1 00:00:00,120 --> 00:00:02,480 Good afternoon, everyone, and welcome to Tesla second quarter 2 00:00:02,480 --> 00:00:05,880 2023 Q&A webcast. My name is Martin Vieca, VP of 3 00:00:05,880 --> 00:00:08,320 Investor Relations, and I'm joined today by Elon Musk, 4 00:00:08,680 --> 00:00:11,040 Zachary Kirkhorn and a number of other executives. 5 00:00:11,840 --> 00:00:14,960 Our Q2 results were announced at about 3:00 PM Central Time in 6 00:00:14,960 --> 00:00:17,680 the update deck we published at the same link as this webcast. 7 00:00:18,480 --> 00:00:20,640 During this call, we will discuss our business outlook and 8 00:00:20,640 --> 00:00:23,840 make forwardlooking statements. These comments are based on our 9 00:00:23,840 --> 00:00:25,840 predictions and expectations as of today. 10 00:00:26,480 --> 00:00:28,840 Actual events or results could differ materially due to a 11 00:00:28,840 --> 00:00:31,880 number of recent uncertainties including those mentioned in our 12 00:00:31,880 --> 00:00:33,760 most recent filings with the SEC. 13 00:00:34,640 --> 00:00:37,160 During the question and answer portion of today's call, please 14 00:00:37,160 --> 00:00:39,760 limit yourself to one question and one follow up. 15 00:00:40,720 --> 00:00:43,080 Please use the raise hand button to join the question queue. 16 00:00:43,800 --> 00:00:46,960 But before we jump into the Q&A, Elon has some opening remarks. 17 00:00:47,160 --> 00:00:49,040 Elon. Thank you, Martin. 18 00:00:49,480 --> 00:00:53,000 So just a Q2 recap. In Q2, we achieved record 19 00:00:53,000 --> 00:00:55,640 vehicle production and deliveries and record revenue of 20 00:00:55,640 --> 00:00:57,840 about $25 billion in a single quarter. 21 00:00:58,600 --> 00:01:01,560 And Model Y became the best selling vehicle of any kind 22 00:01:01,920 --> 00:01:06,480 globally in Q1, surpassing the lights of likes of Corolla and 23 00:01:06,480 --> 00:01:08,840 Golf. So it was the number one vehicle 24 00:01:08,840 --> 00:01:12,960 of any kind, including vehicles that are at a seller far lower 25 00:01:12,960 --> 00:01:15,560 price. This is I think an incredible 26 00:01:15,560 --> 00:01:19,120 achievement by the Tesla team and just a huge thank you to our 27 00:01:19,120 --> 00:01:24,980 customers for their support. So and this came in spite of 28 00:01:24,980 --> 00:01:29,500 high interest rates and a lot of macro uncertainty and 29 00:01:29,500 --> 00:01:32,740 nonetheless we managed to achieve operating margin of 30 00:01:32,740 --> 00:01:38,780 about 10%. We continue to target 1.8 31 00:01:38,780 --> 00:01:43,460 million vehicle deliveries this year, although we expect that Q3 32 00:01:44,220 --> 00:01:47,780 production will be a little bit down because we've got summer 33 00:01:47,780 --> 00:01:52,130 shutdowns to for. A lot of factory upgrades, so 34 00:01:53,410 --> 00:01:58,450 just probably a slight decrease in production Q3 for sort of 35 00:01:58,450 --> 00:02:05,930 global factory upgrades in the long term autonomy, we think 36 00:02:05,930 --> 00:02:09,650 it's gonna just drive volume through the ceiling next level 37 00:02:11,210 --> 00:02:17,490 and our future Robotaxi products, dedicated Robotaxi 38 00:02:17,490 --> 00:02:21,040 products. We think have like quasi 39 00:02:21,040 --> 00:02:31,880 infinite demand so and we're the way we're gonna manufacture the 40 00:02:31,880 --> 00:02:35,320 robot taxi is is also itself a revolution and so it's 41 00:02:35,920 --> 00:02:38,560 revolutionary design made in a revolutionary way. 42 00:02:40,400 --> 00:02:46,800 It'll be by by far the highest units per hour of of any vehicle 43 00:02:46,800 --> 00:02:50,710 production ever so. Very, very excited about that. 44 00:02:52,550 --> 00:02:55,350 With respect to Autopilot and Dojo, in order to build 45 00:02:55,510 --> 00:02:59,150 autonomy, we also need to train our neural net with the data 46 00:02:59,150 --> 00:03:03,390 from millions of vehicles. With the more, I mean this has 47 00:03:03,390 --> 00:03:05,910 been proven over and over again, the more training data you have, 48 00:03:05,910 --> 00:03:10,230 the better the results. And I mean there's times where 49 00:03:10,230 --> 00:03:17,270 we see basically in a neural net, basically it's sort of at a 50 00:03:17,270 --> 00:03:21,470 million training examples. It barely works at 2,000,000. 51 00:03:21,510 --> 00:03:25,550 It's it slightly works at 3,000,000 it's like wow, OK 52 00:03:25,550 --> 00:03:27,670 we're seeing something but then you get like 10 million training 53 00:03:27,670 --> 00:03:29,630 examples. It's it's like it becomes 54 00:03:29,630 --> 00:03:33,790 incredible. So you just there's just there's 55 00:03:33,790 --> 00:03:37,230 just no substitute for massive amount of data and obviously 56 00:03:37,230 --> 00:03:43,430 Tesla has more vehicles on the road that are collecting this 57 00:03:43,430 --> 00:03:47,070 data than all of the companies combined by I think maybe even 58 00:03:47,070 --> 00:03:50,610 an order of magnitude. So I think we might we might 59 00:03:50,610 --> 00:03:54,370 have 90% of all or a very big number. 60 00:03:55,850 --> 00:04:01,970 So you know the success in AI and dev is is a function of 61 00:04:01,970 --> 00:04:11,330 talent sort of unique data and computer resources and and we 62 00:04:13,450 --> 00:04:16,370 have outstanding capabilities in all three arenas. 63 00:04:20,700 --> 00:04:23,460 And I really just don't know how anyone could do what we're doing 64 00:04:23,580 --> 00:04:26,100 even if they had our software and had our computer if they did 65 00:04:26,100 --> 00:04:28,020 not have the the the training data. 66 00:04:28,020 --> 00:04:33,900 So Speaking of which, our training computer is designed to 67 00:04:33,900 --> 00:04:36,140 significantly reduce the cost of neural net training. 68 00:04:37,700 --> 00:04:41,500 It it is designed to it's it's it's so optimized for the kind 69 00:04:41,500 --> 00:04:45,740 of training that we need which is a video training so. 70 00:04:46,560 --> 00:04:51,320 You know would we just see that that the need for neural net 71 00:04:51,320 --> 00:04:57,240 training being a quasi things is is just enormous. 72 00:04:58,440 --> 00:05:03,400 So I think having having we we we we expect to use both NVIDIA 73 00:05:03,400 --> 00:05:09,360 and Dojo to be clear. But there's there's we just see 74 00:05:09,360 --> 00:05:14,440 demand for really fast training resources. 75 00:05:16,730 --> 00:05:20,810 And we, we think we may reach in house your net, your net 76 00:05:20,810 --> 00:05:24,490 training capability of 100 exaflops by the end of next 77 00:05:24,490 --> 00:05:30,570 year. So to today over 300,000,000 78 00:05:30,570 --> 00:05:33,050 miles have been driven using FSD beta. 79 00:05:33,050 --> 00:05:37,170 That 300,000,000 mile number is gonna seem very small very 80 00:05:37,170 --> 00:05:42,130 quickly. It'll soon be billions of miles, 81 00:05:42,130 --> 00:05:47,950 then 10s of billions of miles. And that FSD will will go from 82 00:05:47,950 --> 00:05:51,790 being better, from being as good as a human to them being vastly 83 00:05:51,790 --> 00:05:55,590 better than a human. We see a clear path to full self 84 00:05:55,590 --> 00:06:00,670 driving being 10 times safer than the average human driver. 85 00:06:01,270 --> 00:06:11,510 So and between autopilot Georgia computer, our inference hardware 86 00:06:11,550 --> 00:06:16,030 in the car which we calls. Sort of hardware 3-4, you know, 87 00:06:16,670 --> 00:06:19,350 but it's really dedicated, it's it's, it's a high efficiency in 88 00:06:19,350 --> 00:06:20,470 front of computer that's in the car. 89 00:06:20,990 --> 00:06:24,510 And our optimist robot translates clearly at the 90 00:06:24,510 --> 00:06:32,350 cutting edge of a ad development to with we continue to build 91 00:06:32,590 --> 00:06:35,590 release candidates of the cyber truck on our final production 92 00:06:35,590 --> 00:06:37,870 line in Austin. I'm actually here in Austin at 93 00:06:37,870 --> 00:06:42,750 the Giga factory, this is the first truck that we're aware of 94 00:06:42,750 --> 00:06:46,700 that will have 4 door. Was over 6 foot bed and 1 foot 95 00:06:46,780 --> 00:06:50,940 into a 20 foot garage. So it's it's a it's a biggest on 96 00:06:50,940 --> 00:06:52,500 the outside but it's even bigger on the inside. 97 00:06:52,500 --> 00:06:56,780 So it's a I think that's one of the one of the elements of good 98 00:06:56,780 --> 00:07:00,060 design is it should feel bigger on the inside than it looks on 99 00:07:00,060 --> 00:07:02,900 the outside. And and this is this is no small 100 00:07:02,900 --> 00:07:07,220 car but we we we really cared about the exterior dimensions of 101 00:07:07,220 --> 00:07:09,060 the side truck down to the last millimeter. 102 00:07:10,180 --> 00:07:13,300 So it's just we try to get right in the middle of the Goldilocks 103 00:07:13,300 --> 00:07:19,260 zone, not too big, not too small and and then really maximize the 104 00:07:19,820 --> 00:07:24,420 utility of the volume and we can't wait to start delivering 105 00:07:24,420 --> 00:07:28,500 it later this year. Some some other highlights, our 106 00:07:28,500 --> 00:07:33,180 global supercharging network now stands at over 50,000, roughly 107 00:07:33,180 --> 00:07:37,980 50,000 connectors and over 5000 locations as I think a lot of 108 00:07:37,980 --> 00:07:43,280 people are aware. The Tesla starting the the Tesla 109 00:07:43,680 --> 00:07:47,360 charging standard which we made open source and it's now called 110 00:07:47,360 --> 00:07:48,840 the North American charging standard. 111 00:07:49,640 --> 00:07:53,560 We're we're deeply honored that Ford, GM, Mercedes and many 112 00:07:53,560 --> 00:08:00,640 other O M's have signed up to use our connector and gain 113 00:08:00,640 --> 00:08:06,800 access to our charging network. Yeah we we we strongly believe 114 00:08:06,800 --> 00:08:11,070 in helping. Other car companies to 115 00:08:12,510 --> 00:08:16,310 accelerate the EV revolution and just trying to do the right 116 00:08:16,310 --> 00:08:19,030 thing in general. So that's a goal there. 