Q4 2023 Tesla Inc Earnings Call - Q&A
[music].
Good afternoon, everyone and welcome to Tesla's fourth quarter 2023, Q&A webcast.
Name is marketing via <unk> VP of Investor Relations and I'm joined today by Elon Musk JB off the nature and a number of other executives or.
Our Q4 results were announced at about three P. M Central time in the update deck, we published at the same link as this webcast.
During this call we will discuss our business outlook and make forward looking statements. These comments are based on our predictions and expectations as of today.
Elon Reeve Musk: Actual events or results could differ materially due to a number of risks and uncertainties, including those mentioned in our most recent filings with the SEC.
Elon Reeve Musk: During the question and answer portion of today's call. Please limit yourself to one question and one follow up please use the raison button to join the question queue, but before we jump into Q&A Elon has some opening remarks elon. Thank.
Elon Reeve Musk: Thank you.
Elon Reeve Musk: So the total team did an incredible job.
Elon Reeve Musk: In 2023, we.
Elon Reeve Musk: We were achieved record production and deliveries are up over 1.8 million vehicles.
Elon Reeve Musk: In line with our official guidance.
And in Q4 were producing vehicles on annualized run rate of almost 2 million cars a year.
So it was really a phenomenal achievement.
Elon Reeve Musk: Looking at just the Fremont factory alone, we made 560000 cars.
This is a record in fact, it's the highest output.
Elon Reeve Musk: Automotive plants in North America.
Elon Reeve Musk: People, often surprised that'd be the highest I put a factory contractor in North America is.
Elon Reeve Musk: The San Francisco Bay area, it's a little counterintuitive, perhaps.
Elon Reeve Musk: And the it's really had a incredibly positive impact on that entire area what would've been a rundown strip mall is the highest productivity car plant.
Elon Reeve Musk: And that in the Americas, I think about that.
Elon Reeve Musk: But it was derelict one when we got it and now it's the most productive plant.
Hum.
Elon Reeve Musk: And this entire part of the world.
Elon Reeve Musk: Hum.
And its enrich the community in so many different ways.
Elon Reeve Musk: It's.
Elon Reeve Musk: It's really a job so.
I'm Super proud of the people that work there.
Elon Reeve Musk: Model Y became the best selling vehicle globally.
Elon Reeve Musk: As predicted the.
Elon Reeve Musk: Domestic suddenly pick up any kind not just electric vehicles with over one 2 million units delivered.
Elon Reeve Musk: The energy storage business.
Elon Reeve Musk: Delivered nearly 15 gigawatt hours of batteries and twin 23, compared to six five gigawatt hours the year before so tremendous year over year growth.
Elon Reeve Musk: Triple digits.
Elon Reeve Musk:
Elon Reeve Musk: And.
Elon Reeve Musk: Yeah.
Elon Reeve Musk: We will continue to continue to see very strong growth.
Elon Reeve Musk: And storage S. S predict right I said for many years that the storage business will grow much faster than the core business and it is doing that.
Elon Reeve Musk: Our free cash flow remained strong at $4 4 billion in 2023 in spite of a record spending on future projects.
Elon Reeve Musk: So we're at record Capex expenses as well as record R&D.
Elon Reeve Musk: This brings us to 2024, there's a lot to look forward to in 'twenty 'twenty four.
Elon Reeve Musk: Tesla is currently between two major growth waves.
Elon Reeve Musk: Folks are making sure that our next growth wave driven by Nextgen vehicle empty storage full self driving other project is executed as well as possible.
Elon Reeve Musk: For full self driving we've released version 12, which is a.
Elon Reeve Musk: Complete architectural.
Elon Reeve Musk: Alright compared to prior versions. This is our end to end artificial intelligence, so another but nets basically photons in and controls out.
Elon Reeve Musk: And.
Elon Reeve Musk: Yeah.
Elon Reeve Musk: It really is.
Elon Reeve Musk: Quite a profound difference.
Elon Reeve Musk: This is currently just with employees and a few customers, but we will be rolling out to.
Elon Reeve Musk: Oh, who almost all customers in the U S who requests the puzzle driving in the weeks to come.
Elon Reeve Musk: Oh, that's over 400000 vehicles in North America.
Elon Reeve Musk: So this is the first time he is been used not just for object perception, but full path planning and vehicle controls.
Elon Reeve Musk:
Elon Reeve Musk: We replaced 330000 lines, a C plus plus code with neural nets.
Elon Reeve Musk: It's really quite remarkable.
Speaker Change: Sort of as a side note I think Tesla is probably the most probably the most efficient company.
Elon Reeve Musk: In the world for AI inference out of necessity, we've we've actually had to be extremely good.
Elon Reeve Musk: At getting the most out of hardware because hardware three at this point is.
Elon Reeve Musk: Several years old.
Elon Reeve Musk: So I don't I think we're quite far ahead of any other company in the world.
Elon Reeve Musk: In terms of.
Elon Reeve Musk: AI inference deficiency, which isn't going to be a very important metric in the future.
Elon Reeve Musk: In many arenas.
Elon Reeve Musk: So.
Elon Reeve Musk:
Elon Reeve Musk: C, but the new model three is now available globally. So it didnt updated model three.
While the call look some of them a lot of work has gone into vehicles make it better in every way.
Elon Reeve Musk: It is significantly quieter more find better equipped has longer range and many other improvements and I recommend taking a test drive if you have not driven the model three in a long time I shouldn't really try it anyway.
Elon Reeve Musk: So steady improvements.
And we're.
Elon Reeve Musk: Very far along on a next generation low cost vehicle.
Elon Reeve Musk: This is an earnings call not a product announcement.
Elon Reeve Musk: So it will not be many questions, but quite a.
Ask us about new product.
New products coming but.
