Q2 2022 Tesla Inc Earnings Call
Speaker 1: including those mentioned in our most recent filings for the SEC.
Speaker 1: During the question and answer portion of today's call, please limit yourself to one question and one follow-up. Please use the raise hand button to join the question queue.
Speaker 1: But before we jump into Q&A, Elon has some opening remarks. Elon? Thank you, Martin. So just as a Q2 recap, Q2 was a unique quarter for Tesla due to a prolonged shutdown of our Shanghai factory. But in spite of all these challenges, it was one of the strongest quarters in our history. Most importantly, in June , we achieved production rate close in both Fremont and Shanghai. And as a result, we have the potential for a record-breaking second half of the year.
Speaker 1: I do want to emphasize this is obviously subject to force measure. I think things outside of our control, the past few years have been quite a few force measures. And it's been kind of supply chain hell for...
Speaker 1: several years. We create credit to our horse and tezlis play chain team for overcoming and saving difficult challenges. And huge thanks to the tezlis, a Shanghai factory team who sacrificed a lot to get the factory back up and running in June and achieve a record output.
Speaker 1: So also making good progress with production ramp with Berlin. We achieved important milestone of a thousand cars week in June and we're expecting our giga Texas.
Speaker 1: to which it took exceed the 1000 vehicle quick milestone and hopefully in the next few months.
Speaker 1: We're currently making the cars with the 2170 cells. We'll address some of the 4680 questions later in this call.
Speaker 1: But it is worth emphasizing that we have enough 2170 cells to satisfy oil vehicle production for the remainder of the year. So we're not dependent on 4680. 4680 will be important next year, but it is not important this year.
Speaker 2: Okay.
Speaker 1: That's it. We haven't solved the second generation of manufacturing equipment, but 44680 cells in Texas. We've got 44680 cells in Texas.
Speaker 1: and even at our established factories like Fremont and Shanghai, we continue to expand capacity.
Speaker 1: Regarding autopilot, we have now deployed FSD Beta with City Streets driving capability to over 100,000 owners.
Speaker 1: They're very happy with the capability of the system and will continue to improve it every week. We've now driven over 35 million miles with the FSD beta. That's more autonomous miles than any company we're aware of. I think probably more than that might be more than any other whole other companies combined.
Speaker 1: So, and that mileage is growing exponentially.
Speaker 1: With regard to manufacturing and technology, about five or six years ago, we said we wanted to become the best manufacturer in the world and that that is somewhat counterintuitively to some people what will actually be, I think our strongest competitive advantage.
Speaker 1: We're superprome-e-facturing here at Tesla. And in general, we want to encourage other companies to be superprome-e-facturing. And um...
Speaker 1: In general, I think it is a very important thing to do. We need to make stuff and make it efficiently, and that's very factually. And that's where you actually... That's where you actually... And that's where you actually... And that's where you actually...
Speaker 1: So, um,
Speaker 1: So we've made a lot of advancements in manufacturing processes. As we now show in the shareholder deck, thanks to the largest castings, we make the world's largest castings, we reduced body welding robot count by 70% per unit of capacity in Orson and Boleyn. So that's...
Speaker 1: you know, call it roughly a body shop that is roughly three times smaller than would normally be the case.
Speaker 1: Anish says also light a cheaper and has superior noise vibration and hoshes. And has superior noise vibration and hoshes.
Speaker 1: So it's good on every level.
Speaker 1: But the journey is not over, we'll bring another level of simplicity and manufacturing improvements with cybercruck. The journey is not over, we'll bring another level of simplicity and manufacturing
Speaker 1: and future products that we're not quite ready to talk about now, but I think will be very exciting to unveil in the future.
Speaker 1: Our safety team also introduced a feature that tensions seat belts if the vision system detects imminent collision, which has never been done before. So you can imagine that if you have a seat belt that only tensions upon impact, you have very little time to tension the seat belt.
Speaker 1: If you're going to be the cars, whoever you've got to be crunching,
Speaker 1: to trigger the seatbelt tensioner. But because we have vision, we can actually see that a collision is about to occur with 100% probability before it actually happens. And so we can tension the seatbelts and we can even adjust the airbag deployment because we can see, not just feel. This is a fundamental safety advantage that Teslas are now able to offer.