117 00:08:24,150 --> 00:08:29,950 Then it's only I think I want to emphasize like very, very 118 00:08:29,950 --> 00:08:31,790 strongly. This is a very important point 119 00:08:32,390 --> 00:08:37,429 is that tells that just as with the. 120 00:08:38,309 --> 00:08:39,870 North American charging standard, although we're not 121 00:08:39,870 --> 00:08:42,470 licensed in that case not licensing, we're just making it 122 00:08:42,470 --> 00:08:47,230 available, but but we are very open to licensing our full self 123 00:08:47,230 --> 00:08:51,590 driving software and hardware to other car companies and we are 124 00:08:51,590 --> 00:08:56,350 already in discussions with early discussions with a major 125 00:08:56,350 --> 00:09:03,790 OEM about using the Tesla FSD. So we're not trying to keep this 126 00:09:03,790 --> 00:09:06,390 to ourselves, we're more than happy to to license it to 127 00:09:06,390 --> 00:09:10,330 others. And lastly, our new lithium 128 00:09:10,330 --> 00:09:12,970 refinery and catheter facility are progressing well. 129 00:09:15,530 --> 00:09:18,690 Then in conclusion, we continue to focus on making as many 130 00:09:18,690 --> 00:09:21,810 causes as we can while maintaining healthy financials. 131 00:09:22,530 --> 00:09:25,490 Our artificial intelligence development is obviously 132 00:09:25,490 --> 00:09:30,050 entering a new era and we're incredibly excited about what's 133 00:09:30,050 --> 00:09:32,570 to come. Our other businesses such as 134 00:09:32,570 --> 00:09:36,210 Megapack supercharging service. And what not all started to 135 00:09:36,210 --> 00:09:40,930 become a meaningful contributor to overall profitability this 136 00:09:40,930 --> 00:09:43,410 quarter. And then lastly, I'd just like 137 00:09:43,410 --> 00:09:49,250 to profusely thank all of our employees who are making a lot 138 00:09:49,250 --> 00:09:50,930 of extra effort during uncertain times. 139 00:09:51,370 --> 00:09:53,570 Thank you very much for your hard work and impact you're 140 00:09:53,570 --> 00:09:55,930 making. Thank you very much, Elon. 141 00:09:56,050 --> 00:09:58,250 And I think Zach gets some opening remarks as well. 142 00:09:59,450 --> 00:10:00,330 Yeah. Thanks, Martin. 143 00:10:01,690 --> 00:10:04,090 As Elon mentioned, Q2 was another record quarter of 144 00:10:04,090 --> 00:10:07,250 production and deliveries, as well as records and profit for 145 00:10:07,250 --> 00:10:09,450 energy and services and other businesses. 146 00:10:09,970 --> 00:10:12,450 Congratulations again to the Tesla team on the continued 147 00:10:12,450 --> 00:10:16,290 progress as we navigate through a period of economic 148 00:10:16,370 --> 00:10:19,530 uncertainty, rising interest rates, volatility and consumer 149 00:10:19,530 --> 00:10:21,370 confidence and regulatory change. 150 00:10:21,370 --> 00:10:23,650 I want to comment on our financial approach. 151 00:10:24,390 --> 00:10:27,230 First, the single most important priority is to ensure we are 152 00:10:27,230 --> 00:10:30,190 continuing to invest heavily in the core technologies that will 153 00:10:30,350 --> 00:10:32,470 drive the long term value of the business. 154 00:10:33,270 --> 00:10:36,870 This include increasing spending on a I related technologies such 155 00:10:36,870 --> 00:10:40,670 as full self driving Optimus and Dojo as well as new products 156 00:10:40,670 --> 00:10:43,750 such as Cybertruck, our next generation platform in the semi 157 00:10:44,190 --> 00:10:46,670 as evidenced by the continued growth in our R&D spend. 158 00:10:47,350 --> 00:10:50,390 This also includes continuing our investments in capacity 159 00:10:50,390 --> 00:10:52,560 expansion. Not only in our vehicle 160 00:10:52,560 --> 00:10:55,200 factories, but also our supercharging network, service 161 00:10:55,200 --> 00:10:59,040 internal applications and battery processes as we continue 162 00:10:59,040 --> 00:11:01,000 with meaningful capital expenditures to lay this 163 00:11:01,000 --> 00:11:04,880 foundation for the future. 2nd, we continue to work towards our 164 00:11:04,880 --> 00:11:08,240 goals of maximizing volumes on both our vehicle and energy 165 00:11:08,240 --> 00:11:12,040 business, but most importantly doing so in a way that generates 166 00:11:12,040 --> 00:11:15,840 the capital to continue our pace of R&D and capital investments. 167 00:11:16,520 --> 00:11:19,920 This requires a strong focus on per unit COGS reductions in each 168 00:11:19,920 --> 00:11:22,700 of our key businesses. As well as working capital 169 00:11:22,700 --> 00:11:26,020 improvements on raw materials, working process inventory and 170 00:11:26,020 --> 00:11:29,580 customer AR, all of which progressed appropriately in Q2. 171 00:11:30,740 --> 00:11:33,900 If we look specifically at our automotive business, our gross 172 00:11:33,900 --> 00:11:37,620 margin showed a modest reduction and remain healthy despite 173 00:11:37,620 --> 00:11:40,140 action taken to further improve vehicle affordability. 174 00:11:40,180 --> 00:11:44,020 Early in the quarter, we recognize we realize per unit 175 00:11:44,020 --> 00:11:46,980 cost improvements in nearly every category including 176 00:11:46,980 --> 00:11:50,140 material costs and commodities, manufacturing costs and 177 00:11:50,140 --> 00:11:52,730 logistics. While also continuing to rapidly 178 00:11:52,730 --> 00:11:55,450 increase the build rate in our Austin and Berlin factories. 179 00:11:56,450 --> 00:11:58,850 For our energy business, we improved margins and gross 180 00:11:58,850 --> 00:12:01,890 profit driven by cost reductions in deal economics, particularly 181 00:12:01,890 --> 00:12:05,010 with Megapack. As a reminder, storage volumes 182 00:12:05,010 --> 00:12:07,530 are typically volatile sequentially based on the types 183 00:12:07,530 --> 00:12:11,010 of projects and their specific revenue recognition milestones. 184 00:12:12,050 --> 00:12:14,530 As we look forward to the rest of the year, I want to reiterate 185 00:12:14,530 --> 00:12:18,170 Elon's comments on Q3 volumes driven by plan down times for 186 00:12:18,170 --> 00:12:21,430 factory upgrades. These upgrades will also carry 187 00:12:21,430 --> 00:12:23,110 some amount of factory at all cost. 188 00:12:23,190 --> 00:12:26,150 How however, we are working to minimize as much as possible. 189 00:12:26,830 --> 00:12:28,910 It's also important to keep in mind the uncertainty in the 190 00:12:28,910 --> 00:12:32,470 macro environment which can impact our execution positively 191 00:12:32,470 --> 00:12:35,950 or negatively in the near term. Regardless, we continue to 192 00:12:35,950 --> 00:12:39,270 remain dynamic with a focus on fundamental efficiency and a 193 00:12:39,270 --> 00:12:42,190 long term outlook. Congratulations again to 194 00:12:42,190 --> 00:12:46,040 everybody on a great quarter. Thank you very much, Zach, and 195 00:12:46,040 --> 00:12:48,960 let's go to investor questions. The first, the first question on 196 00:12:48,960 --> 00:12:50,840 licensing FSD, we've already answered. 197 00:12:50,880 --> 00:12:53,800 So let's go to the second one. The second question is what is 198 00:12:53,800 --> 00:12:58,640 the status of 4680 cells? How far are you from the specs 199 00:12:58,640 --> 00:13:01,800 you laid out on Battery Day? When do you expect to achieve 200 00:13:01,800 --> 00:13:03,320 what you laid out on Battery Day? 201 00:13:05,520 --> 00:13:06,520 Yeah. First, I'll just start with a 202 00:13:06,520 --> 00:13:08,160 little bit of a production update. 203 00:13:08,160 --> 00:13:13,240 So in Texas 4680, cell production increased 80% Q2 over 204 00:13:13,240 --> 00:13:15,400 Q1. And the team surpassed 10 205 00:13:15,400 --> 00:13:17,520 million production cells produced here in Texas, so 206 00:13:17,560 --> 00:13:21,000 Congrats to the team for that. Their focus on yield reduced our 207 00:13:21,000 --> 00:13:25,040 scrap bill by 40% quarter over quarter and that resulted in a 208 00:13:25,040 --> 00:13:30,080 25% reduction in cell COGS. Here in Texas, we're preparing 209 00:13:30,080 --> 00:13:32,920 to launch our cyber truck cell, which is 10% higher energy 210 00:13:32,920 --> 00:13:35,880 density than current production. That was accomplished through 211 00:13:35,880 --> 00:13:39,280 process and mechanical design optimization as we scale cyber 212 00:13:39,280 --> 00:13:40,320 cell production through the end of. 213 00:13:41,230 --> 00:13:44,070 The year and early next, we should be in a comfortable place 214 00:13:44,110 --> 00:13:49,510 on cost per cell against our battery energy density targets. 215 00:13:49,670 --> 00:13:52,630 The cyber cell is at our expectations on a like for like 216 00:13:52,670 --> 00:13:56,390 electrochemistry basis. We're yet to integrate silicon 217 00:13:56,390 --> 00:13:59,510 or in house cathode production, both reviewed on battery day, 218 00:13:59,750 --> 00:14:01,990 which do bring significant further energy density and cost 219 00:14:01,990 --> 00:14:04,110 improvements, but that is a topic for another day. 220 00:14:05,760 --> 00:14:07,840 Lastly, it is important to remember that most of what we 221 00:14:07,840 --> 00:14:11,200 focused on a battery day was the Tesla engineered 4680 production 222 00:14:11,200 --> 00:14:14,800 system and the improvements we strove to achieve on equipment 223 00:14:14,800 --> 00:14:18,440 factory density, capital cost and utility cost reduction, all 224 00:14:18,440 --> 00:14:20,600 of which we are realizing in our Texas scale up to date. 225 00:14:22,920 --> 00:14:26,320 Thank you very much. The next question is, can you 226 00:14:26,320 --> 00:14:30,200 talk more to the upcoming Tesla Energy products and how you're 227 00:14:30,200 --> 00:14:32,240 thinking has evolved on the revenue model? 228 00:14:32,970 --> 00:14:36,050 Given Tesla's AI capabilities, how do you see the long term mix 229 00:14:36,050 --> 00:14:39,010 between hardware margin and recurring softer margin from 230 00:14:39,050 --> 00:14:41,850 auto bidder as the segment accelerates? 231 00:14:44,090 --> 00:14:46,650 We can't comment on future product road map, but I can 232 00:14:46,690 --> 00:14:48,890 provide a quick energy Q2 update. 233 00:14:49,690 --> 00:14:52,850 Megapack continues to show strong demand globally with 234 00:14:52,850 --> 00:14:55,650 Lathrop ramping successfully to meet our contracted projects in 235 00:14:55,650 --> 00:14:58,480 2023. As stated last quarter, Megapack 236 00:14:58,480 --> 00:15:01,000 margins are in a reasonable place in line with our target 237 00:15:01,000 --> 00:15:05,080 market vehicle target margins. The second final assembly line 238 00:15:05,080 --> 00:15:08,160 at Lathrop is progressing on schedule, eventually doubling 239 00:15:08,200 --> 00:15:11,840 Lathrop capacity ahead of our full factory ramp in 2024. 