like cargo until they realized actually, you should get dual use of a fuel tank as a wing and as fuel tank. And that makes the planes lighter and better. And the same is true of electric vehicles.",
"session": "Answer",
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"name": "Martin Viecha",
"speech": "And on cost improvements, are they due to scale or about solving technical issues?",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 26
},
{
"name": "Elon Musk",
"speech": "Yes. Yes. I mean really, the 2 things that improve costs are economies of scale and tech and core technology.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 27
},
{
"name": "Drew Baglino",
"speech": "Yes. I think technical issue is not the right.",
"session": "Answer",
"person_id": 393478,
"person_company": null,
"component_order": 28
},
{
"name": "Elon Musk",
"speech": "Technical issues like",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 29
},
{
"name": "Drew Baglino",
"speech": "Getting to the optimal design, right? Like you always start with some access. Some people might call it that, but that's not really what you think it is initially. It's that you don't know how you can get it until you've done it a couple of times.",
"session": "Answer",
"person_id": 393478,
"person_company": null,
"component_order": 30
},
{
"name": "Elon Musk",
"speech": "Yes. I mean there's some platonic ideal of the perfect product where the atoms -- you have exactly the right atoms and they're in exactly the right position, and you asymptotically approach this platonic ideal. But it takes a lot of effort over time to figure out actually what is the platonic ideal and then actually gradually approach that.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 31
},
{
"name": "Drew Baglino",
"speech": "Yes. I mean, you might need to create a new alloy. Then you need to figure out how to cast it, then you need to ramp the casting machine with the new alloy.",
"session": "Answer",
"person_id": 393478,
"person_company": null,
"component_order": 32
},
{
"name": "Elon Musk",
"speech": "We did.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 33
},
{
"name": "Lars Moravy",
"speech": "We've done it for We've done it castings. Yes. But those take time.",
"session": "Answer",
"person_id": 482177,
"person_company": null,
"component_order": 34
},
{
"name": "Drew Baglino",
"speech": "On improvement is something we're used to here, and it's something like we've done with their vehicles and our design since the beginning. I mean, even we're talking a couple of weeks ago, like the first version of the front casting that we made that went into the early vehicles is like...",
"session": "Answer",
"person_id": 393478,
"person_company": null,
"component_order": 35
},
{
"name": "Elon Musk",
"speech": "I mean, Model S stage.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 36
},
{
"name": "Drew Baglino",
"speech": "No, I'm talking about like first Model Ys. Since we've ordered more dies because bringing more dies for more production, we've saved like 4 or 5 kilos with just die iteration. And that's something we do at Tesla like quite regularly and we'll continue to do. So we're not happy with a C, like maybe we're at a C-plus now because I think we got to keep going to B-minus.",
"session": "Answer",
"person_id": 393478,
"person_company": null,
"component_order": 37
},
{
"name": "Elon Musk",
"speech": "On the rear casting. But this will transfer for improvement with the casting. So the casting is already way better than the rare body casting is already way better than the -- on the way is done in the past where you've got 120 different parts that are welded together or bonded together with different alloys and then you have to put sealant in between all the various parts for water ingress and noise. \r\nSo we're already way better than that with current casting, but there's still a lot of opportunities to reduce the master casting and also extend the casting to include more parts as well as adapt the rest of the vehicle for the fact that there's a cast.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 38
},
{
"name": "Drew Baglino",
"speech": "Yes, I was going to say the same thing, right? Like we're not just evaluating the pack and insulation either. It's the pack plus the body, the integration, do we have mass in the right places, we have the cost in the right places and only just the right amount. And I think we've gone through 1 iteration. We're going to do another 1 with Cybertruck. I mean, we're taking the learnings and doing -- the next version hopefully is a B-plus in A architecture. That's certainly a target.",
"session": "Answer",
"person_id": 393478,
"person_company": null,
"component_order": 39
},
{
"name": "Martin Viecha",
"speech": "Thank you. The next question is, how do you feel the progress of FSD is going? And does Andre leaving have any significant impact on time lines or potential progress?",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 40
},
{
"name": "Elon Musk",
"speech": "Well, since Andre was writing all the code by himself, naturally, things have come to a grinding halt. And irony. So Andre's also we have respect for Andre. He's decided to -- I think he wants to contribute more to, I think, core AI at an academic level and get back to coding individually. \r\nBut we've got a team of about 120 people in our software AI group that are extremely talented. And I think we will have -- I'm highly confident we will solve full self-driving and it still seems to be this year. I know people are like says that. But it does seem to be epic. It does seem as though we are converging on full self-driving this year.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 41
},
{
"name": "Martin Viecha",
"speech": "Thank you. The next question is, how is the 4680 ramp going? And is Giga Texas producing cells yet?",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 42
},
{
"name": "Drew Baglino",
"speech": "Yes. So we are making progress on 4680. But right now, as Elon mentioned, we are leveraging supplier cells, which we have in sufficient quantity to ramp Texas and Berlin. We expect to ramp total 4680 production to exceed 1,000 per week by the end of the year, hopefully before -- well before. \r\nIn Q2, at we fully automated Pattern Vance for the dry in electrode tool there, unlocking major increases in production and improvements in yields. Since March because of that, output has grown about 35% month-over-month each month since, and yields throughout the factory are already at targets in most areas and trending in that direction and a few others. \r\nWe did feed learnings from Fremont cell and pack lines to Texas and Berlin there, a carbon copy. design was revved to unlock higher performance and manufacturing simplicity. Manufacturing lines were further integrated and we in-sourced additional content. For these reasons, there are some new ramp challenges to overcome in Texas and Berlin. \r\nSpecific to Texas last quarter, cell equipment was fully installed and commissioned and we produced our first commissioning car sets of cells through the end of the line. Our target for Texas is to begin production this quarter and aim for Texas to be capable of exceeding Kato weekly output before the end of this year.",
"session": "Answer",
"person_id": 393478,
"person_company": null,
"component_order": 43
},
{
"name": "Martin Viecha",
"speech": "Thank you very much. The next question is on 4680 as well, but I think Drew has covered everything that was in the next question. So the following question is with regards to the ramp of production in Austin and Berlin. How is the situation with regards to supply of semiconductors, battery cells and other components? How about cost inflation impacting profitability of these other plants?",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 44
},
{
"name": "Drew Baglino",
"speech": "I can take that. So Tesla procures about 1,600 unique pieces of silicon from 43 semiconductor companies. So with a portfolio of that size, there are always challenges. Things are more stable on the latest generation chips. We still see some tightness in the older generation semiconductors, especially in the analog and mixed signal space. But we have line of sight to solve for the volumes being contemplated for both Austin and Berlin. \r\nAnd on the cell front, like Elon mentioned, we have a comfortable margin, thanks to record output from our partners and have line of sight that matches the planned output from both factories. We've grown cell production significantly on a 12-month rolling basis and have long-term contracts with all our partners for key battery metals. So we don't see any major problems for the components, of course, barring unforeseen COVID-related shutdowns.",
"session": "Answer",
"person_id": 393478,
"person_company": null,
"component_order": 45
},
{
"name": "Zachary Kirkhorn",
"speech": "Just to add on the profitability part of the question. Q2 was our largest increase yet over the last handful of quarters on inflation and commodity-related increases to our cars. It's fairly evenly spread across the factories, given common suppliers or common issues that impact the broad supply chain.\r\nSo I think I had mentioned before that we have been seeing increases over the course of last year. It ticked up in Q1 and then it ticked up again at the rate of increase was more in Q2. So as we look through to the end of the year, what we're seeing is we don't think the inflation-related increases in Q3 will be as big as Q2. But as Elon has mentioned, there is uncertainty on pricing here. \r\nAnd we don't have full exposure, as had just mentioned, on every component of cost because we do have some contracts in place. But there are some spot buys as well and some contracts being renegotiated. So we're managing it with pricing and in partnership with our suppliers but it does continue to be something that is impacting our financials.",
"session": "Answer",
"person_id": 385023,
"person_company": null,
"component_order": 46
},
{
"name": "Martin Viecha",
"speech": "Thank you very much. And the last question is, when will the Cybertruck be officially available?",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 47
},
{
"name": "Elon Musk",
"speech": "We're hoping to start delivering them in the middle of next year.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 48
},
{
"name": "Martin Viecha",
"speech": "Great. Thank you very much. And now let's go to analyst questions. The first question comes from Pierre Ferragu from New Street Research. Pierre, feel free to unmute yourself.",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 49
},
{
"name": "Pierre Ferragu",
"speech": "I'd like to ask like a question on 4680 and the structural battery pack. And I'd love to understand where you stand on the technology and efficiency and energy density road map that you described at the Battery Day. So what I'm trying to understand is where do you stand on the architecture of the battery cell itself? How much silicon do you have in it? How much energy improvement have you achieved already so far? Sorry. \r\nAnd the reason why I'm asking that is because you have like very smart guys on Twitter who shared experience about trying to fully empty a Model Y from Texas from Austin and noticing behaviors and like recharging behavior that suggested that maybe these cars had like very, very high mileage, very high range, and were like artificially limited in range in software. So I'm just kind of trying to understand how much of an edge you're building at the moment with the 4680 and the battery back on range.",
"session": "Question",
"person_id": 356336,
"person_company": null,
"component_order": 50
},
{
"name": "Drew Baglino",
"speech": "Yes. Let me just try to provide like a super straightforward answer. Like as Elon mentioned before, our priority was really on simplicity and scale during the initial 4680 and structural battery ramp. So we weren't like putting all the bells and whistles in from day 1 because if so, we would be sort of suffering under a string of serious miracles that we would need to achieve to get going. \r\nBut as we attain the manufacturing goals that we've stated at the ramp that we need to hit next year, we are certainly planning to layer in new material technologies and higher-range structural packs, like we're not like holding back goodies for some rainy day or something like that.",
"session": "Answer",
"person_id": 393478,
"person_company": null,
"component_order": 51
},
{
"name": "Elon Musk",
"speech": "Yes. Maybe another way of putting it is that the -- our focus right now is on the dozens of little issues that inhibit the production ramp of the 4680. Some of the more challenging ones have been feeding the anode-cathode material because we're using this revolutionary dry electrode process. But when something is revolutionary, it's a lot of unknowns that have to be resolved. \r\nSo we're confident of resolving those unknowns but it's very difficult. It's -- yes, we're making rapid progress on that point. So the first order of business is really get the basics right, get to high volume and high reliability and then very rapidly iterate within that to enhance the energy density and reduce the cost of the cell.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 52
},
{
"name": "Drew Baglino",
"speech": "Totally agree, yes.",
"session": "Answer",
"person_id": 393478,
"person_company": null,
"component_order": 53
},
{
"name": "Elon Musk",
"speech": "I'd say we are highly confident of a good outcome. It's the exact counterpoint of that is perhaps is of some debate but the outcome is not.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 54
},
{
"name": "Drew Baglino",
"speech": "Yes. Specific to the dry process, we made a major advance this past quarter in Kato that the team is really excited about, and congrats to the team for achieving that.",
"session": "Answer",
"person_id": 393478,
"person_company": null,
"component_order": 55
},
{
"name": "Elon Musk",
"speech": "But I should also emphasize that it is not as though Tesla intends to displace our suppliers of battery cells. The Tesla battery cell production is in addition to what our suppliers can do. And we want our suppliers to grow their battery output as fast as they possibly can, and that goes for the entire supply chain. \r\nThe fundamental rate limiter for both transitioning to sustainable energy is how fast can you grow with the amount battery output per year? This is the fundamental rate limiter for transition to sustainability because you need the batteries for 2 of the pillars of sustainability, the stationary storage and for vehicles. So yes.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 56
},
{
"name": "Drew Baglino",
"speech": "Yes, I just want to stress that a lot of these higher energy density technologies are not necessarily scalable. I mean, most of them are not scalable from what I've seen. And so like focusing on them is a distraction from the mission, like it really is how do we scale as fast as possible? \r\nAnd we're taking these risks that we've discussed at Battery Day. And our plan is as we derisk them and they are successful, we want to bring them back to our partners so that they can go faster, too, because that's all on the mission, right, like how do we accelerate.",
"session": "Answer",
"person_id": 393478,
"person_company": null,
"component_order": 57
},
{
"name": "Elon Musk",
"speech": "People often ask me, if you often ask me, is some breakthrough needed in battery technology for the world to transition to sustainability? The answer is no. Even if there was 0 technology breakthroughs, so literally 0 from where the technology is right now, we could fully transition Earth to sustainable energy. The issue is very much the rate at which the entire supply chain from mining to refining to cell production. How fast can that grow? It's growing fast with the faster it grows, the faster we transition to a sustainable energy economy.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 58
},
{
"name": "Pierre Ferragu",
"speech": "This is actually a great exactly where my follow-up is. So Elon, you always mention this 50% per annum sustainable growth target that you guys have. And so my question here is when we see like the difficulty regarding the commodities, raw materials, swinging prices, I'm kind of wondering, as you are planning for this 50% per annum growth, if we stand today over the next 5 to 10 years, how much of that do you feel you've secured through your work at entering into long-term contracts and things like that? And you were calling for entrepreneurs to go into the lithium business. \r\nSo does that mean you don't have enough lithium secured to grow 50% per annum over multiple years? And what's -- how much of that is secured today? And how fast can you improve that basically?",
"session": "Question",
"person_id": 356336,
"person_company": null,
"component_order": 59
},
{
"name": "Elon Musk",
"speech": "Well, I think it's very difficult to predict anything 10 years from now. I hope civilization is still around, frankly. I don't count that as a win.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 60
},
{
"name": "Pierre Ferragu",
"speech": "Not that fun.",
"session": "Question",
"person_id": 356336,
"person_company": null,
"component_order": 61
},
{
"name": "Elon Musk",
"speech": "Yes, exactly. Hopefully, we haven't had World War III by then. So the -- we do see constraints in refining of the materials necessary lithium ion batteries. I do want to emphasize this as -- it is not due to a scarcity of the raw material. In the case of lithium, lithium is one of the most common elements on Earth. It's pretty much everywhere. \r\nBut refining of the lithium into ultra-high purity battery-grade lithium hydroxide, lithium carbonate is quite difficult and requires a massive amount of machinery and it's a hard thing to scale. As it was also difficult to create the anode and cathode. I think -- my guess is maybe 2/3 of batteries will be iron phosphate or maybe iron phosphate with some manganese. And there's plenty of -- there's a ridiculous amount of iron. In fact, Earth is -- a little better of trivia. says, what is Earth made of more than anything else? Iron. Iron is the #1 ingredient of Earth by mass. Number 2 is oxygen, which is wild. \r\nYes. Basically rust. Actually, we're stuck together. We're a rust ball. That's roughly -- that's almost 2/3 of Earth, I think, is rust. We are like a rusty ball bearing with a little bit of other stuff. So -- but plenty of lithium. So anyway, there's not like a shortage of materials.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 62
},
{
"name": "Drew Baglino",
"speech": "But the other thing on the LFP thing is that it isn't just that there's more access to material that way. The actual refining process is less capital intensive to make a good LFP cathode. And so there's -- it's not just scalable on the resource side, it's scalable on the refining side.",
"session": "Answer",
"person_id": 393478,
"person_company": null,
"component_order": 63
},
{
"name": "Elon Musk",
"speech": "Absolutely. To clear, there's no fundamental barrier here. It's simply a rate question. Like at what rate can you scale production? And I think we're seeing a very rapid increase in battery production and in the whole supply chain. If you were to say today, what are concerns appears down the road? I would say one of the concerns is the machinery to refine the -- the critical ingredients of lithium ion cells. So the lithium itself and then the cathode, which I said like I said, will be mostly iron phosphate, some manganese. \r\nI think almost all stationary storage will be iron phosphate and then you really just need nickel chemistry for long-range vehicles and like aircraft and that kind of thing.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 64
},
{
"name": "Drew Baglino",
"speech": "Yes. The other thing I would say is -- we are working with our suppliers to ramp their capability as quickly as possible. And it's not like we have a problem in the next year or 2 to -- specifically to your question. But when we look 10 years out, yes, we need to do more to accelerate the growth. And that is why we are making our own investments, like we are building a facility here in Texas. The steel is going up, you can see it in the flyovers. \r\nWe're working on a lithium refining activity as well ourselves because the best way to learn how to accelerate something is to do it yourself. So these are the things we're doing to move it all forward.",
"session": "Answer",
"person_id": 393478,
"person_company": null,
"component_order": 65
},
{
"name": "Elon Musk",
"speech": "Yes. If our suppliers don't solve these problems, then we will.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 66
},
{
"name": "Martin Viecha",
"speech": "Thank you. The next question comes from Emmanuel Rosner from Deutsche Bank.",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 67
},
{
"name": "Emmanuel Rosner",
"speech": "Yes. I have a question on your vehicle demand and then a quick follow-up on supply. First, on the demand side. Are you seeing any sort of pressure in the order book or the pace of new order or any sort of like slowdown as a result of the pressures that the consumer is experiencing? Are you worried about it in light of your view of the risks to the economy that I think you expressed, Elon?",
"session": "Question",
"person_id": 376728,
"person_company": null,
"component_order": 68
},
{
"name": "Elon Musk",
"speech": "Well, right now, our is very much production. So we've long leads on -- as anyone can tell, if they order our car, you order Model Y, it'll arrive sometime next year. So this is clearly not an issue for many months for us. Our problem is overwhelmingly that of production. So yes.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 69
},
{
"name": "Zachary Kirkhorn",
"speech": "Okay. Maybe just 2 things to add. Specifically on your question, are we seeing a macroeconomic impact on our demand? Not that I can tell. Maybe a little.",
"session": "Answer",
"person_id": 385023,
"person_company": null,
"component_order": 70
},
{
"name": "Elon Musk",
"speech": "Some maybe.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 71
},
{
"name": "Zachary Kirkhorn",
"speech": "But it's not material. The second thing to Elon's point about backlogs, we have a very long runway with very long lead times here. I mean, certainly, the world is uncertain, and we'll have to see where things go with commodity prices, how quickly we're ramping production, what the state of the road looks like at some point next year. But the demand is not something we spend really any time talking about.",
"session": "Answer",
"person_id": 385023,
"person_company": null,
"component_order": 72
},
{
"name": "Elon Musk",
"speech": "Yes. I think it's -- maybe just 1 thing worth mentioning the -- that there is surface between value for money and fundamental affordability because sometimes people say, \"Well, if you got all this demand. Why don't you just raise the price to some -- double the price or something?\" And this is usually expressed by somebody who's rich. \r\nBut there's -- even if you rail value for money to infinity, if somebody does concerns do not have enough money to buy it, even a product where the desirability is rail to infinity, they basically cannot buy it. So this is why you kind of just raise prices to some arbitrarily high level because you pass the affordability boundary and then the demand falls off a cliff. \r\nSo I do feel like we've raised our prices or we raise the price quite a few times. They're frankly at embarrassing levels. But we've also had a lot of supply chain and production trucks and as we've got crazy inflation. So I'm hopeful, this is not a promise or anything, but I'm hopeful that at some point, we can reduce the prices a little bit.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 73
},
{
"name": "Martin Viecha",
"speech": "Thank you. Emmanuel, do you have a follow-up?",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 74
},
{
"name": "Emmanuel Rosner",
"speech": "Yes. My follow-up was actually on the supply side. So it was very encouraging to see that you're quantifying your current installed capacity at basically already in excess of 1.9 million units installed currently. How quickly do you think that you can fill that capacity?",
"session": "Question",
"person_id": 376728,
"person_company": null,
"component_order": 75
},
{
"name": "Elon Musk",
"speech": "Well, I mean, we -- I think we've got a good chance of exiting this year at 40,000 vehicles a week.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 76
},
{
"name": "Drew Baglino",
"speech": "Yes. I mean our internal plans are to have the capacity utilized by the end of the year. It takes time to ramp there. It will be a challenge. There's a lot that needs to happen to get there but that's what we're working on.",
"session": "Answer",
"person_id": 393478,
"person_company": null,
"component_order": 77
},
{
"name": "Elon Musk",
"speech": "Yes. We've had many 30,000-car weeks already, so I think a 40,000-car week is within reach by the end of this year.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 78
},
{
"name": "Drew Baglino",
"speech": "Shanghai and Fremont, as we said last month for record production and they're really fire to better doing really well. But then also Berlin are coming on strong. Theoretically, they also had record quarters last quarter. And if we ramp them to the capacity shown in the deck by the end of this year, we'll be at that rate.",
"session": "Answer",
"person_id": 393478,
"person_company": null,
"component_order": 79
},
{
"name": "Elon Musk",
"speech": "There's always a lot of uncertainty like the production looks like, and that intermediate part of the difficult to bridge that with high certainty. But the end part of the S-curve, you can say, I think you can have a lot more certainty. And so that's why I'm confident we'll get to 5,000 cars a week at -- in Austin and Berlin by the end of this year or early next year and probably but not certainly, 10,000 cars a week at both locations by the end of next year.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 80
},
{
"name": "Martin Viecha",
"speech": "Thank you. The next question comes from Colin Rusch from Oppenheimer.",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 81
},
{
"name": "Colin Rusch",
"speech": "Could you talk a little bit about the pricing strategy around FSD, and as you get closer to this full functionality rolling out and the increased cycle times, how you see that evolving through the balance of this year and into 2023?",
"session": "Question",
"person_id": 310676,
"person_company": null,
"component_order": 82
},
{
"name": "Elon Musk",
"speech": "Yes, we will increase the price of FSD sometime later this year. I think probably just before we go to quiet beta or beta is anyone who wants to use the beta software with all the caveats associated with that can use it, then it would make sense to increase the price of FSD. The value of FSD is, I think, extremely high and not well understood by most people. It is basically currently ridiculously cheap, assuming FSD materializes, which is well.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 83
},
{
"name": "Colin Rusch",
"speech": "Great. And then sorry to belabor a little bit on battery materials side. But in terms of some of the suppliers and the contaminants, can you be a little bit more specific around some of the elements that you guys see in some of your supply chain that can prove troublesome yields for the 4680s, particularly around lithium and potential contaminants in either oxide, the carbonates that you guys end up seeing real issues with as you move into production?",
"session": "Question",
"person_id": 310676,
"person_company": null,
"component_order": 84
},
{
"name": "Zachary Kirkhorn",
"speech": "Yes. I don't really think we have anything to comment on, yes, the purity specs of lithium on this call right now, yes.",
"session": "Answer",
"person_id": 385023,
"person_company": null,
"component_order": 85
},
{
"name": "Elon Musk",
"speech": "Yes. The contaminants from the 4680 are not a factor, which is not an issue.",
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"name": "Martin Viecha",
"speech": "Thank you very much. The next question comes from Tony Sacconaghi from Bernstein.",
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{
"name": "Toni Sacconaghi",
"speech": "Yes. I have 2 as well. In response to the question around demand, I think, Zach, you said maybe a little, and Elon, you said maybe some indication that you might see some pressure on demand. And I'm wondering if that is really just speculation or whether there's any empirical data that you saw in the last month, whether it be cancellations or order lead times that led you to make that comment. \r\nI think anecdotally, if you squint, the lead times have gotten a little lower over the last 4 months in both China and the U.S. That's really the only visibility investors have. So I'm wondering if you could maybe elaborate on whether that's really just you're sort of anticipating there could be some impact because of high prices or whether they're something anecdotally or quantitatively that you could point to, please?",
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"name": "Elon Musk",
"speech": "No. I mean, I think we've said this now for many years, I know has proven true. Tesla does not have a demand problem, we have a production problem. And we've almost always had it's a very rare exception it's always been a production problem. I think that will remain the case.",
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"name": "Toni Sacconaghi",
"speech": "So there's a denominator and a numerator and like, you increase production?",
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"name": "Elon Musk",
"speech": "Yes, absolutely. As we increase production, more demand is needed obviously.",
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{
"name": "Drew Baglino",
"speech": "No, it's more just like you can't look at the backlog and state much about demand because we're doing a lot on the other side to change the production.",
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{
"name": "Elon Musk",
"speech": "We're trying to make the backlog lower, not longer.",
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{
"name": "Unknown Executive",
"speech": "Building factories and building --",
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{
"name": "Elon Musk",
"speech": "We don't want a long backlog. That's annoying. It'd be like go to a restaurant and you order a burger and you have to wait 3 hours and like, that's annoying. You want to get your burger right away. Same with the car. So we want that lead times to reduce.",
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"name": "Toni Sacconaghi",
"speech": "Okay. Now I was just trying to follow up on the fact that you both said that maybe we're seeing demand be impacted a little bit, and that was the spirit of the question.",
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{
"name": "Elon Musk",
"speech": "We don't have like -- like because we see daily orders from around the world for our cars, it's actually -- it is like a mood barometer of people's confidence in the economy. But one can't read too much into it because things can vary a great deal from 1 day to the next. Consumer sentiment is all over the map. So it's -- manage price, frankly. But we have so much excess demand. That is really just not an issue for us. It might be an issue for some other companies but it is not an issue for us.",
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"name": "Toni Sacconaghi",
"speech": "Okay. Elon, I'm just wondering, a question for you. Tesla's obviously changed dramatically in the last 3 years from near life or death to a company with consistent cash flow and industry-leading margins. I'm wondering if you can comment on your personal role in the company and whether you see that changing in terms of your role, your commitment and time spent at the company over the next 3 or 4 years. \r\nI think you said a few calls ago, you wouldn't be on calls unless there's something unusual and you've been on every call since then. I'm wondering.",
"session": "Question",
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{
"name": "Elon Musk",
"speech": "I do a lot of unusual things, let's face it. Basically, if there's only good news, I won't be on the call. But if you have like a tough situation like COVID shutdowns in China, then I think I'll be on the call -- relatively speaking, if there's bad news. And we have this good news, then I won't be on the call. \r\nBut I'm committed to the long -- I mean, I'll work at Tesla as long as I can usefully advance the cause of sustainability and autonomy.",
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"name": "Martin Viecha",
"speech": "Fantastic. Thank you very much. The next question comes from William Stein.",
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"name": "William Stein",
"speech": "Elon, in the past, you've given some assessment as to the likelihood that you can achieve success in some of the more interesting AI-oriented efforts, not only FSD but also Dojo and Optimus. Perhaps you can give an updated view on those.",
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"name": "Elon Musk",
"speech": "Well, I don't want to steal thunder from AI Day. So I think we'll have some exciting news on AI Day that I think will be further ahead than probably most people think. But I don't want to -- I'd love to answer you but I think we'll leave that excitement for AI Day.",
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"name": "William Stein",
"speech": "Okay. And perhaps a follow-up if I can. We've heard a lot from others and certainly to some degree from you all about the shortages in semiconductors, in particular. We have seen some big, important customers of that type of product decide to sort of leverage the ecosystems that exist to make some of their own in those categories. \r\nI'm wondering to what degree you're doing that. That's outside of Dojo in terms of the -- I guess, on the inference side, you're certainly doing that in the car, but what about sort of the more mundane areas like microcontrollers and the like? Is there any internal effort to improve supply chain and maybe improve other performance aspects?",
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{
"name": "Elon Musk",
"speech": "Well, there's we've done -- we've been working with our suppliers side. We don't currently intend to make chips ourselves. We don't think there will be a need to make chips, but we have been working closely with a number of suppliers. Actually just met with one of our key supplier CEOs right before this call. We had a great meeting. They're going to make major investments in some of the critical chips and components that we need in the car. \r\nAnd I'd actually like to take a moment to thank our key suppliers once again for supporting us through difficult times. And they really went above and beyond to support us. So to all our suppliers out there, thanks very much.",
"session": "Answer",
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"name": "Drew Baglino",
"speech": "Yes. And I guess just maybe we don't talk about it very often, but we do have a lot of custom silicon in the vehicle already. Microcontrollers, yes, some battery management, yes, power electronics, yes, some. So we try to go after where there's actually a technical advantage. And in the future, I think we're going to look at where there's a supplier",
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"name": "Elon Musk",
"speech": "[indiscernible] even now where the supply chain issues with our Tier 1s and Tier 2s, get into it with us on the engineering side when we find solutions, whether it's alternative chips or changing the entire structure of this pack to make it work. And I think that's an advantage we have that many other OEs just simply cannot. \r\nI think Tesla is as much a software company as it is a hardware company. And so one of the ways that we've been able to address supply chain issues on the chip front is by rewriting of software to be able to use different chips or, in some cases, achieve dual use of a single chip, which is even better. And actually, quite frankly, the chip shortage has served as a forcing function for us to reduce the number of chips in the car. Yes, turns out we had more chips than we needed. \r\nBut that's a testament to our software team that we're able to roll a new chip into the car, write a whole new patch of software for that chip and -- without interrupting production.",
"session": "Answer",
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"name": "Drew Baglino",
"speech": "Yes. And our goal is as we mature and scale the platforms to integrate more functionality into fewer chips, like that is the way that it's gone with laptops and phones. It's going that way in cars. And we're trying to do that wherever it makes sense to do it as quickly as we can.",
"session": "Answer",
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{
"name": "Elon Musk",
"speech": "From a supply chain standpoint, do we -- what do you think about the chips and whatnot?",
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{
"name": "Drew Baglino",
"speech": "Yes. I think -- I mean, from a high level, instead of designing and building our own microcontrollers, we're partnering with key partners that understand the architectural of [indiscernible] and they'll take the specs and design something for us. We've done that, to your point, the battery sensing space. We've got some application-specific ICs. But yes, integrating, reducing the number of components, it's a mix of supply chain but it also makes the reliability of the end product better because there's less failure points. So that's always been the mantra.",
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{
"name": "Lars Moravy",
"speech": "And at times, we've also got the wafer level and try to consume less to achieve the same functionality. So that's something also that we've been looking at in some of the constrained modules that we have faced in the last 6 months.",
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{
"name": "Martin Viecha",
"speech": "Fantastic. Well, thank you very much. I appreciate all of your questions. Unfortunately, this is all the time we have this quarter, and we will speak to you again in 3 months' time. Thank you very much, and goodbye.",
"session": "Answer",
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{
"name": "Elon Musk",
"speech": "Bye.",
"session": "Answer",
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],
"title": "Tesla, Inc., Q2 2022 Earnings Call, Jul 20, 2022",
"quarter": 2,
"year": 2022
}
},
{
"transcript_title": "Tesla, Inc. - Q1 2022",
"transcript_name": "Tesla, Inc., Q1 2022 Earnings Call, Apr 20, 2022",
"ticker": "NASDAQ:TSLA",
"transcript_url": "https://wkarticles.blob.core.windows.net/finnhub/snp_transcript_2540518",
"date": "2022-04-20",
"year": 2022,
"quarter": 1,
"transcript_data": {
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{
"name": "Martin Viecha",
"speech": "Okay. Good afternoon, everyone, and welcome to Tesla's First Quarter 2022 Q&A Webcast. My name is Martin Viecha, VP of Investor Relations, and I'm joined today by Elon Musk, Zachary Kirkhorn and a number of other executives. Our Q1 results were announced at about 3 p.m. Central Time in the update deck we published at the same link as this webcast. \r\nDuring this call, we will discuss our business outlook and make forward-looking statements. These comments are based on our predictions and expectations as of today. Actual events and results could differ materially due to a number of risks and uncertainties, including those mentioned in our most recent filings with the SEC. \r\n[Operator Instructions] Before we jump into Q&A, Zach will have some opening remarks. Zach?",
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"name": "Zachary Kirkhorn",
"speech": "Yes. Thanks, Martin. Just to start off here, Q1 was a challenging but extremely successful quarter for the company. Numerous supply interruptions, including shuts at our Shanghai factory and nearby suppliers due to COVID, we've continued making progress and achieved our best-ever vehicle deliveries. \r\nLast quarter, we demonstrated a series of new financial records, including revenue, gross margins, operating margin and bottom line profitability. GAAP automotive gross margin reached 32.9% and first time exceeded $0.30 when excluding regulatory credits. Higher pricing continues to positively impact our financials as we make progress delivering cars and our growing backlog. Note that, for most vehicles, our delivery wait times are quite long. Thus, cars delivered in Q1 generally carried pricing set in prior quarters and at levels lower than cars being ordered today. \r\nOur per unit vehicle cost increased as well. Inflation, raw material prices, expedites and logistics costs continues to impact our cost structure. Factory shutdowns also occurred with little to no notice. Hence, we are unable to take action to plan those interruptions in a cost-efficient manner. Additionally, we saw a slight mix shift towards more profitable vehicles, including the Model Y. We also recognized a onetime benefit of $288 million from credit revenue relating to a regulatory change in the U.S. CAFE penalty, without of which credit revenue would have declined compared to the same period last year. \r\nThe energy business has continued to be impacted by macro conditions, more severely than the vehicle business. Our storage products, our need of chip supply and new import processes have impacted supply of certain components for our solar systems, which is reflected in our solar volume for the quarter. \r\nOpEx as a percentage of revenue continues to reduce, driven by higher revenue, lower stock-based comp expense and other items. As a result of our ongoing improvements in operating leverage, we achieved a record operating margin of over 19%. Note that commissioning costs for our factories are in R&D as Berlin started production in late March and Austin in early April. These costs will be in automotive COGS going forward, given these factories are now producing customer sellable cars. \r\nOur free cash flows have remained quite strong, yet were impacted by working capital related to lower-than-planned production. Additionally, we have reduced our debt, excluding product financing, to nearly 0. \r\nLooking ahead in the immediate term, a few things to keep in mind for Q2. First, we've lost about a month of build volume out of our factory in Shanghai due to COVID-related shutdowns. Production is resuming at limited levels, and we're working to get back to full production as quickly as possible. This will impact total build and delivery volume in Q2. Second, as I've mentioned before, Austin and Berlin are just starting their ramps. And thus, those inefficiencies will start to flow through our gross margins in Q2. Third, we do have higher ASPs in our backlog, which will help to offset some of these headwinds. \r\nWe continue to drive towards further strengthening of our financials in the second half of the year and believe our 50% or above growth rate remains achievable for the year. \r\nI want to conclude by thanking the Tesla team, our suppliers and our new customers for a great first quarter.",
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"name": "Martin Viecha",
"speech": "Thank you very much. And Elon has opening remarks as well.",
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"name": "Elon Musk",
"speech": "Sure. Some of my remarks will be redundant with Zach's, but it's maybe worth repeating. Q1 was once again a record quarter on many levels, by reaching the highest deliveries, profit and an operating margin of 19%. This was despite a lot of chip shortages, many logistics challenges and an overall difficult quarter. So I'd really like to congratulate the Tesla team on achieving record profitability and output despite many, many difficult headwinds. And especially the Tesla China team in our Shanghai factory, they really had significant challenges due to the COVID shutdown and nonetheless have been able to output a tremendous number of high-quality vehicles. And we are already back up and running with the Shanghai factory. \r\nSo as Zach said, we remain confident of a 40% growth in vehicle production in 2022 versus '21. I think we actually have a reasonable shot at a 60% increase over last year. So let's see. Obviously, we ramped production, as you will know, with Giga Berlin and Giga Texas in the past few months. So with 2 fantastic factories with great teams, and they are ramping rapidly. Now with new factories, the initial ramp always looks small, but it grows exponentially. So I have very high confidence in the teams in both factories, and we expect to ramp those initially slowly, but like I said, growing exponentially with them achieving high volume by the end of this year. \r\nSo we're also working on a new vehicle that I alluded to at the Giga Texas opening, which is a dedicated robotaxi. That's highly optimized for autonomy, meaning it would not have steering wheel or pedals. And there are a number of other innovations around it that I think are quite exciting. That is fundamentally optimized for -- trying to achieve the lowest fully considered cost per mile or cost per kilometer, accounting everything. And so it's, I think, going to be a very powerful product where we aspire to reach volume production of that in 2024. So I think that really will be a massive driver of Tesla's growth. And we remain on track to reach volume production of the Cybertruck next year. \r\nLet's see. So it's basically, once again, I'd like to thank the Tesla employees for their hard work, but also I'd like to thank our suppliers who have really gone the extra mile. They -- we have an amazing supplier group, and I want say heartfelt thanks to the suppliers that have really worked day and night to ensure that Tesla is able to keep the factories running. \r\nAnd we're really at the early stage of that journey. We only crossed 1 million units in the past 12 months recently. And we are -- we aspire to head to 20 million units a year, so we're basically 5% along the way towards our goal. And we are growing very, very rapidly year-over-year. And we remain confident of exceeding 50% annual growth for the foreseeable future for basically several of the next years, I mean, so yes. \r\nAnd then there's, of course, Optimus, which I was surprised that people did not realize the magnitude of the Optimus robot program. The importance of Optimus will become apparent in the coming years. Those who are insightful or listen carefully will understand that Optimus ultimately will be worth more than the car business, worth more than FSD. That's my firm belief. So -- and then, of course, insurance is growing well. We expect to address the part shortages that limited our progress with batteries and solar. So we expect batteries and solar to also grow well this year. \r\nAnd basically, the future is very exciting. I've never been more optimistic or excited about Tesla's future than I am right now. Thank you.",
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"name": "Martin Viecha",
"speech": "Thank you very much. Let's go to first investor question. And the first investor question is, Elon has historically provided FSD time lines with not optimal accuracy. We love his optimism for 2022 release, but is there any data Tesla can share with investors to help them make their own conclusions on progress being made, interventions per mile driven or any other data?",
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"name": "Elon Musk",
"speech": "Sure. Well, with respect to full self-driving, of any technology development I've ever been involved in, I've never really seen more kind of false dawns or where it seems like we're going to break through, but we don't, as I've seen in full self-driving. And ultimately, what it comes down to is that to solve full self-driving, you actually have to solve real-world artificial intelligence, which is -- which nobody has solved. The whole road system is made for biological neural nets and eyes. And so actually, when you think about it, in order to solve for full self-driving, we have to solve neural nets and cameras to a degree of capability that is on par with or really exceeds humans. \r\nAnd I think we will achieve that this year. The best way to reach your own assessment is to join the Tesla full self-driving beta program where we have over 100,000 people right now enrolled in that program, and we expect to broaden that significantly this year. So that's my recommendation is join the full self-driving beta program and experience it for yourself and take note of the rate of improvement with every release. And we put out a new release roughly every 2 weeks. So -- and you'll see a little bit of 2 steps forward, 1 step back. But overall, the rate of improvement is incredibly quick. So that's my recommendation for reaching your own assessment is literally try it.",
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"name": "Martin Viecha",
"speech": "Thank you. The second question is, how much of an impact will the production shutdown in Shanghai have in Q2? What is the time line for localizing the Model 3 in Europe? Or will newer models be prioritized in Berlin?",
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"name": "Elon Musk",
"speech": "Well, the -- we did lose a lot of important days of production. And because there are sort of upstream supplier challenges where a lot of suppliers also have lost many days of production. But Tesla Shanghai -- Giga Shanghai is coming back with a vengeance. So I think notwithstanding new issues that arise, I think we will see record output per week from Giga Shanghai this quarter, albeit we are missing a couple of weeks. So that means the most likely vehicle production in Q2 will be similar to Q1, maybe slightly lower, but it's also possible we may pull a rabbit out of the hat and be slightly higher. But it's really, call it, roughly on par. But then Q3 and Q4 will be substantially higher. So it seems likely that we'll be able to produce over 1.5 million cars this year is my -- that's my best guess. \r\nAnd then Model 3. It's important for new factories to be focused on -- and have the least amount of complexity and variation, which is why Giga Berlin and Giga Texas are focused on the Model Y. It's -- from the point in which you have a factory complete and you're making a small number of units to the point where it's producing high-quality vehicles in volume is sort of 9 to 12 months from start of production. So now hopefully, we're getting better at that ramp, so maybe it's a little less. But to get to sort of the 5,000 a week level has typically taken us around 12 months from start of production.",
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"name": "Martin Viecha",
"speech": "Thank you. The next question is, how much raw material exposure do you have, measured roughly in percentage of cost of goods sold? For example, in a given quarter versus 1 to 2 years out, both direct and indirect. Separately, how do you think about price increases versus prioritizing higher mix vehicles going forward?",
"session": "Answer",
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"name": "Elon Musk",
"speech": "Actually, on the price increase front, I should mention that it may seem like maybe we're being unreasonable about increasing the prices of our vehicles given that we had record profitability this quarter, but the wait list for our vehicles is quite long. And some of the vehicles that people will order, the wait list extends into next year. So our prices of vehicles ordered now are really anticipating supplier and logistics cost growth that we're aware of and believe will happen over the next 6 to 12 months. So that's why we have the price increases today because the car ordered today will arrive, in some cases, a year from now. So we have a very long wait list, and we're obviously not demand-limited. We are production-limited by very much for the production of the unit.",
"session": "Answer",
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"name": "Martin Viecha",
"speech": "Raw material exposure?",
"session": "Answer",
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{
"name": "Zachary Kirkhorn",
"speech": "Yes. Just to add to what Elon is saying, there's different ways to calculate raw material exposure. I think the simple way we estimate we're around 10% to 15% of our cost structure exposed to raw materials. \r\nAnd just to clarify a couple of things on that. So we've been experiencing increases in cost in general, but also raw materials for a number of quarters now. That pace picked up in Q1, so last quarter. And what we're seeing for Q2 is slightly higher than that as well. And as indices move, it doesn't impact us immediately or directly. In some cases, we have contracts with suppliers. But then as those contracts expire, we have to renegotiate them so that there can be a lag. \r\nIn some cases, our contracts do directly reflect movement in commodity prices or raw material prices. But the timing in which that, that Tesla pays for that has a lag associated with it as well based on the contract. And so to Elon's point, what we're trying to do here, because it's quite an unprecedented situation of raw material movement in all of these various lags and uncertainty around renegotiating contracts, is we're trying to anticipate where things will go and make sure the pricing that we have put in place at the time that those raw material cost increases hit us that they align and that the company can remain financially healthy in various scenarios as we look out over the next 4 quarters.",
"session": "Answer",
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{
"name": "Martin Viecha",
"speech": "Okay. Thank you very much. The next question is, why does Tesla continue to fight dealership laws on a state-by-state basis versus taking it federal? Separately, why isn't Tesla using 800-volt architecture in its vehicles? What are the advantages or disadvantages?",
"session": "Answer",
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},
{
"name": "Elon Musk",
"speech": "So -- standpoint, obviously, we'd like to have federal legislation that allows direct sales in all states, but we have not seen willingness on the part of the Congress to enact such law that would override a variety of state laws. So unfortunately, we have to fight it on a state-by-state basis. And Drew, do you want to answer the 800-volt question?",
"session": "Answer",
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{
"name": "Drew Baglino",
"speech": "Yes, sure. On the 800-volt thing, yes, so it's really a case-by-case thing. For the smaller platform vehicles like 3 and Y, there's some wins and losses with 800 volts, not everything is better. And so we look at that platform and we're not like ignoring the reality that you can go to a higher voltage, but there's nothing really encouraging us to do so on that platform. It's really about mass and power. And as you look at bigger vehicles, there are some advantages on those bigger vehicles.",
"session": "Answer",
"person_id": 393478,
"person_company": null,
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},
{
"name": "Elon Musk",
"speech": "Let me just quantify that. Basically, our estimate is that going from 400 to 800 volts might save $100. It's not really moving the needle.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
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},
{
"name": "Drew Baglino",
"speech": "And you're changing many things. It's charging infrastructure all the way through the entire vehicle system to get maybe $100.",
"session": "Answer",
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},
{
"name": "Elon Musk",
"speech": "Yes, exactly. So I mean, in the U.S., you've got 110-volt household voltage. And then in your most -- like sort of 220. But really, it doesn't make that much of a difference, and appliances work pretty much as well in, say, Europe as they do in the U.S. So there's some -- the advantages are small and the cost is high. Like you say, like long term, like years now, it does it make sense probably to an 800-volt architecture probably, but it really needs a very big vehicle volume to pay for the cost of changing from 400 to 800 volts. And then Drew, do want to continue to...",
"session": "Answer",
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},
{
"name": "Drew Baglino",
"speech": "I was just going to say that 100 volts is also kind of like a spreadsheet exercise, right?",
"session": "Answer",
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},
{
"name": "Elon Musk",
"speech": "$100.",
"session": "Answer",
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},
{
"name": "Drew Baglino",
"speech": "Sorry. $100. It's roughly like a spreadsheet exercise, like you have to get through the full to the end to see that maybe it's been whittled away to $50 or less. Yes. On bigger vehicles, where you're talking about higher power on the charging side or higher power from the battery to the power electronics or you need more torque, so the current requirements go up, there's a little bit more semiconductor and actual conductor savings of going to the higher voltage. And so we do consider that for Semi and Cybertruck. But for the 3/Y platform where we've got everything running and the benefit is questionably small.",
"session": "Answer",
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},
{
"name": "Elon Musk",
"speech": "Yes. It's basically 0 for robotaxi.",
"session": "Answer",
"person_id": 175883,
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},
{
"name": "Drew Baglino",
"speech": "Yes. For robotaxi, yes, it doesn't make sense.",
"session": "Answer",
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},
{
"name": "Elon Musk",
"speech": "No, no. Sorry, this...",
"session": "Answer",
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{
"name": "Drew Baglino",
"speech": "Sounds good.",
"session": "Answer",
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{
"name": "Martin Viecha",
"speech": "Okay. Let's go to the next question. Next question is, how are the current 4680 performing versus expectations set during the battery day in terms of expected range increase and dollars per kilowatt hour?",
"session": "Answer",
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},
{
"name": "Elon Musk",
"speech": "Yes.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
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},
{
"name": "Drew Baglino",
"speech": "Yes. We're working in all the areas we shared on Battery Day, and we have sort of consistent progress across all of those areas towards achieving the 5-year cost trajectory goals for the cost within our control, but we do not control all the commodity costs. So that's an exception I needed to call out. \r\nSimilar to Model 3, it will take us several years to get rate and yields to the point where everything that we've discussed is achieved. Our priority was on simplicity and scale during our initial 4680 battery ramps. And as we attain our manufacturing goals, we will layer in new material technologies we are developing and higher-range structural pack provisions.",
"session": "Answer",
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},
{
"name": "Elon Musk",
"speech": "I think maybe, in a nutshell, I think it probably is fair to say that 4680 and structural pack will be competitive with the best alternatives later this year and we think will exceed the best alternatives next year.",
"session": "Answer",
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"person_company": null,
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},
{
"name": "Drew Baglino",
"speech": "Yes. I mean we have some good existing proofs, right? Like we've built the facility here in Texas, like we know how much we spent on capital equipment in the facility. And it's more than 5x less than prior technology installations. So we're saving huge on CapEx, on utilities and personnel. We know what those loads are and how many people are needed to run what is basically in a highly automized factory. And we have massive reductions in both of those. So like the cost model is well understood. It's really about rate and yield, which will come in time, as Elon said, over the course of this year and next.",
"session": "Answer",
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},
{
"name": "Elon Musk",
"speech": "Yes.",
"session": "Answer",
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},
{
"name": "Martin Viecha",
"speech": "Thank you. And the next question is, how does Tesla plan to secure raw materials required to scale to extreme size?",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 31
},
{
"name": "Elon Musk",
"speech": "Yes. So this is something we think about quite a lot. It depends what extreme size means. But certainly looking at, like, say, the $5 million, $10 million, $20 million -- 5 million, 10 million, 20 million vehicle levels, you really have to analyze the sort of macroeconomic, just like what is the tonnage of lithium that you need, of nickel, of iron phosphate, of graphite separators, electrolytes. It looks like really you think of like just macro tonnage. \r\nAnd when we need to think about this for the world as a whole, because just -- we want to what -- limiting factors for accelerating the advent of a sustainable energy future. And whatever the most limiting factors are, Tesla will take action on those limiting factors. So right now, we think mining and refining lithium is -- appears to be a limiting factor, and it certainly is responsible for quite a bit of cost growth in the sales. It's I think the single biggest cost growth item right now all on a percentage basis. Although just for those who don't totally know this, the actual content of lithium in lithium ion cell is maybe around 2% or 3% of the cell. So.",
"session": "Answer",
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{
"name": "Drew Baglino",
"speech": "5 kg a car.",
"session": "Answer",
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{
"name": "Elon Musk",
"speech": "Yes, exactly. 5 kg. It's not -- it's called lithium ion cell, but by far, like the most expensive and heaviest item in the cell is the cathode. So that's the nickel or the iron phosphate. So we're looking carefully at all of the raw materials and trying to figure out how we can accelerate the total amount of raw materials needed to transition the world to sustainability. I think we've got -- we don't have enough time on this call to really go through all those details, but we are thinking about these things. And we think we'll have some exciting announcements in the months to come.",
"session": "Answer",
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{
"name": "Drew Baglino",
"speech": "Yes. One thing I want to call out is like we're also committed to recycling at all of our cell factories. We're recycling 50 tonnes a week right now in Reno and ramping to 150 with all of that reclaimed material going directly back into our cathode supply chain. So we're looking at the beginning and end of life needs here.",
"session": "Answer",
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{
"name": "Elon Musk",
"speech": "Yes. And that's true like since Reno build a Gigafactory and we started doing that with batteries. But as we build newer factories or vehicles, for example, Giga Texas here, where we are today, we said was all of its non yielded or scrap aluminum from the stamping shop directly into the casting shop. We regrind any plastic figures out. And so we're really concerned about raw materials, not just like mining them and consuming them, but when we get them in the door, using all 100% of them.",
"session": "Answer",
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{
"name": "Drew Baglino",
"speech": "Yes. No, that's a great point. So we're storing -- we're selling sort of health furnaces for probably minimum [indiscernible] for the Model Y that we've built here in -- at Giga Texas has both a front and a rear body casting. So we're casting almost 2/3 of the body then that's -- it's high pressure aluminum. And so we can take both scrap from the casting machine and the gating that comes out and put that -- just really pass that back into the melting aluminum melting pot. And then as Elon was saying, also take any stampings and any other aluminum scrap and also through that in the melting pot, matter of fact, we've also figured out that we can use wheels from practically any car. Yes, yes. So we're going to be recycling the aluminum wheels from legacy gasoline cars as well and throwing that in the melting pot for our aluminum cast body of Model Y. And also we'll be moving to the sort of cast part rear body in all vehicles over time? Well, actually, maybe not S/X, but 3/Y.",
"session": "Answer",
"person_id": 393478,
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},
{
"name": "Martin Viecha",
"speech": "Thank you. At what rate do you expect Berlin and Austin to ramp relative to Shanghai? Are you able to leverage learnings from Shanghai? Or are the processes substantially different in the new factories?",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 38
},
{
"name": "Elon Musk",
"speech": "Ramp production faster than Shanghai because we have learned a lot. And we've now gone through the -- we have basically veteran teams that obviously in the 3/Y ramp [indiscernible] especially in multiple locations. And we're obviously sharing what we've learned. And so we don't want to get complacent or entitled, but this should be a faster ramp because we have learned more, and we have done a lot to simplify the production prices of Model Y that should lead us to a faster ramp within Texas and Berlin, yes.",
"session": "Answer",
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{
"name": "Drew Baglino",
"speech": "But we also had a structural casting, about 30% less robots, we expect to almost double the capacity for body, for example, reducing the number of robots, but doubling our capacity in a lot of areas.",
"session": "Answer",
"person_id": 393478,
"person_company": null,
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},
{
"name": "Elon Musk",
"speech": "Yes. Right. The body line for the structural pack is -- and if you got a structural pack and front and rear castings, the body shop sizes drops by over 60% relative to the standard way of making a car.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
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},
{
"name": "Drew Baglino",
"speech": "[indiscernible] general assembly or everything else because, yes, we have the structural battery, the floor is the battery. We put the seats on the battery and then we put that in their cars. So there's actually 10% and 15% of our stations in GA because of the general [indiscernible] as well.\r\nSo really, like I think about this and the way we think about cars, if you're waiting for the best Tesla, you're going to be waiting forever. If you're waiting for investment, you're also going to be waiting forever because every new factory is better than the last one because we take all that learning and triple it.",
"session": "Answer",
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},
{
"name": "Elon Musk",
"speech": "Yes.",
"session": "Answer",
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{
"name": "Martin Viecha",
"speech": "Next question is at Cyber Rodeo, Elon mentioned that a future is the driverless robotaxi vehicle is on the road map. When can we expect more details on the product offering to be unveiled? Is this something that people can own? Or will this be only offered by Tesla as a service?",
"session": "Answer",
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},
{
"name": "Elon Musk",
"speech": "So I think we want to hold up on -- we don't want to jump the gun on an exciting product announcement too much. So I think we'll aim to we do a product event for robotaxi next year and get into more detail, but we are aiming for volume production in 2024.",
"session": "Answer",
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{
"name": "Martin Viecha",
"speech": "All right. And maybe the last question from investors is, what is the current run rate of 4680 cell production at Fremont and at Giga Texas? What do you expect run rates of 4680 to be in Fremont and the Giga Texas or Berlin at the end of the year?",
"session": "Answer",
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{
"name": "Elon Musk",
"speech": "Well, Berlin is using the 2170 nonstructural pack. So they're not constrained by 4680. They will transition to 4680 hopefully later this year, but current billing production is not to acquire that. We also have, just as a risk mitigation 2170 nonstructural pack capability in Giga Texas as well. But -- if things go according to plan, we will be in volume production with 4680 sometime perhaps towards the end of the third quarter and certainly in the fourth quarter. Is that accurate?",
"session": "Answer",
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{
"name": "Drew Baglino",
"speech": "Yes. And the other thing I would add is like with the China COVID shutdown and the semiconductor bottlenecks we had through Q4 and hence a little bit in Q1, we have sizable cell inventory at the moment and excess cells to support the 2022 volume targets you described. So that gives us the ability to be pretty deliberate in the 4680 ramp where we can maximize learning step by step, take engineering downtime to upgrade key pieces of equipment and modify the structural pack design to improve reliability, all while achieving what you just said. So.",
"session": "Answer",
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},
{
"name": "Elon Musk",
"speech": "Yes. 4680 output is not a risk to achieving 1.5 million vehicles produced this year, but it would become a risk next year if we do not solve volume production by early 2023, but we're highly confident of doing so.",
"session": "Answer",
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{
"name": "Martin Viecha",
"speech": "Thank you very much. Let's go to analyst questions now. The first question comes from Dan Levy from CSFB.",
"session": "Answer",
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{
"name": "Dan Levy",
"speech": "First, maybe you can just talk through or address what some of the drivers of cost improvement were in the quarter. Was it just further improvements within Shanghai or in Fremont? Anything around sort of ongoing kaizen that you've talked about in the past? Maybe you could just talk through what you benefited from in the first quarter.",
"session": "Question",
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{
"name": "Zachary Kirkhorn",
"speech": "Sure. I mean at a high level, cars produced in Shanghai do carry a lower cost structure than cars produced in Fremont. And so as our mix of cars shift towards Shanghai, the average cost is positively impacted by that. We're also seeing some progress in manufacturing efficiencies in Fremont, particularly on the S/X side as volume increases improves there. Expedites has been a huge story for the company. Q4, we had massive amounts of expedites. Q1 was still quite large, but we did make progress on bringing that down some.",
"session": "Answer",
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{
"name": "Elon Musk",
"speech": "Special mention goes to the Fremont manufacturing team and our associates there because we're achieving record output at Fremont.",
"session": "Answer",
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{
"name": "Zachary Kirkhorn",
"speech": "The Fremont team is doing a tremendous job.",
"session": "Answer",
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{
"name": "Elon Musk",
"speech": "Really absolutely from the [indiscernible] quarters",
"session": "Answer",
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{
"name": "Zachary Kirkhorn",
"speech": "Yes.",
"session": "Answer",
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"person_company": null,
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{
"name": "Drew Baglino",
"speech": "It's hard to underweight. Like you should -- the expedite situation with the crazy logistics that occurred with COVID.",
"session": "Answer",
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{
"name": "Zachary Kirkhorn",
"speech": "Yes. And to Elon's point, the Fremont team and also the Shanghai team has been extremely dynamic with the unpredictable nature of our part arrivals. And our supply chain team, in particular, production planning portion of supply chain. We often get very little notice when there's part shortage is coming, and it's kind of a scramble couple of days before that part is supposed to arrive to figure out how to get it here. And so the amount of Herculean effort that goes in to produce a quarter like Q1 and even the quarters before that is absolutely immense.",
"session": "Answer",
"person_id": 385023,
"person_company": null,
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},
{
"name": "Elon Musk",
"speech": "There's a saying in the military, it's like amateurs talk about tactics, professionals talk about logistics when it comes to war.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
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},
{
"name": "Zachary Kirkhorn",
"speech": "Yes. So there were some inherent cost improvements, as I mentioned, but there's also offsets that we've talked about previously on raw materials. Commodities outbound logistics continues to remain a challenge despite a ton of efforts to increase capacity there and bring those costs down.",
"session": "Answer",
"person_id": 385023,
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{
"name": "Rodney Westmoreland",
"speech": "[indiscernible]",
"session": "Answer",
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"person_company": null,
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},
{
"name": "Elon Musk",
"speech": "Sorry. Go ahead.",
"session": "Answer",
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{
"name": "Dan Levy",
"speech": "Yes. Yes. Second question, one of the initial goals of Model 3 way back when was to have an EV that was affordable for a wide portion of the market. And we know prices are much higher now just given the supply constraints. Prices are higher for all other automakers. We know that there's inflation that you're battling through, and some of that needs to be passed through the price of the vehicles. And you're going to be supply-constrained for the foreseeable future, so it's sort of a moot point. But given the goal long term of making EVs more widely available to the masses over time, how do you look at the progression of prices over time?",
"session": "Question",
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"person_company": null,
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{
"name": "Elon Musk",
"speech": "We absolutely want to make EVs as affordable as possible. It's been very difficult with the -- I mean, I think, inflation is at like a 40 or 50 year high. And I think the official numbers actually understate the true magnitude of inflation, so -- and that inflation appears to be likely to continue for at least the remainder of this year is what -- when we're talking to suppliers, under severe cost pressure. So yes, and in some cases, we're seeing suppliers request 20% to 30% cost increases for parts from last year to the end of this year. \r\nSo it's -- there's a lot of cost pressure there. That's why we raised our prices because we -- when things are on -- with respect to inflation, you know it's high, then -- and we've got orders that go out a year or more in some cases, then we have to anticipate those cost increases. But I think, especially with the robotaxi and autonomy, I think we will end up providing consumers with, by far, the lowest cost per mile of transport that they've ever experienced. Yes. I mean with robotaxi, like maybe 5 to 10x cost per mile, it's really quite substantial.",
"session": "Answer",
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{
"name": "Drew Baglino",
"speech": "And therefore, accessible to [indiscernible]",
"session": "Answer",
"person_id": 393478,
"person_company": null,
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},
{
"name": "Elon Musk",
"speech": "Yes. I mean -- looking at some of our projections, it would appear that a robotaxi ride will cost less than a bus ticket, subsidized bus ticket or subsidized subway ticket.",
"session": "Answer",
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{
"name": "Martin Viecha",
"speech": "Let's go to the next question from Rod Lache from Wolfe Research.",
"session": "Answer",
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{
"name": "Rod Lache",
"speech": "I'm trying to just parse out your comments about the inflation and constrained supply and battery feedstocks and the initiatives that you are working on internally to secure these materials. It sounds like you're optimistic about Tesla's ability to solve this for Tesla. Do you -- but do you see this as a constraint on EV adoption more broadly?",
"session": "Question",
"person_id": 370532,
"person_company": null,
"component_order": 68
},
{
"name": "Elon Musk",
"speech": "Yes, absolutely. But what's sort of keeping our costs down, at least in the short term, is that we have long-term contracts with suppliers, but those long-term contracts will obviously run out and then the year we'll start to see potentially significant cost increases. But the macro is sort of looking at the world as a whole and saying, okay, what does it take for Earth to transition to sustainable energy faster? It's fundamentally -- the fundamental limiting factor is the output of cell -- basically, cell output. At what rate can lithium ion cells increase the gigawatt hours per year? That is the fundamental limiting factor. \r\nSo in order -- and that will move as fast as the slowest element of the whole supply chain. Currently, we see that as being a challenge with lithium. And it's not that -- to be clear, it's not that there's a shortage of lithium ore in the world. Lithium is present almost everywhere. It's a very common element. However, you still need to take up the ore -- take up basically sludge or whatever the clay with the lithium and then you need to go through a whole series of refinement steps. And that's a lot of industrial equipment that's needed to refine lithium ore to lithium that can be used as lithium hydroxide or lithium carbonate in the battery cell. \r\nSo we think we're going to need to help the industry on this front, but the -- I mean, the industry is very fast, and I certainly encourage entrepreneurs out there who are looking for opportunities to get into the lithium business. The lithium margins right now are practically software margins. I mean if the -- I think it's something -- I think there's a -- I mean, is that -- correct me if I'm wrong, but I think we're seeing cases where the spot lithium price is 10x higher than the cost of extraction. So like we're talking 19% margins here. Can some -- can more people please get into the lithium business? It's -- do you like minting money? We'll look the lithium business is for you.",
"session": "Answer",
"person_id": 175883,
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},
{
"name": "Rod Lache",
"speech": "So interesting. So I guess we'll stay tuned to see what happens from that. My second question is it's impressive to see just a modest increase in cost per vehicle -- cost of goods sold per vehicle, given what we've seen in terms of commodities actually. And from here, you have a lot of savings opportunities with 4680 cells and the cell manufacturing changes, the anode chemistry structural packs, giga castings. Are you suggesting that even those may not be sufficient to offset the inflation that you're seeing and that you're going to need additional pricing as well in addition to those specific initiatives that you've called out?",
"session": "Question",
"person_id": 370532,
"person_company": null,
"component_order": 70
},
{
"name": "Elon Musk",
"speech": "We hope we don't need to increase the pricing further. The current pricing is anticipating what we think is the probable growth in costs. And if those growth -- if that growth in cost does not materialize, we actually may slightly reduce prices. So should we currently anticipate making significant price increases. But obviously, we don't control the macroeconomic environment. If governments keep printing vast amounts of money and if there's -- if there are not significant increases in lithium extraction and refinement and other raw materials, such that everyone is competing for a limited amount of raw materials, then obviously, that will drive prices to high levels. So if you have a crystal that can tell us what the future is going to be like, we'll adjust accordingly, but the current prices are what we -- the current prices are for a vehicle delivered in the future, like 6 to 12 months from now. So this is our best guess.",
"session": "Answer",
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{
"name": "Drew Baglino",
"speech": "But I think if you zoom out, right, like as you said, our mission is to accelerate the transition to sustainable energy. So we are working with our existing suppliers and others to figure out how to grow all of these raw materials as quickly as possible to not slow down the transition.",
"session": "Answer",
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{
"name": "Elon Musk",
"speech": "Yes.",
"session": "Answer",
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{
"name": "Drew Baglino",
"speech": "And whether that means we have to get directly involved in some cases or not comes down to the counterparty and their willingness to expand at the rate we think they should be able to expand. And that's similar to what we've done with everything else, like we built a Gigafactory in Reno because it needed to be done. And so like we will do what needs to be done to not slow down the transition. And affordability is a goal because it's unaffordable, It's going to retard the growth of what is inherently a good thing that we can't have that as [indiscernible]",
"session": "Answer",
"person_id": 393478,
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{
"name": "Martin Viecha",
"speech": "Thank you. The next question comes from Pierre Ferragu from New Street Research.",
"session": "Answer",
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{
"name": "Pierre Ferragu",
"speech": "Can you hear me well?",
"session": "Question",
"person_id": 356336,
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{
"name": "Martin Viecha",
"speech": "Yes.",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 77
},
{
"name": "Pierre Ferragu",
"speech": "Great. I'd like to ask you some questions about free cash flow. Do you -- so first, maybe in the long run, if you look at your performance and your growth model and your growth ambitions, I did the math very quick, and I see you guys sitting on $400 billion or maybe $500 billion of cash at the end of the decade. And I was wondering if it's something you have given some thoughts about.",
"session": "Question",
"person_id": 356336,
"person_company": null,
"component_order": 78
},
{
"name": "Elon Musk",
"speech": "If inflation keeps going crazy, $500 billion might be like $20 billion today, I don't know. So we'll see what $500 billion buys you in a decade, but it might be a lot less. So I don't know if we'll -- that seems like a lot of cash. I don't know. We'll try to do something useful with it. I mean, Zach, I don't know -- I realize that's your problem, that's for sure.",
"session": "Answer",
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{
"name": "Zachary Kirkhorn",
"speech": "The way we've been -- I think we have to take this one step at a time. And so we have investments that are happening right now to get Austin and Berlin up and running. And then as Elon mentioned, installing capacity for robotaxi production. And there are some decisions that, as Elon alluded to, just to share in the future about what the economic model looks like, what the economic model looks like for robotaxi. And so the way Elon and I have discussed this is [indiscernible]",
"session": "Answer",
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{
"name": "Elon Musk",
"speech": "Let's just -- maybe just everyone [indiscernible]",
"session": "Answer",
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},
{
"name": "Zachary Kirkhorn",
"speech": "Yes. So our focus is to get to the point where robotaxis are on the road, Optimus in use, get the economic model for that dialed in and then evaluate the size of cash flows at that point and make decisions then as to what's next.",
"session": "Answer",
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{
"name": "Martin Viecha",
"speech": "Pierre, do you have a follow-up question?",
"session": "Answer",
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{
"name": "Pierre Ferragu",
"speech": "[indiscernible]",
"session": "Question",
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{
"name": "Martin Viecha",
"speech": "All right. Let's go to the next one. The next question comes from Trip Chowdhry from Global Equity Research.",
"session": "Answer",
"person_id": 370659,
"person_company": null,
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{
"name": "Trip Chowdhry",
"speech": "Two questions I have. First is regarding the Cybertruck. And I was wondering like in terms of number of parts, how would Cybertruck compare with the traditional pickup truck in terms of number of parts? The second question I have is on Gigafactory Nevada Sparks. Will we have any production of vehicles in that factory? Or all the future production will happen in Giga Austin?",
"session": "Question",
"person_id": 191315,
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{
"name": "Elon Musk",
"speech": "I'm not sure if we've actually done a comparison of Cybertruck parts versus regular truck parts. I mean, Lars?",
"session": "Answer",
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"person_company": null,
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{
"name": "Lars Moravy",
"speech": "Yes. I mean, if you want to go down the like -- it depends on what kind of part. We still have cells in [indiscernible] all it sounds [indiscernible]",
"session": "Answer",
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{
"name": "Elon Musk",
"speech": "Mention count.",
"session": "Answer",
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{
"name": "Lars Moravy",
"speech": "If we don't count that, like the simplicity of our structure is significant versus a traditional pickup truck or any other vehicle, like as we've talked about their gigacastings, we save hundreds of parts there.",
"session": "Answer",
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{
"name": "Elon Musk",
"speech": "I mean the entire -- kind of half of the car is one cast.",
"session": "Answer",
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{
"name": "Lars Moravy",
"speech": "So with the Cybertruck and the doors, for example, we have an exoskeleton design where the door is ready to take and it takes all the long-term impact. So we really have -- like we don't have the door reinforcements. We don't have the crash [indiscernible] So to your point, I haven't counted them because I don't often look back at old technologies to decide how well I'm doing. I take that once in a while. But in general, architecture is always moving to reduce complexity, reduce parts or reduce parts count. I would say, ignoring the battery cells, we are probably 20% to 30% less.",
"session": "Answer",
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},
{
"name": "Elon Musk",
"speech": "All right.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 93
},
{
"name": "Martin Viecha",
"speech": "Okay.",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 94
},
{
"name": "Elon Musk",
"speech": "Do we expect to expand? Yes, we do expect to expand Giga Nevada. There's a lot of room for expansion there, and we do expect to increase output from Nevada, but then by far the biggest increase in output will be from Giga Texas.",
"session": "Answer",
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"person_company": null,
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{
"name": "Martin Viecha",
"speech": "Thank you very much. The next question comes from Alex Potter from Piper Sandler. Alex, can you hear us?",
"session": "Answer",
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"person_company": null,
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{
"name": "Alex Potter",
"speech": "Yes. Martin, can you hear me?",
"session": "Question",
"person_id": 140104,
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{
"name": "Martin Viecha",
"speech": "Yes.",
"session": "Answer",
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"component_order": 98
},
{
"name": "Alex Potter",
"speech": "Okay. Great. So first question I had was the extent to which other plants outside of China are insulated from any further upstream supply bottlenecks that we may have in China. Obviously, if this COVID lockdown things gets out of hand, clearly, that's going to continue impacting Shanghai. But is there a point at which it could actually also impact other facilities?",
"session": "Question",
"person_id": 140104,
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"component_order": 99
},
{
"name": "Elon Musk",
"speech": "Yes, if it would continue, but there are some parts that are sourced in China that apply worldwide. and that would be -- that would impact production elsewhere. But all indications are that we are -- our Giga Shanghai is back in production at fairly high levels already and so are our suppliers. So we don't think this is going to be a big deal.",
"session": "Answer",
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},
{
"name": "Alex Potter",
"speech": "Okay. Second question, obviously, the higher profitability that you guys have been able to experience over the last couple of quarters, a lot of that is reflecting sort of \"real\" improvements. Another part of it is because we're no longer paying you, Elon, as much as we were. And so I'm wondering the extent to which you and the Board are in the process of contemplating another one of these long-term compensation packages, which in the past have seemed to work quite well.",
"session": "Question",
"person_id": 140104,
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},
{
"name": "Elon Musk",
"speech": "There are no discussions currently underway for incremental compensation for me.",
"session": "Answer",
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{
"name": "Martin Viecha",
"speech": "Thank you. The next question comes from Colin Langan from Wells Fargo.",
"session": "Answer",
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"component_order": 103
},
{
"name": "Colin Langan",
"speech": "Great. Do you guys hear me?",
"session": "Question",
"person_id": 480193,
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"component_order": 104
},
{
"name": "Martin Viecha",
"speech": "Yes.",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 105
},
{
"name": "Colin Langan",
"speech": "Perfect. Just to follow-up, sorry to keep going on the raw material issue on the battery side, but obviously, it seems pretty important. How quickly can raw material supply be built? Because my understanding it takes many years to build that out. So are we just sort of facing -- when do you think we see a lithium shortage or a nickel shortage? And is there even enough time to build that sort of mining capacity in place? And then related, how quickly can you switch to like LFP for the nickel issue?",
"session": "Question",
"person_id": 480193,
"person_company": null,
"component_order": 106
},
{
"name": "Drew Baglino",
"speech": "Yes. I mean I'll take the LFP question. Like it says so in our letter, like half of our products were LFT last quarter, which shows how quickly we were able to respond to -- well, honestly, it wasn't because of a raw material shortage, but just because it seemed like the right thing to do, we could change our cathode chemistry. And there's more to be done on the cathode side, and we are actively pursuing it to give us substitution flexibility in response to market conditions between the other cathodes that are out there that can be competitive in our vehicles, which there are many options. \r\nSo we -- I guess what I would say is, specifically on the cathode side, like flexibility is the way we're going to achieve this. And not all of the materials that go into cathodes are actually, first of all, hard to secure like through mining or refining. And second of all, in many cases, are like very plentiful already, like huge scale. And if all of the batteries in the world use those cathodes, it's less than a 1% increase in total annual output. So that's the cathode side. \r\nI think Elon already spent a lot of time talking about lithium. It really depends on the resource. Some resources like just getting rocks out of the ground, expanding the amount of rock that you're getting out of the ground is maybe a little bit of paperwork and some additional sort of blasting and trucking operations. The finding is maybe where there's -- it's a little bit more chunky to bring it online, but also the refining doesn't -- it's not like an oil refinery. It's a much smaller operation to refine lithium amount of spodumene or for liquid like a brine or a salt pond evaporation. So you're talking about a time scale of 1 to 2 years. And it's not like we haven't been talking to all of the lithium suppliers out there for many years. They have a lot of projects already in the pipeline to come online this year and next. \r\nSome of what's going on in the lithium market this year doesn't actually have truth to bear to the like fundamentals of supply and demand, which is also a little frustrating. But yes, if we look past this year or next year and into 2030 when we need to 15 to 20 terawatt hours of this stuff to get on the growth trajectory -- stay on the growth trajectory we're on, we need everybody to do more in the lithium space than they currently are. I don't know if that answers the question.",
"session": "Answer",
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{
"name": "Colin Langan",
"speech": "Yes.",
"session": "Question",
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},
{
"name": "Martin Viecha",
"speech": "Fantastic. Thank you very much. So let's go to the last question from Mark Delaney from Goldman Sachs.",
"session": "Answer",
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{
"name": "Mark Delaney",
"speech": "Yes. I was hoping you could comment on your latest thoughts about potentially opening up the charging network in the U.S. to non-Tesla owners. It's certainly really important to have a good experience for Tesla owners in terms of wait times and charge installs. But if Tesla is able to have enough capacity it could be a really good way to bring other vehicle owners into the Tesla network, perhaps help Tesla to sustain its network benefits and maybe make more people likely to buy a Tesla vehicles in the future.",
"session": "Question",
"person_id": 182836,
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{
"name": "Drew Baglino",
"speech": "Yes. As Elon has said and as we've publicly committed, yes, we do plan to provide third-party vehicle access in all over the world, not just in Europe, where our original pilot was. And we are working on solutions in North America, which is a little bit more problematic with our connector being different than others, but we are moving in that direction.",
"session": "Answer",
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{
"name": "Martin Viecha",
"speech": "I don't know if you want to add.",
"session": "Answer",
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{
"name": "Elon Musk",
"speech": "Yes. Yes, I think that's -- there's more to be said on that, but we're -- yes, we want to do the right thing with respect to the whole system.",
"session": "Answer",
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{
"name": "Zachary Kirkhorn",
"speech": "And we're going faster on adding chargers. Absolutely. With the growth of the cars that we're producing and then anticipating what you was discussing overall charger capacity is really important. And so the pace of our investment in supercharging has accelerated.",
"session": "Answer",
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{
"name": "Elon Musk",
"speech": "Absolutely.",
"session": "Answer",
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{
"name": "Mark Delaney",
"speech": "Okay. That's helpful. And for my second question, could you share any more details on Tesla Insurance, in particular, as you wind it out in more states? Are there any metrics you can share on what take rates have been like? And how do profitability margins on the insurance offering compared to the corporate average?",
"session": "Question",
"person_id": 182836,
"person_company": null,
"component_order": 116
},
{
"name": "Zachary Kirkhorn",
"speech": "So we just launched Tesla Insurance for real-time insurance in Virginia, Colorado and Oregon earlier this week. Maybe one step that I'll share, so Texas is our longest-standing real-time insurance market. But based upon the information that we have, Tesla is the second largest insurer of Teslas in the State of Texas. And possibly by the end of this quarter, maybe early next quarter, we'll be the largest insurer of Teslas. And so the customer reception to this has been quite positive. And I was reading social media on Monday after we launched in the 3 new states. A lot of folks who are reporting their stories of saving quite substantial amounts of money relative to their previous insurance. And so we're quite encouraged by that. And we're working as quickly as we can to get to 80% of customers having access to a Tesla Insurance product by the end of this year in the United States, at which point we'll pivot our attention to expansion outside of the U.S. \r\nThe other thing I'll say on insurance is with these 3 new states, the model is different because we are now the underwriter, and we are also now holding the risk. And so with those states, we are a fully vertically integrated provider of insurance from systems and financials. With respect to the financials of the program, it's still very early. And so as the program gets more scale, happy to share more information on that.",
"session": "Answer",
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{
"name": "Elon Musk",
"speech": "And once I noticed that we are seeing that the -- having real-time feedback for driving habits is actually resulting in Tesla owners driving the cars in a safer way because they can see the -- they get real-time feedback on, okay, this is affecting my insurance rate or it isn't. And so when people see it -- they can see a real-time score, they realize, if I make changes in my driving habits, then I pay less in insurance, then they have a very -- like a real-time feedback loop for driving for safer driving and an incentive to do so. So it is -- actually, what we're seeing is it is causing people to drive their cars in a safer manner, which is also net good.",
"session": "Answer",
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{
"name": "Zachary Kirkhorn",
"speech": "It's safer on average, what we see in the data, to Elon's point, and premiums are lower. We see that in the take rate data. We have extremely high retention for customers who experience the product. And I think I've talked about this in the past, but this has become a real passion program for us for these benefits. It's bigger than just the economics. We're trying to do a good thing here for our customers, save people money and make the roads a little bit safer.",
"session": "Answer",
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{
"name": "Elon Musk",
"speech": "Yes. I think it improves just overall macroeconomic efficiency. It's also a feedback loop for Tesla because we see if there is crash, both large or small, like we sort of see exactly what the cause. And then we think about how can we change the design of the car or the software in order to minimize the probability of that accident -- most accidents are minor. But how do you have those accidents occur less frequently? And how do we make the repair associated with that accident super fast? Like aspirational-ly, it would be like a same-day repair of a collision, which is night and day difference compared to sometimes having to wait for a month while insurance claims are settled and figured out -- because Tesla is also doing collision repair.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
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{
"name": "Zachary Kirkhorn",
"speech": "Yes, the feedback loop is instant.",
"session": "Answer",
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{
"name": "Elon Musk",
"speech": "Right.",
"session": "Answer",
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{
"name": "Zachary Kirkhorn",
"speech": "So I mean we do claims management in-house. And so we receive the notification that there's an accident, we work to prepare the estimate. And we can, with the support of our customers, use our collision centers to do the repair. And so it's full end-to-end visibility. And all of that, to Elon's point, we can then identify areas of cost inefficiency, feed those back to our engineering teams or elsewhere, software teams, actually improve the product. This lowers the cost of insurance, improves reliability of the product. So it's a full circle.",
"session": "Answer",
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{
"name": "Elon Musk",
"speech": "Yes. And basically, the customer experience is just vastly better because if there's an accident, there's no argument. We'll repair it immediately. And -- this is as compared to arguing with an insurance company and then a claims adjuster and then a collision repair center. And this can be a nightmare ease. So we're trying to turn a nightmare to [indiscernible]",
"session": "Answer",
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},
{
"name": "Martin Viecha",
"speech": "Fantastic. Thank you very much. Unfortunately, that's all the time we have this quarter. So thank you very much for all your great questions, and we'll speak to you again in 3 months.",
"session": "Answer",
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},
{
"name": "Elon Musk",
"speech": "Thank you.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 126
}
],
"title": "Tesla, Inc., Q1 2022 Earnings Call, Apr 20, 2022",
"quarter": 1,
"year": 2022
}
},
{
"transcript_title": "Tesla, Inc. - Q4 2021",
"transcript_name": "Tesla, Inc., Q4 2021 Earnings Call, Jan 26, 2022",
"ticker": "NASDAQ:TSLA",
"transcript_url": "https://wkarticles.blob.core.windows.net/finnhub/snp_transcript_2478087",
"date": "2022-01-26",
"year": 2021,
"quarter": 4,
"transcript_data": {
"date": "2022-01-26",
"participant": [
{
"name": "Ben Kallo",
"role": "Analysts",
"pro_id": 60307958,
"job_title": "Senior Research Analyst",
"description": "Analysts",
"company_name": "Robert W. Baird & Co. Incorporated, Research Division",
"transcript_person_id": 160874
},
{
"name": "Drew Baglino",
"role": "Executives",
"pro_id": 621069668,
"job_title": "Former Senior Vice President of Powertrain & Energy Engineering",
"description": "Executives",
"company_name": "Tesla, Inc.",
"transcript_person_id": 393478
},
{
"name": "Elon Musk",
"role": "Executives",
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"job_title": "Co-Founder, Technoking of Tesla, CEO & Director",
"description": "Executives",
"company_name": "Tesla, Inc.",
"transcript_person_id": 175883
},
{
"name": "Jonathan Dorsheimer",
"role": "Analysts",
"pro_id": 30272171,
"job_title": "Former MD & Analyst",
"description": "Analysts",
"company_name": "Canaccord Genuity Corp., Research Division",
"transcript_person_id": 95165
},
{
"name": "Lars Moravy",
"role": "Executives",
"pro_id": 712755131,
"job_title": "Vice President of Vehicle Engineering",
"description": "Executives",
"company_name": "Tesla, Inc.",
"transcript_person_id": 482177
},
{
"name": "Martin Viecha",
"role": "Executives",
"pro_id": 588894062,
"job_title": "Former Vice President of Investor Relations",
"description": "Executives",
"company_name": "Tesla, Inc.",
"transcript_person_id": 370659
},
{
"name": "Pierre Ferragu",
"role": "Analysts",
"pro_id": 558629883,
"job_title": "Global Team Head of Technology Infrastructure",
"description": "Analysts",
"company_name": "New Street Research LLP",
"transcript_person_id": 356336
},
{
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"role": "Analysts",
"pro_id": 29289688,
"job_title": "Former MD & Senior Research Analyst",
"description": "Analysts",
"company_name": "Sanford C. Bernstein & Co., LLC., Research Division",
"transcript_person_id": 117232
},
{
"name": "Zachary Kirkhorn",
"role": "Executives",
"pro_id": 600445395,
"job_title": "Former Master of Coin & CFO",
"description": "Executives",
"company_name": "Tesla, Inc.",
"transcript_person_id": 385023
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],
"transcript": [
{
"name": "Martin Viecha",
"speech": "Good afternoon, everyone, and welcome to Tesla's Fourth Quarter 2021 Q&A Webcast. My name is Martin Viecha, Senior Director of Investor Relations, and I'm joined today by Elon Musk, Zachary Kirkhorn and a number of other executives. Our Q4 results were announced at about 3:00 p.m. Central Time in the update deck we published at the same link as this webcast. \r\nDuring this call, we will discuss our business outlook and make forward-looking statements. These comments are based on our predictions and expectations as of today. Actual events or results could differ materially due to a number of risks and uncertainties, including those mentioned in our most recent filings with the SEC. [Operator Instructions] But before we jump into Q&A, Elon has some opening remarks. Elon?",
"session": "Presenter Speech",
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"component_order": 0
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{
"name": "Elon Musk",
"speech": "Thanks, Martin. So just to recap 2021, it was a breakthrough year for Tesla and for electric vehicles in general. And while we battled, and everyone did, with supply chain challenges through the year, we managed to grow our volumes by nearly 90% last year. This level of growth didn't happen by coincidence. It was a result of ingenuity and hard work across multiple teams throughout the company. \r\nAdditionally, we reached the highest operating margin in the industry in the last widely reported quarter at over 14% GAAP operating margin. Lastly, thanks to $5.5 billion of -- million, small finger [indiscernible] now, $5.5 billion of GAAP net income in 2021, our accumulated profitability since the inception of the company became positive, which I think makes us a real company at this point. \r\nThis is a critical milestone for the company. So after an exceptional year, we shift our focus to the future, Texas and Berlin. So we've begun production at both Texas and Berlin, we started that last quarter. But that's not the most important thing. We'll focus more on when we get to volume production and when can we deliver cars to customers. But I think it is worth noting that we, and as the Internet has observed, we've been making quite a few cars in Texas and Berlin, so -- in Austin and Berlin. \r\nSo in Texas, we're building the Model Ys with the structural battery pack and the 4680 cells, and we will start delivering after final certification of the vehicle, which should be fairly soon. Capacity expansion will continue through maximizing output of each factory and building new factories and new locations in the future. Although we're not ready to announce any new locations on this call, but we will through 2022, look at new locations and probably be able to announce new locations towards the end of the year, I expect. \r\nIn 2022, supply chain will continue to be the fundamental limiter of output across all factories. So the chip shortage, while better than last year, is still an issue. And yes, so that's -- there are multiple supply chain challenges. And last year was difficult to predict and hopefully, this year will be smooth sailing, but I'm not sure what you do for an encore to 2021, 2020. Nonetheless, we do expect significant growth in 2022 over 2021, comfortably above [ 50% ] growth in 2022. \r\nFull self-driving. So over time, we think Full self-driving will become the most important source of profitability for Tesla. It's great. Actually, if you run the numbers on robotaxis, it's kind of nutty. It's nutty good from a financial standpoint. And I think we are completely confident at this point that it will be achieved. And my personal guess is that we'll achieve full self-driving this year, yes, with data safety level significantly greater than present. \r\nSo it's -- the cars in the fleet essentially becoming self-driving by a software update, I think, might end up being the biggest increase in asset value of any asset class in history. We shall see. It would also have a profound impact on improving safety and on accelerating the world towards sustainable energy through vastly better asset utilization. \r\nLet's see. So on the product road map front, there's quite a lot to talk about. I'm not going to go through every sort of thing that we're working on because I think a lot of them deserve product launches of their own as opposed to a few minutes on an earnings call, so I'll talk kind of at a high level, yes, mostly at a high level. \r\nThe fundamental focus of Tesla this year is scaling output. So both last year and this year, if we were to introduce new vehicles, our total vehicle output would decrease. This is a very important point that I think people do not -- a lot of people do not understand. So last year, we spent a lot of engineering and management resources solving supply chain issues: rewriting code, changing our chips, reducing the number of chips we need, with chip drama central. \r\nSo that was not the only supply chain issue. So there's just hundreds of things. And as a result, we were able to grow almost 90% while at least almost every other manufacturer contracted last year. So that's a good result. But if we had introduced, say, a new car last year, we would -- our total vehicle output would have been the same because of the constraints -- the chips constraints, particularly. So if we'd actually introduced an additional product, that would then require a bunch of attention and resources on that increased complexity of the additional product, resulting in fewer vehicles actually being delivered. \r\nAnd the same is true of this year so we will not be introducing new vehicle models this year. It would not make any sense because we'll still be parts constrained. We will, however, do a lot of engineering and tooling and whatnot to create those vehicles, Cybertruck, Semi, Roadster, Optimus, and could be ready to bring those to production hopefully next year. That is most likely. But like I said, it is dependent on, are we able to produce more cars or fewer cars? \r\nSo in terms of priority of products, I think the -- I think actually the most important product development we're doing this year is actually the Optimus humanoid robot. This, I think, has the potential to be more significant than the vehicle business over time. If you think about the economy, it is -- the foundation of the economy is labor. Capital equipment is distilled labor. So what happens if you don't actually have a labor shortage? I'm not sure what an economy even means at that point. That's what Optimus is about. So very important. \r\nLet's see. Drew, do you want to talk about the 4680 program? Or is this a good right, the right time?",
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"name": "Drew Baglino",
"speech": "Sure. Yes, yes. Sure. So throughout 2021, we focused on growing cell supply alongside our in-house 4680 effort to provide us flexibility and insurance as we attempt to grow as fast as possible. As we sit today, sales from suppliers is actually -- it sort of exceeds our other factory-limiting constraints that you mentioned, Elon, in 2022 or to say differently, 4680 cells are not a constraint to our 2022 volume plans based on the information we have. \r\nBut we are making meaningful progress of the ramp curve in Kato. We're building 4680 structural packs every day, which are being assembled into vehicles in Texas. I was driving 1 yesterday and the day before. And we believe our first 4680 vehicles will be delivered this quarter. Our focus on the cell, the pack and the vehicles here is driving yield quality and cost to ensure we're ready for larger volumes this year as we ramp and next year. \r\nAnd the 4680 and pack tool installations here at Austin are progressing well with some areas producing first parts and the Internet has also noticed that. Yes, I was touring the factory -- the cell factory here. I'm super pumped. It's like a really exciting accomplishment for us to bring everything into 1 awesome factory here in Texas.",
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"name": "Elon Musk",
"speech": "Absolutely. And just to repeat Drew's point, we are still -- we still expect to be part or primarily chip-limited this year. So that's the thing that's actually the driver, yes, and that chip limitation should alleviate next year. And then probably, we transition into a cell limitation battery, total gigawatt-hours of cell limitation, which is when the 4680 will become very [indiscernible]",
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"name": "Drew Baglino",
"speech": "Agreed.",
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"name": "Martin Viecha",
"speech": "Thank you very much, and now Zach has some opening remarks as well.",
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"name": "Elon Musk",
"speech": "Long opening remarks.",
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"name": "Zachary Kirkhorn",
"speech": "Yes. Thanks, Martin. As Elon mentioned, 2021 was a financially transformative year for the company. If we look across the full year '21 and compare that to 2020, our automotive gross margin, excluding credits, rose by over 600 basis points, enabled by work on cost reduction, utilization of our Shanghai factory for exports and accelerating demand. \r\nOpEx as a percentage of revenue reduced despite the impact of onetime items and unique items. And operating income more than tripled, with operating margin reaching our guidance of mid-teens and these margins are trending up. We also saw regulatory credits accounting for a relatively small portion of our 2021 profitability, which we expect to continue to reduce in materiality going forward. \r\nFor Q4 specifically, automotive gross margin, excluding credits, increased to 29.2%, which is our highest yet. We do continue to see some impact of fire pricing on certain models and trims as was the case in prior quarters. But please keep in mind that due to backlogs, changes in pricing will generally impact our financials in future quarters. \r\nSupply chain challenges and port congestion resulted in a significant increase in our expedited costs in Q4. We also took reserves associated with warranty and recall costs. Operating expenses were meaningfully impacted by stock-based compensation from the final 2 tranches of the CEO stock grant becoming probable and payroll taxes associated with the exercise of the 2012 CEO options. The total impact of these payroll taxes, warranty and recall costs and excess expedites was just over $700 million in the quarter. \r\nOur free cash flows have remained strong, reaching record levels in Q4 of $2.8 billion despite increased CapEx. In addition to using cash to grow the business as quickly as we can, we have been retiring legacy and high interest debt. Note that we plan to continue to utilize the ABS market for product-specific financing. \r\nAs we look forward, we expect 2022 to be another significant and exciting year for the company. We continue to drive for vehicle volume growth at or above 50%, as Elon mentioned, and our plans show that this is actually achievable with just our Fremont and Shanghai factories. For quite some time now, these factories have been running below capacity due to macro challenges with supply and logistics. As Elon mentioned as well, from what we're seeing, the pace of growth in 2022 will again be determined by supply chain and logistics, which is quite difficult for us to forecast. \r\nDespite these constraints, it's important to begin the ramp of Austin and Berlin to ensure that we are prepared once limitations ease, enabling us to increase total output more quickly in the future. This will result in higher fixed and semi-variable costs in the near term, in addition to the usual inefficiencies as we ramp a new factory. We are also seeing inflation and rising commodity prices, which we expect to continue to put pressure on our costs. How this specifically impacts gross margins in the near term is uncertain, given a mix of both tailwinds and headwinds. However, we do expect to continue to see stronger operating margins as we grow our volumes and improve operating leverage. \r\nOver a longer-term horizon, we are quite optimistic about the expansion of margins, though. From the hardware side, we are aggressively driving manufacturing innovations and operational efficiency to reduce cost. And with the rapid development of FSD, software-based profits will ultimately become a strong addition to the profits generated by selling hardware. \r\nSo congratulations to the Tesla team for a terrific 2021, and thank you to our suppliers who supported us. Looking forward to another great year.",
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"name": "Elon Musk",
"speech": "I'd like to just second the thank you to suppliers. A lot of suppliers worked late nights, weekends, vacations around the world, and we're very grateful for that.",
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"name": "Martin Viecha",
"speech": "Thank you very much. Let's go to the Q&A from the investor side. The first question was on 4680 cells, which we already answered so let's go to the second question. How is the progress of the $25,000 compact car? Can you give an update?",
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"name": "Elon Musk",
"speech": "Well, we're not currently working on a $25,000 car. We -- at some point, we will, but we have enough on our plate right now, too much on our plate, frankly. So at some point, there will be. I think that's sort of a question that it's sort of the wrong question. Really, it's really the thing that overwhelmingly matters is when is the car autonomous? At the point in which it is autonomous, the cost of transport drops by, I don't know, a factor of [ 4 or 5 ]",
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"name": "Martin Viecha",
"speech": "Thank you. The next question from investors is, since we're talking product road maps today, how do you view domestic cooling and heating in the context of accelerating the sustainable energy transition? And how might Tesla's HVAC and heat pump advances fit it?",
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"name": "Elon Musk",
"speech": "You want to talk about that, Drew?",
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"name": "Drew Baglino",
"speech": "Yes. I think from a mission perspective, it's very aligned. If you imagine replacing natural gas, water and space heaters with electric heat pumps, it offsets something equivalent to like 80% of what a solar plus Powerwall system would offset, so it's very impactful. And we have learned a lot about how to make capable and reliable heat pumps that work in all environmental conditions and are excited about the idea of working on that problem 1 day. We put it that way. It's definitely aligned with our mission to transition to sustainable -- accelerate the transition to sustainable energy.",
"session": "Answer",
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{
"name": "Elon Musk",
"speech": "Yes, I think it really becomes quite a compelling solution to the consumer where you integrate the electric vehicle charging, solar energy storage, hot water, HVAC in a very tight compact package that also looks good. It just doesn't exist.",
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{
"name": "Lars Moravy",
"speech": "Yes. I mean, the integration of those systems in the house...",
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{
"name": "Elon Musk",
"speech": "That's Lars, by the way.",
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{
"name": "Lars Moravy",
"speech": "The integration of those systems in a house are no different than the integration of those systems in a vehicle. The only difference is, we do it all in the vehicle. [indiscernible]",
"session": "Answer",
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{
"name": "Elon Musk",
"speech": "And then it's so constrained on mass and volume and energy, it's like -- you get to the house [indiscernible] wow",
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{
"name": "Lars Moravy",
"speech": "Kind of easy problem.",
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{
"name": "Elon Musk",
"speech": "Yes.",
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"name": "Lars Moravy",
"speech": "But obviously, those systems are all just disparate and what we've been doing with Powerwall and charging solar is integrating them more and more. The next logical step is obviously HVAC and water and heating. So we will do that and we will integrate it probably better than anyone has. But as you said, we have a lot of stuff on our plate.",
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"name": "Elon Musk",
"speech": "Yes. [indiscernible] integrates with like phone, everything and the car can -- like the house can just heat and cool things because [indiscernible] coming home type of thing. It still needs to be like randomly that temperature when you're not there or...",
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{
"name": "Lars Moravy",
"speech": "When the cat moves.",
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"name": "Elon Musk",
"speech": "Yes, exactly. When the cat moves, exactly. So just do sensible things and just work really, I think it would be just quite a game changer down the road. We've got a lot of fish frying on it. And so it is a thing we will do but we're not committing to a time frame at this point.",
"session": "Answer",
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{
"name": "Lars Moravy",
"speech": "And people should do it.",
"session": "Answer",
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{
"name": "Elon Musk",
"speech": "Yes, if somebody else wants to do it, yes, yes.",
"session": "Answer",
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{
"name": "Lars Moravy",
"speech": "It's super beneficial for achieving the goal here.",
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"name": "Martin Viecha",
"speech": "The next question is, would you consider splitting FSD packages into perpetual and term licenses, with a higher tier for both options for commercial use? A perpetual license that could be attached to individual or business and not the vehicle itself.",
"session": "Answer",
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"name": "Elon Musk",
"speech": "Now I mean, this sounds maybe too complicated. We're just going to be focused on like what sells for the fully considered lowest cost per mile, kilometer of driving. And these other -- so that's what matters like how do you maximize the efficiency of people 1 place to another and then charge them in a sensible way.",
"session": "Answer",
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"name": "Drew Baglino",
"speech": "Including the charging infrastructure. That's a big part of it.",
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"name": "Elon Musk",
"speech": "Yes. So charging for money and charging for energy.",
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"name": "Martin Viecha",
"speech": "Thank you. The next question is, is Dojo on track for summer 2022? And what challenges, if any, are you working through? Is Dojo necessary for FSD to operate better in cities like New York City? Or on a separate note, where should we expect the first implementation of Tesla pads in your factories?",
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"name": "Elon Musk",
"speech": "Okay. There's a few questions on there.",
"session": "Answer",
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"name": "Martin Viecha",
"speech": "Like 6 questions.",
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"name": "Elon Musk",
"speech": "Yes, Dojo appears to be on track for doing something useful in the summer this year. I think the threshold that really matters is at which point when does it become more competitive than a GPU cluster for training? And obviously, the GPU cluster is getting better. So it's a moving target. But that's the goal I've set for the team is the FSD team running our GPU supercluster needs to tell me that they want to use Dojo instead that. That's where -- that's the obvious sort of threshold. \r\nAnd I don't know when that will. It's -- I wouldn't say like success is 100% certain here. I think we just generally want to overestimate meeting options to underestimate ourselves. But it does seem as though we might pass that threshold next year with Dojo if we execute well. Dojo is not needed for full self-driving but it is a cost optimization on creating vast amounts of video data. \r\nCustomization also, a rate of improvement so if you can train models faster, have a shorter iteration interval, then you can make progress faster. So not everything can be distributed to deep GPUs. There's some elements of serialization there. So -- and then if Dojo is competitive, then it does seem like the kind of thing where we would offer it to other companies that want to do neural net training. Those are very much a neural net training optimized system. \r\nBut in theory, it should be better than computing platform or say, GPUs, which were not really intended for the is not directly intended for optimizing training of your networks. They just happen to work better than CPUs in most cases. So things like Dojos like a giant ASIC optimized for neural net training, especially video, or at But as like said, we're not saying, for sure, Dojo would succeed. We think it will. We would encourage those who think this is an interesting problem to join Tesla, and yes.",
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"name": "Martin Viecha",
"speech": "And the first use of Tesla pad, whether it's in the factory or elsewhere?",
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"name": "Elon Musk",
"speech": "Yes. The first use of the Tesla pad Optimus, the Optimus name seems to be sticking at least internally, Optimus Subprime. Like if we can't find a use for it, then we shouldn't expect that others would. So the first use of the Optimus robot would be, at Tesla, like moving parts around the factory or something like that.",
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"name": "Martin Viecha",
"speech": "Okay, thank you very much. And the next question on insurance. When do you plan on having your insurance services rolled out in all the states, international rollout timing in markets that have Tesla Insurance, what kind of uptake rates are you seeing?",
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"name": "Zachary Kirkhorn",
"speech": "Yes. We currently offer Tesla Insurance in 5 states in the U.S. Four of them are telematics, which is Texas, Illinois, Ohio and Arizona. And then California, which has a more standard insurance offering based upon regulations there.",
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"name": "Elon Musk",
"speech": "It should be clear, like we are pushing very hard for California to change the rules to allow informatics, which basically means that you're as safe as you're driving is measured. So I think the current California rules are contrary to the best interest of the consumers in California and should be changed.",
"session": "Answer",
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"name": "Zachary Kirkhorn",
"speech": "Yes. And that's evidenced by what we're seeing in Texas. We've been in this market now for about 3 months. And what we see in the data is the frequency of collision by folks who are -- who are given a feedback loop on how they are driving is quite a bit lower than the frequency of collision otherwise.",
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"name": "Elon Musk",
"speech": "Yes. And we direct feedback on whether driving safe -- and if the driver their insurance cost less, so they drive safer. It encourages Tesla Insurance with informatics and real-time feedback encourages safer driving and rewards it monetarily. It's great.",
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"name": "Zachary Kirkhorn",
"speech": "Exactly. And so we see that so far in Texas. Take rates have been quite strong. We measure this on the conversion rate from when folks quote to see what their monthly rate would be at the starting point to what percentage of them purchase. So we're very encouraged by the interest that we're seeing in Texas. \r\nAnd then we have enough history in Texas to see what does the loss ratios look like and how do the economics of the program work. And we're on the right track there as well. So we're comfortable with what we've seen in Texas to move as quickly as the intent to scale this across the U.S. \r\nSpecifically on the question about when we will be in all states, this is a slow process because of insurance being regulated at the state level. And so we have to go through each of those processes with each of the departments of insurance in each state. But our internal goal here by the end of the year is to be in enough locations that 80% of our customers within the U.S. could choose to sign up for Tesla Insurance if they wanted to. \r\nThere's a lot of uncertainty around that based upon the regulatory processes, but that's our goal. And then as we make more progress rolling out in the states and each incremental state becomes a little bit less effort than the prior, that's when we'll turn our attention to the Europe market. We might be able to do that by the end of the year, starting to get work on Europe by the end of the year. We'll have to see how we progress in the U.S.",
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"name": "Martin Viecha",
"speech": "Thank you. Next question is, what is your expected max capacity from each of your current factories, pretty much Shanghai, Berlin and Austin and timing for new factory announcements?",
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"name": "Elon Musk",
"speech": "I don't think we want to comment on -- like that's -- it's always possible to increase the output of any given factory to say, what's the next capacity? Well, it's difficult to say what that next capacity is because you put a lot of evidence that you increase capacity quite a lot. \r\nI think the -- look at the big picture -- you initially always want to increase capacity at 1 factory because your logistics cost of transporting cars needs to be considered. Especially as the cars become more affordable, you want to have factories that are not like thousands of miles away from the customers. So even if you could increase output, it may not actually be the smart thing to do. \r\nSo in the U.S. with, for example, with Giga Texas, I mean, coming up, we would want to deliver, say, Model Ys that are going to the eastern 2/3 of the United States from this factory. The logistics costs are going to be much less. But we will continue to increase output in Fremont and in -- at Giga Nevada and Shanghai. And as I said at the beginning of the call, this -- 2022 is the year we will be looking at factory locations to see what makes the most sense, possibly with some announcement by the end of this year. Yes.",
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"name": "Martin Viecha",
"speech": "And the next question is, what are the biggest obstacles for Cybertruck volume production besides battery shortage?",
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{
"name": "Elon Musk",
"speech": "Batteries will probably not be the limiting factor in Cybertruck production. There's a lot of new technology in the Cybertruck that will take some time to work through. And then there's a question of like, what's the average cost of Cybertruck and to what degree is that affordable? There's -- you can make something infinitely desirable. But if it's not affordable, that will constrain people's ability to buy it because they don't have the money. \r\nI worry more about like how do we make the Cybertruck affordable despite having awesome technology. That's the thing that will really set the rate. Aspirationally, we'd like it to go, in terms of just a rough order of magnitude, we'd like Cybertruck to be at least on the order of [ 250,000 ] vehicles a year. But it will take us a moment to get to that level.",
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"name": "Martin Viecha",
"speech": "Thank you. The next question is, how much of Tesla's margin improvement is from, number one, economies of scale; number two, production design -- production line design efficiencies; number three, reduced transportation costs from multiple plant locations; and number four, pricing versus cost inflation; or number five, other sources? And how much further could margins improve and why?",
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{
"name": "Zachary Kirkhorn",
"speech": "Yes. Basically -- yes, there's basically 4 major factors if we look over the last year to the margin improvement in the company. And they're in no particular order here but these are the big ones. So our mix of Model Y is increasing as we've ramped that to higher capacity in Fremont and also in Shanghai. And the reason that matters is the Model Y is a vehicle that carries a higher profit than the Model 3. And so that is helpful on our margins. And then as we increase the volume on that program with labor efficiencies, fixed cost amortization, they improve and the costs go down as well. \r\nThe second 1 here is localization in Shanghai has been a huge help for margins for the company. And the obvious things around logistics and duties is a big part of it, but we've also -- that factory had a different line design, more efficient from the start, and we've been pushing the boundaries on the volume there. So that has been helpful. \r\nIf you recall at the beginning of the year, we also were in a transition to the new version of the Model S and Model X. And so as that has ramped over the course of the year, that has been helpful. And then we've also done various price increases in certain markets on certain models, which has helped there. So that's generally the story at a high level. \r\nAs we look over the next a quarter or 2, as I mentioned in my opening remarks in the last call as well, we have ramp inefficiencies from the launch of Austin and Berlin. We also have pressures coming from inflation, supply chain, raw materials, et cetera. And so where that nets out is hard to say in the immediate term. And we obviously, as a company, are going to be driving to increase margins as much as we can. But I just want to be realistic that we're launching 2 factories simultaneously here and it unavoidably will add cost to the business as we do that. \r\nAnd as we look further out, and Elon mentioned this in his opening remarks as well, the software portion of the business, I think, is the one to really pay attention to. As full self-driving features get rolled out to more and more folks, I mean, for me, personally, I prefer to drive my car with the FSD bid on. And I think as more and more people experience that, take rates there, and then as we work towards the robotaxi space, there's actually quite a bit of upside on margins from a software perspective.",
"session": "Answer",
"person_id": 385023,
"person_company": null,
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},
{
"name": "Elon Musk",
"speech": "Yes, I think basically everything pales in comparison to the value of robotaxi or personal driving. I mean, it's just -- I mean, that just tends to everything. You just go from having an asset that is -- has a utility of perhaps 12 hours a week per passenger car to maybe around 50 or 60 hours a week to a 5x increase in the utility of the asset. The cost didn't change. Yes. So that's where just things just had just kind of your mind.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 50
},
{
"name": "Martin Viecha",
"speech": "Thank you. And the last question from investors is Elon mentioned Level 4 autonomy could be achieved this year. Is it based off initial FSD beta rollout experience or is Level 4 ability predicated on Dojo being completed online?",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 51
},
{
"name": "Elon Musk",
"speech": "As mentioned earlier, Dojo is not required for full self-driving. It should have a positive effect on the cost of training networks. It's not just a question like, does it get to full self-driving but really kind of like the March of Nines of reliability, is it 99.999% reliable or 99.999999% reliable. This is -- it gets nutty. \r\nObviously want to get to post perfection as possible. So frankly, being safe than a human is a low standard, not a high standard. People are very, very lossy, often distracted, tired, texting. Anyway, it's remarkable that we don't have more accidents. So it's yes. So actually being better than a human, I think, is relatively forward, frankly, how do you be 1,000% better or 10,000% better. Yes. That's what gets much harder. \r\nBut I think anyone who's been in the FSD beta program, I mean, if they were just to plot the progress of the beta interventions per mile, it's obviously trending to a very small number of interventions per mile and pace of improvement is fast. And there are several profound improvements to the FSD stack that are coming in the next few months. So yes. I would be shocked if we do not achieve full self-driving safer than human this year. I would be shocked.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 52
},
{
"name": "Martin Viecha",
"speech": "Thank you. Let's go to analyst questions now. And the first question comes from Jed from Canaccord. Jed, feel free to unmute yourself and ask a question.",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 53
},
{
"name": "Jonathan Dorsheimer",
"speech": "Congratulations on a great year. Elon, I guess my question is around the Megapack or your energy business. And so as we look at the strategy or the supply chain constraints that you mentioned, you have 2 different strategies or it seems like with Megapack and Powerwall. And I think the Powerwall was answered with 4680 and the 2170 opening up. So I was wondering if you could just talk about the supply chain and LFP for the Megapack and what we should expect for that?",
"session": "Question",
"person_id": 95165,
"person_company": null,
"component_order": 54
},
{
"name": "Elon Musk",
"speech": "Yes. To be clear, we do think that old stationary storage, Powerwall and Megapack, will be -- will transition to an iron-based system, basically a non-nickel system. Manganese is also -- could be part of the future, but primarily iron. It just comes down. Iron nickel -- we need something that is formed in a star before a supernova ideally. So iron is. So that's because there's a ridiculous amount of iron on Earth as is a ridiculous amount of lithium. \r\nSo you can really expect all stationary storage to transition to iron over time. And like I said, with manganese is like a wildcard, manganese. And I should say like we did short-change the energy business last year in that vehicle took priority over the energy side. So on sales, but on a yes, on chipset, yes. We do see a very -- I mean, long-term probably terawatt-hour per year energy business. A lot -- it's very vast. Yes.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 55
},
{
"name": "Jonathan Dorsheimer",
"speech": "That's helpful. So you see that '22 is kind of the opening of that the energy business reaccelerating?",
"session": "Question",
"person_id": 95165,
"person_company": null,
"component_order": 56
},
{
"name": "Elon Musk",
"speech": "It's hard to predict 2022 because we still have lingering supply chain -- there are still lingering supply chain issues globally. But I think the chip stuff, at least the chip side of things appears to looks like it will alleviate end of this year or '23. I mean, there are a crazy number of chip fabs being built, which is great. The sheer number of chip fabs being built right now is exciting to see, yes. So there could be other issues. We're trying to anticipate those as much as possible but predicting the future is difficult.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 57
},
{
"name": "Lars Moravy",
"speech": "And the goal is definitely to grow it this year.",
"session": "Answer",
"person_id": 482177,
"person_company": null,
"component_order": 58
},
{
"name": "Elon Musk",
"speech": "Yes, we'll grow it this year, for sure. It's just -- we -- if we're simply we're able to respond to demand, it might grow by like 200% or 300% or something as opposed to sort of 50% or so.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 59
},
{
"name": "Zachary Kirkhorn",
"speech": "Yes. Yes. I mean I think it's exactly that. I mean, it's a question of does it double, triple, quadruple? I mean, either way, I think our plans are pretty ambitious for Megapack this year and storage in general. The exact amount of growth is hard to know. But ultimately, I mean, to Elon's point about the growth of this business, I mean, we need to be growing it faster than the vehicle business.",
"session": "Answer",
"person_id": 385023,
"person_company": null,
"component_order": 60
},
{
"name": "Elon Musk",
"speech": "And it will actually grow faster than the vehicle business once we can [indiscernible] chip constraint, frankly. So it will grow like stars basically on the road, it needs to. And our primary mission is to accelerate sustainable energy. That's always been our primary mission and we're trying to stay true to that.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 61
},
{
"name": "Martin Viecha",
"speech": "The next question comes from Ben Kallo from Baird.",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 62
},
{
"name": "Ben Kallo",
"speech": "I was wondering on the R&D front because like you said, you have so many fish frying. How do you organize the R&D efforts so that you can start talking about all these new products? Is there like an incubator or some type of thing like that? But just structurally, I'm curious about that.",
"session": "Question",
"person_id": 160874,
"person_company": null,
"component_order": 63
},
{
"name": "Elon Musk",
"speech": "Well, we don't have incubators.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 64
},
{
"name": "Drew Baglino",
"speech": "Or research centers.",
"session": "Answer",
"person_id": 393478,
"person_company": null,
"component_order": 65
},
{
"name": "Elon Musk",
"speech": "Research centers. We have no research centers. We're We work on things that go into our products. Yes, we're like this is a useful product that the world really needs. And we just like what to make this thing, design it up and iterate fast and then how to make this at scale at a reasonable price. That last part is the super hard part. Many times, we've said prototypes are easy, production is hard. If we could work out prototypes, but what's the point of that? \r\nLike you actually reach scale production and have cash and exceed cash out. That's the super hard part. So",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 66
},
{
"name": "Drew Baglino",
"speech": "So everybody needs to be in the factory often enough to be able to understand that last part of the equation. Yes. And if you're in the research center...",
"session": "Answer",
"person_id": 393478,
"person_company": null,
"component_order": 67
},
{
"name": "Elon Musk",
"speech": "Yes. Doing them separately is like [indiscernible] for actually making products. So we don't think of it as R&D and then like the product development. It's just 1 f****** [indiscernible] just make great products at -- is the same general society with those way too much value placed on the idea. \r\nIt's like the -- like the idea of going to the moon. That's what the hard part. Okay, going to the moon is the hard part by far. And the thing is that, that is true for really most products. So this is just weighing too much value placed in the idea of versus execution. And we have ideas, we have a bazillion ideas [indiscernible] so many ideas we don't know what do with. Sort through them and say, which 1 are we actually going to going through the [indiscernible] of bringing to volume production. That's the super and then actually do that, right -- that's tough.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 68
},
{
"name": "Lars Moravy",
"speech": "And the closer you are applying blood, sweat and tears to actual production, the faster you'll be able to bring new things into actual production.",
"session": "Answer",
"person_id": 482177,
"person_company": null,
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{
"name": "Elon Musk",
"speech": "Yes, exactly. If you want to tie you back with production, just like the offices we're sitting in right now, looks over the Giga Texas production line, like the offices are integrated into the factory.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 70
},
{
"name": "Martin Viecha",
"speech": "The next question comes from Toni Sacconaghi from Bernstein.",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 71
},
{
"name": "Toni Sacconaghi",
"speech": "I have 2, please. First, you spoke a lot about FSD and how the economics could be very attractive going forward. I'm wondering if you could just share what your current attach rate might be for FSD on your vehicles or how to think about the progress of your attach rate or revenue in FSD, let's say, in '21 versus '20? And how much deferred revenue for FSD was drawn down during the year? And I have a follow-up, please.",
"session": "Question",
"person_id": 117232,
"person_company": null,
"component_order": 72
},
{
"name": "Elon Musk",
"speech": "I think the FSD stuff, you really don't want to be looking at the rearview mirror. It will not be a good indicator for the future. This is what you need to look out the front windscreen, because it is such a profound step change. I mean, effectively long term, every car will have FSD. And so -- and the value of that will be a very big number. I just look at this as asset utilization. \r\nYou have a passenger car, which normally is driven maybe 1.5 hours a day on average, maybe 10 -- 10 hours, 10, 12 hours a week, a lot of cars in So we're spending money, not just driving the cars but storing them all over the place. We can get rid of a lot of parking lots if you have a car that is operating all the time. But there will be a challenge with traffic. So we like this little tiny baby company, The Boring Company, which I initially started as a joke, and now I think it actually could be quite essential to alleviating the insane traffic that will happen when cars are autonomous because you reduce the pain of travel and you reduce the cost of travel so dramatically that there will be a crazy number of cars on the road. \r\nI mean, it's going to be -- I think it's way cheaper to point with robotaxi, which is an autonomous Tesla, which every car we've made in the past 3 or 4 years will be capable of that, than a bus or a subway, will cost less than the subsidized value of a bus ticket. So we want to I'm not going to take the bus. If it costs you, I don't know if agents take $2 to travel 10 miles point to point. taking the bus, especially in cold weather or dark or maybe a little bit dangerous or [indiscernible] \r\njust do not understand how profound change this is. It's not like some little feature select the most profound software upgrade maybe in history. Millions of cars suddenly have about 4 or 5x utility [indiscernible] overnight. I don't actually know how to quantify that financially except that it's some big number.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 73
},
{
"name": "Toni Sacconaghi",
"speech": "Okay. Elon, I was wondering if I could just follow up and ask you. You talked about your product road map and also your goal to keep growing at 50% per year or better. That would put you at 3.2 million vehicles or more in 2024. And I think you made reference to Cybertruck maybe being 250,000 vehicles. If there is no $25,000 vehicle being worked on, is it really realistic to think that you can sell more than 3 million vehicles with 2 very high-volume cars and Cybertruck in 2024? Or how do we think about that or what else is missing in that equation?",
"session": "Question",
"person_id": 117232,
"person_company": null,
"component_order": 74
},
{
"name": "Elon Musk",
"speech": "Yes. I mean, it's apparent from the questions that the gravity of full self-driving is not fully appreciated. If an asset has 5x more utilization than the -- it's like dividing the cost of that asset by 5. So if you have a $50,000 car, it's like having a $10,000 car all of a sudden, but maybe better than that because don't want to drive. So the person can be engaged in productivity or amusement instead of having to onerously drive through traffic. So it's probably better than 5x, I don't know. Yes. I mean basically, if the cost of our cars do not change at all, we would still sell as many as we could possibly make.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 75
},
{
"name": "Martin Viecha",
"speech": "Thank you. And the next question comes from Pierre Ferragu from New Street Research.",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 76
},
{
"name": "Pierre Ferragu",
"speech": "I wanted to come back on battery. So it's great to hear on 1 hand that you guys expect to sell like the first car with 4680 this quarter and at the same time, that you don't really depend on that ramp to achieve your -- what you hope to achieve in terms of significant volume growth this year. And the question I had is I understand well the ramp of 4680 internally. But I'd be curious to hear you talk about how you think about 4680 as being a form factor that your suppliers could adopt as well. \r\nAnd how you see in the long run, in the greater scheme of things, what does 4680 become? Is it going to be, outside of Tesla, the largest form factor for batteries? Is it something that you guys are going to deploy in all cars, whatever the chemistry also in the Megapack, in all your energy storage business? And do you expect eventually a lot of other companies to use that form factor as well?",
"session": "Question",
"person_id": 356336,
"person_company": null,
"component_order": 77
},
{
"name": "Drew Baglino",
"speech": "Yes. On the 4680 as a form factor, yes, we've engaged with a number of our partners or suppliers on the form factor and they're all working on it. And they look at it the way we look at it as a way to drive fundamental cost efficiencies in production and also ultimately, the design of the cell itself to drive the cost down of the cell. And so that's what's engaged -- I mean, we're engaged because we think it's a good form factor there, engaged because they think it's a good form factor, and we want people to make it for sure. \r\nTo the question about should everything be 4680, it doesn't have to be. In the end, it's about cost competitiveness, scalability of manufacturing. And when you compare like an iron cell with a nickel cell, for example, like there are some just physics-based differences in what happens in certain corner cases that would drive different form factors, and we just have to be cognizant of that and design to that. So it isn't like the ultimate form factor for all things. There's other form factors that could be better for an iron cell, for example.",
"session": "Answer",
"person_id": 393478,
"person_company": null,
"component_order": 78
},
{
"name": "Elon Musk",
"speech": "We don't use 4680 at all for the iron cells.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 79
},
{
"name": "Pierre Ferragu",
"speech": "Okay. And I have a quick follow-up on chips. So you've talked a lot about all this shortage and the supply difficulties. And I was wondering if you could give us some color on like the power chips you need for investors and all the power systems you're putting together versus like the more traditional logic chips, if the situation is different between the 2? \r\nAnd should we understand from the situation today that you're working very hard also at expanding the scope of your suppliers? And should we expect like Tesla to take on board additional suppliers in the near term, especially on the power side?",
"session": "Question",
"person_id": 356336,
"person_company": null,
"component_order": 80
},
{
"name": "Elon Musk",
"speech": "Well, last year was chip hell of many chips, so silicon voters certainly one of them, but...",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 81
},
{
"name": "Lars Moravy",
"speech": "Honestly, there's a lot of annoying very boring parts.",
"session": "Answer",
"person_id": 482177,
"person_company": null,
"component_order": 82
},
{
"name": "Elon Musk",
"speech": "Yes. It's a ton of very simple control chips that front-of-the-mill literally coming. Yes. Basic to control.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 83
},
{
"name": "Lars Moravy",
"speech": "It also references oscillators, so very boring things.",
"session": "Answer",
"person_id": 482177,
"person_company": null,
"component_order": 84
},
{
"name": "Elon Musk",
"speech": "Yes, exactly. Like the little chip that allows you to move your seat back and forth. That actually was a big problem. Yes. Can move seats. So -- but a lot of these things are alleviating. I think there's some degree of the toilet paper problem as well, where there was a toilet paper shortage during COVID. \r\nLike obviously, it wasn't really certainly a tremendous enhanced need for a** wiping. It's just people panicked in order -- and got every paper product you could possibly wipe your a** with basically. And I was sure, is this like a real thing or not? Actually took my kids to the HEB and Walmart in Texas to just confirm if this was real. Indeed, it was. And there's plenty of food and everything else, but just nothing, no paper products that didn't cause split out. \r\nAnd our choice for people to panic [indiscernible] since coming as we told at the least of your problems. So I think we saw just a lot of companies over-order chips and they buffer the chips. And so we should see -- we are seeing alleviation in almost every area, but the output of the vehicle is -- goes with the least lucky. What are the most problematic item in the entire cars? And there's like at least 10,000 unique parts in the car. So waiting more than that if you go further off the supply chain and it's just, which 1 is going to be the least lucky 1 this time? It's hard to say.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 85
},
{
"name": "Drew Baglino",
"speech": "I mean, on a go-forward basis, right, the idea is to continue to drive simplification. So there are fewer unique parts, fewer of them. On the power side, in particular, it's still like an area of like technological development where the next chip can do the same thing with less diarrhea, so like the total fab required to accomplish the function goes down. So there's still room to grow without needing more fab capacity. But in general, there's a lot more fab capacity coming. So that's like a win-win there.",
"session": "Answer",
"person_id": 393478,
"person_company": null,
"component_order": 86
},
{
"name": "Elon Musk",
"speech": "Yes, yes. It's not a long-term thing because there's going to be -- there's a great amount of chip fabs being built, which is great.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 87
},
{
"name": "Martin Viecha",
"speech": "Well, thank you very much. Unfortunately, that is all the time we have for this session. Thanks very much for all your good questions, and we'll speak to you again in 3 months' time. Have a good day. Bye-bye.",
"session": "Answer",
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},
{
"name": "Elon Musk",
"speech": "Thanks.",
"session": "Answer",
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}
],
"title": "Tesla, Inc., Q4 2021 Earnings Call, Jan 26, 2022",
"quarter": 4,
"year": 2021
}
},
{
"transcript_title": "Tesla, Inc. - Q3 2021",
"transcript_name": "Tesla, Inc., Q3 2021 Earnings Call, Oct 20, 2021",
"ticker": "NASDAQ:TSLA",
"transcript_url": "https://wkarticles.blob.core.windows.net/finnhub/snp_transcript_2408343",
"date": "2021-10-20",
"year": 2021,
"quarter": 3,
"transcript_data": {
"date": "2021-10-20",
"participant": [
{
"name": "Brian Johnson",
"role": "Analysts",
"pro_id": 53425383,
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"description": "Analysts",
"company_name": "Barclays Bank PLC, Research Division",
"transcript_person_id": 96852
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"role": "Analysts",
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"description": "Analysts",
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"transcript_person_id": 480193
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"role": "Analysts",
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"description": "Analysts",
"company_name": "Oppenheimer & Co. Inc., Research Division",
"transcript_person_id": 310676
},
{
"name": "Drew Baglino",
"role": "Executives",
"pro_id": 621069668,
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"description": "Executives",
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"transcript_person_id": 393478
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"description": "Analysts",
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"transcript_person_id": 95165
},
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"name": "Joseph Spak",
"role": "Analysts",
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"job_title": "Former Autos and Leisure Analyst",
"description": "Analysts",
"company_name": "RBC Capital Markets, Research Division",
"transcript_person_id": 124280
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{
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"job_title": "Vice President of Vehicle Engineering",
"description": "Executives",
"company_name": "Tesla, Inc.",
"transcript_person_id": 482177
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{
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"role": "Executives",
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"description": "Executives",
"company_name": "Tesla, Inc.",
"transcript_person_id": 370659
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{
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"description": "Analysts",
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"role": "Analysts",
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"description": "Analysts",
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"transcript_person_id": 191315
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"transcript": [
{
"name": "Martin Viecha",
"speech": "Good afternoon, everyone, and welcome to Tesla's Third Quarter 2021 Q&A Webcast. My name is Martin Viecha, Senior Director of Investor Relations, and I'm joined today by our CFO, Zachary Kirkhorn, and our Senior VP, Drew Baglino as well as other executives. Our Q3 results were announced at about 3:00 p.m. Central Time in the update deck we published at the same link as this webcast. \r\nDuring this call, we will discuss our business outlook and make forward-looking statements. These comments are based on our predictions and expectations as of today. Actual events or results could differ materially due to a number of risks and uncertainties, including those mentioned in our most recent filings with the SEC. [Operator Instructions] But before we jump into the Q&A, Zach has some opening remarks. Zach?",
"session": "Presenter Speech",
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{
"name": "Zachary Kirkhorn",
"speech": "Yes. Thanks, Martin. We're continuing to make great progress as a company, setting new records on each of the most important financial metrics for Q3. Overall, we delivered just over 240,000 cars, 20% higher than last quarter and 70% higher than the same quarter last year. We were also able to achieve an annualized production run rate of over 1 million cars towards the end of the quarter. The increase in production rate has primarily been driven by further ramping of the Model Y at our Shanghai factory. \r\nAdditionally, we have made great progress increasing production volumes of Model S and have recently started the ramp and deliveries of Model X. It will take a bit more time to get this program back to prior volumes, but based on demand, we are targeting to exceed historical production levels. \r\nWe have also completed the transition of our Shanghai factory as our main export hub. This has enabled us to supply more vehicles to the North America market and to introduce Model Y to Europe. Due to part shortages and logistics variability, we have not been able to run our factories at full capacity. It's important to note that while we have roughly doubled deliveries year-to-date, this has been exceptionally difficult to achieve. I want to thank our supply chain team for their incredible work and our production teams for showing impressive flexibility as we make adjustments real-time. This team's expertise in the chip industry across all tiers has made a huge difference when managing through these challenges. \r\nAdditionally, we never reduced our production forecast with our suppliers as we're adding capacity as quickly as possible. I also want to thank our suppliers for their dedication and partnership to Tesla. Despite these increases in production and generally higher prices, our backlogs are continuing to grow and average customer wait times are extending. The only practical way to address this in the immediate term is to do everything we can to build more cars on our existing production lines, which is where we are focused. \r\nSimilar dynamics are also playing out in our storage business as we are working to expand Powerwall and Megapack production as quickly as parts and cells allow us to do so. Additionally, we have made good progress on the in-house battery manufacturing program, and we're excited to have expanded the full self-driving beta program to more customers. \r\nFinancially, our auto gross margins reached 30.5% on a GAAP basis and just under 29% excluding regulatory credits, which is our strongest yet. This benefit primarily comes from higher volumes, particularly out of the Shanghai factory, increased mix of the Model Y as we -- and we have made good progress increasing Model S volumes. The Model S has now returned to positive gross margin, and we expect this to increase with higher production and the ramp of Model X. \r\nAs was the case in Q2, there was some net benefit from pricing actions. However, this remains small in the context of other contributors. Please keep in mind that given backlog, it will take time for the impact of recent changes to flow through our financials. Note that we are also not yet recognizing additional revenue from the FSD beta program. \r\nSupply chain challenges, including expedites, continue to provide cost headwinds as was also the case with FX this quarter. While we are seeing an impact from the rise in commodity and labor costs, we have also been adjusting pricing which should help to compensate. Overall, as I mentioned in our last call, our P&L continues to benefit from the marginal profitability of each incremental unit with higher fixed cost absorption. \r\nAs a result of the great progress on margins, volume and appropriate management of overhead costs, we were able to achieve an operating margin of just under 15%, exceeding the long-term guidance we've laid out previously. \r\nOn cash, we generated record operating cash flows of $3.1 billion and continue to invest heavily in the build-out of manufacturing, supercharging and service capacity. We also continue to retire high interest rate debt including the early settlement of our 2025 senior notes of $1.8 billion during the quarter. As we look forward, we are clearly quite a bit ahead of the pacing required to achieve our target annual growth rate of 50% this year. Q4 production will depend heavily on availability of parts but we are driving for continued growth. \r\nWe are also nearing assembly of our first production cars in Austin and Berlin. It's important to stress, while the first production car is an important milestone, the hardest work lies ahead in the ramp. Please keep in mind that we are pushing the boundaries on new product and manufacturing technologies at these factories, which makes it difficult to predict the exact pace of the ramp. These factories will also partially weigh on our margins as we work towards volume production. \r\nOverall, I'm very proud of what the team has accomplished, and I'm excited for our next phase of growth into Q4 and into 2022. The team has done a tremendous job improving our financial health in a short period of time while also continuing to improve our precision and pace of execution. Thank you.",
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"name": "Martin Viecha",
"speech": "Thank you very much. And we will now take questions from institutional and retail shareholders that we posted on our website.",
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"name": "Martin Viecha",
"speech": "The first question is, when should we expect the first vehicles to be delivered with 4680 cells?",
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"name": "Drew Baglino",
"speech": "Yes. Thanks, Martin. Early next year, from a non-cell perspective, structural battery crash, range and reliability testing are on track to be complete this quarter. Testing is -- to date has gone well and the Fremont manufacturing line is on track to support. However, similar to what Zach said before, this is a new architecture and unknown unknowns may exist still. Our top priority is ensuring quality in what we deliver. And from a cell perspective, we are comfortable with the design maturity and manufacturing readiness matching the PAC time line I just mentioned.",
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"name": "Martin Viecha",
"speech": "Thank you very much. The second question from an institutional investor comes. Do you still expect to start production of the $25,000 model in 2023? What are the biggest hurdles from now until then?",
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"name": "Lars Moravy",
"speech": "Thanks, Martin. Yes. We're working on a strategy to increase our production rates as quickly as possible. I think Zach spoke to that well. And we're doing this while trying to add the least amount of incremental complexity to the business. We don't want to add any new vehicles to our lineup when we're generally in a cell-constrained world. \r\nWhile there is still more runway to grow these existing products, we are focused on Model Y expansion in Austin, Berlin, ramping S and X further in Fremont to restore to past levels while also growing 3 and Y production in Fremont and Shanghai. As we've mentioned before, after Model Y in Austin, our next product launch will be Cybertruck. And that timing, of course, depends on increasing cell capacity both from our suppliers and through our in-house cell as well as many other headwinds we face in the supply chain and completing our currently full plate of products on the table.",
"session": "Answer",
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"name": "Martin Viecha",
"speech": "Thank you very much. The third question is, with FSD beta training data sets set to explode exponentially, as software is released to a wider and wider audience, are there any early takeaways with regards to how quickly versions can iterate and be pushed out from biweekly to weekly or even daily?",
"session": "Answer",
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{
"name": "Drew Baglino",
"speech": "At this point, it's not so much about how much data can we collect but how quickly can we process the data we've collected. This is where Dojo comes in, as we mentioned on AI Day. With substantially faster training computer in Dojo, we will be able to iterate more often than we do now. If for instance, say the training, the net takes 1 day instead of 1 week, makes a huge difference in our ability to push out more updates. \r\nBut realistically, there's a whole lot more that comes into play when iterating software updates. The whole infrastructure from top to bottom including testing and validation needs to be set up for faster iteration. So daily updates are not really realistic for now.",
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"name": "Martin Viecha",
"speech": "Thank you very much. The next question is, can you provide an update on future model development and how much diversity in your fleet will be necessary to achieve 20 million in annual volumes? The best-selling cars in the world today only sell slightly over 1 million units. So is it possible to achieve 20 million units with just S, X, 3 Y, Truck and the $25,000 car?",
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"name": "Lars Moravy",
"speech": "Thanks, Martin. Yes, as we've mentioned before, we've seen record growth of both Model 3 and Model Y segments, where Model 3 is currently the best-selling luxury sedan worldwide. And as we mentioned at our shareholders meeting, Model Y is poised to be the best-selling vehicle in the world. Tesla continues to break molds in these vehicle segments and we hope to do so with each new product. As we've said publicly, we'll eventually expand the vehicle lineup to get to larger volumes, and we believe that we will need to be in all major segments across small and midsized large sedans, SUVs and trucks to do so, along with, of course, the massive space of robotaxi.",
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"name": "Martin Viecha",
"speech": "Thank you very much. The next question from a retail shareholder is, what is Tesla's goal for vehicle production capacity for the 4 current factories, Fremont, Shanghai, Austin and Berlin by 2024?",
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"name": "Zachary Kirkhorn",
"speech": "Yes. Thanks, Martin. Our goal as a company here is to grow on an average pace of 50% per year. And so you can extrapolate that out. There may be some periods of time in which we're well ahead of that. There could be some periods of time, despite best efforts, where we're slightly lower than that. But that remains the long-term goal of the company. \r\nIn Fremont, we're continuing to push the boundaries of what's possible there. Over the last 12 months, we've done about 430,000 cars of production. And based upon everything that we know in the factory, where the bottlenecks are, what the potential is, we're targeting to increase that another 50%. I think that will be a difficult goal but that's the goal that the internal team has, and they're going to continue to push on that. \r\nAs we look towards Shanghai, we're continuing to push the boundaries there and we continue to ramp production there as well. So most recently, the ramp-up of the Model Y, which was our biggest contributor of volume in Q3, we'll continue to ramp that factory. And our plans there with time are to keep growing the capacity in that factory. \r\nAustin and Berlin are interesting factories because our first iterations of capacity there are on Model Y. But we've intentionally set these factories in locations in which they have quite a significant amount of land and ability to expand. And so we'll take Model Y at these factories, we're trying to get to 5,000 cars a week as soon as we can. And then we'll continue to push beyond that, potentially even getting to 10,000 cars per week at those factories. And then we'll add Cybertruck here in Austin and continue to grow from there. \r\nSo our goal is to get to millions of cars per year over the next couple of years, and then ultimately, in the long term, be able to achieve 20 million cars per year. We're going to grow as quickly as is feasibly possible with an eye towards a 50% annual growth rate.",
"session": "Answer",
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"name": "Martin Viecha",
"speech": "Great. Thank you very much. The next question is, what is your view on the tightening regulatory environment for FSD, the investigation and broad data request by NHTSA? Some of the recent nominees to an NHTSA have been publicly critical of FSD, including engaging with short sellers online. How will you manage this environment?",
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"name": "Lars Moravy",
"speech": "Thanks, Martin. Yes, as we have been for years, we always engage with NHTSA and other worldwide regulatory bodies to share our knowledge and to work with them on our approaches on both active and passive safety. There are ongoing regulatory inquiries taking place all the time and especially on the subjects like FSD that are at the cutting edge of technology development. \r\nDuring these investigations, my team, myself, are always cooperative as much as possible. We expect and embrace the scrutiny of these products and know that the truth about their performance and the innovations our products have will ultimately be all that matters. In the end and as I've said on previous calls, we take safety as a top priority in all our designs. This is because our primary motivation is coming from a team of incredible engineers designing software and hardware that saves lives and prevents injuries. \r\nIn doing so, we'll continue to be transparent to the public on how our technology is both developing from an autopilot safety data, the latest of which we just shared in the shareholder update. And you can also see and review a wide variety of customer post FSD videos on social media.",
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"name": "Zachary Kirkhorn",
"speech": "Great. Just to add to that, I mean, as Lars said, safety is extremely important for Tesla. It's the right thing to do. And if you look at various independent testing and regulatory testing of our products, you can see the work of incredibly talented engineers in the results of those tests. And our goal in developing safety-oriented software around the car is to continue to go beyond what the hardware is able to provide. If you can prevent a crash from happening, that's the safest way to manage this. \r\nAnd I think at a macro level here, what we're seeing, and this is entirely understandable and expected, is that the automotive industry is going through a transition from the traditional car as we know it to more of a computer, software-oriented sensor suites around them that can manage things beyond just what the driver manages. And regulatory bodies are, understandably so, are interested in understanding how to regulate in this environment, and NHTSA is no exception to that. \r\nSo as Lars mentioned here, I think this is a great thing. We're excited to partner and we'll work collaboratively with all regulatory bodies who want to go on the journey to the transition to a software-oriented vehicle.",
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"name": "Martin Viecha",
"speech": "Thank you very much. The next question is, service remains an issue with appointments available weeks or even months out. Likewise, Supercharger wait times have become untenable at some locations. What concrete steps is Tesla taking to improve the customer experience in these 2 key areas?",
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"name": "Zachary Kirkhorn",
"speech": "Yes. I'll take the service part of this question. Drew, you can take the supercharging part. We have seen an increase in service wait times throughout the summer. And there's a couple of things that have contributed to that based upon the information that we have. The first is that, and I think this is kind of not -- this is not unique to us, is that the return to some sense of normalcy in a post-pandemic world has happened, I think, more quickly than most people expected. \r\nAnd what we're seeing here is that the number of miles that people are driving has increased. There may have been some demand for service during 2020 or in the early parts of 2021 that customers put off, and so there's a bit of a catch-up that's occurring. That has increased demand for service. \r\nAt the same time, in the macro environment here, logistics, moving parts, sourcing parts has become increasingly more difficult, which is a well-known issue in the world right now, as well as challenges in the labor market. And so this kind of the simultaneous increase in demand for service, where the ability to supply that service, has been impacted for the reasons I mentioned. \r\nAnd so we saw an uptick, primarily in Europe and North America in service wait times over the course of the summer. And we've been working extremely hard since then to address this. And we've seen our wait times come down. So this is not the case in every location, but if you think about it from a regional average perspective, we are seeing improvements there. \r\nWe remain super-focused on adding locations. And so over the last year, we've grown our physical footprint of service centers by 35%. We've grown our footprint of mobile repair by over 40%. We're also adding staffing as quickly as we can in the areas that are most impacted by the imbalance of supply and demand for service. But I think the most important part about all of this is, and we've said this on calls before, where the best service is no service. \r\nAnd so we have been incredibly focused as a company both on the initial quality of our vehicles and reliability of our vehicles. And we've seen pretty substantial improvements in both of those metrics over the long term and over the last couple of quarters. So it is something that remains on our minds. We monitor this very closely. But hopefully, that's a helpful explanation into the context and what we're doing.",
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"name": "Drew Baglino",
"speech": "Yes. And on the Supercharger side, the supercharging team monitors congestion and plans expansion to ensure customer experience with minimal wait times, alongside the growth in our vehicle fleet. While we certainly have work to do in expanding capacity in some congested areas, average congestion on the network has decreased over the past 18 months. Nonetheless, we're not standing still. We are executing accelerating expansion plans globally. The network has doubled in the last 18 months and we are planning to triple it over the next 2 years. And even so on an individual site basis to combat existing congestion more quickly where it is isolated and problematic, we expedite local relief sites, deploy mobile Superchargers and we try to introduce pricing strategies that encourage more off-peak usage to avoid the waiting.",
"session": "Answer",
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{
"name": "Martin Viecha",
"speech": "Thank you very much.",
"session": "Answer",
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{
"name": "Zachary Kirkhorn",
"speech": "Just 1 thing to add on supercharging. If you haven't experienced our latest iteration of battery packs that can handle fast charge rates in combination with our 250-kilowatt charging stations, it's pretty incredible. And this is a really important component to supercharging capacity because the faster you can charge, the more charge sessions that you can have on an individual post, the better the customer experience is as you're going on a long-term journey because your supercharging times are lower. So this is a really important part of the strategy. Supercharging team has done a great job rolling these out. But it requires a combination of both the 250-kilowatt charging and our latest iteration of battery packs.",
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"name": "Drew Baglino",
"speech": "And we've also maintained an ongoing road map on software improvements, dynamic routing to avoid busy Superchargers, that's actually really helpful. We take the real-time business of the stations into account when choosing where to navigate people on their road trip. And beyond that, we're also continuing to improve the trip planner itself and how it estimates how much energy people use so it's not too conservative in asking people to charge more than they need to, which is another thing that can delay a total trip.",
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"name": "Martin Viecha",
"speech": "Great. Thank you very much. The next question is, is Tesla considering any other ideas other than FSD with real-world AI that can bring additional software revenue to Tesla? If not, can Tesla consider building interesting games around FSD beta?",
"session": "Answer",
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"name": "Zachary Kirkhorn",
"speech": "Sure. At AI Day, we did talk about a potential future where Dojo could be used as a neural net training platform for other companies. It's not a focus of ours today as we're fully subscribed on Dojo with our internal uses. We do expect to continue to improve the in-car experience in the context of FSD.",
"session": "Answer",
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{
"name": "Martin Viecha",
"speech": "Great, thank you. And maybe last question from shareholders is how does FSD take rate -- how has FSD take rate changed since the introduction of monthly subscription? Are there any plans to increase FSD pricing as wider release becomes imminent?",
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"name": "Zachary Kirkhorn",
"speech": "I'll take the second part of the question first. We won't be providing any kind of forward-looking commentary on our pricing strategy or what may happen here over the near term. With respect to the first part of the question, it has been an interesting theme for us to unpack within the company. \r\nI mean, what I'll say just as a general statement before I make a couple of specific comments is that the things that we learn on FSD subscription today are not necessarily all that relevant. This is really more of a platform for when FSD beta goes into a wide release and the features and functionality become more accessible to more customers. \r\nThe second thing that I'll note is that if you look at the pricing, the monthly pricing of FSD subscription and then you compare that to the cost of either rolling FSD option into your lease or your loan, then on a monthly basis, the most economical way for a customer to enjoy the features of full self-driving is through purchasing it upfront and rolling it through their financing. \r\nAnd as a result of that, what we've seen in the data is not -- we're unable to detect a change in the upfront take rate of FSD when people purchase cars. We have seen quite a bit of activity of folks curious to experience what the software has to offer and subscribing to it and enjoying it through that route. But again, as I said at the beginning, I think what we've seen so far on FSD subscription is not terribly relevant. We'll see how that plays out in the future as we continue to release more features.",
"session": "Answer",
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"name": "Martin Viecha",
"speech": "Thank you very much. And now let's go to analyst questions. [Operator Instructions] The next question comes from Pierre Ferragu from New Street Research. Okay. While Pierre works on that, let's go to the next analyst. The next question comes from Joseph Spak from RBC. Joe, we cannot hear you. Can you click unmute? \r\nOkay. While the team is working on that, let's just go back to Say.com questions. So the next Say.com question is, can Tesla allow for FSD to be transferred to another vehicle at a fee, something less than $10,000? Early adopters are paying the price if they want to upgrade their vehicle. You lose the value on the trade-in and now you have to buy in at a higher cost.",
"session": "Answer",
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"name": "Zachary Kirkhorn",
"speech": "I don't think that this is widely known, but we're already actually doing the sentiment of what this question is asking. If you trade in your Tesla to Tesla, there's a difference in price that we pay for a trade-in that has FSD compared to 1 that doesn't. And so there's that premium that we pay to repurchase the FSD. That money can then be applied towards the purchase of a new car. \r\nSo I just -- we hear this feedback quite a bit. We see it on social media. We see it in the forums, et cetera. And so this already does exist, not directly in the form here and we don't call it out explicitly in the trade-in potentially that we have increased the price of your trade-in as a result. And hopefully, this clears this up because we do actually do that.",
"session": "Answer",
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"name": "Martin Viecha",
"speech": "Okay. And the next question is, Elon said that we get an update on Cybertruck in November a year ago but it hasn't happened. And we know there are a lot of updates. Will you show off the new and improved Cybertruck?",
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"name": "Lars Moravy",
"speech": "Yes. Thanks, Martin. We get a lot of questions on Cybertruck. We've been busy detailing the Cybertruck to achieve the prototype version we shared with customers a while back. As you may have seen recently in social media, we've built a number of alphas and are currently testing those to further mature the design. And while those point out a few key additions like rear steer, there are also a number of smaller or less visible improvements, though the product is largely true to the initial vision. We'll continue to work through the product in the beta stages that we're in now and look to launch that by next year.",
"session": "Answer",
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"name": "Martin Viecha",
"speech": "Okay, thank you very much. We just promoted Pierre to a presenter to hear us.",
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"name": "Pierre Ferragu",
"speech": "I'm very impressed that you managed to figure that out. Let me ask you my question. Actually, I'm very intrigued by what you guys are doing on the insurance front. And so you have now in the market in Texas an insurance product for which the premium varies as a function of the safety score of the driver. And so I'd love to hear you about that. You must have some initial data points about market reaction. What's the update? \r\nAnd from there, can you tell us about how you think you're going to distribute that? Is that going to go through your installed base very easily here or is it going to be like a heavy marketing push? And then maybe tell us about your expansion plans. What are the next geographies? What's the timing? How fast is that business line likely to grow in the next few years?",
"session": "Question",
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"name": "Zachary Kirkhorn",
"speech": "Yes. Thank you, Pierre. I'm extremely passionate about our insurance product. We have a terrific team here at Tesla of folks who have been spending a lot of time developing this and probably listening to the call. So we're pretty excited so far, Pierre. \r\nSo I mean, at the highest level here, we entered the insurance market kind of unintentionally, I would say. Our customers were coming to us complaining that the price of traditional insurance was too high, and it was reducing the affordability of a Tesla. And part of our journey here at Tesla is we want as many people as possible to be able to afford our products. That's extremely important to achieving the mission of the company. \r\nAnd if you look at the price of insurance as a percentage of what somebody's monthly payment is, it's quite high. And we spend extreme amounts of effort in manufacturing to take $5 of BOM cost out here or $10 out somewhere else. If we can get $5, $10, $20, $30 out on a monthly payment, you can calculate what that means in terms of reduction of the price of the car, if you finance it, and the leverage of improving insurance cost is huge in terms of affordability. \r\nAnd so that's kind of the context by which we stepped into this. As we started to do more research, essentially, the tools by which the insurance is traditionally calculated are optimized based upon the existing data, but the existing data is limited. So there's a focus on things like marital status or age or other attributes like that. Accident history is a good one, et cetera. \r\nBut what essentially happens here is customers who are low risk and don't actually file many claims end up overpaying on their insurance relative to their cost. That overpayment then goes to riskier customers who are essentially being subsidized. And as we looked at this and we looked at the data, we thought this just doesn't seem like it's fair. At Tesla, because our cars are connected, because they are essentially computers on wheels, there's enormous amounts of data that we have available to us to be able to assess the attributes of a driver who's operating that car and whether those attributes correlate with safety because we do get a signal when a car has been in an accident. \r\nSo we've been spending our time looking at hundreds of different variables and also looking at billions of miles of driving history. And we've been able to fit a model that is able to predict, with decent accuracy, the probability of collision over a period of time. And the model is not perfect, right? The model is a function of the data that we have available. That data set continues to grow. We continue to experiment with new variables, but we do have a model that works pretty well so far. \r\nAnd from that model, being able to predict frequency of collision, we can then align that against the price curve. And we can have individualized pricing integrated into the car, integrated into the app, integrated into that customer's experience with a feedback loop back to the customer on how they are driving after every drive, the attributes that they were successful on or unsuccessful on and the tips of things that they can do to improve their safety. So that's what we've developed. \r\nWe then included the safety score as part of the FSD beta enrollment program, where we have almost 150,000 cars currently using the safety score. And I believe the latest data is over 100 million miles of driving, so we've been able to go back and analyzed that data. And we've learned 2 things coming from that. The first is that the probability of collision for a customer using a safety score versus not is 30% lower. It's a pretty big difference. It means that the product is working and customers are responding to it. \r\nThe second thing that we've looked at is what is the probability of collision based upon actual data as a function of a driver safety score. And that is aligning with our models. Most notably, if you're in the top tier of safety compared to lower tiers, there's multiple X difference in probability of collision based upon actual data. So this is a very new and very exciting frontier for us. I know that was long-winded, but I -- we spent a lot of time on this and we put a lot of thought into it. \r\nSpecifically with respect to the rollout, the insurance industry in the U.S. is intensely regulated and it's regulated on a state-by-state level. That means that we require regulatory approvals from each individual Department of Insurance at each individual state. Texas is the first state that we launched in. I do want to thank the Texas insurance regulators here. You have been great to work with. We have a road map of additional states. We will launch the product in those states as we receive regulatory approvals. And our goal is to be in every major market in which we have cars in. \r\nWe did a soft launch in Texas, was it last week? Yes. And what we're seeing in initial take rate data is that if you compare that to what we're seeing in California, we're off to a good start here. So we're very excited about it. We're excited about individual risk-based pricing. We're excited about the ability for folks to become safer and, as a result, save money. And it feeds into our priority of a company of building the safest products in the world.",
"session": "Answer",
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"name": "Lars Moravy",
"speech": "Yes. If I can add to that, it's really exciting for the engineering team, the finance team and taking on safety into their world, too. It's just pervasive. Thanks for that, guys.",
"session": "Answer",
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{
"name": "Zachary Kirkhorn",
"speech": "Thank you, Lars.",
"session": "Answer",
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{
"name": "Martin Viecha",
"speech": "Thank you. Pierre, do you have a follow-up question?",
"session": "Answer",
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"person_company": null,
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{
"name": "Pierre Ferragu",
"speech": "No, I think I'm fine. Zach, thanks for taking the time to answer. It's fascinating and very interesting, yes. I look forward to looking to that.",
"session": "Question",
"person_id": 356336,
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{
"name": "Martin Viecha",
"speech": "The next question comes from Joseph Spak from RBC.",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 37
},
{
"name": "Joseph Spak",
"speech": "So Zach, as you noticed -- or as you noted, you hit low teens operating margins, that was your medium-term target. You're there now despite the number of challenges and you're not full utilization in some of the plans. So how are you thinking about that target now? And does it allow you to either drive price down further to unlock more demand, invest in other initiatives or does that target need to change? And then longer term, do you have an aspirational gross margin target as the mix of software and hardware changes?",
"session": "Question",
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{
"name": "Zachary Kirkhorn",
"speech": "Yes. We have achieved -- we've actually exceeded our long-term guidance on our operating margin target, so we're very pleased to see that. And as we look out over the next quarter and the next year, there's kind of -- there's a number of puts and takes financially for the company. \r\nThe launch of Austin and Berlin, we'll have ramp inefficiencies there for some period of time until we get those factories up and running. And so that's likely to put some downward pressure on our margins as those factories ramp. Our goals are to ramp those as quickly as possible. But as Drew mentioned earlier, there are a number of unknown unknowns that we'll need to work through. \r\nWe are kind of also in this uncertain environment with respect to cost structure, so we are seeing cost increase on the commodity side. We're getting feedback from our suppliers, as we are seeing ourselves, the impact of labor shortage. And then logistics and expedite costs just continue to be a part of our story here. And it's uncertain how that will unfold. It's our hope that these things stabilize. Exactly when that happens is difficult to predict. And we have been adjusting pricing in line with those changes in cost. And so we'll see how that unfolds over the course of the next year. So it's difficult on gross margin to say where that will go for those reasons. \r\nWith respect to operating margin, we've been very focused as a company on managing our overhead expenses and operating expenses. And operating expenses as a percentage of revenue has been declining, and I expect that trend to continue to happen. And I think the net of all of this is hopefully that we continue to make progress on operating margin over the next 4 or 5 quarters. \r\nAs we think kind of forward, the business up until this point has kind of largely been a hardware automotive business with a little bit of software on top of that. As full self-driving matures, as take rates increase, if we are to raise pricing on that, there's considerable upside both on gross margins and operating margin as that comes to light as the business starts to become more of a mix of a hardware-based company and a software-based company. \r\nSo we feel optimistic about the journey, very optimistic about the journey as we look over into the long term. Just a little bit difficult over the next 4 to 5 quarters. We'll continue to update on earnings calls as we learn more information. There's just a lot of uncertainty in the world right now.",
"session": "Answer",
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{
"name": "Martin Viecha",
"speech": "Thank you. Joe, do you have a follow-up question?",
"session": "Answer",
"person_id": 370659,
"person_company": null,
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},
{
"name": "Joseph Spak",
"speech": "Yes. The second question is just you mentioned LFP packs globally for standard range models. My understanding is that all comes from China. Is that the continued go-forward plan or do you want LFP capabilities in other factories around the world?",
"session": "Question",
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{
"name": "Drew Baglino",
"speech": "Yes. Certainly, our goal is to localize all key parts of the vehicles on the continent, at least the continent, if not closer to where the vehicles are produced. So that is our goal and we're working with internally and with our suppliers to accomplish that goal and not just at the end assembly level but as far upstream as possible.",
"session": "Answer",
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{
"name": "Martin Viecha",
"speech": "Thank you very much. And the next question comes from Colin Langan from Wells Fargo.",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 43
},
{
"name": "Colin Langan",
"speech": "Yes, just actually kind of following up on the question before. You had mentioned commodities are rising. And when I look at a lot of the key raw materials in the battery, cobalt, nickel, lithium all up 40%. And I know you guys have done a good job of getting long-term contracts to sort of mitigate that impact. I mean, have you seen so far any impact from that spike? And if not, I mean, any sense of when that raw material headwind might actually show up or has shown up?",
"session": "Question",
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{
"name": "Zachary Kirkhorn",
"speech": "Yes. We have seen an impact. Our primary exposure right now is around nickel and aluminum, nickel on the cell, aluminum on the non-cell. And we have a mixture of contracts with various suppliers. Some materials we contract directly and we have full exposure to price fluctuations. We do have a number of long-term commitments -- long-term contracts in place. We also have contracts where there's some amount of cost sharing based upon the movement of indexes. \r\nAnd so as these have been moving, some of those costs have been flowing through to us. It's not a substantial amount of cost but it's not small. As we look towards the next year, I certainly hope it doesn't play out this way, but it's possible that we continue to see more of cost headwind as a result of these movements. It's difficult to say precisely but the volatility and the increases are just substantial, so substantial. And there are certain suppliers that, maybe up to a certain point, have been absorbing some of the increase. And as contracts expire there or we have to renew and extend them, we'll have to return to negotiations. \r\nAnd so what we have to do as a company and what we are intensely focused on is we need to be continuing to drive down the cost of our products, which we have been doing. And we have to overcome cost increases that are outside of our control. So whether that's resourcing components or redesigning components or finding ways to be more efficient in manufacturing, we have no choice but to continue on that path and be even more aggressive in the light of the macroeconomics here.",
"session": "Answer",
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{
"name": "Lars Moravy",
"speech": "And diversification, right. Like it doesn't need to be nickel or cobalt or I mean, there's always another option.",
"session": "Answer",
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{
"name": "Martin Viecha",
"speech": "Thank you. Colin, do you have a follow-up question? Okay. Let's go to the next one. The next question comes from Colin Rusch from Oppenheimer.",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 47
},
{
"name": "Colin Rusch",
"speech": "Can you talk a little bit about your strategy around anode materials and your ability to leverage that into a reduction on the cathode side and performance from that [indiscernible]",
"session": "Question",
"person_id": 310676,
"person_company": null,
"component_order": 48
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{
"name": "Drew Baglino",
