Q4 2021 Tesla Inc Earnings Call
History.
While the reported quarter at over 14% GAAP operating margin.
Lastly, thanks to five and ethylene, but $5 billion of million.
Sure finger by the snow.
There's probably not $1 billion of GAAP net income in 2021, our accumulated profitability since the inception of the company became positive.
I think it makes us a real company at this point.
This is a critical milestone for the company.
So after an exceptional year, we shift our focus to the future.
Texas in 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're focused more on when do 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 in Berlin.
So unfortunately <unk> so.
In Texas, we're putting the model wise with the structural battery pack and the <unk> 46 to eight cells.
And we will start delivering after final certification of the vehicle, which should be fairly soon.
Capacity expansion will continue.
Maximizing output of each factory.
And building new factories in new locations in the future.
Although we're not ready to announce any new locations on this call, but but we will.
And through 2020 to look at new locations and probably be able to announce new locations towards the end of this year I expect.
Sure.
So in 2022 supply chain will continue to be the fundamental immature of output across all factories.
So the.
The chip shortage, while better than last year is still.
An issue.
And.
Okay. So.
There are there are multiple supply chain challenges.
And.
Last year was.
Difficult to predict.
This year will be.
Smooth sailing.
Yeah.
Especially what you do for an encore to 2021 2020.
But nonetheless, we do expect.
So it's significant.
In 2022 of 2021.
Okay.
Comfortably above 50% growth in 2022.
Full self driving so overtime, we think full self driving will become the most important source of profitability for Tesla.
It's.
Okay.
I mean actually if you run the numbers on Robo taxis.
Its kind of nutty.
It's not good for from a financial standpoint.
And I think we will.
Completely confident at this point that it will be achieved.
And.
My personal guess is that we will achieve for self driving this year.
<unk>.
Yes, with regard to out of state level significantly greater than a person.
No.
Yes.
The cars.
In the fleet.
Essentially becoming self driving.
Our software update.
I think Mike might end up being so.
The biggest increase in asset value.
Of any asset class in history.
Specialty.
It will also have a profound impact on improving safety and on accelerating that.
The world towards sustainable energy through vastly better asset utilization.
Let's see so on the <unk>.
Product roadmap front.
There's quite a lot to talk about.
I'm not going to go through every.
Absorption.
The 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.
Oh.
Yes, most of that high level.
The fundamental focus 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 because 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 out chips, reducing the number of chips, we need that.
Drama Central.
And there were not that was not the only supply chain issue.
So there is just hundreds of things.
And as a result, we were able to grow.
Almost 90% while.
Almost every other manufacturer of contracted last year.
So.
That is a good result.
But if we had introduced a new car last year.
With a total bit output would've been the same because of the constraints the chips constraints, particularly so.
If we'd actually introduced an additional product.
I would now.
Then.
I require a bunch of attention and resources on that.
Increased complexity of the additional product, resulting in fewer vehicles actually being delivered.
The same is true of this year so.
So we will not be.
Introducing new vehicle models.
This year it would not make any sense.
So it will still be part of the constraint.
We will.
However, due a lot of engineering and tooling and whatnot to create those vehicles cyber truck semi roadster.
<unk>.
Optimists.
And.
And be ready to bring those two production hopefully next year.
That is most likely.
But it is dependent on.
How are we able to produce more cars with fewer cars.
<unk>.
So.
Sure.
And in terms of.
Priority.
Products.
The.
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.
The vehicle business over time.
If you think about the economy.
Okay.
It is.
With the foundation of economies labor.
Covenant is to stop labor.
So what happens if you don't actually have.
A labor shortage.
I'm not sure what kind of an economy, even means at that point.
That's what <unk> is about.
So.
Yeah.
C treatment.
Or do you want to talk about any okay.
Hum.
Always good right the right time.
Yes, yes.
Yeah sure. So throughout 2021, we focused on growing cell supply alongside our in house 46 80 effort.
Its products provide us flexibility and insurance as we attempt to grow as fast as possible.
We sit today sells.