Elon Reeve Musk: We reserved right now I'm supposed to book product announcements not only calls so but if we were very excited about this and this is really.
Elon Reeve Musk: Gonna be profound I'm not just into the design of the big myself and the design of the manufacturing system. This is a revolutionary manufacturing system cyclical.
Elon Reeve Musk: Far more advanced.
Elon Reeve Musk: Any other major automotive manufacturing system in the world.
By by a significant margin.
Elon Reeve Musk:
Elon Reeve Musk: Several years ago, I said that.
Elon Reeve Musk: Yeah.
Elon Reeve Musk: Perhaps the most important competitive characteristic Tesla.
In the future will be manufacturing technology, and you will really see that come to bear with our Nextgen vehicle.
Elon Reeve Musk: The first manufacturing location for this will be out of how Giga factory and headquarters in Austin, Texas.
Elon Reeve Musk: And then we'll follow that up with the other locations around the world probably out.
Elon Reeve Musk: The factory built in Mexico will be second and then we'll be looking to identify a third location, perhaps by the end of this year or early next outside North America.
Elon Reeve Musk: So.
Elon Reeve Musk: In conclusion, we had a great year with record production record deliveries and our strong free cash flow in spite of a pretty high interest rate environment.
Elon Reeve Musk: And we are focused on exciting new projects that will.
Elon Reeve Musk: I think ultimately.
Elon Reeve Musk: If we execute on all these things and it is very hard to do all these things sort of not a sure thing, but I do see a path.
We're at where Tesla could one day be.
Elon Reeve Musk: The most valuable company in the World.
Elon Reeve Musk: Duane emphasized that is probably the easy path at a very difficult one.
Duane: But it is out in the set of possible outcomes and previously I would not have thought the commission set a possible outcome.
Duane: So and thank you again to all of our investors our employees and our suppliers for a strong year and looking forward to a great 'twenty 'twenty four and just to come thank you.
Duane: Thank you and our CFO Roberto.
Duane: I'm opening remarks as well thanks, Martin good afternoon, everyone.
Ilan: As Ilan mentioned, we had a record year in terms of both production and deliveries for auto business as well as I could departments and our allergy business.
Roberto: This was achieved despite don't take them to keep being a challenging yet in terms of interest rates and high inflation make tanks to a customer for being with us through this challenging period.
Elon Reeve Musk: Also like to thank the whole Tesla team for their resolve and dedication throughout.
Martin Viecha: In terms of financials, we ended the year with over 96 million of revenue and generated $4 4 billion of free cash flow to end the year with over $29 billion of cash and investments on hand.
Martin Viecha: I wanted to do pre GAAP net income was impacted by the recognition of one time noncash benefit of $5 9 billion from the release of valuation allowance until the different tax assets.
This was due to our recent history of sustained profitability and is similar to several other companies who have recently gone through a similar change in their account.
Martin Viecha: Currently starting with Q1, a book tax it will now be more in line with other companies in the S&P 500.
Martin Viecha: And our Waco business, we continued to see improvements in our per unit costs. Despite us being in the early phase of cyber truck.
Martin Viecha: As a result automotive margin improved sequentially. That's at predicting logos allegiance is extremely challenging. So there are many moving parts to this equation some of which well out of our control like the change in tariffs or local incentives to name a few once.
The teams are focused on cost reductions we are approaching the limits within like other platforms on.
Martin Viecha: On the demand front, that's a promise we made investments in digital campaigns into lithography. We fully appreciate the importance of customer education is we're still in the customer acquisition pace. Our data suggests that around 90% of our political buyers in 2000 Twenty's. He never owned a Tesla before.
Martin Viecha: We are being creative and figuring out ways to bring in new customers and educate them about the benefits of owning a tesla versus Gaspar would wake up.
The key among them being total cost of ownership. This concept is mostly overlook, but just the upfront cost.
Martin Viecha: We really like this and evaluating our campaigns, creating the content and optimizing spend accordingly to support the world demand.
Martin Viecha: There are two additional things I would like to mention that since the last of the U S market was well customers who qualify for the biomarker that we now offer that as a point of sale benefit formula one which means an immediate reduction of 75 at the time of Cortez to that Gaslog Secondly, we continue to.
Martin Viecha: So very attractive lease rates for model, three and Y using a partner leasing program.
Martin Viecha: The sales under this program are recognized as upfront revenue and reported within automotive sales.
And the emerging storage business had another record year with deployments more than doubling in revenues them, because they've got more than 50%.
Martin Viecha: This business is poised to again surpass our auto business in terms of growth rate in 2024.
Martin Viecha: This has been in the works for quite some time with us laying the foundation of a few years back when building a bigger factor and that's what I.
Martin Viecha: I would like to thank the whole Tesla and limited team for their efforts to make this a reality.
Services and others business also started contributing meaningfully to our results.
Martin Viecha: And our fleets.
Martin Viecha: Has that fleet goes as we explained the feedback seven use from Supercharging used cars and services to continue to increase.
Martin Viecha: For 224, our focus is to continue growing our output continuing our cost reduction efforts and increasing investments in our future growth initiatives.
Martin Viecha: Currently we are currently expecting our capital expenditures totaled 24 to be in excess of $10 billion.
Martin Viecha: We believe this will be critical in helping US lay the foundation for the next phase of the world.
Martin Viecha: Once again I would like to thank everybody at Tesla, all investors and our suppliers for being with us in this journey.
Martin Viecha: We can open it up to questions. Thank.
Martin Viecha: Thank you and let's go through Investor questions. A question number one is from Michael given that you moved the start of the next generation compact vehicle production to Austin has the timeline improved so that we might see the next generation platform vehicles in 2025.
Martin Viecha:
Martin Viecha: Suddenly say see things with they should be taking with a grain of salt.
Martin Viecha: Since I'm often optimistic.