"speech": "Sure. I don't know that I'm going to get into too many specifics, but I guess first, 1 thing I would say is unlike the commodities discussion we just had, like the anode materials are not really in the same situation just in terms of what their constituent components are. So there's less of a focus on like rapidly changing them 1 way or the other because they're generally stable commodities. \r\nThere isn't exactly like a tit for tat where like get a better anode, use less cathode, like there's a fundamental ratio that you need to maintain for the cell to function. So I guess zooming out, the primary focus on the anode side that we have is just ensuring that it doesn't, in any way, that we are able to continue to reduce the cost of the anode without impeding on the long-term cyclability of the product. \r\nIt can also help with energy density as you like sort of improve the energy density of the anode, you improve the energy density of the cell, not directly 1:1 because you have to pack more cathode in as the anode gets better. And that's a focus as well but the trade space is just sort of cycling versus day 1 cost.",
"session": "Answer",
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{
"name": "Colin Rusch",
"speech": "That's very helpful. And then just around the vehicle pricing strategy, obviously, there's a lot of flexibility there for some customers and not. Can you just talk a little bit about the process around vehicle pricing? And how quickly do you expect to change that and adjust as you see some of these commodity prices flow through the cost structure and you look at the brand dynamics for vehicles?",
"session": "Question",
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{
"name": "Zachary Kirkhorn",
"speech": "Yes. Pricing has been a really difficult thing for us over the last couple of quarters. And we're -- part of the challenge is, well, I mean, the great thing that we're seeing in the space right now is there appears to just be quite a profound awakening of the desirability for electric vehicles. And I mean, to be totally frank, it's caught us a little bit offguard. \r\nAnd that kind of awakening and changing consumer sentiment, I'm sure there's lots of reasons that go into it, but folks want to buy an electric car and folks want to buy a Tesla right now. It's very exciting for us. At the same time, we have installed capacity to build more cars but we're constrained by a number of dynamics, as we've talked about in great detail. And we are putting an extreme effort to build as many cars as we possibly can. \r\nIt's hard to overstate how extreme the efforts are. It's quite the grind. We're trying as hard as we can to maximize that capacity and to be able to meet the demand that we're receiving. But the net-net of all of this is that we're not able to increase production capacity fast enough. So at the same time we are seeing macroeconomic cost impacts on our structure, as we've discussed previously on the call, so we're trying to think through if somebody orders a car now, it'll -- it could be delivered, in some cases, depending upon the car and which factory, could be a couple of months, could be a couple of quarters. And the timing in which we build that car will be just before that car gets delivered. \r\nAnd what will the world look like at that point? And so we're trying to think through how the cost structure is evolving? How does pricing need to change with that? What are the supply dynamics in the space? The other thing that I'll just note on pricing is that companies change pricing all the time. The difference is that when Tesla changes pricing, it's extremely transparent where that's not always the case otherwise. \r\nAnd sometimes our pricing will increase, sometimes our pricing will reduce. Sometimes, to the public, our pricing changes may not seem to make logical sense. But there is a strategy that we work behind the scenes as we're balancing supply and demand, as we're also trying to balance very shortages on parts, as we're trying to manage wait times, all of that goes into the optimization here.",
"session": "Answer",
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{
"name": "Martin Viecha",
"speech": "Okay. Thank you very much. The next question is from Brian Johnson from Barclays.",
"session": "Answer",
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{
"name": "Brian Johnson",
"speech": "By the way, great to hear there's a team at Tesla, not just a 1-person show. I want to drill down a bit more on FSD. In December of 2020, in a Business Insider interview in Germany, your leader said that he expected Level 5 autonomy by December -- within a year, so that would be now. Yet we look at the progress in FSD and some of the issues you see on YouTube, and it looks very much like a Level 2, 2+ system that requires vigilances, in fact, your disclaimers cite. \r\nSo I guess, 3 questions. Kind of, one, what is the timetable to get to Level 4 at least capability? We can deal with the regulatory stuff later. Two, what is the criteria, for Zach, for you to release revenue -- deferred revenue around FSD? And is having a Level 2 system that needs monitoring enough to release that deferred revenue? And then three, maybe you could talk a little bit more about how you plan to work with the folks at NHTSA who appear to be asking some questions? They have 3 requests out to you regarding information around the Level 2, around the capabilities of FSD.",
"session": "Question",
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{
"name": "Zachary Kirkhorn",
"speech": "We'll take them in order. It's difficult to be specific on the time lines. The Autopilot team is working extremely hard iterating on every version. We are being extremely transparent through the release of this to public customers who are posting information online. So when you're using full self-driving and you're going through the iterations, you can feel the progress. \r\nAnd for those who don't have it in their cars, social media is excellent at getting a sense for how that's progressing. And the team is moving quickly with every iteration, with every update, and they're working very hard on that. \r\nOn your second question about the criteria to release deferred revenue, the way that this works is we have made certain commitments as to what this product can offer at the time that a customer has purchased that. And so what we have to assess is, have we met those commitments? And is the software widely available to folks that we've made those commitments to within a certain geography? And given that FSD is still currently in the beta phase, it's invitation-only and it's limited, we have not deemed that to be appropriate for recognition of deferred revenue. And we'll continue to evolve this. We'll continue to monitor it within the finance team to see when we get to the milestones in which we're comfortable releasing. On the NHTSA question, Lars, do you want to take that?",
"session": "Answer",
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{
"name": "Lars Moravy",
"speech": "Sure. I mean, as I said earlier, we always corroborate fully with NHTSA and other regulatory bodies in any sort of investigation they may have, particularly related to ADAS systems. When they came out with the standing general order in July, we were quick to respond to that and one of the first and only companies capable of actually meeting the needs of that report. We continue to send that information to them as required weekly as incidents occur. \r\nAnd with the additional investigations, as I said, we meet that with great sincerity and we'll work through them 1 by 1 to make sure that all the facts come out and that NHTSA is well informed about our strategies for both active safety in this case but also passive safety. \r\nAs you guys may know, we released updates to our airbag and restraint system last week to Model Y using our fleet data. We worked closely with NHTSA on that, and they were fully in the loop before we did it. So I think these kinds of things will continue to happen in the new regulatory space that Zach discussed as we move towards a software-based vehicle. And we're happy to be a part of that journey.",
"session": "Answer",
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{
"name": "Martin Viecha",
"speech": "Thank you very much. And the next question comes from Trip Chowdhry.",
"session": "Answer",
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{
"name": "Trip Chowdhry",
"speech": "Very good quarter. I had 2 quick questions. First is regarding the 2 upcoming factories in Berlin and Austin. How are the 2 factories different from each other? Maybe in the layout, design, assembly lines? And the second question is related to Cybertruck. Who is the supplier looking at if you look at the exoskeleton steel? Is the supply for that material sufficient for immediate ramp-up, say, in '23, '24 time for Cybertruck? That's all for me.",
"session": "Question",
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{
"name": "Lars Moravy",
"speech": "Yes, sure. So obviously, as we've noted in the past, we developed our own stainless steel grade for the exterior of Cybertruck to meet both the durability and requirements required for an automotive world. With this raw material and others, as Drew mentioned, we continue to look at multiple sources. We have made some early sourcing decisions in that, but I think we'll keep that 1 internal and we've already began the first casting-ins of that. \r\nRolling stainless isn't so different from pulling any other material. It's just about how hard the rollers are to get to that hardness level. And just like every manufacturing process we put in for every new vehicle, we'll work with our suppliers and vendors to make sure those time lines and supply meet the need and demand of our customers.",
"session": "Answer",
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{
"name": "Drew Baglino",
"speech": "And on the differences between Austin and Berlin, there are some. They're largely associated with the different sort of building architectural choices that were -- happened to occur while collaboration with like local codes and other sort of governing requirements that drive the differences in the architecture between the locations. \r\nIn general, though, like we're trying to progress the manufacturing system as a system and make sort of logical, like, path to find improvements from factory to factory. And in some cases, there was an improvement identified between, like, decisions for one, Austin, the other Berlin or vice versa. And so there might be a slightly newer iteration of 1 part of the factory and 1 place than the other, but they're -- it's all part of like a path forward in the factory that builds the machine, the machine that builds the machine, sorry.",
"session": "Answer",
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{
"name": "Martin Viecha",
"speech": "Thank you very much. And the last question comes from Jed Dorsheimer from Canaccord.",
"session": "Answer",
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{
"name": "Jonathan Dorsheimer",
"speech": "So Brandenburg, I'm just wondering, Zach, if you could estimate the carry costs from a margin perspective? Or I guess, in 2 parts. So when do you expect -- do you still expect production coming on in '21, so a couple of months left in December? And how do you see that margin impact as a function of the carry cost? And I do have a follow-up question.",
"session": "Question",
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{
"name": "Zachary Kirkhorn",
"speech": "Sure. So it remains our target in both Austin and Berlin to be able to build our first production cars before the end of the year. We've talked about this a bit, the unknown unknowns, new factories, new vehicle designs, new technologies, new locations, new teams. So there is quite an execution journey ahead of us. But that remains our target and all of our plans are oriented around that. \r\nWe should not expect for us to deliver cars by the end of 2021 from these factories even if we do produce them, so homologation, regulatory reasons. And we'll want to make sure that we build up some number of cars that we're confident in the quality and the customer experience around them. \r\nThe second thing that I'll say, and I mentioned this in my opening remarks, is because of the newness here, it's extremely difficult for us to be precise in what the ramp will look like. And it's possible things -- the stars align and things move quickly, it's possible that we're spending the bulk of next year working on ramping these factories. It's just very hard to say, and we'll continue to update you all through these calls and through other forums. \r\nAs to how that then impacts our margins, that is also difficult because that is a function of the ramp, which is uncertain. So the benefit here, which is different in the ramp of these factories compared to other factories, is if you think about the percentage of our total cost structure in any given quarter that is associated with new ramps, we have the Fremont factory that's running, generating stable and growing margins there. The same is also true in Shanghai. So I expect we'll see some amount of headwind on margin from these ramps. It's just entirely dependent on how quickly we're able to ramp and what uncertainties come up during the process.",
"session": "Answer",
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{
"name": "Jonathan Dorsheimer",
"speech": "Sure. So on a margin per car, but I would suspect though, if your carry cost is full right now on the -- that as you start producing vehicles, it's going to be a margin lifter from where you're at right now? No?",
"session": "Question",
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{
"name": "Zachary Kirkhorn",
"speech": "I mean, we are carrying some amount of costs associated with the factories today. And so the incremental cost associated with turning the factories, it's not 100% of a factory, if that's what you're getting at in your question.",
"session": "Answer",
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{
"name": "Jonathan Dorsheimer",
"speech": "Yes, that's what I was getting at.",
"session": "Question",
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{
"name": "Zachary Kirkhorn",
"speech": "Yes. We also actually saw a very similar dynamic to this when we were launching Model S earlier in the year. So when a product starts launching and then cost of goods sold starts to activate, depreciation starts to activate, there's a bit of a movement in the P&L as to where that cost resides. So yes, seeming to some extent, Brandenburg and Austin costs are already flowing through our P&L. But we still need to continue staffing and ramping and incurring all the operating costs associated with the factory that we're not spending right now.",
"session": "Answer",
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{
"name": "Martin Viecha",
"speech": "Fantastic. Thank you very much, everyone, for all your questions, and we'll see you again in 3 months. Thank you very much, and goodbye.",
"session": "Answer",
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],
"title": "Tesla, Inc., Q3 2021 Earnings Call, Oct 20, 2021",
"quarter": 3,
"year": 2021
}
},
{
"transcript_title": "Tesla, Inc. - Q2 2021",
"transcript_name": "Tesla, Inc., Q2 2021 Earnings Call, Jul 26, 2021",
"ticker": "NASDAQ:TSLA",
"transcript_url": "https://wkarticles.blob.core.windows.net/finnhub/snp_transcript_2351062",
"date": "2021-07-26",
"year": 2021,
"quarter": 2,
"transcript_data": {
"date": "2021-07-26",
"participant": [
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"description": "Analysts",
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"role": "Executives",
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"description": "Executives",
"company_name": "Tesla, Inc.",
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"role": "Executives",
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"description": "Executives",
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"transcript_person_id": 370659
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"transcript": [
{
"name": "Operator",
"speech": "Good day, and thank you for standing by. Welcome to the Tesla Second Quarter 2021 Financial Results and Q&A Webcast. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions] I would now like to hand the conference over to your speaker today, Martin Viecha, Senior Director of Investor Relations. Please go ahead.",
"session": "Presentation Operator Message",
"person_id": 1,
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"component_order": 0
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{
"name": "Martin Viecha",
"speech": "Thank you, and good afternoon, everyone. Welcome to Tesla's Second Quarter 2021 Q&A Webcast. I'm joined today by Elon Musk, Zachary Kirkhorn and a number of other executives. Our Q2 results were announced at about 1:00 p.m. Pacific Time in the update deck we published at the same link as this webcast. \r\nDuring this call, we will discuss our business outlook and make forward-looking statements. These comments are based on our predictions and expectations as of today. Actual events and results could differ materially due to a number of risks and uncertainties, including those mentioned in our most recent filings with the SEC. [Operator Instructions] But before we jump into Q&A, Elon has some opening remarks. Elon?",
"session": "Presenter Speech",
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{
"name": "Elon Musk",
"speech": "Sure. So to recap, Q2 2021 was a record quarter on many levels. We achieved record production, deliveries and surpassed over $1 billion in GAAP net income for the first time in Tesla history. I'd really like to congratulate everyone at Tesla for an amazing job. This is really an incredible milestone. \r\nIt also seems that public sentiment towards EVs is at an inflection point. And at this point, I think almost everyone agrees that electric vehicles are the only way forward. Regarding supply chain, while we're making cars at full speed, the global chip shortage situation remains quite serious. For the rest of this year, our growth rates will be determined by the slowest part in our supply chain, which is there are a wide range of chips that are, at various times, the slowest parts of the supply chain. \r\nI mean, it's worth noting that if we had everything else, if we had vast numbers of vehicles themselves, we would not be able to make them -- if everything, except the chips, we wouldn't be able to make them. The chip supply is fundamentally the governing factor on our output. It is difficult for us to see how long this will last because we don't have -- this is out of our control essentially. It does seem like it's getting better but it's hard to predict. \r\nSo in fact, even achieving the output that we did achieve was only due to an immense effort from people within Tesla. We were able to substitute alternative chips and then write the firmware in a matter of weeks. It's not just a matter of swapping out a chip, you also have to rewrite the software. So it was an incredibly intense effort of finding new chips, writing new firmware, integrating with the vehicle and testing in order to maintain production. \r\nAnd I'd also like to thank our suppliers who work with us. And there have been many calls at midnight, 1 a.m., just with suppliers but -- in resolving a lot of the shortages. So thanks very much to our suppliers. \r\nLet's see, in terms of FSD subscription, we were able to launch Full Self-Driving subscription last month. And we expect it to build slowly and -- but then gather a lot of momentum over time. Obviously, we need to have the Full-Self Driving build widely available for it really to take off at high rates and making a lot of progress there. So yes, I think FSD subscription will be a significant factor probably next year. \r\nWith regard to Giga Texas and Giga Berlin, we're actually doing this earnings call from Giga Texas, so we're in the factory right now doing this earnings call. And the team has made incredible progress here. You can see the pictures online and see that there's basically nothing a year ago and this mostly complete large factory a year later. So it's really great work by the Giga Texas team. And then also great work in Berlin [indiscernible] with the team there. \r\nSo we expect to be producing the sort of new design of the Model Y in both factories and limited production later this year. It's always like -- it's not -- it's hard to sort of explain to people who have not been through the agony of a manufacturing ramp, like why can't you just turn it on and make 5,000 a week? This is -- it is so hard to do manufacturing. It is so hard to do production. At gross approximation, there are 10,000 unique parts and processes that have to work. And the greater growth of production goes as fast as the least lucky and dumbest of those 10,000 things, and a bunch of them are not even in our control. So I think it's like -- it's insanely difficult. \r\nI'm fond of saying that prototypes are easy and production is hard. And arguably, the really remarkable thing that Tesla's done is not to make an electric car or to be a car start-up because there have been hundreds of car start-ups in the United States and outside United States. So the thing that's remarkable is that Tesla didn't go bankrupt in reaching volume production. That's the amazing part because everyone else did, because they all got the prototype or the idea was the hard part and it is not. It is trivial by comparison with actual production. \r\nSo it's always worth noting that of all the American car companies, there are only 2 that have not gone bankrupt and that is Ford and Tesla. So the seeds of defeat are sown on the day of victory and we must be careful that we do not do that. So often, if you look at history, so often, the seeds of defeat are sown on the day of victory. We will endeavor not to make that the case of Tesla. \r\nSo let's see, the model lines in Texas and mainly, Texas and Berlin, will be -- will look very much like the Model Ys we currently make, but there are substantial improvements in the difficulty of manufacturing. So for example, the Model Y made here and in Berlin will have a cast body and a case body, whereas the 1 in California has a cast-rear body but not a cast-front body. We're also aiming to do a structural pack with [ 4680s ] cells, which is a mass reduction and a cost reduction. \r\nBut we're not counting on that as the only way to make things work. We have some backup plan with nonstructural -- with a nonstructural pack and 2170s essentially. But at scale production, we obviously want to be using 4680s and a structural pack. From a physics standpoint, this is the best architecture. And from an economic standpoint, it is the lowest cost way to go. So the life is lowest cost. \r\nBut there's a lot of new technology there so it is difficult to predict with precision. When does it work? And when do you reach scale production? And Drew's going to talk a bit more about the 4680 production. Yes. So we're all making great progress on the 4680 cells, but there is a tremendous amount of innovation that we're packing into that 4680 cells. And so it's not simply a sort of minor improvement on state-of-the-art. There are -- and we went through this on the Battery Cell Day, really dozens of -- half a dozen major improvements and dozens of small improvements. So I think it will be great, but it's difficult to say when the last of the technical challenges will be solved. \r\nSo in conclusion, our team continues to make huge efforts to make our factories run at full speed, which is very difficult. We have had some factory shutdowns due to partial outages, and we hope those will be relieved in the coming weeks and months. And we're making great progress on Full Self-Driving. Some of the progress is not easy to see because it is at a foundational software level, and so that ends up being sort of 2 steps forward, 1 step back situation. And -- but over time, you do 2 steps forward and 1 step back and keep going, you do move forward. \r\nSo I'm highly confident that the cars will be capable of full self-driving. They have a full self-driving computer and the cameras, I'm confident that they will be able to themselves with the safety level substantially greater than that of the average post. Once again, thanks to all of our employees who are making this a breakthrough year for Tesla and an incredible quarter. Thanks, guys.",
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"name": "Martin Viecha",
"speech": "Thank you very much. And we have some follow-up remarks from Zachary Kirkhorn.",
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"name": "Zachary Kirkhorn",
"speech": "Yes. Thanks, Martin, and thanks, Elon. Just to reiterate, Q2 was a great quarter for the Tesla team with strong improvements across the business. In particular, auto gross profit and margin, excluding credit, increased substantially. This was primarily driven by better cost optimization across our factories, good execution against our cost reduction plans as well as increases in production and delivery volumes. \r\nThere was some benefit from pricing actions mostly in North America. However, it was small in the context of the other contributors. Note that the Model S and X program was at a slight loss for the quarter due to the relatively low volume. \r\nIn supply chain challenges, including expedites, continue to provide cost headwinds. Additionally, it's encouraging to see the progress made on profitability within our energy and services and other businesses. While there's some benefit to looking at our progress quarter-over-quarter, I find it more helpful to look at progress over a slightly long-term horizon. Over the last 2 years, our vehicle delivery volumes have more than doubled. This volume increase was made possible by a steady decrease in ASPs of more than 10%, driven by our road map to increase affordability and shifting mix towards our more affordable vehicles. \r\nYet over that same period of time, our auto gross margin, excluding credit, has increased nearly 10 percentage points to our highest yet since the introduction of Model 3. This is only possible because our average cost per vehicle has reduced by more than the reduction in average price. This is a remarkable achievement in the context of the volume growth and ASP reduction, as mentioned, and a testament to the hard work by the Tesla team. \r\nAdditionally, OpEx as a percentage of revenue has declined and in particular, SG&A, representing the work we've done to become more efficient as we scale the company while still making the required R&D investments to support our future. As a result, our GAAP operating margins have risen from negative to double digit in line with what we have guided. By managing our overhead costs and driving higher volumes, our P&L is benefiting from the marginal profitability of each incremental unit or, said differently, we are recognizing the benefits of scale and improved fixed cost absorption. \r\nWith strong operating cash flows and cash balance, we are putting that cash to use. CapEx continues to tick up, primarily driven by capacity investments in Austin, Berlin and Shanghai. Additionally, each quarter, we are using our cash to retire legacy debt, which was taken on at a time when interest rates and company risks were much higher than in today's environment. \r\nAs I've mentioned before, our 2021 volumes will skew towards the second half of the year as we push for continued sequential increases in volume. Despite the great work so far managing the instability of the supply chain, these challenges remain and are unfortunately increasing in [ pain ] with a higher volume. As we work through the uncertainty, we want to ensure we do our best to manage customer wait times as well as the impact these interruptions have on our employees and costs. \r\nAnd as Elon mentioned, volume growth will be determined by part availability as we have the factory capacity ready and are in a strong demand position. I'm excited to see the progress made by the Tesla team as we continue building the business and strengthening our financials. Thank you very much.",
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"name": "Martin Viecha",
"speech": "Great. Thank you very much, Zach. And now let's go through the retail investor questions on say.com.",
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"name": "Martin Viecha",
"speech": "The first question from Robert is Tesla's website still says Cybertruck production is expected to begin in late 2021. Can Tesla share more details on the current status of the Cybertruck and confirm if production is still [Technical Difficulty] Lars, do you want to...",
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"name": "Lars Moravy",
"speech": "Sorry, we cut out there for a second. Yes, the Cybertruck is currently in its alpha stages. We finished the basic engineering architecture of the vehicle. With the Cybertruck, we're redefining how the vehicle is being made. As Elon said, it carries much of the structural pack and large casting designs of the Model Y being built in Berlin and Austin. Obviously, those take priority over the Cybertruck, but we are moving into the beta phases of Cybertruck later this year, and we'll be looking to ramp that in production in Giga Texas after Model Y is up and going.",
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"name": "Elon Musk",
"speech": "Yes, just worth reemphasizing that the extraordinarily difficult -- extraordinary difficulty of ramping production of large manufacturing items. [indiscernible] of being competitive, it's actually easy to make prototypes or sort of handle small volume production. But anything produced at high volume, which is really what's relevant here is, it's going to move as fast as the slowest of the say, rough order of magnitude, 10,000 unique parts and processes. \r\nAnd so you can have 9,999, which is 1 is missing. I mean, we were missing, for example, like a big struggle this quarter was the module that controls the airbags and the seatbelts. And obviously, you cannot ship a car without those. And that limited our production severely worldwide in Shanghai and in Fremont. So it -- like it wouldn't have mattered if we had like 17 different car models because they won't need the airbag module [indiscernible] \r\nSo the -- in order for Cybertruck and [indiscernible] to scale to volume that's meaningful for customer deliveries, we would have got to solve the chip shortage or working with our suppliers and people say, \"Why don't you just build a chip fab?\" Okay, well, okay, that would take us, even moving like lightning, 12 to 18 months. So it's not like you can just swap out a chip fab. It is like yes, I'll just make a quick chip fab. \r\nSo some of these things are -- yes, anyway. It is quite a trial dealing with all of the constraints of scaling a large manufacturing object. I think it may be the case that Tesla is scaling. I think we might be the fastest in history ever for scaling a large manufactured object. Maybe the Model T would have been comparable back in the day, the Model T. Probably, the Internet knows the answer. But I think we may be scaling large manufactured object at the fastest rate in history. Or I'd like to know who did it faster so we can learn from them. So it's worth just noting that, and they're going thing is not bad. \r\nSo yes, so Cybertruck and Semi, actually both are heavy users of cell capacity. So we've got to make sure we have the cell capacity for those 2 vehicles or it's kind of point that we can make a small number of vehicles. The effective cost, if you make a small number of vehicles is the same, like they literally cost $1 million a piece or more. There's a reason why you do things at volume production, which is to get the economies of scale that get us down. \r\nSo we are looking at a pretty massive increase in cell availability next year. But it's not like in January 1. It comes through -- it ramps up through the course of next year. But even without Tesla cell production, we believe our suppliers will be able to deliver about twice as much cell output in next year as this year. Drew, do you want to talk more about that?",
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"name": "Drew Baglino",
"speech": "Yes, given concerns over cell's bottlenecking growth, our target is to grow cell supply ahead of the 50% year-on-year growth targets of the vehicle business and also enable increased energy storage deployments. So yes, our cell suppliers are tracking to double their production in 2022.",
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"name": "Elon Musk",
"speech": "Yes. It's worth thing like if you have a target of a certain number, that doesn't mean it happens like as sure as night follows day. It's a target. So if there is some calamity in the world that it drops the supply chain, then it will be less. But the contracts that we have with cell suppliers quote roughly a doubling of cell supply to Tesla in 2022. \r\nAnd we have to juggle these exponential -- there's a whole much of exponential graphs sort of overlay on the top of each other and small changes in where you are on the X axis of time can quite substantially change the area under the curve. So what we're thinking of doing is like depending on -- if it's basically overshooting on cell supply for vehicles, and then as we have, say, excess cell supply in 1 month or another, then routing that cell output to the Megapack and Powerwall, [indiscernible] by the same if we're prior to taking vehicle production, if there's a shortage of cell output, for some reason, then we will throttle down Megapack and Powerwall production. So it will be something's got to give basically.",
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"name": "Drew Baglino",
"speech": "Or if there's a disruption to vehicle production, you have an outlet for cells.",
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"name": "Elon Musk",
"speech": "Yes, exactly. There's a tremendous amount of inertia in the supply chain. So if we say it to a supplier, we want you to double cell output, well, even doing that in a year is very difficult. And then that's -- that system has a tremendous amount of momentum. It is like a of super tankers. It's the same.",
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"name": "Drew Baglino",
"speech": "Speaking of which, from a raw materials perspective, we also have long-term contracts to secure our supply chain also enable its growth. So we're not just looking at the suppliers but upstream from there.",
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"name": "Elon Musk",
"speech": "Yes.",
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"name": "Drew Baglino",
"speech": "Which has more flow to it.",
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"name": "Elon Musk",
"speech": "Yes, exactly. As mentioned, things will move as fast as the slowest part of the entire supply chain, which goes all the way back to raw materials but the -- nickel and that kind of thing. And there's sometimes perception that Tesla uses a lot of cobalt but we actually don't. Apple uses, I think, almost 100% cobalt in their batteries and cellphones, laptops. But Tesla uses no cobalt in the iron phosphate packs and almost none in the nickel basis chemistries. \r\nSo on a weighted average basis, we might use 2% cobalt compared to the Apple's 100% cobalt. Anyway, so it's just -- it's really just not a fact that -- we expect to basically have 0 cobalt in the future. So I do -- maybe with -- I think probably there is a long-term shift more in the direction of iron-based lithium-ion cells over nickel. As the energy density of sort of iron ore to the iron phosphate, [indiscernible] taken for granted. But iron-based cell cells and nickel-based [indiscernible] cells, I think probably we'll see a shift. My guess is probably to 2/3 iron, 1/3 nickel or something on that order. \r\nAnd this is actually good because there's plenty of iron in the world. There's an insane amount of iron. But nickel is -- there's much less nickel and there's way less cobalt. So it is good for relieving the long-term scaling to move to iron-based cells mostly. And I think long term, possibly all -- there's a good chance that all stationary storage, that is Powerwall and Megapack moves iron. It is most likely the case since you do not need to transport it and there's less volume of constraint for stationary storage. So then nickel would be for -- really for long-range road transport ships and aircraft and that kind of thing.",
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"name": "Martin Viecha",
"speech": "Thank you. Let's go to the second question from retail, which is Elon has said that Tesla will be opening up the Supercharger network to other EVs later this year. Can you share some more details on how this will be structured? Will this be at select brands or will they contribute to the growth of this network?",
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"name": "Elon Musk",
"speech": "Yes. We're currently thinking it's a real simple thing where you just download the Tesla app and you go to a Supercharger and you just indicate which stall you're in. So you plug in your car, even if it's not Tesla. And then you just access the app, I'd say, turn on the stall that I'm in or how much electricity. And this should basically work with, I think, almost any manufacturer's cars. \r\nThere will be a time constraint. So if the charge rate is super slow, then somebody will be charged more because the biggest constraint at the Superchargers is time, how occupied is the stall. And we'll also be smarter with how we charge for electricity at the Superchargers. So rush-hour charging will be more expensive than charging because there are times when the Superchargers are empty and times when they're jampacked. And so it makes sense to have some time-based discrimination.",
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"name": "Drew Baglino",
"speech": "Yes. We've been doing that and it's been working and people are responding. It helps with utilization.",
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"name": "Elon Musk",
"speech": "Yes, exactly. So yes, I think we're -- in Europe and China and most of rest of the world, it's the same connector for everyone. So this is a fairly easy thing to do, develop our own connector, which in my opinion, is actually the best connector. It's small and light, looks good standard. So we developed our own connector, which in my opinion, is actually the best connector. It's small and light, looks good. \r\nSo an adapter is needed to work for EVs in North America. But people could buy this adapter, and we anticipate having it available at the Superchargers as well if people don't sort of steal them or something.",
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"name": "Drew Baglino",
"speech": "We have a good solution for that.",
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"name": "Elon Musk",
"speech": "Okay. But that is -- that's a constraint on North America thing. That's basically a vestige of history. But I think we do want to emphasize that it is -- our goal is to support the advent of sustainable energy. It is not to create a walled garden and use that to bludgeon our competitors, which is sometimes used by some companies.",
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"name": "Drew Baglino",
"speech": "I think it's also important to comment that increasing the utilization of the network actually reduces our costs, which allows us to lower charging prices for all customers, makes the network more profitable, allows us to grow the network faster. So that's a good thing there. And no matter what, we're going to continue to aggressively expand the network capacity, increasing charging speeds, improving the trip planning tools to protect against site congestion using dynamic pricing, as Elon mentioned, and just continuing to focus on minimum wait time for all customers.",
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"name": "Elon Musk",
"speech": "Yes. Obviously, in order for this to be -- for a Supercharger to be useful to other power companies, Lars, we need to grow the network faster than we're growing vehicle output, which is not easy. We're growing vehicle output at a horrible rate. So Superchargers need to grow faster than vehicle output. So this is a lot of work with the Supercharger team. But it is only useful in the grand scheme of things. It's only useful to the public if we're able to grow faster than Tesla vehicle output. So that is our goal.",
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"name": "Martin Viecha",
"speech": "Thank you very much. And the third question is, Elon said 4680 cells aren't reliable enough for vehicles. Is this referring to cycle life degradation or something else? Please update us on progress of 4680s? And what still needs to be done to make them reliable in vehicles?",
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"name": "Elon Musk",
"speech": "Yes. I mean, really, this is about -- we'll definitely make the 4680 reliable enough for vehicles. And I think at the point wherein limited volume, it is reliable enough for vehicles. The -- again, going back to like limited production is easier, prototype production is easy but high-volume production is hard. There are a number of challenges in transitioning from small-scale production to a large volume production. \r\nAnd not to get too much into the weeds of things, but right now, we have a challenge with basically the, what's called calendaring or basically squashing the cathode material to a particular height. So it just goes through these welders and get squashed like pizza dough basically and -- but very hard pizza dough. And the -- it's closing -- it's denting the cathode. This is not something that happened when the rolls was smaller, but it is happening when the rules are bigger. So just like we're like, okay, weren't expecting that.",
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"name": "Drew Baglino",
"speech": "It's not a like science problem. It's an engineering -- it's not a question of if, it's a question of when, and the team is 100% focused on resolving these limiting processes as quick as possible.",
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"name": "Elon Musk",
"speech": "Exactly.",
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"name": "Drew Baglino",
"speech": "Yes. And on the reliability side, as Elon mentioned, we have successfully validated performance and the lifetime durability of the 4680 cells produced -- And we're continuing ongoing verification of that reliability. We're actually accruing over 1 million equivalent miles on our cells that we produce every month in our testing activities. The focus on that is very clear. We want high-quality cells for all of our customers. And yes, we're just focused on the unlucky limiting steps in the facility. And with the engineers focused on those few steps remaining, we're going to break through as fast as possible.",
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"name": "Elon Musk",
"speech": "In the meantime, we have a massive amount of equipment on order and arriving for the high-volume cell production in and Berlin. And obvious, given what we've learned with the pilot plant, which is in Fremont, which is really quite a big plant by most standards, we will have to modify a bunch of that equipment. So it won't be able to start it immediately. But it seems like -- let me do correct me if I'm wrong, but we think most likely, we will hit an annualized rate of 100 gigawatt hours a year sometime next year.",
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"name": "Drew Baglino",
"speech": "We'll have all the equipment installed to accomplish 100 gigawatt hours. And it's possible that by the end of the year, we will be at an annualized rate of 100 gigawatt hours by the end of the year.",
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"name": "Elon Musk",
"speech": "Yes. I mean, my guess is more likely than not, about 50% of reaching 100 gigawatt hours a year by the end of next year on the annualized rate, something like that. It could shift by a little bit, but nothing, as Drew mentioned, it's nothing fundamental. Just a lot of work.",
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"name": "Drew Baglino",
"speech": "Yes. And even to the large roller question, Elon, right, like on the side, the large rollers were great, no concerns. And so we're just learning as we go. And the nice thing about having that facility on the fast track like we had it and we talked about it at Battery Day was really derisking the big factories here that we've done, and we've learned a lot. And with each successive iteration, the ramp-up and the equipment installation will be faster or.",
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"name": "Martin Viecha",
"speech": "All right. And the last question from retail is from Emmet. Can Elon do an interview with one of our YouTube channels once or twice a year? I would nominate David or [indiscernible] Tesla daily channels as first possible candidates.",
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"name": "Elon Musk",
"speech": "Yes. I guess I'll do an interview. I mean, if I'm doing interviews and I can't do actual other work. So it's not -- I only have time in the day. So but yes, I'll do one. I won't do it annually but I'll do one. I think also like this is the -- I won't say the last time I'll do earnings calls but this is the -- I will no longer be defaults during earnings calls. So obviously, I'll do the annual shareholder meeting. But I think going forward, I will most likely not be on earnings calls unless there's something really important that I need to say.",
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"name": "Martin Viecha",
"speech": "Okay, thank you. Now let's go to institutional questions. The first one and we covered a lot of this already. Can you please update us on time lines for the start of production of Berlin and Austin Model Y, Cybertruck and the Semi? Do you expect the ramp of Cybertruck to be as difficult as it is a new process?",
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"name": "Elon Musk",
"speech": "I think Cybertruck ramp will be difficult because it's such a new architecture. It's going to be a great product. It might, I think, be our best product ever. But if there's a lot of fundamentally new design ideas, Cybertruck, never made a car like this before, be like this before. So there'll probably be challenges because there's so much unexplored territory. Yes.",
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"name": "Martin Viecha",
"speech": "Thank you. I think question 2 and question 3, we can skip, given we have already addressed it. I'll get to question 4. In 5 years' time, how much faster or better could you be at manufacturing capacity expansion using [indiscernible] And what are the biggest issues you need to solve to get to that rate?",
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"name": "Elon Musk",
"speech": "Well, like I said, I think we might be the fastest-growing company in history [indiscernible] large manufactured items. So those who have not actually been involved in the manufacturing ramp-up just have no idea how painful and difficult it is. It's like you got to eat a lot of glass and for our manufacturing ramp, it's hard.",
"session": "Answer",
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"name": "Drew Baglino",
"speech": "Yes. I mean I think if you look at the expansion we've done in Shanghai, that factory was built in less in a year and ramped in 5 to 6 months to full volume...",
"session": "Answer",
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{
"name": "Elon Musk",
"speech": "[indiscernible] took longer than that, about a year.",
"session": "Answer",
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{
"name": "Drew Baglino",
"speech": "And when you consider cut and paste, we've repeated that in Fremont and whatever. But now with Berlin and Austin, we have new factories and new designs. And so there's always challenges, as you said, Elon, with new designs in ramping that. But I think having teams in 3 locations or 3 continents will definitely expand our ability and our capacity to grow more lines rather than just having the 1 factory in Fremont that we had 1.5 years ago.",
"session": "Answer",
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{
"name": "Elon Musk",
"speech": "Yes. So I mean, for Shanghai incredible team both the [indiscernible] back in 11 months, but it took longer than building the factory because it took longer than that to actually reach volume production -- high volume production. So took about a year. So when you put a factory in a new geography, in order for that factory to be efficient, you have to localize the supply chain. So there's no such thing as cut and paste. It does not exist. \r\nAnd obviously doing the same to do vehicle production in Europe but send vast numbers of parts from North America, that would be -- that would make the producing in Europe, for example, just crazy. You've got to localize the supply chain to have efficiency and then you're moving as fast as your least lucky, least good supplier. \r\nYes. It's only supply chain where you like 3 or 4 layers deep, it's frankly -- I feel at times that we are inheriting all force majeure or [indiscernible] So if anything goes wrong anywhere on Earth, something happens to mess up the supply chain. So yes.",
"session": "Answer",
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{
"name": "Drew Baglino",
"speech": "I think the human capital growth though is having factories here in Berlin, Shanghai, Fremont does allow us to maybe not exponentially grow but well, hopefully.",
"session": "Answer",
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{
"name": "Elon Musk",
"speech": "We are exponentially growing.",
"session": "Answer",
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{
"name": "Drew Baglino",
"speech": "Yes, hopefully maintain that exponential curve.",
"session": "Answer",
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{
"name": "Elon Musk",
"speech": "Yes. So yes, -- it's also -- it takes a while to hire old people and train old people to operate the factory. The factory is like a giant cybernetic collective. And you can't just hire 10,000 people and have them work instantly. It's not possible. I really encourage more people to get involved in manufacturing. \r\nI think especially in the U.S., like this has just not been an area where all that many smart people have gone into. I think U.S. has an overallocation of talent, good finance and [indiscernible] compliment by saying we shouldn't have people in finance I'm just saying that this might be -- maybe we have too many smart people in those areas.",
"session": "Answer",
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{
"name": "Drew Baglino",
"speech": "Manufacturing is fun.",
"session": "Answer",
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{
"name": "Elon Musk",
"speech": "Yes, manufacturing is great. It's a very interesting problem. And obviously, you can't have stuff unless someone makes it. That's how it gets off. Yes.",
"session": "Answer",
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{
"name": "Martin Viecha",
"speech": "Okay, thank you very much. And let's go to the last investor question. Does Tesla plan to offer more services beyond FSD or high-speed connectivity as part of its subscription bundle going forward? What areas, in particular, present an opportunity?",
"session": "Answer",
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{
"name": "Elon Musk",
"speech": "Yes, we don't have a lot of ideas on this, to be frank. Really Full Self-Driving is the main thing. Things are obviously headed towards the fully autonomous electric vehicle future. And I think Tesla is well positioned and, quite frankly, is the leader objectively in both of those areas, electrification and autonomy. \r\nSo it's always tempting to try to find analogies. But with other companies or whatever, but really the value of fully electric autonomous fleet is any gigantic, boggles the mind really. So that will be one of the most valuable things that is ever done in the history of civilization.",
"session": "Answer",
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{
"name": "Martin Viecha",
"speech": "Thank you very much. And now let's go back to analyst Q&A, please.",
"session": "Answer",
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{
"name": "Operator",
"speech": "[Operator Instructions] \r\nOur first question comes from Colin Rusch with Oppenheimer.",
"session": "Question and Answer Operator Message",
"person_id": 1,
"person_company": null,
"component_order": 53
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{
"name": "Colin Rusch",
"speech": "Can you speak to the attach rates for FSD so far and what you're targeting in terms of the subscription levels?",
"session": "Question",
"person_id": 310676,
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{
"name": "Elon Musk",
"speech": "Yes. It's not worth commenting on right now. It's not meaningful. We really need Full Self-Driving, at least the beta, to be widely available to anyone who wants it can get it. Otherwise, it'd be pointless to read anything into where things are right now.",
"session": "Answer",
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{
"name": "Colin Rusch",
"speech": "Okay. And then just the follow-up there is about the cadence of the regulatory environment keeping up with the technology. Are you seeing meaningful evolution in terms of the regulators really understanding the technology and beginning to set some standards here sometime in the near term?",
"session": "Question",
"person_id": 310676,
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"component_order": 56
},
{
"name": "Elon Musk",
"speech": "At least in the U.S., we don't see regulation as a fundamental limiter. We've got -- we're obviously going to make the work and then demonstrate that the reliability is significantly in excess of the average human driver for it to be allowed -- for people to be able to use it without paying attention to the road. \r\nI think we have a massive fleet. So it will be, I think, straightforward to make the argument on statistical grounds just based on the number of interventions or especially in events that would result in a crash. At scale, we think we'll have [ millions ] of miles of travel to be able to show that it is the safety of the car with autopilot on is 100% or 200% or more safer than the average human driver. At that point, I think it would be unconscionable to -- not to allow autopilot because the car just comes way less safe. \r\nIt will be sort of like if you take the elevator analogy. Back in the day, you used to have elevator operators with like a big sort of switch that operates the elevator and moves between floors. But that gets tired or maybe drunk for something or distracted, and every time and again, somebody would be kind of in half between floors. That's kind of the situation we have with cars. Autonomy will become so safe that it will be unsafe to manually operate the car, relatively speaking. \r\nAnd it's -- obviously, we're just getting an elevator request of the button for which floor we want and it just takes us there safely. And it would be quite alarming if elevators were operated by a person with a giant switch. That's how we'll be with cars.",
"session": "Answer",
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{
"name": "Operator",
"speech": "Next question comes from Rod Lache with Wolfe Research.",
"session": "Question and Answer Operator Message",
"person_id": 1,
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{
"name": "Rod Lache",
"speech": "Your cost of goods sold per vehicle is already down to the mid-$37,000 range in the quarter. It's down $5,000 year-over-year despite some of the inefficiencies that you talked about. And I know that a lot is going to change from here, just given how mix is going to evolve. But if you're successful on the structural pack and front and rear castings and the launch of the 4680 cell, can you just maybe give us a sense of what a successful outcome would look like maybe a year from now? Obviously, a lot has to go right, but just any kind of broad framework for us to think about.",
"session": "Question",
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{
"name": "Elon Musk",
"speech": "Yes, it's really difficult for us to make specific predictions, it's very difficult. I think we feel confident of, let's say, at least a 50% growth year-over-year next year and maybe it's 100%, but that's -- you need a lot of crystal balls to figure out exactly what it's going to be. And we're just -- it is literally impossible to make a specific prediction. But at least 50%, maybe 100%, something like that.",
"session": "Answer",
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{
"name": "Rod Lache",
"speech": "Okay. And maybe just separately from this, can you just clarify what the status is of some of the advances in battery manufacturing, things like dry cathode mixing that you talked about on Battery Day? What's the time line? How are those evolving?",
"session": "Question",
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{
"name": "Drew Baglino",
"speech": "Yes. We commented on it today already actually. But in the facility at over 90% of the like processes have demonstrated rate there, but we are limited by the unlucky few that have not and that's what we're working on. One of them that Elon mentioned was running the full-scale cathode calendar. We're working through some improvements that we need to make to that equipment and to the actual raw material itself to not have those limitations. But again, it's an engineering problem, it's not a question of if, it's a question of when. \r\nOn the mixing side, we haven't actually really had any challenges specific to your question. Fundamentally, we're still happy with the dry process direction. In terms of the factory footprint, complexity, utility consumption, space and overall complexity simplification. Yes. I mean -- and the costs associated with everything that I just said.",
"session": "Answer",
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{
"name": "Elon Musk",
"speech": "Yes. And on emphasize dry cathode, I mean, it is -- I don't know, maybe it's like 10% or 15% of the cost improvement or something like that. I don't know, 20% maybe?",
"session": "Answer",
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{
"name": "Drew Baglino",
"speech": "Yes, 10%. [indiscernible] 10.",
"session": "Answer",
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{
"name": "Elon Musk",
"speech": "Yes. So it's like just like people don't think like this is like the [indiscernible] or something. Wet versus dry reduces -- to dry is like 10% less cost than wet. So it's not -- still nothing to sneeze at, especially if you're making hundreds of gigawatt hours a year, but it's not [indiscernible]",
"session": "Answer",
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{
"name": "Operator",
"speech": "Next question comes from Pierre Ferragu with New Street Research.",
"session": "Question and Answer Operator Message",
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{
"name": "Pierre Ferragu",
"speech": "I have another question actually on batteries but on a slightly different angle. I was wondering how you're looking at your sourcing strategy for the 4680. You've talked a lot about all the work you're doing to develop your in-house production. But what about asking other battery manufacturers to do 4680 cells with their own technology, maybe less innovation than what you guys are lining up internally? \r\nAnd I was wondering if the first 4680 cells that we'll see on the road will definitely come from Tesla's own manufacturing lines or whether they could be coming actually from outside suppliers as well. And I have a quick follow-up.",
"session": "Question",
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{
"name": "Elon Musk",
"speech": "Yes. We are, in fact, working with our existing suppliers to produce 4680 format cells. And this is just a guess right now, but I see us sort of like consolidating around 4680 nickel-based structural pack and for long-range vehicles. And then not necessarily a 4680 format but some other format for iron-based sales. And so we -- right now, we kind of have the Baskin-Robbins of batteries situation with us. We have so many formats and so many chemistries that it's like we've got like 36 flavors of battery of this \r\nThis is just -- this results in an engineering drag coefficient where each variant of cell chemistry and format requires a certain amount of engineering to maintain it and troubleshoot and this inhibits our forward progress. So it is going to be important to consolidate to just maybe ideally 2 form factors, maybe 3, but ideally 2. And then just 1 nickel chemistry and 1 iron chemistry and -- So we don't have to troubleshoot so many different variants.",
"session": "Answer",
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{
"name": "Drew Baglino",
"speech": "Yes. And towards that end, we are engaging with the suppliers that we've had good partnerships with on 4680 designs to enable that simplification. And so far, so good. They're working on -- they're bringing their core competencies to bear on that. We're not mandating like what's going on inside but it's been a good leverage.",
"session": "Answer",
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{
"name": "Elon Musk",
"speech": "Yes. And we do expect to see significant increases in supply from our existing suppliers in addition to the cells that Tesla's making. So it's both. Sometimes, I get questions from our cells suppliers like, are we just going to make all the cells ourselves and we're like no. Please make as many as you possibly can and them to us. We have a significant unmet demand in stationary storage. \r\nMegapack is basically sold out until the end of next year, I believe. We have a massive backlog in Powerwall demand. The [indiscernible] versus production is same mismatch. Now part of that problem is also the semiconductor issue. So we use a lot of the same chips in the Powerwall as you do the car. So it's like which one do you want to make? Cars or Powerwalls. So we need to make cars so that Powerwall production has been reduced. \r\nBut as that semiconductor shortage is alleviated, then we can massively ramp up Powerwall production. I think we have a chance of hitting an annualized rate of 1 million units of Powerwall next year, maybe towards on the order of 20,000 a week, but again, dependent on cell supply and semiconductors. But in terms of demand, I think there's probably demand for in excess of 1 million Powerwalls per year and actually just a vast amount of for utilities as a little transition to a sustainable energy production, solar and wind are intermittent and, by their nature, really need battery packs in order to provide a steady flow of electricity. \r\nAnd when you look at all of the utilities in the world, this is a vast amount of back batteries that are needed. That's why long term, we really think sort of combine Tesla and suppliers need to produce at least 1,000 gigawatt hours a year and maybe 2,000 gigawatt hours a year.",
"session": "Answer",
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{
"name": "Pierre Ferragu",
"speech": "Okay, great. And I have a quick question. I know, Elon, you don't think it's meaningful today, but I'd be curious to know if you have any stats about when you announced the new pricing on the FSD moving from [ $10,000 ] from to [ 1 99 ] with the lock-in. I'd be curious to understand how it affected behavior and if you saw like a massive uptake in the service. And I'm not thinking about people looking at it as an FSD but more to try the most advanced version of autopilot and to try it. So in the first days, you've announced the pricing. Have you seen like a very significant in the take rate? And can you give us a sense of how big it was?",
"session": "Question",
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{
"name": "Elon Musk",
"speech": "Okay. You're asking like is the take rate too expensive and that's why we're doing subscription? Or I'm not sure if I understand your question correctly.",
"session": "Answer",
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{
"name": "Pierre Ferragu",
"speech": "No, my question is from the time you announced like the subscription at the $199 per [indiscernible] how much did like the take rate increase, like the percentage of people who basically took the subscription as they bought a new car versus how it was when they had to pay [ $10,000 ]",
"session": "Question",
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{
"name": "Zachary Kirkhorn",
"speech": "Yes. This is Zach here. I mean, I think we're still early in understanding how FSD subscription will unfold, but a couple of data points here. So we took a look at our backlog to see customers in our backlog who have ordered FSD, did they cancel presumably to go to subscription after they take delivery? And the level of cancellations there not seeing cannibalization there. It's possible that, that changes but that was also part of our pricing strategy at $99 and $199.",
"session": "Answer",
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{
"name": "Elon Musk",
"speech": "Yes. I mean, I think any given price is going to be wrong. So we'll just adjust it over time as we see the value proposition makes sense to people. So we're just really -- I'm not thinking about this a lot right now. We need to make Full Self-Driving to work in order for it to be a compelling value proposition. Otherwise, people are kind of on the future. \r\nI mean, like right now, is it -- does it make sense for somebody to do FSD subscription? I think it's debatable. But once we have also driving widely deployed, then the value proposition will be clear. And at that point, I think basically everyone will use it or [indiscernible]",
"session": "Answer",
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{
"name": "Martin Viecha",
"speech": "Okay. Thank you very much for your help. And I think that's all the time we have for today. Thanks for all your questions, and we'll speak to you again in 3 months' time. Have a good day, everyone.",
"session": "Answer",
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{
"name": "Elon Musk",
"speech": "All right. Thank you.",
"session": "Answer",
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{
"name": "Operator",
"speech": "This concludes today's conference call. Thank you for participating. You may now disconnect.",
"session": "Question and Answer Operator Message",
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],
"title": "Tesla, Inc., Q2 2021 Earnings Call, Jul 26, 2021",
"quarter": 2,
"year": 2021
}
},
{
"transcript_title": "Tesla, Inc. - Q1 2021",
"transcript_name": "Tesla, Inc., Q1 2021 Earnings Call, Apr 26, 2021",
"ticker": "NASDAQ:TSLA",
"transcript_url": "https://wkarticles.blob.core.windows.net/finnhub/snp_transcript_2258465",
"date": "2021-04-26",
"year": 2021,
"quarter": 1,
"transcript_data": {
"date": "2021-04-26",
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"transcript": [
{
"name": "Operator",
"speech": "Good day, ladies and gentlemen, and thank you for standing by, and welcome to the Tesla First Quarter 2021 Results and Q&A Webcast. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions] \r\nI will now hand the conference over to your speaker today, Martin Viecha, Senior Director of Investor Relations.",
"session": "Presentation Operator Message",
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{
"name": "Martin Viecha",
"speech": "Thank you, Carmen, and good afternoon, everyone, and welcome to Tesla's First Quarter 2021 Q&A webcast. I'm joined today by Elon Musk, Zachary Kirkhorn and a number of other executives. Our Q1 results were announced at about 1:00 p.m. Pacific Time in the update deck we published at the same link as this webcast. \r\nDuring this call, we will discuss our business outlook and make forward-looking statements. These comments are based on our predictions and expectations as of today. Actual events or results could differ materially due to a number of risks and uncertainties including those mentioned in our most recent filings with the SEC. \r\n[Operator Instructions] But before we jump into Q&A, Elon has some opening remarks. Elon?",
"session": "Presenter Speech",
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{
"name": "Elon Musk",
"speech": "Great. Thank you. So Q1 2021 was a record quarter on many levels. Tesla achieved record production deliveries and surpassed $1 billion in non-GAAP net income for the first time. And we've seen a real shift in customer perception of electric vehicles, and our demand is the best we've ever seen. So this is -- we're used to seeing a reduction in demand in the first quarter, and we saw an increase in demand that exceeded the normal seasonal in demand in Q1. So Model 3 became the best-selling midsized premier sedan in the world, in fact, I should say the best-selling luxury sedan of any kind in the world. The BMW 3 series was for the longest time the best-selling premium sedan, has been exceeded by the Tesla Model 3. And this is only 3.5 years into production and was just 2 factories. For Model 3 outselling its combustion competitors, I think is quite remarkable. \r\nIn the past couple of quarters, we delivered roughly 0.25 million Model 3s, so -- which translates to annualized rates of $0.5 million per year. When it comes to Model Y, we think Model Y will be the best-selling car or vehicle of any kind in the world and probably next year. So I'm not 100% certain next year, but I think quite likely. I'd say more likely than not, that in 2022 Model Y is the best-selling car or truck of any kind in the world. \r\nThen with regard to full self-driving, full self-driving continues to make great progress. But there's definitely one of the -- I think one of the hardest technical problems that exists, that's maybe ever existed. And really, in order to solve it, we basically need to solve a pretty significant part of artificial intelligence, specifically real-world artificial intelligence. And that sort of AI, the needs be compressed into a fairly small computer -- a very efficient computer that was designed, but nonetheless, a small computer that's using on the order of 70 or 80 watts. So this is a much harder problem than if you were you say 10,000 computers in a server room or something like that. \r\nThis is going to fit into a smallest brain. And -- I think with the elimination of we're finally getting rid of one of the last was really -- it was making up for some of the shortfalls of vision, but this is not good. You actually just need vision to work. And when vision works, it works -- it works better than the best human. It's like having 8 cameras. It's like having eyes in the back of your head, besides you had a 3 eyes of different focal businesses looking forward. This is -- and processing it at a speed that is superhuman. I know there's no question in that with vision solution, we can make a car that is dramatically safer than the average So -- but it is a hard problem because we are actually solving something quite fundamental about artificial intelligence, where we basically have to solve real-world vision AI, and we are. So -- and key to some of this is also having a massive data set. So just having well over 1 million cars on the road that are collecting data from very sort of corner case rare situations -- yes, sort of like so many things in the world like a truck -- carrying a truck or a car with -- one example is like a car as an example, a car with the kayak on the roof where the kayak has a little weight dangling from the front of the kayak in front of the car and the car ingore this and just look at the road. \r\nSo it's really quite tricky, but I am highly confident that we will get this done. So -- yes. This quarter, and I think we'll continue to see that a little bit in Q2 and Q3. So Q1 was -- had some of the most difficult supply chain challenges that we've ever experienced in Tesla and same difficulties with supply chain parts -- over the whole range of parts. Obviously, people have heard about the chip shortage. This is a huge problem. But then in addition to that example, we had quite a difficulty scaling, production in China because we're unable to get critical engineers there because of COVID quarantine restrictions. So -- which meant that worldwide was dependent on drive units made at our factory in So that was a very challenging situation. \r\nI think we're mostly out of that particular problem. That's just -- this was just 2 of many challenges. So team has really done an incredible job of dealing with really severe supply chain shortages. So with respect to the Model S and X, there were more challenges than expected in developing the Model S or what we call the program, which is the new version of Model S and X, which has revised interior and new battery pack and new drive units and new internal electronics, and has, for example, a station 5 level system. There's just a lot of issues encountered, ensuring that the new factory was, as also were saying was quite energy in a smaller pace. So it took quite a bit of of development to ensure that the battery of the new is safe. And we're trying to get in the cars slowly for the past few months, but we're just stacking them up in the yard and just making refinements to the cars that we built. \r\nBut we do expect to ramp Model S production and start delivering in probably next month. And then to be in sort of fairly high volume production for in Q3 and delivering Model X in Q3 as well. So I think as we ramp up, I think probably the demand for the new will be quite high. So it's really just going to be a question of ramping supply chain and internal production processes. So probably, like we're going to aim to produce over 2,000 per week, perhaps if we get lucky, upwards of 2,400 or 2,500. This again is contingent on global supply chain issues, which just a lot of factors outside of our control here. But I do think these will it's just a matter of time, and then we'll be doing well over 2,000 per week at a car that actually costs us less to produce, a little bit less to produce. But it is a product. \r\nSo the conclusion is there's a lot to be excited about in 2021 and '22. We're going as quickly as we can. Both Texas and Berlin are progressing well, and we expect to have initial limited production from those factories this year and volume production from Texas and Berlin next year. At this time, we are continuing to ramp production of in Fremont and Shanghai. In the background, we're continuing work -- development work on the Semi, Cybertruck, Roadster and other products. Thanks to everyone at Tesla, who made this year, a huge success. Now on to questions.",
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"name": "Martin Viecha",
"speech": "Thank you very much. We have some remarks from Zachary Kirkhorn as well.",
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"name": "Zachary Kirkhorn",
"speech": "So congratulations to the Tesla team on breaking multiple records in the first quarter of '21, as Elon had mentioned, which is typically the most difficult of the year for many reasons. To summarize the quarter, I think it's best understood by 3 key items: First, we successfully launched and began the ramp of Model Y in Shanghai, achieving positive gross margin in the first quarter of and receiving a great reception from the market. Second, as Elon mentioned, although we began the production process for the Model S during the quarter, we have not yet begun customer deliveries. The reduction in Model S and X deliveries from Q4 to Q1 were a meaningful headwind to free cash flows and profit generation. \r\nFor example, we incurred an estimated $200 million of direct P&L impact relating to this program in Q1 and the majority of which is reflected in COGS and that's before even considering the impact of lost revenue and profits as a result of the transition. And as mentioned -- as Elon mentioned, we expect the first deliveries to begin shortly. Third, as we continue to work through the instability of the global supply chain, particularly around semiconductors and port capacities, the Tesla team in partnership with our suppliers did tremendous work keeping our factories running. We did experience high expedite costs in the quarter, and they were also higher than they were in Q4 with some minor interruptions to production over the course of the quarter. We believe that this landscape is improving, but it does remain difficult and it's an evolving situation. \r\nIf we double-click within net income, gross margin, excluding credits, improved sequentially and year-over-year. This is in spite of the cost mentions for and expedites and a reduction in global ASPs and as our cost structure as a company is reducing at an even faster pace. So as we look out over the course of the year, we feel optimistic about our gross margin strength, particularly as some of these headwinds we're experiencing start to be resolved. \r\nOn services and other margins, these have recovered and are trending towards profitability, aided by strength in the used car business, operational improvements in service and additional service revenue opportunities to help absorb fixed overheads. On energy gross margins, these remained negative for our second quarter. This is driven by solar-related ramp costs and winter seasonality in the PPA business. We continue to manage through a multi-quarter backlog on Powerwall. We're working as fast as we can to increase production. And this will aid in profitability of this business as those volumes increase. \r\nOn operating expenses, these increased for Q1, which is driven by our investments in technology and growth, in particular, for R&D, this includes the structural battery pack and cells, investments in the new and our and silicon investments. On the SG&A side, we're setting up infrastructure and support for both China and EMEA in anticipation of volume to come there. And as I said before, our plans show that we remain on track for sustained industry-leading operating margins. \r\nDouble-clicking on cash flows. We continue to generate positive free cash flows and this was despite the significant working capital headwinds from S and X. Additionally, we are making progress reducing various forms of debt. We also invested $1.5 billion in Bitcoin during the quarter, then trimmed our position by 10%, and which contributed to a small gain in our Q1 financials. \r\nTaking a step back, we've generated $8 billion in operating cash flows and $4 billion in free cash flows over the past 4 quarters. As we look forward, our plans remain unchanged for long-term growth of 50% annually, and believe we're on track to exceed that this year as we guided to last quarter. Global demand remains meaningfully higher than production levels. And so we're driving as fast as we can to increase our production rates. As we think about Q2 and Q3, these quarters should largely be driven by execution on S and X, as we've discussed, continued ramp of Model Y in Shanghai and the associated cost reductions of these programs. And we expect profitability and cash generation to evolve over the course of the year in line with those improvements. \r\nAnd then as we get towards the end of the year, our story will pivot towards the launch and ramp of our newest factories in Austin and Berlin. So there's certainly no shortage of exciting things for us to work on and look forward to. Thank you, and we'll open it up for questions.",
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"name": "Martin Viecha",
"speech": "Thank you very much. And we'll first take questions from website. The first question is, how is coming along? Could unlock an AWS like business line for Tesla over the next few years?",
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"name": "Zachary Kirkhorn",
"speech": "Yes. I'll jump in here. So with respect to...",
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"name": "Elon Musk",
"speech": "Sorry, my mic was on mute.",
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"name": "Zachary Kirkhorn",
"speech": "Go ahead, Elon.",
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"name": "Elon Musk",
"speech": "So yes, I was just basically saying that the -- although like right now, people think of Tesla has car company or energy company. I think long term, people will think of Tesla as much as an AI robotics company as we are a car company or an energy company. I think we are developing one of the strongest hardware and software AI teams in the world. Certainly, we appear to be able to use things with full self-driving that others cannot. So if you look at the evolution of what technologies we developed, we developed them in order to solve the problem of self-driving. So we can find a computer. So we designed and our own. The software out there was really quite primitive for this task. And so we built the team from scratch and have been developing what we think is probably the most advanced real-world AI in the world. And then if it makes sense, this is kind of what needs to happen because the road system is designed for a neural net computer, our brain. Our brain is neural net computer. And it's -- the entire road system is designed for vision with neural net computer, which is because it's designed for eyes in the brain. And so if you have a system which has very good eyes, you can see all directions at once, be 3 focal points ahead or forward, but it never gets tired. It's never sort of texting. It has redundancy and its reaction time is super human. Then it seems pretty obvious that, that such a system would achieve an extremely high level of safety, of the average person. That's what we're doing. is kind of the training part of that. So because we're -- we have over 1 million cars, and perhaps next year, we'll have 2 million cars in active use, providing vast amounts of video training data that then needs to be digested by a very powerful training system. And currently, we use Tesla training software. So we developed a lot of training software, a lot of labeling software to do, to do, surround video labeling, which is quite tricky. This means all 8 cameras simultaneously of 36 frames a second per count labeling video over time. There wasn't a tool that existed for this. So we developed our own labeling tool. Then taking it a step further, obviously, the holy grail is auto labeling. So now we're getting quite good at auto labeling, where we do -- we're -- but the trainers train the training system and then the system auto labels the data and the human labels just need to look at the labeling to confirm that it is correct and perhaps make edits. And then every time an edit is made, that's where it trains the system. So it's kind of like a rule. It's just sort of spinning up. And really, the only way to do this is with fast amounts of video data. So then we need to train this efficiently. So is really a -- it is a supercomputer optimized for neural net training. We think will be probably in order of magnitude more efficient on, say, not sure what the exact right metric is, but say, per frame of video, we think it will be an order of magnitude more cost efficiency in hardware and in energy usage for a frame of video compared to a GPU-based solution or compared to the next best solution that we're aware of. \r\nSo then possibly that could be used by others. It does seem as though over time -- I mean just an observation, I think basically just the fact that neural net based computing or AI-based computing is and more and more of the compute stack. We -- conventional perhaps heuristics based computing is going to be important -- still going to be very important. But it will become -- but neural net will become a bigger and bigger portion of compute. So a long story. But I think, yes, probably others will want to use it too, and we will make it available.",
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"name": "Martin Viecha",
"speech": "Let's go to the second question from retail investors. The recent price changes on Solar Roof have been discouraging for customers and investors. Could just like share more about Solar Roof challenges? And if the outlook has changed at all, i.e., 1,000 roofs per week.",
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"name": "Elon Musk",
"speech": "Yes. First of all, I should say that the demand for the Solar Roof remains strong. So despite raising the price, the demand is still significantly in excess of our ability to meet the demand to install the Solar Roof. So production has gone fine. But we are at the inflation point. We did find that we basically made some significant mistakes in assessing the difficulty of certain roofs, but the complexity of roofs varies dramatically. Some roofs are to be literally 2 or 3x easier than other roofs. So you just can't have a one size fits all situation. If a roof has large or if the roof sort of -- the core structure of the roof is or is it not strong enough to hold the Solar Roof, then the cost can be double, sometimes 3x what we -- what our initial quotes were. So in those cases, what we obviously hope to do is to refund customers their deposit, and -- but what we cannot do is go and just lose an absolute amount of money. We just got to provide a refund of the early deposit. But that's what is I think most important about the Solar Roof situation, which I about this past week is that we're shifting the whole sort of solar situation -- the solar power basically situation to there's only 1 product basically -- or there's only 1 configuration. Every house -- we will not sell a house, solar without a Powerwall. The solar could either be solar retrofit with conventional panels put on the roof or it can be the Tesla Solarglass Roof. But in all cases, it will have the power to it's actually The plus refers to a higher peak power capability. So basically, all Powerwall made since roughly November of last year have a lot more peak power capability than than the specification on the website. They have about twice the power capability roughly. It on how you count power, but about twice the peak power and arguably twice the steady-state power of the specification of the website. The energy the power is roughly double. And all the installations -- so all installations will have a Powerwall. And the difficulty installation will dramatically -- or the difficulty of the installation will be much less. It will be much easier because the power from the Solar Roof -- Solarglass Roof or the solar panels will only ever go directly into the Powerwall. And the Powerwall will only ever go between the utility means -- between the utility and the main power panel of the house, which means you never need to touch the main breakers of the house. You never need to touch the house breakers. Effectively, almost every house, therefore, looks the same electrically instead of being a unique work of art and requiring exceptional ability to rewire the main panel. \r\nSo this is extremely important for scalability is the only way to do it, really. And this also means that every solar power installation that the house or whatever the case may be, will be its own utility. And so even if all lights go in the neighborhood, you will still have power. So that gives people energy security. And we can also in working with the utilities use the Powerwall to stabilize the overall grid. So let's say that there's a -- like there was in Texas, there was a peak power demand, and the power demand, because the grid lack the ability to buffer the power, they have to shut down power. There's no power storage. No good point on power storage. However, with a whole bunch of Powerwall and houses, we can actually buffer the power. And so if the grid needs more power, we can actually then, with the consent, obviously, of the homeowner and the partnership with the utility, we can then actually release power onto the grid to take care of peak power demand. \r\nSo effectively, the Powerwalls can operate as a giant distributed utility. This is profound. I'm not sure how much you actually understand this as this is extremely profound and necessary. Because we are headed towards a world where as we just talked about earlier, where people are moving towards electric vehicles. This will mean that the power needs in -- at homes and businesses will increase significantly. We will -- there will need to be a bunch more electricity coming somewhere. In fact, if you go to full renewable electricity, we need about 3x as much electricity as we currently have. So these are rough numbers, but roughly you need twice -- roughly need twice much electricity if transport goes electric, and they need 3x much electricity if all heating goes electric. So basically, this is a prosperous future, I think both for Tesla and for the utilities. \r\nBecause -- and in fact, I think this will be very -- if this is not done, the utilities will fail to serve their customers. They won't be able to do it. They won't be able to that stuff. And we're going to see more and more of what we see, say, in California and Texas of people seeing and blackouts and utility not being able to respond because there's a massive change going on with the transition to electric transport, and we're seeing more extreme weather events. This is the reported So it is very important to have solar and batteries at the level of the house. In addition, it is important to have large battery storage at the utility level. So that -- solar and wind, which are the main forms of renewable electricity can be -- that electricity can be stored because sometimes the wind doesn't is worthwhile. So that's worth too much but didn't go up. But if you have a battery, you can source the energy and provide the energy to the grid as needed. The same goes for solar because obviously, the sun does not shine at night. And sometimes, it is very cloudy. And so by having battery storage paired with solar and wind, this is the long-term solution to a sustainable energy future. And as I said, especially to both at the local level and at the utility level. If it doesn't occur at the local level, what will actually be required is a massive increase in power lines in power plants. So I have to put long distance and local power lines all over the place, they'll have to increase the size of the substations is a nightmare. This must occur. \r\nThere must be solar battery is the only way.",
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"name": "Martin Viecha",
"speech": "Thank you very much. And the next retail question is master of can you tell us anything about Tesla's future plans digital currency space or when any such major developments might be revealed?",
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"name": "Zachary Kirkhorn",
"speech": "Sure. Thanks, Martin. So as I noted in our opening remarks, and we've announced is Tesla did invest $1.5 billion into Bitcoin in Q1, and then we subsequently sold a 10% stake in that. We also allow customers to make vehicle deposits and final vehicle purchases using Bitcoin. And so where our Bitcoin story -- maybe just to share a little bit of context here. Jon and I were looking for a place to store cash that wasn't being immediately used, trying to get some level of return on this, but also preserve liquidity. Particularly as we look forward to the launch of Austin and Berlin and uncertainty that's happening with semiconductors and port capacity, being able to access our cash very quickly is super important to us right now. And there aren't many traditional opportunities to do this or at least that we found and in talking to others that we could get good feedback on, particularly with yields being so low and without taking on additional risk or sacrificing liquidity. And Bitcoin seemed at the time and so far has proven to be a good decision. A good place to play some of our cash that's not immediately being used for daily operations or maybe not needed until the end of the year and be able to get some return on that. And I think one of the key points that I want to make about our experiences in the digital currency space is that there's a lot of reasons to optimistic here. We're certainly watching it very closely at Tesla, watching how the market develops, listening to what our customers are saying. But thinking about it from a corporate treasury perspective, we've been quite pleased with how much liquidity there is in the Bitcoin market. So our ability to build our first position happen quickly. When we did the sale later in March, we also were able to execute on that very quickly. And so as we think about kind of global liquidity for the business in risk management, being able to get cash in and out of the market is something that I think is exceptionally important for us. So we do believe long term in the value of Bitcoin. So it is our intent to hold what we have long term and continue to accumulate Bitcoin from transactions from our customers as they purchase vehicles. Specifically with respect to things we may do, there are things that we're constantly discussing. We're not planning to make any announcements here, and we're watching this space closely. So when we're ready to make an announcement on this front, if there's one to come, we'll certainly let you all know.",
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"name": "Martin Viecha",
"speech": "Thank you. And the fourth question from retail investors is does Tesla have any proactive plans to tackle mainstream imminent, massive and deceptive click-based headline campaigns on safety of autopilot or FSD specialty PR job of some sort.",
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"name": "Unknown Executive",
"speech": "Well, I can -- I'll take this one, guys. From the safety side, I continue to say a few as drive the point -- go ahead, Elon.",
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"name": "Elon Musk",
"speech": "I think -- please go ahead. I touched with just going through the facts of the -- what -- I mean, specifically, there were -- there was not a regarding actually there was high-speed in Tesla. But -- and there was really just extremely deceptive media practices where it was claimed to be where this is completely false. And those journalists should be ashamed themselves. Please go ahead,",
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"name": "Unknown Executive",
"speech": "Yes. Thanks, Elon. So I was just saying, we're committed to safety in all our designs, and that's number 1 in what we do here. Regarding the in Houston, specifically, we worked directly with the local authorities, NTSB and Neto, wherever replicable and whenever they reach out to us for help directly on the engineering level and else we can support. In that vein, we did a study with them over the past week to understand what happened in that particular crash. And what we've learned from that effort was that auto steer not -- could not engage on the road condition that -- as it was designed. Our adaptive cruise control only engage when a driver was buckled in about 5 miles per hour. And it only accelerated to 30 miles per hour distance before the car crashed. As well adaptive fusion control disengage the cars fully to complete to a stop when the driver's seatbelt was unbuckled. Through further investigation of the vehicle and accident remains, we inspected the car with NTSB and and the local police and we're able to find that the steering oil was indeed so they must leading to likelihood that someone was in the driver seat at the time of the crash and all seatbelts post crash were found to be unbundled. We're unable to recover the data from the SD card at the time of impact, but the local authorities are working on doing that and we await their report. As I said, we continue to hold safety in a higher regard and look to improve products in the future through this kind of data and other information from the field.",
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"name": "Martin Viecha",
"speech": "Okay. Thank you very much. Let's go to the next question on institutional investors. The first question is, proponents of alternative grid storage technologies claimed at lithium-ion. It's unsuited for long term storage at scale due to Could 4680 cells address this limitation? Is the limitation even relevant for charging the energy equation?",
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"name": "Unknown Executive",
"speech": "That's definitely not the issue. Good lithium ion cell -- self discharge is less than 0.001% of its energy per day. So the drain is maybe not...",
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"name": "Elon Musk",
"speech": "[indiscernible]",
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"name": "Unknown Executive",
"speech": "Yes, I think the challenge with seasonal storage is your value proposition drops from hundreds of full cycles per year to less than maybe 10 or maybe even less than 5 cycles per year. So it's just a different type of technology altogether, that would make sense, given that it's more than an order in magnitude, different use case.",
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"name": "Elon Musk",
"speech": "Yes. We've got a long way to go before we're dealing with seasonal technology issues. But certainly a way to deal with seasonal technology would be to have wind and solar erring on the side of more latitude. And -- but then across a variety of longitude. So essentially, like let's say, in the U.S., for example, there was -- I'm not sure if you understand that you can actually power the entire United States with just sort of 100 -- roughly a 100 mile -- by 100-mile grid of solar. Some people don't quite understand like, well, how much solar is needed out of the United States. Almost nothing of the [indiscernible] of almost any country in the world. The incident is a gigawatt per square kilometer. This is insane. In fact, you took the clear area, just the area or saying for nuclear power plants, the area that is considered not usable because of a nuclear power plant is there. In most cases, If you just put solar there, it would generate more power than the nuclear power plant because they typically have pretty wide clear areas. So it really -- so if you have, say, 25% efficient solar panels and then those are 80% efficient in how they laid out, you're going to do about 200 megawatts per square kilometer. Therefore 5 kilometer at which might be a typical sort of power plant. It's really not much area at all. And a lot of places can have wind and solar in place. So anyway, it's entirely possible to power all of us with a small percentage of earth's area. And then to transfer that power to high-voltage DC lines, no new technology. No -- you don't need like room temperature superconductors. This another room temperature superconductors. Almost irrelevant, in my opinion, almost irrelevant. Low-cost, long-distance power lines using copper or aluminum very important. So heating is So that's current time of resistance. So as you increase voltage, you can drop the current dramatically and drop the heating dramatically to the point where it is of minor relevance, like maybe you lose 5% to 7% with a high-voltage DC power line, something like that. So I wonder [indiscernible] We just need to scale this thing up. We -- the technologies exist today to solve renewable energy. And some people will say, well, why don't we do it? That's because the energy basis of the earth is gigantic, super mega and gigantic. So you can't just go and do 1 billion terawatts overnight. You've got to build the production capacity for the cells -- for the battery cells or solar cells. You've got to put that into vehicles, you going to put that storage pack, you've got to solar panels and Solarglass Roof and you've got to deploy all this thing -- all this stuff. But it is certainly the case that we can accelerate this. And we should try to accelerate it. And the right thing to do, I think, from an economic standpoint, I think as an economist to agree is to have a common tax, just as we have a tax on and alcohol, which we think are more likely to be bad than good, and we tend to tax vegetables less. It was the same should be true. We should tax energy that we think is fully bad and support energy think is probably good, just like alcohol versus fruits and vegetables. Just And -- but I guess on the plus side, I'm not suggesting anyone to be complacent, but sustainable energy, renewable energy will be sold. It is being sold, but it matters how fast we sold it. And if we sold it faster, that's better for the world. \r\nThere's no question in my mind, what sort of the energy storage can be sold with the batteries. 0. I want to be clear, 0. I think the buyers will tend to be towards iron-based lithium cells. When we say lithium, I don't think lithium must be a big constitute of the cells. It's more like 1% to 2% if the cell is lithium. But the main part of the cell is cathode. The main mass and in the cells is the cathode. Where high-energy cells like for example, what we use in most have nickel-based lithium-ion cells, which have higher energy density, longer range than iron-based cells. However, stationary storage -- the energy that is not as important because just thinking around. And so I think the vast majority of stationary storage will be iron-based lithium-ion cells with an iron phosphate cathode typically. But I think the phosphate part of necessary is or nickel on the terminology. I just think it was iron and nickel. And there's the same amount of iron in the world, more iron than we possible use. And there's also more lithium than we could possibly use. Basically, there is no shortage of anything whatsoever in iron lithium-ion cells.",
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"name": "Martin Viecha",
"speech": "Thank you very much. Let's go to the next question from traditional investors, which is you've suggested that between a 5x to 10x improvement is achievable in the automotive production versus the first Model 3 line on the first principles physics analysis. Where does where does Berlin sit relative to that limit?",
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"name": "Elon Musk",
"speech": "I think we're still quite away from it. I mean the thing to bear in mind with production is -- but for those who've never they just don't understand how insanely hard production is. I want to review the very, very here. Prototypes are -- their child's play. Production is hard, is very hard. Now you say production at very scale with higher liability and low cost, insanely difficult. But what has achieved on the automotive side was not to create an electric car. The truly profound thing on the car side is that Tesla was the first American car company to achieve volume production of a car in 100 years and not go bankrupt. So this is -- this -- basically, myself and many others at Tesla had to basically have several aneurysms to get this done. It was so hard, no idea. So anyway -- and the thing about making a large complex manufacturing object is, let's say you have approximation, 10,000 unique items. And even one of those items is slow, that saturate, just one. Doesn't matter so trivial. We've had production stopped because of carpet and We had production stopped because of USB cable. At one point, for more or less, the rated every electronics store in the Bay Area for a few days there, nobody could buy USB cable in the area because we went and bought them all to put them in the car, literally. And the like hundreds of stories like that. So anyway, that's that -- those constraints and a logistics problem that makes World War II, a trivial. I'm not hitting like the scale millions of cars, massive global supply chain in 50 countries, dozens of regulatory regimes. It's insane.",
"session": "Answer",
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"name": "Martin Viecha",
"speech": "Yes. Thank you. And last question from institutional investors. Master plan Part 2 talks about an urban transport vehicle that is smaller than traditional bus with greater aerial density achieved by removing the central aisle. Do you have any updates to share on this goal?",
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"name": "Elon Musk",
"speech": "Not at this time.",
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"name": "Martin Viecha",
"speech": "Okay. Thank you very much. So let's move to analyst Q&A.",
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"name": "Operator",
"speech": "First question is from Pierre Ferragu with New Street Research.",
"session": "Question and Answer Operator Message",
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{
"name": "Pierre Ferragu",
"speech": "I'd love to get actually on what you presented on the Battery Day. In the last 6, 7 months, I want -- I was much progress you've made on that front first, in terms of process development. So how are things coming together on your pilot line? Are you getting to the kind of production throughput you were aiming for? And second, actually, on your production ramp. So I was wondering in which sites you're ramping production capacity for the 4680 cell and where you stand on ramping up that capacity as well? And I have a quick follow on energy as if that's possible.",
"session": "Question",
"person_id": 356336,
"person_company": null,
"component_order": 29
},
{
"name": "Elon Musk",
"speech": "Well, so we have the -- Andrew, you add to this. But we have the small sort of pilot plant, which is still big expected to have like a 10-gigawatt per hour capability in Fremont And cells, we're not quite yet at the point where we think ourselves are reliable enough to be shipped in cars, but we're getting close to that point. And then we've already ordered mostly equipment for battery production in Poland and much of as well. So we really don't flick the nitty-gritty elements. But overall, I think we still sort of we're quite optimistic about this achieving volume production of the 4680 next year?",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 30
},
{
"name": "Drew Baglino",
"speech": "Yes. I think just one thing I would add is there's been a lot of questions about yields. Actually, I noticed people asking about that. And the yield progress has been really strong every day. We were really still in commissioning phase. We were really still in commissioning phase with most of the tools to the point where we're confident that the yield trajectory aligns with our internal cost projections. We did talk about yield also a better but there's a lot of reasons why it's useful to check in on that. It takes a while, as Elon just mentioned, to go from prototype to production, and it's not just parts. It's processes, it's equipment. But as we've matured the process equipment, we've gotten to where we need to be on the yield side.",
"session": "Answer",
"person_id": 393478,
"person_company": null,
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},
{
"name": "Elon Musk",
"speech": "Yes. Basically, this is just a guess because we don't know for sure, but it appears as though we are about 12 -- they're probably not more than 18 months away from volume production 4680. Now at the same time, we are actually trying to have cell supply of partners ramp up their supply as much as possible. So this is not is something that is to the exclusion of suppliers. It is in conjunction with suppliers. So we're want to be super clear about that. It's not about replacing suppliers. It is about supplementing the suppliers. So we have a very strong partnership with with Panasonic and LG. And we would -- our strategic partners for self-supply is please make us -- please supply us with as much as you possibly can, provided the price is affordable, we will buy everything that they can make.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 32
},
{
"name": "Drew Baglino",
"speech": "Yes. Yes. And specific to that, we're on track to more than double the supplier capacity",
"session": "Answer",
"person_id": 393478,
"person_company": null,
"component_order": 33
},
{
"name": "Elon Musk",
"speech": "Yes. We do expect from suppliers going to pursue you doubled the sale output next year versus this year?",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 34
},
{
"name": "Pierre Ferragu",
"speech": "Yes. Okay. And I had a quick follow-up on maybe Zack, for you on your business. So I understand like the negative gross margin with Solar Roof ran. But I was wondering what do gross margin look like there when you look at the storage business and where you -- what's your ambition in terms of gross margin in that business, I guess, it's going to grow in the mix in coming years. So it's important for long-term modeling.",
"session": "Question",
"person_id": 356336,
"person_company": null,
"component_order": 35
},
{
"name": "Zachary Kirkhorn",
"speech": "Yes. We're seeing a lot of -- we're aiming for comparable margins in storage as in vehicle. But it is important to bear in mind that vehicle is more mature than the storage. So -- We already are at margins with Powerwall. But some additional work is needed for a mega pack to achieve good margins. Yes Drew, what do you think?",
"session": "Answer",
"person_id": 385023,
"person_company": null,
"component_order": 36
},
{
"name": "Drew Baglino",
"speech": "Yes. Sorry, just jumping in Absolutely agree. Powerwall is mature. We've been producing Powerwall for 3 years now and we're good margins there, but has more room to go to achieve our targets.",
"session": "Answer",
"person_id": 393478,
"person_company": null,
"component_order": 37
},
{
"name": "Elon Musk",
"speech": "We have a clear runway for improving the customer a megawatt hour at the Megapack.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 38
},
{
"name": "Drew Baglino",
"speech": "Absolutely. Yes, we do.",
"session": "Answer",
"person_id": 393478,
"person_company": null,
"component_order": 39
},
{
"name": "Operator",
"speech": "From Rod Lache with Wolfe Research.",
"session": "Question and Answer Operator Message",
"person_id": 1,
"person_company": null,
"component_order": 40
},
{
"name": "Rod Lache",
"speech": "I was hoping maybe just first, you could talk a little bit about how you're thinking about the rollout of version 9 and the transition to the subscription model. It sounds like some of this is about to roll out next month. I'm not sure if that's a subscription model, but maybe you could just spend a little time talking about how impactful you expect that to be.",
"session": "Question",
"person_id": 370532,
"person_company": null,
"component_order": 41
},
{
"name": "Zachary Kirkhorn",
"speech": "We're working on getting FSD subscription out, there's a couple of internal technical dependencies, but from a business model perspective, that's aligned, and we're hoping to roll that out soon. The key thing that I say here, there's a lot of potential for recurring revenue based on FSD subscription. 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 is a great option for them. One of the things we'll need to keep an eye on is a potential transition from cash purchases of FSD subscription over to -- or cash purchases of FSD who may move over to FSD subscription. And so there could be a period of time in which cash reduces in the near term and then as the portfolio of subscription customers build up, then that becomes a pretty strong business for us over time. But we're hoping to get this launched pretty soon and see what the response is to it.",
"session": "Answer",
"person_id": 385023,
"person_company": null,
"component_order": 42
},
{
"name": "Rod Lache",
"speech": "Okay. Great. And I was hoping, Zach, maybe you can just talk a little bit about OpEx. There was a noticeable increase, even excluding SBC. Obviously, a lot going on this quarter, but can you maybe just talk a little bit about how we should be thinking about that going forward?",
"session": "Question",
"person_id": 370532,
"person_company": null,
"component_order": 43
},
{
"name": "Zachary Kirkhorn",
"speech": "Sure. On the R&D side, what we're seeing, as I mentioned in my opening remarks, is kind of a convergence of a series of programs that are happening. And our R&D OpEx spend kind of correlates to where we are in the product life cycle on different programs. And so we're kind of at the tail end of investments in what we call internally palladium, which is the new Model S and Model X. And so we expect that to decrease over time, but it was high in Q1 for a lot of the reasons that Eolon have mentioned. We're also getting very heavy into 4680 development that Drew and team are working on and the associated structural battery pack that goes along with that. And so these are new technologies, not only new to Tesla, but new to the industry. And so we're investing heavily there on the R&D side to work out those And spend along in those areas should continue as we continue to work through the development cycle of those. And then I also mentioned Elon talked a bit about and the potential there. So from neural net investments and custom silicon investments, these continue to be areas that we spend on and make investments in. On the SG&A side, the business is pivoting very quickly to be global. And China is ramping quite quickly. And we're trying to make sure that we are staying ahead of the volume, so that we have the right sales capacity, store capacity there, local investments and IT and others to manage the growth such that as the growth comes, the execution challenges are smaller than maybe in similar periods of growth that we've seen in the past. And so we're making investments there ahead of the growth. And overall, as we look at OpEx as a percentage of revenue over the course of the year, we do expect to see a substantial drop from 2020 to 2021 as the volumes in the latter part of the year pickup.",
"session": "Answer",
"person_id": 385023,
"person_company": null,
"component_order": 44
},
{
"name": "Operator",
"speech": "Dan Levy from Credit Suisse. .",
"session": "Question and Answer Operator Message",
"person_id": 1,
"person_company": null,
"component_order": 45
},
{
"name": "Dan Levy",
"speech": "Two questions. One is on COGS. I think we've gotten from Battery Day a pretty good feel about the potential for COGS reduction related to powertrain. But I'd like to get a sense of the path to reducing COGS ex powertrain as you'd still need a meaningful reduction on that front to make the math work on a $25,000 vehicle. So what levers do you have to reducing your cost ex powertrain? Is it just more scale, better supplier pricing or is it just based on ongoing cost reductions.",
"session": "Question",
"person_id": 377011,
"person_company": null,
"component_order": 46
},
{
"name": "Unknown Executive",
"speech": "I mean on the vehicle side, there's plenty of opportunity as well. Obviously, building a car like a lot less is quite complex and has various moving parts, Model 3 and Model Y were steps of improvement in that. When you look at some of the other advancements that we're including in the Model Y factories into Austin and Berlin, we've reduced the body count by as much as 60% in the park cost money. So we continue to find optimization there as well as we get economies of scale. When we start to talk about the volumes we're considering worldwide with 4 factories building the same vehicle. So both of those things on the vehicle side will improve our COGS as well and powertrain continues to be integrated into that.",
"session": "Answer",
"person_id": 182536,
"person_company": null,
"component_order": 47
},
{
"name": "Dan Levy",
"speech": "Great. And then just related, as you see Berlin and Austin ramp. I'd like to just get a sense on the comparison of Fremont versus the new capacity. Obviously, Fremont non-optimized because you bought the facility you had to retrofit that to your need. So maybe you can give us a sense of how your new capacity is going to differ versus Fremont. What are the areas that you have efficiencies that you previously didn't have, maybe how much does that add up to improved COGS over time to help you achieve that $25,000 vehicle.",
"session": "Question",
"person_id": 377011,
"person_company": null,
"component_order": 48
},
{
"name": "Elon Musk",
"speech": "Yes. I think we want to talk too much about future product development. The earnings call is not the right place for to make major product announcement. Yes. we'll get there. We'll",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 49
},
{
"name": "Martin Viecha",
"speech": "All right. Thank you very much. Unfortunately, this is all the time we have for today. Thank you very much for dialing in and for listening, and we'll speak to you again in about 3 months. Thank you.",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 50
},
{
"name": "Elon Musk",
"speech": "Thanks, everyone.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 51
},
{
"name": "Operator",
"speech": "This concludes today's conference call. Thank you for participating. You may now disconnect.",
"session": "Question and Answer Operator Message",
"person_id": 1,
"person_company": null,
"component_order": 52
}
],
"title": "Tesla, Inc., Q1 2021 Earnings Call, Apr 26, 2021",
"quarter": 1,
"year": 2021
}
}
],
"count": 12,
"from_year": 2021,
"to_year": 2023
}
Enrichment
Fetch Earnings Transcripts
Fetch earnings call transcripts for a public company. Supports year-range filtering via from_year and to_year.
GET
/
api
/
enterprise
/
company
/
earnings-calls
/
Fetch Earnings Transcripts
curl --request GET \
--url https://api.wokelo.ai/api/enterprise/company/earnings-calls/ \
--header 'Authorization: Bearer <token>'import requests
url = "https://api.wokelo.ai/api/enterprise/company/earnings-calls/"
headers = {"Authorization": "Bearer <token>"}
response = requests.get(url, headers=headers)
print(response.text)const options = {method: 'GET', headers: {Authorization: 'Bearer <token>'}};
fetch('https://api.wokelo.ai/api/enterprise/company/earnings-calls/', options)
.then(res => res.json())
.then(res => console.log(res))
.catch(err => console.error(err));<?php
$curl = curl_init();
curl_setopt_array($curl, [
CURLOPT_URL => "https://api.wokelo.ai/api/enterprise/company/earnings-calls/",
CURLOPT_RETURNTRANSFER => true,
CURLOPT_ENCODING => "",
CURLOPT_MAXREDIRS => 10,
CURLOPT_TIMEOUT => 30,
CURLOPT_HTTP_VERSION => CURL_HTTP_VERSION_1_1,
CURLOPT_CUSTOMREQUEST => "GET",
CURLOPT_HTTPHEADER => [
"Authorization: Bearer <token>"
],
]);
$response = curl_exec($curl);
$err = curl_error($curl);
curl_close($curl);
if ($err) {
echo "cURL Error #:" . $err;
} else {
echo $response;
}package main
import (
"fmt"
"net/http"
"io"
)
func main() {
url := "https://api.wokelo.ai/api/enterprise/company/earnings-calls/"
req, _ := http.NewRequest("GET", url, nil)
req.Header.Add("Authorization", "Bearer <token>")
res, _ := http.DefaultClient.Do(req)
defer res.Body.Close()
body, _ := io.ReadAll(res.Body)
fmt.Println(string(body))
}HttpResponse<String> response = Unirest.get("https://api.wokelo.ai/api/enterprise/company/earnings-calls/")
.header("Authorization", "Bearer <token>")
.asString();require 'uri'
require 'net/http'
url = URI("https://api.wokelo.ai/api/enterprise/company/earnings-calls/")
http = Net::HTTP.new(url.host, url.port)
http.use_ssl = true
request = Net::HTTP::Get.new(url)
request["Authorization"] = 'Bearer <token>'
response = http.request(request)
puts response.read_body{
"status": "success",
"data": [
{
"transcript_title": "Tesla, Inc. - Q4 2023",
"transcript_name": "Tesla, Inc., Q4 2023 Earnings Call, Jan 24, 2024",
"ticker": "NASDAQ:TSLA",
"transcript_url": "https://wkarticles.blob.core.windows.net/finnhub/snp_transcript_3003051",
"date": "2024-01-24",
"year": 2023,
"quarter": 4,
"transcript_data": {
"date": "2024-01-24",
"participant": [
{
"name": "Adam Jonas",
"role": "Analysts",
"pro_id": 29412103,
"job_title": "MD & Head of Global Auto & Shared Mobility Research",
"description": "Analysts",
"company_name": "Morgan Stanley, Research Division",
"transcript_person_id": 118469
},
{
"name": "Colin Langan",
"role": "Analysts",
"pro_id": 710566519,
"job_title": "Senior Equity Analyst",
"description": "Analysts",
"company_name": "Wells Fargo Securities, LLC, Research Division",
"transcript_person_id": 480193
},
{
"name": "Dan Levy",
"role": "Analysts",
"pro_id": 214533139,
"job_title": "Senior Analyst",
"description": "Analysts",
"company_name": "Barclays Bank PLC, Research Division",
"transcript_person_id": 253177
},
{
"name": "Drew Baglino",
"role": "Executives",
"pro_id": 621069668,
"job_title": "Former Senior Vice President of Powertrain & Energy Engineering",
"description": "Executives",
"company_name": "Tesla, Inc.",
"transcript_person_id": 393478
},
{
"name": "Elon Musk",
"role": "Executives",
"pro_id": 27546373,
"job_title": "Co-Founder, Technoking of Tesla, CEO & Director",
"description": "Executives",
"company_name": "Tesla, Inc.",
"transcript_person_id": 175883
},
{
"name": "Lars Moravy",
"role": "Executives",
"pro_id": 712755131,
"job_title": "Vice President of Vehicle Engineering",
"description": "Executives",
"company_name": "Tesla, Inc.",
"transcript_person_id": 482177
},
{
"name": "Martin Viecha",
"role": "Executives",
"pro_id": 588894062,
"job_title": "Former Vice President of Investor Relations",
"description": "Executives",
"company_name": "Tesla, Inc.",
"transcript_person_id": 370659
},
{
"name": "Pierre Ferragu",
"role": "Analysts",
"pro_id": 558629883,
"job_title": "Global Team Head of Technology Infrastructure",
"description": "Analysts",
"company_name": "New Street Research LLP",
"transcript_person_id": 356336
},
{
"name": "Vaibhav Taneja",
"role": "Executives",
"pro_id": 608950986,
"job_title": "Chief Financial Officer",
"description": "Executives",
"company_name": "Tesla, Inc.",
"transcript_person_id": 595078
}
],
"transcript": [
{
"name": "Martin Viecha",
"speech": "Good afternoon, everyone, and welcome to Tesla's Fourth Quarter 2023 Q&A Webcast. My name is Martin Viecha, VP of Investor Relations, and I'm joined today by Elon Musk, Vaibhav Taneja, and a number of other executives. Our Q4 results were announced at about 3:00 p.m. Central Time in the update deck we published at the same link as this webcast.\r\nDuring this call, we will discuss our business outlook and make forward-looking statements. These comments are based on our predictions and expectations as of today. Actual events or results could differ materially due to a number of risks and uncertainties, including those mentioned in our most recent filings with the SEC. During the question-and-answer portion of today's call, please limit yourself to 1 question and 1 follow-up. [Operator Instructions] But before we jump into Q&A, Elon has some operating remarks. Elon?",
"session": "Presenter Speech",
"person_id": 370659,
"person_company": null,
"component_order": 0
},
{
"name": "Elon Musk",
"speech": "Thank you. So the Tesla team did an incredible job in 2023. We achieved record production and deliveries of [ about ] 1.8 million vehicles, in line with our official guidance. And in Q4, we're producing vehicles at an annualized run rate of almost 2 million cars a year. This is really a phenomenal achievement. Looking at just the Fremont factory alone, we made 560,000 cars. This is a record. In fact, it's the highest output of automotive plant in North America. And people are often surprised that the highest output factory -- car factory in North America is in the San Francisco Bay Area. It's a little counterintuitive perhaps.\r\nAnd it's really had an incredibly positive impact on that entire area. What would have been a run-down strip mall is the highest productivity car plant in the Americas. Think about that. It was derelict when we got it, and now it's the most productive plant in this entire part of the world. And it's enriched the community in so many different ways. It's really a gem. So I'm super proud of the people that work there.\r\nModel Y became the best-selling vehicle globally, as predicted, the best selling vehicle of any kind, not just electric vehicles, with over 1.2 million units delivered. The energy storage business delivered nearly 15 gigawatt hours of batteries in 2023 compared to 6.5 gigawatt hours the year before, so tremendous year-over-year growth, triple digits. And yes, I think we'll continue to see very strong growth in storage, as predicted. I said for many years that the storage business will grow much faster than the car business, and it is doing that.\r\nFree cash flow remained strong at $4.4 billion in 2023 in spite of record spending on future projects. So we had record CapEx expenses as well as record R&D. This brings us to 2024. There's a lot to look forward to in 2024. Tesla is currently between 2 major growth waves. We're focused on making sure that our next growth wave driven by next-gen vehicle, energy storage, full self-driving and other projects is executed as well as possible. For full self-driving, we've released version 12, which is a complete architectural rewrite compared to prior versions. This is end-to-end artificial intelligence. So [indiscernible] basically, photons in and controls out.\r\nAnd it really is quite a profound difference. This is currently just with employees and a few customers, but we will be rolling out to all who -- all those customers in the U.S. who request full self-driving in the weeks to come. That's over 400,000 vehicles in North America. So this is the first time AI has been used not just for object perception but for path lending and vehicle controls. We replaced 330,000 lines of C++ code with neural nets. It's really quite remarkable.\r\nSo as a side note, I think Tesla is probably the most efficient company in the world for AI inference. Out of necessity, we've actually had to be extremely good at getting the most out of hardware because Hardware 3 at this point is several years old. So I think we're quite far ahead of any other company in the world in terms of AI inference efficiency, which is going to be a very important metric in the future in many arenas.\r\nSo see, the new Model 3 is now available globally, so we did an update in Model 3. While the car looks similar, a lot of work has gone into the vehicle to make it better in every way. It is significantly quieter, more refined, better equipped, has longer range and many other improvements, and I recommend taking it for a test drive. If you have not driven a Model 3 in a long time, you should really try the new one. So steady improvements.\r\nAnd we're very far along on our next-generation low-cost vehicle. This is an earnings call, not a product announcement. So there'll not be many questions that try to ask us about new products coming, but we reserve product announcements for product announcements, not earning calls. But we're very excited about this, and this is really going to be profound, not just in its design of the vehicle itself but in the design of the manufacturing system. This is a revolutionary manufacturing system, significant -- far more advanced than any other automotive manufacturing system in the world, like by a significant margin.\r\nSeveral years ago, I said the -- perhaps the most important competitive characteristic of Tesla in the future will be manufacturing technology. And you will really see that come to bear with our next-gen vehicle. The first manufacturing location for this will be at our Gigafactory and headquarters in Austin, Texas. And then we'll follow that up with other locations around the world, probably our built in Mexico will be second, and then we'll be looking to identify a third location perhaps by the end of this year or early next outside of North America.\r\nIn conclusion, we had a great year with record production, record deliveries and a strong free cash flow in spite of a very high interest rate environment. And we are focused on exciting new projects that will, I think ultimately, if we execute on all these things, and it is very hard to do all these things, not a sure thing, but I do see a path where Tesla could 1 day be the most valuable company in the world. I do want to emphasize that is not an easy path, a very difficult one, but it is now a set of possible outcomes. And previously, I would not have thought it is in possible outcome.\r\nAnd thank you again to all of our investors, our employees, and our suppliers for a strong year and looking forward to a great 2024 and years to come. Thank you.",
"session": "Presenter Speech",
"person_id": 175883,
"person_company": null,
"component_order": 1
},
{
"name": "Martin Viecha",
"speech": "Thank you. And our CFO, Vaibhav, has opening remarks as well.",
"session": "Presenter Speech",
"person_id": 370659,
"person_company": null,
"component_order": 2
},
{
"name": "Vaibhav Taneja",
"speech": "Thanks, Martin. Good afternoon, everyone. As Elon mentioned, we had a record year in terms of both production and deliveries for our auto business as well as record deployments in our energy business. This was achieved despite 2023 being a challenging year in terms of higher interest rates and higher inflation. Big thanks to our customer for being with us through this challenging period. I would also like to thank whole Tesla team for their resolve and dedication throughout.\r\nIn terms of our 2023 financials, we ended the year with over $96 million of revenue and generated $4.4 billion of free cash flow to end the year with over $29 billion of cash and investments on hand. Our 2023 GAAP net income was impacted by the recognition of onetime noncash benefit of $5.9 million from the release of valuation allowance on certain deferred tax assets. This was due to our recent history of sustained profitability and is similar to several other companies who have recently gone through a similar change in their accounting.\r\nAccordingly, starting with Q1, our booked tax rate will now be more in line with other companies in the S&P 500. In our vehicle business, we continue to see improvements in our per unit cost despite us being in the early phase of Cybertruck era. As a result, our auto gross margin improved sequentially. That said, predicting auto gross margins is extremely challenging since there are many moving parts to this equation, some of which are out of our control, like the change in tariffs or local incentives, to name a few. While the teams are focused on cost reductions, we are approaching the limits within our current platforms.\r\nOn the demand front, as promised, we made investments in digital campaigns in 2023. We fully appreciate the importance of customer education as we are still in the customer acquisition phase. Our data suggests that around 90% of our vehicle buyers in 2023 never owned a Tesla before. We are being creative in figuring out ways to bring in new customers and educate them about the benefits of owning a Tesla versus gas-powered vehicles, the key among them being total cost of ownership. This concept is mostly overlooked for just the upfront cost. We will be in evaluating our campaigns, curating the content and optimizing spend accordingly to support the overall demand.\r\nThere are 2 additional things I would like to mention as it relates to the U.S. market. First, for customers who qualify for buying credit, we now offer that as a point-of-sale benefit for Model Y, which means an immediate reduction of $7,500 at the time of purchase to the end customer. Secondly, we continue to offer very attractive lease rates for Model 3 and Y using our partner leasing program. Note that the sales under this program are recognized as upfront revenue and reported within automotive sales.\r\nOur energy storage business had another record year, with deployments more than doubling and revenues increasing by more than 50%. This business is poised to again surpass our auto business in terms of growth rate in 2024. This has been in the works for quite some time with us laying the foundation a few years back by building our Megafactory in metro. I would like to thank the whole Tesla energy team for their efforts to make this a reality.\r\nOur services and others business also started contributing meaningfully to our results, and our fleets -- as our fleets grow as we expect the fleet-based revenues from supercharging, used cars and services to continue to increase. For 2024, our focus is to continue growing our output, continuing our cost reduction efforts and increasing investments in our future growth initiatives. Accordingly, we are currently expecting our capital expenditure for 2024 to be in excess of $10 million. We believe this would be critical in helping us lay the foundation for the next phase of growth.\r\nOnce again, I would like to thank everybody at Tesla, our investors, and our suppliers for being with us in this journey. We can open it up to questions, Martin.",
"session": "Presenter Speech",
"person_id": 595078,
"person_company": null,
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},
{
"name": "Martin Viecha",
"speech": "Thank you, and let's go through investor questions. Question number 1 is from Michael. Given that you moved the start of the next-generation compact vehicle production to Austin, has the time line improved so that we might see the next-generation platform vehicles in 2025?",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 4
},
{
"name": "Elon Musk",
"speech": "We -- I won't certainly say things with -- that should be taken with a grain of salt since I am often optimistic. But I don't want to blow your mind but I'm often optimistic regarding time. But our current schedule shows that we will start production towards the end of 2025, sometime in the second half. That's just what our current schedule says. There's a lot of new technology, like a tremendous amount of new revolutionary manufacturing technology here.\r\nThe reason I want to put this new revolutionary manufacturing line at Giga Texas was because we really need the engineers to be living on the line. This is not sort of off-the-shelf just works type of thing. And it's just a lot easier for Tesla engineering to live on the line if it's in Austin versus elsewhere. But we are currently expecting to start production second half of next year. That will be a challenging production ramp, like I can't emphasize, we'll be sleeping on the line practically. In fact, not practically, we will be.\r\nBut I am confident that once it is going, it will be head and shoulders above any other manufacturing technology that exists anywhere in the world. It's next level. So it's always difficult to predict what that S curve of manufacturing looks like. So we start off real slow and then it grows exponentially. And predicting that intermediate S curve is difficult, but -- so I don't know. It's hard to say what the unit volume would be next year. We're not going to make any predictions on that front, but it does seem quite likely that we will start production next year.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 5
},
{
"name": "Martin Viecha",
"speech": "Thank you. The next question is from Michael again. What has been the barrier to ramping 4680 cells into multimillion cells per week rate? And when do you expect to get there? Drew?",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 6
},
{
"name": "Drew Baglino",
"speech": "Yes. First, I just want to allay any concerns regarding 4680 limiting the Cybertruck ramp because I've seen some people commenting about that. Today, 4680 production is ahead of the ramp with actually weeks of finished cell inventory. And the goal is to keep it that way, not only for Cyber but for our future vehicle programs. And as Elon said, it is an S curve here too, like it's hard to predict these things. But I'm just describing our goals.",
"session": "Answer",
"person_id": 393478,
"person_company": null,
"component_order": 7
},
{
"name": "Elon Musk",
"speech": "It's a hard problem, like there are entire companies where all they do is make battery cells. That's like all they do, indeed. We do a lot of other things. And we've got a lot of breakthrough technologies that take time to figure out. It's not just that it's a 46-millimeter diameter by 80-millimeter cell. That's just the dimensions. There's tremendous amount of new technology in the cell itself.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 8
},
{
"name": "Drew Baglino",
"speech": "And manufacturing technology.",
"session": "Answer",
"person_id": 393478,
"person_company": null,
"component_order": 9
},
{
"name": "Elon Musk",
"speech": "Yes, exactly.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 10
},
{
"name": "Drew Baglino",
"speech": "And just regarding what the team was able to do in Q4, Texas successfully swapped line 1 from the model line design of the cells, the Cybertruck [indiscernible] which was the 10% cell energy increase I've mentioned before. And as with any major new product introduction, the factory and engineering teams collaborated to ensure quality of the new design and the process changes as their first priority. And now our focus returns to cost and production ramp in Q1.\r\nAnd in terms of what we're doing, we're currently running 1 production line, 1 assembly line, using 2 assembly lines in addition for yield and rate improvement trials, and we have a fourth in commissioning and 4 more will be installed starting in Q3 this year. So definitely, this is a big year for ramping for",
"session": "Answer",
"person_id": 393478,
"person_company": null,
"component_order": 11
},
{
"name": "Elon Musk",
"speech": "We also do want to emphasize that we also expect to ramp orders from our suppliers. So this is not about replacing our suppliers. It's about supplementing our suppliers. So we are very appreciative of our suppliers. Panasonic, obviously, is our longest supplier. They're an amazing company. We've got CTL. We've got LG and BYD.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 12
},
{
"name": "Martin Viecha",
"speech": "Thank you. The next question is from Adam. Should retail shareholders be concerned that Elon has stated -- should retail shareholders be concerned that Elon has stated that he is uncomfortable expanding AI and robotics at Tesla if he doesn't have 25% of voting?",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 13
},
{
"name": "Elon Musk",
"speech": "Yes. I guess let me explain what my concern is here, which is that I see a path to creating an artificial intelligence and robotics [indiscernible] of truly immense capability and power. And my concern would be, I don't want to control it but if I have so little influence over the company at that stage, that I could sort of be voted out by some sort of random shareholder advisory firm.\r\nWe've had a lot of challenges with institutional shareholder services, ISS, I call them ISIS, and Glass Lewis, which there's a lot of activists that basically infiltrate those organizations and have strange ideas about what should be done. So I want to have enough to be influenced -- like if we could do a dual-class stock, that would be ideal. I'm not looking for additional economics. I just want to be an effective steward of very powerful technology.\r\nAnd the reason I just sort of roughly picked approximately 25% was that, that's not so much that I can control the company even if I go bonkers. And if I'm like mad, they can throw me out, but it's enough that I have a strong influence. That's what I'm aiming for is a strong influence but not control. There's some way to achieve that, that would be great.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 14
},
{
"name": "Martin Viecha",
"speech": "The next question is what is your expectation for automotive gross margin ex regulatory credits for the full year?",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 15
},
{
"name": "Vaibhav Taneja",
"speech": "Like I said in my opening remarks, we're focused on reducing the cost of our vehicles. This is very extensive and involved exercise, whereby we look at not just the component cost down -- but down to the packaging used to get materials to the production floor. Each element of the cost is scrutinized to optimize further. A few pennies saved at the subcomponent lever, whether through engineering redesign or from many other things which I mentioned, these do cost reduction. This is a constant exercise and we just have to chase down every penny possible. We have a strong team which is hyper-focused on this. However, this is a very difficult thing to predict precisely because there are a lot of...",
"session": "Answer",
"person_id": 595078,
"person_company": null,
"component_order": 16
},
{
"name": "Elon Musk",
"speech": "We don't know. We don't have a crystal ball so it's difficult for us to predict this with precision. If the interest rates come down quickly, I think margins will be good. And if they don't come down quickly, they won't be that good. Yes. It's always important to remember that the vast majority of people buying a car is about the monthly payment. It's not that people don't want -- we have tons of -- we have lots of people want to buy our car but simply cannot afford it.\r\nAnd that -- as interest rates drop and [indiscernible] payment drops, then they're able to afford it and they buy the car. It's pretty straightforward. And there are no tricks around to get around this.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 17
},
{
"name": "Martin Viecha",
"speech": "The next question is, does the company anticipate 50% volume CAGR to be realized in either 2024 or 2025? If not, why not?",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 18
},
{
"name": "Vaibhav Taneja",
"speech": "As we have said in our prior guidance, there will be periods where we won't be growing at the same rate as before. We are between 2 major growth waves. The first 1 began with the global expansion of Model 3 and Y. And we believe the next 1 will be initiated with the next-generation platform. In 2024, our volume growth will be lower, as we have said, because we're trying to focus the team on the launch of the next-generation vehicle.",
"session": "Answer",
"person_id": 595078,
"person_company": null,
"component_order": 19
},
{
"name": "Martin Viecha",
"speech": "All right. Thank you very much. The next question is from Michael. When will Tesla start construction on the Giga Nevada expansion and Giga Mexico? And when can we expect each of these to produce their first products such as 4680 cell semi and the next-gen vehicles?",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 20
},
{
"name": "Drew Baglino",
"speech": "We have recently broken ground the next phase of Giga Nevada expansion to incorporate semi and other projects. But as said earlier, as regarding Mexico, we want to first demonstrate success with the next-generation platform in Austin before we start construction. Therefore, we have started the long lead work to get the basics ready and plan to follow our recipe from the 3, Y ramp with Shanghai, where we started with learnings from Fremont and ramped really quickly.",
"session": "Answer",
"person_id": 393478,
"person_company": null,
"component_order": 21
},
{
"name": "Elon Musk",
"speech": "Yes, exactly. It's important to emphasize that I mean, Model 3 production was 3 years of hell, honestly before. Some of the really worst years in my life, frankly. This mental scar tissue from that -- from those 3 years as do many. But then -- and then Model Y was somewhat of a variant on Model 3 so a much easier situation. And then we're able to actually do an improved -- slightly improved versions of -- in some cases, significantly improved versions of the Model Y production line in Shanghai and Berlin.\r\nAnd that's the right -- I think the sensible way to go about things is kind of figure out the core technology of the manufacturing line and then replicate it with improvements throughout the world.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 22
},
{
"name": "Martin Viecha",
"speech": "The next question for Michael is, has there been any progress made with an FSD licensing agreement with another company?",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 23
},
{
"name": "Elon Musk",
"speech": "I really think lots of car companies should be asking for FSD licenses, but -- and we have had some tentative conversations, but I think they don't believe it's real quite yet. I think that will become obvious probably this year. And I do want to emphasize that if I were a CEO of another car company, I would definitely be calling Tesla and asking to license in terms of full self-driving technology. It's definitely the smart move.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 24
},
{
"name": "Martin Viecha",
"speech": "Thank you. The next question from Siddhart. What is the time line for Optimus first production of volume production line? And what are the barriers to getting there?",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 25
},
{
"name": "Elon Musk",
"speech": "Optimus obviously is a very new product, an extremely revolutionary product and something that I think has the potential to far exceed the value of everything else at Tesla combined. And when you think of an economy, economy is productivity per capita times capita. No wonder there's no limit to capita. There's no limit to the economy. And the technologies that we've -- the AI technologies we've developed for the car translate quite well to a humanized robot because the car is just a robot on 4 wheels.\r\nTesla is arguably already the biggest robot-maker in the world. It's just a 4-wheeled robot. So Optimus is a robot with a human robot with arms and legs. Just by most sophisticated humanoid robot that's being developed anywhere in the world. I think we've got a good chance of shipping some number of Optimus units next year. This is a brand-new product. A lot of uncertainty when you have -- when there's a lot of uncertainty in your uncharted territory, it's obviously impossible to make a percentage prediction.\r\nBut we will be updating the public with progress on Optimus every few months. And you can see that it's advancing very quickly. I was in the Optimus lab actually until late last night, like night or something, if I Optimus lab. The team is doing amazing work. That's obviously the case where we want to make sure that Optimus is safe, especially at scale. And that there's no -- it should be impossible for any centralized control to upload malware to a humanoid robot. So we're going to want to -- localize shut off that cannot be updated from the -- from a central server. That's the case where we really update extreme thought to safety. But like I said, I do think it has the potential to be the most valuable product of any kind ever, by far.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 26
},
{
"name": "Drew Baglino",
"speech": "Just to comment on the barrier. I think the barrier, and we've talked about this, is like getting it to actually do something useful, like we can get it to walk around, we can get it to do things, but it's like that utility part.",
"session": "Answer",
"person_id": 393478,
"person_company": null,
"component_order": 27
},
{
"name": "Elon Musk",
"speech": "It can already do some useful things.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 28
},
{
"name": "Drew Baglino",
"speech": "But like, you know, to making millions of these things, it's like utility. You got to get to utility.",
"session": "Answer",
"person_id": 393478,
"person_company": null,
"component_order": 29
},
{
"name": "Elon Musk",
"speech": "Yes. A smart robot that can do -- that's capable of doing generalized tasks is what it will be. And in terms of doing moderately specialized tasks, it can already do that and it'll just get better through the course of the year. As we improve the technology in the car, we improve the technology in Optimus at the same time. It runs the same AI inference computer that's in the car, same training technology. I mean, we're really building the future. I mean, the Optimus lab looks like the set of Westworld. But admittedly, that was not a super Utopian situation.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 30
},
{
"name": "Drew Baglino",
"speech": "Yes, not the best reference.",
"session": "Answer",
"person_id": 393478,
"person_company": null,
"component_order": 31
},
{
"name": "Elon Musk",
"speech": "Yes. The creators of Westworld, Jon Nolan, at least Jon Nolan, friend of mine actually. I invited him to come see the lab. I think come hopefully soon. It's pretty well especially the sort of subsystem test stands, where you just got like 1 leg on a test stand just doing repetitive exercises and 1 arm in a test stand, pretty wild.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 32
},
{
"name": "Drew Baglino",
"speech": "We're not entering Westworld anytime soon.",
"session": "Answer",
"person_id": 393478,
"person_company": null,
"component_order": 33
},
{
"name": "Elon Musk",
"speech": "Right, right. We're going to take safety very, very seriously.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 34
},
{
"name": "Martin Viecha",
"speech": "Thank you. The next question from Narmin is how many Cybertruck orders are in the queue? And when do you anticipate to be able to fulfill existing orders?",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 35
},
{
"name": "Unknown Executive",
"speech": "First of all, I want to thank all of the Cybertruck [indiscernible] for their patients. The reservation to order conversion rate so far has been very, very encouraging. If the trend continues, as it very likely to be, we will soon sort out all the builds in 2024. And also, we have new orders coming after the launch. networks keep growing. So we're now all hands on deck focus on ramping so we can fulfill all the demands in a away time.",
"session": "Answer",
"person_id": 182536,
"person_company": null,
"component_order": 36
},
{
"name": "Elon Musk",
"speech": "Yes, it's important to emphasize that this is very much a production constrained situation, not a demand constrained situation. And obviously, we could dramatically raise the price but that doesn't feel right to us to sort of gouge people for early delivery. But really the demand is off the hook. As long as we have the price is affordable, I mean, I see us ultimately delivering on the order of 0.25 million, something like 0.25 million Cybertruck a year in North America. But maybe more, but give or take, roughly on that time frame. And it's -- I mean, it sure is a head turner.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 37
},
{
"name": "Unknown Executive",
"speech": "Definitely is. Anywhere you go, people look at you. They give you thumbs up.",
"session": "Answer",
"person_id": 182536,
"person_company": null,
"component_order": 38
},
{
"name": "Elon Musk",
"speech": "Yes. It's like finally the future looks like the future. It's just that with the other trucks on the road there, which -- and there are some very good trucks on the road. But if you were to switch out the brand name, you wouldn't hardly know which company made them. But you definitely would know the Cybertruck. It's our best product ever.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 39
},
{
"name": "Martin Viecha",
"speech": "All right. Thank you. The next question is, can we get Tesla energy volumes reported in the production and delivery release?",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 40
},
{
"name": "Drew Baglino",
"speech": "Yes. We will strive to do so starting from this quarter. And just a brief update from a business perspective. Megapack continues to see strong demand signals globally, driving consistent growth trajectory through '24 and '25. We want to thank all of our partners who put their trust and the Megapack team to execute on critical infrastructure around the world. And I would like to personally thank the Megapack engineering and production teams for their strong 2023 execution. Lathrop continues to ramp through 2024 with the operation of a second final assembly line to double capacity from 20 to 40 gigawatt hours by the end of the year.",
"session": "Answer",
"person_id": 393478,
"person_company": null,
"component_order": 41
},
{
"name": "Martin Viecha",
"speech": "Thank you. And the last investor question is from Siddharth. What are the preliminary results on the return on investment of your ads and education campaign? Given that many people still lack awareness the Tesla average price is less than the average non-luxury car price of $45,000, will you expand educational ads?",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 42
},
{
"name": "Unknown Executive",
"speech": "As Elon mentioned, the ultimate solution to increase EV adoption is really address the affordability issue. But at the same time, we do aware there's awareness issue as well. So in Q4, we ran a series of digital campaigns, very targeted digital campaigns across different deals and different channels. The target of these tests is really just to drive awareness and ultimately measure the return on investment on those digital channels.\r\nAnd the messaging we're driving is really focused on our product and also try to address some of the misconception of the EV, such as safety, affordability. And 1 particular awareness campaign where you run -- in Texas, we reached the audience about 10 million unique viewers and generally close to 0.5 million visits to our website. A large number of distributors are first-time visitors to our site. The traffic through these digital channels actually very similar to those organic traffic come to our website. So going forward, we're just going to keep exploring different channels and doing our trials to get a better understanding of the effectiveness of this digital campaign.",
"session": "Answer",
"person_id": 182536,
"person_company": null,
"component_order": 43
},
{
"name": "Vaibhav Taneja",
"speech": "But I would also like to caution that we will be very careful that we don't want to overspend on this side. We want to make sure people are aware, but we'll -- that's where we'll keep tweaking our methodology about how and where we spend the money because we understand the importance of increasing awareness, but at the same token, we don't want to spend a lot of money on just creating awareness.",
"session": "Answer",
"person_id": 595078,
"person_company": null,
"component_order": 44
},
{
"name": "Elon Musk",
"speech": "Yes. I mean, some geographies where our market share is remarkably low, like Japan, for example. Now we obviously need to make sure that we have Superchargers in the right locations and the service centers are there and the product works well in Japan, but Japan is the third largest car market in the world of any country. And we should at least have a market share proportionate to say other non-Japanese carmakers like Mercedes or BMW, which we do not currently have. So I think that's the case. And when I talk to friends of mine in Japan, there is like quite a lack of awareness of Tesla. So that's a case where we definitely need to increase awareness and countries and regions where there is, yes, not much awareness.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 45
},
{
"name": "Martin Viecha",
"speech": "Thank you. Let's go to analyst questions. The first question comes from Pierre Ferragu from New Street Research.",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 46
},
{
"name": "Pierre Ferragu",
"speech": "Okay. Well, it's really tough to find the unmute button on Teams. Sorry for being late. So yes, my question would be on like the cost reduction. You've talked about it already a lot. And if I look at it over the last, like, 5, 6 quarters on average, the cost per car has been coming down like more than 2% sequentially on average. So that means you are like on a trajectory of COGS per car going down 10% a year. So that's probably like unheard of in the auto industry. I don't think any car manufacturer ever achieved that.\r\nBut that's very, very mundane and very -- it's a good performance, but it's a very normal performance in a lot of other manufacturing industry like microelectronics or consumer electronics. And so I'd love to hear your thoughts about whether you consider yourself closer to the latter to like a micro experience business, where you have this ability to actually always improve costs, you have more control how things are pulled together into your cars, and you see yourself sustainably taking costs down with that kind of pace. Or do you think your ability to take down cost is actually going to become more like in line with the rest in the industry over time?",
"session": "Question",
"person_id": 356336,
"person_company": null,
"component_order": 47
},
{
"name": "Vaibhav Taneja",
"speech": "Yes. I think I've covered this in a pretty detail, even in my opening remarks and in a previous question, but to just further clarify, we are constantly looking for what we can do to reduce costs. Like I said, it's a game of pennies and we've talked about it before as well. And the team is constantly going and checking where can we reduce the cost further. And do I believe that we will have the same pace which you've seen over the past few years? Probably not because remember, we were coming out with a period wherein commodity prices were rising. So then we did see benefits coming from that.\r\nSo those are more or less taken care of, but there is more which we're still chasing. And I would say a big kudos goes to the team out here at Tesla, both the engineering team as well as the supply chain team because every time we give them a challenge, they go gangbusters to try and figure out whatever they can to take out further costs.\r\nBut yes, I would -- like I said, I would want to caution that do not project the previous cost reduction at the same pace completely in future because with our current platform, we are getting to a place wherein there are limitations.",
"session": "Answer",
"person_id": 595078,
"person_company": null,
"component_order": 48
},
{
"name": "Drew Baglino",
"speech": "Yes, the increased scale also sort of helps us there. As we introduce new products, we have the opportunity to go renegotiate existing suppliers for better pricing. We're looking at every penny like Vaibhav and Elon mentioned. Just to give you an example, our inbound logistics cost has come down by 22% year-over-year. And this is because of optimization on using returnable packaging as opposed to cardboard, which is even better for the environment.\r\nOptimizing trucking routes, negotiating better pricing with shipping companies, with tripping companies, going with the full truckloads and just doing that sort of -- the bigger we become, the more we put far into these things and the more efficient we become as a result of it. So those work streams are going to continue.",
"session": "Answer",
"person_id": 393478,
"person_company": null,
"component_order": 49
},
{
"name": "Unknown Executive",
"speech": "And we are also getting into the tiers of supply chain to see where there are opportunities. Getting to the Tier 2s, Tier 3, Tier 4 levels and then negotiate those pricing as well get more efficiency out of the system.",
"session": "Answer",
"person_id": 182536,
"person_company": null,
"component_order": 50
},
{
"name": "Drew Baglino",
"speech": "And then on the design side, we're not static, right, like especially in areas where the technology is still improving rapidly. Power electronics is a great example. We continue to bring improvements there that are like fundamentals sort of driven from the device up that result in cost reductions generation over generation. And they don't only go into the new vehicles, they come to the old vehicles as well. So that's closer to what you were talking about with like the microelectronics space. Some of that exists in the vehicle.",
"session": "Answer",
"person_id": 393478,
"person_company": null,
"component_order": 51
},
{
"name": "Lars Moravy",
"speech": "And certainly, our car is more computer than car in many ways and has a lot of new tech over the last 100 years of automotive production everyone [indiscernible] pennies from.",
"session": "Answer",
"person_id": 482177,
"person_company": null,
"component_order": 52
},
{
"name": "Elon Musk",
"speech": "We have a crazy amount of compute in that car as compared to anywhere else. It's like orders of magnitude.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 53
},
{
"name": "Drew Baglino",
"speech": "And we get to ride that down, right?",
"session": "Answer",
"person_id": 393478,
"person_company": null,
"component_order": 54
},
{
"name": "Elon Musk",
"speech": "Maybe 1,000 times more. I don't know, it's some [ 90 ] number.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 55
},
{
"name": "Drew Baglino",
"speech": "I mean, like if I just look at the main microcontroller that makes the motor go, for example, like when I think about what that cost when we stuck it in a Roadster in 2006, cost now, there's no comparison. So we've definitely been riding that electronics cost wave.",
"session": "Answer",
"person_id": 393478,
"person_company": null,
"component_order": 56
},
{
"name": "Lars Moravy",
"speech": "And then even on the like what you call traditional vehicle side, we do things that no other automakers do to bring costs down through breaking down the way structures are built and the way we put our cars together. And I think that mindset that we have is very much closer to the microprocessor power electronics industry than the automotive industry.",
"session": "Answer",
"person_id": 482177,
"person_company": null,
"component_order": 57
},
{
"name": "Martin Viecha",
"speech": "Pierre, do you have a follow-up?",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 58
},
{
"name": "Pierre Ferragu",
"speech": "Yes, a quick one. It's -- you mentioned this like phase in which you are between 2 big growth period. I'd love to hear you about what you consider the size of your addressable market with the portfolio you have today, like the 3, the Y, the X, and the S. What's your estimate of your addressable market? You're shipping like probably about like a 2 million unit run rate today. And given the price points of these cars, what kind of market share of what you addressed with this car do you think you've already achieved today?",
"session": "Question",
"person_id": 356336,
"person_company": null,
"component_order": 59
},
{
"name": "Elon Musk",
"speech": "I don't know if we have -- I actually don't think we have a firm idea that's -- it's hard to say exactly.",
"session": "Answer",
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{
"name": "Vaibhav Taneja",
"speech": "Yes, this -- I wouldn't say there's -- I mean, one way to think about it is look at the automotive industry as well. EVs still contribute a very small market share. So yes, our goal is to try and take as much market share out of that pie. But do I have a specific number to give you? I don't think we can say that with certainty.",
"session": "Answer",
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{
"name": "Drew Baglino",
"speech": "And it's a growing pie as well. It's like it's 9% today but it could be 20% in a couple of years or in the future.",
"session": "Answer",
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{
"name": "Lars Moravy",
"speech": "And certainly, like the way we've looked at it, and we've always said this, it's not about how many EVs you can sell, it's how many great cars you can sell, how many vehicles you can sell, and that market's $100 million a year and we're barely 2% of that. I still think there's 98% more to get.",
"session": "Answer",
"person_id": 482177,
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{
"name": "Elon Musk",
"speech": "I mean, it's worth noting that if you look at, say, the average selling price of the other top-selling vehicles in the world, they are much lower priced than Model Y. So like a Toyota RAV4, Corolla, Honda Civic, that kind of thing, they are much lower priced than ours. So people are really stretching their wallets to be able to afford a Tesla. It's quite a difficult thing for them to do. And remarkable that it's the best-selling car in unit volume despite being much more expensive than other high-volume cars.",
"session": "Answer",
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{
"name": "Martin Viecha",
"speech": "Thank you. Let's go to the next analyst. The next question comes from Adam Jonas from Morgan Stanley.",
"session": "Answer",
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{
"name": "Adam Jonas",
"speech": "So I can't wait to see the Optimus lab. I'm sure everybody on this call feels the same way. Your last AI Day, Elon, was September 2022. Can we expect a Tesla AI Day this year? It seems like a lot has changed in that Is this year the time?",
"session": "Question",
"person_id": 118469,
"person_company": null,
"component_order": 66
},
{
"name": "Elon Musk",
"speech": "Yes, good question. We have found that when we do these AI Days, some of our competitors literally look at what we do on a frame-by-frame basis.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
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{
"name": "Adam Jonas",
"speech": "They do.",
"session": "Question",
"person_id": 118469,
"person_company": null,
"component_order": 68
},
{
"name": "Elon Musk",
"speech": "And then we find these things being copied.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 69
},
{
"name": "Drew Baglino",
"speech": "Same thing with Battery Day.",
"session": "Answer",
"person_id": 393478,
"person_company": null,
"component_order": 70
},
{
"name": "Elon Musk",
"speech": "Same thing with Battery Day. So we have to be a little cautious about revealing the exact recipe of the secret sauce. But I think some kind of update would be good to do. I'll talk it over with the team. And yes, I think we might do something later this year. I may go with these AI Days as recruiting. So yes. And to sort of change the perception of Tesla as people think of Tesla as a car company when they should be thinking of Tesla as an AI robotics company.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 71
},
{
"name": "Adam Jonas",
"speech": "Maybe as a follow-up, Elon, I'd love your thoughts on the topic of China-based OEMs expanding into Western markets as that -- as the China market kind of gets saturated and there's a tremendous growth in the supply. How much success should Tesla investors allow for this competition to achieve in Western markets? And can you envision a scenario where Tesla could partner with a Chinese OEM to help accelerate sustainable transport in markets like Europe and the United States?",
"session": "Question",
"person_id": 118469,
"person_company": null,
"component_order": 72
},
{
"name": "Elon Musk",
"speech": "Well, our observation is generally that the Chinese car companies are the most competitive car companies in the world. So I think they will have significant success outside of China, depending on what kind of tariffs where trade barriers are established. Frankly, I think if there are not trade barriers established, they will pretty much demolish most other car companies in the world. So they're extremely good.\r\nWe don't see an obvious opportunity to partner. Certainly, we're happy to -- except on the Supercharger front, we're obviously happy to give any electric car company access to our Supercharger network. We're also happy to license full self-driving, perhaps license other technologies and anything that could be helpful in advancing the sustainable energy revolution.",
"session": "Answer",
"person_id": 175883,
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{
"name": "Martin Viecha",
"speech": "Thank you. And the next question comes from Dan Levy from Barclays.",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 74
},
{
"name": "Dan Levy",
"speech": "First, I'm wondering if you can just walk through some of the gating factors required to unlock your next-gen platform. You talked about a number of cost initiatives back at the Investor Day a year ago, things in manufacturing and powertrain. Maybe you can just give us a sense of where these initiatives stand. And do you believe -- we know that there's a number of new features and technologies in Cybertruck, things like 48-volt architecture really employing your 4680 batteries. To what extent do you think Cybertruck is really a proving ground for next-gen platform and is really going to be a gating factor to unlocking cost reductions needed for the next-gen platform?",
"session": "Question",
"person_id": 253177,
"person_company": null,
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{
"name": "Lars Moravy",
"speech": "Yes. I don't think that anything in Cybertruck should be considered gating for the next-gen platform. We're obviously doing a lot of manufacturing innovations for a next-generation vehicle. When you do something at that scale, you have to prove it out. You don't just throw it on the line and just build it. So we're going through those validation phases for all those new manufacturing technologies now. Sure, 48-volt was definitely something we wanted to carry forward, and it's something we hope the industry adopts as well. We're also open to partnering, if everyone wants to do that.",
"session": "Answer",
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"person_company": null,
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},
{
"name": "Elon Musk",
"speech": "But people really know that this is like inside-baseball thing, but man, it's high time that the [indiscernible] moved from 12 -- the random number of 12 to 48.",
"session": "Answer",
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},
{
"name": "Lars Moravy",
"speech": "Number [ 40. ]",
"session": "Answer",
"person_id": 482177,
"person_company": null,
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},
{
"name": "Elon Musk",
"speech": "Yes. Well, it's much less random.",
"session": "Answer",
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"person_company": null,
"component_order": 79
},
{
"name": "Lars Moravy",
"speech": "Slightly less random based on human injury.",
"session": "Answer",
"person_id": 482177,
"person_company": null,
"component_order": 80
},
{
"name": "Elon Musk",
"speech": "But I mean, dramatically reduces the amount of copper you need in the vehicle and moving to sort of higher bandwidth communications, sort of Ethernet level of communications opposed to [indiscernible] which is pretty slow. So it's really just bringing cars to the...",
"session": "Answer",
"person_id": 175883,
"person_company": null,
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},
{
"name": "Lars Moravy",
"speech": "The 21st century.",
"session": "Answer",
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},
{
"name": "Elon Musk",
"speech": "Yes, pretty much. So certainly -- it's like normal for a laptop.",
"session": "Answer",
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"person_company": null,
"component_order": 83
},
{
"name": "Lars Moravy",
"speech": "Certainly bringing that like is an evolution in our architecture of the vehicles but it's not gating by any means. The gating work is just to finish the design and manufacturing of the car, test them out and get them going.",
"session": "Answer",
"person_id": 482177,
"person_company": null,
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},
{
"name": "Drew Baglino",
"speech": "Yes, programs and execution, right? Right. So it's talking about like tooling lead time manufacturer, factory lead time and executing this program.",
"session": "Answer",
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},
{
"name": "Elon Musk",
"speech": "There's a lot of specialized machines that make the machine for our next-gen vehicle. So these are not machines you can just order from anyone. They actually have to design a machine that has never existed to build a car in a way that has never existed.",
"session": "Answer",
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{
"name": "Drew Baglino",
"speech": "Yes. So you don't just have like a design validation phase but you have an equipment design phase as well.",
"session": "Answer",
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},
{
"name": "Elon Musk",
"speech": "It doesn't make it very hard to copy us because you have to copy the machine that makes the machine that makes the machine.",
"session": "Answer",
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},
{
"name": "Drew Baglino",
"speech": "talk about tiers.",
"session": "Answer",
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{
"name": "Elon Musk",
"speech": "Yes, yes, exactly. Manufacturing exception. So I do think it's quite a powerful sustainable advantage because there just is no place to go to order the machines that make our next-gen car that don't exist.",
"session": "Answer",
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{
"name": "Dan Levy",
"speech": "Great. As a follow-up, your release does not mention Dojo. So if you could just provide us an update on where Dojo stands. And at what point do you expect Dojo to be a resource in improving FSD? Or do you think that you now have sufficient supply of NVIDIA GPUs needed for the training of the system?",
"session": "Question",
"person_id": 253177,
"person_company": null,
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},
{
"name": "Elon Musk",
"speech": "I mean, the AI part of your question is -- that's a deep one. So we're obviously hedging our bets here with significant orders of NVIDIA GPUs. GPU is the wrong word, the is for you. There's no -- you can't like produce graphics, so that's not a graphic [indiscernible] neural net, something like that. And yes, GPU's a funny word, like vestigial.\r\nAnd a lot of our progress in self-driving is training-limited. Something that's important with training, it's much like a human. The more effort you put into training, the less effort you need in inference. So just like a person. If you train in the subject is sort of classic 10,000 hours, the less mental effort it takes to do something. If you remember when you first started to drive how much of your mental capacity it took to drive. It was -- you had to be focused completely on driving. And after you've been driving for many years, it only takes a little bit of your mind to drive, and you can think about other things and still drive safely.\r\nSo the more training you do, the more efficient it is at the inference level. So we do need a lot of training. And we're pursuing the dual path of NVIDIA and Dojo. But I would think of Dojo as a long shot. It's a long shot worth taking because the payoff is potentially very high but it's not something that is a high probability. It's not like a sure thing at all. It's high-risk, high payoff program. Dojo is working and it is doing training jobs. So -- and [indiscernible] it up.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
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},
{
"name": "Lars Moravy",
"speech": "And we have plans for Dojo 1.5, Dojo 2, Dojo 3 and whatnot. So I think it's got potential.",
"session": "Answer",
"person_id": 482177,
"person_company": null,
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},
{
"name": "Elon Musk",
"speech": "I can't emphasize enough, high risk, high payoffs. So I think it still makes sense, given the -- even if it's a low probability of success for the -- I think I'm belaboring the subject. It's a very interesting program. It has the potential for something special. There's also our inference hardware in the car. So we're now -- what's called Hardware 4 but it's actually version 2 of the Tesla-designed AI inference chip.\r\nAnd we're about to complete design of -- the terminology is a bit confusing. About to complete design of Hardware 5, which is actually version 3 of the Tesla-designed chip because the version 1 was mobile version 2 was NVIDIA and then version 3 was Tesla. And we're making gigantic improvements from 1 -- from Hardware 3 to 4 to 5.\r\nI mean, there's a potentially interesting play where when cars are not in use in the future, that the in-car computer can do generalized AI tasks, can run a sort of GPT4 or 3 or something like that. If you've got tens of millions of vehicles out there, even in a robotaxi scenario, whether in heavy use, [indiscernible] used 50 out of 168 hours, that still leaves well over 100 hours of time available -- of compute hours. Like it's possible with the right architectural decisions that Tesla may, in the future, have more compute than everyone else combined.",
"session": "Answer",
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{
"name": "Martin Viecha",
"speech": "Thank you. And the next question comes from Colin Langan from Wells Fargo.",
"session": "Answer",
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"person_company": null,
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{
"name": "Colin Langan",
"speech": "As we're thinking about going to 2024, the press release talks about; hitting 36,000 or slightly above in Q4. And the comments on the release talked about approaching the aperture limits, and it sounds like you're continuing to try to little that away, but that sort of implies there's not much left.\r\nIn addition, you have the hourly wage increase, I guess, will add to next year. And I thought you said raw material costs are kind of -- that benefit is sort of almost played out. So is there an opportunity to continue to go below the [ 36 ] Or should we kind of be modeling that it kind of stays at this level into '24?",
"session": "Question",
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{
"name": "Vaibhav Taneja",
"speech": "We are definitely aware of the cost increases, which are coming through because of the wage increases. But like I said, we keep looking at other cost opportunities and try and figure out where else can we out. So there is definitely more opportunity to bring down costs further. I won't specifically guide to a number which we will try and get to, but there's definitely more opportunity there.",
"session": "Answer",
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{
"name": "Drew Baglino",
"speech": "Yes, we're chasing lots of cost opportunities on the design side still for 2024, north of 8 figures is what we're worth, just in my organization and large is got. And then from a commodities perspective, it's such a long cycle time through the whole material supply chain that even with what we've already seen to this point, there's more to come on commodities reductions.",
"session": "Answer",
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"person_company": null,
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},
{
"name": "Vaibhav Taneja",
"speech": "And there's still some tailwind left on the in aluminum and steel.",
"session": "Answer",
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"person_company": null,
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{
"name": "Drew Baglino",
"speech": "Yes. And battery [indiscernible]",
"session": "Answer",
"person_id": 393478,
"person_company": null,
"component_order": 100
},
{
"name": "Elon Musk",
"speech": "It boggles my mind to think that if we make a 1% improvement in cost, that's $1 billion. So it's like on average, if we reduce the cost by $0.01, $1 billion. What? I mean, we started off that long ago that we're only making like 10 cars a week. And yes, where does it lead ultimately? Yes, with good execution. Like I said, it's not a slam dunk, but with -- if we execute very well, I think Tesla could be the most valuable company on.",
"session": "Answer",
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{
"name": "Martin Viecha",
"speech": "Thank you. Colin, do you have a follow-up question?",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 102
},
{
"name": "Colin Langan",
"speech": "Just a quick follow-up. In the commentary, you mentioned the taxes would go to the S&P 500 level. I think you've been trending slightly below 10%. S&P, I think it's typically 25%-ish. Is that going to -- should we expect that to jump right up next year when we're modeling next year? Or would it be like a gradual change over the next few years? And any cash impact from that tax change as well that we should be considering?",
"session": "Question",
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{
"name": "Vaibhav Taneja",
"speech": "Yes. So there's no impact on cash taxes from the release of the valuation amount, which I spoke about. What it does is it's how you account for taxes on your books. So it's basically an accounting change wherein there are certain jurisdictions because we had enough NOLs, et cetera, where we didn't have to accrue book taxes. Now that the valuation allowance has been released and we have recognized deferred tax assets on the books, that means your tax rate immediately goes up.",
"session": "Answer",
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{
"name": "Martin Viecha",
"speech": "Okay. I think that's all the time we have for today. Thank you so much for all of your questions, and we'll speak to you again in 3 months. Thank you. Bye-bye.",
"session": "Answer",
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},
{
"name": "Elon Musk",
"speech": "Thank you.",
"session": "Answer",
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"person_company": null,
"component_order": 106
}
],
"title": "Tesla, Inc., Q4 2023 Earnings Call, Jan 24, 2024",
"quarter": 4,
"year": 2023
}
},
{
"transcript_title": "Tesla, Inc. - Q3 2023",
"transcript_name": "Tesla, Inc., Q3 2023 Earnings Call, Oct 18, 2023",
"ticker": "NASDAQ:TSLA",
"transcript_url": "https://wkarticles.blob.core.windows.net/finnhub/snp_transcript_3078546",
"date": "2024-04-03",
"year": 2023,
"quarter": 3,
"transcript_data": {
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"description": "Executives",
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"transcript": [
{
"name": "Martin Viecha",
"speech": "Good afternoon, everyone and welcome to Tesla's Third Quarter 2023 Q&A Webcast. My name is Martin Viecha, VP of Investor Relations, and I'm joined today by Elon Musk, Vaibhav Taneja and a number of other executives. Our Q3 results were announced at about 3:00 p.m. Central Time in the update that we published at the same link as this webcast. During this call, we will discuss our business outlook and make forward-looking statements. These comments are based on our predictions and expectations as of today. Actual events or results could differ materially due to a number of risks and uncertainties including those mentioned in our most recent filings with the SEC.\r\nDuring the question and answer portion of today's call, please limit yourself to one question and one followup. [Operator Instructions] But before we jump into the Q&A, Elon has some opening remarks. Elon?",
"session": "Presenter Speech",
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{
"name": "Elon Musk",
"speech": "Thanks, Martin. So just a Q3 recap. Our last quarter was impacted by down time for global factory upgrades that will help us reduce cost per vehicle as well as increase production. We remain focused on 3 main objectives which is the cost reduction of our products, investments in artificial intelligence, and other growth projects like Optimus. And continued free cash flow generation. Regarding vehicle cost, our team was able to reduce the cost per vehicle further in Q3 despite headwinds from factory idle costs and ramp-up of new factories, and we believe there's still meaningful room for improvement there. \r\nRegarding Autopilot and AI, our vehicle has now driven over 0.5 billion miles with FSD Beta, Full Self-Driving Beta, and that number is growing rapidly. We recently completed a 10,000 GPU cluster of H100s. We think probably bringing it into operation faster than anyone's ever brought that much compute per unit time into production since training is the fundamental limiting factor on progress with full self-driving and vehicle autonomy. \r\nWe're also seeing significant promise with FSD Version 12. This is the end-to-end AI where it's a photon count in, controls out or really you can think of it as there's just a large bit stream coming in and a tiny bit stream going out, compressing reality into a very small set of outputs, which is actually kind of how humans work. The vast majority of human data input is optics, right from our eyes. And so we are, like the car, photons in, controls out with neural nets, just neural nets in the middle. It's really interesting to think about that. \r\nWe will continue to invest significantly in AI development as this is really the massive game changer, and I mean, success in this regard, in the long term, I think, has the potential to make Tesla the most valuable company in the world by far. If you have fully autonomous cars at scale and fully autonomous humanoid robots that are truly useful, it's not clear what the limit is. \r\nRegarding Energy Storage, we deployed 4 gigawatt hours of energy, of storage products in Q3. And as this business grows, the energy division is becoming our highest-margin business. Energy and service now contribute over $0.5 billion to quarterly profit. \r\nThe Cybertruck, I know a lot of people are excited about Cybertruck, I am too. I've driven the car. It's an amazing product. I do want to emphasize that there will be enormous challenges in reaching volume production with the Cybertruck and then in making a Cybertruck cash flow positive. This is simply normal for -- when you've got a product with a lot of new technology or any new -- brand-new vehicle program, but especially one that is as different and advanced as the Cybertruck, you will have problems proportionate to how many new things you're trying to solve at scale. So I just want to emphasize that, one, I think this is potentially our best product ever, and I think it is our best product ever. It is going to be -- require immense work to reach volume production and be cash flow positive at a price that people can afford. \r\nOften, people do not understand what is truly hard. That's why I say prototypes are easy, production is hard. People think it's the idea or you make a prototype, you design a car. And as soon as designing a car is -- it's not just anyone can do it. It does require taste. It does require effort to design a prototype. But the difficulty of going from a prototype to volume production is like 10,000% harder to get to volume production than to make the prototype in the first place. And then it is even harder than that to reach positive cash flow. That is why there have not been new car start-ups that have been successful for 100 years apart from Tesla. \r\nSo I just want to temper expectations for Cybertruck. It's a great product. But financially, it will take, I don't know, a year to 18 months before it is a significant positive cash flow contributor. I wish there was some way for that to be different, but that's my best guess. \r\nSo really, the demand is off the charts. We have over 1 million people who have reserved the car. So it's not a demand issue, but we have to make it, and we need to make it at a price that people can afford; insanely difficult things. \r\nIn conclusion, we continue to focus on ramping production while maintaining a positive cash flow, and we continue to target and expect to have around 1.8 million vehicle deliveries, as stated earlier this year. The Tesla AI team is, I think, one of the world's best, and I think it is actually by far the world's best when it comes to real-world AI. But I'll say that again: Tesla has the best real-world AI team on earth, period, and it's getting better. \r\nAnd lastly, I wanted to thank all of our employees who are making a lot of extra effort during uncertain times. Thank you very much for your hard work and the impact that you're making.",
"session": "Presenter Speech",
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{
"name": "Martin Viecha",
"speech": "Thank you very much, Elon. And our CFO, Vaibhav, had some opening remarks as well.",
"session": "Presenter Speech",
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{
"name": "Vaibhav Taneja",
"speech": "Thanks, Martin. Vehicle deliveries in Q3 outpaced production, and we had yet another record quarter of profitability in our energy business. Congratulations to the Tesla team for their continued focus on operational excellence as we navigate through a period of economic uncertainty, higher interest rates and shifting consumer sentiment. \r\nAs Elon mentioned, our Q3 operational and financial performance was impacted by planned downtimes for our factory upgrades. This was necessary to allow for further factory improvements and production rate increases. Despite those factory shutdowns, our cost per vehicle decreased to approximately $37,500. We saw sequential decreases in material costs and freight. Reducing the cost of our vehicles is our top priority. \r\nOn the operating expenses front, R&D expenses continue to rise due to Cybertruck prototype builds and pilot production testing, combined with spend on AI technologies like full self-driving Optimus and Dojo. We have and will continue to make investments in these areas and hence, our capital expenditure and R&D will continue to grow in the near term. \r\nHowever, our focus is to continue making investments through positive cash flow from operations. This year itself we have generated operating cash flows of approximately $8.9 billion and free cash flows of approximately $2.3 billion. \r\nOur other businesses are becoming more prominent on a stand-alone basis, with Energy business leading the charge primarily from the growth in megabyte deployments. Our Services and Other businesses, on a year-on-year basis, also continued to show positive momentum as we benefit from our growing fleet. \r\nAs regards our pricing strategy, in addition to what we have shared before, I want to elaborate that most car buying happens with one or other form of financing. And hence, we also view pricing in terms of monthly costs for the customer. And therefore, as interest costs in the U.S. have risen substantially, it has required us to adjust the price of our vehicles to keep the monthly cost in parity. We've tried to offset such adjustments via our focus on reducing costs. However, there is an inherent lag in cost reductions, which in turn impacts margins. \r\nTo that extent, we recently announced a partner vehicle leasing program in the U.S., whereby you can get our Standard Range Model Y for as low as $399 a month. \r\nIn conclusion, as we navigate through a challenging economic environment, we're focused on reducing costs, maximizing delivery volumes and continue making investments in the future, in particular, AI and other next-generation platforms. We believe this strategy positions us well for the long term. Once again, I would like to thank the Tesla team for their efforts in the last quarter.",
"session": "Presenter Speech",
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{
"name": "Martin Viecha",
"speech": "Thank you very much. And now let's go to investor questions. The first investor question comes from Craig. How many Cybertruck deliveries do you anticipate for 2024?",
"session": "Answer",
"person_id": 370659,
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"component_order": 4
},
{
"name": "Elon Musk",
"speech": "I scruple to make an accurate guess at this point, going back to what I said earlier that the ramp is going to be extremely difficult. And like I said, there's no way around that. If you try to make -- if we just try to do some copycat vehicle design, of which there are literally 200 models that are slight variations on a theme in the combustion engine world, just distinctions without a difference, then it's really not that hard. But if you want to do something radical and innovative and something really special like the Cybertruck, it is extremely difficult because there's nothing to copy. You have to invent it, not just the car but the way to make the car. \r\nSo the more uncharted the territory, the less predictable the outcome. Now I can say that -- if you say, \"Well, where will things end up,\" I think we'll end up with roughly 0.25 million Cybertrucks a year, and -- but we're not -- I don't think we're going to reach that output rate next year. I think we'll probably reach it sometime in 2025. That's my best guess.",
"session": "Answer",
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"person_company": null,
"component_order": 5
},
{
"name": "Martin Viecha",
"speech": "Thank you. The second question is can you provide a progress update on the 4680 cell, particularly progress towards performance improvements and cost savings outlined on Battery Day?",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 6
},
{
"name": "Drew Baglino",
"speech": "Sure thing, Martin. 4680 cell production in Texas increased 40% quarter-over-quarter. Congrats to the Texas team for producing their 20 millionth cell off of line 1. Texas is now our primary 4680 facility. We're heavily focused on quality. Scrap is down 40% quarter-over-quarter. With the increased volume and yield improvements, cell costs consistently improved month over month within the quarter, although we have a lot more work to do to achieve our steady-state goals. And that is our priority. \r\nThe Cybertruck cell, with 10% higher energy than our Model Y cell, started production on line 2 in Texas. This quarter, we convert to building 100% Cybertruck cells to simplify and focus the factory as we ramp all 4 lines in Phase 1 over the next 3 quarters. Phase 2 of the Texas 4680 facility is currently under construction. The additional 4 lines incorporate further capital efficiencies over Phase 1, and our target is for them to start producing in late 2024. \r\nLastly, in Kato, we're retooling to enable large-scale pilot runs of our next-generation cell designs. Kato's long-term goal is to be the launch pad for new cells, one generation ahead of our mass production facilities, enabling faster iteration and smoother ramp-ups of new designs.",
"session": "Answer",
"person_id": 393478,
"person_company": null,
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},
{
"name": "Martin Viecha",
"speech": "Thank you. The next question from Institutional Investor is, could you please provide an update on capacity expansion plans for company's factories in Berlin and Austin and the opening schedule of Gigafactory in Mexico?",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 8
},
{
"name": "Unknown Executive",
"speech": "Berlin and Austin factory, the current priority is actually to maximize the output from our existing lines by laser focusing on efficiency improvements. As always, maintaining a high quality and reducing per unit cost will be as critical as growing the production volume. For Mexico, we are working on infrastructure and factory design in parallel with the engineering development of the new production that we will be manufacturing there. That's what I can share for that.",
"session": "Answer",
"person_id": 182536,
"person_company": null,
"component_order": 9
},
{
"name": "Elon Musk",
"speech": "In Mexico, we're laying the groundwork to begin construction and doing all the long lead items, but I think we want to just get a sense for what the global economy is like before we go full tilt on the Mexico factory. I am worried about the high interest rate environment that we're in. It's -- I just can't emphasize this enough that the vast majority of people buying a car is about the monthly payment. And as interest rates rise, the proportion of that monthly payment that is interest increases naturally. So that's -- if interest rates remain high or if they go even higher, it's that much harder to -- for people to buy the car. They simply can't afford it. \r\nSo -- and we are tracking, I believe, at this point for Model Y to be the best selling car on earth, not just in revenue but in unit value. If you compare that to the other vehicles that are #2 and #3 and whatnot, they cost much less than our car. So we're just hitting the law of large numbers situations here. \r\nI know people want us advertising. We are advertising. I think there is something to be gained on the advertising front. I don't think it's nothing. But informing people of a car that is great but they cannot afford doesn't really help. So that is really the thing that must be sold, is to make the car affordable or the average person cannot buy it for any amount of money. They simply can't afford it. They can't afford it, so this is a big deal.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 10
},
{
"name": "Martin Viecha",
"speech": "Okay. Thank you very much. The next question is, when do you expect Model 3 Highland to be available in the U.S.? I just wanted to address that, unfortunately, we don't answer product-related questions and timings on earnings calls. So let's go to the next one. \r\nCurrent sell-side consensus assumes that Tesla will deliver 2.3 million vehicles in 2024, representing 28% growth versus 2023 guidance. Is this growth rate achievable without any mass-market launches in 2024? And when does Tesla expect to return to its 50% long-term CAGR?",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 11
},
{
"name": "Vaibhav Taneja",
"speech": "Thanks for the question. When we look at 2024, there are a lot of moving pieces. Elon just talked about what is happening in the macroeconomic environment. So we're focused on growing our volumes in a very cost-efficient manner and are carefully reviewing all our options, and we'll be able to provide a much more meaningful update at our next earnings call.",
"session": "Answer",
"person_id": 595078,
"person_company": null,
"component_order": 12
},
{
"name": "Elon Musk",
"speech": "Yes. I mean at the risk of stating the obvious, it is not possible to have a compound growth rate of 50% forever or you will exceed the mass of the known universe. So -- but I think we will grow very rapidly, much faster than any other car company on earth by far.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 13
},
{
"name": "Martin Viecha",
"speech": "Thank you. Next question is, do you have an approximate time line in mind for the robotaxi, driven or nondriven? What excites you most about how this project is progressing?",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 14
},
{
"name": "Elon Musk",
"speech": "Well, the robotaxi is, I guess, certainly nondriven. The -- I guess, I am very excited about our progress with autonomy. The end-to-end, nothing but net, self-driving software is amazing. I -- drives me around Austin with no interventions. So it's clearly the right move. So it's really pretty amazing. And obviously, that same software and approach will enable Optimus to do useful things and enable Optimus to learn how to do things simply by looking. So extremely exciting in the long term. \r\nAs I've mentioned before, given that the economic output is the number of people times productivity, if you no longer have a constraint on people, effectively, you've got a humanoid robot that can do as much as you'd like, your economy is twice the infinite or infinite for all intents and purposes. So I don't think anyone is going to do it better than Tesla, not by a long shot. Boston Dynamics is impressive, but their robot lacks the brain. They're like the Wizard of Oz or whatever. Yes, lacks the brain. And then you also need to be able to design the humanoid robot in such a way that it can be mass manufactured. And then at some point, the robots will manufacture the robots. \r\nAnd obviously, we need to make sure that it's a good place for humans in that future. We do not create some variance of the Terminator outcome. So we're going to put a lot of effort into localized control of the humanoid robot. So basically, anyone will be able to shut it off locally, and you can't change that even if you put -- like a software update, you can't change that. It has to be hard-coded.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 15
},
{
"name": "Martin Viecha",
"speech": "Thank you. The next question is, why was the price dropped on FSD if it is getting better and robotaxi is expected so soon?",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 16
},
{
"name": "Elon Musk",
"speech": "Well, we just wanted to make it more affordable as more people try it. Yes. I think, over time, the price of FSD will increase proportionate to its value. So we'd regard the current price as a kind of a temporary low.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 17
},
{
"name": "Martin Viecha",
"speech": "The next question is, again, on FSD. Mercedes is accepting legal liability for when its Level 3 autonomous driving system, DRIVE PILOT, is active. Is Tesla planning to accept legal liability for FSD? And if so, when?",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 18
},
{
"name": "Elon Musk",
"speech": "Well, there's a lot of people that assume we have legal liability, judging by the lawsuits. We're certainly not being let off the hook on that front, whether we'd like to or wouldn't like to.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 19
},
{
"name": "Unknown Executive",
"speech": "I mean I think it's important to remember for everyone that Mercedes' system is limited to roads in Nevada and some certain cities in California. It doesn't work in the snow or the fog. It must have a lead car and marked lanes, only 40 miles per hour. Our system is meant to be holistic and drive in any conditions, so we obviously have a much more capable approach. But with those kind of limitations, it's really not very useful.",
"session": "Answer",
"person_id": 182536,
"person_company": null,
"component_order": 20
},
{
"name": "Elon Musk",
"speech": "Now I think some people understand the profundity of the Tesla AI system, mostly, but very, very few. It's basically baby AGI. It has to understand reality in order to drive, a baby AGI.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 21
},
{
"name": "Martin Viecha",
"speech": "Thank you. The next question on Optimus, will Optimus be working on Gigafactory lines next year? If so, how many would you guess will be deployed?",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 22