Sales from suppliers is that actually sort of exceeds our other factor limiting constraints that you mentioned the one.
In 2022 or to say differently 46, 80 cells are not a constraint to our 2020 volume plans based on the information we have but we are making meaningful progress up the ramp curve in Cana, where buildings 40, cutaneous structural packs everyday which are being assembled into vehicles in Texas I was driving one yesterday and the day before.
And we believe our first 46 80 vehicles will be delivered this quarter our focus on the <unk>.
Sale of the pack and vehicles here is driving yield quality and cost to ensure we are ready for larger volumes. This year as we ramp next year.
And the 46 80 impactful installations here at Giga, Austin and are progressing well with some areas producing first parts in the Internet and is also not as bad.
[laughter].
Yes, I was trying to factory yourself accurate here.
I am Super pumped it looks like a really.
Exciting.
Accomplishment for us to bring everything into one Austin factory here in Texas.
Absolutely.
And just to repeat Chris' point, where we are we aren't still we still expect to be part or primarily chip limited this year.
So.
That's the thing that's actually the driver yeah.
And.
Limitation should.
Alleviate next year.
Then probably we transitioned into a.
Sell limitation battery cells.
Total gigawatt hours of cell limitation, which is when the 46 80 will become very important.
Yeah.
Thank you very much and now Jack has some opening remarks as well.
Too long okay. Okay.
Yes, Thanks, Brian .
As Ilan mentioned 2021 was not financially transformative here for the company.
If we look across the full year 'twenty line and compare that to 2020, our autumn amount of gross margin excluding credits rasp over 600 basis points enabled by work on cost reduction and utilization of our Shanghai factory for exports and accelerating demand.
Opex 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.
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.
For Q4, specifically automotive gross margin excluding credits increased to 29, 2%, which is our highest yet we.
We do continue to see some impact of higher pricing on certain models and trends as was the case in prior quarters.
Keep in mind that due to backlogs changes in pricing will generally impact our financials in future quarters.
Supply chain challenges and port congestion resulted in a significant increase in our expedite 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 two tranches of the CEO stock grant becomes 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 access expedite, let's just over $700 million and acquire.
Our 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.
As 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 in Shanghai factories.
For quite some time now these factories have been running below capacity due to macro challenges with supply and logistics.
As Ilan 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.
Despite these constraints it's important to begin the ramp of Austin in 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 and in factoring.
We're 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 them excellent talent and headwinds Hello.
We do expect to continue to see stronger operating margins as we grow our volumes and improved operating leverage.
Over a longer term horizon, we are quite optimistic about the expansion of margins down 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.
Congratulations to the Tesla team for a terrific 2021, and thank you to our suppliers, who supported US looking forward to another great year I'd like to to the second.
You to suppliers.
A lot of players.
But let late nights weekends vacations.
Around the world.
We're very grateful for that.
Thank you very much.
Let's go to the Q&A from the Investor side. The first question was on 46 80 cell switch we already answered so let's go to the second question how.
How is the progress of the $25000 compact car can you give an update.
We will.
We're not.
Currently working on the 20.
25 Tuscola car.
We.
You know at some point we will.
We have enough on our plate right now too much on our plate frankly so.
At some point there will be.
I think thats sort of a question about sort of the wrong question.
Really the thing that overwhelmingly matches.
Ah witness the car autonomous.
And at the point of which is the autonomous the cost of transport drops by I don't know if that grow for a while.
Thank you.
Next question from investors is since we're talking product Roadmaps today, how do you view domestic cooling and heating in the context of accelerating the sustainable energy transition and how my Tesla HVAC and heat pump adventurous spirit.
Okay.
Yes, I think our emission 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 power wall system, but offset so it's very impactful.
And we have learned a lot about how to make.
Capable unreliable heat pumps.
That work in hall, environmental conditions and are excited about the idea of working on that problem Monday.
And put it that way, it's definitely aligned with our mission to transition to sustainable accelerate the transition to <unk>.
Yes.
Really.
It comes quite a compelling solution.