Martin Viecha: I don't want to put your minds, but I'm.
Martin Viecha: Often optimistic regarding time.
Martin Viecha: <unk>.
But our current schedule says that we will start production.
Martin Viecha: Towards the end of 2025.
Martin Viecha: Sometime in the second half.
Martin Viecha:
Martin Viecha: That's just what our current schedule says.
Martin Viecha: <unk>.
Martin Viecha: But there's a lot of a lot of new technology like the tremendous amount of new revolutionary manufacturing technology here.
Martin Viecha: The reason.
Martin Viecha: I wanted to put the.
Martin Viecha: Especially you.
Revolutionary manufacturing line.
Martin Viecha: Got it.
Martin Viecha: Texas was because we really need the engineers to be living on the line. This is not because there's not sort of.
Martin Viecha: Off the shelf.
You know just just works type of thing.
Martin Viecha: And just a lot easier for.
Martin Viecha: Total engineering.
Martin Viecha: The live online if it's in an Austin versus elsewhere. So.
Martin Viecha:
Martin Viecha: But work we are currently.
Martin Viecha: <unk> to start production second half next year.
Martin Viecha: Hum.
Martin Viecha: That will be a challenging production ramp like.
Martin Viecha: I can answer that but boy sleeping.
Martin Viecha: Sleeping online practically impacts on frankly, we will be.
Martin Viecha: But I I am confident that once it is growing it will be head and shoulders above any other manufacturing technology that exists anywhere in the world. It's.
Martin Viecha: This next level.
Martin Viecha: So.
Martin Viecha: It's always difficult to predict what that S curve of manufacturing looks like so it always starts off real slow and then it grows exponentially.
Martin Viecha: So.
Martin Viecha: And predicting that intimated S curve is difficult but.
Martin Viecha: Got it.
Martin Viecha:
Martin Viecha: So I don't I don't know, it's hard to say what the unit volume would be next year, we're not gonna make any predictions on that front, but it does seem quite likely that we will start production next year.
Martin Viecha: Thank you.
Martin Viecha: Question is from Michael again, what has been the barrier to ramping 46 80 sells into multimillion cells per week, a race and when do you expect to get there.
Martin Viecha: Yeah first of all I just wanted to allay any concerns regarding 46 80, limiting the cyber truck ramp because I've seen some people common thing about that today 46 80 production is ahead of the ramp with actually we said finish sell inventory and the goal is to keep it that way not only for cyber but for our future vehicle programs and as Elon said it is an S curve here too.
Elon Reeve Musk: Like it's hard to predict these things, but I'm just describing our goals.
Elon Reeve Musk: It's a hard problem or their entire companies, where all they do is make battery cells. That's all they do.
Martin Viecha: We do a lot of other things.
Martin Viecha: And we've got a lot of it we've got a lot of you know breakthrough.
Martin Viecha: Breakthrough technologies.
Martin Viecha: But that take time to figure out with 46, it's not just that it's a 46 millimeter diameter by 80 millimeter cross sell that such as the time, that's what the dimensions are those trends.
Martin Viecha: New technology in the salary so and manufacturing.
Martin Viecha: Exactly.
And just regarding what the team was able to do in Q4.
Martin Viecha: Texas successfully swap line one from the mono line design of the cell to the cyber tractors out of the cell, which was that 10% sell energy increase I've mentioned before and as with any major new product introduction the factor and engineering teams collaborated to ensure quality of the new design and process changes as their first priority and our FERC focus returns to call.
Cost and production ramp in Q1.
Martin Viecha: <unk>.
Martin Viecha: And.
In terms of what we're doing we're currently running one production line. One Assembly line are using two assembly lines. In addition for yield and rate improvement trials and we have a fourth in commissioning and four more will be installed starting in Q3. This year. So definitely this is a big year for ramping participating.
Martin Viecha: We also do want to emphasize that we think we also expect to ramp orders from our suppliers ship. So this is not about replacing our suppliers. It's about supplementing our suppliers, yes. So we are.
Martin Viecha: We're very appreciative of our suppliers.
Martin Viecha: You know Panasonic, obviously is our longest supplier there amazing company.
Martin Viecha: We've got.
C a T O.
Martin Viecha: Algae.
Martin Viecha: Hello.
Martin Viecha: And N B y J.
Martin Viecha: Yeah.
Martin Viecha: Thank you.
Martin Viecha: The next question is from Adam.
Adam Michael Jonas: Should retail shareholders be concerned that Elon has stated.
Adam Michael Jonas: It should be recalled shareholders be concerned of Elon has stated that he's uncomfortable expanding AI and robotics at Tesla if he doesn't have 25% of voting.
Martin Viecha: Yeah, I guess, let me explain why what my concern is here, which is that.
Martin Viecha: I see a path to creating.
Martin Viecha: And artificial intelligence and robotics juggernaut.
Martin Viecha: Up truly immense.
Capability power.
Martin Viecha: And my concern would be I don't want to control it but if I have so little influence.
Martin Viecha: Over the company at that stage that.
Martin Viecha: I could sort of be brought it out by some.
Martin Viecha: So random shareholder advisory firm.
Martin Viecha: We've had a lot of challenges with.
Martin Viecha: Institutional shareholder services, ISS I called them Isis.
Martin Viecha:
Martin Viecha: [laughter] and glass Lewis you know what.
Martin Viecha: There's a lot of activists that basically infiltrate those organizations.
Martin Viecha: You know strange ideas about what should be done so.
Martin Viecha:
Martin Viecha: You know.
Martin Viecha: So I went on them.
Martin Viecha: Having enough to be influenced like if we could do at dose dual class stock that would be ideal I'm not looking for additional economics.
I just.
It won't be an effective steward of very powerful technology.
Martin Viecha: And.