Speaker 1: And then there's also an over-the-air update. So if this is something that will...
Speaker 1: that will be in place in all cars that have at least a23 Hardware.
Speaker 1: In conclusion, we exit Q2 with a stronger production rate than ever before. Our team continues to focus on Savitruck production readiness and some future platform design. We are expecting to be still expecting to be in production with the Savitruck middle next year.
Speaker 1: And I...
Speaker 1: We're very very excited about that product. I think it might it might actually be the obvious product ever
Speaker 1: Let's see, and FSD beta is on track to be released for all of North American customers before into this year. FSD beta is on track to be released for all of North American customers before
Speaker 1: And hopefully, if we forget regulatory approval, we'll also be releasing it hopefully in Europe and some other parts of the world.
Speaker 1: We're hosting our AI Day in a few months. I think people will be amazed at what we're able to show off in AI Day. So basically, there's a trans not to look forward to in the second half of this year, and I want to thank all of our employees and suppliers for their super hard work during these challenging times.
Speaker 1: Super appreciate it. Thank you. Thank you very much. And Zak has some opening remarks as well.
Speaker 3: Yeah, thanks, Barton.
Speaker 3: I want to start by congratulating the Tufts La Team on excellent execution during the second quarter.
Speaker 3: Although our production volume reduced sequentially due to COVID related shutdowns in Shanghai, we made substantial progress in nearly every area of the business. And in particular, our global vehicle production rate as we exit at the quarter.
Speaker 3: Our Fremont factory supported by our Reno team reach new production records, the Shanghai Factory Regimental Production, and our new factories in Austin and Berlin are progressing well to their initial range.
Speaker 3: Additionally, our energy business achieved record gross profit with the highest solar volumes in many years.
Speaker 3: I want to personally thank the entire Tesla team as I know many of you are listening, given body of remarkable and relentless pursuit of excellence in support of our mission. I also want to thank our suppliers for their support during another complicated quarter.
Speaker 3: On gap automotive gross margin, it declined sequentially to 27.9 percent. Temporary decline in Shanghai production volume meaningfully impacted margin, including idle capacity and factory restart costs and also had implications on the mix of regional deliveries.
Speaker 3: Additionally, as discussed on previous calls, we are working through the ramp inefficiencies of our new factories, which are progressing well but have had an impact on margin as those factories come online.
Speaker 3: While we continue to see a benefit from prior pricing flowing through, which experienced some foreign exchange related headlines, our costs are continues to experience across increases from inflation, commodities, and logistics. The cost increases from inflation, commodities, and logistics.
Speaker 3: The energy business progressed well in Q2, aided by alternate solar supply coming online and progress on unit economics.
Speaker 3: Our storage business remains component constrained on both Powerwall and Megapack, which we hope will alleviate to some extent in the second half of the year.
Speaker 3: We are greatly appreciative of the patience and flexibility shown by our customers while we work through these challenges.
Speaker 3: Within operating expenses, Austin and Berlin related start-up costs have slammed down as these factories have moved into production and their costs are now reflected in automotive costs.
Speaker 3: Additionally, we converted a majority of our Bitcoin holdings to fiat for a realized gain, offset by impairment charges on the remainder of our holdings, netting a $106 million cost to the P&L included within Restructuring and Other.
Speaker 1: We also incurred restructuring charges related to targeted staffing reductions. Yeah, actually, it should be mentioned that the reason we sold a bunch of our Bitcoin holdings was that we were uncertain as to when the COVID lockdowns in China would alleviate. So it was important for us to maximize our cash position given the uncertainty of the COVID lockdowns in China. That's really our strategy.
Speaker 1: Certainly open to increasing up with coin holdings in future. So this should not be taken as some project on Bitcoin. It's just that we were concerned about overall liquidity for the company given code shutdowns in China. And we have not sold any of our doors went. And we have not sold any of our doors went.
Speaker 1: We still have it. Thank you.
Speaker 2: Aight.
Speaker 3: Despite these challenges, we were still able to achieve one of our strongest operating margins of 14.6%.
Speaker 3: Our free cash flows were impacted by working capital related to the Shanghai factory shutdown. However, we expect this will show as a benefit in Q3 as our working capital related cash flows re-stabilize. Until next month, regarding the
Speaker 3: As we look ahead and as you all mentioned, we are positioned for a record breaking second half of the year. We are quite excited about this. We are quite excited about this. We are quite excited about this.