Good consumer.
You integrate.
Okay electric vehicles charging.
Solar.
<unk>.
Energy storage.
Hot water.
HVAC.
It's been a very tight compact package.
It also looks good.
It just doesn't exist.
The integration of those systems in our house because Lars.
Hey, Brian .
The increasing of the systems in our house or no different than the integration of those systems in vehicles only differences, yes, we do it on a vehicle wastewater that vehicle and then.
So a constraint on massive volume of energy, it's like you get the house, you're like Wow, if they've got an easy problem yes.
Obviously those systems are all disparate and what we've been doing with power wall and charging solar is integrating them more and more the next logical step is obviously HVAC and water heating. So we will do that and we will integrate it probably better than anyone else, but as you said, we have a lot of stuff on a quite yeah. So.
And obviously the integrated.
And are you going after everything.
The car can be like a housekeeping just heat and cool things.
Because I know youre coming home.
Type of thing.
It is still needs to be like.
Randomly that temperature, we're hearing out there or.
Yeah.
Yes exactly.
So do sensible things and.
Pete.
Work really well I think it would be interesting.
Quite a game changer down the road.
So we got a lot of fish frying.
So it is a thing we will do but we're not committing to a timeframe at this point.
And people should do it anyway, if somebody else wants to acquire Rguest.
Thank you for beneficial for achieving the goal here.
Okay.
Thank you. The next question is would you consider splitting FSB packages into perpetual and term licenses with a higher tier for both options for commercial use.
<unk> license could be attached to individual business and not the vehicle itself.
No.
So it sounds maybe too complicated.
We're just going to focus on like what sorts for fully considered lowest cost for.
While a kilometer.
Driving.
And these other.
So.
That's what matters like headboard Henry.
Maximize the efficiency of particularly with one place to another.
And then and then.
Charge.
So im in a sensible way, including the charging infrastructure, that's a big part of the second charge with mining and trucking of energy.
Thank you.
Next question is is dojo on track for summer 2022, and what challenges. If any are you working through his doctoral necessary for FSD to operate better in cities like New York City.
On a separate note where should we expect the first implementation of the implementation of Tesla bonds in your factories.
Okay I have a few questions on that six questions.
Yes, industrial appears to be on track for.
Doing something useful in the summer of this year.
<unk>.
I think the Parisian.
First of all that really matters is at which point.
When does it become.
More competitive than GPU cluster for training.
And also the GP youre closer to getting better so.
It's a moving target.
But that's the the goal I've set for the team is.
B.
Yes.
Yes.
FSP team running our <unk> supercluster.
Please tell me that they walking you start joins that that's the best way.
Elisa.
Yes.
Yeah August sort of thresholds.
And I don't know when that.
I wouldn't say like success is 100% certain here.
Thanks, John .
Just generally want to overestimate.
Eating options underestimate ourselves.
Okay.
But it does seem as though we might pass that threshold next year.
<unk>.
Yes.
Correct here well.
The data is not needed for full self driving.
But it is.
A cost optimization.
<unk> vast amounts of video data.
Okay.
First organization also.
The rate of improvement.
So if you can please you can train models faster.
And have a shorter duration interval then you can make progress faster.
So.
But not everything can be distributed to its only a deep gpus.
So there's some elements of sterilization there so.
And then if soldier is competitive then it does seem like the kind of thing where we would offer it to other companies that wanted to do.
That training this business.
Very much so narrowing that training optimized.
System.
But in theory, it should be better than <unk>.
General generalized computing platform or <unk>, which were not really intended for.
The pixel trader is not right.
Correctly intended for optimizing training a vote.
Networks.
We just happen to work rather than Cpus most cases.
So significant Dodgers like giant ASIC.
Optimized.
Knowing that training, especially video.
Hopefully you like things.
But.
We're not saying for sure Jojo will succeed.
I think it will.
We would encourage those who think this is an interesting problem to join Tesla.
<unk>.
And.
Yes.
Sure.
Thank you and have a diverse use of Tesla box or whether it's in the factory or elsewhere.