},
{
"name": "Elon Musk",
"speech": "I think at this point, we are not ready to discuss details of the Optimus program, but we will make -- provide periodic updates online. So as you can see, we're -- Optimus, a year ago, could barely walk and now it can do yoga. So a few years from now, it can probably do ballet.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 23
},
{
"name": "Martin Viecha",
"speech": "Sounds good. And the last question from Investors is neural net path planning represents a significant advance in capability and safety for FSD. What steps is Tesla taking to make this technology available outside the U.S.?",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 24
},
{
"name": "Elon Musk",
"speech": "Yes, our approach has been to try to get it -- like, the more places we're trying to make it work, the harder the problem is. So the reason we don't do it in all countries simultaneously is that it would take much longer to make it work anywhere at all. So that's why it's currently just North America. And also for most parts of the world, you have to get approval before deploying things, whereas in the U.S., you can deploy things at risk or at least you can take liability for what you're deploying. So it's a -- whereas most countries require some sort of extensive approval program. So we only want to go through that extensive approval program when we think it's kind of ready for prime time in that country. \r\nI apologize it's not out in those countries, but we keep finding ways to make it better. And it really -- it needs to drive such that it exceeds even the unsupervised, significantly exceeds the probability of injury of a human or significantly better, a lower probability of injury than a human by far. I think we're tracking to that point very quickly. \r\nObviously, in the past, I've been overly optimistic about this. The reason I've been overly optimistic is that the progress tends to sort of look like a log curve, which is that you have kind of rapid initial improvements that if you were to extrapolate that sort of rapid, fairly linear rate of improvement, you get to self-driving quite quickly, but then the rate of improvement curves over logarithmically as well as the asymptote. That's now happened several times. I would characterize our progress in real world AI as a series of stacked log curves. I think that's also true in other parts of AI, like [ LOMs ] and whatnot, a series of stacked log curves. Each log curve gets higher than the last one. So if we keep stacking them, we keep stacking logs, eventually, we get to FSD.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 25
},
{
"name": "Martin Viecha",
"speech": "Thank you. Let's now go to analyst questions. The first question comes from Will Stein from Truist.",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 26
},
{
"name": "William Stein",
"speech": "We learned earlier on the call, it sounds like you don't think the truck will ramp to significant volume until its third year of production. Should we have a similar anticipation for the ramp of the next-gen platform? Or is there any reason that we should be maybe more optimistic or pessimistic about the ramp profile there?",
"session": "Question",
"person_id": 256580,
"person_company": null,
"component_order": 27
},
{
"name": "Elon Musk",
"speech": "Yes. I mean, to be clear, it's not really the third year of production. It's kind of like the 18th month of production is roughly my guess. So it's just that they happen -- it will happen if not the -- it starts this year, spans next year and gets to 2025. So technically, there are 3 calendar years in there, but there's actually only 18 months, not 3 years. I would be very disappointed if it took us -- and that would be shocking if it took us 3 years. But 18 months from initial deliveries to have -- to reach volume and reach prosperity with an immense -- I can't tell you how much -- the blood, sweat and tears level required to achieve that is just staggering. I have been through it many times. And here we go again.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 28
},
{
"name": "William Stein",
"speech": "A similar path for the next-gen platform?",
"session": "Question",
"person_id": 256580,
"person_company": null,
"component_order": 29
},
{
"name": "Drew Baglino",
"speech": "I mean there's like unique complexity to Cybertruck.",
"session": "Answer",
"person_id": 393478,
"person_company": null,
"component_order": 30
},
{
"name": "Elon Musk",
"speech": "Yes. I mean Cybertruck is...",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 31
},
{
"name": "Drew Baglino",
"speech": "Hence, the 18 months.",
"session": "Answer",
"person_id": 393478,
"person_company": null,
"component_order": 32
},
{
"name": "Elon Musk",
"speech": "Yes. I mean we dug our own grave with Cybertruck. Nobody, in general, probably nobody digs a grave better than themselves. And so it is -- Cybertruck is one of those special products that comes along only once in a long while. And special products that come along once in a long while are just incredibly difficult to bring to market, to reach volume, to be prosperous. It's fundamental to the nature of the newness. So now the sort of high-volume, low-cost smaller vehicle is actually much more conventional.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 33
},
{
"name": "Unknown Executive",
"speech": "Yes. In terms of like the technologies we're putting into it, we didn't have to invent how to bend full hard stainless steel or have mega 9,000-ton castings or the largest hot stamping in the world or new -- high voltage level architecture. It's learning from everything we've done, so we hope it will ramp faster than the technology...",
"session": "Answer",
"person_id": 182536,
"person_company": null,
"component_order": 34
},
{
"name": "Unknown Executive",
"speech": "We also went through the ruthless simplification exercise.",
"session": "Answer",
"person_id": 182536,
"person_company": null,
"component_order": 35
},
{
"name": "Unknown Executive",
"speech": "Yes we did. Significantly less parts. You're only as [ simple ] as the least part. If you had less of those, that means you could probably do [indiscernible]",
"session": "Answer",
"person_id": 182536,
"person_company": null,
"component_order": 36
},
{
"name": "Elon Musk",
"speech": "Yes, exactly. I mean that is so...",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 37
},
{
"name": "Unknown Executive",
"speech": "So pretty revolutionary in how we're going to build it.",
"session": "Answer",
"person_id": 182536,
"person_company": null,
"component_order": 38
},
{
"name": "Elon Musk",
"speech": "It is. Yes, it's a -- their manufacturing approach for the higher volume small vehicle is revolutionary. It's not revolutionary quite in the same way as the Cybertruck. I think it will be quite a fast ramp. So as I was saying, we're doing everything possible to simplify that vehicle in order to achieve any units per minute level that is unheard of in the auto industry.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 39
},
{
"name": "Drew Baglino",
"speech": "Yes. I mean, a single location makes it easier to automate. It also makes it lower cost. Yes, that's intrinsically lower cost.",
"session": "Answer",
"person_id": 393478,
"person_company": null,
"component_order": 40
},
{
"name": "Elon Musk",
"speech": "Yes. Let's be clear, it will be cool, but it's utilitarian. It's not meant to be -- fill you with awe and magic. It can get you from A to B. It will be still beautiful, but it's a utility.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 41
},
{
"name": "Drew Baglino",
"speech": "That's not 14 inches of [ travel on its ] suspension, as an example.",
"session": "Answer",
"person_id": 393478,
"person_company": null,
"component_order": 42
},
{
"name": "Elon Musk",
"speech": "Yes. So I mean, the Cybertruck has a lot of bells and whistles.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 43
},
{
"name": "Martin Viecha",
"speech": "All right. Thank you very much. Let's go to Pierre Ferragu from New Street Research.",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 44
},
{
"name": "Pierre Ferragu",
"speech": "Hey, can you hear me fine, yes?",
"session": "Question",
"person_id": 356336,
"person_company": null,
"component_order": 45
},
{
"name": "Martin Viecha",
"speech": "Yes.",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 46
},
{
"name": "Pierre Ferragu",
"speech": "I have first like a follow-up question on FSD and pricing and adoption. So I agree with you that as FSD improves, we should see its value increasing. But I guess like the ultimate values of FSD, which is to be able to handle like a robotaxi is not going to necessarily interest everybody, and you have a bit of a degraded version that would be like a chauffeur service where the car drives by itself, but you still have to be in the car and around. And then there is like the hands-on, eyes-on version of the service. And I guess, there should be like much lower cost, lower feature kind of variance of the service that could have a very large penetration on your installed base and a more expensive one that would remain at a lower penetration level. So I'm just wondering if you're taking that. \r\nAnd last but not least, like the simplest version of FSD available are going to work from a technical perspective, probably before like the ultimate robotaxi version can work, if ever. And so I'm wondering how you take that into account and how you're thinking like the financial contribution of FSD over time and whether you could evolve your pricing along that kind of tiers to increase adoption?",
"session": "Question",
"person_id": 356336,
"person_company": null,
"component_order": 47
},
{
"name": "Elon Musk",
"speech": "Yes. I mean, a fully autonomous vehicle, I think, Pierre, the sort of the economics of an autonomous vehicle are truly astounding in a positive way. When you look at passenger vehicles today, they only get about 10 to 12 hours of usage per week. That's -- if you drive 1.5 hours a day on average, that's roughly 10 hours a week out of 168 hours. And then there's -- also you're going to have parking and insurance. You've got to take care of the car. It's like there's a lot of overhead.\r\nSo I mean, yes, it's like the economics of the system are just insanely positive given that the car -- like, all of the cars we're making and have made for a while, we believe, are capable of full autonomy. So then if you're able to, say, increase the utility of that car by a factor of 5, which only means that you've -- it's being used for maybe 50 hours a week out of 168. So you'll still notice -- you're still assuming -- that still assumes less than 1/3 of the hours of the week it is doing something useful. You've increased the value of that by 5, but it still costs the same. Like, you have something -- then we're a hardware company with software margins.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 48
},
{
"name": "Martin Viecha",
"speech": "Pierre, do you have a follow-up?",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 49
},
{
"name": "Pierre Ferragu",
"speech": "Yes. I have a few on a different topic for you that I have, if that's okay. It's about like your gross margin in the quarter. Could you give us a sense of, like, in how the gross margin evolved sequentially? How much was the impact of idle cost? How much was, like, the sequential benefit, I imagine, of production ramping at Berlin and Austin? And then I saw, like, this massive jump in Energy Storage, a very strong positive surprise. So if you can give us the background on that and tell us how we should think about that gross margin going forward.",
"session": "Question",
"person_id": 356336,
"person_company": null,
"component_order": 50
},
{
"name": "Vaibhav Taneja",
"speech": "Thanks for the question. So in terms of -- we have a few different aspects of your question. So for -- if I just look at from a Q3 perspective, obviously, factory idle time had an impact. It did impact by -- and I won't give you the exact percentage, but it had a decent impact for the quarter. And when you look at the other pieces, which we are trying to do, we did see certain of our other factories ramping up pretty well, right? And they actually contributed pretty well to the margin for this quarter. In fact, one of the factories came pretty close to in terms of per unit cost to where we are for our other established factory, which is Fremont. So that was a positive in the quarter. \r\nWhen it comes to energy margins, Megapack deployment was the key driver there. And that product has done well. On the cost curve also, we've been able to do a lot there. But I do want to caution that Megapack deployments are a bit lumpy. So yes, we had a great quarter this period. But depending upon where we are trying to deploy that product in different markets, you would see periods where there would be downward pressure on deployment because of us trying to get the product to that base way...",
"session": "Answer",
"person_id": 595078,
"person_company": null,
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},
{
"name": "Unknown Executive",
"speech": "Yes, the product in transit. Yes.",
"session": "Answer",
"person_id": 182536,
"person_company": null,
"component_order": 52
},
{
"name": "Vaibhav Taneja",
"speech": "Yes.",
"session": "Answer",
"person_id": 595078,
"person_company": null,
"component_order": 53
},
{
"name": "Martin Viecha",
"speech": "Okay. Thank you very much. Let's go to Rod Lache from Wolfe Research.",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 54
},
{
"name": "Rod Lache",
"speech": "Really nice to see the rate of vehicle cost improvement despite the downtime that you took. You've taken now about $2,000 out of the average vehicle costs over the past year. Can you give us maybe a sense of the rate of improvement that you see from the changes that you alluded to, the factory changes you alluded to? Is there a way maybe to convey the speed of improvement on your existing product from here? And then related to that, can you share the timing of your next gen -- the lower-priced product that you talked about earlier this year?",
"session": "Question",
"person_id": 370532,
"person_company": null,
"component_order": 55
},
{
"name": "Vaibhav Taneja",
"speech": "Yes. So just in terms of product margins, there are lots of puts and takes when you look into this. There are certain things which we control, and there are certain things which we don't control. We get -- we expect that we'll get some benefits from our cost reduction efforts, which are all underway. But on the other hand, we just finished our factory upgrades late in Q3. Some of these factories are still in the early ramp phase in Q4. We're still not up to where we want those factories to be. So they will impact in the near term. Plus, like Elon mentioned, we're going to be ramping Cybertruck, which is going to be another headwind, which we will be dealing with. \r\nOn top of all that, there's overall uncertainty in the macroeconomic environment, which even makes it harder to predict precisely as to where we land. But yes, this is something which -- it's an evolving thing which we're observing every day and reacting to it on a daily basis.",
"session": "Answer",
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{
"name": "Drew Baglino",
"speech": "I would just say that on the cost reduction efforts, like we are not -- we are unflagging in our pursuit of additional cost downs for 2024. We do have a good pipeline of them and work on both the engineering side and the factory operations side. And our intention is to like maintain or exceed the trend that you saw. We're trying as hard as we possibly can.",
"session": "Answer",
"person_id": 393478,
"person_company": null,
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},
{
"name": "Rod Lache",
"speech": "The timing of the next-gen product, can you share that?",
"session": "Question",
"person_id": 370532,
"person_company": null,
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{
"name": "Elon Musk",
"speech": "Not at this time.",
"session": "Answer",
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{
"name": "Rod Lache",
"speech": "Okay. And just as a follow-up, obviously, price is also a driver of demand, but that's obviously not happening in a vacuum. And you mentioned that -- I think you mentioned at some point during this call that you're also maybe hitting the law of large numbers on some of your products. Can you just share how you're thinking about price elasticity just at this point in this macro environment, and any thoughts along those lines?",
"session": "Question",
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{
"name": "Elon Musk",
"speech": "I think that there's very significant price elasticity. I mean to be totally frank, if our car costs the same as a Rav4, nobody would buy a Rav4, or at least they're very unlikely to. It's worth noting that a lot of these incentives like the tax credit and whatnot, they're actually very difficult for the average person to access because they -- most people do not have $10,000 or even $7,500 burning a hole in their bank account. A lot of -- a large number of people are living paycheck to paycheck and with a lot of debt. They've got credit card debt, mortgage debt. So yes, it's -- that's reality for most people. It's sometimes difficult for people who are high income earners, and when I say high, it'd be like someone who's earning over $200,000 a year, to understand what life is like for someone who is earning $50,000 or $60,000 or $70,000 a year, which is most people.\r\nSo like, for a lot of people, like, this tax credit just -- they can't front $7,500 for 18 months or even 6 months to -- for the tax credit, and they actually don't, in some cases even have that [ an ancillary $7,500 ] in taxes. So it's really just the vast regard to people is how much money do they have to pay immediately and how much per month. That's it. You can stop right there. And our car is still much more expensive than a Rav4 when you look at it that way.",
"session": "Answer",
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{
"name": "Vaibhav Taneja",
"speech": "One other thing which I'll add, when you look at car buying in general, we're trying to get to the next set of EV adopters.",
"session": "Answer",
"person_id": 595078,
"person_company": null,
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{
"name": "Elon Musk",
"speech": "Not an EV adopter, just who wants a great car.",
"session": "Answer",
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"person_company": null,
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{
"name": "Vaibhav Taneja",
"speech": "Exactly.",
"session": "Answer",
"person_id": 595078,
"person_company": null,
"component_order": 64
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{
"name": "Elon Musk",
"speech": "It's not -- so now you get things like -- honestly, I would say, like, it somewhat correlates with the why doesn't everyone work from home crowd. I'm like -- I mean this is like some real Marie Antoinette vibes from people who say why isn't everyone working from home? Like, what about all the people that have to come to the factory and pull the cars or all the people that have to go to the restaurant and make your food and deliver your food. It's like what are you talking about you -- I mean, how detached from reality does the work-from-home crowd have to be while they take advantage of all those who do -- who cannot work from home? So I mean, you have to say, like, \"Why did I sleep in the factory so many times?\" Because it mattered. \r\nSo I just can't emphasize again how important cost is. It's not an optional thing for most people. It is a necessary thing. We have to make our cars more affordable that people can buy it. And I keep harping on this interest thing, but I mean it just raises the cost of the car. I mean we're looking at it in an internal analysis, which I know we -- we think is more or less on track that when you look at the cost -- or the price reductions we've made in, say, the Model Y and you compare that to how much people's monthly payment has risen due to interest rates, the price of the Model Y is almost unchanged.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
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{
"name": "Vaibhav Taneja",
"speech": "If you factor in the changing interest rates.",
"session": "Answer",
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"person_company": null,
"component_order": 66
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{
"name": "Elon Musk",
"speech": "Yes, which is -- this is what I'm trying to say. The thing that matters is the monthly pay. It's how much money do they have to put down and do they literally have that in their bank account or their check balance? And then what is the monthly payment? And it doesn't matter how -- if that monthly payment is principal interest or whatever, it's just a number, and that number has to not cause their bank account to go negative. \r\nAs it -- so going from near 0 interest rates to kind of the current very high interest rates, the actual monthly payment is basically the same. It's just a bunch more of it is going to interest. And there are some incremental challenges beyond that, which is the difficulty of getting credit at all has increased. And so there are a number of people who simply cannot get credit, period. Even if they've got a job and everything is solid, the banks are a little gun-shy on handing out credit given that a bunch of them kicked the bucket earlier this year.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 67
},
{
"name": "Drew Baglino",
"speech": "Yes. There's also just fewer options. Even if they hand out credit, there's fewer banks to go to.",
"session": "Answer",
"person_id": 393478,
"person_company": null,
"component_order": 68
},
{
"name": "Elon Musk",
"speech": "It's like does your bank still exist? Well, if your bank does not exist, you have to establish a relationship with a new bank. And so a lot of regional banks have died, and I mean even Credit Suisse, I mean, geez, that was a shocker. You've got a 160-year-old-ish Swiss institution that doesn't exist anymore. That's mind-blowing. And I think there's still quite a few shoes to drop on the bad credit situation. I mean commercial real estate obviously is in terrible shape. Credit card debt has been rising significantly. The credit card interest rates are usurious. It's over 20% interest rates, meaning like -- which over time just becomes obviously extremely punishing. Because if somebody's paying 20% interest on their credit cards, it means they cannot pay them off. And if you cannot pay them off and you're still accruing interest at 20%, you're at best headed to a bad place.",
"session": "Answer",
"person_id": 175883,
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{
"name": "Martin Viecha",
"speech": "Thank you. Let's go to next question from George from Canaccord.",
"session": "Answer",
"person_id": 370659,
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},
{
"name": "George Gianarikas",
"speech": "Just to focus on the cost per vehicle coming down in future quarters as you discussed in your written remarks, I'm curious as to what the levers of that could be. Is it more scale, more factory utilization? Is it material cost reductions? Are there things like Gigacasting? I mean can you just kind of give us some data points to give us confidence that that's going to come down over time?\r\nAnd if I can sneak one in, please, there are press reports, and I know how perilous it is to believe some of these, but they say that you've included radar as an option in some Model Ys in China. And I'm just here to ask if that's true. And if so, why?",
"session": "Question",
"person_id": 547012,
"person_company": null,
"component_order": 71
},
{
"name": "Elon Musk",
"speech": "We've not included radar. We have radar as -- a Tesla-designed radar is an experiment in Model S and X. That's it. We'll see whether that experiment is worth it, but there are no plans to integrate radar into 3 or Y. Just as humans drive well, and in fact, an excellent human driver can drive with amazing safety simply with their eyes, the car will far exceed the average human safety just with visual, far, far, far. Because, I mean, the car is looking at all directions at once, and we don't have eyes on the back of our head. So -- and the computer never gets tired and never gets distracted, get drunk, hopefully. \r\nAnd so radar is -- what really matters is how much does it affect the probability of an accident. And in order for the radar to be effective, you have to be able to do radar-only braking or you have to do actions that are radar only. Otherwise, you get this disambiguation problem between vision and radar. That's why we actually turned off the radar in cars historically that we had chipped. All 3 and Y used to have radar, but we turned it off because the radar actually generated more noise than signal. Now the Tesla-designed radar is a high-resolution radar that has some potential to be useful, but the jury is still very much out on whether that is, in fact, the case.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 72
},
{
"name": "Unknown Executive",
"speech": "On the cost question, I guess, from the vehicle side, like as Drew mentioned earlier, we are always trying to engineer our products to be cheaper to make and more efficient to make. That comes obviously on the engineering side as we come up with new innovations but as well on the supply chain side with our partners, we work with them to automate some of their lines, remove their bottlenecks and their high cost as well. On the logistics side, getting parts to the factory. It's not like a one thing. You just have to attack cost everywhere, and we do it ruthlessly at all times.",
"session": "Answer",
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"person_company": null,
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},
{
"name": "Unknown Executive",
"speech": "And operations efficiency. All of the above.",
"session": "Answer",
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"person_company": null,
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},
{
"name": "Vaibhav Taneja",
"speech": "Yes. I would say there's a whole laundry list of things, which we are chasing. We internally call it the cost attack where we are literally going line by line and saying how can we make it better. And it's a grind.",
"session": "Answer",
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{
"name": "Elon Musk",
"speech": "It's like Game of Thrones but with pennies. I mean at first approximation, if you've got a $40,000 car, and roughly 10,000 items in that car, that means each thing, on average, costs $4. So in order to get the cost down, say, by 10%, you have to get $0.40 out of each part on average. It is a game of pennies.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 76
},
{
"name": "Unknown Executive",
"speech": "We play it willingly.",
"session": "Answer",
"person_id": 182536,
"person_company": null,
"component_order": 77
},
{
"name": "Elon Musk",
"speech": "Yes. We've done it many, many times. And even something as simple as like a sticker, like, there's too many stickers internally in the car that nobody ever sees. There's something as simple as a QR code. You may think, well, putting a QR code on a part, why don't just put them on there. It's like, well, are we actually going to use that QR code?",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 78
},
{
"name": "Unknown Executive",
"speech": "Costs $0.01.",
"session": "Answer",
"person_id": 182536,
"person_company": null,
"component_order": 79
},
{
"name": "Elon Musk",
"speech": "Yes. Exactly. And then inevitably, sometimes the QR code doesn't go on properly or you can't read it properly, and it stops the line.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 80
},
{
"name": "Unknown Executive",
"speech": "Costs more than $0.01.",
"session": "Answer",
"person_id": 182536,
"person_company": null,
"component_order": 81
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{
"name": "Elon Musk",
"speech": "Yes. Absolutely. So chipping away, with -- I mean it is trying to -- it does feel like digging a tunnel with a spoon at times.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
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},
{
"name": "Unknown Executive",
"speech": "Like very much escaping prison.",
"session": "Answer",
"person_id": 182536,
"person_company": null,
"component_order": 83
},
{
"name": "Elon Musk",
"speech": "Yes.",
"session": "Answer",
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"person_company": null,
"component_order": 84
},
{
"name": "Vaibhav Taneja",
"speech": "On top of it, like we said, we did some factory upgrades, so we expect volume to go up. That would also bring some cost savings from higher production. But then on the flip side, we're going to be ramping a new product like Cybertruck, which we talked about. So yes, so those are the real puts and takes which we are working through.",
"session": "Answer",
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{
"name": "Elon Musk",
"speech": "Yes. But there's not like some -- accidently, some brick of gold that we've got, unfortunately. And it's -- we're trying to be very rigorous about improving the quality and capability of the car because -- it's like, any fool can reduce the cost of a car by making it worse and just deleting functionality and capability. That's why I'd call this, sort of any fool that -- like, if you want to like lose weight and you said, \"Well, I need to lose 15 pounds right away,\" well, you could chop your arm off, but then you're sitting here with one arm, and you're still fat. So like...",
"session": "Answer",
"person_id": 175883,
"person_company": null,
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},
{
"name": "Unknown Executive",
"speech": "You got to work out.",
"session": "Answer",
"person_id": 182536,
"person_company": null,
"component_order": 87
},
{
"name": "Elon Musk",
"speech": "Yes, you actually have to eat less food and work out. That's the actual way.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 88
},
{
"name": "Unknown Executive",
"speech": "And you need doctor's advice.",
"session": "Answer",
"person_id": 182536,
"person_company": null,
"component_order": 89
},
{
"name": "Elon Musk",
"speech": "Yes. It's not super fun because food is delicious. And personally, I'm not -- I don't love working out. I know some of you do. I wish I did, but I don't. Unless moving the mouse consists of working out, in which case, I love moving the mouse.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
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{
"name": "Martin Viecha",
"speech": "All right. Let's go to Colin Langan from Wells Fargo. Colin?",
"session": "Answer",
"person_id": 370659,
"person_company": null,
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},
{
"name": "Colin Langan",
"speech": "Sorry about that. Do you hear me now?",
"session": "Question",
"person_id": 480193,
"person_company": null,
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{
"name": "Elon Musk",
"speech": "Yes.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 93
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{
"name": "Colin Langan",
"speech": "You said in the commentary that you're not going full tilt on the plant in Mexico until there are signs that the economy is strong. Can you continue at a 50% CAGR without that plant? And where would that come from? And any color on what you mean of sort of not going full tilt? Could that plant get delayed indefinitely? Or what are you kind of talking about?",
"session": "Question",
"person_id": 480193,
"person_company": null,
"component_order": 94
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{
"name": "Elon Musk",
"speech": "No, we're definitely making the factory in Mexico. We feel very good about that. We've put a lot of effort into looking at different locations, and we feel very good about that location, and we are going to build a factory there and it's going to be great. The question is really just one of timing. And it's going to be a broken record on the interest front. It's just the interest rates have to come down. Like, if interest rates keep rising, you just fundamentally reduce affordability. It is just the same as increasing the price of the car. So I just don't have visibility into -- if you can tell me what the interest rates are, I can tell you when we should build the factory. We're going to build it. And I mean we think we'll start the initial phases of construction next year. \r\nBut I am still somewhat scarred by 2009 when General Motors and Chrysler went bankrupt. So -- while that's now 14 years ago, it's -- that is seared into my mind with a branding iron because kind of Tesla was just hanging on by a thread during that entire time and with -- I mean, we closed our financing round 2008 at 6 p.m. December 24, Christmas Eve. And if we had not closed that financing round, we would have bounced payroll 2 days after Christmas. So we actually closed that round at the last hour, at the last day that it was possible. Stressful, to say the least, and then barely made it through 2009. So I'm like I want to just -- I don't want to be going at top speed into uncertainty. A lot of wars going on in the world obviously as well, so...",
"session": "Answer",
"person_id": 175883,
"person_company": null,
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},
{
"name": "Unknown Executive",
"speech": "And we have room here, like in Giga Texas. You said we still have room in this building. It's not full with Cybertruck and the line. There's plenty of growth opportunities still to have inside the building where our team already is.",
"session": "Answer",
"person_id": 182536,
"person_company": null,
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{
"name": "Elon Musk",
"speech": "We also have 2,000 acres here.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 97
},
{
"name": "Unknown Executive",
"speech": "There's also one for...",
"session": "Answer",
"person_id": 182536,
"person_company": null,
"component_order": 98
},
{
"name": "Elon Musk",
"speech": "We're actually only occupying a tiny corner of the land that we own. So we could technically do all the scaling just here. So I mean personnel is our biggest challenge, in that the greater Austin area only has -- generously, the greater Austin area only has 2 million people. So people are moving here and they're willing to move here, but there is somewhat of a housing crisis. They got to live somewhere, so yes. \r\nSo I don't know, I mean I'm just curious -- like I just -- I'm not saying things will be bad. I'm just saying they might be. And I think -- like, Tesla is an incredibly capable ship, but we need to make sure like as -- if the macroeconomic conditions are stormy, even the best ship is still going to have tough times. The weaker ships will sink. We're not going to sink. But even a great ship in a storm has challenges. Now that storm will apply to everyone, not just us and not just the auto industry. It will apply to everyone, I think, apart from necessary sort of staples like food and stuff. But -- so I just -- I don't know. If interest rates start coming down, we will accelerate.",
"session": "Answer",
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"person_company": null,
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{
"name": "Martin Viecha",
"speech": "All right.",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 100
},
{
"name": "Elon Musk",
"speech": "If anybody's got any good guesses on this, I'd love to be less wrong. And I apologize if I'm perhaps more paranoid than I should be because that might also be the case. Because I am -- I have PTSD from 2009, big time. And 2017 through '19 were no picnic, either. That was very tough going. So the auto industry is also somewhat cyclic because people tend to hesitate to buy a new car and if there's uncertainty in the economy. So car companies do very well in good economic times and they don't do as well in tough economic times. So it's just -- whereas if somebody is selling bread, then I think people will still need to eat bread. Yes, we need bread. We need it for all of time. But a new car, you don't have to have right this minute.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
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},
{
"name": "Vaibhav Taneja",
"speech": "Especially if there are wars going on and then that impacts your sentiment.",
"session": "Answer",
"person_id": 595078,
"person_company": null,
"component_order": 102
},
{
"name": "Elon Musk",
"speech": "Yes. I mean people are reading about wars all over the world at this -- buying a new car tends to not be front of mind.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
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},
{
"name": "Martin Viecha",
"speech": "All right. Unfortunately, that's all the time we have today. Thank you very much for all of your good questions, and we'll see you again in 3 months. Thank you very much.",
"session": "Answer",
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],
"title": "Tesla, Inc., Q3 2023 Earnings Call, Oct 18, 2023",
"quarter": 3,
"year": 2023
}
},
{
"transcript_title": "Tesla, Inc. - Q2 2023",
"transcript_name": "Tesla, Inc., Q2 2023 Earnings Call, Jul 19, 2023",
"ticker": "NASDAQ:TSLA",
"transcript_url": "https://wkarticles.blob.core.windows.net/finnhub/snp_transcript_2854174",
"date": "2023-07-19",
"year": 2023,
"quarter": 2,
"transcript_data": {
"date": "2023-07-19",
"participant": [
{
"name": "Colin Rusch",
"role": "Analysts",
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"description": "Analysts",
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"transcript_person_id": 256580
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"transcript": [
{
"name": "Martin Viecha",
"speech": "Good afternoon, everyone, and welcome to Tesla's Second Quarter 2023 Q&A Webcast. My name is Martin Viecha, I'm VP of Investor Relations, and I'm joined today by Elon Musk, Zachary Kirkhorn and a number of other executives. \r\nOur Q2 results were announced at about 3 p.m. Central Time in the update deck we published at the same link as this webcast. During this call, we will discuss our business outlook and make forward-looking statements. These comments are based on our predictions and expectations as of today. Actual events or results could differ materially due to a number of risks and uncertainties, including those mentioned in our most recent filings with the SEC. [Operator Instructions] But before we jump into the Q&A, Elon has some opening remarks. Elon?",
"session": "Presenter Speech",
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{
"name": "Elon Musk",
"speech": "Thank you, Martin. So just a Q2 recap. In Q2, we achieved record vehicle production and deliveries and record revenue of about $25 billion in a single quarter. And Model Y became the best-selling vehicle of any kind globally in Q1, surpassing the likes of Corolla and Gulf. So it was the #1 vehicle of any kind, including vehicles that are sold at a far lower price. This is, I think, an incredible achievement by the Tesla team, and just a huge thank you to our customers for their support. \r\nSo this came in spite of high interest rates and a lot of macro uncertainty. And nonetheless, we managed to achieve operating margin of about 10%. We continue to target 1.8 million vehicle deliveries this year, although we expect that Q3 production will be a little bit down because we've got summer shutdowns to -- for a lot of factory upgrades. So just probably a slight decrease in production in Q3 for sort of global factory upgrades. \r\nIn the long-term economy we think is going to just drive volume through the ceiling next level. And sort of future robotaxi products, the dedicated robotaxi products, we think, have a quasi infinite demand. So -- and the way we're going to manufacture the robotaxi is also itself a revolution. So it's revolutionary sign made in a revolutionary way. It will be, by far, the highest units per hour of any vehicle production ever. So very excited about that. \r\nWith respect to Autopilot and Dojo, in order to build autonomy, we also need to train our neural network with data from millions of vehicles. The more -- I mean, this is proven over and over again. The more training data you have, the better the results. And I mean, there are times where we see basically in a neural net basically, it is sort of at a million training examples, it barely works at 2 million, it slightly works at 3 million. It's like, wow, okay, we're seeing something. So then you get like 10 million training examples, it's like -- it becomes incredible. So there's just no substitute for a massive amount of data. And obviously, Tesla has more vehicles on the road that are collecting this data than all other companies combined by, I think, maybe even an order of magnitude. So I think we might have 90% of all -- a very big number. \r\nSo the success in AI and dev is a function of talent, sort of unique data and computing resources. And we have outstanding capabilities in all 3 arenas. And I really just don't know how anyone could do what we're doing, even if they had our software and had our computer, if they did not have the training data. \r\nSo sticking at which our Dojo training computer is designed to significantly reduce the cost of neural net training. It is designed to -- it's not optimized for the kind of training that we need, which is a video training. So we just see that the need for neural net training, again, talking in quasi kind of things is just enormous. So I think having -- we expect to use both NVIDIA and Dojo, to be clear. But there's -- we just see a demand for really advanced training resources. And we think we may reach in-house neural net training capability of 100 [ exoblocks ] by the end of next year. So today, over 300 million miles have been driven using FSD beta. That 300 million-mile number is going to seem small very quickly. It will soon be billions of miles and tens of billions of miles. And that FSD will go from -- from being as good as a human to then being vastly better than a human. We see a clear path to full self-driving being 10x safer than the average human driver. So -- and between autopilot, Dojo computer, our inference hardware in the car, which we call sort of hardware [indiscernible] but it's really dedicated. It's a high efficiency inference computer that's in the car and our Optimus robot. It's really at the cutting edge of AI movement. \r\nWith regard to our Cybertruck, we continue to build release candidates of the Cybertruck on our final production line in Austin. I'm actually here in Austin at the Gigafactory. This is the first truck that we're aware of that will have 4-door over a 6-foot bed and will fit into a 20-foot garage. So it's the biggest on the outside, but it's even bigger on the inside. So it's -- I think that's -- one of the elements of good design is it should feel bigger on the inside than it looks on the outside. And this is no small car, but we -- we're really cared about the exterior dimensions of the Cybertruck down the last millimeter. So just trying to get right the middle of the goldilocks zone, not too big, not too small, and then really maximize the utility of the volume. And we can't wait to start delivering it later this year. \r\nSome other highlights. Our global Supercharging network now stands at over roughly 50,000 connectors and over 5,000 locations. As I think a lot of people are aware, the Tesla charging standard, which we made open source, and it's now called the North American Charging Standard, we're deeply honored that Ford, GM, Mercedes and many other OEMs have signed up to use our connector and gain access to our charging network. We strongly believe in helping the other car companies to accelerate the EV revolution and just trying to do the right thing in general. So that's some goal there. \r\nThen it's -- I think I want to emphasize like very strongly. This is a very important point, is that Tesla, just as with the North American charging standard, although we're not licensing, we're just making it available. But we are very open to licensing our full-self driving software and hardware to other car companies. And we are already in discussions with only just early discussions with a major OEM about using Tesla FSD. So we're not trying to keep this to ourselves. We're more than happy to license it to others. \r\nAnd lastly, our new lithium refinery and cathode facility are progressing well. Now in conclusion, we continue to focus on making as many cars as we can while maintaining healthy financials. Our artificial intelligence development is obviously entering a new era, and we're incredibly excited about what's to come. Our other businesses such as Megapack, Supercharging service and whatnot all started to become a meaningful contributor to overall profitability this quarter. And then lastly, I'd just like to profusely thank all of our employees who are making a lot of extra effort during uncertain times. Thank you very much for your hard work and the impact you're making.",
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"name": "Martin Viecha",
"speech": "Thank you very much, Elon. And I think Zach has some opening remarks as well.",
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"name": "Zachary Kirkhorn",
"speech": "Yes. Thanks, Martin. As Elon mentioned, Q2 was another record quarter of production and deliveries as well as records in profit for energy and services and other businesses. Congratulations again to the Tesla team on the continued progress. As we navigate through a period of economic uncertainty, rising interest rates, volatility and consumer confidence and regulatory change, I want to comment on our financial approach. \r\nFirst, the single most important priority is to ensure we are continuing to invest heavily in the core technologies that will drive the long-term value of the business. This includes increasing spending on AI-related technologies such as full-self driving, Optimus and Dojo as well as new products such as Cybertruck, our next-generation platform in the semi, as evidenced by the continued growth in our R&D spend. This also includes continuing our investments in capacity expansion, not only in our vehicle factories, but also our Supercharging network service, internal applications and battery processes as we continue with meaningful capital expenditures to lay this foundation for the future. \r\nSecond, we continue to work towards our goals of maximizing volumes on both our vehicle and energy business, but most importantly, doing so in a way that generates the capital to continue our pace of R&D and capital investments. This requires a strong focus on per unit COGS reductions in each of our key businesses as well as working capital improvements on raw materials, work in process inventory and customer AR, all of which progressed appropriately in Q2. \r\nIf we look specifically at our automotive business, our gross margin showed a modest reduction and remained healthy, despite action taken to further improve vehicle affordability early in the quarter. We recognize -- we realized per unit cost improvements in nearly every category, including material cost and commodities, manufacturing costs and logistics while also continuing to rapidly increase the build rate in our Austin and Berlin factories. \r\nFor our Energy business, we improved margins and gross profit driven by cost reductions in deal economics, particularly with Megapack. As a reminder, storage volumes are typically volatile sequentially based on the types of projects and their specific revenue recognition milestones. \r\nAs we look forward to the rest of the year, I want to reiterate Elon's comments on Q3 volumes driven by planned downtimes for factory upgrades. These upgrades will also carry some amount of factor idle cost. However, we are working to minimize as much as possible. It's also important to keep in mind the uncertainty in the macro environment, which can impact our execution positively or negatively in the near term. Regardless, we continue to remain dynamic with a focus on fundamental efficiency and a long-term outlook. Congratulations again to everybody on a great quarter.",
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"name": "Martin Viecha",
"speech": "Thank you very much, Zach. And let's go to investor questions. The first question on licensing FSD we've already answered. So let's go to the second one. The second question is, what is the status of 4680 cells? How far are you from the specs you laid out on Battery Day? When do you expect to achieve what you laid out on Battery Day?",
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"name": "Drew Baglino",
"speech": "Yes. First, I'll just start with a little bit of a production update. So in Texas, 4680 cell production increased 80% Q2 over Q1, and the team surpassed 10 million production cells produced here in Texas. So congrats to the team for that. Their focus on yield reduced our scrap bill by 40% quarter-over-quarter, and that resulted in a 25% reduction in cell COGS. \r\nHere in Texas, we're preparing to launch our Cybertruck cell, which is 10% higher energy density than current production. That was accomplished through process and mechanical design optimization. As we scale Cyber Cell production through the end of the year and early next, we should be in a comfortable place on cost per cell. \r\nAgainst our battery energy density targets, the Cyber Cell is at our expectations on a like-for-like electrochemistry basis. We're yet to integrate silicon or in-house cathode production, both reviewed on Battery Day, which do bring significant further energy density and cost improvements, but that is a topic for another day. \r\nLastly, it is important to remember that most of what we focused on a Battery Day was the Tesla-engineered 4680 production system and the improvements we strove to achieve on equipment, factory density, capital cost and utility cost reduction, all of which we are realizing in our Texas scale up to date.",
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"name": "Martin Viecha",
"speech": "Thank you very much. The next question is, can you talk more to the upcoming Tesla Energy products and how your thinking has evolved on the revenue model? Given Tesla's AI capabilities, how do you see the long-term mix between hardware margin and recurring software margin from Autobidder as this segment accelerates?",
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"name": "Drew Baglino",
"speech": "We can't comment on future product road map, but I can provide a quick energy and Q2 update. Megapack continues to show strong demand globally with Lathrop ramping successfully to meet our contracted projects in 2023. As stated last quarter, Megapack margins are in a reasonable place in line with our target market -- vehicle target margins. \r\nThe second final assembly line at Lathrop is progressing on schedule, eventually doubling Lathrop capacity ahead of our full factory ramp in 2024. We have several exciting large projects in construction or nearing completion, including the KES project in Hawaii, the Riverina project in Australia, several products in California and one here at Gigafactory, Texas that we'll tour today, actually. We want to thank our customers, utilities and grid operators for trusting us with these projects. \r\nOn the Autobidder question. We continue to grow Autobidder contracts in wholesale markets like Australia, Texas, U.K. and California with over 6 gigawatt hours under Tesla's dispatch next year. In the U.K., our projects performed best in the industry in Q2. Autobidder does have software margins and is an enabler for hardware sales, but it's a relatively small contributor to revenues, given how much deployment growth on the Megapack hardware side is occurring. It's important to remember that this large project -- these large capital projects have lifetimes of 20 years of recurring revenues on an annualized basis relative to upfront CapEx are small. \r\nOn the residential side, we have some fun things happening. We recently surpassed 0.5 million Powerwalls installed. Just this week, we are launching charge on solar, which allows Tesla Powerwall and vehicle customers to charge their vehicles using their excess solar and drive only on the sunshine that hits their roof. Yesterday, we began paying customers in Texas for participating in our virtual power plant to provide grid support to ERCOT. We expect these credits to lower our median customer's annual bill by 1/3 and to increase these credits over time as ERCOT expands market access. And today, we are expanding Tesla electric enrollment to new Model 3 owners in Texas, followed by all Texas vehicle customers over the rest of the quarter. \r\nUnfortunately and somewhat similar to Tesla Insurance, bringing Tesla electric and BPP capabilities to our customers requires working through a fractured regulatory environment on a jurisdiction-by-jurisdiction basis. In the long run, the value of residential energy software and hardware will be driven by the level of market access that utilities, market operators and regulators permit. \r\nFor Powerwall that's eligible to provide the full stack of energy services, like peaker capacity and system offering, such as in Australia, we can more than double the value of ownership relative to a typical system today.",
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"name": "Martin Viecha",
"speech": "Thank you very much. The next question is, could you quantify the benefits to COGS per unit from the IRA battery manufacturing incentives; and secondly, battery raw material declines year-to-date?",
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"name": "Zachary Kirkhorn",
"speech": "All right. I can take that. On the first part of the question for IRA manufacturing incentives, we provided previous guidance that we expect these to be for the course of this year in the range of $150 million to $250 million per quarter. We are staying within that foundry as we guided previously, so that was the case in Q2 as well. I will note, and I think we've mentioned this before, that this includes a 50-50 sharing of credits for qualified cells from our long-term battery partner, Panasonic. \r\nOn the commodity side, we are continuing to see improvements there, as we've discussed previously. Lithium is the most notable improvement so far. I think I commented on this on the last call, because typically, we see this coming about a quarter before it actually is realized in our financials. And also just as a reminder, we're not fully exposed to the price of lithium. Our supply chain team has done a terrific job in partnership with another -- a bunch of other companies to put in place some long-term agreements here, but we do have some exposure that moves up and down. \r\nWe're also seeing benefits in aluminum and steel, which I think is great. Not as large as the lithium impacts, but they contribute nonetheless. So if we add up the total impact of this in Q2 relative to prior quarter, it's about the same size and magnitude as the IRA benefits that we also received. \r\nJust to put this in context, as you look at COGS per unit sequentially from Q1 to Q2, I think there's 2 things to keep in mind there. The first is that our mix for deliveries increased quite a bit from Q1 to Q2. So as you think about fundamental cost reductions, it's important to adjust for that. And then secondly, as we continue to work on reducing our Austin and Berlin cost, which we did quite a bit of that from Q1 to Q2, these factories are still slightly above Model Y production costs elsewhere. And in the quarter, our mix of Austin- and Berlin-related builds increased. And so that's something to consider as you model out the impact on -- from Q1 to Q2 in terms of COGS per unit. I do want to ask Karn if there's anything else on the commodity side or just more generally, you want to add here?",
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"name": "Karn Budhiraj",
"speech": "Yes. As you mentioned, Zach, we've naturally been a little bit hedged from the lithium position because of the long-term contracts we have in place. But we have seen reduction in pricing across the board for all commodities that specifically go into batteries such as nickel, cobalt and graphite. And the reductions in pricing translate into thousands of dollars when you look at it from a per-vehicle impact. We're taking advantage, expect some of those fixed price contracts through the end of the decade. So it's a playbook that we'll continue to kind of go back to as we look to the future.",
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"name": "Martin Viecha",
"speech": "Thank you. The next question on FSD. Have you considered allowing FSD transferability as a lever to allow existing customers to upgrade to a new Tesla instead of being locked into an existing car due to the price of FSD?",
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"name": "Elon Musk",
"speech": "Yes, this is a question we get asked a lot. So we're excited to announce that for Q3, we will be allowing transfer of FSD. This is a onetime amnesty. So it needs to be -- you need to take advantage of it in Q3, but -- or at least place the order in Q3 within reasonable delivery time frames. So yes, yes, yes, I hope this makes people happy. [indiscernible] This is a onetime thing.",
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"name": "Martin Viecha",
"speech": "Right. The next question, when will we give more information about the Cybertruck orders, estimated delivery schedules, pricing and specifications?",
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"name": "Elon Musk",
"speech": "Demand is so far off the hook you can't even see the hook. So that's really not an issue. I do want to emphasize that the Cybertruck has a lot of new technology in it, like a lot. It doesn't look like -- it doesn't look like any other vehicle because it is not like any other vehicle. So -- and the production ramp will move as fast as the slowest and least likely elements of the entire supply chain and internal production. So I wouldn't expect -- I hope it's smooth. We're certainly better at production ramps that -- we've got a lot of experience with the production ramps. But first order approximation, there's like 10,000 unique [indiscernible] and processes in the Cybertruck. And if any one of -- it will go as fast as the least lucky, least well-executed element of the 10,000. So it's always difficult to predict the ramp initially, but I think we'll be making them in high volume next year, and we will be delivering the car this year.",
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"name": "Martin Viecha",
"speech": "Thank you. The next question is critics of Gigacasting contended that process makes vehicles harder and more costly to repair, essentially pushing costs on to the customer. Can you share some details about the initial repair experience with Gigacast vehicles?",
"session": "Answer",
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"name": "Elon Musk",
"speech": "That must be why everyone's copying us.",
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{
"name": "Lars Moravy",
"speech": "Thanks, everyone. This is Lars. I mean, that's like simply not true. There's a misconception that traditional bodies are easy to repair, but they are made up of multiple materials and multiple joining methods. Spot welds and rivets have to be drilled out. Panels and structural adhesives have to be chiseled down. Dried adhesive has to be removed. Stains, cut, blah, blah, blah.",
"session": "Answer",
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"name": "Elon Musk",
"speech": "It's a crazy patch of a quilt.",
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"name": "Lars Moravy",
"speech": "Yes. And so putting that back together means time and money. Using an example of replacing a rear cast rail in the Model Y. To do that versus like what we replaced it with from Model 3, it's 10x cheaper and 3x faster to do it with the cast rail. Design team works with our collision repair team since we're a closed loop on this with insurance, and we design specific parts that make it easier and faster to repair. And we have an incentive to do that because we have our own insurance and our own body shops. We expect that we'll continue to do this, and collision repair will continue to become cheaper and faster over time. And we already make this available to all body shops or our Tesla-approved body shop training.",
"session": "Answer",
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"name": "Elon Musk",
"speech": "Yes, closing loop on collision repair and factoring that into design is a big deal. .",
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"name": "Lars Moravy",
"speech": "It's crucial. I don't think anyone else can do it with that ecosystem that we have so.",
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"name": "Elon Musk",
"speech": "Yes. And we are actually able to change the details of the casting with inserts, and we actually do that all the time. So -- because the answer is actually wear out and need to be replaced anyway. So we can actually make design changes to be inserts and tweak the castings. But the cast rear body or front body is lighter, cheaper, better noise vibration, harshness much easier to manufacture.",
"session": "Answer",
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{
"name": "Lars Moravy",
"speech": "It's better in every way.",
"session": "Answer",
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{
"name": "Elon Musk",
"speech": "And that's why so many other car companies are copying us.",
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"name": "Lars Moravy",
"speech": "Probably.",
"session": "Answer",
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"name": "Elon Musk",
"speech": "Well, they certainly put out a lot of press releases about it. I think it's basically going to be how all cars are made in the future.",
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"name": "Martin Viecha",
"speech": "Thank you. Next question, how many Optimus bots have been made? And when will they be able to start performing useful tasks?",
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"name": "Elon Musk",
"speech": "10 million. Yes. I think we're around 5 or 6 bots. I think -- there's a -- we were -- look, 10, I guess. Depends on what -- how many are working and what phase. But it's sort of -- yes, there's more every month. The things -- a lot of interesting things, a lot of interesting things about the Optimus bot. We found that there are actually no suppliers that can produce the actuators. There are no off-the-shelf actuators that work well for [indiscernible] robot at any price.",
"session": "Answer",
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"name": "Drew Baglino",
"speech": "Certainly not compelling.",
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{
"name": "Elon Musk",
"speech": "Yes, there's not a [indiscernible] robot that can do something at -- the things that human could do. So we've actually had to design our own actuators that integrate the motor or the power electronics, the controller, the sensors. And really, every one of them is custom designed. So -- and then, of course, we'll be using the same inference hardware as the car. So -- but we are -- in designing these actuators, we're designing them for volume production. So they're not just lighter, tighter and more capable than any other actuators where that exists in the world. But it's also actually manufacturable. So we should be able to make them in volume. \r\nThe first Optimus that is -- that we'll have all of the Tesla designed actuators, sort of production candidate actuators integrated and walking should be around November-ish. So -- and then we'll start ramping up after that. In terms of when we'll be able to do some useful things, like we'll first be trying this out in our own factories and just proving out its utility, but I think we'll be able to have it do something useful in our factories sometime next year. I would be -- yes, I'm pretty confident of that. So yes, it's going well. \r\nI should say another cool thing about Optimus is that there's -- just in the U.S. alone, there are 2 million amputees. And I was just talking to the Neuralink team. And by combining a Neuralink implant and a robotic arm or leg for someone that has had their arm or leg or arms and legs amputated, we believe we can give basically a cyber body that is incredibly capable. $6 million men in real life. [indiscernible] costs $6 million. $60,000 man. Seems that was impressive, but it will actually -- so that actually could be a really -- I think, would be incredible to potentially help people around the world and give them a robot arm like that is as good, maybe long term better than a [indiscernible] going.",
"session": "Answer",
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"name": "Martin Viecha",
"speech": "Thank you. The next question is, how has the order intake trended relatively to production levels during Q2? And how has it trended in the quarter-to-date period? Conceptually, how does Tesla decide when is it appropriate to reduce prices or at other sales incentives to increase demand?",
"session": "Answer",
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"name": "Elon Musk",
"speech": "Yes. I guess demand has roughly tracked production. So -- which is what we aim for is we look at something that we have that really -- I think no other carmaker has is that we have real-time demand and real-time production, like so 7 days a week. I get an e-mail -- order generated e-mail, chose output from all factories and orders globally. So it's like a real-time finger on the pulse of earth basically. And we're just, of course, according to what the mood of the public is. \r\nBut buying a new car is a big decision for vast majority of people. So any time there's economic uncertainty, people generally pause on new car buying at least to see what happens. And then obviously, another challenge is the interest rate environment. As interest rates rise, the affordability of anything bought with debt decreases. So effectively increasing the price of the car. \r\nSo when interest rates rise dramatically, we actually have to reduce the price of the car because the interest payments increased the price of the car. So -- and this is -- at least up until recently, it was, I believe, the sharpest interest rate rise in history. So we had to do something about that. And I don't have a crystal ball for the global economy. I really appreciate it. If I could borrow that crystal ball.",
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"name": "Unknown Executive",
"speech": "[indiscernible]",
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"name": "Elon Musk",
"speech": "Yes, exactly [indiscernible]. It should be not on Twitter. So I mean, one day, it seems like the world economy is falling apart. And the next day, everything is fine. I don't know what's going on. It'd be totally fine. I wish I did. So I mean that's why I say like I was on Twitter, I posted like just really advising because I care a lot about the small shareholders, especially ones that have stuck with us through thick and thin. I love you, guys. And so we can't control these macro shocks or the thematic depressive nature of the stock market. So that's why I recommend against margin loans in times that are turbulent. If times are not that turbulent, actually a module can be a smart move within reason. But we're in, I would call it, turbulent times. Like I have very high confidence in the long-term value of Tesla. Like I see it -- I really see a path to a 10x [indiscernible] -- call it a 5x increase in the value of the company, maybe a 10x. And where things go along the way, the trials and tribulations and the mood of the markets, one cannot predict. And so the old adage of buy and hold is right. For an investment advice, I see like identifying a company as products you love. See if they -- does it seem like they'll continue to make good products or great products? Buy that stock and hold it. That's it. You all win. \r\nThe reason companies exist is to make goods and services, ideally great goods and services. They don't exist for any other reason. They shouldn't. So that's why you should buy the stock of a company that makes -- has a great future pipeline. It's common sense, actually. And then generally, if you see -- if you provide your confidence about what that company's products or services are when the market panics, buy; and when the market is overly exuberant, you can sell. I'm not recommending yourself [indiscernible] but yes, buy low, sell high. \r\nWarren Buffett actually, I think has a saying -- I'm paraphrasing here, but a publicly traded company like is like imagine living in your house and some crazy manic-depressive guy comes and stands outside your house and yells property prices at you. So it's a different price every day. But the house is still the same house. So this is a tough market. Credit that to Warren Buffett.",
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"name": "Martin Viecha",
"speech": "Thank you. Let's go to the next question. With the emphasis of price cuts to drive volume growth eating into automotive gross margin, can investors expect to see automotive gross margin stabilize or even rise due to efficiencies outpacing the cuts? And if so, when?",
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{
"name": "Elon Musk",
"speech": "Where's that crystal ball again? If I may, look, the short-term variances in gross margin and profitability really are minor relative to the long-term picture. Autonomy, we'll make all of these numbers look silly. I'd recommend looking at ARK Invest. I think their analysis is very good. It's the best, I mean, and generally, Fintwit or like the finance, Smart Finance on Twitter, follow their accounts. They're great. So that's, in my opinion, where you'll get the best info. So I strongly believe Tesla is a big long-term investment. And that's when things go up and down, in fact, the market panics, buy; if the market is a little too exuberant, sell at the time. But just generally, like I feel -- I'm confident we'll deliver over long term, but can't control short term. So -- and the autonomy is really where it's at. I mean, Zachary?",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 36
},
{
"name": "Zachary Kirkhorn",
"speech": "I fully agree with you. I mean I think the only thing in the short term that matters is what I said in my opening remarks, which is are we generating enough money to continue to invest. And the portfolio of products and technologies that the technical teams are investing in right now, this is intense. It's intense in terms of investment, it's intense in terms of potential.",
"session": "Answer",
"person_id": 385023,
"person_company": null,
"component_order": 37
},
{
"name": "Elon Musk",
"speech": "Frankly, I think it's ridiculous that we have positive free cash flow in a capital-intensive business, while investing massive amounts of money in new technology. That is super hard.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 38
},
{
"name": "Drew Baglino",
"speech": "And vertical integration. It's not even just like new products, but also...",
"session": "Answer",
"person_id": 393478,
"person_company": null,
"component_order": 39
},
{
"name": "Elon Musk",
"speech": "Yes. We actually make our ship. [indiscernible] others but. Question. Cool.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 40
},
{
"name": "Zachary Kirkhorn",
"speech": "And so at least from my perspective, what matters is continuing to generate the cash to invest. That means continuing to be hyper focused on near-term cost reduction. Is everything we do in near-term cost reduction provides capital to reinvest? Hyper focus on working capital management, which we've made quite a bit of progress there on the raw materials and [indiscernible] side of that. We've been very focused on accounts receivables as well to ensure that we can continue to reinvest the cash. This is what we're focused on. And so there's a set of this that we control. We have a pipeline of cost reductions. We are getting tailwinds in the commodity space right now, as Karn mentioned, that's helpful. \r\nVariability around average selling prices goes back to Elon's point. We don't control interest rates. We don't control macro consumer sentiment. But we have an obligation to be responsive to that to ensure that we're matching supply and demand and keeping things balanced. And so this is how we're managing the next handful of quarters. Soon enough, these quarters will be behind us. They won't be part of the present value of future cash flows of the business. And so we want to make sure we keep that view and make sure that the long term business is exactly the way that we want it to be.",
"session": "Answer",
"person_id": 385023,
"person_company": null,
"component_order": 41
},
{
"name": "Elon Musk",
"speech": "[indiscernible]",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 42
},
{
"name": "Martin Viecha",
"speech": "All right. Thank you very much. And now let's go to analyst questions. The first question comes from Dan Levy from Barclays.",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 43
},
{
"name": "Dan Levy",
"speech": "I wanted to start first with a question about your efforts in AI and Dojo. It's pretty clear it sounds like you're accelerating your focus. Can you maybe provide us with a sense of what the process is of refining a product? Is it more machines? And maybe you could give us a sense of when the payout starts to -- when you start to see the payout and what the resource outlay is, what should we expect on the OpEx front as a result of this?",
"session": "Question",
"person_id": 253177,
"person_company": null,
"component_order": 44
},
{
"name": "Elon Musk",
"speech": "Sorry. Are you saying how much are we going to spend on Dojo or?",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 45
},
{
"name": "Dan Levy",
"speech": "Yes.",
"session": "Question",
"person_id": 253177,
"person_company": null,
"component_order": 46
},
{
"name": "Elon Musk",
"speech": "R&D and Dojo?",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 47
},
{
"name": "Dan Levy",
"speech": "Yes.",
"session": "Question",
"person_id": 253177,
"person_company": null,
"component_order": 48
},
{
"name": "Elon Musk",
"speech": "Well, we're not going to be open loop on our Dojo expenditures. So -- but I mean, I think we will be spending something north of $1 billion over the next year on [indiscernible] through the next year, it's well over $1 billion in Dojo. And yes, so I mean we've got a truly staggering amount of video data to do training on. And this is another thing I like. In order to copy us, you also need to spend billions of dollars on training compute. I mean it's like -- and it's also hard to -- you need the data, and you need a training computer. It's like -- think, well, things needed to actually achieve this at scale toward generalized solution for autonomy. It's -- this is one of the highest problems ever. \r\nYou see a lot of AI companies doing LLMs and whatnot. I would say if they're so great, why can't they make a self-driving car? Because it's harder. That's why. So -- but I do think -- I think there's some great AI companies out there. But just fundamentally, the staggering amount of data we've got to process, it's got to be processed somehow. And custom silicon is the best way to do that. \r\nSo that's what Dojo is designed to do is optimize for video training. It's not optimized for LLMs. It's optimized for video training. With video training, you have a much higher ratio of compute-to-memory bandwidth. So whereas LLMs tends to be memory bandwidth choked. So that's it. I mean -- but like I said, we're also -- we have some -- we're using a lot of NVIDIA hardware. We'll continue to use -- we'll actually take NVIDIA hardware as fast as NVIDIA will deliver it to us. Tremendous respect for Jensen and NVIDIA. They've done an incredible job. \r\nAnd frankly, I don't know if they could deliver us enough GPUs, we might not need Dojo, but they can't. So they've got so many customers. They've been kind of to, nonetheless, prioritize some of our GPU orders. But yes, the sheer magnitude of video training -- because like I said, we're not trying to just get as good as human. We want to get to 10x better than human, maybe 100x better than human. \r\nRight now, I believe there's something on the order of 1 million automotive deaths per year. And then if you say permanent serious injuries, I think it's probably closer to 10 million per year. And -- so it matters if you're twice as good as human, 10x -- like 10x better than human would still mean 100,000 deaths and 1 million severe permanent injuries. So it's like, okay, we would rather be 100x better. So there's really -- it's a [ match of 9s, ] and we want to achieve as perfect safety as possible. And that's truly mind-boggling amounts of video and computer needed for that. So -- and then I do think there's other applications for Dojo, but we just desperately need it for video training.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 49
},
{
"name": "Zachary Kirkhorn",
"speech": "Just to add to what Elon mentioned. So the numbers that he mentioned are between R&D spend and capital spend. And this is moving quickly. And so we provide a 3-year outlook on our capital expense. We are considering these expenses in that outlook. And as that moves up and down, we'll continue to update our guidance in the Q.",
"session": "Answer",
"person_id": 385023,
"person_company": null,
"component_order": 50
},
{
"name": "Elon Musk",
"speech": "Yes. I want to say the fundamental rate limiter on the progress of full self-driving is training. That's -- if we had more training compute, we would get done faster. So that's it.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 51
},
{
"name": "Zachary Kirkhorn",
"speech": "And it's just difficult to predict how quickly we can execute on it.",
"session": "Answer",
"person_id": 385023,
"person_company": null,
"component_order": 52
},
{
"name": "Dan Levy",
"speech": "Great. Thank you. Just as a follow-up, I recognize there's incredible macro uncertainty right now, but you're sticking with your near term, your volume target of 50% CAGR. As we just think about sort of in the year ahead, Cybertruck is going to be some contribution. There's going to be some help from further EV penetration growth. But to what extent are you willing to sacrifice on pricing to keep that 50% volume CAGR intact? Or are you thinking differently about margins versus your prior commentary of willing to sacrifice on margins to get more share?",
"session": "Question",
"person_id": 253177,
"person_company": null,
"component_order": 53
},
{
"name": "Elon Musk",
"speech": "It started by getting more share. It's just that you can think of every car that we sell or produce that has full autonomy capability as actually something that in the future may be worth as much as 5x what it is today. Because average [indiscernible] vehicle is doing like maybe 10 hours of driving a week. If sort of -- if this says 1.5 hours a day on average, that's 10 hours a week-ish. If you've got on autonomous -- if the vehicle is able to operate autonomously and use either dedicated autonomous or partially autonomous like Airbnb, like maybe sometimes you allow your car to be used by others. Sometimes you want to use it exclusively just like Airbnb -- doing Airbnb with a room in your house. The value is just tremendous. So I think it's sort of, it would be -- I think it -- it does make sense to sacrifice margins in favor of making more vehicles because we think in the -- not just in the future, but they will have a dramatic valuation increase. I think the Tesla fleet value increase at the point in which we can upload full self-driving and is approved by regulators will be the single biggest step change in asset value maybe in history.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 54
},
{
"name": "Martin Viecha",
"speech": "Thank you. Let's go to the next analyst. The question comes from Emmanuel Rosner from Deutsche Bank.",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 55
},
{
"name": "Emmanuel Rosner",
"speech": "Two questions from me as well. First, following up on the autonomy. So before you start launching these dedicated robotaxi vehicles on existing vehicles, you're improving FSD incrementally. What is your latest targeted timing to essentially release a non-beta version or an eyes-off version that would trigger much higher take rates? \r\nAnd would Tesla benefit from lowering the price of FSD?",
"session": "Question",
"person_id": 376728,
"person_company": null,
"component_order": 56
},
{
"name": "Elon Musk",
"speech": "Well, obviously, as people have sort of made fun of me and perhaps quite fairly have made fun of me, my predictions about achieving full self-driving have been optimistic in the past. The reason I've been optimistic is what -- it tends to look like is the -- we'll make rapid progress with a new version of FSD, but then it will curve over logarithmically. So first, logarithmic curve looks like just sort of fairly straight upward line, diagonally up. And so if you extrapolate that, then you have a great thing. But then because it's actually logarithmic, it curves over, and then there have been a series of stacked logarithmic curves. \r\nNow I'm the boy who cried FSD, but I think we'll be better than human by the end of this year. That's not to say we're approved by regulators. And I'm saying that would be in the U.S. because we've got to focus on one market first. But I think we'll be better than human by the end of this year. I've been wrong in the past, I may be wrong this time. \r\nAnd the price of FSD -- so the way I think is the price of FSD is actually very low is not high. When you go back to what I say here, the value of the car increased dramatically if it is actually autonomous. [ $15,000 ] is actually a low price, not a high price. And we will offer -- and we -- I think we do sort of offer FSD as a sort of monthly subscription, although most people don't know that. So I'd recommend like maybe trying it out as a monthly subscription so you don't have to go with the [ $13,000 ] thing. But I think yes, yes -- obviously, if the car is worth several times, it's original price, $15,000 is actually a low price for FSD.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 57
},
{
"name": "Martin Viecha",
"speech": "And the next question comes from William Stein from Truist.",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 58
},
{
"name": "William Stein",
"speech": "Great. I'd like to ask about -- to stick on this AI topic. We've read with great interest the developments in Dojo today, and you've spoken about FSD, but you've also -- Elon, you started this x.ai company. And for investors that think that there might be quite a bit of value in the AI features and products of Tesla, it might be concerning to see you pursuing another endeavor where AI is the focus. So can you talk about how x.ai might overlap, might perhaps compete with Tesla or in other ways, perhaps it enhances the value of what Tesla does.",
"session": "Question",
"person_id": 256580,
"person_company": null,
"component_order": 59
},
{
"name": "Elon Musk",
"speech": "Yes, I think we'll actually enhance the value of Tesla. There were just some of the world's best AI engineers and scientists that were willing to join a startup, but they were not willing to join a large sort of relatively established company like Tesla. So it was like that's actually how it got started. I was interviewing a few people and they're like, no, we want to do a startup. I was like, and that's well, I can't convince them to join Tesla. So -- so it's like, okay, well, better to start up that [indiscernible] then go work somewhere else. That's kind of the genesis of xAI. \r\nAnd xAI is focused on sort of AGI. Yes. So it's -- like I said, I think there will be some value that xAI brings to Tesla. Also some of the best -- for the very best people in the world, they really just want to work on interesting problem. So if you take, say, a material science group, really what convinced the Charlie Colman to leave Apple, where he was very happy and well compensated, and both at -- in both -- where we think is the best material science group in the world, was that he got to work at both Tesla and SpaceX. He wasn't willing to leave Apple if it was just Tesla, but he's willing to do it if it is Tesla and SpaceX. So sometimes you get the best talent in the world if that's the kind of thing you need to do. And that actually has been very beneficial to Tesla.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 60
},
{
"name": "William Stein",
"speech": "If I could squeeze one more mundane question in. I wonder if you think you can hit the 1.8 million unit number with current pricing? Or do you anticipate needing to continue to lower prices because it seems like they've stabilized. The trends have stabilized in the last maybe 1.5 months. Should we expect sort of continued decreases or more stabilization for the rest of the year?",
"session": "Question",
"person_id": 256580,
"person_company": null,
"component_order": 61
},
{
"name": "Elon Musk",
"speech": "Sure. We have sort of -- we started the referral program, which I think will be quite effective. As Zach was saying earlier, we don't control the macroeconomic conditions. So if interest rates continue to rise, that reduces the affordability of cars. And for a lot of people, they're really [indiscernible] just really breaking even every month. In fact, if you look at the rise in credit card debt, they are, in fact, not breaking even every month. Credit card debt is looking scary. So we just don't control the market conditions. If market condition is stable, I think prices will be stable. If they're not stable, then we would have lower prices. Yes.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 62
},
{
"name": "Martin Viecha",
"speech": "Thank you. Let's go to Colin Rusch from Oppenheimer.",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 63
},
{
"name": "Colin Rusch",
"speech": "As you're building out Dojo and implementing what truly is going to be a highly complex set of software, can you speak to the maturity of the operating system and how much outsourced software you're expecting to use in that system?",
"session": "Question",
"person_id": 310676,
"person_company": null,
"component_order": 64
},
{
"name": "Elon Musk",
"speech": "This is a custom software stack. So -- but it is designed such that you can run at a high level, PyTorch and JAX. So -- but then we have to customize it to actually run on a custom silicon. So the software stack is a combination of open source software and then Tesla software all the way to the bare silicon, which is the case for the inference computer in the car.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 65
},
{
"name": "Colin Rusch",
"speech": "Okay. That's super helpful. And then can you speak to how you're managing some of the geopolitical risks relative to your capacity expansion? Obviously, as you guys continue to grow at this rate, you're going to be putting some folks out of business. And there's going to be some impacts around regional economy. So I just want to understand how you're thinking about that in terms of some of your CapEx plans and how you're managing some of those relationships with different countries and regions.",
"session": "Question",
"person_id": 310676,
"person_company": null,
"component_order": 66
},
{
"name": "Elon Musk",
"speech": "Well, this is a period of unusual geopolitical risk. So I think we're -- the best we can do is have factories in many parts of the world such that if things get difficult in one part of the world, we can still keep things going in the rest of the world.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 67
},
{
"name": "Martin Viecha",
"speech": "Thank you. The next question comes from Mark Delaney from Goldman Sachs.",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 68
},
{
"name": "Mark Delaney",
"speech": "Tesla has been making progress reducing costs and did so again last quarter. Can you give an update on when you think automotive COGS per vehicle could be under the historical $36,000 per vehicle level? And what are the key puts and takes to get there?",
"session": "Question",
"person_id": 182836,
"person_company": null,
"component_order": 69
},
{
"name": "Zachary Kirkhorn",
"speech": "This is -- I think I was asked this in the past. This is very difficult to forecast. There's a series of costs that we manage. The series of cost in which we don't control. And so particularly on the commodity side, where labor cost go, et cetera, it's just hard to say.",
"session": "Answer",
"person_id": 385023,
"person_company": null,
"component_order": 70
},
{
"name": "Elon Musk",
"speech": "Yes. And we saw very inflationary -- like strong inflationary pressures for a while last year. And now -- which obviously makes it very difficult to reduce COGS. And now we're seeing what seems to be deflationary pressures, certainly deflationary -- deflation isn't pressure. But we're seeing commodity prices dropping as was mentioned, as Karn mentioned a moment ago. I mean, I don't know, what do you think? I mean, basically, the trends seem to be deflationary at the commodity level.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 71
},
{
"name": "Karn Budhiraj",
"speech": "Definitely. There's that. And then there's also the unit economics improve as volumes grow. That's the other thing we're seeing. As we're becoming a bigger and better part of a lot of suppliers, the economies of scale come into play. There's equipment depreciation that comes into play equipment that was commissioned 5 to 7 years ago. That used to be a part of the piece price. That's completely amortized. So we'll see situation where piece price comes down because that equipment contribution has gone away. \r\nAnd then just we continue to have this mentality of continuous improvement in terms of labor, reducing labor, improving automation, and just continue to get better at what we do. So we have seen -- I think every quarter, we have seen an improvement. Of course, the commodities spiked up and down. Just in general, the trend is towards being more efficient.",
"session": "Answer",
"person_id": 568567,
"person_company": null,
"component_order": 72
},
{
"name": "Zachary Kirkhorn",
"speech": "Yes, I'm totally agreeing.",
"session": "Answer",
"person_id": 385023,
"person_company": null,
"component_order": 73
},
{
"name": "Elon Musk",
"speech": "Yes, lithium prices weren't absolutely insane there for a while.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 74
},
{
"name": "Zachary Kirkhorn",
"speech": "Yes. And they're recovering now.",
"session": "Answer",
"person_id": 385023,
"person_company": null,
"component_order": 75
},
{
"name": "Karn Budhiraj",
"speech": "Cobalt the way it used to be.",
"session": "Answer",
"person_id": 568567,
"person_company": null,
"component_order": 76
},
{
"name": "Zachary Kirkhorn",
"speech": "Yes. And we're still early in the ramp -- well, not early in the ramp, but early in the cost down curve of Austin and Berlin. And so it takes time to work the cost out it. First, it's a focus on ramp, ramp it brings cost down...",
"session": "Answer",
"person_id": 385023,
"person_company": null,
"component_order": 77
},
{
"name": "Elon Musk",
"speech": "And quality costs.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 78
},
{
"name": "Zachary Kirkhorn",
"speech": "Yes. And then once that stabilizes, we can divert bandwidth to cost reduction. And so Austin and Berlin saw quite a decent amount of cost reduction on a fundamental basis from Q1 to Q2. We'll continue to do that work, that will be helpful. And so we're just going to keep chipping away at it.",
"session": "Answer",
"person_id": 385023,
"person_company": null,
"component_order": 79
},
{
"name": "Unknown Executive",
"speech": "Packaging is a big element to that.",
"session": "Answer",
"person_id": 182536,
"person_company": null,
"component_order": 80
},
{
"name": "Elon Musk",
"speech": "Yes. Just takes [indiscernible].",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 81
},
{
"name": "Zachary Kirkhorn",
"speech": "Logistics is normalizing, which is great.",
"session": "Answer",
"person_id": 385023,
"person_company": null,
"component_order": 82
},
{
"name": "Unknown Executive",
"speech": "[indiscernible] utilization, something that the team has been very focused on. So every bit of it.",
"session": "Answer",
"person_id": 182536,
"person_company": null,
"component_order": 83
},
{
"name": "Zachary Kirkhorn",
"speech": "Yes, and it's hard...",
"session": "Answer",
"person_id": 385023,
"person_company": null,
"component_order": 84
},
{
"name": "Elon Musk",
"speech": "Logistics is underappreciated. Yes, so I was saying guys like valves and with tactics as one with logistics.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 85
},
{
"name": "Unknown Executive",
"speech": "Yes. And we've made tremendous improvements in cost in all fronts on expect costs. We have done pre-pandemic expect cost levels now, and our goal is to go further down.",
"session": "Answer",
"person_id": 182536,
"person_company": null,
"component_order": 86
},
{
"name": "Zachary Kirkhorn",
"speech": "Yes. So when we look at our progress from Q1 to Q2 on cost, the way that we look at internally normalized for the impacts of mix shift with Austin and Berlin being a higher percentage of our mix, normalized for S and X being a higher percentage for mix in Q2 versus Q1. The sequential cost reduction, it might be the largest we've had in a while. So I think it's great work on behalf of the Tesla team, and we just got to keep it up.",
"session": "Answer",
"person_id": 385023,
"person_company": null,
"component_order": 87
},
{
"name": "Elon Musk",
"speech": "Yes, it's a game of pennies. So Game of Thrones with pennies.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 88
},
{
"name": "Martin Viecha",
"speech": "Mark, do you have a follow-up question? I think you're muted.",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 89
},
{
"name": "Mark Delaney",
"speech": "Yes. Maybe you could put a finer point on the downtime impact that you spoke about in your prepared comments in terms of production impact and then also to what extent there's a margin impact from those factory upgrades that you're planning this quarter?",
"session": "Question",
"person_id": 182836,
"person_company": null,
"component_order": 90
},
{
"name": "Zachary Kirkhorn",
"speech": "Yes, the downtime -- we don't know exactly the number of cars impacted because kind of the way that we go into downtime Windows for upgrades is we set aside a period of time, but then the team is challenged to go as quickly as possible so that we can get the factories up and running again and minimize that. It's not profound reduction. Hopefully, it's small.",
"session": "Answer",
"person_id": 385023,
"person_company": null,
"component_order": 91
},
{
"name": "Elon Musk",
"speech": "I think we're getting too much into the weeds here. I mean like we're asking for a level of precision that is not possible to answer. So let's move on.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 92
},
{
"name": "Martin Viecha",
"speech": "Yes. I think this is unfortunately all the time we have for today. So we'll speak to you all in the next 3 months. Thank you very much.",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 93
},
{
"name": "Elon Musk",
"speech": "Thank you.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 94
}
],
"title": "Tesla, Inc., Q2 2023 Earnings Call, Jul 19, 2023",
"quarter": 2,
"year": 2023
}
},
{
"transcript_title": "Tesla, Inc. - Q1 2023",
"transcript_name": "Tesla, Inc., Q1 2023 Earnings Call, Apr 19, 2023",
"ticker": "NASDAQ:TSLA",
"transcript_url": "https://wkarticles.blob.core.windows.net/finnhub/snp_transcript_2782075",
"date": "2023-04-19",
"year": 2023,
"quarter": 1,
"transcript_data": {
"date": "2023-04-19",
"participant": [
{
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{
"name": "Martin Viecha",
"speech": "Good afternoon, everyone, and welcome to Tesla's First Quarter 2023 Q&A Webcast. My name is Martin Viecha, VP of Investor Relations, and I'm joined today by Elon Musk, Zachary Kirkhorn and a number of other executives. Our Q1 results were announced at about 3:00 p.m. Central Time in the update deck we published at the same link as this webcast. \r\nDuring this call, we will discuss our business outlook and make forward-looking statements. These comments are based on our predictions and expectations as of today. Actual events or results could differ materially due to a number of risks and uncertainties, including those mentioned in our most recent filings with the SEC. [Operator Instructions] But before we jump into Q&A, Elon has some opening remarks. Elon?",
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"name": "Elon Musk",
"speech": "Thank you, Martin. So just a Q1 recap. Model Y became the best-selling vehicle of any kind in Europe and the best-selling non-pickup vehicle in the United States. And this is in spite of a lot of challenges in production and delivery. So it's a huge credit to the Tesla team for achieving these great results. The -- it is worth pointing out that the current macro environment remains uncertain. I don't think I'm telling anyone anything, I think people already know, especially with large purchases such as cars. And while we reduced prices considerably in early Q1, it's worth noting that our operating margin remains among the best in the industry. We've taken a view that pushing for higher volumes and a larger fleet is the right choice here versus a lower volume and higher margin. However, we expect our vehicles, over time, will be able to generate significant profit through autonomy. So we do believe we're like laying the groundwork here and that it's better to ship a large number of cars at a lower margin, and subsequently, harvest that margin in the future as we perfect autonomy. This is an extremely important point. \r\nLet's see. Regarding the Cybertruck, we continue to build Alpha versions of the Cybertruck on our pilot line for testing purposes. It's a great product, and we're completing the installation of the volume production line at Giga Texas, and we're anticipating having a delivery event, a great delivery event probably in Q3. As with all new products, it will follow an S curve, so production starts out slow and then accelerates. So the Cybertruck is no different. So it's -- there's [ press ] amount of demand for the product, obviously. And it is my view, a fantastic product, a hall of [ famer ]. But as with all new products, it takes time to get the manufacturing line going. And this is really a very radical product. It's not made in the way that other cars are made. \r\nSo with regard to Megapack, we're making great progress. Our energy storage deployment reached nearly 4 gigawatt hours in Q1. This is, by far, the strongest quarter ever. And this growth was achieved thanks to the ongoing ramp at our Mega factory in Lathrop, California. There's still some way to go to reach the [ full ] rate of 40 gigawatt hours per year. And then we additionally announced the start of a new Mega factory in Shanghai. So we're -- as we've expected, the stationary storage growth actually will significantly exceed the vehicle growth. \r\nRegarding Autopilot and Full Self-Driving. We've now crossed over 150 million miles driven by Full Self-Driving beta, and this number is growing exponentially. We're -- I mean, this is a data advantage that really no one else has. Those who understand AI will understand the importance of data -- of training data and how fundamental that is to achieving an incredible outcome. So yes, so we're also very focused on improving our neural net training capabilities as is one of the main limiting factors of achieving full autonomy. So we're continuing to simultaneously make significant purchases of NVIDIA GPUs and also putting a lot of effort into Dojo, which we believe has the potential for an order of magnitude improvement in the cost of training. And it also -- Dojo also has the potential to become a sellable service that we would offer to other companies in the same way that Amazon Web Services offers web services, even though it started out as a bookstore. So I really think that, yes, the Dojo potential is very significant. \r\nIn conclusion, we're taking a view that we want to keep making and selling as many cars as we can. Despite this being an uncertain macro environment, this is a good time to increase our lead further, and we'll continue to invest in growth as fast as possible. Once again, I'd like to give a huge thanks to all Tesla employees worldwide who are doing an incredible job again. And yes, super appreciated.",
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"name": "Martin Viecha",
"speech": "Thank you very much. And Zach has some remarks as well.",
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"name": "Zachary Kirkhorn",
"speech": "Thanks, Martin. I want to start by congratulating the Tesla team for record vehicle production and deliveries. And I also want to congratulate our energy storage team for record volumes as well. \r\nThere's 3 main points I want to make. First, automotive gross margin and operating margin reduced sequentially. But as Elon mentioned, these remain at healthy levels. In particular, automotive gross margin was impacted by a few factors since our discussion on the last earnings call, which include additional action taken in the second half of the quarter to improve vehicle pricing and onetime items, most notably warranty adjustments on older S and X vehicles as well as increased deferred revenue for certain Autopilot features as we transition technologies. \r\nProgress on vehicle cost reduction continued in Q1 with meaningful improvements on logistics and the beginnings of some commodity cost reductions starting to be realized. Per unit cost for Austin and Berlin improved as well, driven by record volumes. However, these factories still provide a margin headwind and will likely continue to do so until after we reach and stabilize at our intended volumes. Note that Q1 was our third quarter in our multi-quarter plan to move to a more regionally balanced mix of build and deliveries. As I've mentioned previously, this results in lower deliveries and production within a quarter due to a higher volume of cars in transit at the end of the quarter and has an associated impact on quarter-ending free cash flows. This was particularly prevalent in Q1 for S and X as we begin exporting cars for international deliveries. \r\nSecond, our storage business is starting to take shape, and this is exciting to see after many years of investment and focus. This business is growing as a percentage of the businesses of the company's revenue and reached its highest level yet in Q1, driven by an increasing rate of deliveries for our Megapack products. We are also making progress on storage profitability, generating our highest gross profit yet in the quarter. \r\nThird, I want to reiterate the philosophy by which we're operating the business this year. Our approach is to grow volumes as quickly as possible in both our vehicle and energy businesses. We plan to continue to invest heavily into our future plans, which include the Cybertruck next-generation platform, in-house cell production, energy storage business and our autonomy and AI-enabled products. And we plan to do this while keeping the business financially healthy and industry-leading. To accomplish this, we need to remain focused on cost efficiency and working capital and in particular, unwinding the strategic inventory buildup left over from the pandemic. \r\nI want to conclude by thanking the Tesla team again as well as thanking our suppliers and our customers.",
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"name": "Martin Viecha",
"speech": "Thank you very much. And let's go to investor questions on say.com. The first one is what is the process to make auto pricing adjustments? What variables do you consider? How frequently do you review pricing?",
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"name": "Zachary Kirkhorn",
"speech": "Do you want to take that, Elon, or do you want me to take that?",
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"name": "Elon Musk",
"speech": "My apologies. Sorry, I was on mute. Yes, I think this is not something that we can really talk about. It's just -- we do our best to evaluate the production output, macroeconomic conditions, and we make a decision. But it's -- unless there's something you'd like to add, Zach.",
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"name": "Zachary Kirkhorn",
"speech": "I think that's right. I mean, as a team, we review where we stand globally on a weekly basis and certainly, I can't get into the details of the reasons why certain decisions are made. But it is something that's very actively managed by a subset of the leadership team.",
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"name": "Martin Viecha",
"speech": "Thank you. The second question is, do you still believe Tesla Energy will be bigger than auto? And when will you provide more formal guidance on Megapack and overall Tesla Energy?",
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"name": "Elon Musk",
"speech": "Yes, I should just clarify like bigger than auto from the standpoint of like total gigawatt hours deployed. So it's possible automotive revenue may be higher, but gigawatt hours I think will be probably higher with stationary storage. If you just look at the -- what's needed to transition the world to a sustainable energy economy, there is more stationary energy storage needed than there is mobile energy storage. So -- and we are seeing growth of our stationary storage well in excess of automotive. So that is in line with expectations.",
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"name": "Zachary Kirkhorn",
"speech": "Yes. And on the guidance part of the question, and maybe, Martin, we can combine this with the next question, which is on guidance for margins, just have a single comment there. I think we are -- we will get to the point where we, as a company, provide guidance on the storage business. I say storage is a combination of both the Megapack business and the -- business. Relative to total revenues of the company, it's still fairly small. And the business has a lot of volatility currently, both in terms of volumes as well as financials just given the small volumes and kind of diversification of the customer pool there. But as this business grows and smooths out, I don't think we're that far away from it. I think including these volumes on our day 2 production and deliveries release is something that we'll start doing and then we can talk more formally as a business about our expectations over the coming year. I think it will be a few more quarters before we get there.",
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"name": "Martin Viecha",
"speech": "Thank you. The next question, as you said, was already answered, so let's go to the battery question.",
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"name": "Zachary Kirkhorn",
"speech": "Sorry. Just one other thing I wanted to mention on margin. While we're not providing specific guidance there, I mean, just to set expectations of where we think this business will go in terms of margins, probably generally in the ballpark of what we've seen historically on the vehicle business. We generally look to mid-20% gross margins for any program that we launch. And so we're not there yet on this business, but that's what we're working towards.",
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"name": "Elon Musk",
"speech": "We're hopeful to get there later this year, but that's not a promise. That's an aspiration.",
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"name": "Martin Viecha",
"speech": "Thank you. The next question is, how well are 4680 cells meeting the expectations described on the Battery Day? How long will it be until the cells meet those goals? Drew?",
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"name": "Drew Baglino",
"speech": "Yes. So on Battery Day, we established a cost-down road map through 2026 across 5 areas of effort. There was the cell design we discussed, [ anode and ] cathode materials, the structural pack concept and the cell factory itself, and we've been making progress across all of these aspects since then. For the cell factory, the Texas 4680 factory are partway through building and commissioning and selling and operating will be 70% lower CapEx per gigawatt hour than typical cell factories when fully ramped, in line with what we described on Battery Day. And we're continuing to further pursue densification and investment reduction opportunities in future factory build-outs like in Nevada. \r\nOn the cell design, we're in production with not only the first generation tablet cell we unveiled in Battery Day, but a second more manufactural version in Texas today. On the cathode materials side, we have a number of activities underway per the Battery Day road map. For lithium, our Corpus Christi Lithium refinery breaks ground this May. Our goal is to start commissioning portions of the facility before the end of the year. The refinery uses the sulfate-free spodumene refining process with reduced process costs, no acid or caustic reagents, lower embodied energy. It actually produces a beneficial byproduct that can be repurposed in construction materials. We discussed all of these concepts on Battery Day. Same with cathode precursor, we've successfully demonstrated lower process cost, 0 waste water precursor process that we described on Battery Day at both lab and pilot scale and are in the detailed design phase for incorporating this technology into the front end of our Austin cathode facility. \r\nOn cathode production, we are 50% equipment and 75% utilities installed at our new cathode building in Austin with our goal to begin dry and wet commissioning this quarter and next quarter with a target to produce first material before the end of the year. Structural pack, we saw big improvements with pack manufacturing with the 4680 cell and the structural pack concept, 50% lower CapEx and 66% smaller factory for the same output in gigawatt hours per year. We do believe structural as a concept is a good one. It's simpler. We'll continue to structurally load the cells and use the pack as the floor of the vehicle while iterating the design to closer to B-level execution of this A-level architecture in future programs. \r\nAnd zooming out for the 4680 team, Q1 was all about cost and quality. We made significant improvements in both areas. Texas production increased 50% quarter-over-quarter through yields increased 12% and [ CATO ] peak rate increased by 20% and [ 3 ] yields improved by 20%. Altogether, the team accomplished a 25% reduction in COGS over the quarter, and we are on track to achieve steady-state cost targets over the next 12 months. And going forward for the rest of the year, the priority, one, is yielding cost for the 4680 program as we steadily ramp production ahead of Cybertruck next year.",
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"name": "Martin Viecha",
"speech": "Thank you very much. The next question is, what do you anticipate 2023 automotive gross margins ex credits will be at the company's current pricing levels?",
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"name": "Zachary Kirkhorn",
"speech": "Yes, I can start off on this one. This is a difficult environment to make a projection like this. There's a lot of macro uncertainty. There's also headwinds and tailwinds. And this is basically a question I think that's asking about viewpoint and where costs will go. And within costs, there's a set of costs in which we do control the set of costs in which we're kind of subject to what's going on in the macro world. Within the bucket of things we control, the most of the cost down that we're working on is around ramping our Austin factory, stabilizing that and then doing the cost optimization work once we get to our intended volumes there. And a part of the cost journey in the Austin factory is, as Drew mentioned, the 4680 cells, which is an input into our Austin COGS. And so as the 4680 program improves over the course of the year on cost, as Drew mentioned, and then the noncell portion of the factory improves, then we see a pretty good trajectory in the Austin facility. \r\nA similar story exists in the Berlin factory. It does not have 4680 as an input, but for that factory, the journey to complete localization is still ongoing. And so over the course of this year, as volume increases, more localization occurs, we do see a good path to cost reduction in the Berlin factory as well. In existing factories, do we talk about this on every call, so I don't need to rehash it, but the expectation is that every existing factory improves all of their key metrics, and we continue to see the progress there. \r\nThere's also a handful of other costs in which we have influence, but the philosophy here is that we're aggressively going across every cost bucket that we can. Within the world that we don't control, the 2 major costs there being logistics, which fortunately is moving in our favor, and I think our supply chain team has done a great job both on logistics optimization and taking advantage of reduced spot rates where they can. So thank you to our supply chain team. \r\nAnd then there's the commodities world, which has been a huge page point in our cost structure over the last, say, 2 years or so, and we're still kind of at the maximum of pain for commodities in our cost structure. It kind of maximize -- max down in the second half of last year. We did start to see, in Q1, a little bit of improvement. We think there'll be a little bit more improvement in Q2, but...",
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"name": "Elon Musk",
"speech": "The [ team ] has dropped a lot. It's worth mentioning that the price of lithium has dropped significantly.",
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"name": "Zachary Kirkhorn",
"speech": "Yes. And that's the piece that we expect to see more impact on in Q2. And generally, as a company, we do expect commodity prices to come down and have a more meaningful impact in the second half of the year. So this is our approach. How that nets out, I mean, just a lot of risk, and we'll have to see how the year progresses.",
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"name": "Martin Viecha",
"speech": "Thank you. The next question is, how has global order intake tracked since the most recent round of price cuts?",
"session": "Answer",
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"name": "Elon Musk",
"speech": "I think the overall thing we can say is that orders are in excess of production.",
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"name": "Martin Viecha",
"speech": "Thank you. And maybe the last question from investors, can you give updated specs and pricing for Cybertruck and any new features that will make it to production?",
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"name": "Elon Musk",
"speech": "Well, I think we'll save that for the Cybertruck handover, which will hopefully be around the end of Q3 this year. And one thing I am confident of saying is that it's an incredible product, it's a hall of famer, I think. And a product like this only comes once in a long while. So it will not be disappointed at all. It's amazing.",
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"name": "Martin Viecha",
"speech": "Great. Thank you very much. And let's go to analyst questions. We'll start with Alex Potter from Piper Sandler.",
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"name": "Alex Potter",
"speech": "Can you hear me? .",
"session": "Question",
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"name": "Martin Viecha",
"speech": "Yes.",
"session": "Answer",
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"name": "Elon Musk",
"speech": "Yes.",
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"name": "Alex Potter",
"speech": "Okay. Perfect. So first question was on Lathrop. Obviously, that's -- it's great to see the growth there. Just wondering when you think that facility might be closer to full utilization? Are you just sort of deliberately working your way up the S curve there? Demand, obviously, isn't the limitation. So what are what are the steps, I guess, to unlocking full utilization there?",
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"name": "Drew Baglino",
"speech": "Sure. There are some plastic factory aspects of what's going on in Lathrop. We actually had 2 phases of the CapEx there. We [ placed ] some of the general assembly parts of the facility. But in addition, we also have ramps with our suppliers that we are following, so both on the sell side and on the power electronics side. And we will see that unlock in the latter half of this year with inputs. So the overall facility was phased with the second phase of CapEx coming online towards the end of this year.",
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"name": "Alex Potter",
"speech": "Okay. Great. And then I guess my second question is on your ability to serve other markets out of Shanghai. Obviously, the facility in Berlin should be opening up your ability to, I guess, allocate more vehicles to Southeast Asia, Australia, other areas. I'm just wondering what other regions do you think you're maybe not yet serving effectively? What are your time lines for addressing some of those gaps in your regional exposure?",
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"name": "Elon Musk",
"speech": "Yes. That's a good question because there are still many parts of the world that we do not yet serve with respect to vehicles especially. So we do expect to open up new markets around the world. And while those markets are not necessarily individually gigantic, they do add up to add a whole bunch of markets. They do collectively sum up to something significant. So it's high time that Tesla operates cars to the rest of the world, and that is something that we intend to do.",
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"name": "Martin Viecha",
"speech": "Okay. Thank you very much. Let's go to the next analyst, George from Canaccord.",
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"name": "George Gianarikas",
"speech": "I was wondering, first, if you could discuss your FSD take rates and whether you've seen any significant positive or negative change there? And also, given that you've reduced the prices for your vehicles, do you think you need to do that for FSD as well?",
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"name": "Elon Musk",
"speech": "Well, I can kind of answer the details on the FSD take rate, but the -- it's a tricky pricing question because the value of a car that is autonomous is enormous. So in a way, the price right now is an option value on an autonomous vehicle. And that value is -- will ultimately be very significant. And it's really -- yes. I mean, for those that are using the FSD beta, I think you can see the improvements are really quite dramatic. There'll be a little bit of 2 steps forward, 1 step back between releases for those trying the beta. But the trend is very clearly towards full self-driving, towards full autonomy. And I hesitate to say this, but I think we'll do it this year. So that's what it looks like. Yes.",
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"name": "George Gianarikas",
"speech": "Maybe on the dramatic change we've seen in EV-related commodity prices. Do you think it's a reflection of any recent overcapacity in mining and refining? Or is that sort of a coincident indicator on global EV demand? And how do you expect those prices to kind of track over the next several quarters?",
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{
"name": "Elon Musk",
"speech": "Man, I wish I had a crystal ball to answer your question. I don't know if we can provide a question that would -- with -- that would have any value really. I think we're in uncertain times. And if somebody got a crystal ball they can lend me, I'd really like to borrow it. But these are uncertain times. My guess is this it's economic stormy weather for about a year or so. And then if we hold roughly 12 months and then -- but this is my guess. It's just pure speculation. Stormy weather for about 12 months. And then provided there are no major geopolitical wildcards that show up, that things start getting sunny around spring next year.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 36
},
{
"name": "Drew Baglino",
"speech": "The only thing I would say on the -- like EV materials markets. They're not all super liquid and some of them, for example, like less than -- like single-digit percentage of the market has actually traded on the spot market. And not only are they not super liquid, there's not -- like storage isn't particularly fast for all of materials. So like small mismatches in supply and demand drive, like large price wins, not really real price wins, but just like temporarily large price swings. So it's hard to read into those price wings. I don't know, Karn, if you want to add anything.",
"session": "Answer",
"person_id": 393478,
"person_company": null,
"component_order": 37
},
{
"name": "Karn Budhiraj",
"speech": "Yes. Well, this is Karn, by the way. We are seeing, as Elon mentioned, quite a bit of softening in the lithium carbonate market. This was -- 6 months ago, we were trading at like $85,000 a ton, and today's spot price is about 26%. So there's been a dramatic decrease in that. Of course, we were able to take advantage of low lithium pricing earlier on with fixed price contracts. And we find that this is going to be another opportunity -- opportune moment to basically extend that into the later half of the decade. But we -- at the quantities we're procuring, we're not as impacted by the spot market because we have those contracts in place, and we're just going to be going and doing more of that. The other thing that's happening is because of the price spike, a lot of the companies that are in this business are becoming more ambitious about finding more upstream resources and exploring locations in Africa as well as South America. So that's also helping the macro situation with pricing.",
"session": "Answer",
"person_id": 568567,
"person_company": null,
"component_order": 38
},
{
"name": "Elon Musk",
"speech": "Yes. But just on the lithium front, to emphasize, the choke point is more -- much more on refining capacity than it is on mining. The theme is actually -- is very common throughout the world, including in the U.S. and really never -- it's just a very common element on earth, it's lithium. So it's much more a question of where is the refining capacity and can the refining capacity keep up? That's really what matters more than where is the lithium ore. It's everywhere basically. \r\nI think that same question also extends to refining of the cathode and to some degree, refining of the anode. And this is why we, at Tesla, we're building our lithium refinery capability at Corpus Christi and our cathode refinery outside Austin. \r\nIt's worth noting, I hope other companies do the same thing. We will have, by far, the most lithium refining capability and the most cathode refining capability in North America, I think, probably more than everyone else combined by a lot. So can other people please do those work? That would be great. We're begging you. We don't want to do it. Can someone please? Like instead of making a picture-sharing app, please, we're trying, lithium, mining and refining, heavy industry, come on.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 39
},
{
"name": "Zachary Kirkhorn",
"speech": "It's fun. It's actually fun.",
"session": "Answer",
"person_id": 385023,
"person_company": null,
"component_order": 40
},
{
"name": "Elon Musk",
"speech": "Yes, yes. Exactly. For real.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 41
},
{
"name": "Zachary Kirkhorn",
"speech": "Tesla -- we're here, ready to buy.",
"session": "Answer",
"person_id": 385023,
"person_company": null,
"component_order": 42
},
{
"name": "Elon Musk",
"speech": "It's [indiscernible] Tesla is not famous because we want to do it. We have a lot of fish to fry, obviously, but we're doing it because others aren't doing it, and we wish others would do it.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 43
},
{
"name": "Martin Viecha",
"speech": "Awesome. Thank you very much. Let's go to Emmanuel Rosner from Deutsche Bank.",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 44
},
{
"name": "Emmanuel Rosner",
"speech": "Can you hear me?",
"session": "Question",
"person_id": 376728,
"person_company": null,
"component_order": 45
},
{
"name": "Martin Viecha",
"speech": "Yes, we can. Yes.",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 46
},
{
"name": "Emmanuel Rosner",
"speech": "Maybe a first question for Elon, on your pricing strategy. So if I understand your message, you're saying Tesla feels it's worth maximizing the volume, increasing the size of the fleet as fast as you can because you'll be able to monetize this over the life cycle of the vehicle. Could you be a little bit more specific around ways you would be able to monetize sort of like this existing fleet in the future. Obviously, I think autonomous seems to be a big piece of it, but my understanding was that robotaxi would probably be for the next-generation vehicle, not the existing ones. So I guess in which ways would you monetize it?",
"session": "Question",
"person_id": 376728,
"person_company": null,
"component_order": 47
},
{
"name": "Elon Musk",
"speech": "Sorry, the robotaxi terminology can be a bit confusing because that's sort of like a generic term for our next-generation vehicle. And we obviously are working on next-generation vehicle. That's going to be very compelling. This is just not the time to talk about it in details product. So we internally call it robotaxi. But really, all of the vehicles that have hardware 3, which is the vast majority of our fleet, we believe will achieve full autonomy. So there will be a like a Model 3 or Model Y would be a robotaxi, a robotic taxi. So yes, that's -- to the best of my knowledge that we believe the current hardware can achieve full autonomy.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 48
},
{
"name": "Emmanuel Rosner",
"speech": "Understood. And then maybe a question for Zach back on the automotive gross margins. So I think, I guess, a few months ago, even after major price cuts, you felt pretty strongly that 20% automotive gross margin was still probably a reasonable floor. Obviously, the macro has gone worse and additional price cuts have happened. Is there anything else that has changed in terms of the outlook? Is it just the macro deteriorating? Is it the competitive landscape? Anything else that's sort of like makes you think differently around the full year? And is there a way, therefore, to frame a floor?",
"session": "Question",
"person_id": 376728,
"person_company": null,
"component_order": 49
},
{
"name": "Zachary Kirkhorn",
"speech": "Yes. About half of the miss against that previous conversation last quarter is attributed to adjustments we made in pricing in the second half of the quarter. I mean, I guess you could argue that, that lowers the floor in a sense. We've also made pricing adjustments so far this quarter. So that brings it down further. About the other half of the miss in Q1 was attributed to things that are nonrecurring. So I mentioned these in my opening remarks. It's a warranty adjustment for cars that were previously produced but not part of the pedigree of cars we're building now and some autopilot-related deferrals as we make some technology changes here that this deferral should get recognized once some of the software catches up. So those 2 things are not repeating. So hopefully, that helps answer your question.",
"session": "Answer",
"person_id": 385023,
"person_company": null,
"component_order": 50
},
{
"name": "Elon Musk",
"speech": "Yes. I mean there's really 2 macro factors that are tricky. The biggest being the interest rate. So if there's a very high Fed rate or interest rates are very high, that -- that is -- every time the Fed raise the interest rates, that's equivalent to increasing the price of a car. It makes the cars less affordable because people are able to buy cars as a function of what they can afford on a monthly basis. So that's -- so it's just almost directly equivalent to a price increase, is there any kind of interest rate increase. \r\nThen the other factor is whenever there is uncertainty in the economy, people will generally postpone new -- big, new capital purchases like a new car. This is a natural human reaction. So if people are reading about layoffs and whatnot in the press, they're like, well, they might be worried about -- they might be laid off. So then there'll be naturally a little more hesitant than they would otherwise be to buy a new car. Now this is just the nature of the auto industry. But there is -- there will be a trans amount of pent-up demand for new cars. So it goes through cycles.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 51
},
{
"name": "Martin Viecha",
"speech": "Thank you. Let's go to Ben Kallo from Baird.",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 52
},
{
"name": "Ben Kallo",
"speech": "When you talk about [ manifest ] supply, you talked about Dojo being a product that you can sell outside of Tesla. How do we rank all the things you have going on and then in the economic environment? I mean, like heat pumps and everything else you have going on versus investing in the vehicle business? Or is that not the right way to look at it?",
"session": "Question",
"person_id": 160874,
"person_company": null,
"component_order": 53
},
{
"name": "Elon Musk",
"speech": "I'm not sure I fully understand your question, but I'd look at Dojo as like kind of a long-shot bet, but if it's a long chart bet that pays off, it will pay off in a very, very big way. But potentially, yes, potentially in a very, very big way. Like in the multi-hundred billion dollar level. But I think it's like still put it in the long shot category, but long shot with a multi-hundred billion dollar potential outcome. And -- so it's a bet worth making, but not one you can sort of say like or take it to the bank type of thing. Although these days take it to the bank, it's maybe not as secure as it used to be. \r\nSo obviously, we're big believes in heat pumps. And that is on all this that over time is to do a really good heat pump for homes and commercial offices and stuff. And we have the technology that's really good. But it's still -- it's a back burner item. Our focus is very much on vehicles, autonomy, stationary storage, basically solving sustainable energy and solving autonomy, which would be like -- solving autonomy, if we're able to have a fleet of several million vehicles that with a software update can be potentially worth several times their original value, that's -- that will be -- if that happens, that will be the -- and I think it will happen, that will be the biggest asset value increase in history, I think.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 54
},
{
"name": "Ben Kallo",
"speech": "[indiscernible] pricing, but a lot of pundits talk about the pie and losing share or gaining share. But how do you guys look at pricing versus the [ BBs ] or price vehicles? Or does that not come into the equation? Sorry to ask about pricing again.",
"session": "Question",
"person_id": 160874,
"person_company": null,
"component_order": 55
},
{
"name": "Elon Musk",
"speech": "No, it's really just like -- every day, we get a daily real-time update of how many cars were ordered yesterday, how many cars were produced yesterday. We must have -- if there's a company that's got more real-time data than Tesla -- I'm not sure there's any company on earth that has better real-time data than Tesla, except maybe SpaceX Starlink. So -- because like we don't have to -- for the other car companies, they will make the cars, send them to the dealers, then the dealers will sell the cars. And then it takes quite a long time for them to get the data back to actually figure out how many cars were sold. Whereas we know how many cars were ordered yesterday throughout the world. So our fingers on the pulse is real time and does not have latency, whereas the other car companies have a lot of latency in their data. \r\nAs does the government, the government has a lot of agency in their data. So we're just looking at and saying, okay, what does it take to achieve a clearing price for our vehicle production? And then we'll make a pricing change, and we see what happens immediately and adjust course. So we're adjusting course -- and we're thinking about it literally every day, 7 days a week. Every 7 days, we [ collect ] that e-mail and so is the rest of the team. And we try to make the lease down decision that we can. And on balance, I think our decisions are pretty good. Sometimes they'll be down, but on average, they're, I think, better than the rest of the industry.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 56
},
{
"name": "Zachary Kirkhorn",
"speech": "Just to add on the question about EV market share or ICE. This comes up a lot. I think a lot of the public debate is around this concept of EV market share. We don't look at it that way. I mean we look at it as [indiscernible] it's a car market and not an EV market. And actually, the mission of the company requires internal combustion engine cars to be switched over to electric vehicles. So that's what we pay attention to.",
"session": "Answer",
"person_id": 385023,
"person_company": null,
"component_order": 57
},
{
"name": "Martin Viecha",
"speech": "Yes. I've said that last time, too. We got -- you guys got to stop looking at it as the EV market. It's how many cars are we selling. Just start looking at it that way.",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 58
},
{
"name": "Elon Musk",
"speech": "All cars will be EVs. It's going to -- I've said this for a long time. We'll look back, I don't know, assuming civilization is still around in 20 years, we'll look back on internal combustion engine vehicles the same way we look back on external combustion engine vehicles, which is like the steam engine. A steam engine is an external combustion engine vehicle. And there's still a few around. They're kind of quirky and kind of cool collectors' items. That's how gasoline cars will be in the future.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 59
},
{
"name": "Martin Viecha",
"speech": "Thank you. Let's go to Colin Rusch from Oppenheimer.",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 60
},
{
"name": "Colin Rusch",
"speech": "Can you talk a little bit about how much of the actual cost structure is variable on these vehicles? And if you could give us a range on pulse or minus the lithium cost within those contracted volumes that you're seeing?",
"session": "Question",
"person_id": 310676,
"person_company": null,
"component_order": 61
},
{
"name": "Elon Musk",
"speech": "Well, I think -- again, we'd really love to have a crystal ball here, but we don't have it. Depending on what time scale you're looking at, most of the car is variable. So most car cost is variable. So -- and probably, if I were to guess, I think we will see improved costs from suppliers yes, I think we will -- that is our expectation.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 62
},
{
"name": "Drew Baglino",
"speech": "And we're already starting to see that, Elon, I think you had mentioned before that we anticipated a crash in the lithium prices and some of that has flowed through by way of lithium carbonate reductions into battery cost. And the same thing will happen with lithium hydroxide. The length of the supply chain matters also because what we're talking about is very far upstream. So by the time it makes sense that [indiscernible]. It will be several months. But beyond just the commodity pricing, as Zach mentioned earlier, we're also very focused on other metrics that make production very efficient. So for example, detention and demurrage air expedites. I think our air expedites are down 90%. Detention and demurrage is down 93% from the peaks. That can be hundreds of thousands of dollars per vehicle. So we're sort of attacking all vectors and becoming very efficient.",
"session": "Answer",
"person_id": 393478,
"person_company": null,
"component_order": 63
},
{
"name": "Colin Rusch",
"speech": "Okay. And then my follow-up is really around stationary storage demand on the utility scale. I mean, obviously, there's a gigantic queue for interconnection in the U.S. And can you talk about the volume of quotation you're seeing at this point around stationary storage for the renewables queue on a global basis? And how much of that is converting into actual sales?",
"session": "Question",
"person_id": 310676,
"person_company": null,
"component_order": 64
},
{
"name": "Elon Musk",
"speech": "Drew, do you want to take that?",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 65
},
{
"name": "Drew Baglino",
"speech": "I mean -- yes, I don't -- that's also not exactly how we look at it, really. We're not like -- yes, we're not engaged in the interconnection queue. Like we're focused on ramping Megapack as quickly and efficiently as we can, and we have visibility into the pipelines of a variety of different renewable energy and just pure stationary storage developers and we also develop our own projects. And we're mostly just -- we're being selective in trying to pick the products -- the projects that best fit our mission and our objectives.",
"session": "Answer",
"person_id": 393478,
"person_company": null,
"component_order": 66
},
{
"name": "Elon Musk",
"speech": "Yes. This -- again, this is not a product call, but we'll have something -- I mean, this -- we're making improvements on many fronts, including Megapacks. So I think some of those improvements will improve the speed at which you can connect the Megapacks to the grid.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 67
},
{
"name": "Martin Viecha",
"speech": "Thank you. The next question is from Mark Delaney from Goldman Sachs.",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 68
},
{
"name": "Mark Delaney",
"speech": "Do you still see 2 million units as an upside case for volume this year? And is the gating factor for reaching 1.8 million or 2 million units in 2023 still supply chain, as was mentioned on your last conference call? Or is it more about [ the end of this month? ]",
"session": "Question",
"person_id": 182836,
"person_company": null,
"component_order": 69
},
{
"name": "Elon Musk",
"speech": "Well, if you have a crystal ball you can lend me, back to the crystal ball situation. These are volatile times. From a production standpoint, if things go well, we've got a shot at 2 million vehicles this year. But that's an upside case. And we feel comfortable with 1.8 million. And we'll see how this year unfolds.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 70
},
{
"name": "Mark Delaney",
"speech": "That's helpful. And then the company had spoken at the Investor Day and then for the past conference calls about opening up its vehicle charging network. Can you speak to some of the feedback you've been getting from both Tesla owners and non-Tesla owners? And how the ramp of the charging network may progress from here?",
"session": "Question",
"person_id": 182836,
"person_company": null,
"component_order": 71
},
{
"name": "Elon Musk",
"speech": "Drew, do you want to take that?",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 72
},
{
"name": "Drew Baglino",
"speech": "Yes. So as you may have seen, we opened our first [indiscernible] post in Europe and our [ Magic Dock ] in North America. And that is indicative of the direction we're heading with universal compatibility for all vehicles no matter where the charge port, et cetera, in all major markets, and we're going to continue to roll out those sort of improved offerings as we build new stations. We're always balancing like our ability to serve our own customers with our ability to serve new customers when doing that. I think we've been able to balance it rather well. For example, in Europe, 50% of all of our supercharging stations are open to all EVs, and we've been able to do that without any increase in wait times at all for anybody. So we're going to continue to take a similar approach as we do this in North America and China over the coming quarters.",
"session": "Answer",
"person_id": 393478,
"person_company": null,
"component_order": 73
},
{
"name": "Martin Viecha",
"speech": "Okay. Thank you very much. Let's go to Rod Lache from Wolfe Research.",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 74
},
{
"name": "Rod Lache",
"speech": "I just wanted to first just follow up on your comments in your letter about leveraging your cost position as others struggle with unit economics and also taking into account the lifetime revenue, actually in a way that most other automakers will never see just given your service network and supercharging and other attributes. Can you just maybe give us a sense of how far you'd be willing to take this? Are there brackets around the range of initial margin that you'd be comfortable with? And again, any color that you might provide on the updated range of margins that you'd expect in the auto business?",
"session": "Question",
"person_id": 370532,
"person_company": null,
"component_order": 75
},
{
"name": "Elon Musk",
"speech": "I think we may have answered this question or tried to ask this question a few times. But it's difficult to say what the margin will be. It depends on what the macroeconomic environment is like. So for example, if the Fed were to lower the rates, that would be super helpful for demand. If they raise them, that just raises the interest costs that buyers have to pay for to buy a car. So it reduces affordability and therefore, reduces demand. So it's -- but if -- like if we look past, say, this year or like go sometime next year, middle of next year, so I think things are looking really -- I think, like I said, [indiscernible], if there's some major geopolitical wildcard that turns up. But in the absence of that, I think I would be very optimistic about middle of next year, end of next year.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 76
},
{
"name": "Zachary Kirkhorn",
"speech": "Just to add to Elon's comments, just 2 other points. What's really important for us this year in addition to just managing the day-to-day of the business but is also investing in, as Elon mentioned, what 2024 and 2025 will look like. And so using the cash generated from the sale of products today and reinvesting that, this is very important for us. And I think that what happens to margins over the next couple of quarters that only matters in the context of of what that means for our ability to reinvest into 2024 and 2025. And we have a lot of space before that becomes something that we have to revisit our investment plans. And so we're planning to keep the business healthy. But I just want to caution folks about reading too much into what happens over the near term here because we're very focused as a company on making sure that when we exit this macroeconomic situation, this company is positioned in the best possible way.",
"session": "Answer",
"person_id": 385023,
"person_company": null,
"component_order": 77
},
{
"name": "Elon Musk",
"speech": "Yes, exactly.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 78
},
{
"name": "Rod Lache",
"speech": "Just to elaborate on that point though, the revenue the long-term lifetime revenue that you're targeting from each vehicle is massive. So if you took that to the extreme, it would seem that you'd be comfortable with a relatively low initial margin. Am I misinterpreting that? Or is that exactly right?",
"session": "Question",
"person_id": 370532,
"person_company": null,
"component_order": 79
},
{
"name": "Elon Musk",
"speech": "Correct. That's exactly right.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 80
},
{
"name": "Rod Lache",
"speech": "Okay. And the -- normally, in a recession, when consumers feel less financially secure, actually price elasticity deteriorates. Just based on your pulse taking of the consumer, do you have a view on elasticity of demand?",
"session": "Question",
"person_id": 370532,
"person_company": null,
"component_order": 81
},
{
"name": "Elon Musk",
"speech": "Well, I can't emphasize enough the whole -- just fundamental question of affordability. For most people, their ability to buy a car is a function of can they make monthly payment or not. And so like I said, if interest rates are really high, like they are right now, then in some cases, people can't get a loan at all. So it's -- I think probably banks are pretty -- not leaning forward in providing loans, I expect, these days. So that's -- like there is -- there is quite a powerful story here when you -- going back to something as alluded to a moment ago -- I mentioned a moment ago that Tesla is in a uniquely strong strategic position. Because we're the only ones making cars that technically, we could sell for 0 profit for now and then yield actually tremendous economics in the future through autonomy, no one else can do that. I'm not sure how many people will appreciate the profundity of what I've just said, but it is extremely significant.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 82
},
{
"name": "Martin Viecha",
"speech": "Thank you. Let's go to Adam Jonas from Morgan Stanley.",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 83
},
{
"name": "Adam Jonas",
"speech": "So first, Elon, good luck with tomorrow's launch of Boca Chica. Break a leg.",
"session": "Question",
"person_id": 118469,
"person_company": null,
"component_order": 84
},
{
"name": "Elon Musk",
"speech": "Thanks. You can't have too much luck in the rocket business, that's for sure.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 85
},
{
"name": "Adam Jonas",
"speech": "Incredible. So now that you've gotten to know the Twitter architecture kind of intimately well over the past 6 months, what can you tell Tesla stakeholders about how an X.com or Super App could be potentially accelerative to Tesla's business model?",
"session": "Question",
"person_id": 118469,
"person_company": null,
"component_order": 86
},
{
"name": "Elon Musk",
"speech": "Well, I don't know. I guess it could make it potentially make it easier to buy cars. So -- We've string somewhat off topic here because I think there's some benefit. I think probably there's some benefit, yes.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 87
},
{
"name": "Adam Jonas",
"speech": "I get it, Elon,. So just as a follow-up on manufacturing, you're a student of history. And you'll note that back in 1913, Henry Ford introduced the moving assembly line in Highland Park, Michigan. And the price of a Model T, which had already been undercutting cars around the time, fell another 70% or 80%, and hundreds of rival car companies went bust. I'm wondering if history is repeating itself here, Elon, and that the recent pattern of cuts with you is way ahead of the cost curve compared to competition? Is this -- it seems like it's a calculated strategy, not just in reaction to competition or changing supply demand in the market, but your -- could we catalyze some Darwinian forces in the EV market?",
"session": "Question",
"person_id": 118469,
"person_company": null,
"component_order": 88
},
{
"name": "Elon Musk",
"speech": "Well, I mean, we're not trying to say, take pricing actions in order to be deliberately -- to deliberately undermine competitors or anything like that. We really don't think about competitors that much. We just look at, do people like our cars, how can we make the product better, can they afford our cars? And the sort of the things like improving service and whatnot. But actually, we do have this unique strategic advantage that we have -- we're making a car that if autonomy pans out and we think it will, where that asset is actually will be worth a hell a lot more in the future than it is now. So it is taking to be possible to sell it at 0 profit, but still have the net present value of future cash flows associated with that asset very significant.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 89
},
{
"name": "Drew Baglino",
"speech": "And service and charging and insurance and all of these other ongoing revenue streams that other companies don't have.",
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"name": "Elon Musk",
"speech": "Yes.",
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"name": "Lars Moravy",
"speech": "Certainly, we want all EVs to succeed, too. We just want to say that we're not like some malicious attacks to try to [ discredit ] everybody.",
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"name": "Elon Musk",
"speech": "Definitely not. We're like opening up superchargers. We've made our patents available for free. So it's like -- we're trying to be helpful here. So we're not out to destroy competitors or anything like that. We're trying to help competitors, frankly, in any way we can.",
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"name": "Martin Viecha",
"speech": "Thank you. Let's go to Dan Levy from Barclays.",
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"name": "Dan Levy",
"speech": "First question, you're ramping supply at Austin and Berlin. So I wanted to understand just how critical it is to further increase volume at those plants just to get the vertical integration benefits in the face of the sort of market with some demand questions. And just broadly, should we -- I mean, historically, you've been operating at the pace at which your supply allows you to produce as opposed to gauging to demand. Should we generally expect that you're going to continue to produce at your -- whatever the max capacity that you're allowed within your supply constraints, regardless of what the broader economic environment is just to continue to get that volume out there?",
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"name": "Elon Musk",
"speech": "So that is -- yes, I mean, there could be like obviously a macro shock that is so severe that people just stop buying cars for some reason. But in the absence of that, we will continue to grow output at a rapid clip.",
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"name": "Dan Levy",
"speech": "Great. And then just on the margins associated with Austin and Berlin. You mentioned Austin want to have the margin drag until you reach intended volumes. I don't know if you can disclose what those volumes are. And then maybe you could just remind us of what the margin profile of Austin and Berlin will look like versus Shanghai once you get the vertical integration benefits in place?",
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"name": "Elon Musk",
"speech": "Well, probably [indiscernible] have be quite as good as Shanghai. Shanhai Is hard to -- has a very efficient cost structures, obviously, our lowest cost structure in the world. But we do expect to be -- make significant improvements in Austin and Berlin and continue to make improvements in Fremont as well. So...",
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"name": "Unknown Executive",
"speech": "We've increased -- this is [indiscernible]. We increased our localization efforts. So that will then drive down our days and on-hand requirements. We've made 10% quarter-over-quarter improvement in days and on-hand. So we'll continue that as a localization improves.",
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"name": "Martin Viecha",
"speech": "Okay. Thank you very much. And our final question comes from Philip Houchois from Jefferies.",
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"name": "Philippe Houchois",
"speech": "It's slightly longer term. I completely agree with your comments that we should look at Tesla in terms of auto market share and not EV market share. But I'm just wondering, as you build up the market share globally, is there a limit to the direct selling business model as you practice it? And should we think about -- going forward, you need to look into the agency or using importers to basically develop market share more smoothly, I guess, globally? And so in other words, is there kind of [ fell by date ] for the direct business model as you -- today?",
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"name": "Elon Musk",
"speech": "Seems to be working well so far.",
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"name": "Philippe Houchois",
"speech": "Because we hear different feedback from customers who miss the human interaction or unhappy with the service, and I'm just wondering if you're seeing some growth pains in there that would lead you to change. You're not seeing that?",
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"name": "Elon Musk",
"speech": "Well, I mean, there are -- since we're always going to have some growing pains where at times -- and it depends on which geography we're talking about where sometimes service is behind sales, sometimes it's ahead of sales. This is -- I mean Telsa's growing, I believe, faster than any company in history that makes a large complex manufactured object. So these are -- as you try to max -- it's always difficult to match exponentials. So -- but I think it is helpful to have the feedback loop with a service because that means we feel the pain of service, and then we can address the design to make the car need less service. And I think that gives us the right incentive structure like because the best service is no service. The car doesn't break. And whereas if you have, say, a dealer network that is reliant upon services revenue, then you arguably have a misalignment of incentives where they're making money on service. But actually, we want to -- the best thing for the consumer is the car doesn't need servicing so.",
"session": "Answer",
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"name": "Philippe Houchois",
"speech": "Yes. And then last one, if I can follow up. Have you worked out, I mean, for many of your traditional competitors? A fair amount of profits for them comes from selling spare parts and servicing, and you don't have that in your profit structure. And have you looked at the deficit you have compared to your peers?",
"session": "Question",
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"name": "Elon Musk",
"speech": "Yes. Actually, this one -- assuming I could wax on about for a while because really, people didn't understand that the best short-selling argument against Tesla for the longest time was the fact that Tesla does not have an existing fleet and that the auto industry, the reason incumbents succeed and newcomers fail, the biggest reason is that the incumbents have a large fleet, and they're able to sell new cars at close to 0 margin and then sell spare parts at a very high margin, sort of razors and blades type thing. And so the only way to actually succeed for a newcomer to succeed is to have a product that is so compelling that people are willing to pay a premium over the incumbent product. And in the absence of electrification and autonomy, I don't think a newcomer can succeed.",
"session": "Answer",
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{
"name": "Martin Viecha",
"speech": "Thank you very much, everyone. Unfortunately, that's all the time we have for this quarter. We'll see you again in 3 months from now. Thank you.",
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],
"title": "Tesla, Inc., Q1 2023 Earnings Call, Apr 19, 2023",
"quarter": 1,
"year": 2023
}
},
{
"transcript_title": "Tesla, Inc. - Q4 2022",
"transcript_name": "Tesla, Inc., Q4 2022 Earnings Call, Jan 25, 2023",
"ticker": "NASDAQ:TSLA",
"transcript_url": "https://wkarticles.blob.core.windows.net/finnhub/snp_transcript_2721581",
"date": "2023-01-25",
"year": 2022,
"quarter": 4,
"transcript_data": {
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"transcript": [
{
"name": "Martin Viecha",
"speech": "Good afternoon, everyone, and welcome to Tesla's Fourth Quarter 2022 Q&A Webcast. My name is Martin Viecha, VP of Investor Relations, and I'm joined today by Elon Musk, Zachary Kirkhorn and a number of other executives. Our Q4 results were announced at about 3:00 p.m. Central Time in the update deck we published at the same link as this webcast.\r\nDuring this call, we will discuss our business outlook and make forward-looking statements. These comments are based on our predictions and expectations as of today. Actual events or results could differ materially due to a number of risks and uncertainties, including those mentioned in our most recent filings with the SEC. [Operator Instructions] But before we jump into Q&A, Elon has some opening remarks. Elon?",
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"name": "Elon Musk",
"speech": "Thank you, Martin. So '22 -- just going through the '22 recap. It was a fantastic year for Tesla. It was our best year ever on every level. Team did an amazing job. It's an honor, of course, to work with such an incredibly talented group of people.\r\nSo in 2022, we delivered over 1.3 million cars and achieved a 17% operating margin, the highest among any volume carmaker, I think maybe among any carmaker. While doing so, we generated $12.5 billion in net income and $7.5 billion in free cash flow. Importantly, the Tesla team achieved these records while -- despite the fact that 2022 was an incredibly challenging year due to forced shutdowns, very high interest rates and many delivery challenges. So it's worth noting that all these records were in the face of massive difficulties. Credit to the team for achieving that. \r\nThe most common question we've been getting from investors is about demand. Thus far -- so I want to put that concern to rest. Thus far in January, we've seen the strongest orders year-to-date than ever in our history. We currently are seeing orders at almost twice the rate of production. So I mean, that -- it's not to say whether that will continue [indiscernible] but the orders are high. And we've actually raised the Model Y price a little bit in response to that. \r\nSo we do -- we think demand will be good despite probably a contraction in the automotive market as a whole. So basically, price really matters. I think there's just a vast number of people that want to buy a Tesla car but can't afford it. And so these price changes really make a difference for the average consumer. And sometimes for those -- for people who are well -- who have a lot of money, they sort of forget about how important affordability is. And it's always been our goal at Tesla to make cars that are affordable to as many people as possible so I'm glad that we're able to do so. And yes, so I think it's a good thing, all things considered. \r\nWe're also making very good progress on cost control. And we're seeing the cost production in Berlin and Austin drop commensurate with the growth in production, as you'd expect, so yes. With respect to Autopilot, as of now, we deployed whole self-driving beta to [indiscernible] city streets to roughly 400,000 customers in North America. This is a huge milestone for autonomy as FSD Beta is the only way any consumer can actually test the latest AI-powered autonomy. And we're currently at about 100 million miles of FSD outside of highways. \r\nAnd our published data shows that improvement in safety system -- stuttering here, safety statistics, it's very clear. So we would not have released the FSD Beta if the safety statistics were not excellent. Regarding batteries, production rate of 4680 cells reached 1,000 cars a week at the end of last year, and we're increasing capacity for 4680 cells by another 100 gigawatt-hours as announced at Giga Nevada yesterday. Our long-term goal is to get to well in excess of 1,000 gigawatt-hours of cells produced internally and continue to use the self cell providers. So to be clear, we will continue to use other cell providers. Just that the demand for lithium ion batteries is quasi-infinite and will be for quite some time. So we feel we can scale a lot faster using both suppliers and internally produced cells. \r\nAnd we've got an amazing plan for making the 4680 cell low-cost and high energy density. So energy storage also saw record growth and with that is continuing to accelerate. That's always worth remembering that the 3 pillars of a sustainable energy future are obviously electric vehicles, solar and wind, and the third key item is stationary storage to store the energy from solar and wind because obviously, the sun doesn't shine all the time and the wind doesn't blow all the time. So you have those 3 things, you can convert all of it to a fully sustainable situation many times over, actually. \r\nSo I would like to just make it clear that there is a path to a fully sustainable future for humanity, and we -- our goal at Tesla is to accelerate progress on that path as much as humanly possible. So yes, so we were ramping up Megapack production. And we expect it to grow at a rate quite a bit faster than our legal output. \r\nSo in conclusion, we are taking a view that we want to keep making and selling as many cars as we can. We believe we can keep pushing for strong volume growth while retaining the industry's best operating margins. As we mentioned many times before, we want to be the best manufacturer. But really, manufacturing technology will be our most important long-term strength. And we'll talk more about our upcoming plans at the March 1 Investor Day. And lastly, I want to once again thank all of our employees for delivering another record-breaking year. Congratulations, guys.",
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"name": "Martin Viecha",
"speech": "Thanks, Elon. And I think Zach has some opening remarks as well.",
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"name": "Zachary Kirkhorn",
"speech": "Yes. Thanks, Martin. So as Elon mentioned, 2022 was a terrific year for Tesla. I also want to congratulate the Tesla team and also say thank you to our suppliers for your support during quite a volatile year. On a full year basis, revenue increased over 50%. Operating income doubled, free cash flows increased over 50% and our margins remained industry-leading. Additionally, we continued to make progress on overhead efficiencies as non-GAAP OpEx as a percentage of revenue improved further.\r\nFor Q4 specifically, sequential and annual margin was impacted by ASP reductions as we are managing through COVID impacts in China, uncertainty around the consumer tax credit in the U.S. and a rising interest rate environment. Note that in 2022, rising interest rates alone had effectively increased the price of our cars in the U.S. by nearly 10%. \r\nAdditionally, COGS per unit has increased on a year-over-year basis, driven primarily by 3 factors: first is raw materials and inflation led by lithium prices and discussed at length in previous calls; second, we are working through the early ramp of inefficiencies of our Austin and Berlin and in-house cell production factories; third, our vehicle mix over the last year has moved more heavily towards Model Y, which carries a slight cost premium to Model 3. \r\nPartially offsetting these impacts, we've continued to execute on Tesla controllable cost reductions, in line with the progress we've made in prior years. These improvements include our continued work to gradually move towards a regionally balanced build of vehicles. The energy business had its strongest year yet across all metrics, led by steady improvement in both retail and commercial storage. While much work remains to grow this business and improve costs, we believe we are on a good trajectory. \r\nAs we look towards 2023, we are moving forward aggressively leveraging our strength and cost. There are 3 key points I wanted to make here: first, on demand, as Elon mentioned, customer interest in our products remains high; second, on cost reduction, we're holding steady on our plans to rapidly increase volume while improving overhead efficiency, which is the most effective method to retain strength in our operating margins. In particular, we're accelerating improvements in our new factories in Austin, Berlin and in-house cells, where efficiencies are the highest. But we are attacking every other area of cost and unwinding cost increases created for multiple years of COVID-related instability. This includes logistics, expedites, accumulation of material buffers, part premiums, productivity and overheads as an example. \r\nAs the world transitions from an inflationary to deflationary environment, we expect a strong partnership with our suppliers on this journey as well. In that, we've priced our products with a view towards a longer-term cost structure. Thus, there will be an impact on operating margin in the near term. However, we believe our margins will remain healthy and industry-leading over the course of the year. \r\nThird, we are continuing to ensure funding is prioritized for our long-term road map. This includes expanding in-house cell production, bringing Cybertruck to market, development of our next-generation vehicle platform, expansion of our manufacturing footprint and growth of the energy business. We're looking forward to discussing these plans in more detail on our Investor Day in a month. Thank you.",
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"name": "Martin Viecha",
"speech": "Thank you very much, Zach. Let's now go to investor questions. The first question is, some analysts are claiming that Tesla orders, net of cancellations, came in at a rate less than half of production in the fourth quarter. This has raised demand concerns. Can you elaborate on order trends so far this year and how they compare to current production rates? I think...",
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"name": "Elon Musk",
"speech": "We already answered that question.",
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"name": "Martin Viecha",
"speech": "Yes, exactly.",
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"name": "Elon Musk",
"speech": "Demand far exceeds production, and we actually are making some small price increases as a result.",
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"name": "Martin Viecha",
"speech": "Thank you. The second question is in a similar vein. What has the initial reaction been to global price reductions in early 1Q 2023, specifically in terms of order intake levels? We've answered that 1 as well. \r\nSo let's go to the next one. The next investor question is, will Tesla be able to take full advantage of advanced manufacturing production credits for battery cells packs? So $3,700 per long-range Model 3 and Model Y, it's $45 a kilowatt-hour for autos and energy products and how much does Tesla expect to earn in the coming year from these credits?",
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"name": "Elon Musk",
"speech": "I'll say a little bit about it, then I think Zach will add some. Long term, we expect these -- the value of these credits to be very significant. You can do the math if we were to get anyone your 1,000 gigawatt-hours [ a year ] of production or even a few hundred gigawatt-hours, it's very significant. So -- but the credits do rely upon domestic manufacturing. And in the case of Panasonic domestic manufacturing, we're splitting the value of the credits. So it -- the value of credits this year will not be gigantic, but I think it could be gigantic -- we think it probably will be very significant in the future.",
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"name": "Zachary Kirkhorn",
"speech": "Yes, just to add and input some boundaries on what we're expecting in terms of impact to Tesla for this year. So different products, we think, will get different amounts of credit. The regulations here are still in flux and there continues to be updates so this is just our best understanding at the moment. But we think on the order of $150 million to $250 million per quarter this year and growing over the course of the year as our volumes grow. \r\nAnd part of the work we're doing here, which is part of what this incentive package is trying to incentivize is, as Elon mentioned, to move more manufacturing onshore in the United States, which is Tesla's plans anyways. And so I think we're pretty well positioned over the coming years to take advantage of this. \r\nBut then also part of what the goal of this incentive package is, is to improve adoption from our customers. And so we also want to use these incentives to improve affordability as we think about what the price points are in our products going forward. And so as we're thinking about our pricing changes in the U.S. a couple of weeks ago that we announced, we were looking at what the credit benefit to Tesla would be to make sure that customers are able to receive the benefit not only from this that were received to some extent but also on the consumer-facing side, which is currently $7,500 per car of tax credit, assuming that -- subject to the MSRP caps and the income caps. So we want to use this to accelerate sustainable energy, which is our mission and also the goal of this bill.",
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"name": "Martin Viecha",
"speech": "Thank you very much. The next question from investors is, after recent price cuts, analyst released expectations that Tesla automotive gross margin, excluding leasing and credits, will drop below 20% and average selling price around $47,000 across all models. Where do you see average selling price and gross margins after the price cuts?",
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"name": "Elon Musk",
"speech": "Yes, go ahead, Zach.",
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"name": "Zachary Kirkhorn",
"speech": "Yes, I'll jump in on this. So there is certainly a lot of uncertainty about how the year will unfold, but I'll share what's in our current forecast for a moment. So based upon these metrics here, we believe that we'll be above both of the metrics that are stated in the question, so 20% automotive gross margin, excluding leases and credits and then $47,000 ASP across all models.\r\nAnd so 2 other comments I want to make on this, just tactically on sequential ASP changes from Q4 to Q1. And just as a reminder, the ASP reduction is not as large as the reduction in configurator prices. As in Q4, we had backlog customers that we're delivering cars to at a lower price book, given that backlogs had been so long for so much of 2022. But then also, there are various programs in place that we used in Q4 that lowered ASPs. \r\nThe second comment I wanted to make here is that as a management team here, we're most focused on what our operating margin is. And so as other areas of the business become more important, particularly the energy business, which is growing faster than the vehicle business and as we're heavily focused on operating leverage here, improving efficiency of our overheads, we think the right metric for us to be focused on is operating margin. And so I wanted to make sure that I shared that with the investor community as well because that is what we're primarily managing to now.",
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"name": "Elon Musk",
"speech": "Yes. Something that I think some of these smart retail investors understand but I think a lot of others maybe don't is that the -- every time we sell a car, it has the ability, just from uploading software, to have full self-driving enabled and full self-driving is obviously getting better very rapidly. So that's actually a tremendous upside potential because all of those cars, with a few exceptions -- I mean, only a small percentage of cars don't have Hardware 3. \r\nSo that means that there's millions of cars were full self-driving can be sold at essentially 100% gross margin. And the value of it grows as the autonomous capability grows. And then when it becomes fully autonomous, that is a value increase in the fleet. That might be the biggest asset value increase of anything in history. Yes.",
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"name": "Martin Viecha",
"speech": "Thank you. Let's go to the next investor question. Since Elon started political influencing, polls from Morning Consult and YouGov show...",
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"name": "Elon Musk",
"speech": "YouGov, [indiscernible]",
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"name": "Martin Viecha",
"speech": "Show Tesla brand favorability declining in 2022 and division among partisan lines. Such brand damage can impact demand. Does Tesla track favorability? And how will any brand image be mitigated?",
"session": "Answer",
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"name": "Elon Musk",
"speech": "Well, let me check my Twitter account. Okay, so I've got 127 million followers. It continues to grow very rapidly. That suggests that I'm reasonably popular. It might not be popular the way with some people, but for the vast majority of people, my follow count speaks for itself. I'm the most interactive account -- social media account, I think, maybe in the world, certainly on Twitter, and that's actually predated the Twitter acquisition. \r\nSo I think Twitter is actually an incredibly powerful tool for driving demand for Tesla. And I would really encourage companies out there of all kinds, automotive or otherwise, to make more use of Twitter and to use their Twitter accounts in ways that are interesting and informative, entertaining, and it will help them drive sales just as it has with Tesla. So the net value of Twitter, apart from a few people are complaining, is gigantic, obviously.",
"session": "Answer",
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"name": "Martin Viecha",
"speech": "Thank you. Let's go to the next question. Please provide a detailed explanation of where you are on the 4680 ramp. What are the current roadblocks? And when do you expect to scale to 10,000 vehicles a year -- a week?",
"session": "Answer",
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{
"name": "Drew Baglino",
"speech": "Yes. Thanks, Martin. First, I just want to say congrats and thanks to the Tesla 4680 team for achieving 1,000 a week in Q4. It was no small feat. Definitely a result of more than a couple of years of hard work. As far as where we stand in Texas, 1 of 4 lines are in production, with the remaining 3 in stages of commissioning and install. Really, our 2023 goal as a 4680 team is to deliver a cost-effective ramp of 4680s well ahead of Cybertruck. \r\nFocus areas are dialing in and improving the quality of the high-volume supply mechanical parts and driving factory process yields up as much as possible. Between 2 of those things, if we had achieved those key goals, we'll be well set up to -- for a major 4680 year in 2024.",
"session": "Answer",
"person_id": 393478,
"person_company": null,
"component_order": 20
},
{
"name": "Martin Viecha",
"speech": "Thank you. Next investor question is Elon said previously that FSD Hardware 4 will most likely come first in Cybertruck. Is that still the current plan? Do you expect there to be an upgrade path for Hardware 3 cars to Hardware 4?",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 21
},
{
"name": "Elon Musk",
"speech": "Yes, Cybertruck will have Hardware 4. And to be clear, for 2023, Cybertruck will not be a significant contributor to the bottom line but it will be into next year. So it's an incredible product. I can't wait to drive it personally. It will be the car that I drive every day. I actually just I'm wearing the T-shirt with this matched glass. And it's just one of those products that only comes along once in a while, and it's really special. \r\nSo yes, so with respect to upgrading cars on Hardware 3, I don't think that will be needed. Hardware 3 will not be as good as Hardware 4, but I'm confident that Hardware 3 will so far exceed the average -- the safety of the average human. So [indiscernible] like how do we get ultimately to, let's say, for argument's sake if Hardware 3 can be, say, 200% or 300% safer than human, Hardware 4 might be 500% or 600%. It will be Hardware 5 beyond that. \r\nBut what really matters is are we improving the average safety on the road. But it is the cost and difficulty of retrofitting Hardware 3 with Hardware 4 is quite significant. So it would not be, I think, economically feasible to do so.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 22
},
{
"name": "Martin Viecha",
"speech": "Thank you. The next question is for Zach. Zach, when do you think Tesla Insurance will become big enough revenue source to warrant providing more details in the financials of the business so investors can compare it to other insurance companies?",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 23
},
{
"name": "Zachary Kirkhorn",
"speech": "Yes. I think it's probably going to take some time before this business is large enough for specific financial disclosures. But I'm happy to provide an update on where we stand in the business. So we're currently at a $300 million annual premium run rate as of the end of last year. We're growing 20% a quarter so it's growing faster than the growth in our vehicle business. \r\nAnd in the states in which we're operating, on average, 17% of the customers in the states are using a Tesla Insurance product. And that number continues to tick up as we spend more time in markets. And we see most of the adoption occurring when folks take delivery of a new car, as they're setting up insurance for the first time as opposed to going back and switching when they already have insurance set up. So there's an inherent stickiness in the Insurance business.",
"session": "Answer",
"person_id": 385023,
"person_company": null,
"component_order": 24
},
{
"name": "Elon Musk",
"speech": "No, go ahead.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 25
},
{
"name": "Zachary Kirkhorn",
"speech": "No, I was just going to say, just as a broader reminder on kind of the motivation for starting this business, it was to improve and still is to improve the total cost of ownership of our cars, given that we're seeing high premiums of insurance from third-party companies. And that remains our priority here. We'll obviously run this as a healthy business, but we want to make sure we keep our costs low and insurance stays affordable to our customers.",
"session": "Answer",
"person_id": 385023,
"person_company": null,
"component_order": 26
},
{
"name": "Elon Musk",
"speech": "Yes. And so there are 2 really important side benefit to our Tesla Insurance that are worth mentioning, one of which Zach alluded to, which is that just by Tesla operating insurance for our cars at a competitive rate, that makes the other car insurance companies offer better rates for Teslas. So it has a bigger effect than you think because it improves total cost of insurance costs even when they don't use Tesla Insurance, because now the guy goes up to the world have to compete with Tesla and cannot charge outrageous insurance for Teslas. So it's great. So it has an amplified effect, very important. \r\nThen it is also giving us a good feedback loop into minimizing the cost of repair of Teslas for all Teslas worldwide because we obviously want to minimize the cost of repairing at Tesla if it's in a collision and for Tesla Insurance. And previously, we didn't actually have good insight into that because the other insurance companies would cover the cost. And actually, the cost, in some cases, were unreasonably high. \r\nSo we've actually adjusted the design of the car and made changes in the software of the car to minimize the cost of repair, obviously minimize -- first, the best repair is no repair, avoid the accident entirely, which since every Tesla comes with the most advanced active safety in the world, whether or not you buy full self-driving, you still get the intelligence of full self-driving for active safety, active collision prevention. So it's giving us this really good feedback before, again, reducing cost -- total cost of ownership and also just figuring out how to get -- if somebody's cars in an accident, most accidents are actually small. They're like a broken fender or scratched side of the car or something like, the vast majority of accidents. \r\nBut we're actually solving how to get somebody's car repaired very quickly and efficiently and back in their hands. And like I said, those improvements actually apply then to old cars. And we're making just to emphasize another key point because some of these points might be like, so I apologize for being repetitive. \r\nBut it's remarkable how small changes in design of the bumper and improving -- obviously improving the logistics of spare part, providing spare parts needed for collision repair, have an enormous effect on the repair cost. So if you're waiting for a part to get repaired and that part takes a month, now you've got a month of having to rent another car. It's extremely expensive. And of course, you're missing the car that you love and the 1 you actually want to drive. So this has actually a very significant effect on total cost of ownership and customer happiness.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 27
},
{
"name": "Martin Viecha",
"speech": "Thank you. The next question from investors is, is Cybertruck production still on track for midyear?",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 28
},
{
"name": "Elon Musk",
"speech": "We do expect production to start, I don't know, maybe sometime this summer. But I always like a downplay at the start of production because the start of production is always very slow. It increases exponentially, but it's always very slow at first. So I wouldn't put too much stock in start of production. It's kind of when does volume production actually happen, and that's next year.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 29
},
{
"name": "Drew Baglino",
"speech": "Yes, that's on. Like just to emphasize on that, we've started installation of production equipment here in Giga Texas, castings, GA, general assembly, body shops. We built all our beta vehicles, some more coming still in the next month, but as you said, the ramp will really come 2024.",
"session": "Answer",
"person_id": 393478,
"person_company": null,
"component_order": 30
},
{
"name": "Elon Musk",
"speech": "Yes, exactly.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 31
},
{
"name": "Martin Viecha",
"speech": "And the last investor question is with near-infinite global demand for energy storage, where will Tesla build the next Megapack factories? How many are needed on each continent?",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 32
},
{
"name": "Elon Musk",
"speech": "It's a good question. It's not something we -- I think we'll provide an update about that in the future, but it is something we're thinking about very carefully. I really kind of like what is the fastest path to 1,000 gigawatt-hours a year of production. And you'll see announcements come out later this year and next that answer that question.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 33
},
{
"name": "Martin Viecha",
"speech": "Thank you. Okay. And now let's go to analyst questions. The first analyst question comes from Rod Lache from Wolfe Research.",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 34
},
{
"name": "Rod Lache",
"speech": "Just firstly, it sounds like your 1.8 million unit volume indication for this year is somewhat more supply constrained than demand constrained. Then I have a follow-up on cost. Is that an accurate statement?",
"session": "Question",
"person_id": 370532,
"person_company": null,
"component_order": 35
},
{
"name": "Elon Musk",
"speech": "Well, okay. I mean, our internal production potential is actually closer to 2 million vehicles, but we were saying 1.8 million because I don't know, it just always seems to be some force majeure thing that happened somewhere on Earth. And we don't control if there's like earthquakes, tsunamis, wars, pandemics, et cetera. So if it's a smooth year, actually, without some big supply chain interruption or massive problem, we actually have the potential to do 2 million cars this year. We're not committing to that but I'm just saying that's the potential. So -- and I think there would be demand for that, too.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 36
},
{
"name": "Rod Lache",
"speech": "Yes, thanks for clarifying that. And on the cost side, the numbers that we just saw from you, as you pointed out, were weighed down by the 4680 ramp, the Berlin, Austin Giga things, processes, not at rate. Can you give us a bit of an indication of the headwind that you're absorbing from those things like you did last quarter? \r\nAnd then lastly, on cost, do you think that we can tease out an interesting data point from on where battery costs are headed from this announcement that you just made last night? If I'm correct, it looks like the investment cost per kilowatt-hour is less than half of what I've seen anywhere else, maybe $30 a kilowatt-hour for that capacity.",
"session": "Question",
"person_id": 370532,
"person_company": null,
"component_order": 37
},
{
"name": "Elon Musk",
"speech": "I don't think we want to say the specific number, but it's interesting, if you look at the size of the -- of Giga Nevada that is allocated to make 100 gigawatt-hours, is a small fraction of the size that currently makes about 35.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 38
},
{
"name": "Drew Baglino",
"speech": "Yes. I mean, the goals we've outlaid at Battery Day on the investment required to deploy cell manufacturing, I mean, that's been a key focus of ours and the team is doing a good job hitting the marks on that focus.",
"session": "Answer",
"person_id": 393478,
"person_company": null,
"component_order": 39
},
{
"name": "Elon Musk",
"speech": "Yes. And it goes back to the point I was making. I said it several years ago, I think Tesla's really the competitive strength that will be, by far, the hardest for other companies to replicate is Tesla being just d*** good at manufacturing and having the most advanced manufacturing technology in the world. And if you've got that sort of advanced manufacturing toolbox, you can apply it to many things and we're applying it now to battery cells. \r\nI should also say that there -- we have other products in development. We're not going to announce them obviously, but they're very exciting. And I think we'll the minds when they -- when we reveal them. Tesla has the most exciting product of any company on Earth by a long shot. And we'll continue to, I think, be in that position. We've got more great ideas. I mean, we know what to do with So the future is very exciting. \r\nAs I said in the last call, there's going to be bumps along the way and we'll probably have a pretty difficult recession this year, probably. I hope not, but probably. And so 1 can't predict the short-term sort of stock value because when there's a recession and people panic and the stock market, then prices of stocks value of stocks can drop sometimes to surprisingly low levels. But long term, I'm convinced that Tesla will be the most valuable company on us.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 40
},
{
"name": "Martin Viecha",
"speech": "Thank you. And I think, Zach, there was a question on cost headwind in Q4.",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 41
},
{
"name": "Zachary Kirkhorn",
"speech": "Yes. I mean, our weighted average COGS for the company, if you were to assume Austin and Berlin were at the cost structure of our other factories, it was on the order of [ 2,000 to 2,500 ] of headwinds. So I think from there, you can back into margin impact of those factories as of end of Q4.",
"session": "Answer",
"person_id": 385023,
"person_company": null,
"component_order": 42
},
{
"name": "Martin Viecha",
"speech": "Thank you very much. And let's go to the next question from Pierre Ferragu from New Street Research.",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 43
},
{
"name": "Pierre Ferragu",
"speech": "Zach, actually, I'd like to follow up on the data point you just gave on cost. If I look back at the COGS per car, you guys bottom close to $36,000 in the middle of 2021. And then the number went up as you had to face with inflation in input costs and the ramp of Berlin and Texas. And this quarter, I think we are close to $40,000 and we peaked maybe close to $42,000 at some point last year. And so my question from here is, how much time do you think it takes you to get back to this kind of $36,000, which would mean Berlin and Texas and [indiscernible] all that stuff is normalizing, is that like -- and that would be like a kind of like a 10% decline in the COGS per car? Is that something we can hope to see this year or is that too optimistic?",
"session": "Question",
"person_id": 356336,
"person_company": null,
"component_order": 44
},
{
"name": "Zachary Kirkhorn",
"speech": "The Austin and Berlin ramp in efficiencies and 4680 will make a substantial amount of progress on that over the course of the year, and that's within Tesla's control. We're doing a lot of work on cost reduction outside of that. And we talked about supply chain costs, expedite logistics, attacking everything.\r\nOn the raw materials and inflation side, where lithium is the large driver there and this was a meaningful source of cost increase for us, we'll have to see where lithium prices go. And we're not fully exposed to lithium prices, but I think in general, is what we've seen from our forecast here, cost per car of lithium in 2023 will be higher than 2022. So that's a headwind that would have to be overcome to return back to those levels. So I don't think we'll get there this year but I think we'll make progress. And we'll continue to find ways to offset these raw material costs that we don't have control over. Andrew, is there anything on that?",
"session": "Answer",
"person_id": 385023,
"person_company": null,
"component_order": 45
},
{
"name": "Lars Moravy",
"speech": "Yes. Like on the non-cells raw material, we begin to capture benefits of indexes tapering out, but due to the length of various supply chains, it does take time before this is reflected in our financials. And while alumina is down like 20% year-over-year, steel is about 30% down year-over-year, the global non-cells raw materials market continues to be influenced by geopolitical situations in Europe, high production cost due to labor cost increases and energy spikes and disruptions due to natural disasters like typhoon in Korea 4 months ago, pandemic lockdowns. \r\nSo we believe that meaningful price corrections will ultimately come but it remains uncertain exactly when. In the meantime, we continue to redesign supply chain to make it more efficient and work with our supplier partners to find more efficiencies, streamline logistics and transportation to produce cars.",
"session": "Answer",
"person_id": 482177,
"person_company": null,
"component_order": 46
},
{
"name": "Martin Viecha",
"speech": "Sorry, do you want to go say something?",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 47
},
{
"name": "Drew Baglino",
"speech": "I was going to say, we're also -- our fleet is starting to mature, the 3, Y fleet. And we're gathering a lot of data out of that fleet to understand how we can sort of bring some margin that we didn't know we had out of the product. So over the course of 2023 on the powertrain side, we're actually going to go after sort of some materials where we're paying for more performance than we need or we have more content than we need without impacting reliability at all.\r\nAnd that will actually add up to a pretty significant cost reduction on the powertrain side over the course of 2023. So we're not just sort of relying on supply. We're also doing design actions to bring cost out.",
"session": "Answer",
"person_id": 393478,
"person_company": null,
"component_order": 48
},
{
"name": "Elon Musk",
"speech": "My guess is if the -- if the recession is a serious one and I think it probably will be but I hope it isn't, that would lead to meaningful decreases in almost all of our input costs. So we expect to see deflation in our input costs most likely, which would then lead to, yes, better margin. I'm just guessing here. So this is -- that would be my, I guess.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 49
},
{
"name": "Pierre Ferragu",
"speech": "So as a quick follow-up, Elon, I was thinking about like FSD, and when you look at like the situation today compared to a year ago, it's -- like the progress has been, like, amazing in the quality of the product but also its rollout. And so I was wondering, how much is this like impacting the take rate of FSD today? So do you already see that people are getting more excited by FSD because they see it around them on 400,000 cars and they see the value of the service already? Or is that too early to really see like to expect like an uptick in the take rate?",
"session": "Question",
"person_id": 356336,
"person_company": null,
"component_order": 50
},
{
"name": "Elon Musk",
"speech": "The trend is very strong towards use of FSD. And as you alluded to, the -- with each incremental improvement, the enthusiasm obviously increases. And so I think something that still a lot of people out there don't quite appreciate is that Tesla's, Tesla is as much as a software company as a hardware company, but Tesla is really one of the world's leading AI companies. This is kind of a big deal with AI on the software side and on the hardware side.\r\nWith the Hardware 3 inference computer still the most efficient inference computer in the world despite being, at this point, 5 years old from the design point. And with Hardware 4 coming and then Hardware 5 beyond that where there are significant leaps. And the Dojo computer, we expect to be using that operationally at Tesla later this year. And we're seeing just a lot of world-class AI talent join the company. \r\nThere's also the long-term potential of Optimus where we're able to use our expertise in electric motors and power electronics, batteries and advanced manufacturing to be able to make a humanoid robot that is actually useful and can be made at high volume with exceptional capabilities because of the AI that where we take the -- because the car is like a robot on 4 wheels and Optimus is a robot on legs. \r\nBut the -- as we get closer and closer to solving real-world AI, and we don't see anyone even close to us in achieving this, the value -- I think you appreciate this and a few others do but most don't know what I'm talking about. And so -- but it's -- this is the thing that has order of magnitude potential market cap improvement for Tesla.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 51
},
{
"name": "Martin Viecha",
"speech": "And the next question comes from Alex Potter from Piper Sandler.",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 52
},
{
"name": "Alex Potter",
"speech": "Okay, great. So a quick 1 on FSD. This, I guess, for Zach. Obviously, you unlocked some deferred revenue in the quarter that will translate presumably into higher margins on every incremental sale going forward so long as people opt in for FSD. But was wondering if you're able to disclose the percentage of the $15,000 price that you're not going to be able to recognize as revenue upfront rather than deferred.",
"session": "Question",
"person_id": 140104,
"person_company": null,
"component_order": 53
},
{
"name": "Zachary Kirkhorn",
"speech": "Yes. I mean, the way that we've structured this is a full self-driving package has 2 components. There's enhanced Autopilot, the price of which is listed on the website. We fully recognize that. Then there's an incremental, which is for the additional features of full self-driving offers and we've released a portion of that. \r\nAnd then there's a minority of the total package that's remaining that will be released over time as software updates are there. And in our shareholder letter, in addition to disclosing the dollar amount of the deferred revenue release, we also included in there the dollar value of the balance of unreleased deferred revenue that will be released over time with future software updates.",
"session": "Answer",
"person_id": 385023,
"person_company": null,
"component_order": 54
},
{
"name": "Alex Potter",
"speech": "Okay, great. And then maybe 1 additional question here on the incremental capacity in Nevada, the 4680s that you're planning. That's a lot of batteries obviously, and presumably, you won't be putting all of those in Tesla Semi. So I guess, 2 questions about that incremental capacity. First, is it correct to assume that all of those 4680s are going to be more or less fungible and usable in your entire range of products? And if the answer is yes, then if you had to guess, how do you think that 100 gigawatt-hours would be allocated between your various end markets?",
"session": "Question",
"person_id": 140104,
"person_company": null,
"component_order": 55
},
{
"name": "Elon Musk",
"speech": "I don't know, this is a bit too much guessing at this point.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 56
},
{
"name": "Drew Baglino",
"speech": "Yes.",
"session": "Answer",
"person_id": 393478,
"person_company": null,
"component_order": 57
},
{
"name": "Elon Musk",
"speech": "But -- yes, Yes.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 58
},
{
"name": "Drew Baglino",
"speech": "I mean, you're right. Not all of the 100 gigawatt-hours are going to go into the Semi trucks, that is correct.",
"session": "Answer",
"person_id": 393478,
"person_company": null,
"component_order": 59
},
{
"name": "Elon Musk",
"speech": "Let's say like -- I alluded to a number of future products. Those future products would use the 4680.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 60
},
{
"name": "Martin Viecha",
"speech": "Thank you. And the next question comes from George from Canaccord Research.",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 61
},
{
"name": "George Gianarikas",
"speech": "So you recently adjusted prices and that may have put many of your competitors in the back foot. In addition to that, capital markets have recently gotten a lot tougher. So with those factors in mind, I'm curious how you see the current competitive landscape changing over the next few years. And who do you see as your chief competitors 5 years from now?",
"session": "Question",
"person_id": 547012,
"person_company": null,
"component_order": 62
},
{
"name": "Elon Musk",
"speech": "Five years is a long time. As with the Tesla order part, AI team, until late last night and just we're just asking guys like, so who do we think is close to Tesla with -- a general solution for self-driving? And we still don't even know really who would even be there just in second. So yes, it really seems like we're -- I mean, right now, I don't think you could see a second place with a telescope, at least we can't. So that wouldn't last forever. So in 5 years, I don't know, probably somebody has figured it out. I don't think it's any of the car companies that we're aware of. But I'm just guessing that someone might be right out eventually, so yes.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 63
},
{
"name": "Lars Moravy",
"speech": "I mean, beyond that, Elon, like in the vehicle space, even though the market is shrinking, we're growing and EVs have doubled almost year-over-year. So like it ever keeps up with the trend of EVs is going to be our competitor. The Chinese are scary, we always say that. But like a lot of people always look at the EV market share, but we always look at it is how much of the total vehicle space do we have, and we're just going to keep growing in that space. There's 95% for us to go get.",
"session": "Answer",
"person_id": 482177,
"person_company": null,
"component_order": 64
},
{
"name": "Elon Musk",
"speech": "Yes. And I don't want to say like -- I think we have a lot of respect for the car companies in China. They are the most competitive in the world, that is our experience and the Chinese market, it is the most competitive. They work the hardest and they work the smartest, that's so for the car companies that we're competing against. And so we guess, there are probably some company out of China as the most likely to be second to Tesla. \r\nWe are -- our team is winning in China. And I think we actually are able to attract the best talent in China. So hopefully, that continues. So yes, [indiscernible] future well, it's going to be great.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 65
},
{
"name": "George Gianarikas",
"speech": "Just as a follow-up, the Inflation Reduction Act has created huge tax incentives for commercial vehicles. You mentioned an incredibly interesting product pipeline. Are there maybe some plans to accelerate commercial vehicle form factors outside of the Tesla Semi to help accelerate EV adoption?",
"session": "Question",
"person_id": 547012,
"person_company": null,
"component_order": 66
},
{
"name": "Elon Musk",