240 00:15:11,840 --> 00:15:14,600 We have several exciting large projects in construction or 241 00:15:14,600 --> 00:15:18,120 nearing completion, including the KES project in Hawaii, the 242 00:15:18,120 --> 00:15:20,600 River Rena project in Australia, several projects in California 243 00:15:20,600 --> 00:15:23,320 and one here at Gigafactory, Texas toward today actually. 244 00:15:24,290 --> 00:15:27,010 We want to thank our customers, utilities and grid operators for 245 00:15:27,010 --> 00:15:30,770 trusting us with these projects. On the auto bidder question, we 246 00:15:30,770 --> 00:15:33,490 continue to grow auto bidder contracts in wholesale markets 247 00:15:33,490 --> 00:15:36,210 like Australia, Texas, UK and California with over 6 kwatt 248 00:15:36,210 --> 00:15:40,930 hours under Tesla's dispatch next year in the UK, Our project 249 00:15:40,930 --> 00:15:43,010 performed best in the industry in Q2. 250 00:15:43,450 --> 00:15:46,050 Auto bidder does have software margins and is an enabler for 251 00:15:46,050 --> 00:15:49,090 hardware sales, but it's a relatively small contributor to 252 00:15:49,090 --> 00:15:51,210 revenues given how much deployment growth on the 253 00:15:51,210 --> 00:15:53,050 Megapack hardware side is occurring. 254 00:15:53,420 --> 00:15:56,060 It's important to remember that these large projects, these 255 00:15:56,060 --> 00:15:58,180 large capital projects have lifetimes of 20 years of 256 00:15:58,180 --> 00:16:00,780 recurring revenues on an analyzed basis relative to 257 00:16:00,780 --> 00:16:04,700 upfront CapEx are small. On the residential side, we have 258 00:16:04,700 --> 00:16:07,420 some fun things happening. We recently surpassed a half 259 00:16:07,420 --> 00:16:10,660 million power walls installed. Just this week we were launching 260 00:16:10,660 --> 00:16:13,460 charge on solar, which allows test the power wall and vehicle 261 00:16:13,460 --> 00:16:15,700 customers to charge their vehicles using their excess 262 00:16:15,700 --> 00:16:18,500 solar and drive only on the sunshine that hits their roof. 263 00:16:19,470 --> 00:16:21,470 Yesterday we began paying customers in Texas for 264 00:16:21,470 --> 00:16:23,870 participating in our virtual power plant to provide grid 265 00:16:23,870 --> 00:16:26,950 support to ERCOT. We expect these credits to lower 266 00:16:26,950 --> 00:16:30,070 our median customers annual bill by a third and to increase these 267 00:16:30,070 --> 00:16:32,710 credits over time as ERCOT expands market access. 268 00:16:33,110 --> 00:16:35,510 And today we are expanding Tesla electric enrollment to new Model 269 00:16:35,510 --> 00:16:38,990 3 owners in Texas, fall by all Texas vehicle customers over the 270 00:16:38,990 --> 00:16:41,830 rest of the quarter unfortunately and somewhat 271 00:16:41,830 --> 00:16:45,340 similar to Tesla insurance. Bringing Tesla Electric and VPP 272 00:16:45,340 --> 00:16:47,940 capabilities to our customers requires working through a 273 00:16:47,940 --> 00:16:50,420 fractured regulatory environment on a jurisdiction by 274 00:16:50,420 --> 00:16:53,380 jurisdiction basis. In the long run, the value of 275 00:16:53,380 --> 00:16:56,020 residential energy software and hardware will be driven by the 276 00:16:56,020 --> 00:16:59,020 level of market access that utilities, market operators and 277 00:16:59,020 --> 00:17:02,260 regulators permit. For power walls eligible to 278 00:17:02,260 --> 00:17:05,980 provide the full stack of energy services like peaker, peaker 279 00:17:05,980 --> 00:17:08,380 capacity and system buffering such as in Australia, we can 280 00:17:08,380 --> 00:17:10,859 more than double the value of ownership relative to a typical 281 00:17:10,859 --> 00:17:13,970 system today. Thank you very much. 282 00:17:14,290 --> 00:17:17,690 The next question is, could you quantify the benefits to COGS 283 00:17:18,089 --> 00:17:22,010 per unit from the IRA battery manufacturing incentives? 284 00:17:22,490 --> 00:17:25,210 And secondly, battery raw material declines year to date? 285 00:17:27,010 --> 00:17:28,410 All right. I can take that. 286 00:17:30,090 --> 00:17:33,730 On the first part of the question for IRA manufacturing 287 00:17:33,730 --> 00:17:37,570 incentives, we provided previous guidance that we expect these to 288 00:17:37,570 --> 00:17:39,550 be. For the course of this year in 289 00:17:39,550 --> 00:17:44,550 the range of 150 million to 250 million per quarter, we are 290 00:17:45,030 --> 00:17:47,230 staying within that boundary as we got it previously. 291 00:17:47,230 --> 00:17:49,030 So that was the case in Q2 as well. 292 00:17:50,070 --> 00:17:54,270 I will note, I think we've mentioned this before that this 293 00:17:54,270 --> 00:17:59,030 includes a 5050 sharing of credits for qualified sales from 294 00:17:59,110 --> 00:18:04,630 our long term battery partner Panasonic on the commodity side. 295 00:18:05,150 --> 00:18:07,350 We are continuing to see improvements there. 296 00:18:07,350 --> 00:18:10,950 As we've discussed previously, Lithium is the most notable 297 00:18:10,950 --> 00:18:14,990 improvement so far. I think I commented on this on 298 00:18:14,990 --> 00:18:18,630 the last call because typically we see this coming about 1/4 299 00:18:18,630 --> 00:18:20,830 before it actually is realized in our financials. 300 00:18:21,990 --> 00:18:24,670 And also just as a reminder, we're not fully exposed to the 301 00:18:24,670 --> 00:18:27,270 price of Lithium. Our supply chain team has done a 302 00:18:27,270 --> 00:18:30,870 terrific job in partnership with another bunch of other companies 303 00:18:30,870 --> 00:18:34,990 to put in place. Some long term agreements here, 304 00:18:34,990 --> 00:18:37,990 but we do have some exposure that moves up and down. 305 00:18:38,750 --> 00:18:41,830 We're also seeing benefits in aluminum and steel which I think 306 00:18:41,830 --> 00:18:46,190 is great but not as large as the lithium impacts, but they 307 00:18:46,190 --> 00:18:49,790 contribute nonetheless. So if we add up the total impact 308 00:18:49,790 --> 00:18:53,310 of this in Q2 relative to prior quarter, it's about the same 309 00:18:53,310 --> 00:18:56,550 size and magnitude as the IRA benefits that we also received, 310 00:18:58,310 --> 00:19:00,190 you know just to put this in context. 311 00:19:01,090 --> 00:19:04,690 As you look at COGS per unit sequentially from Q1 to Q2, I 312 00:19:05,170 --> 00:19:07,370 think there's there's two things to keep in mind there. 313 00:19:08,010 --> 00:19:12,970 The 1st is that our SX mix and for deliveries increased quite a 314 00:19:12,970 --> 00:19:15,930 bit from Q1 to Q2. So as you think about 315 00:19:15,930 --> 00:19:19,250 fundamental cost reductions, it's important to adjust for 316 00:19:19,250 --> 00:19:22,250 that. And then secondly, you know as 317 00:19:22,250 --> 00:19:25,250 we continue to work on reducing our Austin and Berlin costs 318 00:19:25,650 --> 00:19:29,210 which we did quite a bit of that from Q1 to Q2. 319 00:19:29,930 --> 00:19:32,730 These factories are still a slightly above Model Y 320 00:19:32,730 --> 00:19:36,170 production costs elsewhere and in the quarter, our mix of 321 00:19:36,250 --> 00:19:38,690 Austin and Berlin related builds increased. 322 00:19:39,450 --> 00:19:43,050 And so that's something to consider as you model out the 323 00:19:43,050 --> 00:19:45,970 impact on from Q1 to Q2 in terms of COGS per unit. 324 00:19:47,610 --> 00:19:49,530 I do want to ask Karen if there's anything else on the 325 00:19:49,530 --> 00:19:52,810 commodity side or just more generally you want to add here. 326 00:19:53,260 --> 00:19:56,660 Yeah, As you mentioned Zach, we we've naturally been a little 327 00:19:56,660 --> 00:19:58,820 bit hedged from the lithium position because the the long 328 00:19:58,820 --> 00:20:01,580 term contracts we have in place. But we have seen reduction in 329 00:20:01,580 --> 00:20:05,220 pricing across the board for all commodities that specifically go 330 00:20:05,220 --> 00:20:08,460 into batteries such as nickel, cobalt and graphite. 331 00:20:09,100 --> 00:20:11,700 And the reductions and pricing translate into thousands of 332 00:20:11,700 --> 00:20:13,340 dollars. When you look at it from a 333 00:20:13,740 --> 00:20:17,660 purvedaical impact. We're taking advantage of the 334 00:20:17,660 --> 00:20:20,740 look historically low commodity pricing in certain areas to kind 335 00:20:20,740 --> 00:20:22,500 of extend some of those fixed price contracts. 336 00:20:23,350 --> 00:20:25,790 Through the end of the decade. So it's a playbook that will 337 00:20:25,790 --> 00:20:28,590 continue to kind of go back to as we look to the future. 338 00:20:30,230 --> 00:20:32,510 Thank you. And the next question on FSD. 339 00:20:33,550 --> 00:20:37,310 Have you considered allowing FSD transferability as a lever to 340 00:20:37,310 --> 00:20:40,310 allow existing customers to upgrade to a new Tesla instead 341 00:20:40,310 --> 00:20:43,510 of being locked into an existing car due to the price of FSD? 342 00:20:45,830 --> 00:20:47,590 Yeah, this is a question we get asked a lot. 343 00:20:49,050 --> 00:20:54,570 So we're excited to announce that for Q3 we will be allowing 344 00:20:54,850 --> 00:20:58,770 transfer of FSD. This is a one time amnesty. 345 00:21:00,690 --> 00:21:05,250 So it needs to be you need to take advantage of it in Q3, but 346 00:21:06,090 --> 00:21:08,810 or at least place the order in Q3 with within with within 347 00:21:08,810 --> 00:21:14,210 reasonable delivery time frames. So yeah, yeah. 348 00:21:15,970 --> 00:21:21,130 Yeah, I hope this makes people happy this one time thing. 349 00:21:23,690 --> 00:21:25,370 Right. The next question, when will, 350 00:21:25,810 --> 00:21:28,650 when will we give more information about the cyber 351 00:21:28,650 --> 00:21:31,970 truck orders, estimated delivery schedules, pricing and 352 00:21:31,970 --> 00:21:37,130 specifications? The demand is so is so far off 353 00:21:37,130 --> 00:21:38,290 the hook, you can't even see the hook. 354 00:21:39,690 --> 00:21:43,290 So that's really not an issue. I do want to emphasize that the 355 00:21:43,290 --> 00:21:46,450 cyber truck. Has a lot of new technology in 356 00:21:46,450 --> 00:21:52,210 it like a lie, it doesn't look like, it doesn't look like you 357 00:21:52,210 --> 00:21:54,250 know any other vehicle because it is not like any other 358 00:21:54,250 --> 00:21:58,130 vehicle. So and the production ramp will 359 00:21:58,130 --> 00:22:02,010 move as fast as the slowest and least like the elements of the 360 00:22:02,970 --> 00:22:07,210 of the entire supply chain and an internal production. 