Yes, the first use of the tests.
Optimists.
Documents name seems to be sticking can do it internally.
Okay.
Ocular subprime.
Yes.
Okay.
Yes.
If we can if we can't find a use for it then we shouldn't expect that others would so the first use of that.
The total darkness.
<unk> would be.
At Tesla.
Kind of like moving.
Parts around the factory or something like that.
Okay. Thank you very much.
The next question on insurance when do you plan on having your insurance services are rolled out in all the states international rollout timing in markets that have Tesla insurance, what kind of uptake rates are you seeing.
Yeah.
We currently offer Tesla insurance in five 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 it should be clear like we are pushing very hard for California to change the rules to allow informatics, which basically means that.
Aerospace as you were driving is measured.
So.
Turning to <unk>.
Current California rules are contrary to the best interest of the consumers in California.
And should be changed.
Yes, and that's evidenced by what we're seeing in Texas, Yes.
And in this market now for about three months.
And what we see in the data is the frequency of collision by folks who are and were given a feedback loop on how they are driving quite a bit lower.
And the frequency of collision otherwise, yes, reschedule direct feedback on whether they're driving safe and to drive safer their insurance costs less soy drive safer.
That's great. It's encourages Tesla insurance with informatics, and real time feedback encouraging safer driving and rewarded.
Monetarily scrape exactly until.
And so we've seen that so far in Texas takeaway take rates have been quite strong and we measure that on the conversion rate from when folks.
To see what their monthly rent 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.
And then you've had enough history in Texas to see what does the loss ratios Mcclain and how do the economics of the program work and we're on the right track there as well.
We're comfortable with what we've seen in Texas to move as quickly and to scale this across the U S.
Specifically on the question about when we will be in all states. This is a slow process because of insurance.
Insurance being regulated at the state level.
And so you 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 an enough locations that 80% of our customers within the U S.
Could choose to sign up for Tesla insurance, if they wanted to.
There'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 states becomes a little bit less effort than the prior that's one we'll turn our attention to the Europe market.
We might be able to do that by the end of the year and starting to get work on Europe by the end of the theory on what we'll have to see how we progress in the U S.
Okay. Thank you next.
The next question is what is your expected Max capacity from each of your current factory stream on Shanghai Berlin in Austin and timing for new factory announcements.
I don't think we want to comment on that.
Yes.
Okay.
It's always possible to increase the output of any given factory.
So you say well, what's the Max capacity well difficult to say what that makes Christy is because we put a lot of evidence with your increased capacity quite a lot.
I think it does.
Look at the Big picture.
Initially you always want to increase capacity at one factory because.
Youll logistics cost of transporting.
Cars.
It has to be considered especially as the cars become more affordable.
Do 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.
<unk>.
So in the U S with for example, with.
Giga, Texas coming.
Coming up where we were.
Once you deliver the same otherwise that are going to be.
Eastern two thirds of the United States from Swiss factory.
The logistics costs are going to be much less.
We will continue to increase output.
And three months.
And in Nevada.
And Anna Chenghai end.
<unk>.
And as I said, a beginning of Covid.
2022 years.
The year, we will be looking at factory locations to see what makes the most sense.
Possibly with the <unk>.
Some announcement by the end of this year.
Yes.
Thank you and the next question is what are the biggest obstacles for cyber truck volume production Besides battery shortage.
Yeah.
Okay.
Alright batteries will probably not be the limiting factor in seven truck production with a lot of new technology and.
So I'll correct that.
We will take some time to work through.
<unk>.
And then there was a question of like what's the average.
After the cyber truck and taught degree is that affordable.
Right.
You can make something infinitely desirable but.
If it's not affordable that will constrain people's ability to buy it because we don't have money.
I was worried more about like how do we make this hybrid truck.
Portable.
Despite having some technology.
That's that's the thing that will really set the the rate.
They're aspirational, we'd like it to grow.
So it's just a rough order of magnitude, we'd like subtract here at least on the order of <unk>.
Ultimately in vehicles here.