"speech": "Well, I was basically saying that, yes, but I'm not going to give you details because this is -- nice try, nice try. Yes, of course, of course. So to always look at like, what is the limiting factor for new vehicles? Because if the -- for the longest time, we've been constrained on total cell lithium-ion production output. And so people said, like, why not bring this other car to market or that other car to market? Well, it doesn't really help if all you're doing is shuffling around the batteries from 1 car to another. In fact, it hurts because you add complexity but you don't add incremental volume. \r\nSo it's sort of pointless, in fact, like counterproductive to add model complexity without solving the availability of lithium-ion batteries. So as we get -- so we want new product introduction to match where the cells are available or that new product to use those cells without cannibalizing the cells of the other cars. That's the actual limiting factor if we need new models, not anything else really.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 67
},
{
"name": "Martin Viecha",
"speech": "Thank you. Let's go to the next question. The next question comes from William Stein from Truist.",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 68
},
{
"name": "William Stein",
"speech": "You started to answer this earlier but I'd like to ask this question about the AI elements of your business and ask if you could comment on progress around Dojo and Optimus and your anticipation for the likelihood, for example, for the company to disconnect the GPU cluster in favor of Dojo and to have some market achievement an Optimus.",
"session": "Question",
"person_id": 256580,
"person_company": null,
"component_order": 69
},
{
"name": "Elon Musk",
"speech": "Yes. I mean, obviously, with -- just we're still at the early stages, there are big [indiscernible] in any predictions. It's like -- I think easy to predict long term but hard to predict the time in between now and then. But it's -- we think Dojo will be competitive with the NVIDIA H1 at the end of this year and then hopefully surpass it next year. And the key there is -- I think what's the energy usage required for a given amount of -- if you're training a frame of video, how -- what's the energy cost required to do that training? \r\nAnd we think probably we said this already actually at AI Day, so it's not new information, but we do see potential for an order of magnitude improvement relative to GPU, what GPUs can do for Dojo, which is obviously very specialized for AI training. It's hyper-specialized for AI training. It's not -- wouldn't be great for other things but it should be extremely good for AI training. \r\nSo just like if you do an ASIC or something, it's going to be better than a CPU. This is sort of, in some ways, like a giant ASIC. And we're able to -- since we're operating one of the biggest GPU clusters in the world already, the -- we've got a good sense of how efficient the GPU clusters operate and what Dojo needs to do in order to be competitive. But we think that it does have a fundamental architectural advantage because it's designed not to be -- the GPU is trying to do many things for many people. We're trying to do graphics, video games. It's doing crypto mining. It's doing a lot of things. \r\nDojo is just doing 1 thing and that is training. And we're also optimizing the low-level software too. So it had a [indiscernible] level so it's just insanely good at efficient training. And the intra-communication between the Dojo modules is extremely high. It's not going across an Ethernet cable. It's like -- so anyway, the -- we see a path to an order of magnitude improvement in the energy efficiency or per given unit of training. But we also have to achieve that. \r\nAnd so when will it be achieved? It's hard to say but we do see a path to get there. And then also on inference, like once you've got something trained, well, if you want to have a product that's a consequence of that training, that product may not be anything to do with cars. Then the efficiency of inference is extremely important. And we also have, by far, the most efficient inference computer at the -- with the FSD computer in the car. This has potential for products that are even really in automotive.",
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"name": "Martin Viecha",
"speech": "Thank you. And William, do you have a follow-up?",
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"name": "William Stein",
"speech": "Yes. It sounds like the 1.8 million units you expect this year is supply, not demand-limited supply, it sounds like by the lithium batteries. If you were to become demand limited, can you talk to us about your propensity to use price and your relatively high industry margins to grow units and share?",
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"name": "Zachary Kirkhorn",
"speech": "Yes. To be clear, the 1.8 million is not cell supply limited. And I mean, we did address that number earlier in the call if you want to answer.",
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"name": "Elon Musk",
"speech": "Yes. It's roughly -- cell supply is roughly matched with that. And [ 1.8 million ] cars, if we get lucky, it could be more. And then the rest would go into stationary storage, the Powerwall and Megapack. So yes.",
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"name": "Martin Viecha",
"speech": "Okay. Let's have the final question from Adam Jonas.",
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{
"name": "Adam Jonas",
"speech": "Elon, first question is, is it time for Tesla to significantly expand the captive finco? I mean, you only have like $4.5 billion of receivables. It's basically nothing compared to other big auto companies. And then I have a follow-up.",
"session": "Question",
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"name": "Elon Musk",
"speech": "Zach maybe is best to answer that.",
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"name": "Zachary Kirkhorn",
"speech": "Yes. I mean, the way that we've been using captive financing so far is to plug what we believe to be gaps in the market of existing third-party products. And so we have a couple of offerings in Europe. We do loans for our energy business, retail energy business here in the U.S. We do leasing and we do a small amount of U.S. loans that are very targeted.\r\nAnd so we're using captives to support market caps, as I mentioned. So basically, it's a vehicle to support vehicle sales, make sure customers have access. I do think there's opportunity here to continue to grow this. We are growing it slowly here. It is a consumer of cash so we're being cautious on how we do that. But the plumbing is in place to do a lot more here. And I think we'll have to see how things unfold over the course of the year and make decisions real time as to how much we ramp it up versus ramp it back.",
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"name": "Elon Musk",
"speech": "I think if we see a severe recession this year, which like I said, hopefully, we don't, in severe recessions, cash is king big time because it's in such short supply. So we want to be cautious about using cash for loans and that sort of thing for cars. I feel we're in a very strong position to get through a recession because we really don't have any debt, and we've got over $20 billion of cash, which is great. The cash is earning a ridiculous return, a good return, so it's like nontrivial. And the interest rate actually in the $20 billion is earning like quite a good amount. \r\nAnd I've made this point on Twitter a few times. I'm sure a lot of people on this call understand the fact -- the basic value of a security is a function of the [indiscernible] rate or we'll see how risk-free it really is but the T-bill rate. So if you've got -- I think the -- I recall correctly, the S&P 500 has a long-term rate of return of roughly 6%. And so I think that needs to be very cautious about having Fed rates that potentially exceeds 6%. \r\nLike if we see deflation, and I think we are seeing deflation, then you would add the deflation number to the \"risk-free rate\" from the Fed. And as that starts to exceed 6%, now you're starting to exceed the long-term return of the S&P 500 and starts to become questionable as to why don't just put your money in a savings account essentially instead of in the S&P 500 if the S&P 500 is variable and the bank interest rate is not? This is -- so basically, the is the risk of crushing the value of all equities. Quite a serious danger.",
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"name": "Adam Jonas",
"speech": "And just a follow-up. I don't want to steal thunder from March 1 and in Austin, but how close are we to that step change improvement in BoM cost where you could sell an EV for under $25,000 or $30,000 and actually generate a profit, that kind of real moving assembly line moment in manufacturing? Again, I don't want to steal the thunder but just if you wanted to kind of wrap up with thoughts there, that would be helpful.",
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"name": "Elon Musk",
"speech": "I mean, I'd love to answer -- I'll probably be asking the same question, but we would be jumping the gun on future announcements.",
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{
"name": "Martin Viecha",
"speech": "Fantastic. Thank you very much, everyone, for all your good questions, and we will see you again in 3 months' time.",
"session": "Answer",
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{
"name": "Elon Musk",
"speech": "Thank you.",
"session": "Answer",
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{
"name": "Martin Viecha",
"speech": "Thank you. Bye-bye.",
"session": "Answer",
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],
"title": "Tesla, Inc., Q4 2022 Earnings Call, Jan 25, 2023",
"quarter": 4,
"year": 2022
}
},
{
"transcript_title": "Tesla, Inc. - Q3 2022",
"transcript_name": "Tesla, Inc., Q3 2022 Earnings Call, Oct 19, 2022",
"ticker": "NASDAQ:TSLA",
"transcript_url": "https://wkarticles.blob.core.windows.net/finnhub/snp_transcript_2659286",
"date": "2022-10-19",
"year": 2022,
"quarter": 3,
"transcript_data": {
"date": "2022-10-19",
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"transcript": [
{
"name": "Martin Viecha",
"speech": "Good afternoon, everyone, and welcome to Tesla's Third Quarter 2022 Q&A Webcast. My name is Martin Viecha, VP of Investor Relations, and I'm joined today by Elon Musk, Zachary Kirkhorn and a number of other executives. Our Q3 results were announced at about 3 p.m. Central Time in the update that we published at the same link as this webcast. \r\nDuring the call, we will discuss our business outlook and make forward-looking statements. These comments are based on our predictions and expectations as of today. Actual events or results could differ materially due to a number of risks and uncertainties, including those mentioned in our most recent filings with the SEC. During the Q&A session portion of today's call, please limit yourself to 1 question and 1 follow-up. [Operator Instructions] But before we jump into Q&A, Elon has some opening remarks. Elon?",
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"name": "Elon Musk",
"speech": "Thank you, Martin. So just to do a Q3 recap. Q3 was another record quarter on many levels. We had our industry-leading operating margin reach 17%. And our free cash flow surpassed $3 billion in Q3 and approached $9 billion in the past 12 months. As our factories ramp, we're looking forward to a record-breaking Q4. So it really, knock on wood, it looks like we'll have an epic end of year. So Q4 is looking extremely good. \r\nOn the production ramp, Giga Berlin achieved another milestone of 2,000 cars made in a week with very good quality and is ramping rapidly. Giga Austin or Giga Texas should reach this milestone very soon. And in fact, just yesterday, we extrapolated yesterday's hold rate, it would be 2,000.\r\nOur production of 4680 cells has tripled in Q3 compared to the previous quarter. We are finally gaining rapid traction on the 4680 cell. And its output is growing rapidly, and we expect it to start incorporating in cars and having it be a significant portion of our production in Texas in the coming months. We also have our second generation of manufacturing equipment for 4680 cells in Texas, which continues to show great progress along with our original pilot line in Fremont. The Fremont factory team once again reached record production in Q3. And we intend to keep raising production in Fremont. \r\nRegarding Autopilot, at the end of -- at the end of September, we hosted our second AI Day and [indiscernible] the first prototype of our Optimus robot, released updates on our training computer and high range of improvements of full self-driving software. Our vehicles have now driven nearly 60 miles in full self-driving beta mode, and this number continues to grow exponentially. Our goal with that AI Day was to post recruiting, and we've seen a massive influx of world-class artificial intelligence engineer and scientist resume. So it generated a tremendous amount of interest from some of the best AI researchers in the world. I can't emphasize the importance of this enough because I think finally has become clear to the smallest AI technologists in the world that Tesla is among the very best. \r\nSo this quarter, we expect to go to wide release of full self-driving beta in North America. So anyone who has ordered a full self-driving Beta -- full self-driving will have access to the FSD Beta program this year, probably about a month from now. So -- and then obviously, any new -- anyone who buys a car and purchase a full self-driving option will immediately have that available to them. So the safety that we're seeing when the car is in FSD mode is actually significantly greater than the safety we're seeing when it is not, which is a key threshold for going to a wide Beta. \r\nLet's see with respect to demand. We've got a lot of questions about demand in recent weeks. I can't emphasize enough, we have excellent demand for Q4, and we expect to sell every car that we make for as far in the future as we can see. So the factories are running at full speed, and we're delivering a recovery make and keeping operating margins strong. We are still a very small percentage of the total vehicles on the road. Of the 2 billion [indiscernible] trucks on the road, we only have about 3.5 million. So we're about a long way to go to even reach 1% of the global fleet. \r\nLet's see. Kind of based on my -- what people -- based on many things, but certainly questions I get on Twitter about buybacks. And I think every one of our Board members has gotten questions about buybacks. The -- we've debated the buyback idea extensively at the Board level. The Board generally thinks that it makes sense to do a buyback. But we want to work through the right process to do a buyback, but it's certainly possible for us to do a buyback on the order of $5 billion to $10 billion. Even in the downside scenario next year, even if next year is -- was a very difficult year, we still have the ability to do a $5 billion to $10 billion buyback. This is obviously pending Board review and approval. So it's likely that we'll do some meaningful buyback. \r\nSo in conclusion, while the market teams revolve around the short term, it's very important to focus on the long term. I can't emphasize this enough with investors and I think long-time investors, obviously recognize it with Tesla. We have our sort of local ups and downs, but long-term trend has been extremely good. And several years ago, I said, I think on our earnings call, that I thought it was possible for Tesla to be worth more than Apple, which was then the highest cap company, I think, in the market. At that time, I think it was around $700 billion. And I said required incredible execution, at least some luck, and we didn't only achieve that. Tesla went, in fact, or passed Apple's market cap [ time ]. And now, I have the opinion that we can far exceed Apple's current market cap. In fact, I see a potential path with Tesla worth more than Apple and Saudi Aramco combined. So now that doesn't mean it will happen or that will be easy. In fact, I think it will be very difficult. It will require a lot of work, some very creative new products, manage expansion and always luck. But for the first time, I am seeing -- I see a way for Tesla to be -- let's say, roughly twice the value of Saudi Aramco. I think that's -- I haven't quite seen that yet. I mean this is the first time I've seen that potential. \r\nSo we have an incredible product portfolio. I think we've got the most exciting product portfolio of any company on earth, some of which you've heard about, some of which you haven't. We're in the final lap for Cybertruck. We building a Cybertruck line here at Giga Texas and making a lot of progress in the robotaxi platform design. \r\nAnd then with respect to batteries, we're moving as fast as possible to have -- to achieve 1,000 gigawatt hours a year of production capacity in the United States vertically integrated. And our cap load refining, we're moving a ton to do that. \r\nSo I think it's an incredibly exciting future and really an unprecedented future. None of this would be possible without the incredible team that we have here at Tesla. So I'd like to give a huge shout-out to all of our factory employees, engineers, executives and the whole Tesla team. You guys rock. You're the ones that make it happen. Thank you. Thank you, everyone.",
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"name": "Martin Viecha",
"speech": "Thank you very much. And Zach has some opening remarks as well.",
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"name": "Zachary Kirkhorn",
"speech": "Yes. Thanks, Martin. Just to continue on Elon's theme, I just want to thank and congratulate the Tesla team for achieving record vehicle deliveries, production and storage deployments in the third quarter. \r\nOn automotive profitability, our GAAP operating margin was 17.2%, with automotive gross margin at 27.9%. Operating margin is one of our best yet, with improvements in operating leverage. However, Austin and Berlin ramp costs weighed on our margins, particularly if you compare it to Q1. Removing regulatory credits and Austin and Berlin, our operating margins would have been our strongest yet and auto gross margin would have been nearly 30%. Note that while small and growing, each car we build in Austin and Berlin is contributing positively to profitability. \r\nWe also continue to experience margin headwinds associated with macroeconomic conditions, as we've discussed at length on prior calls. In particular, raw materials, logistics and foreign exchange was a big part of this past quarter. \r\nOn energy profitability, we achieved our strongest gross profit yet for this business, driven primarily by record volumes of our Megapack and Powerwall products. Our free cash flows were also a record despite an increase in cars in transit at the end of the quarter, which has a negative impact on working capital. \r\nSpecifically on cars in transit, as noted in our press release on October 2, we've started to experience limits on outbound logistics capacity which we didn't anticipate. This issue is particularly present for ships from Shanghai to Europe and local trucking within certain parts of the U.S. and Europe. Our historical operating pattern of batch building by delivery region leads to extreme concentrations of outbound logistics needs in the final weeks of each quarter. Just to put this in perspective, roughly 2/3 of our Q3 deliveries occurred in September and 1/3 in the final 2 weeks. As a result, we have begun to smooth the regional builds throughout the quarter to reduce our peak needs for outbound logistics. We expect this to simplify our operations, reduce costs and improve the experience of our customers. \r\nAs we look ahead, our plans show that we're on track for the 50% annual growth in production this year, although we are tracking supply chain risks which are beyond our control. On the delivery side, we do expect to be just under 50% growth due to an increase in the cars in transit at the end of the year, as noted, just above. This means that, again, you should expect a gap between production and deliveries in Q4, and those cars in transit will be delivered shortly to their customers upon arrival to their destination in Q1. Boston and Berlin ramp costs will continue to weigh on margins, although we expect the impact to be less than what we saw in Q3. And as Elon mentioned, we are continuing to build as many cars as possible while also maintaining strong operating margins. Thank you.",
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"name": "Martin Viecha",
"speech": "Thank you very much. And let's go first to the shareholder questions. The first shareholder question is given the stringent battery content and assembly requirements for consumer tax credit eligibility under the Inflation Reduction Act, can you speak to Tesla's ability to meet those thresholds in each of 2023, 2024 and 2025 through your existing and planned supply chain?",
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"name": "Elon Musk",
"speech": "Well, yes, I mean I think just at a high level, I'd say, we do expect to fully meet the IRA's requirements. Do you want to add?",
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"name": "Zachary Kirkhorn",
"speech": "Yes. We view that passing of the Inflation Reduction Act there's a significant boost towards accelerating automation, while also scaling the battery supply chain at large in the United States. We expect Treasury to publish detailed guidance by the end of the year. Until such time, it's difficult to fully determine the eligibility criteria, but we believe Tesla is very well positioned to capture a significant share of that for solar storage and also electric vehicles.",
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"name": "Elon Musk",
"speech": "Yes, I'd like to say, we're -- like I said earlier, we're going to go basically pedal to the metal as fast as humanly possible to get to 1,000 gigawatt hours a year of production in the U.S. vertically integrated.",
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"name": "Martin Viecha",
"speech": "Thank you. Let's go to the next question. The next question is, what updates can you offer on the backlog and the recent order intake trends, especially outside of the U.S. and especially in China?",
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"name": "Elon Musk",
"speech": "Well, it's -- there's definitely -- China is experiencing a reverse of a recession of sorts, which is property market, simply from a property market mostly. And Europe has recession of sorts driven by energy. The U.S. actually isn't -- going North -- North America is a pretty good health. The Fed is raising interest rates more than they should, but I think they'll eventually realize that and bring back down again. \r\nDemand is a little higher than it would otherwise be. But as I said earlier, we are extremely confident of the [indiscernible] Q4, and we anticipate continuing to grow our vehicle production sales deliveries by -- on average 50% a year as far into the future as we can see.",
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"name": "Martin Viecha",
"speech": "Thank you.",
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"name": "Elon Musk",
"speech": "Actually I want to caveat, I should say, growing production by [ 50% ] every year because deliveries -- we're trying to smooth out the deliveries and not have this crazy delivery way at the end of every quarter. So in fact, we're just fundamentally running out of -- there weren't enough boats, there weren't enough trains, there weren't enough car carriers to actually support the wave because it got too big. So whether we like it or not, we actually have to smooth out the delivery of cars intra-quarter because there aren't just enough transportation objects to move them around.",
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"name": "Martin Viecha",
"speech": "Thank you. The next question is, do you still expect 50% annualized growth for the foreseeable future? Is this also true specifically for the Chinese domestic market? Do you expect to need to cut vehicle prices or offer incentives in any market to sustain a demand? Or has demand remained stable? Or is it even rising? There are 3 questions there.",
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"name": "Elon Musk",
"speech": "Well, like I said, we want to sort of focus on a high level on what we think is possible here. We -- to the best of our knowledge, we believe that Tesla will continue to grow deliveries and revenue production at a 50% or greater compound annual growth rate. It might occasionally be a year that is a little less, and then some of years would be maybe a little more or a lot more. In some of our out-year planning, we see potential annual growth rates that are in excess of 50%.",
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"name": "Martin Viecha",
"speech": "Thank you. The next question is, can you tell us more about the product feature road map beyond new models and FSD, and especially for interior and powertrain of existing vehicle models?",
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"name": "Elon Musk",
"speech": "Yes. We could, but who wants? Sorry, guys, we can't like jumping on, on future product announcements.",
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"name": "Zachary Kirkhorn",
"speech": "Committed to continuing [indiscernible].",
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"name": "Elon Musk",
"speech": "Yes, we obviously are -- yes. [indiscernible]. But we'll also be committed to continuous growth. Yes. At Tesla, we've always been committed to continuous improvement. So his friends might have asked me like, when should I buy a car, I'm like now because we just keep improving the cars. Always been the latest Tesla. Yes, there's still the latest Tesla. I don't really -- yes, the -- on the gain, we do have some big technology upgrade like Plaid. And by the way, I think the Plaid Model S and X are the best cars on earth. There's nothing even close, in my opinion. Just try one. Epic.",
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"name": "Martin Viecha",
"speech": "Thank you. The next question is, we keep hearing of dire energy crisis in Germany this winter. What are Tesla's plans to combat power cuts? And will there be any delays in ramp-up in production from Giga Berlin because of this?",
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"name": "Zachary Kirkhorn",
"speech": "Yes, I can take that. I think 2 points on this question. The first is just that based upon everything that we know, we don't see this as a large risk to the company. Even if production did go down for a period of time, this is on near term, it doesn't have any impact on the long term of the company.",
"session": "Answer",
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},
{
"name": "Elon Musk",
"speech": "But we don't -- we have no indication whatsoever that we will have to cut our production in Germany.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 20
},
{
"name": "Zachary Kirkhorn",
"speech": "And we put in place backup plans, and we're working through the supply chain as well. Nearly all of our suppliers are prepared as well. So we'll see how this plays out, but it's not something that we're terribly worried about.",
"session": "Answer",
"person_id": 385023,
"person_company": null,
"component_order": 21
},
{
"name": "Martin Viecha",
"speech": "Thank you. And the next question is, how is production planning going for the Cybertruck? What is the initial Phase 1 production target? When can we expect an update on pricing and final design?",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 22
},
{
"name": "Unknown Executive",
"speech": "Yes. I mean, as Elon said earlier, we'd be facilities preparations here in Giga Texas for Cybertruck. We're still on track to enter early production in the middle of next year. We started our data builds of all of the battery body in the existing...",
"session": "Answer",
"person_id": 182536,
"person_company": null,
"component_order": 23
},
{
"name": "Elon Musk",
"speech": "When should I drop my beta?",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 24
},
{
"name": "Unknown Executive",
"speech": "In a few weeks. That's going well, and we continue ramping up through the end of next year and into 2023.",
"session": "Answer",
"person_id": 182536,
"person_company": null,
"component_order": 25
},
{
"name": "Elon Musk",
"speech": "Great. Yes, the car is going to be sick and sick. That is going to be a hall of famer next level. \r\nSorry, sorry, I took it longer than expected, but there were a few things that got in the way, like insane constant global supply chain shortages like FedEx, which are most majors if they ever other one.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 26
},
{
"name": "Martin Viecha",
"speech": "Right. Thank you.",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 27
},
{
"name": "Elon Musk",
"speech": "Of course. There's Tesla Semi, of course. So we'll be handing over our first production Tesla Semis to Pepsi on December 1. I'll be there in person. And we will begin ramping up production of the Tesla Semi, which is a max low, heavy -- heavy truck. That's a Class A truck, Class A truck.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 28
},
{
"name": "Zachary Kirkhorn",
"speech": "No sacrifice to cargo capacity.",
"session": "Answer",
"person_id": 385023,
"person_company": null,
"component_order": 29
},
{
"name": "Elon Musk",
"speech": "Yes, exactly, very important, no sacrifice to cargo capacity, 500-mile range. Just to be clear, 500 miles with the cargo. Yes, 500 miles with the cargo on level ground. Yes, sure. Not up. It's excellent. But the point is it's a long-range truck and even with heavy cargo. And the number of times people all know you can't -- it's impossible to make a long-range heavy-duty Class A truck. And then I'll ask, well, what are your assumptions about what [ hour kilogram ] and what hours per mile, and they look at me with a blank stare and then say hydrogen. I'm like, no, that's not the answer, but I was looking for numbers literally. It's not a number. It's [indiscernible] table. You obviously don't need hydrogen for heavy trucking [indiscernible] you. \r\nAnd we'll be ramping up Semi production through next year. As I think everyone knows at this point, it takes about a year to ramp up production. So we expect to see significant -- we're tentatively aiming for 50,000 units in 2024 for Tesla Semi in North America. And obviously, we'll expand beyond North America. And these would sell -- I don't want to say the exact prices, but they're much more than a passenger vehicle. So with a few thousand heavy trucks of this nature would be worth several Model Ys.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 30
},
{
"name": "Martin Viecha",
"speech": "Thank you. The next question is, what is the progress of the 4680 cell ramp? And what factors determine whether vehicles get 2170s versus 4680 cells? And how will that change in the next year?",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 31
},
{
"name": "Zachary Kirkhorn",
"speech": "Yes, ramp is going well, as Elon said. Total output is up 3x quarter-over-quarter, and production is tracking to exceed 1,000 car [ cells ] per week this quarter as we said last quarter. Our focus is now shifting from 100% ramp to cost and further expanding production capacity in North America, as Elon also mentioned. \r\nOn the 2170 versus 4680, in our factories, we really attempt to minimize factory complexity and product changeover while still making sure we get enough new product into the field to learn how it is performing. And that sort of mix is going to shift as 4680 scales here and the overall factory ramp [indiscernible] in Texas.",
"session": "Answer",
"person_id": 385023,
"person_company": null,
"component_order": 32
},
{
"name": "Elon Musk",
"speech": "Right. Basically, production of 4680 ramp is growing exponentially. And yes, it's going well. We're just looking at this -- just going to be a major back to the future.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 33
},
{
"name": "Zachary Kirkhorn",
"speech": "[indiscernible]",
"session": "Answer",
"person_id": 385023,
"person_company": null,
"component_order": 34
},
{
"name": "Elon Musk",
"speech": "Yes. And like I said, we're -- our goal is to strive towards 1,000 gigawatt hours a year of annualized production in United States alone by Tesla, not including [indiscernible] will be on top of that.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 35
},
{
"name": "Unknown Executive",
"speech": "We need to get 300 to 400 terawatt hours to accomplish our goal.",
"session": "Answer",
"person_id": 182536,
"person_company": null,
"component_order": 36
},
{
"name": "Elon Musk",
"speech": "Yes, there's roughly -- to transition to sustainable energy, our price calculation for both stationary and vehicles is 300,000 to 400,000 gigawatt hours or 300 to 400 terawatt hours.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 37
},
{
"name": "Unknown Executive",
"speech": "So when you're like 1 tower assembling a lot, well it's a lot of terawatt hours to get [indiscernible]",
"session": "Answer",
"person_id": 182536,
"person_company": null,
"component_order": 38
},
{
"name": "Elon Musk",
"speech": "Yes. And on the cathode side, the [indiscernible] we think will probably be iron and most of the iron -- iron can scale to very, very high tonnage and then some nickel. The exact percentages are hard to figure out, but it's probably be as much iron cathodes as they [indiscernible] more. And then there's the manganese wildcard as well. [indiscernible]",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 39
},
{
"name": "Zachary Kirkhorn",
"speech": "No. And on that note, we're pursuing aggressively North American iron supplies. And how -- yes, we can talk more about that at a future date.",
"session": "Answer",
"person_id": 385023,
"person_company": null,
"component_order": 40
},
{
"name": "Martin Viecha",
"speech": "Yes. Thank you. The next question is on the Semi truck, which we already addressed. So I'm going to skip to the next one. Can you talk about how Tesla could adjust if we were to enter a prolonged recession, including new product prioritization, investment flexibility, new factory versus factory expansion, service support infrastructure, productivity cost measures and demand stimulation alternatives?",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 41
},
{
"name": "Elon Musk",
"speech": "Well, to be frank, we're very pedal to the metal come rain or shine. So we are not reducing our production in any meaningful way. We're essential not recession.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 42
},
{
"name": "Zachary Kirkhorn",
"speech": "It's the [ 1% point ] come in.",
"session": "Answer",
"person_id": 385023,
"person_company": null,
"component_order": 43
},
{
"name": "Elon Musk",
"speech": "Yes, exactly. So I think the public, at large, realizes that everyone's moving towards electric vehicles and that it's foolish to actually buy a new gasoline car at this point because the residual value of that gasoline car is going to be very low. So I think we have to be in a very good spot. But I wouldn't say it's recession proof, but it's certainly risk -- recession resilient because basically, it has people both have large part made the decision to move from gasoline cars to electric cars. \r\nAnd then in transitioning a generation to sustainable, you need certain wind with the stationary battery pack to buffer the power. So you have 24/7 power because the wind doesn't go [indiscernible] travel time. So that also -- we actually see the energy storage business, stationary storage, growing more like 150% to 200% a year, much faster than cars by a lot.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 44
},
{
"name": "Zachary Kirkhorn",
"speech": "Just to add before you jump in, Martin. Just to echo Elon's point, I mean, I think where our cash balance is, what our forecasted cash generation is, where our margins are as a company, I mean we can withstand quite a lot of downside before we would have to dig into our capital plans, Supercharger expansion, product lineup. \r\nSo the business has done quite well over the last handful of quarters. And this is a real opportunity, I think, for the company to press forward, and most [indiscernible], as Elon has mentioned.",
"session": "Answer",
"person_id": 385023,
"person_company": null,
"component_order": 45
},
{
"name": "Elon Musk",
"speech": "Yes, we try to model out like, let's say, 2023 is a brutal recession year. Even then, we generate meaningful cash. Once you get out of that for [indiscernible]",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 46
},
{
"name": "Martin Viecha",
"speech": "Great. Thank you very much. And let's go to the last investor question, which is the progression from Tesla's first platform with SMX to the second platform with 3 and Y led to a 50% reduction in cost of goods sold. When do you see Tesla's third platform being released? And what level of cost of goods sold reduction could you achieve?",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 47
},
{
"name": "Elon Musk",
"speech": "Well, we don't want to talk exact dates, but this is a -- I mean, the primary focus of our new vehicle development team, obviously. But at this point, we've done the engineering for Cybertrucks and for Semi. So it's obviously against what we're working on, which is the next-generation vehicle, which will be probably about the cost of 3 and Y platform. It will be smaller, to be clear. But it will, I think, certainly become -- certainly exceed the production of all our other vehicles combined. \r\nI mean, obviously, we're going to take everything we learned from S, X, 3, Y, Cybertruck and Semi into that platform. But we -- as you've said to us many times, we're on a 2-for-1 target. So [indiscernible] we're trying to get to that 50% number again. It's like, we're going to take 2. If that's exactly what [indiscernible], how are we making 2 cars for the amount of effort that we currently take to make 1 Model 3.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 48
},
{
"name": "Zachary Kirkhorn",
"speech": "Effort costs.",
"session": "Answer",
"person_id": 385023,
"person_company": null,
"component_order": 49
},
{
"name": "Elon Musk",
"speech": "Consider.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 50
},
{
"name": "Zachary Kirkhorn",
"speech": "Half the loss, half the past, half the factory floor space.",
"session": "Answer",
"person_id": 385023,
"person_company": null,
"component_order": 51
},
{
"name": "Elon Musk",
"speech": "We're twice the output. And we do believe this can be done. By the way, I should mention that when I said that probably now that I see a path in extremely very difficult path, incredible execution required, a massive amount of hard work and some luck to get to where Tesla with as much as Apple and Saudi Aramco combined, I wasn't including Optimus.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 52
},
{
"name": "Martin Viecha",
"speech": "Thank you. Let's go to analyst questions next. The first question comes from Adam Jonas from Morgan Stanley.",
"session": "Answer",
"person_id": 370659,
"person_company": null,
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},
{
"name": "Adam Jonas",
"speech": "Great. Can you hear me?",
"session": "Question",
"person_id": 118469,
"person_company": null,
"component_order": 54
},
{
"name": "Martin Viecha",
"speech": "Yes.",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 55
},
{
"name": "Elon Musk",
"speech": "Yes.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 56
},
{
"name": "Adam Jonas",
"speech": "So Elon, would you consider vertically integrating into mining? That's my first question.",
"session": "Question",
"person_id": 118469,
"person_company": null,
"component_order": 57
},
{
"name": "Elon Musk",
"speech": "We'll do whatever we have to. Without limiting factor is, we'll do. We do not personally constrain ourselves. We don't particularly integrate just for the hell of particularly integrating. Like if there was a great supplier who's better than us or we think actively is very good, or even where the economics of comparative advantage suggests that we should use that supplier, even if we could beat them, but we could use our resources to do something else that will be more productive, then we would in source in that case. But if we have to go mine, we will mine.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 58
},
{
"name": "Adam Jonas",
"speech": "Okay. Thanks, Elon. My follow-up is 1 terawatt hour of manufacturing in the United States, vertically integrated. I guess my question is what would need to change with U.S. permitting laws to allow that? Kind of what would be your message to this administration or next? And do you think you could do a terawatt hour? What's the going price of that? Can you do that for under $100 billion in the States?",
"session": "Question",
"person_id": 118469,
"person_company": null,
"component_order": 59
},
{
"name": "Elon Musk",
"speech": "Well, I mean, I think the message to the government would be that there should be -- I should say, we've actually had conversations with a number of senior government leaders, White House, Congress and whatnot. And the suggestion that we have is that there should be an expedited permitting process for anything which is critical to a sustainable energy future. So it doesn't make sense to put like a coal mine and a sustainable energy battery like lithium mine in the same category. Coal is not of the future, lithium does. And by the way, you can extract lithium with almost no disturbance to the local environment. So it's not actually ugly, nasty find situation. \r\nSo I would recommend expedite permitting would really be helpful. Basically, a fast track environmentally, I think a sense fast track things that are important for the environment and the [indiscernible]. That seems logical. And the reception has been positive. So we'll see if something happens with that. \r\nI think probably on this earnings call, we're not ready to go into financial details of the -- what will take to get there. But what we are seeing is practical improvements as we redesign the whole supply chain and all of the elements that go into battery cell. We're figuring out dramatic efficiencies. And I think we'll -- net result which would be that the capital required to achieve that level output will be much less work than [indiscernible].",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 60
},
{
"name": "Martin Viecha",
"speech": "Thank you very much Let's go to the next question from Colin Langan from Wells Fargo.",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 61
},
{
"name": "Colin Langan",
"speech": "Can you hear me now?",
"session": "Question",
"person_id": 480193,
"person_company": null,
"component_order": 62
},
{
"name": "Martin Viecha",
"speech": "Yes, we can hear you.",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 63
},
{
"name": "Colin Langan",
"speech": "Okay. Sorry about that. Any update on full self-driving? I think you had said a couple of quarters ago, would be available by the end of the year. Is that still possible? Is it -- would it still be like a Level 4 or Level 5 that you're talking about? And are there any sort of regulatory hurdles you'd have to think about?",
"session": "Question",
"person_id": 480193,
"person_company": null,
"component_order": 64
},
{
"name": "Elon Musk",
"speech": "We -- as I said earlier, we're expecting to release the full self-driving software to anyone who orders the package by the end of this year. So a separate matter as to will it have regulatory approval. It won't have regulatory approval at that time. But the call we'll be able to take you from your home to your work, your friend's house, the -- to the grocery store without you touching oil. So it's looking very good.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 65
},
{
"name": "Colin Langan",
"speech": "And it would mean like Level 4, Level 5 kind of traditional definition you're talking about?",
"session": "Question",
"person_id": 480193,
"person_company": null,
"component_order": 66
},
{
"name": "Elon Musk",
"speech": "Well, there's this debate is like what's the -- what are the interventions per mile and maybe safety interventions per mile. Like we're not saying that that's quite ready to have no one behind the wheel. It's just that you will almost never have to touch the control, vehicle controllers. \r\nSo like when I came to Giga Texas from Brent's house, I never touched any controls to already here. And then there is a longer process of like called the 9s of like how many 9s reliability do you need before you could really be comfortable saying that the car could drive with no one in it. And that's some subjectivity as to how many 9s you need. But I think we'll be pretty close to having enough 9s that you're going to have no one in the car by the end of this year. And certainly, without a question, that's whatever in my mind next year. I think we'll also have an update next year able to show to regulators that the car is safer much so than the average human.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 67
},
{
"name": "Colin Langan",
"speech": "Got it. And just as a follow-up. You mentioned in the prior questions about IRA. I mean it sounded like you thought you could get -- can you get all of it? I mean, because my interpretation is like the production credits, battery component credits for buyers seems very likely for you guys. Is the sourcing part of it possible? Because that seems like a pretty tough hurdle given how much has to be sourced from the U.S.?",
"session": "Question",
"person_id": 480193,
"person_company": null,
"component_order": 68
},
{
"name": "Unknown Executive",
"speech": "Yes. So we have a cross-functional team that's looking very closely. As you mentioned, the sourcing threshold increases by the year. So we're looking at all options and also getting some clarification from treasury. That's -- it's important to say that's only a fraction of the other credits. We do manufacture ourselves in the U.S. We manufacture the modules in the U.S. So that's a pretty [indiscernible]. So yes, we feel confident that we'll have a path as these incentives as the threshold sort of increases by the year.",
"session": "Answer",
"person_id": 182536,
"person_company": null,
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},
{
"name": "Elon Musk",
"speech": "Yes. We'll meet those thresholds..",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 70
},
{
"name": "Martin Viecha",
"speech": "Thank you. The next question comes from Colin Rusch from Oppenheimer.",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 71
},
{
"name": "Colin Rusch",
"speech": "The operating leverage has been pretty impressive here. And I'm curious about areas where you could invest in an incremental way, whether it's on the R&D side or on the sales side to accelerate growth or cost reduction? Or should we be thinking about this level of spend on a go-forward basis and some significant operating leverage as you scale up from here?",
"session": "Question",
"person_id": 310676,
"person_company": null,
"component_order": 72
},
{
"name": "Zachary Kirkhorn",
"speech": "I mean our operating leverage has improved quite a bit. It's the lowest this quarter, I think, ever, and by a decent amount. OpEx as a percentage of revenue. I mean, our forecast is that it will keep reducing. I mean I think the way to think about it is our total amount of operating expenses will slowly tick up as the company grows. It's very hard to keep it flat with the rapid growth of the company, but it's growing much slower. So some amount of growth there, but the top line of the business is growing so quickly. So I think there continues to be enormous opportunity to improve the overhead efficiency of the business, and we're seeing it.",
"session": "Answer",
"person_id": 385023,
"person_company": null,
"component_order": 73
},
{
"name": "Elon Musk",
"speech": "Yes. Look, we are in the -- at least for now, quite in a good position of we're investing in everything we can think of to possibly invest in, and we're still generating cash. So I guess it gets a pretty good place to be.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 74
},
{
"name": "Zachary Kirkhorn",
"speech": "Yes. I mean, how many R&D programs are we running in parallel right now?",
"session": "Answer",
"person_id": 385023,
"person_company": null,
"component_order": 75
},
{
"name": "Elon Musk",
"speech": "People don't even know old R&D so per day. There are some of it, but a bunch of it.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 76
},
{
"name": "Zachary Kirkhorn",
"speech": "I also don't think cash is a good gauge of how much R&D you're doing.",
"session": "Answer",
"person_id": 385023,
"person_company": null,
"component_order": 77
},
{
"name": "Elon Musk",
"speech": "No. It isn't because like it's not like -- it's not like engineers, they're not generic. So it's just like if you could you spend $5 billion or $10 billion, that will like -- that your actual R&D is useful product ship will be proportionate to that. It's just not true. Engineers on coming with some assembly line like cookies or something.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 78
},
{
"name": "Zachary Kirkhorn",
"speech": "Until we get optimistic.",
"session": "Answer",
"person_id": 385023,
"person_company": null,
"component_order": 79
},
{
"name": "Elon Musk",
"speech": "Get optimistic. Don't change things. What matters is where are the most brilliant people working. And Tesla remains the -- Tesla and SpaceX are 2 companies where the smartest engineers want to work.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 80
},
{
"name": "Zachary Kirkhorn",
"speech": "I mean like we don't have to spend billions of dollars to invest in the future and invent the future. Engineers are also cost conscious. And we don't just burn the money out the window when we're trying to do R&D. I would stop looking at like R&D as a cash investment for [indiscernible]...",
"session": "Answer",
"person_id": 385023,
"person_company": null,
"component_order": 81
},
{
"name": "Elon Musk",
"speech": "I think Tesla is frankly worth an infinite number of dollars above inch. Both you could have like a -- almost the number of credit shares and they would not be able to do work [ 1 week ] Tesla we can do. You can't make it up in volume.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 82
},
{
"name": "Martin Viecha",
"speech": "Okay. Thank you very much. Let's go to the next question from George at Canaccord.",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 83
},
{
"name": "George Gianarikas",
"speech": "I think you would -- at your Annual Shareholder event, where Elon mentioned that the prices of many of the materials used in your production have started to come off the boil. If that continues, does that give you an opportunity to adjust prices globally after several increases?",
"session": "Question",
"person_id": 547012,
"person_company": null,
"component_order": 84
},
{
"name": "Elon Musk",
"speech": "Well, we're looking at the prices of -- [indiscernible] prices closely. I mean, obviously, anyone can just Google what the price of future price of copper or steel is going to be. It's just like one Google Search away. And everyone can see that the commodities look on a go-forward basis are on a dropping a lot. But in electric vehicles, things like battery-grade lithium are still crazy expensive. So we've got a mixture of things where prices are dropping and things where prices are increasing.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 85
},
{
"name": "Unknown Executive",
"speech": "I would say quarter-over-quarter, steel, aluminum has stopped anywhere between 17% to 20% at the same time on the battery side.",
"session": "Answer",
"person_id": 182536,
"person_company": null,
"component_order": 86
},
{
"name": "Zachary Kirkhorn",
"speech": "And cost of shipping has come down tremendously. Like last year, the cost of a container on the spot market from Shanghai got as high as $20,000. And now it's $3,500, $3,600. It's that kind of reality. We're seeing deflation in a lot of commodities with a few exceptions as Elon mentioned on batteries.",
"session": "Answer",
"person_id": 385023,
"person_company": null,
"component_order": 87
},
{
"name": "Elon Musk",
"speech": "There's more deflation than inflation.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
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"name": "Zachary Kirkhorn",
"speech": "Definitely.",
"session": "Answer",
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{
"name": "Elon Musk",
"speech": "And again, this is publicly available information. Anyone could just Google it. And I think Cathie Wood at Ark Invest is -- I'm going to make this point over and over again, to the Fed and the Fed is not listening because they're looking at the rearview mirror instead of looking out the front windshield.",
"session": "Answer",
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"name": "Zachary Kirkhorn",
"speech": "Yes. Just to add a little bit more context. So commodity increases were the highest in Q3 that we've seen over the last 2 years. And so when indexes change, it does take time before they fully reflect.",
"session": "Answer",
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{
"name": "Elon Musk",
"speech": "Yes, there's latency.",
"session": "Answer",
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{
"name": "Zachary Kirkhorn",
"speech": "Yes, there's latency.",
"session": "Answer",
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{
"name": "Elon Musk",
"speech": "That's why I say that the best decisions make sense if you're looking through the rearview mirror, but not if you look out the windshield. And windshield got front windshield.",
"session": "Answer",
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"name": "Zachary Kirkhorn",
"speech": "Yes. And so what -- at least of what we know so far, the peak on the commodity side in Q3, I say peak, hopefully, it stays the peak, hopefully, it starts to come down. There is a small amount of production that we're seeing going into our Q4 cost structure from steel and aluminum primarily, but it's less than 10% of the total increases we've seen so far. \r\nSo we're optimistic here based upon what we're seeing on the indexes for some of our cost structure. So this will start to come in over time. But I just want to set expectations that there's not some windfall of cost reduction in this space coming in Q4, maybe some as we go into next year.",
"session": "Answer",
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"name": "Elon Musk",
"speech": "Yes. We'll probably see some cost reduction in 2023. I'll be surprised if we did not.",
"session": "Answer",
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{
"name": "George Gianarikas",
"speech": "And just as a follow-up, this is for Elon. With your pending acquisition of Twitter and your stakes in SpaceX and Neuralink and Tesla, how much would the combined companies benefit from operating under a single super structure, if at all, like a Google Alphabet?",
"session": "Question",
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"name": "Elon Musk",
"speech": "It starts [indiscernible] what the overlap is. It's not 0, but it's -- I think we're reaching. I'm not worried about it. I'm not an investor. I'm an engineer and a manufacturing person and a technologists. So I actually work and design and develop products. And that's what I do. So it's not a -- we're not going to have a portfolio sort of investments over it. \r\nSo I don't know. I don't see an obvious sort of some get combined under an umbrella, at least right now. So I am excited about the Twitter situation because obviously another part in incredibly well. And I think it's massive that this sort of languished for a long time, but has an incredible potential. Although, obviously, myself and the other investors are obviously overpaying for Twitter right now. The long-term potential for Twitter, in my view, is, in order of magnitude, greater than its current value",
"session": "Answer",
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"name": "Martin Viecha",
"speech": "Let's go to the next question from Pierre Ferragu from New Street Research.",
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"name": "Pierre Ferragu",
"speech": "Can you hear me, guys?",
"session": "Question",
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"name": "Martin Viecha",
"speech": "Yes, we can hear you now.",
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{
"name": "Pierre Ferragu",
"speech": "Great. I'd love to have another update on 4680, Drew. So last time we talked about it, there were -- was it was a question about like scaling up with manufacturing and there were still a few things to get right. Is it fair to say that now you are at scale, and it's just a question of logistics to get bigger? So that's question number one. \r\nAnd then question number two, on the kind of like innovation and cost reduction and efficiency improvements kind of path that you described at the battery day, where are we today? And how much time is it going to take to deliver all the potential you outlined then?",
"session": "Question",
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{
"name": "Drew Baglino",
"speech": "Well, I'll take the second question first. At Battery Day, we showed a time line out to 2026 for all of the ideas we had proposed and had shared with everybody then.",
"session": "Answer",
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{
"name": "Elon Musk",
"speech": "And yes, I'd be surprised. I think we'll do better than that.",
"session": "Answer",
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{
"name": "Drew Baglino",
"speech": "Yes. I mean, but just that's the rough -- just give you all -- it's in that order. It's not like a month. It's not 6 months. It's 6 years. And we are executing on all of those different ideas pretty aggressively in parallel with the OpEx that -- some people think isn't enough, but we're getting it done.",
"session": "Answer",
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{
"name": "Elon Musk",
"speech": "I mean I'm not turning down POs.",
"session": "Answer",
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"component_order": 106
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{
"name": "Drew Baglino",
"speech": "Yes, yes, yes. We're great talent, like we find someone awesome, we bring them into the company. And people shouldn't believe we are turning people away.",
"session": "Answer",
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{
"name": "Elon Musk",
"speech": "Yes. I mean, it's a hot pond but we're solving it. And I think -- we still feel confident that 4680 will be the most competitive battery cell in the world.",
"session": "Answer",
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{
"name": "Drew Baglino",
"speech": "And it's the whole system around it, right? It's not necessarily a specific form factor. It's the attention to detail on how to bring costs out of the manufacturing process -- or remove processing steps.",
"session": "Answer",
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{
"name": "Elon Musk",
"speech": "And all the way down from the mine to the cell.",
"session": "Answer",
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{
"name": "Drew Baglino",
"speech": "Yes, exactly.",
"session": "Answer",
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{
"name": "Elon Musk",
"speech": "Many steps along the way.",
"session": "Answer",
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{
"name": "Drew Baglino",
"speech": "Yes. And for those who watched the YouTube videos, like our on-site cathode facilities coming together, I'm really excited about that, which is a part of the plan that we discussed on Battery Day.",
"session": "Answer",
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{
"name": "Elon Musk",
"speech": "We're possibly lithium refinery.",
"session": "Answer",
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{
"name": "Drew Baglino",
"speech": "In Corpus Christi. So we're making -- putting our money where our mouths are and all the various efforts that we discussed on Battery Day. \r\nOn the technical challenges and the ramp question, which is your first question of 4680, no ramp is ever easy even at the end when you're 80% to the end, like it's still very challenging to get to the end. And that sort of leaning out of yields, the final cycle time to achieve target -- you mentioned logistics. It's not something that we're specifically focused on, I guess, but eventually could be a problem as we're talking about hundreds of gigawatt hours at different sites across the United States. But I would never sit here and say we have no challenges remaining, but we've made a lot of progress reducing technical risk in many areas. Cycle times have dramatically improved. Yield has dramatically improved. And just walking the line here in Texas, like Martin was walking it yesterday, made some comments to me. You really see the acceleration around you. And we've made a ton of simplifications moving from the Fremont factory to Texas, and it's coming to play in speed of ramp here. And of course, that's on 1 line of many here in Texas. So it's not like factory to factory. It's a multiplication of both simplicity and scale. So yes, we're excited about where it's headed.",
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"name": "Elon Musk",
"speech": "Yes. And I think, once we are fully integrated, I think we still do see a path to hold roughly $70 kilowatt hour cell -- $70 per kilowatt hour cell before any incentive.",
"session": "Answer",
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{
"name": "Drew Baglino",
"speech": "Before incentive.",
"session": "Answer",
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{
"name": "Elon Musk",
"speech": "Before incentive. Yes.",
"session": "Answer",
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{
"name": "Martin Viecha",
"speech": "Thank you. And the next question comes from Toni Sacconaghi from Bernstein.",
"session": "Answer",
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{
"name": "Toni Sacconaghi",
"speech": "Yes. I just wanted to follow up on the 4680 cells and where we are seeing them deployed today. So are those in the Semis that are being delivered on December 1? Are we seeing them in Model Ys that are being produced out of Austin? And is -- do you anticipate 4680 being a gating factor for Cybertruck ramp later this year? And how do you balance the need for 4680 across Semi, Cybertruck and potentially Model Y in 2023? And I have a follow-up, please.",
"session": "Question",
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{
"name": "Elon Musk",
"speech": "Wow. Okay. The Semi doesn't use 4680s. Yes. We are making Model Ys. Some of the Model Ys coming out of Giga Texas are 4680. And I think, Drew, the car you drive around is 4680 Model Y?",
"session": "Answer",
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{
"name": "Drew Baglino",
"speech": "Yes. 10,000 miles.",
"session": "Answer",
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{
"name": "Elon Musk",
"speech": "10,000 miles. Pretty good.",
"session": "Answer",
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{
"name": "Drew Baglino",
"speech": "No problems yet. Yes. Structural back, structural pack.",
"session": "Answer",
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{
"name": "Elon Musk",
"speech": "Yes. So -- and yes, I mean, and our output 4680 is growing exponentially. So -- but it's worth bearing in mind like there are entire highly competitive companies that are very smart that all they do is make battery cells. This is simply 1 segment of Tesla. So Yes. So it's not a total [indiscernible].",
"session": "Answer",
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{
"name": "Drew Baglino",
"speech": "No, there aren't -- there are challenges still ahead that we have not yet surpassed. No doubt.",
"session": "Answer",
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"name": "Elon Musk",
"speech": "We don't anticipate this being anything like Cybertruck or anything else.",
"session": "Answer",
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{
"name": "Martin Viecha",
"speech": "Okay. And the last question comes from William Stein from Truist.",
"session": "Answer",
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{
"name": "William Stein",
"speech": "I guess I'll go at one that I asked last time, Elon, which is your expectation for the likelihood of commercial success in each of the 3 major AI endeavors? FSD sort of as imagined without a driver, the training computer and, of course, Optimus?",
"session": "Question",
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{
"name": "Elon Musk",
"speech": "We'll achieve full self-driving full time -- that occurring is 100%. And I think we'll -- we're almost there. And then, of course, we've got to prove it to regulators and get the regulatory approvals, which is outside of our control. But anyone who's driving full self-driving cars, full self-driving Beta in the car, you can see the rate of improvement. You can just experience for yourself that we are, in fact, getting there. In fact, we almost are there. And so we're probably achieving that 100%. \r\nThe Optimus, probably of that being a successful product, I think, also extremely high given enough time, 100%. \r\nDojo, just maybe more of a question around Dojo. Like can we be competitive with NVIDIA GPUs even as somebody continues to rapidly evolve their GPUs? So the jury is out on Dojo. There's a team [indiscernible] outperform NVIDIA for neural training. The jury's out, we will probably -- I don't know, next year, if that's true or not. But we think we're probably -- we think it's -- this is -- the architecture of Dojo is the right architecture to win. Yes. It depends on how well we execute in that architecture.",
"session": "Answer",
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{
"name": "Martin Viecha",
"speech": "Thank you very much. I think, unfortunately, it's all the time that we have today. So thank you so much for your great questions and look forward to talking to you in about 3 months from now. Thank you, and have a good day.",
"session": "Answer",
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"name": "Elon Musk",
"speech": "Thanks, everyone.",
"session": "Answer",
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],
"title": "Tesla, Inc., Q3 2022 Earnings Call, Oct 19, 2022",
"quarter": 3,
"year": 2022
}
},
{
"transcript_title": "Tesla, Inc. - Q2 2022",
"transcript_name": "Tesla, Inc., Q2 2022 Earnings Call, Jul 20, 2022",
"ticker": "NASDAQ:TSLA",
"transcript_url": "https://wkarticles.blob.core.windows.net/finnhub/snp_transcript_2601728",
"date": "2022-07-20",
"year": 2022,
"quarter": 2,
"transcript_data": {
"date": "2022-07-20",
"participant": [
{
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"role": "Analysts",
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"job_title": "MD & Senior Analyst and Head of Sustainable Growth & Resource Optimization",
"description": "Analysts",
"company_name": "Oppenheimer & Co. Inc., Research Division",
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"role": "Executives",
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"description": "Executives",
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{
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"description": "Executives",
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{
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"job_title": "Managing Director",
"description": "Analysts",
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"transcript": [
{
"name": "Martin Viecha",
"speech": "Good afternoon, everyone, and welcome to Tesla's Second Quarter 2022 Q&A Webcast. My name is Martin Viecha, VP of Investor Relations; and I'm joined today by Elon Musk, Zachary Kirkhorn and a number of other executives. Our Q2 results were announced at about 3:00 p.m. Central Time in the update deck we published at the same link as this webcast. \r\nDuring this call, we will discuss our business outlook and make forward-looking statements. These comments are based on our predictions and expectations as of today. Actual events or results could differ materially due to a number of risks and uncertainties, including those mentioned in our most recent filings with the SEC. [Operator Instructions] But before we jump into Q&A, Elon has some opening remarks. Elon?",
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"name": "Elon Musk",
"speech": "Thank you, Martin. So just as a Q2 recap, Q2 was a unique quarter for Tesla due to a prolonged shutdown of our Shanghai factory. But in spite of all these challenges, it was one of the strongest quarters in our history. Most importantly, in June, we achieved production records in both Fremont and Shanghai. And as a result, we have the potential for a record-breaking second half of the year.\r\nI do want to emphasize this is obviously subject to force majeure, things outside of our control. The past [ few ] years have been quite a few force majeures, and it's been kind of supply chain hell for several years. Credit to our awesome Tesla supply chain team for overcoming and difficult challenges. And huge thanks to the Tesla Shanghai factory team who sacrificed a lot to get the factory back up and running in June and achieve a record output. \r\nSo also making good progress with production ramp with Berlin. We achieved an important milestone of 1,000 cars a week in June. And we're expecting -- sorry, our Giga Texas to exceed the 1,000-vehicle per week milestone and hopefully in the next few months. To be clear, we're currently making the cars with the 2170 cells, and Drew Baglino will address some of the 4680 questions later in this call. But it is worth emphasizing that we have enough 2170 cells to satisfy all vehicle production for the remainder of the year. \r\nSo we're not dependent on 4680. 4680 will be important next year but it is not important for this year. That said, we have installed the second generation of manufacturing equipment for 4680 cells in Texas. And even at our established factories like Fremont and Shanghai, we continue to expand capacity. \r\nRegarding Autopilot, we have now deployed our FSD beta with City Streets driving capability to over 100,000 owners. They're very happy with the capability of the system and we'll continue to improve it every week. We've now driven over 35 million miles with FSD beta. That's more autonomous miles than any company we're aware of, I think probably more than -- it might be more than any -- all other companies combined. So -- and that mileage is growing exponentially. \r\nWith regard to manufacturing and technology, about 5 or 6 years ago, we said we wanted to become the best manufacturer in the world and that is somewhat counterintuitively, to some people, will actually be, I think, our strongest competitive advantage. We're super pro-manufacturing here at Tesla. And in general, we want to encourage other companies to be super pro-manufacturing. And in general, I think it is a very important thing to do. \r\nWe need to make stuff and make it efficiently and that's manufacturing. So we've made a lot of advancements in manufacturing processes. As we now show in the shareholder deck, thanks to our -- the large castings, we make the world's largest castings. We reduced body welding robot count by 70% per unit of capacity in Austin and Berlin. So that's, call it, roughly a body shop that is roughly 3x smaller than would normally be the case. And I should say it's also lighter, cheaper and has superior noise vibration harshness. \r\nSo it's good on every level. But this journey is not over. We'll bring another level of simplicity and manufacturing improvements with Cybertruck and future products that we're not quite ready to talk about now but I think will be very exciting to unveil in the future. \r\nOur safety team also introduced a feature that tension seat builds, if the vision system detects imminent collision, which has never been done before. So you can imagine that if you have a seatbelt that only tensions upon impact, you have very little time to tension the seatbelt. If you've got to be -- the car has got to be crunching to trigger the seatbelt tensioner. But because we have vision, we can actually see that a collision is about to occur with 100% probability before it actually happens. \r\nAnd so we can tension the seat belts, and we can even adjust the airbag deployment because we can see, not just feel. This is a fundamental safety advantage that Teslas are now able to offer. And there's also an over-the-air update, so this is something that will be in place in all cars that have at least AP3 hardware. \r\nIn conclusion, we exited Q2 with a strong production rate than ever before. Our team continues to focus on Cybertruck production readiness and some future platform design. We are expecting to be -- still expecting to be in production with the Cybertruck in the middle of next year. And we're very, very excited about that product. I think it might actually be our best product ever.\r\nLet's see. FSD beta is on track to be released for all of North American customers before the end of this year. And hopefully, if we get regulatory approval, we'll also be releasing it hopefully in Europe and some other parts of the world.\r\nWe're hosting our AI Day in a few months. I think people will be amazed at what we're able to show off in AI Day. So basically, there's a tremendous amount to look forward to in the second half of this year. And I want to thank all of our employees and suppliers for their super hard work during these challenging times. Super appreciate it. Thank you.",
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{
"name": "Martin Viecha",
"speech": "Thank you very much. And Zach has some opening remarks as well.",
"session": "Presenter Speech",
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{
"name": "Zachary Kirkhorn",
"speech": "Yes. Thanks, Martin. I want to start by congratulating the Tesla team on an excellent execution during the second quarter. Although our production volume reduced sequentially due to COVID-related shutdowns in Shanghai, we made substantial progress in nearly every area of the business, and in particular, our global vehicle production rate as we exited the quarter.\r\nOur Fremont factory, supported by our Reno team, reached new production records. The Shanghai factory resumed full production, and our new factories in Austin and Berlin are progressing well through their initial ramps. Additionally, our energy business achieved record gross profit with the highest solar volumes in many years. I want to personally thank the entire Tesla team, as I know many of you are listening. You've embodied a remarkable and relentless pursuit of excellence in support of our mission. I also want to thank our suppliers for their support during another complicated quarter. \r\nOn GAAP automotive gross margin, it declined sequentially to 27.9%. The temporary decline in Shanghai production volume meaningfully impacted margin, including idle capacity and factory restart costs and also had implications on the mix of regional deliveries. Additionally, as discussed on previous calls, we are working through the ramp inefficiencies of our new factories, which are progressing well but have had an impact on margin as those factories come online. While we continue to see a benefit from higher pricing flowing through, which experienced some foreign exchange-related headwinds, our cost structure continues to experience cost increases from inflation, commodities and logistics. \r\nThe energy business progressed well in Q2, aided by alternate solar supply coming online and progress on unit economics. Our storage business remains component-constrained on both Powerwall and Megapack, which we hope will alleviate to some extent in the second half of the year. We are greatly appreciative of the patience and flexibility shown by our customers while we work through these challenges. \r\nWithin operating expenses, Boston and Berlin-related start-up costs have wound down as these factories have moved into production and their costs are now reflected in automotive COGS. Additionally, we converted a majority of our Bitcoin holdings to fiat for a realized gain, offset by impairment charges on the remainder of our holdings, netting a $106 million cost to the P&L included within restructuring and other. We also incurred restructuring charges related to targeted staffing reductions.",
"session": "Presenter Speech",
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{
"name": "Elon Musk",
"speech": "Yes, actually, it should be mentioned that the reason we sold a bunch of our Bitcoin holdings was that we were uncertain as to when the COVID lockdowns in China would alleviate. So it was important for us to maximize our cash position, given the uncertainty of the COVID lockdowns in China.\r\nWe are certainly open to increasing our Bitcoin holdings in future, so this should not be taken as some verdict on Bitcoin. It's just that we were concerned about overall liquidity for the company, given COVID shutdowns in China. And we have not sold any of our Dogecoin.",
"session": "Presenter Speech",
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{
"name": "Zachary Kirkhorn",
"speech": "We still have it.",
"session": "Presenter Speech",
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},
{
"name": "Elon Musk",
"speech": "We still have our Dogecoin.",
"session": "Presenter Speech",
"person_id": 175883,
"person_company": null,
"component_order": 6
},
{
"name": "Zachary Kirkhorn",
"speech": "Despite these challenges, we were still able to achieve one of our strongest operating margins of 14.6%. Our free cash flows were impacted by working capital related to the Shanghai factory shutdown. However, we expect this will show as a benefit in Q3 as our working capital-related cash flows restabilize. \r\nAs we look ahead and as Elon mentioned, we are positioned for a record-breaking second half of the year. We're quite excited about this. A couple of things to keep in mind as we progress. Austin and Berlin ramp inefficiencies will continue to weigh on our margins for the balance of the year. However, the impact should reduce as we increase ramp.\r\nSecond, as we've mentioned before, we expect to continue to see recognized global pricing to increase as our backlog flows through. However, macroeconomic-related cost increases will also continue to be part of our story. And finally, despite losing more builds in Q3 than expected, we're still pushing to reach 50% growth this year. This target has become more difficult but it remains possible with strong execution. And as Elon mentioned, no more force majeure events for the balance of the year.",
"session": "Presenter Speech",
"person_id": 385023,
"person_company": null,
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},
{
"name": "Elon Musk",
"speech": "Yes, a lot of force majeure in the last several years, that's for sure.",
"session": "Presenter Speech",
"person_id": 175883,
"person_company": null,
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},
{
"name": "Zachary Kirkhorn",
"speech": "Thank you.",
"session": "Presenter Speech",
"person_id": 385023,
"person_company": null,
"component_order": 9
},
{
"name": "Martin Viecha",
"speech": "Thank you very much. And now let's go to the questions from investors. And the first question is, Chinese EV manufacturers seem to be doing a better job than their Western competitors, excluding Tesla, at innovating in software and design. How can Tesla make sure the company is staying ahead of those manufacturers, both within China and outside of China?",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 10
},
{
"name": "Elon Musk",
"speech": "Well, the -- right now, the best Chinese EV manufacturer is Tesla train. We're actually doing the best, thanks to our incredible team in China. But I have a lot of respect for the Chinese, our manufacturers and EV manufacturers in particular. I think they will be a force to be reckoned with worldwide. They're very -- they're smart and they're hardworking. And I think anyone who is not -- any company that's not as competitive as them will obviously suffer a share decline. So obviously, we have a lot of respect for the current companies in China and then their capabilities, yes.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 11
},
{
"name": "Martin Viecha",
"speech": "Thank you. The next question is, when will Tesla have a unified vector space for both static and moving object network? Will this be a [ V11 ] or later version? If the latter, can you explain what makes it a difficult problem in layman terms?",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 12
},
{
"name": "Elon Musk",
"speech": "Okay. This will be understood by 0.01% of the audience, I think. I suppose people want to find out what a unified factory space would actually mean. It essentially would be if you can take -- if instead of netting together static and dynamic objects in C++, if they could be net together at the neural net level, then you don't need to reconcile them within C++ heuristics. \r\nThat is an architecturally better way to -- that's the most desirable outcome. It's -- I think it's probably not necessary to achieve full self-driving, but it would be a slight improvement in the efficiency of the self-driving. And it's certainly something we want to get to. Yes. The sort of nirvana situation is you have surround video/auto labeling of all static and dynamic objects. And you have then surround video inference with spatial memory as well. \r\nThen that's -- I mean, I think we're almost certainly there before the end of the year. Yes, I'm not sure how many you would understand that. But I should say also, we are also confident of improving the frame rate as we some of the legacy neural nets, we think we might be able to get to the frame rate of what the -- of [indiscernible] camera is maybe up to 36 fps, which is actually a lot of frames, considering its [indiscernible] cameras. It's certainly comfortably above 24 frames, which is basically the movie frame rate of movies.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 13
},
{
"name": "Martin Viecha",
"speech": "Thank you. The next question is Elon recently tweeted about lowering prices once inflation cools down. Can you elaborate on what do you mean by cooling down and how aggressively the company will lower prices? More broadly, how do you think about the auto pricing long term?",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 14
},
{
"name": "Elon Musk",
"speech": "Yes. So since we have -- there's a quite a long wait when somebody orders in a car, in some cases, 6 months; in some cases, it could be up to a year. We have to anticipate what the probable inflation rate is over that period of time. So that's what we're trying to do. When we -- when or if we see indications that the inflation rate is declining, then we would not need to increase our car prices. It's possible that there could be a slight decrease in car prices, but this is fundamentally dependent on macroeconomic inflation. It's not something we control. \r\nIf I were to guess, and I would take this with a grain of salt, I think inflation will decline towards the end of this year. We're certainly seeing prices of commodities trending lower. Yes. But take it with a grain of salt. This is -- making economic prognostication is fraught with error. I don't know if you guys want to -- do you want to say anything about...",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 15
},
{
"name": "Drew Baglino",
"speech": "Yes. We're certainly seeing, I mean, it's kind of a whole spectrum. On the battery metal side, for example, the price of lithium has really shot up. We used to be $11 a kilogram to more than $80 a kilogram. But it's -- not every situation is that bad so it's kind of a spectrum.",
"session": "Answer",
"person_id": 393478,
"person_company": null,
"component_order": 16
},
{
"name": "Unknown Executive",
"speech": "Carbon steel, aluminum, [indiscernible] carbon steel and aluminum has started trending down. We will see the benefits of it only probably later part of this year or early next year.",
"session": "Answer",
"person_id": 182536,
"person_company": null,
"component_order": 17
},
{
"name": "Elon Musk",
"speech": "Yes. But I think that's just like for most commodities, we're seeing a downward trend towards the end of this year or next year. Some commodities, the pricing of lithium is insane. I would like to, once again, urge entrepreneurs to enter the lithium refining business. The mining is relatively easy. The refining is much harder. \r\nSo lithium is actually a very common -- sort of very -- like lithium pretty much everywhere. But you have to refine the lithium into battery-grade lithium carbonate and lithium hydroxide, which has to be extremely high purity. So it is basically like minting money right now. There's like software margins in lithium processing right now. So I would really like to encourage, once again, entrepreneurs to enter the lithium refining business. You can't lose. It's licensed to print money.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 18
},
{
"name": "Martin Viecha",
"speech": "Thank you. The next question is you made the right economic call before most on inflation when you diversified into Bitcoin. It has since shown it's not much of a hedge in the real-world test the last few months. How do you think about it as an asset over long term? And what do you need to see to change your view?",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 19
},
{
"name": "Elon Musk",
"speech": "Well, Tesla is -- Tesla's goal is to accelerate the advent of sustainable energy. We're not really -- cryptocurrency is a sideshow to the sideshow. We're not a -- cryptocurrency is not something we think about a lot. We think a lot about scaling production and accelerating the advent of sustainable energy, which the record heat waves around Earth, so to emphasize the urgency of that transition. \r\nSo that is what we're trying to do is make electric vehicles and solar and stationary storage battery packs. But the 3 pillars of a sustainable energy future, which is like solar and wind for energy generation, stationary battery packs for storage of the solar energy because of its intermittency and then electric vehicles, the third pillar. And if those 3 things are solved, we have a sustainable future for civilization. \r\nAnd the fundamental good of Tesla and the reason we're doing this, so certainly, my primary motivation here is to have the day of sustainable energy comes sooner. That's our goal. We're neither here nor there on cryptocurrency.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 20
},
{
"name": "Martin Viecha",
"speech": "Thank you. The next question on 4680. Elon noted that 4680 plus structural pack is not yet optimized. Can you please share the general path of 4680 in structural packs in terms of cost efficiencies when compared to the traditional 2170 pack? Will cost improvements be mostly due to scale or do we need to solve some technical issues?",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 21
},
{
"name": "Drew Baglino",
"speech": "Yes, do you want to do the architecture?",
"session": "Answer",
"person_id": 393478,
"person_company": null,
"component_order": 22
},
{
"name": "Elon Musk",
"speech": "Yes. So structural pack where we get dual use of the battery cells as structure and as energy storage in the same way that an aircraft gets dual use of the wing as a fuel tank and as a wing is, I think, unequivocally, from a physics standpoint, the superior architecture. It's the A architecture. \r\nNow because it is new, we'll start off getting, I don't know, aspirationally a C within an A architecture. But the potential is there for to get radically better and then unequivocally better than a battery pack, which is carried like a sack of potatoes.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 23
},
{
"name": "Drew Baglino",
"speech": "Yes. And we've gained the perspective through putting our first structural pack in production that it is actually the A architecture. Like before we did that, it was a hypothesis that was backed with -- I got a lot of modeling and first principles analysis. And now we've actually built and are more confident in that assertion.",
"session": "Answer",
"person_id": 393478,
"person_company": null,
"component_order": 24
},
{
"name": "Elon Musk",
"speech": "Yes. So exactly. So the structural pack, even the C and the A architecture is beating the nonstructural pack. And so over time, it will, with further refinement, be substantially superior to that is carrying a battery pack as though it is cargo. And this is like -- it's very much very analogous to the early days of aviation where fuel tanks were initially carried like cargo until they realized actually, you should get dual use of a fuel tank as a wing and as fuel tank. And that makes the planes lighter and better. And the same is true of electric vehicles.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 25
},
{
"name": "Martin Viecha",
"speech": "And on cost improvements, are they due to scale or about solving technical issues?",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 26
},
{
"name": "Elon Musk",
"speech": "Yes. Yes. I mean really, the 2 things that improve costs are economies of scale and tech and core technology.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 27
},
{
"name": "Drew Baglino",
"speech": "Yes. I think technical issue is not the right.",
"session": "Answer",
"person_id": 393478,
"person_company": null,
"component_order": 28
},
{
"name": "Elon Musk",
"speech": "Technical issues like",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 29
},
{
"name": "Drew Baglino",
"speech": "Getting to the optimal design, right? Like you always start with some access. Some people might call it that, but that's not really what you think it is initially. It's that you don't know how you can get it until you've done it a couple of times.",
"session": "Answer",
"person_id": 393478,
"person_company": null,
"component_order": 30
},
{
"name": "Elon Musk",
"speech": "Yes. I mean there's some platonic ideal of the perfect product where the atoms -- you have exactly the right atoms and they're in exactly the right position, and you asymptotically approach this platonic ideal. But it takes a lot of effort over time to figure out actually what is the platonic ideal and then actually gradually approach that.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 31
},
{
"name": "Drew Baglino",
"speech": "Yes. I mean, you might need to create a new alloy. Then you need to figure out how to cast it, then you need to ramp the casting machine with the new alloy.",
"session": "Answer",
"person_id": 393478,
"person_company": null,
"component_order": 32
},
{
"name": "Elon Musk",
"speech": "We did.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 33
},
{
"name": "Lars Moravy",
"speech": "We've done it for We've done it castings. Yes. But those take time.",
"session": "Answer",
"person_id": 482177,
"person_company": null,
"component_order": 34
},
{
"name": "Drew Baglino",
"speech": "On improvement is something we're used to here, and it's something like we've done with their vehicles and our design since the beginning. I mean, even we're talking a couple of weeks ago, like the first version of the front casting that we made that went into the early vehicles is like...",
"session": "Answer",
"person_id": 393478,
"person_company": null,
"component_order": 35
},
{
"name": "Elon Musk",
"speech": "I mean, Model S stage.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 36
},
{
"name": "Drew Baglino",
"speech": "No, I'm talking about like first Model Ys. Since we've ordered more dies because bringing more dies for more production, we've saved like 4 or 5 kilos with just die iteration. And that's something we do at Tesla like quite regularly and we'll continue to do. So we're not happy with a C, like maybe we're at a C-plus now because I think we got to keep going to B-minus.",
"session": "Answer",
"person_id": 393478,
"person_company": null,
"component_order": 37
},
{
"name": "Elon Musk",
"speech": "On the rear casting. But this will transfer for improvement with the casting. So the casting is already way better than the rare body casting is already way better than the -- on the way is done in the past where you've got 120 different parts that are welded together or bonded together with different alloys and then you have to put sealant in between all the various parts for water ingress and noise. \r\nSo we're already way better than that with current casting, but there's still a lot of opportunities to reduce the master casting and also extend the casting to include more parts as well as adapt the rest of the vehicle for the fact that there's a cast.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 38
},
{
"name": "Drew Baglino",
"speech": "Yes, I was going to say the same thing, right? Like we're not just evaluating the pack and insulation either. It's the pack plus the body, the integration, do we have mass in the right places, we have the cost in the right places and only just the right amount. And I think we've gone through 1 iteration. We're going to do another 1 with Cybertruck. I mean, we're taking the learnings and doing -- the next version hopefully is a B-plus in A architecture. That's certainly a target.",
"session": "Answer",
"person_id": 393478,
"person_company": null,
"component_order": 39
},
{
"name": "Martin Viecha",
"speech": "Thank you. The next question is, how do you feel the progress of FSD is going? And does Andre leaving have any significant impact on time lines or potential progress?",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 40
},
{
"name": "Elon Musk",
"speech": "Well, since Andre was writing all the code by himself, naturally, things have come to a grinding halt. And irony. So Andre's also we have respect for Andre. He's decided to -- I think he wants to contribute more to, I think, core AI at an academic level and get back to coding individually. \r\nBut we've got a team of about 120 people in our software AI group that are extremely talented. And I think we will have -- I'm highly confident we will solve full self-driving and it still seems to be this year. I know people are like says that. But it does seem to be epic. It does seem as though we are converging on full self-driving this year.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 41
},
{
"name": "Martin Viecha",
"speech": "Thank you. The next question is, how is the 4680 ramp going? And is Giga Texas producing cells yet?",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 42
},
{
"name": "Drew Baglino",
"speech": "Yes. So we are making progress on 4680. But right now, as Elon mentioned, we are leveraging supplier cells, which we have in sufficient quantity to ramp Texas and Berlin. We expect to ramp total 4680 production to exceed 1,000 per week by the end of the year, hopefully before -- well before. \r\nIn Q2, at we fully automated Pattern Vance for the dry in electrode tool there, unlocking major increases in production and improvements in yields. Since March because of that, output has grown about 35% month-over-month each month since, and yields throughout the factory are already at targets in most areas and trending in that direction and a few others. \r\nWe did feed learnings from Fremont cell and pack lines to Texas and Berlin there, a carbon copy. design was revved to unlock higher performance and manufacturing simplicity. Manufacturing lines were further integrated and we in-sourced additional content. For these reasons, there are some new ramp challenges to overcome in Texas and Berlin. \r\nSpecific to Texas last quarter, cell equipment was fully installed and commissioned and we produced our first commissioning car sets of cells through the end of the line. Our target for Texas is to begin production this quarter and aim for Texas to be capable of exceeding Kato weekly output before the end of this year.",
"session": "Answer",
"person_id": 393478,
"person_company": null,
"component_order": 43
},
{
"name": "Martin Viecha",
"speech": "Thank you very much. The next question is on 4680 as well, but I think Drew has covered everything that was in the next question. So the following question is with regards to the ramp of production in Austin and Berlin. How is the situation with regards to supply of semiconductors, battery cells and other components? How about cost inflation impacting profitability of these other plants?",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 44
},
{
"name": "Drew Baglino",
"speech": "I can take that. So Tesla procures about 1,600 unique pieces of silicon from 43 semiconductor companies. So with a portfolio of that size, there are always challenges. Things are more stable on the latest generation chips. We still see some tightness in the older generation semiconductors, especially in the analog and mixed signal space. But we have line of sight to solve for the volumes being contemplated for both Austin and Berlin. \r\nAnd on the cell front, like Elon mentioned, we have a comfortable margin, thanks to record output from our partners and have line of sight that matches the planned output from both factories. We've grown cell production significantly on a 12-month rolling basis and have long-term contracts with all our partners for key battery metals. So we don't see any major problems for the components, of course, barring unforeseen COVID-related shutdowns.",
"session": "Answer",
"person_id": 393478,
"person_company": null,
"component_order": 45
},
{
"name": "Zachary Kirkhorn",
"speech": "Just to add on the profitability part of the question. Q2 was our largest increase yet over the last handful of quarters on inflation and commodity-related increases to our cars. It's fairly evenly spread across the factories, given common suppliers or common issues that impact the broad supply chain.\r\nSo I think I had mentioned before that we have been seeing increases over the course of last year. It ticked up in Q1 and then it ticked up again at the rate of increase was more in Q2. So as we look through to the end of the year, what we're seeing is we don't think the inflation-related increases in Q3 will be as big as Q2. But as Elon has mentioned, there is uncertainty on pricing here. \r\nAnd we don't have full exposure, as had just mentioned, on every component of cost because we do have some contracts in place. But there are some spot buys as well and some contracts being renegotiated. So we're managing it with pricing and in partnership with our suppliers but it does continue to be something that is impacting our financials.",
"session": "Answer",
"person_id": 385023,
"person_company": null,
"component_order": 46
},
{
"name": "Martin Viecha",
"speech": "Thank you very much. And the last question is, when will the Cybertruck be officially available?",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 47
},
{
"name": "Elon Musk",
"speech": "We're hoping to start delivering them in the middle of next year.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 48
},
{
"name": "Martin Viecha",
"speech": "Great. Thank you very much. And now let's go to analyst questions. The first question comes from Pierre Ferragu from New Street Research. Pierre, feel free to unmute yourself.",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 49
},
{
"name": "Pierre Ferragu",
"speech": "I'd like to ask like a question on 4680 and the structural battery pack. And I'd love to understand where you stand on the technology and efficiency and energy density road map that you described at the Battery Day. So what I'm trying to understand is where do you stand on the architecture of the battery cell itself? How much silicon do you have in it? How much energy improvement have you achieved already so far? Sorry. \r\nAnd the reason why I'm asking that is because you have like very smart guys on Twitter who shared experience about trying to fully empty a Model Y from Texas from Austin and noticing behaviors and like recharging behavior that suggested that maybe these cars had like very, very high mileage, very high range, and were like artificially limited in range in software. So I'm just kind of trying to understand how much of an edge you're building at the moment with the 4680 and the battery back on range.",
"session": "Question",
"person_id": 356336,
"person_company": null,
"component_order": 50
},
{
"name": "Drew Baglino",
"speech": "Yes. Let me just try to provide like a super straightforward answer. Like as Elon mentioned before, our priority was really on simplicity and scale during the initial 4680 and structural battery ramp. So we weren't like putting all the bells and whistles in from day 1 because if so, we would be sort of suffering under a string of serious miracles that we would need to achieve to get going. \r\nBut as we attain the manufacturing goals that we've stated at the ramp that we need to hit next year, we are certainly planning to layer in new material technologies and higher-range structural packs, like we're not like holding back goodies for some rainy day or something like that.",
"session": "Answer",
"person_id": 393478,
"person_company": null,
"component_order": 51
},
{
"name": "Elon Musk",
"speech": "Yes. Maybe another way of putting it is that the -- our focus right now is on the dozens of little issues that inhibit the production ramp of the 4680. Some of the more challenging ones have been feeding the anode-cathode material because we're using this revolutionary dry electrode process. But when something is revolutionary, it's a lot of unknowns that have to be resolved. \r\nSo we're confident of resolving those unknowns but it's very difficult. It's -- yes, we're making rapid progress on that point. So the first order of business is really get the basics right, get to high volume and high reliability and then very rapidly iterate within that to enhance the energy density and reduce the cost of the cell.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
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},
{
"name": "Drew Baglino",
"speech": "Totally agree, yes.",
"session": "Answer",
"person_id": 393478,
"person_company": null,
"component_order": 53
},
{
"name": "Elon Musk",
"speech": "I'd say we are highly confident of a good outcome. It's the exact counterpoint of that is perhaps is of some debate but the outcome is not.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 54
},
{
"name": "Drew Baglino",
"speech": "Yes. Specific to the dry process, we made a major advance this past quarter in Kato that the team is really excited about, and congrats to the team for achieving that.",
"session": "Answer",
"person_id": 393478,
"person_company": null,
"component_order": 55
},
{
"name": "Elon Musk",
"speech": "But I should also emphasize that it is not as though Tesla intends to displace our suppliers of battery cells. The Tesla battery cell production is in addition to what our suppliers can do. And we want our suppliers to grow their battery output as fast as they possibly can, and that goes for the entire supply chain. \r\nThe fundamental rate limiter for both transitioning to sustainable energy is how fast can you grow with the amount battery output per year? This is the fundamental rate limiter for transition to sustainability because you need the batteries for 2 of the pillars of sustainability, the stationary storage and for vehicles. So yes.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 56
},
{
"name": "Drew Baglino",
"speech": "Yes, I just want to stress that a lot of these higher energy density technologies are not necessarily scalable. I mean, most of them are not scalable from what I've seen. And so like focusing on them is a distraction from the mission, like it really is how do we scale as fast as possible? \r\nAnd we're taking these risks that we've discussed at Battery Day. And our plan is as we derisk them and they are successful, we want to bring them back to our partners so that they can go faster, too, because that's all on the mission, right, like how do we accelerate.",
"session": "Answer",
"person_id": 393478,
"person_company": null,
"component_order": 57
},
{
"name": "Elon Musk",
"speech": "People often ask me, if you often ask me, is some breakthrough needed in battery technology for the world to transition to sustainability? The answer is no. Even if there was 0 technology breakthroughs, so literally 0 from where the technology is right now, we could fully transition Earth to sustainable energy. The issue is very much the rate at which the entire supply chain from mining to refining to cell production. How fast can that grow? It's growing fast with the faster it grows, the faster we transition to a sustainable energy economy.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 58
},
{
"name": "Pierre Ferragu",
"speech": "This is actually a great exactly where my follow-up is. So Elon, you always mention this 50% per annum sustainable growth target that you guys have. And so my question here is when we see like the difficulty regarding the commodities, raw materials, swinging prices, I'm kind of wondering, as you are planning for this 50% per annum growth, if we stand today over the next 5 to 10 years, how much of that do you feel you've secured through your work at entering into long-term contracts and things like that? And you were calling for entrepreneurs to go into the lithium business. \r\nSo does that mean you don't have enough lithium secured to grow 50% per annum over multiple years? And what's -- how much of that is secured today? And how fast can you improve that basically?",
"session": "Question",
"person_id": 356336,
"person_company": null,
"component_order": 59
},
{
"name": "Elon Musk",
"speech": "Well, I think it's very difficult to predict anything 10 years from now. I hope civilization is still around, frankly. I don't count that as a win.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 60
},
{
"name": "Pierre Ferragu",
"speech": "Not that fun.",
"session": "Question",
"person_id": 356336,
"person_company": null,
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"name": "Elon Musk",
"speech": "Yes, exactly. Hopefully, we haven't had World War III by then. So the -- we do see constraints in refining of the materials necessary lithium ion batteries. I do want to emphasize this as -- it is not due to a scarcity of the raw material. In the case of lithium, lithium is one of the most common elements on Earth. It's pretty much everywhere. \r\nBut refining of the lithium into ultra-high purity battery-grade lithium hydroxide, lithium carbonate is quite difficult and requires a massive amount of machinery and it's a hard thing to scale. As it was also difficult to create the anode and cathode. I think -- my guess is maybe 2/3 of batteries will be iron phosphate or maybe iron phosphate with some manganese. And there's plenty of -- there's a ridiculous amount of iron. In fact, Earth is -- a little better of trivia. says, what is Earth made of more than anything else? Iron. Iron is the #1 ingredient of Earth by mass. Number 2 is oxygen, which is wild. \r\nYes. Basically rust. Actually, we're stuck together. We're a rust ball. That's roughly -- that's almost 2/3 of Earth, I think, is rust. We are like a rusty ball bearing with a little bit of other stuff. So -- but plenty of lithium. So anyway, there's not like a shortage of materials.",
"session": "Answer",
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{
"name": "Drew Baglino",
"speech": "But the other thing on the LFP thing is that it isn't just that there's more access to material that way. The actual refining process is less capital intensive to make a good LFP cathode. And so there's -- it's not just scalable on the resource side, it's scalable on the refining side.",
"session": "Answer",
"person_id": 393478,
"person_company": null,
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{
"name": "Elon Musk",
"speech": "Absolutely. To clear, there's no fundamental barrier here. It's simply a rate question. Like at what rate can you scale production? And I think we're seeing a very rapid increase in battery production and in the whole supply chain. If you were to say today, what are concerns appears down the road? I would say one of the concerns is the machinery to refine the -- the critical ingredients of lithium ion cells. So the lithium itself and then the cathode, which I said like I said, will be mostly iron phosphate, some manganese. \r\nI think almost all stationary storage will be iron phosphate and then you really just need nickel chemistry for long-range vehicles and like aircraft and that kind of thing.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
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{
"name": "Drew Baglino",
"speech": "Yes. The other thing I would say is -- we are working with our suppliers to ramp their capability as quickly as possible. And it's not like we have a problem in the next year or 2 to -- specifically to your question. But when we look 10 years out, yes, we need to do more to accelerate the growth. And that is why we are making our own investments, like we are building a facility here in Texas. The steel is going up, you can see it in the flyovers. \r\nWe're working on a lithium refining activity as well ourselves because the best way to learn how to accelerate something is to do it yourself. So these are the things we're doing to move it all forward.",
"session": "Answer",
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{
"name": "Elon Musk",
"speech": "Yes. If our suppliers don't solve these problems, then we will.",
"session": "Answer",
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},
{
"name": "Martin Viecha",
"speech": "Thank you. The next question comes from Emmanuel Rosner from Deutsche Bank.",
"session": "Answer",
"person_id": 370659,
"person_company": null,
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},
{
"name": "Emmanuel Rosner",
"speech": "Yes. I have a question on your vehicle demand and then a quick follow-up on supply. First, on the demand side. Are you seeing any sort of pressure in the order book or the pace of new order or any sort of like slowdown as a result of the pressures that the consumer is experiencing? Are you worried about it in light of your view of the risks to the economy that I think you expressed, Elon?",
"session": "Question",
"person_id": 376728,
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},
{
"name": "Elon Musk",
"speech": "Well, right now, our is very much production. So we've long leads on -- as anyone can tell, if they order our car, you order Model Y, it'll arrive sometime next year. So this is clearly not an issue for many months for us. Our problem is overwhelmingly that of production. So yes.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
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},
{
"name": "Zachary Kirkhorn",
"speech": "Okay. Maybe just 2 things to add. Specifically on your question, are we seeing a macroeconomic impact on our demand? Not that I can tell. Maybe a little.",
"session": "Answer",
"person_id": 385023,
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},
{
"name": "Elon Musk",
"speech": "Some maybe.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 71
},
{
"name": "Zachary Kirkhorn",
"speech": "But it's not material. The second thing to Elon's point about backlogs, we have a very long runway with very long lead times here. I mean, certainly, the world is uncertain, and we'll have to see where things go with commodity prices, how quickly we're ramping production, what the state of the road looks like at some point next year. But the demand is not something we spend really any time talking about.",
"session": "Answer",
"person_id": 385023,
"person_company": null,
"component_order": 72
},
{
"name": "Elon Musk",
"speech": "Yes. I think it's -- maybe just 1 thing worth mentioning the -- that there is surface between value for money and fundamental affordability because sometimes people say, \"Well, if you got all this demand. Why don't you just raise the price to some -- double the price or something?\" And this is usually expressed by somebody who's rich. \r\nBut there's -- even if you rail value for money to infinity, if somebody does concerns do not have enough money to buy it, even a product where the desirability is rail to infinity, they basically cannot buy it. So this is why you kind of just raise prices to some arbitrarily high level because you pass the affordability boundary and then the demand falls off a cliff. \r\nSo I do feel like we've raised our prices or we raise the price quite a few times. They're frankly at embarrassing levels. But we've also had a lot of supply chain and production trucks and as we've got crazy inflation. So I'm hopeful, this is not a promise or anything, but I'm hopeful that at some point, we can reduce the prices a little bit.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 73
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{
"name": "Martin Viecha",
"speech": "Thank you. Emmanuel, do you have a follow-up?",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 74
},
{
"name": "Emmanuel Rosner",
"speech": "Yes. My follow-up was actually on the supply side. So it was very encouraging to see that you're quantifying your current installed capacity at basically already in excess of 1.9 million units installed currently. How quickly do you think that you can fill that capacity?",
"session": "Question",
"person_id": 376728,
"person_company": null,
"component_order": 75
},
{
"name": "Elon Musk",
"speech": "Well, I mean, we -- I think we've got a good chance of exiting this year at 40,000 vehicles a week.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 76
},
{
"name": "Drew Baglino",
"speech": "Yes. I mean our internal plans are to have the capacity utilized by the end of the year. It takes time to ramp there. It will be a challenge. There's a lot that needs to happen to get there but that's what we're working on.",
"session": "Answer",
"person_id": 393478,
"person_company": null,
"component_order": 77
},
{
"name": "Elon Musk",
"speech": "Yes. We've had many 30,000-car weeks already, so I think a 40,000-car week is within reach by the end of this year.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 78
},
{
"name": "Drew Baglino",
"speech": "Shanghai and Fremont, as we said last month for record production and they're really fire to better doing really well. But then also Berlin are coming on strong. Theoretically, they also had record quarters last quarter. And if we ramp them to the capacity shown in the deck by the end of this year, we'll be at that rate.",
"session": "Answer",
"person_id": 393478,
"person_company": null,
"component_order": 79
},
{
"name": "Elon Musk",
"speech": "There's always a lot of uncertainty like the production looks like, and that intermediate part of the difficult to bridge that with high certainty. But the end part of the S-curve, you can say, I think you can have a lot more certainty. And so that's why I'm confident we'll get to 5,000 cars a week at -- in Austin and Berlin by the end of this year or early next year and probably but not certainly, 10,000 cars a week at both locations by the end of next year.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 80
},
{
"name": "Martin Viecha",
"speech": "Thank you. The next question comes from Colin Rusch from Oppenheimer.",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 81
},
{
"name": "Colin Rusch",
"speech": "Could you talk a little bit about the pricing strategy around FSD, and as you get closer to this full functionality rolling out and the increased cycle times, how you see that evolving through the balance of this year and into 2023?",
"session": "Question",
"person_id": 310676,
"person_company": null,
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},
{
"name": "Elon Musk",
"speech": "Yes, we will increase the price of FSD sometime later this year. I think probably just before we go to quiet beta or beta is anyone who wants to use the beta software with all the caveats associated with that can use it, then it would make sense to increase the price of FSD. The value of FSD is, I think, extremely high and not well understood by most people. It is basically currently ridiculously cheap, assuming FSD materializes, which is well.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 83
},
{
"name": "Colin Rusch",
"speech": "Great. And then sorry to belabor a little bit on battery materials side. But in terms of some of the suppliers and the contaminants, can you be a little bit more specific around some of the elements that you guys see in some of your supply chain that can prove troublesome yields for the 4680s, particularly around lithium and potential contaminants in either oxide, the carbonates that you guys end up seeing real issues with as you move into production?",
"session": "Question",
"person_id": 310676,
"person_company": null,
"component_order": 84
},
{
"name": "Zachary Kirkhorn",
"speech": "Yes. I don't really think we have anything to comment on, yes, the purity specs of lithium on this call right now, yes.",
"session": "Answer",
"person_id": 385023,
"person_company": null,
"component_order": 85
},
{
"name": "Elon Musk",
"speech": "Yes. The contaminants from the 4680 are not a factor, which is not an issue.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 86
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{
"name": "Martin Viecha",
"speech": "Thank you very much. The next question comes from Tony Sacconaghi from Bernstein.",
"session": "Answer",
"person_id": 370659,
"person_company": null,
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{
"name": "Toni Sacconaghi",
"speech": "Yes. I have 2 as well. In response to the question around demand, I think, Zach, you said maybe a little, and Elon, you said maybe some indication that you might see some pressure on demand. And I'm wondering if that is really just speculation or whether there's any empirical data that you saw in the last month, whether it be cancellations or order lead times that led you to make that comment. \r\nI think anecdotally, if you squint, the lead times have gotten a little lower over the last 4 months in both China and the U.S. That's really the only visibility investors have. So I'm wondering if you could maybe elaborate on whether that's really just you're sort of anticipating there could be some impact because of high prices or whether they're something anecdotally or quantitatively that you could point to, please?",
"session": "Question",
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"person_company": null,
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{
"name": "Elon Musk",
"speech": "No. I mean, I think we've said this now for many years, I know has proven true. Tesla does not have a demand problem, we have a production problem. And we've almost always had it's a very rare exception it's always been a production problem. I think that will remain the case.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 89
},
{
"name": "Toni Sacconaghi",
"speech": "So there's a denominator and a numerator and like, you increase production?",
"session": "Question",
"person_id": 117232,
"person_company": null,
"component_order": 90
},
{
"name": "Elon Musk",
"speech": "Yes, absolutely. As we increase production, more demand is needed obviously.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 91
},
{
"name": "Drew Baglino",
"speech": "No, it's more just like you can't look at the backlog and state much about demand because we're doing a lot on the other side to change the production.",
"session": "Answer",
"person_id": 393478,
"person_company": null,
"component_order": 92
},
{
"name": "Elon Musk",
"speech": "We're trying to make the backlog lower, not longer.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 93
},
{
"name": "Unknown Executive",
"speech": "Building factories and building --",
"session": "Answer",
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},
{
"name": "Elon Musk",
"speech": "We don't want a long backlog. That's annoying. It'd be like go to a restaurant and you order a burger and you have to wait 3 hours and like, that's annoying. You want to get your burger right away. Same with the car. So we want that lead times to reduce.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 95
},
{
"name": "Toni Sacconaghi",
"speech": "Okay. Now I was just trying to follow up on the fact that you both said that maybe we're seeing demand be impacted a little bit, and that was the spirit of the question.",
"session": "Question",
"person_id": 117232,
"person_company": null,
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},
{
"name": "Elon Musk",
"speech": "We don't have like -- like because we see daily orders from around the world for our cars, it's actually -- it is like a mood barometer of people's confidence in the economy. But one can't read too much into it because things can vary a great deal from 1 day to the next. Consumer sentiment is all over the map. So it's -- manage price, frankly. But we have so much excess demand. That is really just not an issue for us. It might be an issue for some other companies but it is not an issue for us.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 97
},
{
"name": "Toni Sacconaghi",
"speech": "Okay. Elon, I'm just wondering, a question for you. Tesla's obviously changed dramatically in the last 3 years from near life or death to a company with consistent cash flow and industry-leading margins. I'm wondering if you can comment on your personal role in the company and whether you see that changing in terms of your role, your commitment and time spent at the company over the next 3 or 4 years. \r\nI think you said a few calls ago, you wouldn't be on calls unless there's something unusual and you've been on every call since then. I'm wondering.",
"session": "Question",
"person_id": 117232,
"person_company": null,
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},
{
"name": "Elon Musk",
"speech": "I do a lot of unusual things, let's face it. Basically, if there's only good news, I won't be on the call. But if you have like a tough situation like COVID shutdowns in China, then I think I'll be on the call -- relatively speaking, if there's bad news. And we have this good news, then I won't be on the call. \r\nBut I'm committed to the long -- I mean, I'll work at Tesla as long as I can usefully advance the cause of sustainability and autonomy.",
"session": "Answer",
"person_id": 175883,
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},
{
"name": "Martin Viecha",
"speech": "Fantastic. Thank you very much. The next question comes from William Stein.",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 100
},
{
"name": "William Stein",
"speech": "Elon, in the past, you've given some assessment as to the likelihood that you can achieve success in some of the more interesting AI-oriented efforts, not only FSD but also Dojo and Optimus. Perhaps you can give an updated view on those.",
"session": "Question",
"person_id": 256580,
"person_company": null,
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},
{
"name": "Elon Musk",
"speech": "Well, I don't want to steal thunder from AI Day. So I think we'll have some exciting news on AI Day that I think will be further ahead than probably most people think. But I don't want to -- I'd love to answer you but I think we'll leave that excitement for AI Day.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 102
},
{
"name": "William Stein",
"speech": "Okay. And perhaps a follow-up if I can. We've heard a lot from others and certainly to some degree from you all about the shortages in semiconductors, in particular. We have seen some big, important customers of that type of product decide to sort of leverage the ecosystems that exist to make some of their own in those categories. \r\nI'm wondering to what degree you're doing that. That's outside of Dojo in terms of the -- I guess, on the inference side, you're certainly doing that in the car, but what about sort of the more mundane areas like microcontrollers and the like? Is there any internal effort to improve supply chain and maybe improve other performance aspects?",
"session": "Question",
"person_id": 256580,
"person_company": null,
"component_order": 103
},
{
"name": "Elon Musk",
"speech": "Well, there's we've done -- we've been working with our suppliers side. We don't currently intend to make chips ourselves. We don't think there will be a need to make chips, but we have been working closely with a number of suppliers. Actually just met with one of our key supplier CEOs right before this call. We had a great meeting. They're going to make major investments in some of the critical chips and components that we need in the car. \r\nAnd I'd actually like to take a moment to thank our key suppliers once again for supporting us through difficult times. And they really went above and beyond to support us. So to all our suppliers out there, thanks very much.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 104
},
{
"name": "Drew Baglino",
"speech": "Yes. And I guess just maybe we don't talk about it very often, but we do have a lot of custom silicon in the vehicle already. Microcontrollers, yes, some battery management, yes, power electronics, yes, some. So we try to go after where there's actually a technical advantage. And in the future, I think we're going to look at where there's a supplier",
"session": "Answer",
"person_id": 393478,
"person_company": null,
"component_order": 105
},
{
"name": "Elon Musk",
"speech": "[indiscernible] even now where the supply chain issues with our Tier 1s and Tier 2s, get into it with us on the engineering side when we find solutions, whether it's alternative chips or changing the entire structure of this pack to make it work. And I think that's an advantage we have that many other OEs just simply cannot. \r\nI think Tesla is as much a software company as it is a hardware company. And so one of the ways that we've been able to address supply chain issues on the chip front is by rewriting of software to be able to use different chips or, in some cases, achieve dual use of a single chip, which is even better. And actually, quite frankly, the chip shortage has served as a forcing function for us to reduce the number of chips in the car. Yes, turns out we had more chips than we needed. \r\nBut that's a testament to our software team that we're able to roll a new chip into the car, write a whole new patch of software for that chip and -- without interrupting production.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 106
},
{
"name": "Drew Baglino",
"speech": "Yes. And our goal is as we mature and scale the platforms to integrate more functionality into fewer chips, like that is the way that it's gone with laptops and phones. It's going that way in cars. And we're trying to do that wherever it makes sense to do it as quickly as we can.",
"session": "Answer",
"person_id": 393478,
"person_company": null,
"component_order": 107
},
{
"name": "Elon Musk",
"speech": "From a supply chain standpoint, do we -- what do you think about the chips and whatnot?",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 108
},
{
"name": "Drew Baglino",
"speech": "Yes. I think -- I mean, from a high level, instead of designing and building our own microcontrollers, we're partnering with key partners that understand the architectural of [indiscernible] and they'll take the specs and design something for us. We've done that, to your point, the battery sensing space. We've got some application-specific ICs. But yes, integrating, reducing the number of components, it's a mix of supply chain but it also makes the reliability of the end product better because there's less failure points. So that's always been the mantra.",
"session": "Answer",
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},
{
"name": "Lars Moravy",
"speech": "And at times, we've also got the wafer level and try to consume less to achieve the same functionality. So that's something also that we've been looking at in some of the constrained modules that we have faced in the last 6 months.",
"session": "Answer",
"person_id": 482177,
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{
"name": "Martin Viecha",
"speech": "Fantastic. Well, thank you very much. I appreciate all of your questions. Unfortunately, this is all the time we have this quarter, and we will speak to you again in 3 months' time. Thank you very much, and goodbye.",
"session": "Answer",
"person_id": 370659,
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},
{
"name": "Elon Musk",
"speech": "Bye.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
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}
],
"title": "Tesla, Inc., Q2 2022 Earnings Call, Jul 20, 2022",
"quarter": 2,
"year": 2022
}
},
{
"transcript_title": "Tesla, Inc. - Q1 2022",
"transcript_name": "Tesla, Inc., Q1 2022 Earnings Call, Apr 20, 2022",
"ticker": "NASDAQ:TSLA",
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"name": "Martin Viecha",
"speech": "Okay. Good afternoon, everyone, and welcome to Tesla's First Quarter 2022 Q&A Webcast. My name is Martin Viecha, VP of Investor Relations, and I'm joined today by Elon Musk, Zachary Kirkhorn and a number of other executives. Our Q1 results were announced at about 3 p.m. Central Time in the update deck we published at the same link as this webcast. \r\nDuring this call, we will discuss our business outlook and make forward-looking statements. These comments are based on our predictions and expectations as of today. Actual events and results could differ materially due to a number of risks and uncertainties, including those mentioned in our most recent filings with the SEC. \r\n[Operator Instructions] Before we jump into Q&A, Zach will have some opening remarks. Zach?",
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"name": "Zachary Kirkhorn",
"speech": "Yes. Thanks, Martin. Just to start off here, Q1 was a challenging but extremely successful quarter for the company. Numerous supply interruptions, including shuts at our Shanghai factory and nearby suppliers due to COVID, we've continued making progress and achieved our best-ever vehicle deliveries. \r\nLast quarter, we demonstrated a series of new financial records, including revenue, gross margins, operating margin and bottom line profitability. GAAP automotive gross margin reached 32.9% and first time exceeded $0.30 when excluding regulatory credits. Higher pricing continues to positively impact our financials as we make progress delivering cars and our growing backlog. Note that, for most vehicles, our delivery wait times are quite long. Thus, cars delivered in Q1 generally carried pricing set in prior quarters and at levels lower than cars being ordered today. \r\nOur per unit vehicle cost increased as well. Inflation, raw material prices, expedites and logistics costs continues to impact our cost structure. Factory shutdowns also occurred with little to no notice. Hence, we are unable to take action to plan those interruptions in a cost-efficient manner. Additionally, we saw a slight mix shift towards more profitable vehicles, including the Model Y. We also recognized a onetime benefit of $288 million from credit revenue relating to a regulatory change in the U.S. CAFE penalty, without of which credit revenue would have declined compared to the same period last year. \r\nThe energy business has continued to be impacted by macro conditions, more severely than the vehicle business. Our storage products, our need of chip supply and new import processes have impacted supply of certain components for our solar systems, which is reflected in our solar volume for the quarter. \r\nOpEx as a percentage of revenue continues to reduce, driven by higher revenue, lower stock-based comp expense and other items. As a result of our ongoing improvements in operating leverage, we achieved a record operating margin of over 19%. Note that commissioning costs for our factories are in R&D as Berlin started production in late March and Austin in early April. These costs will be in automotive COGS going forward, given these factories are now producing customer sellable cars. \r\nOur free cash flows have remained quite strong, yet were impacted by working capital related to lower-than-planned production. Additionally, we have reduced our debt, excluding product financing, to nearly 0. \r\nLooking ahead in the immediate term, a few things to keep in mind for Q2. First, we've lost about a month of build volume out of our factory in Shanghai due to COVID-related shutdowns. Production is resuming at limited levels, and we're working to get back to full production as quickly as possible. This will impact total build and delivery volume in Q2. Second, as I've mentioned before, Austin and Berlin are just starting their ramps. And thus, those inefficiencies will start to flow through our gross margins in Q2. Third, we do have higher ASPs in our backlog, which will help to offset some of these headwinds. \r\nWe continue to drive towards further strengthening of our financials in the second half of the year and believe our 50% or above growth rate remains achievable for the year. \r\nI want to conclude by thanking the Tesla team, our suppliers and our new customers for a great first quarter.",
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"name": "Martin Viecha",
"speech": "Thank you very much. And Elon has opening remarks as well.",
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"name": "Elon Musk",
"speech": "Sure. Some of my remarks will be redundant with Zach's, but it's maybe worth repeating. Q1 was once again a record quarter on many levels, by reaching the highest deliveries, profit and an operating margin of 19%. This was despite a lot of chip shortages, many logistics challenges and an overall difficult quarter. So I'd really like to congratulate the Tesla team on achieving record profitability and output despite many, many difficult headwinds. And especially the Tesla China team in our Shanghai factory, they really had significant challenges due to the COVID shutdown and nonetheless have been able to output a tremendous number of high-quality vehicles. And we are already back up and running with the Shanghai factory. \r\nSo as Zach said, we remain confident of a 40% growth in vehicle production in 2022 versus '21. I think we actually have a reasonable shot at a 60% increase over last year. So let's see. Obviously, we ramped production, as you will know, with Giga Berlin and Giga Texas in the past few months. So with 2 fantastic factories with great teams, and they are ramping rapidly. Now with new factories, the initial ramp always looks small, but it grows exponentially. So I have very high confidence in the teams in both factories, and we expect to ramp those initially slowly, but like I said, growing exponentially with them achieving high volume by the end of this year. \r\nSo we're also working on a new vehicle that I alluded to at the Giga Texas opening, which is a dedicated robotaxi. That's highly optimized for autonomy, meaning it would not have steering wheel or pedals. And there are a number of other innovations around it that I think are quite exciting. That is fundamentally optimized for -- trying to achieve the lowest fully considered cost per mile or cost per kilometer, accounting everything. And so it's, I think, going to be a very powerful product where we aspire to reach volume production of that in 2024. So I think that really will be a massive driver of Tesla's growth. And we remain on track to reach volume production of the Cybertruck next year. \r\nLet's see. So it's basically, once again, I'd like to thank the Tesla employees for their hard work, but also I'd like to thank our suppliers who have really gone the extra mile. They -- we have an amazing supplier group, and I want say heartfelt thanks to the suppliers that have really worked day and night to ensure that Tesla is able to keep the factories running. \r\nAnd we're really at the early stage of that journey. We only crossed 1 million units in the past 12 months recently. And we are -- we aspire to head to 20 million units a year, so we're basically 5% along the way towards our goal. And we are growing very, very rapidly year-over-year. And we remain confident of exceeding 50% annual growth for the foreseeable future for basically several of the next years, I mean, so yes. \r\nAnd then there's, of course, Optimus, which I was surprised that people did not realize the magnitude of the Optimus robot program. The importance of Optimus will become apparent in the coming years. Those who are insightful or listen carefully will understand that Optimus ultimately will be worth more than the car business, worth more than FSD. That's my firm belief. So -- and then, of course, insurance is growing well. We expect to address the part shortages that limited our progress with batteries and solar. So we expect batteries and solar to also grow well this year. \r\nAnd basically, the future is very exciting. I've never been more optimistic or excited about Tesla's future than I am right now. Thank you.",
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"name": "Martin Viecha",
"speech": "Thank you very much. Let's go to first investor question. And the first investor question is, Elon has historically provided FSD time lines with not optimal accuracy. We love his optimism for 2022 release, but is there any data Tesla can share with investors to help them make their own conclusions on progress being made, interventions per mile driven or any other data?",
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"name": "Elon Musk",
"speech": "Sure. Well, with respect to full self-driving, of any technology development I've ever been involved in, I've never really seen more kind of false dawns or where it seems like we're going to break through, but we don't, as I've seen in full self-driving. And ultimately, what it comes down to is that to solve full self-driving, you actually have to solve real-world artificial intelligence, which is -- which nobody has solved. The whole road system is made for biological neural nets and eyes. And so actually, when you think about it, in order to solve for full self-driving, we have to solve neural nets and cameras to a degree of capability that is on par with or really exceeds humans. \r\nAnd I think we will achieve that this year. The best way to reach your own assessment is to join the Tesla full self-driving beta program where we have over 100,000 people right now enrolled in that program, and we expect to broaden that significantly this year. So that's my recommendation is join the full self-driving beta program and experience it for yourself and take note of the rate of improvement with every release. And we put out a new release roughly every 2 weeks. So -- and you'll see a little bit of 2 steps forward, 1 step back. But overall, the rate of improvement is incredibly quick. So that's my recommendation for reaching your own assessment is literally try it.",
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"name": "Martin Viecha",
"speech": "Thank you. The second question is, how much of an impact will the production shutdown in Shanghai have in Q2? What is the time line for localizing the Model 3 in Europe? Or will newer models be prioritized in Berlin?",
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"name": "Elon Musk",
"speech": "Well, the -- we did lose a lot of important days of production. And because there are sort of upstream supplier challenges where a lot of suppliers also have lost many days of production. But Tesla Shanghai -- Giga Shanghai is coming back with a vengeance. So I think notwithstanding new issues that arise, I think we will see record output per week from Giga Shanghai this quarter, albeit we are missing a couple of weeks. So that means the most likely vehicle production in Q2 will be similar to Q1, maybe slightly lower, but it's also possible we may pull a rabbit out of the hat and be slightly higher. But it's really, call it, roughly on par. But then Q3 and Q4 will be substantially higher. So it seems likely that we'll be able to produce over 1.5 million cars this year is my -- that's my best guess. \r\nAnd then Model 3. It's important for new factories to be focused on -- and have the least amount of complexity and variation, which is why Giga Berlin and Giga Texas are focused on the Model Y. It's -- from the point in which you have a factory complete and you're making a small number of units to the point where it's producing high-quality vehicles in volume is sort of 9 to 12 months from start of production. So now hopefully, we're getting better at that ramp, so maybe it's a little less. But to get to sort of the 5,000 a week level has typically taken us around 12 months from start of production.",
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"name": "Martin Viecha",
"speech": "Thank you. The next question is, how much raw material exposure do you have, measured roughly in percentage of cost of goods sold? For example, in a given quarter versus 1 to 2 years out, both direct and indirect. Separately, how do you think about price increases versus prioritizing higher mix vehicles going forward?",
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"name": "Elon Musk",
"speech": "Actually, on the price increase front, I should mention that it may seem like maybe we're being unreasonable about increasing the prices of our vehicles given that we had record profitability this quarter, but the wait list for our vehicles is quite long. And some of the vehicles that people will order, the wait list extends into next year. So our prices of vehicles ordered now are really anticipating supplier and logistics cost growth that we're aware of and believe will happen over the next 6 to 12 months. So that's why we have the price increases today because the car ordered today will arrive, in some cases, a year from now. So we have a very long wait list, and we're obviously not demand-limited. We are production-limited by very much for the production of the unit.",
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"name": "Martin Viecha",
"speech": "Raw material exposure?",
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"name": "Zachary Kirkhorn",
"speech": "Yes. Just to add to what Elon is saying, there's different ways to calculate raw material exposure. I think the simple way we estimate we're around 10% to 15% of our cost structure exposed to raw materials. \r\nAnd just to clarify a couple of things on that. So we've been experiencing increases in cost in general, but also raw materials for a number of quarters now. That pace picked up in Q1, so last quarter. And what we're seeing for Q2 is slightly higher than that as well. And as indices move, it doesn't impact us immediately or directly. In some cases, we have contracts with suppliers. But then as those contracts expire, we have to renegotiate them so that there can be a lag. \r\nIn some cases, our contracts do directly reflect movement in commodity prices or raw material prices. But the timing in which that, that Tesla pays for that has a lag associated with it as well based on the contract. And so to Elon's point, what we're trying to do here, because it's quite an unprecedented situation of raw material movement in all of these various lags and uncertainty around renegotiating contracts, is we're trying to anticipate where things will go and make sure the pricing that we have put in place at the time that those raw material cost increases hit us that they align and that the company can remain financially healthy in various scenarios as we look out over the next 4 quarters.",
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"name": "Martin Viecha",
"speech": "Okay. Thank you very much. The next question is, why does Tesla continue to fight dealership laws on a state-by-state basis versus taking it federal? Separately, why isn't Tesla using 800-volt architecture in its vehicles? What are the advantages or disadvantages?",
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"name": "Elon Musk",
"speech": "So -- standpoint, obviously, we'd like to have federal legislation that allows direct sales in all states, but we have not seen willingness on the part of the Congress to enact such law that would override a variety of state laws. So unfortunately, we have to fight it on a state-by-state basis. And Drew, do you want to answer the 800-volt question?",
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"name": "Drew Baglino",
"speech": "Yes, sure. On the 800-volt thing, yes, so it's really a case-by-case thing. For the smaller platform vehicles like 3 and Y, there's some wins and losses with 800 volts, not everything is better. And so we look at that platform and we're not like ignoring the reality that you can go to a higher voltage, but there's nothing really encouraging us to do so on that platform. It's really about mass and power. And as you look at bigger vehicles, there are some advantages on those bigger vehicles.",
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"name": "Elon Musk",
"speech": "Let me just quantify that. Basically, our estimate is that going from 400 to 800 volts might save $100. It's not really moving the needle.",
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"name": "Drew Baglino",
"speech": "And you're changing many things. It's charging infrastructure all the way through the entire vehicle system to get maybe $100.",
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"name": "Elon Musk",
"speech": "Yes, exactly. So I mean, in the U.S., you've got 110-volt household voltage. And then in your most -- like sort of 220. But really, it doesn't make that much of a difference, and appliances work pretty much as well in, say, Europe as they do in the U.S. So there's some -- the advantages are small and the cost is high. Like you say, like long term, like years now, it does it make sense probably to an 800-volt architecture probably, but it really needs a very big vehicle volume to pay for the cost of changing from 400 to 800 volts. And then Drew, do want to continue to...",
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"name": "Drew Baglino",
"speech": "I was just going to say that 100 volts is also kind of like a spreadsheet exercise, right?",
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"name": "Elon Musk",
"speech": "$100.",
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"name": "Drew Baglino",
"speech": "Sorry. $100. It's roughly like a spreadsheet exercise, like you have to get through the full to the end to see that maybe it's been whittled away to $50 or less. Yes. On bigger vehicles, where you're talking about higher power on the charging side or higher power from the battery to the power electronics or you need more torque, so the current requirements go up, there's a little bit more semiconductor and actual conductor savings of going to the higher voltage. And so we do consider that for Semi and Cybertruck. But for the 3/Y platform where we've got everything running and the benefit is questionably small.",
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"name": "Elon Musk",
"speech": "Yes. It's basically 0 for robotaxi.",
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"name": "Drew Baglino",
"speech": "Yes. For robotaxi, yes, it doesn't make sense.",
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"name": "Elon Musk",
"speech": "No, no. Sorry, this...",
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"name": "Drew Baglino",
"speech": "Sounds good.",
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"name": "Martin Viecha",
"speech": "Okay. Let's go to the next question. Next question is, how are the current 4680 performing versus expectations set during the battery day in terms of expected range increase and dollars per kilowatt hour?",
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"name": "Elon Musk",
"speech": "Yes.",
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"name": "Drew Baglino",
"speech": "Yes. We're working in all the areas we shared on Battery Day, and we have sort of consistent progress across all of those areas towards achieving the 5-year cost trajectory goals for the cost within our control, but we do not control all the commodity costs. So that's an exception I needed to call out. \r\nSimilar to Model 3, it will take us several years to get rate and yields to the point where everything that we've discussed is achieved. Our priority was on simplicity and scale during our initial 4680 battery ramps. And as we attain our manufacturing goals, we will layer in new material technologies we are developing and higher-range structural pack provisions.",
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"name": "Elon Musk",
"speech": "I think maybe, in a nutshell, I think it probably is fair to say that 4680 and structural pack will be competitive with the best alternatives later this year and we think will exceed the best alternatives next year.",
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"name": "Drew Baglino",
"speech": "Yes. I mean we have some good existing proofs, right? Like we've built the facility here in Texas, like we know how much we spent on capital equipment in the facility. And it's more than 5x less than prior technology installations. So we're saving huge on CapEx, on utilities and personnel. We know what those loads are and how many people are needed to run what is basically in a highly automized factory. And we have massive reductions in both of those. So like the cost model is well understood. It's really about rate and yield, which will come in time, as Elon said, over the course of this year and next.",
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"name": "Elon Musk",
"speech": "Yes.",
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"name": "Martin Viecha",
"speech": "Thank you. And the next question is, how does Tesla plan to secure raw materials required to scale to extreme size?",
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"name": "Elon Musk",
"speech": "Yes. So this is something we think about quite a lot. It depends what extreme size means. But certainly looking at, like, say, the $5 million, $10 million, $20 million -- 5 million, 10 million, 20 million vehicle levels, you really have to analyze the sort of macroeconomic, just like what is the tonnage of lithium that you need, of nickel, of iron phosphate, of graphite separators, electrolytes. It looks like really you think of like just macro tonnage. \r\nAnd when we need to think about this for the world as a whole, because just -- we want to what -- limiting factors for accelerating the advent of a sustainable energy future. And whatever the most limiting factors are, Tesla will take action on those limiting factors. So right now, we think mining and refining lithium is -- appears to be a limiting factor, and it certainly is responsible for quite a bit of cost growth in the sales. It's I think the single biggest cost growth item right now all on a percentage basis. Although just for those who don't totally know this, the actual content of lithium in lithium ion cell is maybe around 2% or 3% of the cell. So.",
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"name": "Drew Baglino",
"speech": "5 kg a car.",
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"name": "Elon Musk",
"speech": "Yes, exactly. 5 kg. It's not -- it's called lithium ion cell, but by far, like the most expensive and heaviest item in the cell is the cathode. So that's the nickel or the iron phosphate. So we're looking carefully at all of the raw materials and trying to figure out how we can accelerate the total amount of raw materials needed to transition the world to sustainability. I think we've got -- we don't have enough time on this call to really go through all those details, but we are thinking about these things. And we think we'll have some exciting announcements in the months to come.",
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"name": "Drew Baglino",
"speech": "Yes. One thing I want to call out is like we're also committed to recycling at all of our cell factories. We're recycling 50 tonnes a week right now in Reno and ramping to 150 with all of that reclaimed material going directly back into our cathode supply chain. So we're looking at the beginning and end of life needs here.",
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"name": "Elon Musk",
"speech": "Yes. And that's true like since Reno build a Gigafactory and we started doing that with batteries. But as we build newer factories or vehicles, for example, Giga Texas here, where we are today, we said was all of its non yielded or scrap aluminum from the stamping shop directly into the casting shop. We regrind any plastic figures out. And so we're really concerned about raw materials, not just like mining them and consuming them, but when we get them in the door, using all 100% of them.",
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"name": "Drew Baglino",
"speech": "Yes. No, that's a great point. So we're storing -- we're selling sort of health furnaces for probably minimum [indiscernible] for the Model Y that we've built here in -- at Giga Texas has both a front and a rear body casting. So we're casting almost 2/3 of the body then that's -- it's high pressure aluminum. And so we can take both scrap from the casting machine and the gating that comes out and put that -- just really pass that back into the melting aluminum melting pot. And then as Elon was saying, also take any stampings and any other aluminum scrap and also through that in the melting pot, matter of fact, we've also figured out that we can use wheels from practically any car. Yes, yes. So we're going to be recycling the aluminum wheels from legacy gasoline cars as well and throwing that in the melting pot for our aluminum cast body of Model Y. And also we'll be moving to the sort of cast part rear body in all vehicles over time? Well, actually, maybe not S/X, but 3/Y.",
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"name": "Martin Viecha",
"speech": "Thank you. At what rate do you expect Berlin and Austin to ramp relative to Shanghai? Are you able to leverage learnings from Shanghai? Or are the processes substantially different in the new factories?",
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"name": "Elon Musk",
"speech": "Ramp production faster than Shanghai because we have learned a lot. And we've now gone through the -- we have basically veteran teams that obviously in the 3/Y ramp [indiscernible] especially in multiple locations. And we're obviously sharing what we've learned. And so we don't want to get complacent or entitled, but this should be a faster ramp because we have learned more, and we have done a lot to simplify the production prices of Model Y that should lead us to a faster ramp within Texas and Berlin, yes.",
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"name": "Drew Baglino",
"speech": "But we also had a structural casting, about 30% less robots, we expect to almost double the capacity for body, for example, reducing the number of robots, but doubling our capacity in a lot of areas.",
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"name": "Elon Musk",
"speech": "Yes. Right. The body line for the structural pack is -- and if you got a structural pack and front and rear castings, the body shop sizes drops by over 60% relative to the standard way of making a car.",
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"name": "Drew Baglino",
"speech": "[indiscernible] general assembly or everything else because, yes, we have the structural battery, the floor is the battery. We put the seats on the battery and then we put that in their cars. So there's actually 10% and 15% of our stations in GA because of the general [indiscernible] as well.\r\nSo really, like I think about this and the way we think about cars, if you're waiting for the best Tesla, you're going to be waiting forever. If you're waiting for investment, you're also going to be waiting forever because every new factory is better than the last one because we take all that learning and triple it.",
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"name": "Elon Musk",
"speech": "Yes.",
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"name": "Martin Viecha",
"speech": "Next question is at Cyber Rodeo, Elon mentioned that a future is the driverless robotaxi vehicle is on the road map. When can we expect more details on the product offering to be unveiled? Is this something that people can own? Or will this be only offered by Tesla as a service?",
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"name": "Elon Musk",
"speech": "So I think we want to hold up on -- we don't want to jump the gun on an exciting product announcement too much. So I think we'll aim to we do a product event for robotaxi next year and get into more detail, but we are aiming for volume production in 2024.",
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"name": "Martin Viecha",
"speech": "All right. And maybe the last question from investors is, what is the current run rate of 4680 cell production at Fremont and at Giga Texas? What do you expect run rates of 4680 to be in Fremont and the Giga Texas or Berlin at the end of the year?",
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{
"name": "Elon Musk",
"speech": "Well, Berlin is using the 2170 nonstructural pack. So they're not constrained by 4680. They will transition to 4680 hopefully later this year, but current billing production is not to acquire that. We also have, just as a risk mitigation 2170 nonstructural pack capability in Giga Texas as well. But -- if things go according to plan, we will be in volume production with 4680 sometime perhaps towards the end of the third quarter and certainly in the fourth quarter. Is that accurate?",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 47
},
{
"name": "Drew Baglino",
"speech": "Yes. And the other thing I would add is like with the China COVID shutdown and the semiconductor bottlenecks we had through Q4 and hence a little bit in Q1, we have sizable cell inventory at the moment and excess cells to support the 2022 volume targets you described. So that gives us the ability to be pretty deliberate in the 4680 ramp where we can maximize learning step by step, take engineering downtime to upgrade key pieces of equipment and modify the structural pack design to improve reliability, all while achieving what you just said. So.",
"session": "Answer",
"person_id": 393478,
"person_company": null,
"component_order": 48
},
{
"name": "Elon Musk",
"speech": "Yes. 4680 output is not a risk to achieving 1.5 million vehicles produced this year, but it would become a risk next year if we do not solve volume production by early 2023, but we're highly confident of doing so.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 49
},
{
"name": "Martin Viecha",
"speech": "Thank you very much. Let's go to analyst questions now. The first question comes from Dan Levy from CSFB.",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 50
},
{
"name": "Dan Levy",
"speech": "First, maybe you can just talk through or address what some of the drivers of cost improvement were in the quarter. Was it just further improvements within Shanghai or in Fremont? Anything around sort of ongoing kaizen that you've talked about in the past? Maybe you could just talk through what you benefited from in the first quarter.",
"session": "Question",
"person_id": 377011,
"person_company": null,
"component_order": 51
},
{
"name": "Zachary Kirkhorn",
"speech": "Sure. I mean at a high level, cars produced in Shanghai do carry a lower cost structure than cars produced in Fremont. And so as our mix of cars shift towards Shanghai, the average cost is positively impacted by that. We're also seeing some progress in manufacturing efficiencies in Fremont, particularly on the S/X side as volume increases improves there. Expedites has been a huge story for the company. Q4, we had massive amounts of expedites. Q1 was still quite large, but we did make progress on bringing that down some.",
"session": "Answer",
"person_id": 385023,
"person_company": null,
"component_order": 52
},
{
"name": "Elon Musk",
"speech": "Special mention goes to the Fremont manufacturing team and our associates there because we're achieving record output at Fremont.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 53
},
{
"name": "Zachary Kirkhorn",
"speech": "The Fremont team is doing a tremendous job.",
"session": "Answer",
"person_id": 385023,
"person_company": null,
"component_order": 54
},
{
"name": "Elon Musk",
"speech": "Really absolutely from the [indiscernible] quarters",
"session": "Answer",
"person_id": 175883,
"person_company": null,
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},
{
"name": "Zachary Kirkhorn",
"speech": "Yes.",
"session": "Answer",
"person_id": 385023,
"person_company": null,
"component_order": 56
},
{
"name": "Drew Baglino",
"speech": "It's hard to underweight. Like you should -- the expedite situation with the crazy logistics that occurred with COVID.",
"session": "Answer",
"person_id": 393478,
"person_company": null,
"component_order": 57
},
{
"name": "Zachary Kirkhorn",
"speech": "Yes. And to Elon's point, the Fremont team and also the Shanghai team has been extremely dynamic with the unpredictable nature of our part arrivals. And our supply chain team, in particular, production planning portion of supply chain. We often get very little notice when there's part shortage is coming, and it's kind of a scramble couple of days before that part is supposed to arrive to figure out how to get it here. And so the amount of Herculean effort that goes in to produce a quarter like Q1 and even the quarters before that is absolutely immense.",
"session": "Answer",
"person_id": 385023,
"person_company": null,
"component_order": 58
},
{
"name": "Elon Musk",
"speech": "There's a saying in the military, it's like amateurs talk about tactics, professionals talk about logistics when it comes to war.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 59
},
{
"name": "Zachary Kirkhorn",
"speech": "Yes. So there were some inherent cost improvements, as I mentioned, but there's also offsets that we've talked about previously on raw materials. Commodities outbound logistics continues to remain a challenge despite a ton of efforts to increase capacity there and bring those costs down.",
"session": "Answer",
"person_id": 385023,
"person_company": null,
"component_order": 60
},
{
"name": "Rodney Westmoreland",
"speech": "[indiscernible]",
"session": "Answer",
"person_id": 456164,
"person_company": null,
"component_order": 61
},
{
"name": "Elon Musk",
"speech": "Sorry. Go ahead.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 62
},
{
"name": "Dan Levy",
"speech": "Yes. Yes. Second question, one of the initial goals of Model 3 way back when was to have an EV that was affordable for a wide portion of the market. And we know prices are much higher now just given the supply constraints. Prices are higher for all other automakers. We know that there's inflation that you're battling through, and some of that needs to be passed through the price of the vehicles. And you're going to be supply-constrained for the foreseeable future, so it's sort of a moot point. But given the goal long term of making EVs more widely available to the masses over time, how do you look at the progression of prices over time?",
"session": "Question",
"person_id": 377011,
"person_company": null,
"component_order": 63
},
{
"name": "Elon Musk",
"speech": "We absolutely want to make EVs as affordable as possible. It's been very difficult with the -- I mean, I think, inflation is at like a 40 or 50 year high. And I think the official numbers actually understate the true magnitude of inflation, so -- and that inflation appears to be likely to continue for at least the remainder of this year is what -- when we're talking to suppliers, under severe cost pressure. So yes, and in some cases, we're seeing suppliers request 20% to 30% cost increases for parts from last year to the end of this year. \r\nSo it's -- there's a lot of cost pressure there. That's why we raised our prices because we -- when things are on -- with respect to inflation, you know it's high, then -- and we've got orders that go out a year or more in some cases, then we have to anticipate those cost increases. But I think, especially with the robotaxi and autonomy, I think we will end up providing consumers with, by far, the lowest cost per mile of transport that they've ever experienced. Yes. I mean with robotaxi, like maybe 5 to 10x cost per mile, it's really quite substantial.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 64
},
{
"name": "Drew Baglino",
"speech": "And therefore, accessible to [indiscernible]",
"session": "Answer",
"person_id": 393478,
"person_company": null,
"component_order": 65
},
{
"name": "Elon Musk",
"speech": "Yes. I mean -- looking at some of our projections, it would appear that a robotaxi ride will cost less than a bus ticket, subsidized bus ticket or subsidized subway ticket.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 66
},
{
"name": "Martin Viecha",
"speech": "Let's go to the next question from Rod Lache from Wolfe Research.",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 67
},
{
"name": "Rod Lache",
"speech": "I'm trying to just parse out your comments about the inflation and constrained supply and battery feedstocks and the initiatives that you are working on internally to secure these materials. It sounds like you're optimistic about Tesla's ability to solve this for Tesla. Do you -- but do you see this as a constraint on EV adoption more broadly?",
"session": "Question",
"person_id": 370532,
"person_company": null,
"component_order": 68
},
{
"name": "Elon Musk",
"speech": "Yes, absolutely. But what's sort of keeping our costs down, at least in the short term, is that we have long-term contracts with suppliers, but those long-term contracts will obviously run out and then the year we'll start to see potentially significant cost increases. But the macro is sort of looking at the world as a whole and saying, okay, what does it take for Earth to transition to sustainable energy faster? It's fundamentally -- the fundamental limiting factor is the output of cell -- basically, cell output. At what rate can lithium ion cells increase the gigawatt hours per year? That is the fundamental limiting factor. \r\nSo in order -- and that will move as fast as the slowest element of the whole supply chain. Currently, we see that as being a challenge with lithium. And it's not that -- to be clear, it's not that there's a shortage of lithium ore in the world. Lithium is present almost everywhere. It's a very common element. However, you still need to take up the ore -- take up basically sludge or whatever the clay with the lithium and then you need to go through a whole series of refinement steps. And that's a lot of industrial equipment that's needed to refine lithium ore to lithium that can be used as lithium hydroxide or lithium carbonate in the battery cell. \r\nSo we think we're going to need to help the industry on this front, but the -- I mean, the industry is very fast, and I certainly encourage entrepreneurs out there who are looking for opportunities to get into the lithium business. The lithium margins right now are practically software margins. I mean if the -- I think it's something -- I think there's a -- I mean, is that -- correct me if I'm wrong, but I think we're seeing cases where the spot lithium price is 10x higher than the cost of extraction. So like we're talking 19% margins here. Can some -- can more people please get into the lithium business? It's -- do you like minting money? We'll look the lithium business is for you.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 69
},
{
"name": "Rod Lache",
"speech": "So interesting. So I guess we'll stay tuned to see what happens from that. My second question is it's impressive to see just a modest increase in cost per vehicle -- cost of goods sold per vehicle, given what we've seen in terms of commodities actually. And from here, you have a lot of savings opportunities with 4680 cells and the cell manufacturing changes, the anode chemistry structural packs, giga castings. Are you suggesting that even those may not be sufficient to offset the inflation that you're seeing and that you're going to need additional pricing as well in addition to those specific initiatives that you've called out?",
"session": "Question",
"person_id": 370532,
"person_company": null,
"component_order": 70
},
{
"name": "Elon Musk",
"speech": "We hope we don't need to increase the pricing further. The current pricing is anticipating what we think is the probable growth in costs. And if those growth -- if that growth in cost does not materialize, we actually may slightly reduce prices. So should we currently anticipate making significant price increases. But obviously, we don't control the macroeconomic environment. If governments keep printing vast amounts of money and if there's -- if there are not significant increases in lithium extraction and refinement and other raw materials, such that everyone is competing for a limited amount of raw materials, then obviously, that will drive prices to high levels. So if you have a crystal that can tell us what the future is going to be like, we'll adjust accordingly, but the current prices are what we -- the current prices are for a vehicle delivered in the future, like 6 to 12 months from now. So this is our best guess.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 71
},
{
"name": "Drew Baglino",
"speech": "But I think if you zoom out, right, like as you said, our mission is to accelerate the transition to sustainable energy. So we are working with our existing suppliers and others to figure out how to grow all of these raw materials as quickly as possible to not slow down the transition.",
"session": "Answer",
"person_id": 393478,
"person_company": null,
"component_order": 72
},
{
"name": "Elon Musk",
"speech": "Yes.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 73
},
{
"name": "Drew Baglino",
"speech": "And whether that means we have to get directly involved in some cases or not comes down to the counterparty and their willingness to expand at the rate we think they should be able to expand. And that's similar to what we've done with everything else, like we built a Gigafactory in Reno because it needed to be done. And so like we will do what needs to be done to not slow down the transition. And affordability is a goal because it's unaffordable, It's going to retard the growth of what is inherently a good thing that we can't have that as [indiscernible]",
"session": "Answer",
"person_id": 393478,
"person_company": null,
"component_order": 74
},
{
"name": "Martin Viecha",
"speech": "Thank you. The next question comes from Pierre Ferragu from New Street Research.",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 75
},
{
"name": "Pierre Ferragu",
"speech": "Can you hear me well?",
"session": "Question",
"person_id": 356336,
"person_company": null,
"component_order": 76
},
{
"name": "Martin Viecha",
"speech": "Yes.",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 77
},
{
"name": "Pierre Ferragu",
"speech": "Great. I'd like to ask you some questions about free cash flow. Do you -- so first, maybe in the long run, if you look at your performance and your growth model and your growth ambitions, I did the math very quick, and I see you guys sitting on $400 billion or maybe $500 billion of cash at the end of the decade. And I was wondering if it's something you have given some thoughts about.",
"session": "Question",
"person_id": 356336,
"person_company": null,
"component_order": 78
},
{
"name": "Elon Musk",
"speech": "If inflation keeps going crazy, $500 billion might be like $20 billion today, I don't know. So we'll see what $500 billion buys you in a decade, but it might be a lot less. So I don't know if we'll -- that seems like a lot of cash. I don't know. We'll try to do something useful with it. I mean, Zach, I don't know -- I realize that's your problem, that's for sure.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 79
},
{
"name": "Zachary Kirkhorn",
"speech": "The way we've been -- I think we have to take this one step at a time. And so we have investments that are happening right now to get Austin and Berlin up and running. And then as Elon mentioned, installing capacity for robotaxi production. And there are some decisions that, as Elon alluded to, just to share in the future about what the economic model looks like, what the economic model looks like for robotaxi. And so the way Elon and I have discussed this is [indiscernible]",
"session": "Answer",
"person_id": 385023,
"person_company": null,
"component_order": 80
},
{
"name": "Elon Musk",
"speech": "Let's just -- maybe just everyone [indiscernible]",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 81
},
{
"name": "Zachary Kirkhorn",
"speech": "Yes. So our focus is to get to the point where robotaxis are on the road, Optimus in use, get the economic model for that dialed in and then evaluate the size of cash flows at that point and make decisions then as to what's next.",
"session": "Answer",
"person_id": 385023,
"person_company": null,
"component_order": 82
},
{
"name": "Martin Viecha",
"speech": "Pierre, do you have a follow-up question?",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 83
},
{
"name": "Pierre Ferragu",
"speech": "[indiscernible]",
"session": "Question",
"person_id": 356336,
"person_company": null,
"component_order": 84
},
{
"name": "Martin Viecha",
"speech": "All right. Let's go to the next one. The next question comes from Trip Chowdhry from Global Equity Research.",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 85
},
{
"name": "Trip Chowdhry",
"speech": "Two questions I have. First is regarding the Cybertruck. And I was wondering like in terms of number of parts, how would Cybertruck compare with the traditional pickup truck in terms of number of parts? The second question I have is on Gigafactory Nevada Sparks. Will we have any production of vehicles in that factory? Or all the future production will happen in Giga Austin?",
"session": "Question",
"person_id": 191315,
"person_company": null,
"component_order": 86
},
{
"name": "Elon Musk",
"speech": "I'm not sure if we've actually done a comparison of Cybertruck parts versus regular truck parts. I mean, Lars?",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 87
},
{
"name": "Lars Moravy",
"speech": "Yes. I mean, if you want to go down the like -- it depends on what kind of part. We still have cells in [indiscernible] all it sounds [indiscernible]",
"session": "Answer",
"person_id": 482177,
"person_company": null,
"component_order": 88
},
{
"name": "Elon Musk",
"speech": "Mention count.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 89
},
{
"name": "Lars Moravy",
"speech": "If we don't count that, like the simplicity of our structure is significant versus a traditional pickup truck or any other vehicle, like as we've talked about their gigacastings, we save hundreds of parts there.",
"session": "Answer",
"person_id": 482177,
"person_company": null,
"component_order": 90
},
{
"name": "Elon Musk",
"speech": "I mean the entire -- kind of half of the car is one cast.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 91
},
{
"name": "Lars Moravy",
"speech": "So with the Cybertruck and the doors, for example, we have an exoskeleton design where the door is ready to take and it takes all the long-term impact. So we really have -- like we don't have the door reinforcements. We don't have the crash [indiscernible] So to your point, I haven't counted them because I don't often look back at old technologies to decide how well I'm doing. I take that once in a while. But in general, architecture is always moving to reduce complexity, reduce parts or reduce parts count. I would say, ignoring the battery cells, we are probably 20% to 30% less.",
"session": "Answer",
"person_id": 482177,
"person_company": null,
"component_order": 92
},
{
"name": "Elon Musk",
"speech": "All right.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 93
},
{
"name": "Martin Viecha",
"speech": "Okay.",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 94
},
{
"name": "Elon Musk",
"speech": "Do we expect to expand? Yes, we do expect to expand Giga Nevada. There's a lot of room for expansion there, and we do expect to increase output from Nevada, but then by far the biggest increase in output will be from Giga Texas.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 95
},
{
"name": "Martin Viecha",
"speech": "Thank you very much. The next question comes from Alex Potter from Piper Sandler. Alex, can you hear us?",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 96
},
{
"name": "Alex Potter",
"speech": "Yes. Martin, can you hear me?",
"session": "Question",
"person_id": 140104,
"person_company": null,
"component_order": 97
},
{
"name": "Martin Viecha",
"speech": "Yes.",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 98
},
{
"name": "Alex Potter",
"speech": "Okay. Great. So first question I had was the extent to which other plants outside of China are insulated from any further upstream supply bottlenecks that we may have in China. Obviously, if this COVID lockdown things gets out of hand, clearly, that's going to continue impacting Shanghai. But is there a point at which it could actually also impact other facilities?",
"session": "Question",
"person_id": 140104,
"person_company": null,
"component_order": 99
},
{
"name": "Elon Musk",
"speech": "Yes, if it would continue, but there are some parts that are sourced in China that apply worldwide. and that would be -- that would impact production elsewhere. But all indications are that we are -- our Giga Shanghai is back in production at fairly high levels already and so are our suppliers. So we don't think this is going to be a big deal.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 100
},
{
"name": "Alex Potter",
"speech": "Okay. Second question, obviously, the higher profitability that you guys have been able to experience over the last couple of quarters, a lot of that is reflecting sort of \"real\" improvements. Another part of it is because we're no longer paying you, Elon, as much as we were. And so I'm wondering the extent to which you and the Board are in the process of contemplating another one of these long-term compensation packages, which in the past have seemed to work quite well.",
"session": "Question",
"person_id": 140104,
"person_company": null,
"component_order": 101
},
{
"name": "Elon Musk",
"speech": "There are no discussions currently underway for incremental compensation for me.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 102
},
{
"name": "Martin Viecha",
"speech": "Thank you. The next question comes from Colin Langan from Wells Fargo.",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 103
},
{
"name": "Colin Langan",
"speech": "Great. Do you guys hear me?",
"session": "Question",
"person_id": 480193,
"person_company": null,
"component_order": 104
},
{
"name": "Martin Viecha",
"speech": "Yes.",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 105
},
{
"name": "Colin Langan",
"speech": "Perfect. Just to follow-up, sorry to keep going on the raw material issue on the battery side, but obviously, it seems pretty important. How quickly can raw material supply be built? Because my understanding it takes many years to build that out. So are we just sort of facing -- when do you think we see a lithium shortage or a nickel shortage? And is there even enough time to build that sort of mining capacity in place? And then related, how quickly can you switch to like LFP for the nickel issue?",
"session": "Question",
"person_id": 480193,
"person_company": null,
"component_order": 106
},
{
"name": "Drew Baglino",
"speech": "Yes. I mean I'll take the LFP question. Like it says so in our letter, like half of our products were LFT last quarter, which shows how quickly we were able to respond to -- well, honestly, it wasn't because of a raw material shortage, but just because it seemed like the right thing to do, we could change our cathode chemistry. And there's more to be done on the cathode side, and we are actively pursuing it to give us substitution flexibility in response to market conditions between the other cathodes that are out there that can be competitive in our vehicles, which there are many options. \r\nSo we -- I guess what I would say is, specifically on the cathode side, like flexibility is the way we're going to achieve this. And not all of the materials that go into cathodes are actually, first of all, hard to secure like through mining or refining. And second of all, in many cases, are like very plentiful already, like huge scale. And if all of the batteries in the world use those cathodes, it's less than a 1% increase in total annual output. So that's the cathode side. \r\nI think Elon already spent a lot of time talking about lithium. It really depends on the resource. Some resources like just getting rocks out of the ground, expanding the amount of rock that you're getting out of the ground is maybe a little bit of paperwork and some additional sort of blasting and trucking operations. The finding is maybe where there's -- it's a little bit more chunky to bring it online, but also the refining doesn't -- it's not like an oil refinery. It's a much smaller operation to refine lithium amount of spodumene or for liquid like a brine or a salt pond evaporation. So you're talking about a time scale of 1 to 2 years. And it's not like we haven't been talking to all of the lithium suppliers out there for many years. They have a lot of projects already in the pipeline to come online this year and next. \r\nSome of what's going on in the lithium market this year doesn't actually have truth to bear to the like fundamentals of supply and demand, which is also a little frustrating. But yes, if we look past this year or next year and into 2030 when we need to 15 to 20 terawatt hours of this stuff to get on the growth trajectory -- stay on the growth trajectory we're on, we need everybody to do more in the lithium space than they currently are. I don't know if that answers the question.",
"session": "Answer",
"person_id": 393478,
"person_company": null,
"component_order": 107
},
{
"name": "Colin Langan",
"speech": "Yes.",
"session": "Question",
"person_id": 480193,
"person_company": null,
"component_order": 108
},
{
"name": "Martin Viecha",
"speech": "Fantastic. Thank you very much. So let's go to the last question from Mark Delaney from Goldman Sachs.",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 109
},
{
"name": "Mark Delaney",
"speech": "Yes. I was hoping you could comment on your latest thoughts about potentially opening up the charging network in the U.S. to non-Tesla owners. It's certainly really important to have a good experience for Tesla owners in terms of wait times and charge installs. But if Tesla is able to have enough capacity it could be a really good way to bring other vehicle owners into the Tesla network, perhaps help Tesla to sustain its network benefits and maybe make more people likely to buy a Tesla vehicles in the future.",
"session": "Question",
"person_id": 182836,
"person_company": null,
"component_order": 110
},
{
"name": "Drew Baglino",
"speech": "Yes. As Elon has said and as we've publicly committed, yes, we do plan to provide third-party vehicle access in all over the world, not just in Europe, where our original pilot was. And we are working on solutions in North America, which is a little bit more problematic with our connector being different than others, but we are moving in that direction.",
"session": "Answer",
"person_id": 393478,
"person_company": null,
"component_order": 111
},
{
"name": "Martin Viecha",
"speech": "I don't know if you want to add.",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 112
},
{
"name": "Elon Musk",
"speech": "Yes. Yes, I think that's -- there's more to be said on that, but we're -- yes, we want to do the right thing with respect to the whole system.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 113
},
{
"name": "Zachary Kirkhorn",
"speech": "And we're going faster on adding chargers. Absolutely. With the growth of the cars that we're producing and then anticipating what you was discussing overall charger capacity is really important. And so the pace of our investment in supercharging has accelerated.",
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"name": "Elon Musk",
"speech": "Absolutely.",
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"name": "Mark Delaney",
"speech": "Okay. That's helpful. And for my second question, could you share any more details on Tesla Insurance, in particular, as you wind it out in more states? Are there any metrics you can share on what take rates have been like? And how do profitability margins on the insurance offering compared to the corporate average?",
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"name": "Zachary Kirkhorn",
"speech": "So we just launched Tesla Insurance for real-time insurance in Virginia, Colorado and Oregon earlier this week. Maybe one step that I'll share, so Texas is our longest-standing real-time insurance market. But based upon the information that we have, Tesla is the second largest insurer of Teslas in the State of Texas. And possibly by the end of this quarter, maybe early next quarter, we'll be the largest insurer of Teslas. And so the customer reception to this has been quite positive. And I was reading social media on Monday after we launched in the 3 new states. A lot of folks who are reporting their stories of saving quite substantial amounts of money relative to their previous insurance. And so we're quite encouraged by that. And we're working as quickly as we can to get to 80% of customers having access to a Tesla Insurance product by the end of this year in the United States, at which point we'll pivot our attention to expansion outside of the U.S. \r\nThe other thing I'll say on insurance is with these 3 new states, the model is different because we are now the underwriter, and we are also now holding the risk. And so with those states, we are a fully vertically integrated provider of insurance from systems and financials. With respect to the financials of the program, it's still very early. And so as the program gets more scale, happy to share more information on that.",
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"name": "Elon Musk",
"speech": "And once I noticed that we are seeing that the -- having real-time feedback for driving habits is actually resulting in Tesla owners driving the cars in a safer way because they can see the -- they get real-time feedback on, okay, this is affecting my insurance rate or it isn't. And so when people see it -- they can see a real-time score, they realize, if I make changes in my driving habits, then I pay less in insurance, then they have a very -- like a real-time feedback loop for driving for safer driving and an incentive to do so. So it is -- actually, what we're seeing is it is causing people to drive their cars in a safer manner, which is also net good.",
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"name": "Zachary Kirkhorn",
"speech": "It's safer on average, what we see in the data, to Elon's point, and premiums are lower. We see that in the take rate data. We have extremely high retention for customers who experience the product. And I think I've talked about this in the past, but this has become a real passion program for us for these benefits. It's bigger than just the economics. We're trying to do a good thing here for our customers, save people money and make the roads a little bit safer.",
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"name": "Elon Musk",
"speech": "Yes. I think it improves just overall macroeconomic efficiency. It's also a feedback loop for Tesla because we see if there is crash, both large or small, like we sort of see exactly what the cause. And then we think about how can we change the design of the car or the software in order to minimize the probability of that accident -- most accidents are minor. But how do you have those accidents occur less frequently? And how do we make the repair associated with that accident super fast? Like aspirational-ly, it would be like a same-day repair of a collision, which is night and day difference compared to sometimes having to wait for a month while insurance claims are settled and figured out -- because Tesla is also doing collision repair.",
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"name": "Zachary Kirkhorn",
"speech": "Yes, the feedback loop is instant.",
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"name": "Elon Musk",
"speech": "Right.",
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"name": "Zachary Kirkhorn",
"speech": "So I mean we do claims management in-house. And so we receive the notification that there's an accident, we work to prepare the estimate. And we can, with the support of our customers, use our collision centers to do the repair. And so it's full end-to-end visibility. And all of that, to Elon's point, we can then identify areas of cost inefficiency, feed those back to our engineering teams or elsewhere, software teams, actually improve the product. This lowers the cost of insurance, improves reliability of the product. So it's a full circle.",
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"name": "Elon Musk",
"speech": "Yes. And basically, the customer experience is just vastly better because if there's an accident, there's no argument. We'll repair it immediately. And -- this is as compared to arguing with an insurance company and then a claims adjuster and then a collision repair center. And this can be a nightmare ease. So we're trying to turn a nightmare to [indiscernible]",
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{
"name": "Martin Viecha",
"speech": "Fantastic. Thank you very much. Unfortunately, that's all the time we have this quarter. So thank you very much for all your great questions, and we'll speak to you again in 3 months.",
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"name": "Elon Musk",
"speech": "Thank you.",
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"title": "Tesla, Inc., Q1 2022 Earnings Call, Apr 20, 2022",
"quarter": 1,
"year": 2022
}
},
{
"transcript_title": "Tesla, Inc. - Q4 2021",
"transcript_name": "Tesla, Inc., Q4 2021 Earnings Call, Jan 26, 2022",
"ticker": "NASDAQ:TSLA",
"transcript_url": "https://wkarticles.blob.core.windows.net/finnhub/snp_transcript_2478087",
"date": "2022-01-26",
"year": 2021,
"quarter": 4,
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"transcript": [
{
"name": "Martin Viecha",
"speech": "Good afternoon, everyone, and welcome to Tesla's Fourth Quarter 2021 Q&A Webcast. My name is Martin Viecha, Senior Director of Investor Relations, and I'm joined today by Elon Musk, Zachary Kirkhorn and a number of other executives. Our Q4 results were announced at about 3:00 p.m. Central Time in the update deck we published at the same link as this webcast. \r\nDuring this call, we will discuss our business outlook and make forward-looking statements. These comments are based on our predictions and expectations as of today. Actual events or results could differ materially due to a number of risks and uncertainties, including those mentioned in our most recent filings with the SEC. [Operator Instructions] But before we jump into Q&A, Elon has some opening remarks. Elon?",
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"name": "Elon Musk",
"speech": "Thanks, Martin. So just to recap 2021, it was a breakthrough year for Tesla and for electric vehicles in general. And while we battled, and everyone did, with supply chain challenges through the year, we managed to grow our volumes by nearly 90% last year. This level of growth didn't happen by coincidence. It was a result of ingenuity and hard work across multiple teams throughout the company. \r\nAdditionally, we reached the highest operating margin in the industry in the last widely reported quarter at over 14% GAAP operating margin. Lastly, thanks to $5.5 billion of -- million, small finger [indiscernible] now, $5.5 billion of GAAP net income in 2021, our accumulated profitability since the inception of the company became positive, which I think makes us a real company at this point. \r\nThis is a critical milestone for the company. So after an exceptional year, we shift our focus to the future, Texas and Berlin. So we've begun production at both Texas and Berlin, we started that last quarter. But that's not the most important thing. We'll focus more on when we get to volume production and when can we deliver cars to customers. But I think it is worth noting that we, and as the Internet has observed, we've been making quite a few cars in Texas and Berlin, so -- in Austin and Berlin. \r\nSo in Texas, we're building the Model Ys with the structural battery pack and the 4680 cells, and we will start delivering after final certification of the vehicle, which should be fairly soon. Capacity expansion will continue through maximizing output of each factory and building new factories and new locations in the future. Although we're not ready to announce any new locations on this call, but we will through 2022, look at new locations and probably be able to announce new locations towards the end of the year, I expect. \r\nIn 2022, supply chain will continue to be the fundamental limiter of output across all factories. So the chip shortage, while better than last year, is still an issue. And yes, so that's -- there are multiple supply chain challenges. And last year was difficult to predict and hopefully, this year will be smooth sailing, but I'm not sure what you do for an encore to 2021, 2020. Nonetheless, we do expect significant growth in 2022 over 2021, comfortably above [ 50% ] growth in 2022. \r\nFull self-driving. So over time, we think Full self-driving will become the most important source of profitability for Tesla. It's great. Actually, if you run the numbers on robotaxis, it's kind of nutty. It's nutty good from a financial standpoint. And I think we are completely confident at this point that it will be achieved. And my personal guess is that we'll achieve full self-driving this year, yes, with data safety level significantly greater than present. \r\nSo it's -- the cars in the fleet essentially becoming self-driving by a software update, I think, might end up being the biggest increase in asset value of any asset class in history. We shall see. It would also have a profound impact on improving safety and on accelerating the world towards sustainable energy through vastly better asset utilization. \r\nLet's see. So on the product road map front, there's quite a lot to talk about. I'm not going to go through every sort of thing that we're working on because I think a lot of them deserve product launches of their own as opposed to a few minutes on an earnings call, so I'll talk kind of at a high level, yes, mostly at a high level. \r\nThe fundamental focus of Tesla this year is scaling output. So both last year and this year, if we were to introduce new vehicles, our total vehicle output would decrease. This is a very important point that I think people do not -- a lot of people do not understand. So last year, we spent a lot of engineering and management resources solving supply chain issues: rewriting code, changing our chips, reducing the number of chips we need, with chip drama central. \r\nSo that was not the only supply chain issue. So there's just hundreds of things. And as a result, we were able to grow almost 90% while at least almost every other manufacturer contracted last year. So that's a good result. But if we had introduced, say, a new car last year, we would -- our total vehicle output would have been the same because of the constraints -- the chips constraints, particularly. So if we'd actually introduced an additional product, that would then require a bunch of attention and resources on that increased complexity of the additional product, resulting in fewer vehicles actually being delivered. \r\nAnd the same is true of this year so we will not be introducing new vehicle models this year. It would not make any sense because we'll still be parts constrained. We will, however, do a lot of engineering and tooling and whatnot to create those vehicles, Cybertruck, Semi, Roadster, Optimus, and could be ready to bring those to production hopefully next year. That is most likely. But like I said, it is dependent on, are we able to produce more cars or fewer cars? \r\nSo in terms of priority of products, I think the -- I think actually the most important product development we're doing this year is actually the Optimus humanoid robot. This, I think, has the potential to be more significant than the vehicle business over time. If you think about the economy, it is -- the foundation of the economy is labor. Capital equipment is distilled labor. So what happens if you don't actually have a labor shortage? I'm not sure what an economy even means at that point. That's what Optimus is about. So very important. \r\nLet's see. Drew, do you want to talk about the 4680 program? Or is this a good right, the right time?",
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"name": "Drew Baglino",
"speech": "Sure. Yes, yes. Sure. So throughout 2021, we focused on growing cell supply alongside our in-house 4680 effort to provide us flexibility and insurance as we attempt to grow as fast as possible. As we sit today, sales from suppliers is actually -- it sort of exceeds our other factory-limiting constraints that you mentioned, Elon, in 2022 or to say differently, 4680 cells are not a constraint to our 2022 volume plans based on the information we have. \r\nBut we are making meaningful progress of the ramp curve in Kato. We're building 4680 structural packs every day, which are being assembled into vehicles in Texas. I was driving 1 yesterday and the day before. And we believe our first 4680 vehicles will be delivered this quarter. Our focus on the cell, the pack and the vehicles here is driving yield quality and cost to ensure we're ready for larger volumes this year as we ramp and next year. \r\nAnd the 4680 and pack tool installations here at Austin are progressing well with some areas producing first parts and the Internet has also noticed that. Yes, I was touring the factory -- the cell factory here. I'm super pumped. It's like a really exciting accomplishment for us to bring everything into 1 awesome factory here in Texas.",
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"name": "Elon Musk",
"speech": "Absolutely. And just to repeat Drew's point, we are still -- we still expect to be part or primarily chip-limited this year. So that's the thing that's actually the driver, yes, and that chip limitation should alleviate next year. And then probably, we transition into a cell limitation battery, total gigawatt-hours of cell limitation, which is when the 4680 will become very [indiscernible]",
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"name": "Drew Baglino",
"speech": "Agreed.",
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"name": "Martin Viecha",
"speech": "Thank you very much, and now Zach has some opening remarks as well.",
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"name": "Elon Musk",
"speech": "Long opening remarks.",
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"name": "Zachary Kirkhorn",
"speech": "Yes. Thanks, Martin. As Elon mentioned, 2021 was a financially transformative year for the company. If we look across the full year '21 and compare that to 2020, our automotive gross margin, excluding credits, rose by over 600 basis points, enabled by work on cost reduction, utilization of our Shanghai factory for exports and accelerating demand. \r\nOpEx as a percentage of revenue reduced despite the impact of onetime items and unique items. And operating income more than tripled, with operating margin reaching our guidance of mid-teens and these margins are trending up. We also saw regulatory credits accounting for a relatively small portion of our 2021 profitability, which we expect to continue to reduce in materiality going forward. \r\nFor Q4 specifically, automotive gross margin, excluding credits, increased to 29.2%, which is our highest yet. We do continue to see some impact of fire pricing on certain models and trims as was the case in prior quarters. But please keep in mind that due to backlogs, changes in pricing will generally impact our financials in future quarters. \r\nSupply chain challenges and port congestion resulted in a significant increase in our expedited costs in Q4. We also took reserves associated with warranty and recall costs. Operating expenses were meaningfully impacted by stock-based compensation from the final 2 tranches of the CEO stock grant becoming probable and payroll taxes associated with the exercise of the 2012 CEO options. The total impact of these payroll taxes, warranty and recall costs and excess expedites was just over $700 million in the quarter. \r\nOur free cash flows have remained strong, reaching record levels in Q4 of $2.8 billion despite increased CapEx. In addition to using cash to grow the business as quickly as we can, we have been retiring legacy and high interest debt. Note that we plan to continue to utilize the ABS market for product-specific financing. \r\nAs we look forward, we expect 2022 to be another significant and exciting year for the company. We continue to drive for vehicle volume growth at or above 50%, as Elon mentioned, and our plans show that this is actually achievable with just our Fremont and Shanghai factories. For quite some time now, these factories have been running below capacity due to macro challenges with supply and logistics. As Elon mentioned as well, from what we're seeing, the pace of growth in 2022 will again be determined by supply chain and logistics, which is quite difficult for us to forecast. \r\nDespite these constraints, it's important to begin the ramp of Austin and Berlin to ensure that we are prepared once limitations ease, enabling us to increase total output more quickly in the future. This will result in higher fixed and semi-variable costs in the near term, in addition to the usual inefficiencies as we ramp a new factory. We are also seeing inflation and rising commodity prices, which we expect to continue to put pressure on our costs. How this specifically impacts gross margins in the near term is uncertain, given a mix of both tailwinds and headwinds. However, we do expect to continue to see stronger operating margins as we grow our volumes and improve operating leverage. \r\nOver a longer-term horizon, we are quite optimistic about the expansion of margins, though. From the hardware side, we are aggressively driving manufacturing innovations and operational efficiency to reduce cost. And with the rapid development of FSD, software-based profits will ultimately become a strong addition to the profits generated by selling hardware. \r\nSo congratulations to the Tesla team for a terrific 2021, and thank you to our suppliers who supported us. Looking forward to another great year.",