361 00:22:07,810 --> 00:22:12,890 So you know, I wouldn't expect you know it. 362 00:22:13,560 --> 00:22:15,720 I I hope it's smooth. You know we're certainly better 363 00:22:15,720 --> 00:22:19,080 at production ramps than than you know we've got a lot of 364 00:22:19,080 --> 00:22:20,440 experience with production ramps. 365 00:22:20,760 --> 00:22:24,560 But you know first order to 1st order approximation is there's 366 00:22:24,560 --> 00:22:30,200 like 10,000 unique parts and processes in in a you know in 367 00:22:30,200 --> 00:22:33,600 the Cybertruck and if any one of it'll go as fast as the least 368 00:22:34,120 --> 00:22:38,520 lucky, you know least well executed element of the 10,000 369 00:22:38,680 --> 00:22:41,940 so. Always very difficult to predict 370 00:22:41,980 --> 00:22:45,820 the ramp initially, but I think we'll be making them in high 371 00:22:45,820 --> 00:22:50,780 volume next year and we will be delivering the car this year. 372 00:22:52,300 --> 00:22:55,060 Thank you. The next question is critics of 373 00:22:55,060 --> 00:22:58,780 Giga casting contended that process makes vehicles harder 374 00:22:58,780 --> 00:23:01,860 and more costly to repair, essentially pushing costs onto 375 00:23:01,860 --> 00:23:04,180 the customer. You share some details about the 376 00:23:04,180 --> 00:23:06,460 initial repair experience with Giga cast vehicles. 377 00:23:06,660 --> 00:23:08,260 That must be why everyone's copying us. 378 00:23:10,050 --> 00:23:11,450 Yeah, thanks you. On. 379 00:23:11,450 --> 00:23:14,650 This is Lars and Martin. That that's like, simply not 380 00:23:14,650 --> 00:23:16,290 true. There's a misconception that 381 00:23:16,290 --> 00:23:19,530 traditional bodies are easy to repair, but they're made of 382 00:23:19,530 --> 00:23:21,290 multiple materials and multiple joining methods. 383 00:23:21,290 --> 00:23:23,090 Spot welds and rivets have to be drilled out. 384 00:23:23,090 --> 00:23:26,570 Panels and structural adhesive have to be chiseled out, dry 385 00:23:26,570 --> 00:23:29,090 adhesive has to be removed, stampings cut, blah, blah, blah. 386 00:23:29,250 --> 00:23:30,930 It's a crazy patchwork quilt. Yeah. 387 00:23:31,050 --> 00:23:33,050 And so putting that back together means time and money. 388 00:23:33,370 --> 00:23:36,370 Using an example of replacing a rear cast rail on a Model Y. 389 00:23:38,390 --> 00:23:41,110 To do that versus like what we replaced it with from the Model 390 00:23:41,110 --> 00:23:44,830 3, it's 1010 times cheaper and three times faster to do it with 391 00:23:44,830 --> 00:23:47,510 the cash rail. My design team works with our 392 00:23:47,510 --> 00:23:50,390 collision repair team since we're closed loop on this with 393 00:23:50,390 --> 00:23:53,710 insurance and we design specific parts that are make it easier 394 00:23:53,710 --> 00:23:56,590 and faster to repair, we have an incentive to do that because we 395 00:23:56,710 --> 00:23:59,150 have our own insurance and our own body shops. 396 00:24:00,310 --> 00:24:03,310 We expect that we'll continue to do this and collision repair 397 00:24:03,310 --> 00:24:05,550 will continue to become cheaper and faster over time. 398 00:24:05,960 --> 00:24:07,960 And we already made this available to all body shops or 399 00:24:07,960 --> 00:24:09,760 our tests are approved Body Shop training. 400 00:24:10,440 --> 00:24:13,560 Yeah, closing loop on collision repair and factoring that into 401 00:24:13,560 --> 00:24:15,280 design is is a big deal. It's crucial. 402 00:24:15,640 --> 00:24:18,200 I don't think anyone else can do it with that ecosystem that we 403 00:24:18,200 --> 00:24:20,000 have. So, yeah and and we are actually 404 00:24:20,000 --> 00:24:24,640 able to change the details of the casting with inserts and we 405 00:24:24,640 --> 00:24:25,960 actually do do that all the time. 406 00:24:26,960 --> 00:24:29,080 So because the the answer is actually wear out and. 407 00:24:29,810 --> 00:24:32,450 Need to be replaced anyway, so we can actually make design 408 00:24:32,450 --> 00:24:36,290 changes to the inserts and tweak the castings, but the the cast 409 00:24:36,810 --> 00:24:40,770 basically cast the rear rear body or front body is lighter, 410 00:24:40,810 --> 00:24:44,850 cheaper, better for noise, vibration, harshness, much 411 00:24:44,850 --> 00:24:48,170 easier to manufacture and it's better in every way. 412 00:24:49,010 --> 00:24:51,930 And that's why so many other car companies are copying us, 413 00:24:52,690 --> 00:24:55,330 because probably they don't know. 414 00:24:55,370 --> 00:24:57,370 They certainly put out a lot of fresh releases about it. 415 00:24:59,370 --> 00:25:02,250 I think it's basically going to be how old cars are made in the 416 00:25:02,250 --> 00:25:05,130 future. Thank you. 417 00:25:06,210 --> 00:25:10,050 Next question, how many optimist bots have been made and when 418 00:25:10,050 --> 00:25:12,530 will they be able to start performing useful tasks? 419 00:25:12,730 --> 00:25:21,930 10 million, yeah. I think. 420 00:25:21,930 --> 00:25:25,730 I think we're around 5:00 or 6 bots like, you know, there's an 421 00:25:26,410 --> 00:25:29,080 we're. Like 10 I guess yeah it depends 422 00:25:29,120 --> 00:25:32,800 on what how many are working and what phase. 423 00:25:32,880 --> 00:25:40,960 But it's it's sort of yeah, like there's there's more more every 424 00:25:40,960 --> 00:25:47,520 month the there's a lot of interesting things a lot of 425 00:25:47,520 --> 00:25:49,520 interesting things about the option spot. 426 00:25:51,840 --> 00:25:54,840 We found that there are actually no suppliers that can produce 427 00:25:54,840 --> 00:25:57,880 the actuators. There are no off the shelf 428 00:25:58,840 --> 00:26:02,520 actuators that work well for Human Aid Robot at any price. 429 00:26:02,720 --> 00:26:07,920 Certainly not compelling. Yes, not a not a human robot 430 00:26:07,920 --> 00:26:10,360 that can do something that, you know, the things that human 431 00:26:10,360 --> 00:26:13,600 could do. So we've actually had to design 432 00:26:14,040 --> 00:26:18,640 our own actuators that integrate the motor of the power 433 00:26:18,640 --> 00:26:27,890 electronics, the controller. The sensors and really everyone 434 00:26:27,890 --> 00:26:34,370 of them is custom design. So and then of course we'll be 435 00:26:34,370 --> 00:26:38,450 using the same inference hardware as the car. 436 00:26:40,290 --> 00:26:46,210 So you know and we are in designing these actuators, 437 00:26:46,490 --> 00:26:48,290 designing them for volume production. 438 00:26:48,920 --> 00:26:52,120 So they're not just lighter, tighter, more and more capable 439 00:26:52,120 --> 00:26:55,360 any any other actuators that that we're aware of that exists 440 00:26:55,360 --> 00:26:57,360 in the world. There's also actually 441 00:26:58,240 --> 00:27:01,400 manufacturable. So we we should be able to make 442 00:27:01,400 --> 00:27:07,680 them in volume. The the first optimist that is 443 00:27:07,720 --> 00:27:11,200 that will have all of the test that designed actuators sort of 444 00:27:11,200 --> 00:27:16,240 production candidate actuators integrated and and walking 445 00:27:16,240 --> 00:27:22,350 should be. Around November ish so and then 446 00:27:22,350 --> 00:27:29,910 we'll we'll we'll start wrapping up after that you know in terms 447 00:27:29,910 --> 00:27:34,350 of when we'll be able to do some useful things like we'll first 448 00:27:34,350 --> 00:27:36,830 be trying this out in our own factories and just proving out 449 00:27:37,110 --> 00:27:40,110 its utility. But I I think I think we'll be 450 00:27:40,110 --> 00:27:44,270 able to have it do something useful in our factories sometime 451 00:27:44,270 --> 00:27:49,340 next year I I would be. Yeah, I'm pretty, pretty 452 00:27:49,340 --> 00:27:58,140 confident of that. So yeah, and it's going well, I 453 00:27:58,140 --> 00:28:00,300 should say. Another cool thing about 454 00:28:00,300 --> 00:28:03,580 optimists is that, you know, there's just in the US alone, 455 00:28:03,580 --> 00:28:09,420 there are two million amputees. And I was just talking to the 456 00:28:09,420 --> 00:28:15,220 neural link team and by combining A neural link implant. 457 00:28:15,840 --> 00:28:20,000 And a robotic armor leg. For someone that has has had 458 00:28:20,000 --> 00:28:25,320 their arms, armor leg or all arms and legs amputated, we 459 00:28:25,320 --> 00:28:29,240 believe we can give you basically a cyber body that is 460 00:28:30,200 --> 00:28:38,440 incredibly capable $6 million man in real life before. 461 00:28:38,440 --> 00:28:43,120 Don't worry it cost $6,000,000 sixty $1000 man. 462 00:28:45,000 --> 00:28:49,640 Since I was impressive but it's it'll actually you know so that 463 00:28:49,640 --> 00:28:52,320 that that actually could be a really I think would be 464 00:28:52,480 --> 00:28:55,400 incredible to you know potentially help police people 465 00:28:55,400 --> 00:29:01,920 around the world and and give them you know Obama like that is 466 00:29:03,000 --> 00:29:05,720 as good maybe a long term better than a biological 1. 467 00:29:08,080 --> 00:29:11,540 Thank you. The next question is how has the 468 00:29:11,540 --> 00:29:15,100 order intake trended relatively to production levels during Q2 469 00:29:15,580 --> 00:29:17,900 and how is it trended in the quarter to date period? 470 00:29:18,020 --> 00:29:21,420 Conceptually, how does this decide when is it appropriate to 471 00:29:21,420 --> 00:29:25,740 reduce prices or add other sales incentives to increase demand? 472 00:29:28,180 --> 00:29:29,820 Yeah. I guess demand is roughly track 473 00:29:29,820 --> 00:29:34,900 production. So which is what we aim for is 474 00:29:35,060 --> 00:29:37,600 is. But we look at you know 475 00:29:37,600 --> 00:29:40,880 something that that we have that really I think no other car 476 00:29:40,880 --> 00:29:44,960 maker has is that we have real time demand and real time 477 00:29:44,960 --> 00:29:51,440 production like so seven days a week you know I get an e-mail 478 00:29:51,440 --> 00:29:54,360 order generated e-mail that shows output from all factories 479 00:29:55,040 --> 00:29:59,800 and orders globally. So it's like a real time thing 480 00:29:59,800 --> 00:30:05,240 on the pulse of earth basically and and we would you know. 481 00:30:06,110 --> 00:30:09,630 We're just we're just course according to what the mood of 482 00:30:09,630 --> 00:30:13,510 the of the public is. You know buying a new car is a 483 00:30:14,590 --> 00:30:17,590 is a big decision for vast majority of people. 