Martin Viecha: Can I just sort of roughly picked approximately 25% was that.
Martin Viecha: But that's that's not so much that I can control the company, even if I go bonkers.
Martin Viecha: And if I'm like Mad didn't they can throw me out, but it's enough that I have a strong influence that's what that's what I'm aiming for is a strong influence but not control.
Cause.
Martin Viecha: Some way to achieve that that would be great.
Martin Viecha: Thank you. The next question is what is your expectation for automotive gross margin ex regulatory credits for the full year.
Martin Viecha: Like I said in my opening remarks, we're focused on reducing the cost of away codes. This is very extensive in ringwald exercise, where we whereby we look at not just the component cost down too.
Martin Viecha: But don't do the packaging used to get the materials for the production.
Martin Viecha: Each element of the cost of scrutinized to optimize Florida, a few pennies saved at a sub component of liver.
Martin Viecha: Through engineering redesign on for many of the things that I've mentioned.
Martin Viecha: These two blocks reduction this is a constant exercise and we just have to chase down every penny possible.
Martin Viecha: We have a strong team, which is hyper focused on this however.
Martin Viecha: This is a little difficult.
Martin Viecha: Thing to predict.
Martin Viecha: Precisely because I don't know.
We don't have a crystal ball so it is difficult to predict with precision.
Martin Viecha: If the.
Martin Viecha: If interest rates come down quickly I think.
Martin Viecha: Margins will be.
Martin Viecha: Good and if they don't come down quickly they won't be that good.
Martin Viecha: Yes.
Martin Viecha: It's always important to remember that the vast majority of people are buying.
Martin Viecha: Buying a car is about the monthly payment.
Martin Viecha: It's not that people don't want it.
Martin Viecha: Tons of that.
Martin Viecha: We have lots of people want to buy a car that simply cannot afford it.
And so in that.
Martin Viecha: As interest rates dropped and that monthly payment drops then they're able to afford it when they buy the car it's pretty straightforward.
Martin Viecha: And there are no tricks, Rob did you get around us.
Martin Viecha: Okay. Thank you.
Martin Viecha: The next question is does the company anticipate 50% volume CAGR to be realized and either 'twenty 'twenty four 'twenty 25, if not why not.
Martin Viecha: [laughter].
As we have said in our prior guidance there will be periods, where we won't be growing at the same rate as before.
Martin Viecha: We are between two major <unk>. The first one began with the global expansion of model three and y and.
Martin Viecha: We believe the next one will be initiated with the next initial platform.
Martin Viecha: We turned it on before our volume growth will be.
Martin Viecha: Lower as we have said.
Martin Viecha: Because we're trying to focus the team on the launch of the next generation Michaels.
Martin Viecha: Alright. Thank you very much. The next question is from Michael when will Tesla start construction on the Giga, Nevada expansion and Giga, Mexico and when can we expect each of these to produce their first product such as the 46 80 sell semi and the Nextgen vehicles.
Martin Viecha: We have recently broken ground for the next phase of Giga, Nevada expansion to.
Martin Viecha: To incorporate semi and other projects.
Martin Viecha: But as said earlier is regarding Mexico, we want to first demonstrate success with our next generation platform and often before we start construction. Therefore, we have started the long lead work to get the basics right and plan to follow our recipe from the three Y ramp yeah, with Shanghai, where we started with learnings from Fremont ramp fairly quickly yeah, exactly it's important to emphasize that.
Model three production was what three years of how honest here before some of it the other way.
Martin Viecha: She wasn't all that frankly.
Martin Viecha: Slips mental scar tissue from that for another three years as do many of them.
<unk>.
Martin Viecha: But then and then model y was.
Martin Viecha: Somewhat of a variance on model three so much much easier situation and then we were able to actually do an improved slightly improved versions of Kentucky I system significantly improved versions of the model Y production line in Shanghai and Berlin.
Martin Viecha: And you know that.
Martin Viecha: That's the right I think it was such a sensible way to go about things as some kind of.
Martin Viecha:
Martin Viecha: Figure out the core the core technology that put the manufacturing line and then.
Martin Viecha: Brocade with improvements throughout the world.
Martin Viecha: Thank you.
Martin Viecha: Our next question from Michael This has there been any progress made within FSD licensing agreement with another company.
Martin Viecha: I really think lots of car companies should be asking for FSP licenses, but.
Martin Viecha: And we've had we've had some tentative conversations but I think they don't believe it's real quite yet.
Martin Viecha:
Martin Viecha: I think that that will become obvious probably this year.
And I do want to emphasize that if I were.
Martin Viecha: But another company that would definitely be calling Tesla announcements license.
Martin Viecha: So as opposed self driving technology.
Second wave a smart move.
Martin Viecha: Thank you the next question from Siddharth.
Siddharth: What is the timeline for Optimists first production of volume production line and what are the barriers to getting there.
Siddharth: Okay.
Siddharth: Optimists, obviously is a very new product.
Siddharth: And extremely revolutionary product.
Siddharth:
Martin Viecha: And something that I think has the potential to.
You got the potential to far exceed the value of everything else it sounds like combined.
Martin Viecha: And when you think of an economy economy is productivity per capita times capita providing if there's no limit to capital.
Martin Viecha: There's no limit to the economy.
Martin Viecha:
And the technologies that we're the only technologies were developed for the car translate quite well to a humanoid robot because the car is just a robot on four wheels.
Martin Viecha: Their test is arguably already the biggest robot maker in the world. It's just a whole wheeled robot.
Martin Viecha: So.
Martin Viecha: Artemis is a.
Martin Viecha: Robot with the humanoid robots bombs legs.
Martin Viecha: It's by far the most sophisticated humanoid robot.
Martin Viecha: Developed anywhere in the world.