Speaker 3: A couple of things to keep in mind as we progress. Austin and Berlin ramp inefficiencies will continue to lay on our margins for the balance of the year. However, the impact should reduce as we increase ramp.
Speaker 3: Second, as we've mentioned before, we expect to continue to see recognized global pricing to increase.
Speaker 3: as our backlog flows through. However, macroeconomic related cost increases will also continue to be part of our story.
Speaker 3: And finally, despite losing more builds in Q3 than expected, we're still pushing to reach 50% growth this year. This target has become more difficult, but it remains possible with strong execution. And as Elon mentioned, no more forced measure events for the balance of the year. There were a lot of force measure in last two years. I think that's for sure.
Speaker 2: Thank you.
Speaker 1: Thank you very much. And now let's go to the questions from investors. And the first question is, Chinese EV manufacturers seem to be doing a better job than their Western competitors, excluding Tesla, at innovating in software and design. How can Tesla make sure the company's staying ahead of those manufacturers both within China and outside of China? And both within China and outside of China?
Speaker 4: floating.
Speaker 1: Right now the best Chinese EV manufacturer is Tesla China. We're actually doing the best thanks to our incredible team in China. But I have a lot of respect for the Chinese EV industry.
Speaker 1: How many factors in the United States factors in particular? I think there will be a force to be reckoned with worldwide.
Speaker 1: They're very smart and they're hardworking and I think anyone who is not. It's not.
Speaker 1: any company that's not.
Speaker 1: As competitive as them, well, obviously suffer a mock <expletive> of client. So I say we have a lot of respect for the their clients. in China and then the capabilities.
Speaker 1: to suffer a mob should decline. So I say we have a lot of respect for the companies in China and then the capabilities. Yeah.
Speaker 1: Thank you. The next question is, when will Tesla have a unified vector space for both static and moving object network? Will this be a V11 or later version? If the latter, can you explain what makes it a difficult problem in layman terms?
Speaker 1: Okay, this answer will be understood by.0.
Speaker 1: This answer will be understood by 0.001%.
Speaker 1: of the audience, I think, most people don't know what a unified subfactor space would actually mean. It essentially would be if you can take, if instead of knitting together static and dynamic objects in C++, if they can be knit together at the neural net level, then you don't need to reconcile them within C++ heuristics.
Speaker 1: That is an octetually better way.
Speaker 1: to that's like that's the most desirable outcome.
Speaker 1: I think it's probably not necessary to achieve full self-driving, but it would be...
Speaker 1: a slight improvement in the efficiency of the self-driving.
Speaker 1: And that's something we want to get to.
Speaker 1: Yeah, this sort of nirvana situation is you have surround video auto-labeling of all static and dynamic objects and you have then surround video inference.
Speaker 4: with the
Speaker 1: with spatial memory as well.
Speaker 1: And that's, I mean, I think it would.
Speaker 1: almost certainly there before the end of the year.
Speaker 1: Yeah, I'm sure how many people would understand that.
Speaker 1: Sounds good. I should say also we are also confident of improving the frame rate as we...
Speaker 1: as we delete some of the legacy neural nets.
Speaker 1: We think we might be able to get to the frame rate.
Speaker 1: of what the cameras
Speaker 1: maybe up to 36 FPS, which is actually a lot of frames considering say front cameras. It's only comfortably above 24 frames, which is basically the movie, it's the most framerate of movies.
Speaker 1: Thank you. The next question is, email recently tweeted about lowering prices once inflation cools down. Can you elaborate on what do you mean by cooling down and how aggressively the company will lower prices? Or broadly, how do you think about the auto pricing one term? Or broadly, how do you think about the auto pricing one term?
Speaker 1: Yeah, so since we have this, there's quite a long wait when somebody orders in a car. It's okay, it's like six months. In some cases, it could be up to a year.
Speaker 1: We have to anticipate what the probable inflation rate is over that period of time.
Speaker 4: So.
Speaker 1: That's what we're trying to do. When or if we see indications that the inflation rate is declining, then we would not need to increase our car prices. It's possible that there could be a slight decrease in car prices, but this is fundamentally dependent on how much gets vaccinated, obviously.