484 00:30:17,590 --> 00:30:21,310 So you know anytime there's economic uncertainty people 485 00:30:21,310 --> 00:30:25,230 generally pause on your car buying at least to see to see 486 00:30:25,230 --> 00:30:30,190 what happens and you know and then obviously another challenge 487 00:30:30,190 --> 00:30:34,150 is the the interest rate environment as interest rates 488 00:30:34,150 --> 00:30:37,180 rise. The affordability of anything 489 00:30:37,180 --> 00:30:42,300 bought with debt decreases, so effectively increasing the price 490 00:30:42,300 --> 00:30:45,860 of the car. So when interest rates rise 491 00:30:45,860 --> 00:30:48,700 dramatically, we actually have to reduce the price of the car 492 00:30:48,700 --> 00:30:52,100 because the the, the interest payments increase the price of 493 00:30:52,100 --> 00:30:57,220 the car. So and and this is at least at 494 00:30:57,380 --> 00:30:59,940 least up until recently it was the, I believe the sharpest 495 00:31:00,540 --> 00:31:04,580 interest rate rise in history. So we had to do something about 496 00:31:04,580 --> 00:31:08,660 that. And if somebody's got a crystal 497 00:31:08,660 --> 00:31:11,380 ball for the global economy, I really appreciate it. 498 00:31:11,380 --> 00:31:12,860 If I got borrow that crystal ball. 499 00:31:14,940 --> 00:31:15,860 Yeah, exactly. Damn. 500 00:31:15,860 --> 00:31:18,580 Yeah, it should be. Not on Twitter. 501 00:31:19,820 --> 00:31:24,940 So, I mean, one day it seems like the world economy is 502 00:31:24,940 --> 00:31:27,260 falling apart and the next day everything's fine. 503 00:31:27,580 --> 00:31:28,780 I I don't know what the hell is going on. 504 00:31:30,140 --> 00:31:32,580 It'd be totally frank. I wish I did. 505 00:31:34,880 --> 00:31:37,880 So I I mean that that's why that's why I say like I always 506 00:31:38,280 --> 00:31:42,480 you know you know I on Twitter I posted like you know just really 507 00:31:42,680 --> 00:31:47,840 advising because I, you know I care a lot about the the the the 508 00:31:47,880 --> 00:31:51,200 sort of the small shareholders especially ones that have stuck, 509 00:31:51,200 --> 00:31:53,160 stuck with us through through thick and thin. 510 00:31:53,760 --> 00:32:00,640 I love you guys and so the. We we can't control these macro 511 00:32:00,640 --> 00:32:04,280 shocks you know or the the manic depressive nature of the stock 512 00:32:04,280 --> 00:32:06,360 market. So that's why I I recommend 513 00:32:06,360 --> 00:32:10,080 against margin loans in times that are turbulent. 514 00:32:10,400 --> 00:32:13,360 You know if times are not that turbulent actually a margin loan 515 00:32:13,400 --> 00:32:18,720 can be a smart move within reason but but we're in I would 516 00:32:18,800 --> 00:32:23,360 call it turbulent times. I like I have very high 517 00:32:23,360 --> 00:32:26,520 confidence, confidence in the long term value of Tesla. 518 00:32:28,530 --> 00:32:33,090 Like I I see it really, you know, see a path to a 10X these 519 00:32:33,650 --> 00:32:40,010 days, like 5X increase in the value of the company, maybe a 520 00:32:40,010 --> 00:32:47,770 10X and where things go along the way that the trials and 521 00:32:47,770 --> 00:32:51,490 tribulations and the mood of the mood of the markets 1 cannot 522 00:32:51,490 --> 00:32:55,130 predict. And so you know. 523 00:32:57,350 --> 00:33:00,990 The the, the old adage of buy and hold is is right. 524 00:33:01,230 --> 00:33:07,390 You know, for investment advice I say like identify companies 525 00:33:07,390 --> 00:33:12,110 products you love See if they you know does it seem like 526 00:33:12,110 --> 00:33:15,350 they'll continue to make good products or great products. 527 00:33:16,110 --> 00:33:19,230 Buy that stock and hold it, that's it. 528 00:33:19,430 --> 00:33:25,110 But you will win. The reason companies exist is to 529 00:33:25,150 --> 00:33:27,750 make. Goods and services, ideally 530 00:33:27,750 --> 00:33:31,350 great goods and services, they don't exist for any other 531 00:33:31,350 --> 00:33:32,550 reason. They shouldn't. 532 00:33:33,910 --> 00:33:36,070 So that's why I should buy a software company that makes me 533 00:33:36,230 --> 00:33:38,430 likeson has a great future pipeline. 534 00:33:38,590 --> 00:33:46,550 It's common sense actually And and then and then generally if 535 00:33:46,550 --> 00:33:50,470 you see if if you provided, you're confident about what that 536 00:33:50,590 --> 00:33:55,430 company's products or services are when the market panics. 537 00:33:56,010 --> 00:34:01,170 Buy and when the market is, you know, overly exuberant, you can 538 00:34:01,170 --> 00:34:02,810 sell. I'm not recommending yourself as 539 00:34:02,850 --> 00:34:10,690 a bit, but yeah, I love sell high. 540 00:34:15,090 --> 00:34:17,370 You know, Warren Buffett actually I think has saying I'm 541 00:34:17,370 --> 00:34:20,050 paraphrasing him. But, you know, publicly traded 542 00:34:20,050 --> 00:34:24,010 companies like it's like imagine you're living in your house and 543 00:34:24,010 --> 00:34:27,350 some. A crazy manic depressive guy 544 00:34:27,350 --> 00:34:31,030 comes and stands at the outside your house and yells property 545 00:34:31,030 --> 00:34:35,510 prices at you. You know, and it's a different 546 00:34:35,670 --> 00:34:38,030 price every day. The house is still the same 547 00:34:38,030 --> 00:34:45,909 house, so this is the stock market, you know, Credit that 548 00:34:45,909 --> 00:34:48,630 door about it. Thank you. 549 00:34:48,630 --> 00:34:51,750 Let's go to the next question. With the emphasis of price cuts 550 00:34:51,750 --> 00:34:54,750 to drive volume growth eating into automotive gross margin, 551 00:34:54,750 --> 00:34:57,030 can investors expect to see automotive gross margin 552 00:34:57,630 --> 00:35:01,150 stabilize or even rise due to efficiencies outpacing the cuts? 553 00:35:01,550 --> 00:35:07,590 And if so, when? Where's that crystal ball again 554 00:35:10,790 --> 00:35:13,470 if if, I mean it's like look the, the, the short term 555 00:35:15,270 --> 00:35:19,730 variances in in. Gross margin and profitability 556 00:35:20,210 --> 00:35:23,050 really are minor relative to the long term picture. 557 00:35:24,410 --> 00:35:29,450 Autonomy will make all of these numbers look silly. 558 00:35:30,170 --> 00:35:31,730 I'd recommend looking at Arc Invest. 559 00:35:31,730 --> 00:35:34,650 I think their analysis is very good. 560 00:35:34,650 --> 00:35:42,170 It's the best you know I mean and generally fin Twit or like 561 00:35:42,170 --> 00:35:45,590 if the finance. There's the smart fans, people 562 00:35:45,590 --> 00:35:47,110 on Twitter follow their accounts. 563 00:35:47,430 --> 00:35:54,430 They're great. So that that's what that that's 564 00:35:55,030 --> 00:35:58,430 that's in my view where you'll get the best, best info. 565 00:35:59,710 --> 00:36:04,310 So you know, I strongly believe Tesla is epic long term 566 00:36:04,310 --> 00:36:09,790 investment and don't swear when you know things go up and down. 567 00:36:09,790 --> 00:36:11,590 In fact, if the market panics, buy. 568 00:36:13,350 --> 00:36:15,710 If the market's a little too exuberant sell at the time but 569 00:36:16,030 --> 00:36:21,310 but just generally like like I feel I I confident you know we 570 00:36:21,310 --> 00:36:24,950 we will deliver a long term but can't control short term so and 571 00:36:24,950 --> 00:36:29,550 and these the the autonomy is is really where it's at exactly. 572 00:36:30,430 --> 00:36:34,830 I fully agree with you. I mean, I think the only thing 573 00:36:34,990 --> 00:36:39,110 in the short term that matters is, is what I said in my opening 574 00:36:39,110 --> 00:36:41,210 remarks. Which is, you know, are 575 00:36:41,210 --> 00:36:44,890 regenerating enough money to continue to invest and you know, 576 00:36:44,890 --> 00:36:48,690 the portfolio of products and technologies that the technical 577 00:36:48,690 --> 00:36:50,530 teams are investing in right now. 578 00:36:52,210 --> 00:36:55,330 This is intense. It's intense in terms of 579 00:36:55,330 --> 00:36:57,010 investment. It's intense in terms of 580 00:36:57,010 --> 00:36:59,330 potential. Frankly, I think it's ridiculous 581 00:36:59,330 --> 00:37:03,410 that we have positive free cash flow in a capital intensive 582 00:37:03,410 --> 00:37:07,650 business while investing massive amounts of money in new 583 00:37:07,650 --> 00:37:10,580 technology. That is super hard. 584 00:37:10,620 --> 00:37:12,900 And vertical integration, it's not even just like new products, 585 00:37:12,900 --> 00:37:15,180 but also. Yeah, we actually make our shit, 586 00:37:19,100 --> 00:37:20,100 yeah. And so. 587 00:37:20,500 --> 00:37:29,580 Others but. And so, at least from my 588 00:37:29,580 --> 00:37:32,860 perspective, what matters is continuing to generate the cash 589 00:37:32,860 --> 00:37:36,810 to invest. You know that means continuing 590 00:37:36,810 --> 00:37:40,290 to be hyper focused on near term cost reduction because 591 00:37:40,290 --> 00:37:43,130 everything we do in near term cost reduction provides capital 592 00:37:43,130 --> 00:37:47,930 to reinvest, hyper focused on working Capital Management of 593 00:37:48,610 --> 00:37:51,970 which we've made quite a bit of progress there. 594 00:37:52,850 --> 00:37:56,810 On the raw materials and whip side of that, we've been very 595 00:37:56,810 --> 00:38:00,090 focused on accounts receivables as well to ensure that we can 596 00:38:00,090 --> 00:38:02,410 continue to reinvest, reinvest the cash. 597 00:38:04,590 --> 00:38:06,150 You know that this is what we're focused on. 598 00:38:06,630 --> 00:38:08,510 Yeah. And you know, so there's you 599 00:38:08,510 --> 00:38:10,910 know a set of this that we control. 600 00:38:11,230 --> 00:38:13,390 You know, we have a pipeline of cost reductions. 