But it'll take us a moment to get to get to that level.
Thank you. The next question is.
How much of Tesla margin improvement this from number one economies of scale number two.
Production design production line design efficiencies number three reduce 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.
Yes.
Basically yeah, there are essentially four major factors and cleanup over the last year to the margin improvement in the company.
And there are no particular order here, but these are the big ones. So are 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 to come out of lines vehicle that kind of a higher profit in the monitoring.
And so that is helpful on our margins and then actually increase the volume on that program.
It's labor efficiencies.
Thanks costs amortization, they improve in our cost go down as well.
The second one heritage is localization in Shanghai has been a huge help for margins for the company.
And the.
The obvious things around logistics antibodies has.
Is it a big part of that but there's also a factor.
Factoring in 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.
If you recall at the beginning of the year. We're also we're in a transition to the new version of the model S and final acts and so as that has ramped over the course of the year.
That has been helpful.
And then we've also done <unk> price increases.
In certain markets on certain models.
Much has helped them.
So.
Generally the story at a high level.
And as we look over the next.
A quarter or two as I mentioned in my opening remarks in the last call as well.
We we have ramp inefficiencies from the launch of Austin in Berlin.
We also have pressures coming from inflation supply chain raw materials et cetera.
And so you know where that nets out is hard to say in the immediate term and we obviously as a company on driving to increase margins as much as we can but I just want to be realistic that we're launching two factories simultaneously here.
Unavoidably will add cost to the business as we do that.
And as we look further out.
And I mentioned this in his opening remarks as well.
And the software portion of the business I think is the one to really pay attention to him and full.
Full self driving.
<unk> features.
Get rolled out tomorrow and more folks I mean for me personally I prefer to drive my car with PFS data on.
And I think as more and more people experience that take rates there and then as we work towards the around the taxi space is actually quite a bit of upside.
Margins from a software perspective.
Yes, I think.
Yes.
Basically.
Everything pales in comparison to the value of robo taxi or personal driving.
It's just.
And just I mean that just tends to overwhelm everything.
Can you just go from having an asset that is.
As the utility of <unk> 12 hours a week for passenger car too.
Maybe around 50 or 60 hours a week.
So five X increase in load.
The utility of <unk>.
The asset.
Cost can change.
Yeah. So.
Thus, we're just things just.
Just kind of put your mind.
Thank you.
The last question from investors is implemented on level four autonomy could be achieved this year is it based off initial FSB beta rollout of experience.
Is level four ability predicated on dojo being completed online.
As mentioned earlier <unk> is not required for wholesale driving.
It should.
It should have a positive effect on the cost of training.
<unk>.
As much as a question like this to get to get to full self driving but really.
It's kind of like a march of nines of reliability.
$99 99, 9% reliable for $9 90, 990, 999% business gets muddy so.
So you want to get too exposed to perfection as possible.
So.
Frankly stinks.
Safer than a human is a low standard.
Not a high standard.
People are very very lossy often distracted.
<unk>.
No.
Texting.
Okay, Alright, so it was remarkable.
So we don't have more accidents.
Alright.
Okay.
Yeah.
Being better than human I think its system.
Relatively great.
Very forward frankly.
How do you be 1000% better or 10% better.
Yeah that's.
It gets us much water.
But I think anyone who has been in the FSC beta program.
If they were just two plus the progress of the beta.
Interventions per mile.
Uh huh.
It's obviously trending too.
A very small number of interventions per mile.
And then paste improvement as fast.
And there are several profound improvements to the.
The FSC stack that are coming.
In the next few months.
So.
Yeah.
I would be shocked if we do not achieve.
Full self driving safer than a human this year I would be shocked.
Okay.
Thank you, let's go to analyst questions now and the first question comes from Jed <unk> from Canaccord, Jed feel free to a mute yourself and ask a question.
Hi, Thanks.
And congratulations on a great year.
I guess, Mike My question's around Mega.
Mega Pack network your energy business and so as we look at.
<unk>.
Strategy or the supply chain constraints that you mentioned.