Speaker 1: macroeconomic inflation, it's not something we control.
Speaker 1: If I were to.
Speaker 1: Yes, and I wouldn't take this with a grain of salt. I think inflation will decline towards the end of this year. We're certainly seeing...
Speaker 1: prices of commodities, trading, lower.
Speaker 2: All right.
Speaker 1: But tell you what a grain of salt this is. Making economic prognostication is fraught with error. I don't know if you guys want to – do you want to say anything about it? Yeah, we're certainly saying – I mean, it's kind of a whole spectrum. On the battery metal side, for example, the price of lithium has really shot up. We used to be $11 a kilogram to more than $80 a kilogram. But it's not every situation is that bad, so it's kind of a spectrum. It's not every situation is that bad, so it's kind of a spectrum.
Speaker 1: Carbon steel, aluminum, I'm sorry, we're talking about carbon steel. And aluminum has started trending down. We'll see the benefits of it's only probably later part of this year or early next year. Yeah, but I think that's just like we were for most commodities for seeing a downward trend towards end of this year or next year. Some commodities we are processing of lithium is insane. I'd like to once again urge.
Speaker 1: entrepreneurs to enter the Lithium refining business. The mining is relatively easy. The refining is much harder. So the Lithium is actually very common.
Speaker 1: It's very, there's like lithium pretty much everywhere, but you have to refine the lithium into battery-grade lithium carbonate and lithium hydroxide, which has the extremely high purity. So it is basically like minting money right now. It's like software margins in lithium processing right now. So I've...
Speaker 1: I really like turn cards once again.
Speaker 1: entrepreneurs to enter the lithium refining business you can't lose it's license to print money
Speaker 1: them refining business. You can't lose. It's a license to put mine.
Speaker 1: Thank you. The next question is, you made the right economic call before most on inflation when you diversified into Bitcoin. It has since shown it's not much of a hedge in the real world test in the last few months. How do you think about it as an asset over long term and what do you need to see to change your view?
Speaker 1: Well, you know, Tesla is a, Tesla's goal is to accelerate the advance and sustainable energy. Um, uh, we, you know, we're, we're not really, uh, cryptocurrency is a, a side show to the side show. Um, so it's, you know, we're not, uh, Um, so it, you know, we're not, uh,
Speaker 1: Of course, the cover car is also something we think about a lot. We think a lot about scaling production and accelerating the advanced sustainable energy, which the record heat waves around Earth.
Speaker 1: So to emphasize the urgency of that transition. So that is what we're trying to do is. So that is what we're trying to do is.
Speaker 1: make electric vehicles and solar and stationary storage battery packs of the three pillars of a sustainable energy future, which is like solar and wind for energy generation, stationary battery packs for storage of the solar and wind and energy because of its intermittency and then electric vehicles, the third pillar. And if those three things are solved, we have a sustainable future for civilization and PEND.
Speaker 1: the fundamental good of Tesla. And the reason we're doing this, so my primary motivation here is to have the day of sustainable energy come sooner. That's our goal.
Speaker 4: A sign!
Speaker 4: We're neither here nor there on cryptocurrency.
Speaker 1: Thank you. The next question of 4680. Elon noted that 4680 plus structural pack is not yet optimized. Can you please share the general path of 4680 and structural packs in terms of cost efficiencies compared to the traditional 2170 pack?
Speaker 1: Will cost improvements be mostly due to scale, or do we need to solve some technical issues?
Speaker 4: I don't want to do the architecture. Yeah. Yeah. So structural pack where we get dual use of the battery or the cells as structure and as energy storage in the same way that an aircraft gets to use of the wing as a fuel tank and as a wing. So I have to get still use of the wing as a fuel tank and as a wing.
Speaker 4: is, I think, unequivocally from a physics standpoint, the superior architecture. So I'm investing 3 million times in physics, but I'm also investing what's known as the
Speaker 4: Now because it is new, we will start off getting, I don't know if that's forationally a C within an A-Oc texture. I don't know if that's forationally a C within an A-Oc texture.