601 00:38:14,110 --> 00:38:16,750 We are getting tailwinds in the commodity space right now. 602 00:38:16,750 --> 00:38:20,990 As Karen mentioned, that's helpful variability around 603 00:38:21,230 --> 00:38:23,550 average selling prices. You know, goes back to Elon's 604 00:38:23,550 --> 00:38:28,950 point, we don't control interest rates, We don't control macro 605 00:38:28,950 --> 00:38:32,600 consumer sentiment. But we have an obligation to be 606 00:38:32,600 --> 00:38:36,200 responsive to that to ensure that we're matching supply and 607 00:38:36,200 --> 00:38:37,880 demand and keeping things balanced. 608 00:38:38,840 --> 00:38:40,920 And so this is how we're managing the next handful of 609 00:38:40,920 --> 00:38:44,520 quarters. You know soon enough these 610 00:38:44,520 --> 00:38:48,200 quarters will be behind us. They won't be part of the 611 00:38:48,440 --> 00:38:50,760 present value of future cash flows of the business. 612 00:38:51,600 --> 00:38:54,480 And so we want to make sure we keep that view and make sure 613 00:38:54,480 --> 00:38:57,560 that the long term of the business is exactly the way that 614 00:38:57,560 --> 00:39:02,660 we want it to be. Alright, thank you very much. 615 00:39:02,780 --> 00:39:05,900 And now let's go to analyst questions. 616 00:39:06,220 --> 00:39:09,060 The first question comes from Dan Levi from Barclays. 617 00:39:09,700 --> 00:39:11,660 Then feel free to unmute yourself. 618 00:39:14,900 --> 00:39:17,340 Great. Good evening. 619 00:39:17,340 --> 00:39:20,780 Thank you. Wanted to start first with the 620 00:39:21,020 --> 00:39:24,260 with a question about your efforts in AI and Dojo. 621 00:39:24,580 --> 00:39:26,620 It's pretty clear, it sounds like you're accelerating your 622 00:39:26,620 --> 00:39:30,200 focus. Can you maybe provide us with a 623 00:39:30,200 --> 00:39:34,200 sense of what the process is of refining a product, Is it more 624 00:39:34,200 --> 00:39:38,800 machines and and maybe you could give us a sense of you know when 625 00:39:38,800 --> 00:39:42,120 the the payout starts to when you start to see the payout and 626 00:39:42,120 --> 00:39:45,040 what the resource outlay is. You know what should we expect 627 00:39:45,040 --> 00:39:47,720 on the OpEx front as a result of this? 628 00:39:50,160 --> 00:39:52,360 Sorry, are you saying how much are we gonna spend on Georgia 629 00:39:52,360 --> 00:39:54,040 or? Yeah, it. 630 00:39:54,280 --> 00:39:55,800 Warranty of Georgia. Yes. 631 00:39:58,580 --> 00:40:01,020 Well, we're not going to be open loop on our Dojo expenditures. 632 00:40:01,020 --> 00:40:07,420 So but I mean I think we, we will be spending you know the 633 00:40:07,460 --> 00:40:11,100 north of a billion over the next year on on through the end of 634 00:40:11,100 --> 00:40:14,220 next year, it's well over a billion dollars in Dojo. 635 00:40:15,260 --> 00:40:22,380 And yeah, so I mean we've got a truly staggering amount of of 636 00:40:22,780 --> 00:40:25,700 video data. To do training on and this is 637 00:40:25,700 --> 00:40:28,460 another thing I don't like into in order to copy us you you also 638 00:40:28,460 --> 00:40:32,220 need to spend billions of dollars on on training compute. 639 00:40:32,300 --> 00:40:37,860 I mean it's like and it's it's also hard to you know you need 640 00:40:37,860 --> 00:40:40,740 the data you need the training computer it's like think think 641 00:40:40,740 --> 00:40:43,620 all things needed to actually achieve this at scale toward a 642 00:40:43,620 --> 00:40:46,700 generalized solution for autonomy is it's this is this is 643 00:40:46,700 --> 00:40:47,940 one of the hottest problems ever. 644 00:40:49,960 --> 00:40:52,760 You know you see a lot of AI companies doing you know Llms 645 00:40:52,760 --> 00:40:55,640 and and and and whatnot and I'm saying if they're they're so 646 00:40:55,640 --> 00:40:57,680 great why can't they make yourself a great driving car 647 00:40:59,960 --> 00:41:07,600 because it's harder that's why. So but I do think that's that's 648 00:41:07,640 --> 00:41:09,640 I think there's some you know great great AI companies out 649 00:41:09,640 --> 00:41:15,480 there but but but just fundamentally the the the 650 00:41:15,480 --> 00:41:17,960 staggering amount of data we've got to process recovery process 651 00:41:17,960 --> 00:41:21,260 somehow. And custom silicon is the best 652 00:41:21,260 --> 00:41:26,340 way to do that. So that that's what Dojo is is 653 00:41:26,340 --> 00:41:32,140 designed to do is is yeah optimized for for video training 654 00:41:33,900 --> 00:41:36,500 it's it's not optimized for LMS it's optimized for video 655 00:41:36,500 --> 00:41:40,340 training. With the with with video 656 00:41:40,340 --> 00:41:45,860 training you have a a much higher ratio of compute to 657 00:41:45,900 --> 00:41:51,390 memory bandwidth so. This you know whereas LMS tend 658 00:41:51,950 --> 00:41:58,750 to be memory bandwidth choked. So that's that's it I mean but 659 00:41:58,950 --> 00:42:03,150 like so we're also we have some we're using a lot of NVIDIA 660 00:42:03,150 --> 00:42:08,390 hardware and continue to you know we'll actually take NVIDIA 661 00:42:08,390 --> 00:42:10,670 hardware as fast as NVIDIA will deliver it to us. 662 00:42:11,470 --> 00:42:16,710 Tremendous respect for Jensen and NVIDIA they've done an 663 00:42:16,710 --> 00:42:23,350 incredible job. And and frankly, I don't know if 664 00:42:23,350 --> 00:42:27,110 they could deliver us enough GPUs, we we we might not need 665 00:42:27,110 --> 00:42:31,430 your Dojo, but they can't. So they got so many customers, 666 00:42:33,230 --> 00:42:37,230 they've been kind enough to you know nonetheless prioritize some 667 00:42:37,230 --> 00:42:44,960 about our GPU orders, but. Yeah, the, the, the sheer 668 00:42:44,960 --> 00:42:47,960 magnitude of video training because like I said, we're not 669 00:42:47,960 --> 00:42:49,320 trying to just get as good as human. 670 00:42:49,320 --> 00:42:52,880 We want to get to, you know, 10 times better than human, maybe 671 00:42:52,880 --> 00:42:56,120 100 times better than human. Right now I believe there's 672 00:42:56,120 --> 00:42:58,360 something on the order of 1,000,000 automotive deaths per 673 00:42:58,360 --> 00:43:00,560 year. And and then if you say 674 00:43:00,560 --> 00:43:04,480 permanent serious injuries, I think it's probably closer to 10 675 00:43:04,480 --> 00:43:09,880 million per year. And you know, so it matters if 676 00:43:09,880 --> 00:43:15,290 you if you're, you know. Twice as good as as human 10 677 00:43:15,290 --> 00:43:18,010 times. You know like 10 times better 678 00:43:18,010 --> 00:43:22,050 than human would still mean 100,000 deaths and a million 679 00:43:22,930 --> 00:43:25,890 severe permanent injuries. So it's like OK, well we'd 680 00:43:25,890 --> 00:43:28,810 probably be 100 times better. So there's this really you know 681 00:43:28,970 --> 00:43:33,570 it's a March of 9th and and we want to achieve as perfect 682 00:43:34,490 --> 00:43:39,690 safety as possible and it's fast truly mind boggling amounts of 683 00:43:39,690 --> 00:43:41,930 video and and and computer needed for that. 684 00:43:42,350 --> 00:43:45,430 So and then I just, you know, I do think there's there's other 685 00:43:45,430 --> 00:43:49,230 applications for for Dojo but we just desperately needed for 686 00:43:49,230 --> 00:43:51,910 video training. Right. 687 00:43:51,910 --> 00:43:55,390 Just to just to add to what Ilan mentioned, so you know the 688 00:43:55,390 --> 00:43:59,550 numbers that he mentioned are you know between R&D spend and 689 00:43:59,550 --> 00:44:05,870 capital spend and you know this is moving quickly you know and 690 00:44:05,870 --> 00:44:09,590 so we provide a three-year outlook on our capital expense 691 00:44:09,830 --> 00:44:13,330 we are considering. These these expenses in that 692 00:44:13,330 --> 00:44:17,050 outlook and as that moves up and down, we'll continue to update 693 00:44:17,210 --> 00:44:21,170 our guidance in the queue. Yeah, I wanna say that the the 694 00:44:21,530 --> 00:44:24,850 the fundamental rate limiter on the progress of full self 695 00:44:24,850 --> 00:44:28,970 driving is training. But that's if if we had more 696 00:44:28,970 --> 00:44:31,250 training compute we would get it done faster. 697 00:44:32,370 --> 00:44:36,010 So that's it, that's it. And and it's just difficult to 698 00:44:36,010 --> 00:44:38,210 predict how quickly, yeah, we can execute on it. 699 00:44:40,710 --> 00:44:45,070 Great, thank you. Just as as a follow up, I 700 00:44:45,070 --> 00:44:49,190 recognize you know there there's incredible macro uncertainty 701 00:44:49,190 --> 00:44:53,830 right now, but you're sticking with your near term your volume 702 00:44:53,830 --> 00:44:57,910 target 50% kegger. As we just think about sort of 703 00:44:57,910 --> 00:45:00,990 in the in the year ahead, you know cyber truck is going to be 704 00:45:00,990 --> 00:45:04,030 some contribution. You know there's going to be 705 00:45:04,030 --> 00:45:06,590 some help from further EV penetration growth but. 706 00:45:07,150 --> 00:45:12,070 But to to what extent are you willing to sacrifice on pricing 707 00:45:12,070 --> 00:45:18,030 to keep that 50% volume cager intact or you know, are you 708 00:45:18,030 --> 00:45:21,190 thinking differently about margins versus your prior 709 00:45:21,190 --> 00:45:23,830 commentary of willing to sacrifice on margins to get more 710 00:45:23,830 --> 00:45:27,030 share? It's not like getting more fair, 711 00:45:27,030 --> 00:45:31,710 it's just that you can think of every car that we that we sell 712 00:45:31,790 --> 00:45:38,340 or produce that that that has. Full autonomy capability as 713 00:45:39,460 --> 00:45:42,860 actually something that in the future may be worth as much as 714 00:45:42,860 --> 00:45:49,940 five times what it is today because, you know, average 715 00:45:50,140 --> 00:45:53,860 passenger bickle is doing like maybe 10 hours of driving a 716 00:45:53,860 --> 00:45:55,740 week. You know, one if if it's sort of 717 00:45:55,740 --> 00:45:58,300 1 if let's say it's 1 1/2 hours a day, on average that's 10 718 00:45:58,300 --> 00:46:04,100 hours a week. Ish if you've got. 719 00:46:04,970 --> 00:46:10,090 An autonomous if that that vehicle's able to operate 720 00:46:10,090 --> 00:46:16,050 autonomously and and and use be used in some either either 721 00:46:16,050 --> 00:46:18,530 dedicated autonomous or partially autonomous like like 722 00:46:18,530 --> 00:46:20,650 Airbnb. Like some maybe sometimes you 723 00:46:21,250 --> 00:46:24,890 allow your your card to be used by others sometimes you want to 724 00:46:24,930 --> 00:46:27,930 use it exclusively. Just like you know Airbnb, you 725 00:46:27,930 --> 00:46:31,250 know doing Airbnb with a room in your house. 