You have two different strategies, where it seems like with Mega pack and power wall and I think the power wall was answered with $46.
21, 70 opening up so I was wondering if you could just talk about.
The supply chain and LLP for the Mega pack and what we should expect for that.
Yeah.
To be clear, we do think that all stationary storage.
Firewall and Mega pack will be will transition to.
And iron based system.
Basically in non nickel system.
Manganese is also key.
Part of the future grid, primarily iron.
It just comes out of iron nickel.
Net.
As.
Formed in the star before a supernova hygiene.
Hi, Julie.
So.
Kind of iron.
Iron is.
So that's.
That's a ridiculous amount of iron ore metals ridiculous amount of lithium so.
So you can really expect all stationary storage tier transition too.
Iron.
Overtime.
And like I said with whats manganese is like a wildcard.
So let's not manganese.
Uh huh.
And I should say like we did short change the energy business last year.
And that vehicle took priority over.
The energy side so.
And ourselves, but on Geos, yes.
<unk> exactly.
So.
Yes.
Yeah.
But.
We do.
We see a very.
I mean long term, probably terawatt hour per year energy business, yes.
While our lives.
<unk>.
Yeah.
That's helpful. Thank you. So so you're seeing what do you see that 22 is kind of the opening of the energy business Reaccelerate.
It's hard to predict 2022, because we still have lingering supply chain there are still lingering supply chain issues globally.
<unk>.
But I think the chip stuff at least the chip side of things appears to.
It looks like it will alleviate.
End of this year or 'twenty three.
A crazy number of chip apps being both which is great.
<unk>.
The sheer number of chip bags being built right now is exciting to see.
So, but it could be other issues, we're trying to anticipate that as much as possible but.
You know predicting the future is difficult time, Nicole has definitely ticked road this year.
Yes, it will grow this year for sure.
Re.
If we're simply.
We were able to respond to demand.
Microbiology, two or 300% or something.
As opposed to.
50 per centers.
Yeah.
I think it's exactly that I mean thats a question of does the double triple quadruple.
I think our plans are pretty ambitious for Mega pack this year and storage in general, yes exact amount of growth is hard to know.
But ultimately 19 lines point.
The growth of this business I mean, we need to be growing faster than the vehicle business.
And it will it will naturally grow fast in the vehicle business.
Once once we can reshape the temperature of constraint frankly.
So.
It will grow like cowboy salary expense Greg.
Sure.
It needs to.
And our primary mission is to accelerate sustainable energy.
He has been our primary mission.
We're trying to stay true to that.
Thank you and the next question comes from Ben Kalo from Baird.
Hi, Thanks for taking my question.
I was wondering on the R&D front, because like you said you have so many fish frying.
How do you organize R&D.
Efforts.
So that you can start talking about all these new products is there like an incubator or.
Some other things like that but just structurally as curious I'm curious about that thank you.
So we don't have incubators.
Yes.
Uh huh.
Research centers research, there and our research centers.
Yeah.
We're working on things that go into our products.
Yes.
This is a useful product.
Yes.
What really needs.
And we're just like let's make this thing.
Designer and iterate faster.
And then.
Figure out how to make this at scale at a reasonable price.
Last part is a super hard work.
So many times I've said prototypes for Egypt production is hard.
If we get to about as William prototypes.
Part of that.
Yes, actually I should reach scale production.
And have.
Cash and exceed cash out that's the Super Super hard part.
No.
Everybody needs to be in the factory offload ought to be able to understand that last part of the equation.
And if you're in a research center.
The hearing on separately as like installation for actually making products.
We don't think of it as R&D and product development is just one fucking it's Greg.
Well I'm going to just make great product sector.
Yeah.
Is it the same general Societally those way too much.
Value placed on the idea.
It looks like you know like the <unk> like you had have kept the idea of going to the moon vessel the hard part.
Okay going to the Moon is the heart block by block.
And the thing is like that is true for really most products.
It's just way too much value pricing idea.
Versus execution.
But we havent ideas.