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"name": "Elon Musk",
"speech": "I'd like to just second the thank you to suppliers. A lot of suppliers worked late nights, weekends, vacations around the world, and we're very grateful for that.",
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"name": "Martin Viecha",
"speech": "Thank you very much. Let's go to the Q&A from the investor side. The first question was on 4680 cells, which we already answered so let's go to the second question. How is the progress of the $25,000 compact car? Can you give an update?",
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"name": "Elon Musk",
"speech": "Well, we're not currently working on a $25,000 car. We -- at some point, we will, but we have enough on our plate right now, too much on our plate, frankly. So at some point, there will be. I think that's sort of a question that it's sort of the wrong question. Really, it's really the thing that overwhelmingly matters is when is the car autonomous? At the point in which it is autonomous, the cost of transport drops by, I don't know, a factor of [ 4 or 5 ]",
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"name": "Martin Viecha",
"speech": "Thank you. The next question from investors is, since we're talking product road maps today, how do you view domestic cooling and heating in the context of accelerating the sustainable energy transition? And how might Tesla's HVAC and heat pump advances fit it?",
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"name": "Elon Musk",
"speech": "You want to talk about that, Drew?",
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"name": "Drew Baglino",
"speech": "Yes. I think from a mission perspective, it's very aligned. If you imagine replacing natural gas, water and space heaters with electric heat pumps, it offsets something equivalent to like 80% of what a solar plus Powerwall system would offset, so it's very impactful. And we have learned a lot about how to make capable and reliable heat pumps that work in all environmental conditions and are excited about the idea of working on that problem 1 day. We put it that way. It's definitely aligned with our mission to transition to sustainable -- accelerate the transition to sustainable energy.",
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"name": "Elon Musk",
"speech": "Yes, I think it really becomes quite a compelling solution to the consumer where you integrate the electric vehicle charging, solar energy storage, hot water, HVAC in a very tight compact package that also looks good. It just doesn't exist.",
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"name": "Lars Moravy",
"speech": "Yes. I mean, the integration of those systems in the house...",
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"name": "Elon Musk",
"speech": "That's Lars, by the way.",
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"name": "Lars Moravy",
"speech": "The integration of those systems in a house are no different than the integration of those systems in a vehicle. The only difference is, we do it all in the vehicle. [indiscernible]",
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"name": "Elon Musk",
"speech": "And then it's so constrained on mass and volume and energy, it's like -- you get to the house [indiscernible] wow",
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"name": "Lars Moravy",
"speech": "Kind of easy problem.",
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"name": "Elon Musk",
"speech": "Yes.",
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"speech": "But obviously, those systems are all just disparate and what we've been doing with Powerwall and charging solar is integrating them more and more. The next logical step is obviously HVAC and water and heating. So we will do that and we will integrate it probably better than anyone has. But as you said, we have a lot of stuff on our plate.",
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"name": "Elon Musk",
"speech": "Yes. [indiscernible] integrates with like phone, everything and the car can -- like the house can just heat and cool things because [indiscernible] coming home type of thing. It still needs to be like randomly that temperature when you're not there or...",
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"name": "Lars Moravy",
"speech": "When the cat moves.",
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"name": "Elon Musk",
"speech": "Yes, exactly. When the cat moves, exactly. So just do sensible things and just work really, I think it would be just quite a game changer down the road. We've got a lot of fish frying on it. And so it is a thing we will do but we're not committing to a time frame at this point.",
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"name": "Lars Moravy",
"speech": "And people should do it.",
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"name": "Elon Musk",
"speech": "Yes, if somebody else wants to do it, yes, yes.",
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"speech": "It's super beneficial for achieving the goal here.",
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"name": "Martin Viecha",
"speech": "The next question is, would you consider splitting FSD packages into perpetual and term licenses, with a higher tier for both options for commercial use? A perpetual license that could be attached to individual or business and not the vehicle itself.",
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"name": "Elon Musk",
"speech": "Now I mean, this sounds maybe too complicated. We're just going to be focused on like what sells for the fully considered lowest cost per mile, kilometer of driving. And these other -- so that's what matters like how do you maximize the efficiency of people 1 place to another and then charge them in a sensible way.",
"session": "Answer",
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"name": "Drew Baglino",
"speech": "Including the charging infrastructure. That's a big part of it.",
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"name": "Elon Musk",
"speech": "Yes. So charging for money and charging for energy.",
"session": "Answer",
"person_id": 175883,
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},
{
"name": "Martin Viecha",
"speech": "Thank you. The next question is, is Dojo on track for summer 2022? And what challenges, if any, are you working through? Is Dojo necessary for FSD to operate better in cities like New York City? Or on a separate note, where should we expect the first implementation of Tesla pads in your factories?",
"session": "Answer",
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"person_company": null,
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},
{
"name": "Elon Musk",
"speech": "Okay. There's a few questions on there.",
"session": "Answer",
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},
{
"name": "Martin Viecha",
"speech": "Like 6 questions.",
"session": "Answer",
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{
"name": "Elon Musk",
"speech": "Yes, Dojo appears to be on track for doing something useful in the summer this year. I think the threshold that really matters is at which point when does it become more competitive than a GPU cluster for training? And obviously, the GPU cluster is getting better. So it's a moving target. But that's the goal I've set for the team is the FSD team running our GPU supercluster needs to tell me that they want to use Dojo instead that. That's where -- that's the obvious sort of threshold. \r\nAnd I don't know when that will. It's -- I wouldn't say like success is 100% certain here. I think we just generally want to overestimate meeting options to underestimate ourselves. But it does seem as though we might pass that threshold next year with Dojo if we execute well. Dojo is not needed for full self-driving but it is a cost optimization on creating vast amounts of video data. \r\nCustomization also, a rate of improvement so if you can train models faster, have a shorter iteration interval, then you can make progress faster. So not everything can be distributed to deep GPUs. There's some elements of serialization there. So -- and then if Dojo is competitive, then it does seem like the kind of thing where we would offer it to other companies that want to do neural net training. Those are very much a neural net training optimized system. \r\nBut in theory, it should be better than computing platform or say, GPUs, which were not really intended for the is not directly intended for optimizing training of your networks. They just happen to work better than CPUs in most cases. So things like Dojos like a giant ASIC optimized for neural net training, especially video, or at But as like said, we're not saying, for sure, Dojo would succeed. We think it will. We would encourage those who think this is an interesting problem to join Tesla, and yes.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 35
},
{
"name": "Martin Viecha",
"speech": "And the first use of Tesla pad, whether it's in the factory or elsewhere?",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 36
},
{
"name": "Elon Musk",
"speech": "Yes. The first use of the Tesla pad Optimus, the Optimus name seems to be sticking at least internally, Optimus Subprime. Like if we can't find a use for it, then we shouldn't expect that others would. So the first use of the Optimus robot would be, at Tesla, like moving parts around the factory or something like that.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 37
},
{
"name": "Martin Viecha",
"speech": "Okay, thank you very much. And the next question on insurance. When do you plan on having your insurance services rolled out in all the states, international rollout timing in markets that have Tesla Insurance, what kind of uptake rates are you seeing?",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 38
},
{
"name": "Zachary Kirkhorn",
"speech": "Yes. We currently offer Tesla Insurance in 5 states in the U.S. Four of them are telematics, which is Texas, Illinois, Ohio and Arizona. And then California, which has a more standard insurance offering based upon regulations there.",
"session": "Answer",
"person_id": 385023,
"person_company": null,
"component_order": 39
},
{
"name": "Elon Musk",
"speech": "It should be clear, like we are pushing very hard for California to change the rules to allow informatics, which basically means that you're as safe as you're driving is measured. So I think the current California rules are contrary to the best interest of the consumers in California and should be changed.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 40
},
{
"name": "Zachary Kirkhorn",
"speech": "Yes. And that's evidenced by what we're seeing in Texas. We've been in this market now for about 3 months. And what we see in the data is the frequency of collision by folks who are -- who are given a feedback loop on how they are driving is quite a bit lower than the frequency of collision otherwise.",
"session": "Answer",
"person_id": 385023,
"person_company": null,
"component_order": 41
},
{
"name": "Elon Musk",
"speech": "Yes. And we direct feedback on whether driving safe -- and if the driver their insurance cost less, so they drive safer. It encourages Tesla Insurance with informatics and real-time feedback encourages safer driving and rewards it monetarily. It's great.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 42
},
{
"name": "Zachary Kirkhorn",
"speech": "Exactly. And so we see that so far in Texas. Take rates have been quite strong. We measure this on the conversion rate from when folks quote to see what their monthly rate would be at the starting point to what percentage of them purchase. So we're very encouraged by the interest that we're seeing in Texas. \r\nAnd then we have enough history in Texas to see what does the loss ratios look like and how do the economics of the program work. And we're on the right track there as well. So we're comfortable with what we've seen in Texas to move as quickly as the intent to scale this across the U.S. \r\nSpecifically on the question about when we will be in all states, this is a slow process because of insurance being regulated at the state level. And so we have to go through each of those processes with each of the departments of insurance in each state. But our internal goal here by the end of the year is to be in enough locations that 80% of our customers within the U.S. could choose to sign up for Tesla Insurance if they wanted to. \r\nThere's a lot of uncertainty around that based upon the regulatory processes, but that's our goal. And then as we make more progress rolling out in the states and each incremental state becomes a little bit less effort than the prior, that's when we'll turn our attention to the Europe market. We might be able to do that by the end of the year, starting to get work on Europe by the end of the year. We'll have to see how we progress in the U.S.",
"session": "Answer",
"person_id": 385023,
"person_company": null,
"component_order": 43
},
{
"name": "Martin Viecha",
"speech": "Thank you. Next question is, what is your expected max capacity from each of your current factories, pretty much Shanghai, Berlin and Austin and timing for new factory announcements?",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 44
},
{
"name": "Elon Musk",
"speech": "I don't think we want to comment on -- like that's -- it's always possible to increase the output of any given factory to say, what's the next capacity? Well, it's difficult to say what that next capacity is because you put a lot of evidence that you increase capacity quite a lot. \r\nI think the -- look at the big picture -- you initially always want to increase capacity at 1 factory because your logistics cost of transporting cars needs to be considered. Especially as the cars become more affordable, you want to have factories that are not like thousands of miles away from the customers. So even if you could increase output, it may not actually be the smart thing to do. \r\nSo in the U.S. with, for example, with Giga Texas, I mean, coming up, we would want to deliver, say, Model Ys that are going to the eastern 2/3 of the United States from this factory. The logistics costs are going to be much less. But we will continue to increase output in Fremont and in -- at Giga Nevada and Shanghai. And as I said at the beginning of the call, this -- 2022 is the year we will be looking at factory locations to see what makes the most sense, possibly with some announcement by the end of this year. Yes.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 45
},
{
"name": "Martin Viecha",
"speech": "And the next question is, what are the biggest obstacles for Cybertruck volume production besides battery shortage?",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 46
},
{
"name": "Elon Musk",
"speech": "Batteries will probably not be the limiting factor in Cybertruck production. There's a lot of new technology in the Cybertruck that will take some time to work through. And then there's a question of like, what's the average cost of Cybertruck and to what degree is that affordable? There's -- you can make something infinitely desirable. But if it's not affordable, that will constrain people's ability to buy it because they don't have the money. \r\nI worry more about like how do we make the Cybertruck affordable despite having awesome technology. That's the thing that will really set the rate. Aspirationally, we'd like it to go, in terms of just a rough order of magnitude, we'd like Cybertruck to be at least on the order of [ 250,000 ] vehicles a year. But it will take us a moment to get to that level.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 47
},
{
"name": "Martin Viecha",
"speech": "Thank you. The next question is, how much of Tesla's margin improvement is from, number one, economies of scale; number two, production design -- production line design efficiencies; number three, reduced transportation costs from multiple plant locations; and number four, pricing versus cost inflation; or number five, other sources? And how much further could margins improve and why?",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 48
},
{
"name": "Zachary Kirkhorn",
"speech": "Yes. Basically -- yes, there's basically 4 major factors if we look over the last year to the margin improvement in the company. And they're in no particular order here but these are the big ones. So our mix of Model Y is increasing as we've ramped that to higher capacity in Fremont and also in Shanghai. And the reason that matters is the Model Y is a vehicle that carries a higher profit than the Model 3. And so that is helpful on our margins. And then as we increase the volume on that program with labor efficiencies, fixed cost amortization, they improve and the costs go down as well. \r\nThe second 1 here is localization in Shanghai has been a huge help for margins for the company. And the obvious things around logistics and duties is a big part of it, but we've also -- that factory had a different line design, more efficient from the start, and we've been pushing the boundaries on the volume there. So that has been helpful. \r\nIf you recall at the beginning of the year, we also were in a transition to the new version of the Model S and Model X. And so as that has ramped over the course of the year, that has been helpful. And then we've also done various price increases in certain markets on certain models, which has helped there. So that's generally the story at a high level. \r\nAs we look over the next a quarter or 2, as I mentioned in my opening remarks in the last call as well, we have ramp inefficiencies from the launch of Austin and Berlin. We also have pressures coming from inflation, supply chain, raw materials, et cetera. And so where that nets out is hard to say in the immediate term. And we obviously, as a company, are going to be driving to increase margins as much as we can. But I just want to be realistic that we're launching 2 factories simultaneously here and it unavoidably will add cost to the business as we do that. \r\nAnd as we look further out, and Elon mentioned this in his opening remarks as well, the software portion of the business, I think, is the one to really pay attention to. As full self-driving features get rolled out to more and more folks, I mean, for me, personally, I prefer to drive my car with the FSD bid on. And I think as more and more people experience that, take rates there, and then as we work towards the robotaxi space, there's actually quite a bit of upside on margins from a software perspective.",
"session": "Answer",
"person_id": 385023,
"person_company": null,
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},
{
"name": "Elon Musk",
"speech": "Yes, I think basically everything pales in comparison to the value of robotaxi or personal driving. I mean, it's just -- I mean, that just tends to everything. You just go from having an asset that is -- has a utility of perhaps 12 hours a week per passenger car to maybe around 50 or 60 hours a week to a 5x increase in the utility of the asset. The cost didn't change. Yes. So that's where just things just had just kind of your mind.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 50
},
{
"name": "Martin Viecha",
"speech": "Thank you. And the last question from investors is Elon mentioned Level 4 autonomy could be achieved this year. Is it based off initial FSD beta rollout experience or is Level 4 ability predicated on Dojo being completed online?",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 51
},
{
"name": "Elon Musk",
"speech": "As mentioned earlier, Dojo is not required for full self-driving. It should have a positive effect on the cost of training networks. It's not just a question like, does it get to full self-driving but really kind of like the March of Nines of reliability, is it 99.999% reliable or 99.999999% reliable. This is -- it gets nutty. \r\nObviously want to get to post perfection as possible. So frankly, being safe than a human is a low standard, not a high standard. People are very, very lossy, often distracted, tired, texting. Anyway, it's remarkable that we don't have more accidents. So it's yes. So actually being better than a human, I think, is relatively forward, frankly, how do you be 1,000% better or 10,000% better. Yes. That's what gets much harder. \r\nBut I think anyone who's been in the FSD beta program, I mean, if they were just to plot the progress of the beta interventions per mile, it's obviously trending to a very small number of interventions per mile and pace of improvement is fast. And there are several profound improvements to the FSD stack that are coming in the next few months. So yes. I would be shocked if we do not achieve full self-driving safer than human this year. I would be shocked.",
"session": "Answer",
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{
"name": "Martin Viecha",
"speech": "Thank you. Let's go to analyst questions now. And the first question comes from Jed from Canaccord. Jed, feel free to unmute yourself and ask a question.",
"session": "Answer",
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{
"name": "Jonathan Dorsheimer",
"speech": "Congratulations on a great year. Elon, I guess my question is around the Megapack or your energy business. And so as we look at the strategy or the supply chain constraints that you mentioned, you have 2 different strategies or it seems like with Megapack and Powerwall. And I think the Powerwall was answered with 4680 and the 2170 opening up. So I was wondering if you could just talk about the supply chain and LFP for the Megapack and what we should expect for that?",
"session": "Question",
"person_id": 95165,
"person_company": null,
"component_order": 54
},
{
"name": "Elon Musk",
"speech": "Yes. To be clear, we do think that old stationary storage, Powerwall and Megapack, will be -- will transition to an iron-based system, basically a non-nickel system. Manganese is also -- could be part of the future, but primarily iron. It just comes down. Iron nickel -- we need something that is formed in a star before a supernova ideally. So iron is. So that's because there's a ridiculous amount of iron on Earth as is a ridiculous amount of lithium. \r\nSo you can really expect all stationary storage to transition to iron over time. And like I said, with manganese is like a wildcard, manganese. And I should say like we did short-change the energy business last year in that vehicle took priority over the energy side. So on sales, but on a yes, on chipset, yes. We do see a very -- I mean, long-term probably terawatt-hour per year energy business. A lot -- it's very vast. Yes.",
"session": "Answer",
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"person_company": null,
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},
{
"name": "Jonathan Dorsheimer",
"speech": "That's helpful. So you see that '22 is kind of the opening of that the energy business reaccelerating?",
"session": "Question",
"person_id": 95165,
"person_company": null,
"component_order": 56
},
{
"name": "Elon Musk",
"speech": "It's hard to predict 2022 because we still have lingering supply chain -- there are still lingering supply chain issues globally. But I think the chip stuff, at least the chip side of things appears to looks like it will alleviate end of this year or '23. I mean, there are a crazy number of chip fabs being built, which is great. The sheer number of chip fabs being built right now is exciting to see, yes. So there could be other issues. We're trying to anticipate those as much as possible but predicting the future is difficult.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 57
},
{
"name": "Lars Moravy",
"speech": "And the goal is definitely to grow it this year.",
"session": "Answer",
"person_id": 482177,
"person_company": null,
"component_order": 58
},
{
"name": "Elon Musk",
"speech": "Yes, we'll grow it this year, for sure. It's just -- we -- if we're simply we're able to respond to demand, it might grow by like 200% or 300% or something as opposed to sort of 50% or so.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
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},
{
"name": "Zachary Kirkhorn",
"speech": "Yes. Yes. I mean I think it's exactly that. I mean, it's a question of does it double, triple, quadruple? I mean, either way, I think our plans are pretty ambitious for Megapack this year and storage in general. The exact amount of growth is hard to know. But ultimately, I mean, to Elon's point about the growth of this business, I mean, we need to be growing it faster than the vehicle business.",
"session": "Answer",
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},
{
"name": "Elon Musk",
"speech": "And it will actually grow faster than the vehicle business once we can [indiscernible] chip constraint, frankly. So it will grow like stars basically on the road, it needs to. And our primary mission is to accelerate sustainable energy. That's always been our primary mission and we're trying to stay true to that.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 61
},
{
"name": "Martin Viecha",
"speech": "The next question comes from Ben Kallo from Baird.",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 62
},
{
"name": "Ben Kallo",
"speech": "I was wondering on the R&D front because like you said, you have so many fish frying. How do you organize the R&D efforts so that you can start talking about all these new products? Is there like an incubator or some type of thing like that? But just structurally, I'm curious about that.",
"session": "Question",
"person_id": 160874,
"person_company": null,
"component_order": 63
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{
"name": "Elon Musk",
"speech": "Well, we don't have incubators.",
"session": "Answer",
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"person_company": null,
"component_order": 64
},
{
"name": "Drew Baglino",
"speech": "Or research centers.",
"session": "Answer",
"person_id": 393478,
"person_company": null,
"component_order": 65
},
{
"name": "Elon Musk",
"speech": "Research centers. We have no research centers. We're We work on things that go into our products. Yes, we're like this is a useful product that the world really needs. And we just like what to make this thing, design it up and iterate fast and then how to make this at scale at a reasonable price. That last part is the super hard part. Many times, we've said prototypes are easy, production is hard. If we could work out prototypes, but what's the point of that? \r\nLike you actually reach scale production and have cash and exceed cash out. That's the super hard part. So",
"session": "Answer",
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"person_company": null,
"component_order": 66
},
{
"name": "Drew Baglino",
"speech": "So everybody needs to be in the factory often enough to be able to understand that last part of the equation. Yes. And if you're in the research center...",
"session": "Answer",
"person_id": 393478,
"person_company": null,
"component_order": 67
},
{
"name": "Elon Musk",
"speech": "Yes. Doing them separately is like [indiscernible] for actually making products. So we don't think of it as R&D and then like the product development. It's just 1 f****** [indiscernible] just make great products at -- is the same general society with those way too much value placed on the idea. \r\nIt's like the -- like the idea of going to the moon. That's what the hard part. Okay, going to the moon is the hard part by far. And the thing is that, that is true for really most products. So this is just weighing too much value placed in the idea of versus execution. And we have ideas, we have a bazillion ideas [indiscernible] so many ideas we don't know what do with. Sort through them and say, which 1 are we actually going to going through the [indiscernible] of bringing to volume production. That's the super and then actually do that, right -- that's tough.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 68
},
{
"name": "Lars Moravy",
"speech": "And the closer you are applying blood, sweat and tears to actual production, the faster you'll be able to bring new things into actual production.",
"session": "Answer",
"person_id": 482177,
"person_company": null,
"component_order": 69
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{
"name": "Elon Musk",
"speech": "Yes, exactly. If you want to tie you back with production, just like the offices we're sitting in right now, looks over the Giga Texas production line, like the offices are integrated into the factory.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 70
},
{
"name": "Martin Viecha",
"speech": "The next question comes from Toni Sacconaghi from Bernstein.",
"session": "Answer",
"person_id": 370659,
"person_company": null,
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},
{
"name": "Toni Sacconaghi",
"speech": "I have 2, please. First, you spoke a lot about FSD and how the economics could be very attractive going forward. I'm wondering if you could just share what your current attach rate might be for FSD on your vehicles or how to think about the progress of your attach rate or revenue in FSD, let's say, in '21 versus '20? And how much deferred revenue for FSD was drawn down during the year? And I have a follow-up, please.",
"session": "Question",
"person_id": 117232,
"person_company": null,
"component_order": 72
},
{
"name": "Elon Musk",
"speech": "I think the FSD stuff, you really don't want to be looking at the rearview mirror. It will not be a good indicator for the future. This is what you need to look out the front windscreen, because it is such a profound step change. I mean, effectively long term, every car will have FSD. And so -- and the value of that will be a very big number. I just look at this as asset utilization. \r\nYou have a passenger car, which normally is driven maybe 1.5 hours a day on average, maybe 10 -- 10 hours, 10, 12 hours a week, a lot of cars in So we're spending money, not just driving the cars but storing them all over the place. We can get rid of a lot of parking lots if you have a car that is operating all the time. But there will be a challenge with traffic. So we like this little tiny baby company, The Boring Company, which I initially started as a joke, and now I think it actually could be quite essential to alleviating the insane traffic that will happen when cars are autonomous because you reduce the pain of travel and you reduce the cost of travel so dramatically that there will be a crazy number of cars on the road. \r\nI mean, it's going to be -- I think it's way cheaper to point with robotaxi, which is an autonomous Tesla, which every car we've made in the past 3 or 4 years will be capable of that, than a bus or a subway, will cost less than the subsidized value of a bus ticket. So we want to I'm not going to take the bus. If it costs you, I don't know if agents take $2 to travel 10 miles point to point. taking the bus, especially in cold weather or dark or maybe a little bit dangerous or [indiscernible] \r\njust do not understand how profound change this is. It's not like some little feature select the most profound software upgrade maybe in history. Millions of cars suddenly have about 4 or 5x utility [indiscernible] overnight. I don't actually know how to quantify that financially except that it's some big number.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 73
},
{
"name": "Toni Sacconaghi",
"speech": "Okay. Elon, I was wondering if I could just follow up and ask you. You talked about your product road map and also your goal to keep growing at 50% per year or better. That would put you at 3.2 million vehicles or more in 2024. And I think you made reference to Cybertruck maybe being 250,000 vehicles. If there is no $25,000 vehicle being worked on, is it really realistic to think that you can sell more than 3 million vehicles with 2 very high-volume cars and Cybertruck in 2024? Or how do we think about that or what else is missing in that equation?",
"session": "Question",
"person_id": 117232,
"person_company": null,
"component_order": 74
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{
"name": "Elon Musk",
"speech": "Yes. I mean, it's apparent from the questions that the gravity of full self-driving is not fully appreciated. If an asset has 5x more utilization than the -- it's like dividing the cost of that asset by 5. So if you have a $50,000 car, it's like having a $10,000 car all of a sudden, but maybe better than that because don't want to drive. So the person can be engaged in productivity or amusement instead of having to onerously drive through traffic. So it's probably better than 5x, I don't know. Yes. I mean basically, if the cost of our cars do not change at all, we would still sell as many as we could possibly make.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 75
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{
"name": "Martin Viecha",
"speech": "Thank you. And the next question comes from Pierre Ferragu from New Street Research.",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 76
},
{
"name": "Pierre Ferragu",
"speech": "I wanted to come back on battery. So it's great to hear on 1 hand that you guys expect to sell like the first car with 4680 this quarter and at the same time, that you don't really depend on that ramp to achieve your -- what you hope to achieve in terms of significant volume growth this year. And the question I had is I understand well the ramp of 4680 internally. But I'd be curious to hear you talk about how you think about 4680 as being a form factor that your suppliers could adopt as well. \r\nAnd how you see in the long run, in the greater scheme of things, what does 4680 become? Is it going to be, outside of Tesla, the largest form factor for batteries? Is it something that you guys are going to deploy in all cars, whatever the chemistry also in the Megapack, in all your energy storage business? And do you expect eventually a lot of other companies to use that form factor as well?",
"session": "Question",
"person_id": 356336,
"person_company": null,
"component_order": 77
},
{
"name": "Drew Baglino",
"speech": "Yes. On the 4680 as a form factor, yes, we've engaged with a number of our partners or suppliers on the form factor and they're all working on it. And they look at it the way we look at it as a way to drive fundamental cost efficiencies in production and also ultimately, the design of the cell itself to drive the cost down of the cell. And so that's what's engaged -- I mean, we're engaged because we think it's a good form factor there, engaged because they think it's a good form factor, and we want people to make it for sure. \r\nTo the question about should everything be 4680, it doesn't have to be. In the end, it's about cost competitiveness, scalability of manufacturing. And when you compare like an iron cell with a nickel cell, for example, like there are some just physics-based differences in what happens in certain corner cases that would drive different form factors, and we just have to be cognizant of that and design to that. So it isn't like the ultimate form factor for all things. There's other form factors that could be better for an iron cell, for example.",
"session": "Answer",
"person_id": 393478,
"person_company": null,
"component_order": 78
},
{
"name": "Elon Musk",
"speech": "We don't use 4680 at all for the iron cells.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 79
},
{
"name": "Pierre Ferragu",
"speech": "Okay. And I have a quick follow-up on chips. So you've talked a lot about all this shortage and the supply difficulties. And I was wondering if you could give us some color on like the power chips you need for investors and all the power systems you're putting together versus like the more traditional logic chips, if the situation is different between the 2? \r\nAnd should we understand from the situation today that you're working very hard also at expanding the scope of your suppliers? And should we expect like Tesla to take on board additional suppliers in the near term, especially on the power side?",
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"name": "Elon Musk",
"speech": "Well, last year was chip hell of many chips, so silicon voters certainly one of them, but...",
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"speech": "Honestly, there's a lot of annoying very boring parts.",
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"name": "Elon Musk",
"speech": "Yes. It's a ton of very simple control chips that front-of-the-mill literally coming. Yes. Basic to control.",
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"speech": "It also references oscillators, so very boring things.",
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"name": "Elon Musk",
"speech": "Yes, exactly. Like the little chip that allows you to move your seat back and forth. That actually was a big problem. Yes. Can move seats. So -- but a lot of these things are alleviating. I think there's some degree of the toilet paper problem as well, where there was a toilet paper shortage during COVID. \r\nLike obviously, it wasn't really certainly a tremendous enhanced need for a** wiping. It's just people panicked in order -- and got every paper product you could possibly wipe your a** with basically. And I was sure, is this like a real thing or not? Actually took my kids to the HEB and Walmart in Texas to just confirm if this was real. Indeed, it was. And there's plenty of food and everything else, but just nothing, no paper products that didn't cause split out. \r\nAnd our choice for people to panic [indiscernible] since coming as we told at the least of your problems. So I think we saw just a lot of companies over-order chips and they buffer the chips. And so we should see -- we are seeing alleviation in almost every area, but the output of the vehicle is -- goes with the least lucky. What are the most problematic item in the entire cars? And there's like at least 10,000 unique parts in the car. So waiting more than that if you go further off the supply chain and it's just, which 1 is going to be the least lucky 1 this time? It's hard to say.",
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"name": "Drew Baglino",
"speech": "I mean, on a go-forward basis, right, the idea is to continue to drive simplification. So there are fewer unique parts, fewer of them. On the power side, in particular, it's still like an area of like technological development where the next chip can do the same thing with less diarrhea, so like the total fab required to accomplish the function goes down. So there's still room to grow without needing more fab capacity. But in general, there's a lot more fab capacity coming. So that's like a win-win there.",
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"name": "Elon Musk",
"speech": "Yes, yes. It's not a long-term thing because there's going to be -- there's a great amount of chip fabs being built, which is great.",
"session": "Answer",
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{
"name": "Martin Viecha",
"speech": "Well, thank you very much. Unfortunately, that is all the time we have for this session. Thanks very much for all your good questions, and we'll speak to you again in 3 months' time. Have a good day. Bye-bye.",
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"name": "Elon Musk",
"speech": "Thanks.",
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],
"title": "Tesla, Inc., Q4 2021 Earnings Call, Jan 26, 2022",
"quarter": 4,
"year": 2021
}
},
{
"transcript_title": "Tesla, Inc. - Q3 2021",
"transcript_name": "Tesla, Inc., Q3 2021 Earnings Call, Oct 20, 2021",
"ticker": "NASDAQ:TSLA",
"transcript_url": "https://wkarticles.blob.core.windows.net/finnhub/snp_transcript_2408343",
"date": "2021-10-20",
"year": 2021,
"quarter": 3,
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"transcript": [
{
"name": "Martin Viecha",
"speech": "Good afternoon, everyone, and welcome to Tesla's Third Quarter 2021 Q&A Webcast. My name is Martin Viecha, Senior Director of Investor Relations, and I'm joined today by our CFO, Zachary Kirkhorn, and our Senior VP, Drew Baglino as well as other executives. Our Q3 results were announced at about 3:00 p.m. Central Time in the update deck we published at the same link as this webcast. \r\nDuring this call, we will discuss our business outlook and make forward-looking statements. These comments are based on our predictions and expectations as of today. Actual events or results could differ materially due to a number of risks and uncertainties, including those mentioned in our most recent filings with the SEC. [Operator Instructions] But before we jump into the Q&A, Zach has some opening remarks. Zach?",
"session": "Presenter Speech",
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"name": "Zachary Kirkhorn",
"speech": "Yes. Thanks, Martin. We're continuing to make great progress as a company, setting new records on each of the most important financial metrics for Q3. Overall, we delivered just over 240,000 cars, 20% higher than last quarter and 70% higher than the same quarter last year. We were also able to achieve an annualized production run rate of over 1 million cars towards the end of the quarter. The increase in production rate has primarily been driven by further ramping of the Model Y at our Shanghai factory. \r\nAdditionally, we have made great progress increasing production volumes of Model S and have recently started the ramp and deliveries of Model X. It will take a bit more time to get this program back to prior volumes, but based on demand, we are targeting to exceed historical production levels. \r\nWe have also completed the transition of our Shanghai factory as our main export hub. This has enabled us to supply more vehicles to the North America market and to introduce Model Y to Europe. Due to part shortages and logistics variability, we have not been able to run our factories at full capacity. It's important to note that while we have roughly doubled deliveries year-to-date, this has been exceptionally difficult to achieve. I want to thank our supply chain team for their incredible work and our production teams for showing impressive flexibility as we make adjustments real-time. This team's expertise in the chip industry across all tiers has made a huge difference when managing through these challenges. \r\nAdditionally, we never reduced our production forecast with our suppliers as we're adding capacity as quickly as possible. I also want to thank our suppliers for their dedication and partnership to Tesla. Despite these increases in production and generally higher prices, our backlogs are continuing to grow and average customer wait times are extending. The only practical way to address this in the immediate term is to do everything we can to build more cars on our existing production lines, which is where we are focused. \r\nSimilar dynamics are also playing out in our storage business as we are working to expand Powerwall and Megapack production as quickly as parts and cells allow us to do so. Additionally, we have made good progress on the in-house battery manufacturing program, and we're excited to have expanded the full self-driving beta program to more customers. \r\nFinancially, our auto gross margins reached 30.5% on a GAAP basis and just under 29% excluding regulatory credits, which is our strongest yet. This benefit primarily comes from higher volumes, particularly out of the Shanghai factory, increased mix of the Model Y as we -- and we have made good progress increasing Model S volumes. The Model S has now returned to positive gross margin, and we expect this to increase with higher production and the ramp of Model X. \r\nAs was the case in Q2, there was some net benefit from pricing actions. However, this remains small in the context of other contributors. Please keep in mind that given backlog, it will take time for the impact of recent changes to flow through our financials. Note that we are also not yet recognizing additional revenue from the FSD beta program. \r\nSupply chain challenges, including expedites, continue to provide cost headwinds as was also the case with FX this quarter. While we are seeing an impact from the rise in commodity and labor costs, we have also been adjusting pricing which should help to compensate. Overall, as I mentioned in our last call, our P&L continues to benefit from the marginal profitability of each incremental unit with higher fixed cost absorption. \r\nAs a result of the great progress on margins, volume and appropriate management of overhead costs, we were able to achieve an operating margin of just under 15%, exceeding the long-term guidance we've laid out previously. \r\nOn cash, we generated record operating cash flows of $3.1 billion and continue to invest heavily in the build-out of manufacturing, supercharging and service capacity. We also continue to retire high interest rate debt including the early settlement of our 2025 senior notes of $1.8 billion during the quarter. As we look forward, we are clearly quite a bit ahead of the pacing required to achieve our target annual growth rate of 50% this year. Q4 production will depend heavily on availability of parts but we are driving for continued growth. \r\nWe are also nearing assembly of our first production cars in Austin and Berlin. It's important to stress, while the first production car is an important milestone, the hardest work lies ahead in the ramp. Please keep in mind that we are pushing the boundaries on new product and manufacturing technologies at these factories, which makes it difficult to predict the exact pace of the ramp. These factories will also partially weigh on our margins as we work towards volume production. \r\nOverall, I'm very proud of what the team has accomplished, and I'm excited for our next phase of growth into Q4 and into 2022. The team has done a tremendous job improving our financial health in a short period of time while also continuing to improve our precision and pace of execution. Thank you.",
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"name": "Martin Viecha",
"speech": "Thank you very much. And we will now take questions from institutional and retail shareholders that we posted on our website.",
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"name": "Martin Viecha",
"speech": "The first question is, when should we expect the first vehicles to be delivered with 4680 cells?",
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"name": "Drew Baglino",
"speech": "Yes. Thanks, Martin. Early next year, from a non-cell perspective, structural battery crash, range and reliability testing are on track to be complete this quarter. Testing is -- to date has gone well and the Fremont manufacturing line is on track to support. However, similar to what Zach said before, this is a new architecture and unknown unknowns may exist still. Our top priority is ensuring quality in what we deliver. And from a cell perspective, we are comfortable with the design maturity and manufacturing readiness matching the PAC time line I just mentioned.",
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"name": "Martin Viecha",
"speech": "Thank you very much. The second question from an institutional investor comes. Do you still expect to start production of the $25,000 model in 2023? What are the biggest hurdles from now until then?",
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"name": "Lars Moravy",
"speech": "Thanks, Martin. Yes. We're working on a strategy to increase our production rates as quickly as possible. I think Zach spoke to that well. And we're doing this while trying to add the least amount of incremental complexity to the business. We don't want to add any new vehicles to our lineup when we're generally in a cell-constrained world. \r\nWhile there is still more runway to grow these existing products, we are focused on Model Y expansion in Austin, Berlin, ramping S and X further in Fremont to restore to past levels while also growing 3 and Y production in Fremont and Shanghai. As we've mentioned before, after Model Y in Austin, our next product launch will be Cybertruck. And that timing, of course, depends on increasing cell capacity both from our suppliers and through our in-house cell as well as many other headwinds we face in the supply chain and completing our currently full plate of products on the table.",
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"speech": "Thank you very much. The third question is, with FSD beta training data sets set to explode exponentially, as software is released to a wider and wider audience, are there any early takeaways with regards to how quickly versions can iterate and be pushed out from biweekly to weekly or even daily?",
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"name": "Drew Baglino",
"speech": "At this point, it's not so much about how much data can we collect but how quickly can we process the data we've collected. This is where Dojo comes in, as we mentioned on AI Day. With substantially faster training computer in Dojo, we will be able to iterate more often than we do now. If for instance, say the training, the net takes 1 day instead of 1 week, makes a huge difference in our ability to push out more updates. \r\nBut realistically, there's a whole lot more that comes into play when iterating software updates. The whole infrastructure from top to bottom including testing and validation needs to be set up for faster iteration. So daily updates are not really realistic for now.",
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"name": "Martin Viecha",
"speech": "Thank you very much. The next question is, can you provide an update on future model development and how much diversity in your fleet will be necessary to achieve 20 million in annual volumes? The best-selling cars in the world today only sell slightly over 1 million units. So is it possible to achieve 20 million units with just S, X, 3 Y, Truck and the $25,000 car?",
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"name": "Lars Moravy",
"speech": "Thanks, Martin. Yes, as we've mentioned before, we've seen record growth of both Model 3 and Model Y segments, where Model 3 is currently the best-selling luxury sedan worldwide. And as we mentioned at our shareholders meeting, Model Y is poised to be the best-selling vehicle in the world. Tesla continues to break molds in these vehicle segments and we hope to do so with each new product. As we've said publicly, we'll eventually expand the vehicle lineup to get to larger volumes, and we believe that we will need to be in all major segments across small and midsized large sedans, SUVs and trucks to do so, along with, of course, the massive space of robotaxi.",
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"name": "Martin Viecha",
"speech": "Thank you very much. The next question from a retail shareholder is, what is Tesla's goal for vehicle production capacity for the 4 current factories, Fremont, Shanghai, Austin and Berlin by 2024?",
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"name": "Zachary Kirkhorn",
"speech": "Yes. Thanks, Martin. Our goal as a company here is to grow on an average pace of 50% per year. And so you can extrapolate that out. There may be some periods of time in which we're well ahead of that. There could be some periods of time, despite best efforts, where we're slightly lower than that. But that remains the long-term goal of the company. \r\nIn Fremont, we're continuing to push the boundaries of what's possible there. Over the last 12 months, we've done about 430,000 cars of production. And based upon everything that we know in the factory, where the bottlenecks are, what the potential is, we're targeting to increase that another 50%. I think that will be a difficult goal but that's the goal that the internal team has, and they're going to continue to push on that. \r\nAs we look towards Shanghai, we're continuing to push the boundaries there and we continue to ramp production there as well. So most recently, the ramp-up of the Model Y, which was our biggest contributor of volume in Q3, we'll continue to ramp that factory. And our plans there with time are to keep growing the capacity in that factory. \r\nAustin and Berlin are interesting factories because our first iterations of capacity there are on Model Y. But we've intentionally set these factories in locations in which they have quite a significant amount of land and ability to expand. And so we'll take Model Y at these factories, we're trying to get to 5,000 cars a week as soon as we can. And then we'll continue to push beyond that, potentially even getting to 10,000 cars per week at those factories. And then we'll add Cybertruck here in Austin and continue to grow from there. \r\nSo our goal is to get to millions of cars per year over the next couple of years, and then ultimately, in the long term, be able to achieve 20 million cars per year. We're going to grow as quickly as is feasibly possible with an eye towards a 50% annual growth rate.",
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"name": "Martin Viecha",
"speech": "Great. Thank you very much. The next question is, what is your view on the tightening regulatory environment for FSD, the investigation and broad data request by NHTSA? Some of the recent nominees to an NHTSA have been publicly critical of FSD, including engaging with short sellers online. How will you manage this environment?",
"session": "Answer",
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"name": "Lars Moravy",
"speech": "Thanks, Martin. Yes, as we have been for years, we always engage with NHTSA and other worldwide regulatory bodies to share our knowledge and to work with them on our approaches on both active and passive safety. There are ongoing regulatory inquiries taking place all the time and especially on the subjects like FSD that are at the cutting edge of technology development. \r\nDuring these investigations, my team, myself, are always cooperative as much as possible. We expect and embrace the scrutiny of these products and know that the truth about their performance and the innovations our products have will ultimately be all that matters. In the end and as I've said on previous calls, we take safety as a top priority in all our designs. This is because our primary motivation is coming from a team of incredible engineers designing software and hardware that saves lives and prevents injuries. \r\nIn doing so, we'll continue to be transparent to the public on how our technology is both developing from an autopilot safety data, the latest of which we just shared in the shareholder update. And you can also see and review a wide variety of customer post FSD videos on social media.",
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"name": "Zachary Kirkhorn",
"speech": "Great. Just to add to that, I mean, as Lars said, safety is extremely important for Tesla. It's the right thing to do. And if you look at various independent testing and regulatory testing of our products, you can see the work of incredibly talented engineers in the results of those tests. And our goal in developing safety-oriented software around the car is to continue to go beyond what the hardware is able to provide. If you can prevent a crash from happening, that's the safest way to manage this. \r\nAnd I think at a macro level here, what we're seeing, and this is entirely understandable and expected, is that the automotive industry is going through a transition from the traditional car as we know it to more of a computer, software-oriented sensor suites around them that can manage things beyond just what the driver manages. And regulatory bodies are, understandably so, are interested in understanding how to regulate in this environment, and NHTSA is no exception to that. \r\nSo as Lars mentioned here, I think this is a great thing. We're excited to partner and we'll work collaboratively with all regulatory bodies who want to go on the journey to the transition to a software-oriented vehicle.",
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"name": "Martin Viecha",
"speech": "Thank you very much. The next question is, service remains an issue with appointments available weeks or even months out. Likewise, Supercharger wait times have become untenable at some locations. What concrete steps is Tesla taking to improve the customer experience in these 2 key areas?",
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"name": "Zachary Kirkhorn",
"speech": "Yes. I'll take the service part of this question. Drew, you can take the supercharging part. We have seen an increase in service wait times throughout the summer. And there's a couple of things that have contributed to that based upon the information that we have. The first is that, and I think this is kind of not -- this is not unique to us, is that the return to some sense of normalcy in a post-pandemic world has happened, I think, more quickly than most people expected. \r\nAnd what we're seeing here is that the number of miles that people are driving has increased. There may have been some demand for service during 2020 or in the early parts of 2021 that customers put off, and so there's a bit of a catch-up that's occurring. That has increased demand for service. \r\nAt the same time, in the macro environment here, logistics, moving parts, sourcing parts has become increasingly more difficult, which is a well-known issue in the world right now, as well as challenges in the labor market. And so this kind of the simultaneous increase in demand for service, where the ability to supply that service, has been impacted for the reasons I mentioned. \r\nAnd so we saw an uptick, primarily in Europe and North America in service wait times over the course of the summer. And we've been working extremely hard since then to address this. And we've seen our wait times come down. So this is not the case in every location, but if you think about it from a regional average perspective, we are seeing improvements there. \r\nWe remain super-focused on adding locations. And so over the last year, we've grown our physical footprint of service centers by 35%. We've grown our footprint of mobile repair by over 40%. We're also adding staffing as quickly as we can in the areas that are most impacted by the imbalance of supply and demand for service. But I think the most important part about all of this is, and we've said this on calls before, where the best service is no service. \r\nAnd so we have been incredibly focused as a company both on the initial quality of our vehicles and reliability of our vehicles. And we've seen pretty substantial improvements in both of those metrics over the long term and over the last couple of quarters. So it is something that remains on our minds. We monitor this very closely. But hopefully, that's a helpful explanation into the context and what we're doing.",
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"name": "Drew Baglino",
"speech": "Yes. And on the Supercharger side, the supercharging team monitors congestion and plans expansion to ensure customer experience with minimal wait times, alongside the growth in our vehicle fleet. While we certainly have work to do in expanding capacity in some congested areas, average congestion on the network has decreased over the past 18 months. Nonetheless, we're not standing still. We are executing accelerating expansion plans globally. The network has doubled in the last 18 months and we are planning to triple it over the next 2 years. And even so on an individual site basis to combat existing congestion more quickly where it is isolated and problematic, we expedite local relief sites, deploy mobile Superchargers and we try to introduce pricing strategies that encourage more off-peak usage to avoid the waiting.",
"session": "Answer",
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"name": "Martin Viecha",
"speech": "Thank you very much.",
"session": "Answer",
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"name": "Zachary Kirkhorn",
"speech": "Just 1 thing to add on supercharging. If you haven't experienced our latest iteration of battery packs that can handle fast charge rates in combination with our 250-kilowatt charging stations, it's pretty incredible. And this is a really important component to supercharging capacity because the faster you can charge, the more charge sessions that you can have on an individual post, the better the customer experience is as you're going on a long-term journey because your supercharging times are lower. So this is a really important part of the strategy. Supercharging team has done a great job rolling these out. But it requires a combination of both the 250-kilowatt charging and our latest iteration of battery packs.",
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"name": "Drew Baglino",
"speech": "And we've also maintained an ongoing road map on software improvements, dynamic routing to avoid busy Superchargers, that's actually really helpful. We take the real-time business of the stations into account when choosing where to navigate people on their road trip. And beyond that, we're also continuing to improve the trip planner itself and how it estimates how much energy people use so it's not too conservative in asking people to charge more than they need to, which is another thing that can delay a total trip.",
"session": "Answer",
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"name": "Martin Viecha",
"speech": "Great. Thank you very much. The next question is, is Tesla considering any other ideas other than FSD with real-world AI that can bring additional software revenue to Tesla? If not, can Tesla consider building interesting games around FSD beta?",
"session": "Answer",
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"name": "Zachary Kirkhorn",
"speech": "Sure. At AI Day, we did talk about a potential future where Dojo could be used as a neural net training platform for other companies. It's not a focus of ours today as we're fully subscribed on Dojo with our internal uses. We do expect to continue to improve the in-car experience in the context of FSD.",
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{
"name": "Martin Viecha",
"speech": "Great, thank you. And maybe last question from shareholders is how does FSD take rate -- how has FSD take rate changed since the introduction of monthly subscription? Are there any plans to increase FSD pricing as wider release becomes imminent?",
"session": "Answer",
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{
"name": "Zachary Kirkhorn",
"speech": "I'll take the second part of the question first. We won't be providing any kind of forward-looking commentary on our pricing strategy or what may happen here over the near term. With respect to the first part of the question, it has been an interesting theme for us to unpack within the company. \r\nI mean, what I'll say just as a general statement before I make a couple of specific comments is that the things that we learn on FSD subscription today are not necessarily all that relevant. This is really more of a platform for when FSD beta goes into a wide release and the features and functionality become more accessible to more customers. \r\nThe second thing that I'll note is that if you look at the pricing, the monthly pricing of FSD subscription and then you compare that to the cost of either rolling FSD option into your lease or your loan, then on a monthly basis, the most economical way for a customer to enjoy the features of full self-driving is through purchasing it upfront and rolling it through their financing. \r\nAnd as a result of that, what we've seen in the data is not -- we're unable to detect a change in the upfront take rate of FSD when people purchase cars. We have seen quite a bit of activity of folks curious to experience what the software has to offer and subscribing to it and enjoying it through that route. But again, as I said at the beginning, I think what we've seen so far on FSD subscription is not terribly relevant. We'll see how that plays out in the future as we continue to release more features.",
"session": "Answer",
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{
"name": "Martin Viecha",
"speech": "Thank you very much. And now let's go to analyst questions. [Operator Instructions] The next question comes from Pierre Ferragu from New Street Research. Okay. While Pierre works on that, let's go to the next analyst. The next question comes from Joseph Spak from RBC. Joe, we cannot hear you. Can you click unmute? \r\nOkay. While the team is working on that, let's just go back to Say.com questions. So the next Say.com question is, can Tesla allow for FSD to be transferred to another vehicle at a fee, something less than $10,000? Early adopters are paying the price if they want to upgrade their vehicle. You lose the value on the trade-in and now you have to buy in at a higher cost.",
"session": "Answer",
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{
"name": "Zachary Kirkhorn",
"speech": "I don't think that this is widely known, but we're already actually doing the sentiment of what this question is asking. If you trade in your Tesla to Tesla, there's a difference in price that we pay for a trade-in that has FSD compared to 1 that doesn't. And so there's that premium that we pay to repurchase the FSD. That money can then be applied towards the purchase of a new car. \r\nSo I just -- we hear this feedback quite a bit. We see it on social media. We see it in the forums, et cetera. And so this already does exist, not directly in the form here and we don't call it out explicitly in the trade-in potentially that we have increased the price of your trade-in as a result. And hopefully, this clears this up because we do actually do that.",
"session": "Answer",
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{
"name": "Martin Viecha",
"speech": "Okay. And the next question is, Elon said that we get an update on Cybertruck in November a year ago but it hasn't happened. And we know there are a lot of updates. Will you show off the new and improved Cybertruck?",
"session": "Answer",
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{
"name": "Lars Moravy",
"speech": "Yes. Thanks, Martin. We get a lot of questions on Cybertruck. We've been busy detailing the Cybertruck to achieve the prototype version we shared with customers a while back. As you may have seen recently in social media, we've built a number of alphas and are currently testing those to further mature the design. And while those point out a few key additions like rear steer, there are also a number of smaller or less visible improvements, though the product is largely true to the initial vision. We'll continue to work through the product in the beta stages that we're in now and look to launch that by next year.",
"session": "Answer",
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{
"name": "Martin Viecha",
"speech": "Okay, thank you very much. We just promoted Pierre to a presenter to hear us.",
"session": "Answer",
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{
"name": "Pierre Ferragu",
"speech": "I'm very impressed that you managed to figure that out. Let me ask you my question. Actually, I'm very intrigued by what you guys are doing on the insurance front. And so you have now in the market in Texas an insurance product for which the premium varies as a function of the safety score of the driver. And so I'd love to hear you about that. You must have some initial data points about market reaction. What's the update? \r\nAnd from there, can you tell us about how you think you're going to distribute that? Is that going to go through your installed base very easily here or is it going to be like a heavy marketing push? And then maybe tell us about your expansion plans. What are the next geographies? What's the timing? How fast is that business line likely to grow in the next few years?",
"session": "Question",
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{
"name": "Zachary Kirkhorn",
"speech": "Yes. Thank you, Pierre. I'm extremely passionate about our insurance product. We have a terrific team here at Tesla of folks who have been spending a lot of time developing this and probably listening to the call. So we're pretty excited so far, Pierre. \r\nSo I mean, at the highest level here, we entered the insurance market kind of unintentionally, I would say. Our customers were coming to us complaining that the price of traditional insurance was too high, and it was reducing the affordability of a Tesla. And part of our journey here at Tesla is we want as many people as possible to be able to afford our products. That's extremely important to achieving the mission of the company. \r\nAnd if you look at the price of insurance as a percentage of what somebody's monthly payment is, it's quite high. And we spend extreme amounts of effort in manufacturing to take $5 of BOM cost out here or $10 out somewhere else. If we can get $5, $10, $20, $30 out on a monthly payment, you can calculate what that means in terms of reduction of the price of the car, if you finance it, and the leverage of improving insurance cost is huge in terms of affordability. \r\nAnd so that's kind of the context by which we stepped into this. As we started to do more research, essentially, the tools by which the insurance is traditionally calculated are optimized based upon the existing data, but the existing data is limited. So there's a focus on things like marital status or age or other attributes like that. Accident history is a good one, et cetera. \r\nBut what essentially happens here is customers who are low risk and don't actually file many claims end up overpaying on their insurance relative to their cost. That overpayment then goes to riskier customers who are essentially being subsidized. And as we looked at this and we looked at the data, we thought this just doesn't seem like it's fair. At Tesla, because our cars are connected, because they are essentially computers on wheels, there's enormous amounts of data that we have available to us to be able to assess the attributes of a driver who's operating that car and whether those attributes correlate with safety because we do get a signal when a car has been in an accident. \r\nSo we've been spending our time looking at hundreds of different variables and also looking at billions of miles of driving history. And we've been able to fit a model that is able to predict, with decent accuracy, the probability of collision over a period of time. And the model is not perfect, right? The model is a function of the data that we have available. That data set continues to grow. We continue to experiment with new variables, but we do have a model that works pretty well so far. \r\nAnd from that model, being able to predict frequency of collision, we can then align that against the price curve. And we can have individualized pricing integrated into the car, integrated into the app, integrated into that customer's experience with a feedback loop back to the customer on how they are driving after every drive, the attributes that they were successful on or unsuccessful on and the tips of things that they can do to improve their safety. So that's what we've developed. \r\nWe then included the safety score as part of the FSD beta enrollment program, where we have almost 150,000 cars currently using the safety score. And I believe the latest data is over 100 million miles of driving, so we've been able to go back and analyzed that data. And we've learned 2 things coming from that. The first is that the probability of collision for a customer using a safety score versus not is 30% lower. It's a pretty big difference. It means that the product is working and customers are responding to it. \r\nThe second thing that we've looked at is what is the probability of collision based upon actual data as a function of a driver safety score. And that is aligning with our models. Most notably, if you're in the top tier of safety compared to lower tiers, there's multiple X difference in probability of collision based upon actual data. So this is a very new and very exciting frontier for us. I know that was long-winded, but I -- we spent a lot of time on this and we put a lot of thought into it. \r\nSpecifically with respect to the rollout, the insurance industry in the U.S. is intensely regulated and it's regulated on a state-by-state level. That means that we require regulatory approvals from each individual Department of Insurance at each individual state. Texas is the first state that we launched in. I do want to thank the Texas insurance regulators here. You have been great to work with. We have a road map of additional states. We will launch the product in those states as we receive regulatory approvals. And our goal is to be in every major market in which we have cars in. \r\nWe did a soft launch in Texas, was it last week? Yes. And what we're seeing in initial take rate data is that if you compare that to what we're seeing in California, we're off to a good start here. So we're very excited about it. We're excited about individual risk-based pricing. We're excited about the ability for folks to become safer and, as a result, save money. And it feeds into our priority of a company of building the safest products in the world.",
"session": "Answer",
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{
"name": "Lars Moravy",
"speech": "Yes. If I can add to that, it's really exciting for the engineering team, the finance team and taking on safety into their world, too. It's just pervasive. Thanks for that, guys.",
"session": "Answer",
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{
"name": "Zachary Kirkhorn",
"speech": "Thank you, Lars.",
"session": "Answer",
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{
"name": "Martin Viecha",
"speech": "Thank you. Pierre, do you have a follow-up question?",
"session": "Answer",
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{
"name": "Pierre Ferragu",
"speech": "No, I think I'm fine. Zach, thanks for taking the time to answer. It's fascinating and very interesting, yes. I look forward to looking to that.",
"session": "Question",
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{
"name": "Martin Viecha",
"speech": "The next question comes from Joseph Spak from RBC.",
"session": "Answer",
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{
"name": "Joseph Spak",
"speech": "So Zach, as you noticed -- or as you noted, you hit low teens operating margins, that was your medium-term target. You're there now despite the number of challenges and you're not full utilization in some of the plans. So how are you thinking about that target now? And does it allow you to either drive price down further to unlock more demand, invest in other initiatives or does that target need to change? And then longer term, do you have an aspirational gross margin target as the mix of software and hardware changes?",
"session": "Question",
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{
"name": "Zachary Kirkhorn",
"speech": "Yes. We have achieved -- we've actually exceeded our long-term guidance on our operating margin target, so we're very pleased to see that. And as we look out over the next quarter and the next year, there's kind of -- there's a number of puts and takes financially for the company. \r\nThe launch of Austin and Berlin, we'll have ramp inefficiencies there for some period of time until we get those factories up and running. And so that's likely to put some downward pressure on our margins as those factories ramp. Our goals are to ramp those as quickly as possible. But as Drew mentioned earlier, there are a number of unknown unknowns that we'll need to work through. \r\nWe are kind of also in this uncertain environment with respect to cost structure, so we are seeing cost increase on the commodity side. We're getting feedback from our suppliers, as we are seeing ourselves, the impact of labor shortage. And then logistics and expedite costs just continue to be a part of our story here. And it's uncertain how that will unfold. It's our hope that these things stabilize. Exactly when that happens is difficult to predict. And we have been adjusting pricing in line with those changes in cost. And so we'll see how that unfolds over the course of the next year. So it's difficult on gross margin to say where that will go for those reasons. \r\nWith respect to operating margin, we've been very focused as a company on managing our overhead expenses and operating expenses. And operating expenses as a percentage of revenue has been declining, and I expect that trend to continue to happen. And I think the net of all of this is hopefully that we continue to make progress on operating margin over the next 4 or 5 quarters. \r\nAs we think kind of forward, the business up until this point has kind of largely been a hardware automotive business with a little bit of software on top of that. As full self-driving matures, as take rates increase, if we are to raise pricing on that, there's considerable upside both on gross margins and operating margin as that comes to light as the business starts to become more of a mix of a hardware-based company and a software-based company. \r\nSo we feel optimistic about the journey, very optimistic about the journey as we look over into the long term. Just a little bit difficult over the next 4 to 5 quarters. We'll continue to update on earnings calls as we learn more information. There's just a lot of uncertainty in the world right now.",
"session": "Answer",
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{
"name": "Martin Viecha",
"speech": "Thank you. Joe, do you have a follow-up question?",
"session": "Answer",
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{
"name": "Joseph Spak",
"speech": "Yes. The second question is just you mentioned LFP packs globally for standard range models. My understanding is that all comes from China. Is that the continued go-forward plan or do you want LFP capabilities in other factories around the world?",
"session": "Question",
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{
"name": "Drew Baglino",
"speech": "Yes. Certainly, our goal is to localize all key parts of the vehicles on the continent, at least the continent, if not closer to where the vehicles are produced. So that is our goal and we're working with internally and with our suppliers to accomplish that goal and not just at the end assembly level but as far upstream as possible.",
"session": "Answer",
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{
"name": "Martin Viecha",
"speech": "Thank you very much. And the next question comes from Colin Langan from Wells Fargo.",
"session": "Answer",
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{
"name": "Colin Langan",
"speech": "Yes, just actually kind of following up on the question before. You had mentioned commodities are rising. And when I look at a lot of the key raw materials in the battery, cobalt, nickel, lithium all up 40%. And I know you guys have done a good job of getting long-term contracts to sort of mitigate that impact. I mean, have you seen so far any impact from that spike? And if not, I mean, any sense of when that raw material headwind might actually show up or has shown up?",
"session": "Question",
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{
"name": "Zachary Kirkhorn",
"speech": "Yes. We have seen an impact. Our primary exposure right now is around nickel and aluminum, nickel on the cell, aluminum on the non-cell. And we have a mixture of contracts with various suppliers. Some materials we contract directly and we have full exposure to price fluctuations. We do have a number of long-term commitments -- long-term contracts in place. We also have contracts where there's some amount of cost sharing based upon the movement of indexes. \r\nAnd so as these have been moving, some of those costs have been flowing through to us. It's not a substantial amount of cost but it's not small. As we look towards the next year, I certainly hope it doesn't play out this way, but it's possible that we continue to see more of cost headwind as a result of these movements. It's difficult to say precisely but the volatility and the increases are just substantial, so substantial. And there are certain suppliers that, maybe up to a certain point, have been absorbing some of the increase. And as contracts expire there or we have to renew and extend them, we'll have to return to negotiations. \r\nAnd so what we have to do as a company and what we are intensely focused on is we need to be continuing to drive down the cost of our products, which we have been doing. And we have to overcome cost increases that are outside of our control. So whether that's resourcing components or redesigning components or finding ways to be more efficient in manufacturing, we have no choice but to continue on that path and be even more aggressive in the light of the macroeconomics here.",
"session": "Answer",
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{
"name": "Lars Moravy",
"speech": "And diversification, right. Like it doesn't need to be nickel or cobalt or I mean, there's always another option.",
"session": "Answer",
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{
"name": "Martin Viecha",
"speech": "Thank you. Colin, do you have a follow-up question? Okay. Let's go to the next one. The next question comes from Colin Rusch from Oppenheimer.",
"session": "Answer",
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{
"name": "Colin Rusch",
"speech": "Can you talk a little bit about your strategy around anode materials and your ability to leverage that into a reduction on the cathode side and performance from that [indiscernible]",
"session": "Question",
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{
"name": "Drew Baglino",
"speech": "Sure. I don't know that I'm going to get into too many specifics, but I guess first, 1 thing I would say is unlike the commodities discussion we just had, like the anode materials are not really in the same situation just in terms of what their constituent components are. So there's less of a focus on like rapidly changing them 1 way or the other because they're generally stable commodities. \r\nThere isn't exactly like a tit for tat where like get a better anode, use less cathode, like there's a fundamental ratio that you need to maintain for the cell to function. So I guess zooming out, the primary focus on the anode side that we have is just ensuring that it doesn't, in any way, that we are able to continue to reduce the cost of the anode without impeding on the long-term cyclability of the product. \r\nIt can also help with energy density as you like sort of improve the energy density of the anode, you improve the energy density of the cell, not directly 1:1 because you have to pack more cathode in as the anode gets better. And that's a focus as well but the trade space is just sort of cycling versus day 1 cost.",
"session": "Answer",
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"name": "Colin Rusch",
"speech": "That's very helpful. And then just around the vehicle pricing strategy, obviously, there's a lot of flexibility there for some customers and not. Can you just talk a little bit about the process around vehicle pricing? And how quickly do you expect to change that and adjust as you see some of these commodity prices flow through the cost structure and you look at the brand dynamics for vehicles?",
"session": "Question",
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"name": "Zachary Kirkhorn",
"speech": "Yes. Pricing has been a really difficult thing for us over the last couple of quarters. And we're -- part of the challenge is, well, I mean, the great thing that we're seeing in the space right now is there appears to just be quite a profound awakening of the desirability for electric vehicles. And I mean, to be totally frank, it's caught us a little bit offguard. \r\nAnd that kind of awakening and changing consumer sentiment, I'm sure there's lots of reasons that go into it, but folks want to buy an electric car and folks want to buy a Tesla right now. It's very exciting for us. At the same time, we have installed capacity to build more cars but we're constrained by a number of dynamics, as we've talked about in great detail. And we are putting an extreme effort to build as many cars as we possibly can. \r\nIt's hard to overstate how extreme the efforts are. It's quite the grind. We're trying as hard as we can to maximize that capacity and to be able to meet the demand that we're receiving. But the net-net of all of this is that we're not able to increase production capacity fast enough. So at the same time we are seeing macroeconomic cost impacts on our structure, as we've discussed previously on the call, so we're trying to think through if somebody orders a car now, it'll -- it could be delivered, in some cases, depending upon the car and which factory, could be a couple of months, could be a couple of quarters. And the timing in which we build that car will be just before that car gets delivered. \r\nAnd what will the world look like at that point? And so we're trying to think through how the cost structure is evolving? How does pricing need to change with that? What are the supply dynamics in the space? The other thing that I'll just note on pricing is that companies change pricing all the time. The difference is that when Tesla changes pricing, it's extremely transparent where that's not always the case otherwise. \r\nAnd sometimes our pricing will increase, sometimes our pricing will reduce. Sometimes, to the public, our pricing changes may not seem to make logical sense. But there is a strategy that we work behind the scenes as we're balancing supply and demand, as we're also trying to balance very shortages on parts, as we're trying to manage wait times, all of that goes into the optimization here.",
"session": "Answer",
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{
"name": "Martin Viecha",
"speech": "Okay. Thank you very much. The next question is from Brian Johnson from Barclays.",
"session": "Answer",
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{
"name": "Brian Johnson",
"speech": "By the way, great to hear there's a team at Tesla, not just a 1-person show. I want to drill down a bit more on FSD. In December of 2020, in a Business Insider interview in Germany, your leader said that he expected Level 5 autonomy by December -- within a year, so that would be now. Yet we look at the progress in FSD and some of the issues you see on YouTube, and it looks very much like a Level 2, 2+ system that requires vigilances, in fact, your disclaimers cite. \r\nSo I guess, 3 questions. Kind of, one, what is the timetable to get to Level 4 at least capability? We can deal with the regulatory stuff later. Two, what is the criteria, for Zach, for you to release revenue -- deferred revenue around FSD? And is having a Level 2 system that needs monitoring enough to release that deferred revenue? And then three, maybe you could talk a little bit more about how you plan to work with the folks at NHTSA who appear to be asking some questions? They have 3 requests out to you regarding information around the Level 2, around the capabilities of FSD.",
"session": "Question",
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"name": "Zachary Kirkhorn",
"speech": "We'll take them in order. It's difficult to be specific on the time lines. The Autopilot team is working extremely hard iterating on every version. We are being extremely transparent through the release of this to public customers who are posting information online. So when you're using full self-driving and you're going through the iterations, you can feel the progress. \r\nAnd for those who don't have it in their cars, social media is excellent at getting a sense for how that's progressing. And the team is moving quickly with every iteration, with every update, and they're working very hard on that. \r\nOn your second question about the criteria to release deferred revenue, the way that this works is we have made certain commitments as to what this product can offer at the time that a customer has purchased that. And so what we have to assess is, have we met those commitments? And is the software widely available to folks that we've made those commitments to within a certain geography? And given that FSD is still currently in the beta phase, it's invitation-only and it's limited, we have not deemed that to be appropriate for recognition of deferred revenue. And we'll continue to evolve this. We'll continue to monitor it within the finance team to see when we get to the milestones in which we're comfortable releasing. On the NHTSA question, Lars, do you want to take that?",
"session": "Answer",
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"name": "Lars Moravy",
"speech": "Sure. I mean, as I said earlier, we always corroborate fully with NHTSA and other regulatory bodies in any sort of investigation they may have, particularly related to ADAS systems. When they came out with the standing general order in July, we were quick to respond to that and one of the first and only companies capable of actually meeting the needs of that report. We continue to send that information to them as required weekly as incidents occur. \r\nAnd with the additional investigations, as I said, we meet that with great sincerity and we'll work through them 1 by 1 to make sure that all the facts come out and that NHTSA is well informed about our strategies for both active safety in this case but also passive safety. \r\nAs you guys may know, we released updates to our airbag and restraint system last week to Model Y using our fleet data. We worked closely with NHTSA on that, and they were fully in the loop before we did it. So I think these kinds of things will continue to happen in the new regulatory space that Zach discussed as we move towards a software-based vehicle. And we're happy to be a part of that journey.",
"session": "Answer",
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{
"name": "Martin Viecha",
"speech": "Thank you very much. And the next question comes from Trip Chowdhry.",
"session": "Answer",
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{
"name": "Trip Chowdhry",
"speech": "Very good quarter. I had 2 quick questions. First is regarding the 2 upcoming factories in Berlin and Austin. How are the 2 factories different from each other? Maybe in the layout, design, assembly lines? And the second question is related to Cybertruck. Who is the supplier looking at if you look at the exoskeleton steel? Is the supply for that material sufficient for immediate ramp-up, say, in '23, '24 time for Cybertruck? That's all for me.",
"session": "Question",
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{
"name": "Lars Moravy",
"speech": "Yes, sure. So obviously, as we've noted in the past, we developed our own stainless steel grade for the exterior of Cybertruck to meet both the durability and requirements required for an automotive world. With this raw material and others, as Drew mentioned, we continue to look at multiple sources. We have made some early sourcing decisions in that, but I think we'll keep that 1 internal and we've already began the first casting-ins of that. \r\nRolling stainless isn't so different from pulling any other material. It's just about how hard the rollers are to get to that hardness level. And just like every manufacturing process we put in for every new vehicle, we'll work with our suppliers and vendors to make sure those time lines and supply meet the need and demand of our customers.",
"session": "Answer",
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{
"name": "Drew Baglino",
"speech": "And on the differences between Austin and Berlin, there are some. They're largely associated with the different sort of building architectural choices that were -- happened to occur while collaboration with like local codes and other sort of governing requirements that drive the differences in the architecture between the locations. \r\nIn general, though, like we're trying to progress the manufacturing system as a system and make sort of logical, like, path to find improvements from factory to factory. And in some cases, there was an improvement identified between, like, decisions for one, Austin, the other Berlin or vice versa. And so there might be a slightly newer iteration of 1 part of the factory and 1 place than the other, but they're -- it's all part of like a path forward in the factory that builds the machine, the machine that builds the machine, sorry.",
"session": "Answer",
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{
"name": "Martin Viecha",
"speech": "Thank you very much. And the last question comes from Jed Dorsheimer from Canaccord.",
"session": "Answer",
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{
"name": "Jonathan Dorsheimer",
"speech": "So Brandenburg, I'm just wondering, Zach, if you could estimate the carry costs from a margin perspective? Or I guess, in 2 parts. So when do you expect -- do you still expect production coming on in '21, so a couple of months left in December? And how do you see that margin impact as a function of the carry cost? And I do have a follow-up question.",
"session": "Question",
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{
"name": "Zachary Kirkhorn",
"speech": "Sure. So it remains our target in both Austin and Berlin to be able to build our first production cars before the end of the year. We've talked about this a bit, the unknown unknowns, new factories, new vehicle designs, new technologies, new locations, new teams. So there is quite an execution journey ahead of us. But that remains our target and all of our plans are oriented around that. \r\nWe should not expect for us to deliver cars by the end of 2021 from these factories even if we do produce them, so homologation, regulatory reasons. And we'll want to make sure that we build up some number of cars that we're confident in the quality and the customer experience around them. \r\nThe second thing that I'll say, and I mentioned this in my opening remarks, is because of the newness here, it's extremely difficult for us to be precise in what the ramp will look like. And it's possible things -- the stars align and things move quickly, it's possible that we're spending the bulk of next year working on ramping these factories. It's just very hard to say, and we'll continue to update you all through these calls and through other forums. \r\nAs to how that then impacts our margins, that is also difficult because that is a function of the ramp, which is uncertain. So the benefit here, which is different in the ramp of these factories compared to other factories, is if you think about the percentage of our total cost structure in any given quarter that is associated with new ramps, we have the Fremont factory that's running, generating stable and growing margins there. The same is also true in Shanghai. So I expect we'll see some amount of headwind on margin from these ramps. It's just entirely dependent on how quickly we're able to ramp and what uncertainties come up during the process.",
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"name": "Jonathan Dorsheimer",
"speech": "Sure. So on a margin per car, but I would suspect though, if your carry cost is full right now on the -- that as you start producing vehicles, it's going to be a margin lifter from where you're at right now? No?",
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"name": "Zachary Kirkhorn",
"speech": "I mean, we are carrying some amount of costs associated with the factories today. And so the incremental cost associated with turning the factories, it's not 100% of a factory, if that's what you're getting at in your question.",
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"name": "Jonathan Dorsheimer",
"speech": "Yes, that's what I was getting at.",
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"name": "Zachary Kirkhorn",
"speech": "Yes. We also actually saw a very similar dynamic to this when we were launching Model S earlier in the year. So when a product starts launching and then cost of goods sold starts to activate, depreciation starts to activate, there's a bit of a movement in the P&L as to where that cost resides. So yes, seeming to some extent, Brandenburg and Austin costs are already flowing through our P&L. But we still need to continue staffing and ramping and incurring all the operating costs associated with the factory that we're not spending right now.",
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"name": "Martin Viecha",
"speech": "Fantastic. Thank you very much, everyone, for all your questions, and we'll see you again in 3 months. Thank you very much, and goodbye.",
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"title": "Tesla, Inc., Q3 2021 Earnings Call, Oct 20, 2021",
"quarter": 3,
"year": 2021
}
},
{
"transcript_title": "Tesla, Inc. - Q2 2021",
"transcript_name": "Tesla, Inc., Q2 2021 Earnings Call, Jul 26, 2021",
"ticker": "NASDAQ:TSLA",
"transcript_url": "https://wkarticles.blob.core.windows.net/finnhub/snp_transcript_2351062",
"date": "2021-07-26",
"year": 2021,
"quarter": 2,
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"transcript": [
{
"name": "Operator",
"speech": "Good day, and thank you for standing by. Welcome to the Tesla Second Quarter 2021 Financial Results and Q&A Webcast. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions] I would now like to hand the conference over to your speaker today, Martin Viecha, Senior Director of Investor Relations. Please go ahead.",
"session": "Presentation Operator Message",
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"name": "Martin Viecha",
"speech": "Thank you, and good afternoon, everyone. Welcome to Tesla's Second Quarter 2021 Q&A Webcast. I'm joined today by Elon Musk, Zachary Kirkhorn and a number of other executives. Our Q2 results were announced at about 1:00 p.m. Pacific Time in the update deck we published at the same link as this webcast. \r\nDuring this call, we will discuss our business outlook and make forward-looking statements. These comments are based on our predictions and expectations as of today. Actual events and results could differ materially due to a number of risks and uncertainties, including those mentioned in our most recent filings with the SEC. [Operator Instructions] But before we jump into Q&A, Elon has some opening remarks. Elon?",
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"name": "Elon Musk",
"speech": "Sure. So to recap, Q2 2021 was a record quarter on many levels. We achieved record production, deliveries and surpassed over $1 billion in GAAP net income for the first time in Tesla history. I'd really like to congratulate everyone at Tesla for an amazing job. This is really an incredible milestone. \r\nIt also seems that public sentiment towards EVs is at an inflection point. And at this point, I think almost everyone agrees that electric vehicles are the only way forward. Regarding supply chain, while we're making cars at full speed, the global chip shortage situation remains quite serious. For the rest of this year, our growth rates will be determined by the slowest part in our supply chain, which is there are a wide range of chips that are, at various times, the slowest parts of the supply chain. \r\nI mean, it's worth noting that if we had everything else, if we had vast numbers of vehicles themselves, we would not be able to make them -- if everything, except the chips, we wouldn't be able to make them. The chip supply is fundamentally the governing factor on our output. It is difficult for us to see how long this will last because we don't have -- this is out of our control essentially. It does seem like it's getting better but it's hard to predict. \r\nSo in fact, even achieving the output that we did achieve was only due to an immense effort from people within Tesla. We were able to substitute alternative chips and then write the firmware in a matter of weeks. It's not just a matter of swapping out a chip, you also have to rewrite the software. So it was an incredibly intense effort of finding new chips, writing new firmware, integrating with the vehicle and testing in order to maintain production. \r\nAnd I'd also like to thank our suppliers who work with us. And there have been many calls at midnight, 1 a.m., just with suppliers but -- in resolving a lot of the shortages. So thanks very much to our suppliers. \r\nLet's see, in terms of FSD subscription, we were able to launch Full Self-Driving subscription last month. And we expect it to build slowly and -- but then gather a lot of momentum over time. Obviously, we need to have the Full-Self Driving build widely available for it really to take off at high rates and making a lot of progress there. So yes, I think FSD subscription will be a significant factor probably next year. \r\nWith regard to Giga Texas and Giga Berlin, we're actually doing this earnings call from Giga Texas, so we're in the factory right now doing this earnings call. And the team has made incredible progress here. You can see the pictures online and see that there's basically nothing a year ago and this mostly complete large factory a year later. So it's really great work by the Giga Texas team. And then also great work in Berlin [indiscernible] with the team there. \r\nSo we expect to be producing the sort of new design of the Model Y in both factories and limited production later this year. It's always like -- it's not -- it's hard to sort of explain to people who have not been through the agony of a manufacturing ramp, like why can't you just turn it on and make 5,000 a week? This is -- it is so hard to do manufacturing. It is so hard to do production. At gross approximation, there are 10,000 unique parts and processes that have to work. And the greater growth of production goes as fast as the least lucky and dumbest of those 10,000 things, and a bunch of them are not even in our control. So I think it's like -- it's insanely difficult. \r\nI'm fond of saying that prototypes are easy and production is hard. And arguably, the really remarkable thing that Tesla's done is not to make an electric car or to be a car start-up because there have been hundreds of car start-ups in the United States and outside United States. So the thing that's remarkable is that Tesla didn't go bankrupt in reaching volume production. That's the amazing part because everyone else did, because they all got the prototype or the idea was the hard part and it is not. It is trivial by comparison with actual production. \r\nSo it's always worth noting that of all the American car companies, there are only 2 that have not gone bankrupt and that is Ford and Tesla. So the seeds of defeat are sown on the day of victory and we must be careful that we do not do that. So often, if you look at history, so often, the seeds of defeat are sown on the day of victory. We will endeavor not to make that the case of Tesla. \r\nSo let's see, the model lines in Texas and mainly, Texas and Berlin, will be -- will look very much like the Model Ys we currently make, but there are substantial improvements in the difficulty of manufacturing. So for example, the Model Y made here and in Berlin will have a cast body and a case body, whereas the 1 in California has a cast-rear body but not a cast-front body. We're also aiming to do a structural pack with [ 4680s ] cells, which is a mass reduction and a cost reduction. \r\nBut we're not counting on that as the only way to make things work. We have some backup plan with nonstructural -- with a nonstructural pack and 2170s essentially. But at scale production, we obviously want to be using 4680s and a structural pack. From a physics standpoint, this is the best architecture. And from an economic standpoint, it is the lowest cost way to go. So the life is lowest cost. \r\nBut there's a lot of new technology there so it is difficult to predict with precision. When does it work? And when do you reach scale production? And Drew's going to talk a bit more about the 4680 production. Yes. So we're all making great progress on the 4680 cells, but there is a tremendous amount of innovation that we're packing into that 4680 cells. And so it's not simply a sort of minor improvement on state-of-the-art. There are -- and we went through this on the Battery Cell Day, really dozens of -- half a dozen major improvements and dozens of small improvements. So I think it will be great, but it's difficult to say when the last of the technical challenges will be solved. \r\nSo in conclusion, our team continues to make huge efforts to make our factories run at full speed, which is very difficult. We have had some factory shutdowns due to partial outages, and we hope those will be relieved in the coming weeks and months. And we're making great progress on Full Self-Driving. Some of the progress is not easy to see because it is at a foundational software level, and so that ends up being sort of 2 steps forward, 1 step back situation. And -- but over time, you do 2 steps forward and 1 step back and keep going, you do move forward. \r\nSo I'm highly confident that the cars will be capable of full self-driving. They have a full self-driving computer and the cameras, I'm confident that they will be able to themselves with the safety level substantially greater than that of the average post. Once again, thanks to all of our employees who are making this a breakthrough year for Tesla and an incredible quarter. Thanks, guys.",
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"name": "Martin Viecha",
"speech": "Thank you very much. And we have some follow-up remarks from Zachary Kirkhorn.",
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"name": "Zachary Kirkhorn",
"speech": "Yes. Thanks, Martin, and thanks, Elon. Just to reiterate, Q2 was a great quarter for the Tesla team with strong improvements across the business. In particular, auto gross profit and margin, excluding credit, increased substantially. This was primarily driven by better cost optimization across our factories, good execution against our cost reduction plans as well as increases in production and delivery volumes. \r\nThere was some benefit from pricing actions mostly in North America. However, it was small in the context of the other contributors. Note that the Model S and X program was at a slight loss for the quarter due to the relatively low volume. \r\nIn supply chain challenges, including expedites, continue to provide cost headwinds. Additionally, it's encouraging to see the progress made on profitability within our energy and services and other businesses. While there's some benefit to looking at our progress quarter-over-quarter, I find it more helpful to look at progress over a slightly long-term horizon. Over the last 2 years, our vehicle delivery volumes have more than doubled. This volume increase was made possible by a steady decrease in ASPs of more than 10%, driven by our road map to increase affordability and shifting mix towards our more affordable vehicles. \r\nYet over that same period of time, our auto gross margin, excluding credit, has increased nearly 10 percentage points to our highest yet since the introduction of Model 3. This is only possible because our average cost per vehicle has reduced by more than the reduction in average price. This is a remarkable achievement in the context of the volume growth and ASP reduction, as mentioned, and a testament to the hard work by the Tesla team. \r\nAdditionally, OpEx as a percentage of revenue has declined and in particular, SG&A, representing the work we've done to become more efficient as we scale the company while still making the required R&D investments to support our future. As a result, our GAAP operating margins have risen from negative to double digit in line with what we have guided. By managing our overhead costs and driving higher volumes, our P&L is benefiting from the marginal profitability of each incremental unit or, said differently, we are recognizing the benefits of scale and improved fixed cost absorption. \r\nWith strong operating cash flows and cash balance, we are putting that cash to use. CapEx continues to tick up, primarily driven by capacity investments in Austin, Berlin and Shanghai. Additionally, each quarter, we are using our cash to retire legacy debt, which was taken on at a time when interest rates and company risks were much higher than in today's environment. \r\nAs I've mentioned before, our 2021 volumes will skew towards the second half of the year as we push for continued sequential increases in volume. Despite the great work so far managing the instability of the supply chain, these challenges remain and are unfortunately increasing in [ pain ] with a higher volume. As we work through the uncertainty, we want to ensure we do our best to manage customer wait times as well as the impact these interruptions have on our employees and costs. \r\nAnd as Elon mentioned, volume growth will be determined by part availability as we have the factory capacity ready and are in a strong demand position. I'm excited to see the progress made by the Tesla team as we continue building the business and strengthening our financials. Thank you very much.",
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"name": "Martin Viecha",
"speech": "Great. Thank you very much, Zach. And now let's go through the retail investor questions on say.com.",
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"name": "Martin Viecha",
"speech": "The first question from Robert is Tesla's website still says Cybertruck production is expected to begin in late 2021. Can Tesla share more details on the current status of the Cybertruck and confirm if production is still [Technical Difficulty] Lars, do you want to...",
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"name": "Lars Moravy",
"speech": "Sorry, we cut out there for a second. Yes, the Cybertruck is currently in its alpha stages. We finished the basic engineering architecture of the vehicle. With the Cybertruck, we're redefining how the vehicle is being made. As Elon said, it carries much of the structural pack and large casting designs of the Model Y being built in Berlin and Austin. Obviously, those take priority over the Cybertruck, but we are moving into the beta phases of Cybertruck later this year, and we'll be looking to ramp that in production in Giga Texas after Model Y is up and going.",
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"name": "Elon Musk",
"speech": "Yes, just worth reemphasizing that the extraordinarily difficult -- extraordinary difficulty of ramping production of large manufacturing items. [indiscernible] of being competitive, it's actually easy to make prototypes or sort of handle small volume production. But anything produced at high volume, which is really what's relevant here is, it's going to move as fast as the slowest of the say, rough order of magnitude, 10,000 unique parts and processes. \r\nAnd so you can have 9,999, which is 1 is missing. I mean, we were missing, for example, like a big struggle this quarter was the module that controls the airbags and the seatbelts. And obviously, you cannot ship a car without those. And that limited our production severely worldwide in Shanghai and in Fremont. So it -- like it wouldn't have mattered if we had like 17 different car models because they won't need the airbag module [indiscernible] \r\nSo the -- in order for Cybertruck and [indiscernible] to scale to volume that's meaningful for customer deliveries, we would have got to solve the chip shortage or working with our suppliers and people say, \"Why don't you just build a chip fab?\" Okay, well, okay, that would take us, even moving like lightning, 12 to 18 months. So it's not like you can just swap out a chip fab. It is like yes, I'll just make a quick chip fab. \r\nSo some of these things are -- yes, anyway. It is quite a trial dealing with all of the constraints of scaling a large manufacturing object. I think it may be the case that Tesla is scaling. I think we might be the fastest in history ever for scaling a large manufactured object. Maybe the Model T would have been comparable back in the day, the Model T. Probably, the Internet knows the answer. But I think we may be scaling large manufactured object at the fastest rate in history. Or I'd like to know who did it faster so we can learn from them. So it's worth just noting that, and they're going thing is not bad. \r\nSo yes, so Cybertruck and Semi, actually both are heavy users of cell capacity. So we've got to make sure we have the cell capacity for those 2 vehicles or it's kind of point that we can make a small number of vehicles. The effective cost, if you make a small number of vehicles is the same, like they literally cost $1 million a piece or more. There's a reason why you do things at volume production, which is to get the economies of scale that get us down. \r\nSo we are looking at a pretty massive increase in cell availability next year. But it's not like in January 1. It comes through -- it ramps up through the course of next year. But even without Tesla cell production, we believe our suppliers will be able to deliver about twice as much cell output in next year as this year. Drew, do you want to talk more about that?",
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"name": "Drew Baglino",
"speech": "Yes, given concerns over cell's bottlenecking growth, our target is to grow cell supply ahead of the 50% year-on-year growth targets of the vehicle business and also enable increased energy storage deployments. So yes, our cell suppliers are tracking to double their production in 2022.",
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"name": "Elon Musk",
"speech": "Yes. It's worth thing like if you have a target of a certain number, that doesn't mean it happens like as sure as night follows day. It's a target. So if there is some calamity in the world that it drops the supply chain, then it will be less. But the contracts that we have with cell suppliers quote roughly a doubling of cell supply to Tesla in 2022. \r\nAnd we have to juggle these exponential -- there's a whole much of exponential graphs sort of overlay on the top of each other and small changes in where you are on the X axis of time can quite substantially change the area under the curve. So what we're thinking of doing is like depending on -- if it's basically overshooting on cell supply for vehicles, and then as we have, say, excess cell supply in 1 month or another, then routing that cell output to the Megapack and Powerwall, [indiscernible] by the same if we're prior to taking vehicle production, if there's a shortage of cell output, for some reason, then we will throttle down Megapack and Powerwall production. So it will be something's got to give basically.",
"session": "Answer",
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"name": "Drew Baglino",
"speech": "Or if there's a disruption to vehicle production, you have an outlet for cells.",
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"name": "Elon Musk",
"speech": "Yes, exactly. There's a tremendous amount of inertia in the supply chain. So if we say it to a supplier, we want you to double cell output, well, even doing that in a year is very difficult. And then that's -- that system has a tremendous amount of momentum. It is like a of super tankers. It's the same.",
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"name": "Drew Baglino",
"speech": "Speaking of which, from a raw materials perspective, we also have long-term contracts to secure our supply chain also enable its growth. So we're not just looking at the suppliers but upstream from there.",
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"name": "Elon Musk",
"speech": "Yes.",
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"name": "Drew Baglino",
"speech": "Which has more flow to it.",
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"name": "Elon Musk",
"speech": "Yes, exactly. As mentioned, things will move as fast as the slowest part of the entire supply chain, which goes all the way back to raw materials but the -- nickel and that kind of thing. And there's sometimes perception that Tesla uses a lot of cobalt but we actually don't. Apple uses, I think, almost 100% cobalt in their batteries and cellphones, laptops. But Tesla uses no cobalt in the iron phosphate packs and almost none in the nickel basis chemistries. \r\nSo on a weighted average basis, we might use 2% cobalt compared to the Apple's 100% cobalt. Anyway, so it's just -- it's really just not a fact that -- we expect to basically have 0 cobalt in the future. So I do -- maybe with -- I think probably there is a long-term shift more in the direction of iron-based lithium-ion cells over nickel. As the energy density of sort of iron ore to the iron phosphate, [indiscernible] taken for granted. But iron-based cell cells and nickel-based [indiscernible] cells, I think probably we'll see a shift. My guess is probably to 2/3 iron, 1/3 nickel or something on that order. \r\nAnd this is actually good because there's plenty of iron in the world. There's an insane amount of iron. But nickel is -- there's much less nickel and there's way less cobalt. So it is good for relieving the long-term scaling to move to iron-based cells mostly. And I think long term, possibly all -- there's a good chance that all stationary storage, that is Powerwall and Megapack moves iron. It is most likely the case since you do not need to transport it and there's less volume of constraint for stationary storage. So then nickel would be for -- really for long-range road transport ships and aircraft and that kind of thing.",
"session": "Answer",
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"name": "Martin Viecha",
"speech": "Thank you. Let's go to the second question from retail, which is Elon has said that Tesla will be opening up the Supercharger network to other EVs later this year. Can you share some more details on how this will be structured? Will this be at select brands or will they contribute to the growth of this network?",
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"name": "Elon Musk",
"speech": "Yes. We're currently thinking it's a real simple thing where you just download the Tesla app and you go to a Supercharger and you just indicate which stall you're in. So you plug in your car, even if it's not Tesla. And then you just access the app, I'd say, turn on the stall that I'm in or how much electricity. And this should basically work with, I think, almost any manufacturer's cars. \r\nThere will be a time constraint. So if the charge rate is super slow, then somebody will be charged more because the biggest constraint at the Superchargers is time, how occupied is the stall. And we'll also be smarter with how we charge for electricity at the Superchargers. So rush-hour charging will be more expensive than charging because there are times when the Superchargers are empty and times when they're jampacked. And so it makes sense to have some time-based discrimination.",
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"name": "Drew Baglino",
"speech": "Yes. We've been doing that and it's been working and people are responding. It helps with utilization.",
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"name": "Elon Musk",
"speech": "Yes, exactly. So yes, I think we're -- in Europe and China and most of rest of the world, it's the same connector for everyone. So this is a fairly easy thing to do, develop our own connector, which in my opinion, is actually the best connector. It's small and light, looks good standard. So we developed our own connector, which in my opinion, is actually the best connector. It's small and light, looks good. \r\nSo an adapter is needed to work for EVs in North America. But people could buy this adapter, and we anticipate having it available at the Superchargers as well if people don't sort of steal them or something.",
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"name": "Drew Baglino",
"speech": "We have a good solution for that.",
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"name": "Elon Musk",
"speech": "Okay. But that is -- that's a constraint on North America thing. That's basically a vestige of history. But I think we do want to emphasize that it is -- our goal is to support the advent of sustainable energy. It is not to create a walled garden and use that to bludgeon our competitors, which is sometimes used by some companies.",
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"name": "Drew Baglino",
"speech": "I think it's also important to comment that increasing the utilization of the network actually reduces our costs, which allows us to lower charging prices for all customers, makes the network more profitable, allows us to grow the network faster. So that's a good thing there. And no matter what, we're going to continue to aggressively expand the network capacity, increasing charging speeds, improving the trip planning tools to protect against site congestion using dynamic pricing, as Elon mentioned, and just continuing to focus on minimum wait time for all customers.",
"session": "Answer",
"person_id": 393478,
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},
{
"name": "Elon Musk",
"speech": "Yes. Obviously, in order for this to be -- for a Supercharger to be useful to other power companies, Lars, we need to grow the network faster than we're growing vehicle output, which is not easy. We're growing vehicle output at a horrible rate. So Superchargers need to grow faster than vehicle output. So this is a lot of work with the Supercharger team. But it is only useful in the grand scheme of things. It's only useful to the public if we're able to grow faster than Tesla vehicle output. So that is our goal.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 24
},
{
"name": "Martin Viecha",
"speech": "Thank you very much. And the third question is, Elon said 4680 cells aren't reliable enough for vehicles. Is this referring to cycle life degradation or something else? Please update us on progress of 4680s? And what still needs to be done to make them reliable in vehicles?",
"session": "Answer",
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},
{
"name": "Elon Musk",
"speech": "Yes. I mean, really, this is about -- we'll definitely make the 4680 reliable enough for vehicles. And I think at the point wherein limited volume, it is reliable enough for vehicles. The -- again, going back to like limited production is easier, prototype production is easy but high-volume production is hard. There are a number of challenges in transitioning from small-scale production to a large volume production. \r\nAnd not to get too much into the weeds of things, but right now, we have a challenge with basically the, what's called calendaring or basically squashing the cathode material to a particular height. So it just goes through these welders and get squashed like pizza dough basically and -- but very hard pizza dough. And the -- it's closing -- it's denting the cathode. This is not something that happened when the rolls was smaller, but it is happening when the rules are bigger. So just like we're like, okay, weren't expecting that.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
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},
{
"name": "Drew Baglino",
"speech": "It's not a like science problem. It's an engineering -- it's not a question of if, it's a question of when, and the team is 100% focused on resolving these limiting processes as quick as possible.",
"session": "Answer",
"person_id": 393478,
"person_company": null,
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},
{
"name": "Elon Musk",
"speech": "Exactly.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 28
},
{
"name": "Drew Baglino",
"speech": "Yes. And on the reliability side, as Elon mentioned, we have successfully validated performance and the lifetime durability of the 4680 cells produced -- And we're continuing ongoing verification of that reliability. We're actually accruing over 1 million equivalent miles on our cells that we produce every month in our testing activities. The focus on that is very clear. We want high-quality cells for all of our customers. And yes, we're just focused on the unlucky limiting steps in the facility. And with the engineers focused on those few steps remaining, we're going to break through as fast as possible.",
"session": "Answer",
"person_id": 393478,
"person_company": null,
"component_order": 29
},
{
"name": "Elon Musk",
"speech": "In the meantime, we have a massive amount of equipment on order and arriving for the high-volume cell production in and Berlin. And obvious, given what we've learned with the pilot plant, which is in Fremont, which is really quite a big plant by most standards, we will have to modify a bunch of that equipment. So it won't be able to start it immediately. But it seems like -- let me do correct me if I'm wrong, but we think most likely, we will hit an annualized rate of 100 gigawatt hours a year sometime next year.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 30
},
{
"name": "Drew Baglino",
"speech": "We'll have all the equipment installed to accomplish 100 gigawatt hours. And it's possible that by the end of the year, we will be at an annualized rate of 100 gigawatt hours by the end of the year.",
"session": "Answer",
"person_id": 393478,
"person_company": null,
"component_order": 31
},
{
"name": "Elon Musk",
"speech": "Yes. I mean, my guess is more likely than not, about 50% of reaching 100 gigawatt hours a year by the end of next year on the annualized rate, something like that. It could shift by a little bit, but nothing, as Drew mentioned, it's nothing fundamental. Just a lot of work.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 32
},
{
"name": "Drew Baglino",
"speech": "Yes. And even to the large roller question, Elon, right, like on the side, the large rollers were great, no concerns. And so we're just learning as we go. And the nice thing about having that facility on the fast track like we had it and we talked about it at Battery Day was really derisking the big factories here that we've done, and we've learned a lot. And with each successive iteration, the ramp-up and the equipment installation will be faster or.",
"session": "Answer",
"person_id": 393478,
"person_company": null,
"component_order": 33
},
{
"name": "Martin Viecha",
"speech": "All right. And the last question from retail is from Emmet. Can Elon do an interview with one of our YouTube channels once or twice a year? I would nominate David or [indiscernible] Tesla daily channels as first possible candidates.",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 34
},
{
"name": "Elon Musk",
"speech": "Yes. I guess I'll do an interview. I mean, if I'm doing interviews and I can't do actual other work. So it's not -- I only have time in the day. So but yes, I'll do one. I won't do it annually but I'll do one. I think also like this is the -- I won't say the last time I'll do earnings calls but this is the -- I will no longer be defaults during earnings calls. So obviously, I'll do the annual shareholder meeting. But I think going forward, I will most likely not be on earnings calls unless there's something really important that I need to say.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 35
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{
"name": "Martin Viecha",
"speech": "Okay, thank you. Now let's go to institutional questions. The first one and we covered a lot of this already. Can you please update us on time lines for the start of production of Berlin and Austin Model Y, Cybertruck and the Semi? Do you expect the ramp of Cybertruck to be as difficult as it is a new process?",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 36
},
{
"name": "Elon Musk",
"speech": "I think Cybertruck ramp will be difficult because it's such a new architecture. It's going to be a great product. It might, I think, be our best product ever. But if there's a lot of fundamentally new design ideas, Cybertruck, never made a car like this before, be like this before. So there'll probably be challenges because there's so much unexplored territory. Yes.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 37
},
{
"name": "Martin Viecha",
"speech": "Thank you. I think question 2 and question 3, we can skip, given we have already addressed it. I'll get to question 4. In 5 years' time, how much faster or better could you be at manufacturing capacity expansion using [indiscernible] And what are the biggest issues you need to solve to get to that rate?",
"session": "Answer",
"person_id": 370659,
"person_company": null,
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},
{
"name": "Elon Musk",
"speech": "Well, like I said, I think we might be the fastest-growing company in history [indiscernible] large manufactured items. So those who have not actually been involved in the manufacturing ramp-up just have no idea how painful and difficult it is. It's like you got to eat a lot of glass and for our manufacturing ramp, it's hard.",
"session": "Answer",
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"person_company": null,
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},
{
"name": "Drew Baglino",
"speech": "Yes. I mean I think if you look at the expansion we've done in Shanghai, that factory was built in less in a year and ramped in 5 to 6 months to full volume...",
"session": "Answer",
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"person_company": null,
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},
{
"name": "Elon Musk",
"speech": "[indiscernible] took longer than that, about a year.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
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},
{
"name": "Drew Baglino",
"speech": "And when you consider cut and paste, we've repeated that in Fremont and whatever. But now with Berlin and Austin, we have new factories and new designs. And so there's always challenges, as you said, Elon, with new designs in ramping that. But I think having teams in 3 locations or 3 continents will definitely expand our ability and our capacity to grow more lines rather than just having the 1 factory in Fremont that we had 1.5 years ago.",
"session": "Answer",
"person_id": 393478,
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},
{
"name": "Elon Musk",
"speech": "Yes. So I mean, for Shanghai incredible team both the [indiscernible] back in 11 months, but it took longer than building the factory because it took longer than that to actually reach volume production -- high volume production. So took about a year. So when you put a factory in a new geography, in order for that factory to be efficient, you have to localize the supply chain. So there's no such thing as cut and paste. It does not exist. \r\nAnd obviously doing the same to do vehicle production in Europe but send vast numbers of parts from North America, that would be -- that would make the producing in Europe, for example, just crazy. You've got to localize the supply chain to have efficiency and then you're moving as fast as your least lucky, least good supplier. \r\nYes. It's only supply chain where you like 3 or 4 layers deep, it's frankly -- I feel at times that we are inheriting all force majeure or [indiscernible] So if anything goes wrong anywhere on Earth, something happens to mess up the supply chain. So yes.",
"session": "Answer",
"person_id": 175883,
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},
{
"name": "Drew Baglino",
"speech": "I think the human capital growth though is having factories here in Berlin, Shanghai, Fremont does allow us to maybe not exponentially grow but well, hopefully.",
"session": "Answer",
"person_id": 393478,
"person_company": null,
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},
{
"name": "Elon Musk",
"speech": "We are exponentially growing.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 45
},
{
"name": "Drew Baglino",
"speech": "Yes, hopefully maintain that exponential curve.",
"session": "Answer",
"person_id": 393478,
"person_company": null,
"component_order": 46
},
{
"name": "Elon Musk",
"speech": "Yes. So yes, -- it's also -- it takes a while to hire old people and train old people to operate the factory. The factory is like a giant cybernetic collective. And you can't just hire 10,000 people and have them work instantly. It's not possible. I really encourage more people to get involved in manufacturing. \r\nI think especially in the U.S., like this has just not been an area where all that many smart people have gone into. I think U.S. has an overallocation of talent, good finance and [indiscernible] compliment by saying we shouldn't have people in finance I'm just saying that this might be -- maybe we have too many smart people in those areas.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
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},
{
"name": "Drew Baglino",
"speech": "Manufacturing is fun.",
"session": "Answer",
"person_id": 393478,
"person_company": null,
"component_order": 48
},
{
"name": "Elon Musk",
"speech": "Yes, manufacturing is great. It's a very interesting problem. And obviously, you can't have stuff unless someone makes it. That's how it gets off. Yes.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
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{
"name": "Martin Viecha",
"speech": "Okay, thank you very much. And let's go to the last investor question. Does Tesla plan to offer more services beyond FSD or high-speed connectivity as part of its subscription bundle going forward? What areas, in particular, present an opportunity?",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 50
},
{
"name": "Elon Musk",
"speech": "Yes, we don't have a lot of ideas on this, to be frank. Really Full Self-Driving is the main thing. Things are obviously headed towards the fully autonomous electric vehicle future. And I think Tesla is well positioned and, quite frankly, is the leader objectively in both of those areas, electrification and autonomy. \r\nSo it's always tempting to try to find analogies. But with other companies or whatever, but really the value of fully electric autonomous fleet is any gigantic, boggles the mind really. So that will be one of the most valuable things that is ever done in the history of civilization.",
"session": "Answer",
"person_id": 175883,
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{
"name": "Martin Viecha",
"speech": "Thank you very much. And now let's go back to analyst Q&A, please.",
"session": "Answer",
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{
"name": "Operator",
"speech": "[Operator Instructions] \r\nOur first question comes from Colin Rusch with Oppenheimer.",
"session": "Question and Answer Operator Message",
"person_id": 1,
"person_company": null,
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{
"name": "Colin Rusch",
"speech": "Can you speak to the attach rates for FSD so far and what you're targeting in terms of the subscription levels?",
"session": "Question",
"person_id": 310676,
"person_company": null,
"component_order": 54
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{
"name": "Elon Musk",
"speech": "Yes. It's not worth commenting on right now. It's not meaningful. We really need Full Self-Driving, at least the beta, to be widely available to anyone who wants it can get it. Otherwise, it'd be pointless to read anything into where things are right now.",
"session": "Answer",
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{
"name": "Colin Rusch",
"speech": "Okay. And then just the follow-up there is about the cadence of the regulatory environment keeping up with the technology. Are you seeing meaningful evolution in terms of the regulators really understanding the technology and beginning to set some standards here sometime in the near term?",
"session": "Question",
"person_id": 310676,
"person_company": null,
"component_order": 56
},
{
"name": "Elon Musk",
"speech": "At least in the U.S., we don't see regulation as a fundamental limiter. We've got -- we're obviously going to make the work and then demonstrate that the reliability is significantly in excess of the average human driver for it to be allowed -- for people to be able to use it without paying attention to the road. \r\nI think we have a massive fleet. So it will be, I think, straightforward to make the argument on statistical grounds just based on the number of interventions or especially in events that would result in a crash. At scale, we think we'll have [ millions ] of miles of travel to be able to show that it is the safety of the car with autopilot on is 100% or 200% or more safer than the average human driver. At that point, I think it would be unconscionable to -- not to allow autopilot because the car just comes way less safe. \r\nIt will be sort of like if you take the elevator analogy. Back in the day, you used to have elevator operators with like a big sort of switch that operates the elevator and moves between floors. But that gets tired or maybe drunk for something or distracted, and every time and again, somebody would be kind of in half between floors. That's kind of the situation we have with cars. Autonomy will become so safe that it will be unsafe to manually operate the car, relatively speaking. \r\nAnd it's -- obviously, we're just getting an elevator request of the button for which floor we want and it just takes us there safely. And it would be quite alarming if elevators were operated by a person with a giant switch. That's how we'll be with cars.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
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{
"name": "Operator",
"speech": "Next question comes from Rod Lache with Wolfe Research.",
"session": "Question and Answer Operator Message",
"person_id": 1,
"person_company": null,
"component_order": 58
},
{
"name": "Rod Lache",
"speech": "Your cost of goods sold per vehicle is already down to the mid-$37,000 range in the quarter. It's down $5,000 year-over-year despite some of the inefficiencies that you talked about. And I know that a lot is going to change from here, just given how mix is going to evolve. But if you're successful on the structural pack and front and rear castings and the launch of the 4680 cell, can you just maybe give us a sense of what a successful outcome would look like maybe a year from now? Obviously, a lot has to go right, but just any kind of broad framework for us to think about.",
"session": "Question",
"person_id": 370532,
"person_company": null,
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{
"name": "Elon Musk",
"speech": "Yes, it's really difficult for us to make specific predictions, it's very difficult. I think we feel confident of, let's say, at least a 50% growth year-over-year next year and maybe it's 100%, but that's -- you need a lot of crystal balls to figure out exactly what it's going to be. And we're just -- it is literally impossible to make a specific prediction. But at least 50%, maybe 100%, something like that.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
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{
"name": "Rod Lache",
"speech": "Okay. And maybe just separately from this, can you just clarify what the status is of some of the advances in battery manufacturing, things like dry cathode mixing that you talked about on Battery Day? What's the time line? How are those evolving?",
"session": "Question",
"person_id": 370532,
"person_company": null,
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{
"name": "Drew Baglino",
"speech": "Yes. We commented on it today already actually. But in the facility at over 90% of the like processes have demonstrated rate there, but we are limited by the unlucky few that have not and that's what we're working on. One of them that Elon mentioned was running the full-scale cathode calendar. We're working through some improvements that we need to make to that equipment and to the actual raw material itself to not have those limitations. But again, it's an engineering problem, it's not a question of if, it's a question of when. \r\nOn the mixing side, we haven't actually really had any challenges specific to your question. Fundamentally, we're still happy with the dry process direction. In terms of the factory footprint, complexity, utility consumption, space and overall complexity simplification. Yes. I mean -- and the costs associated with everything that I just said.",
"session": "Answer",
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{
"name": "Elon Musk",
"speech": "Yes. And on emphasize dry cathode, I mean, it is -- I don't know, maybe it's like 10% or 15% of the cost improvement or something like that. I don't know, 20% maybe?",
"session": "Answer",
"person_id": 175883,
"person_company": null,
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{
"name": "Drew Baglino",
"speech": "Yes, 10%. [indiscernible] 10.",
"session": "Answer",
"person_id": 393478,
"person_company": null,
"component_order": 64
},
{
"name": "Elon Musk",
"speech": "Yes. So it's like just like people don't think like this is like the [indiscernible] or something. Wet versus dry reduces -- to dry is like 10% less cost than wet. So it's not -- still nothing to sneeze at, especially if you're making hundreds of gigawatt hours a year, but it's not [indiscernible]",
"session": "Answer",
"person_id": 175883,
"person_company": null,
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{
"name": "Operator",
"speech": "Next question comes from Pierre Ferragu with New Street Research.",
"session": "Question and Answer Operator Message",
"person_id": 1,
"person_company": null,
"component_order": 66
},
{
"name": "Pierre Ferragu",
"speech": "I have another question actually on batteries but on a slightly different angle. I was wondering how you're looking at your sourcing strategy for the 4680. You've talked a lot about all the work you're doing to develop your in-house production. But what about asking other battery manufacturers to do 4680 cells with their own technology, maybe less innovation than what you guys are lining up internally? \r\nAnd I was wondering if the first 4680 cells that we'll see on the road will definitely come from Tesla's own manufacturing lines or whether they could be coming actually from outside suppliers as well. And I have a quick follow-up.",
"session": "Question",
"person_id": 356336,
"person_company": null,
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{
"name": "Elon Musk",
"speech": "Yes. We are, in fact, working with our existing suppliers to produce 4680 format cells. And this is just a guess right now, but I see us sort of like consolidating around 4680 nickel-based structural pack and for long-range vehicles. And then not necessarily a 4680 format but some other format for iron-based sales. And so we -- right now, we kind of have the Baskin-Robbins of batteries situation with us. We have so many formats and so many chemistries that it's like we've got like 36 flavors of battery of this \r\nThis is just -- this results in an engineering drag coefficient where each variant of cell chemistry and format requires a certain amount of engineering to maintain it and troubleshoot and this inhibits our forward progress. So it is going to be important to consolidate to just maybe ideally 2 form factors, maybe 3, but ideally 2. And then just 1 nickel chemistry and 1 iron chemistry and -- So we don't have to troubleshoot so many different variants.",
"session": "Answer",
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{
"name": "Drew Baglino",
"speech": "Yes. And towards that end, we are engaging with the suppliers that we've had good partnerships with on 4680 designs to enable that simplification. And so far, so good. They're working on -- they're bringing their core competencies to bear on that. We're not mandating like what's going on inside but it's been a good leverage.",
"session": "Answer",
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{
"name": "Elon Musk",
"speech": "Yes. And we do expect to see significant increases in supply from our existing suppliers in addition to the cells that Tesla's making. So it's both. Sometimes, I get questions from our cells suppliers like, are we just going to make all the cells ourselves and we're like no. Please make as many as you possibly can and them to us. We have a significant unmet demand in stationary storage. \r\nMegapack is basically sold out until the end of next year, I believe. We have a massive backlog in Powerwall demand. The [indiscernible] versus production is same mismatch. Now part of that problem is also the semiconductor issue. So we use a lot of the same chips in the Powerwall as you do the car. So it's like which one do you want to make? Cars or Powerwalls. So we need to make cars so that Powerwall production has been reduced. \r\nBut as that semiconductor shortage is alleviated, then we can massively ramp up Powerwall production. I think we have a chance of hitting an annualized rate of 1 million units of Powerwall next year, maybe towards on the order of 20,000 a week, but again, dependent on cell supply and semiconductors. But in terms of demand, I think there's probably demand for in excess of 1 million Powerwalls per year and actually just a vast amount of for utilities as a little transition to a sustainable energy production, solar and wind are intermittent and, by their nature, really need battery packs in order to provide a steady flow of electricity. \r\nAnd when you look at all of the utilities in the world, this is a vast amount of back batteries that are needed. That's why long term, we really think sort of combine Tesla and suppliers need to produce at least 1,000 gigawatt hours a year and maybe 2,000 gigawatt hours a year.",
"session": "Answer",
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"person_company": null,
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},
{
"name": "Pierre Ferragu",
"speech": "Okay, great. And I have a quick question. I know, Elon, you don't think it's meaningful today, but I'd be curious to know if you have any stats about when you announced the new pricing on the FSD moving from [ $10,000 ] from to [ 1 99 ] with the lock-in. I'd be curious to understand how it affected behavior and if you saw like a massive uptake in the service. And I'm not thinking about people looking at it as an FSD but more to try the most advanced version of autopilot and to try it. So in the first days, you've announced the pricing. Have you seen like a very significant in the take rate? And can you give us a sense of how big it was?",
"session": "Question",
"person_id": 356336,
"person_company": null,
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},
{
"name": "Elon Musk",
"speech": "Okay. You're asking like is the take rate too expensive and that's why we're doing subscription? Or I'm not sure if I understand your question correctly.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
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{
"name": "Pierre Ferragu",
"speech": "No, my question is from the time you announced like the subscription at the $199 per [indiscernible] how much did like the take rate increase, like the percentage of people who basically took the subscription as they bought a new car versus how it was when they had to pay [ $10,000 ]",
"session": "Question",
"person_id": 356336,
"person_company": null,
"component_order": 73
},
{
"name": "Zachary Kirkhorn",
"speech": "Yes. This is Zach here. I mean, I think we're still early in understanding how FSD subscription will unfold, but a couple of data points here. So we took a look at our backlog to see customers in our backlog who have ordered FSD, did they cancel presumably to go to subscription after they take delivery? And the level of cancellations there not seeing cannibalization there. It's possible that, that changes but that was also part of our pricing strategy at $99 and $199.",
"session": "Answer",
"person_id": 385023,
"person_company": null,
"component_order": 74
},
{
"name": "Elon Musk",
"speech": "Yes. I mean, I think any given price is going to be wrong. So we'll just adjust it over time as we see the value proposition makes sense to people. So we're just really -- I'm not thinking about this a lot right now. We need to make Full Self-Driving to work in order for it to be a compelling value proposition. Otherwise, people are kind of on the future. \r\nI mean, like right now, is it -- does it make sense for somebody to do FSD subscription? I think it's debatable. But once we have also driving widely deployed, then the value proposition will be clear. And at that point, I think basically everyone will use it or [indiscernible]",
"session": "Answer",
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{
"name": "Martin Viecha",
"speech": "Okay. Thank you very much for your help. And I think that's all the time we have for today. Thanks for all your questions, and we'll speak to you again in 3 months' time. Have a good day, everyone.",
"session": "Answer",
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{
"name": "Elon Musk",
"speech": "All right. Thank you.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
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},
{
"name": "Operator",
"speech": "This concludes today's conference call. Thank you for participating. You may now disconnect.",
"session": "Question and Answer Operator Message",
"person_id": 1,
"person_company": null,
"component_order": 78
}
],
"title": "Tesla, Inc., Q2 2021 Earnings Call, Jul 26, 2021",
"quarter": 2,
"year": 2021
}
},
{
"transcript_title": "Tesla, Inc. - Q1 2021",
"transcript_name": "Tesla, Inc., Q1 2021 Earnings Call, Apr 26, 2021",
"ticker": "NASDAQ:TSLA",
"transcript_url": "https://wkarticles.blob.core.windows.net/finnhub/snp_transcript_2258465",
"date": "2021-04-26",
"year": 2021,
"quarter": 1,
"transcript_data": {
"date": "2021-04-26",
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"name": "Operator",
"speech": "Good day, ladies and gentlemen, and thank you for standing by, and welcome to the Tesla First Quarter 2021 Results and Q&A Webcast. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions] \r\nI will now hand the conference over to your speaker today, Martin Viecha, Senior Director of Investor Relations.",
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"name": "Martin Viecha",
"speech": "Thank you, Carmen, and good afternoon, everyone, and welcome to Tesla's First Quarter 2021 Q&A webcast. I'm joined today by Elon Musk, Zachary Kirkhorn and a number of other executives. Our Q1 results were announced at about 1:00 p.m. Pacific Time in the update deck we published at the same link as this webcast. \r\nDuring this call, we will discuss our business outlook and make forward-looking statements. These comments are based on our predictions and expectations as of today. Actual events or results could differ materially due to a number of risks and uncertainties including those mentioned in our most recent filings with the SEC. \r\n[Operator Instructions] But before we jump into Q&A, Elon has some opening remarks. Elon?",
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"name": "Elon Musk",
"speech": "Great. Thank you. So Q1 2021 was a record quarter on many levels. Tesla achieved record production deliveries and surpassed $1 billion in non-GAAP net income for the first time. And we've seen a real shift in customer perception of electric vehicles, and our demand is the best we've ever seen. So this is -- we're used to seeing a reduction in demand in the first quarter, and we saw an increase in demand that exceeded the normal seasonal in demand in Q1. So Model 3 became the best-selling midsized premier sedan in the world, in fact, I should say the best-selling luxury sedan of any kind in the world. The BMW 3 series was for the longest time the best-selling premium sedan, has been exceeded by the Tesla Model 3. And this is only 3.5 years into production and was just 2 factories. For Model 3 outselling its combustion competitors, I think is quite remarkable. \r\nIn the past couple of quarters, we delivered roughly 0.25 million Model 3s, so -- which translates to annualized rates of $0.5 million per year. When it comes to Model Y, we think Model Y will be the best-selling car or vehicle of any kind in the world and probably next year. So I'm not 100% certain next year, but I think quite likely. I'd say more likely than not, that in 2022 Model Y is the best-selling car or truck of any kind in the world. \r\nThen with regard to full self-driving, full self-driving continues to make great progress. But there's definitely one of the -- I think one of the hardest technical problems that exists, that's maybe ever existed. And really, in order to solve it, we basically need to solve a pretty significant part of artificial intelligence, specifically real-world artificial intelligence. And that sort of AI, the needs be compressed into a fairly small computer -- a very efficient computer that was designed, but nonetheless, a small computer that's using on the order of 70 or 80 watts. So this is a much harder problem than if you were you say 10,000 computers in a server room or something like that. \r\nThis is going to fit into a smallest brain. And -- I think with the elimination of we're finally getting rid of one of the last was really -- it was making up for some of the shortfalls of vision, but this is not good. You actually just need vision to work. And when vision works, it works -- it works better than the best human. It's like having 8 cameras. It's like having eyes in the back of your head, besides you had a 3 eyes of different focal businesses looking forward. This is -- and processing it at a speed that is superhuman. I know there's no question in that with vision solution, we can make a car that is dramatically safer than the average So -- but it is a hard problem because we are actually solving something quite fundamental about artificial intelligence, where we basically have to solve real-world vision AI, and we are. So -- and key to some of this is also having a massive data set. So just having well over 1 million cars on the road that are collecting data from very sort of corner case rare situations -- yes, sort of like so many things in the world like a truck -- carrying a truck or a car with -- one example is like a car as an example, a car with the kayak on the roof where the kayak has a little weight dangling from the front of the kayak in front of the car and the car ingore this and just look at the road. \r\nSo it's really quite tricky, but I am highly confident that we will get this done. So -- yes. This quarter, and I think we'll continue to see that a little bit in Q2 and Q3. So Q1 was -- had some of the most difficult supply chain challenges that we've ever experienced in Tesla and same difficulties with supply chain parts -- over the whole range of parts. Obviously, people have heard about the chip shortage. This is a huge problem. But then in addition to that example, we had quite a difficulty scaling, production in China because we're unable to get critical engineers there because of COVID quarantine restrictions. So -- which meant that worldwide was dependent on drive units made at our factory in So that was a very challenging situation. \r\nI think we're mostly out of that particular problem. That's just -- this was just 2 of many challenges. So team has really done an incredible job of dealing with really severe supply chain shortages. So with respect to the Model S and X, there were more challenges than expected in developing the Model S or what we call the program, which is the new version of Model S and X, which has revised interior and new battery pack and new drive units and new internal electronics, and has, for example, a station 5 level system. There's just a lot of issues encountered, ensuring that the new factory was, as also were saying was quite energy in a smaller pace. So it took quite a bit of of development to ensure that the battery of the new is safe. And we're trying to get in the cars slowly for the past few months, but we're just stacking them up in the yard and just making refinements to the cars that we built. \r\nBut we do expect to ramp Model S production and start delivering in probably next month. And then to be in sort of fairly high volume production for in Q3 and delivering Model X in Q3 as well. So I think as we ramp up, I think probably the demand for the new will be quite high. So it's really just going to be a question of ramping supply chain and internal production processes. So probably, like we're going to aim to produce over 2,000 per week, perhaps if we get lucky, upwards of 2,400 or 2,500. This again is contingent on global supply chain issues, which just a lot of factors outside of our control here. But I do think these will it's just a matter of time, and then we'll be doing well over 2,000 per week at a car that actually costs us less to produce, a little bit less to produce. But it is a product. \r\nSo the conclusion is there's a lot to be excited about in 2021 and '22. We're going as quickly as we can. Both Texas and Berlin are progressing well, and we expect to have initial limited production from those factories this year and volume production from Texas and Berlin next year. At this time, we are continuing to ramp production of in Fremont and Shanghai. In the background, we're continuing work -- development work on the Semi, Cybertruck, Roadster and other products. Thanks to everyone at Tesla, who made this year, a huge success. Now on to questions.",
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"name": "Martin Viecha",
"speech": "Thank you very much. We have some remarks from Zachary Kirkhorn as well.",
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"name": "Zachary Kirkhorn",
"speech": "So congratulations to the Tesla team on breaking multiple records in the first quarter of '21, as Elon had mentioned, which is typically the most difficult of the year for many reasons. To summarize the quarter, I think it's best understood by 3 key items: First, we successfully launched and began the ramp of Model Y in Shanghai, achieving positive gross margin in the first quarter of and receiving a great reception from the market. Second, as Elon mentioned, although we began the production process for the Model S during the quarter, we have not yet begun customer deliveries. The reduction in Model S and X deliveries from Q4 to Q1 were a meaningful headwind to free cash flows and profit generation. \r\nFor example, we incurred an estimated $200 million of direct P&L impact relating to this program in Q1 and the majority of which is reflected in COGS and that's before even considering the impact of lost revenue and profits as a result of the transition. And as mentioned -- as Elon mentioned, we expect the first deliveries to begin shortly. Third, as we continue to work through the instability of the global supply chain, particularly around semiconductors and port capacities, the Tesla team in partnership with our suppliers did tremendous work keeping our factories running. We did experience high expedite costs in the quarter, and they were also higher than they were in Q4 with some minor interruptions to production over the course of the quarter. We believe that this landscape is improving, but it does remain difficult and it's an evolving situation. \r\nIf we double-click within net income, gross margin, excluding credits, improved sequentially and year-over-year. This is in spite of the cost mentions for and expedites and a reduction in global ASPs and as our cost structure as a company is reducing at an even faster pace. So as we look out over the course of the year, we feel optimistic about our gross margin strength, particularly as some of these headwinds we're experiencing start to be resolved. \r\nOn services and other margins, these have recovered and are trending towards profitability, aided by strength in the used car business, operational improvements in service and additional service revenue opportunities to help absorb fixed overheads. On energy gross margins, these remained negative for our second quarter. This is driven by solar-related ramp costs and winter seasonality in the PPA business. We continue to manage through a multi-quarter backlog on Powerwall. We're working as fast as we can to increase production. And this will aid in profitability of this business as those volumes increase. \r\nOn operating expenses, these increased for Q1, which is driven by our investments in technology and growth, in particular, for R&D, this includes the structural battery pack and cells, investments in the new and our and silicon investments. On the SG&A side, we're setting up infrastructure and support for both China and EMEA in anticipation of volume to come there. And as I said before, our plans show that we remain on track for sustained industry-leading operating margins. \r\nDouble-clicking on cash flows. We continue to generate positive free cash flows and this was despite the significant working capital headwinds from S and X. Additionally, we are making progress reducing various forms of debt. We also invested $1.5 billion in Bitcoin during the quarter, then trimmed our position by 10%, and which contributed to a small gain in our Q1 financials. \r\nTaking a step back, we've generated $8 billion in operating cash flows and $4 billion in free cash flows over the past 4 quarters. As we look forward, our plans remain unchanged for long-term growth of 50% annually, and believe we're on track to exceed that this year as we guided to last quarter. Global demand remains meaningfully higher than production levels. And so we're driving as fast as we can to increase our production rates. As we think about Q2 and Q3, these quarters should largely be driven by execution on S and X, as we've discussed, continued ramp of Model Y in Shanghai and the associated cost reductions of these programs. And we expect profitability and cash generation to evolve over the course of the year in line with those improvements. \r\nAnd then as we get towards the end of the year, our story will pivot towards the launch and ramp of our newest factories in Austin and Berlin. So there's certainly no shortage of exciting things for us to work on and look forward to. Thank you, and we'll open it up for questions.",
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"name": "Martin Viecha",
"speech": "Thank you very much. And we'll first take questions from website. The first question is, how is coming along? Could unlock an AWS like business line for Tesla over the next few years?",
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"name": "Zachary Kirkhorn",
"speech": "Yes. I'll jump in here. So with respect to...",
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"name": "Elon Musk",
"speech": "Sorry, my mic was on mute.",
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"name": "Zachary Kirkhorn",
"speech": "Go ahead, Elon.",
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"name": "Elon Musk",
"speech": "So yes, I was just basically saying that the -- although like right now, people think of Tesla has car company or energy company. I think long term, people will think of Tesla as much as an AI robotics company as we are a car company or an energy company. I think we are developing one of the strongest hardware and software AI teams in the world. Certainly, we appear to be able to use things with full self-driving that others cannot. So if you look at the evolution of what technologies we developed, we developed them in order to solve the problem of self-driving. So we can find a computer. So we designed and our own. The software out there was really quite primitive for this task. And so we built the team from scratch and have been developing what we think is probably the most advanced real-world AI in the world. And then if it makes sense, this is kind of what needs to happen because the road system is designed for a neural net computer, our brain. Our brain is neural net computer. And it's -- the entire road system is designed for vision with neural net computer, which is because it's designed for eyes in the brain. And so if you have a system which has very good eyes, you can see all directions at once, be 3 focal points ahead or forward, but it never gets tired. It's never sort of texting. It has redundancy and its reaction time is super human. Then it seems pretty obvious that, that such a system would achieve an extremely high level of safety, of the average person. That's what we're doing. is kind of the training part of that. So because we're -- we have over 1 million cars, and perhaps next year, we'll have 2 million cars in active use, providing vast amounts of video training data that then needs to be digested by a very powerful training system. And currently, we use Tesla training software. So we developed a lot of training software, a lot of labeling software to do, to do, surround video labeling, which is quite tricky. This means all 8 cameras simultaneously of 36 frames a second per count labeling video over time. There wasn't a tool that existed for this. So we developed our own labeling tool. Then taking it a step further, obviously, the holy grail is auto labeling. So now we're getting quite good at auto labeling, where we do -- we're -- but the trainers train the training system and then the system auto labels the data and the human labels just need to look at the labeling to confirm that it is correct and perhaps make edits. And then every time an edit is made, that's where it trains the system. So it's kind of like a rule. It's just sort of spinning up. And really, the only way to do this is with fast amounts of video data. So then we need to train this efficiently. So is really a -- it is a supercomputer optimized for neural net training. We think will be probably in order of magnitude more efficient on, say, not sure what the exact right metric is, but say, per frame of video, we think it will be an order of magnitude more cost efficiency in hardware and in energy usage for a frame of video compared to a GPU-based solution or compared to the next best solution that we're aware of. \r\nSo then possibly that could be used by others. It does seem as though over time -- I mean just an observation, I think basically just the fact that neural net based computing or AI-based computing is and more and more of the compute stack. We -- conventional perhaps heuristics based computing is going to be important -- still going to be very important. But it will become -- but neural net will become a bigger and bigger portion of compute. So a long story. But I think, yes, probably others will want to use it too, and we will make it available.",
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"name": "Martin Viecha",
"speech": "Let's go to the second question from retail investors. The recent price changes on Solar Roof have been discouraging for customers and investors. Could just like share more about Solar Roof challenges? And if the outlook has changed at all, i.e., 1,000 roofs per week.",
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"name": "Elon Musk",
"speech": "Yes. First of all, I should say that the demand for the Solar Roof remains strong. So despite raising the price, the demand is still significantly in excess of our ability to meet the demand to install the Solar Roof. So production has gone fine. But we are at the inflation point. We did find that we basically made some significant mistakes in assessing the difficulty of certain roofs, but the complexity of roofs varies dramatically. Some roofs are to be literally 2 or 3x easier than other roofs. So you just can't have a one size fits all situation. If a roof has large or if the roof sort of -- the core structure of the roof is or is it not strong enough to hold the Solar Roof, then the cost can be double, sometimes 3x what we -- what our initial quotes were. So in those cases, what we obviously hope to do is to refund customers their deposit, and -- but what we cannot do is go and just lose an absolute amount of money. We just got to provide a refund of the early deposit. But that's what is I think most important about the Solar Roof situation, which I about this past week is that we're shifting the whole sort of solar situation -- the solar power basically situation to there's only 1 product basically -- or there's only 1 configuration. Every house -- we will not sell a house, solar without a Powerwall. The solar could either be solar retrofit with conventional panels put on the roof or it can be the Tesla Solarglass Roof. But in all cases, it will have the power to it's actually The plus refers to a higher peak power capability. So basically, all Powerwall made since roughly November of last year have a lot more peak power capability than than the specification on the website. They have about twice the power capability roughly. It on how you count power, but about twice the peak power and arguably twice the steady-state power of the specification of the website. The energy the power is roughly double. And all the installations -- so all installations will have a Powerwall. And the difficulty installation will dramatically -- or the difficulty of the installation will be much less. It will be much easier because the power from the Solar Roof -- Solarglass Roof or the solar panels will only ever go directly into the Powerwall. And the Powerwall will only ever go between the utility means -- between the utility and the main power panel of the house, which means you never need to touch the main breakers of the house. You never need to touch the house breakers. Effectively, almost every house, therefore, looks the same electrically instead of being a unique work of art and requiring exceptional ability to rewire the main panel. \r\nSo this is extremely important for scalability is the only way to do it, really. And this also means that every solar power installation that the house or whatever the case may be, will be its own utility. And so even if all lights go in the neighborhood, you will still have power. So that gives people energy security. And we can also in working with the utilities use the Powerwall to stabilize the overall grid. So let's say that there's a -- like there was in Texas, there was a peak power demand, and the power demand, because the grid lack the ability to buffer the power, they have to shut down power. There's no power storage. No good point on power storage. However, with a whole bunch of Powerwall and houses, we can actually buffer the power. And so if the grid needs more power, we can actually then, with the consent, obviously, of the homeowner and the partnership with the utility, we can then actually release power onto the grid to take care of peak power demand. \r\nSo effectively, the Powerwalls can operate as a giant distributed utility. This is profound. I'm not sure how much you actually understand this as this is extremely profound and necessary. Because we are headed towards a world where as we just talked about earlier, where people are moving towards electric vehicles. This will mean that the power needs in -- at homes and businesses will increase significantly. We will -- there will need to be a bunch more electricity coming somewhere. In fact, if you go to full renewable electricity, we need about 3x as much electricity as we currently have. So these are rough numbers, but roughly you need twice -- roughly need twice much electricity if transport goes electric, and they need 3x much electricity if all heating goes electric. So basically, this is a prosperous future, I think both for Tesla and for the utilities. \r\nBecause -- and in fact, I think this will be very -- if this is not done, the utilities will fail to serve their customers. They won't be able to do it. They won't be able to that stuff. And we're going to see more and more of what we see, say, in California and Texas of people seeing and blackouts and utility not being able to respond because there's a massive change going on with the transition to electric transport, and we're seeing more extreme weather events. This is the reported So it is very important to have solar and batteries at the level of the house. In addition, it is important to have large battery storage at the utility level. So that -- solar and wind, which are the main forms of renewable electricity can be -- that electricity can be stored because sometimes the wind doesn't is worthwhile. So that's worth too much but didn't go up. But if you have a battery, you can source the energy and provide the energy to the grid as needed. The same goes for solar because obviously, the sun does not shine at night. And sometimes, it is very cloudy. And so by having battery storage paired with solar and wind, this is the long-term solution to a sustainable energy future. And as I said, especially to both at the local level and at the utility level. If it doesn't occur at the local level, what will actually be required is a massive increase in power lines in power plants. So I have to put long distance and local power lines all over the place, they'll have to increase the size of the substations is a nightmare. This must occur. \r\nThere must be solar battery is the only way.",
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"name": "Martin Viecha",
"speech": "Thank you very much. And the next retail question is master of can you tell us anything about Tesla's future plans digital currency space or when any such major developments might be revealed?",
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"name": "Zachary Kirkhorn",
"speech": "Sure. Thanks, Martin. So as I noted in our opening remarks, and we've announced is Tesla did invest $1.5 billion into Bitcoin in Q1, and then we subsequently sold a 10% stake in that. We also allow customers to make vehicle deposits and final vehicle purchases using Bitcoin. And so where our Bitcoin story -- maybe just to share a little bit of context here. Jon and I were looking for a place to store cash that wasn't being immediately used, trying to get some level of return on this, but also preserve liquidity. Particularly as we look forward to the launch of Austin and Berlin and uncertainty that's happening with semiconductors and port capacity, being able to access our cash very quickly is super important to us right now. And there aren't many traditional opportunities to do this or at least that we found and in talking to others that we could get good feedback on, particularly with yields being so low and without taking on additional risk or sacrificing liquidity. And Bitcoin seemed at the time and so far has proven to be a good decision. A good place to play some of our cash that's not immediately being used for daily operations or maybe not needed until the end of the year and be able to get some return on that. And I think one of the key points that I want to make about our experiences in the digital currency space is that there's a lot of reasons to optimistic here. We're certainly watching it very closely at Tesla, watching how the market develops, listening to what our customers are saying. But thinking about it from a corporate treasury perspective, we've been quite pleased with how much liquidity there is in the Bitcoin market. So our ability to build our first position happen quickly. When we did the sale later in March, we also were able to execute on that very quickly. And so as we think about kind of global liquidity for the business in risk management, being able to get cash in and out of the market is something that I think is exceptionally important for us. So we do believe long term in the value of Bitcoin. So it is our intent to hold what we have long term and continue to accumulate Bitcoin from transactions from our customers as they purchase vehicles. Specifically with respect to things we may do, there are things that we're constantly discussing. We're not planning to make any announcements here, and we're watching this space closely. So when we're ready to make an announcement on this front, if there's one to come, we'll certainly let you all know.",
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"name": "Martin Viecha",
"speech": "Thank you. And the fourth question from retail investors is does Tesla have any proactive plans to tackle mainstream imminent, massive and deceptive click-based headline campaigns on safety of autopilot or FSD specialty PR job of some sort.",
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"name": "Unknown Executive",
"speech": "Well, I can -- I'll take this one, guys. From the safety side, I continue to say a few as drive the point -- go ahead, Elon.",
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"name": "Elon Musk",
"speech": "I think -- please go ahead. I touched with just going through the facts of the -- what -- I mean, specifically, there were -- there was not a regarding actually there was high-speed in Tesla. But -- and there was really just extremely deceptive media practices where it was claimed to be where this is completely false. And those journalists should be ashamed themselves. Please go ahead,",
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"name": "Unknown Executive",
"speech": "Yes. Thanks, Elon. So I was just saying, we're committed to safety in all our designs, and that's number 1 in what we do here. Regarding the in Houston, specifically, we worked directly with the local authorities, NTSB and Neto, wherever replicable and whenever they reach out to us for help directly on the engineering level and else we can support. In that vein, we did a study with them over the past week to understand what happened in that particular crash. And what we've learned from that effort was that auto steer not -- could not engage on the road condition that -- as it was designed. Our adaptive cruise control only engage when a driver was buckled in about 5 miles per hour. And it only accelerated to 30 miles per hour distance before the car crashed. As well adaptive fusion control disengage the cars fully to complete to a stop when the driver's seatbelt was unbuckled. Through further investigation of the vehicle and accident remains, we inspected the car with NTSB and and the local police and we're able to find that the steering oil was indeed so they must leading to likelihood that someone was in the driver seat at the time of the crash and all seatbelts post crash were found to be unbundled. We're unable to recover the data from the SD card at the time of impact, but the local authorities are working on doing that and we await their report. As I said, we continue to hold safety in a higher regard and look to improve products in the future through this kind of data and other information from the field.",
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"name": "Martin Viecha",
"speech": "Okay. Thank you very much. Let's go to the next question on institutional investors. The first question is, proponents of alternative grid storage technologies claimed at lithium-ion. It's unsuited for long term storage at scale due to Could 4680 cells address this limitation? Is the limitation even relevant for charging the energy equation?",
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"name": "Unknown Executive",
"speech": "That's definitely not the issue. Good lithium ion cell -- self discharge is less than 0.001% of its energy per day. So the drain is maybe not...",
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"name": "Elon Musk",
"speech": "[indiscernible]",
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"name": "Unknown Executive",
"speech": "Yes, I think the challenge with seasonal storage is your value proposition drops from hundreds of full cycles per year to less than maybe 10 or maybe even less than 5 cycles per year. So it's just a different type of technology altogether, that would make sense, given that it's more than an order in magnitude, different use case.",
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"name": "Elon Musk",
"speech": "Yes. We've got a long way to go before we're dealing with seasonal technology issues. But certainly a way to deal with seasonal technology would be to have wind and solar erring on the side of more latitude. And -- but then across a variety of longitude. So essentially, like let's say, in the U.S., for example, there was -- I'm not sure if you understand that you can actually power the entire United States with just sort of 100 -- roughly a 100 mile -- by 100-mile grid of solar. Some people don't quite understand like, well, how much solar is needed out of the United States. Almost nothing of the [indiscernible] of almost any country in the world. The incident is a gigawatt per square kilometer. This is insane. In fact, you took the clear area, just the area or saying for nuclear power plants, the area that is considered not usable because of a nuclear power plant is there. In most cases, If you just put solar there, it would generate more power than the nuclear power plant because they typically have pretty wide clear areas. So it really -- so if you have, say, 25% efficient solar panels and then those are 80% efficient in how they laid out, you're going to do about 200 megawatts per square kilometer. Therefore 5 kilometer at which might be a typical sort of power plant. It's really not much area at all. And a lot of places can have wind and solar in place. So anyway, it's entirely possible to power all of us with a small percentage of earth's area. And then to transfer that power to high-voltage DC lines, no new technology. No -- you don't need like room temperature superconductors. This another room temperature superconductors. Almost irrelevant, in my opinion, almost irrelevant. Low-cost, long-distance power lines using copper or aluminum very important. So heating is So that's current time of resistance. So as you increase voltage, you can drop the current dramatically and drop the heating dramatically to the point where it is of minor relevance, like maybe you lose 5% to 7% with a high-voltage DC power line, something like that. So I wonder [indiscernible] We just need to scale this thing up. We -- the technologies exist today to solve renewable energy. And some people will say, well, why don't we do it? That's because the energy basis of the earth is gigantic, super mega and gigantic. So you can't just go and do 1 billion terawatts overnight. You've got to build the production capacity for the cells -- for the battery cells or solar cells. You've got to put that into vehicles, you going to put that storage pack, you've got to solar panels and Solarglass Roof and you've got to deploy all this thing -- all this stuff. But it is certainly the case that we can accelerate this. And we should try to accelerate it. And the right thing to do, I think, from an economic standpoint, I think as an economist to agree is to have a common tax, just as we have a tax on and alcohol, which we think are more likely to be bad than good, and we tend to tax vegetables less. It was the same should be true. We should tax energy that we think is fully bad and support energy think is probably good, just like alcohol versus fruits and vegetables. Just And -- but I guess on the plus side, I'm not suggesting anyone to be complacent, but sustainable energy, renewable energy will be sold. It is being sold, but it matters how fast we sold it. And if we sold it faster, that's better for the world. \r\nThere's no question in my mind, what sort of the energy storage can be sold with the batteries. 0. I want to be clear, 0. I think the buyers will tend to be towards iron-based lithium cells. When we say lithium, I don't think lithium must be a big constitute of the cells. It's more like 1% to 2% if the cell is lithium. But the main part of the cell is cathode. The main mass and in the cells is the cathode. Where high-energy cells like for example, what we use in most have nickel-based lithium-ion cells, which have higher energy density, longer range than iron-based cells. However, stationary storage -- the energy that is not as important because just thinking around. And so I think the vast majority of stationary storage will be iron-based lithium-ion cells with an iron phosphate cathode typically. But I think the phosphate part of necessary is or nickel on the terminology. I just think it was iron and nickel. And there's the same amount of iron in the world, more iron than we possible use. And there's also more lithium than we could possibly use. Basically, there is no shortage of anything whatsoever in iron lithium-ion cells.",
"session": "Answer",
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{
"name": "Martin Viecha",
"speech": "Thank you very much. Let's go to the next question from traditional investors, which is you've suggested that between a 5x to 10x improvement is achievable in the automotive production versus the first Model 3 line on the first principles physics analysis. Where does where does Berlin sit relative to that limit?",
"session": "Answer",
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{
"name": "Elon Musk",
"speech": "I think we're still quite away from it. I mean the thing to bear in mind with production is -- but for those who've never they just don't understand how insanely hard production is. I want to review the very, very here. Prototypes are -- their child's play. Production is hard, is very hard. Now you say production at very scale with higher liability and low cost, insanely difficult. But what has achieved on the automotive side was not to create an electric car. The truly profound thing on the car side is that Tesla was the first American car company to achieve volume production of a car in 100 years and not go bankrupt. So this is -- this -- basically, myself and many others at Tesla had to basically have several aneurysms to get this done. It was so hard, no idea. So anyway -- and the thing about making a large complex manufacturing object is, let's say you have approximation, 10,000 unique items. And even one of those items is slow, that saturate, just one. Doesn't matter so trivial. We've had production stopped because of carpet and We had production stopped because of USB cable. At one point, for more or less, the rated every electronics store in the Bay Area for a few days there, nobody could buy USB cable in the area because we went and bought them all to put them in the car, literally. And the like hundreds of stories like that. So anyway, that's that -- those constraints and a logistics problem that makes World War II, a trivial. I'm not hitting like the scale millions of cars, massive global supply chain in 50 countries, dozens of regulatory regimes. It's insane.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
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{
"name": "Martin Viecha",
"speech": "Yes. Thank you. And last question from institutional investors. Master plan Part 2 talks about an urban transport vehicle that is smaller than traditional bus with greater aerial density achieved by removing the central aisle. Do you have any updates to share on this goal?",
"session": "Answer",
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{
"name": "Elon Musk",
"speech": "Not at this time.",
"session": "Answer",
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{
"name": "Martin Viecha",
"speech": "Okay. Thank you very much. So let's move to analyst Q&A.",
"session": "Answer",
"person_id": 370659,
"person_company": null,
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},
{
"name": "Operator",
"speech": "First question is from Pierre Ferragu with New Street Research.",
"session": "Question and Answer Operator Message",
"person_id": 1,
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"component_order": 28
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{
"name": "Pierre Ferragu",
"speech": "I'd love to get actually on what you presented on the Battery Day. In the last 6, 7 months, I want -- I was much progress you've made on that front first, in terms of process development. So how are things coming together on your pilot line? Are you getting to the kind of production throughput you were aiming for? And second, actually, on your production ramp. So I was wondering in which sites you're ramping production capacity for the 4680 cell and where you stand on ramping up that capacity as well? And I have a quick follow on energy as if that's possible.",
"session": "Question",
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{
"name": "Elon Musk",
"speech": "Well, so we have the -- Andrew, you add to this. But we have the small sort of pilot plant, which is still big expected to have like a 10-gigawatt per hour capability in Fremont And cells, we're not quite yet at the point where we think ourselves are reliable enough to be shipped in cars, but we're getting close to that point. And then we've already ordered mostly equipment for battery production in Poland and much of as well. So we really don't flick the nitty-gritty elements. But overall, I think we still sort of we're quite optimistic about this achieving volume production of the 4680 next year?",
"session": "Answer",
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{
"name": "Drew Baglino",
"speech": "Yes. I think just one thing I would add is there's been a lot of questions about yields. Actually, I noticed people asking about that. And the yield progress has been really strong every day. We were really still in commissioning phase. We were really still in commissioning phase with most of the tools to the point where we're confident that the yield trajectory aligns with our internal cost projections. We did talk about yield also a better but there's a lot of reasons why it's useful to check in on that. It takes a while, as Elon just mentioned, to go from prototype to production, and it's not just parts. It's processes, it's equipment. But as we've matured the process equipment, we've gotten to where we need to be on the yield side.",
"session": "Answer",
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"name": "Elon Musk",
"speech": "Yes. Basically, this is just a guess because we don't know for sure, but it appears as though we are about 12 -- they're probably not more than 18 months away from volume production 4680. Now at the same time, we are actually trying to have cell supply of partners ramp up their supply as much as possible. So this is not is something that is to the exclusion of suppliers. It is in conjunction with suppliers. So we're want to be super clear about that. It's not about replacing suppliers. It is about supplementing the suppliers. So we have a very strong partnership with with Panasonic and LG. And we would -- our strategic partners for self-supply is please make us -- please supply us with as much as you possibly can, provided the price is affordable, we will buy everything that they can make.",
"session": "Answer",
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"name": "Drew Baglino",
"speech": "Yes. Yes. And specific to that, we're on track to more than double the supplier capacity",
"session": "Answer",
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{
"name": "Elon Musk",
"speech": "Yes. We do expect from suppliers going to pursue you doubled the sale output next year versus this year?",
"session": "Answer",
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{
"name": "Pierre Ferragu",
"speech": "Yes. Okay. And I had a quick follow-up on maybe Zack, for you on your business. So I understand like the negative gross margin with Solar Roof ran. But I was wondering what do gross margin look like there when you look at the storage business and where you -- what's your ambition in terms of gross margin in that business, I guess, it's going to grow in the mix in coming years. So it's important for long-term modeling.",
"session": "Question",
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{
"name": "Zachary Kirkhorn",
"speech": "Yes. We're seeing a lot of -- we're aiming for comparable margins in storage as in vehicle. But it is important to bear in mind that vehicle is more mature than the storage. So -- We already are at margins with Powerwall. But some additional work is needed for a mega pack to achieve good margins. Yes Drew, what do you think?",
"session": "Answer",
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{
"name": "Drew Baglino",
"speech": "Yes. Sorry, just jumping in Absolutely agree. Powerwall is mature. We've been producing Powerwall for 3 years now and we're good margins there, but has more room to go to achieve our targets.",
"session": "Answer",
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{
"name": "Elon Musk",
"speech": "We have a clear runway for improving the customer a megawatt hour at the Megapack.",
"session": "Answer",
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{
"name": "Drew Baglino",
"speech": "Absolutely. Yes, we do.",
"session": "Answer",
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{
"name": "Operator",
"speech": "From Rod Lache with Wolfe Research.",
"session": "Question and Answer Operator Message",
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{
"name": "Rod Lache",
"speech": "I was hoping maybe just first, you could talk a little bit about how you're thinking about the rollout of version 9 and the transition to the subscription model. It sounds like some of this is about to roll out next month. I'm not sure if that's a subscription model, but maybe you could just spend a little time talking about how impactful you expect that to be.",
"session": "Question",
"person_id": 370532,
"person_company": null,
"component_order": 41
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{
"name": "Zachary Kirkhorn",
"speech": "We're working on getting FSD subscription out, there's a couple of internal technical dependencies, but from a business model perspective, that's aligned, and we're hoping to roll that out soon. The key thing that I say here, there's a lot of potential for recurring revenue based on FSD subscription. 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 is a great option for them. One of the things we'll need to keep an eye on is a potential transition from cash purchases of FSD subscription over to -- or cash purchases of FSD who may move over to FSD subscription. And so there could be a period of time in which cash reduces in the near term and then as the portfolio of subscription customers build up, then that becomes a pretty strong business for us over time. But we're hoping to get this launched pretty soon and see what the response is to it.",
"session": "Answer",
"person_id": 385023,
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{
"name": "Rod Lache",
"speech": "Okay. Great. And I was hoping, Zach, maybe you can just talk a little bit about OpEx. There was a noticeable increase, even excluding SBC. Obviously, a lot going on this quarter, but can you maybe just talk a little bit about how we should be thinking about that going forward?",
"session": "Question",
"person_id": 370532,
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{
"name": "Zachary Kirkhorn",
"speech": "Sure. On the R&D side, what we're seeing, as I mentioned in my opening remarks, is kind of a convergence of a series of programs that are happening. And our R&D OpEx spend kind of correlates to where we are in the product life cycle on different programs. And so we're kind of at the tail end of investments in what we call internally palladium, which is the new Model S and Model X. And so we expect that to decrease over time, but it was high in Q1 for a lot of the reasons that Eolon have mentioned. We're also getting very heavy into 4680 development that Drew and team are working on and the associated structural battery pack that goes along with that. And so these are new technologies, not only new to Tesla, but new to the industry. And so we're investing heavily there on the R&D side to work out those And spend along in those areas should continue as we continue to work through the development cycle of those. And then I also mentioned Elon talked a bit about and the potential there. So from neural net investments and custom silicon investments, these continue to be areas that we spend on and make investments in. On the SG&A side, the business is pivoting very quickly to be global. And China is ramping quite quickly. And we're trying to make sure that we are staying ahead of the volume, so that we have the right sales capacity, store capacity there, local investments and IT and others to manage the growth such that as the growth comes, the execution challenges are smaller than maybe in similar periods of growth that we've seen in the past. And so we're making investments there ahead of the growth. And overall, as we look at OpEx as a percentage of revenue over the course of the year, we do expect to see a substantial drop from 2020 to 2021 as the volumes in the latter part of the year pickup.",
"session": "Answer",
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},
{
"name": "Operator",
"speech": "Dan Levy from Credit Suisse. .",
"session": "Question and Answer Operator Message",
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"person_company": null,
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},
{
"name": "Dan Levy",
"speech": "Two questions. One is on COGS. I think we've gotten from Battery Day a pretty good feel about the potential for COGS reduction related to powertrain. But I'd like to get a sense of the path to reducing COGS ex powertrain as you'd still need a meaningful reduction on that front to make the math work on a $25,000 vehicle. So what levers do you have to reducing your cost ex powertrain? Is it just more scale, better supplier pricing or is it just based on ongoing cost reductions.",
"session": "Question",
"person_id": 377011,
"person_company": null,
"component_order": 46
},
{
"name": "Unknown Executive",
"speech": "I mean on the vehicle side, there's plenty of opportunity as well. Obviously, building a car like a lot less is quite complex and has various moving parts, Model 3 and Model Y were steps of improvement in that. When you look at some of the other advancements that we're including in the Model Y factories into Austin and Berlin, we've reduced the body count by as much as 60% in the park cost money. So we continue to find optimization there as well as we get economies of scale. When we start to talk about the volumes we're considering worldwide with 4 factories building the same vehicle. So both of those things on the vehicle side will improve our COGS as well and powertrain continues to be integrated into that.",
"session": "Answer",
"person_id": 182536,
"person_company": null,
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},
{
"name": "Dan Levy",
"speech": "Great. And then just related, as you see Berlin and Austin ramp. I'd like to just get a sense on the comparison of Fremont versus the new capacity. Obviously, Fremont non-optimized because you bought the facility you had to retrofit that to your need. So maybe you can give us a sense of how your new capacity is going to differ versus Fremont. What are the areas that you have efficiencies that you previously didn't have, maybe how much does that add up to improved COGS over time to help you achieve that $25,000 vehicle.",
"session": "Question",
"person_id": 377011,
"person_company": null,
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},
{
"name": "Elon Musk",
"speech": "Yes. I think we want to talk too much about future product development. The earnings call is not the right place for to make major product announcement. Yes. we'll get there. We'll",
"session": "Answer",
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"person_company": null,
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},
{
"name": "Martin Viecha",
"speech": "All right. Thank you very much. Unfortunately, this is all the time we have for today. Thank you very much for dialing in and for listening, and we'll speak to you again in about 3 months. Thank you.",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 50
},
{
"name": "Elon Musk",
"speech": "Thanks, everyone.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 51
},
{
"name": "Operator",
"speech": "This concludes today's conference call. Thank you for participating. You may now disconnect.",
"session": "Question and Answer Operator Message",
"person_id": 1,
"person_company": null,
"component_order": 52
}
],
"title": "Tesla, Inc., Q1 2021 Earnings Call, Apr 26, 2021",
"quarter": 1,
"year": 2021
}
}
],
"count": 12,
"from_year": 2021,
"to_year": 2023
}
Overview
Fetch earnings call transcripts for a public company. Supports year-range filtering.Endpoint Details
- Method: GET
- Endpoint:
/api/enterprise/company/earnings-calls/
Authentication requirements
- Include a valid JWT token in your request header
- If you don’t have a token yet, you can get one from the
/auth/token/endpoint first.
Request
Request Parameters
Header Parameters
JWT token obtained from the Authentication request
URL Parameters
Permalink or URL of the company. E.g.
"salesforce"Start year of the date range.
End year of the date range.