Speaker 4: but the potential is there for to get radically better and then unequivocally better than a battery pack which is carried like a second potatoes. The battery pack is a battery pack which is a battery pack which is a battery pack which is a battery pack which is a battery pack which is a
Speaker 3: So yeah, and we've gained the perspective through putting our first structural packing production that it is actually the A architecture. Before we did that, it was a hypothesis that was backed with a lot of modeling and first principles analysis. And now we've actually built in and are more confident in that assertion.
Speaker 4: Yeah, so the exact, so the structural pack, even the C in the A-Oc texture is beating with the non-structural pack. And so over time, it will, with further refinement, be substantially superior to a corn that is carrying a battery pack as though it is cargo. And this, like I said, it's very, very much, very analogous to the holidays of aviation where virtual tanks were.
Speaker 4: It initially carried like cargo until they realized actually you should get dual use of the fuel tank as a wing and as
Speaker 4: as fuel tank.
Speaker 4: and that makes the planes lighter and better.
Speaker 4: And that's the same as true of...
Speaker 4: What's that?
Speaker 4: Thank you very much.
Speaker 1: And on cost improvements, are they due to scale or about solving technical issues?
Speaker 1: Yeah, it's always fun.
Speaker 4: Yeah, I mean, really the two things that improve cost are economies of scale and tech and...
Speaker 1: and core technology. Yeah, technically, he's made not the right. It was a take-away, it was like, it's only the beginning. It's the optimal design, right? Like you always start with some access.
Speaker 3: Some people might call it that, but that's not really what you think it is initially. It's that you don't know how lean you can get it until you've done it a couple of times.
Speaker 4: Yeah, I mean, there's some platonic ideal of the perfect product where the atom is, you have exactly the right atoms and they're in exactly the right position. And you asymptotically approach this platonic ideal and we're going to take a lot of effort over time to figure out actually what is platonic ideal and then out.
Speaker 1: To actually gradually approach that. Yeah. I mean, you might need to create a new ally. They figure out how to cast it. Then you need to ramp the custom machine of the new ally. We did it for rotors. We've done it for passing. So yeah, but those take time. Constant improvement is something we're used to here. It's something we've done with our vehicles and our designs since the beginning. Even a couple weeks ago.
Speaker 4: First version of the forecasting that we made that went into the early vehicles is like the model of main model of space. No, I'm talking about like our first model of life. Oh yeah. Since we've ordered more dies because we need more dies from our production, we've saved like four or five kilos of mass in just in dieteration. And that's something we do at Tesla, like quite regularly. And we'll continue to do so. Like we're not happy with the scene. Like maybe we're at a C plus now, because we've got to keep going to get to B minus the pitch on the rear cast thing.
Speaker 4: But this will trust room for improvement with the casting. So the casting is already way better than, the everybody catching is already way better than the...
Speaker 4: And then the way it's, we're done in the past where you've got 120 different parts that are well together bonded together.
Speaker 4: with different alloys and then you have to put sealants in between all the various parts.
Speaker 4: for water ingress and noise.
Speaker 4: So we're ready.
Speaker 4: way better than that with carcassing, but there's...
Speaker 4: So a lot of opportunities to reduce the mass of the casting and also extend the casting to include more parts. And also extend the casting to include more parts.
Speaker 3: as well as adapt the risk of the vehicle or the fact that there's a cast date. Yeah, I was going to say the same thing, right? We're not just evaluating the pack in isolation either. It's the pack plus the body, the integration. You know, we have mass in the right place, as we have the cost in the right place, and only just the right amount.
Speaker 3: And I think we've gone through one iteration, we're doing another one with Cybertruck. We were taking the learnings and.
Speaker 3: I'm doing the next one and hopefully it's a B plus. Yeah. Okay. All right.
Speaker 4: That's certainly target.
Speaker 1: Thank you. The next question is, how do you feel the progress of FSD is going and does Andreic Harpappi's leaving any significant impact on time on the slides or potential progress? I'm Alex. I'm Alex. I'm Alex. I'm Alex. I'm Alex. I'm Alex. I'm Alex. I'm Alex. I'm Alex. I'm Alex. I'm Alex.
Speaker 4: Well, since Henry was writing all the code by himself, I think that you know, naturally things have come to a grinding halt.
Speaker 4: And so, irony. So, Andre is awesome and we have tremendous respect for Andre. He's decided to contribute more to core AI at an academic level.