The Brazilian ideas why it isn't we don't do it let's just go through and say, which one are we actually going to be.
We go through the bloodstream chairs are bringing to volume production.
Let's see.
To actually do that desktop.
And the closer you are to it.
Applying blood sweat and tears to actual production the faster you will be able to bring new things into actual production.
Yes, exactly what type of feedback loop with production.
Looks like.
We're sitting in right now literally looks over the.
The <unk> production line.
Like the offices are integrated.
Into the factory.
Thank you.
Thank you very much. The next question comes from Toni <unk> from Bernstein.
Yes. Thank you for taking my question.
I have two please firstly you spoke a lot about FSD.
And how the economics could be very attractive going forward I'm wondering if you could just share.
Your current attach rate might be for FSD on your vehicles.
How to think about the progress of your attach rate of revenue and SSD, let's say in 'twenty one versus 'twenty.
And.
How much deferred revenue.
For FSD was drawn down during the year and I have a follow up please thank you.
I think youll FSC of stuff, you really don't want to be looking in the rearview mirror.
It will not be a good indicator for the future.
This is where you need to look up the front windscreen.
So.
Uh huh.
Because it is such a profound step change.
I mean effectively long time every car will have FSP.
So.
And the value of that will be.
A very big number.
Like I mean, just look at this as.
Asset utilization.
And we have.
Our passenger car, which.
He has driven maybe one and a half hours.
We added a day on average maybe 10.
10 hours 10, 10, 12 hours a week, but a lot of cars in parking lots.
Turning money not just driving the cars with storing them all over the place.
<unk>.
We can get rid of a lot of parking lots.
Do you have a car that is operating all the time.
Well, there will be a challenge with traffic.
So.
And I'll go back to this little tiny Baby Company, <unk> company, which I initially started as a joke and now.
But now I think it actually can be quite essential to alleviating be insane traffic that will happen. When cars are autonomous cause you to 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.
I mean, it's.
We're going to be I think it will be cheaper too.
Cove point to point.
With a robo taxi, which is an autonomous Tesla, which every car we have made in the past three or four years will be capable of that.
And then a bus or a.
For subway.
Yes.
Cost less in the subsidized valuable bus tickets.
So.
But we won't get to I'm not going to take the bus.
Okay.
The cost too.
Fragrance sake.
Two a toolbox to traveled 10 miles point to point.
Nobody's taking the bus.
Especially in cold weather, or it's dark or maybe top of dangerous or.
How about you know.
Corridor.
Pure just do not understand how profound change this is.
So it's not like some little feature.
Select the most profound software upgrade maybe in history.
Millions of cars suddenly have.
Four or five times utilities, maybe.
Overnight.
I don't actually know how to quantify that financially except that it's some big number.
Okay. Thank you for that.
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 cyber truck.
250000 vehicles.
If there is no $25000 vehicle being worked on.
Really realistic to think that you can sell more than 3 million vehicles with two very high volume cars cyber truck in 2024, or how do we how do we think about that or what else is missing in that equation.
Yes, I mean as is apparent from the questions that.
The gravity of the gravity of full self driving is margin.
There is not fully appreciated.
If an asset has five times more utilization number.
It's like it's like defining the constant asset by fine.
So if you're a 50000 dollar cars like having a 10000 dollar call herbicide.
Better than that because you didn't want to drive to a person.
Person can be engaged in productivity or amusement instead of having to.
Owners, we drive through traffic.
So, it's probably better than five times.
No.
Yeah.
Basically if the cost of our cost structure at all.
We will still sell as many as we could possibly make.
Thank you and our next question comes from Pierre for <unk> from New Street Research.
Hey, Thank you for taking my question can you hear me well.
Yes.
I wanted to come back on the battery. So it's great to hear on one hand that you guys expect to sell or exit first Calgary as part of <unk>.
This quarter and at the same time that you don't really depend on that ramp to to achieve your.
What you hope to achieve in terms of significant volume growth this year.
And the question I have is.
I understand where does the ramp up 46 80 internally.