726 00:46:33,120 --> 00:46:35,040 You know that the the, the value is just tremendous. 727 00:46:35,680 --> 00:46:40,680 So I think it's sort of it would be I I think it makes it does 728 00:46:40,680 --> 00:46:43,960 make sense to sacrifice margins in favor of making more vehicles 729 00:46:43,960 --> 00:46:48,080 because we think in the not too distant future they will have 730 00:46:48,720 --> 00:46:50,880 have a dramatic valuation increase. 731 00:46:50,880 --> 00:46:54,360 I think the Tesla fleet value increase at the point which we 732 00:46:54,360 --> 00:46:56,880 can upload full self, you know full self driving and it's 733 00:46:56,880 --> 00:47:02,160 approved by regulators. Will be the single biggest step 734 00:47:02,160 --> 00:47:04,760 Change in asset value, maybe in history? 735 00:47:08,600 --> 00:47:10,560 Thank you. Let's go to the next analyst. 736 00:47:10,560 --> 00:47:13,560 The question comes from Emmanuel Rosner from Deutsche Bank. 737 00:47:15,600 --> 00:47:18,440 Thank you very much. Two questions for me as well. 738 00:47:18,880 --> 00:47:23,080 First following up on on the autonomy, so you know before you 739 00:47:23,080 --> 00:47:26,360 start launching these dedicated Robo Taxi vehicles on, on 740 00:47:26,360 --> 00:47:29,720 existing vehicles you're. Improving FSD, you know, 741 00:47:29,720 --> 00:47:33,760 incrementally what is your latest targeted timing to 742 00:47:34,280 --> 00:47:38,120 essentially release a non beta version or an ISOF version that 743 00:47:38,120 --> 00:47:42,280 would trigger much higher take rates And would Tesla benefit 744 00:47:42,280 --> 00:47:52,760 from lowering the price of FSD? Well obviously I you know. 745 00:47:56,180 --> 00:47:59,300 As people have sort of made fun of me and perhaps the, you know, 746 00:48:00,580 --> 00:48:03,300 quite fairly have made fun of me, my predictions about 747 00:48:03,860 --> 00:48:10,140 achieving full self driving have been optimistic in the past. 748 00:48:11,700 --> 00:48:14,220 The reason they've been optimistic is what it tends to 749 00:48:14,220 --> 00:48:18,540 look like is the we'll make rapid progress with the new 750 00:48:18,540 --> 00:48:23,390 version of. Of FSD but but then it will 751 00:48:23,470 --> 00:48:28,310 curve over logarithmically so. So at first logarithmic curve 752 00:48:28,310 --> 00:48:32,510 looks like you know just sort of fairly straight upward line 753 00:48:32,830 --> 00:48:35,830 diagonal and up. And so if you extrapolate that 754 00:48:36,030 --> 00:48:39,070 it then you you have a great thing but then because it's 755 00:48:39,070 --> 00:48:41,590 actually logarithmic, it curves over and then there's been a 756 00:48:41,590 --> 00:48:44,750 series of stacked logarithmic curves now. 757 00:48:48,680 --> 00:48:53,440 I know, I don't know the the, the, the boy who cried FSD, but 758 00:48:53,440 --> 00:48:58,120 I I man, I I think I think we'll be better than human by the end 759 00:48:58,120 --> 00:49:04,360 of this year. That's not to say we're approved 760 00:49:04,360 --> 00:49:09,720 by regulators and and I'm saying that that would be in the US 761 00:49:10,000 --> 00:49:12,280 because we got to focus on one market 1st. 762 00:49:12,800 --> 00:49:14,880 But I I think we'll be better than human by the end of this 763 00:49:14,880 --> 00:49:16,810 year. I've been wrong in the past. 764 00:49:16,810 --> 00:49:22,050 I may be wrong this time and that the the price of FSD. 765 00:49:22,210 --> 00:49:24,730 So the the way thing is the price of FSD is actually very 766 00:49:24,730 --> 00:49:29,410 low. It's not high When you go back 767 00:49:29,410 --> 00:49:32,210 to what I say earlier the the the value of the car increases 768 00:49:32,210 --> 00:49:35,050 dramatically if it is actually autonomous. 769 00:49:37,650 --> 00:49:41,730 You know $15,000 is is actually a low price not a high price 770 00:49:43,410 --> 00:49:48,210 and. Now we will offer you know and 771 00:49:48,210 --> 00:49:51,490 we have, I think I think we do sort of offer FSD as a sort of 772 00:49:51,490 --> 00:49:54,210 monthly subscription although like most people don't know 773 00:49:54,210 --> 00:49:56,770 that. So I'd recommend like maybe 774 00:49:56,770 --> 00:49:58,810 trying it out as a monthly subscription so you don't have 775 00:49:58,810 --> 00:50:06,570 to go with the $15,000 thing. But I think yeah, yeah the the 776 00:50:07,410 --> 00:50:10,690 obviously if if the car is worth several times it's original 777 00:50:10,690 --> 00:50:15,490 price. $13,000 is actually a low price for FSD. 778 00:50:18,130 --> 00:50:20,130 Thank you. And the next question comes from 779 00:50:20,210 --> 00:50:23,970 William Stein from Trust. William, go ahead and unmute. 780 00:50:26,170 --> 00:50:28,410 Great. Thank you very much for taking 781 00:50:28,410 --> 00:50:35,290 my question. I'd like to ask about to stick 782 00:50:35,290 --> 00:50:39,980 on this AI topic. We've read, you know, with great 783 00:50:39,980 --> 00:50:43,420 interest the developments in Dojo today and you've spoken 784 00:50:43,420 --> 00:50:48,860 about FSD, but you've also Elon, you've started this X dot AI 785 00:50:49,340 --> 00:50:53,060 company and you know for investors that think that there 786 00:50:53,060 --> 00:50:58,860 might be quite a bit of value in the AI features and products of 787 00:50:58,860 --> 00:51:01,900 Tesla, it might be concerning to see you. 788 00:51:02,510 --> 00:51:04,990 You know, pursuing another endeavor where AI is the focus. 789 00:51:04,990 --> 00:51:12,430 So can you talk about how X dot AI might overlap, might perhaps 790 00:51:12,430 --> 00:51:16,710 compete with Tesla or in other ways Perhaps it it enhances the 791 00:51:16,710 --> 00:51:19,510 value of what Tesla does? Thanks very much. 792 00:51:21,350 --> 00:51:24,670 Yeah, I think we'll actually enhance the the value of Tesla 793 00:51:26,590 --> 00:51:29,150 there. There were just some. 794 00:51:30,270 --> 00:51:33,230 Some of the world's best AI engineers and scientists that 795 00:51:33,230 --> 00:51:36,430 were willing to join a startup, but they were not willing to 796 00:51:36,430 --> 00:51:40,030 join a large sort of relatively established company like like 797 00:51:40,030 --> 00:51:42,270 Tesla. So I was like that that's 798 00:51:42,270 --> 00:51:44,630 actually how it got started. I was interviewing a few people 799 00:51:44,630 --> 00:51:46,350 and they're like, no, we we want to do a startup. 800 00:51:46,350 --> 00:51:49,750 I was like, and that's all I I couldn't, I couldn't convince 801 00:51:49,750 --> 00:51:54,990 them to join Tesla. So, So I was like, OK, well, you 802 00:51:55,030 --> 00:51:59,130 know, better to start up that. That I run that's then. 803 00:51:59,130 --> 00:52:00,890 Then they go work somewhere else. 804 00:52:01,890 --> 00:52:07,050 That's kind of the the genesis of of Xai and Xai is is focused 805 00:52:07,050 --> 00:52:15,570 on a sort of AGI. Yeah so it's but I I'd like so I 806 00:52:15,570 --> 00:52:25,050 think there will be some value that Xai brings to Tesla you 807 00:52:25,050 --> 00:52:27,920 know also some of the best. For the very best people in the 808 00:52:27,920 --> 00:52:29,960 world they they really just want to work on interesting problems. 809 00:52:29,960 --> 00:52:33,440 If you take say you know our material science group you know 810 00:52:33,520 --> 00:52:37,640 really what convinced the Charlie Coleman to leave Apple 811 00:52:37,640 --> 00:52:43,680 we was very happy and well compensated and both at and both 812 00:52:43,680 --> 00:52:49,560 you know the the the where we think is the best material 813 00:52:49,560 --> 00:52:52,440 science group in the world was that he got to work at both 814 00:52:52,440 --> 00:52:55,160 Tesla and SpaceX He he wasn't willing to. 815 00:52:55,790 --> 00:52:58,670 Leave Apple, If it was just Tesla, but he was willing to do 816 00:52:58,670 --> 00:53:01,950 it, it was Tesla and SpaceX. So sometimes you get the best 817 00:53:01,950 --> 00:53:03,710 talent in the world. That's the kind of thing you 818 00:53:03,710 --> 00:53:06,310 know you need to do. And that actually has been very 819 00:53:06,310 --> 00:53:11,470 beneficial to Tesla so. If you know if I can squeeze one 820 00:53:11,470 --> 00:53:16,790 more mundane question in, I I wonder if you think you can hit 821 00:53:17,110 --> 00:53:20,470 the 1.8 million unit number with current pricing or do you 822 00:53:20,470 --> 00:53:24,140 anticipate? Needing to continue to lower 823 00:53:24,140 --> 00:53:27,140 prices because it seems like they've stabilized, the trends 824 00:53:27,140 --> 00:53:29,900 have stabilized in the last maybe a month and a half. 825 00:53:29,900 --> 00:53:34,580 Should we expect a sort of continued decreases or or more 826 00:53:34,580 --> 00:53:36,220 stabilization for the rest of the year? 827 00:53:41,420 --> 00:53:43,020 Sure. You know we have, we have a 828 00:53:43,860 --> 00:53:47,420 really sort of we started the referral program which I think 829 00:53:47,420 --> 00:53:51,750 will be quite effective. So you know, as as Zach was 830 00:53:51,750 --> 00:53:55,030 saying earlier, we we don't control the macroeconomic 831 00:53:55,030 --> 00:53:57,150 conditions. So if interest rates continue to 832 00:53:57,150 --> 00:54:02,510 rise that reduces the affordability of cars, you know 833 00:54:02,550 --> 00:54:05,030 and and for a lot of people they're really trying to balance 834 00:54:05,070 --> 00:54:08,710 that just you know, barely breaking even every month. 835 00:54:08,710 --> 00:54:10,830 In fact, if you look at the rise in credit card debt, they are in 836 00:54:10,830 --> 00:54:14,710 fact not breaking even every month like credit card debt is, 837 00:54:14,710 --> 00:54:21,950 is looking scary so. You know, we just don't control 838 00:54:22,070 --> 00:54:24,710 the micro conditions. If American conditions are 839 00:54:24,710 --> 00:54:26,350 stable, I think prices will be stable. 840 00:54:26,350 --> 00:54:30,430 And if they're not stable, then we would have to lower prices, 841 00:54:31,430 --> 00:54:33,870 yeah. Thank you. 842 00:54:34,270 --> 00:54:36,390 Let's go to Colin Rush from Oppenheimer. 