Speaker 4: and get back to coding individually. So, but we've got a team of.
Speaker 4: 120 people in our software AI group that are extremely talented.
Speaker 4: I think we will have, I'm highly confident we will solve for self-driving and still seems to be this year. I know people like, you know, it says that, but... I know people like, you know, it says that, but...
Speaker 4: It does seem to be like, it does seem as though we're converging on solving full-cell driving issues here.
Speaker 1: Thank you. The next question is, how is the 4680 RAM going, and is Giga Texas producing ASL cells yet?
Speaker 3: Yeah, so we are making progress on 4680, but right now as Elon mentioned, we are leveraging supplier cells, which we have in sufficient quantity to ramp Texas and Berlin. We expect to ramp total 4680 production succeed, one paper a week by the end of the year, hopefully before, well before. In Q2 at Kato, we fully automated our advance for the dry end of collector tool there. Unlocking major increases in production and improvements in the old.
Speaker 3: Since March, because of that, Cato output has grown 35 percent month over month each month since, and yields throughout the factory are already at targets in most areas and trending in that direction and a few others. We did feed learnings from Fremont, cell impact lines to Texas and Berlin. They aren't a carbon copy. Cell design was revved to unlock higher performance and manufacturing simplicity. Brand lines were further integrated and we in-sourced additional content.
Speaker 3: For these reasons, there are some new ramp challenges to overcome in Texas.
Speaker 3: Anne Berlin. Specific to Texas last quarter, Selic, but was fully installed and commissioned and we produced our first commissioning car sets of cells through the end of the line. The commissioning car sets of cells through the end of the line.
Speaker 3: Our target for Texas is to begin production this quarter and aim for Texas to be capable of exceeding Cato weekly output before the end of this year.
Speaker 3: Thank you very much. The next question is on 46 areas well, but I think Drew has covered everything that was in the next question.
Speaker 3: So the following question is, with regards to the ramp of production in Austin and Berlin, how is the situation with regards to supply both semiconductors, battery cells, and other components?
Speaker 3: about ghost inflation and impacting profitability of these other plants. of these other plants.
Speaker 1: Smart. I can take that. So Tesla procures about 1,600 unique pieces of silicon from 43 semiconductor companies. So with a portfolio of that size, there are all these challenges. Things are more stable on the latest generation chips. We still see some tightness in the older generation semiconductors, especially in the analog and mixed signal space. But we have line of sight to solve for the volumes being contemplated for both Austin and Berlin. And on the sell front, like Elon mentioned, we have a comfortable margin thanks to Red...
Speaker 3: YouTube is our largest increase yet over the last handful of quarters on inflation and community-related increases to our cars.
Speaker 3: It's fairly even these spread across the factories giving comments, the suppliers are common issues that impact.
Speaker 3: the broad supply chain.
Speaker 3: So, you know, I think I had mentioned before that we had been seeing increases over the course of last year. It took up in Q1 and then it took up again the rate of increases more in Q2. And the rate of increases more in Q2. And the rate of increases more in Q2.
Speaker 5: So, as we look through to the end of the year,
Speaker 5: What we're seeing is we don't think the inflation-related increases in Q3 will be as big as Q2, but as Elon had mentioned, there's uncertainty on pricing here.
Speaker 5: And we don't have full exposure as a parent had just mentioned on every component of cost because we do have some contracts in place But there are some spot buys as well and some contracts being renegotiated
Speaker 5: So, you know, we're managing it with pricing and in partnership with our suppliers, but it does continue to be something that is impacting our financials.
Speaker 1: Okay, thank you very much. And the last question is, when will the cyber truck be officially available? When will the cyber truck be officially available?
Speaker 4: We're hoping to.
Speaker 4: start luring them in the middle of next year.
Speaker 3: Right, thank you very much. And now let's go to Annelies questions. The first question comes from Pierre Faragou from NewsTreat Research. Pierre, feel free to unmute yourself.
Speaker 6: Hi, I thanks a lot for taking my question. I'd like to ask like a question on 4680 and the structural battery pack. And I'd love to understand where you stand on the technology and efficiency and energy density run map that you described at the battery day. So what I'm trying to understand is.