Martin Viecha:
Martin Viecha: I think we've got a good chance of shipping some number of optimists units next year.
Martin Viecha: It's like I said this is a brand new product.
Martin Viecha: A lot of uncertainty as to when you have when there's a lot of uncertainty in your uncharted territory, it's honestly impossible to make a precise prediction.
Martin Viecha:
Martin Viecha: But we will be updating republic with progress on optimize.
Martin Viecha: Every few months.
Martin Viecha: And you can see that it's advancing very quickly.
Martin Viecha: I was just in the Artemis lineup actually until late last night.
Martin Viecha: But at night or something.
Martin Viecha: And finally, the Artemis lab.
Martin Viecha: And the team's doing amazing work.
Martin Viecha:
Martin Viecha: Now that's obviously, a case, where we want to make sure that.
Martin Viecha: Occupancy is safe, especially at scale.
Martin Viecha:
Martin Viecha: And that Theres no it should be impossible for.
Martin Viecha: Any centralized control too.
Martin Viecha: Hmm.
Martin Viecha: Malware.
Martin Viecha: A humanoid robot.
Martin Viecha: So we're going to want to.
Martin Viecha: Well then.
Martin Viecha: Localized shutoff that cannot be updated from the.
From a central server.
Martin Viecha: That that's the case, where we really have to do.
Martin Viecha: Extreme thought to safety.
Martin Viecha:
Martin Viecha: But like I said I think I do think it has the potential to be.
Martin Viecha: The most valuable most vehicle product of any kind.
Martin Viecha: Ever.
Martin Viecha: By far.
Martin Viecha: Just to comment on the barrier I think the barrier and we've talked about this is like.
Martin Viecha: Getting it to actually do something useful life.
Martin Viecha: Like we can get it to work around we can get to do things, but it's like that utility part we can already do some useful things, but like yeah, yeah to making millions of new fans it's like.
Martin Viecha: Utility Gotta get the utility apps.
Martin Viecha: Yeah.
Martin Viecha: Smart robot.
Martin Viecha: That can do that's capable of doing generalized tasks.
Martin Viecha: That's what it will be.
Martin Viecha: And then in terms of doing.
Martin Viecha: Moderately specialized tasks, but can already do that.
Martin Viecha: I will just get better through through the course of the year.
Martin Viecha: As we improve our technology in the car or in proof of technology and optimism at the same time.
Martin Viecha: It runs the same.
Martin Viecha: AI inference computer that's on the car.
Martin Viecha: Same training to technology.
Martin Viecha:
Martin Viecha: I mean, we're really building the future.
Martin Viecha: The I mean, the Optimus lab and it looks like the setup westworld.
Martin Viecha: Yes.
Martin Viecha: But literally that was not a super utopian situation.
Martin Viecha: That's not the best reference yeah.
The creators of Westworld.
Martin Viecha: Turning Nolan.
Martin Viecha: At least sterno and brings our old friends of mine actually.
Martin Viecha: And invite them to come see your lab, I think well come see it hopefully soon.
Martin Viecha:
Martin Viecha: It's pretty well dispersed, especially with the sort of sub system test stands where you just got like one leg on the test stand.
Martin Viecha: Just doing repetitive exercises and upon all I'm going to spend.
Martin Viecha: Pretty well.
Martin Viecha:
Martin Viecha: Yeah, we're not entering westworld anytime soon right.
[laughter] take safety very very seriously.
Thank you and the next question from Norman is how many cyber truck orders are in the queue and when do you anticipate to be able to fulfill existing orders.
Martin Viecha: First of all I want to thank all of the cyber truck the registered holders for their patients.
Martin Viecha: The reservation to order conversion rate so far has been very very encouraging.
Martin Viecha: If the trend continues.
That's very likely to be.
As soon as filled out all the bills in 2024.
Martin Viecha: And also we have.
Martin Viecha: The new orders come in after the launch the other number to keep it growing so we're now all hands on deck focused on ramping so we can fulfill all the demands in a reduced overtime.
Martin Viecha: Yes, it's important to emphasize that this is very much a production constraint switching really is not a demand constrained situation.
Martin Viecha: And we obviously, we like like we could dramatically raised the price, but that but it doesn't feel right to us to sort of get.
Martin Viecha: Got you know gosh people.
Martin Viecha: For early delivery.
Martin Viecha: So.
Martin Viecha:
Martin Viecha: But really the demand is off the hook.
Martin Viecha:
Martin Viecha: As long as the ports as long as the.
Martin Viecha: The prices affordable.
Martin Viecha:
Martin Viecha: I mean, I see us ultimately delivering on the order of a.
Martin Viecha: Quarter million suddenly quarter million subjects here.
Martin Viecha: In North America.
Martin Viecha: But maybe more but give or take roughly on that on that.
Martin Viecha: And.
Martin Viecha: It's a I mean, it's it's matures.
Martin Viecha: I had Turner.
Martin Viecha: Okay.
Martin Viecha: Definitely yes, yeah anywhere you go look at it.
Martin Viecha: Yeah, I can give you tons up [laughter].
Martin Viecha: Yeah, it's funny that the future looks like the future.
Martin Viecha: It's just that.
Martin Viecha:
Martin Viecha: Yeah.
Martin Viecha: Do you have the trucks on the road there, which then there are some very good trucks on the road, but if you put a switch out the brand name you would hardly know who which company meeting would you definitely would know the cemetery.
So that's how that's what I thought best product ever.
Martin Viecha: Alright. Thank you. The next question is can we get the Tesla energy volumes reported in the production and delivery release.
Yeah, we will strive to do so starting from this quarter.
Martin Viecha: And just.
Martin Viecha: Brief update from the business perspective.
Martin Viecha: That continues to see strong demand signals globally, driving consistent growth trajectory through 'twenty, four and 'twenty five we want to thank all of our partners who have put their trust in the manpack team to execute on critical infrastructure around the world.