Response
Successful response will have status as “success”. Results are returned in the response.{
"status": "success",
"data": [
{
"transcript_title": "Tesla, Inc. - Q4 2023",
"transcript_name": "Tesla, Inc., Q4 2023 Earnings Call, Jan 24, 2024",
"ticker": "NASDAQ:TSLA",
"transcript_url": "https://wkarticles.blob.core.windows.net/finnhub/snp_transcript_3003051",
"date": "2024-01-24",
"year": 2023,
"quarter": 4,
"transcript_data": {
"date": "2024-01-24",
"participant": [
{
"name": "Adam Jonas",
"role": "Analysts",
"pro_id": 29412103,
"job_title": "MD & Head of Global Auto & Shared Mobility Research",
"description": "Analysts",
"company_name": "Morgan Stanley, Research Division",
"transcript_person_id": 118469
},
{
"name": "Colin Langan",
"role": "Analysts",
"pro_id": 710566519,
"job_title": "Senior Equity Analyst",
"description": "Analysts",
"company_name": "Wells Fargo Securities, LLC, Research Division",
"transcript_person_id": 480193
},
{
"name": "Dan Levy",
"role": "Analysts",
"pro_id": 214533139,
"job_title": "Senior Analyst",
"description": "Analysts",
"company_name": "Barclays Bank PLC, Research Division",
"transcript_person_id": 253177
},
{
"name": "Drew Baglino",
"role": "Executives",
"pro_id": 621069668,
"job_title": "Former Senior Vice President of Powertrain & Energy Engineering",
"description": "Executives",
"company_name": "Tesla, Inc.",
"transcript_person_id": 393478
},
{
"name": "Elon Musk",
"role": "Executives",
"pro_id": 27546373,
"job_title": "Co-Founder, Technoking of Tesla, CEO & Director",
"description": "Executives",
"company_name": "Tesla, Inc.",
"transcript_person_id": 175883
},
{
"name": "Lars Moravy",
"role": "Executives",
"pro_id": 712755131,
"job_title": "Vice President of Vehicle Engineering",
"description": "Executives",
"company_name": "Tesla, Inc.",
"transcript_person_id": 482177
},
{
"name": "Martin Viecha",
"role": "Executives",
"pro_id": 588894062,
"job_title": "Former Vice President of Investor Relations",
"description": "Executives",
"company_name": "Tesla, Inc.",
"transcript_person_id": 370659
},
{
"name": "Pierre Ferragu",
"role": "Analysts",
"pro_id": 558629883,
"job_title": "Global Team Head of Technology Infrastructure",
"description": "Analysts",
"company_name": "New Street Research LLP",
"transcript_person_id": 356336
},
{
"name": "Vaibhav Taneja",
"role": "Executives",
"pro_id": 608950986,
"job_title": "Chief Financial Officer",
"description": "Executives",
"company_name": "Tesla, Inc.",
"transcript_person_id": 595078
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],
"transcript": [
{
"name": "Martin Viecha",
"speech": "Good afternoon, everyone, and welcome to Tesla's Fourth Quarter 2023 Q&A Webcast. My name is Martin Viecha, VP of Investor Relations, and I'm joined today by Elon Musk, Vaibhav Taneja, and a number of other executives. Our Q4 results were announced at about 3:00 p.m. Central Time in the update deck we published at the same link as this webcast.\r\nDuring this call, we will discuss our business outlook and make forward-looking statements. These comments are based on our predictions and expectations as of today. Actual events or results could differ materially due to a number of risks and uncertainties, including those mentioned in our most recent filings with the SEC. During the question-and-answer portion of today's call, please limit yourself to 1 question and 1 follow-up. [Operator Instructions] But before we jump into Q&A, Elon has some operating remarks. Elon?",
"session": "Presenter Speech",
"person_id": 370659,
"person_company": null,
"component_order": 0
},
{
"name": "Elon Musk",
"speech": "Thank you. So the Tesla team did an incredible job in 2023. We achieved record production and deliveries of [ about ] 1.8 million vehicles, in line with our official guidance. And in Q4, we're producing vehicles at an annualized run rate of almost 2 million cars a year. This is really a phenomenal achievement. Looking at just the Fremont factory alone, we made 560,000 cars. This is a record. In fact, it's the highest output of automotive plant in North America. And people are often surprised that the highest output factory -- car factory in North America is in the San Francisco Bay Area. It's a little counterintuitive perhaps.\r\nAnd it's really had an incredibly positive impact on that entire area. What would have been a run-down strip mall is the highest productivity car plant in the Americas. Think about that. It was derelict when we got it, and now it's the most productive plant in this entire part of the world. And it's enriched the community in so many different ways. It's really a gem. So I'm super proud of the people that work there.\r\nModel Y became the best-selling vehicle globally, as predicted, the best selling vehicle of any kind, not just electric vehicles, with over 1.2 million units delivered. The energy storage business delivered nearly 15 gigawatt hours of batteries in 2023 compared to 6.5 gigawatt hours the year before, so tremendous year-over-year growth, triple digits. And yes, I think we'll continue to see very strong growth in storage, as predicted. I said for many years that the storage business will grow much faster than the car business, and it is doing that.\r\nFree cash flow remained strong at $4.4 billion in 2023 in spite of record spending on future projects. So we had record CapEx expenses as well as record R&D. This brings us to 2024. There's a lot to look forward to in 2024. Tesla is currently between 2 major growth waves. We're focused on making sure that our next growth wave driven by next-gen vehicle, energy storage, full self-driving and other projects is executed as well as possible. For full self-driving, we've released version 12, which is a complete architectural rewrite compared to prior versions. This is end-to-end artificial intelligence. So [indiscernible] basically, photons in and controls out.\r\nAnd it really is quite a profound difference. This is currently just with employees and a few customers, but we will be rolling out to all who -- all those customers in the U.S. who request full self-driving in the weeks to come. That's over 400,000 vehicles in North America. So this is the first time AI has been used not just for object perception but for path lending and vehicle controls. We replaced 330,000 lines of C++ code with neural nets. It's really quite remarkable.\r\nSo as a side note, I think Tesla is probably the most efficient company in the world for AI inference. Out of necessity, we've actually had to be extremely good at getting the most out of hardware because Hardware 3 at this point is several years old. So I think we're quite far ahead of any other company in the world in terms of AI inference efficiency, which is going to be a very important metric in the future in many arenas.\r\nSo see, the new Model 3 is now available globally, so we did an update in Model 3. While the car looks similar, a lot of work has gone into the vehicle to make it better in every way. It is significantly quieter, more refined, better equipped, has longer range and many other improvements, and I recommend taking it for a test drive. If you have not driven a Model 3 in a long time, you should really try the new one. So steady improvements.\r\nAnd we're very far along on our next-generation low-cost vehicle. This is an earnings call, not a product announcement. So there'll not be many questions that try to ask us about new products coming, but we reserve product announcements for product announcements, not earning calls. But we're very excited about this, and this is really going to be profound, not just in its design of the vehicle itself but in the design of the manufacturing system. This is a revolutionary manufacturing system, significant -- far more advanced than any other automotive manufacturing system in the world, like by a significant margin.\r\nSeveral years ago, I said the -- perhaps the most important competitive characteristic of Tesla in the future will be manufacturing technology. And you will really see that come to bear with our next-gen vehicle. The first manufacturing location for this will be at our Gigafactory and headquarters in Austin, Texas. And then we'll follow that up with other locations around the world, probably our built in Mexico will be second, and then we'll be looking to identify a third location perhaps by the end of this year or early next outside of North America.\r\nIn conclusion, we had a great year with record production, record deliveries and a strong free cash flow in spite of a very high interest rate environment. And we are focused on exciting new projects that will, I think ultimately, if we execute on all these things, and it is very hard to do all these things, not a sure thing, but I do see a path where Tesla could 1 day be the most valuable company in the world. I do want to emphasize that is not an easy path, a very difficult one, but it is now a set of possible outcomes. And previously, I would not have thought it is in possible outcome.\r\nAnd thank you again to all of our investors, our employees, and our suppliers for a strong year and looking forward to a great 2024 and years to come. Thank you.",
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"name": "Martin Viecha",
"speech": "Thank you. And our CFO, Vaibhav, has opening remarks as well.",
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"name": "Vaibhav Taneja",
"speech": "Thanks, Martin. Good afternoon, everyone. As Elon mentioned, we had a record year in terms of both production and deliveries for our auto business as well as record deployments in our energy business. This was achieved despite 2023 being a challenging year in terms of higher interest rates and higher inflation. Big thanks to our customer for being with us through this challenging period. I would also like to thank whole Tesla team for their resolve and dedication throughout.\r\nIn terms of our 2023 financials, we ended the year with over $96 million of revenue and generated $4.4 billion of free cash flow to end the year with over $29 billion of cash and investments on hand. Our 2023 GAAP net income was impacted by the recognition of onetime noncash benefit of $5.9 million from the release of valuation allowance on certain deferred tax assets. This was due to our recent history of sustained profitability and is similar to several other companies who have recently gone through a similar change in their accounting.\r\nAccordingly, starting with Q1, our booked tax rate will now be more in line with other companies in the S&P 500. In our vehicle business, we continue to see improvements in our per unit cost despite us being in the early phase of Cybertruck era. As a result, our auto gross margin improved sequentially. That said, predicting auto gross margins is extremely challenging since there are many moving parts to this equation, some of which are out of our control, like the change in tariffs or local incentives, to name a few. While the teams are focused on cost reductions, we are approaching the limits within our current platforms.\r\nOn the demand front, as promised, we made investments in digital campaigns in 2023. We fully appreciate the importance of customer education as we are still in the customer acquisition phase. Our data suggests that around 90% of our vehicle buyers in 2023 never owned a Tesla before. We are being creative in figuring out ways to bring in new customers and educate them about the benefits of owning a Tesla versus gas-powered vehicles, the key among them being total cost of ownership. This concept is mostly overlooked for just the upfront cost. We will be in evaluating our campaigns, curating the content and optimizing spend accordingly to support the overall demand.\r\nThere are 2 additional things I would like to mention as it relates to the U.S. market. First, for customers who qualify for buying credit, we now offer that as a point-of-sale benefit for Model Y, which means an immediate reduction of $7,500 at the time of purchase to the end customer. Secondly, we continue to offer very attractive lease rates for Model 3 and Y using our partner leasing program. Note that the sales under this program are recognized as upfront revenue and reported within automotive sales.\r\nOur energy storage business had another record year, with deployments more than doubling and revenues increasing by more than 50%. This business is poised to again surpass our auto business in terms of growth rate in 2024. This has been in the works for quite some time with us laying the foundation a few years back by building our Megafactory in metro. I would like to thank the whole Tesla energy team for their efforts to make this a reality.\r\nOur services and others business also started contributing meaningfully to our results, and our fleets -- as our fleets grow as we expect the fleet-based revenues from supercharging, used cars and services to continue to increase. For 2024, our focus is to continue growing our output, continuing our cost reduction efforts and increasing investments in our future growth initiatives. Accordingly, we are currently expecting our capital expenditure for 2024 to be in excess of $10 million. We believe this would be critical in helping us lay the foundation for the next phase of growth.\r\nOnce again, I would like to thank everybody at Tesla, our investors, and our suppliers for being with us in this journey. We can open it up to questions, Martin.",
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"name": "Martin Viecha",
"speech": "Thank you, and let's go through investor questions. Question number 1 is from Michael. Given that you moved the start of the next-generation compact vehicle production to Austin, has the time line improved so that we might see the next-generation platform vehicles in 2025?",
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"name": "Elon Musk",
"speech": "We -- I won't certainly say things with -- that should be taken with a grain of salt since I am often optimistic. But I don't want to blow your mind but I'm often optimistic regarding time. But our current schedule shows that we will start production towards the end of 2025, sometime in the second half. That's just what our current schedule says. There's a lot of new technology, like a tremendous amount of new revolutionary manufacturing technology here.\r\nThe reason I want to put this new revolutionary manufacturing line at Giga Texas was because we really need the engineers to be living on the line. This is not sort of off-the-shelf just works type of thing. And it's just a lot easier for Tesla engineering to live on the line if it's in Austin versus elsewhere. But we are currently expecting to start production second half of next year. That will be a challenging production ramp, like I can't emphasize, we'll be sleeping on the line practically. In fact, not practically, we will be.\r\nBut I am confident that once it is going, it will be head and shoulders above any other manufacturing technology that exists anywhere in the world. It's next level. So it's always difficult to predict what that S curve of manufacturing looks like. So we start off real slow and then it grows exponentially. And predicting that intermediate S curve is difficult, but -- so I don't know. It's hard to say what the unit volume would be next year. We're not going to make any predictions on that front, but it does seem quite likely that we will start production next year.",
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"name": "Martin Viecha",
"speech": "Thank you. The next question is from Michael again. What has been the barrier to ramping 4680 cells into multimillion cells per week rate? And when do you expect to get there? Drew?",
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"name": "Drew Baglino",
"speech": "Yes. First, I just want to allay any concerns regarding 4680 limiting the Cybertruck ramp because I've seen some people commenting about that. Today, 4680 production is ahead of the ramp with actually weeks of finished cell inventory. And the goal is to keep it that way, not only for Cyber but for our future vehicle programs. And as Elon said, it is an S curve here too, like it's hard to predict these things. But I'm just describing our goals.",
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"name": "Elon Musk",
"speech": "It's a hard problem, like there are entire companies where all they do is make battery cells. That's like all they do, indeed. We do a lot of other things. And we've got a lot of breakthrough technologies that take time to figure out. It's not just that it's a 46-millimeter diameter by 80-millimeter cell. That's just the dimensions. There's tremendous amount of new technology in the cell itself.",
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{
"name": "Drew Baglino",
"speech": "And manufacturing technology.",
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{
"name": "Elon Musk",
"speech": "Yes, exactly.",
"session": "Answer",
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"name": "Drew Baglino",
"speech": "And just regarding what the team was able to do in Q4, Texas successfully swapped line 1 from the model line design of the cells, the Cybertruck [indiscernible] which was the 10% cell energy increase I've mentioned before. And as with any major new product introduction, the factory and engineering teams collaborated to ensure quality of the new design and the process changes as their first priority. And now our focus returns to cost and production ramp in Q1.\r\nAnd in terms of what we're doing, we're currently running 1 production line, 1 assembly line, using 2 assembly lines in addition for yield and rate improvement trials, and we have a fourth in commissioning and 4 more will be installed starting in Q3 this year. So definitely, this is a big year for ramping for",
"session": "Answer",
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"name": "Elon Musk",
"speech": "We also do want to emphasize that we also expect to ramp orders from our suppliers. So this is not about replacing our suppliers. It's about supplementing our suppliers. So we are very appreciative of our suppliers. Panasonic, obviously, is our longest supplier. They're an amazing company. We've got CTL. We've got LG and BYD.",
"session": "Answer",
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"name": "Martin Viecha",
"speech": "Thank you. The next question is from Adam. Should retail shareholders be concerned that Elon has stated -- should retail shareholders be concerned that Elon has stated that he is uncomfortable expanding AI and robotics at Tesla if he doesn't have 25% of voting?",
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"name": "Elon Musk",
"speech": "Yes. I guess let me explain what my concern is here, which is that I see a path to creating an artificial intelligence and robotics [indiscernible] of truly immense capability and power. And my concern would be, I don't want to control it but if I have so little influence over the company at that stage, that I could sort of be voted out by some sort of random shareholder advisory firm.\r\nWe've had a lot of challenges with institutional shareholder services, ISS, I call them ISIS, and Glass Lewis, which there's a lot of activists that basically infiltrate those organizations and have strange ideas about what should be done. So I want to have enough to be influenced -- like if we could do a dual-class stock, that would be ideal. I'm not looking for additional economics. I just want to be an effective steward of very powerful technology.\r\nAnd the reason I just sort of roughly picked approximately 25% was that, that's not so much that I can control the company even if I go bonkers. And if I'm like mad, they can throw me out, but it's enough that I have a strong influence. That's what I'm aiming for is a strong influence but not control. There's some way to achieve that, that would be great.",
"session": "Answer",
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{
"name": "Martin Viecha",
"speech": "The next question is what is your expectation for automotive gross margin ex regulatory credits for the full year?",
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"name": "Vaibhav Taneja",
"speech": "Like I said in my opening remarks, we're focused on reducing the cost of our vehicles. This is very extensive and involved exercise, whereby we look at not just the component cost down -- but down to the packaging used to get materials to the production floor. Each element of the cost is scrutinized to optimize further. A few pennies saved at the subcomponent lever, whether through engineering redesign or from many other things which I mentioned, these do cost reduction. This is a constant exercise and we just have to chase down every penny possible. We have a strong team which is hyper-focused on this. However, this is a very difficult thing to predict precisely because there are a lot of...",
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{
"name": "Elon Musk",
"speech": "We don't know. We don't have a crystal ball so it's difficult for us to predict this with precision. If the interest rates come down quickly, I think margins will be good. And if they don't come down quickly, they won't be that good. Yes. It's always important to remember that the vast majority of people buying a car is about the monthly payment. It's not that people don't want -- we have tons of -- we have lots of people want to buy our car but simply cannot afford it.\r\nAnd that -- as interest rates drop and [indiscernible] payment drops, then they're able to afford it and they buy the car. It's pretty straightforward. And there are no tricks around to get around this.",
"session": "Answer",
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{
"name": "Martin Viecha",
"speech": "The next question is, does the company anticipate 50% volume CAGR to be realized in either 2024 or 2025? If not, why not?",
"session": "Answer",
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{
"name": "Vaibhav Taneja",
"speech": "As we have said in our prior guidance, there will be periods where we won't be growing at the same rate as before. We are between 2 major growth waves. The first 1 began with the global expansion of Model 3 and Y. And we believe the next 1 will be initiated with the next-generation platform. In 2024, our volume growth will be lower, as we have said, because we're trying to focus the team on the launch of the next-generation vehicle.",
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"name": "Martin Viecha",
"speech": "All right. Thank you very much. The next question is from Michael. When will Tesla start construction on the Giga Nevada expansion and Giga Mexico? And when can we expect each of these to produce their first products such as 4680 cell semi and the next-gen vehicles?",
"session": "Answer",
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"name": "Drew Baglino",
"speech": "We have recently broken ground the next phase of Giga Nevada expansion to incorporate semi and other projects. But as said earlier, as regarding Mexico, we want to first demonstrate success with the next-generation platform in Austin before we start construction. Therefore, we have started the long lead work to get the basics ready and plan to follow our recipe from the 3, Y ramp with Shanghai, where we started with learnings from Fremont and ramped really quickly.",
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"name": "Elon Musk",
"speech": "Yes, exactly. It's important to emphasize that I mean, Model 3 production was 3 years of hell, honestly before. Some of the really worst years in my life, frankly. This mental scar tissue from that -- from those 3 years as do many. But then -- and then Model Y was somewhat of a variant on Model 3 so a much easier situation. And then we're able to actually do an improved -- slightly improved versions of -- in some cases, significantly improved versions of the Model Y production line in Shanghai and Berlin.\r\nAnd that's the right -- I think the sensible way to go about things is kind of figure out the core technology of the manufacturing line and then replicate it with improvements throughout the world.",
"session": "Answer",
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"name": "Martin Viecha",
"speech": "The next question for Michael is, has there been any progress made with an FSD licensing agreement with another company?",
"session": "Answer",
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"name": "Elon Musk",
"speech": "I really think lots of car companies should be asking for FSD licenses, but -- and we have had some tentative conversations, but I think they don't believe it's real quite yet. I think that will become obvious probably this year. And I do want to emphasize that if I were a CEO of another car company, I would definitely be calling Tesla and asking to license in terms of full self-driving technology. It's definitely the smart move.",
"session": "Answer",
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"name": "Martin Viecha",
"speech": "Thank you. The next question from Siddhart. What is the time line for Optimus first production of volume production line? And what are the barriers to getting there?",
"session": "Answer",
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{
"name": "Elon Musk",
"speech": "Optimus obviously is a very new product, an extremely revolutionary product and something that I think has the potential to far exceed the value of everything else at Tesla combined. And when you think of an economy, economy is productivity per capita times capita. No wonder there's no limit to capita. There's no limit to the economy. And the technologies that we've -- the AI technologies we've developed for the car translate quite well to a humanized robot because the car is just a robot on 4 wheels.\r\nTesla is arguably already the biggest robot-maker in the world. It's just a 4-wheeled robot. So Optimus is a robot with a human robot with arms and legs. Just by most sophisticated humanoid robot that's being developed anywhere in the world. I think we've got a good chance of shipping some number of Optimus units next year. This is a brand-new product. A lot of uncertainty when you have -- when there's a lot of uncertainty in your uncharted territory, it's obviously impossible to make a percentage prediction.\r\nBut we will be updating the public with progress on Optimus every few months. And you can see that it's advancing very quickly. I was in the Optimus lab actually until late last night, like night or something, if I Optimus lab. The team is doing amazing work. That's obviously the case where we want to make sure that Optimus is safe, especially at scale. And that there's no -- it should be impossible for any centralized control to upload malware to a humanoid robot. So we're going to want to -- localize shut off that cannot be updated from the -- from a central server. That's the case where we really update extreme thought to safety. But like I said, I do think it has the potential to be the most valuable product of any kind ever, by far.",
"session": "Answer",
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{
"name": "Drew Baglino",
"speech": "Just to comment on the barrier. I think the barrier, and we've talked about this, is like getting it to actually do something useful, like we can get it to walk around, we can get it to do things, but it's like that utility part.",
"session": "Answer",
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{
"name": "Elon Musk",
"speech": "It can already do some useful things.",
"session": "Answer",
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{
"name": "Drew Baglino",
"speech": "But like, you know, to making millions of these things, it's like utility. You got to get to utility.",
"session": "Answer",
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{
"name": "Elon Musk",
"speech": "Yes. A smart robot that can do -- that's capable of doing generalized tasks is what it will be. And in terms of doing moderately specialized tasks, it can already do that and it'll just get better through the course of the year. As we improve the technology in the car, we improve the technology in Optimus at the same time. It runs the same AI inference computer that's in the car, same training technology. I mean, we're really building the future. I mean, the Optimus lab looks like the set of Westworld. But admittedly, that was not a super Utopian situation.",
"session": "Answer",
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{
"name": "Drew Baglino",
"speech": "Yes, not the best reference.",
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{
"name": "Elon Musk",
"speech": "Yes. The creators of Westworld, Jon Nolan, at least Jon Nolan, friend of mine actually. I invited him to come see the lab. I think come hopefully soon. It's pretty well especially the sort of subsystem test stands, where you just got like 1 leg on a test stand just doing repetitive exercises and 1 arm in a test stand, pretty wild.",
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{
"name": "Drew Baglino",
"speech": "We're not entering Westworld anytime soon.",
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{
"name": "Elon Musk",
"speech": "Right, right. We're going to take safety very, very seriously.",
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"name": "Martin Viecha",
"speech": "Thank you. The next question from Narmin is how many Cybertruck orders are in the queue? And when do you anticipate to be able to fulfill existing orders?",
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"name": "Unknown Executive",
"speech": "First of all, I want to thank all of the Cybertruck [indiscernible] for their patients. The reservation to order conversion rate so far has been very, very encouraging. If the trend continues, as it very likely to be, we will soon sort out all the builds in 2024. And also, we have new orders coming after the launch. networks keep growing. So we're now all hands on deck focus on ramping so we can fulfill all the demands in a away time.",
"session": "Answer",
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{
"name": "Elon Musk",
"speech": "Yes, it's important to emphasize that this is very much a production constrained situation, not a demand constrained situation. And obviously, we could dramatically raise the price but that doesn't feel right to us to sort of gouge people for early delivery. But really the demand is off the hook. As long as we have the price is affordable, I mean, I see us ultimately delivering on the order of 0.25 million, something like 0.25 million Cybertruck a year in North America. But maybe more, but give or take, roughly on that time frame. And it's -- I mean, it sure is a head turner.",
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"name": "Unknown Executive",
"speech": "Definitely is. Anywhere you go, people look at you. They give you thumbs up.",
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"name": "Elon Musk",
"speech": "Yes. It's like finally the future looks like the future. It's just that with the other trucks on the road there, which -- and there are some very good trucks on the road. But if you were to switch out the brand name, you wouldn't hardly know which company made them. But you definitely would know the Cybertruck. It's our best product ever.",
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"name": "Martin Viecha",
"speech": "All right. Thank you. The next question is, can we get Tesla energy volumes reported in the production and delivery release?",
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"name": "Drew Baglino",
"speech": "Yes. We will strive to do so starting from this quarter. And just a brief update from a business perspective. Megapack continues to see strong demand signals globally, driving consistent growth trajectory through '24 and '25. We want to thank all of our partners who put their trust and the Megapack team to execute on critical infrastructure around the world. And I would like to personally thank the Megapack engineering and production teams for their strong 2023 execution. Lathrop continues to ramp through 2024 with the operation of a second final assembly line to double capacity from 20 to 40 gigawatt hours by the end of the year.",
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"name": "Martin Viecha",
"speech": "Thank you. And the last investor question is from Siddharth. What are the preliminary results on the return on investment of your ads and education campaign? Given that many people still lack awareness the Tesla average price is less than the average non-luxury car price of $45,000, will you expand educational ads?",
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{
"name": "Unknown Executive",
"speech": "As Elon mentioned, the ultimate solution to increase EV adoption is really address the affordability issue. But at the same time, we do aware there's awareness issue as well. So in Q4, we ran a series of digital campaigns, very targeted digital campaigns across different deals and different channels. The target of these tests is really just to drive awareness and ultimately measure the return on investment on those digital channels.\r\nAnd the messaging we're driving is really focused on our product and also try to address some of the misconception of the EV, such as safety, affordability. And 1 particular awareness campaign where you run -- in Texas, we reached the audience about 10 million unique viewers and generally close to 0.5 million visits to our website. A large number of distributors are first-time visitors to our site. The traffic through these digital channels actually very similar to those organic traffic come to our website. So going forward, we're just going to keep exploring different channels and doing our trials to get a better understanding of the effectiveness of this digital campaign.",
"session": "Answer",
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"name": "Vaibhav Taneja",
"speech": "But I would also like to caution that we will be very careful that we don't want to overspend on this side. We want to make sure people are aware, but we'll -- that's where we'll keep tweaking our methodology about how and where we spend the money because we understand the importance of increasing awareness, but at the same token, we don't want to spend a lot of money on just creating awareness.",
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"name": "Elon Musk",
"speech": "Yes. I mean, some geographies where our market share is remarkably low, like Japan, for example. Now we obviously need to make sure that we have Superchargers in the right locations and the service centers are there and the product works well in Japan, but Japan is the third largest car market in the world of any country. And we should at least have a market share proportionate to say other non-Japanese carmakers like Mercedes or BMW, which we do not currently have. So I think that's the case. And when I talk to friends of mine in Japan, there is like quite a lack of awareness of Tesla. So that's a case where we definitely need to increase awareness and countries and regions where there is, yes, not much awareness.",
"session": "Answer",
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{
"name": "Martin Viecha",
"speech": "Thank you. Let's go to analyst questions. The first question comes from Pierre Ferragu from New Street Research.",
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{
"name": "Pierre Ferragu",
"speech": "Okay. Well, it's really tough to find the unmute button on Teams. Sorry for being late. So yes, my question would be on like the cost reduction. You've talked about it already a lot. And if I look at it over the last, like, 5, 6 quarters on average, the cost per car has been coming down like more than 2% sequentially on average. So that means you are like on a trajectory of COGS per car going down 10% a year. So that's probably like unheard of in the auto industry. I don't think any car manufacturer ever achieved that.\r\nBut that's very, very mundane and very -- it's a good performance, but it's a very normal performance in a lot of other manufacturing industry like microelectronics or consumer electronics. And so I'd love to hear your thoughts about whether you consider yourself closer to the latter to like a micro experience business, where you have this ability to actually always improve costs, you have more control how things are pulled together into your cars, and you see yourself sustainably taking costs down with that kind of pace. Or do you think your ability to take down cost is actually going to become more like in line with the rest in the industry over time?",
"session": "Question",
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"name": "Vaibhav Taneja",
"speech": "Yes. I think I've covered this in a pretty detail, even in my opening remarks and in a previous question, but to just further clarify, we are constantly looking for what we can do to reduce costs. Like I said, it's a game of pennies and we've talked about it before as well. And the team is constantly going and checking where can we reduce the cost further. And do I believe that we will have the same pace which you've seen over the past few years? Probably not because remember, we were coming out with a period wherein commodity prices were rising. So then we did see benefits coming from that.\r\nSo those are more or less taken care of, but there is more which we're still chasing. And I would say a big kudos goes to the team out here at Tesla, both the engineering team as well as the supply chain team because every time we give them a challenge, they go gangbusters to try and figure out whatever they can to take out further costs.\r\nBut yes, I would -- like I said, I would want to caution that do not project the previous cost reduction at the same pace completely in future because with our current platform, we are getting to a place wherein there are limitations.",
"session": "Answer",
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{
"name": "Drew Baglino",
"speech": "Yes, the increased scale also sort of helps us there. As we introduce new products, we have the opportunity to go renegotiate existing suppliers for better pricing. We're looking at every penny like Vaibhav and Elon mentioned. Just to give you an example, our inbound logistics cost has come down by 22% year-over-year. And this is because of optimization on using returnable packaging as opposed to cardboard, which is even better for the environment.\r\nOptimizing trucking routes, negotiating better pricing with shipping companies, with tripping companies, going with the full truckloads and just doing that sort of -- the bigger we become, the more we put far into these things and the more efficient we become as a result of it. So those work streams are going to continue.",
"session": "Answer",
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{
"name": "Unknown Executive",
"speech": "And we are also getting into the tiers of supply chain to see where there are opportunities. Getting to the Tier 2s, Tier 3, Tier 4 levels and then negotiate those pricing as well get more efficiency out of the system.",
"session": "Answer",
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{
"name": "Drew Baglino",
"speech": "And then on the design side, we're not static, right, like especially in areas where the technology is still improving rapidly. Power electronics is a great example. We continue to bring improvements there that are like fundamentals sort of driven from the device up that result in cost reductions generation over generation. And they don't only go into the new vehicles, they come to the old vehicles as well. So that's closer to what you were talking about with like the microelectronics space. Some of that exists in the vehicle.",
"session": "Answer",
"person_id": 393478,
"person_company": null,
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},
{
"name": "Lars Moravy",
"speech": "And certainly, our car is more computer than car in many ways and has a lot of new tech over the last 100 years of automotive production everyone [indiscernible] pennies from.",
"session": "Answer",
"person_id": 482177,
"person_company": null,
"component_order": 52
},
{
"name": "Elon Musk",
"speech": "We have a crazy amount of compute in that car as compared to anywhere else. It's like orders of magnitude.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
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},
{
"name": "Drew Baglino",
"speech": "And we get to ride that down, right?",
"session": "Answer",
"person_id": 393478,
"person_company": null,
"component_order": 54
},
{
"name": "Elon Musk",
"speech": "Maybe 1,000 times more. I don't know, it's some [ 90 ] number.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 55
},
{
"name": "Drew Baglino",
"speech": "I mean, like if I just look at the main microcontroller that makes the motor go, for example, like when I think about what that cost when we stuck it in a Roadster in 2006, cost now, there's no comparison. So we've definitely been riding that electronics cost wave.",
"session": "Answer",
"person_id": 393478,
"person_company": null,
"component_order": 56
},
{
"name": "Lars Moravy",
"speech": "And then even on the like what you call traditional vehicle side, we do things that no other automakers do to bring costs down through breaking down the way structures are built and the way we put our cars together. And I think that mindset that we have is very much closer to the microprocessor power electronics industry than the automotive industry.",
"session": "Answer",
"person_id": 482177,
"person_company": null,
"component_order": 57
},
{
"name": "Martin Viecha",
"speech": "Pierre, do you have a follow-up?",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 58
},
{
"name": "Pierre Ferragu",
"speech": "Yes, a quick one. It's -- you mentioned this like phase in which you are between 2 big growth period. I'd love to hear you about what you consider the size of your addressable market with the portfolio you have today, like the 3, the Y, the X, and the S. What's your estimate of your addressable market? You're shipping like probably about like a 2 million unit run rate today. And given the price points of these cars, what kind of market share of what you addressed with this car do you think you've already achieved today?",
"session": "Question",
"person_id": 356336,
"person_company": null,
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},
{
"name": "Elon Musk",
"speech": "I don't know if we have -- I actually don't think we have a firm idea that's -- it's hard to say exactly.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
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},
{
"name": "Vaibhav Taneja",
"speech": "Yes, this -- I wouldn't say there's -- I mean, one way to think about it is look at the automotive industry as well. EVs still contribute a very small market share. So yes, our goal is to try and take as much market share out of that pie. But do I have a specific number to give you? I don't think we can say that with certainty.",
"session": "Answer",
"person_id": 595078,
"person_company": null,
"component_order": 61
},
{
"name": "Drew Baglino",
"speech": "And it's a growing pie as well. It's like it's 9% today but it could be 20% in a couple of years or in the future.",
"session": "Answer",
"person_id": 393478,
"person_company": null,
"component_order": 62
},
{
"name": "Lars Moravy",
"speech": "And certainly, like the way we've looked at it, and we've always said this, it's not about how many EVs you can sell, it's how many great cars you can sell, how many vehicles you can sell, and that market's $100 million a year and we're barely 2% of that. I still think there's 98% more to get.",
"session": "Answer",
"person_id": 482177,
"person_company": null,
"component_order": 63
},
{
"name": "Elon Musk",
"speech": "I mean, it's worth noting that if you look at, say, the average selling price of the other top-selling vehicles in the world, they are much lower priced than Model Y. So like a Toyota RAV4, Corolla, Honda Civic, that kind of thing, they are much lower priced than ours. So people are really stretching their wallets to be able to afford a Tesla. It's quite a difficult thing for them to do. And remarkable that it's the best-selling car in unit volume despite being much more expensive than other high-volume cars.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 64
},
{
"name": "Martin Viecha",
"speech": "Thank you. Let's go to the next analyst. The next question comes from Adam Jonas from Morgan Stanley.",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 65
},
{
"name": "Adam Jonas",
"speech": "So I can't wait to see the Optimus lab. I'm sure everybody on this call feels the same way. Your last AI Day, Elon, was September 2022. Can we expect a Tesla AI Day this year? It seems like a lot has changed in that Is this year the time?",
"session": "Question",
"person_id": 118469,
"person_company": null,
"component_order": 66
},
{
"name": "Elon Musk",
"speech": "Yes, good question. We have found that when we do these AI Days, some of our competitors literally look at what we do on a frame-by-frame basis.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 67
},
{
"name": "Adam Jonas",
"speech": "They do.",
"session": "Question",
"person_id": 118469,
"person_company": null,
"component_order": 68
},
{
"name": "Elon Musk",
"speech": "And then we find these things being copied.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 69
},
{
"name": "Drew Baglino",
"speech": "Same thing with Battery Day.",
"session": "Answer",
"person_id": 393478,
"person_company": null,
"component_order": 70
},
{
"name": "Elon Musk",
"speech": "Same thing with Battery Day. So we have to be a little cautious about revealing the exact recipe of the secret sauce. But I think some kind of update would be good to do. I'll talk it over with the team. And yes, I think we might do something later this year. I may go with these AI Days as recruiting. So yes. And to sort of change the perception of Tesla as people think of Tesla as a car company when they should be thinking of Tesla as an AI robotics company.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 71
},
{
"name": "Adam Jonas",
"speech": "Maybe as a follow-up, Elon, I'd love your thoughts on the topic of China-based OEMs expanding into Western markets as that -- as the China market kind of gets saturated and there's a tremendous growth in the supply. How much success should Tesla investors allow for this competition to achieve in Western markets? And can you envision a scenario where Tesla could partner with a Chinese OEM to help accelerate sustainable transport in markets like Europe and the United States?",
"session": "Question",
"person_id": 118469,
"person_company": null,
"component_order": 72
},
{
"name": "Elon Musk",
"speech": "Well, our observation is generally that the Chinese car companies are the most competitive car companies in the world. So I think they will have significant success outside of China, depending on what kind of tariffs where trade barriers are established. Frankly, I think if there are not trade barriers established, they will pretty much demolish most other car companies in the world. So they're extremely good.\r\nWe don't see an obvious opportunity to partner. Certainly, we're happy to -- except on the Supercharger front, we're obviously happy to give any electric car company access to our Supercharger network. We're also happy to license full self-driving, perhaps license other technologies and anything that could be helpful in advancing the sustainable energy revolution.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 73
},
{
"name": "Martin Viecha",
"speech": "Thank you. And the next question comes from Dan Levy from Barclays.",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 74
},
{
"name": "Dan Levy",
"speech": "First, I'm wondering if you can just walk through some of the gating factors required to unlock your next-gen platform. You talked about a number of cost initiatives back at the Investor Day a year ago, things in manufacturing and powertrain. Maybe you can just give us a sense of where these initiatives stand. And do you believe -- we know that there's a number of new features and technologies in Cybertruck, things like 48-volt architecture really employing your 4680 batteries. To what extent do you think Cybertruck is really a proving ground for next-gen platform and is really going to be a gating factor to unlocking cost reductions needed for the next-gen platform?",
"session": "Question",
"person_id": 253177,
"person_company": null,
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},
{
"name": "Lars Moravy",
"speech": "Yes. I don't think that anything in Cybertruck should be considered gating for the next-gen platform. We're obviously doing a lot of manufacturing innovations for a next-generation vehicle. When you do something at that scale, you have to prove it out. You don't just throw it on the line and just build it. So we're going through those validation phases for all those new manufacturing technologies now. Sure, 48-volt was definitely something we wanted to carry forward, and it's something we hope the industry adopts as well. We're also open to partnering, if everyone wants to do that.",
"session": "Answer",
"person_id": 482177,
"person_company": null,
"component_order": 76
},
{
"name": "Elon Musk",
"speech": "But people really know that this is like inside-baseball thing, but man, it's high time that the [indiscernible] moved from 12 -- the random number of 12 to 48.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
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},
{
"name": "Lars Moravy",
"speech": "Number [ 40. ]",
"session": "Answer",
"person_id": 482177,
"person_company": null,
"component_order": 78
},
{
"name": "Elon Musk",
"speech": "Yes. Well, it's much less random.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 79
},
{
"name": "Lars Moravy",
"speech": "Slightly less random based on human injury.",
"session": "Answer",
"person_id": 482177,
"person_company": null,
"component_order": 80
},
{
"name": "Elon Musk",
"speech": "But I mean, dramatically reduces the amount of copper you need in the vehicle and moving to sort of higher bandwidth communications, sort of Ethernet level of communications opposed to [indiscernible] which is pretty slow. So it's really just bringing cars to the...",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 81
},
{
"name": "Lars Moravy",
"speech": "The 21st century.",
"session": "Answer",
"person_id": 482177,
"person_company": null,
"component_order": 82
},
{
"name": "Elon Musk",
"speech": "Yes, pretty much. So certainly -- it's like normal for a laptop.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 83
},
{
"name": "Lars Moravy",
"speech": "Certainly bringing that like is an evolution in our architecture of the vehicles but it's not gating by any means. The gating work is just to finish the design and manufacturing of the car, test them out and get them going.",
"session": "Answer",
"person_id": 482177,
"person_company": null,
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},
{
"name": "Drew Baglino",
"speech": "Yes, programs and execution, right? Right. So it's talking about like tooling lead time manufacturer, factory lead time and executing this program.",
"session": "Answer",
"person_id": 393478,
"person_company": null,
"component_order": 85
},
{
"name": "Elon Musk",
"speech": "There's a lot of specialized machines that make the machine for our next-gen vehicle. So these are not machines you can just order from anyone. They actually have to design a machine that has never existed to build a car in a way that has never existed.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 86
},
{
"name": "Drew Baglino",
"speech": "Yes. So you don't just have like a design validation phase but you have an equipment design phase as well.",
"session": "Answer",
"person_id": 393478,
"person_company": null,
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},
{
"name": "Elon Musk",
"speech": "It doesn't make it very hard to copy us because you have to copy the machine that makes the machine that makes the machine.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 88
},
{
"name": "Drew Baglino",
"speech": "talk about tiers.",
"session": "Answer",
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"person_company": null,
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},
{
"name": "Elon Musk",
"speech": "Yes, yes, exactly. Manufacturing exception. So I do think it's quite a powerful sustainable advantage because there just is no place to go to order the machines that make our next-gen car that don't exist.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
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},
{
"name": "Dan Levy",
"speech": "Great. As a follow-up, your release does not mention Dojo. So if you could just provide us an update on where Dojo stands. And at what point do you expect Dojo to be a resource in improving FSD? Or do you think that you now have sufficient supply of NVIDIA GPUs needed for the training of the system?",
"session": "Question",
"person_id": 253177,
"person_company": null,
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},
{
"name": "Elon Musk",
"speech": "I mean, the AI part of your question is -- that's a deep one. So we're obviously hedging our bets here with significant orders of NVIDIA GPUs. GPU is the wrong word, the is for you. There's no -- you can't like produce graphics, so that's not a graphic [indiscernible] neural net, something like that. And yes, GPU's a funny word, like vestigial.\r\nAnd a lot of our progress in self-driving is training-limited. Something that's important with training, it's much like a human. The more effort you put into training, the less effort you need in inference. So just like a person. If you train in the subject is sort of classic 10,000 hours, the less mental effort it takes to do something. If you remember when you first started to drive how much of your mental capacity it took to drive. It was -- you had to be focused completely on driving. And after you've been driving for many years, it only takes a little bit of your mind to drive, and you can think about other things and still drive safely.\r\nSo the more training you do, the more efficient it is at the inference level. So we do need a lot of training. And we're pursuing the dual path of NVIDIA and Dojo. But I would think of Dojo as a long shot. It's a long shot worth taking because the payoff is potentially very high but it's not something that is a high probability. It's not like a sure thing at all. It's high-risk, high payoff program. Dojo is working and it is doing training jobs. So -- and [indiscernible] it up.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 92
},
{
"name": "Lars Moravy",
"speech": "And we have plans for Dojo 1.5, Dojo 2, Dojo 3 and whatnot. So I think it's got potential.",
"session": "Answer",
"person_id": 482177,
"person_company": null,
"component_order": 93
},
{
"name": "Elon Musk",
"speech": "I can't emphasize enough, high risk, high payoffs. So I think it still makes sense, given the -- even if it's a low probability of success for the -- I think I'm belaboring the subject. It's a very interesting program. It has the potential for something special. There's also our inference hardware in the car. So we're now -- what's called Hardware 4 but it's actually version 2 of the Tesla-designed AI inference chip.\r\nAnd we're about to complete design of -- the terminology is a bit confusing. About to complete design of Hardware 5, which is actually version 3 of the Tesla-designed chip because the version 1 was mobile version 2 was NVIDIA and then version 3 was Tesla. And we're making gigantic improvements from 1 -- from Hardware 3 to 4 to 5.\r\nI mean, there's a potentially interesting play where when cars are not in use in the future, that the in-car computer can do generalized AI tasks, can run a sort of GPT4 or 3 or something like that. If you've got tens of millions of vehicles out there, even in a robotaxi scenario, whether in heavy use, [indiscernible] used 50 out of 168 hours, that still leaves well over 100 hours of time available -- of compute hours. Like it's possible with the right architectural decisions that Tesla may, in the future, have more compute than everyone else combined.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
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},
{
"name": "Martin Viecha",
"speech": "Thank you. And the next question comes from Colin Langan from Wells Fargo.",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 95
},
{
"name": "Colin Langan",
"speech": "As we're thinking about going to 2024, the press release talks about; hitting 36,000 or slightly above in Q4. And the comments on the release talked about approaching the aperture limits, and it sounds like you're continuing to try to little that away, but that sort of implies there's not much left.\r\nIn addition, you have the hourly wage increase, I guess, will add to next year. And I thought you said raw material costs are kind of -- that benefit is sort of almost played out. So is there an opportunity to continue to go below the [ 36 ] Or should we kind of be modeling that it kind of stays at this level into '24?",
"session": "Question",
"person_id": 480193,
"person_company": null,
"component_order": 96
},
{
"name": "Vaibhav Taneja",
"speech": "We are definitely aware of the cost increases, which are coming through because of the wage increases. But like I said, we keep looking at other cost opportunities and try and figure out where else can we out. So there is definitely more opportunity to bring down costs further. I won't specifically guide to a number which we will try and get to, but there's definitely more opportunity there.",
"session": "Answer",
"person_id": 595078,
"person_company": null,
"component_order": 97
},
{
"name": "Drew Baglino",
"speech": "Yes, we're chasing lots of cost opportunities on the design side still for 2024, north of 8 figures is what we're worth, just in my organization and large is got. And then from a commodities perspective, it's such a long cycle time through the whole material supply chain that even with what we've already seen to this point, there's more to come on commodities reductions.",
"session": "Answer",
"person_id": 393478,
"person_company": null,
"component_order": 98
},
{
"name": "Vaibhav Taneja",
"speech": "And there's still some tailwind left on the in aluminum and steel.",
"session": "Answer",
"person_id": 595078,
"person_company": null,
"component_order": 99
},
{
"name": "Drew Baglino",
"speech": "Yes. And battery [indiscernible]",
"session": "Answer",
"person_id": 393478,
"person_company": null,
"component_order": 100
},
{
"name": "Elon Musk",
"speech": "It boggles my mind to think that if we make a 1% improvement in cost, that's $1 billion. So it's like on average, if we reduce the cost by $0.01, $1 billion. What? I mean, we started off that long ago that we're only making like 10 cars a week. And yes, where does it lead ultimately? Yes, with good execution. Like I said, it's not a slam dunk, but with -- if we execute very well, I think Tesla could be the most valuable company on.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 101
},
{
"name": "Martin Viecha",
"speech": "Thank you. Colin, do you have a follow-up question?",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 102
},
{
"name": "Colin Langan",
"speech": "Just a quick follow-up. In the commentary, you mentioned the taxes would go to the S&P 500 level. I think you've been trending slightly below 10%. S&P, I think it's typically 25%-ish. Is that going to -- should we expect that to jump right up next year when we're modeling next year? Or would it be like a gradual change over the next few years? And any cash impact from that tax change as well that we should be considering?",
"session": "Question",
"person_id": 480193,
"person_company": null,
"component_order": 103
},
{
"name": "Vaibhav Taneja",
"speech": "Yes. So there's no impact on cash taxes from the release of the valuation amount, which I spoke about. What it does is it's how you account for taxes on your books. So it's basically an accounting change wherein there are certain jurisdictions because we had enough NOLs, et cetera, where we didn't have to accrue book taxes. Now that the valuation allowance has been released and we have recognized deferred tax assets on the books, that means your tax rate immediately goes up.",
"session": "Answer",
"person_id": 595078,
"person_company": null,
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},
{
"name": "Martin Viecha",
"speech": "Okay. I think that's all the time we have for today. Thank you so much for all of your questions, and we'll speak to you again in 3 months. Thank you. Bye-bye.",
"session": "Answer",
"person_id": 370659,
"person_company": null,
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},
{
"name": "Elon Musk",
"speech": "Thank you.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 106
}
],
"title": "Tesla, Inc., Q4 2023 Earnings Call, Jan 24, 2024",
"quarter": 4,
"year": 2023
}
},
{
"transcript_title": "Tesla, Inc. - Q3 2023",
"transcript_name": "Tesla, Inc., Q3 2023 Earnings Call, Oct 18, 2023",
"ticker": "NASDAQ:TSLA",
"transcript_url": "https://wkarticles.blob.core.windows.net/finnhub/snp_transcript_3078546",
"date": "2024-04-03",
"year": 2023,
"quarter": 3,
"transcript_data": {
"date": "2024-04-03",
"participant": [
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"role": "Executives",
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"description": "Executives",
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{
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{
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{
"name": "Martin Viecha",
"speech": "Good afternoon, everyone and welcome to Tesla's Third Quarter 2023 Q&A Webcast. My name is Martin Viecha, VP of Investor Relations, and I'm joined today by Elon Musk, Vaibhav Taneja and a number of other executives. Our Q3 results were announced at about 3:00 p.m. Central Time in the update that we published at the same link as this webcast. During this call, we will discuss our business outlook and make forward-looking statements. These comments are based on our predictions and expectations as of today. Actual events or results could differ materially due to a number of risks and uncertainties including those mentioned in our most recent filings with the SEC.\r\nDuring the question and answer portion of today's call, please limit yourself to one question and one followup. [Operator Instructions] But before we jump into the Q&A, Elon has some opening remarks. Elon?",
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"name": "Elon Musk",
"speech": "Thanks, Martin. So just a Q3 recap. Our last quarter was impacted by down time for global factory upgrades that will help us reduce cost per vehicle as well as increase production. We remain focused on 3 main objectives which is the cost reduction of our products, investments in artificial intelligence, and other growth projects like Optimus. And continued free cash flow generation. Regarding vehicle cost, our team was able to reduce the cost per vehicle further in Q3 despite headwinds from factory idle costs and ramp-up of new factories, and we believe there's still meaningful room for improvement there. \r\nRegarding Autopilot and AI, our vehicle has now driven over 0.5 billion miles with FSD Beta, Full Self-Driving Beta, and that number is growing rapidly. We recently completed a 10,000 GPU cluster of H100s. We think probably bringing it into operation faster than anyone's ever brought that much compute per unit time into production since training is the fundamental limiting factor on progress with full self-driving and vehicle autonomy. \r\nWe're also seeing significant promise with FSD Version 12. This is the end-to-end AI where it's a photon count in, controls out or really you can think of it as there's just a large bit stream coming in and a tiny bit stream going out, compressing reality into a very small set of outputs, which is actually kind of how humans work. The vast majority of human data input is optics, right from our eyes. And so we are, like the car, photons in, controls out with neural nets, just neural nets in the middle. It's really interesting to think about that. \r\nWe will continue to invest significantly in AI development as this is really the massive game changer, and I mean, success in this regard, in the long term, I think, has the potential to make Tesla the most valuable company in the world by far. If you have fully autonomous cars at scale and fully autonomous humanoid robots that are truly useful, it's not clear what the limit is. \r\nRegarding Energy Storage, we deployed 4 gigawatt hours of energy, of storage products in Q3. And as this business grows, the energy division is becoming our highest-margin business. Energy and service now contribute over $0.5 billion to quarterly profit. \r\nThe Cybertruck, I know a lot of people are excited about Cybertruck, I am too. I've driven the car. It's an amazing product. I do want to emphasize that there will be enormous challenges in reaching volume production with the Cybertruck and then in making a Cybertruck cash flow positive. This is simply normal for -- when you've got a product with a lot of new technology or any new -- brand-new vehicle program, but especially one that is as different and advanced as the Cybertruck, you will have problems proportionate to how many new things you're trying to solve at scale. So I just want to emphasize that, one, I think this is potentially our best product ever, and I think it is our best product ever. It is going to be -- require immense work to reach volume production and be cash flow positive at a price that people can afford. \r\nOften, people do not understand what is truly hard. That's why I say prototypes are easy, production is hard. People think it's the idea or you make a prototype, you design a car. And as soon as designing a car is -- it's not just anyone can do it. It does require taste. It does require effort to design a prototype. But the difficulty of going from a prototype to volume production is like 10,000% harder to get to volume production than to make the prototype in the first place. And then it is even harder than that to reach positive cash flow. That is why there have not been new car start-ups that have been successful for 100 years apart from Tesla. \r\nSo I just want to temper expectations for Cybertruck. It's a great product. But financially, it will take, I don't know, a year to 18 months before it is a significant positive cash flow contributor. I wish there was some way for that to be different, but that's my best guess. \r\nSo really, the demand is off the charts. We have over 1 million people who have reserved the car. So it's not a demand issue, but we have to make it, and we need to make it at a price that people can afford; insanely difficult things. \r\nIn conclusion, we continue to focus on ramping production while maintaining a positive cash flow, and we continue to target and expect to have around 1.8 million vehicle deliveries, as stated earlier this year. The Tesla AI team is, I think, one of the world's best, and I think it is actually by far the world's best when it comes to real-world AI. But I'll say that again: Tesla has the best real-world AI team on earth, period, and it's getting better. \r\nAnd lastly, I wanted to thank all of our employees who are making a lot of extra effort during uncertain times. Thank you very much for your hard work and the impact that you're making.",
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"name": "Martin Viecha",
"speech": "Thank you very much, Elon. And our CFO, Vaibhav, had some opening remarks as well.",
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"name": "Vaibhav Taneja",
"speech": "Thanks, Martin. Vehicle deliveries in Q3 outpaced production, and we had yet another record quarter of profitability in our energy business. Congratulations to the Tesla team for their continued focus on operational excellence as we navigate through a period of economic uncertainty, higher interest rates and shifting consumer sentiment. \r\nAs Elon mentioned, our Q3 operational and financial performance was impacted by planned downtimes for our factory upgrades. This was necessary to allow for further factory improvements and production rate increases. Despite those factory shutdowns, our cost per vehicle decreased to approximately $37,500. We saw sequential decreases in material costs and freight. Reducing the cost of our vehicles is our top priority. \r\nOn the operating expenses front, R&D expenses continue to rise due to Cybertruck prototype builds and pilot production testing, combined with spend on AI technologies like full self-driving Optimus and Dojo. We have and will continue to make investments in these areas and hence, our capital expenditure and R&D will continue to grow in the near term. \r\nHowever, our focus is to continue making investments through positive cash flow from operations. This year itself we have generated operating cash flows of approximately $8.9 billion and free cash flows of approximately $2.3 billion. \r\nOur other businesses are becoming more prominent on a stand-alone basis, with Energy business leading the charge primarily from the growth in megabyte deployments. Our Services and Other businesses, on a year-on-year basis, also continued to show positive momentum as we benefit from our growing fleet. \r\nAs regards our pricing strategy, in addition to what we have shared before, I want to elaborate that most car buying happens with one or other form of financing. And hence, we also view pricing in terms of monthly costs for the customer. And therefore, as interest costs in the U.S. have risen substantially, it has required us to adjust the price of our vehicles to keep the monthly cost in parity. We've tried to offset such adjustments via our focus on reducing costs. However, there is an inherent lag in cost reductions, which in turn impacts margins. \r\nTo that extent, we recently announced a partner vehicle leasing program in the U.S., whereby you can get our Standard Range Model Y for as low as $399 a month. \r\nIn conclusion, as we navigate through a challenging economic environment, we're focused on reducing costs, maximizing delivery volumes and continue making investments in the future, in particular, AI and other next-generation platforms. We believe this strategy positions us well for the long term. Once again, I would like to thank the Tesla team for their efforts in the last quarter.",
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"name": "Martin Viecha",
"speech": "Thank you very much. And now let's go to investor questions. The first investor question comes from Craig. How many Cybertruck deliveries do you anticipate for 2024?",
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"name": "Elon Musk",
"speech": "I scruple to make an accurate guess at this point, going back to what I said earlier that the ramp is going to be extremely difficult. And like I said, there's no way around that. If you try to make -- if we just try to do some copycat vehicle design, of which there are literally 200 models that are slight variations on a theme in the combustion engine world, just distinctions without a difference, then it's really not that hard. But if you want to do something radical and innovative and something really special like the Cybertruck, it is extremely difficult because there's nothing to copy. You have to invent it, not just the car but the way to make the car. \r\nSo the more uncharted the territory, the less predictable the outcome. Now I can say that -- if you say, \"Well, where will things end up,\" I think we'll end up with roughly 0.25 million Cybertrucks a year, and -- but we're not -- I don't think we're going to reach that output rate next year. I think we'll probably reach it sometime in 2025. That's my best guess.",
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"name": "Martin Viecha",
"speech": "Thank you. The second question is can you provide a progress update on the 4680 cell, particularly progress towards performance improvements and cost savings outlined on Battery Day?",
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"name": "Drew Baglino",
"speech": "Sure thing, Martin. 4680 cell production in Texas increased 40% quarter-over-quarter. Congrats to the Texas team for producing their 20 millionth cell off of line 1. Texas is now our primary 4680 facility. We're heavily focused on quality. Scrap is down 40% quarter-over-quarter. With the increased volume and yield improvements, cell costs consistently improved month over month within the quarter, although we have a lot more work to do to achieve our steady-state goals. And that is our priority. \r\nThe Cybertruck cell, with 10% higher energy than our Model Y cell, started production on line 2 in Texas. This quarter, we convert to building 100% Cybertruck cells to simplify and focus the factory as we ramp all 4 lines in Phase 1 over the next 3 quarters. Phase 2 of the Texas 4680 facility is currently under construction. The additional 4 lines incorporate further capital efficiencies over Phase 1, and our target is for them to start producing in late 2024. \r\nLastly, in Kato, we're retooling to enable large-scale pilot runs of our next-generation cell designs. Kato's long-term goal is to be the launch pad for new cells, one generation ahead of our mass production facilities, enabling faster iteration and smoother ramp-ups of new designs.",
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"name": "Martin Viecha",
"speech": "Thank you. The next question from Institutional Investor is, could you please provide an update on capacity expansion plans for company's factories in Berlin and Austin and the opening schedule of Gigafactory in Mexico?",
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"name": "Unknown Executive",
"speech": "Berlin and Austin factory, the current priority is actually to maximize the output from our existing lines by laser focusing on efficiency improvements. As always, maintaining a high quality and reducing per unit cost will be as critical as growing the production volume. For Mexico, we are working on infrastructure and factory design in parallel with the engineering development of the new production that we will be manufacturing there. That's what I can share for that.",
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"name": "Elon Musk",
"speech": "In Mexico, we're laying the groundwork to begin construction and doing all the long lead items, but I think we want to just get a sense for what the global economy is like before we go full tilt on the Mexico factory. I am worried about the high interest rate environment that we're in. It's -- I just can't emphasize this enough that the vast majority of people buying a car is about the monthly payment. And as interest rates rise, the proportion of that monthly payment that is interest increases naturally. So that's -- if interest rates remain high or if they go even higher, it's that much harder to -- for people to buy the car. They simply can't afford it. \r\nSo -- and we are tracking, I believe, at this point for Model Y to be the best selling car on earth, not just in revenue but in unit value. If you compare that to the other vehicles that are #2 and #3 and whatnot, they cost much less than our car. So we're just hitting the law of large numbers situations here. \r\nI know people want us advertising. We are advertising. I think there is something to be gained on the advertising front. I don't think it's nothing. But informing people of a car that is great but they cannot afford doesn't really help. So that is really the thing that must be sold, is to make the car affordable or the average person cannot buy it for any amount of money. They simply can't afford it. They can't afford it, so this is a big deal.",
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"name": "Martin Viecha",
"speech": "Okay. Thank you very much. The next question is, when do you expect Model 3 Highland to be available in the U.S.? I just wanted to address that, unfortunately, we don't answer product-related questions and timings on earnings calls. So let's go to the next one. \r\nCurrent sell-side consensus assumes that Tesla will deliver 2.3 million vehicles in 2024, representing 28% growth versus 2023 guidance. Is this growth rate achievable without any mass-market launches in 2024? And when does Tesla expect to return to its 50% long-term CAGR?",
"session": "Answer",
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{
"name": "Vaibhav Taneja",
"speech": "Thanks for the question. When we look at 2024, there are a lot of moving pieces. Elon just talked about what is happening in the macroeconomic environment. So we're focused on growing our volumes in a very cost-efficient manner and are carefully reviewing all our options, and we'll be able to provide a much more meaningful update at our next earnings call.",
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"name": "Elon Musk",
"speech": "Yes. I mean at the risk of stating the obvious, it is not possible to have a compound growth rate of 50% forever or you will exceed the mass of the known universe. So -- but I think we will grow very rapidly, much faster than any other car company on earth by far.",
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"name": "Martin Viecha",
"speech": "Thank you. Next question is, do you have an approximate time line in mind for the robotaxi, driven or nondriven? What excites you most about how this project is progressing?",
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"name": "Elon Musk",
"speech": "Well, the robotaxi is, I guess, certainly nondriven. The -- I guess, I am very excited about our progress with autonomy. The end-to-end, nothing but net, self-driving software is amazing. I -- drives me around Austin with no interventions. So it's clearly the right move. So it's really pretty amazing. And obviously, that same software and approach will enable Optimus to do useful things and enable Optimus to learn how to do things simply by looking. So extremely exciting in the long term. \r\nAs I've mentioned before, given that the economic output is the number of people times productivity, if you no longer have a constraint on people, effectively, you've got a humanoid robot that can do as much as you'd like, your economy is twice the infinite or infinite for all intents and purposes. So I don't think anyone is going to do it better than Tesla, not by a long shot. Boston Dynamics is impressive, but their robot lacks the brain. They're like the Wizard of Oz or whatever. Yes, lacks the brain. And then you also need to be able to design the humanoid robot in such a way that it can be mass manufactured. And then at some point, the robots will manufacture the robots. \r\nAnd obviously, we need to make sure that it's a good place for humans in that future. We do not create some variance of the Terminator outcome. So we're going to put a lot of effort into localized control of the humanoid robot. So basically, anyone will be able to shut it off locally, and you can't change that even if you put -- like a software update, you can't change that. It has to be hard-coded.",
"session": "Answer",
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"name": "Martin Viecha",
"speech": "Thank you. The next question is, why was the price dropped on FSD if it is getting better and robotaxi is expected so soon?",
"session": "Answer",
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"name": "Elon Musk",
"speech": "Well, we just wanted to make it more affordable as more people try it. Yes. I think, over time, the price of FSD will increase proportionate to its value. So we'd regard the current price as a kind of a temporary low.",
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"name": "Martin Viecha",
"speech": "The next question is, again, on FSD. Mercedes is accepting legal liability for when its Level 3 autonomous driving system, DRIVE PILOT, is active. Is Tesla planning to accept legal liability for FSD? And if so, when?",
"session": "Answer",
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{
"name": "Elon Musk",
"speech": "Well, there's a lot of people that assume we have legal liability, judging by the lawsuits. We're certainly not being let off the hook on that front, whether we'd like to or wouldn't like to.",
"session": "Answer",
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{
"name": "Unknown Executive",
"speech": "I mean I think it's important to remember for everyone that Mercedes' system is limited to roads in Nevada and some certain cities in California. It doesn't work in the snow or the fog. It must have a lead car and marked lanes, only 40 miles per hour. Our system is meant to be holistic and drive in any conditions, so we obviously have a much more capable approach. But with those kind of limitations, it's really not very useful.",
"session": "Answer",
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{
"name": "Elon Musk",
"speech": "Now I think some people understand the profundity of the Tesla AI system, mostly, but very, very few. It's basically baby AGI. It has to understand reality in order to drive, a baby AGI.",
"session": "Answer",
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{
"name": "Martin Viecha",
"speech": "Thank you. The next question on Optimus, will Optimus be working on Gigafactory lines next year? If so, how many would you guess will be deployed?",
"session": "Answer",
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{
"name": "Elon Musk",
"speech": "I think at this point, we are not ready to discuss details of the Optimus program, but we will make -- provide periodic updates online. So as you can see, we're -- Optimus, a year ago, could barely walk and now it can do yoga. So a few years from now, it can probably do ballet.",
"session": "Answer",
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"name": "Martin Viecha",
"speech": "Sounds good. And the last question from Investors is neural net path planning represents a significant advance in capability and safety for FSD. What steps is Tesla taking to make this technology available outside the U.S.?",
"session": "Answer",
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"name": "Elon Musk",
"speech": "Yes, our approach has been to try to get it -- like, the more places we're trying to make it work, the harder the problem is. So the reason we don't do it in all countries simultaneously is that it would take much longer to make it work anywhere at all. So that's why it's currently just North America. And also for most parts of the world, you have to get approval before deploying things, whereas in the U.S., you can deploy things at risk or at least you can take liability for what you're deploying. So it's a -- whereas most countries require some sort of extensive approval program. So we only want to go through that extensive approval program when we think it's kind of ready for prime time in that country. \r\nI apologize it's not out in those countries, but we keep finding ways to make it better. And it really -- it needs to drive such that it exceeds even the unsupervised, significantly exceeds the probability of injury of a human or significantly better, a lower probability of injury than a human by far. I think we're tracking to that point very quickly. \r\nObviously, in the past, I've been overly optimistic about this. The reason I've been overly optimistic is that the progress tends to sort of look like a log curve, which is that you have kind of rapid initial improvements that if you were to extrapolate that sort of rapid, fairly linear rate of improvement, you get to self-driving quite quickly, but then the rate of improvement curves over logarithmically as well as the asymptote. That's now happened several times. I would characterize our progress in real world AI as a series of stacked log curves. I think that's also true in other parts of AI, like [ LOMs ] and whatnot, a series of stacked log curves. Each log curve gets higher than the last one. So if we keep stacking them, we keep stacking logs, eventually, we get to FSD.",
"session": "Answer",
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"name": "Martin Viecha",
"speech": "Thank you. Let's now go to analyst questions. The first question comes from Will Stein from Truist.",
"session": "Answer",
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"name": "William Stein",
"speech": "We learned earlier on the call, it sounds like you don't think the truck will ramp to significant volume until its third year of production. Should we have a similar anticipation for the ramp of the next-gen platform? Or is there any reason that we should be maybe more optimistic or pessimistic about the ramp profile there?",
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"name": "Elon Musk",
"speech": "Yes. I mean, to be clear, it's not really the third year of production. It's kind of like the 18th month of production is roughly my guess. So it's just that they happen -- it will happen if not the -- it starts this year, spans next year and gets to 2025. So technically, there are 3 calendar years in there, but there's actually only 18 months, not 3 years. I would be very disappointed if it took us -- and that would be shocking if it took us 3 years. But 18 months from initial deliveries to have -- to reach volume and reach prosperity with an immense -- I can't tell you how much -- the blood, sweat and tears level required to achieve that is just staggering. I have been through it many times. And here we go again.",
"session": "Answer",
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"name": "William Stein",
"speech": "A similar path for the next-gen platform?",
"session": "Question",
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{
"name": "Drew Baglino",
"speech": "I mean there's like unique complexity to Cybertruck.",
"session": "Answer",
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"name": "Elon Musk",
"speech": "Yes. I mean Cybertruck is...",
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"name": "Drew Baglino",
"speech": "Hence, the 18 months.",
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"name": "Elon Musk",
"speech": "Yes. I mean we dug our own grave with Cybertruck. Nobody, in general, probably nobody digs a grave better than themselves. And so it is -- Cybertruck is one of those special products that comes along only once in a long while. And special products that come along once in a long while are just incredibly difficult to bring to market, to reach volume, to be prosperous. It's fundamental to the nature of the newness. So now the sort of high-volume, low-cost smaller vehicle is actually much more conventional.",
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"name": "Unknown Executive",
"speech": "Yes. In terms of like the technologies we're putting into it, we didn't have to invent how to bend full hard stainless steel or have mega 9,000-ton castings or the largest hot stamping in the world or new -- high voltage level architecture. It's learning from everything we've done, so we hope it will ramp faster than the technology...",
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{
"name": "Unknown Executive",
"speech": "We also went through the ruthless simplification exercise.",
"session": "Answer",
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"name": "Unknown Executive",
"speech": "Yes we did. Significantly less parts. You're only as [ simple ] as the least part. If you had less of those, that means you could probably do [indiscernible]",
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"name": "Elon Musk",
"speech": "Yes, exactly. I mean that is so...",
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{
"name": "Unknown Executive",
"speech": "So pretty revolutionary in how we're going to build it.",
"session": "Answer",
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{
"name": "Elon Musk",
"speech": "It is. Yes, it's a -- their manufacturing approach for the higher volume small vehicle is revolutionary. It's not revolutionary quite in the same way as the Cybertruck. I think it will be quite a fast ramp. So as I was saying, we're doing everything possible to simplify that vehicle in order to achieve any units per minute level that is unheard of in the auto industry.",
"session": "Answer",
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"name": "Drew Baglino",
"speech": "Yes. I mean, a single location makes it easier to automate. It also makes it lower cost. Yes, that's intrinsically lower cost.",
"session": "Answer",
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"name": "Elon Musk",
"speech": "Yes. Let's be clear, it will be cool, but it's utilitarian. It's not meant to be -- fill you with awe and magic. It can get you from A to B. It will be still beautiful, but it's a utility.",
"session": "Answer",
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{
"name": "Drew Baglino",
"speech": "That's not 14 inches of [ travel on its ] suspension, as an example.",
"session": "Answer",
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{
"name": "Elon Musk",
"speech": "Yes. So I mean, the Cybertruck has a lot of bells and whistles.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 43
},
{
"name": "Martin Viecha",
"speech": "All right. Thank you very much. Let's go to Pierre Ferragu from New Street Research.",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 44
},
{
"name": "Pierre Ferragu",
"speech": "Hey, can you hear me fine, yes?",
"session": "Question",
"person_id": 356336,
"person_company": null,
"component_order": 45
},
{
"name": "Martin Viecha",
"speech": "Yes.",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 46
},
{
"name": "Pierre Ferragu",
"speech": "I have first like a follow-up question on FSD and pricing and adoption. So I agree with you that as FSD improves, we should see its value increasing. But I guess like the ultimate values of FSD, which is to be able to handle like a robotaxi is not going to necessarily interest everybody, and you have a bit of a degraded version that would be like a chauffeur service where the car drives by itself, but you still have to be in the car and around. And then there is like the hands-on, eyes-on version of the service. And I guess, there should be like much lower cost, lower feature kind of variance of the service that could have a very large penetration on your installed base and a more expensive one that would remain at a lower penetration level. So I'm just wondering if you're taking that. \r\nAnd last but not least, like the simplest version of FSD available are going to work from a technical perspective, probably before like the ultimate robotaxi version can work, if ever. And so I'm wondering how you take that into account and how you're thinking like the financial contribution of FSD over time and whether you could evolve your pricing along that kind of tiers to increase adoption?",
"session": "Question",
"person_id": 356336,
"person_company": null,
"component_order": 47
},
{
"name": "Elon Musk",
"speech": "Yes. I mean, a fully autonomous vehicle, I think, Pierre, the sort of the economics of an autonomous vehicle are truly astounding in a positive way. When you look at passenger vehicles today, they only get about 10 to 12 hours of usage per week. That's -- if you drive 1.5 hours a day on average, that's roughly 10 hours a week out of 168 hours. And then there's -- also you're going to have parking and insurance. You've got to take care of the car. It's like there's a lot of overhead.\r\nSo I mean, yes, it's like the economics of the system are just insanely positive given that the car -- like, all of the cars we're making and have made for a while, we believe, are capable of full autonomy. So then if you're able to, say, increase the utility of that car by a factor of 5, which only means that you've -- it's being used for maybe 50 hours a week out of 168. So you'll still notice -- you're still assuming -- that still assumes less than 1/3 of the hours of the week it is doing something useful. You've increased the value of that by 5, but it still costs the same. Like, you have something -- then we're a hardware company with software margins.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 48
},
{
"name": "Martin Viecha",
"speech": "Pierre, do you have a follow-up?",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 49
},
{
"name": "Pierre Ferragu",
"speech": "Yes. I have a few on a different topic for you that I have, if that's okay. It's about like your gross margin in the quarter. Could you give us a sense of, like, in how the gross margin evolved sequentially? How much was the impact of idle cost? How much was, like, the sequential benefit, I imagine, of production ramping at Berlin and Austin? And then I saw, like, this massive jump in Energy Storage, a very strong positive surprise. So if you can give us the background on that and tell us how we should think about that gross margin going forward.",
"session": "Question",
"person_id": 356336,
"person_company": null,
"component_order": 50
},
{
"name": "Vaibhav Taneja",
"speech": "Thanks for the question. So in terms of -- we have a few different aspects of your question. So for -- if I just look at from a Q3 perspective, obviously, factory idle time had an impact. It did impact by -- and I won't give you the exact percentage, but it had a decent impact for the quarter. And when you look at the other pieces, which we are trying to do, we did see certain of our other factories ramping up pretty well, right? And they actually contributed pretty well to the margin for this quarter. In fact, one of the factories came pretty close to in terms of per unit cost to where we are for our other established factory, which is Fremont. So that was a positive in the quarter. \r\nWhen it comes to energy margins, Megapack deployment was the key driver there. And that product has done well. On the cost curve also, we've been able to do a lot there. But I do want to caution that Megapack deployments are a bit lumpy. So yes, we had a great quarter this period. But depending upon where we are trying to deploy that product in different markets, you would see periods where there would be downward pressure on deployment because of us trying to get the product to that base way...",
"session": "Answer",
"person_id": 595078,
"person_company": null,
"component_order": 51
},
{
"name": "Unknown Executive",
"speech": "Yes, the product in transit. Yes.",
"session": "Answer",
"person_id": 182536,
"person_company": null,
"component_order": 52
},
{
"name": "Vaibhav Taneja",
"speech": "Yes.",
"session": "Answer",
"person_id": 595078,
"person_company": null,
"component_order": 53
},
{
"name": "Martin Viecha",
"speech": "Okay. Thank you very much. Let's go to Rod Lache from Wolfe Research.",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 54
},
{
"name": "Rod Lache",
"speech": "Really nice to see the rate of vehicle cost improvement despite the downtime that you took. You've taken now about $2,000 out of the average vehicle costs over the past year. Can you give us maybe a sense of the rate of improvement that you see from the changes that you alluded to, the factory changes you alluded to? Is there a way maybe to convey the speed of improvement on your existing product from here? And then related to that, can you share the timing of your next gen -- the lower-priced product that you talked about earlier this year?",
"session": "Question",
"person_id": 370532,
"person_company": null,
"component_order": 55
},
{
"name": "Vaibhav Taneja",
"speech": "Yes. So just in terms of product margins, there are lots of puts and takes when you look into this. There are certain things which we control, and there are certain things which we don't control. We get -- we expect that we'll get some benefits from our cost reduction efforts, which are all underway. But on the other hand, we just finished our factory upgrades late in Q3. Some of these factories are still in the early ramp phase in Q4. We're still not up to where we want those factories to be. So they will impact in the near term. Plus, like Elon mentioned, we're going to be ramping Cybertruck, which is going to be another headwind, which we will be dealing with. \r\nOn top of all that, there's overall uncertainty in the macroeconomic environment, which even makes it harder to predict precisely as to where we land. But yes, this is something which -- it's an evolving thing which we're observing every day and reacting to it on a daily basis.",
"session": "Answer",
"person_id": 595078,
"person_company": null,
"component_order": 56
},
{
"name": "Drew Baglino",
"speech": "I would just say that on the cost reduction efforts, like we are not -- we are unflagging in our pursuit of additional cost downs for 2024. We do have a good pipeline of them and work on both the engineering side and the factory operations side. And our intention is to like maintain or exceed the trend that you saw. We're trying as hard as we possibly can.",
"session": "Answer",
"person_id": 393478,
"person_company": null,
"component_order": 57
},
{
"name": "Rod Lache",
"speech": "The timing of the next-gen product, can you share that?",
"session": "Question",
"person_id": 370532,
"person_company": null,
"component_order": 58
},
{
"name": "Elon Musk",
"speech": "Not at this time.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 59
},
{
"name": "Rod Lache",
"speech": "Okay. And just as a follow-up, obviously, price is also a driver of demand, but that's obviously not happening in a vacuum. And you mentioned that -- I think you mentioned at some point during this call that you're also maybe hitting the law of large numbers on some of your products. Can you just share how you're thinking about price elasticity just at this point in this macro environment, and any thoughts along those lines?",
"session": "Question",
"person_id": 370532,
"person_company": null,
"component_order": 60
},
{
"name": "Elon Musk",
"speech": "I think that there's very significant price elasticity. I mean to be totally frank, if our car costs the same as a Rav4, nobody would buy a Rav4, or at least they're very unlikely to. It's worth noting that a lot of these incentives like the tax credit and whatnot, they're actually very difficult for the average person to access because they -- most people do not have $10,000 or even $7,500 burning a hole in their bank account. A lot of -- a large number of people are living paycheck to paycheck and with a lot of debt. They've got credit card debt, mortgage debt. So yes, it's -- that's reality for most people. It's sometimes difficult for people who are high income earners, and when I say high, it'd be like someone who's earning over $200,000 a year, to understand what life is like for someone who is earning $50,000 or $60,000 or $70,000 a year, which is most people.\r\nSo like, for a lot of people, like, this tax credit just -- they can't front $7,500 for 18 months or even 6 months to -- for the tax credit, and they actually don't, in some cases even have that [ an ancillary $7,500 ] in taxes. So it's really just the vast regard to people is how much money do they have to pay immediately and how much per month. That's it. You can stop right there. And our car is still much more expensive than a Rav4 when you look at it that way.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 61
},
{
"name": "Vaibhav Taneja",
"speech": "One other thing which I'll add, when you look at car buying in general, we're trying to get to the next set of EV adopters.",
"session": "Answer",
"person_id": 595078,
"person_company": null,
"component_order": 62
},
{
"name": "Elon Musk",
"speech": "Not an EV adopter, just who wants a great car.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 63
},
{
"name": "Vaibhav Taneja",
"speech": "Exactly.",
"session": "Answer",
"person_id": 595078,
"person_company": null,
"component_order": 64
},
{
"name": "Elon Musk",
"speech": "It's not -- so now you get things like -- honestly, I would say, like, it somewhat correlates with the why doesn't everyone work from home crowd. I'm like -- I mean this is like some real Marie Antoinette vibes from people who say why isn't everyone working from home? Like, what about all the people that have to come to the factory and pull the cars or all the people that have to go to the restaurant and make your food and deliver your food. It's like what are you talking about you -- I mean, how detached from reality does the work-from-home crowd have to be while they take advantage of all those who do -- who cannot work from home? So I mean, you have to say, like, \"Why did I sleep in the factory so many times?\" Because it mattered. \r\nSo I just can't emphasize again how important cost is. It's not an optional thing for most people. It is a necessary thing. We have to make our cars more affordable that people can buy it. And I keep harping on this interest thing, but I mean it just raises the cost of the car. I mean we're looking at it in an internal analysis, which I know we -- we think is more or less on track that when you look at the cost -- or the price reductions we've made in, say, the Model Y and you compare that to how much people's monthly payment has risen due to interest rates, the price of the Model Y is almost unchanged.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 65
},
{
"name": "Vaibhav Taneja",
"speech": "If you factor in the changing interest rates.",
"session": "Answer",
"person_id": 595078,
"person_company": null,
"component_order": 66
},
{
"name": "Elon Musk",
"speech": "Yes, which is -- this is what I'm trying to say. The thing that matters is the monthly pay. It's how much money do they have to put down and do they literally have that in their bank account or their check balance? And then what is the monthly payment? And it doesn't matter how -- if that monthly payment is principal interest or whatever, it's just a number, and that number has to not cause their bank account to go negative. \r\nAs it -- so going from near 0 interest rates to kind of the current very high interest rates, the actual monthly payment is basically the same. It's just a bunch more of it is going to interest. And there are some incremental challenges beyond that, which is the difficulty of getting credit at all has increased. And so there are a number of people who simply cannot get credit, period. Even if they've got a job and everything is solid, the banks are a little gun-shy on handing out credit given that a bunch of them kicked the bucket earlier this year.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 67
},
{
"name": "Drew Baglino",
"speech": "Yes. There's also just fewer options. Even if they hand out credit, there's fewer banks to go to.",
"session": "Answer",
"person_id": 393478,
"person_company": null,
"component_order": 68
},
{
"name": "Elon Musk",
"speech": "It's like does your bank still exist? Well, if your bank does not exist, you have to establish a relationship with a new bank. And so a lot of regional banks have died, and I mean even Credit Suisse, I mean, geez, that was a shocker. You've got a 160-year-old-ish Swiss institution that doesn't exist anymore. That's mind-blowing. And I think there's still quite a few shoes to drop on the bad credit situation. I mean commercial real estate obviously is in terrible shape. Credit card debt has been rising significantly. The credit card interest rates are usurious. It's over 20% interest rates, meaning like -- which over time just becomes obviously extremely punishing. Because if somebody's paying 20% interest on their credit cards, it means they cannot pay them off. And if you cannot pay them off and you're still accruing interest at 20%, you're at best headed to a bad place.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 69
},
{
"name": "Martin Viecha",
"speech": "Thank you. Let's go to next question from George from Canaccord.",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 70
},
{
"name": "George Gianarikas",
"speech": "Just to focus on the cost per vehicle coming down in future quarters as you discussed in your written remarks, I'm curious as to what the levers of that could be. Is it more scale, more factory utilization? Is it material cost reductions? Are there things like Gigacasting? I mean can you just kind of give us some data points to give us confidence that that's going to come down over time?\r\nAnd if I can sneak one in, please, there are press reports, and I know how perilous it is to believe some of these, but they say that you've included radar as an option in some Model Ys in China. And I'm just here to ask if that's true. And if so, why?",
"session": "Question",
"person_id": 547012,
"person_company": null,
"component_order": 71
},
{
"name": "Elon Musk",
"speech": "We've not included radar. We have radar as -- a Tesla-designed radar is an experiment in Model S and X. That's it. We'll see whether that experiment is worth it, but there are no plans to integrate radar into 3 or Y. Just as humans drive well, and in fact, an excellent human driver can drive with amazing safety simply with their eyes, the car will far exceed the average human safety just with visual, far, far, far. Because, I mean, the car is looking at all directions at once, and we don't have eyes on the back of our head. So -- and the computer never gets tired and never gets distracted, get drunk, hopefully. \r\nAnd so radar is -- what really matters is how much does it affect the probability of an accident. And in order for the radar to be effective, you have to be able to do radar-only braking or you have to do actions that are radar only. Otherwise, you get this disambiguation problem between vision and radar. That's why we actually turned off the radar in cars historically that we had chipped. All 3 and Y used to have radar, but we turned it off because the radar actually generated more noise than signal. Now the Tesla-designed radar is a high-resolution radar that has some potential to be useful, but the jury is still very much out on whether that is, in fact, the case.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 72
},
{
"name": "Unknown Executive",
"speech": "On the cost question, I guess, from the vehicle side, like as Drew mentioned earlier, we are always trying to engineer our products to be cheaper to make and more efficient to make. That comes obviously on the engineering side as we come up with new innovations but as well on the supply chain side with our partners, we work with them to automate some of their lines, remove their bottlenecks and their high cost as well. On the logistics side, getting parts to the factory. It's not like a one thing. You just have to attack cost everywhere, and we do it ruthlessly at all times.",
"session": "Answer",
"person_id": 182536,
"person_company": null,
"component_order": 73
},
{
"name": "Unknown Executive",
"speech": "And operations efficiency. All of the above.",
"session": "Answer",
"person_id": 182536,
"person_company": null,
"component_order": 74
},
{
"name": "Vaibhav Taneja",
"speech": "Yes. I would say there's a whole laundry list of things, which we are chasing. We internally call it the cost attack where we are literally going line by line and saying how can we make it better. And it's a grind.",
"session": "Answer",
"person_id": 595078,
"person_company": null,
"component_order": 75
},
{
"name": "Elon Musk",
"speech": "It's like Game of Thrones but with pennies. I mean at first approximation, if you've got a $40,000 car, and roughly 10,000 items in that car, that means each thing, on average, costs $4. So in order to get the cost down, say, by 10%, you have to get $0.40 out of each part on average. It is a game of pennies.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 76
},
{
"name": "Unknown Executive",
"speech": "We play it willingly.",
"session": "Answer",
"person_id": 182536,
"person_company": null,
"component_order": 77
},
{
"name": "Elon Musk",
"speech": "Yes. We've done it many, many times. And even something as simple as like a sticker, like, there's too many stickers internally in the car that nobody ever sees. There's something as simple as a QR code. You may think, well, putting a QR code on a part, why don't just put them on there. It's like, well, are we actually going to use that QR code?",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 78
},
{
"name": "Unknown Executive",
"speech": "Costs $0.01.",
"session": "Answer",
"person_id": 182536,
"person_company": null,
"component_order": 79
},
{
"name": "Elon Musk",
"speech": "Yes. Exactly. And then inevitably, sometimes the QR code doesn't go on properly or you can't read it properly, and it stops the line.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 80
},
{
"name": "Unknown Executive",
"speech": "Costs more than $0.01.",
"session": "Answer",
"person_id": 182536,
"person_company": null,
"component_order": 81
},
{
"name": "Elon Musk",
"speech": "Yes. Absolutely. So chipping away, with -- I mean it is trying to -- it does feel like digging a tunnel with a spoon at times.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 82
},
{
"name": "Unknown Executive",
"speech": "Like very much escaping prison.",
"session": "Answer",
"person_id": 182536,
"person_company": null,
"component_order": 83
},
{
"name": "Elon Musk",
"speech": "Yes.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 84
},
{
"name": "Vaibhav Taneja",
"speech": "On top of it, like we said, we did some factory upgrades, so we expect volume to go up. That would also bring some cost savings from higher production. But then on the flip side, we're going to be ramping a new product like Cybertruck, which we talked about. So yes, so those are the real puts and takes which we are working through.",
"session": "Answer",
"person_id": 595078,
"person_company": null,
"component_order": 85
},
{
"name": "Elon Musk",
"speech": "Yes. But there's not like some -- accidently, some brick of gold that we've got, unfortunately. And it's -- we're trying to be very rigorous about improving the quality and capability of the car because -- it's like, any fool can reduce the cost of a car by making it worse and just deleting functionality and capability. That's why I'd call this, sort of any fool that -- like, if you want to like lose weight and you said, \"Well, I need to lose 15 pounds right away,\" well, you could chop your arm off, but then you're sitting here with one arm, and you're still fat. So like...",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 86
},
{
"name": "Unknown Executive",
"speech": "You got to work out.",
"session": "Answer",
"person_id": 182536,
"person_company": null,
"component_order": 87
},
{
"name": "Elon Musk",
"speech": "Yes, you actually have to eat less food and work out. That's the actual way.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 88
},
{
"name": "Unknown Executive",
"speech": "And you need doctor's advice.",
"session": "Answer",
"person_id": 182536,
"person_company": null,
"component_order": 89
},
{
"name": "Elon Musk",
"speech": "Yes. It's not super fun because food is delicious. And personally, I'm not -- I don't love working out. I know some of you do. I wish I did, but I don't. Unless moving the mouse consists of working out, in which case, I love moving the mouse.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 90
},
{
"name": "Martin Viecha",
"speech": "All right. Let's go to Colin Langan from Wells Fargo. Colin?",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 91
},
{
"name": "Colin Langan",
"speech": "Sorry about that. Do you hear me now?",
"session": "Question",
"person_id": 480193,
"person_company": null,
"component_order": 92
},
{
"name": "Elon Musk",
"speech": "Yes.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 93
},
{
"name": "Colin Langan",
"speech": "You said in the commentary that you're not going full tilt on the plant in Mexico until there are signs that the economy is strong. Can you continue at a 50% CAGR without that plant? And where would that come from? And any color on what you mean of sort of not going full tilt? Could that plant get delayed indefinitely? Or what are you kind of talking about?",
"session": "Question",
"person_id": 480193,
"person_company": null,
"component_order": 94
},
{
"name": "Elon Musk",
"speech": "No, we're definitely making the factory in Mexico. We feel very good about that. We've put a lot of effort into looking at different locations, and we feel very good about that location, and we are going to build a factory there and it's going to be great. The question is really just one of timing. And it's going to be a broken record on the interest front. It's just the interest rates have to come down. Like, if interest rates keep rising, you just fundamentally reduce affordability. It is just the same as increasing the price of the car. So I just don't have visibility into -- if you can tell me what the interest rates are, I can tell you when we should build the factory. We're going to build it. And I mean we think we'll start the initial phases of construction next year. \r\nBut I am still somewhat scarred by 2009 when General Motors and Chrysler went bankrupt. So -- while that's now 14 years ago, it's -- that is seared into my mind with a branding iron because kind of Tesla was just hanging on by a thread during that entire time and with -- I mean, we closed our financing round 2008 at 6 p.m. December 24, Christmas Eve. And if we had not closed that financing round, we would have bounced payroll 2 days after Christmas. So we actually closed that round at the last hour, at the last day that it was possible. Stressful, to say the least, and then barely made it through 2009. So I'm like I want to just -- I don't want to be going at top speed into uncertainty. A lot of wars going on in the world obviously as well, so...",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 95
},
{
"name": "Unknown Executive",
"speech": "And we have room here, like in Giga Texas. You said we still have room in this building. It's not full with Cybertruck and the line. There's plenty of growth opportunities still to have inside the building where our team already is.",
"session": "Answer",
"person_id": 182536,
"person_company": null,
"component_order": 96
},
{
"name": "Elon Musk",
"speech": "We also have 2,000 acres here.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 97
},
{
"name": "Unknown Executive",
"speech": "There's also one for...",
"session": "Answer",
"person_id": 182536,
"person_company": null,
"component_order": 98
},
{
"name": "Elon Musk",
"speech": "We're actually only occupying a tiny corner of the land that we own. So we could technically do all the scaling just here. So I mean personnel is our biggest challenge, in that the greater Austin area only has -- generously, the greater Austin area only has 2 million people. So people are moving here and they're willing to move here, but there is somewhat of a housing crisis. They got to live somewhere, so yes. \r\nSo I don't know, I mean I'm just curious -- like I just -- I'm not saying things will be bad. I'm just saying they might be. And I think -- like, Tesla is an incredibly capable ship, but we need to make sure like as -- if the macroeconomic conditions are stormy, even the best ship is still going to have tough times. The weaker ships will sink. We're not going to sink. But even a great ship in a storm has challenges. Now that storm will apply to everyone, not just us and not just the auto industry. It will apply to everyone, I think, apart from necessary sort of staples like food and stuff. But -- so I just -- I don't know. If interest rates start coming down, we will accelerate.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 99
},
{
"name": "Martin Viecha",
"speech": "All right.",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 100
},
{
"name": "Elon Musk",
"speech": "If anybody's got any good guesses on this, I'd love to be less wrong. And I apologize if I'm perhaps more paranoid than I should be because that might also be the case. Because I am -- I have PTSD from 2009, big time. And 2017 through '19 were no picnic, either. That was very tough going. So the auto industry is also somewhat cyclic because people tend to hesitate to buy a new car and if there's uncertainty in the economy. So car companies do very well in good economic times and they don't do as well in tough economic times. So it's just -- whereas if somebody is selling bread, then I think people will still need to eat bread. Yes, we need bread. We need it for all of time. But a new car, you don't have to have right this minute.",
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"name": "Vaibhav Taneja",
"speech": "Especially if there are wars going on and then that impacts your sentiment.",
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"name": "Elon Musk",
"speech": "Yes. I mean people are reading about wars all over the world at this -- buying a new car tends to not be front of mind.",
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"name": "Martin Viecha",
"speech": "All right. Unfortunately, that's all the time we have today. Thank you very much for all of your good questions, and we'll see you again in 3 months. Thank you very much.",
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"title": "Tesla, Inc., Q3 2023 Earnings Call, Oct 18, 2023",
"quarter": 3,
"year": 2023
}
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{
"transcript_title": "Tesla, Inc. - Q2 2023",
"transcript_name": "Tesla, Inc., Q2 2023 Earnings Call, Jul 19, 2023",
"ticker": "NASDAQ:TSLA",
"transcript_url": "https://wkarticles.blob.core.windows.net/finnhub/snp_transcript_2854174",
"date": "2023-07-19",
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"transcript": [
{
"name": "Martin Viecha",
"speech": "Good afternoon, everyone, and welcome to Tesla's Second Quarter 2023 Q&A Webcast. My name is Martin Viecha, I'm VP of Investor Relations, and I'm joined today by Elon Musk, Zachary Kirkhorn and a number of other executives. \r\nOur Q2 results were announced at about 3 p.m. Central Time in the update deck we published at the same link as this webcast. During this call, we will discuss our business outlook and make forward-looking statements. These comments are based on our predictions and expectations as of today. Actual events or results could differ materially due to a number of risks and uncertainties, including those mentioned in our most recent filings with the SEC. [Operator Instructions] But before we jump into the Q&A, Elon has some opening remarks. Elon?",
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"name": "Elon Musk",
"speech": "Thank you, Martin. So just a Q2 recap. In Q2, we achieved record vehicle production and deliveries and record revenue of about $25 billion in a single quarter. And Model Y became the best-selling vehicle of any kind globally in Q1, surpassing the likes of Corolla and Gulf. So it was the #1 vehicle of any kind, including vehicles that are sold at a far lower price. This is, I think, an incredible achievement by the Tesla team, and just a huge thank you to our customers for their support. \r\nSo this came in spite of high interest rates and a lot of macro uncertainty. And nonetheless, we managed to achieve operating margin of about 10%. We continue to target 1.8 million vehicle deliveries this year, although we expect that Q3 production will be a little bit down because we've got summer shutdowns to -- for a lot of factory upgrades. So just probably a slight decrease in production in Q3 for sort of global factory upgrades. \r\nIn the long-term economy we think is going to just drive volume through the ceiling next level. And sort of future robotaxi products, the dedicated robotaxi products, we think, have a quasi infinite demand. So -- and the way we're going to manufacture the robotaxi is also itself a revolution. So it's revolutionary sign made in a revolutionary way. It will be, by far, the highest units per hour of any vehicle production ever. So very excited about that. \r\nWith respect to Autopilot and Dojo, in order to build autonomy, we also need to train our neural network with data from millions of vehicles. The more -- I mean, this is proven over and over again. The more training data you have, the better the results. And I mean, there are times where we see basically in a neural net basically, it is sort of at a million training examples, it barely works at 2 million, it slightly works at 3 million. It's like, wow, okay, we're seeing something. So then you get like 10 million training examples, it's like -- it becomes incredible. So there's just no substitute for a massive amount of data. And obviously, Tesla has more vehicles on the road that are collecting this data than all other companies combined by, I think, maybe even an order of magnitude. So I think we might have 90% of all -- a very big number. \r\nSo the success in AI and dev is a function of talent, sort of unique data and computing resources. And we have outstanding capabilities in all 3 arenas. And I really just don't know how anyone could do what we're doing, even if they had our software and had our computer, if they did not have the training data. \r\nSo sticking at which our Dojo training computer is designed to significantly reduce the cost of neural net training. It is designed to -- it's not optimized for the kind of training that we need, which is a video training. So we just see that the need for neural net training, again, talking in quasi kind of things is just enormous. So I think having -- we expect to use both NVIDIA and Dojo, to be clear. But there's -- we just see a demand for really advanced training resources. And we think we may reach in-house neural net training capability of 100 [ exoblocks ] by the end of next year. So today, over 300 million miles have been driven using FSD beta. That 300 million-mile number is going to seem small very quickly. It will soon be billions of miles and tens of billions of miles. And that FSD will go from -- from being as good as a human to then being vastly better than a human. We see a clear path to full self-driving being 10x safer than the average human driver. So -- and between autopilot, Dojo computer, our inference hardware in the car, which we call sort of hardware [indiscernible] but it's really dedicated. It's a high efficiency inference computer that's in the car and our Optimus robot. It's really at the cutting edge of AI movement. \r\nWith regard to our Cybertruck, we continue to build release candidates of the Cybertruck on our final production line in Austin. I'm actually here in Austin at the Gigafactory. This is the first truck that we're aware of that will have 4-door over a 6-foot bed and will fit into a 20-foot garage. So it's the biggest on the outside, but it's even bigger on the inside. So it's -- I think that's -- one of the elements of good design is it should feel bigger on the inside than it looks on the outside. And this is no small car, but we -- we're really cared about the exterior dimensions of the Cybertruck down the last millimeter. So just trying to get right the middle of the goldilocks zone, not too big, not too small, and then really maximize the utility of the volume. And we can't wait to start delivering it later this year. \r\nSome other highlights. Our global Supercharging network now stands at over roughly 50,000 connectors and over 5,000 locations. As I think a lot of people are aware, the Tesla charging standard, which we made open source, and it's now called the North American Charging Standard, we're deeply honored that Ford, GM, Mercedes and many other OEMs have signed up to use our connector and gain access to our charging network. We strongly believe in helping the other car companies to accelerate the EV revolution and just trying to do the right thing in general. So that's some goal there. \r\nThen it's -- I think I want to emphasize like very strongly. This is a very important point, is that Tesla, just as with the North American charging standard, although we're not licensing, we're just making it available. But we are very open to licensing our full-self driving software and hardware to other car companies. And we are already in discussions with only just early discussions with a major OEM about using Tesla FSD. So we're not trying to keep this to ourselves. We're more than happy to license it to others. \r\nAnd lastly, our new lithium refinery and cathode facility are progressing well. Now in conclusion, we continue to focus on making as many cars as we can while maintaining healthy financials. Our artificial intelligence development is obviously entering a new era, and we're incredibly excited about what's to come. Our other businesses such as Megapack, Supercharging service and whatnot all started to become a meaningful contributor to overall profitability this quarter. And then lastly, I'd just like to profusely thank all of our employees who are making a lot of extra effort during uncertain times. Thank you very much for your hard work and the impact you're making.",
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"name": "Martin Viecha",
"speech": "Thank you very much, Elon. And I think Zach has some opening remarks as well.",
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"name": "Zachary Kirkhorn",
"speech": "Yes. Thanks, Martin. As Elon mentioned, Q2 was another record quarter of production and deliveries as well as records in profit for energy and services and other businesses. Congratulations again to the Tesla team on the continued progress. As we navigate through a period of economic uncertainty, rising interest rates, volatility and consumer confidence and regulatory change, I want to comment on our financial approach. \r\nFirst, the single most important priority is to ensure we are continuing to invest heavily in the core technologies that will drive the long-term value of the business. This includes increasing spending on AI-related technologies such as full-self driving, Optimus and Dojo as well as new products such as Cybertruck, our next-generation platform in the semi, as evidenced by the continued growth in our R&D spend. This also includes continuing our investments in capacity expansion, not only in our vehicle factories, but also our Supercharging network service, internal applications and battery processes as we continue with meaningful capital expenditures to lay this foundation for the future. \r\nSecond, we continue to work towards our goals of maximizing volumes on both our vehicle and energy business, but most importantly, doing so in a way that generates the capital to continue our pace of R&D and capital investments. This requires a strong focus on per unit COGS reductions in each of our key businesses as well as working capital improvements on raw materials, work in process inventory and customer AR, all of which progressed appropriately in Q2. \r\nIf we look specifically at our automotive business, our gross margin showed a modest reduction and remained healthy, despite action taken to further improve vehicle affordability early in the quarter. We recognize -- we realized per unit cost improvements in nearly every category, including material cost and commodities, manufacturing costs and logistics while also continuing to rapidly increase the build rate in our Austin and Berlin factories. \r\nFor our Energy business, we improved margins and gross profit driven by cost reductions in deal economics, particularly with Megapack. As a reminder, storage volumes are typically volatile sequentially based on the types of projects and their specific revenue recognition milestones. \r\nAs we look forward to the rest of the year, I want to reiterate Elon's comments on Q3 volumes driven by planned downtimes for factory upgrades. These upgrades will also carry some amount of factor idle cost. However, we are working to minimize as much as possible. It's also important to keep in mind the uncertainty in the macro environment, which can impact our execution positively or negatively in the near term. Regardless, we continue to remain dynamic with a focus on fundamental efficiency and a long-term outlook. Congratulations again to everybody on a great quarter.",
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"name": "Martin Viecha",
"speech": "Thank you very much, Zach. And let's go to investor questions. The first question on licensing FSD we've already answered. So let's go to the second one. The second question is, what is the status of 4680 cells? How far are you from the specs you laid out on Battery Day? When do you expect to achieve what you laid out on Battery Day?",
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"name": "Drew Baglino",
"speech": "Yes. First, I'll just start with a little bit of a production update. So in Texas, 4680 cell production increased 80% Q2 over Q1, and the team surpassed 10 million production cells produced here in Texas. So congrats to the team for that. Their focus on yield reduced our scrap bill by 40% quarter-over-quarter, and that resulted in a 25% reduction in cell COGS. \r\nHere in Texas, we're preparing to launch our Cybertruck cell, which is 10% higher energy density than current production. That was accomplished through process and mechanical design optimization. As we scale Cyber Cell production through the end of the year and early next, we should be in a comfortable place on cost per cell. \r\nAgainst our battery energy density targets, the Cyber Cell is at our expectations on a like-for-like electrochemistry basis. We're yet to integrate silicon or in-house cathode production, both reviewed on Battery Day, which do bring significant further energy density and cost improvements, but that is a topic for another day. \r\nLastly, it is important to remember that most of what we focused on a Battery Day was the Tesla-engineered 4680 production system and the improvements we strove to achieve on equipment, factory density, capital cost and utility cost reduction, all of which we are realizing in our Texas scale up to date.",
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"name": "Martin Viecha",
"speech": "Thank you very much. The next question is, can you talk more to the upcoming Tesla Energy products and how your thinking has evolved on the revenue model? Given Tesla's AI capabilities, how do you see the long-term mix between hardware margin and recurring software margin from Autobidder as this segment accelerates?",
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"name": "Drew Baglino",
"speech": "We can't comment on future product road map, but I can provide a quick energy and Q2 update. Megapack continues to show strong demand globally with Lathrop ramping successfully to meet our contracted projects in 2023. As stated last quarter, Megapack margins are in a reasonable place in line with our target market -- vehicle target margins. \r\nThe second final assembly line at Lathrop is progressing on schedule, eventually doubling Lathrop capacity ahead of our full factory ramp in 2024. We have several exciting large projects in construction or nearing completion, including the KES project in Hawaii, the Riverina project in Australia, several products in California and one here at Gigafactory, Texas that we'll tour today, actually. We want to thank our customers, utilities and grid operators for trusting us with these projects. \r\nOn the Autobidder question. We continue to grow Autobidder contracts in wholesale markets like Australia, Texas, U.K. and California with over 6 gigawatt hours under Tesla's dispatch next year. In the U.K., our projects performed best in the industry in Q2. Autobidder does have software margins and is an enabler for hardware sales, but it's a relatively small contributor to revenues, given how much deployment growth on the Megapack hardware side is occurring. It's important to remember that this large project -- these large capital projects have lifetimes of 20 years of recurring revenues on an annualized basis relative to upfront CapEx are small. \r\nOn the residential side, we have some fun things happening. We recently surpassed 0.5 million Powerwalls installed. Just this week, we are launching charge on solar, which allows Tesla Powerwall and vehicle customers to charge their vehicles using their excess solar and drive only on the sunshine that hits their roof. Yesterday, we began paying customers in Texas for participating in our virtual power plant to provide grid support to ERCOT. We expect these credits to lower our median customer's annual bill by 1/3 and to increase these credits over time as ERCOT expands market access. And today, we are expanding Tesla electric enrollment to new Model 3 owners in Texas, followed by all Texas vehicle customers over the rest of the quarter. \r\nUnfortunately and somewhat similar to Tesla Insurance, bringing Tesla electric and BPP capabilities to our customers requires working through a fractured regulatory environment on a jurisdiction-by-jurisdiction basis. In the long run, the value of residential energy software and hardware will be driven by the level of market access that utilities, market operators and regulators permit. \r\nFor Powerwall that's eligible to provide the full stack of energy services, like peaker capacity and system offering, such as in Australia, we can more than double the value of ownership relative to a typical system today.",
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"name": "Martin Viecha",
"speech": "Thank you very much. The next question is, could you quantify the benefits to COGS per unit from the IRA battery manufacturing incentives; and secondly, battery raw material declines year-to-date?",
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"name": "Zachary Kirkhorn",
"speech": "All right. I can take that. On the first part of the question for IRA manufacturing incentives, we provided previous guidance that we expect these to be for the course of this year in the range of $150 million to $250 million per quarter. We are staying within that foundry as we guided previously, so that was the case in Q2 as well. I will note, and I think we've mentioned this before, that this includes a 50-50 sharing of credits for qualified cells from our long-term battery partner, Panasonic. \r\nOn the commodity side, we are continuing to see improvements there, as we've discussed previously. Lithium is the most notable improvement so far. I think I commented on this on the last call, because typically, we see this coming about a quarter before it actually is realized in our financials. And also just as a reminder, we're not fully exposed to the price of lithium. Our supply chain team has done a terrific job in partnership with another -- a bunch of other companies to put in place some long-term agreements here, but we do have some exposure that moves up and down. \r\nWe're also seeing benefits in aluminum and steel, which I think is great. Not as large as the lithium impacts, but they contribute nonetheless. So if we add up the total impact of this in Q2 relative to prior quarter, it's about the same size and magnitude as the IRA benefits that we also received. \r\nJust to put this in context, as you look at COGS per unit sequentially from Q1 to Q2, I think there's 2 things to keep in mind there. The first is that our mix for deliveries increased quite a bit from Q1 to Q2. So as you think about fundamental cost reductions, it's important to adjust for that. And then secondly, as we continue to work on reducing our Austin and Berlin cost, which we did quite a bit of that from Q1 to Q2, these factories are still slightly above Model Y production costs elsewhere. And in the quarter, our mix of Austin- and Berlin-related builds increased. And so that's something to consider as you model out the impact on -- from Q1 to Q2 in terms of COGS per unit. I do want to ask Karn if there's anything else on the commodity side or just more generally, you want to add here?",
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"name": "Karn Budhiraj",
"speech": "Yes. As you mentioned, Zach, we've naturally been a little bit hedged from the lithium position because of the long-term contracts we have in place. But we have seen reduction in pricing across the board for all commodities that specifically go into batteries such as nickel, cobalt and graphite. And the reductions in pricing translate into thousands of dollars when you look at it from a per-vehicle impact. We're taking advantage, expect some of those fixed price contracts through the end of the decade. So it's a playbook that we'll continue to kind of go back to as we look to the future.",
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"name": "Martin Viecha",
"speech": "Thank you. The next question on FSD. Have you considered allowing FSD transferability as a lever to allow existing customers to upgrade to a new Tesla instead of being locked into an existing car due to the price of FSD?",
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"name": "Elon Musk",
"speech": "Yes, this is a question we get asked a lot. So we're excited to announce that for Q3, we will be allowing transfer of FSD. This is a onetime amnesty. So it needs to be -- you need to take advantage of it in Q3, but -- or at least place the order in Q3 within reasonable delivery time frames. So yes, yes, yes, I hope this makes people happy. [indiscernible] This is a onetime thing.",
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"name": "Martin Viecha",
"speech": "Right. The next question, when will we give more information about the Cybertruck orders, estimated delivery schedules, pricing and specifications?",
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"name": "Elon Musk",
"speech": "Demand is so far off the hook you can't even see the hook. So that's really not an issue. I do want to emphasize that the Cybertruck has a lot of new technology in it, like a lot. It doesn't look like -- it doesn't look like any other vehicle because it is not like any other vehicle. So -- and the production ramp will move as fast as the slowest and least likely elements of the entire supply chain and internal production. So I wouldn't expect -- I hope it's smooth. We're certainly better at production ramps that -- we've got a lot of experience with the production ramps. But first order approximation, there's like 10,000 unique [indiscernible] and processes in the Cybertruck. And if any one of -- it will go as fast as the least lucky, least well-executed element of the 10,000. So it's always difficult to predict the ramp initially, but I think we'll be making them in high volume next year, and we will be delivering the car this year.",
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"name": "Martin Viecha",
"speech": "Thank you. The next question is critics of Gigacasting contended that process makes vehicles harder and more costly to repair, essentially pushing costs on to the customer. Can you share some details about the initial repair experience with Gigacast vehicles?",
"session": "Answer",
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"name": "Elon Musk",
"speech": "That must be why everyone's copying us.",
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"name": "Lars Moravy",
"speech": "Thanks, everyone. This is Lars. I mean, that's like simply not true. There's a misconception that traditional bodies are easy to repair, but they are made up of multiple materials and multiple joining methods. Spot welds and rivets have to be drilled out. Panels and structural adhesives have to be chiseled down. Dried adhesive has to be removed. Stains, cut, blah, blah, blah.",
"session": "Answer",
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"name": "Elon Musk",
"speech": "It's a crazy patch of a quilt.",
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"name": "Lars Moravy",
"speech": "Yes. And so putting that back together means time and money. Using an example of replacing a rear cast rail in the Model Y. To do that versus like what we replaced it with from Model 3, it's 10x cheaper and 3x faster to do it with the cast rail. Design team works with our collision repair team since we're a closed loop on this with insurance, and we design specific parts that make it easier and faster to repair. And we have an incentive to do that because we have our own insurance and our own body shops. We expect that we'll continue to do this, and collision repair will continue to become cheaper and faster over time. And we already make this available to all body shops or our Tesla-approved body shop training.",
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"name": "Elon Musk",
"speech": "Yes, closing loop on collision repair and factoring that into design is a big deal. .",
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"name": "Lars Moravy",
"speech": "It's crucial. I don't think anyone else can do it with that ecosystem that we have so.",
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"name": "Elon Musk",
"speech": "Yes. And we are actually able to change the details of the casting with inserts, and we actually do that all the time. So -- because the answer is actually wear out and need to be replaced anyway. So we can actually make design changes to be inserts and tweak the castings. But the cast rear body or front body is lighter, cheaper, better noise vibration, harshness much easier to manufacture.",
"session": "Answer",
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"name": "Lars Moravy",
"speech": "It's better in every way.",
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"name": "Elon Musk",
"speech": "And that's why so many other car companies are copying us.",
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"name": "Lars Moravy",
"speech": "Probably.",
"session": "Answer",
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"name": "Elon Musk",
"speech": "Well, they certainly put out a lot of press releases about it. I think it's basically going to be how all cars are made in the future.",
"session": "Answer",
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"name": "Martin Viecha",
"speech": "Thank you. Next question, how many Optimus bots have been made? And when will they be able to start performing useful tasks?",
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{
"name": "Elon Musk",
"speech": "10 million. Yes. I think we're around 5 or 6 bots. I think -- there's a -- we were -- look, 10, I guess. Depends on what -- how many are working and what phase. But it's sort of -- yes, there's more every month. The things -- a lot of interesting things, a lot of interesting things about the Optimus bot. We found that there are actually no suppliers that can produce the actuators. There are no off-the-shelf actuators that work well for [indiscernible] robot at any price.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
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},
{
"name": "Drew Baglino",
"speech": "Certainly not compelling.",
"session": "Answer",
"person_id": 393478,
"person_company": null,
"component_order": 29
},
{
"name": "Elon Musk",
"speech": "Yes, there's not a [indiscernible] robot that can do something at -- the things that human could do. So we've actually had to design our own actuators that integrate the motor or the power electronics, the controller, the sensors. And really, every one of them is custom designed. So -- and then, of course, we'll be using the same inference hardware as the car. So -- but we are -- in designing these actuators, we're designing them for volume production. So they're not just lighter, tighter and more capable than any other actuators where that exists in the world. But it's also actually manufacturable. So we should be able to make them in volume. \r\nThe first Optimus that is -- that we'll have all of the Tesla designed actuators, sort of production candidate actuators integrated and walking should be around November-ish. So -- and then we'll start ramping up after that. In terms of when we'll be able to do some useful things, like we'll first be trying this out in our own factories and just proving out its utility, but I think we'll be able to have it do something useful in our factories sometime next year. I would be -- yes, I'm pretty confident of that. So yes, it's going well. \r\nI should say another cool thing about Optimus is that there's -- just in the U.S. alone, there are 2 million amputees. And I was just talking to the Neuralink team. And by combining a Neuralink implant and a robotic arm or leg for someone that has had their arm or leg or arms and legs amputated, we believe we can give basically a cyber body that is incredibly capable. $6 million men in real life. [indiscernible] costs $6 million. $60,000 man. Seems that was impressive, but it will actually -- so that actually could be a really -- I think, would be incredible to potentially help people around the world and give them a robot arm like that is as good, maybe long term better than a [indiscernible] going.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 30
},
{
"name": "Martin Viecha",
"speech": "Thank you. The next question is, how has the order intake trended relatively to production levels during Q2? And how has it trended in the quarter-to-date period? Conceptually, how does Tesla decide when is it appropriate to reduce prices or at other sales incentives to increase demand?",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 31
},
{
"name": "Elon Musk",
"speech": "Yes. I guess demand has roughly tracked production. So -- which is what we aim for is we look at something that we have that really -- I think no other carmaker has is that we have real-time demand and real-time production, like so 7 days a week. I get an e-mail -- order generated e-mail, chose output from all factories and orders globally. So it's like a real-time finger on the pulse of earth basically. And we're just, of course, according to what the mood of the public is. \r\nBut buying a new car is a big decision for vast majority of people. So any time there's economic uncertainty, people generally pause on new car buying at least to see what happens. And then obviously, another challenge is the interest rate environment. As interest rates rise, the affordability of anything bought with debt decreases. So effectively increasing the price of the car. \r\nSo when interest rates rise dramatically, we actually have to reduce the price of the car because the interest payments increased the price of the car. So -- and this is -- at least up until recently, it was, I believe, the sharpest interest rate rise in history. So we had to do something about that. And I don't have a crystal ball for the global economy. I really appreciate it. If I could borrow that crystal ball.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
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},
{
"name": "Unknown Executive",
"speech": "[indiscernible]",
"session": "Answer",
"person_id": 182536,
"person_company": null,
"component_order": 33
},
{
"name": "Elon Musk",
"speech": "Yes, exactly [indiscernible]. It should be not on Twitter. So I mean, one day, it seems like the world economy is falling apart. And the next day, everything is fine. I don't know what's going on. It'd be totally fine. I wish I did. So I mean that's why I say like I was on Twitter, I posted like just really advising because I care a lot about the small shareholders, especially ones that have stuck with us through thick and thin. I love you, guys. And so we can't control these macro shocks or the thematic depressive nature of the stock market. So that's why I recommend against margin loans in times that are turbulent. If times are not that turbulent, actually a module can be a smart move within reason. But we're in, I would call it, turbulent times. Like I have very high confidence in the long-term value of Tesla. Like I see it -- I really see a path to a 10x [indiscernible] -- call it a 5x increase in the value of the company, maybe a 10x. And where things go along the way, the trials and tribulations and the mood of the markets, one cannot predict. And so the old adage of buy and hold is right. For an investment advice, I see like identifying a company as products you love. See if they -- does it seem like they'll continue to make good products or great products? Buy that stock and hold it. That's it. You all win. \r\nThe reason companies exist is to make goods and services, ideally great goods and services. They don't exist for any other reason. They shouldn't. So that's why you should buy the stock of a company that makes -- has a great future pipeline. It's common sense, actually. And then generally, if you see -- if you provide your confidence about what that company's products or services are when the market panics, buy; and when the market is overly exuberant, you can sell. I'm not recommending yourself [indiscernible] but yes, buy low, sell high. \r\nWarren Buffett actually, I think has a saying -- I'm paraphrasing here, but a publicly traded company like is like imagine living in your house and some crazy manic-depressive guy comes and stands outside your house and yells property prices at you. So it's a different price every day. But the house is still the same house. So this is a tough market. Credit that to Warren Buffett.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 34
},
{
"name": "Martin Viecha",
"speech": "Thank you. Let's go to the next question. With the emphasis of price cuts to drive volume growth eating into automotive gross margin, can investors expect to see automotive gross margin stabilize or even rise due to efficiencies outpacing the cuts? And if so, when?",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 35
},
{
"name": "Elon Musk",
"speech": "Where's that crystal ball again? If I may, look, the short-term variances in gross margin and profitability really are minor relative to the long-term picture. Autonomy, we'll make all of these numbers look silly. I'd recommend looking at ARK Invest. I think their analysis is very good. It's the best, I mean, and generally, Fintwit or like the finance, Smart Finance on Twitter, follow their accounts. They're great. So that's, in my opinion, where you'll get the best info. So I strongly believe Tesla is a big long-term investment. And that's when things go up and down, in fact, the market panics, buy; if the market is a little too exuberant, sell at the time. But just generally, like I feel -- I'm confident we'll deliver over long term, but can't control short term. So -- and the autonomy is really where it's at. I mean, Zachary?",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 36
},
{
"name": "Zachary Kirkhorn",
"speech": "I fully agree with you. I mean I think the only thing in the short term that matters is what I said in my opening remarks, which is are we generating enough money to continue to invest. And the portfolio of products and technologies that the technical teams are investing in right now, this is intense. It's intense in terms of investment, it's intense in terms of potential.",
"session": "Answer",
"person_id": 385023,
"person_company": null,
"component_order": 37
},
{
"name": "Elon Musk",
"speech": "Frankly, I think it's ridiculous that we have positive free cash flow in a capital-intensive business, while investing massive amounts of money in new technology. That is super hard.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 38
},
{
"name": "Drew Baglino",
"speech": "And vertical integration. It's not even just like new products, but also...",
"session": "Answer",
"person_id": 393478,
"person_company": null,
"component_order": 39
},
{
"name": "Elon Musk",
"speech": "Yes. We actually make our ship. [indiscernible] others but. Question. Cool.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 40
},
{
"name": "Zachary Kirkhorn",
"speech": "And so at least from my perspective, what matters is continuing to generate the cash to invest. That means continuing to be hyper focused on near-term cost reduction. Is everything we do in near-term cost reduction provides capital to reinvest? Hyper focus on working capital management, which we've made quite a bit of progress there on the raw materials and [indiscernible] side of that. We've been very focused on accounts receivables as well to ensure that we can continue to reinvest the cash. This is what we're focused on. And so there's a set of this that we control. We have a pipeline of cost reductions. We are getting tailwinds in the commodity space right now, as Karn mentioned, that's helpful. \r\nVariability around average selling prices goes back to Elon's point. We don't control interest rates. We don't control macro consumer sentiment. But we have an obligation to be responsive to that to ensure that we're matching supply and demand and keeping things balanced. And so this is how we're managing the next handful of quarters. Soon enough, these quarters will be behind us. They won't be part of the present value of future cash flows of the business. And so we want to make sure we keep that view and make sure that the long term business is exactly the way that we want it to be.",
"session": "Answer",
"person_id": 385023,
"person_company": null,
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},
{
"name": "Elon Musk",
"speech": "[indiscernible]",
"session": "Answer",
"person_id": 175883,
"person_company": null,
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},
{
"name": "Martin Viecha",
"speech": "All right. Thank you very much. And now let's go to analyst questions. The first question comes from Dan Levy from Barclays.",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 43
},
{
"name": "Dan Levy",
"speech": "I wanted to start first with a question about your efforts in AI and Dojo. It's pretty clear it sounds like you're accelerating your focus. Can you maybe provide us with a sense of what the process is of refining a product? Is it more machines? And maybe you could give us a sense of when the payout starts to -- when you start to see the payout and what the resource outlay is, what should we expect on the OpEx front as a result of this?",
"session": "Question",
"person_id": 253177,
"person_company": null,
"component_order": 44
},
{
"name": "Elon Musk",
"speech": "Sorry. Are you saying how much are we going to spend on Dojo or?",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 45
},
{
"name": "Dan Levy",
"speech": "Yes.",
"session": "Question",
"person_id": 253177,
"person_company": null,
"component_order": 46
},
{
"name": "Elon Musk",
"speech": "R&D and Dojo?",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 47
},
{
"name": "Dan Levy",
"speech": "Yes.",
"session": "Question",
"person_id": 253177,
"person_company": null,
"component_order": 48
},
{
"name": "Elon Musk",
"speech": "Well, we're not going to be open loop on our Dojo expenditures. So -- but I mean, I think we will be spending something north of $1 billion over the next year on [indiscernible] through the next year, it's well over $1 billion in Dojo. And yes, so I mean we've got a truly staggering amount of video data to do training on. And this is another thing I like. In order to copy us, you also need to spend billions of dollars on training compute. I mean it's like -- and it's also hard to -- you need the data, and you need a training computer. It's like -- think, well, things needed to actually achieve this at scale toward generalized solution for autonomy. It's -- this is one of the highest problems ever. \r\nYou see a lot of AI companies doing LLMs and whatnot. I would say if they're so great, why can't they make a self-driving car? Because it's harder. That's why. So -- but I do think -- I think there's some great AI companies out there. But just fundamentally, the staggering amount of data we've got to process, it's got to be processed somehow. And custom silicon is the best way to do that. \r\nSo that's what Dojo is designed to do is optimize for video training. It's not optimized for LLMs. It's optimized for video training. With video training, you have a much higher ratio of compute-to-memory bandwidth. So whereas LLMs tends to be memory bandwidth choked. So that's it. I mean -- but like I said, we're also -- we have some -- we're using a lot of NVIDIA hardware. We'll continue to use -- we'll actually take NVIDIA hardware as fast as NVIDIA will deliver it to us. Tremendous respect for Jensen and NVIDIA. They've done an incredible job. \r\nAnd frankly, I don't know if they could deliver us enough GPUs, we might not need Dojo, but they can't. So they've got so many customers. They've been kind of to, nonetheless, prioritize some of our GPU orders. But yes, the sheer magnitude of video training -- because like I said, we're not trying to just get as good as human. We want to get to 10x better than human, maybe 100x better than human. \r\nRight now, I believe there's something on the order of 1 million automotive deaths per year. And then if you say permanent serious injuries, I think it's probably closer to 10 million per year. And -- so it matters if you're twice as good as human, 10x -- like 10x better than human would still mean 100,000 deaths and 1 million severe permanent injuries. So it's like, okay, we would rather be 100x better. So there's really -- it's a [ match of 9s, ] and we want to achieve as perfect safety as possible. And that's truly mind-boggling amounts of video and computer needed for that. So -- and then I do think there's other applications for Dojo, but we just desperately need it for video training.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 49
},
{
"name": "Zachary Kirkhorn",
"speech": "Just to add to what Elon mentioned. So the numbers that he mentioned are between R&D spend and capital spend. And this is moving quickly. And so we provide a 3-year outlook on our capital expense. We are considering these expenses in that outlook. And as that moves up and down, we'll continue to update our guidance in the Q.",
"session": "Answer",
"person_id": 385023,
"person_company": null,
"component_order": 50
},
{
"name": "Elon Musk",
"speech": "Yes. I want to say the fundamental rate limiter on the progress of full self-driving is training. That's -- if we had more training compute, we would get done faster. So that's it.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 51
},
{
"name": "Zachary Kirkhorn",
"speech": "And it's just difficult to predict how quickly we can execute on it.",
"session": "Answer",
"person_id": 385023,
"person_company": null,
"component_order": 52
},
{
"name": "Dan Levy",
"speech": "Great. Thank you. Just as a follow-up, I recognize there's incredible macro uncertainty right now, but you're sticking with your near term, your volume target of 50% CAGR. As we just think about sort of in the year ahead, Cybertruck is going to be some contribution. There's going to be some help from further EV penetration growth. But to what extent are you willing to sacrifice on pricing to keep that 50% volume CAGR intact? Or are you thinking differently about margins versus your prior commentary of willing to sacrifice on margins to get more share?",
"session": "Question",
"person_id": 253177,
"person_company": null,
"component_order": 53
},
{
"name": "Elon Musk",
"speech": "It started by getting more share. It's just that you can think of every car that we sell or produce that has full autonomy capability as actually something that in the future may be worth as much as 5x what it is today. Because average [indiscernible] vehicle is doing like maybe 10 hours of driving a week. If sort of -- if this says 1.5 hours a day on average, that's 10 hours a week-ish. If you've got on autonomous -- if the vehicle is able to operate autonomously and use either dedicated autonomous or partially autonomous like Airbnb, like maybe sometimes you allow your car to be used by others. Sometimes you want to use it exclusively just like Airbnb -- doing Airbnb with a room in your house. The value is just tremendous. So I think it's sort of, it would be -- I think it -- it does make sense to sacrifice margins in favor of making more vehicles because we think in the -- not just in the future, but they will have a dramatic valuation increase. I think the Tesla fleet value increase at the point in which we can upload full self-driving and is approved by regulators will be the single biggest step change in asset value maybe in history.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 54
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{
"name": "Martin Viecha",
"speech": "Thank you. Let's go to the next analyst. The question comes from Emmanuel Rosner from Deutsche Bank.",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 55
},
{
"name": "Emmanuel Rosner",
"speech": "Two questions from me as well. First, following up on the autonomy. So before you start launching these dedicated robotaxi vehicles on existing vehicles, you're improving FSD incrementally. What is your latest targeted timing to essentially release a non-beta version or an eyes-off version that would trigger much higher take rates? \r\nAnd would Tesla benefit from lowering the price of FSD?",
"session": "Question",
"person_id": 376728,
"person_company": null,
"component_order": 56
},
{
"name": "Elon Musk",
"speech": "Well, obviously, as people have sort of made fun of me and perhaps quite fairly have made fun of me, my predictions about achieving full self-driving have been optimistic in the past. The reason I've been optimistic is what -- it tends to look like is the -- we'll make rapid progress with a new version of FSD, but then it will curve over logarithmically. So first, logarithmic curve looks like just sort of fairly straight upward line, diagonally up. And so if you extrapolate that, then you have a great thing. But then because it's actually logarithmic, it curves over, and then there have been a series of stacked logarithmic curves. \r\nNow I'm the boy who cried FSD, but I think we'll be better than human by the end of this year. That's not to say we're approved by regulators. And I'm saying that would be in the U.S. because we've got to focus on one market first. But I think we'll be better than human by the end of this year. I've been wrong in the past, I may be wrong this time. \r\nAnd the price of FSD -- so the way I think is the price of FSD is actually very low is not high. When you go back to what I say here, the value of the car increased dramatically if it is actually autonomous. [ $15,000 ] is actually a low price, not a high price. And we will offer -- and we -- I think we do sort of offer FSD as a sort of monthly subscription, although most people don't know that. So I'd recommend like maybe trying it out as a monthly subscription so you don't have to go with the [ $13,000 ] thing. But I think yes, yes -- obviously, if the car is worth several times, it's original price, $15,000 is actually a low price for FSD.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 57
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{
"name": "Martin Viecha",
"speech": "And the next question comes from William Stein from Truist.",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 58
},
{
"name": "William Stein",
"speech": "Great. I'd like to ask about -- to stick on this AI topic. We've read with great interest the developments in Dojo today, and you've spoken about FSD, but you've also -- Elon, you started this x.ai company. And for investors that think that there might be quite a bit of value in the AI features and products of Tesla, it might be concerning to see you pursuing another endeavor where AI is the focus. So can you talk about how x.ai might overlap, might perhaps compete with Tesla or in other ways, perhaps it enhances the value of what Tesla does.",
"session": "Question",
"person_id": 256580,
"person_company": null,
"component_order": 59
},
{
"name": "Elon Musk",
"speech": "Yes, I think we'll actually enhance the value of Tesla. There were just some of the world's best AI engineers and scientists that were willing to join a startup, but they were not willing to join a large sort of relatively established company like Tesla. So it was like that's actually how it got started. I was interviewing a few people and they're like, no, we want to do a startup. I was like, and that's well, I can't convince them to join Tesla. So -- so it's like, okay, well, better to start up that [indiscernible] then go work somewhere else. That's kind of the genesis of xAI. \r\nAnd xAI is focused on sort of AGI. Yes. So it's -- like I said, I think there will be some value that xAI brings to Tesla. Also some of the best -- for the very best people in the world, they really just want to work on interesting problem. So if you take, say, a material science group, really what convinced the Charlie Colman to leave Apple, where he was very happy and well compensated, and both at -- in both -- where we think is the best material science group in the world, was that he got to work at both Tesla and SpaceX. He wasn't willing to leave Apple if it was just Tesla, but he's willing to do it if it is Tesla and SpaceX. So sometimes you get the best talent in the world if that's the kind of thing you need to do. And that actually has been very beneficial to Tesla.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 60
},
{
"name": "William Stein",
"speech": "If I could squeeze one more mundane question in. I wonder if you think you can hit the 1.8 million unit number with current pricing? Or do you anticipate needing to continue to lower prices because it seems like they've stabilized. The trends have stabilized in the last maybe 1.5 months. Should we expect sort of continued decreases or more stabilization for the rest of the year?",
"session": "Question",
"person_id": 256580,
"person_company": null,
"component_order": 61
},
{
"name": "Elon Musk",
"speech": "Sure. We have sort of -- we started the referral program, which I think will be quite effective. As Zach was saying earlier, we don't control the macroeconomic conditions. So if interest rates continue to rise, that reduces the affordability of cars. And for a lot of people, they're really [indiscernible] just really breaking even every month. In fact, if you look at the rise in credit card debt, they are, in fact, not breaking even every month. Credit card debt is looking scary. So we just don't control the market conditions. If market condition is stable, I think prices will be stable. If they're not stable, then we would have lower prices. Yes.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 62
},
{
"name": "Martin Viecha",
"speech": "Thank you. Let's go to Colin Rusch from Oppenheimer.",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 63
},
{
"name": "Colin Rusch",
"speech": "As you're building out Dojo and implementing what truly is going to be a highly complex set of software, can you speak to the maturity of the operating system and how much outsourced software you're expecting to use in that system?",
"session": "Question",
"person_id": 310676,
"person_company": null,
"component_order": 64
},
{
"name": "Elon Musk",
"speech": "This is a custom software stack. So -- but it is designed such that you can run at a high level, PyTorch and JAX. So -- but then we have to customize it to actually run on a custom silicon. So the software stack is a combination of open source software and then Tesla software all the way to the bare silicon, which is the case for the inference computer in the car.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 65
},
{
"name": "Colin Rusch",
"speech": "Okay. That's super helpful. And then can you speak to how you're managing some of the geopolitical risks relative to your capacity expansion? Obviously, as you guys continue to grow at this rate, you're going to be putting some folks out of business. And there's going to be some impacts around regional economy. So I just want to understand how you're thinking about that in terms of some of your CapEx plans and how you're managing some of those relationships with different countries and regions.",
"session": "Question",
"person_id": 310676,
"person_company": null,
"component_order": 66
},
{
"name": "Elon Musk",
"speech": "Well, this is a period of unusual geopolitical risk. So I think we're -- the best we can do is have factories in many parts of the world such that if things get difficult in one part of the world, we can still keep things going in the rest of the world.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 67
},
{
"name": "Martin Viecha",
"speech": "Thank you. The next question comes from Mark Delaney from Goldman Sachs.",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 68
},
{
"name": "Mark Delaney",
"speech": "Tesla has been making progress reducing costs and did so again last quarter. Can you give an update on when you think automotive COGS per vehicle could be under the historical $36,000 per vehicle level? And what are the key puts and takes to get there?",
"session": "Question",
"person_id": 182836,
"person_company": null,
"component_order": 69
},
{
"name": "Zachary Kirkhorn",
"speech": "This is -- I think I was asked this in the past. This is very difficult to forecast. There's a series of costs that we manage. The series of cost in which we don't control. And so particularly on the commodity side, where labor cost go, et cetera, it's just hard to say.",
"session": "Answer",
"person_id": 385023,
"person_company": null,
"component_order": 70
},
{
"name": "Elon Musk",
"speech": "Yes. And we saw very inflationary -- like strong inflationary pressures for a while last year. And now -- which obviously makes it very difficult to reduce COGS. And now we're seeing what seems to be deflationary pressures, certainly deflationary -- deflation isn't pressure. But we're seeing commodity prices dropping as was mentioned, as Karn mentioned a moment ago. I mean, I don't know, what do you think? I mean, basically, the trends seem to be deflationary at the commodity level.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 71
},
{
"name": "Karn Budhiraj",
"speech": "Definitely. There's that. And then there's also the unit economics improve as volumes grow. That's the other thing we're seeing. As we're becoming a bigger and better part of a lot of suppliers, the economies of scale come into play. There's equipment depreciation that comes into play equipment that was commissioned 5 to 7 years ago. That used to be a part of the piece price. That's completely amortized. So we'll see situation where piece price comes down because that equipment contribution has gone away. \r\nAnd then just we continue to have this mentality of continuous improvement in terms of labor, reducing labor, improving automation, and just continue to get better at what we do. So we have seen -- I think every quarter, we have seen an improvement. Of course, the commodities spiked up and down. Just in general, the trend is towards being more efficient.",
"session": "Answer",
"person_id": 568567,
"person_company": null,
"component_order": 72
},
{
"name": "Zachary Kirkhorn",
"speech": "Yes, I'm totally agreeing.",
"session": "Answer",
"person_id": 385023,
"person_company": null,
"component_order": 73
},
{
"name": "Elon Musk",
"speech": "Yes, lithium prices weren't absolutely insane there for a while.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 74
},
{
"name": "Zachary Kirkhorn",
"speech": "Yes. And they're recovering now.",
"session": "Answer",
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"speech": "Yes. And we're still early in the ramp -- well, not early in the ramp, but early in the cost down curve of Austin and Berlin. And so it takes time to work the cost out it. First, it's a focus on ramp, ramp it brings cost down...",
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"speech": "Yes. And then once that stabilizes, we can divert bandwidth to cost reduction. And so Austin and Berlin saw quite a decent amount of cost reduction on a fundamental basis from Q1 to Q2. We'll continue to do that work, that will be helpful. And so we're just going to keep chipping away at it.",
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"speech": "Yes. Just takes [indiscernible].",
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"speech": "[indiscernible] utilization, something that the team has been very focused on. So every bit of it.",
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"speech": "Logistics is underappreciated. Yes, so I was saying guys like valves and with tactics as one with logistics.",
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"speech": "Yes. And we've made tremendous improvements in cost in all fronts on expect costs. We have done pre-pandemic expect cost levels now, and our goal is to go further down.",
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"speech": "Yes. So when we look at our progress from Q1 to Q2 on cost, the way that we look at internally normalized for the impacts of mix shift with Austin and Berlin being a higher percentage of our mix, normalized for S and X being a higher percentage for mix in Q2 versus Q1. The sequential cost reduction, it might be the largest we've had in a while. So I think it's great work on behalf of the Tesla team, and we just got to keep it up.",
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"speech": "Yes, it's a game of pennies. So Game of Thrones with pennies.",
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"speech": "Mark, do you have a follow-up question? I think you're muted.",
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"name": "Mark Delaney",
"speech": "Yes. Maybe you could put a finer point on the downtime impact that you spoke about in your prepared comments in terms of production impact and then also to what extent there's a margin impact from those factory upgrades that you're planning this quarter?",
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"name": "Zachary Kirkhorn",
"speech": "Yes, the downtime -- we don't know exactly the number of cars impacted because kind of the way that we go into downtime Windows for upgrades is we set aside a period of time, but then the team is challenged to go as quickly as possible so that we can get the factories up and running again and minimize that. It's not profound reduction. Hopefully, it's small.",
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"speech": "I think we're getting too much into the weeds here. I mean like we're asking for a level of precision that is not possible to answer. So let's move on.",
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"name": "Martin Viecha",
"speech": "Yes. I think this is unfortunately all the time we have for today. So we'll speak to you all in the next 3 months. Thank you very much.",
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"speech": "Thank you.",
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"title": "Tesla, Inc., Q2 2023 Earnings Call, Jul 19, 2023",
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"year": 2023
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{
"name": "Martin Viecha",
"speech": "Good afternoon, everyone, and welcome to Tesla's First Quarter 2023 Q&A Webcast. My name is Martin Viecha, VP of Investor Relations, and I'm joined today by Elon Musk, Zachary Kirkhorn and a number of other executives. Our Q1 results were announced at about 3:00 p.m. Central Time in the update deck we published at the same link as this webcast. \r\nDuring this call, we will discuss our business outlook and make forward-looking statements. These comments are based on our predictions and expectations as of today. Actual events or results could differ materially due to a number of risks and uncertainties, including those mentioned in our most recent filings with the SEC. [Operator Instructions] But before we jump into Q&A, Elon has some opening remarks. Elon?",
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"name": "Elon Musk",
"speech": "Thank you, Martin. So just a Q1 recap. Model Y became the best-selling vehicle of any kind in Europe and the best-selling non-pickup vehicle in the United States. And this is in spite of a lot of challenges in production and delivery. So it's a huge credit to the Tesla team for achieving these great results. The -- it is worth pointing out that the current macro environment remains uncertain. I don't think I'm telling anyone anything, I think people already know, especially with large purchases such as cars. And while we reduced prices considerably in early Q1, it's worth noting that our operating margin remains among the best in the industry. We've taken a view that pushing for higher volumes and a larger fleet is the right choice here versus a lower volume and higher margin. However, we expect our vehicles, over time, will be able to generate significant profit through autonomy. So we do believe we're like laying the groundwork here and that it's better to ship a large number of cars at a lower margin, and subsequently, harvest that margin in the future as we perfect autonomy. This is an extremely important point. \r\nLet's see. Regarding the Cybertruck, we continue to build Alpha versions of the Cybertruck on our pilot line for testing purposes. It's a great product, and we're completing the installation of the volume production line at Giga Texas, and we're anticipating having a delivery event, a great delivery event probably in Q3. As with all new products, it will follow an S curve, so production starts out slow and then accelerates. So the Cybertruck is no different. So it's -- there's [ press ] amount of demand for the product, obviously. And it is my view, a fantastic product, a hall of [ famer ]. But as with all new products, it takes time to get the manufacturing line going. And this is really a very radical product. It's not made in the way that other cars are made. \r\nSo with regard to Megapack, we're making great progress. Our energy storage deployment reached nearly 4 gigawatt hours in Q1. This is, by far, the strongest quarter ever. And this growth was achieved thanks to the ongoing ramp at our Mega factory in Lathrop, California. There's still some way to go to reach the [ full ] rate of 40 gigawatt hours per year. And then we additionally announced the start of a new Mega factory in Shanghai. So we're -- as we've expected, the stationary storage growth actually will significantly exceed the vehicle growth. \r\nRegarding Autopilot and Full Self-Driving. We've now crossed over 150 million miles driven by Full Self-Driving beta, and this number is growing exponentially. We're -- I mean, this is a data advantage that really no one else has. Those who understand AI will understand the importance of data -- of training data and how fundamental that is to achieving an incredible outcome. So yes, so we're also very focused on improving our neural net training capabilities as is one of the main limiting factors of achieving full autonomy. So we're continuing to simultaneously make significant purchases of NVIDIA GPUs and also putting a lot of effort into Dojo, which we believe has the potential for an order of magnitude improvement in the cost of training. And it also -- Dojo also has the potential to become a sellable service that we would offer to other companies in the same way that Amazon Web Services offers web services, even though it started out as a bookstore. So I really think that, yes, the Dojo potential is very significant. \r\nIn conclusion, we're taking a view that we want to keep making and selling as many cars as we can. Despite this being an uncertain macro environment, this is a good time to increase our lead further, and we'll continue to invest in growth as fast as possible. Once again, I'd like to give a huge thanks to all Tesla employees worldwide who are doing an incredible job again. And yes, super appreciated.",
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"name": "Martin Viecha",
"speech": "Thank you very much. And Zach has some remarks as well.",
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"name": "Zachary Kirkhorn",
"speech": "Thanks, Martin. I want to start by congratulating the Tesla team for record vehicle production and deliveries. And I also want to congratulate our energy storage team for record volumes as well. \r\nThere's 3 main points I want to make. First, automotive gross margin and operating margin reduced sequentially. But as Elon mentioned, these remain at healthy levels. In particular, automotive gross margin was impacted by a few factors since our discussion on the last earnings call, which include additional action taken in the second half of the quarter to improve vehicle pricing and onetime items, most notably warranty adjustments on older S and X vehicles as well as increased deferred revenue for certain Autopilot features as we transition technologies. \r\nProgress on vehicle cost reduction continued in Q1 with meaningful improvements on logistics and the beginnings of some commodity cost reductions starting to be realized. Per unit cost for Austin and Berlin improved as well, driven by record volumes. However, these factories still provide a margin headwind and will likely continue to do so until after we reach and stabilize at our intended volumes. Note that Q1 was our third quarter in our multi-quarter plan to move to a more regionally balanced mix of build and deliveries. As I've mentioned previously, this results in lower deliveries and production within a quarter due to a higher volume of cars in transit at the end of the quarter and has an associated impact on quarter-ending free cash flows. This was particularly prevalent in Q1 for S and X as we begin exporting cars for international deliveries. \r\nSecond, our storage business is starting to take shape, and this is exciting to see after many years of investment and focus. This business is growing as a percentage of the businesses of the company's revenue and reached its highest level yet in Q1, driven by an increasing rate of deliveries for our Megapack products. We are also making progress on storage profitability, generating our highest gross profit yet in the quarter. \r\nThird, I want to reiterate the philosophy by which we're operating the business this year. Our approach is to grow volumes as quickly as possible in both our vehicle and energy businesses. We plan to continue to invest heavily into our future plans, which include the Cybertruck next-generation platform, in-house cell production, energy storage business and our autonomy and AI-enabled products. And we plan to do this while keeping the business financially healthy and industry-leading. To accomplish this, we need to remain focused on cost efficiency and working capital and in particular, unwinding the strategic inventory buildup left over from the pandemic. \r\nI want to conclude by thanking the Tesla team again as well as thanking our suppliers and our customers.",
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"name": "Martin Viecha",
"speech": "Thank you very much. And let's go to investor questions on say.com. The first one is what is the process to make auto pricing adjustments? What variables do you consider? How frequently do you review pricing?",
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"name": "Zachary Kirkhorn",
"speech": "Do you want to take that, Elon, or do you want me to take that?",
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"name": "Elon Musk",
"speech": "My apologies. Sorry, I was on mute. Yes, I think this is not something that we can really talk about. It's just -- we do our best to evaluate the production output, macroeconomic conditions, and we make a decision. But it's -- unless there's something you'd like to add, Zach.",
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"speech": "I think that's right. I mean, as a team, we review where we stand globally on a weekly basis and certainly, I can't get into the details of the reasons why certain decisions are made. But it is something that's very actively managed by a subset of the leadership team.",
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"name": "Martin Viecha",
"speech": "Thank you. The second question is, do you still believe Tesla Energy will be bigger than auto? And when will you provide more formal guidance on Megapack and overall Tesla Energy?",
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"name": "Elon Musk",
"speech": "Yes, I should just clarify like bigger than auto from the standpoint of like total gigawatt hours deployed. So it's possible automotive revenue may be higher, but gigawatt hours I think will be probably higher with stationary storage. If you just look at the -- what's needed to transition the world to a sustainable energy economy, there is more stationary energy storage needed than there is mobile energy storage. So -- and we are seeing growth of our stationary storage well in excess of automotive. So that is in line with expectations.",
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"name": "Zachary Kirkhorn",
"speech": "Yes. And on the guidance part of the question, and maybe, Martin, we can combine this with the next question, which is on guidance for margins, just have a single comment there. I think we are -- we will get to the point where we, as a company, provide guidance on the storage business. I say storage is a combination of both the Megapack business and the -- business. Relative to total revenues of the company, it's still fairly small. And the business has a lot of volatility currently, both in terms of volumes as well as financials just given the small volumes and kind of diversification of the customer pool there. But as this business grows and smooths out, I don't think we're that far away from it. I think including these volumes on our day 2 production and deliveries release is something that we'll start doing and then we can talk more formally as a business about our expectations over the coming year. I think it will be a few more quarters before we get there.",
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"name": "Martin Viecha",
"speech": "Thank you. The next question, as you said, was already answered, so let's go to the battery question.",
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"name": "Zachary Kirkhorn",
"speech": "Sorry. Just one other thing I wanted to mention on margin. While we're not providing specific guidance there, I mean, just to set expectations of where we think this business will go in terms of margins, probably generally in the ballpark of what we've seen historically on the vehicle business. We generally look to mid-20% gross margins for any program that we launch. And so we're not there yet on this business, but that's what we're working towards.",
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"name": "Elon Musk",
"speech": "We're hopeful to get there later this year, but that's not a promise. That's an aspiration.",
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"name": "Martin Viecha",
"speech": "Thank you. The next question is, how well are 4680 cells meeting the expectations described on the Battery Day? How long will it be until the cells meet those goals? Drew?",
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"name": "Drew Baglino",
"speech": "Yes. So on Battery Day, we established a cost-down road map through 2026 across 5 areas of effort. There was the cell design we discussed, [ anode and ] cathode materials, the structural pack concept and the cell factory itself, and we've been making progress across all of these aspects since then. For the cell factory, the Texas 4680 factory are partway through building and commissioning and selling and operating will be 70% lower CapEx per gigawatt hour than typical cell factories when fully ramped, in line with what we described on Battery Day. And we're continuing to further pursue densification and investment reduction opportunities in future factory build-outs like in Nevada. \r\nOn the cell design, we're in production with not only the first generation tablet cell we unveiled in Battery Day, but a second more manufactural version in Texas today. On the cathode materials side, we have a number of activities underway per the Battery Day road map. For lithium, our Corpus Christi Lithium refinery breaks ground this May. Our goal is to start commissioning portions of the facility before the end of the year. The refinery uses the sulfate-free spodumene refining process with reduced process costs, no acid or caustic reagents, lower embodied energy. It actually produces a beneficial byproduct that can be repurposed in construction materials. We discussed all of these concepts on Battery Day. Same with cathode precursor, we've successfully demonstrated lower process cost, 0 waste water precursor process that we described on Battery Day at both lab and pilot scale and are in the detailed design phase for incorporating this technology into the front end of our Austin cathode facility. \r\nOn cathode production, we are 50% equipment and 75% utilities installed at our new cathode building in Austin with our goal to begin dry and wet commissioning this quarter and next quarter with a target to produce first material before the end of the year. Structural pack, we saw big improvements with pack manufacturing with the 4680 cell and the structural pack concept, 50% lower CapEx and 66% smaller factory for the same output in gigawatt hours per year. We do believe structural as a concept is a good one. It's simpler. We'll continue to structurally load the cells and use the pack as the floor of the vehicle while iterating the design to closer to B-level execution of this A-level architecture in future programs. \r\nAnd zooming out for the 4680 team, Q1 was all about cost and quality. We made significant improvements in both areas. Texas production increased 50% quarter-over-quarter through yields increased 12% and [ CATO ] peak rate increased by 20% and [ 3 ] yields improved by 20%. Altogether, the team accomplished a 25% reduction in COGS over the quarter, and we are on track to achieve steady-state cost targets over the next 12 months. And going forward for the rest of the year, the priority, one, is yielding cost for the 4680 program as we steadily ramp production ahead of Cybertruck next year.",
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"name": "Martin Viecha",
"speech": "Thank you very much. The next question is, what do you anticipate 2023 automotive gross margins ex credits will be at the company's current pricing levels?",
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"name": "Zachary Kirkhorn",
"speech": "Yes, I can start off on this one. This is a difficult environment to make a projection like this. There's a lot of macro uncertainty. There's also headwinds and tailwinds. And this is basically a question I think that's asking about viewpoint and where costs will go. And within costs, there's a set of costs in which we do control the set of costs in which we're kind of subject to what's going on in the macro world. Within the bucket of things we control, the most of the cost down that we're working on is around ramping our Austin factory, stabilizing that and then doing the cost optimization work once we get to our intended volumes there. And a part of the cost journey in the Austin factory is, as Drew mentioned, the 4680 cells, which is an input into our Austin COGS. And so as the 4680 program improves over the course of the year on cost, as Drew mentioned, and then the noncell portion of the factory improves, then we see a pretty good trajectory in the Austin facility. \r\nA similar story exists in the Berlin factory. It does not have 4680 as an input, but for that factory, the journey to complete localization is still ongoing. And so over the course of this year, as volume increases, more localization occurs, we do see a good path to cost reduction in the Berlin factory as well. In existing factories, do we talk about this on every call, so I don't need to rehash it, but the expectation is that every existing factory improves all of their key metrics, and we continue to see the progress there. \r\nThere's also a handful of other costs in which we have influence, but the philosophy here is that we're aggressively going across every cost bucket that we can. Within the world that we don't control, the 2 major costs there being logistics, which fortunately is moving in our favor, and I think our supply chain team has done a great job both on logistics optimization and taking advantage of reduced spot rates where they can. So thank you to our supply chain team. \r\nAnd then there's the commodities world, which has been a huge page point in our cost structure over the last, say, 2 years or so, and we're still kind of at the maximum of pain for commodities in our cost structure. It kind of maximize -- max down in the second half of last year. We did start to see, in Q1, a little bit of improvement. We think there'll be a little bit more improvement in Q2, but...",
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"name": "Elon Musk",
"speech": "The [ team ] has dropped a lot. It's worth mentioning that the price of lithium has dropped significantly.",
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"name": "Zachary Kirkhorn",
"speech": "Yes. And that's the piece that we expect to see more impact on in Q2. And generally, as a company, we do expect commodity prices to come down and have a more meaningful impact in the second half of the year. So this is our approach. How that nets out, I mean, just a lot of risk, and we'll have to see how the year progresses.",
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{
"name": "Martin Viecha",
"speech": "Thank you. The next question is, how has global order intake tracked since the most recent round of price cuts?",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 20
},
{
"name": "Elon Musk",
"speech": "I think the overall thing we can say is that orders are in excess of production.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 21
},
{
"name": "Martin Viecha",
"speech": "Thank you. And maybe the last question from investors, can you give updated specs and pricing for Cybertruck and any new features that will make it to production?",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 22
},
{
"name": "Elon Musk",
"speech": "Well, I think we'll save that for the Cybertruck handover, which will hopefully be around the end of Q3 this year. And one thing I am confident of saying is that it's an incredible product, it's a hall of famer, I think. And a product like this only comes once in a long while. So it will not be disappointed at all. It's amazing.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 23
},
{
"name": "Martin Viecha",
"speech": "Great. Thank you very much. And let's go to analyst questions. We'll start with Alex Potter from Piper Sandler.",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 24
},
{
"name": "Alex Potter",
"speech": "Can you hear me? .",
"session": "Question",
"person_id": 140104,
"person_company": null,
"component_order": 25
},
{
"name": "Martin Viecha",
"speech": "Yes.",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 26
},
{
"name": "Elon Musk",
"speech": "Yes.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 27
},
{
"name": "Alex Potter",
"speech": "Okay. Perfect. So first question was on Lathrop. Obviously, that's -- it's great to see the growth there. Just wondering when you think that facility might be closer to full utilization? Are you just sort of deliberately working your way up the S curve there? Demand, obviously, isn't the limitation. So what are what are the steps, I guess, to unlocking full utilization there?",
"session": "Question",
"person_id": 140104,
"person_company": null,
"component_order": 28
},
{
"name": "Drew Baglino",
"speech": "Sure. There are some plastic factory aspects of what's going on in Lathrop. We actually had 2 phases of the CapEx there. We [ placed ] some of the general assembly parts of the facility. But in addition, we also have ramps with our suppliers that we are following, so both on the sell side and on the power electronics side. And we will see that unlock in the latter half of this year with inputs. So the overall facility was phased with the second phase of CapEx coming online towards the end of this year.",
"session": "Answer",
"person_id": 393478,
"person_company": null,
"component_order": 29
},
{
"name": "Alex Potter",
"speech": "Okay. Great. And then I guess my second question is on your ability to serve other markets out of Shanghai. Obviously, the facility in Berlin should be opening up your ability to, I guess, allocate more vehicles to Southeast Asia, Australia, other areas. I'm just wondering what other regions do you think you're maybe not yet serving effectively? What are your time lines for addressing some of those gaps in your regional exposure?",
"session": "Question",
"person_id": 140104,
"person_company": null,
"component_order": 30
},
{
"name": "Elon Musk",
"speech": "Yes. That's a good question because there are still many parts of the world that we do not yet serve with respect to vehicles especially. So we do expect to open up new markets around the world. And while those markets are not necessarily individually gigantic, they do add up to add a whole bunch of markets. They do collectively sum up to something significant. So it's high time that Tesla operates cars to the rest of the world, and that is something that we intend to do.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 31
},
{
"name": "Martin Viecha",
"speech": "Okay. Thank you very much. Let's go to the next analyst, George from Canaccord.",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 32
},
{
"name": "George Gianarikas",
"speech": "I was wondering, first, if you could discuss your FSD take rates and whether you've seen any significant positive or negative change there? And also, given that you've reduced the prices for your vehicles, do you think you need to do that for FSD as well?",
"session": "Question",
"person_id": 547012,
"person_company": null,
"component_order": 33
},
{
"name": "Elon Musk",
"speech": "Well, I can kind of answer the details on the FSD take rate, but the -- it's a tricky pricing question because the value of a car that is autonomous is enormous. So in a way, the price right now is an option value on an autonomous vehicle. And that value is -- will ultimately be very significant. And it's really -- yes. I mean, for those that are using the FSD beta, I think you can see the improvements are really quite dramatic. There'll be a little bit of 2 steps forward, 1 step back between releases for those trying the beta. But the trend is very clearly towards full self-driving, towards full autonomy. And I hesitate to say this, but I think we'll do it this year. So that's what it looks like. Yes.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 34
},
{
"name": "George Gianarikas",
"speech": "Maybe on the dramatic change we've seen in EV-related commodity prices. Do you think it's a reflection of any recent overcapacity in mining and refining? Or is that sort of a coincident indicator on global EV demand? And how do you expect those prices to kind of track over the next several quarters?",
"session": "Question",
"person_id": 547012,
"person_company": null,
"component_order": 35
},
{
"name": "Elon Musk",
"speech": "Man, I wish I had a crystal ball to answer your question. I don't know if we can provide a question that would -- with -- that would have any value really. I think we're in uncertain times. And if somebody got a crystal ball they can lend me, I'd really like to borrow it. But these are uncertain times. My guess is this it's economic stormy weather for about a year or so. And then if we hold roughly 12 months and then -- but this is my guess. It's just pure speculation. Stormy weather for about 12 months. And then provided there are no major geopolitical wildcards that show up, that things start getting sunny around spring next year.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 36
},
{
"name": "Drew Baglino",
"speech": "The only thing I would say on the -- like EV materials markets. They're not all super liquid and some of them, for example, like less than -- like single-digit percentage of the market has actually traded on the spot market. And not only are they not super liquid, there's not -- like storage isn't particularly fast for all of materials. So like small mismatches in supply and demand drive, like large price wins, not really real price wins, but just like temporarily large price swings. So it's hard to read into those price wings. I don't know, Karn, if you want to add anything.",
"session": "Answer",
"person_id": 393478,
"person_company": null,
"component_order": 37
},
{
"name": "Karn Budhiraj",
"speech": "Yes. Well, this is Karn, by the way. We are seeing, as Elon mentioned, quite a bit of softening in the lithium carbonate market. This was -- 6 months ago, we were trading at like $85,000 a ton, and today's spot price is about 26%. So there's been a dramatic decrease in that. Of course, we were able to take advantage of low lithium pricing earlier on with fixed price contracts. And we find that this is going to be another opportunity -- opportune moment to basically extend that into the later half of the decade. But we -- at the quantities we're procuring, we're not as impacted by the spot market because we have those contracts in place, and we're just going to be going and doing more of that. The other thing that's happening is because of the price spike, a lot of the companies that are in this business are becoming more ambitious about finding more upstream resources and exploring locations in Africa as well as South America. So that's also helping the macro situation with pricing.",
"session": "Answer",
"person_id": 568567,
"person_company": null,
"component_order": 38
},
{
"name": "Elon Musk",
"speech": "Yes. But just on the lithium front, to emphasize, the choke point is more -- much more on refining capacity than it is on mining. The theme is actually -- is very common throughout the world, including in the U.S. and really never -- it's just a very common element on earth, it's lithium. So it's much more a question of where is the refining capacity and can the refining capacity keep up? That's really what matters more than where is the lithium ore. It's everywhere basically. \r\nI think that same question also extends to refining of the cathode and to some degree, refining of the anode. And this is why we, at Tesla, we're building our lithium refinery capability at Corpus Christi and our cathode refinery outside Austin. \r\nIt's worth noting, I hope other companies do the same thing. We will have, by far, the most lithium refining capability and the most cathode refining capability in North America, I think, probably more than everyone else combined by a lot. So can other people please do those work? That would be great. We're begging you. We don't want to do it. Can someone please? Like instead of making a picture-sharing app, please, we're trying, lithium, mining and refining, heavy industry, come on.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 39
},
{
"name": "Zachary Kirkhorn",
"speech": "It's fun. It's actually fun.",
"session": "Answer",
"person_id": 385023,
"person_company": null,
"component_order": 40
},
{
"name": "Elon Musk",
"speech": "Yes, yes. Exactly. For real.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 41
},
{
"name": "Zachary Kirkhorn",
"speech": "Tesla -- we're here, ready to buy.",
"session": "Answer",
"person_id": 385023,
"person_company": null,
"component_order": 42
},
{
"name": "Elon Musk",
"speech": "It's [indiscernible] Tesla is not famous because we want to do it. We have a lot of fish to fry, obviously, but we're doing it because others aren't doing it, and we wish others would do it.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 43
},
{
"name": "Martin Viecha",
"speech": "Awesome. Thank you very much. Let's go to Emmanuel Rosner from Deutsche Bank.",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 44
},
{
"name": "Emmanuel Rosner",
"speech": "Can you hear me?",
"session": "Question",
"person_id": 376728,
"person_company": null,
"component_order": 45
},
{
"name": "Martin Viecha",
"speech": "Yes, we can. Yes.",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 46
},
{
"name": "Emmanuel Rosner",
"speech": "Maybe a first question for Elon, on your pricing strategy. So if I understand your message, you're saying Tesla feels it's worth maximizing the volume, increasing the size of the fleet as fast as you can because you'll be able to monetize this over the life cycle of the vehicle. Could you be a little bit more specific around ways you would be able to monetize sort of like this existing fleet in the future. Obviously, I think autonomous seems to be a big piece of it, but my understanding was that robotaxi would probably be for the next-generation vehicle, not the existing ones. So I guess in which ways would you monetize it?",
"session": "Question",
"person_id": 376728,
"person_company": null,
"component_order": 47
},
{
"name": "Elon Musk",
"speech": "Sorry, the robotaxi terminology can be a bit confusing because that's sort of like a generic term for our next-generation vehicle. And we obviously are working on next-generation vehicle. That's going to be very compelling. This is just not the time to talk about it in details product. So we internally call it robotaxi. But really, all of the vehicles that have hardware 3, which is the vast majority of our fleet, we believe will achieve full autonomy. So there will be a like a Model 3 or Model Y would be a robotaxi, a robotic taxi. So yes, that's -- to the best of my knowledge that we believe the current hardware can achieve full autonomy.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 48
},
{
"name": "Emmanuel Rosner",
"speech": "Understood. And then maybe a question for Zach back on the automotive gross margins. So I think, I guess, a few months ago, even after major price cuts, you felt pretty strongly that 20% automotive gross margin was still probably a reasonable floor. Obviously, the macro has gone worse and additional price cuts have happened. Is there anything else that has changed in terms of the outlook? Is it just the macro deteriorating? Is it the competitive landscape? Anything else that's sort of like makes you think differently around the full year? And is there a way, therefore, to frame a floor?",
"session": "Question",
"person_id": 376728,
"person_company": null,
"component_order": 49
},
{
"name": "Zachary Kirkhorn",
"speech": "Yes. About half of the miss against that previous conversation last quarter is attributed to adjustments we made in pricing in the second half of the quarter. I mean, I guess you could argue that, that lowers the floor in a sense. We've also made pricing adjustments so far this quarter. So that brings it down further. About the other half of the miss in Q1 was attributed to things that are nonrecurring. So I mentioned these in my opening remarks. It's a warranty adjustment for cars that were previously produced but not part of the pedigree of cars we're building now and some autopilot-related deferrals as we make some technology changes here that this deferral should get recognized once some of the software catches up. So those 2 things are not repeating. So hopefully, that helps answer your question.",
"session": "Answer",
"person_id": 385023,
"person_company": null,
"component_order": 50
},
{
"name": "Elon Musk",
"speech": "Yes. I mean there's really 2 macro factors that are tricky. The biggest being the interest rate. So if there's a very high Fed rate or interest rates are very high, that -- that is -- every time the Fed raise the interest rates, that's equivalent to increasing the price of a car. It makes the cars less affordable because people are able to buy cars as a function of what they can afford on a monthly basis. So that's -- so it's just almost directly equivalent to a price increase, is there any kind of interest rate increase. \r\nThen the other factor is whenever there is uncertainty in the economy, people will generally postpone new -- big, new capital purchases like a new car. This is a natural human reaction. So if people are reading about layoffs and whatnot in the press, they're like, well, they might be worried about -- they might be laid off. So then there'll be naturally a little more hesitant than they would otherwise be to buy a new car. Now this is just the nature of the auto industry. But there is -- there will be a trans amount of pent-up demand for new cars. So it goes through cycles.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 51
},
{
"name": "Martin Viecha",
"speech": "Thank you. Let's go to Ben Kallo from Baird.",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 52
},
{
"name": "Ben Kallo",
"speech": "When you talk about [ manifest ] supply, you talked about Dojo being a product that you can sell outside of Tesla. How do we rank all the things you have going on and then in the economic environment? I mean, like heat pumps and everything else you have going on versus investing in the vehicle business? Or is that not the right way to look at it?",
"session": "Question",
"person_id": 160874,
"person_company": null,
"component_order": 53
},
{
"name": "Elon Musk",
"speech": "I'm not sure I fully understand your question, but I'd look at Dojo as like kind of a long-shot bet, but if it's a long chart bet that pays off, it will pay off in a very, very big way. But potentially, yes, potentially in a very, very big way. Like in the multi-hundred billion dollar level. But I think it's like still put it in the long shot category, but long shot with a multi-hundred billion dollar potential outcome. And -- so it's a bet worth making, but not one you can sort of say like or take it to the bank type of thing. Although these days take it to the bank, it's maybe not as secure as it used to be. \r\nSo obviously, we're big believes in heat pumps. And that is on all this that over time is to do a really good heat pump for homes and commercial offices and stuff. And we have the technology that's really good. But it's still -- it's a back burner item. Our focus is very much on vehicles, autonomy, stationary storage, basically solving sustainable energy and solving autonomy, which would be like -- solving autonomy, if we're able to have a fleet of several million vehicles that with a software update can be potentially worth several times their original value, that's -- that will be -- if that happens, that will be the -- and I think it will happen, that will be the biggest asset value increase in history, I think.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 54
},
{
"name": "Ben Kallo",
"speech": "[indiscernible] pricing, but a lot of pundits talk about the pie and losing share or gaining share. But how do you guys look at pricing versus the [ BBs ] or price vehicles? Or does that not come into the equation? Sorry to ask about pricing again.",
"session": "Question",
"person_id": 160874,
"person_company": null,
"component_order": 55
},
{
"name": "Elon Musk",
"speech": "No, it's really just like -- every day, we get a daily real-time update of how many cars were ordered yesterday, how many cars were produced yesterday. We must have -- if there's a company that's got more real-time data than Tesla -- I'm not sure there's any company on earth that has better real-time data than Tesla, except maybe SpaceX Starlink. So -- because like we don't have to -- for the other car companies, they will make the cars, send them to the dealers, then the dealers will sell the cars. And then it takes quite a long time for them to get the data back to actually figure out how many cars were sold. Whereas we know how many cars were ordered yesterday throughout the world. So our fingers on the pulse is real time and does not have latency, whereas the other car companies have a lot of latency in their data. \r\nAs does the government, the government has a lot of agency in their data. So we're just looking at and saying, okay, what does it take to achieve a clearing price for our vehicle production? And then we'll make a pricing change, and we see what happens immediately and adjust course. So we're adjusting course -- and we're thinking about it literally every day, 7 days a week. Every 7 days, we [ collect ] that e-mail and so is the rest of the team. And we try to make the lease down decision that we can. And on balance, I think our decisions are pretty good. Sometimes they'll be down, but on average, they're, I think, better than the rest of the industry.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 56
},
{
"name": "Zachary Kirkhorn",
"speech": "Just to add on the question about EV market share or ICE. This comes up a lot. I think a lot of the public debate is around this concept of EV market share. We don't look at it that way. I mean we look at it as [indiscernible] it's a car market and not an EV market. And actually, the mission of the company requires internal combustion engine cars to be switched over to electric vehicles. So that's what we pay attention to.",
"session": "Answer",
"person_id": 385023,
"person_company": null,
"component_order": 57
},
{
"name": "Martin Viecha",
"speech": "Yes. I've said that last time, too. We got -- you guys got to stop looking at it as the EV market. It's how many cars are we selling. Just start looking at it that way.",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 58
},
{
"name": "Elon Musk",
"speech": "All cars will be EVs. It's going to -- I've said this for a long time. We'll look back, I don't know, assuming civilization is still around in 20 years, we'll look back on internal combustion engine vehicles the same way we look back on external combustion engine vehicles, which is like the steam engine. A steam engine is an external combustion engine vehicle. And there's still a few around. They're kind of quirky and kind of cool collectors' items. That's how gasoline cars will be in the future.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 59
},
{
"name": "Martin Viecha",
"speech": "Thank you. Let's go to Colin Rusch from Oppenheimer.",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 60
},
{
"name": "Colin Rusch",
"speech": "Can you talk a little bit about how much of the actual cost structure is variable on these vehicles? And if you could give us a range on pulse or minus the lithium cost within those contracted volumes that you're seeing?",
"session": "Question",
"person_id": 310676,
"person_company": null,
"component_order": 61
},
{
"name": "Elon Musk",
"speech": "Well, I think -- again, we'd really love to have a crystal ball here, but we don't have it. Depending on what time scale you're looking at, most of the car is variable. So most car cost is variable. So -- and probably, if I were to guess, I think we will see improved costs from suppliers yes, I think we will -- that is our expectation.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 62
},
{
"name": "Drew Baglino",
"speech": "And we're already starting to see that, Elon, I think you had mentioned before that we anticipated a crash in the lithium prices and some of that has flowed through by way of lithium carbonate reductions into battery cost. And the same thing will happen with lithium hydroxide. The length of the supply chain matters also because what we're talking about is very far upstream. So by the time it makes sense that [indiscernible]. It will be several months. But beyond just the commodity pricing, as Zach mentioned earlier, we're also very focused on other metrics that make production very efficient. So for example, detention and demurrage air expedites. I think our air expedites are down 90%. Detention and demurrage is down 93% from the peaks. That can be hundreds of thousands of dollars per vehicle. So we're sort of attacking all vectors and becoming very efficient.",
"session": "Answer",
"person_id": 393478,
"person_company": null,
"component_order": 63
},
{
"name": "Colin Rusch",
"speech": "Okay. And then my follow-up is really around stationary storage demand on the utility scale. I mean, obviously, there's a gigantic queue for interconnection in the U.S. And can you talk about the volume of quotation you're seeing at this point around stationary storage for the renewables queue on a global basis? And how much of that is converting into actual sales?",
"session": "Question",
"person_id": 310676,
"person_company": null,
"component_order": 64
},
{
"name": "Elon Musk",
"speech": "Drew, do you want to take that?",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 65
},
{
"name": "Drew Baglino",
"speech": "I mean -- yes, I don't -- that's also not exactly how we look at it, really. We're not like -- yes, we're not engaged in the interconnection queue. Like we're focused on ramping Megapack as quickly and efficiently as we can, and we have visibility into the pipelines of a variety of different renewable energy and just pure stationary storage developers and we also develop our own projects. And we're mostly just -- we're being selective in trying to pick the products -- the projects that best fit our mission and our objectives.",
"session": "Answer",
"person_id": 393478,
"person_company": null,
"component_order": 66
},
{
"name": "Elon Musk",
"speech": "Yes. This -- again, this is not a product call, but we'll have something -- I mean, this -- we're making improvements on many fronts, including Megapacks. So I think some of those improvements will improve the speed at which you can connect the Megapacks to the grid.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 67
},
{
"name": "Martin Viecha",
"speech": "Thank you. The next question is from Mark Delaney from Goldman Sachs.",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 68
},
{
"name": "Mark Delaney",
"speech": "Do you still see 2 million units as an upside case for volume this year? And is the gating factor for reaching 1.8 million or 2 million units in 2023 still supply chain, as was mentioned on your last conference call? Or is it more about [ the end of this month? ]",
"session": "Question",
"person_id": 182836,
"person_company": null,
"component_order": 69
},
{
"name": "Elon Musk",
"speech": "Well, if you have a crystal ball you can lend me, back to the crystal ball situation. These are volatile times. From a production standpoint, if things go well, we've got a shot at 2 million vehicles this year. But that's an upside case. And we feel comfortable with 1.8 million. And we'll see how this year unfolds.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 70
},
{
"name": "Mark Delaney",
"speech": "That's helpful. And then the company had spoken at the Investor Day and then for the past conference calls about opening up its vehicle charging network. Can you speak to some of the feedback you've been getting from both Tesla owners and non-Tesla owners? And how the ramp of the charging network may progress from here?",
"session": "Question",
"person_id": 182836,
"person_company": null,
"component_order": 71
},
{
"name": "Elon Musk",
"speech": "Drew, do you want to take that?",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 72
},
{
"name": "Drew Baglino",
"speech": "Yes. So as you may have seen, we opened our first [indiscernible] post in Europe and our [ Magic Dock ] in North America. And that is indicative of the direction we're heading with universal compatibility for all vehicles no matter where the charge port, et cetera, in all major markets, and we're going to continue to roll out those sort of improved offerings as we build new stations. We're always balancing like our ability to serve our own customers with our ability to serve new customers when doing that. I think we've been able to balance it rather well. For example, in Europe, 50% of all of our supercharging stations are open to all EVs, and we've been able to do that without any increase in wait times at all for anybody. So we're going to continue to take a similar approach as we do this in North America and China over the coming quarters.",
"session": "Answer",
"person_id": 393478,
"person_company": null,
"component_order": 73
},
{
"name": "Martin Viecha",
"speech": "Okay. Thank you very much. Let's go to Rod Lache from Wolfe Research.",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 74
},
{
"name": "Rod Lache",
"speech": "I just wanted to first just follow up on your comments in your letter about leveraging your cost position as others struggle with unit economics and also taking into account the lifetime revenue, actually in a way that most other automakers will never see just given your service network and supercharging and other attributes. Can you just maybe give us a sense of how far you'd be willing to take this? Are there brackets around the range of initial margin that you'd be comfortable with? And again, any color that you might provide on the updated range of margins that you'd expect in the auto business?",
"session": "Question",
"person_id": 370532,
"person_company": null,
"component_order": 75
},
{
"name": "Elon Musk",
"speech": "I think we may have answered this question or tried to ask this question a few times. But it's difficult to say what the margin will be. It depends on what the macroeconomic environment is like. So for example, if the Fed were to lower the rates, that would be super helpful for demand. If they raise them, that just raises the interest costs that buyers have to pay for to buy a car. So it reduces affordability and therefore, reduces demand. So it's -- but if -- like if we look past, say, this year or like go sometime next year, middle of next year, so I think things are looking really -- I think, like I said, [indiscernible], if there's some major geopolitical wildcard that turns up. But in the absence of that, I think I would be very optimistic about middle of next year, end of next year.",
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"name": "Zachary Kirkhorn",
"speech": "Just to add to Elon's comments, just 2 other points. What's really important for us this year in addition to just managing the day-to-day of the business but is also investing in, as Elon mentioned, what 2024 and 2025 will look like. And so using the cash generated from the sale of products today and reinvesting that, this is very important for us. And I think that what happens to margins over the next couple of quarters that only matters in the context of of what that means for our ability to reinvest into 2024 and 2025. And we have a lot of space before that becomes something that we have to revisit our investment plans. And so we're planning to keep the business healthy. But I just want to caution folks about reading too much into what happens over the near term here because we're very focused as a company on making sure that when we exit this macroeconomic situation, this company is positioned in the best possible way.",
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"name": "Elon Musk",
"speech": "Yes, exactly.",
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"name": "Rod Lache",
"speech": "Just to elaborate on that point though, the revenue the long-term lifetime revenue that you're targeting from each vehicle is massive. So if you took that to the extreme, it would seem that you'd be comfortable with a relatively low initial margin. Am I misinterpreting that? Or is that exactly right?",
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"name": "Elon Musk",
"speech": "Correct. That's exactly right.",
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"name": "Rod Lache",
"speech": "Okay. And the -- normally, in a recession, when consumers feel less financially secure, actually price elasticity deteriorates. Just based on your pulse taking of the consumer, do you have a view on elasticity of demand?",
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"name": "Elon Musk",
"speech": "Well, I can't emphasize enough the whole -- just fundamental question of affordability. For most people, their ability to buy a car is a function of can they make monthly payment or not. And so like I said, if interest rates are really high, like they are right now, then in some cases, people can't get a loan at all. So it's -- I think probably banks are pretty -- not leaning forward in providing loans, I expect, these days. So that's -- like there is -- there is quite a powerful story here when you -- going back to something as alluded to a moment ago -- I mentioned a moment ago that Tesla is in a uniquely strong strategic position. Because we're the only ones making cars that technically, we could sell for 0 profit for now and then yield actually tremendous economics in the future through autonomy, no one else can do that. I'm not sure how many people will appreciate the profundity of what I've just said, but it is extremely significant.",
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"name": "Martin Viecha",
"speech": "Thank you. Let's go to Adam Jonas from Morgan Stanley.",
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{
"name": "Adam Jonas",
"speech": "So first, Elon, good luck with tomorrow's launch of Boca Chica. Break a leg.",
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"name": "Elon Musk",
"speech": "Thanks. You can't have too much luck in the rocket business, that's for sure.",
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{
"name": "Adam Jonas",
"speech": "Incredible. So now that you've gotten to know the Twitter architecture kind of intimately well over the past 6 months, what can you tell Tesla stakeholders about how an X.com or Super App could be potentially accelerative to Tesla's business model?",
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"name": "Elon Musk",
"speech": "Well, I don't know. I guess it could make it potentially make it easier to buy cars. So -- We've string somewhat off topic here because I think there's some benefit. I think probably there's some benefit, yes.",
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"name": "Adam Jonas",
"speech": "I get it, Elon,. So just as a follow-up on manufacturing, you're a student of history. And you'll note that back in 1913, Henry Ford introduced the moving assembly line in Highland Park, Michigan. And the price of a Model T, which had already been undercutting cars around the time, fell another 70% or 80%, and hundreds of rival car companies went bust. I'm wondering if history is repeating itself here, Elon, and that the recent pattern of cuts with you is way ahead of the cost curve compared to competition? Is this -- it seems like it's a calculated strategy, not just in reaction to competition or changing supply demand in the market, but your -- could we catalyze some Darwinian forces in the EV market?",
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"name": "Elon Musk",
"speech": "Well, I mean, we're not trying to say, take pricing actions in order to be deliberately -- to deliberately undermine competitors or anything like that. We really don't think about competitors that much. We just look at, do people like our cars, how can we make the product better, can they afford our cars? And the sort of the things like improving service and whatnot. But actually, we do have this unique strategic advantage that we have -- we're making a car that if autonomy pans out and we think it will, where that asset is actually will be worth a hell a lot more in the future than it is now. So it is taking to be possible to sell it at 0 profit, but still have the net present value of future cash flows associated with that asset very significant.",
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{
"name": "Drew Baglino",
"speech": "And service and charging and insurance and all of these other ongoing revenue streams that other companies don't have.",
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{
"name": "Elon Musk",
"speech": "Yes.",
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{
"name": "Lars Moravy",
"speech": "Certainly, we want all EVs to succeed, too. We just want to say that we're not like some malicious attacks to try to [ discredit ] everybody.",
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"name": "Elon Musk",
"speech": "Definitely not. We're like opening up superchargers. We've made our patents available for free. So it's like -- we're trying to be helpful here. So we're not out to destroy competitors or anything like that. We're trying to help competitors, frankly, in any way we can.",
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"name": "Martin Viecha",
"speech": "Thank you. Let's go to Dan Levy from Barclays.",
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{
"name": "Dan Levy",
"speech": "First question, you're ramping supply at Austin and Berlin. So I wanted to understand just how critical it is to further increase volume at those plants just to get the vertical integration benefits in the face of the sort of market with some demand questions. And just broadly, should we -- I mean, historically, you've been operating at the pace at which your supply allows you to produce as opposed to gauging to demand. Should we generally expect that you're going to continue to produce at your -- whatever the max capacity that you're allowed within your supply constraints, regardless of what the broader economic environment is just to continue to get that volume out there?",
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"name": "Elon Musk",
"speech": "So that is -- yes, I mean, there could be like obviously a macro shock that is so severe that people just stop buying cars for some reason. But in the absence of that, we will continue to grow output at a rapid clip.",
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"name": "Dan Levy",
"speech": "Great. And then just on the margins associated with Austin and Berlin. You mentioned Austin want to have the margin drag until you reach intended volumes. I don't know if you can disclose what those volumes are. And then maybe you could just remind us of what the margin profile of Austin and Berlin will look like versus Shanghai once you get the vertical integration benefits in place?",
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"name": "Elon Musk",