843 00:54:38,870 --> 00:54:40,950 That's so much. Guys, you know is your. 844 00:54:41,030 --> 00:54:45,150 Building out Dojo, implementing what really is gonna be a highly 845 00:54:45,150 --> 00:54:48,310 complex set of software. Can you speak to the maturity of 846 00:54:48,310 --> 00:54:52,150 the operating system and how much software you're expecting 847 00:54:52,150 --> 00:54:58,470 to use in that system? This is a custom software stack 848 00:54:58,910 --> 00:55:06,630 so but it is designed such that you can run at the high at a 849 00:55:06,630 --> 00:55:14,430 high level pie torch. And jacks, so but then you know 850 00:55:14,430 --> 00:55:17,910 we have to customize it to actually run on a custom 851 00:55:17,910 --> 00:55:21,350 silicon. So this the software stack is a 852 00:55:22,150 --> 00:55:24,590 combination of open source software and then and that tells 853 00:55:24,590 --> 00:55:28,150 the software all the way to the bear silicon, which is the case 854 00:55:28,150 --> 00:55:32,190 for the inference computer in the car so. 855 00:55:34,290 --> 00:55:35,730 Okay, thanks so much. That's super powerful. 856 00:55:35,730 --> 00:55:37,530 And then can you speak to how you're managing some of the 857 00:55:37,530 --> 00:55:41,290 geopolitical risks relative to your capacity expansion? 858 00:55:41,730 --> 00:55:43,850 You know, obviously as you guys continue to grow at this rate, 859 00:55:43,850 --> 00:55:46,690 you're gonna be putting some folks out of business and you 860 00:55:46,730 --> 00:55:49,090 know there's going to be some impacts around regional 861 00:55:49,090 --> 00:55:50,530 economies. So just want to understand how 862 00:55:50,530 --> 00:55:53,050 you're thinking about that in terms of some of your CapEx 863 00:55:53,050 --> 00:55:54,810 plans and and how you're managing some of those 864 00:55:54,810 --> 00:55:57,530 relationships with with different countries and regions? 865 00:56:03,140 --> 00:56:06,900 You know, this is a period of unusual geopolitical risk. 866 00:56:09,300 --> 00:56:14,300 So I think we're the best we can do is you know have factories 867 00:56:14,300 --> 00:56:19,140 and many parts of the world such that if things get difficult in 868 00:56:19,140 --> 00:56:22,620 one part of the world we you know, we can still keep keep 869 00:56:22,620 --> 00:56:24,380 things going in the rest of the world. 870 00:56:27,940 --> 00:56:30,220 Thank you. The next question comes from 871 00:56:30,220 --> 00:56:38,470 Mark Delaney from Goldman Sachs. Thank you very much for taking 872 00:56:38,470 --> 00:56:40,710 that question. Tesla has been making progress 873 00:56:40,710 --> 00:56:43,190 reducing cost and did so again last quarter. 874 00:56:43,230 --> 00:56:45,470 Can you give an update on when you think automotive COGS per 875 00:56:45,470 --> 00:56:48,710 vehicle could be under the historical $36,000 per vehicle 876 00:56:48,710 --> 00:56:49,350 level? And what are? 877 00:56:49,350 --> 00:56:50,750 The key puts and takes to get there. 878 00:56:54,190 --> 00:56:56,150 This is, I think it was asked this in the past. 879 00:56:56,150 --> 00:56:57,630 This is very difficult to forecast. 880 00:56:58,030 --> 00:57:00,070 You know there's a series of costs that we manage. 881 00:57:01,350 --> 00:57:05,750 This here is a cost in which we don't control and so you know 882 00:57:05,750 --> 00:57:09,350 particularly on the commodity side where labor, Costco 883 00:57:09,350 --> 00:57:15,190 etcetera, it's just hard to say. Yeah, we saw very inflationary 884 00:57:15,510 --> 00:57:17,790 like strong inflationary pressures for a while last year 885 00:57:19,910 --> 00:57:23,430 and and now we're which obviously makes it very 886 00:57:23,430 --> 00:57:27,590 difficult to reduce COGS you know now we're seeing. 887 00:57:28,110 --> 00:57:30,190 What seemed to be deflationary pressures, certainly 888 00:57:30,190 --> 00:57:37,190 deflationary deflation is a pressure, but we're seeing you 889 00:57:37,190 --> 00:57:40,670 know commodity prices dropped, dropping as as was mentioned you 890 00:57:40,670 --> 00:57:45,350 know as car mentioned a moment ago and. 891 00:57:46,980 --> 00:57:49,780 I think, I mean what do you think it basically the trends 892 00:57:49,780 --> 00:57:51,620 should be deflationary at the commodity level? 893 00:57:51,940 --> 00:57:54,860 Definitely there's that. And then there's also the the 894 00:57:54,860 --> 00:57:57,260 unit economics improve as volumes grow. 895 00:57:57,300 --> 00:57:59,660 That's the other thing we're seeing as we're becoming a 896 00:57:59,660 --> 00:58:02,460 bigger and bigger part of a lot of suppliers, economies of scale 897 00:58:02,620 --> 00:58:04,860 come into play. There's equipment appreciation 898 00:58:04,860 --> 00:58:07,060 that comes into play, equipment that was commissioned five to 899 00:58:07,060 --> 00:58:10,580 seven years ago that used to be a part of the peace price that's 900 00:58:10,580 --> 00:58:13,740 completely amortized. So we'll see situations where 901 00:58:13,740 --> 00:58:16,040 peace price comes down. Because that equipment 902 00:58:16,200 --> 00:58:19,640 contribution has gone away and then just we continued to have 903 00:58:19,640 --> 00:58:22,960 this mentality of continuous improvement in terms of Labor 904 00:58:23,280 --> 00:58:27,040 reducing labor, improving automation and and just continue 905 00:58:27,040 --> 00:58:29,680 to get better at what we do. So we have seen I think every 906 00:58:29,680 --> 00:58:31,680 quarter. We have seen an improvement, of 907 00:58:31,680 --> 00:58:33,480 course, the commodity spiked up and down. 908 00:58:33,680 --> 00:58:36,520 Yeah, just in. General the trend is towards 909 00:58:37,040 --> 00:58:40,630 being more efficient. Yeah, and and totally agree. 910 00:58:40,630 --> 00:58:43,230 Yeah, but lithium prices weren't absolutely insane there for a 911 00:58:43,230 --> 00:58:44,150 while. Yeah, yeah. 912 00:58:44,150 --> 00:58:46,910 And they're recovering now. About like 1/3 of what it used 913 00:58:46,910 --> 00:58:48,270 to be. Yeah. 914 00:58:48,310 --> 00:58:49,510 Yeah. And you know, we're still early 915 00:58:49,510 --> 00:58:52,630 in the ramps. Well, not early in the ramp, but 916 00:58:52,830 --> 00:58:55,070 early in the cost down curve of Austin and Berlin. 917 00:58:55,430 --> 00:58:57,230 Yeah. So it takes time to work the 918 00:58:57,230 --> 00:59:01,510 cost out at first it's a focused on ramp, ramp it brings cost. 919 00:59:01,630 --> 00:59:04,040 Down quality and then yeah. And quality cost. 920 00:59:04,160 --> 00:59:05,680 Yeah. And then once that stabilizes, 921 00:59:05,680 --> 00:59:08,120 we can divert bandwidth to cost reduction. 922 00:59:08,200 --> 00:59:12,920 And so Austin Berlin saw quite a decent amount of cost reduction 923 00:59:12,960 --> 00:59:15,240 on a fundamental basis from Q1 to Q2. 924 00:59:15,240 --> 00:59:17,280 We'll continue to do that work. That will be helpful. 925 00:59:18,960 --> 00:59:20,760 And so we're just gonna keep shipping away at it, yeah. 926 00:59:22,920 --> 00:59:26,080 Package is a big, big element to logistics too. 927 00:59:26,200 --> 00:59:28,400 Logistics is normalizing, which is great. 928 00:59:28,960 --> 00:59:33,430 QQ Bot utilization. Something that your team has 929 00:59:33,430 --> 00:59:37,110 been very focused on, so every bit of it. 930 00:59:38,390 --> 00:59:39,270 Yeah. It's hard. 931 00:59:39,310 --> 00:59:44,110 Logistics is under appreciated. Yeah, the whole thing is like 932 00:59:45,590 --> 00:59:47,750 that was one with tactics, wasn't one with logistics. 933 00:59:48,870 --> 00:59:49,990 Yeah. And we've made tremendous 934 00:59:49,990 --> 00:59:54,550 improvements in cost and on fronts on you know express 935 00:59:54,550 --> 00:59:58,190 costs. We have down down Pre, Pandemic 936 00:59:58,590 --> 01:00:02,260 Express cost levels now. And our goal is to go further 937 01:00:02,260 --> 01:00:06,820 down. So, yeah, so when we look at our 938 01:00:06,820 --> 01:00:10,100 progress from Q1 to Q2 on cost, the way that we look at 939 01:00:10,100 --> 01:00:14,540 internally and normalize for the impacts of mix shift with Austin 940 01:00:14,540 --> 01:00:17,060 and Berlin being a higher percentage of our mix, normalize 941 01:00:17,060 --> 01:00:20,540 for S&X being a higher percentage of our mix in Q2 942 01:00:20,540 --> 01:00:24,580 versus Q1, the sequential cost reduction, it might be the 943 01:00:24,580 --> 01:00:28,420 largest we've had in a while. So anything is it's great work 944 01:00:28,420 --> 01:00:31,680 on behalf of the Tesla team. And we just gotta keep it up. 945 01:00:32,800 --> 01:00:35,160 To get game of pennies, it's like Game of Thrones with 946 01:00:35,160 --> 01:00:39,680 pennies. Mark, do you have a follow up 947 01:00:39,680 --> 01:00:41,440 question? I think you're muted. 948 01:00:42,770 --> 01:00:43,290 Yep. Yeah. 949 01:00:43,290 --> 01:00:46,090 Thank you very much for all the the details on that. 950 01:00:46,610 --> 01:00:49,690 Maybe you could put a finer point on the downtime impact 951 01:00:49,690 --> 01:00:53,730 that you you spoke about in your prepared comments in terms of 952 01:00:53,730 --> 01:00:56,690 production impact and then also to what extent there's a margin 953 01:00:56,690 --> 01:00:59,290 impact from those if? You have a phrase that you're 954 01:00:59,290 --> 01:01:00,690 planning this quarter. Thank you. 955 01:01:06,430 --> 01:01:11,800 Yeah, the the downtime. You know, we don't know exactly 956 01:01:11,800 --> 01:01:14,680 the number of cars impacted because you know kind of the way 957 01:01:14,680 --> 01:01:18,640 that we go into downtime windows for upgrades is, you know we set 958 01:01:18,640 --> 01:01:21,720 aside a period of time, but then the team is challenged to go as 959 01:01:21,720 --> 01:01:24,400 quickly as possible so that we can get the factories up and 960 01:01:24,400 --> 01:01:29,120 running again and minimize that. So it's not, it's not profound 961 01:01:29,120 --> 01:01:31,760 reduction, you know, hopefully it's quite small I think. 962 01:01:31,880 --> 01:01:33,200 We're getting too much into Louise here. 963 01:01:33,200 --> 01:01:35,640 I mean, like we're asking for a level of precision that is not 964 01:01:36,440 --> 01:01:39,730 possible to answer. So let's move on. 965 01:01:40,290 --> 01:01:42,210 Yeah. I think this is unfortunately 966 01:01:42,210 --> 01:01:43,850 all the time we have for today. OK. 967 01:01:44,130 --> 01:01:47,730 So we'll speak to you all in the next three months. 968 01:01:47,970 --> 01:01:49,090 Thank. You very much thank you.