Martin Viecha: I'd like to personally thank the Mega pack engineering and production teams for their strong 2023 execution.
Martin Viecha: Later continues to ramp through 'twenty 'twenty four but the operation of a second final Assembly line to double capacity from 20 to 40 gigawatt hours by the end of the year.
Martin Viecha: Thank you and the last Investor question asked from sweetheart.
Martin Viecha: What are their preliminary results on the return on investment of your ads and education campaign, given that many people still lack of awareness that that's about average prices less than the average non luxury car price of $45000 will you expand educational apps.
Martin Viecha: As you know I mentioned that the ultimate solution to increasingly adoption is really across the affordability issue.
Martin Viecha: But at same time, we do it where there is awareness issue. That's all so in Q4, we ran a series of digital campaigns very targeted digital campaigns.
Martin Viecha: Across different Geos different channel.
The target of these tests those are really the chips will drive awareness.
Martin Viecha: And ultimately the measure the return on investments.
Martin Viecha: On those digital channels.
Martin Viecha: And.
Martin Viecha: The messaging, we're driving that's really focused on our product and also try to address some of the misconception of DB.
Martin Viecha: Such as safety profitability.
Martin Viecha: In one particular awareness campaign, where you've run in Texas will reach the audience about $10 billion.
Martin Viecha: Unique viewers and <unk>.
Generally with close to half a million visits to our website.
Martin Viecha: At a large number of these viewers are first time visitors to our website.
Martin Viecha: The traffic through these digital channels actually behave very similar to those organic traffic come to our Webster website.
So going forward, we're just going to keep exploring.
Martin Viecha: The channels are doing trials to get a better understanding of the effects of this digital campaigns.
Martin Viecha: But I would also like to caution that it will be very careful that we don't want to spend on this slide I want to make sure people are aware, but we'll that's where we'll keep tweaking.
Martin Viecha: Methodology about how and where we spend the money because we understand the importance of increasing awareness, but at the same token we don't want to spend a lot of money.
Creating awareness yeah, I mean, there are some geographies, where our market share is remarkably low like Japan for example.
Martin Viecha: Now we also need to make sure that we have supercharging the right locations to service centers that are in the.
Martin Viecha: The product works well in Japan, but Japan is the third largest carmax in the world.
Martin Viecha: But we're gonna country. So.
Martin Viecha: And we should at least have a market share proportionate to say.
Martin Viecha: Although non Japanese carmakers, like Mercedes or BMW, which we do not currently have so I think that's the case.
Martin Viecha: When I talk to friends of mine in Japan, They like the like if there is like quite a lack of awareness of Tesla.
Martin Viecha: So that's a case, where we definitely need to increase awareness and.
Martin Viecha: Countries and regions, where there was there is.
Martin Viecha: Yeah.
Martin Viecha: Not that much arenas.
Martin Viecha: Thank you, let's go to analyst questions. The first question comes from peer for a group from New Street research.
Martin Viecha: Go ahead please.
Martin Viecha: Feel free to a mute.
Martin Viecha: Peer can you hear us.
Martin Viecha: Okay.
Martin Viecha: It's really tough to find.
Martin Viecha: Question on the guidance sorry for being late.
Martin Viecha: No.
Martin Viecha: So yes my question would be yes.
Martin Viecha: You know on Mexico prediction, you've talked about it already.
Martin Viecha: And.
Martin Viecha: If I look at it over the last slides five six quarters on average.
The Cogs basket.
Martin Viecha: It's been coming down by more than 2% sequentially on average.
Martin Viecha: So that means you are not going to project, our Eos <unk> going down to 10% a year. So that's probably like unheard of in the auto industry I don't see any car manufacturer.
Martin Viecha: Achieve that but that's very very mundane and very it's a good performance, but it's a very normal performance and a lot of other manufacturing industry like Michael and they coordinate so.
Martin Viecha: Clinics.
Martin Viecha: And so I'd love to hear your folks about.
Martin Viecha: When you consider yourself closer to the latter two like our microwave business where.
<unk> actually always includes cars do you have more control on how things are holding together into your <unk> do you see yourself sustainably taking costs down.
Martin Viecha: With that kind of pace.
Martin Viecha: Or do you think you have ability to take down cost is actually.
Martin Viecha: Going to become more like in line with the rest in the industry.
I'm.
Martin Viecha: Yes, I think I've covered this pretty well then can you tell even in my opening remarks that previous question, but just further clarify.
Martin Viecha: We are constantly looking for what we can do to reduce costs and like I said, it's a game of spending as we've talked about it before as well.
Martin Viecha: And the team is in constant.
Martin Viecha: Constantly going and checking where can we reduce the cost for them.
Martin Viecha: And.
Martin Viecha: Two I believe that we will have the same base, which you've seen over the past few years.
Martin Viecha: Probably not because remember we weren't coming out with a period when commodity prices for zinc. So then we did see benefits coming from that.
Martin Viecha: More or less.
Martin Viecha: Taken care off but there is more which were still changing.
I would say a big kudos goes to the.
Martin Viecha: T Mo desktop both engineering team as well as the supply chain team.
Martin Viecha: Every time, we give them a challenge they go they go gangbusters to try and figure out whatever they can to take out further costs.
Yes, I would like I said I wanted to caution that do not project the previous cost reduction.
The reduction at the same pace completely in the future because with our current platform, we are getting to a place for them.
Martin Viecha: Yes, there are limitations.
Martin Viecha: The increased scale also sort of helps us there as we introduce new products, we have the opportunity to build renegotiate existing suppliers for better pricing.
Martin Viecha: Looking at every penny like Blah, Blah blah and anyone mentioned just to give you. An example, our inbound logistics costs has come down by 22% year over year and this was because of optimization on using returnable packaging as opposed to.