"speech": "Well, probably [indiscernible] have be quite as good as Shanghai. Shanhai Is hard to -- has a very efficient cost structures, obviously, our lowest cost structure in the world. But we do expect to be -- make significant improvements in Austin and Berlin and continue to make improvements in Fremont as well. So...",
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"name": "Unknown Executive",
"speech": "We've increased -- this is [indiscernible]. We increased our localization efforts. So that will then drive down our days and on-hand requirements. We've made 10% quarter-over-quarter improvement in days and on-hand. So we'll continue that as a localization improves.",
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"name": "Martin Viecha",
"speech": "Okay. Thank you very much. And our final question comes from Philip Houchois from Jefferies.",
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"name": "Philippe Houchois",
"speech": "It's slightly longer term. I completely agree with your comments that we should look at Tesla in terms of auto market share and not EV market share. But I'm just wondering, as you build up the market share globally, is there a limit to the direct selling business model as you practice it? And should we think about -- going forward, you need to look into the agency or using importers to basically develop market share more smoothly, I guess, globally? And so in other words, is there kind of [ fell by date ] for the direct business model as you -- today?",
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"name": "Elon Musk",
"speech": "Seems to be working well so far.",
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{
"name": "Philippe Houchois",
"speech": "Because we hear different feedback from customers who miss the human interaction or unhappy with the service, and I'm just wondering if you're seeing some growth pains in there that would lead you to change. You're not seeing that?",
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"name": "Elon Musk",
"speech": "Well, I mean, there are -- since we're always going to have some growing pains where at times -- and it depends on which geography we're talking about where sometimes service is behind sales, sometimes it's ahead of sales. This is -- I mean Telsa's growing, I believe, faster than any company in history that makes a large complex manufactured object. So these are -- as you try to max -- it's always difficult to match exponentials. So -- but I think it is helpful to have the feedback loop with a service because that means we feel the pain of service, and then we can address the design to make the car need less service. And I think that gives us the right incentive structure like because the best service is no service. The car doesn't break. And whereas if you have, say, a dealer network that is reliant upon services revenue, then you arguably have a misalignment of incentives where they're making money on service. But actually, we want to -- the best thing for the consumer is the car doesn't need servicing so.",
"session": "Answer",
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"name": "Philippe Houchois",
"speech": "Yes. And then last one, if I can follow up. Have you worked out, I mean, for many of your traditional competitors? A fair amount of profits for them comes from selling spare parts and servicing, and you don't have that in your profit structure. And have you looked at the deficit you have compared to your peers?",
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"name": "Elon Musk",
"speech": "Yes. Actually, this one -- assuming I could wax on about for a while because really, people didn't understand that the best short-selling argument against Tesla for the longest time was the fact that Tesla does not have an existing fleet and that the auto industry, the reason incumbents succeed and newcomers fail, the biggest reason is that the incumbents have a large fleet, and they're able to sell new cars at close to 0 margin and then sell spare parts at a very high margin, sort of razors and blades type thing. And so the only way to actually succeed for a newcomer to succeed is to have a product that is so compelling that people are willing to pay a premium over the incumbent product. And in the absence of electrification and autonomy, I don't think a newcomer can succeed.",
"session": "Answer",
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{
"name": "Martin Viecha",
"speech": "Thank you very much, everyone. Unfortunately, that's all the time we have for this quarter. We'll see you again in 3 months from now. Thank you.",
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"title": "Tesla, Inc., Q1 2023 Earnings Call, Apr 19, 2023",
"quarter": 1,
"year": 2023
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{
"transcript_title": "Tesla, Inc. - Q4 2022",
"transcript_name": "Tesla, Inc., Q4 2022 Earnings Call, Jan 25, 2023",
"ticker": "NASDAQ:TSLA",
"transcript_url": "https://wkarticles.blob.core.windows.net/finnhub/snp_transcript_2721581",
"date": "2023-01-25",
"year": 2022,
"quarter": 4,
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"transcript": [
{
"name": "Martin Viecha",
"speech": "Good afternoon, everyone, and welcome to Tesla's Fourth Quarter 2022 Q&A Webcast. My name is Martin Viecha, VP of Investor Relations, and I'm joined today by Elon Musk, Zachary Kirkhorn and a number of other executives. Our Q4 results were announced at about 3:00 p.m. Central Time in the update deck we published at the same link as this webcast.\r\nDuring this call, we will discuss our business outlook and make forward-looking statements. These comments are based on our predictions and expectations as of today. Actual events or results could differ materially due to a number of risks and uncertainties, including those mentioned in our most recent filings with the SEC. [Operator Instructions] But before we jump into Q&A, Elon has some opening remarks. Elon?",
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"name": "Elon Musk",
"speech": "Thank you, Martin. So '22 -- just going through the '22 recap. It was a fantastic year for Tesla. It was our best year ever on every level. Team did an amazing job. It's an honor, of course, to work with such an incredibly talented group of people.\r\nSo in 2022, we delivered over 1.3 million cars and achieved a 17% operating margin, the highest among any volume carmaker, I think maybe among any carmaker. While doing so, we generated $12.5 billion in net income and $7.5 billion in free cash flow. Importantly, the Tesla team achieved these records while -- despite the fact that 2022 was an incredibly challenging year due to forced shutdowns, very high interest rates and many delivery challenges. So it's worth noting that all these records were in the face of massive difficulties. Credit to the team for achieving that. \r\nThe most common question we've been getting from investors is about demand. Thus far -- so I want to put that concern to rest. Thus far in January, we've seen the strongest orders year-to-date than ever in our history. We currently are seeing orders at almost twice the rate of production. So I mean, that -- it's not to say whether that will continue [indiscernible] but the orders are high. And we've actually raised the Model Y price a little bit in response to that. \r\nSo we do -- we think demand will be good despite probably a contraction in the automotive market as a whole. So basically, price really matters. I think there's just a vast number of people that want to buy a Tesla car but can't afford it. And so these price changes really make a difference for the average consumer. And sometimes for those -- for people who are well -- who have a lot of money, they sort of forget about how important affordability is. And it's always been our goal at Tesla to make cars that are affordable to as many people as possible so I'm glad that we're able to do so. And yes, so I think it's a good thing, all things considered. \r\nWe're also making very good progress on cost control. And we're seeing the cost production in Berlin and Austin drop commensurate with the growth in production, as you'd expect, so yes. With respect to Autopilot, as of now, we deployed whole self-driving beta to [indiscernible] city streets to roughly 400,000 customers in North America. This is a huge milestone for autonomy as FSD Beta is the only way any consumer can actually test the latest AI-powered autonomy. And we're currently at about 100 million miles of FSD outside of highways. \r\nAnd our published data shows that improvement in safety system -- stuttering here, safety statistics, it's very clear. So we would not have released the FSD Beta if the safety statistics were not excellent. Regarding batteries, production rate of 4680 cells reached 1,000 cars a week at the end of last year, and we're increasing capacity for 4680 cells by another 100 gigawatt-hours as announced at Giga Nevada yesterday. Our long-term goal is to get to well in excess of 1,000 gigawatt-hours of cells produced internally and continue to use the self cell providers. So to be clear, we will continue to use other cell providers. Just that the demand for lithium ion batteries is quasi-infinite and will be for quite some time. So we feel we can scale a lot faster using both suppliers and internally produced cells. \r\nAnd we've got an amazing plan for making the 4680 cell low-cost and high energy density. So energy storage also saw record growth and with that is continuing to accelerate. That's always worth remembering that the 3 pillars of a sustainable energy future are obviously electric vehicles, solar and wind, and the third key item is stationary storage to store the energy from solar and wind because obviously, the sun doesn't shine all the time and the wind doesn't blow all the time. So you have those 3 things, you can convert all of it to a fully sustainable situation many times over, actually. \r\nSo I would like to just make it clear that there is a path to a fully sustainable future for humanity, and we -- our goal at Tesla is to accelerate progress on that path as much as humanly possible. So yes, so we were ramping up Megapack production. And we expect it to grow at a rate quite a bit faster than our legal output. \r\nSo in conclusion, we are taking a view that we want to keep making and selling as many cars as we can. We believe we can keep pushing for strong volume growth while retaining the industry's best operating margins. As we mentioned many times before, we want to be the best manufacturer. But really, manufacturing technology will be our most important long-term strength. And we'll talk more about our upcoming plans at the March 1 Investor Day. And lastly, I want to once again thank all of our employees for delivering another record-breaking year. Congratulations, guys.",
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"name": "Martin Viecha",
"speech": "Thanks, Elon. And I think Zach has some opening remarks as well.",
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"name": "Zachary Kirkhorn",
"speech": "Yes. Thanks, Martin. So as Elon mentioned, 2022 was a terrific year for Tesla. I also want to congratulate the Tesla team and also say thank you to our suppliers for your support during quite a volatile year. On a full year basis, revenue increased over 50%. Operating income doubled, free cash flows increased over 50% and our margins remained industry-leading. Additionally, we continued to make progress on overhead efficiencies as non-GAAP OpEx as a percentage of revenue improved further.\r\nFor Q4 specifically, sequential and annual margin was impacted by ASP reductions as we are managing through COVID impacts in China, uncertainty around the consumer tax credit in the U.S. and a rising interest rate environment. Note that in 2022, rising interest rates alone had effectively increased the price of our cars in the U.S. by nearly 10%. \r\nAdditionally, COGS per unit has increased on a year-over-year basis, driven primarily by 3 factors: first is raw materials and inflation led by lithium prices and discussed at length in previous calls; second, we are working through the early ramp of inefficiencies of our Austin and Berlin and in-house cell production factories; third, our vehicle mix over the last year has moved more heavily towards Model Y, which carries a slight cost premium to Model 3. \r\nPartially offsetting these impacts, we've continued to execute on Tesla controllable cost reductions, in line with the progress we've made in prior years. These improvements include our continued work to gradually move towards a regionally balanced build of vehicles. The energy business had its strongest year yet across all metrics, led by steady improvement in both retail and commercial storage. While much work remains to grow this business and improve costs, we believe we are on a good trajectory. \r\nAs we look towards 2023, we are moving forward aggressively leveraging our strength and cost. There are 3 key points I wanted to make here: first, on demand, as Elon mentioned, customer interest in our products remains high; second, on cost reduction, we're holding steady on our plans to rapidly increase volume while improving overhead efficiency, which is the most effective method to retain strength in our operating margins. In particular, we're accelerating improvements in our new factories in Austin, Berlin and in-house cells, where efficiencies are the highest. But we are attacking every other area of cost and unwinding cost increases created for multiple years of COVID-related instability. This includes logistics, expedites, accumulation of material buffers, part premiums, productivity and overheads as an example. \r\nAs the world transitions from an inflationary to deflationary environment, we expect a strong partnership with our suppliers on this journey as well. In that, we've priced our products with a view towards a longer-term cost structure. Thus, there will be an impact on operating margin in the near term. However, we believe our margins will remain healthy and industry-leading over the course of the year. \r\nThird, we are continuing to ensure funding is prioritized for our long-term road map. This includes expanding in-house cell production, bringing Cybertruck to market, development of our next-generation vehicle platform, expansion of our manufacturing footprint and growth of the energy business. We're looking forward to discussing these plans in more detail on our Investor Day in a month. Thank you.",
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"name": "Martin Viecha",
"speech": "Thank you very much, Zach. Let's now go to investor questions. The first question is, some analysts are claiming that Tesla orders, net of cancellations, came in at a rate less than half of production in the fourth quarter. This has raised demand concerns. Can you elaborate on order trends so far this year and how they compare to current production rates? I think...",
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"name": "Elon Musk",
"speech": "We already answered that question.",
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"name": "Martin Viecha",
"speech": "Yes, exactly.",
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"name": "Elon Musk",
"speech": "Demand far exceeds production, and we actually are making some small price increases as a result.",
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"name": "Martin Viecha",
"speech": "Thank you. The second question is in a similar vein. What has the initial reaction been to global price reductions in early 1Q 2023, specifically in terms of order intake levels? We've answered that 1 as well. \r\nSo let's go to the next one. The next investor question is, will Tesla be able to take full advantage of advanced manufacturing production credits for battery cells packs? So $3,700 per long-range Model 3 and Model Y, it's $45 a kilowatt-hour for autos and energy products and how much does Tesla expect to earn in the coming year from these credits?",
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{
"name": "Elon Musk",
"speech": "I'll say a little bit about it, then I think Zach will add some. Long term, we expect these -- the value of these credits to be very significant. You can do the math if we were to get anyone your 1,000 gigawatt-hours [ a year ] of production or even a few hundred gigawatt-hours, it's very significant. So -- but the credits do rely upon domestic manufacturing. And in the case of Panasonic domestic manufacturing, we're splitting the value of the credits. So it -- the value of credits this year will not be gigantic, but I think it could be gigantic -- we think it probably will be very significant in the future.",
"session": "Answer",
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{
"name": "Zachary Kirkhorn",
"speech": "Yes, just to add and input some boundaries on what we're expecting in terms of impact to Tesla for this year. So different products, we think, will get different amounts of credit. The regulations here are still in flux and there continues to be updates so this is just our best understanding at the moment. But we think on the order of $150 million to $250 million per quarter this year and growing over the course of the year as our volumes grow. \r\nAnd part of the work we're doing here, which is part of what this incentive package is trying to incentivize is, as Elon mentioned, to move more manufacturing onshore in the United States, which is Tesla's plans anyways. And so I think we're pretty well positioned over the coming years to take advantage of this. \r\nBut then also part of what the goal of this incentive package is, is to improve adoption from our customers. And so we also want to use these incentives to improve affordability as we think about what the price points are in our products going forward. And so as we're thinking about our pricing changes in the U.S. a couple of weeks ago that we announced, we were looking at what the credit benefit to Tesla would be to make sure that customers are able to receive the benefit not only from this that were received to some extent but also on the consumer-facing side, which is currently $7,500 per car of tax credit, assuming that -- subject to the MSRP caps and the income caps. So we want to use this to accelerate sustainable energy, which is our mission and also the goal of this bill.",
"session": "Answer",
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{
"name": "Martin Viecha",
"speech": "Thank you very much. The next question from investors is, after recent price cuts, analyst released expectations that Tesla automotive gross margin, excluding leasing and credits, will drop below 20% and average selling price around $47,000 across all models. Where do you see average selling price and gross margins after the price cuts?",
"session": "Answer",
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{
"name": "Elon Musk",
"speech": "Yes, go ahead, Zach.",
"session": "Answer",
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{
"name": "Zachary Kirkhorn",
"speech": "Yes, I'll jump in on this. So there is certainly a lot of uncertainty about how the year will unfold, but I'll share what's in our current forecast for a moment. So based upon these metrics here, we believe that we'll be above both of the metrics that are stated in the question, so 20% automotive gross margin, excluding leases and credits and then $47,000 ASP across all models.\r\nAnd so 2 other comments I want to make on this, just tactically on sequential ASP changes from Q4 to Q1. And just as a reminder, the ASP reduction is not as large as the reduction in configurator prices. As in Q4, we had backlog customers that we're delivering cars to at a lower price book, given that backlogs had been so long for so much of 2022. But then also, there are various programs in place that we used in Q4 that lowered ASPs. \r\nThe second comment I wanted to make here is that as a management team here, we're most focused on what our operating margin is. And so as other areas of the business become more important, particularly the energy business, which is growing faster than the vehicle business and as we're heavily focused on operating leverage here, improving efficiency of our overheads, we think the right metric for us to be focused on is operating margin. And so I wanted to make sure that I shared that with the investor community as well because that is what we're primarily managing to now.",
"session": "Answer",
"person_id": 385023,
"person_company": null,
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},
{
"name": "Elon Musk",
"speech": "Yes. Something that I think some of these smart retail investors understand but I think a lot of others maybe don't is that the -- every time we sell a car, it has the ability, just from uploading software, to have full self-driving enabled and full self-driving is obviously getting better very rapidly. So that's actually a tremendous upside potential because all of those cars, with a few exceptions -- I mean, only a small percentage of cars don't have Hardware 3. \r\nSo that means that there's millions of cars were full self-driving can be sold at essentially 100% gross margin. And the value of it grows as the autonomous capability grows. And then when it becomes fully autonomous, that is a value increase in the fleet. That might be the biggest asset value increase of anything in history. Yes.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 14
},
{
"name": "Martin Viecha",
"speech": "Thank you. Let's go to the next investor question. Since Elon started political influencing, polls from Morning Consult and YouGov show...",
"session": "Answer",
"person_id": 370659,
"person_company": null,
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},
{
"name": "Elon Musk",
"speech": "YouGov, [indiscernible]",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 16
},
{
"name": "Martin Viecha",
"speech": "Show Tesla brand favorability declining in 2022 and division among partisan lines. Such brand damage can impact demand. Does Tesla track favorability? And how will any brand image be mitigated?",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 17
},
{
"name": "Elon Musk",
"speech": "Well, let me check my Twitter account. Okay, so I've got 127 million followers. It continues to grow very rapidly. That suggests that I'm reasonably popular. It might not be popular the way with some people, but for the vast majority of people, my follow count speaks for itself. I'm the most interactive account -- social media account, I think, maybe in the world, certainly on Twitter, and that's actually predated the Twitter acquisition. \r\nSo I think Twitter is actually an incredibly powerful tool for driving demand for Tesla. And I would really encourage companies out there of all kinds, automotive or otherwise, to make more use of Twitter and to use their Twitter accounts in ways that are interesting and informative, entertaining, and it will help them drive sales just as it has with Tesla. So the net value of Twitter, apart from a few people are complaining, is gigantic, obviously.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 18
},
{
"name": "Martin Viecha",
"speech": "Thank you. Let's go to the next question. Please provide a detailed explanation of where you are on the 4680 ramp. What are the current roadblocks? And when do you expect to scale to 10,000 vehicles a year -- a week?",
"session": "Answer",
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{
"name": "Drew Baglino",
"speech": "Yes. Thanks, Martin. First, I just want to say congrats and thanks to the Tesla 4680 team for achieving 1,000 a week in Q4. It was no small feat. Definitely a result of more than a couple of years of hard work. As far as where we stand in Texas, 1 of 4 lines are in production, with the remaining 3 in stages of commissioning and install. Really, our 2023 goal as a 4680 team is to deliver a cost-effective ramp of 4680s well ahead of Cybertruck. \r\nFocus areas are dialing in and improving the quality of the high-volume supply mechanical parts and driving factory process yields up as much as possible. Between 2 of those things, if we had achieved those key goals, we'll be well set up to -- for a major 4680 year in 2024.",
"session": "Answer",
"person_id": 393478,
"person_company": null,
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},
{
"name": "Martin Viecha",
"speech": "Thank you. Next investor question is Elon said previously that FSD Hardware 4 will most likely come first in Cybertruck. Is that still the current plan? Do you expect there to be an upgrade path for Hardware 3 cars to Hardware 4?",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 21
},
{
"name": "Elon Musk",
"speech": "Yes, Cybertruck will have Hardware 4. And to be clear, for 2023, Cybertruck will not be a significant contributor to the bottom line but it will be into next year. So it's an incredible product. I can't wait to drive it personally. It will be the car that I drive every day. I actually just I'm wearing the T-shirt with this matched glass. And it's just one of those products that only comes along once in a while, and it's really special. \r\nSo yes, so with respect to upgrading cars on Hardware 3, I don't think that will be needed. Hardware 3 will not be as good as Hardware 4, but I'm confident that Hardware 3 will so far exceed the average -- the safety of the average human. So [indiscernible] like how do we get ultimately to, let's say, for argument's sake if Hardware 3 can be, say, 200% or 300% safer than human, Hardware 4 might be 500% or 600%. It will be Hardware 5 beyond that. \r\nBut what really matters is are we improving the average safety on the road. But it is the cost and difficulty of retrofitting Hardware 3 with Hardware 4 is quite significant. So it would not be, I think, economically feasible to do so.",
"session": "Answer",
"person_id": 175883,
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"component_order": 22
},
{
"name": "Martin Viecha",
"speech": "Thank you. The next question is for Zach. Zach, when do you think Tesla Insurance will become big enough revenue source to warrant providing more details in the financials of the business so investors can compare it to other insurance companies?",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 23
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{
"name": "Zachary Kirkhorn",
"speech": "Yes. I think it's probably going to take some time before this business is large enough for specific financial disclosures. But I'm happy to provide an update on where we stand in the business. So we're currently at a $300 million annual premium run rate as of the end of last year. We're growing 20% a quarter so it's growing faster than the growth in our vehicle business. \r\nAnd in the states in which we're operating, on average, 17% of the customers in the states are using a Tesla Insurance product. And that number continues to tick up as we spend more time in markets. And we see most of the adoption occurring when folks take delivery of a new car, as they're setting up insurance for the first time as opposed to going back and switching when they already have insurance set up. So there's an inherent stickiness in the Insurance business.",
"session": "Answer",
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{
"name": "Elon Musk",
"speech": "No, go ahead.",
"session": "Answer",
"person_id": 175883,
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},
{
"name": "Zachary Kirkhorn",
"speech": "No, I was just going to say, just as a broader reminder on kind of the motivation for starting this business, it was to improve and still is to improve the total cost of ownership of our cars, given that we're seeing high premiums of insurance from third-party companies. And that remains our priority here. We'll obviously run this as a healthy business, but we want to make sure we keep our costs low and insurance stays affordable to our customers.",
"session": "Answer",
"person_id": 385023,
"person_company": null,
"component_order": 26
},
{
"name": "Elon Musk",
"speech": "Yes. And so there are 2 really important side benefit to our Tesla Insurance that are worth mentioning, one of which Zach alluded to, which is that just by Tesla operating insurance for our cars at a competitive rate, that makes the other car insurance companies offer better rates for Teslas. So it has a bigger effect than you think because it improves total cost of insurance costs even when they don't use Tesla Insurance, because now the guy goes up to the world have to compete with Tesla and cannot charge outrageous insurance for Teslas. So it's great. So it has an amplified effect, very important. \r\nThen it is also giving us a good feedback loop into minimizing the cost of repair of Teslas for all Teslas worldwide because we obviously want to minimize the cost of repairing at Tesla if it's in a collision and for Tesla Insurance. And previously, we didn't actually have good insight into that because the other insurance companies would cover the cost. And actually, the cost, in some cases, were unreasonably high. \r\nSo we've actually adjusted the design of the car and made changes in the software of the car to minimize the cost of repair, obviously minimize -- first, the best repair is no repair, avoid the accident entirely, which since every Tesla comes with the most advanced active safety in the world, whether or not you buy full self-driving, you still get the intelligence of full self-driving for active safety, active collision prevention. So it's giving us this really good feedback before, again, reducing cost -- total cost of ownership and also just figuring out how to get -- if somebody's cars in an accident, most accidents are actually small. They're like a broken fender or scratched side of the car or something like, the vast majority of accidents. \r\nBut we're actually solving how to get somebody's car repaired very quickly and efficiently and back in their hands. And like I said, those improvements actually apply then to old cars. And we're making just to emphasize another key point because some of these points might be like, so I apologize for being repetitive. \r\nBut it's remarkable how small changes in design of the bumper and improving -- obviously improving the logistics of spare part, providing spare parts needed for collision repair, have an enormous effect on the repair cost. So if you're waiting for a part to get repaired and that part takes a month, now you've got a month of having to rent another car. It's extremely expensive. And of course, you're missing the car that you love and the 1 you actually want to drive. So this has actually a very significant effect on total cost of ownership and customer happiness.",
"session": "Answer",
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{
"name": "Martin Viecha",
"speech": "Thank you. The next question from investors is, is Cybertruck production still on track for midyear?",
"session": "Answer",
"person_id": 370659,
"person_company": null,
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},
{
"name": "Elon Musk",
"speech": "We do expect production to start, I don't know, maybe sometime this summer. But I always like a downplay at the start of production because the start of production is always very slow. It increases exponentially, but it's always very slow at first. So I wouldn't put too much stock in start of production. It's kind of when does volume production actually happen, and that's next year.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 29
},
{
"name": "Drew Baglino",
"speech": "Yes, that's on. Like just to emphasize on that, we've started installation of production equipment here in Giga Texas, castings, GA, general assembly, body shops. We built all our beta vehicles, some more coming still in the next month, but as you said, the ramp will really come 2024.",
"session": "Answer",
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},
{
"name": "Elon Musk",
"speech": "Yes, exactly.",
"session": "Answer",
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"person_company": null,
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},
{
"name": "Martin Viecha",
"speech": "And the last investor question is with near-infinite global demand for energy storage, where will Tesla build the next Megapack factories? How many are needed on each continent?",
"session": "Answer",
"person_id": 370659,
"person_company": null,
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},
{
"name": "Elon Musk",
"speech": "It's a good question. It's not something we -- I think we'll provide an update about that in the future, but it is something we're thinking about very carefully. I really kind of like what is the fastest path to 1,000 gigawatt-hours a year of production. And you'll see announcements come out later this year and next that answer that question.",
"session": "Answer",
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},
{
"name": "Martin Viecha",
"speech": "Thank you. Okay. And now let's go to analyst questions. The first analyst question comes from Rod Lache from Wolfe Research.",
"session": "Answer",
"person_id": 370659,
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},
{
"name": "Rod Lache",
"speech": "Just firstly, it sounds like your 1.8 million unit volume indication for this year is somewhat more supply constrained than demand constrained. Then I have a follow-up on cost. Is that an accurate statement?",
"session": "Question",
"person_id": 370532,
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{
"name": "Elon Musk",
"speech": "Well, okay. I mean, our internal production potential is actually closer to 2 million vehicles, but we were saying 1.8 million because I don't know, it just always seems to be some force majeure thing that happened somewhere on Earth. And we don't control if there's like earthquakes, tsunamis, wars, pandemics, et cetera. So if it's a smooth year, actually, without some big supply chain interruption or massive problem, we actually have the potential to do 2 million cars this year. We're not committing to that but I'm just saying that's the potential. So -- and I think there would be demand for that, too.",
"session": "Answer",
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{
"name": "Rod Lache",
"speech": "Yes, thanks for clarifying that. And on the cost side, the numbers that we just saw from you, as you pointed out, were weighed down by the 4680 ramp, the Berlin, Austin Giga things, processes, not at rate. Can you give us a bit of an indication of the headwind that you're absorbing from those things like you did last quarter? \r\nAnd then lastly, on cost, do you think that we can tease out an interesting data point from on where battery costs are headed from this announcement that you just made last night? If I'm correct, it looks like the investment cost per kilowatt-hour is less than half of what I've seen anywhere else, maybe $30 a kilowatt-hour for that capacity.",
"session": "Question",
"person_id": 370532,
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},
{
"name": "Elon Musk",
"speech": "I don't think we want to say the specific number, but it's interesting, if you look at the size of the -- of Giga Nevada that is allocated to make 100 gigawatt-hours, is a small fraction of the size that currently makes about 35.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
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},
{
"name": "Drew Baglino",
"speech": "Yes. I mean, the goals we've outlaid at Battery Day on the investment required to deploy cell manufacturing, I mean, that's been a key focus of ours and the team is doing a good job hitting the marks on that focus.",
"session": "Answer",
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{
"name": "Elon Musk",
"speech": "Yes. And it goes back to the point I was making. I said it several years ago, I think Tesla's really the competitive strength that will be, by far, the hardest for other companies to replicate is Tesla being just d*** good at manufacturing and having the most advanced manufacturing technology in the world. And if you've got that sort of advanced manufacturing toolbox, you can apply it to many things and we're applying it now to battery cells. \r\nI should also say that there -- we have other products in development. We're not going to announce them obviously, but they're very exciting. And I think we'll the minds when they -- when we reveal them. Tesla has the most exciting product of any company on Earth by a long shot. And we'll continue to, I think, be in that position. We've got more great ideas. I mean, we know what to do with So the future is very exciting. \r\nAs I said in the last call, there's going to be bumps along the way and we'll probably have a pretty difficult recession this year, probably. I hope not, but probably. And so 1 can't predict the short-term sort of stock value because when there's a recession and people panic and the stock market, then prices of stocks value of stocks can drop sometimes to surprisingly low levels. But long term, I'm convinced that Tesla will be the most valuable company on us.",
"session": "Answer",
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{
"name": "Martin Viecha",
"speech": "Thank you. And I think, Zach, there was a question on cost headwind in Q4.",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 41
},
{
"name": "Zachary Kirkhorn",
"speech": "Yes. I mean, our weighted average COGS for the company, if you were to assume Austin and Berlin were at the cost structure of our other factories, it was on the order of [ 2,000 to 2,500 ] of headwinds. So I think from there, you can back into margin impact of those factories as of end of Q4.",
"session": "Answer",
"person_id": 385023,
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{
"name": "Martin Viecha",
"speech": "Thank you very much. And let's go to the next question from Pierre Ferragu from New Street Research.",
"session": "Answer",
"person_id": 370659,
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{
"name": "Pierre Ferragu",
"speech": "Zach, actually, I'd like to follow up on the data point you just gave on cost. If I look back at the COGS per car, you guys bottom close to $36,000 in the middle of 2021. And then the number went up as you had to face with inflation in input costs and the ramp of Berlin and Texas. And this quarter, I think we are close to $40,000 and we peaked maybe close to $42,000 at some point last year. And so my question from here is, how much time do you think it takes you to get back to this kind of $36,000, which would mean Berlin and Texas and [indiscernible] all that stuff is normalizing, is that like -- and that would be like a kind of like a 10% decline in the COGS per car? Is that something we can hope to see this year or is that too optimistic?",
"session": "Question",
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{
"name": "Zachary Kirkhorn",
"speech": "The Austin and Berlin ramp in efficiencies and 4680 will make a substantial amount of progress on that over the course of the year, and that's within Tesla's control. We're doing a lot of work on cost reduction outside of that. And we talked about supply chain costs, expedite logistics, attacking everything.\r\nOn the raw materials and inflation side, where lithium is the large driver there and this was a meaningful source of cost increase for us, we'll have to see where lithium prices go. And we're not fully exposed to lithium prices, but I think in general, is what we've seen from our forecast here, cost per car of lithium in 2023 will be higher than 2022. So that's a headwind that would have to be overcome to return back to those levels. So I don't think we'll get there this year but I think we'll make progress. And we'll continue to find ways to offset these raw material costs that we don't have control over. Andrew, is there anything on that?",
"session": "Answer",
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},
{
"name": "Lars Moravy",
"speech": "Yes. Like on the non-cells raw material, we begin to capture benefits of indexes tapering out, but due to the length of various supply chains, it does take time before this is reflected in our financials. And while alumina is down like 20% year-over-year, steel is about 30% down year-over-year, the global non-cells raw materials market continues to be influenced by geopolitical situations in Europe, high production cost due to labor cost increases and energy spikes and disruptions due to natural disasters like typhoon in Korea 4 months ago, pandemic lockdowns. \r\nSo we believe that meaningful price corrections will ultimately come but it remains uncertain exactly when. In the meantime, we continue to redesign supply chain to make it more efficient and work with our supplier partners to find more efficiencies, streamline logistics and transportation to produce cars.",
"session": "Answer",
"person_id": 482177,
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{
"name": "Martin Viecha",
"speech": "Sorry, do you want to go say something?",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 47
},
{
"name": "Drew Baglino",
"speech": "I was going to say, we're also -- our fleet is starting to mature, the 3, Y fleet. And we're gathering a lot of data out of that fleet to understand how we can sort of bring some margin that we didn't know we had out of the product. So over the course of 2023 on the powertrain side, we're actually going to go after sort of some materials where we're paying for more performance than we need or we have more content than we need without impacting reliability at all.\r\nAnd that will actually add up to a pretty significant cost reduction on the powertrain side over the course of 2023. So we're not just sort of relying on supply. We're also doing design actions to bring cost out.",
"session": "Answer",
"person_id": 393478,
"person_company": null,
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},
{
"name": "Elon Musk",
"speech": "My guess is if the -- if the recession is a serious one and I think it probably will be but I hope it isn't, that would lead to meaningful decreases in almost all of our input costs. So we expect to see deflation in our input costs most likely, which would then lead to, yes, better margin. I'm just guessing here. So this is -- that would be my, I guess.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 49
},
{
"name": "Pierre Ferragu",
"speech": "So as a quick follow-up, Elon, I was thinking about like FSD, and when you look at like the situation today compared to a year ago, it's -- like the progress has been, like, amazing in the quality of the product but also its rollout. And so I was wondering, how much is this like impacting the take rate of FSD today? So do you already see that people are getting more excited by FSD because they see it around them on 400,000 cars and they see the value of the service already? Or is that too early to really see like to expect like an uptick in the take rate?",
"session": "Question",
"person_id": 356336,
"person_company": null,
"component_order": 50
},
{
"name": "Elon Musk",
"speech": "The trend is very strong towards use of FSD. And as you alluded to, the -- with each incremental improvement, the enthusiasm obviously increases. And so I think something that still a lot of people out there don't quite appreciate is that Tesla's, Tesla is as much as a software company as a hardware company, but Tesla is really one of the world's leading AI companies. This is kind of a big deal with AI on the software side and on the hardware side.\r\nWith the Hardware 3 inference computer still the most efficient inference computer in the world despite being, at this point, 5 years old from the design point. And with Hardware 4 coming and then Hardware 5 beyond that where there are significant leaps. And the Dojo computer, we expect to be using that operationally at Tesla later this year. And we're seeing just a lot of world-class AI talent join the company. \r\nThere's also the long-term potential of Optimus where we're able to use our expertise in electric motors and power electronics, batteries and advanced manufacturing to be able to make a humanoid robot that is actually useful and can be made at high volume with exceptional capabilities because of the AI that where we take the -- because the car is like a robot on 4 wheels and Optimus is a robot on legs. \r\nBut the -- as we get closer and closer to solving real-world AI, and we don't see anyone even close to us in achieving this, the value -- I think you appreciate this and a few others do but most don't know what I'm talking about. And so -- but it's -- this is the thing that has order of magnitude potential market cap improvement for Tesla.",
"session": "Answer",
"person_id": 175883,
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{
"name": "Martin Viecha",
"speech": "And the next question comes from Alex Potter from Piper Sandler.",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 52
},
{
"name": "Alex Potter",
"speech": "Okay, great. So a quick 1 on FSD. This, I guess, for Zach. Obviously, you unlocked some deferred revenue in the quarter that will translate presumably into higher margins on every incremental sale going forward so long as people opt in for FSD. But was wondering if you're able to disclose the percentage of the $15,000 price that you're not going to be able to recognize as revenue upfront rather than deferred.",
"session": "Question",
"person_id": 140104,
"person_company": null,
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},
{
"name": "Zachary Kirkhorn",
"speech": "Yes. I mean, the way that we've structured this is a full self-driving package has 2 components. There's enhanced Autopilot, the price of which is listed on the website. We fully recognize that. Then there's an incremental, which is for the additional features of full self-driving offers and we've released a portion of that. \r\nAnd then there's a minority of the total package that's remaining that will be released over time as software updates are there. And in our shareholder letter, in addition to disclosing the dollar amount of the deferred revenue release, we also included in there the dollar value of the balance of unreleased deferred revenue that will be released over time with future software updates.",
"session": "Answer",
"person_id": 385023,
"person_company": null,
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{
"name": "Alex Potter",
"speech": "Okay, great. And then maybe 1 additional question here on the incremental capacity in Nevada, the 4680s that you're planning. That's a lot of batteries obviously, and presumably, you won't be putting all of those in Tesla Semi. So I guess, 2 questions about that incremental capacity. First, is it correct to assume that all of those 4680s are going to be more or less fungible and usable in your entire range of products? And if the answer is yes, then if you had to guess, how do you think that 100 gigawatt-hours would be allocated between your various end markets?",
"session": "Question",
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{
"name": "Elon Musk",
"speech": "I don't know, this is a bit too much guessing at this point.",
"session": "Answer",
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{
"name": "Drew Baglino",
"speech": "Yes.",
"session": "Answer",
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{
"name": "Elon Musk",
"speech": "But -- yes, Yes.",
"session": "Answer",
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{
"name": "Drew Baglino",
"speech": "I mean, you're right. Not all of the 100 gigawatt-hours are going to go into the Semi trucks, that is correct.",
"session": "Answer",
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{
"name": "Elon Musk",
"speech": "Let's say like -- I alluded to a number of future products. Those future products would use the 4680.",
"session": "Answer",
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{
"name": "Martin Viecha",
"speech": "Thank you. And the next question comes from George from Canaccord Research.",
"session": "Answer",
"person_id": 370659,
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"component_order": 61
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{
"name": "George Gianarikas",
"speech": "So you recently adjusted prices and that may have put many of your competitors in the back foot. In addition to that, capital markets have recently gotten a lot tougher. So with those factors in mind, I'm curious how you see the current competitive landscape changing over the next few years. And who do you see as your chief competitors 5 years from now?",
"session": "Question",
"person_id": 547012,
"person_company": null,
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},
{
"name": "Elon Musk",
"speech": "Five years is a long time. As with the Tesla order part, AI team, until late last night and just we're just asking guys like, so who do we think is close to Tesla with -- a general solution for self-driving? And we still don't even know really who would even be there just in second. So yes, it really seems like we're -- I mean, right now, I don't think you could see a second place with a telescope, at least we can't. So that wouldn't last forever. So in 5 years, I don't know, probably somebody has figured it out. I don't think it's any of the car companies that we're aware of. But I'm just guessing that someone might be right out eventually, so yes.",
"session": "Answer",
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{
"name": "Lars Moravy",
"speech": "I mean, beyond that, Elon, like in the vehicle space, even though the market is shrinking, we're growing and EVs have doubled almost year-over-year. So like it ever keeps up with the trend of EVs is going to be our competitor. The Chinese are scary, we always say that. But like a lot of people always look at the EV market share, but we always look at it is how much of the total vehicle space do we have, and we're just going to keep growing in that space. There's 95% for us to go get.",
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{
"name": "Elon Musk",
"speech": "Yes. And I don't want to say like -- I think we have a lot of respect for the car companies in China. They are the most competitive in the world, that is our experience and the Chinese market, it is the most competitive. They work the hardest and they work the smartest, that's so for the car companies that we're competing against. And so we guess, there are probably some company out of China as the most likely to be second to Tesla. \r\nWe are -- our team is winning in China. And I think we actually are able to attract the best talent in China. So hopefully, that continues. So yes, [indiscernible] future well, it's going to be great.",
"session": "Answer",
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{
"name": "George Gianarikas",
"speech": "Just as a follow-up, the Inflation Reduction Act has created huge tax incentives for commercial vehicles. You mentioned an incredibly interesting product pipeline. Are there maybe some plans to accelerate commercial vehicle form factors outside of the Tesla Semi to help accelerate EV adoption?",
"session": "Question",
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{
"name": "Elon Musk",
"speech": "Well, I was basically saying that, yes, but I'm not going to give you details because this is -- nice try, nice try. Yes, of course, of course. So to always look at like, what is the limiting factor for new vehicles? Because if the -- for the longest time, we've been constrained on total cell lithium-ion production output. And so people said, like, why not bring this other car to market or that other car to market? Well, it doesn't really help if all you're doing is shuffling around the batteries from 1 car to another. In fact, it hurts because you add complexity but you don't add incremental volume. \r\nSo it's sort of pointless, in fact, like counterproductive to add model complexity without solving the availability of lithium-ion batteries. So as we get -- so we want new product introduction to match where the cells are available or that new product to use those cells without cannibalizing the cells of the other cars. That's the actual limiting factor if we need new models, not anything else really.",
"session": "Answer",
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{
"name": "Martin Viecha",
"speech": "Thank you. Let's go to the next question. The next question comes from William Stein from Truist.",
"session": "Answer",
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{
"name": "William Stein",
"speech": "You started to answer this earlier but I'd like to ask this question about the AI elements of your business and ask if you could comment on progress around Dojo and Optimus and your anticipation for the likelihood, for example, for the company to disconnect the GPU cluster in favor of Dojo and to have some market achievement an Optimus.",
"session": "Question",
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{
"name": "Elon Musk",
"speech": "Yes. I mean, obviously, with -- just we're still at the early stages, there are big [indiscernible] in any predictions. It's like -- I think easy to predict long term but hard to predict the time in between now and then. But it's -- we think Dojo will be competitive with the NVIDIA H1 at the end of this year and then hopefully surpass it next year. And the key there is -- I think what's the energy usage required for a given amount of -- if you're training a frame of video, how -- what's the energy cost required to do that training? \r\nAnd we think probably we said this already actually at AI Day, so it's not new information, but we do see potential for an order of magnitude improvement relative to GPU, what GPUs can do for Dojo, which is obviously very specialized for AI training. It's hyper-specialized for AI training. It's not -- wouldn't be great for other things but it should be extremely good for AI training. \r\nSo just like if you do an ASIC or something, it's going to be better than a CPU. This is sort of, in some ways, like a giant ASIC. And we're able to -- since we're operating one of the biggest GPU clusters in the world already, the -- we've got a good sense of how efficient the GPU clusters operate and what Dojo needs to do in order to be competitive. But we think that it does have a fundamental architectural advantage because it's designed not to be -- the GPU is trying to do many things for many people. We're trying to do graphics, video games. It's doing crypto mining. It's doing a lot of things. \r\nDojo is just doing 1 thing and that is training. And we're also optimizing the low-level software too. So it had a [indiscernible] level so it's just insanely good at efficient training. And the intra-communication between the Dojo modules is extremely high. It's not going across an Ethernet cable. It's like -- so anyway, the -- we see a path to an order of magnitude improvement in the energy efficiency or per given unit of training. But we also have to achieve that. \r\nAnd so when will it be achieved? It's hard to say but we do see a path to get there. And then also on inference, like once you've got something trained, well, if you want to have a product that's a consequence of that training, that product may not be anything to do with cars. Then the efficiency of inference is extremely important. And we also have, by far, the most efficient inference computer at the -- with the FSD computer in the car. This has potential for products that are even really in automotive.",
"session": "Answer",
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{
"name": "Martin Viecha",
"speech": "Thank you. And William, do you have a follow-up?",
"session": "Answer",
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{
"name": "William Stein",
"speech": "Yes. It sounds like the 1.8 million units you expect this year is supply, not demand-limited supply, it sounds like by the lithium batteries. If you were to become demand limited, can you talk to us about your propensity to use price and your relatively high industry margins to grow units and share?",
"session": "Question",
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{
"name": "Zachary Kirkhorn",
"speech": "Yes. To be clear, the 1.8 million is not cell supply limited. And I mean, we did address that number earlier in the call if you want to answer.",
"session": "Answer",
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{
"name": "Elon Musk",
"speech": "Yes. It's roughly -- cell supply is roughly matched with that. And [ 1.8 million ] cars, if we get lucky, it could be more. And then the rest would go into stationary storage, the Powerwall and Megapack. So yes.",
"session": "Answer",
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{
"name": "Martin Viecha",
"speech": "Okay. Let's have the final question from Adam Jonas.",
"session": "Answer",
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{
"name": "Adam Jonas",
"speech": "Elon, first question is, is it time for Tesla to significantly expand the captive finco? I mean, you only have like $4.5 billion of receivables. It's basically nothing compared to other big auto companies. And then I have a follow-up.",
"session": "Question",
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{
"name": "Elon Musk",
"speech": "Zach maybe is best to answer that.",
"session": "Answer",
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{
"name": "Zachary Kirkhorn",
"speech": "Yes. I mean, the way that we've been using captive financing so far is to plug what we believe to be gaps in the market of existing third-party products. And so we have a couple of offerings in Europe. We do loans for our energy business, retail energy business here in the U.S. We do leasing and we do a small amount of U.S. loans that are very targeted.\r\nAnd so we're using captives to support market caps, as I mentioned. So basically, it's a vehicle to support vehicle sales, make sure customers have access. I do think there's opportunity here to continue to grow this. We are growing it slowly here. It is a consumer of cash so we're being cautious on how we do that. But the plumbing is in place to do a lot more here. And I think we'll have to see how things unfold over the course of the year and make decisions real time as to how much we ramp it up versus ramp it back.",
"session": "Answer",
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{
"name": "Elon Musk",
"speech": "I think if we see a severe recession this year, which like I said, hopefully, we don't, in severe recessions, cash is king big time because it's in such short supply. So we want to be cautious about using cash for loans and that sort of thing for cars. I feel we're in a very strong position to get through a recession because we really don't have any debt, and we've got over $20 billion of cash, which is great. The cash is earning a ridiculous return, a good return, so it's like nontrivial. And the interest rate actually in the $20 billion is earning like quite a good amount. \r\nAnd I've made this point on Twitter a few times. I'm sure a lot of people on this call understand the fact -- the basic value of a security is a function of the [indiscernible] rate or we'll see how risk-free it really is but the T-bill rate. So if you've got -- I think the -- I recall correctly, the S&P 500 has a long-term rate of return of roughly 6%. And so I think that needs to be very cautious about having Fed rates that potentially exceeds 6%. \r\nLike if we see deflation, and I think we are seeing deflation, then you would add the deflation number to the \"risk-free rate\" from the Fed. And as that starts to exceed 6%, now you're starting to exceed the long-term return of the S&P 500 and starts to become questionable as to why don't just put your money in a savings account essentially instead of in the S&P 500 if the S&P 500 is variable and the bank interest rate is not? This is -- so basically, the is the risk of crushing the value of all equities. Quite a serious danger.",
"session": "Answer",
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{
"name": "Adam Jonas",
"speech": "And just a follow-up. I don't want to steal thunder from March 1 and in Austin, but how close are we to that step change improvement in BoM cost where you could sell an EV for under $25,000 or $30,000 and actually generate a profit, that kind of real moving assembly line moment in manufacturing? Again, I don't want to steal the thunder but just if you wanted to kind of wrap up with thoughts there, that would be helpful.",
"session": "Question",
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{
"name": "Elon Musk",
"speech": "I mean, I'd love to answer -- I'll probably be asking the same question, but we would be jumping the gun on future announcements.",
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{
"name": "Martin Viecha",
"speech": "Fantastic. Thank you very much, everyone, for all your good questions, and we will see you again in 3 months' time.",
"session": "Answer",
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{
"name": "Elon Musk",
"speech": "Thank you.",
"session": "Answer",
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{
"name": "Martin Viecha",
"speech": "Thank you. Bye-bye.",
"session": "Answer",
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],
"title": "Tesla, Inc., Q4 2022 Earnings Call, Jan 25, 2023",
"quarter": 4,
"year": 2022
}
},
{
"transcript_title": "Tesla, Inc. - Q3 2022",
"transcript_name": "Tesla, Inc., Q3 2022 Earnings Call, Oct 19, 2022",
"ticker": "NASDAQ:TSLA",
"transcript_url": "https://wkarticles.blob.core.windows.net/finnhub/snp_transcript_2659286",
"date": "2022-10-19",
"year": 2022,
"quarter": 3,
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"transcript": [
{
"name": "Martin Viecha",
"speech": "Good afternoon, everyone, and welcome to Tesla's Third Quarter 2022 Q&A Webcast. My name is Martin Viecha, VP of Investor Relations, and I'm joined today by Elon Musk, Zachary Kirkhorn and a number of other executives. Our Q3 results were announced at about 3 p.m. Central Time in the update that we published at the same link as this webcast. \r\nDuring the call, we will discuss our business outlook and make forward-looking statements. These comments are based on our predictions and expectations as of today. Actual events or results could differ materially due to a number of risks and uncertainties, including those mentioned in our most recent filings with the SEC. During the Q&A session portion of today's call, please limit yourself to 1 question and 1 follow-up. [Operator Instructions] But before we jump into Q&A, Elon has some opening remarks. Elon?",
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"name": "Elon Musk",
"speech": "Thank you, Martin. So just to do a Q3 recap. Q3 was another record quarter on many levels. We had our industry-leading operating margin reach 17%. And our free cash flow surpassed $3 billion in Q3 and approached $9 billion in the past 12 months. As our factories ramp, we're looking forward to a record-breaking Q4. So it really, knock on wood, it looks like we'll have an epic end of year. So Q4 is looking extremely good. \r\nOn the production ramp, Giga Berlin achieved another milestone of 2,000 cars made in a week with very good quality and is ramping rapidly. Giga Austin or Giga Texas should reach this milestone very soon. And in fact, just yesterday, we extrapolated yesterday's hold rate, it would be 2,000.\r\nOur production of 4680 cells has tripled in Q3 compared to the previous quarter. We are finally gaining rapid traction on the 4680 cell. And its output is growing rapidly, and we expect it to start incorporating in cars and having it be a significant portion of our production in Texas in the coming months. We also have our second generation of manufacturing equipment for 4680 cells in Texas, which continues to show great progress along with our original pilot line in Fremont. The Fremont factory team once again reached record production in Q3. And we intend to keep raising production in Fremont. \r\nRegarding Autopilot, at the end of -- at the end of September, we hosted our second AI Day and [indiscernible] the first prototype of our Optimus robot, released updates on our training computer and high range of improvements of full self-driving software. Our vehicles have now driven nearly 60 miles in full self-driving beta mode, and this number continues to grow exponentially. Our goal with that AI Day was to post recruiting, and we've seen a massive influx of world-class artificial intelligence engineer and scientist resume. So it generated a tremendous amount of interest from some of the best AI researchers in the world. I can't emphasize the importance of this enough because I think finally has become clear to the smallest AI technologists in the world that Tesla is among the very best. \r\nSo this quarter, we expect to go to wide release of full self-driving beta in North America. So anyone who has ordered a full self-driving Beta -- full self-driving will have access to the FSD Beta program this year, probably about a month from now. So -- and then obviously, any new -- anyone who buys a car and purchase a full self-driving option will immediately have that available to them. So the safety that we're seeing when the car is in FSD mode is actually significantly greater than the safety we're seeing when it is not, which is a key threshold for going to a wide Beta. \r\nLet's see with respect to demand. We've got a lot of questions about demand in recent weeks. I can't emphasize enough, we have excellent demand for Q4, and we expect to sell every car that we make for as far in the future as we can see. So the factories are running at full speed, and we're delivering a recovery make and keeping operating margins strong. We are still a very small percentage of the total vehicles on the road. Of the 2 billion [indiscernible] trucks on the road, we only have about 3.5 million. So we're about a long way to go to even reach 1% of the global fleet. \r\nLet's see. Kind of based on my -- what people -- based on many things, but certainly questions I get on Twitter about buybacks. And I think every one of our Board members has gotten questions about buybacks. The -- we've debated the buyback idea extensively at the Board level. The Board generally thinks that it makes sense to do a buyback. But we want to work through the right process to do a buyback, but it's certainly possible for us to do a buyback on the order of $5 billion to $10 billion. Even in the downside scenario next year, even if next year is -- was a very difficult year, we still have the ability to do a $5 billion to $10 billion buyback. This is obviously pending Board review and approval. So it's likely that we'll do some meaningful buyback. \r\nSo in conclusion, while the market teams revolve around the short term, it's very important to focus on the long term. I can't emphasize this enough with investors and I think long-time investors, obviously recognize it with Tesla. We have our sort of local ups and downs, but long-term trend has been extremely good. And several years ago, I said, I think on our earnings call, that I thought it was possible for Tesla to be worth more than Apple, which was then the highest cap company, I think, in the market. At that time, I think it was around $700 billion. And I said required incredible execution, at least some luck, and we didn't only achieve that. Tesla went, in fact, or passed Apple's market cap [ time ]. And now, I have the opinion that we can far exceed Apple's current market cap. In fact, I see a potential path with Tesla worth more than Apple and Saudi Aramco combined. So now that doesn't mean it will happen or that will be easy. In fact, I think it will be very difficult. It will require a lot of work, some very creative new products, manage expansion and always luck. But for the first time, I am seeing -- I see a way for Tesla to be -- let's say, roughly twice the value of Saudi Aramco. I think that's -- I haven't quite seen that yet. I mean this is the first time I've seen that potential. \r\nSo we have an incredible product portfolio. I think we've got the most exciting product portfolio of any company on earth, some of which you've heard about, some of which you haven't. We're in the final lap for Cybertruck. We building a Cybertruck line here at Giga Texas and making a lot of progress in the robotaxi platform design. \r\nAnd then with respect to batteries, we're moving as fast as possible to have -- to achieve 1,000 gigawatt hours a year of production capacity in the United States vertically integrated. And our cap load refining, we're moving a ton to do that. \r\nSo I think it's an incredibly exciting future and really an unprecedented future. None of this would be possible without the incredible team that we have here at Tesla. So I'd like to give a huge shout-out to all of our factory employees, engineers, executives and the whole Tesla team. You guys rock. You're the ones that make it happen. Thank you. Thank you, everyone.",
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"name": "Martin Viecha",
"speech": "Thank you very much. And Zach has some opening remarks as well.",
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"name": "Zachary Kirkhorn",
"speech": "Yes. Thanks, Martin. Just to continue on Elon's theme, I just want to thank and congratulate the Tesla team for achieving record vehicle deliveries, production and storage deployments in the third quarter. \r\nOn automotive profitability, our GAAP operating margin was 17.2%, with automotive gross margin at 27.9%. Operating margin is one of our best yet, with improvements in operating leverage. However, Austin and Berlin ramp costs weighed on our margins, particularly if you compare it to Q1. Removing regulatory credits and Austin and Berlin, our operating margins would have been our strongest yet and auto gross margin would have been nearly 30%. Note that while small and growing, each car we build in Austin and Berlin is contributing positively to profitability. \r\nWe also continue to experience margin headwinds associated with macroeconomic conditions, as we've discussed at length on prior calls. In particular, raw materials, logistics and foreign exchange was a big part of this past quarter. \r\nOn energy profitability, we achieved our strongest gross profit yet for this business, driven primarily by record volumes of our Megapack and Powerwall products. Our free cash flows were also a record despite an increase in cars in transit at the end of the quarter, which has a negative impact on working capital. \r\nSpecifically on cars in transit, as noted in our press release on October 2, we've started to experience limits on outbound logistics capacity which we didn't anticipate. This issue is particularly present for ships from Shanghai to Europe and local trucking within certain parts of the U.S. and Europe. Our historical operating pattern of batch building by delivery region leads to extreme concentrations of outbound logistics needs in the final weeks of each quarter. Just to put this in perspective, roughly 2/3 of our Q3 deliveries occurred in September and 1/3 in the final 2 weeks. As a result, we have begun to smooth the regional builds throughout the quarter to reduce our peak needs for outbound logistics. We expect this to simplify our operations, reduce costs and improve the experience of our customers. \r\nAs we look ahead, our plans show that we're on track for the 50% annual growth in production this year, although we are tracking supply chain risks which are beyond our control. On the delivery side, we do expect to be just under 50% growth due to an increase in the cars in transit at the end of the year, as noted, just above. This means that, again, you should expect a gap between production and deliveries in Q4, and those cars in transit will be delivered shortly to their customers upon arrival to their destination in Q1. Boston and Berlin ramp costs will continue to weigh on margins, although we expect the impact to be less than what we saw in Q3. And as Elon mentioned, we are continuing to build as many cars as possible while also maintaining strong operating margins. Thank you.",
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{
"name": "Martin Viecha",
"speech": "Thank you very much. And let's go first to the shareholder questions. The first shareholder question is given the stringent battery content and assembly requirements for consumer tax credit eligibility under the Inflation Reduction Act, can you speak to Tesla's ability to meet those thresholds in each of 2023, 2024 and 2025 through your existing and planned supply chain?",
"session": "Answer",
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{
"name": "Elon Musk",
"speech": "Well, yes, I mean I think just at a high level, I'd say, we do expect to fully meet the IRA's requirements. Do you want to add?",
"session": "Answer",
"person_id": 175883,
"person_company": null,
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{
"name": "Zachary Kirkhorn",
"speech": "Yes. We view that passing of the Inflation Reduction Act there's a significant boost towards accelerating automation, while also scaling the battery supply chain at large in the United States. We expect Treasury to publish detailed guidance by the end of the year. Until such time, it's difficult to fully determine the eligibility criteria, but we believe Tesla is very well positioned to capture a significant share of that for solar storage and also electric vehicles.",
"session": "Answer",
"person_id": 385023,
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},
{
"name": "Elon Musk",
"speech": "Yes, I'd like to say, we're -- like I said earlier, we're going to go basically pedal to the metal as fast as humanly possible to get to 1,000 gigawatt hours a year of production in the U.S. vertically integrated.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
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},
{
"name": "Martin Viecha",
"speech": "Thank you. Let's go to the next question. The next question is, what updates can you offer on the backlog and the recent order intake trends, especially outside of the U.S. and especially in China?",
"session": "Answer",
"person_id": 370659,
"person_company": null,
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},
{
"name": "Elon Musk",
"speech": "Well, it's -- there's definitely -- China is experiencing a reverse of a recession of sorts, which is property market, simply from a property market mostly. And Europe has recession of sorts driven by energy. The U.S. actually isn't -- going North -- North America is a pretty good health. The Fed is raising interest rates more than they should, but I think they'll eventually realize that and bring back down again. \r\nDemand is a little higher than it would otherwise be. But as I said earlier, we are extremely confident of the [indiscernible] Q4, and we anticipate continuing to grow our vehicle production sales deliveries by -- on average 50% a year as far into the future as we can see.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
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},
{
"name": "Martin Viecha",
"speech": "Thank you.",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 10
},
{
"name": "Elon Musk",
"speech": "Actually I want to caveat, I should say, growing production by [ 50% ] every year because deliveries -- we're trying to smooth out the deliveries and not have this crazy delivery way at the end of every quarter. So in fact, we're just fundamentally running out of -- there weren't enough boats, there weren't enough trains, there weren't enough car carriers to actually support the wave because it got too big. So whether we like it or not, we actually have to smooth out the delivery of cars intra-quarter because there aren't just enough transportation objects to move them around.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
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},
{
"name": "Martin Viecha",
"speech": "Thank you. The next question is, do you still expect 50% annualized growth for the foreseeable future? Is this also true specifically for the Chinese domestic market? Do you expect to need to cut vehicle prices or offer incentives in any market to sustain a demand? Or has demand remained stable? Or is it even rising? There are 3 questions there.",
"session": "Answer",
"person_id": 370659,
"person_company": null,
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},
{
"name": "Elon Musk",
"speech": "Well, like I said, we want to sort of focus on a high level on what we think is possible here. We -- to the best of our knowledge, we believe that Tesla will continue to grow deliveries and revenue production at a 50% or greater compound annual growth rate. It might occasionally be a year that is a little less, and then some of years would be maybe a little more or a lot more. In some of our out-year planning, we see potential annual growth rates that are in excess of 50%.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
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},
{
"name": "Martin Viecha",
"speech": "Thank you. The next question is, can you tell us more about the product feature road map beyond new models and FSD, and especially for interior and powertrain of existing vehicle models?",
"session": "Answer",
"person_id": 370659,
"person_company": null,
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},
{
"name": "Elon Musk",
"speech": "Yes. We could, but who wants? Sorry, guys, we can't like jumping on, on future product announcements.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
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},
{
"name": "Zachary Kirkhorn",
"speech": "Committed to continuing [indiscernible].",
"session": "Answer",
"person_id": 385023,
"person_company": null,
"component_order": 16
},
{
"name": "Elon Musk",
"speech": "Yes, we obviously are -- yes. [indiscernible]. But we'll also be committed to continuous growth. Yes. At Tesla, we've always been committed to continuous improvement. So his friends might have asked me like, when should I buy a car, I'm like now because we just keep improving the cars. Always been the latest Tesla. Yes, there's still the latest Tesla. I don't really -- yes, the -- on the gain, we do have some big technology upgrade like Plaid. And by the way, I think the Plaid Model S and X are the best cars on earth. There's nothing even close, in my opinion. Just try one. Epic.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 17
},
{
"name": "Martin Viecha",
"speech": "Thank you. The next question is, we keep hearing of dire energy crisis in Germany this winter. What are Tesla's plans to combat power cuts? And will there be any delays in ramp-up in production from Giga Berlin because of this?",
"session": "Answer",
"person_id": 370659,
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},
{
"name": "Zachary Kirkhorn",
"speech": "Yes, I can take that. I think 2 points on this question. The first is just that based upon everything that we know, we don't see this as a large risk to the company. Even if production did go down for a period of time, this is on near term, it doesn't have any impact on the long term of the company.",
"session": "Answer",
"person_id": 385023,
"person_company": null,
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},
{
"name": "Elon Musk",
"speech": "But we don't -- we have no indication whatsoever that we will have to cut our production in Germany.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 20
},
{
"name": "Zachary Kirkhorn",
"speech": "And we put in place backup plans, and we're working through the supply chain as well. Nearly all of our suppliers are prepared as well. So we'll see how this plays out, but it's not something that we're terribly worried about.",
"session": "Answer",
"person_id": 385023,
"person_company": null,
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},
{
"name": "Martin Viecha",
"speech": "Thank you. And the next question is, how is production planning going for the Cybertruck? What is the initial Phase 1 production target? When can we expect an update on pricing and final design?",
"session": "Answer",
"person_id": 370659,
"person_company": null,
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},
{
"name": "Unknown Executive",
"speech": "Yes. I mean, as Elon said earlier, we'd be facilities preparations here in Giga Texas for Cybertruck. We're still on track to enter early production in the middle of next year. We started our data builds of all of the battery body in the existing...",
"session": "Answer",
"person_id": 182536,
"person_company": null,
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},
{
"name": "Elon Musk",
"speech": "When should I drop my beta?",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 24
},
{
"name": "Unknown Executive",
"speech": "In a few weeks. That's going well, and we continue ramping up through the end of next year and into 2023.",
"session": "Answer",
"person_id": 182536,
"person_company": null,
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},
{
"name": "Elon Musk",
"speech": "Great. Yes, the car is going to be sick and sick. That is going to be a hall of famer next level. \r\nSorry, sorry, I took it longer than expected, but there were a few things that got in the way, like insane constant global supply chain shortages like FedEx, which are most majors if they ever other one.",
"session": "Answer",
"person_id": 175883,
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},
{
"name": "Martin Viecha",
"speech": "Right. Thank you.",
"session": "Answer",
"person_id": 370659,
"person_company": null,
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},
{
"name": "Elon Musk",
"speech": "Of course. There's Tesla Semi, of course. So we'll be handing over our first production Tesla Semis to Pepsi on December 1. I'll be there in person. And we will begin ramping up production of the Tesla Semi, which is a max low, heavy -- heavy truck. That's a Class A truck, Class A truck.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 28
},
{
"name": "Zachary Kirkhorn",
"speech": "No sacrifice to cargo capacity.",
"session": "Answer",
"person_id": 385023,
"person_company": null,
"component_order": 29
},
{
"name": "Elon Musk",
"speech": "Yes, exactly, very important, no sacrifice to cargo capacity, 500-mile range. Just to be clear, 500 miles with the cargo. Yes, 500 miles with the cargo on level ground. Yes, sure. Not up. It's excellent. But the point is it's a long-range truck and even with heavy cargo. And the number of times people all know you can't -- it's impossible to make a long-range heavy-duty Class A truck. And then I'll ask, well, what are your assumptions about what [ hour kilogram ] and what hours per mile, and they look at me with a blank stare and then say hydrogen. I'm like, no, that's not the answer, but I was looking for numbers literally. It's not a number. It's [indiscernible] table. You obviously don't need hydrogen for heavy trucking [indiscernible] you. \r\nAnd we'll be ramping up Semi production through next year. As I think everyone knows at this point, it takes about a year to ramp up production. So we expect to see significant -- we're tentatively aiming for 50,000 units in 2024 for Tesla Semi in North America. And obviously, we'll expand beyond North America. And these would sell -- I don't want to say the exact prices, but they're much more than a passenger vehicle. So with a few thousand heavy trucks of this nature would be worth several Model Ys.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
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},
{
"name": "Martin Viecha",
"speech": "Thank you. The next question is, what is the progress of the 4680 cell ramp? And what factors determine whether vehicles get 2170s versus 4680 cells? And how will that change in the next year?",
"session": "Answer",
"person_id": 370659,
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},
{
"name": "Zachary Kirkhorn",
"speech": "Yes, ramp is going well, as Elon said. Total output is up 3x quarter-over-quarter, and production is tracking to exceed 1,000 car [ cells ] per week this quarter as we said last quarter. Our focus is now shifting from 100% ramp to cost and further expanding production capacity in North America, as Elon also mentioned. \r\nOn the 2170 versus 4680, in our factories, we really attempt to minimize factory complexity and product changeover while still making sure we get enough new product into the field to learn how it is performing. And that sort of mix is going to shift as 4680 scales here and the overall factory ramp [indiscernible] in Texas.",
"session": "Answer",
"person_id": 385023,
"person_company": null,
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},
{
"name": "Elon Musk",
"speech": "Right. Basically, production of 4680 ramp is growing exponentially. And yes, it's going well. We're just looking at this -- just going to be a major back to the future.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
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},
{
"name": "Zachary Kirkhorn",
"speech": "[indiscernible]",
"session": "Answer",
"person_id": 385023,
"person_company": null,
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},
{
"name": "Elon Musk",
"speech": "Yes. And like I said, we're -- our goal is to strive towards 1,000 gigawatt hours a year of annualized production in United States alone by Tesla, not including [indiscernible] will be on top of that.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 35
},
{
"name": "Unknown Executive",
"speech": "We need to get 300 to 400 terawatt hours to accomplish our goal.",
"session": "Answer",
"person_id": 182536,
"person_company": null,
"component_order": 36
},
{
"name": "Elon Musk",
"speech": "Yes, there's roughly -- to transition to sustainable energy, our price calculation for both stationary and vehicles is 300,000 to 400,000 gigawatt hours or 300 to 400 terawatt hours.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
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},
{
"name": "Unknown Executive",
"speech": "So when you're like 1 tower assembling a lot, well it's a lot of terawatt hours to get [indiscernible]",
"session": "Answer",
"person_id": 182536,
"person_company": null,
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},
{
"name": "Elon Musk",
"speech": "Yes. And on the cathode side, the [indiscernible] we think will probably be iron and most of the iron -- iron can scale to very, very high tonnage and then some nickel. The exact percentages are hard to figure out, but it's probably be as much iron cathodes as they [indiscernible] more. And then there's the manganese wildcard as well. [indiscernible]",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 39
},
{
"name": "Zachary Kirkhorn",
"speech": "No. And on that note, we're pursuing aggressively North American iron supplies. And how -- yes, we can talk more about that at a future date.",
"session": "Answer",
"person_id": 385023,
"person_company": null,
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},
{
"name": "Martin Viecha",
"speech": "Yes. Thank you. The next question is on the Semi truck, which we already addressed. So I'm going to skip to the next one. Can you talk about how Tesla could adjust if we were to enter a prolonged recession, including new product prioritization, investment flexibility, new factory versus factory expansion, service support infrastructure, productivity cost measures and demand stimulation alternatives?",
"session": "Answer",
"person_id": 370659,
"person_company": null,
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},
{
"name": "Elon Musk",
"speech": "Well, to be frank, we're very pedal to the metal come rain or shine. So we are not reducing our production in any meaningful way. We're essential not recession.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
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},
{
"name": "Zachary Kirkhorn",
"speech": "It's the [ 1% point ] come in.",
"session": "Answer",
"person_id": 385023,
"person_company": null,
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},
{
"name": "Elon Musk",
"speech": "Yes, exactly. So I think the public, at large, realizes that everyone's moving towards electric vehicles and that it's foolish to actually buy a new gasoline car at this point because the residual value of that gasoline car is going to be very low. So I think we have to be in a very good spot. But I wouldn't say it's recession proof, but it's certainly risk -- recession resilient because basically, it has people both have large part made the decision to move from gasoline cars to electric cars. \r\nAnd then in transitioning a generation to sustainable, you need certain wind with the stationary battery pack to buffer the power. So you have 24/7 power because the wind doesn't go [indiscernible] travel time. So that also -- we actually see the energy storage business, stationary storage, growing more like 150% to 200% a year, much faster than cars by a lot.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
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},
{
"name": "Zachary Kirkhorn",
"speech": "Just to add before you jump in, Martin. Just to echo Elon's point, I mean, I think where our cash balance is, what our forecasted cash generation is, where our margins are as a company, I mean we can withstand quite a lot of downside before we would have to dig into our capital plans, Supercharger expansion, product lineup. \r\nSo the business has done quite well over the last handful of quarters. And this is a real opportunity, I think, for the company to press forward, and most [indiscernible], as Elon has mentioned.",
"session": "Answer",
"person_id": 385023,
"person_company": null,
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},
{
"name": "Elon Musk",
"speech": "Yes, we try to model out like, let's say, 2023 is a brutal recession year. Even then, we generate meaningful cash. Once you get out of that for [indiscernible]",
"session": "Answer",
"person_id": 175883,
"person_company": null,
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},
{
"name": "Martin Viecha",
"speech": "Great. Thank you very much. And let's go to the last investor question, which is the progression from Tesla's first platform with SMX to the second platform with 3 and Y led to a 50% reduction in cost of goods sold. When do you see Tesla's third platform being released? And what level of cost of goods sold reduction could you achieve?",
"session": "Answer",
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},
{
"name": "Elon Musk",
"speech": "Well, we don't want to talk exact dates, but this is a -- I mean, the primary focus of our new vehicle development team, obviously. But at this point, we've done the engineering for Cybertrucks and for Semi. So it's obviously against what we're working on, which is the next-generation vehicle, which will be probably about the cost of 3 and Y platform. It will be smaller, to be clear. But it will, I think, certainly become -- certainly exceed the production of all our other vehicles combined. \r\nI mean, obviously, we're going to take everything we learned from S, X, 3, Y, Cybertruck and Semi into that platform. But we -- as you've said to us many times, we're on a 2-for-1 target. So [indiscernible] we're trying to get to that 50% number again. It's like, we're going to take 2. If that's exactly what [indiscernible], how are we making 2 cars for the amount of effort that we currently take to make 1 Model 3.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
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},
{
"name": "Zachary Kirkhorn",
"speech": "Effort costs.",
"session": "Answer",
"person_id": 385023,
"person_company": null,
"component_order": 49
},
{
"name": "Elon Musk",
"speech": "Consider.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 50
},
{
"name": "Zachary Kirkhorn",
"speech": "Half the loss, half the past, half the factory floor space.",
"session": "Answer",
"person_id": 385023,
"person_company": null,
"component_order": 51
},
{
"name": "Elon Musk",
"speech": "We're twice the output. And we do believe this can be done. By the way, I should mention that when I said that probably now that I see a path in extremely very difficult path, incredible execution required, a massive amount of hard work and some luck to get to where Tesla with as much as Apple and Saudi Aramco combined, I wasn't including Optimus.",
"session": "Answer",
"person_id": 175883,
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{
"name": "Martin Viecha",
"speech": "Thank you. Let's go to analyst questions next. The first question comes from Adam Jonas from Morgan Stanley.",
"session": "Answer",
"person_id": 370659,
"person_company": null,
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},
{
"name": "Adam Jonas",
"speech": "Great. Can you hear me?",
"session": "Question",
"person_id": 118469,
"person_company": null,
"component_order": 54
},
{
"name": "Martin Viecha",
"speech": "Yes.",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 55
},
{
"name": "Elon Musk",
"speech": "Yes.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 56
},
{
"name": "Adam Jonas",
"speech": "So Elon, would you consider vertically integrating into mining? That's my first question.",
"session": "Question",
"person_id": 118469,
"person_company": null,
"component_order": 57
},
{
"name": "Elon Musk",
"speech": "We'll do whatever we have to. Without limiting factor is, we'll do. We do not personally constrain ourselves. We don't particularly integrate just for the hell of particularly integrating. Like if there was a great supplier who's better than us or we think actively is very good, or even where the economics of comparative advantage suggests that we should use that supplier, even if we could beat them, but we could use our resources to do something else that will be more productive, then we would in source in that case. But if we have to go mine, we will mine.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
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},
{
"name": "Adam Jonas",
"speech": "Okay. Thanks, Elon. My follow-up is 1 terawatt hour of manufacturing in the United States, vertically integrated. I guess my question is what would need to change with U.S. permitting laws to allow that? Kind of what would be your message to this administration or next? And do you think you could do a terawatt hour? What's the going price of that? Can you do that for under $100 billion in the States?",
"session": "Question",
"person_id": 118469,
"person_company": null,
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{
"name": "Elon Musk",
"speech": "Well, I mean, I think the message to the government would be that there should be -- I should say, we've actually had conversations with a number of senior government leaders, White House, Congress and whatnot. And the suggestion that we have is that there should be an expedited permitting process for anything which is critical to a sustainable energy future. So it doesn't make sense to put like a coal mine and a sustainable energy battery like lithium mine in the same category. Coal is not of the future, lithium does. And by the way, you can extract lithium with almost no disturbance to the local environment. So it's not actually ugly, nasty find situation. \r\nSo I would recommend expedite permitting would really be helpful. Basically, a fast track environmentally, I think a sense fast track things that are important for the environment and the [indiscernible]. That seems logical. And the reception has been positive. So we'll see if something happens with that. \r\nI think probably on this earnings call, we're not ready to go into financial details of the -- what will take to get there. But what we are seeing is practical improvements as we redesign the whole supply chain and all of the elements that go into battery cell. We're figuring out dramatic efficiencies. And I think we'll -- net result which would be that the capital required to achieve that level output will be much less work than [indiscernible].",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 60
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{
"name": "Martin Viecha",
"speech": "Thank you very much Let's go to the next question from Colin Langan from Wells Fargo.",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 61
},
{
"name": "Colin Langan",
"speech": "Can you hear me now?",
"session": "Question",
"person_id": 480193,
"person_company": null,
"component_order": 62
},
{
"name": "Martin Viecha",
"speech": "Yes, we can hear you.",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 63
},
{
"name": "Colin Langan",
"speech": "Okay. Sorry about that. Any update on full self-driving? I think you had said a couple of quarters ago, would be available by the end of the year. Is that still possible? Is it -- would it still be like a Level 4 or Level 5 that you're talking about? And are there any sort of regulatory hurdles you'd have to think about?",
"session": "Question",
"person_id": 480193,
"person_company": null,
"component_order": 64
},
{
"name": "Elon Musk",
"speech": "We -- as I said earlier, we're expecting to release the full self-driving software to anyone who orders the package by the end of this year. So a separate matter as to will it have regulatory approval. It won't have regulatory approval at that time. But the call we'll be able to take you from your home to your work, your friend's house, the -- to the grocery store without you touching oil. So it's looking very good.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 65
},
{
"name": "Colin Langan",
"speech": "And it would mean like Level 4, Level 5 kind of traditional definition you're talking about?",
"session": "Question",
"person_id": 480193,
"person_company": null,
"component_order": 66
},
{
"name": "Elon Musk",
"speech": "Well, there's this debate is like what's the -- what are the interventions per mile and maybe safety interventions per mile. Like we're not saying that that's quite ready to have no one behind the wheel. It's just that you will almost never have to touch the control, vehicle controllers. \r\nSo like when I came to Giga Texas from Brent's house, I never touched any controls to already here. And then there is a longer process of like called the 9s of like how many 9s reliability do you need before you could really be comfortable saying that the car could drive with no one in it. And that's some subjectivity as to how many 9s you need. But I think we'll be pretty close to having enough 9s that you're going to have no one in the car by the end of this year. And certainly, without a question, that's whatever in my mind next year. I think we'll also have an update next year able to show to regulators that the car is safer much so than the average human.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
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},
{
"name": "Colin Langan",
"speech": "Got it. And just as a follow-up. You mentioned in the prior questions about IRA. I mean it sounded like you thought you could get -- can you get all of it? I mean, because my interpretation is like the production credits, battery component credits for buyers seems very likely for you guys. Is the sourcing part of it possible? Because that seems like a pretty tough hurdle given how much has to be sourced from the U.S.?",
"session": "Question",
"person_id": 480193,
"person_company": null,
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},
{
"name": "Unknown Executive",
"speech": "Yes. So we have a cross-functional team that's looking very closely. As you mentioned, the sourcing threshold increases by the year. So we're looking at all options and also getting some clarification from treasury. That's -- it's important to say that's only a fraction of the other credits. We do manufacture ourselves in the U.S. We manufacture the modules in the U.S. So that's a pretty [indiscernible]. So yes, we feel confident that we'll have a path as these incentives as the threshold sort of increases by the year.",
"session": "Answer",
"person_id": 182536,
"person_company": null,
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},
{
"name": "Elon Musk",
"speech": "Yes. We'll meet those thresholds..",
"session": "Answer",
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{
"name": "Martin Viecha",
"speech": "Thank you. The next question comes from Colin Rusch from Oppenheimer.",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 71
},
{
"name": "Colin Rusch",
"speech": "The operating leverage has been pretty impressive here. And I'm curious about areas where you could invest in an incremental way, whether it's on the R&D side or on the sales side to accelerate growth or cost reduction? Or should we be thinking about this level of spend on a go-forward basis and some significant operating leverage as you scale up from here?",
"session": "Question",
"person_id": 310676,
"person_company": null,
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},
{
"name": "Zachary Kirkhorn",
"speech": "I mean our operating leverage has improved quite a bit. It's the lowest this quarter, I think, ever, and by a decent amount. OpEx as a percentage of revenue. I mean, our forecast is that it will keep reducing. I mean I think the way to think about it is our total amount of operating expenses will slowly tick up as the company grows. It's very hard to keep it flat with the rapid growth of the company, but it's growing much slower. So some amount of growth there, but the top line of the business is growing so quickly. So I think there continues to be enormous opportunity to improve the overhead efficiency of the business, and we're seeing it.",
"session": "Answer",
"person_id": 385023,
"person_company": null,
"component_order": 73
},
{
"name": "Elon Musk",
"speech": "Yes. Look, we are in the -- at least for now, quite in a good position of we're investing in everything we can think of to possibly invest in, and we're still generating cash. So I guess it gets a pretty good place to be.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 74
},
{
"name": "Zachary Kirkhorn",
"speech": "Yes. I mean, how many R&D programs are we running in parallel right now?",
"session": "Answer",
"person_id": 385023,
"person_company": null,
"component_order": 75
},
{
"name": "Elon Musk",
"speech": "People don't even know old R&D so per day. There are some of it, but a bunch of it.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 76
},
{
"name": "Zachary Kirkhorn",
"speech": "I also don't think cash is a good gauge of how much R&D you're doing.",
"session": "Answer",
"person_id": 385023,
"person_company": null,
"component_order": 77
},
{
"name": "Elon Musk",
"speech": "No. It isn't because like it's not like -- it's not like engineers, they're not generic. So it's just like if you could you spend $5 billion or $10 billion, that will like -- that your actual R&D is useful product ship will be proportionate to that. It's just not true. Engineers on coming with some assembly line like cookies or something.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 78
},
{
"name": "Zachary Kirkhorn",
"speech": "Until we get optimistic.",
"session": "Answer",
"person_id": 385023,
"person_company": null,
"component_order": 79
},
{
"name": "Elon Musk",
"speech": "Get optimistic. Don't change things. What matters is where are the most brilliant people working. And Tesla remains the -- Tesla and SpaceX are 2 companies where the smartest engineers want to work.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 80
},
{
"name": "Zachary Kirkhorn",
"speech": "I mean like we don't have to spend billions of dollars to invest in the future and invent the future. Engineers are also cost conscious. And we don't just burn the money out the window when we're trying to do R&D. I would stop looking at like R&D as a cash investment for [indiscernible]...",
"session": "Answer",
"person_id": 385023,
"person_company": null,
"component_order": 81
},
{
"name": "Elon Musk",
"speech": "I think Tesla is frankly worth an infinite number of dollars above inch. Both you could have like a -- almost the number of credit shares and they would not be able to do work [ 1 week ] Tesla we can do. You can't make it up in volume.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 82
},
{
"name": "Martin Viecha",
"speech": "Okay. Thank you very much. Let's go to the next question from George at Canaccord.",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 83
},
{
"name": "George Gianarikas",
"speech": "I think you would -- at your Annual Shareholder event, where Elon mentioned that the prices of many of the materials used in your production have started to come off the boil. If that continues, does that give you an opportunity to adjust prices globally after several increases?",
"session": "Question",
"person_id": 547012,
"person_company": null,
"component_order": 84
},
{
"name": "Elon Musk",
"speech": "Well, we're looking at the prices of -- [indiscernible] prices closely. I mean, obviously, anyone can just Google what the price of future price of copper or steel is going to be. It's just like one Google Search away. And everyone can see that the commodities look on a go-forward basis are on a dropping a lot. But in electric vehicles, things like battery-grade lithium are still crazy expensive. So we've got a mixture of things where prices are dropping and things where prices are increasing.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 85
},
{
"name": "Unknown Executive",
"speech": "I would say quarter-over-quarter, steel, aluminum has stopped anywhere between 17% to 20% at the same time on the battery side.",
"session": "Answer",
"person_id": 182536,
"person_company": null,
"component_order": 86
},
{
"name": "Zachary Kirkhorn",
"speech": "And cost of shipping has come down tremendously. Like last year, the cost of a container on the spot market from Shanghai got as high as $20,000. And now it's $3,500, $3,600. It's that kind of reality. We're seeing deflation in a lot of commodities with a few exceptions as Elon mentioned on batteries.",
"session": "Answer",
"person_id": 385023,
"person_company": null,
"component_order": 87
},
{
"name": "Elon Musk",
"speech": "There's more deflation than inflation.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 88
},
{
"name": "Zachary Kirkhorn",
"speech": "Definitely.",
"session": "Answer",
"person_id": 385023,
"person_company": null,
"component_order": 89
},
{
"name": "Elon Musk",
"speech": "And again, this is publicly available information. Anyone could just Google it. And I think Cathie Wood at Ark Invest is -- I'm going to make this point over and over again, to the Fed and the Fed is not listening because they're looking at the rearview mirror instead of looking out the front windshield.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 90
},
{
"name": "Zachary Kirkhorn",
"speech": "Yes. Just to add a little bit more context. So commodity increases were the highest in Q3 that we've seen over the last 2 years. And so when indexes change, it does take time before they fully reflect.",
"session": "Answer",
"person_id": 385023,
"person_company": null,
"component_order": 91
},
{
"name": "Elon Musk",
"speech": "Yes, there's latency.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 92
},
{
"name": "Zachary Kirkhorn",
"speech": "Yes, there's latency.",
"session": "Answer",
"person_id": 385023,
"person_company": null,
"component_order": 93
},
{
"name": "Elon Musk",
"speech": "That's why I say that the best decisions make sense if you're looking through the rearview mirror, but not if you look out the windshield. And windshield got front windshield.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
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},
{
"name": "Zachary Kirkhorn",
"speech": "Yes. And so what -- at least of what we know so far, the peak on the commodity side in Q3, I say peak, hopefully, it stays the peak, hopefully, it starts to come down. There is a small amount of production that we're seeing going into our Q4 cost structure from steel and aluminum primarily, but it's less than 10% of the total increases we've seen so far. \r\nSo we're optimistic here based upon what we're seeing on the indexes for some of our cost structure. So this will start to come in over time. But I just want to set expectations that there's not some windfall of cost reduction in this space coming in Q4, maybe some as we go into next year.",
"session": "Answer",
"person_id": 385023,
"person_company": null,
"component_order": 95
},
{
"name": "Elon Musk",
"speech": "Yes. We'll probably see some cost reduction in 2023. I'll be surprised if we did not.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 96
},
{
"name": "George Gianarikas",
"speech": "And just as a follow-up, this is for Elon. With your pending acquisition of Twitter and your stakes in SpaceX and Neuralink and Tesla, how much would the combined companies benefit from operating under a single super structure, if at all, like a Google Alphabet?",
"session": "Question",
"person_id": 547012,
"person_company": null,
"component_order": 97
},
{
"name": "Elon Musk",
"speech": "It starts [indiscernible] what the overlap is. It's not 0, but it's -- I think we're reaching. I'm not worried about it. I'm not an investor. I'm an engineer and a manufacturing person and a technologists. So I actually work and design and develop products. And that's what I do. So it's not a -- we're not going to have a portfolio sort of investments over it. \r\nSo I don't know. I don't see an obvious sort of some get combined under an umbrella, at least right now. So I am excited about the Twitter situation because obviously another part in incredibly well. And I think it's massive that this sort of languished for a long time, but has an incredible potential. Although, obviously, myself and the other investors are obviously overpaying for Twitter right now. The long-term potential for Twitter, in my view, is, in order of magnitude, greater than its current value",
"session": "Answer",
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{
"name": "Martin Viecha",
"speech": "Let's go to the next question from Pierre Ferragu from New Street Research.",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 99
},
{
"name": "Pierre Ferragu",
"speech": "Can you hear me, guys?",
"session": "Question",
"person_id": 356336,
"person_company": null,
"component_order": 100
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{
"name": "Martin Viecha",
"speech": "Yes, we can hear you now.",
"session": "Answer",
"person_id": 370659,
"person_company": null,
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},
{
"name": "Pierre Ferragu",
"speech": "Great. I'd love to have another update on 4680, Drew. So last time we talked about it, there were -- was it was a question about like scaling up with manufacturing and there were still a few things to get right. Is it fair to say that now you are at scale, and it's just a question of logistics to get bigger? So that's question number one. \r\nAnd then question number two, on the kind of like innovation and cost reduction and efficiency improvements kind of path that you described at the battery day, where are we today? And how much time is it going to take to deliver all the potential you outlined then?",
"session": "Question",
"person_id": 356336,
"person_company": null,
"component_order": 102
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{
"name": "Drew Baglino",
"speech": "Well, I'll take the second question first. At Battery Day, we showed a time line out to 2026 for all of the ideas we had proposed and had shared with everybody then.",
"session": "Answer",
"person_id": 393478,
"person_company": null,
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{
"name": "Elon Musk",
"speech": "And yes, I'd be surprised. I think we'll do better than that.",
"session": "Answer",
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"person_company": null,
"component_order": 104
},
{
"name": "Drew Baglino",
"speech": "Yes. I mean, but just that's the rough -- just give you all -- it's in that order. It's not like a month. It's not 6 months. It's 6 years. And we are executing on all of those different ideas pretty aggressively in parallel with the OpEx that -- some people think isn't enough, but we're getting it done.",
"session": "Answer",
"person_id": 393478,
"person_company": null,
"component_order": 105
},
{
"name": "Elon Musk",
"speech": "I mean I'm not turning down POs.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 106
},
{
"name": "Drew Baglino",
"speech": "Yes, yes, yes. We're great talent, like we find someone awesome, we bring them into the company. And people shouldn't believe we are turning people away.",
"session": "Answer",
"person_id": 393478,
"person_company": null,
"component_order": 107
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{
"name": "Elon Musk",
"speech": "Yes. I mean, it's a hot pond but we're solving it. And I think -- we still feel confident that 4680 will be the most competitive battery cell in the world.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 108
},
{
"name": "Drew Baglino",
"speech": "And it's the whole system around it, right? It's not necessarily a specific form factor. It's the attention to detail on how to bring costs out of the manufacturing process -- or remove processing steps.",
"session": "Answer",
"person_id": 393478,
"person_company": null,
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{
"name": "Elon Musk",
"speech": "And all the way down from the mine to the cell.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
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},
{
"name": "Drew Baglino",
"speech": "Yes, exactly.",
"session": "Answer",
"person_id": 393478,
"person_company": null,
"component_order": 111
},
{
"name": "Elon Musk",
"speech": "Many steps along the way.",
"session": "Answer",
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"person_company": null,
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{
"name": "Drew Baglino",
"speech": "Yes. And for those who watched the YouTube videos, like our on-site cathode facilities coming together, I'm really excited about that, which is a part of the plan that we discussed on Battery Day.",
"session": "Answer",
"person_id": 393478,
"person_company": null,
"component_order": 113
},
{
"name": "Elon Musk",
"speech": "We're possibly lithium refinery.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 114
},
{
"name": "Drew Baglino",
"speech": "In Corpus Christi. So we're making -- putting our money where our mouths are and all the various efforts that we discussed on Battery Day. \r\nOn the technical challenges and the ramp question, which is your first question of 4680, no ramp is ever easy even at the end when you're 80% to the end, like it's still very challenging to get to the end. And that sort of leaning out of yields, the final cycle time to achieve target -- you mentioned logistics. It's not something that we're specifically focused on, I guess, but eventually could be a problem as we're talking about hundreds of gigawatt hours at different sites across the United States. But I would never sit here and say we have no challenges remaining, but we've made a lot of progress reducing technical risk in many areas. Cycle times have dramatically improved. Yield has dramatically improved. And just walking the line here in Texas, like Martin was walking it yesterday, made some comments to me. You really see the acceleration around you. And we've made a ton of simplifications moving from the Fremont factory to Texas, and it's coming to play in speed of ramp here. And of course, that's on 1 line of many here in Texas. So it's not like factory to factory. It's a multiplication of both simplicity and scale. So yes, we're excited about where it's headed.",
"session": "Answer",
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{
"name": "Elon Musk",
"speech": "Yes. And I think, once we are fully integrated, I think we still do see a path to hold roughly $70 kilowatt hour cell -- $70 per kilowatt hour cell before any incentive.",
"session": "Answer",
"person_id": 175883,
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{
"name": "Drew Baglino",
"speech": "Before incentive.",
"session": "Answer",
"person_id": 393478,
"person_company": null,
"component_order": 117
},
{
"name": "Elon Musk",
"speech": "Before incentive. Yes.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
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},
{
"name": "Martin Viecha",
"speech": "Thank you. And the next question comes from Toni Sacconaghi from Bernstein.",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 119
},
{
"name": "Toni Sacconaghi",
"speech": "Yes. I just wanted to follow up on the 4680 cells and where we are seeing them deployed today. So are those in the Semis that are being delivered on December 1? Are we seeing them in Model Ys that are being produced out of Austin? And is -- do you anticipate 4680 being a gating factor for Cybertruck ramp later this year? And how do you balance the need for 4680 across Semi, Cybertruck and potentially Model Y in 2023? And I have a follow-up, please.",
"session": "Question",
"person_id": 117232,
"person_company": null,
"component_order": 120
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{
"name": "Elon Musk",
"speech": "Wow. Okay. The Semi doesn't use 4680s. Yes. We are making Model Ys. Some of the Model Ys coming out of Giga Texas are 4680. And I think, Drew, the car you drive around is 4680 Model Y?",
"session": "Answer",
"person_id": 175883,
"person_company": null,
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},
{
"name": "Drew Baglino",
"speech": "Yes. 10,000 miles.",
"session": "Answer",
"person_id": 393478,
"person_company": null,
"component_order": 122
},
{
"name": "Elon Musk",
"speech": "10,000 miles. Pretty good.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 123
},
{
"name": "Drew Baglino",
"speech": "No problems yet. Yes. Structural back, structural pack.",
"session": "Answer",
"person_id": 393478,
"person_company": null,
"component_order": 124
},
{
"name": "Elon Musk",
"speech": "Yes. So -- and yes, I mean, and our output 4680 is growing exponentially. So -- but it's worth bearing in mind like there are entire highly competitive companies that are very smart that all they do is make battery cells. This is simply 1 segment of Tesla. So Yes. So it's not a total [indiscernible].",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 125
},
{
"name": "Drew Baglino",
"speech": "No, there aren't -- there are challenges still ahead that we have not yet surpassed. No doubt.",
"session": "Answer",
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"component_order": 126
},
{
"name": "Elon Musk",
"speech": "We don't anticipate this being anything like Cybertruck or anything else.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 127
},
{
"name": "Martin Viecha",
"speech": "Okay. And the last question comes from William Stein from Truist.",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 128
},
{
"name": "William Stein",
"speech": "I guess I'll go at one that I asked last time, Elon, which is your expectation for the likelihood of commercial success in each of the 3 major AI endeavors? FSD sort of as imagined without a driver, the training computer and, of course, Optimus?",
"session": "Question",
"person_id": 256580,
"person_company": null,
"component_order": 129
},
{
"name": "Elon Musk",
"speech": "We'll achieve full self-driving full time -- that occurring is 100%. And I think we'll -- we're almost there. And then, of course, we've got to prove it to regulators and get the regulatory approvals, which is outside of our control. But anyone who's driving full self-driving cars, full self-driving Beta in the car, you can see the rate of improvement. You can just experience for yourself that we are, in fact, getting there. In fact, we almost are there. And so we're probably achieving that 100%. \r\nThe Optimus, probably of that being a successful product, I think, also extremely high given enough time, 100%. \r\nDojo, just maybe more of a question around Dojo. Like can we be competitive with NVIDIA GPUs even as somebody continues to rapidly evolve their GPUs? So the jury is out on Dojo. There's a team [indiscernible] outperform NVIDIA for neural training. The jury's out, we will probably -- I don't know, next year, if that's true or not. But we think we're probably -- we think it's -- this is -- the architecture of Dojo is the right architecture to win. Yes. It depends on how well we execute in that architecture.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 130
},
{
"name": "Martin Viecha",
"speech": "Thank you very much. I think, unfortunately, it's all the time that we have today. So thank you so much for your great questions and look forward to talking to you in about 3 months from now. Thank you, and have a good day.",
"session": "Answer",
"person_id": 370659,
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"component_order": 131
},
{
"name": "Elon Musk",
"speech": "Thanks, everyone.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 132
}
],
"title": "Tesla, Inc., Q3 2022 Earnings Call, Oct 19, 2022",
"quarter": 3,
"year": 2022
}
},
{
"transcript_title": "Tesla, Inc. - Q2 2022",
"transcript_name": "Tesla, Inc., Q2 2022 Earnings Call, Jul 20, 2022",
"ticker": "NASDAQ:TSLA",
"transcript_url": "https://wkarticles.blob.core.windows.net/finnhub/snp_transcript_2601728",
"date": "2022-07-20",
"year": 2022,
"quarter": 2,
"transcript_data": {
"date": "2022-07-20",
"participant": [
{
"name": "Colin Rusch",
"role": "Analysts",
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"job_title": "MD & Senior Analyst and Head of Sustainable Growth & Resource Optimization",
"description": "Analysts",
"company_name": "Oppenheimer & Co. Inc., Research Division",
"transcript_person_id": 310676
},
{
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"role": "Executives",
"pro_id": 621069668,
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"description": "Executives",
"company_name": "Tesla, Inc.",
"transcript_person_id": 393478
},
{
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"role": "Executives",
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"description": "Executives",
"company_name": "Tesla, Inc.",
"transcript_person_id": 175883
},
{
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"role": "Analysts",
"pro_id": 595044481,
"job_title": "Former Director & Research Analyst",
"description": "Analysts",
"company_name": "Deutsche Bank AG, Research Division",
"transcript_person_id": 376728
},
{
"name": "Lars Moravy",
"role": "Executives",
"pro_id": 712755131,
"job_title": "Vice President of Vehicle Engineering",
"description": "Executives",
"company_name": "Tesla, Inc.",
"transcript_person_id": 482177
},
{
"name": "Martin Viecha",
"role": "Executives",
"pro_id": 588894062,
"job_title": "Former Vice President of Investor Relations",
"description": "Executives",
"company_name": "Tesla, Inc.",
"transcript_person_id": 370659
},
{
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"role": "Analysts",
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"description": "Analysts",
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"transcript_person_id": 356336
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{
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"role": "Analysts",
"pro_id": 29289688,
"job_title": "Former MD & Senior Research Analyst",
"description": "Analysts",
"company_name": "Sanford C. Bernstein & Co., LLC., Research Division",
"transcript_person_id": 117232
},
{
"name": "William Stein",
"role": "Analysts",
"pro_id": 224802109,
"job_title": "Managing Director",
"description": "Analysts",
"company_name": "Truist Securities, Inc., Research Division",
"transcript_person_id": 256580
},
{
"name": "Zachary Kirkhorn",
"role": "Executives",
"pro_id": 600445395,
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"transcript": [
{
"name": "Martin Viecha",
"speech": "Good afternoon, everyone, and welcome to Tesla's Second Quarter 2022 Q&A Webcast. My name is Martin Viecha, VP of Investor Relations; and I'm joined today by Elon Musk, Zachary Kirkhorn and a number of other executives. Our Q2 results were announced at about 3:00 p.m. Central Time in the update deck we published at the same link as this webcast. \r\nDuring this call, we will discuss our business outlook and make forward-looking statements. These comments are based on our predictions and expectations as of today. Actual events or results could differ materially due to a number of risks and uncertainties, including those mentioned in our most recent filings with the SEC. [Operator Instructions] But before we jump into Q&A, Elon has some opening remarks. Elon?",
"session": "Presenter Speech",
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{
"name": "Elon Musk",
"speech": "Thank you, Martin. So just as a Q2 recap, Q2 was a unique quarter for Tesla due to a prolonged shutdown of our Shanghai factory. But in spite of all these challenges, it was one of the strongest quarters in our history. Most importantly, in June, we achieved production records in both Fremont and Shanghai. And as a result, we have the potential for a record-breaking second half of the year.\r\nI do want to emphasize this is obviously subject to force majeure, things outside of our control. The past [ few ] years have been quite a few force majeures, and it's been kind of supply chain hell for several years. Credit to our awesome Tesla supply chain team for overcoming and difficult challenges. And huge thanks to the Tesla Shanghai factory team who sacrificed a lot to get the factory back up and running in June and achieve a record output. \r\nSo also making good progress with production ramp with Berlin. We achieved an important milestone of 1,000 cars a week in June. And we're expecting -- sorry, our Giga Texas to exceed the 1,000-vehicle per week milestone and hopefully in the next few months. To be clear, we're currently making the cars with the 2170 cells, and Drew Baglino will address some of the 4680 questions later in this call. But it is worth emphasizing that we have enough 2170 cells to satisfy all vehicle production for the remainder of the year. \r\nSo we're not dependent on 4680. 4680 will be important next year but it is not important for this year. That said, we have installed the second generation of manufacturing equipment for 4680 cells in Texas. And even at our established factories like Fremont and Shanghai, we continue to expand capacity. \r\nRegarding Autopilot, we have now deployed our FSD beta with City Streets driving capability to over 100,000 owners. They're very happy with the capability of the system and we'll continue to improve it every week. We've now driven over 35 million miles with FSD beta. That's more autonomous miles than any company we're aware of, I think probably more than -- it might be more than any -- all other companies combined. So -- and that mileage is growing exponentially. \r\nWith regard to manufacturing and technology, about 5 or 6 years ago, we said we wanted to become the best manufacturer in the world and that is somewhat counterintuitively, to some people, will actually be, I think, our strongest competitive advantage. We're super pro-manufacturing here at Tesla. And in general, we want to encourage other companies to be super pro-manufacturing. And in general, I think it is a very important thing to do. \r\nWe need to make stuff and make it efficiently and that's manufacturing. So we've made a lot of advancements in manufacturing processes. As we now show in the shareholder deck, thanks to our -- the large castings, we make the world's largest castings. We reduced body welding robot count by 70% per unit of capacity in Austin and Berlin. So that's, call it, roughly a body shop that is roughly 3x smaller than would normally be the case. And I should say it's also lighter, cheaper and has superior noise vibration harshness. \r\nSo it's good on every level. But this journey is not over. We'll bring another level of simplicity and manufacturing improvements with Cybertruck and future products that we're not quite ready to talk about now but I think will be very exciting to unveil in the future. \r\nOur safety team also introduced a feature that tension seat builds, if the vision system detects imminent collision, which has never been done before. So you can imagine that if you have a seatbelt that only tensions upon impact, you have very little time to tension the seatbelt. If you've got to be -- the car has got to be crunching to trigger the seatbelt tensioner. But because we have vision, we can actually see that a collision is about to occur with 100% probability before it actually happens. \r\nAnd so we can tension the seat belts, and we can even adjust the airbag deployment because we can see, not just feel. This is a fundamental safety advantage that Teslas are now able to offer. And there's also an over-the-air update, so this is something that will be in place in all cars that have at least AP3 hardware. \r\nIn conclusion, we exited Q2 with a strong production rate than ever before. Our team continues to focus on Cybertruck production readiness and some future platform design. We are expecting to be -- still expecting to be in production with the Cybertruck in the middle of next year. And we're very, very excited about that product. I think it might actually be our best product ever.\r\nLet's see. FSD beta is on track to be released for all of North American customers before the end of this year. And hopefully, if we get regulatory approval, we'll also be releasing it hopefully in Europe and some other parts of the world.\r\nWe're hosting our AI Day in a few months. I think people will be amazed at what we're able to show off in AI Day. So basically, there's a tremendous amount to look forward to in the second half of this year. And I want to thank all of our employees and suppliers for their super hard work during these challenging times. Super appreciate it. Thank you.",
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"name": "Martin Viecha",
"speech": "Thank you very much. And Zach has some opening remarks as well.",
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"name": "Zachary Kirkhorn",
"speech": "Yes. Thanks, Martin. I want to start by congratulating the Tesla team on an excellent execution during the second quarter. Although our production volume reduced sequentially due to COVID-related shutdowns in Shanghai, we made substantial progress in nearly every area of the business, and in particular, our global vehicle production rate as we exited the quarter.\r\nOur Fremont factory, supported by our Reno team, reached new production records. The Shanghai factory resumed full production, and our new factories in Austin and Berlin are progressing well through their initial ramps. Additionally, our energy business achieved record gross profit with the highest solar volumes in many years. I want to personally thank the entire Tesla team, as I know many of you are listening. You've embodied a remarkable and relentless pursuit of excellence in support of our mission. I also want to thank our suppliers for their support during another complicated quarter. \r\nOn GAAP automotive gross margin, it declined sequentially to 27.9%. The temporary decline in Shanghai production volume meaningfully impacted margin, including idle capacity and factory restart costs and also had implications on the mix of regional deliveries. Additionally, as discussed on previous calls, we are working through the ramp inefficiencies of our new factories, which are progressing well but have had an impact on margin as those factories come online. While we continue to see a benefit from higher pricing flowing through, which experienced some foreign exchange-related headwinds, our cost structure continues to experience cost increases from inflation, commodities and logistics. \r\nThe energy business progressed well in Q2, aided by alternate solar supply coming online and progress on unit economics. Our storage business remains component-constrained on both Powerwall and Megapack, which we hope will alleviate to some extent in the second half of the year. We are greatly appreciative of the patience and flexibility shown by our customers while we work through these challenges. \r\nWithin operating expenses, Boston and Berlin-related start-up costs have wound down as these factories have moved into production and their costs are now reflected in automotive COGS. Additionally, we converted a majority of our Bitcoin holdings to fiat for a realized gain, offset by impairment charges on the remainder of our holdings, netting a $106 million cost to the P&L included within restructuring and other. We also incurred restructuring charges related to targeted staffing reductions.",
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"name": "Elon Musk",
"speech": "Yes, actually, it should be mentioned that the reason we sold a bunch of our Bitcoin holdings was that we were uncertain as to when the COVID lockdowns in China would alleviate. So it was important for us to maximize our cash position, given the uncertainty of the COVID lockdowns in China.\r\nWe are certainly open to increasing our Bitcoin holdings in future, so this should not be taken as some verdict on Bitcoin. It's just that we were concerned about overall liquidity for the company, given COVID shutdowns in China. And we have not sold any of our Dogecoin.",
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{
"name": "Zachary Kirkhorn",
"speech": "We still have it.",
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"name": "Elon Musk",
"speech": "We still have our Dogecoin.",
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"name": "Zachary Kirkhorn",
"speech": "Despite these challenges, we were still able to achieve one of our strongest operating margins of 14.6%. Our free cash flows were impacted by working capital related to the Shanghai factory shutdown. However, we expect this will show as a benefit in Q3 as our working capital-related cash flows restabilize. \r\nAs we look ahead and as Elon mentioned, we are positioned for a record-breaking second half of the year. We're quite excited about this. A couple of things to keep in mind as we progress. Austin and Berlin ramp inefficiencies will continue to weigh on our margins for the balance of the year. However, the impact should reduce as we increase ramp.\r\nSecond, as we've mentioned before, we expect to continue to see recognized global pricing to increase as our backlog flows through. However, macroeconomic-related cost increases will also continue to be part of our story. And finally, despite losing more builds in Q3 than expected, we're still pushing to reach 50% growth this year. This target has become more difficult but it remains possible with strong execution. And as Elon mentioned, no more force majeure events for the balance of the year.",
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"name": "Elon Musk",
"speech": "Yes, a lot of force majeure in the last several years, that's for sure.",
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"name": "Zachary Kirkhorn",
"speech": "Thank you.",
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"name": "Martin Viecha",
"speech": "Thank you very much. And now let's go to the questions from investors. And the first question is, Chinese EV manufacturers seem to be doing a better job than their Western competitors, excluding Tesla, at innovating in software and design. How can Tesla make sure the company is staying ahead of those manufacturers, both within China and outside of China?",
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"name": "Elon Musk",
"speech": "Well, the -- right now, the best Chinese EV manufacturer is Tesla train. We're actually doing the best, thanks to our incredible team in China. But I have a lot of respect for the Chinese, our manufacturers and EV manufacturers in particular. I think they will be a force to be reckoned with worldwide. They're very -- they're smart and they're hardworking. And I think anyone who is not -- any company that's not as competitive as them will obviously suffer a share decline. So obviously, we have a lot of respect for the current companies in China and then their capabilities, yes.",
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"name": "Martin Viecha",
"speech": "Thank you. The next question is, when will Tesla have a unified vector space for both static and moving object network? Will this be a [ V11 ] or later version? If the latter, can you explain what makes it a difficult problem in layman terms?",
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"name": "Elon Musk",
"speech": "Okay. This will be understood by 0.01% of the audience, I think. I suppose people want to find out what a unified factory space would actually mean. It essentially would be if you can take -- if instead of netting together static and dynamic objects in C++, if they could be net together at the neural net level, then you don't need to reconcile them within C++ heuristics. \r\nThat is an architecturally better way to -- that's the most desirable outcome. It's -- I think it's probably not necessary to achieve full self-driving, but it would be a slight improvement in the efficiency of the self-driving. And it's certainly something we want to get to. Yes. The sort of nirvana situation is you have surround video/auto labeling of all static and dynamic objects. And you have then surround video inference with spatial memory as well. \r\nThen that's -- I mean, I think we're almost certainly there before the end of the year. Yes, I'm not sure how many you would understand that. But I should say also, we are also confident of improving the frame rate as we some of the legacy neural nets, we think we might be able to get to the frame rate of what the -- of [indiscernible] camera is maybe up to 36 fps, which is actually a lot of frames, considering its [indiscernible] cameras. It's certainly comfortably above 24 frames, which is basically the movie frame rate of movies.",
"session": "Answer",
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"name": "Martin Viecha",
"speech": "Thank you. The next question is Elon recently tweeted about lowering prices once inflation cools down. Can you elaborate on what do you mean by cooling down and how aggressively the company will lower prices? More broadly, how do you think about the auto pricing long term?",
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{
"name": "Elon Musk",
"speech": "Yes. So since we have -- there's a quite a long wait when somebody orders in a car, in some cases, 6 months; in some cases, it could be up to a year. We have to anticipate what the probable inflation rate is over that period of time. So that's what we're trying to do. When we -- when or if we see indications that the inflation rate is declining, then we would not need to increase our car prices. It's possible that there could be a slight decrease in car prices, but this is fundamentally dependent on macroeconomic inflation. It's not something we control. \r\nIf I were to guess, and I would take this with a grain of salt, I think inflation will decline towards the end of this year. We're certainly seeing prices of commodities trending lower. Yes. But take it with a grain of salt. This is -- making economic prognostication is fraught with error. I don't know if you guys want to -- do you want to say anything about...",
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"name": "Drew Baglino",
"speech": "Yes. We're certainly seeing, I mean, it's kind of a whole spectrum. On the battery metal side, for example, the price of lithium has really shot up. We used to be $11 a kilogram to more than $80 a kilogram. But it's -- not every situation is that bad so it's kind of a spectrum.",
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{
"name": "Unknown Executive",
"speech": "Carbon steel, aluminum, [indiscernible] carbon steel and aluminum has started trending down. We will see the benefits of it only probably later part of this year or early next year.",
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"name": "Elon Musk",
"speech": "Yes. But I think that's just like for most commodities, we're seeing a downward trend towards the end of this year or next year. Some commodities, the pricing of lithium is insane. I would like to, once again, urge entrepreneurs to enter the lithium refining business. The mining is relatively easy. The refining is much harder. \r\nSo lithium is actually a very common -- sort of very -- like lithium pretty much everywhere. But you have to refine the lithium into battery-grade lithium carbonate and lithium hydroxide, which has to be extremely high purity. So it is basically like minting money right now. There's like software margins in lithium processing right now. So I would really like to encourage, once again, entrepreneurs to enter the lithium refining business. You can't lose. It's licensed to print money.",
"session": "Answer",
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"name": "Martin Viecha",
"speech": "Thank you. The next question is you made the right economic call before most on inflation when you diversified into Bitcoin. It has since shown it's not much of a hedge in the real-world test the last few months. How do you think about it as an asset over long term? And what do you need to see to change your view?",
"session": "Answer",
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{
"name": "Elon Musk",
"speech": "Well, Tesla is -- Tesla's goal is to accelerate the advent of sustainable energy. We're not really -- cryptocurrency is a sideshow to the sideshow. We're not a -- cryptocurrency is not something we think about a lot. We think a lot about scaling production and accelerating the advent of sustainable energy, which the record heat waves around Earth, so to emphasize the urgency of that transition. \r\nSo that is what we're trying to do is make electric vehicles and solar and stationary storage battery packs. But the 3 pillars of a sustainable energy future, which is like solar and wind for energy generation, stationary battery packs for storage of the solar energy because of its intermittency and then electric vehicles, the third pillar. And if those 3 things are solved, we have a sustainable future for civilization. \r\nAnd the fundamental good of Tesla and the reason we're doing this, so certainly, my primary motivation here is to have the day of sustainable energy comes sooner. That's our goal. We're neither here nor there on cryptocurrency.",
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"name": "Martin Viecha",
"speech": "Thank you. The next question on 4680. Elon noted that 4680 plus structural pack is not yet optimized. Can you please share the general path of 4680 in structural packs in terms of cost efficiencies when compared to the traditional 2170 pack? Will cost improvements be mostly due to scale or do we need to solve some technical issues?",
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"name": "Drew Baglino",
"speech": "Yes, do you want to do the architecture?",
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"name": "Elon Musk",
"speech": "Yes. So structural pack where we get dual use of the battery cells as structure and as energy storage in the same way that an aircraft gets dual use of the wing as a fuel tank and as a wing is, I think, unequivocally, from a physics standpoint, the superior architecture. It's the A architecture. \r\nNow because it is new, we'll start off getting, I don't know, aspirationally a C within an A architecture. But the potential is there for to get radically better and then unequivocally better than a battery pack, which is carried like a sack of potatoes.",
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"name": "Drew Baglino",
"speech": "Yes. And we've gained the perspective through putting our first structural pack in production that it is actually the A architecture. Like before we did that, it was a hypothesis that was backed with -- I got a lot of modeling and first principles analysis. And now we've actually built and are more confident in that assertion.",
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"name": "Elon Musk",
"speech": "Yes. So exactly. So the structural pack, even the C and the A architecture is beating the nonstructural pack. And so over time, it will, with further refinement, be substantially superior to that is carrying a battery pack as though it is cargo. And this is like -- it's very much very analogous to the early days of aviation where fuel tanks were initially carried like cargo until they realized actually, you should get dual use of a fuel tank as a wing and as fuel tank. And that makes the planes lighter and better. And the same is true of electric vehicles.",
"session": "Answer",
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"name": "Martin Viecha",
"speech": "And on cost improvements, are they due to scale or about solving technical issues?",
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{
"name": "Elon Musk",
"speech": "Yes. Yes. I mean really, the 2 things that improve costs are economies of scale and tech and core technology.",
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"name": "Drew Baglino",
"speech": "Yes. I think technical issue is not the right.",
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{
"name": "Elon Musk",
"speech": "Technical issues like",
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{
"name": "Drew Baglino",
"speech": "Getting to the optimal design, right? Like you always start with some access. Some people might call it that, but that's not really what you think it is initially. It's that you don't know how you can get it until you've done it a couple of times.",
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"name": "Elon Musk",
"speech": "Yes. I mean there's some platonic ideal of the perfect product where the atoms -- you have exactly the right atoms and they're in exactly the right position, and you asymptotically approach this platonic ideal. But it takes a lot of effort over time to figure out actually what is the platonic ideal and then actually gradually approach that.",
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"name": "Drew Baglino",
"speech": "Yes. I mean, you might need to create a new alloy. Then you need to figure out how to cast it, then you need to ramp the casting machine with the new alloy.",
"session": "Answer",
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{
"name": "Elon Musk",
"speech": "We did.",
"session": "Answer",
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{
"name": "Lars Moravy",
"speech": "We've done it for We've done it castings. Yes. But those take time.",
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"name": "Drew Baglino",
"speech": "On improvement is something we're used to here, and it's something like we've done with their vehicles and our design since the beginning. I mean, even we're talking a couple of weeks ago, like the first version of the front casting that we made that went into the early vehicles is like...",
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{
"name": "Elon Musk",
"speech": "I mean, Model S stage.",
"session": "Answer",
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{
"name": "Drew Baglino",
"speech": "No, I'm talking about like first Model Ys. Since we've ordered more dies because bringing more dies for more production, we've saved like 4 or 5 kilos with just die iteration. And that's something we do at Tesla like quite regularly and we'll continue to do. So we're not happy with a C, like maybe we're at a C-plus now because I think we got to keep going to B-minus.",
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"name": "Elon Musk",
"speech": "On the rear casting. But this will transfer for improvement with the casting. So the casting is already way better than the rare body casting is already way better than the -- on the way is done in the past where you've got 120 different parts that are welded together or bonded together with different alloys and then you have to put sealant in between all the various parts for water ingress and noise. \r\nSo we're already way better than that with current casting, but there's still a lot of opportunities to reduce the master casting and also extend the casting to include more parts as well as adapt the rest of the vehicle for the fact that there's a cast.",
"session": "Answer",
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"name": "Drew Baglino",
"speech": "Yes, I was going to say the same thing, right? Like we're not just evaluating the pack and insulation either. It's the pack plus the body, the integration, do we have mass in the right places, we have the cost in the right places and only just the right amount. And I think we've gone through 1 iteration. We're going to do another 1 with Cybertruck. I mean, we're taking the learnings and doing -- the next version hopefully is a B-plus in A architecture. That's certainly a target.",
"session": "Answer",
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"name": "Martin Viecha",
"speech": "Thank you. The next question is, how do you feel the progress of FSD is going? And does Andre leaving have any significant impact on time lines or potential progress?",
"session": "Answer",
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"name": "Elon Musk",
"speech": "Well, since Andre was writing all the code by himself, naturally, things have come to a grinding halt. And irony. So Andre's also we have respect for Andre. He's decided to -- I think he wants to contribute more to, I think, core AI at an academic level and get back to coding individually. \r\nBut we've got a team of about 120 people in our software AI group that are extremely talented. And I think we will have -- I'm highly confident we will solve full self-driving and it still seems to be this year. I know people are like says that. But it does seem to be epic. It does seem as though we are converging on full self-driving this year.",
"session": "Answer",
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"name": "Martin Viecha",
"speech": "Thank you. The next question is, how is the 4680 ramp going? And is Giga Texas producing cells yet?",
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"name": "Drew Baglino",
"speech": "Yes. So we are making progress on 4680. But right now, as Elon mentioned, we are leveraging supplier cells, which we have in sufficient quantity to ramp Texas and Berlin. We expect to ramp total 4680 production to exceed 1,000 per week by the end of the year, hopefully before -- well before. \r\nIn Q2, at we fully automated Pattern Vance for the dry in electrode tool there, unlocking major increases in production and improvements in yields. Since March because of that, output has grown about 35% month-over-month each month since, and yields throughout the factory are already at targets in most areas and trending in that direction and a few others. \r\nWe did feed learnings from Fremont cell and pack lines to Texas and Berlin there, a carbon copy. design was revved to unlock higher performance and manufacturing simplicity. Manufacturing lines were further integrated and we in-sourced additional content. For these reasons, there are some new ramp challenges to overcome in Texas and Berlin. \r\nSpecific to Texas last quarter, cell equipment was fully installed and commissioned and we produced our first commissioning car sets of cells through the end of the line. Our target for Texas is to begin production this quarter and aim for Texas to be capable of exceeding Kato weekly output before the end of this year.",
"session": "Answer",
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"name": "Martin Viecha",
"speech": "Thank you very much. The next question is on 4680 as well, but I think Drew has covered everything that was in the next question. So the following question is with regards to the ramp of production in Austin and Berlin. How is the situation with regards to supply of semiconductors, battery cells and other components? How about cost inflation impacting profitability of these other plants?",
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"name": "Drew Baglino",
"speech": "I can take that. So Tesla procures about 1,600 unique pieces of silicon from 43 semiconductor companies. So with a portfolio of that size, there are always challenges. Things are more stable on the latest generation chips. We still see some tightness in the older generation semiconductors, especially in the analog and mixed signal space. But we have line of sight to solve for the volumes being contemplated for both Austin and Berlin. \r\nAnd on the cell front, like Elon mentioned, we have a comfortable margin, thanks to record output from our partners and have line of sight that matches the planned output from both factories. We've grown cell production significantly on a 12-month rolling basis and have long-term contracts with all our partners for key battery metals. So we don't see any major problems for the components, of course, barring unforeseen COVID-related shutdowns.",
"session": "Answer",
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"name": "Zachary Kirkhorn",
"speech": "Just to add on the profitability part of the question. Q2 was our largest increase yet over the last handful of quarters on inflation and commodity-related increases to our cars. It's fairly evenly spread across the factories, given common suppliers or common issues that impact the broad supply chain.\r\nSo I think I had mentioned before that we have been seeing increases over the course of last year. It ticked up in Q1 and then it ticked up again at the rate of increase was more in Q2. So as we look through to the end of the year, what we're seeing is we don't think the inflation-related increases in Q3 will be as big as Q2. But as Elon has mentioned, there is uncertainty on pricing here. \r\nAnd we don't have full exposure, as had just mentioned, on every component of cost because we do have some contracts in place. But there are some spot buys as well and some contracts being renegotiated. So we're managing it with pricing and in partnership with our suppliers but it does continue to be something that is impacting our financials.",
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{
"name": "Martin Viecha",
"speech": "Thank you very much. And the last question is, when will the Cybertruck be officially available?",
"session": "Answer",
"person_id": 370659,
"person_company": null,
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},
{
"name": "Elon Musk",
"speech": "We're hoping to start delivering them in the middle of next year.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 48
},
{
"name": "Martin Viecha",
"speech": "Great. Thank you very much. And now let's go to analyst questions. The first question comes from Pierre Ferragu from New Street Research. Pierre, feel free to unmute yourself.",
"session": "Answer",
"person_id": 370659,
"person_company": null,
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},
{
"name": "Pierre Ferragu",
"speech": "I'd like to ask like a question on 4680 and the structural battery pack. And I'd love to understand where you stand on the technology and efficiency and energy density road map that you described at the Battery Day. So what I'm trying to understand is where do you stand on the architecture of the battery cell itself? How much silicon do you have in it? How much energy improvement have you achieved already so far? Sorry. \r\nAnd the reason why I'm asking that is because you have like very smart guys on Twitter who shared experience about trying to fully empty a Model Y from Texas from Austin and noticing behaviors and like recharging behavior that suggested that maybe these cars had like very, very high mileage, very high range, and were like artificially limited in range in software. So I'm just kind of trying to understand how much of an edge you're building at the moment with the 4680 and the battery back on range.",
"session": "Question",
"person_id": 356336,
"person_company": null,
"component_order": 50
},
{
"name": "Drew Baglino",
"speech": "Yes. Let me just try to provide like a super straightforward answer. Like as Elon mentioned before, our priority was really on simplicity and scale during the initial 4680 and structural battery ramp. So we weren't like putting all the bells and whistles in from day 1 because if so, we would be sort of suffering under a string of serious miracles that we would need to achieve to get going. \r\nBut as we attain the manufacturing goals that we've stated at the ramp that we need to hit next year, we are certainly planning to layer in new material technologies and higher-range structural packs, like we're not like holding back goodies for some rainy day or something like that.",
"session": "Answer",
"person_id": 393478,
"person_company": null,
"component_order": 51
},
{
"name": "Elon Musk",
"speech": "Yes. Maybe another way of putting it is that the -- our focus right now is on the dozens of little issues that inhibit the production ramp of the 4680. Some of the more challenging ones have been feeding the anode-cathode material because we're using this revolutionary dry electrode process. But when something is revolutionary, it's a lot of unknowns that have to be resolved. \r\nSo we're confident of resolving those unknowns but it's very difficult. It's -- yes, we're making rapid progress on that point. So the first order of business is really get the basics right, get to high volume and high reliability and then very rapidly iterate within that to enhance the energy density and reduce the cost of the cell.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 52
},
{
"name": "Drew Baglino",
"speech": "Totally agree, yes.",
"session": "Answer",
"person_id": 393478,
"person_company": null,
"component_order": 53
},
{
"name": "Elon Musk",
"speech": "I'd say we are highly confident of a good outcome. It's the exact counterpoint of that is perhaps is of some debate but the outcome is not.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 54
},
{
"name": "Drew Baglino",
"speech": "Yes. Specific to the dry process, we made a major advance this past quarter in Kato that the team is really excited about, and congrats to the team for achieving that.",
"session": "Answer",
"person_id": 393478,
"person_company": null,
"component_order": 55
},
{
"name": "Elon Musk",
"speech": "But I should also emphasize that it is not as though Tesla intends to displace our suppliers of battery cells. The Tesla battery cell production is in addition to what our suppliers can do. And we want our suppliers to grow their battery output as fast as they possibly can, and that goes for the entire supply chain. \r\nThe fundamental rate limiter for both transitioning to sustainable energy is how fast can you grow with the amount battery output per year? This is the fundamental rate limiter for transition to sustainability because you need the batteries for 2 of the pillars of sustainability, the stationary storage and for vehicles. So yes.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 56
},
{
"name": "Drew Baglino",
"speech": "Yes, I just want to stress that a lot of these higher energy density technologies are not necessarily scalable. I mean, most of them are not scalable from what I've seen. And so like focusing on them is a distraction from the mission, like it really is how do we scale as fast as possible? \r\nAnd we're taking these risks that we've discussed at Battery Day. And our plan is as we derisk them and they are successful, we want to bring them back to our partners so that they can go faster, too, because that's all on the mission, right, like how do we accelerate.",
"session": "Answer",
"person_id": 393478,
"person_company": null,
"component_order": 57
},
{
"name": "Elon Musk",
"speech": "People often ask me, if you often ask me, is some breakthrough needed in battery technology for the world to transition to sustainability? The answer is no. Even if there was 0 technology breakthroughs, so literally 0 from where the technology is right now, we could fully transition Earth to sustainable energy. The issue is very much the rate at which the entire supply chain from mining to refining to cell production. How fast can that grow? It's growing fast with the faster it grows, the faster we transition to a sustainable energy economy.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 58
},
{
"name": "Pierre Ferragu",
"speech": "This is actually a great exactly where my follow-up is. So Elon, you always mention this 50% per annum sustainable growth target that you guys have. And so my question here is when we see like the difficulty regarding the commodities, raw materials, swinging prices, I'm kind of wondering, as you are planning for this 50% per annum growth, if we stand today over the next 5 to 10 years, how much of that do you feel you've secured through your work at entering into long-term contracts and things like that? And you were calling for entrepreneurs to go into the lithium business. \r\nSo does that mean you don't have enough lithium secured to grow 50% per annum over multiple years? And what's -- how much of that is secured today? And how fast can you improve that basically?",
"session": "Question",
"person_id": 356336,
"person_company": null,
"component_order": 59
},
{
"name": "Elon Musk",
"speech": "Well, I think it's very difficult to predict anything 10 years from now. I hope civilization is still around, frankly. I don't count that as a win.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 60
},
{
"name": "Pierre Ferragu",
"speech": "Not that fun.",
"session": "Question",
"person_id": 356336,
"person_company": null,
"component_order": 61
},
{
"name": "Elon Musk",
"speech": "Yes, exactly. Hopefully, we haven't had World War III by then. So the -- we do see constraints in refining of the materials necessary lithium ion batteries. I do want to emphasize this as -- it is not due to a scarcity of the raw material. In the case of lithium, lithium is one of the most common elements on Earth. It's pretty much everywhere. \r\nBut refining of the lithium into ultra-high purity battery-grade lithium hydroxide, lithium carbonate is quite difficult and requires a massive amount of machinery and it's a hard thing to scale. As it was also difficult to create the anode and cathode. I think -- my guess is maybe 2/3 of batteries will be iron phosphate or maybe iron phosphate with some manganese. And there's plenty of -- there's a ridiculous amount of iron. In fact, Earth is -- a little better of trivia. says, what is Earth made of more than anything else? Iron. Iron is the #1 ingredient of Earth by mass. Number 2 is oxygen, which is wild. \r\nYes. Basically rust. Actually, we're stuck together. We're a rust ball. That's roughly -- that's almost 2/3 of Earth, I think, is rust. We are like a rusty ball bearing with a little bit of other stuff. So -- but plenty of lithium. So anyway, there's not like a shortage of materials.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 62
},
{
"name": "Drew Baglino",
"speech": "But the other thing on the LFP thing is that it isn't just that there's more access to material that way. The actual refining process is less capital intensive to make a good LFP cathode. And so there's -- it's not just scalable on the resource side, it's scalable on the refining side.",
"session": "Answer",
"person_id": 393478,
"person_company": null,
"component_order": 63
},
{
"name": "Elon Musk",
"speech": "Absolutely. To clear, there's no fundamental barrier here. It's simply a rate question. Like at what rate can you scale production? And I think we're seeing a very rapid increase in battery production and in the whole supply chain. If you were to say today, what are concerns appears down the road? I would say one of the concerns is the machinery to refine the -- the critical ingredients of lithium ion cells. So the lithium itself and then the cathode, which I said like I said, will be mostly iron phosphate, some manganese. \r\nI think almost all stationary storage will be iron phosphate and then you really just need nickel chemistry for long-range vehicles and like aircraft and that kind of thing.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 64
},
{
"name": "Drew Baglino",
"speech": "Yes. The other thing I would say is -- we are working with our suppliers to ramp their capability as quickly as possible. And it's not like we have a problem in the next year or 2 to -- specifically to your question. But when we look 10 years out, yes, we need to do more to accelerate the growth. And that is why we are making our own investments, like we are building a facility here in Texas. The steel is going up, you can see it in the flyovers. \r\nWe're working on a lithium refining activity as well ourselves because the best way to learn how to accelerate something is to do it yourself. So these are the things we're doing to move it all forward.",
"session": "Answer",
"person_id": 393478,
"person_company": null,
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},
{
"name": "Elon Musk",
"speech": "Yes. If our suppliers don't solve these problems, then we will.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 66
},
{
"name": "Martin Viecha",
"speech": "Thank you. The next question comes from Emmanuel Rosner from Deutsche Bank.",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 67
},
{
"name": "Emmanuel Rosner",
"speech": "Yes. I have a question on your vehicle demand and then a quick follow-up on supply. First, on the demand side. Are you seeing any sort of pressure in the order book or the pace of new order or any sort of like slowdown as a result of the pressures that the consumer is experiencing? Are you worried about it in light of your view of the risks to the economy that I think you expressed, Elon?",
"session": "Question",
"person_id": 376728,
"person_company": null,
"component_order": 68
},
{
"name": "Elon Musk",
"speech": "Well, right now, our is very much production. So we've long leads on -- as anyone can tell, if they order our car, you order Model Y, it'll arrive sometime next year. So this is clearly not an issue for many months for us. Our problem is overwhelmingly that of production. So yes.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 69
},
{
"name": "Zachary Kirkhorn",
"speech": "Okay. Maybe just 2 things to add. Specifically on your question, are we seeing a macroeconomic impact on our demand? Not that I can tell. Maybe a little.",
"session": "Answer",
"person_id": 385023,
"person_company": null,
"component_order": 70
},
{
"name": "Elon Musk",
"speech": "Some maybe.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 71
},
{
"name": "Zachary Kirkhorn",
"speech": "But it's not material. The second thing to Elon's point about backlogs, we have a very long runway with very long lead times here. I mean, certainly, the world is uncertain, and we'll have to see where things go with commodity prices, how quickly we're ramping production, what the state of the road looks like at some point next year. But the demand is not something we spend really any time talking about.",
"session": "Answer",
"person_id": 385023,
"person_company": null,
"component_order": 72
},
{
"name": "Elon Musk",
"speech": "Yes. I think it's -- maybe just 1 thing worth mentioning the -- that there is surface between value for money and fundamental affordability because sometimes people say, \"Well, if you got all this demand. Why don't you just raise the price to some -- double the price or something?\" And this is usually expressed by somebody who's rich. \r\nBut there's -- even if you rail value for money to infinity, if somebody does concerns do not have enough money to buy it, even a product where the desirability is rail to infinity, they basically cannot buy it. So this is why you kind of just raise prices to some arbitrarily high level because you pass the affordability boundary and then the demand falls off a cliff. \r\nSo I do feel like we've raised our prices or we raise the price quite a few times. They're frankly at embarrassing levels. But we've also had a lot of supply chain and production trucks and as we've got crazy inflation. So I'm hopeful, this is not a promise or anything, but I'm hopeful that at some point, we can reduce the prices a little bit.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 73
},
{
"name": "Martin Viecha",
"speech": "Thank you. Emmanuel, do you have a follow-up?",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 74
},
{
"name": "Emmanuel Rosner",
"speech": "Yes. My follow-up was actually on the supply side. So it was very encouraging to see that you're quantifying your current installed capacity at basically already in excess of 1.9 million units installed currently. How quickly do you think that you can fill that capacity?",
"session": "Question",
"person_id": 376728,
"person_company": null,
"component_order": 75
},
{
"name": "Elon Musk",
"speech": "Well, I mean, we -- I think we've got a good chance of exiting this year at 40,000 vehicles a week.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 76
},
{
"name": "Drew Baglino",
"speech": "Yes. I mean our internal plans are to have the capacity utilized by the end of the year. It takes time to ramp there. It will be a challenge. There's a lot that needs to happen to get there but that's what we're working on.",
"session": "Answer",
"person_id": 393478,
"person_company": null,
"component_order": 77
},
{
"name": "Elon Musk",
"speech": "Yes. We've had many 30,000-car weeks already, so I think a 40,000-car week is within reach by the end of this year.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 78
},
{
"name": "Drew Baglino",
"speech": "Shanghai and Fremont, as we said last month for record production and they're really fire to better doing really well. But then also Berlin are coming on strong. Theoretically, they also had record quarters last quarter. And if we ramp them to the capacity shown in the deck by the end of this year, we'll be at that rate.",
"session": "Answer",
"person_id": 393478,
"person_company": null,
"component_order": 79
},
{
"name": "Elon Musk",
"speech": "There's always a lot of uncertainty like the production looks like, and that intermediate part of the difficult to bridge that with high certainty. But the end part of the S-curve, you can say, I think you can have a lot more certainty. And so that's why I'm confident we'll get to 5,000 cars a week at -- in Austin and Berlin by the end of this year or early next year and probably but not certainly, 10,000 cars a week at both locations by the end of next year.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 80
},
{
"name": "Martin Viecha",
"speech": "Thank you. The next question comes from Colin Rusch from Oppenheimer.",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 81
},
{
"name": "Colin Rusch",
"speech": "Could you talk a little bit about the pricing strategy around FSD, and as you get closer to this full functionality rolling out and the increased cycle times, how you see that evolving through the balance of this year and into 2023?",
"session": "Question",
"person_id": 310676,
"person_company": null,
"component_order": 82
},
{
"name": "Elon Musk",
"speech": "Yes, we will increase the price of FSD sometime later this year. I think probably just before we go to quiet beta or beta is anyone who wants to use the beta software with all the caveats associated with that can use it, then it would make sense to increase the price of FSD. The value of FSD is, I think, extremely high and not well understood by most people. It is basically currently ridiculously cheap, assuming FSD materializes, which is well.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 83
},
{
"name": "Colin Rusch",
"speech": "Great. And then sorry to belabor a little bit on battery materials side. But in terms of some of the suppliers and the contaminants, can you be a little bit more specific around some of the elements that you guys see in some of your supply chain that can prove troublesome yields for the 4680s, particularly around lithium and potential contaminants in either oxide, the carbonates that you guys end up seeing real issues with as you move into production?",
"session": "Question",
"person_id": 310676,
"person_company": null,
"component_order": 84
},
{
"name": "Zachary Kirkhorn",
"speech": "Yes. I don't really think we have anything to comment on, yes, the purity specs of lithium on this call right now, yes.",
"session": "Answer",
"person_id": 385023,
"person_company": null,
"component_order": 85
},
{
"name": "Elon Musk",
"speech": "Yes. The contaminants from the 4680 are not a factor, which is not an issue.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 86
},
{
"name": "Martin Viecha",
"speech": "Thank you very much. The next question comes from Tony Sacconaghi from Bernstein.",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 87
},
{
"name": "Toni Sacconaghi",
"speech": "Yes. I have 2 as well. In response to the question around demand, I think, Zach, you said maybe a little, and Elon, you said maybe some indication that you might see some pressure on demand. And I'm wondering if that is really just speculation or whether there's any empirical data that you saw in the last month, whether it be cancellations or order lead times that led you to make that comment. \r\nI think anecdotally, if you squint, the lead times have gotten a little lower over the last 4 months in both China and the U.S. That's really the only visibility investors have. So I'm wondering if you could maybe elaborate on whether that's really just you're sort of anticipating there could be some impact because of high prices or whether they're something anecdotally or quantitatively that you could point to, please?",
"session": "Question",
"person_id": 117232,
"person_company": null,
"component_order": 88
},
{
"name": "Elon Musk",
"speech": "No. I mean, I think we've said this now for many years, I know has proven true. Tesla does not have a demand problem, we have a production problem. And we've almost always had it's a very rare exception it's always been a production problem. I think that will remain the case.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 89
},
{
"name": "Toni Sacconaghi",
"speech": "So there's a denominator and a numerator and like, you increase production?",
"session": "Question",
"person_id": 117232,
"person_company": null,
"component_order": 90
},
{
"name": "Elon Musk",
"speech": "Yes, absolutely. As we increase production, more demand is needed obviously.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 91
},
{
"name": "Drew Baglino",
"speech": "No, it's more just like you can't look at the backlog and state much about demand because we're doing a lot on the other side to change the production.",
"session": "Answer",
"person_id": 393478,
"person_company": null,
"component_order": 92
},
{
"name": "Elon Musk",
"speech": "We're trying to make the backlog lower, not longer.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 93
},
{
"name": "Unknown Executive",
"speech": "Building factories and building --",
"session": "Answer",
"person_id": 182536,
"person_company": null,
"component_order": 94
},
{
"name": "Elon Musk",
"speech": "We don't want a long backlog. That's annoying. It'd be like go to a restaurant and you order a burger and you have to wait 3 hours and like, that's annoying. You want to get your burger right away. Same with the car. So we want that lead times to reduce.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 95
},
{
"name": "Toni Sacconaghi",
"speech": "Okay. Now I was just trying to follow up on the fact that you both said that maybe we're seeing demand be impacted a little bit, and that was the spirit of the question.",
"session": "Question",
"person_id": 117232,
"person_company": null,
"component_order": 96
},
{
"name": "Elon Musk",
"speech": "We don't have like -- like because we see daily orders from around the world for our cars, it's actually -- it is like a mood barometer of people's confidence in the economy. But one can't read too much into it because things can vary a great deal from 1 day to the next. Consumer sentiment is all over the map. So it's -- manage price, frankly. But we have so much excess demand. That is really just not an issue for us. It might be an issue for some other companies but it is not an issue for us.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 97
},
{
"name": "Toni Sacconaghi",
"speech": "Okay. Elon, I'm just wondering, a question for you. Tesla's obviously changed dramatically in the last 3 years from near life or death to a company with consistent cash flow and industry-leading margins. I'm wondering if you can comment on your personal role in the company and whether you see that changing in terms of your role, your commitment and time spent at the company over the next 3 or 4 years. \r\nI think you said a few calls ago, you wouldn't be on calls unless there's something unusual and you've been on every call since then. I'm wondering.",
"session": "Question",
"person_id": 117232,
"person_company": null,
"component_order": 98
},
{
"name": "Elon Musk",
"speech": "I do a lot of unusual things, let's face it. Basically, if there's only good news, I won't be on the call. But if you have like a tough situation like COVID shutdowns in China, then I think I'll be on the call -- relatively speaking, if there's bad news. And we have this good news, then I won't be on the call. \r\nBut I'm committed to the long -- I mean, I'll work at Tesla as long as I can usefully advance the cause of sustainability and autonomy.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
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{
"name": "Martin Viecha",
"speech": "Fantastic. Thank you very much. The next question comes from William Stein.",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 100
},
{
"name": "William Stein",
"speech": "Elon, in the past, you've given some assessment as to the likelihood that you can achieve success in some of the more interesting AI-oriented efforts, not only FSD but also Dojo and Optimus. Perhaps you can give an updated view on those.",
"session": "Question",
"person_id": 256580,
"person_company": null,
"component_order": 101
},
{
"name": "Elon Musk",
"speech": "Well, I don't want to steal thunder from AI Day. So I think we'll have some exciting news on AI Day that I think will be further ahead than probably most people think. But I don't want to -- I'd love to answer you but I think we'll leave that excitement for AI Day.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 102
},
{
"name": "William Stein",
"speech": "Okay. And perhaps a follow-up if I can. We've heard a lot from others and certainly to some degree from you all about the shortages in semiconductors, in particular. We have seen some big, important customers of that type of product decide to sort of leverage the ecosystems that exist to make some of their own in those categories. \r\nI'm wondering to what degree you're doing that. That's outside of Dojo in terms of the -- I guess, on the inference side, you're certainly doing that in the car, but what about sort of the more mundane areas like microcontrollers and the like? Is there any internal effort to improve supply chain and maybe improve other performance aspects?",
"session": "Question",
"person_id": 256580,
"person_company": null,
"component_order": 103
},
{
"name": "Elon Musk",
"speech": "Well, there's we've done -- we've been working with our suppliers side. We don't currently intend to make chips ourselves. We don't think there will be a need to make chips, but we have been working closely with a number of suppliers. Actually just met with one of our key supplier CEOs right before this call. We had a great meeting. They're going to make major investments in some of the critical chips and components that we need in the car. \r\nAnd I'd actually like to take a moment to thank our key suppliers once again for supporting us through difficult times. And they really went above and beyond to support us. So to all our suppliers out there, thanks very much.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 104
},
{
"name": "Drew Baglino",
"speech": "Yes. And I guess just maybe we don't talk about it very often, but we do have a lot of custom silicon in the vehicle already. Microcontrollers, yes, some battery management, yes, power electronics, yes, some. So we try to go after where there's actually a technical advantage. And in the future, I think we're going to look at where there's a supplier",
"session": "Answer",
"person_id": 393478,
"person_company": null,
"component_order": 105
},
{
"name": "Elon Musk",
"speech": "[indiscernible] even now where the supply chain issues with our Tier 1s and Tier 2s, get into it with us on the engineering side when we find solutions, whether it's alternative chips or changing the entire structure of this pack to make it work. And I think that's an advantage we have that many other OEs just simply cannot. \r\nI think Tesla is as much a software company as it is a hardware company. And so one of the ways that we've been able to address supply chain issues on the chip front is by rewriting of software to be able to use different chips or, in some cases, achieve dual use of a single chip, which is even better. And actually, quite frankly, the chip shortage has served as a forcing function for us to reduce the number of chips in the car. Yes, turns out we had more chips than we needed. \r\nBut that's a testament to our software team that we're able to roll a new chip into the car, write a whole new patch of software for that chip and -- without interrupting production.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 106
},
{
"name": "Drew Baglino",
"speech": "Yes. And our goal is as we mature and scale the platforms to integrate more functionality into fewer chips, like that is the way that it's gone with laptops and phones. It's going that way in cars. And we're trying to do that wherever it makes sense to do it as quickly as we can.",
"session": "Answer",
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"speech": "From a supply chain standpoint, do we -- what do you think about the chips and whatnot?",
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"speech": "Yes. I think -- I mean, from a high level, instead of designing and building our own microcontrollers, we're partnering with key partners that understand the architectural of [indiscernible] and they'll take the specs and design something for us. We've done that, to your point, the battery sensing space. We've got some application-specific ICs. But yes, integrating, reducing the number of components, it's a mix of supply chain but it also makes the reliability of the end product better because there's less failure points. So that's always been the mantra.",
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"name": "Lars Moravy",
"speech": "And at times, we've also got the wafer level and try to consume less to achieve the same functionality. So that's something also that we've been looking at in some of the constrained modules that we have faced in the last 6 months.",
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"name": "Martin Viecha",
"speech": "Fantastic. Well, thank you very much. I appreciate all of your questions. Unfortunately, this is all the time we have this quarter, and we will speak to you again in 3 months' time. Thank you very much, and goodbye.",
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"speech": "Bye.",
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"title": "Tesla, Inc., Q2 2022 Earnings Call, Jul 20, 2022",
"quarter": 2,
"year": 2022
}
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{
"transcript_title": "Tesla, Inc. - Q1 2022",
"transcript_name": "Tesla, Inc., Q1 2022 Earnings Call, Apr 20, 2022",
"ticker": "NASDAQ:TSLA",
"transcript_url": "https://wkarticles.blob.core.windows.net/finnhub/snp_transcript_2540518",
"date": "2022-04-20",
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{
"name": "Martin Viecha",
"speech": "Okay. Good afternoon, everyone, and welcome to Tesla's First Quarter 2022 Q&A Webcast. My name is Martin Viecha, VP of Investor Relations, and I'm joined today by Elon Musk, Zachary Kirkhorn and a number of other executives. Our Q1 results were announced at about 3 p.m. Central Time in the update deck we published at the same link as this webcast. \r\nDuring this call, we will discuss our business outlook and make forward-looking statements. These comments are based on our predictions and expectations as of today. Actual events and results could differ materially due to a number of risks and uncertainties, including those mentioned in our most recent filings with the SEC. \r\n[Operator Instructions] Before we jump into Q&A, Zach will have some opening remarks. Zach?",
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"name": "Zachary Kirkhorn",
"speech": "Yes. Thanks, Martin. Just to start off here, Q1 was a challenging but extremely successful quarter for the company. Numerous supply interruptions, including shuts at our Shanghai factory and nearby suppliers due to COVID, we've continued making progress and achieved our best-ever vehicle deliveries. \r\nLast quarter, we demonstrated a series of new financial records, including revenue, gross margins, operating margin and bottom line profitability. GAAP automotive gross margin reached 32.9% and first time exceeded $0.30 when excluding regulatory credits. Higher pricing continues to positively impact our financials as we make progress delivering cars and our growing backlog. Note that, for most vehicles, our delivery wait times are quite long. Thus, cars delivered in Q1 generally carried pricing set in prior quarters and at levels lower than cars being ordered today. \r\nOur per unit vehicle cost increased as well. Inflation, raw material prices, expedites and logistics costs continues to impact our cost structure. Factory shutdowns also occurred with little to no notice. Hence, we are unable to take action to plan those interruptions in a cost-efficient manner. Additionally, we saw a slight mix shift towards more profitable vehicles, including the Model Y. We also recognized a onetime benefit of $288 million from credit revenue relating to a regulatory change in the U.S. CAFE penalty, without of which credit revenue would have declined compared to the same period last year. \r\nThe energy business has continued to be impacted by macro conditions, more severely than the vehicle business. Our storage products, our need of chip supply and new import processes have impacted supply of certain components for our solar systems, which is reflected in our solar volume for the quarter. \r\nOpEx as a percentage of revenue continues to reduce, driven by higher revenue, lower stock-based comp expense and other items. As a result of our ongoing improvements in operating leverage, we achieved a record operating margin of over 19%. Note that commissioning costs for our factories are in R&D as Berlin started production in late March and Austin in early April. These costs will be in automotive COGS going forward, given these factories are now producing customer sellable cars. \r\nOur free cash flows have remained quite strong, yet were impacted by working capital related to lower-than-planned production. Additionally, we have reduced our debt, excluding product financing, to nearly 0. \r\nLooking ahead in the immediate term, a few things to keep in mind for Q2. First, we've lost about a month of build volume out of our factory in Shanghai due to COVID-related shutdowns. Production is resuming at limited levels, and we're working to get back to full production as quickly as possible. This will impact total build and delivery volume in Q2. Second, as I've mentioned before, Austin and Berlin are just starting their ramps. And thus, those inefficiencies will start to flow through our gross margins in Q2. Third, we do have higher ASPs in our backlog, which will help to offset some of these headwinds. \r\nWe continue to drive towards further strengthening of our financials in the second half of the year and believe our 50% or above growth rate remains achievable for the year. \r\nI want to conclude by thanking the Tesla team, our suppliers and our new customers for a great first quarter.",
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"speech": "Thank you very much. And Elon has opening remarks as well.",
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"name": "Elon Musk",
"speech": "Sure. Some of my remarks will be redundant with Zach's, but it's maybe worth repeating. Q1 was once again a record quarter on many levels, by reaching the highest deliveries, profit and an operating margin of 19%. This was despite a lot of chip shortages, many logistics challenges and an overall difficult quarter. So I'd really like to congratulate the Tesla team on achieving record profitability and output despite many, many difficult headwinds. And especially the Tesla China team in our Shanghai factory, they really had significant challenges due to the COVID shutdown and nonetheless have been able to output a tremendous number of high-quality vehicles. And we are already back up and running with the Shanghai factory. \r\nSo as Zach said, we remain confident of a 40% growth in vehicle production in 2022 versus '21. I think we actually have a reasonable shot at a 60% increase over last year. So let's see. Obviously, we ramped production, as you will know, with Giga Berlin and Giga Texas in the past few months. So with 2 fantastic factories with great teams, and they are ramping rapidly. Now with new factories, the initial ramp always looks small, but it grows exponentially. So I have very high confidence in the teams in both factories, and we expect to ramp those initially slowly, but like I said, growing exponentially with them achieving high volume by the end of this year. \r\nSo we're also working on a new vehicle that I alluded to at the Giga Texas opening, which is a dedicated robotaxi. That's highly optimized for autonomy, meaning it would not have steering wheel or pedals. And there are a number of other innovations around it that I think are quite exciting. That is fundamentally optimized for -- trying to achieve the lowest fully considered cost per mile or cost per kilometer, accounting everything. And so it's, I think, going to be a very powerful product where we aspire to reach volume production of that in 2024. So I think that really will be a massive driver of Tesla's growth. And we remain on track to reach volume production of the Cybertruck next year. \r\nLet's see. So it's basically, once again, I'd like to thank the Tesla employees for their hard work, but also I'd like to thank our suppliers who have really gone the extra mile. They -- we have an amazing supplier group, and I want say heartfelt thanks to the suppliers that have really worked day and night to ensure that Tesla is able to keep the factories running. \r\nAnd we're really at the early stage of that journey. We only crossed 1 million units in the past 12 months recently. And we are -- we aspire to head to 20 million units a year, so we're basically 5% along the way towards our goal. And we are growing very, very rapidly year-over-year. And we remain confident of exceeding 50% annual growth for the foreseeable future for basically several of the next years, I mean, so yes. \r\nAnd then there's, of course, Optimus, which I was surprised that people did not realize the magnitude of the Optimus robot program. The importance of Optimus will become apparent in the coming years. Those who are insightful or listen carefully will understand that Optimus ultimately will be worth more than the car business, worth more than FSD. That's my firm belief. So -- and then, of course, insurance is growing well. We expect to address the part shortages that limited our progress with batteries and solar. So we expect batteries and solar to also grow well this year. \r\nAnd basically, the future is very exciting. I've never been more optimistic or excited about Tesla's future than I am right now. Thank you.",
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"name": "Martin Viecha",
"speech": "Thank you very much. Let's go to first investor question. And the first investor question is, Elon has historically provided FSD time lines with not optimal accuracy. We love his optimism for 2022 release, but is there any data Tesla can share with investors to help them make their own conclusions on progress being made, interventions per mile driven or any other data?",
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"name": "Elon Musk",
"speech": "Sure. Well, with respect to full self-driving, of any technology development I've ever been involved in, I've never really seen more kind of false dawns or where it seems like we're going to break through, but we don't, as I've seen in full self-driving. And ultimately, what it comes down to is that to solve full self-driving, you actually have to solve real-world artificial intelligence, which is -- which nobody has solved. The whole road system is made for biological neural nets and eyes. And so actually, when you think about it, in order to solve for full self-driving, we have to solve neural nets and cameras to a degree of capability that is on par with or really exceeds humans. \r\nAnd I think we will achieve that this year. The best way to reach your own assessment is to join the Tesla full self-driving beta program where we have over 100,000 people right now enrolled in that program, and we expect to broaden that significantly this year. So that's my recommendation is join the full self-driving beta program and experience it for yourself and take note of the rate of improvement with every release. And we put out a new release roughly every 2 weeks. So -- and you'll see a little bit of 2 steps forward, 1 step back. But overall, the rate of improvement is incredibly quick. So that's my recommendation for reaching your own assessment is literally try it.",
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"speech": "Thank you. The second question is, how much of an impact will the production shutdown in Shanghai have in Q2? What is the time line for localizing the Model 3 in Europe? Or will newer models be prioritized in Berlin?",
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"name": "Elon Musk",
"speech": "Well, the -- we did lose a lot of important days of production. And because there are sort of upstream supplier challenges where a lot of suppliers also have lost many days of production. But Tesla Shanghai -- Giga Shanghai is coming back with a vengeance. So I think notwithstanding new issues that arise, I think we will see record output per week from Giga Shanghai this quarter, albeit we are missing a couple of weeks. So that means the most likely vehicle production in Q2 will be similar to Q1, maybe slightly lower, but it's also possible we may pull a rabbit out of the hat and be slightly higher. But it's really, call it, roughly on par. But then Q3 and Q4 will be substantially higher. So it seems likely that we'll be able to produce over 1.5 million cars this year is my -- that's my best guess. \r\nAnd then Model 3. It's important for new factories to be focused on -- and have the least amount of complexity and variation, which is why Giga Berlin and Giga Texas are focused on the Model Y. It's -- from the point in which you have a factory complete and you're making a small number of units to the point where it's producing high-quality vehicles in volume is sort of 9 to 12 months from start of production. So now hopefully, we're getting better at that ramp, so maybe it's a little less. But to get to sort of the 5,000 a week level has typically taken us around 12 months from start of production.",
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"name": "Martin Viecha",
"speech": "Thank you. The next question is, how much raw material exposure do you have, measured roughly in percentage of cost of goods sold? For example, in a given quarter versus 1 to 2 years out, both direct and indirect. Separately, how do you think about price increases versus prioritizing higher mix vehicles going forward?",
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"name": "Elon Musk",
"speech": "Actually, on the price increase front, I should mention that it may seem like maybe we're being unreasonable about increasing the prices of our vehicles given that we had record profitability this quarter, but the wait list for our vehicles is quite long. And some of the vehicles that people will order, the wait list extends into next year. So our prices of vehicles ordered now are really anticipating supplier and logistics cost growth that we're aware of and believe will happen over the next 6 to 12 months. So that's why we have the price increases today because the car ordered today will arrive, in some cases, a year from now. So we have a very long wait list, and we're obviously not demand-limited. We are production-limited by very much for the production of the unit.",
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"name": "Martin Viecha",
"speech": "Raw material exposure?",
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"name": "Zachary Kirkhorn",
"speech": "Yes. Just to add to what Elon is saying, there's different ways to calculate raw material exposure. I think the simple way we estimate we're around 10% to 15% of our cost structure exposed to raw materials. \r\nAnd just to clarify a couple of things on that. So we've been experiencing increases in cost in general, but also raw materials for a number of quarters now. That pace picked up in Q1, so last quarter. And what we're seeing for Q2 is slightly higher than that as well. And as indices move, it doesn't impact us immediately or directly. In some cases, we have contracts with suppliers. But then as those contracts expire, we have to renegotiate them so that there can be a lag. \r\nIn some cases, our contracts do directly reflect movement in commodity prices or raw material prices. But the timing in which that, that Tesla pays for that has a lag associated with it as well based on the contract. And so to Elon's point, what we're trying to do here, because it's quite an unprecedented situation of raw material movement in all of these various lags and uncertainty around renegotiating contracts, is we're trying to anticipate where things will go and make sure the pricing that we have put in place at the time that those raw material cost increases hit us that they align and that the company can remain financially healthy in various scenarios as we look out over the next 4 quarters.",
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"name": "Martin Viecha",
"speech": "Okay. Thank you very much. The next question is, why does Tesla continue to fight dealership laws on a state-by-state basis versus taking it federal? Separately, why isn't Tesla using 800-volt architecture in its vehicles? What are the advantages or disadvantages?",
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"name": "Elon Musk",
"speech": "So -- standpoint, obviously, we'd like to have federal legislation that allows direct sales in all states, but we have not seen willingness on the part of the Congress to enact such law that would override a variety of state laws. So unfortunately, we have to fight it on a state-by-state basis. And Drew, do you want to answer the 800-volt question?",
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"name": "Drew Baglino",
"speech": "Yes, sure. On the 800-volt thing, yes, so it's really a case-by-case thing. For the smaller platform vehicles like 3 and Y, there's some wins and losses with 800 volts, not everything is better. And so we look at that platform and we're not like ignoring the reality that you can go to a higher voltage, but there's nothing really encouraging us to do so on that platform. It's really about mass and power. And as you look at bigger vehicles, there are some advantages on those bigger vehicles.",
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"name": "Elon Musk",
"speech": "Let me just quantify that. Basically, our estimate is that going from 400 to 800 volts might save $100. It's not really moving the needle.",
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"name": "Drew Baglino",
"speech": "And you're changing many things. It's charging infrastructure all the way through the entire vehicle system to get maybe $100.",
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"name": "Elon Musk",
"speech": "Yes, exactly. So I mean, in the U.S., you've got 110-volt household voltage. And then in your most -- like sort of 220. But really, it doesn't make that much of a difference, and appliances work pretty much as well in, say, Europe as they do in the U.S. So there's some -- the advantages are small and the cost is high. Like you say, like long term, like years now, it does it make sense probably to an 800-volt architecture probably, but it really needs a very big vehicle volume to pay for the cost of changing from 400 to 800 volts. And then Drew, do want to continue to...",
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"name": "Drew Baglino",
"speech": "I was just going to say that 100 volts is also kind of like a spreadsheet exercise, right?",
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"name": "Elon Musk",
"speech": "$100.",
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"name": "Drew Baglino",
"speech": "Sorry. $100. It's roughly like a spreadsheet exercise, like you have to get through the full to the end to see that maybe it's been whittled away to $50 or less. Yes. On bigger vehicles, where you're talking about higher power on the charging side or higher power from the battery to the power electronics or you need more torque, so the current requirements go up, there's a little bit more semiconductor and actual conductor savings of going to the higher voltage. And so we do consider that for Semi and Cybertruck. But for the 3/Y platform where we've got everything running and the benefit is questionably small.",
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"name": "Elon Musk",
"speech": "Yes. It's basically 0 for robotaxi.",
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"name": "Drew Baglino",
"speech": "Yes. For robotaxi, yes, it doesn't make sense.",
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"name": "Elon Musk",
"speech": "No, no. Sorry, this...",
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"name": "Drew Baglino",
"speech": "Sounds good.",
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"name": "Martin Viecha",
"speech": "Okay. Let's go to the next question. Next question is, how are the current 4680 performing versus expectations set during the battery day in terms of expected range increase and dollars per kilowatt hour?",
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"name": "Elon Musk",
"speech": "Yes.",
"session": "Answer",
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"name": "Drew Baglino",
"speech": "Yes. We're working in all the areas we shared on Battery Day, and we have sort of consistent progress across all of those areas towards achieving the 5-year cost trajectory goals for the cost within our control, but we do not control all the commodity costs. So that's an exception I needed to call out. \r\nSimilar to Model 3, it will take us several years to get rate and yields to the point where everything that we've discussed is achieved. Our priority was on simplicity and scale during our initial 4680 battery ramps. And as we attain our manufacturing goals, we will layer in new material technologies we are developing and higher-range structural pack provisions.",
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"name": "Elon Musk",
"speech": "I think maybe, in a nutshell, I think it probably is fair to say that 4680 and structural pack will be competitive with the best alternatives later this year and we think will exceed the best alternatives next year.",
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"name": "Drew Baglino",
"speech": "Yes. I mean we have some good existing proofs, right? Like we've built the facility here in Texas, like we know how much we spent on capital equipment in the facility. And it's more than 5x less than prior technology installations. So we're saving huge on CapEx, on utilities and personnel. We know what those loads are and how many people are needed to run what is basically in a highly automized factory. And we have massive reductions in both of those. So like the cost model is well understood. It's really about rate and yield, which will come in time, as Elon said, over the course of this year and next.",
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"name": "Elon Musk",
"speech": "Yes.",
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"name": "Martin Viecha",
"speech": "Thank you. And the next question is, how does Tesla plan to secure raw materials required to scale to extreme size?",
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"name": "Elon Musk",
"speech": "Yes. So this is something we think about quite a lot. It depends what extreme size means. But certainly looking at, like, say, the $5 million, $10 million, $20 million -- 5 million, 10 million, 20 million vehicle levels, you really have to analyze the sort of macroeconomic, just like what is the tonnage of lithium that you need, of nickel, of iron phosphate, of graphite separators, electrolytes. It looks like really you think of like just macro tonnage. \r\nAnd when we need to think about this for the world as a whole, because just -- we want to what -- limiting factors for accelerating the advent of a sustainable energy future. And whatever the most limiting factors are, Tesla will take action on those limiting factors. So right now, we think mining and refining lithium is -- appears to be a limiting factor, and it certainly is responsible for quite a bit of cost growth in the sales. It's I think the single biggest cost growth item right now all on a percentage basis. Although just for those who don't totally know this, the actual content of lithium in lithium ion cell is maybe around 2% or 3% of the cell. So.",
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},
{
"name": "Drew Baglino",
"speech": "5 kg a car.",
"session": "Answer",
"person_id": 393478,
"person_company": null,
"component_order": 33
},
{
"name": "Elon Musk",
"speech": "Yes, exactly. 5 kg. It's not -- it's called lithium ion cell, but by far, like the most expensive and heaviest item in the cell is the cathode. So that's the nickel or the iron phosphate. So we're looking carefully at all of the raw materials and trying to figure out how we can accelerate the total amount of raw materials needed to transition the world to sustainability. I think we've got -- we don't have enough time on this call to really go through all those details, but we are thinking about these things. And we think we'll have some exciting announcements in the months to come.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 34
},
{
"name": "Drew Baglino",
"speech": "Yes. One thing I want to call out is like we're also committed to recycling at all of our cell factories. We're recycling 50 tonnes a week right now in Reno and ramping to 150 with all of that reclaimed material going directly back into our cathode supply chain. So we're looking at the beginning and end of life needs here.",
"session": "Answer",
"person_id": 393478,
"person_company": null,
"component_order": 35
},
{
"name": "Elon Musk",
"speech": "Yes. And that's true like since Reno build a Gigafactory and we started doing that with batteries. But as we build newer factories or vehicles, for example, Giga Texas here, where we are today, we said was all of its non yielded or scrap aluminum from the stamping shop directly into the casting shop. We regrind any plastic figures out. And so we're really concerned about raw materials, not just like mining them and consuming them, but when we get them in the door, using all 100% of them.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 36
},
{
"name": "Drew Baglino",
"speech": "Yes. No, that's a great point. So we're storing -- we're selling sort of health furnaces for probably minimum [indiscernible] for the Model Y that we've built here in -- at Giga Texas has both a front and a rear body casting. So we're casting almost 2/3 of the body then that's -- it's high pressure aluminum. And so we can take both scrap from the casting machine and the gating that comes out and put that -- just really pass that back into the melting aluminum melting pot. And then as Elon was saying, also take any stampings and any other aluminum scrap and also through that in the melting pot, matter of fact, we've also figured out that we can use wheels from practically any car. Yes, yes. So we're going to be recycling the aluminum wheels from legacy gasoline cars as well and throwing that in the melting pot for our aluminum cast body of Model Y. And also we'll be moving to the sort of cast part rear body in all vehicles over time? Well, actually, maybe not S/X, but 3/Y.",
"session": "Answer",
"person_id": 393478,
"person_company": null,
"component_order": 37
},
{
"name": "Martin Viecha",
"speech": "Thank you. At what rate do you expect Berlin and Austin to ramp relative to Shanghai? Are you able to leverage learnings from Shanghai? Or are the processes substantially different in the new factories?",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 38
},
{
"name": "Elon Musk",
"speech": "Ramp production faster than Shanghai because we have learned a lot. And we've now gone through the -- we have basically veteran teams that obviously in the 3/Y ramp [indiscernible] especially in multiple locations. And we're obviously sharing what we've learned. And so we don't want to get complacent or entitled, but this should be a faster ramp because we have learned more, and we have done a lot to simplify the production prices of Model Y that should lead us to a faster ramp within Texas and Berlin, yes.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 39
},
{
"name": "Drew Baglino",
"speech": "But we also had a structural casting, about 30% less robots, we expect to almost double the capacity for body, for example, reducing the number of robots, but doubling our capacity in a lot of areas.",
"session": "Answer",
"person_id": 393478,
"person_company": null,
"component_order": 40
},
{
"name": "Elon Musk",
"speech": "Yes. Right. The body line for the structural pack is -- and if you got a structural pack and front and rear castings, the body shop sizes drops by over 60% relative to the standard way of making a car.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 41
},
{
"name": "Drew Baglino",
"speech": "[indiscernible] general assembly or everything else because, yes, we have the structural battery, the floor is the battery. We put the seats on the battery and then we put that in their cars. So there's actually 10% and 15% of our stations in GA because of the general [indiscernible] as well.\r\nSo really, like I think about this and the way we think about cars, if you're waiting for the best Tesla, you're going to be waiting forever. If you're waiting for investment, you're also going to be waiting forever because every new factory is better than the last one because we take all that learning and triple it.",
"session": "Answer",
"person_id": 393478,
"person_company": null,
"component_order": 42
},
{
"name": "Elon Musk",
"speech": "Yes.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 43
},
{
"name": "Martin Viecha",
"speech": "Next question is at Cyber Rodeo, Elon mentioned that a future is the driverless robotaxi vehicle is on the road map. When can we expect more details on the product offering to be unveiled? Is this something that people can own? Or will this be only offered by Tesla as a service?",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 44
},
{
"name": "Elon Musk",
"speech": "So I think we want to hold up on -- we don't want to jump the gun on an exciting product announcement too much. So I think we'll aim to we do a product event for robotaxi next year and get into more detail, but we are aiming for volume production in 2024.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 45
},
{
"name": "Martin Viecha",
"speech": "All right. And maybe the last question from investors is, what is the current run rate of 4680 cell production at Fremont and at Giga Texas? What do you expect run rates of 4680 to be in Fremont and the Giga Texas or Berlin at the end of the year?",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 46
},
{
"name": "Elon Musk",
"speech": "Well, Berlin is using the 2170 nonstructural pack. So they're not constrained by 4680. They will transition to 4680 hopefully later this year, but current billing production is not to acquire that. We also have, just as a risk mitigation 2170 nonstructural pack capability in Giga Texas as well. But -- if things go according to plan, we will be in volume production with 4680 sometime perhaps towards the end of the third quarter and certainly in the fourth quarter. Is that accurate?",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 47
},
{
"name": "Drew Baglino",
"speech": "Yes. And the other thing I would add is like with the China COVID shutdown and the semiconductor bottlenecks we had through Q4 and hence a little bit in Q1, we have sizable cell inventory at the moment and excess cells to support the 2022 volume targets you described. So that gives us the ability to be pretty deliberate in the 4680 ramp where we can maximize learning step by step, take engineering downtime to upgrade key pieces of equipment and modify the structural pack design to improve reliability, all while achieving what you just said. So.",
"session": "Answer",
"person_id": 393478,
"person_company": null,
"component_order": 48
},
{
"name": "Elon Musk",
"speech": "Yes. 4680 output is not a risk to achieving 1.5 million vehicles produced this year, but it would become a risk next year if we do not solve volume production by early 2023, but we're highly confident of doing so.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 49
},
{
"name": "Martin Viecha",
"speech": "Thank you very much. Let's go to analyst questions now. The first question comes from Dan Levy from CSFB.",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 50
},
{
"name": "Dan Levy",
"speech": "First, maybe you can just talk through or address what some of the drivers of cost improvement were in the quarter. Was it just further improvements within Shanghai or in Fremont? Anything around sort of ongoing kaizen that you've talked about in the past? Maybe you could just talk through what you benefited from in the first quarter.",
"session": "Question",
"person_id": 377011,
"person_company": null,
"component_order": 51
},
{
"name": "Zachary Kirkhorn",
"speech": "Sure. I mean at a high level, cars produced in Shanghai do carry a lower cost structure than cars produced in Fremont. And so as our mix of cars shift towards Shanghai, the average cost is positively impacted by that. We're also seeing some progress in manufacturing efficiencies in Fremont, particularly on the S/X side as volume increases improves there. Expedites has been a huge story for the company. Q4, we had massive amounts of expedites. Q1 was still quite large, but we did make progress on bringing that down some.",
"session": "Answer",
"person_id": 385023,
"person_company": null,
"component_order": 52
},
{
"name": "Elon Musk",
"speech": "Special mention goes to the Fremont manufacturing team and our associates there because we're achieving record output at Fremont.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 53
},
{
"name": "Zachary Kirkhorn",
"speech": "The Fremont team is doing a tremendous job.",
"session": "Answer",
"person_id": 385023,
"person_company": null,
"component_order": 54
},
{
"name": "Elon Musk",
"speech": "Really absolutely from the [indiscernible] quarters",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 55
},
{
"name": "Zachary Kirkhorn",
"speech": "Yes.",
"session": "Answer",
"person_id": 385023,
"person_company": null,
"component_order": 56
},
{
"name": "Drew Baglino",
"speech": "It's hard to underweight. Like you should -- the expedite situation with the crazy logistics that occurred with COVID.",
"session": "Answer",
"person_id": 393478,
"person_company": null,
"component_order": 57
},
{
"name": "Zachary Kirkhorn",
"speech": "Yes. And to Elon's point, the Fremont team and also the Shanghai team has been extremely dynamic with the unpredictable nature of our part arrivals. And our supply chain team, in particular, production planning portion of supply chain. We often get very little notice when there's part shortage is coming, and it's kind of a scramble couple of days before that part is supposed to arrive to figure out how to get it here. And so the amount of Herculean effort that goes in to produce a quarter like Q1 and even the quarters before that is absolutely immense.",
"session": "Answer",
"person_id": 385023,
"person_company": null,
"component_order": 58
},
{
"name": "Elon Musk",
"speech": "There's a saying in the military, it's like amateurs talk about tactics, professionals talk about logistics when it comes to war.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 59
},
{
"name": "Zachary Kirkhorn",
"speech": "Yes. So there were some inherent cost improvements, as I mentioned, but there's also offsets that we've talked about previously on raw materials. Commodities outbound logistics continues to remain a challenge despite a ton of efforts to increase capacity there and bring those costs down.",
"session": "Answer",
"person_id": 385023,
"person_company": null,
"component_order": 60
},
{
"name": "Rodney Westmoreland",
"speech": "[indiscernible]",
"session": "Answer",
"person_id": 456164,
"person_company": null,
"component_order": 61
},
{
"name": "Elon Musk",
"speech": "Sorry. Go ahead.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 62
},
{
"name": "Dan Levy",
"speech": "Yes. Yes. Second question, one of the initial goals of Model 3 way back when was to have an EV that was affordable for a wide portion of the market. And we know prices are much higher now just given the supply constraints. Prices are higher for all other automakers. We know that there's inflation that you're battling through, and some of that needs to be passed through the price of the vehicles. And you're going to be supply-constrained for the foreseeable future, so it's sort of a moot point. But given the goal long term of making EVs more widely available to the masses over time, how do you look at the progression of prices over time?",
"session": "Question",
"person_id": 377011,
"person_company": null,
"component_order": 63
},
{
"name": "Elon Musk",
"speech": "We absolutely want to make EVs as affordable as possible. It's been very difficult with the -- I mean, I think, inflation is at like a 40 or 50 year high. And I think the official numbers actually understate the true magnitude of inflation, so -- and that inflation appears to be likely to continue for at least the remainder of this year is what -- when we're talking to suppliers, under severe cost pressure. So yes, and in some cases, we're seeing suppliers request 20% to 30% cost increases for parts from last year to the end of this year. \r\nSo it's -- there's a lot of cost pressure there. That's why we raised our prices because we -- when things are on -- with respect to inflation, you know it's high, then -- and we've got orders that go out a year or more in some cases, then we have to anticipate those cost increases. But I think, especially with the robotaxi and autonomy, I think we will end up providing consumers with, by far, the lowest cost per mile of transport that they've ever experienced. Yes. I mean with robotaxi, like maybe 5 to 10x cost per mile, it's really quite substantial.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 64
},
{
"name": "Drew Baglino",
"speech": "And therefore, accessible to [indiscernible]",
"session": "Answer",
"person_id": 393478,
"person_company": null,
"component_order": 65
},
{
"name": "Elon Musk",
"speech": "Yes. I mean -- looking at some of our projections, it would appear that a robotaxi ride will cost less than a bus ticket, subsidized bus ticket or subsidized subway ticket.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 66
},
{
"name": "Martin Viecha",
"speech": "Let's go to the next question from Rod Lache from Wolfe Research.",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 67
},
{
"name": "Rod Lache",
"speech": "I'm trying to just parse out your comments about the inflation and constrained supply and battery feedstocks and the initiatives that you are working on internally to secure these materials. It sounds like you're optimistic about Tesla's ability to solve this for Tesla. Do you -- but do you see this as a constraint on EV adoption more broadly?",
"session": "Question",
"person_id": 370532,
"person_company": null,
"component_order": 68
},
{
"name": "Elon Musk",
"speech": "Yes, absolutely. But what's sort of keeping our costs down, at least in the short term, is that we have long-term contracts with suppliers, but those long-term contracts will obviously run out and then the year we'll start to see potentially significant cost increases. But the macro is sort of looking at the world as a whole and saying, okay, what does it take for Earth to transition to sustainable energy faster? It's fundamentally -- the fundamental limiting factor is the output of cell -- basically, cell output. At what rate can lithium ion cells increase the gigawatt hours per year? That is the fundamental limiting factor. \r\nSo in order -- and that will move as fast as the slowest element of the whole supply chain. Currently, we see that as being a challenge with lithium. And it's not that -- to be clear, it's not that there's a shortage of lithium ore in the world. Lithium is present almost everywhere. It's a very common element. However, you still need to take up the ore -- take up basically sludge or whatever the clay with the lithium and then you need to go through a whole series of refinement steps. And that's a lot of industrial equipment that's needed to refine lithium ore to lithium that can be used as lithium hydroxide or lithium carbonate in the battery cell. \r\nSo we think we're going to need to help the industry on this front, but the -- I mean, the industry is very fast, and I certainly encourage entrepreneurs out there who are looking for opportunities to get into the lithium business. The lithium margins right now are practically software margins. I mean if the -- I think it's something -- I think there's a -- I mean, is that -- correct me if I'm wrong, but I think we're seeing cases where the spot lithium price is 10x higher than the cost of extraction. So like we're talking 19% margins here. Can some -- can more people please get into the lithium business? It's -- do you like minting money? We'll look the lithium business is for you.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 69
},
{
"name": "Rod Lache",
"speech": "So interesting. So I guess we'll stay tuned to see what happens from that. My second question is it's impressive to see just a modest increase in cost per vehicle -- cost of goods sold per vehicle, given what we've seen in terms of commodities actually. And from here, you have a lot of savings opportunities with 4680 cells and the cell manufacturing changes, the anode chemistry structural packs, giga castings. Are you suggesting that even those may not be sufficient to offset the inflation that you're seeing and that you're going to need additional pricing as well in addition to those specific initiatives that you've called out?",
"session": "Question",
"person_id": 370532,
"person_company": null,
"component_order": 70
},
{
"name": "Elon Musk",
"speech": "We hope we don't need to increase the pricing further. The current pricing is anticipating what we think is the probable growth in costs. And if those growth -- if that growth in cost does not materialize, we actually may slightly reduce prices. So should we currently anticipate making significant price increases. But obviously, we don't control the macroeconomic environment. If governments keep printing vast amounts of money and if there's -- if there are not significant increases in lithium extraction and refinement and other raw materials, such that everyone is competing for a limited amount of raw materials, then obviously, that will drive prices to high levels. So if you have a crystal that can tell us what the future is going to be like, we'll adjust accordingly, but the current prices are what we -- the current prices are for a vehicle delivered in the future, like 6 to 12 months from now. So this is our best guess.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 71
},
{
"name": "Drew Baglino",
"speech": "But I think if you zoom out, right, like as you said, our mission is to accelerate the transition to sustainable energy. So we are working with our existing suppliers and others to figure out how to grow all of these raw materials as quickly as possible to not slow down the transition.",
"session": "Answer",
"person_id": 393478,
"person_company": null,
"component_order": 72
},
{
"name": "Elon Musk",
"speech": "Yes.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 73
},
{
"name": "Drew Baglino",
"speech": "And whether that means we have to get directly involved in some cases or not comes down to the counterparty and their willingness to expand at the rate we think they should be able to expand. And that's similar to what we've done with everything else, like we built a Gigafactory in Reno because it needed to be done. And so like we will do what needs to be done to not slow down the transition. And affordability is a goal because it's unaffordable, It's going to retard the growth of what is inherently a good thing that we can't have that as [indiscernible]",
"session": "Answer",
"person_id": 393478,
"person_company": null,
"component_order": 74
},
{
"name": "Martin Viecha",
"speech": "Thank you. The next question comes from Pierre Ferragu from New Street Research.",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 75
},
{
"name": "Pierre Ferragu",
"speech": "Can you hear me well?",
"session": "Question",
"person_id": 356336,
"person_company": null,
"component_order": 76
},
{
"name": "Martin Viecha",
"speech": "Yes.",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 77
},
{
"name": "Pierre Ferragu",
"speech": "Great. I'd like to ask you some questions about free cash flow. Do you -- so first, maybe in the long run, if you look at your performance and your growth model and your growth ambitions, I did the math very quick, and I see you guys sitting on $400 billion or maybe $500 billion of cash at the end of the decade. And I was wondering if it's something you have given some thoughts about.",
"session": "Question",
"person_id": 356336,
"person_company": null,
"component_order": 78
},
{
"name": "Elon Musk",
"speech": "If inflation keeps going crazy, $500 billion might be like $20 billion today, I don't know. So we'll see what $500 billion buys you in a decade, but it might be a lot less. So I don't know if we'll -- that seems like a lot of cash. I don't know. We'll try to do something useful with it. I mean, Zach, I don't know -- I realize that's your problem, that's for sure.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 79
},
{
"name": "Zachary Kirkhorn",
"speech": "The way we've been -- I think we have to take this one step at a time. And so we have investments that are happening right now to get Austin and Berlin up and running. And then as Elon mentioned, installing capacity for robotaxi production. And there are some decisions that, as Elon alluded to, just to share in the future about what the economic model looks like, what the economic model looks like for robotaxi. And so the way Elon and I have discussed this is [indiscernible]",
"session": "Answer",
"person_id": 385023,
"person_company": null,
"component_order": 80
},
{
"name": "Elon Musk",
"speech": "Let's just -- maybe just everyone [indiscernible]",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 81
},
{
"name": "Zachary Kirkhorn",
"speech": "Yes. So our focus is to get to the point where robotaxis are on the road, Optimus in use, get the economic model for that dialed in and then evaluate the size of cash flows at that point and make decisions then as to what's next.",
"session": "Answer",
"person_id": 385023,
"person_company": null,
"component_order": 82
},
{
"name": "Martin Viecha",
"speech": "Pierre, do you have a follow-up question?",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 83
},
{
"name": "Pierre Ferragu",
"speech": "[indiscernible]",
"session": "Question",
"person_id": 356336,
"person_company": null,
"component_order": 84
},
{
"name": "Martin Viecha",
"speech": "All right. Let's go to the next one. The next question comes from Trip Chowdhry from Global Equity Research.",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 85
},
{
"name": "Trip Chowdhry",
"speech": "Two questions I have. First is regarding the Cybertruck. And I was wondering like in terms of number of parts, how would Cybertruck compare with the traditional pickup truck in terms of number of parts? The second question I have is on Gigafactory Nevada Sparks. Will we have any production of vehicles in that factory? Or all the future production will happen in Giga Austin?",
"session": "Question",
"person_id": 191315,
"person_company": null,
"component_order": 86
},
{
"name": "Elon Musk",
"speech": "I'm not sure if we've actually done a comparison of Cybertruck parts versus regular truck parts. I mean, Lars?",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 87
},
{
"name": "Lars Moravy",
"speech": "Yes. I mean, if you want to go down the like -- it depends on what kind of part. We still have cells in [indiscernible] all it sounds [indiscernible]",