But I'd be curious to hear you talk about how you think about 46 80 as being a form factor that's your suppliers crudes.
Docks as well.
And how you're seeing the loan growth in the greater scheme of things.
You know what does 46 HEB come easy.
Is it going to be outside of Tesla is the largest form factor for batteries is it something that you guys are going to.
To deploy in all cars whatever other chemistry also you're not in.
In the May get back in.
All you announced your storage business and do you expect to eventually a lot of other companies to use that form factor as well.
Yeah.
On the Forest city as a form factor, yes, we've engaged with.
Number of our partners our suppliers.
<unk> on the form factor and Darryl working on it.
And.
A look at it the way we look at it as a way to drive fundamental cost efficiencies in production.
And also ultimately designing vishal itself to drive the cost down of the shell.
And so.
So that's that's what's engaged we're engaged because we think it's a good form factor. They are engaged because they think it's a good form factor in where we want people to make it for sure.
To the question about should everything be 46 80 it.
It doesn't have to be in the end it's about.
Cost competitiveness scalability in manufacturing and when you compare like iron cell with a nickel cell for example, like there are some just because.
<unk> space differences and what happens.
In certain corner cases that would drive different form factors and we just have to be.
Cognizant of that and designed to that so it isn't like the ultimate form factor for all things Theres other form factors that could be better for an iron sell for example.
So.
We don't use <unk> at all for the plan.
T cells.
Okay, Thanks, and I have a quick follow up on.
Chip So you spoke to it that's about all this.
<unk> agenda supply difficulties and I was wondering if you could give us some color on.
Lighter power chips you need.
Our investors.
Power systems Johan.
Putting together vascular slides a multinational.
Logic chips the situation is different between the two and should we understand from the situation today that youre working very hard and so at expanding the scope of your supplier and should we expect like a.
That's not to take on board additional suppliers in the near term.
Especially on the private side.
Well last year was chip hell of many trips.
So silicon carbide voters, one or certainly one of them but.
Honestly, there's a lot of annoying very boring parts yeah.
Kind of very simple.
Controller chips.
One of them all literally.
[laughter] Yeah basic.
Controls has referenced is oscillators very boring things yeah.
Exactly.
Sure.
As you move your seat back and forth.
Because it was a big problem.
Okay.
If you can make sweet.
So I like but a lot of these things were leaving any I think theres.
There is some degree of the toilet paper problem as well where.
The toilet paper shortage.
Shrink over at <unk>.
Obviously it wasn't really.
Suddenly a tremendous enhanced need for aflac.
It's just pure product in order to bring.
Got every paper product you, probably you could possibly.
<unk> basically.
Wasn't sure if it was like a real thing or not actually took my kids to the HEB at Walmart and Texas, just confirm that brings real indeed it was.
And there was plenty of food in.
Just nothing no paper products.
But the Nikola splits up so.
And our choice for.
Fuel to panic about.
<unk>.
Eric.
The.
And what was coming.
12 have released your policy.
So I think we're sort of just a lot of companies over order chips and the buffer chips.
<unk>.
And so we should see and we are seeing in aviation.
And.
Almost every area but.
The output of the vehicle is.
It goes with the look the least lucky.
Yes.
What are the most problematic item an entire car isn't there's like.
At least.
10000 unique.
Parts of the car.
Hi.
In a way more than that.
Throughout the supply chain and such.
Which one is going to be the least lucky one this time, it's hard to say.
Yes.
On a go forward basis right.
To continue to drive simplification. So there are fewer parts fewer of them on the power side in particular.
It's still like.
In areas like technological development, where.
The next.
Next chip can do the same thing with less die area. So like the total fab required to accomplish the function goes down. So so there is still.
Room to grow without needing more fab capacity, but in general there is all of them are shop capacity coming so that's like a win win there yeah.
Yes, it's not.
On a long term thing Gary.
Crazy Mount Chip of singles, Okay, great.
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 I will speak to you again in three months time have a good day bye bye.
Okay.
Yes.
Okay.
Okay.
No.
Okay.
Okay.
Yes.