Cardboard, which is even better for the environment optimizing trucking routes negotiating better pricing with shipping companies with trucking companies going but the full truckloads.
Martin Viecha: And just doing that sort of the bigger we become the more we put filings with these things and the more efficiently become as a result of extra those those work streams are going to continue.
Martin Viecha: And we're also getting into the.
Martin Viecha: The tears of supply chain to see if there are.
Opportunities.
Martin Viecha: Getting into the.
Martin Viecha: Tier twos tier three tier four levels.
Then negotiate those pricing as well.
Martin Viecha: To get more efficiency out of the system and then on the design side.
Martin Viecha: Were not static right like especially in areas where.
Martin Viecha: The technology is still improving rapidly power electronics is a great example, you know we continue to bring.
Martin Viecha: Improvements there that are like fundamentals sort of driven from the device up that that result in cost reductions generation over generation and they don't only go into the new vehicles that come to the old vehicles as well.
Martin Viecha: So that that's closer to what you were talking about with like the microelectronics space some of that exists in the in the in the vehicle and certainly our cars more computer than car in many ways from there and has a lot of new tech over the last hundred years of automotive production.
Martin Viecha: Thats, great pennies from a we have a crazy amount of computing that cars compared to anyone else.
What was the magnitude.
Martin Viecha: When we get to ride that down right 1000 times more on it some 90 number I mean like if I just look at the main microcontroller that makes the motor truck go for example, like when we when I think about what I call somebody stuck it in a registered in 2016.
Martin Viecha: No there's no comparison.
So we've definitely been writing that electronics cost plan yeah.
Martin Viecha: And then even on the like non which called traditional vehicle side, we do things that no other automakers do to bring costs down through breaking down.
Martin Viecha: These structures are built in.
Martin Viecha: We put our cars together and I think it's that mindset that we have is very much closer to the <unk>.
Martin Viecha: Micro processor or power electronics industry, the automotive industry.
Thank you.
Martin Viecha: We have a fall right.
Martin Viecha: Yes, a quick one.
Martin Viecha: It's <unk>.
Martin Viecha: You mentioned, it's like phasing, which you are between two two <unk> gross.
Martin Viecha: Gross failures.
I'd Love to hear you about whats once you consider the size of Shaw addressable markets with the portfolio you have today like III otherwise the <unk> S.
Martin Viecha: What's your estimate of <unk> addressable markets Youll see being like what are you about that 2 million units run rates today.
Speaker Change: And given the highest points of these guys.
Martin Viecha: What kind of market share.
Martin Viecha: Once you've addressed with discount do you think you've already achieved to date.
Martin Viecha: I don't know if anybody.
Martin Viecha: I don't think we have a firm.
Martin Viecha: Like idea if that's hard.
Martin Viecha: Hard to say exactly yeah, I wouldn't say there is one.
Martin Viecha: One way to think about it is look at the automotive industry is as well you know evs.
Martin Viecha: Can contribute a very small market share.
Martin Viecha: So yes, our goal is to try and take as much market share out of that pie.
Martin Viecha: Do I have a specific number to give you I don't think we can say that with certainty and it's a growing pie as well exactly like 9% per se, but it could be 20% and a couple of years or in the future yeah.
Martin Viecha: Certainly like the way we've looked at it and we've always said this its not about how many evs, Chris Alex how many cars you can tell them. How many vehicles you can sell in that markets $200 million a year.
Martin Viecha: You know, we're barely 2% of that.
Martin Viecha: I still think there's 98% more to get.
Martin Viecha: I mean, it's worth noting that if you look at say the.
Martin Viecha: Average selling price of the other top selling vehicles in the world. They are much lower price than a bottle of wine.
Martin Viecha: So like a two at around four.
Martin Viecha: Corona.
Martin Viecha: Kind of civic you know that kind of thing there much lower price than ours. So people are really stretched.
Martin Viecha: Stretching their wallets to.
Martin Viecha: To be able to afford a tesla.
It's quite a difficult thing for them to do.
Martin Viecha: Remarkable that it's the best selling car unit volume, despite being much more expensive than other high volume cars.
Martin Viecha: Thank you let's go to the next analyst. The next question comes from Adam Jonas from Morgan Stanley.
Martin Viecha: Hey, everybody.
Adam Michael Jonas: I can't wait to see the Optimus lab I'm sure.
Adam Michael Jonas: On this call it feels the same way Youre last AI day Elon with September 2022 can we expect.
Elon Reeve Musk: Definitely I date, this year and so it seems like a lot has changed in that in that realm.
Elon Reeve Musk: As this year at the time.
Martin Viecha: Yeah, It's a good question.
Martin Viecha: We have found that when we do these AI days some of our competitors literally look at what we do on a frame by frame basis.
Martin Viecha: Thank you.
Martin Viecha: And then we find these things being copied.
Martin Viecha: Same thing with battery day.
Martin Viecha: So we have to be a little cautious about.
Martin Viecha: Revealing the exact recipe of a secret sauce.
Martin Viecha: But.
Martin Viecha: I think some kind of update would be good to do.
Martin Viecha: And I'll talk it over with the team in.
Martin Viecha: Yes, I think what we will do something they did this year.
I'll then go with these AI day things as recruiting so yes, that's true.
Martin Viecha: It sort of change the perception of Tesla as you will think of Tesla as a car company when they should be thinking of Tesla as an AI robotics company.
Martin Viecha: Sure.
Martin Viecha: Maybe as a follow up Ilan I'd love your thoughts on the topic of.
Elon Reeve Musk: China based Oems expanding into the western markets as that as the China market kind of gets saturated and has a tremendous growth in the supply how much success for Tesla.