"session": "Answer",
"person_id": 482177,
"person_company": null,
"component_order": 88
},
{
"name": "Elon Musk",
"speech": "Mention count.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 89
},
{
"name": "Lars Moravy",
"speech": "If we don't count that, like the simplicity of our structure is significant versus a traditional pickup truck or any other vehicle, like as we've talked about their gigacastings, we save hundreds of parts there.",
"session": "Answer",
"person_id": 482177,
"person_company": null,
"component_order": 90
},
{
"name": "Elon Musk",
"speech": "I mean the entire -- kind of half of the car is one cast.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 91
},
{
"name": "Lars Moravy",
"speech": "So with the Cybertruck and the doors, for example, we have an exoskeleton design where the door is ready to take and it takes all the long-term impact. So we really have -- like we don't have the door reinforcements. We don't have the crash [indiscernible] So to your point, I haven't counted them because I don't often look back at old technologies to decide how well I'm doing. I take that once in a while. But in general, architecture is always moving to reduce complexity, reduce parts or reduce parts count. I would say, ignoring the battery cells, we are probably 20% to 30% less.",
"session": "Answer",
"person_id": 482177,
"person_company": null,
"component_order": 92
},
{
"name": "Elon Musk",
"speech": "All right.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 93
},
{
"name": "Martin Viecha",
"speech": "Okay.",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 94
},
{
"name": "Elon Musk",
"speech": "Do we expect to expand? Yes, we do expect to expand Giga Nevada. There's a lot of room for expansion there, and we do expect to increase output from Nevada, but then by far the biggest increase in output will be from Giga Texas.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 95
},
{
"name": "Martin Viecha",
"speech": "Thank you very much. The next question comes from Alex Potter from Piper Sandler. Alex, can you hear us?",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 96
},
{
"name": "Alex Potter",
"speech": "Yes. Martin, can you hear me?",
"session": "Question",
"person_id": 140104,
"person_company": null,
"component_order": 97
},
{
"name": "Martin Viecha",
"speech": "Yes.",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 98
},
{
"name": "Alex Potter",
"speech": "Okay. Great. So first question I had was the extent to which other plants outside of China are insulated from any further upstream supply bottlenecks that we may have in China. Obviously, if this COVID lockdown things gets out of hand, clearly, that's going to continue impacting Shanghai. But is there a point at which it could actually also impact other facilities?",
"session": "Question",
"person_id": 140104,
"person_company": null,
"component_order": 99
},
{
"name": "Elon Musk",
"speech": "Yes, if it would continue, but there are some parts that are sourced in China that apply worldwide. and that would be -- that would impact production elsewhere. But all indications are that we are -- our Giga Shanghai is back in production at fairly high levels already and so are our suppliers. So we don't think this is going to be a big deal.",
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"name": "Alex Potter",
"speech": "Okay. Second question, obviously, the higher profitability that you guys have been able to experience over the last couple of quarters, a lot of that is reflecting sort of \"real\" improvements. Another part of it is because we're no longer paying you, Elon, as much as we were. And so I'm wondering the extent to which you and the Board are in the process of contemplating another one of these long-term compensation packages, which in the past have seemed to work quite well.",
"session": "Question",
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"name": "Elon Musk",
"speech": "There are no discussions currently underway for incremental compensation for me.",
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"name": "Martin Viecha",
"speech": "Thank you. The next question comes from Colin Langan from Wells Fargo.",
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"name": "Colin Langan",
"speech": "Great. Do you guys hear me?",
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"name": "Martin Viecha",
"speech": "Yes.",
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"name": "Colin Langan",
"speech": "Perfect. Just to follow-up, sorry to keep going on the raw material issue on the battery side, but obviously, it seems pretty important. How quickly can raw material supply be built? Because my understanding it takes many years to build that out. So are we just sort of facing -- when do you think we see a lithium shortage or a nickel shortage? And is there even enough time to build that sort of mining capacity in place? And then related, how quickly can you switch to like LFP for the nickel issue?",
"session": "Question",
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"name": "Drew Baglino",
"speech": "Yes. I mean I'll take the LFP question. Like it says so in our letter, like half of our products were LFT last quarter, which shows how quickly we were able to respond to -- well, honestly, it wasn't because of a raw material shortage, but just because it seemed like the right thing to do, we could change our cathode chemistry. And there's more to be done on the cathode side, and we are actively pursuing it to give us substitution flexibility in response to market conditions between the other cathodes that are out there that can be competitive in our vehicles, which there are many options. \r\nSo we -- I guess what I would say is, specifically on the cathode side, like flexibility is the way we're going to achieve this. And not all of the materials that go into cathodes are actually, first of all, hard to secure like through mining or refining. And second of all, in many cases, are like very plentiful already, like huge scale. And if all of the batteries in the world use those cathodes, it's less than a 1% increase in total annual output. So that's the cathode side. \r\nI think Elon already spent a lot of time talking about lithium. It really depends on the resource. Some resources like just getting rocks out of the ground, expanding the amount of rock that you're getting out of the ground is maybe a little bit of paperwork and some additional sort of blasting and trucking operations. The finding is maybe where there's -- it's a little bit more chunky to bring it online, but also the refining doesn't -- it's not like an oil refinery. It's a much smaller operation to refine lithium amount of spodumene or for liquid like a brine or a salt pond evaporation. So you're talking about a time scale of 1 to 2 years. And it's not like we haven't been talking to all of the lithium suppliers out there for many years. They have a lot of projects already in the pipeline to come online this year and next. \r\nSome of what's going on in the lithium market this year doesn't actually have truth to bear to the like fundamentals of supply and demand, which is also a little frustrating. But yes, if we look past this year or next year and into 2030 when we need to 15 to 20 terawatt hours of this stuff to get on the growth trajectory -- stay on the growth trajectory we're on, we need everybody to do more in the lithium space than they currently are. I don't know if that answers the question.",
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"name": "Colin Langan",
"speech": "Yes.",
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"name": "Martin Viecha",
"speech": "Fantastic. Thank you very much. So let's go to the last question from Mark Delaney from Goldman Sachs.",
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"name": "Mark Delaney",
"speech": "Yes. I was hoping you could comment on your latest thoughts about potentially opening up the charging network in the U.S. to non-Tesla owners. It's certainly really important to have a good experience for Tesla owners in terms of wait times and charge installs. But if Tesla is able to have enough capacity it could be a really good way to bring other vehicle owners into the Tesla network, perhaps help Tesla to sustain its network benefits and maybe make more people likely to buy a Tesla vehicles in the future.",
"session": "Question",
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"name": "Drew Baglino",
"speech": "Yes. As Elon has said and as we've publicly committed, yes, we do plan to provide third-party vehicle access in all over the world, not just in Europe, where our original pilot was. And we are working on solutions in North America, which is a little bit more problematic with our connector being different than others, but we are moving in that direction.",
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{
"name": "Martin Viecha",
"speech": "I don't know if you want to add.",
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{
"name": "Elon Musk",
"speech": "Yes. Yes, I think that's -- there's more to be said on that, but we're -- yes, we want to do the right thing with respect to the whole system.",
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"name": "Zachary Kirkhorn",
"speech": "And we're going faster on adding chargers. Absolutely. With the growth of the cars that we're producing and then anticipating what you was discussing overall charger capacity is really important. And so the pace of our investment in supercharging has accelerated.",
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"name": "Elon Musk",
"speech": "Absolutely.",
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"name": "Mark Delaney",
"speech": "Okay. That's helpful. And for my second question, could you share any more details on Tesla Insurance, in particular, as you wind it out in more states? Are there any metrics you can share on what take rates have been like? And how do profitability margins on the insurance offering compared to the corporate average?",
"session": "Question",
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"name": "Zachary Kirkhorn",
"speech": "So we just launched Tesla Insurance for real-time insurance in Virginia, Colorado and Oregon earlier this week. Maybe one step that I'll share, so Texas is our longest-standing real-time insurance market. But based upon the information that we have, Tesla is the second largest insurer of Teslas in the State of Texas. And possibly by the end of this quarter, maybe early next quarter, we'll be the largest insurer of Teslas. And so the customer reception to this has been quite positive. And I was reading social media on Monday after we launched in the 3 new states. A lot of folks who are reporting their stories of saving quite substantial amounts of money relative to their previous insurance. And so we're quite encouraged by that. And we're working as quickly as we can to get to 80% of customers having access to a Tesla Insurance product by the end of this year in the United States, at which point we'll pivot our attention to expansion outside of the U.S. \r\nThe other thing I'll say on insurance is with these 3 new states, the model is different because we are now the underwriter, and we are also now holding the risk. And so with those states, we are a fully vertically integrated provider of insurance from systems and financials. With respect to the financials of the program, it's still very early. And so as the program gets more scale, happy to share more information on that.",
"session": "Answer",
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"name": "Elon Musk",
"speech": "And once I noticed that we are seeing that the -- having real-time feedback for driving habits is actually resulting in Tesla owners driving the cars in a safer way because they can see the -- they get real-time feedback on, okay, this is affecting my insurance rate or it isn't. And so when people see it -- they can see a real-time score, they realize, if I make changes in my driving habits, then I pay less in insurance, then they have a very -- like a real-time feedback loop for driving for safer driving and an incentive to do so. So it is -- actually, what we're seeing is it is causing people to drive their cars in a safer manner, which is also net good.",
"session": "Answer",
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"name": "Zachary Kirkhorn",
"speech": "It's safer on average, what we see in the data, to Elon's point, and premiums are lower. We see that in the take rate data. We have extremely high retention for customers who experience the product. And I think I've talked about this in the past, but this has become a real passion program for us for these benefits. It's bigger than just the economics. We're trying to do a good thing here for our customers, save people money and make the roads a little bit safer.",
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"name": "Elon Musk",
"speech": "Yes. I think it improves just overall macroeconomic efficiency. It's also a feedback loop for Tesla because we see if there is crash, both large or small, like we sort of see exactly what the cause. And then we think about how can we change the design of the car or the software in order to minimize the probability of that accident -- most accidents are minor. But how do you have those accidents occur less frequently? And how do we make the repair associated with that accident super fast? Like aspirational-ly, it would be like a same-day repair of a collision, which is night and day difference compared to sometimes having to wait for a month while insurance claims are settled and figured out -- because Tesla is also doing collision repair.",
"session": "Answer",
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"name": "Zachary Kirkhorn",
"speech": "Yes, the feedback loop is instant.",
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{
"name": "Elon Musk",
"speech": "Right.",
"session": "Answer",
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"name": "Zachary Kirkhorn",
"speech": "So I mean we do claims management in-house. And so we receive the notification that there's an accident, we work to prepare the estimate. And we can, with the support of our customers, use our collision centers to do the repair. And so it's full end-to-end visibility. And all of that, to Elon's point, we can then identify areas of cost inefficiency, feed those back to our engineering teams or elsewhere, software teams, actually improve the product. This lowers the cost of insurance, improves reliability of the product. So it's a full circle.",
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"name": "Elon Musk",
"speech": "Yes. And basically, the customer experience is just vastly better because if there's an accident, there's no argument. We'll repair it immediately. And -- this is as compared to arguing with an insurance company and then a claims adjuster and then a collision repair center. And this can be a nightmare ease. So we're trying to turn a nightmare to [indiscernible]",
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{
"name": "Martin Viecha",
"speech": "Fantastic. Thank you very much. Unfortunately, that's all the time we have this quarter. So thank you very much for all your great questions, and we'll speak to you again in 3 months.",
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"name": "Elon Musk",
"speech": "Thank you.",
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],
"title": "Tesla, Inc., Q1 2022 Earnings Call, Apr 20, 2022",
"quarter": 1,
"year": 2022
}
},
{
"transcript_title": "Tesla, Inc. - Q4 2021",
"transcript_name": "Tesla, Inc., Q4 2021 Earnings Call, Jan 26, 2022",
"ticker": "NASDAQ:TSLA",
"transcript_url": "https://wkarticles.blob.core.windows.net/finnhub/snp_transcript_2478087",
"date": "2022-01-26",
"year": 2021,
"quarter": 4,
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"transcript": [
{
"name": "Martin Viecha",
"speech": "Good afternoon, everyone, and welcome to Tesla's Fourth Quarter 2021 Q&A Webcast. My name is Martin Viecha, Senior Director of Investor Relations, and I'm joined today by Elon Musk, Zachary Kirkhorn and a number of other executives. Our Q4 results were announced at about 3:00 p.m. Central Time in the update deck we published at the same link as this webcast. \r\nDuring this call, we will discuss our business outlook and make forward-looking statements. These comments are based on our predictions and expectations as of today. Actual events or results could differ materially due to a number of risks and uncertainties, including those mentioned in our most recent filings with the SEC. [Operator Instructions] But before we jump into Q&A, Elon has some opening remarks. Elon?",
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"name": "Elon Musk",
"speech": "Thanks, Martin. So just to recap 2021, it was a breakthrough year for Tesla and for electric vehicles in general. And while we battled, and everyone did, with supply chain challenges through the year, we managed to grow our volumes by nearly 90% last year. This level of growth didn't happen by coincidence. It was a result of ingenuity and hard work across multiple teams throughout the company. \r\nAdditionally, we reached the highest operating margin in the industry in the last widely reported quarter at over 14% GAAP operating margin. Lastly, thanks to $5.5 billion of -- million, small finger [indiscernible] now, $5.5 billion of GAAP net income in 2021, our accumulated profitability since the inception of the company became positive, which I think makes us a real company at this point. \r\nThis is a critical milestone for the company. So after an exceptional year, we shift our focus to the future, Texas and Berlin. So we've begun production at both Texas and Berlin, we started that last quarter. But that's not the most important thing. We'll focus more on when we get to volume production and when can we deliver cars to customers. But I think it is worth noting that we, and as the Internet has observed, we've been making quite a few cars in Texas and Berlin, so -- in Austin and Berlin. \r\nSo in Texas, we're building the Model Ys with the structural battery pack and the 4680 cells, and we will start delivering after final certification of the vehicle, which should be fairly soon. Capacity expansion will continue through maximizing output of each factory and building new factories and new locations in the future. Although we're not ready to announce any new locations on this call, but we will through 2022, look at new locations and probably be able to announce new locations towards the end of the year, I expect. \r\nIn 2022, supply chain will continue to be the fundamental limiter of output across all factories. So the chip shortage, while better than last year, is still an issue. And yes, so that's -- there are multiple supply chain challenges. And last year was difficult to predict and hopefully, this year will be smooth sailing, but I'm not sure what you do for an encore to 2021, 2020. Nonetheless, we do expect significant growth in 2022 over 2021, comfortably above [ 50% ] growth in 2022. \r\nFull self-driving. So over time, we think Full self-driving will become the most important source of profitability for Tesla. It's great. Actually, if you run the numbers on robotaxis, it's kind of nutty. It's nutty good from a financial standpoint. And I think we are completely confident at this point that it will be achieved. And my personal guess is that we'll achieve full self-driving this year, yes, with data safety level significantly greater than present. \r\nSo it's -- the cars in the fleet essentially becoming self-driving by a software update, I think, might end up being the biggest increase in asset value of any asset class in history. We shall see. It would also have a profound impact on improving safety and on accelerating the world towards sustainable energy through vastly better asset utilization. \r\nLet's see. So on the product road map front, there's quite a lot to talk about. I'm not going to go through every sort of thing that we're working on because I think a lot of them deserve product launches of their own as opposed to a few minutes on an earnings call, so I'll talk kind of at a high level, yes, mostly at a high level. \r\nThe fundamental focus of Tesla this year is scaling output. So both last year and this year, if we were to introduce new vehicles, our total vehicle output would decrease. This is a very important point that I think people do not -- a lot of people do not understand. So last year, we spent a lot of engineering and management resources solving supply chain issues: rewriting code, changing our chips, reducing the number of chips we need, with chip drama central. \r\nSo that was not the only supply chain issue. So there's just hundreds of things. And as a result, we were able to grow almost 90% while at least almost every other manufacturer contracted last year. So that's a good result. But if we had introduced, say, a new car last year, we would -- our total vehicle output would have been the same because of the constraints -- the chips constraints, particularly. So if we'd actually introduced an additional product, that would then require a bunch of attention and resources on that increased complexity of the additional product, resulting in fewer vehicles actually being delivered. \r\nAnd the same is true of this year so we will not be introducing new vehicle models this year. It would not make any sense because we'll still be parts constrained. We will, however, do a lot of engineering and tooling and whatnot to create those vehicles, Cybertruck, Semi, Roadster, Optimus, and could be ready to bring those to production hopefully next year. That is most likely. But like I said, it is dependent on, are we able to produce more cars or fewer cars? \r\nSo in terms of priority of products, I think the -- I think actually the most important product development we're doing this year is actually the Optimus humanoid robot. This, I think, has the potential to be more significant than the vehicle business over time. If you think about the economy, it is -- the foundation of the economy is labor. Capital equipment is distilled labor. So what happens if you don't actually have a labor shortage? I'm not sure what an economy even means at that point. That's what Optimus is about. So very important. \r\nLet's see. Drew, do you want to talk about the 4680 program? Or is this a good right, the right time?",
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"name": "Drew Baglino",
"speech": "Sure. Yes, yes. Sure. So throughout 2021, we focused on growing cell supply alongside our in-house 4680 effort to provide us flexibility and insurance as we attempt to grow as fast as possible. As we sit today, sales from suppliers is actually -- it sort of exceeds our other factory-limiting constraints that you mentioned, Elon, in 2022 or to say differently, 4680 cells are not a constraint to our 2022 volume plans based on the information we have. \r\nBut we are making meaningful progress of the ramp curve in Kato. We're building 4680 structural packs every day, which are being assembled into vehicles in Texas. I was driving 1 yesterday and the day before. And we believe our first 4680 vehicles will be delivered this quarter. Our focus on the cell, the pack and the vehicles here is driving yield quality and cost to ensure we're ready for larger volumes this year as we ramp and next year. \r\nAnd the 4680 and pack tool installations here at Austin are progressing well with some areas producing first parts and the Internet has also noticed that. Yes, I was touring the factory -- the cell factory here. I'm super pumped. It's like a really exciting accomplishment for us to bring everything into 1 awesome factory here in Texas.",
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"name": "Elon Musk",
"speech": "Absolutely. And just to repeat Drew's point, we are still -- we still expect to be part or primarily chip-limited this year. So that's the thing that's actually the driver, yes, and that chip limitation should alleviate next year. And then probably, we transition into a cell limitation battery, total gigawatt-hours of cell limitation, which is when the 4680 will become very [indiscernible]",
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{
"name": "Drew Baglino",
"speech": "Agreed.",
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{
"name": "Martin Viecha",
"speech": "Thank you very much, and now Zach has some opening remarks as well.",
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"name": "Elon Musk",
"speech": "Long opening remarks.",
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{
"name": "Zachary Kirkhorn",
"speech": "Yes. Thanks, Martin. As Elon mentioned, 2021 was a financially transformative year for the company. If we look across the full year '21 and compare that to 2020, our automotive gross margin, excluding credits, rose by over 600 basis points, enabled by work on cost reduction, utilization of our Shanghai factory for exports and accelerating demand. \r\nOpEx as a percentage of revenue reduced despite the impact of onetime items and unique items. And operating income more than tripled, with operating margin reaching our guidance of mid-teens and these margins are trending up. We also saw regulatory credits accounting for a relatively small portion of our 2021 profitability, which we expect to continue to reduce in materiality going forward. \r\nFor Q4 specifically, automotive gross margin, excluding credits, increased to 29.2%, which is our highest yet. We do continue to see some impact of fire pricing on certain models and trims as was the case in prior quarters. But please keep in mind that due to backlogs, changes in pricing will generally impact our financials in future quarters. \r\nSupply chain challenges and port congestion resulted in a significant increase in our expedited costs in Q4. We also took reserves associated with warranty and recall costs. Operating expenses were meaningfully impacted by stock-based compensation from the final 2 tranches of the CEO stock grant becoming probable and payroll taxes associated with the exercise of the 2012 CEO options. The total impact of these payroll taxes, warranty and recall costs and excess expedites was just over $700 million in the quarter. \r\nOur free cash flows have remained strong, reaching record levels in Q4 of $2.8 billion despite increased CapEx. In addition to using cash to grow the business as quickly as we can, we have been retiring legacy and high interest debt. Note that we plan to continue to utilize the ABS market for product-specific financing. \r\nAs we look forward, we expect 2022 to be another significant and exciting year for the company. We continue to drive for vehicle volume growth at or above 50%, as Elon mentioned, and our plans show that this is actually achievable with just our Fremont and Shanghai factories. For quite some time now, these factories have been running below capacity due to macro challenges with supply and logistics. As Elon mentioned as well, from what we're seeing, the pace of growth in 2022 will again be determined by supply chain and logistics, which is quite difficult for us to forecast. \r\nDespite these constraints, it's important to begin the ramp of Austin and Berlin to ensure that we are prepared once limitations ease, enabling us to increase total output more quickly in the future. This will result in higher fixed and semi-variable costs in the near term, in addition to the usual inefficiencies as we ramp a new factory. We are also seeing inflation and rising commodity prices, which we expect to continue to put pressure on our costs. How this specifically impacts gross margins in the near term is uncertain, given a mix of both tailwinds and headwinds. However, we do expect to continue to see stronger operating margins as we grow our volumes and improve operating leverage. \r\nOver a longer-term horizon, we are quite optimistic about the expansion of margins, though. From the hardware side, we are aggressively driving manufacturing innovations and operational efficiency to reduce cost. And with the rapid development of FSD, software-based profits will ultimately become a strong addition to the profits generated by selling hardware. \r\nSo congratulations to the Tesla team for a terrific 2021, and thank you to our suppliers who supported us. Looking forward to another great year.",
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"name": "Elon Musk",
"speech": "I'd like to just second the thank you to suppliers. A lot of suppliers worked late nights, weekends, vacations around the world, and we're very grateful for that.",
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"name": "Martin Viecha",
"speech": "Thank you very much. Let's go to the Q&A from the investor side. The first question was on 4680 cells, which we already answered so let's go to the second question. How is the progress of the $25,000 compact car? Can you give an update?",
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{
"name": "Elon Musk",
"speech": "Well, we're not currently working on a $25,000 car. We -- at some point, we will, but we have enough on our plate right now, too much on our plate, frankly. So at some point, there will be. I think that's sort of a question that it's sort of the wrong question. Really, it's really the thing that overwhelmingly matters is when is the car autonomous? At the point in which it is autonomous, the cost of transport drops by, I don't know, a factor of [ 4 or 5 ]",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 10
},
{
"name": "Martin Viecha",
"speech": "Thank you. The next question from investors is, since we're talking product road maps today, how do you view domestic cooling and heating in the context of accelerating the sustainable energy transition? And how might Tesla's HVAC and heat pump advances fit it?",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 11
},
{
"name": "Elon Musk",
"speech": "You want to talk about that, Drew?",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 12
},
{
"name": "Drew Baglino",
"speech": "Yes. I think from a mission perspective, it's very aligned. If you imagine replacing natural gas, water and space heaters with electric heat pumps, it offsets something equivalent to like 80% of what a solar plus Powerwall system would offset, so it's very impactful. And we have learned a lot about how to make capable and reliable heat pumps that work in all environmental conditions and are excited about the idea of working on that problem 1 day. We put it that way. It's definitely aligned with our mission to transition to sustainable -- accelerate the transition to sustainable energy.",
"session": "Answer",
"person_id": 393478,
"person_company": null,
"component_order": 13
},
{
"name": "Elon Musk",
"speech": "Yes, I think it really becomes quite a compelling solution to the consumer where you integrate the electric vehicle charging, solar energy storage, hot water, HVAC in a very tight compact package that also looks good. It just doesn't exist.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 14
},
{
"name": "Lars Moravy",
"speech": "Yes. I mean, the integration of those systems in the house...",
"session": "Answer",
"person_id": 482177,
"person_company": null,
"component_order": 15
},
{
"name": "Elon Musk",
"speech": "That's Lars, by the way.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 16
},
{
"name": "Lars Moravy",
"speech": "The integration of those systems in a house are no different than the integration of those systems in a vehicle. The only difference is, we do it all in the vehicle. [indiscernible]",
"session": "Answer",
"person_id": 482177,
"person_company": null,
"component_order": 17
},
{
"name": "Elon Musk",
"speech": "And then it's so constrained on mass and volume and energy, it's like -- you get to the house [indiscernible] wow",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 18
},
{
"name": "Lars Moravy",
"speech": "Kind of easy problem.",
"session": "Answer",
"person_id": 482177,
"person_company": null,
"component_order": 19
},
{
"name": "Elon Musk",
"speech": "Yes.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 20
},
{
"name": "Lars Moravy",
"speech": "But obviously, those systems are all just disparate and what we've been doing with Powerwall and charging solar is integrating them more and more. The next logical step is obviously HVAC and water and heating. So we will do that and we will integrate it probably better than anyone has. But as you said, we have a lot of stuff on our plate.",
"session": "Answer",
"person_id": 482177,
"person_company": null,
"component_order": 21
},
{
"name": "Elon Musk",
"speech": "Yes. [indiscernible] integrates with like phone, everything and the car can -- like the house can just heat and cool things because [indiscernible] coming home type of thing. It still needs to be like randomly that temperature when you're not there or...",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 22
},
{
"name": "Lars Moravy",
"speech": "When the cat moves.",
"session": "Answer",
"person_id": 482177,
"person_company": null,
"component_order": 23
},
{
"name": "Elon Musk",
"speech": "Yes, exactly. When the cat moves, exactly. So just do sensible things and just work really, I think it would be just quite a game changer down the road. We've got a lot of fish frying on it. And so it is a thing we will do but we're not committing to a time frame at this point.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 24
},
{
"name": "Lars Moravy",
"speech": "And people should do it.",
"session": "Answer",
"person_id": 482177,
"person_company": null,
"component_order": 25
},
{
"name": "Elon Musk",
"speech": "Yes, if somebody else wants to do it, yes, yes.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 26
},
{
"name": "Lars Moravy",
"speech": "It's super beneficial for achieving the goal here.",
"session": "Answer",
"person_id": 482177,
"person_company": null,
"component_order": 27
},
{
"name": "Martin Viecha",
"speech": "The next question is, would you consider splitting FSD packages into perpetual and term licenses, with a higher tier for both options for commercial use? A perpetual license that could be attached to individual or business and not the vehicle itself.",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 28
},
{
"name": "Elon Musk",
"speech": "Now I mean, this sounds maybe too complicated. We're just going to be focused on like what sells for the fully considered lowest cost per mile, kilometer of driving. And these other -- so that's what matters like how do you maximize the efficiency of people 1 place to another and then charge them in a sensible way.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 29
},
{
"name": "Drew Baglino",
"speech": "Including the charging infrastructure. That's a big part of it.",
"session": "Answer",
"person_id": 393478,
"person_company": null,
"component_order": 30
},
{
"name": "Elon Musk",
"speech": "Yes. So charging for money and charging for energy.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 31
},
{
"name": "Martin Viecha",
"speech": "Thank you. The next question is, is Dojo on track for summer 2022? And what challenges, if any, are you working through? Is Dojo necessary for FSD to operate better in cities like New York City? Or on a separate note, where should we expect the first implementation of Tesla pads in your factories?",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 32
},
{
"name": "Elon Musk",
"speech": "Okay. There's a few questions on there.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 33
},
{
"name": "Martin Viecha",
"speech": "Like 6 questions.",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 34
},
{
"name": "Elon Musk",
"speech": "Yes, Dojo appears to be on track for doing something useful in the summer this year. I think the threshold that really matters is at which point when does it become more competitive than a GPU cluster for training? And obviously, the GPU cluster is getting better. So it's a moving target. But that's the goal I've set for the team is the FSD team running our GPU supercluster needs to tell me that they want to use Dojo instead that. That's where -- that's the obvious sort of threshold. \r\nAnd I don't know when that will. It's -- I wouldn't say like success is 100% certain here. I think we just generally want to overestimate meeting options to underestimate ourselves. But it does seem as though we might pass that threshold next year with Dojo if we execute well. Dojo is not needed for full self-driving but it is a cost optimization on creating vast amounts of video data. \r\nCustomization also, a rate of improvement so if you can train models faster, have a shorter iteration interval, then you can make progress faster. So not everything can be distributed to deep GPUs. There's some elements of serialization there. So -- and then if Dojo is competitive, then it does seem like the kind of thing where we would offer it to other companies that want to do neural net training. Those are very much a neural net training optimized system. \r\nBut in theory, it should be better than computing platform or say, GPUs, which were not really intended for the is not directly intended for optimizing training of your networks. They just happen to work better than CPUs in most cases. So things like Dojos like a giant ASIC optimized for neural net training, especially video, or at But as like said, we're not saying, for sure, Dojo would succeed. We think it will. We would encourage those who think this is an interesting problem to join Tesla, and yes.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 35
},
{
"name": "Martin Viecha",
"speech": "And the first use of Tesla pad, whether it's in the factory or elsewhere?",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 36
},
{
"name": "Elon Musk",
"speech": "Yes. The first use of the Tesla pad Optimus, the Optimus name seems to be sticking at least internally, Optimus Subprime. Like if we can't find a use for it, then we shouldn't expect that others would. So the first use of the Optimus robot would be, at Tesla, like moving parts around the factory or something like that.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 37
},
{
"name": "Martin Viecha",
"speech": "Okay, thank you very much. And the next question on insurance. When do you plan on having your insurance services rolled out in all the states, international rollout timing in markets that have Tesla Insurance, what kind of uptake rates are you seeing?",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 38
},
{
"name": "Zachary Kirkhorn",
"speech": "Yes. We currently offer Tesla Insurance in 5 states in the U.S. Four of them are telematics, which is Texas, Illinois, Ohio and Arizona. And then California, which has a more standard insurance offering based upon regulations there.",
"session": "Answer",
"person_id": 385023,
"person_company": null,
"component_order": 39
},
{
"name": "Elon Musk",
"speech": "It should be clear, like we are pushing very hard for California to change the rules to allow informatics, which basically means that you're as safe as you're driving is measured. So I think the current California rules are contrary to the best interest of the consumers in California and should be changed.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 40
},
{
"name": "Zachary Kirkhorn",
"speech": "Yes. And that's evidenced by what we're seeing in Texas. We've been in this market now for about 3 months. And what we see in the data is the frequency of collision by folks who are -- who are given a feedback loop on how they are driving is quite a bit lower than the frequency of collision otherwise.",
"session": "Answer",
"person_id": 385023,
"person_company": null,
"component_order": 41
},
{
"name": "Elon Musk",
"speech": "Yes. And we direct feedback on whether driving safe -- and if the driver their insurance cost less, so they drive safer. It encourages Tesla Insurance with informatics and real-time feedback encourages safer driving and rewards it monetarily. It's great.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 42
},
{
"name": "Zachary Kirkhorn",
"speech": "Exactly. And so we see that so far in Texas. Take rates have been quite strong. We measure this on the conversion rate from when folks quote to see what their monthly rate would be at the starting point to what percentage of them purchase. So we're very encouraged by the interest that we're seeing in Texas. \r\nAnd then we have enough history in Texas to see what does the loss ratios look like and how do the economics of the program work. And we're on the right track there as well. So we're comfortable with what we've seen in Texas to move as quickly as the intent to scale this across the U.S. \r\nSpecifically on the question about when we will be in all states, this is a slow process because of insurance being regulated at the state level. And so we have to go through each of those processes with each of the departments of insurance in each state. But our internal goal here by the end of the year is to be in enough locations that 80% of our customers within the U.S. could choose to sign up for Tesla Insurance if they wanted to. \r\nThere's a lot of uncertainty around that based upon the regulatory processes, but that's our goal. And then as we make more progress rolling out in the states and each incremental state becomes a little bit less effort than the prior, that's when we'll turn our attention to the Europe market. We might be able to do that by the end of the year, starting to get work on Europe by the end of the year. We'll have to see how we progress in the U.S.",
"session": "Answer",
"person_id": 385023,
"person_company": null,
"component_order": 43
},
{
"name": "Martin Viecha",
"speech": "Thank you. Next question is, what is your expected max capacity from each of your current factories, pretty much Shanghai, Berlin and Austin and timing for new factory announcements?",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 44
},
{
"name": "Elon Musk",
"speech": "I don't think we want to comment on -- like that's -- it's always possible to increase the output of any given factory to say, what's the next capacity? Well, it's difficult to say what that next capacity is because you put a lot of evidence that you increase capacity quite a lot. \r\nI think the -- look at the big picture -- you initially always want to increase capacity at 1 factory because your logistics cost of transporting cars needs to be considered. Especially as the cars become more affordable, you want to have factories that are not like thousands of miles away from the customers. So even if you could increase output, it may not actually be the smart thing to do. \r\nSo in the U.S. with, for example, with Giga Texas, I mean, coming up, we would want to deliver, say, Model Ys that are going to the eastern 2/3 of the United States from this factory. The logistics costs are going to be much less. But we will continue to increase output in Fremont and in -- at Giga Nevada and Shanghai. And as I said at the beginning of the call, this -- 2022 is the year we will be looking at factory locations to see what makes the most sense, possibly with some announcement by the end of this year. Yes.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 45
},
{
"name": "Martin Viecha",
"speech": "And the next question is, what are the biggest obstacles for Cybertruck volume production besides battery shortage?",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 46
},
{
"name": "Elon Musk",
"speech": "Batteries will probably not be the limiting factor in Cybertruck production. There's a lot of new technology in the Cybertruck that will take some time to work through. And then there's a question of like, what's the average cost of Cybertruck and to what degree is that affordable? There's -- you can make something infinitely desirable. But if it's not affordable, that will constrain people's ability to buy it because they don't have the money. \r\nI worry more about like how do we make the Cybertruck affordable despite having awesome technology. That's the thing that will really set the rate. Aspirationally, we'd like it to go, in terms of just a rough order of magnitude, we'd like Cybertruck to be at least on the order of [ 250,000 ] vehicles a year. But it will take us a moment to get to that level.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 47
},
{
"name": "Martin Viecha",
"speech": "Thank you. The next question is, how much of Tesla's margin improvement is from, number one, economies of scale; number two, production design -- production line design efficiencies; number three, reduced transportation costs from multiple plant locations; and number four, pricing versus cost inflation; or number five, other sources? And how much further could margins improve and why?",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 48
},
{
"name": "Zachary Kirkhorn",
"speech": "Yes. Basically -- yes, there's basically 4 major factors if we look over the last year to the margin improvement in the company. And they're in no particular order here but these are the big ones. So our mix of Model Y is increasing as we've ramped that to higher capacity in Fremont and also in Shanghai. And the reason that matters is the Model Y is a vehicle that carries a higher profit than the Model 3. And so that is helpful on our margins. And then as we increase the volume on that program with labor efficiencies, fixed cost amortization, they improve and the costs go down as well. \r\nThe second 1 here is localization in Shanghai has been a huge help for margins for the company. And the obvious things around logistics and duties is a big part of it, but we've also -- that factory had a different line design, more efficient from the start, and we've been pushing the boundaries on the volume there. So that has been helpful. \r\nIf you recall at the beginning of the year, we also were in a transition to the new version of the Model S and Model X. And so as that has ramped over the course of the year, that has been helpful. And then we've also done various price increases in certain markets on certain models, which has helped there. So that's generally the story at a high level. \r\nAs we look over the next a quarter or 2, as I mentioned in my opening remarks in the last call as well, we have ramp inefficiencies from the launch of Austin and Berlin. We also have pressures coming from inflation, supply chain, raw materials, et cetera. And so where that nets out is hard to say in the immediate term. And we obviously, as a company, are going to be driving to increase margins as much as we can. But I just want to be realistic that we're launching 2 factories simultaneously here and it unavoidably will add cost to the business as we do that. \r\nAnd as we look further out, and Elon mentioned this in his opening remarks as well, the software portion of the business, I think, is the one to really pay attention to. As full self-driving features get rolled out to more and more folks, I mean, for me, personally, I prefer to drive my car with the FSD bid on. And I think as more and more people experience that, take rates there, and then as we work towards the robotaxi space, there's actually quite a bit of upside on margins from a software perspective.",
"session": "Answer",
"person_id": 385023,
"person_company": null,
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},
{
"name": "Elon Musk",
"speech": "Yes, I think basically everything pales in comparison to the value of robotaxi or personal driving. I mean, it's just -- I mean, that just tends to everything. You just go from having an asset that is -- has a utility of perhaps 12 hours a week per passenger car to maybe around 50 or 60 hours a week to a 5x increase in the utility of the asset. The cost didn't change. Yes. So that's where just things just had just kind of your mind.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 50
},
{
"name": "Martin Viecha",
"speech": "Thank you. And the last question from investors is Elon mentioned Level 4 autonomy could be achieved this year. Is it based off initial FSD beta rollout experience or is Level 4 ability predicated on Dojo being completed online?",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 51
},
{
"name": "Elon Musk",
"speech": "As mentioned earlier, Dojo is not required for full self-driving. It should have a positive effect on the cost of training networks. It's not just a question like, does it get to full self-driving but really kind of like the March of Nines of reliability, is it 99.999% reliable or 99.999999% reliable. This is -- it gets nutty. \r\nObviously want to get to post perfection as possible. So frankly, being safe than a human is a low standard, not a high standard. People are very, very lossy, often distracted, tired, texting. Anyway, it's remarkable that we don't have more accidents. So it's yes. So actually being better than a human, I think, is relatively forward, frankly, how do you be 1,000% better or 10,000% better. Yes. That's what gets much harder. \r\nBut I think anyone who's been in the FSD beta program, I mean, if they were just to plot the progress of the beta interventions per mile, it's obviously trending to a very small number of interventions per mile and pace of improvement is fast. And there are several profound improvements to the FSD stack that are coming in the next few months. So yes. I would be shocked if we do not achieve full self-driving safer than human this year. I would be shocked.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
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{
"name": "Martin Viecha",
"speech": "Thank you. Let's go to analyst questions now. And the first question comes from Jed from Canaccord. Jed, feel free to unmute yourself and ask a question.",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 53
},
{
"name": "Jonathan Dorsheimer",
"speech": "Congratulations on a great year. Elon, I guess my question is around the Megapack or your energy business. And so as we look at the strategy or the supply chain constraints that you mentioned, you have 2 different strategies or it seems like with Megapack and Powerwall. And I think the Powerwall was answered with 4680 and the 2170 opening up. So I was wondering if you could just talk about the supply chain and LFP for the Megapack and what we should expect for that?",
"session": "Question",
"person_id": 95165,
"person_company": null,
"component_order": 54
},
{
"name": "Elon Musk",
"speech": "Yes. To be clear, we do think that old stationary storage, Powerwall and Megapack, will be -- will transition to an iron-based system, basically a non-nickel system. Manganese is also -- could be part of the future, but primarily iron. It just comes down. Iron nickel -- we need something that is formed in a star before a supernova ideally. So iron is. So that's because there's a ridiculous amount of iron on Earth as is a ridiculous amount of lithium. \r\nSo you can really expect all stationary storage to transition to iron over time. And like I said, with manganese is like a wildcard, manganese. And I should say like we did short-change the energy business last year in that vehicle took priority over the energy side. So on sales, but on a yes, on chipset, yes. We do see a very -- I mean, long-term probably terawatt-hour per year energy business. A lot -- it's very vast. Yes.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 55
},
{
"name": "Jonathan Dorsheimer",
"speech": "That's helpful. So you see that '22 is kind of the opening of that the energy business reaccelerating?",
"session": "Question",
"person_id": 95165,
"person_company": null,
"component_order": 56
},
{
"name": "Elon Musk",
"speech": "It's hard to predict 2022 because we still have lingering supply chain -- there are still lingering supply chain issues globally. But I think the chip stuff, at least the chip side of things appears to looks like it will alleviate end of this year or '23. I mean, there are a crazy number of chip fabs being built, which is great. The sheer number of chip fabs being built right now is exciting to see, yes. So there could be other issues. We're trying to anticipate those as much as possible but predicting the future is difficult.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 57
},
{
"name": "Lars Moravy",
"speech": "And the goal is definitely to grow it this year.",
"session": "Answer",
"person_id": 482177,
"person_company": null,
"component_order": 58
},
{
"name": "Elon Musk",
"speech": "Yes, we'll grow it this year, for sure. It's just -- we -- if we're simply we're able to respond to demand, it might grow by like 200% or 300% or something as opposed to sort of 50% or so.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 59
},
{
"name": "Zachary Kirkhorn",
"speech": "Yes. Yes. I mean I think it's exactly that. I mean, it's a question of does it double, triple, quadruple? I mean, either way, I think our plans are pretty ambitious for Megapack this year and storage in general. The exact amount of growth is hard to know. But ultimately, I mean, to Elon's point about the growth of this business, I mean, we need to be growing it faster than the vehicle business.",
"session": "Answer",
"person_id": 385023,
"person_company": null,
"component_order": 60
},
{
"name": "Elon Musk",
"speech": "And it will actually grow faster than the vehicle business once we can [indiscernible] chip constraint, frankly. So it will grow like stars basically on the road, it needs to. And our primary mission is to accelerate sustainable energy. That's always been our primary mission and we're trying to stay true to that.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 61
},
{
"name": "Martin Viecha",
"speech": "The next question comes from Ben Kallo from Baird.",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 62
},
{
"name": "Ben Kallo",
"speech": "I was wondering on the R&D front because like you said, you have so many fish frying. How do you organize the R&D efforts so that you can start talking about all these new products? Is there like an incubator or some type of thing like that? But just structurally, I'm curious about that.",
"session": "Question",
"person_id": 160874,
"person_company": null,
"component_order": 63
},
{
"name": "Elon Musk",
"speech": "Well, we don't have incubators.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 64
},
{
"name": "Drew Baglino",
"speech": "Or research centers.",
"session": "Answer",
"person_id": 393478,
"person_company": null,
"component_order": 65
},
{
"name": "Elon Musk",
"speech": "Research centers. We have no research centers. We're We work on things that go into our products. Yes, we're like this is a useful product that the world really needs. And we just like what to make this thing, design it up and iterate fast and then how to make this at scale at a reasonable price. That last part is the super hard part. Many times, we've said prototypes are easy, production is hard. If we could work out prototypes, but what's the point of that? \r\nLike you actually reach scale production and have cash and exceed cash out. That's the super hard part. So",
"session": "Answer",
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"person_company": null,
"component_order": 66
},
{
"name": "Drew Baglino",
"speech": "So everybody needs to be in the factory often enough to be able to understand that last part of the equation. Yes. And if you're in the research center...",
"session": "Answer",
"person_id": 393478,
"person_company": null,
"component_order": 67
},
{
"name": "Elon Musk",
"speech": "Yes. Doing them separately is like [indiscernible] for actually making products. So we don't think of it as R&D and then like the product development. It's just 1 f****** [indiscernible] just make great products at -- is the same general society with those way too much value placed on the idea. \r\nIt's like the -- like the idea of going to the moon. That's what the hard part. Okay, going to the moon is the hard part by far. And the thing is that, that is true for really most products. So this is just weighing too much value placed in the idea of versus execution. And we have ideas, we have a bazillion ideas [indiscernible] so many ideas we don't know what do with. Sort through them and say, which 1 are we actually going to going through the [indiscernible] of bringing to volume production. That's the super and then actually do that, right -- that's tough.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 68
},
{
"name": "Lars Moravy",
"speech": "And the closer you are applying blood, sweat and tears to actual production, the faster you'll be able to bring new things into actual production.",
"session": "Answer",
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{
"name": "Elon Musk",
"speech": "Yes, exactly. If you want to tie you back with production, just like the offices we're sitting in right now, looks over the Giga Texas production line, like the offices are integrated into the factory.",
"session": "Answer",
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{
"name": "Martin Viecha",
"speech": "The next question comes from Toni Sacconaghi from Bernstein.",
"session": "Answer",
"person_id": 370659,
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{
"name": "Toni Sacconaghi",
"speech": "I have 2, please. First, you spoke a lot about FSD and how the economics could be very attractive going forward. I'm wondering if you could just share what your current attach rate might be for FSD on your vehicles or how to think about the progress of your attach rate or revenue in FSD, let's say, in '21 versus '20? And how much deferred revenue for FSD was drawn down during the year? And I have a follow-up, please.",
"session": "Question",
"person_id": 117232,
"person_company": null,
"component_order": 72
},
{
"name": "Elon Musk",
"speech": "I think the FSD stuff, you really don't want to be looking at the rearview mirror. It will not be a good indicator for the future. This is what you need to look out the front windscreen, because it is such a profound step change. I mean, effectively long term, every car will have FSD. And so -- and the value of that will be a very big number. I just look at this as asset utilization. \r\nYou have a passenger car, which normally is driven maybe 1.5 hours a day on average, maybe 10 -- 10 hours, 10, 12 hours a week, a lot of cars in So we're spending money, not just driving the cars but storing them all over the place. We can get rid of a lot of parking lots if you have a car that is operating all the time. But there will be a challenge with traffic. So we like this little tiny baby company, The Boring Company, which I initially started as a joke, and now I think it actually could be quite essential to alleviating the insane traffic that will happen when cars are autonomous because you reduce the pain of travel and you reduce the cost of travel so dramatically that there will be a crazy number of cars on the road. \r\nI mean, it's going to be -- I think it's way cheaper to point with robotaxi, which is an autonomous Tesla, which every car we've made in the past 3 or 4 years will be capable of that, than a bus or a subway, will cost less than the subsidized value of a bus ticket. So we want to I'm not going to take the bus. If it costs you, I don't know if agents take $2 to travel 10 miles point to point. taking the bus, especially in cold weather or dark or maybe a little bit dangerous or [indiscernible] \r\njust do not understand how profound change this is. It's not like some little feature select the most profound software upgrade maybe in history. Millions of cars suddenly have about 4 or 5x utility [indiscernible] overnight. I don't actually know how to quantify that financially except that it's some big number.",
"session": "Answer",
"person_id": 175883,
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{
"name": "Toni Sacconaghi",
"speech": "Okay. Elon, I was wondering if I could just follow up and ask you. You talked about your product road map and also your goal to keep growing at 50% per year or better. That would put you at 3.2 million vehicles or more in 2024. And I think you made reference to Cybertruck maybe being 250,000 vehicles. If there is no $25,000 vehicle being worked on, is it really realistic to think that you can sell more than 3 million vehicles with 2 very high-volume cars and Cybertruck in 2024? Or how do we think about that or what else is missing in that equation?",
"session": "Question",
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{
"name": "Elon Musk",
"speech": "Yes. I mean, it's apparent from the questions that the gravity of full self-driving is not fully appreciated. If an asset has 5x more utilization than the -- it's like dividing the cost of that asset by 5. So if you have a $50,000 car, it's like having a $10,000 car all of a sudden, but maybe better than that because don't want to drive. So the person can be engaged in productivity or amusement instead of having to onerously drive through traffic. So it's probably better than 5x, I don't know. Yes. I mean basically, if the cost of our cars do not change at all, we would still sell as many as we could possibly make.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
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{
"name": "Martin Viecha",
"speech": "Thank you. And the next question comes from Pierre Ferragu from New Street Research.",
"session": "Answer",
"person_id": 370659,
"person_company": null,
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{
"name": "Pierre Ferragu",
"speech": "I wanted to come back on battery. So it's great to hear on 1 hand that you guys expect to sell like the first car with 4680 this quarter and at the same time, that you don't really depend on that ramp to achieve your -- what you hope to achieve in terms of significant volume growth this year. And the question I had is I understand well the ramp of 4680 internally. But I'd be curious to hear you talk about how you think about 4680 as being a form factor that your suppliers could adopt as well. \r\nAnd how you see in the long run, in the greater scheme of things, what does 4680 become? Is it going to be, outside of Tesla, the largest form factor for batteries? Is it something that you guys are going to deploy in all cars, whatever the chemistry also in the Megapack, in all your energy storage business? And do you expect eventually a lot of other companies to use that form factor as well?",
"session": "Question",
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{
"name": "Drew Baglino",
"speech": "Yes. On the 4680 as a form factor, yes, we've engaged with a number of our partners or suppliers on the form factor and they're all working on it. And they look at it the way we look at it as a way to drive fundamental cost efficiencies in production and also ultimately, the design of the cell itself to drive the cost down of the cell. And so that's what's engaged -- I mean, we're engaged because we think it's a good form factor there, engaged because they think it's a good form factor, and we want people to make it for sure. \r\nTo the question about should everything be 4680, it doesn't have to be. In the end, it's about cost competitiveness, scalability of manufacturing. And when you compare like an iron cell with a nickel cell, for example, like there are some just physics-based differences in what happens in certain corner cases that would drive different form factors, and we just have to be cognizant of that and design to that. So it isn't like the ultimate form factor for all things. There's other form factors that could be better for an iron cell, for example.",
"session": "Answer",
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{
"name": "Elon Musk",
"speech": "We don't use 4680 at all for the iron cells.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 79
},
{
"name": "Pierre Ferragu",
"speech": "Okay. And I have a quick follow-up on chips. So you've talked a lot about all this shortage and the supply difficulties. And I was wondering if you could give us some color on like the power chips you need for investors and all the power systems you're putting together versus like the more traditional logic chips, if the situation is different between the 2? \r\nAnd should we understand from the situation today that you're working very hard also at expanding the scope of your suppliers? And should we expect like Tesla to take on board additional suppliers in the near term, especially on the power side?",
"session": "Question",
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"person_company": null,
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{
"name": "Elon Musk",
"speech": "Well, last year was chip hell of many chips, so silicon voters certainly one of them, but...",
"session": "Answer",
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"person_company": null,
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},
{
"name": "Lars Moravy",
"speech": "Honestly, there's a lot of annoying very boring parts.",
"session": "Answer",
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"person_company": null,
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},
{
"name": "Elon Musk",
"speech": "Yes. It's a ton of very simple control chips that front-of-the-mill literally coming. Yes. Basic to control.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 83
},
{
"name": "Lars Moravy",
"speech": "It also references oscillators, so very boring things.",
"session": "Answer",
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{
"name": "Elon Musk",
"speech": "Yes, exactly. Like the little chip that allows you to move your seat back and forth. That actually was a big problem. Yes. Can move seats. So -- but a lot of these things are alleviating. I think there's some degree of the toilet paper problem as well, where there was a toilet paper shortage during COVID. \r\nLike obviously, it wasn't really certainly a tremendous enhanced need for a** wiping. It's just people panicked in order -- and got every paper product you could possibly wipe your a** with basically. And I was sure, is this like a real thing or not? Actually took my kids to the HEB and Walmart in Texas to just confirm if this was real. Indeed, it was. And there's plenty of food and everything else, but just nothing, no paper products that didn't cause split out. \r\nAnd our choice for people to panic [indiscernible] since coming as we told at the least of your problems. So I think we saw just a lot of companies over-order chips and they buffer the chips. And so we should see -- we are seeing alleviation in almost every area, but the output of the vehicle is -- goes with the least lucky. What are the most problematic item in the entire cars? And there's like at least 10,000 unique parts in the car. So waiting more than that if you go further off the supply chain and it's just, which 1 is going to be the least lucky 1 this time? It's hard to say.",
"session": "Answer",
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{
"name": "Drew Baglino",
"speech": "I mean, on a go-forward basis, right, the idea is to continue to drive simplification. So there are fewer unique parts, fewer of them. On the power side, in particular, it's still like an area of like technological development where the next chip can do the same thing with less diarrhea, so like the total fab required to accomplish the function goes down. So there's still room to grow without needing more fab capacity. But in general, there's a lot more fab capacity coming. So that's like a win-win there.",
"session": "Answer",
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{
"name": "Elon Musk",
"speech": "Yes, yes. It's not a long-term thing because there's going to be -- there's a great amount of chip fabs being built, which is great.",
"session": "Answer",
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{
"name": "Martin Viecha",
"speech": "Well, thank you very much. Unfortunately, that is all the time we have for this session. Thanks very much for all your good questions, and we'll speak to you again in 3 months' time. Have a good day. Bye-bye.",
"session": "Answer",
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{
"name": "Elon Musk",
"speech": "Thanks.",
"session": "Answer",
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}
],
"title": "Tesla, Inc., Q4 2021 Earnings Call, Jan 26, 2022",
"quarter": 4,
"year": 2021
}
},
{
"transcript_title": "Tesla, Inc. - Q3 2021",
"transcript_name": "Tesla, Inc., Q3 2021 Earnings Call, Oct 20, 2021",
"ticker": "NASDAQ:TSLA",
"transcript_url": "https://wkarticles.blob.core.windows.net/finnhub/snp_transcript_2408343",
"date": "2021-10-20",
"year": 2021,
"quarter": 3,
"transcript_data": {
"date": "2021-10-20",
"participant": [
{
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"transcript_person_id": 480193
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"transcript_person_id": 310676
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{
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"role": "Executives",
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"description": "Executives",
"company_name": "Tesla, Inc.",
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"description": "Analysts",
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"description": "Analysts",
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"transcript_person_id": 124280
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"job_title": "Vice President of Vehicle Engineering",
"description": "Executives",
"company_name": "Tesla, Inc.",
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"transcript_person_id": 191315
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"transcript": [
{
"name": "Martin Viecha",
"speech": "Good afternoon, everyone, and welcome to Tesla's Third Quarter 2021 Q&A Webcast. My name is Martin Viecha, Senior Director of Investor Relations, and I'm joined today by our CFO, Zachary Kirkhorn, and our Senior VP, Drew Baglino as well as other executives. Our Q3 results were announced at about 3:00 p.m. Central Time in the update deck we published at the same link as this webcast. \r\nDuring this call, we will discuss our business outlook and make forward-looking statements. These comments are based on our predictions and expectations as of today. Actual events or results could differ materially due to a number of risks and uncertainties, including those mentioned in our most recent filings with the SEC. [Operator Instructions] But before we jump into the Q&A, Zach has some opening remarks. Zach?",
"session": "Presenter Speech",
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{
"name": "Zachary Kirkhorn",
"speech": "Yes. Thanks, Martin. We're continuing to make great progress as a company, setting new records on each of the most important financial metrics for Q3. Overall, we delivered just over 240,000 cars, 20% higher than last quarter and 70% higher than the same quarter last year. We were also able to achieve an annualized production run rate of over 1 million cars towards the end of the quarter. The increase in production rate has primarily been driven by further ramping of the Model Y at our Shanghai factory. \r\nAdditionally, we have made great progress increasing production volumes of Model S and have recently started the ramp and deliveries of Model X. It will take a bit more time to get this program back to prior volumes, but based on demand, we are targeting to exceed historical production levels. \r\nWe have also completed the transition of our Shanghai factory as our main export hub. This has enabled us to supply more vehicles to the North America market and to introduce Model Y to Europe. Due to part shortages and logistics variability, we have not been able to run our factories at full capacity. It's important to note that while we have roughly doubled deliveries year-to-date, this has been exceptionally difficult to achieve. I want to thank our supply chain team for their incredible work and our production teams for showing impressive flexibility as we make adjustments real-time. This team's expertise in the chip industry across all tiers has made a huge difference when managing through these challenges. \r\nAdditionally, we never reduced our production forecast with our suppliers as we're adding capacity as quickly as possible. I also want to thank our suppliers for their dedication and partnership to Tesla. Despite these increases in production and generally higher prices, our backlogs are continuing to grow and average customer wait times are extending. The only practical way to address this in the immediate term is to do everything we can to build more cars on our existing production lines, which is where we are focused. \r\nSimilar dynamics are also playing out in our storage business as we are working to expand Powerwall and Megapack production as quickly as parts and cells allow us to do so. Additionally, we have made good progress on the in-house battery manufacturing program, and we're excited to have expanded the full self-driving beta program to more customers. \r\nFinancially, our auto gross margins reached 30.5% on a GAAP basis and just under 29% excluding regulatory credits, which is our strongest yet. This benefit primarily comes from higher volumes, particularly out of the Shanghai factory, increased mix of the Model Y as we -- and we have made good progress increasing Model S volumes. The Model S has now returned to positive gross margin, and we expect this to increase with higher production and the ramp of Model X. \r\nAs was the case in Q2, there was some net benefit from pricing actions. However, this remains small in the context of other contributors. Please keep in mind that given backlog, it will take time for the impact of recent changes to flow through our financials. Note that we are also not yet recognizing additional revenue from the FSD beta program. \r\nSupply chain challenges, including expedites, continue to provide cost headwinds as was also the case with FX this quarter. While we are seeing an impact from the rise in commodity and labor costs, we have also been adjusting pricing which should help to compensate. Overall, as I mentioned in our last call, our P&L continues to benefit from the marginal profitability of each incremental unit with higher fixed cost absorption. \r\nAs a result of the great progress on margins, volume and appropriate management of overhead costs, we were able to achieve an operating margin of just under 15%, exceeding the long-term guidance we've laid out previously. \r\nOn cash, we generated record operating cash flows of $3.1 billion and continue to invest heavily in the build-out of manufacturing, supercharging and service capacity. We also continue to retire high interest rate debt including the early settlement of our 2025 senior notes of $1.8 billion during the quarter. As we look forward, we are clearly quite a bit ahead of the pacing required to achieve our target annual growth rate of 50% this year. Q4 production will depend heavily on availability of parts but we are driving for continued growth. \r\nWe are also nearing assembly of our first production cars in Austin and Berlin. It's important to stress, while the first production car is an important milestone, the hardest work lies ahead in the ramp. Please keep in mind that we are pushing the boundaries on new product and manufacturing technologies at these factories, which makes it difficult to predict the exact pace of the ramp. These factories will also partially weigh on our margins as we work towards volume production. \r\nOverall, I'm very proud of what the team has accomplished, and I'm excited for our next phase of growth into Q4 and into 2022. The team has done a tremendous job improving our financial health in a short period of time while also continuing to improve our precision and pace of execution. Thank you.",
"session": "Presenter Speech",
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{
"name": "Martin Viecha",
"speech": "Thank you very much. And we will now take questions from institutional and retail shareholders that we posted on our website.",
"session": "Presenter Speech",
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{
"name": "Martin Viecha",
"speech": "The first question is, when should we expect the first vehicles to be delivered with 4680 cells?",
"session": "Answer",
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{
"name": "Drew Baglino",
"speech": "Yes. Thanks, Martin. Early next year, from a non-cell perspective, structural battery crash, range and reliability testing are on track to be complete this quarter. Testing is -- to date has gone well and the Fremont manufacturing line is on track to support. However, similar to what Zach said before, this is a new architecture and unknown unknowns may exist still. Our top priority is ensuring quality in what we deliver. And from a cell perspective, we are comfortable with the design maturity and manufacturing readiness matching the PAC time line I just mentioned.",
"session": "Answer",
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{
"name": "Martin Viecha",
"speech": "Thank you very much. The second question from an institutional investor comes. Do you still expect to start production of the $25,000 model in 2023? What are the biggest hurdles from now until then?",
"session": "Answer",
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{
"name": "Lars Moravy",
"speech": "Thanks, Martin. Yes. We're working on a strategy to increase our production rates as quickly as possible. I think Zach spoke to that well. And we're doing this while trying to add the least amount of incremental complexity to the business. We don't want to add any new vehicles to our lineup when we're generally in a cell-constrained world. \r\nWhile there is still more runway to grow these existing products, we are focused on Model Y expansion in Austin, Berlin, ramping S and X further in Fremont to restore to past levels while also growing 3 and Y production in Fremont and Shanghai. As we've mentioned before, after Model Y in Austin, our next product launch will be Cybertruck. And that timing, of course, depends on increasing cell capacity both from our suppliers and through our in-house cell as well as many other headwinds we face in the supply chain and completing our currently full plate of products on the table.",
"session": "Answer",
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"name": "Martin Viecha",
"speech": "Thank you very much. The third question is, with FSD beta training data sets set to explode exponentially, as software is released to a wider and wider audience, are there any early takeaways with regards to how quickly versions can iterate and be pushed out from biweekly to weekly or even daily?",
"session": "Answer",
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{
"name": "Drew Baglino",
"speech": "At this point, it's not so much about how much data can we collect but how quickly can we process the data we've collected. This is where Dojo comes in, as we mentioned on AI Day. With substantially faster training computer in Dojo, we will be able to iterate more often than we do now. If for instance, say the training, the net takes 1 day instead of 1 week, makes a huge difference in our ability to push out more updates. \r\nBut realistically, there's a whole lot more that comes into play when iterating software updates. The whole infrastructure from top to bottom including testing and validation needs to be set up for faster iteration. So daily updates are not really realistic for now.",
"session": "Answer",
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{
"name": "Martin Viecha",
"speech": "Thank you very much. The next question is, can you provide an update on future model development and how much diversity in your fleet will be necessary to achieve 20 million in annual volumes? The best-selling cars in the world today only sell slightly over 1 million units. So is it possible to achieve 20 million units with just S, X, 3 Y, Truck and the $25,000 car?",
"session": "Answer",
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},
{
"name": "Lars Moravy",
"speech": "Thanks, Martin. Yes, as we've mentioned before, we've seen record growth of both Model 3 and Model Y segments, where Model 3 is currently the best-selling luxury sedan worldwide. And as we mentioned at our shareholders meeting, Model Y is poised to be the best-selling vehicle in the world. Tesla continues to break molds in these vehicle segments and we hope to do so with each new product. As we've said publicly, we'll eventually expand the vehicle lineup to get to larger volumes, and we believe that we will need to be in all major segments across small and midsized large sedans, SUVs and trucks to do so, along with, of course, the massive space of robotaxi.",
"session": "Answer",
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{
"name": "Martin Viecha",
"speech": "Thank you very much. The next question from a retail shareholder is, what is Tesla's goal for vehicle production capacity for the 4 current factories, Fremont, Shanghai, Austin and Berlin by 2024?",
"session": "Answer",
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{
"name": "Zachary Kirkhorn",
"speech": "Yes. Thanks, Martin. Our goal as a company here is to grow on an average pace of 50% per year. And so you can extrapolate that out. There may be some periods of time in which we're well ahead of that. There could be some periods of time, despite best efforts, where we're slightly lower than that. But that remains the long-term goal of the company. \r\nIn Fremont, we're continuing to push the boundaries of what's possible there. Over the last 12 months, we've done about 430,000 cars of production. And based upon everything that we know in the factory, where the bottlenecks are, what the potential is, we're targeting to increase that another 50%. I think that will be a difficult goal but that's the goal that the internal team has, and they're going to continue to push on that. \r\nAs we look towards Shanghai, we're continuing to push the boundaries there and we continue to ramp production there as well. So most recently, the ramp-up of the Model Y, which was our biggest contributor of volume in Q3, we'll continue to ramp that factory. And our plans there with time are to keep growing the capacity in that factory. \r\nAustin and Berlin are interesting factories because our first iterations of capacity there are on Model Y. But we've intentionally set these factories in locations in which they have quite a significant amount of land and ability to expand. And so we'll take Model Y at these factories, we're trying to get to 5,000 cars a week as soon as we can. And then we'll continue to push beyond that, potentially even getting to 10,000 cars per week at those factories. And then we'll add Cybertruck here in Austin and continue to grow from there. \r\nSo our goal is to get to millions of cars per year over the next couple of years, and then ultimately, in the long term, be able to achieve 20 million cars per year. We're going to grow as quickly as is feasibly possible with an eye towards a 50% annual growth rate.",
"session": "Answer",
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{
"name": "Martin Viecha",
"speech": "Great. Thank you very much. The next question is, what is your view on the tightening regulatory environment for FSD, the investigation and broad data request by NHTSA? Some of the recent nominees to an NHTSA have been publicly critical of FSD, including engaging with short sellers online. How will you manage this environment?",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 13
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{
"name": "Lars Moravy",
"speech": "Thanks, Martin. Yes, as we have been for years, we always engage with NHTSA and other worldwide regulatory bodies to share our knowledge and to work with them on our approaches on both active and passive safety. There are ongoing regulatory inquiries taking place all the time and especially on the subjects like FSD that are at the cutting edge of technology development. \r\nDuring these investigations, my team, myself, are always cooperative as much as possible. We expect and embrace the scrutiny of these products and know that the truth about their performance and the innovations our products have will ultimately be all that matters. In the end and as I've said on previous calls, we take safety as a top priority in all our designs. This is because our primary motivation is coming from a team of incredible engineers designing software and hardware that saves lives and prevents injuries. \r\nIn doing so, we'll continue to be transparent to the public on how our technology is both developing from an autopilot safety data, the latest of which we just shared in the shareholder update. And you can also see and review a wide variety of customer post FSD videos on social media.",
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{
"name": "Zachary Kirkhorn",
"speech": "Great. Just to add to that, I mean, as Lars said, safety is extremely important for Tesla. It's the right thing to do. And if you look at various independent testing and regulatory testing of our products, you can see the work of incredibly talented engineers in the results of those tests. And our goal in developing safety-oriented software around the car is to continue to go beyond what the hardware is able to provide. If you can prevent a crash from happening, that's the safest way to manage this. \r\nAnd I think at a macro level here, what we're seeing, and this is entirely understandable and expected, is that the automotive industry is going through a transition from the traditional car as we know it to more of a computer, software-oriented sensor suites around them that can manage things beyond just what the driver manages. And regulatory bodies are, understandably so, are interested in understanding how to regulate in this environment, and NHTSA is no exception to that. \r\nSo as Lars mentioned here, I think this is a great thing. We're excited to partner and we'll work collaboratively with all regulatory bodies who want to go on the journey to the transition to a software-oriented vehicle.",
"session": "Answer",
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{
"name": "Martin Viecha",
"speech": "Thank you very much. The next question is, service remains an issue with appointments available weeks or even months out. Likewise, Supercharger wait times have become untenable at some locations. What concrete steps is Tesla taking to improve the customer experience in these 2 key areas?",
"session": "Answer",
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"name": "Zachary Kirkhorn",
"speech": "Yes. I'll take the service part of this question. Drew, you can take the supercharging part. We have seen an increase in service wait times throughout the summer. And there's a couple of things that have contributed to that based upon the information that we have. The first is that, and I think this is kind of not -- this is not unique to us, is that the return to some sense of normalcy in a post-pandemic world has happened, I think, more quickly than most people expected. \r\nAnd what we're seeing here is that the number of miles that people are driving has increased. There may have been some demand for service during 2020 or in the early parts of 2021 that customers put off, and so there's a bit of a catch-up that's occurring. That has increased demand for service. \r\nAt the same time, in the macro environment here, logistics, moving parts, sourcing parts has become increasingly more difficult, which is a well-known issue in the world right now, as well as challenges in the labor market. And so this kind of the simultaneous increase in demand for service, where the ability to supply that service, has been impacted for the reasons I mentioned. \r\nAnd so we saw an uptick, primarily in Europe and North America in service wait times over the course of the summer. And we've been working extremely hard since then to address this. And we've seen our wait times come down. So this is not the case in every location, but if you think about it from a regional average perspective, we are seeing improvements there. \r\nWe remain super-focused on adding locations. And so over the last year, we've grown our physical footprint of service centers by 35%. We've grown our footprint of mobile repair by over 40%. We're also adding staffing as quickly as we can in the areas that are most impacted by the imbalance of supply and demand for service. But I think the most important part about all of this is, and we've said this on calls before, where the best service is no service. \r\nAnd so we have been incredibly focused as a company both on the initial quality of our vehicles and reliability of our vehicles. And we've seen pretty substantial improvements in both of those metrics over the long term and over the last couple of quarters. So it is something that remains on our minds. We monitor this very closely. But hopefully, that's a helpful explanation into the context and what we're doing.",
"session": "Answer",
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{
"name": "Drew Baglino",
"speech": "Yes. And on the Supercharger side, the supercharging team monitors congestion and plans expansion to ensure customer experience with minimal wait times, alongside the growth in our vehicle fleet. While we certainly have work to do in expanding capacity in some congested areas, average congestion on the network has decreased over the past 18 months. Nonetheless, we're not standing still. We are executing accelerating expansion plans globally. The network has doubled in the last 18 months and we are planning to triple it over the next 2 years. And even so on an individual site basis to combat existing congestion more quickly where it is isolated and problematic, we expedite local relief sites, deploy mobile Superchargers and we try to introduce pricing strategies that encourage more off-peak usage to avoid the waiting.",
"session": "Answer",
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{
"name": "Martin Viecha",
"speech": "Thank you very much.",
"session": "Answer",
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{
"name": "Zachary Kirkhorn",
"speech": "Just 1 thing to add on supercharging. If you haven't experienced our latest iteration of battery packs that can handle fast charge rates in combination with our 250-kilowatt charging stations, it's pretty incredible. And this is a really important component to supercharging capacity because the faster you can charge, the more charge sessions that you can have on an individual post, the better the customer experience is as you're going on a long-term journey because your supercharging times are lower. So this is a really important part of the strategy. Supercharging team has done a great job rolling these out. But it requires a combination of both the 250-kilowatt charging and our latest iteration of battery packs.",
"session": "Answer",
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{
"name": "Drew Baglino",
"speech": "And we've also maintained an ongoing road map on software improvements, dynamic routing to avoid busy Superchargers, that's actually really helpful. We take the real-time business of the stations into account when choosing where to navigate people on their road trip. And beyond that, we're also continuing to improve the trip planner itself and how it estimates how much energy people use so it's not too conservative in asking people to charge more than they need to, which is another thing that can delay a total trip.",
"session": "Answer",
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{
"name": "Martin Viecha",
"speech": "Great. Thank you very much. The next question is, is Tesla considering any other ideas other than FSD with real-world AI that can bring additional software revenue to Tesla? If not, can Tesla consider building interesting games around FSD beta?",
"session": "Answer",
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{
"name": "Zachary Kirkhorn",
"speech": "Sure. At AI Day, we did talk about a potential future where Dojo could be used as a neural net training platform for other companies. It's not a focus of ours today as we're fully subscribed on Dojo with our internal uses. We do expect to continue to improve the in-car experience in the context of FSD.",
"session": "Answer",
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{
"name": "Martin Viecha",
"speech": "Great, thank you. And maybe last question from shareholders is how does FSD take rate -- how has FSD take rate changed since the introduction of monthly subscription? Are there any plans to increase FSD pricing as wider release becomes imminent?",
"session": "Answer",
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{
"name": "Zachary Kirkhorn",
"speech": "I'll take the second part of the question first. We won't be providing any kind of forward-looking commentary on our pricing strategy or what may happen here over the near term. With respect to the first part of the question, it has been an interesting theme for us to unpack within the company. \r\nI mean, what I'll say just as a general statement before I make a couple of specific comments is that the things that we learn on FSD subscription today are not necessarily all that relevant. This is really more of a platform for when FSD beta goes into a wide release and the features and functionality become more accessible to more customers. \r\nThe second thing that I'll note is that if you look at the pricing, the monthly pricing of FSD subscription and then you compare that to the cost of either rolling FSD option into your lease or your loan, then on a monthly basis, the most economical way for a customer to enjoy the features of full self-driving is through purchasing it upfront and rolling it through their financing. \r\nAnd as a result of that, what we've seen in the data is not -- we're unable to detect a change in the upfront take rate of FSD when people purchase cars. We have seen quite a bit of activity of folks curious to experience what the software has to offer and subscribing to it and enjoying it through that route. But again, as I said at the beginning, I think what we've seen so far on FSD subscription is not terribly relevant. We'll see how that plays out in the future as we continue to release more features.",
"session": "Answer",
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{
"name": "Martin Viecha",
"speech": "Thank you very much. And now let's go to analyst questions. [Operator Instructions] The next question comes from Pierre Ferragu from New Street Research. Okay. While Pierre works on that, let's go to the next analyst. The next question comes from Joseph Spak from RBC. Joe, we cannot hear you. Can you click unmute? \r\nOkay. While the team is working on that, let's just go back to Say.com questions. So the next Say.com question is, can Tesla allow for FSD to be transferred to another vehicle at a fee, something less than $10,000? Early adopters are paying the price if they want to upgrade their vehicle. You lose the value on the trade-in and now you have to buy in at a higher cost.",
"session": "Answer",
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{
"name": "Zachary Kirkhorn",
"speech": "I don't think that this is widely known, but we're already actually doing the sentiment of what this question is asking. If you trade in your Tesla to Tesla, there's a difference in price that we pay for a trade-in that has FSD compared to 1 that doesn't. And so there's that premium that we pay to repurchase the FSD. That money can then be applied towards the purchase of a new car. \r\nSo I just -- we hear this feedback quite a bit. We see it on social media. We see it in the forums, et cetera. And so this already does exist, not directly in the form here and we don't call it out explicitly in the trade-in potentially that we have increased the price of your trade-in as a result. And hopefully, this clears this up because we do actually do that.",
"session": "Answer",
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{
"name": "Martin Viecha",
"speech": "Okay. And the next question is, Elon said that we get an update on Cybertruck in November a year ago but it hasn't happened. And we know there are a lot of updates. Will you show off the new and improved Cybertruck?",
"session": "Answer",
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{
"name": "Lars Moravy",
"speech": "Yes. Thanks, Martin. We get a lot of questions on Cybertruck. We've been busy detailing the Cybertruck to achieve the prototype version we shared with customers a while back. As you may have seen recently in social media, we've built a number of alphas and are currently testing those to further mature the design. And while those point out a few key additions like rear steer, there are also a number of smaller or less visible improvements, though the product is largely true to the initial vision. We'll continue to work through the product in the beta stages that we're in now and look to launch that by next year.",
"session": "Answer",
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{
"name": "Martin Viecha",
"speech": "Okay, thank you very much. We just promoted Pierre to a presenter to hear us.",
"session": "Answer",
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{
"name": "Pierre Ferragu",
"speech": "I'm very impressed that you managed to figure that out. Let me ask you my question. Actually, I'm very intrigued by what you guys are doing on the insurance front. And so you have now in the market in Texas an insurance product for which the premium varies as a function of the safety score of the driver. And so I'd love to hear you about that. You must have some initial data points about market reaction. What's the update? \r\nAnd from there, can you tell us about how you think you're going to distribute that? Is that going to go through your installed base very easily here or is it going to be like a heavy marketing push? And then maybe tell us about your expansion plans. What are the next geographies? What's the timing? How fast is that business line likely to grow in the next few years?",
"session": "Question",
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{
"name": "Zachary Kirkhorn",
"speech": "Yes. Thank you, Pierre. I'm extremely passionate about our insurance product. We have a terrific team here at Tesla of folks who have been spending a lot of time developing this and probably listening to the call. So we're pretty excited so far, Pierre. \r\nSo I mean, at the highest level here, we entered the insurance market kind of unintentionally, I would say. Our customers were coming to us complaining that the price of traditional insurance was too high, and it was reducing the affordability of a Tesla. And part of our journey here at Tesla is we want as many people as possible to be able to afford our products. That's extremely important to achieving the mission of the company. \r\nAnd if you look at the price of insurance as a percentage of what somebody's monthly payment is, it's quite high. And we spend extreme amounts of effort in manufacturing to take $5 of BOM cost out here or $10 out somewhere else. If we can get $5, $10, $20, $30 out on a monthly payment, you can calculate what that means in terms of reduction of the price of the car, if you finance it, and the leverage of improving insurance cost is huge in terms of affordability. \r\nAnd so that's kind of the context by which we stepped into this. As we started to do more research, essentially, the tools by which the insurance is traditionally calculated are optimized based upon the existing data, but the existing data is limited. So there's a focus on things like marital status or age or other attributes like that. Accident history is a good one, et cetera. \r\nBut what essentially happens here is customers who are low risk and don't actually file many claims end up overpaying on their insurance relative to their cost. That overpayment then goes to riskier customers who are essentially being subsidized. And as we looked at this and we looked at the data, we thought this just doesn't seem like it's fair. At Tesla, because our cars are connected, because they are essentially computers on wheels, there's enormous amounts of data that we have available to us to be able to assess the attributes of a driver who's operating that car and whether those attributes correlate with safety because we do get a signal when a car has been in an accident. \r\nSo we've been spending our time looking at hundreds of different variables and also looking at billions of miles of driving history. And we've been able to fit a model that is able to predict, with decent accuracy, the probability of collision over a period of time. And the model is not perfect, right? The model is a function of the data that we have available. That data set continues to grow. We continue to experiment with new variables, but we do have a model that works pretty well so far. \r\nAnd from that model, being able to predict frequency of collision, we can then align that against the price curve. And we can have individualized pricing integrated into the car, integrated into the app, integrated into that customer's experience with a feedback loop back to the customer on how they are driving after every drive, the attributes that they were successful on or unsuccessful on and the tips of things that they can do to improve their safety. So that's what we've developed. \r\nWe then included the safety score as part of the FSD beta enrollment program, where we have almost 150,000 cars currently using the safety score. And I believe the latest data is over 100 million miles of driving, so we've been able to go back and analyzed that data. And we've learned 2 things coming from that. The first is that the probability of collision for a customer using a safety score versus not is 30% lower. It's a pretty big difference. It means that the product is working and customers are responding to it. \r\nThe second thing that we've looked at is what is the probability of collision based upon actual data as a function of a driver safety score. And that is aligning with our models. Most notably, if you're in the top tier of safety compared to lower tiers, there's multiple X difference in probability of collision based upon actual data. So this is a very new and very exciting frontier for us. I know that was long-winded, but I -- we spent a lot of time on this and we put a lot of thought into it. \r\nSpecifically with respect to the rollout, the insurance industry in the U.S. is intensely regulated and it's regulated on a state-by-state level. That means that we require regulatory approvals from each individual Department of Insurance at each individual state. Texas is the first state that we launched in. I do want to thank the Texas insurance regulators here. You have been great to work with. We have a road map of additional states. We will launch the product in those states as we receive regulatory approvals. And our goal is to be in every major market in which we have cars in. \r\nWe did a soft launch in Texas, was it last week? Yes. And what we're seeing in initial take rate data is that if you compare that to what we're seeing in California, we're off to a good start here. So we're very excited about it. We're excited about individual risk-based pricing. We're excited about the ability for folks to become safer and, as a result, save money. And it feeds into our priority of a company of building the safest products in the world.",
"session": "Answer",
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{
"name": "Lars Moravy",
"speech": "Yes. If I can add to that, it's really exciting for the engineering team, the finance team and taking on safety into their world, too. It's just pervasive. Thanks for that, guys.",
"session": "Answer",
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{
"name": "Zachary Kirkhorn",
"speech": "Thank you, Lars.",
"session": "Answer",
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{
"name": "Martin Viecha",
"speech": "Thank you. Pierre, do you have a follow-up question?",
"session": "Answer",
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{
"name": "Pierre Ferragu",
"speech": "No, I think I'm fine. Zach, thanks for taking the time to answer. It's fascinating and very interesting, yes. I look forward to looking to that.",
"session": "Question",
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{
"name": "Martin Viecha",
"speech": "The next question comes from Joseph Spak from RBC.",
"session": "Answer",
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{
"name": "Joseph Spak",
"speech": "So Zach, as you noticed -- or as you noted, you hit low teens operating margins, that was your medium-term target. You're there now despite the number of challenges and you're not full utilization in some of the plans. So how are you thinking about that target now? And does it allow you to either drive price down further to unlock more demand, invest in other initiatives or does that target need to change? And then longer term, do you have an aspirational gross margin target as the mix of software and hardware changes?",
"session": "Question",
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{
"name": "Zachary Kirkhorn",
"speech": "Yes. We have achieved -- we've actually exceeded our long-term guidance on our operating margin target, so we're very pleased to see that. And as we look out over the next quarter and the next year, there's kind of -- there's a number of puts and takes financially for the company. \r\nThe launch of Austin and Berlin, we'll have ramp inefficiencies there for some period of time until we get those factories up and running. And so that's likely to put some downward pressure on our margins as those factories ramp. Our goals are to ramp those as quickly as possible. But as Drew mentioned earlier, there are a number of unknown unknowns that we'll need to work through. \r\nWe are kind of also in this uncertain environment with respect to cost structure, so we are seeing cost increase on the commodity side. We're getting feedback from our suppliers, as we are seeing ourselves, the impact of labor shortage. And then logistics and expedite costs just continue to be a part of our story here. And it's uncertain how that will unfold. It's our hope that these things stabilize. Exactly when that happens is difficult to predict. And we have been adjusting pricing in line with those changes in cost. And so we'll see how that unfolds over the course of the next year. So it's difficult on gross margin to say where that will go for those reasons. \r\nWith respect to operating margin, we've been very focused as a company on managing our overhead expenses and operating expenses. And operating expenses as a percentage of revenue has been declining, and I expect that trend to continue to happen. And I think the net of all of this is hopefully that we continue to make progress on operating margin over the next 4 or 5 quarters. \r\nAs we think kind of forward, the business up until this point has kind of largely been a hardware automotive business with a little bit of software on top of that. As full self-driving matures, as take rates increase, if we are to raise pricing on that, there's considerable upside both on gross margins and operating margin as that comes to light as the business starts to become more of a mix of a hardware-based company and a software-based company. \r\nSo we feel optimistic about the journey, very optimistic about the journey as we look over into the long term. Just a little bit difficult over the next 4 to 5 quarters. We'll continue to update on earnings calls as we learn more information. There's just a lot of uncertainty in the world right now.",
"session": "Answer",
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{
"name": "Martin Viecha",
"speech": "Thank you. Joe, do you have a follow-up question?",
"session": "Answer",
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{
"name": "Joseph Spak",
"speech": "Yes. The second question is just you mentioned LFP packs globally for standard range models. My understanding is that all comes from China. Is that the continued go-forward plan or do you want LFP capabilities in other factories around the world?",
"session": "Question",
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{
"name": "Drew Baglino",
"speech": "Yes. Certainly, our goal is to localize all key parts of the vehicles on the continent, at least the continent, if not closer to where the vehicles are produced. So that is our goal and we're working with internally and with our suppliers to accomplish that goal and not just at the end assembly level but as far upstream as possible.",
"session": "Answer",
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{
"name": "Martin Viecha",
"speech": "Thank you very much. And the next question comes from Colin Langan from Wells Fargo.",
"session": "Answer",
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{
"name": "Colin Langan",
"speech": "Yes, just actually kind of following up on the question before. You had mentioned commodities are rising. And when I look at a lot of the key raw materials in the battery, cobalt, nickel, lithium all up 40%. And I know you guys have done a good job of getting long-term contracts to sort of mitigate that impact. I mean, have you seen so far any impact from that spike? And if not, I mean, any sense of when that raw material headwind might actually show up or has shown up?",
"session": "Question",
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"name": "Zachary Kirkhorn",
"speech": "Yes. We have seen an impact. Our primary exposure right now is around nickel and aluminum, nickel on the cell, aluminum on the non-cell. And we have a mixture of contracts with various suppliers. Some materials we contract directly and we have full exposure to price fluctuations. We do have a number of long-term commitments -- long-term contracts in place. We also have contracts where there's some amount of cost sharing based upon the movement of indexes. \r\nAnd so as these have been moving, some of those costs have been flowing through to us. It's not a substantial amount of cost but it's not small. As we look towards the next year, I certainly hope it doesn't play out this way, but it's possible that we continue to see more of cost headwind as a result of these movements. It's difficult to say precisely but the volatility and the increases are just substantial, so substantial. And there are certain suppliers that, maybe up to a certain point, have been absorbing some of the increase. And as contracts expire there or we have to renew and extend them, we'll have to return to negotiations. \r\nAnd so what we have to do as a company and what we are intensely focused on is we need to be continuing to drive down the cost of our products, which we have been doing. And we have to overcome cost increases that are outside of our control. So whether that's resourcing components or redesigning components or finding ways to be more efficient in manufacturing, we have no choice but to continue on that path and be even more aggressive in the light of the macroeconomics here.",
"session": "Answer",
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{
"name": "Lars Moravy",
"speech": "And diversification, right. Like it doesn't need to be nickel or cobalt or I mean, there's always another option.",
"session": "Answer",
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{
"name": "Martin Viecha",
"speech": "Thank you. Colin, do you have a follow-up question? Okay. Let's go to the next one. The next question comes from Colin Rusch from Oppenheimer.",
"session": "Answer",
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{
"name": "Colin Rusch",
"speech": "Can you talk a little bit about your strategy around anode materials and your ability to leverage that into a reduction on the cathode side and performance from that [indiscernible]",
"session": "Question",
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{
"name": "Drew Baglino",
"speech": "Sure. I don't know that I'm going to get into too many specifics, but I guess first, 1 thing I would say is unlike the commodities discussion we just had, like the anode materials are not really in the same situation just in terms of what their constituent components are. So there's less of a focus on like rapidly changing them 1 way or the other because they're generally stable commodities. \r\nThere isn't exactly like a tit for tat where like get a better anode, use less cathode, like there's a fundamental ratio that you need to maintain for the cell to function. So I guess zooming out, the primary focus on the anode side that we have is just ensuring that it doesn't, in any way, that we are able to continue to reduce the cost of the anode without impeding on the long-term cyclability of the product. \r\nIt can also help with energy density as you like sort of improve the energy density of the anode, you improve the energy density of the cell, not directly 1:1 because you have to pack more cathode in as the anode gets better. And that's a focus as well but the trade space is just sort of cycling versus day 1 cost.",
"session": "Answer",
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{
"name": "Colin Rusch",
"speech": "That's very helpful. And then just around the vehicle pricing strategy, obviously, there's a lot of flexibility there for some customers and not. Can you just talk a little bit about the process around vehicle pricing? And how quickly do you expect to change that and adjust as you see some of these commodity prices flow through the cost structure and you look at the brand dynamics for vehicles?",
"session": "Question",
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{
"name": "Zachary Kirkhorn",
"speech": "Yes. Pricing has been a really difficult thing for us over the last couple of quarters. And we're -- part of the challenge is, well, I mean, the great thing that we're seeing in the space right now is there appears to just be quite a profound awakening of the desirability for electric vehicles. And I mean, to be totally frank, it's caught us a little bit offguard. \r\nAnd that kind of awakening and changing consumer sentiment, I'm sure there's lots of reasons that go into it, but folks want to buy an electric car and folks want to buy a Tesla right now. It's very exciting for us. At the same time, we have installed capacity to build more cars but we're constrained by a number of dynamics, as we've talked about in great detail. And we are putting an extreme effort to build as many cars as we possibly can. \r\nIt's hard to overstate how extreme the efforts are. It's quite the grind. We're trying as hard as we can to maximize that capacity and to be able to meet the demand that we're receiving. But the net-net of all of this is that we're not able to increase production capacity fast enough. So at the same time we are seeing macroeconomic cost impacts on our structure, as we've discussed previously on the call, so we're trying to think through if somebody orders a car now, it'll -- it could be delivered, in some cases, depending upon the car and which factory, could be a couple of months, could be a couple of quarters. And the timing in which we build that car will be just before that car gets delivered. \r\nAnd what will the world look like at that point? And so we're trying to think through how the cost structure is evolving? How does pricing need to change with that? What are the supply dynamics in the space? The other thing that I'll just note on pricing is that companies change pricing all the time. The difference is that when Tesla changes pricing, it's extremely transparent where that's not always the case otherwise. \r\nAnd sometimes our pricing will increase, sometimes our pricing will reduce. Sometimes, to the public, our pricing changes may not seem to make logical sense. But there is a strategy that we work behind the scenes as we're balancing supply and demand, as we're also trying to balance very shortages on parts, as we're trying to manage wait times, all of that goes into the optimization here.",
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"name": "Martin Viecha",
"speech": "Okay. Thank you very much. The next question is from Brian Johnson from Barclays.",
"session": "Answer",
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"name": "Brian Johnson",
"speech": "By the way, great to hear there's a team at Tesla, not just a 1-person show. I want to drill down a bit more on FSD. In December of 2020, in a Business Insider interview in Germany, your leader said that he expected Level 5 autonomy by December -- within a year, so that would be now. Yet we look at the progress in FSD and some of the issues you see on YouTube, and it looks very much like a Level 2, 2+ system that requires vigilances, in fact, your disclaimers cite. \r\nSo I guess, 3 questions. Kind of, one, what is the timetable to get to Level 4 at least capability? We can deal with the regulatory stuff later. Two, what is the criteria, for Zach, for you to release revenue -- deferred revenue around FSD? And is having a Level 2 system that needs monitoring enough to release that deferred revenue? And then three, maybe you could talk a little bit more about how you plan to work with the folks at NHTSA who appear to be asking some questions? They have 3 requests out to you regarding information around the Level 2, around the capabilities of FSD.",
"session": "Question",
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"name": "Zachary Kirkhorn",
"speech": "We'll take them in order. It's difficult to be specific on the time lines. The Autopilot team is working extremely hard iterating on every version. We are being extremely transparent through the release of this to public customers who are posting information online. So when you're using full self-driving and you're going through the iterations, you can feel the progress. \r\nAnd for those who don't have it in their cars, social media is excellent at getting a sense for how that's progressing. And the team is moving quickly with every iteration, with every update, and they're working very hard on that. \r\nOn your second question about the criteria to release deferred revenue, the way that this works is we have made certain commitments as to what this product can offer at the time that a customer has purchased that. And so what we have to assess is, have we met those commitments? And is the software widely available to folks that we've made those commitments to within a certain geography? And given that FSD is still currently in the beta phase, it's invitation-only and it's limited, we have not deemed that to be appropriate for recognition of deferred revenue. And we'll continue to evolve this. We'll continue to monitor it within the finance team to see when we get to the milestones in which we're comfortable releasing. On the NHTSA question, Lars, do you want to take that?",
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"name": "Lars Moravy",
"speech": "Sure. I mean, as I said earlier, we always corroborate fully with NHTSA and other regulatory bodies in any sort of investigation they may have, particularly related to ADAS systems. When they came out with the standing general order in July, we were quick to respond to that and one of the first and only companies capable of actually meeting the needs of that report. We continue to send that information to them as required weekly as incidents occur. \r\nAnd with the additional investigations, as I said, we meet that with great sincerity and we'll work through them 1 by 1 to make sure that all the facts come out and that NHTSA is well informed about our strategies for both active safety in this case but also passive safety. \r\nAs you guys may know, we released updates to our airbag and restraint system last week to Model Y using our fleet data. We worked closely with NHTSA on that, and they were fully in the loop before we did it. So I think these kinds of things will continue to happen in the new regulatory space that Zach discussed as we move towards a software-based vehicle. And we're happy to be a part of that journey.",
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"name": "Martin Viecha",
"speech": "Thank you very much. And the next question comes from Trip Chowdhry.",
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{
"name": "Trip Chowdhry",
"speech": "Very good quarter. I had 2 quick questions. First is regarding the 2 upcoming factories in Berlin and Austin. How are the 2 factories different from each other? Maybe in the layout, design, assembly lines? And the second question is related to Cybertruck. Who is the supplier looking at if you look at the exoskeleton steel? Is the supply for that material sufficient for immediate ramp-up, say, in '23, '24 time for Cybertruck? That's all for me.",
"session": "Question",
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"name": "Lars Moravy",
"speech": "Yes, sure. So obviously, as we've noted in the past, we developed our own stainless steel grade for the exterior of Cybertruck to meet both the durability and requirements required for an automotive world. With this raw material and others, as Drew mentioned, we continue to look at multiple sources. We have made some early sourcing decisions in that, but I think we'll keep that 1 internal and we've already began the first casting-ins of that. \r\nRolling stainless isn't so different from pulling any other material. It's just about how hard the rollers are to get to that hardness level. And just like every manufacturing process we put in for every new vehicle, we'll work with our suppliers and vendors to make sure those time lines and supply meet the need and demand of our customers.",
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"name": "Drew Baglino",
"speech": "And on the differences between Austin and Berlin, there are some. They're largely associated with the different sort of building architectural choices that were -- happened to occur while collaboration with like local codes and other sort of governing requirements that drive the differences in the architecture between the locations. \r\nIn general, though, like we're trying to progress the manufacturing system as a system and make sort of logical, like, path to find improvements from factory to factory. And in some cases, there was an improvement identified between, like, decisions for one, Austin, the other Berlin or vice versa. And so there might be a slightly newer iteration of 1 part of the factory and 1 place than the other, but they're -- it's all part of like a path forward in the factory that builds the machine, the machine that builds the machine, sorry.",
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"name": "Martin Viecha",
"speech": "Thank you very much. And the last question comes from Jed Dorsheimer from Canaccord.",
"session": "Answer",
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{
"name": "Jonathan Dorsheimer",
"speech": "So Brandenburg, I'm just wondering, Zach, if you could estimate the carry costs from a margin perspective? Or I guess, in 2 parts. So when do you expect -- do you still expect production coming on in '21, so a couple of months left in December? And how do you see that margin impact as a function of the carry cost? And I do have a follow-up question.",
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"name": "Zachary Kirkhorn",
"speech": "Sure. So it remains our target in both Austin and Berlin to be able to build our first production cars before the end of the year. We've talked about this a bit, the unknown unknowns, new factories, new vehicle designs, new technologies, new locations, new teams. So there is quite an execution journey ahead of us. But that remains our target and all of our plans are oriented around that. \r\nWe should not expect for us to deliver cars by the end of 2021 from these factories even if we do produce them, so homologation, regulatory reasons. And we'll want to make sure that we build up some number of cars that we're confident in the quality and the customer experience around them. \r\nThe second thing that I'll say, and I mentioned this in my opening remarks, is because of the newness here, it's extremely difficult for us to be precise in what the ramp will look like. And it's possible things -- the stars align and things move quickly, it's possible that we're spending the bulk of next year working on ramping these factories. It's just very hard to say, and we'll continue to update you all through these calls and through other forums. \r\nAs to how that then impacts our margins, that is also difficult because that is a function of the ramp, which is uncertain. So the benefit here, which is different in the ramp of these factories compared to other factories, is if you think about the percentage of our total cost structure in any given quarter that is associated with new ramps, we have the Fremont factory that's running, generating stable and growing margins there. The same is also true in Shanghai. So I expect we'll see some amount of headwind on margin from these ramps. It's just entirely dependent on how quickly we're able to ramp and what uncertainties come up during the process.",
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"name": "Jonathan Dorsheimer",
"speech": "Sure. So on a margin per car, but I would suspect though, if your carry cost is full right now on the -- that as you start producing vehicles, it's going to be a margin lifter from where you're at right now? No?",
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{
"name": "Zachary Kirkhorn",
"speech": "I mean, we are carrying some amount of costs associated with the factories today. And so the incremental cost associated with turning the factories, it's not 100% of a factory, if that's what you're getting at in your question.",
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"name": "Jonathan Dorsheimer",
"speech": "Yes, that's what I was getting at.",
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{
"name": "Zachary Kirkhorn",
"speech": "Yes. We also actually saw a very similar dynamic to this when we were launching Model S earlier in the year. So when a product starts launching and then cost of goods sold starts to activate, depreciation starts to activate, there's a bit of a movement in the P&L as to where that cost resides. So yes, seeming to some extent, Brandenburg and Austin costs are already flowing through our P&L. But we still need to continue staffing and ramping and incurring all the operating costs associated with the factory that we're not spending right now.",
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{
"name": "Martin Viecha",
"speech": "Fantastic. Thank you very much, everyone, for all your questions, and we'll see you again in 3 months. Thank you very much, and goodbye.",
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],
"title": "Tesla, Inc., Q3 2021 Earnings Call, Oct 20, 2021",
"quarter": 3,
"year": 2021
}
},
{
"transcript_title": "Tesla, Inc. - Q2 2021",
"transcript_name": "Tesla, Inc., Q2 2021 Earnings Call, Jul 26, 2021",
"ticker": "NASDAQ:TSLA",
"transcript_url": "https://wkarticles.blob.core.windows.net/finnhub/snp_transcript_2351062",
"date": "2021-07-26",
"year": 2021,
"quarter": 2,
"transcript_data": {
"date": "2021-07-26",
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"transcript": [
{
"name": "Operator",
"speech": "Good day, and thank you for standing by. Welcome to the Tesla Second Quarter 2021 Financial Results and Q&A Webcast. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions] I would now like to hand the conference over to your speaker today, Martin Viecha, Senior Director of Investor Relations. Please go ahead.",
"session": "Presentation Operator Message",
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"name": "Martin Viecha",
"speech": "Thank you, and good afternoon, everyone. Welcome to Tesla's Second Quarter 2021 Q&A Webcast. I'm joined today by Elon Musk, Zachary Kirkhorn and a number of other executives. Our Q2 results were announced at about 1:00 p.m. Pacific Time in the update deck we published at the same link as this webcast. \r\nDuring this call, we will discuss our business outlook and make forward-looking statements. These comments are based on our predictions and expectations as of today. Actual events and results could differ materially due to a number of risks and uncertainties, including those mentioned in our most recent filings with the SEC. [Operator Instructions] But before we jump into Q&A, Elon has some opening remarks. Elon?",
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"name": "Elon Musk",
"speech": "Sure. So to recap, Q2 2021 was a record quarter on many levels. We achieved record production, deliveries and surpassed over $1 billion in GAAP net income for the first time in Tesla history. I'd really like to congratulate everyone at Tesla for an amazing job. This is really an incredible milestone. \r\nIt also seems that public sentiment towards EVs is at an inflection point. And at this point, I think almost everyone agrees that electric vehicles are the only way forward. Regarding supply chain, while we're making cars at full speed, the global chip shortage situation remains quite serious. For the rest of this year, our growth rates will be determined by the slowest part in our supply chain, which is there are a wide range of chips that are, at various times, the slowest parts of the supply chain. \r\nI mean, it's worth noting that if we had everything else, if we had vast numbers of vehicles themselves, we would not be able to make them -- if everything, except the chips, we wouldn't be able to make them. The chip supply is fundamentally the governing factor on our output. It is difficult for us to see how long this will last because we don't have -- this is out of our control essentially. It does seem like it's getting better but it's hard to predict. \r\nSo in fact, even achieving the output that we did achieve was only due to an immense effort from people within Tesla. We were able to substitute alternative chips and then write the firmware in a matter of weeks. It's not just a matter of swapping out a chip, you also have to rewrite the software. So it was an incredibly intense effort of finding new chips, writing new firmware, integrating with the vehicle and testing in order to maintain production. \r\nAnd I'd also like to thank our suppliers who work with us. And there have been many calls at midnight, 1 a.m., just with suppliers but -- in resolving a lot of the shortages. So thanks very much to our suppliers. \r\nLet's see, in terms of FSD subscription, we were able to launch Full Self-Driving subscription last month. And we expect it to build slowly and -- but then gather a lot of momentum over time. Obviously, we need to have the Full-Self Driving build widely available for it really to take off at high rates and making a lot of progress there. So yes, I think FSD subscription will be a significant factor probably next year. \r\nWith regard to Giga Texas and Giga Berlin, we're actually doing this earnings call from Giga Texas, so we're in the factory right now doing this earnings call. And the team has made incredible progress here. You can see the pictures online and see that there's basically nothing a year ago and this mostly complete large factory a year later. So it's really great work by the Giga Texas team. And then also great work in Berlin [indiscernible] with the team there. \r\nSo we expect to be producing the sort of new design of the Model Y in both factories and limited production later this year. It's always like -- it's not -- it's hard to sort of explain to people who have not been through the agony of a manufacturing ramp, like why can't you just turn it on and make 5,000 a week? This is -- it is so hard to do manufacturing. It is so hard to do production. At gross approximation, there are 10,000 unique parts and processes that have to work. And the greater growth of production goes as fast as the least lucky and dumbest of those 10,000 things, and a bunch of them are not even in our control. So I think it's like -- it's insanely difficult. \r\nI'm fond of saying that prototypes are easy and production is hard. And arguably, the really remarkable thing that Tesla's done is not to make an electric car or to be a car start-up because there have been hundreds of car start-ups in the United States and outside United States. So the thing that's remarkable is that Tesla didn't go bankrupt in reaching volume production. That's the amazing part because everyone else did, because they all got the prototype or the idea was the hard part and it is not. It is trivial by comparison with actual production. \r\nSo it's always worth noting that of all the American car companies, there are only 2 that have not gone bankrupt and that is Ford and Tesla. So the seeds of defeat are sown on the day of victory and we must be careful that we do not do that. So often, if you look at history, so often, the seeds of defeat are sown on the day of victory. We will endeavor not to make that the case of Tesla. \r\nSo let's see, the model lines in Texas and mainly, Texas and Berlin, will be -- will look very much like the Model Ys we currently make, but there are substantial improvements in the difficulty of manufacturing. So for example, the Model Y made here and in Berlin will have a cast body and a case body, whereas the 1 in California has a cast-rear body but not a cast-front body. We're also aiming to do a structural pack with [ 4680s ] cells, which is a mass reduction and a cost reduction. \r\nBut we're not counting on that as the only way to make things work. We have some backup plan with nonstructural -- with a nonstructural pack and 2170s essentially. But at scale production, we obviously want to be using 4680s and a structural pack. From a physics standpoint, this is the best architecture. And from an economic standpoint, it is the lowest cost way to go. So the life is lowest cost. \r\nBut there's a lot of new technology there so it is difficult to predict with precision. When does it work? And when do you reach scale production? And Drew's going to talk a bit more about the 4680 production. Yes. So we're all making great progress on the 4680 cells, but there is a tremendous amount of innovation that we're packing into that 4680 cells. And so it's not simply a sort of minor improvement on state-of-the-art. There are -- and we went through this on the Battery Cell Day, really dozens of -- half a dozen major improvements and dozens of small improvements. So I think it will be great, but it's difficult to say when the last of the technical challenges will be solved. \r\nSo in conclusion, our team continues to make huge efforts to make our factories run at full speed, which is very difficult. We have had some factory shutdowns due to partial outages, and we hope those will be relieved in the coming weeks and months. And we're making great progress on Full Self-Driving. Some of the progress is not easy to see because it is at a foundational software level, and so that ends up being sort of 2 steps forward, 1 step back situation. And -- but over time, you do 2 steps forward and 1 step back and keep going, you do move forward. \r\nSo I'm highly confident that the cars will be capable of full self-driving. They have a full self-driving computer and the cameras, I'm confident that they will be able to themselves with the safety level substantially greater than that of the average post. Once again, thanks to all of our employees who are making this a breakthrough year for Tesla and an incredible quarter. Thanks, guys.",
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"name": "Martin Viecha",
"speech": "Thank you very much. And we have some follow-up remarks from Zachary Kirkhorn.",
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"name": "Zachary Kirkhorn",
"speech": "Yes. Thanks, Martin, and thanks, Elon. Just to reiterate, Q2 was a great quarter for the Tesla team with strong improvements across the business. In particular, auto gross profit and margin, excluding credit, increased substantially. This was primarily driven by better cost optimization across our factories, good execution against our cost reduction plans as well as increases in production and delivery volumes. \r\nThere was some benefit from pricing actions mostly in North America. However, it was small in the context of the other contributors. Note that the Model S and X program was at a slight loss for the quarter due to the relatively low volume. \r\nIn supply chain challenges, including expedites, continue to provide cost headwinds. Additionally, it's encouraging to see the progress made on profitability within our energy and services and other businesses. While there's some benefit to looking at our progress quarter-over-quarter, I find it more helpful to look at progress over a slightly long-term horizon. Over the last 2 years, our vehicle delivery volumes have more than doubled. This volume increase was made possible by a steady decrease in ASPs of more than 10%, driven by our road map to increase affordability and shifting mix towards our more affordable vehicles. \r\nYet over that same period of time, our auto gross margin, excluding credit, has increased nearly 10 percentage points to our highest yet since the introduction of Model 3. This is only possible because our average cost per vehicle has reduced by more than the reduction in average price. This is a remarkable achievement in the context of the volume growth and ASP reduction, as mentioned, and a testament to the hard work by the Tesla team. \r\nAdditionally, OpEx as a percentage of revenue has declined and in particular, SG&A, representing the work we've done to become more efficient as we scale the company while still making the required R&D investments to support our future. As a result, our GAAP operating margins have risen from negative to double digit in line with what we have guided. By managing our overhead costs and driving higher volumes, our P&L is benefiting from the marginal profitability of each incremental unit or, said differently, we are recognizing the benefits of scale and improved fixed cost absorption. \r\nWith strong operating cash flows and cash balance, we are putting that cash to use. CapEx continues to tick up, primarily driven by capacity investments in Austin, Berlin and Shanghai. Additionally, each quarter, we are using our cash to retire legacy debt, which was taken on at a time when interest rates and company risks were much higher than in today's environment. \r\nAs I've mentioned before, our 2021 volumes will skew towards the second half of the year as we push for continued sequential increases in volume. Despite the great work so far managing the instability of the supply chain, these challenges remain and are unfortunately increasing in [ pain ] with a higher volume. As we work through the uncertainty, we want to ensure we do our best to manage customer wait times as well as the impact these interruptions have on our employees and costs. \r\nAnd as Elon mentioned, volume growth will be determined by part availability as we have the factory capacity ready and are in a strong demand position. I'm excited to see the progress made by the Tesla team as we continue building the business and strengthening our financials. Thank you very much.",
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"name": "Martin Viecha",
"speech": "Great. Thank you very much, Zach. And now let's go through the retail investor questions on say.com.",
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"name": "Martin Viecha",
"speech": "The first question from Robert is Tesla's website still says Cybertruck production is expected to begin in late 2021. Can Tesla share more details on the current status of the Cybertruck and confirm if production is still [Technical Difficulty] Lars, do you want to...",
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"name": "Lars Moravy",
"speech": "Sorry, we cut out there for a second. Yes, the Cybertruck is currently in its alpha stages. We finished the basic engineering architecture of the vehicle. With the Cybertruck, we're redefining how the vehicle is being made. As Elon said, it carries much of the structural pack and large casting designs of the Model Y being built in Berlin and Austin. Obviously, those take priority over the Cybertruck, but we are moving into the beta phases of Cybertruck later this year, and we'll be looking to ramp that in production in Giga Texas after Model Y is up and going.",
"session": "Answer",
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{
"name": "Elon Musk",
"speech": "Yes, just worth reemphasizing that the extraordinarily difficult -- extraordinary difficulty of ramping production of large manufacturing items. [indiscernible] of being competitive, it's actually easy to make prototypes or sort of handle small volume production. But anything produced at high volume, which is really what's relevant here is, it's going to move as fast as the slowest of the say, rough order of magnitude, 10,000 unique parts and processes. \r\nAnd so you can have 9,999, which is 1 is missing. I mean, we were missing, for example, like a big struggle this quarter was the module that controls the airbags and the seatbelts. And obviously, you cannot ship a car without those. And that limited our production severely worldwide in Shanghai and in Fremont. So it -- like it wouldn't have mattered if we had like 17 different car models because they won't need the airbag module [indiscernible] \r\nSo the -- in order for Cybertruck and [indiscernible] to scale to volume that's meaningful for customer deliveries, we would have got to solve the chip shortage or working with our suppliers and people say, \"Why don't you just build a chip fab?\" Okay, well, okay, that would take us, even moving like lightning, 12 to 18 months. So it's not like you can just swap out a chip fab. It is like yes, I'll just make a quick chip fab. \r\nSo some of these things are -- yes, anyway. It is quite a trial dealing with all of the constraints of scaling a large manufacturing object. I think it may be the case that Tesla is scaling. I think we might be the fastest in history ever for scaling a large manufactured object. Maybe the Model T would have been comparable back in the day, the Model T. Probably, the Internet knows the answer. But I think we may be scaling large manufactured object at the fastest rate in history. Or I'd like to know who did it faster so we can learn from them. So it's worth just noting that, and they're going thing is not bad. \r\nSo yes, so Cybertruck and Semi, actually both are heavy users of cell capacity. So we've got to make sure we have the cell capacity for those 2 vehicles or it's kind of point that we can make a small number of vehicles. The effective cost, if you make a small number of vehicles is the same, like they literally cost $1 million a piece or more. There's a reason why you do things at volume production, which is to get the economies of scale that get us down. \r\nSo we are looking at a pretty massive increase in cell availability next year. But it's not like in January 1. It comes through -- it ramps up through the course of next year. But even without Tesla cell production, we believe our suppliers will be able to deliver about twice as much cell output in next year as this year. Drew, do you want to talk more about that?",
"session": "Answer",
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"name": "Drew Baglino",
"speech": "Yes, given concerns over cell's bottlenecking growth, our target is to grow cell supply ahead of the 50% year-on-year growth targets of the vehicle business and also enable increased energy storage deployments. So yes, our cell suppliers are tracking to double their production in 2022.",
"session": "Answer",
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{
"name": "Elon Musk",
"speech": "Yes. It's worth thing like if you have a target of a certain number, that doesn't mean it happens like as sure as night follows day. It's a target. So if there is some calamity in the world that it drops the supply chain, then it will be less. But the contracts that we have with cell suppliers quote roughly a doubling of cell supply to Tesla in 2022. \r\nAnd we have to juggle these exponential -- there's a whole much of exponential graphs sort of overlay on the top of each other and small changes in where you are on the X axis of time can quite substantially change the area under the curve. So what we're thinking of doing is like depending on -- if it's basically overshooting on cell supply for vehicles, and then as we have, say, excess cell supply in 1 month or another, then routing that cell output to the Megapack and Powerwall, [indiscernible] by the same if we're prior to taking vehicle production, if there's a shortage of cell output, for some reason, then we will throttle down Megapack and Powerwall production. So it will be something's got to give basically.",
"session": "Answer",
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{
"name": "Drew Baglino",
"speech": "Or if there's a disruption to vehicle production, you have an outlet for cells.",
"session": "Answer",
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{
"name": "Elon Musk",
"speech": "Yes, exactly. There's a tremendous amount of inertia in the supply chain. So if we say it to a supplier, we want you to double cell output, well, even doing that in a year is very difficult. And then that's -- that system has a tremendous amount of momentum. It is like a of super tankers. It's the same.",
"session": "Answer",
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{
"name": "Drew Baglino",
"speech": "Speaking of which, from a raw materials perspective, we also have long-term contracts to secure our supply chain also enable its growth. So we're not just looking at the suppliers but upstream from there.",
"session": "Answer",
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{
"name": "Elon Musk",
"speech": "Yes.",
"session": "Answer",
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{
"name": "Drew Baglino",
"speech": "Which has more flow to it.",
"session": "Answer",
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{
"name": "Elon Musk",
"speech": "Yes, exactly. As mentioned, things will move as fast as the slowest part of the entire supply chain, which goes all the way back to raw materials but the -- nickel and that kind of thing. And there's sometimes perception that Tesla uses a lot of cobalt but we actually don't. Apple uses, I think, almost 100% cobalt in their batteries and cellphones, laptops. But Tesla uses no cobalt in the iron phosphate packs and almost none in the nickel basis chemistries. \r\nSo on a weighted average basis, we might use 2% cobalt compared to the Apple's 100% cobalt. Anyway, so it's just -- it's really just not a fact that -- we expect to basically have 0 cobalt in the future. So I do -- maybe with -- I think probably there is a long-term shift more in the direction of iron-based lithium-ion cells over nickel. As the energy density of sort of iron ore to the iron phosphate, [indiscernible] taken for granted. But iron-based cell cells and nickel-based [indiscernible] cells, I think probably we'll see a shift. My guess is probably to 2/3 iron, 1/3 nickel or something on that order. \r\nAnd this is actually good because there's plenty of iron in the world. There's an insane amount of iron. But nickel is -- there's much less nickel and there's way less cobalt. So it is good for relieving the long-term scaling to move to iron-based cells mostly. And I think long term, possibly all -- there's a good chance that all stationary storage, that is Powerwall and Megapack moves iron. It is most likely the case since you do not need to transport it and there's less volume of constraint for stationary storage. So then nickel would be for -- really for long-range road transport ships and aircraft and that kind of thing.",
"session": "Answer",
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{
"name": "Martin Viecha",
"speech": "Thank you. Let's go to the second question from retail, which is Elon has said that Tesla will be opening up the Supercharger network to other EVs later this year. Can you share some more details on how this will be structured? Will this be at select brands or will they contribute to the growth of this network?",
"session": "Answer",
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{
"name": "Elon Musk",
"speech": "Yes. We're currently thinking it's a real simple thing where you just download the Tesla app and you go to a Supercharger and you just indicate which stall you're in. So you plug in your car, even if it's not Tesla. And then you just access the app, I'd say, turn on the stall that I'm in or how much electricity. And this should basically work with, I think, almost any manufacturer's cars. \r\nThere will be a time constraint. So if the charge rate is super slow, then somebody will be charged more because the biggest constraint at the Superchargers is time, how occupied is the stall. And we'll also be smarter with how we charge for electricity at the Superchargers. So rush-hour charging will be more expensive than charging because there are times when the Superchargers are empty and times when they're jampacked. And so it makes sense to have some time-based discrimination.",
"session": "Answer",
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{
"name": "Drew Baglino",
"speech": "Yes. We've been doing that and it's been working and people are responding. It helps with utilization.",
"session": "Answer",
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{
"name": "Elon Musk",
"speech": "Yes, exactly. So yes, I think we're -- in Europe and China and most of rest of the world, it's the same connector for everyone. So this is a fairly easy thing to do, develop our own connector, which in my opinion, is actually the best connector. It's small and light, looks good standard. So we developed our own connector, which in my opinion, is actually the best connector. It's small and light, looks good. \r\nSo an adapter is needed to work for EVs in North America. But people could buy this adapter, and we anticipate having it available at the Superchargers as well if people don't sort of steal them or something.",
"session": "Answer",
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{
"name": "Drew Baglino",
"speech": "We have a good solution for that.",
"session": "Answer",
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{
"name": "Elon Musk",
"speech": "Okay. But that is -- that's a constraint on North America thing. That's basically a vestige of history. But I think we do want to emphasize that it is -- our goal is to support the advent of sustainable energy. It is not to create a walled garden and use that to bludgeon our competitors, which is sometimes used by some companies.",
"session": "Answer",
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{
"name": "Drew Baglino",
"speech": "I think it's also important to comment that increasing the utilization of the network actually reduces our costs, which allows us to lower charging prices for all customers, makes the network more profitable, allows us to grow the network faster. So that's a good thing there. And no matter what, we're going to continue to aggressively expand the network capacity, increasing charging speeds, improving the trip planning tools to protect against site congestion using dynamic pricing, as Elon mentioned, and just continuing to focus on minimum wait time for all customers.",
"session": "Answer",
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},
{
"name": "Elon Musk",
"speech": "Yes. Obviously, in order for this to be -- for a Supercharger to be useful to other power companies, Lars, we need to grow the network faster than we're growing vehicle output, which is not easy. We're growing vehicle output at a horrible rate. So Superchargers need to grow faster than vehicle output. So this is a lot of work with the Supercharger team. But it is only useful in the grand scheme of things. It's only useful to the public if we're able to grow faster than Tesla vehicle output. So that is our goal.",
"session": "Answer",
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{
"name": "Martin Viecha",
"speech": "Thank you very much. And the third question is, Elon said 4680 cells aren't reliable enough for vehicles. Is this referring to cycle life degradation or something else? Please update us on progress of 4680s? And what still needs to be done to make them reliable in vehicles?",
"session": "Answer",
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{
"name": "Elon Musk",
"speech": "Yes. I mean, really, this is about -- we'll definitely make the 4680 reliable enough for vehicles. And I think at the point wherein limited volume, it is reliable enough for vehicles. The -- again, going back to like limited production is easier, prototype production is easy but high-volume production is hard. There are a number of challenges in transitioning from small-scale production to a large volume production. \r\nAnd not to get too much into the weeds of things, but right now, we have a challenge with basically the, what's called calendaring or basically squashing the cathode material to a particular height. So it just goes through these welders and get squashed like pizza dough basically and -- but very hard pizza dough. And the -- it's closing -- it's denting the cathode. This is not something that happened when the rolls was smaller, but it is happening when the rules are bigger. So just like we're like, okay, weren't expecting that.",
"session": "Answer",
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{
"name": "Drew Baglino",
"speech": "It's not a like science problem. It's an engineering -- it's not a question of if, it's a question of when, and the team is 100% focused on resolving these limiting processes as quick as possible.",
"session": "Answer",
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{
"name": "Elon Musk",
"speech": "Exactly.",
"session": "Answer",
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{
"name": "Drew Baglino",
"speech": "Yes. And on the reliability side, as Elon mentioned, we have successfully validated performance and the lifetime durability of the 4680 cells produced -- And we're continuing ongoing verification of that reliability. We're actually accruing over 1 million equivalent miles on our cells that we produce every month in our testing activities. The focus on that is very clear. We want high-quality cells for all of our customers. And yes, we're just focused on the unlucky limiting steps in the facility. And with the engineers focused on those few steps remaining, we're going to break through as fast as possible.",
"session": "Answer",
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{
"name": "Elon Musk",
"speech": "In the meantime, we have a massive amount of equipment on order and arriving for the high-volume cell production in and Berlin. And obvious, given what we've learned with the pilot plant, which is in Fremont, which is really quite a big plant by most standards, we will have to modify a bunch of that equipment. So it won't be able to start it immediately. But it seems like -- let me do correct me if I'm wrong, but we think most likely, we will hit an annualized rate of 100 gigawatt hours a year sometime next year.",
"session": "Answer",
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{
"name": "Drew Baglino",
"speech": "We'll have all the equipment installed to accomplish 100 gigawatt hours. And it's possible that by the end of the year, we will be at an annualized rate of 100 gigawatt hours by the end of the year.",
"session": "Answer",
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{
"name": "Elon Musk",
"speech": "Yes. I mean, my guess is more likely than not, about 50% of reaching 100 gigawatt hours a year by the end of next year on the annualized rate, something like that. It could shift by a little bit, but nothing, as Drew mentioned, it's nothing fundamental. Just a lot of work.",
"session": "Answer",
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{
"name": "Drew Baglino",
"speech": "Yes. And even to the large roller question, Elon, right, like on the side, the large rollers were great, no concerns. And so we're just learning as we go. And the nice thing about having that facility on the fast track like we had it and we talked about it at Battery Day was really derisking the big factories here that we've done, and we've learned a lot. And with each successive iteration, the ramp-up and the equipment installation will be faster or.",
"session": "Answer",
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{
"name": "Martin Viecha",
"speech": "All right. And the last question from retail is from Emmet. Can Elon do an interview with one of our YouTube channels once or twice a year? I would nominate David or [indiscernible] Tesla daily channels as first possible candidates.",
"session": "Answer",
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{
"name": "Elon Musk",
"speech": "Yes. I guess I'll do an interview. I mean, if I'm doing interviews and I can't do actual other work. So it's not -- I only have time in the day. So but yes, I'll do one. I won't do it annually but I'll do one. I think also like this is the -- I won't say the last time I'll do earnings calls but this is the -- I will no longer be defaults during earnings calls. So obviously, I'll do the annual shareholder meeting. But I think going forward, I will most likely not be on earnings calls unless there's something really important that I need to say.",
"session": "Answer",
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{
"name": "Martin Viecha",
"speech": "Okay, thank you. Now let's go to institutional questions. The first one and we covered a lot of this already. Can you please update us on time lines for the start of production of Berlin and Austin Model Y, Cybertruck and the Semi? Do you expect the ramp of Cybertruck to be as difficult as it is a new process?",
"session": "Answer",
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{
"name": "Elon Musk",
"speech": "I think Cybertruck ramp will be difficult because it's such a new architecture. It's going to be a great product. It might, I think, be our best product ever. But if there's a lot of fundamentally new design ideas, Cybertruck, never made a car like this before, be like this before. So there'll probably be challenges because there's so much unexplored territory. Yes.",
"session": "Answer",
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{
"name": "Martin Viecha",
"speech": "Thank you. I think question 2 and question 3, we can skip, given we have already addressed it. I'll get to question 4. In 5 years' time, how much faster or better could you be at manufacturing capacity expansion using [indiscernible] And what are the biggest issues you need to solve to get to that rate?",
"session": "Answer",
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{
"name": "Elon Musk",
"speech": "Well, like I said, I think we might be the fastest-growing company in history [indiscernible] large manufactured items. So those who have not actually been involved in the manufacturing ramp-up just have no idea how painful and difficult it is. It's like you got to eat a lot of glass and for our manufacturing ramp, it's hard.",
"session": "Answer",
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{
"name": "Drew Baglino",
"speech": "Yes. I mean I think if you look at the expansion we've done in Shanghai, that factory was built in less in a year and ramped in 5 to 6 months to full volume...",
"session": "Answer",
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{
"name": "Elon Musk",
"speech": "[indiscernible] took longer than that, about a year.",
"session": "Answer",
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{
"name": "Drew Baglino",
"speech": "And when you consider cut and paste, we've repeated that in Fremont and whatever. But now with Berlin and Austin, we have new factories and new designs. And so there's always challenges, as you said, Elon, with new designs in ramping that. But I think having teams in 3 locations or 3 continents will definitely expand our ability and our capacity to grow more lines rather than just having the 1 factory in Fremont that we had 1.5 years ago.",
"session": "Answer",
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{
"name": "Elon Musk",
"speech": "Yes. So I mean, for Shanghai incredible team both the [indiscernible] back in 11 months, but it took longer than building the factory because it took longer than that to actually reach volume production -- high volume production. So took about a year. So when you put a factory in a new geography, in order for that factory to be efficient, you have to localize the supply chain. So there's no such thing as cut and paste. It does not exist. \r\nAnd obviously doing the same to do vehicle production in Europe but send vast numbers of parts from North America, that would be -- that would make the producing in Europe, for example, just crazy. You've got to localize the supply chain to have efficiency and then you're moving as fast as your least lucky, least good supplier. \r\nYes. It's only supply chain where you like 3 or 4 layers deep, it's frankly -- I feel at times that we are inheriting all force majeure or [indiscernible] So if anything goes wrong anywhere on Earth, something happens to mess up the supply chain. So yes.",
"session": "Answer",
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{
"name": "Drew Baglino",
"speech": "I think the human capital growth though is having factories here in Berlin, Shanghai, Fremont does allow us to maybe not exponentially grow but well, hopefully.",
"session": "Answer",
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},
{
"name": "Elon Musk",
"speech": "We are exponentially growing.",
"session": "Answer",
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"person_company": null,
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{
"name": "Drew Baglino",
"speech": "Yes, hopefully maintain that exponential curve.",
"session": "Answer",
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},
{
"name": "Elon Musk",
"speech": "Yes. So yes, -- it's also -- it takes a while to hire old people and train old people to operate the factory. The factory is like a giant cybernetic collective. And you can't just hire 10,000 people and have them work instantly. It's not possible. I really encourage more people to get involved in manufacturing. \r\nI think especially in the U.S., like this has just not been an area where all that many smart people have gone into. I think U.S. has an overallocation of talent, good finance and [indiscernible] compliment by saying we shouldn't have people in finance I'm just saying that this might be -- maybe we have too many smart people in those areas.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
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{
"name": "Drew Baglino",
"speech": "Manufacturing is fun.",
"session": "Answer",
"person_id": 393478,
"person_company": null,
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},
{
"name": "Elon Musk",
"speech": "Yes, manufacturing is great. It's a very interesting problem. And obviously, you can't have stuff unless someone makes it. That's how it gets off. Yes.",
"session": "Answer",
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{
"name": "Martin Viecha",
"speech": "Okay, thank you very much. And let's go to the last investor question. Does Tesla plan to offer more services beyond FSD or high-speed connectivity as part of its subscription bundle going forward? What areas, in particular, present an opportunity?",
"session": "Answer",
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{
"name": "Elon Musk",
"speech": "Yes, we don't have a lot of ideas on this, to be frank. Really Full Self-Driving is the main thing. Things are obviously headed towards the fully autonomous electric vehicle future. And I think Tesla is well positioned and, quite frankly, is the leader objectively in both of those areas, electrification and autonomy. \r\nSo it's always tempting to try to find analogies. But with other companies or whatever, but really the value of fully electric autonomous fleet is any gigantic, boggles the mind really. So that will be one of the most valuable things that is ever done in the history of civilization.",
"session": "Answer",
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{
"name": "Martin Viecha",
"speech": "Thank you very much. And now let's go back to analyst Q&A, please.",
"session": "Answer",
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{
"name": "Operator",
"speech": "[Operator Instructions] \r\nOur first question comes from Colin Rusch with Oppenheimer.",
"session": "Question and Answer Operator Message",
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{
"name": "Colin Rusch",
"speech": "Can you speak to the attach rates for FSD so far and what you're targeting in terms of the subscription levels?",
"session": "Question",
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{
"name": "Elon Musk",
"speech": "Yes. It's not worth commenting on right now. It's not meaningful. We really need Full Self-Driving, at least the beta, to be widely available to anyone who wants it can get it. Otherwise, it'd be pointless to read anything into where things are right now.",
"session": "Answer",
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{
"name": "Colin Rusch",
"speech": "Okay. And then just the follow-up there is about the cadence of the regulatory environment keeping up with the technology. Are you seeing meaningful evolution in terms of the regulators really understanding the technology and beginning to set some standards here sometime in the near term?",
"session": "Question",
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{
"name": "Elon Musk",
"speech": "At least in the U.S., we don't see regulation as a fundamental limiter. We've got -- we're obviously going to make the work and then demonstrate that the reliability is significantly in excess of the average human driver for it to be allowed -- for people to be able to use it without paying attention to the road. \r\nI think we have a massive fleet. So it will be, I think, straightforward to make the argument on statistical grounds just based on the number of interventions or especially in events that would result in a crash. At scale, we think we'll have [ millions ] of miles of travel to be able to show that it is the safety of the car with autopilot on is 100% or 200% or more safer than the average human driver. At that point, I think it would be unconscionable to -- not to allow autopilot because the car just comes way less safe. \r\nIt will be sort of like if you take the elevator analogy. Back in the day, you used to have elevator operators with like a big sort of switch that operates the elevator and moves between floors. But that gets tired or maybe drunk for something or distracted, and every time and again, somebody would be kind of in half between floors. That's kind of the situation we have with cars. Autonomy will become so safe that it will be unsafe to manually operate the car, relatively speaking. \r\nAnd it's -- obviously, we're just getting an elevator request of the button for which floor we want and it just takes us there safely. And it would be quite alarming if elevators were operated by a person with a giant switch. That's how we'll be with cars.",
"session": "Answer",
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{
"name": "Operator",
"speech": "Next question comes from Rod Lache with Wolfe Research.",
"session": "Question and Answer Operator Message",
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{
"name": "Rod Lache",
"speech": "Your cost of goods sold per vehicle is already down to the mid-$37,000 range in the quarter. It's down $5,000 year-over-year despite some of the inefficiencies that you talked about. And I know that a lot is going to change from here, just given how mix is going to evolve. But if you're successful on the structural pack and front and rear castings and the launch of the 4680 cell, can you just maybe give us a sense of what a successful outcome would look like maybe a year from now? Obviously, a lot has to go right, but just any kind of broad framework for us to think about.",
"session": "Question",
"person_id": 370532,
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{
"name": "Elon Musk",
"speech": "Yes, it's really difficult for us to make specific predictions, it's very difficult. I think we feel confident of, let's say, at least a 50% growth year-over-year next year and maybe it's 100%, but that's -- you need a lot of crystal balls to figure out exactly what it's going to be. And we're just -- it is literally impossible to make a specific prediction. But at least 50%, maybe 100%, something like that.",
"session": "Answer",
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{
"name": "Rod Lache",
"speech": "Okay. And maybe just separately from this, can you just clarify what the status is of some of the advances in battery manufacturing, things like dry cathode mixing that you talked about on Battery Day? What's the time line? How are those evolving?",
"session": "Question",
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"name": "Drew Baglino",
"speech": "Yes. We commented on it today already actually. But in the facility at over 90% of the like processes have demonstrated rate there, but we are limited by the unlucky few that have not and that's what we're working on. One of them that Elon mentioned was running the full-scale cathode calendar. We're working through some improvements that we need to make to that equipment and to the actual raw material itself to not have those limitations. But again, it's an engineering problem, it's not a question of if, it's a question of when. \r\nOn the mixing side, we haven't actually really had any challenges specific to your question. Fundamentally, we're still happy with the dry process direction. In terms of the factory footprint, complexity, utility consumption, space and overall complexity simplification. Yes. I mean -- and the costs associated with everything that I just said.",
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"name": "Elon Musk",
"speech": "Yes. And on emphasize dry cathode, I mean, it is -- I don't know, maybe it's like 10% or 15% of the cost improvement or something like that. I don't know, 20% maybe?",
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"name": "Drew Baglino",
"speech": "Yes, 10%. [indiscernible] 10.",
"session": "Answer",
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"name": "Elon Musk",
"speech": "Yes. So it's like just like people don't think like this is like the [indiscernible] or something. Wet versus dry reduces -- to dry is like 10% less cost than wet. So it's not -- still nothing to sneeze at, especially if you're making hundreds of gigawatt hours a year, but it's not [indiscernible]",
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"name": "Operator",
"speech": "Next question comes from Pierre Ferragu with New Street Research.",
"session": "Question and Answer Operator Message",
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{
"name": "Pierre Ferragu",
"speech": "I have another question actually on batteries but on a slightly different angle. I was wondering how you're looking at your sourcing strategy for the 4680. You've talked a lot about all the work you're doing to develop your in-house production. But what about asking other battery manufacturers to do 4680 cells with their own technology, maybe less innovation than what you guys are lining up internally? \r\nAnd I was wondering if the first 4680 cells that we'll see on the road will definitely come from Tesla's own manufacturing lines or whether they could be coming actually from outside suppliers as well. And I have a quick follow-up.",
"session": "Question",
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"name": "Elon Musk",
"speech": "Yes. We are, in fact, working with our existing suppliers to produce 4680 format cells. And this is just a guess right now, but I see us sort of like consolidating around 4680 nickel-based structural pack and for long-range vehicles. And then not necessarily a 4680 format but some other format for iron-based sales. And so we -- right now, we kind of have the Baskin-Robbins of batteries situation with us. We have so many formats and so many chemistries that it's like we've got like 36 flavors of battery of this \r\nThis is just -- this results in an engineering drag coefficient where each variant of cell chemistry and format requires a certain amount of engineering to maintain it and troubleshoot and this inhibits our forward progress. So it is going to be important to consolidate to just maybe ideally 2 form factors, maybe 3, but ideally 2. And then just 1 nickel chemistry and 1 iron chemistry and -- So we don't have to troubleshoot so many different variants.",
"session": "Answer",
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"name": "Drew Baglino",
"speech": "Yes. And towards that end, we are engaging with the suppliers that we've had good partnerships with on 4680 designs to enable that simplification. And so far, so good. They're working on -- they're bringing their core competencies to bear on that. We're not mandating like what's going on inside but it's been a good leverage.",
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"name": "Elon Musk",
"speech": "Yes. And we do expect to see significant increases in supply from our existing suppliers in addition to the cells that Tesla's making. So it's both. Sometimes, I get questions from our cells suppliers like, are we just going to make all the cells ourselves and we're like no. Please make as many as you possibly can and them to us. We have a significant unmet demand in stationary storage. \r\nMegapack is basically sold out until the end of next year, I believe. We have a massive backlog in Powerwall demand. The [indiscernible] versus production is same mismatch. Now part of that problem is also the semiconductor issue. So we use a lot of the same chips in the Powerwall as you do the car. So it's like which one do you want to make? Cars or Powerwalls. So we need to make cars so that Powerwall production has been reduced. \r\nBut as that semiconductor shortage is alleviated, then we can massively ramp up Powerwall production. I think we have a chance of hitting an annualized rate of 1 million units of Powerwall next year, maybe towards on the order of 20,000 a week, but again, dependent on cell supply and semiconductors. But in terms of demand, I think there's probably demand for in excess of 1 million Powerwalls per year and actually just a vast amount of for utilities as a little transition to a sustainable energy production, solar and wind are intermittent and, by their nature, really need battery packs in order to provide a steady flow of electricity. \r\nAnd when you look at all of the utilities in the world, this is a vast amount of back batteries that are needed. That's why long term, we really think sort of combine Tesla and suppliers need to produce at least 1,000 gigawatt hours a year and maybe 2,000 gigawatt hours a year.",
"session": "Answer",
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"name": "Pierre Ferragu",
"speech": "Okay, great. And I have a quick question. I know, Elon, you don't think it's meaningful today, but I'd be curious to know if you have any stats about when you announced the new pricing on the FSD moving from [ $10,000 ] from to [ 1 99 ] with the lock-in. I'd be curious to understand how it affected behavior and if you saw like a massive uptake in the service. And I'm not thinking about people looking at it as an FSD but more to try the most advanced version of autopilot and to try it. So in the first days, you've announced the pricing. Have you seen like a very significant in the take rate? And can you give us a sense of how big it was?",
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"name": "Elon Musk",
"speech": "Okay. You're asking like is the take rate too expensive and that's why we're doing subscription? Or I'm not sure if I understand your question correctly.",
"session": "Answer",
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"name": "Pierre Ferragu",
"speech": "No, my question is from the time you announced like the subscription at the $199 per [indiscernible] how much did like the take rate increase, like the percentage of people who basically took the subscription as they bought a new car versus how it was when they had to pay [ $10,000 ]",
"session": "Question",
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"name": "Zachary Kirkhorn",
"speech": "Yes. This is Zach here. I mean, I think we're still early in understanding how FSD subscription will unfold, but a couple of data points here. So we took a look at our backlog to see customers in our backlog who have ordered FSD, did they cancel presumably to go to subscription after they take delivery? And the level of cancellations there not seeing cannibalization there. It's possible that, that changes but that was also part of our pricing strategy at $99 and $199.",
"session": "Answer",
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"name": "Elon Musk",
"speech": "Yes. I mean, I think any given price is going to be wrong. So we'll just adjust it over time as we see the value proposition makes sense to people. So we're just really -- I'm not thinking about this a lot right now. We need to make Full Self-Driving to work in order for it to be a compelling value proposition. Otherwise, people are kind of on the future. \r\nI mean, like right now, is it -- does it make sense for somebody to do FSD subscription? I think it's debatable. But once we have also driving widely deployed, then the value proposition will be clear. And at that point, I think basically everyone will use it or [indiscernible]",
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"name": "Martin Viecha",
"speech": "Okay. Thank you very much for your help. And I think that's all the time we have for today. Thanks for all your questions, and we'll speak to you again in 3 months' time. Have a good day, everyone.",
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"name": "Elon Musk",
"speech": "All right. Thank you.",
"session": "Answer",
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{
"name": "Operator",
"speech": "This concludes today's conference call. Thank you for participating. You may now disconnect.",
"session": "Question and Answer Operator Message",
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"title": "Tesla, Inc., Q2 2021 Earnings Call, Jul 26, 2021",
"quarter": 2,
"year": 2021
}
},
{
"transcript_title": "Tesla, Inc. - Q1 2021",
"transcript_name": "Tesla, Inc., Q1 2021 Earnings Call, Apr 26, 2021",
"ticker": "NASDAQ:TSLA",
"transcript_url": "https://wkarticles.blob.core.windows.net/finnhub/snp_transcript_2258465",
"date": "2021-04-26",
"year": 2021,
"quarter": 1,
"transcript_data": {
"date": "2021-04-26",
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"transcript": [
{
"name": "Operator",
"speech": "Good day, ladies and gentlemen, and thank you for standing by, and welcome to the Tesla First Quarter 2021 Results and Q&A Webcast. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions] \r\nI will now hand the conference over to your speaker today, Martin Viecha, Senior Director of Investor Relations.",
"session": "Presentation Operator Message",
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"name": "Martin Viecha",
"speech": "Thank you, Carmen, and good afternoon, everyone, and welcome to Tesla's First Quarter 2021 Q&A webcast. I'm joined today by Elon Musk, Zachary Kirkhorn and a number of other executives. Our Q1 results were announced at about 1:00 p.m. Pacific Time in the update deck we published at the same link as this webcast. \r\nDuring this call, we will discuss our business outlook and make forward-looking statements. These comments are based on our predictions and expectations as of today. Actual events or results could differ materially due to a number of risks and uncertainties including those mentioned in our most recent filings with the SEC. \r\n[Operator Instructions] But before we jump into Q&A, Elon has some opening remarks. Elon?",
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"name": "Elon Musk",
"speech": "Great. Thank you. So Q1 2021 was a record quarter on many levels. Tesla achieved record production deliveries and surpassed $1 billion in non-GAAP net income for the first time. And we've seen a real shift in customer perception of electric vehicles, and our demand is the best we've ever seen. So this is -- we're used to seeing a reduction in demand in the first quarter, and we saw an increase in demand that exceeded the normal seasonal in demand in Q1. So Model 3 became the best-selling midsized premier sedan in the world, in fact, I should say the best-selling luxury sedan of any kind in the world. The BMW 3 series was for the longest time the best-selling premium sedan, has been exceeded by the Tesla Model 3. And this is only 3.5 years into production and was just 2 factories. For Model 3 outselling its combustion competitors, I think is quite remarkable. \r\nIn the past couple of quarters, we delivered roughly 0.25 million Model 3s, so -- which translates to annualized rates of $0.5 million per year. When it comes to Model Y, we think Model Y will be the best-selling car or vehicle of any kind in the world and probably next year. So I'm not 100% certain next year, but I think quite likely. I'd say more likely than not, that in 2022 Model Y is the best-selling car or truck of any kind in the world. \r\nThen with regard to full self-driving, full self-driving continues to make great progress. But there's definitely one of the -- I think one of the hardest technical problems that exists, that's maybe ever existed. And really, in order to solve it, we basically need to solve a pretty significant part of artificial intelligence, specifically real-world artificial intelligence. And that sort of AI, the needs be compressed into a fairly small computer -- a very efficient computer that was designed, but nonetheless, a small computer that's using on the order of 70 or 80 watts. So this is a much harder problem than if you were you say 10,000 computers in a server room or something like that. \r\nThis is going to fit into a smallest brain. And -- I think with the elimination of we're finally getting rid of one of the last was really -- it was making up for some of the shortfalls of vision, but this is not good. You actually just need vision to work. And when vision works, it works -- it works better than the best human. It's like having 8 cameras. It's like having eyes in the back of your head, besides you had a 3 eyes of different focal businesses looking forward. This is -- and processing it at a speed that is superhuman. I know there's no question in that with vision solution, we can make a car that is dramatically safer than the average So -- but it is a hard problem because we are actually solving something quite fundamental about artificial intelligence, where we basically have to solve real-world vision AI, and we are. So -- and key to some of this is also having a massive data set. So just having well over 1 million cars on the road that are collecting data from very sort of corner case rare situations -- yes, sort of like so many things in the world like a truck -- carrying a truck or a car with -- one example is like a car as an example, a car with the kayak on the roof where the kayak has a little weight dangling from the front of the kayak in front of the car and the car ingore this and just look at the road. \r\nSo it's really quite tricky, but I am highly confident that we will get this done. So -- yes. This quarter, and I think we'll continue to see that a little bit in Q2 and Q3. So Q1 was -- had some of the most difficult supply chain challenges that we've ever experienced in Tesla and same difficulties with supply chain parts -- over the whole range of parts. Obviously, people have heard about the chip shortage. This is a huge problem. But then in addition to that example, we had quite a difficulty scaling, production in China because we're unable to get critical engineers there because of COVID quarantine restrictions. So -- which meant that worldwide was dependent on drive units made at our factory in So that was a very challenging situation. \r\nI think we're mostly out of that particular problem. That's just -- this was just 2 of many challenges. So team has really done an incredible job of dealing with really severe supply chain shortages. So with respect to the Model S and X, there were more challenges than expected in developing the Model S or what we call the program, which is the new version of Model S and X, which has revised interior and new battery pack and new drive units and new internal electronics, and has, for example, a station 5 level system. There's just a lot of issues encountered, ensuring that the new factory was, as also were saying was quite energy in a smaller pace. So it took quite a bit of of development to ensure that the battery of the new is safe. And we're trying to get in the cars slowly for the past few months, but we're just stacking them up in the yard and just making refinements to the cars that we built. \r\nBut we do expect to ramp Model S production and start delivering in probably next month. And then to be in sort of fairly high volume production for in Q3 and delivering Model X in Q3 as well. So I think as we ramp up, I think probably the demand for the new will be quite high. So it's really just going to be a question of ramping supply chain and internal production processes. So probably, like we're going to aim to produce over 2,000 per week, perhaps if we get lucky, upwards of 2,400 or 2,500. This again is contingent on global supply chain issues, which just a lot of factors outside of our control here. But I do think these will it's just a matter of time, and then we'll be doing well over 2,000 per week at a car that actually costs us less to produce, a little bit less to produce. But it is a product. \r\nSo the conclusion is there's a lot to be excited about in 2021 and '22. We're going as quickly as we can. Both Texas and Berlin are progressing well, and we expect to have initial limited production from those factories this year and volume production from Texas and Berlin next year. At this time, we are continuing to ramp production of in Fremont and Shanghai. In the background, we're continuing work -- development work on the Semi, Cybertruck, Roadster and other products. Thanks to everyone at Tesla, who made this year, a huge success. Now on to questions.",
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"name": "Martin Viecha",
"speech": "Thank you very much. We have some remarks from Zachary Kirkhorn as well.",
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"name": "Zachary Kirkhorn",
"speech": "So congratulations to the Tesla team on breaking multiple records in the first quarter of '21, as Elon had mentioned, which is typically the most difficult of the year for many reasons. To summarize the quarter, I think it's best understood by 3 key items: First, we successfully launched and began the ramp of Model Y in Shanghai, achieving positive gross margin in the first quarter of and receiving a great reception from the market. Second, as Elon mentioned, although we began the production process for the Model S during the quarter, we have not yet begun customer deliveries. The reduction in Model S and X deliveries from Q4 to Q1 were a meaningful headwind to free cash flows and profit generation. \r\nFor example, we incurred an estimated $200 million of direct P&L impact relating to this program in Q1 and the majority of which is reflected in COGS and that's before even considering the impact of lost revenue and profits as a result of the transition. And as mentioned -- as Elon mentioned, we expect the first deliveries to begin shortly. Third, as we continue to work through the instability of the global supply chain, particularly around semiconductors and port capacities, the Tesla team in partnership with our suppliers did tremendous work keeping our factories running. We did experience high expedite costs in the quarter, and they were also higher than they were in Q4 with some minor interruptions to production over the course of the quarter. We believe that this landscape is improving, but it does remain difficult and it's an evolving situation. \r\nIf we double-click within net income, gross margin, excluding credits, improved sequentially and year-over-year. This is in spite of the cost mentions for and expedites and a reduction in global ASPs and as our cost structure as a company is reducing at an even faster pace. So as we look out over the course of the year, we feel optimistic about our gross margin strength, particularly as some of these headwinds we're experiencing start to be resolved. \r\nOn services and other margins, these have recovered and are trending towards profitability, aided by strength in the used car business, operational improvements in service and additional service revenue opportunities to help absorb fixed overheads. On energy gross margins, these remained negative for our second quarter. This is driven by solar-related ramp costs and winter seasonality in the PPA business. We continue to manage through a multi-quarter backlog on Powerwall. We're working as fast as we can to increase production. And this will aid in profitability of this business as those volumes increase. \r\nOn operating expenses, these increased for Q1, which is driven by our investments in technology and growth, in particular, for R&D, this includes the structural battery pack and cells, investments in the new and our and silicon investments. On the SG&A side, we're setting up infrastructure and support for both China and EMEA in anticipation of volume to come there. And as I said before, our plans show that we remain on track for sustained industry-leading operating margins. \r\nDouble-clicking on cash flows. We continue to generate positive free cash flows and this was despite the significant working capital headwinds from S and X. Additionally, we are making progress reducing various forms of debt. We also invested $1.5 billion in Bitcoin during the quarter, then trimmed our position by 10%, and which contributed to a small gain in our Q1 financials. \r\nTaking a step back, we've generated $8 billion in operating cash flows and $4 billion in free cash flows over the past 4 quarters. As we look forward, our plans remain unchanged for long-term growth of 50% annually, and believe we're on track to exceed that this year as we guided to last quarter. Global demand remains meaningfully higher than production levels. And so we're driving as fast as we can to increase our production rates. As we think about Q2 and Q3, these quarters should largely be driven by execution on S and X, as we've discussed, continued ramp of Model Y in Shanghai and the associated cost reductions of these programs. And we expect profitability and cash generation to evolve over the course of the year in line with those improvements. \r\nAnd then as we get towards the end of the year, our story will pivot towards the launch and ramp of our newest factories in Austin and Berlin. So there's certainly no shortage of exciting things for us to work on and look forward to. Thank you, and we'll open it up for questions.",
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"name": "Martin Viecha",
"speech": "Thank you very much. And we'll first take questions from website. The first question is, how is coming along? Could unlock an AWS like business line for Tesla over the next few years?",
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"name": "Zachary Kirkhorn",
"speech": "Yes. I'll jump in here. So with respect to...",
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"name": "Elon Musk",
"speech": "Sorry, my mic was on mute.",
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"speech": "Go ahead, Elon.",
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"name": "Elon Musk",
"speech": "So yes, I was just basically saying that the -- although like right now, people think of Tesla has car company or energy company. I think long term, people will think of Tesla as much as an AI robotics company as we are a car company or an energy company. I think we are developing one of the strongest hardware and software AI teams in the world. Certainly, we appear to be able to use things with full self-driving that others cannot. So if you look at the evolution of what technologies we developed, we developed them in order to solve the problem of self-driving. So we can find a computer. So we designed and our own. The software out there was really quite primitive for this task. And so we built the team from scratch and have been developing what we think is probably the most advanced real-world AI in the world. And then if it makes sense, this is kind of what needs to happen because the road system is designed for a neural net computer, our brain. Our brain is neural net computer. And it's -- the entire road system is designed for vision with neural net computer, which is because it's designed for eyes in the brain. And so if you have a system which has very good eyes, you can see all directions at once, be 3 focal points ahead or forward, but it never gets tired. It's never sort of texting. It has redundancy and its reaction time is super human. Then it seems pretty obvious that, that such a system would achieve an extremely high level of safety, of the average person. That's what we're doing. is kind of the training part of that. So because we're -- we have over 1 million cars, and perhaps next year, we'll have 2 million cars in active use, providing vast amounts of video training data that then needs to be digested by a very powerful training system. And currently, we use Tesla training software. So we developed a lot of training software, a lot of labeling software to do, to do, surround video labeling, which is quite tricky. This means all 8 cameras simultaneously of 36 frames a second per count labeling video over time. There wasn't a tool that existed for this. So we developed our own labeling tool. Then taking it a step further, obviously, the holy grail is auto labeling. So now we're getting quite good at auto labeling, where we do -- we're -- but the trainers train the training system and then the system auto labels the data and the human labels just need to look at the labeling to confirm that it is correct and perhaps make edits. And then every time an edit is made, that's where it trains the system. So it's kind of like a rule. It's just sort of spinning up. And really, the only way to do this is with fast amounts of video data. So then we need to train this efficiently. So is really a -- it is a supercomputer optimized for neural net training. We think will be probably in order of magnitude more efficient on, say, not sure what the exact right metric is, but say, per frame of video, we think it will be an order of magnitude more cost efficiency in hardware and in energy usage for a frame of video compared to a GPU-based solution or compared to the next best solution that we're aware of. \r\nSo then possibly that could be used by others. It does seem as though over time -- I mean just an observation, I think basically just the fact that neural net based computing or AI-based computing is and more and more of the compute stack. We -- conventional perhaps heuristics based computing is going to be important -- still going to be very important. But it will become -- but neural net will become a bigger and bigger portion of compute. So a long story. But I think, yes, probably others will want to use it too, and we will make it available.",
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"name": "Martin Viecha",
"speech": "Let's go to the second question from retail investors. The recent price changes on Solar Roof have been discouraging for customers and investors. Could just like share more about Solar Roof challenges? And if the outlook has changed at all, i.e., 1,000 roofs per week.",
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"name": "Elon Musk",
"speech": "Yes. First of all, I should say that the demand for the Solar Roof remains strong. So despite raising the price, the demand is still significantly in excess of our ability to meet the demand to install the Solar Roof. So production has gone fine. But we are at the inflation point. We did find that we basically made some significant mistakes in assessing the difficulty of certain roofs, but the complexity of roofs varies dramatically. Some roofs are to be literally 2 or 3x easier than other roofs. So you just can't have a one size fits all situation. If a roof has large or if the roof sort of -- the core structure of the roof is or is it not strong enough to hold the Solar Roof, then the cost can be double, sometimes 3x what we -- what our initial quotes were. So in those cases, what we obviously hope to do is to refund customers their deposit, and -- but what we cannot do is go and just lose an absolute amount of money. We just got to provide a refund of the early deposit. But that's what is I think most important about the Solar Roof situation, which I about this past week is that we're shifting the whole sort of solar situation -- the solar power basically situation to there's only 1 product basically -- or there's only 1 configuration. Every house -- we will not sell a house, solar without a Powerwall. The solar could either be solar retrofit with conventional panels put on the roof or it can be the Tesla Solarglass Roof. But in all cases, it will have the power to it's actually The plus refers to a higher peak power capability. So basically, all Powerwall made since roughly November of last year have a lot more peak power capability than than the specification on the website. They have about twice the power capability roughly. It on how you count power, but about twice the peak power and arguably twice the steady-state power of the specification of the website. The energy the power is roughly double. And all the installations -- so all installations will have a Powerwall. And the difficulty installation will dramatically -- or the difficulty of the installation will be much less. It will be much easier because the power from the Solar Roof -- Solarglass Roof or the solar panels will only ever go directly into the Powerwall. And the Powerwall will only ever go between the utility means -- between the utility and the main power panel of the house, which means you never need to touch the main breakers of the house. You never need to touch the house breakers. Effectively, almost every house, therefore, looks the same electrically instead of being a unique work of art and requiring exceptional ability to rewire the main panel. \r\nSo this is extremely important for scalability is the only way to do it, really. And this also means that every solar power installation that the house or whatever the case may be, will be its own utility. And so even if all lights go in the neighborhood, you will still have power. So that gives people energy security. And we can also in working with the utilities use the Powerwall to stabilize the overall grid. So let's say that there's a -- like there was in Texas, there was a peak power demand, and the power demand, because the grid lack the ability to buffer the power, they have to shut down power. There's no power storage. No good point on power storage. However, with a whole bunch of Powerwall and houses, we can actually buffer the power. And so if the grid needs more power, we can actually then, with the consent, obviously, of the homeowner and the partnership with the utility, we can then actually release power onto the grid to take care of peak power demand. \r\nSo effectively, the Powerwalls can operate as a giant distributed utility. This is profound. I'm not sure how much you actually understand this as this is extremely profound and necessary. Because we are headed towards a world where as we just talked about earlier, where people are moving towards electric vehicles. This will mean that the power needs in -- at homes and businesses will increase significantly. We will -- there will need to be a bunch more electricity coming somewhere. In fact, if you go to full renewable electricity, we need about 3x as much electricity as we currently have. So these are rough numbers, but roughly you need twice -- roughly need twice much electricity if transport goes electric, and they need 3x much electricity if all heating goes electric. So basically, this is a prosperous future, I think both for Tesla and for the utilities. \r\nBecause -- and in fact, I think this will be very -- if this is not done, the utilities will fail to serve their customers. They won't be able to do it. They won't be able to that stuff. And we're going to see more and more of what we see, say, in California and Texas of people seeing and blackouts and utility not being able to respond because there's a massive change going on with the transition to electric transport, and we're seeing more extreme weather events. This is the reported So it is very important to have solar and batteries at the level of the house. In addition, it is important to have large battery storage at the utility level. So that -- solar and wind, which are the main forms of renewable electricity can be -- that electricity can be stored because sometimes the wind doesn't is worthwhile. So that's worth too much but didn't go up. But if you have a battery, you can source the energy and provide the energy to the grid as needed. The same goes for solar because obviously, the sun does not shine at night. And sometimes, it is very cloudy. And so by having battery storage paired with solar and wind, this is the long-term solution to a sustainable energy future. And as I said, especially to both at the local level and at the utility level. If it doesn't occur at the local level, what will actually be required is a massive increase in power lines in power plants. So I have to put long distance and local power lines all over the place, they'll have to increase the size of the substations is a nightmare. This must occur. \r\nThere must be solar battery is the only way.",
"session": "Answer",
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{
"name": "Martin Viecha",
"speech": "Thank you very much. And the next retail question is master of can you tell us anything about Tesla's future plans digital currency space or when any such major developments might be revealed?",
"session": "Answer",
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{
"name": "Zachary Kirkhorn",
"speech": "Sure. Thanks, Martin. So as I noted in our opening remarks, and we've announced is Tesla did invest $1.5 billion into Bitcoin in Q1, and then we subsequently sold a 10% stake in that. We also allow customers to make vehicle deposits and final vehicle purchases using Bitcoin. And so where our Bitcoin story -- maybe just to share a little bit of context here. Jon and I were looking for a place to store cash that wasn't being immediately used, trying to get some level of return on this, but also preserve liquidity. Particularly as we look forward to the launch of Austin and Berlin and uncertainty that's happening with semiconductors and port capacity, being able to access our cash very quickly is super important to us right now. And there aren't many traditional opportunities to do this or at least that we found and in talking to others that we could get good feedback on, particularly with yields being so low and without taking on additional risk or sacrificing liquidity. And Bitcoin seemed at the time and so far has proven to be a good decision. A good place to play some of our cash that's not immediately being used for daily operations or maybe not needed until the end of the year and be able to get some return on that. And I think one of the key points that I want to make about our experiences in the digital currency space is that there's a lot of reasons to optimistic here. We're certainly watching it very closely at Tesla, watching how the market develops, listening to what our customers are saying. But thinking about it from a corporate treasury perspective, we've been quite pleased with how much liquidity there is in the Bitcoin market. So our ability to build our first position happen quickly. When we did the sale later in March, we also were able to execute on that very quickly. And so as we think about kind of global liquidity for the business in risk management, being able to get cash in and out of the market is something that I think is exceptionally important for us. So we do believe long term in the value of Bitcoin. So it is our intent to hold what we have long term and continue to accumulate Bitcoin from transactions from our customers as they purchase vehicles. Specifically with respect to things we may do, there are things that we're constantly discussing. We're not planning to make any announcements here, and we're watching this space closely. So when we're ready to make an announcement on this front, if there's one to come, we'll certainly let you all know.",
"session": "Answer",
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{
"name": "Martin Viecha",
"speech": "Thank you. And the fourth question from retail investors is does Tesla have any proactive plans to tackle mainstream imminent, massive and deceptive click-based headline campaigns on safety of autopilot or FSD specialty PR job of some sort.",
"session": "Answer",
"person_id": 370659,
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{
"name": "Unknown Executive",
"speech": "Well, I can -- I'll take this one, guys. From the safety side, I continue to say a few as drive the point -- go ahead, Elon.",
"session": "Answer",
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{
"name": "Elon Musk",
"speech": "I think -- please go ahead. I touched with just going through the facts of the -- what -- I mean, specifically, there were -- there was not a regarding actually there was high-speed in Tesla. But -- and there was really just extremely deceptive media practices where it was claimed to be where this is completely false. And those journalists should be ashamed themselves. Please go ahead,",
"session": "Answer",
"person_id": 175883,
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{
"name": "Unknown Executive",
"speech": "Yes. Thanks, Elon. So I was just saying, we're committed to safety in all our designs, and that's number 1 in what we do here. Regarding the in Houston, specifically, we worked directly with the local authorities, NTSB and Neto, wherever replicable and whenever they reach out to us for help directly on the engineering level and else we can support. In that vein, we did a study with them over the past week to understand what happened in that particular crash. And what we've learned from that effort was that auto steer not -- could not engage on the road condition that -- as it was designed. Our adaptive cruise control only engage when a driver was buckled in about 5 miles per hour. And it only accelerated to 30 miles per hour distance before the car crashed. As well adaptive fusion control disengage the cars fully to complete to a stop when the driver's seatbelt was unbuckled. Through further investigation of the vehicle and accident remains, we inspected the car with NTSB and and the local police and we're able to find that the steering oil was indeed so they must leading to likelihood that someone was in the driver seat at the time of the crash and all seatbelts post crash were found to be unbundled. We're unable to recover the data from the SD card at the time of impact, but the local authorities are working on doing that and we await their report. As I said, we continue to hold safety in a higher regard and look to improve products in the future through this kind of data and other information from the field.",
"session": "Answer",
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{
"name": "Martin Viecha",
"speech": "Okay. Thank you very much. Let's go to the next question on institutional investors. The first question is, proponents of alternative grid storage technologies claimed at lithium-ion. It's unsuited for long term storage at scale due to Could 4680 cells address this limitation? Is the limitation even relevant for charging the energy equation?",
"session": "Answer",
"person_id": 370659,
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},
{
"name": "Unknown Executive",
"speech": "That's definitely not the issue. Good lithium ion cell -- self discharge is less than 0.001% of its energy per day. So the drain is maybe not...",
"session": "Answer",
"person_id": 182536,
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},
{
"name": "Elon Musk",
"speech": "[indiscernible]",
"session": "Answer",
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{
"name": "Unknown Executive",
"speech": "Yes, I think the challenge with seasonal storage is your value proposition drops from hundreds of full cycles per year to less than maybe 10 or maybe even less than 5 cycles per year. So it's just a different type of technology altogether, that would make sense, given that it's more than an order in magnitude, different use case.",
"session": "Answer",
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{
"name": "Elon Musk",
"speech": "Yes. We've got a long way to go before we're dealing with seasonal technology issues. But certainly a way to deal with seasonal technology would be to have wind and solar erring on the side of more latitude. And -- but then across a variety of longitude. So essentially, like let's say, in the U.S., for example, there was -- I'm not sure if you understand that you can actually power the entire United States with just sort of 100 -- roughly a 100 mile -- by 100-mile grid of solar. Some people don't quite understand like, well, how much solar is needed out of the United States. Almost nothing of the [indiscernible] of almost any country in the world. The incident is a gigawatt per square kilometer. This is insane. In fact, you took the clear area, just the area or saying for nuclear power plants, the area that is considered not usable because of a nuclear power plant is there. In most cases, If you just put solar there, it would generate more power than the nuclear power plant because they typically have pretty wide clear areas. So it really -- so if you have, say, 25% efficient solar panels and then those are 80% efficient in how they laid out, you're going to do about 200 megawatts per square kilometer. Therefore 5 kilometer at which might be a typical sort of power plant. It's really not much area at all. And a lot of places can have wind and solar in place. So anyway, it's entirely possible to power all of us with a small percentage of earth's area. And then to transfer that power to high-voltage DC lines, no new technology. No -- you don't need like room temperature superconductors. This another room temperature superconductors. Almost irrelevant, in my opinion, almost irrelevant. Low-cost, long-distance power lines using copper or aluminum very important. So heating is So that's current time of resistance. So as you increase voltage, you can drop the current dramatically and drop the heating dramatically to the point where it is of minor relevance, like maybe you lose 5% to 7% with a high-voltage DC power line, something like that. So I wonder [indiscernible] We just need to scale this thing up. We -- the technologies exist today to solve renewable energy. And some people will say, well, why don't we do it? That's because the energy basis of the earth is gigantic, super mega and gigantic. So you can't just go and do 1 billion terawatts overnight. You've got to build the production capacity for the cells -- for the battery cells or solar cells. You've got to put that into vehicles, you going to put that storage pack, you've got to solar panels and Solarglass Roof and you've got to deploy all this thing -- all this stuff. But it is certainly the case that we can accelerate this. And we should try to accelerate it. And the right thing to do, I think, from an economic standpoint, I think as an economist to agree is to have a common tax, just as we have a tax on and alcohol, which we think are more likely to be bad than good, and we tend to tax vegetables less. It was the same should be true. We should tax energy that we think is fully bad and support energy think is probably good, just like alcohol versus fruits and vegetables. Just And -- but I guess on the plus side, I'm not suggesting anyone to be complacent, but sustainable energy, renewable energy will be sold. It is being sold, but it matters how fast we sold it. And if we sold it faster, that's better for the world. \r\nThere's no question in my mind, what sort of the energy storage can be sold with the batteries. 0. I want to be clear, 0. I think the buyers will tend to be towards iron-based lithium cells. When we say lithium, I don't think lithium must be a big constitute of the cells. It's more like 1% to 2% if the cell is lithium. But the main part of the cell is cathode. The main mass and in the cells is the cathode. Where high-energy cells like for example, what we use in most have nickel-based lithium-ion cells, which have higher energy density, longer range than iron-based cells. However, stationary storage -- the energy that is not as important because just thinking around. And so I think the vast majority of stationary storage will be iron-based lithium-ion cells with an iron phosphate cathode typically. But I think the phosphate part of necessary is or nickel on the terminology. I just think it was iron and nickel. And there's the same amount of iron in the world, more iron than we possible use. And there's also more lithium than we could possibly use. Basically, there is no shortage of anything whatsoever in iron lithium-ion cells.",
"session": "Answer",
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{
"name": "Martin Viecha",
"speech": "Thank you very much. Let's go to the next question from traditional investors, which is you've suggested that between a 5x to 10x improvement is achievable in the automotive production versus the first Model 3 line on the first principles physics analysis. Where does where does Berlin sit relative to that limit?",
"session": "Answer",
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{
"name": "Elon Musk",
"speech": "I think we're still quite away from it. I mean the thing to bear in mind with production is -- but for those who've never they just don't understand how insanely hard production is. I want to review the very, very here. Prototypes are -- their child's play. Production is hard, is very hard. Now you say production at very scale with higher liability and low cost, insanely difficult. But what has achieved on the automotive side was not to create an electric car. The truly profound thing on the car side is that Tesla was the first American car company to achieve volume production of a car in 100 years and not go bankrupt. So this is -- this -- basically, myself and many others at Tesla had to basically have several aneurysms to get this done. It was so hard, no idea. So anyway -- and the thing about making a large complex manufacturing object is, let's say you have approximation, 10,000 unique items. And even one of those items is slow, that saturate, just one. Doesn't matter so trivial. We've had production stopped because of carpet and We had production stopped because of USB cable. At one point, for more or less, the rated every electronics store in the Bay Area for a few days there, nobody could buy USB cable in the area because we went and bought them all to put them in the car, literally. And the like hundreds of stories like that. So anyway, that's that -- those constraints and a logistics problem that makes World War II, a trivial. I'm not hitting like the scale millions of cars, massive global supply chain in 50 countries, dozens of regulatory regimes. It's insane.",
"session": "Answer",
"person_id": 175883,
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{
"name": "Martin Viecha",
"speech": "Yes. Thank you. And last question from institutional investors. Master plan Part 2 talks about an urban transport vehicle that is smaller than traditional bus with greater aerial density achieved by removing the central aisle. Do you have any updates to share on this goal?",
"session": "Answer",
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{
"name": "Elon Musk",
"speech": "Not at this time.",
"session": "Answer",
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{
"name": "Martin Viecha",
"speech": "Okay. Thank you very much. So let's move to analyst Q&A.",
"session": "Answer",
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{
"name": "Operator",
"speech": "First question is from Pierre Ferragu with New Street Research.",
"session": "Question and Answer Operator Message",
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"name": "Pierre Ferragu",
"speech": "I'd love to get actually on what you presented on the Battery Day. In the last 6, 7 months, I want -- I was much progress you've made on that front first, in terms of process development. So how are things coming together on your pilot line? Are you getting to the kind of production throughput you were aiming for? And second, actually, on your production ramp. So I was wondering in which sites you're ramping production capacity for the 4680 cell and where you stand on ramping up that capacity as well? And I have a quick follow on energy as if that's possible.",
"session": "Question",
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{
"name": "Elon Musk",
"speech": "Well, so we have the -- Andrew, you add to this. But we have the small sort of pilot plant, which is still big expected to have like a 10-gigawatt per hour capability in Fremont And cells, we're not quite yet at the point where we think ourselves are reliable enough to be shipped in cars, but we're getting close to that point. And then we've already ordered mostly equipment for battery production in Poland and much of as well. So we really don't flick the nitty-gritty elements. But overall, I think we still sort of we're quite optimistic about this achieving volume production of the 4680 next year?",
"session": "Answer",
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{
"name": "Drew Baglino",
"speech": "Yes. I think just one thing I would add is there's been a lot of questions about yields. Actually, I noticed people asking about that. And the yield progress has been really strong every day. We were really still in commissioning phase. We were really still in commissioning phase with most of the tools to the point where we're confident that the yield trajectory aligns with our internal cost projections. We did talk about yield also a better but there's a lot of reasons why it's useful to check in on that. It takes a while, as Elon just mentioned, to go from prototype to production, and it's not just parts. It's processes, it's equipment. But as we've matured the process equipment, we've gotten to where we need to be on the yield side.",
"session": "Answer",
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{
"name": "Elon Musk",
"speech": "Yes. Basically, this is just a guess because we don't know for sure, but it appears as though we are about 12 -- they're probably not more than 18 months away from volume production 4680. Now at the same time, we are actually trying to have cell supply of partners ramp up their supply as much as possible. So this is not is something that is to the exclusion of suppliers. It is in conjunction with suppliers. So we're want to be super clear about that. It's not about replacing suppliers. It is about supplementing the suppliers. So we have a very strong partnership with with Panasonic and LG. And we would -- our strategic partners for self-supply is please make us -- please supply us with as much as you possibly can, provided the price is affordable, we will buy everything that they can make.",
"session": "Answer",
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{
"name": "Drew Baglino",
"speech": "Yes. Yes. And specific to that, we're on track to more than double the supplier capacity",
"session": "Answer",
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{
"name": "Elon Musk",
"speech": "Yes. We do expect from suppliers going to pursue you doubled the sale output next year versus this year?",
"session": "Answer",
"person_id": 175883,
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{
"name": "Pierre Ferragu",
"speech": "Yes. Okay. And I had a quick follow-up on maybe Zack, for you on your business. So I understand like the negative gross margin with Solar Roof ran. But I was wondering what do gross margin look like there when you look at the storage business and where you -- what's your ambition in terms of gross margin in that business, I guess, it's going to grow in the mix in coming years. So it's important for long-term modeling.",
"session": "Question",
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{
"name": "Zachary Kirkhorn",
"speech": "Yes. We're seeing a lot of -- we're aiming for comparable margins in storage as in vehicle. But it is important to bear in mind that vehicle is more mature than the storage. So -- We already are at margins with Powerwall. But some additional work is needed for a mega pack to achieve good margins. Yes Drew, what do you think?",
"session": "Answer",
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{
"name": "Drew Baglino",
"speech": "Yes. Sorry, just jumping in Absolutely agree. Powerwall is mature. We've been producing Powerwall for 3 years now and we're good margins there, but has more room to go to achieve our targets.",
"session": "Answer",
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{
"name": "Elon Musk",
"speech": "We have a clear runway for improving the customer a megawatt hour at the Megapack.",
"session": "Answer",
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{
"name": "Drew Baglino",
"speech": "Absolutely. Yes, we do.",
"session": "Answer",
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{
"name": "Operator",
"speech": "From Rod Lache with Wolfe Research.",
"session": "Question and Answer Operator Message",
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"name": "Rod Lache",
"speech": "I was hoping maybe just first, you could talk a little bit about how you're thinking about the rollout of version 9 and the transition to the subscription model. It sounds like some of this is about to roll out next month. I'm not sure if that's a subscription model, but maybe you could just spend a little time talking about how impactful you expect that to be.",
"session": "Question",
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{
"name": "Zachary Kirkhorn",
"speech": "We're working on getting FSD subscription out, there's a couple of internal technical dependencies, but from a business model perspective, that's aligned, and we're hoping to roll that out soon. The key thing that I say here, there's a lot of potential for recurring revenue based on FSD subscription. 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 is a great option for them. One of the things we'll need to keep an eye on is a potential transition from cash purchases of FSD subscription over to -- or cash purchases of FSD who may move over to FSD subscription. And so there could be a period of time in which cash reduces in the near term and then as the portfolio of subscription customers build up, then that becomes a pretty strong business for us over time. But we're hoping to get this launched pretty soon and see what the response is to it.",
"session": "Answer",
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"name": "Rod Lache",
"speech": "Okay. Great. And I was hoping, Zach, maybe you can just talk a little bit about OpEx. There was a noticeable increase, even excluding SBC. Obviously, a lot going on this quarter, but can you maybe just talk a little bit about how we should be thinking about that going forward?",
"session": "Question",
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"name": "Zachary Kirkhorn",
"speech": "Sure. On the R&D side, what we're seeing, as I mentioned in my opening remarks, is kind of a convergence of a series of programs that are happening. And our R&D OpEx spend kind of correlates to where we are in the product life cycle on different programs. And so we're kind of at the tail end of investments in what we call internally palladium, which is the new Model S and Model X. And so we expect that to decrease over time, but it was high in Q1 for a lot of the reasons that Eolon have mentioned. We're also getting very heavy into 4680 development that Drew and team are working on and the associated structural battery pack that goes along with that. And so these are new technologies, not only new to Tesla, but new to the industry. And so we're investing heavily there on the R&D side to work out those And spend along in those areas should continue as we continue to work through the development cycle of those. And then I also mentioned Elon talked a bit about and the potential there. So from neural net investments and custom silicon investments, these continue to be areas that we spend on and make investments in. On the SG&A side, the business is pivoting very quickly to be global. And China is ramping quite quickly. And we're trying to make sure that we are staying ahead of the volume, so that we have the right sales capacity, store capacity there, local investments and IT and others to manage the growth such that as the growth comes, the execution challenges are smaller than maybe in similar periods of growth that we've seen in the past. And so we're making investments there ahead of the growth. And overall, as we look at OpEx as a percentage of revenue over the course of the year, we do expect to see a substantial drop from 2020 to 2021 as the volumes in the latter part of the year pickup.",
"session": "Answer",
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{
"name": "Operator",
"speech": "Dan Levy from Credit Suisse. .",
"session": "Question and Answer Operator Message",
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{
"name": "Dan Levy",
"speech": "Two questions. One is on COGS. I think we've gotten from Battery Day a pretty good feel about the potential for COGS reduction related to powertrain. But I'd like to get a sense of the path to reducing COGS ex powertrain as you'd still need a meaningful reduction on that front to make the math work on a $25,000 vehicle. So what levers do you have to reducing your cost ex powertrain? Is it just more scale, better supplier pricing or is it just based on ongoing cost reductions.",
"session": "Question",
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{
"name": "Unknown Executive",
"speech": "I mean on the vehicle side, there's plenty of opportunity as well. Obviously, building a car like a lot less is quite complex and has various moving parts, Model 3 and Model Y were steps of improvement in that. When you look at some of the other advancements that we're including in the Model Y factories into Austin and Berlin, we've reduced the body count by as much as 60% in the park cost money. So we continue to find optimization there as well as we get economies of scale. When we start to talk about the volumes we're considering worldwide with 4 factories building the same vehicle. So both of those things on the vehicle side will improve our COGS as well and powertrain continues to be integrated into that.",
"session": "Answer",
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{
"name": "Dan Levy",
"speech": "Great. And then just related, as you see Berlin and Austin ramp. I'd like to just get a sense on the comparison of Fremont versus the new capacity. Obviously, Fremont non-optimized because you bought the facility you had to retrofit that to your need. So maybe you can give us a sense of how your new capacity is going to differ versus Fremont. What are the areas that you have efficiencies that you previously didn't have, maybe how much does that add up to improved COGS over time to help you achieve that $25,000 vehicle.",
"session": "Question",
"person_id": 377011,
"person_company": null,
"component_order": 48
},
{
"name": "Elon Musk",
"speech": "Yes. I think we want to talk too much about future product development. The earnings call is not the right place for to make major product announcement. Yes. we'll get there. We'll",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 49
},
{
"name": "Martin Viecha",
"speech": "All right. Thank you very much. Unfortunately, this is all the time we have for today. Thank you very much for dialing in and for listening, and we'll speak to you again in about 3 months. Thank you.",
"session": "Answer",
"person_id": 370659,
"person_company": null,
"component_order": 50
},
{
"name": "Elon Musk",
"speech": "Thanks, everyone.",
"session": "Answer",
"person_id": 175883,
"person_company": null,
"component_order": 51
},
{
"name": "Operator",
"speech": "This concludes today's conference call. Thank you for participating. You may now disconnect.",
"session": "Question and Answer Operator Message",
"person_id": 1,
"person_company": null,
"component_order": 52
}
],
"title": "Tesla, Inc., Q1 2021 Earnings Call, Apr 26, 2021",
"quarter": 1,
"year": 2021
}
}
],
"count": 12,
"from_year": 2021,
"to_year": 2023
}
Authorizations
JWT token obtained from the /auth/token/ endpoint.
Query Parameters
Permalink or URL of the company.
Start year of the date range.
End year of the date range.
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