Speaker 6: Where do you stand on the architecture of the battery cell? It says how much silicone do you have in it? How much energy improvement have you achieved already so far? And there is a bit of a mess. Sorry. I'm sorry. I'm sorry. Sorry.
Speaker 6: And the reason why I'm asking that is because you have like very smart guys on Twitter who shared experience about trying to fully empty a Model Y from Texas, from Austin, and noticing behaviors and like recharging behaviors that suggested that maybe these cars had like very, very high mileage, very high range and were like artificially limited in range in software. So I'm just kind of trying to understand how much of an edge.
Speaker 6: you're building at the moment with the physics safety and battery back on the range.
Speaker 3: Yeah, let me just try to provide like a super straightforward answer. Like as you've mentioned before, you know, our priority was really on.
Speaker 3: Simplicity in scale during the initial 4680 and structural battery ramp. So. We weren't like putting all the bells and whistles in from day 1, because so we would be sort of suffering under. A string of series miracles that we would need to achieve to get going. But, you know, as we attain the manufacturing goals that we've stated, you know, at the ramp that we need to hit next year. We are.
Speaker 3: Certainly planning to layer in new material technologies in higher range structural past like we're not. In higher range structural past like we're not.
Speaker 3: We're not like holding back goodies for some...
Speaker 3: you know, rainy day or something like that.
Speaker 4: Yeah, maybe another way of putting it is that the.
Speaker 4: Our focus right now is on note.
Speaker 4: Dozens of little issues that inhibit the production ramp of the 4680. Some of the more challenging ones have been...
Speaker 4: feeding the
Speaker 4: anode and cathode material, because we were using this revolutionary dry electrode process. But when something's revolutionary, there's a lot of unknowns that have to be resolved. So we're confident of resolving those unknowns, but it's very difficult.
Speaker 2: It's a...
Speaker 4: We're making rapid progress in that front. So the first sort of business is really get basics right, get to high volume and higher liability and... and...
Speaker 4: And then very rapidly iterate within that to enhance the energy density and reduce the cost of the cell. And then, that's a really great deal. So, yeah, that's a really great deal. Yeah, that's a really great deal.
Speaker 4: Okay, right. I said we're highly confident of a good outcome. It's the exact counter point of that is, perhaps there is of some debate, but the outcome is not.
Speaker 3: Yeah, specific to the dry process, we made a major advance this past quarter in Cato that the team is really excited about and congrats to the team for achieving that.
Speaker 4: But I should also emphasize that it is not as though Tesla intends to displace our suppliers of battery sales. The Tesla battery cell production is in addition to what our suppliers can do. And we want our suppliers to grow their battery output as fast as they possibly can. And that goes for the entire supply chain. The fundamental rate limiter.
Speaker 4: for Earth's transition to sustainable energy is how fast can you grow with the amount of battery output per year.
Speaker 4: This is the fundamental rate limit or for transition to sustainability because you need the batteries for two of the pillars of sustainability, the stationary storage, and for vehicles.
Speaker 3: Yeah, I just want to stress that a lot of these higher energy density technologies are not necessarily scalable. I mean, most of them are not scalable from what I've seen. And so like focusing on them is a distraction from the mission. Like it really is, how do we scale as fast as possible? And we're taking these risks that we've discussed at Battery Day. And our plan is, as we de-risk them and they are successful, we want to bring them back to our partners so that they can go faster too, because that's all on the mission, right? Like, I'm sorry. Yeah, people often ask me. Yeah, people often ask me. Yeah, people often ask me.
Speaker 4: we're finding to...
Speaker 4: to sell production, how fast can that go? It's going fast.
Speaker 4: But the faster it grows, the faster we transition to a sustainable energy economy.
Speaker 6: This is actually a great, where my photo is. You always mention this 50% per annum sustainable growth targets that you guys have. And so my question here is, when we see the difficulty regarding the communities, raw materials, swinging prices, I'm kind of wondering, as you are planning for these 50% per annum growth.
If we stand today over next next cise with 10 years how much of that do do you feel you've secured through your work at entering into long-term contract and things like that and you are acuting for entrepreneurs to go into the lithium business. So does that mean you don't have enough lithium secured to grow 50% downynum of your multiple years and what how much of that is secured today and how fast can you can you improve that basically.