Martin Viecha: Tesla investors allow for this competition to achieve in western markets and can you envision a scenario, where tesla could could partner with a Chinese OEM OEM to help accelerate sustainable transport and markets like Europe, and the United States.
Martin Viecha: Well.
Martin Viecha: Our observation is generally that the.
Martin Viecha: The Chinese car companies with the most competitive car companies in the world.
Martin Viecha:
Martin Viecha: So.
Martin Viecha: I think they will have significant success.
Martin Viecha: Outside of China.
Martin Viecha: Depending on what kind of tariffs or trade barriers are established.
Martin Viecha: Frankly, I think if if if theyre not trade barriers established there they were pretty much demolished.
Martin Viecha: Most other companies in the world.
Martin Viecha: So.
Martin Viecha: They're extremely good.
Martin Viecha: We don't see an obvious opportunity to partner.
Martin Viecha: Suddenly we're happy to accept on the B supercharge upfront for oxy.
Martin Viecha: Happy to.
Martin Viecha: I'll give a any electric car company access to Supercharge network.
Martin Viecha: We're also happy to license full self driving.
Perhaps license other technologies.
Martin Viecha: And.
Martin Viecha: That could be helpful in advancing the <unk>.
Martin Viecha: <unk> energy Revolution.
Martin Viecha: Thank you and the next question comes from <unk> Levi from Barclays.
Martin Viecha: Hi, good evening, Thank you for <unk>.
Martin Viecha: Taking the questions.
Martin Viecha: First.
Martin Viecha: I was wondering if you can.
Just walk through some of the gating factors required to unlock here.
Martin Viecha: Nextgen platform, you talked about a number of cost initiatives back at the Investor day, a year ago things in manufacturing.
Martin Viecha: Powertrain, maybe you can just give us a sense of where these initiatives stand and do you believe it we know that Theres a number of new features and technologies in cyber truck things like 48 volt architecture really employing a 46 80 batteries to what extent do you think cyber truck is really a proving ground for the nexgen platform is really going to be a gating factor.
Martin Viecha: Unlocking the cost reductions needed for the Nexgen platform.
Martin Viecha: Who.
Martin Viecha: Listen I.
Martin Viecha: I don't think there's anything in cyber truck should be considered gating for the Nexgen platform. We're obviously doing a lot of manufacturing innovation isn't onsite for next generation vehicle.
Martin Viecha: You know when you do something of that scale you have to prove it out you don't just throw it on the line and just build it so we're going through those validation phases.
Martin Viecha: Are all those new manufacturing technologies now I'm sure 48 volt was definitely something we wanted to carry forward.
Martin Viecha: And it's something we hope the industry adopts as well we're also open to partnering.
Martin Viecha: If everyone wants to do that and really Matt, but people that really know that this is like the inside baseball thing but.
Martin Viecha: Men for Ya.
Martin Viecha: So high time that the water industry moved from 12, the random number of 12, 2% or 40, and a number of 40 months.
Martin Viecha: Much less random slightly less random based on human injury, but.
Martin Viecha: Dramatically reduces the amount of copper and even political and.
Martin Viecha: Moving to higher bandwidth communications.
Martin Viecha: It's sort of Ethernet.
Martin Viecha: Level communications versus campus, which is pretty pretty slow pretty slow.
Martin Viecha: So its really just bringing cars to the <unk>.
Martin Viecha: For centuries pretty much sort of like certainly like.
Martin Viecha: It's normal for a laptop.
Martin Viecha: Certainly bringing that like.
Martin Viecha: As is our evolution in our in our architectures of vehicles, but it is not gating by any means forgetting work has just finished the design and manufacturing of a car test them out and kind of what kind of.
Martin Viecha: Programs and execution right Yep right. So it's time to start talking about like tooling lead time Manny.
Martin Viecha: Manufacturing.
Martin Viecha: In fact right at the time.
Martin Viecha: Executing this program.
Martin Viecha: There's a lot of.
Martin Viecha: Because a lot of specialized machines that make the machine.
Martin Viecha: For next year and vehicle so.
Martin Viecha: He's not machines, you can just order from anyone actually reference design.
Martin Viecha: That has never existed.
Martin Viecha: Too bold a car in a way that has never existed.
Martin Viecha: So you don't just have like a design validation payers that you havent equipment design.
Martin Viecha: Phase as well.
Martin Viecha: It doesn't make it very hard to copy us because you have two copies of the machine that makes the machine that makes the machine.
Martin Viecha: [laughter] tiers.
Martin Viecha: Yeah, I'd say you know what.
Martin Viecha: Exactly manufacturing exception.
Martin Viecha: So I just think it's a it's quite a powerful sustainable advantage.
Martin Viecha: Because there just is no place to go to all of the machines that.
Martin Viecha: Nextgen car.
Martin Viecha: Yes.
Martin Viecha: Great. Thank you as a follow up.
Martin Viecha: <unk> does not mentioned.
Martin Viecha: So if you could just provide us an update on where that stands and at what point do you expect that to be a resource and improving FSD or do you think that.
Martin Viecha: You now have sufficient supply of Nvidia Gpus needed for the training of the system.
Martin Viecha: I mean part of your question is.
There's a deep one.
Martin Viecha:
Martin Viecha: So.
We're obviously hedging our bets here with the significant orders of Nvidia.
Martin Viecha: Gpus or <unk> is the wrong word thrilling to see it there is no it doesn't.
Martin Viecha: You kind of like produce graphics [laughter], so that's sort of grabbing precedent neural network or something like that.
Tom.
Martin Viecha: Yeah diffuse a plenty of plenty word vista.
Martin Viecha: Mr. Joe.
So.
Martin Viecha:
Martin Viecha: And.
Martin Viecha: A lot of progress in self driving is training limited.
Martin Viecha: <unk>.
Martin Viecha: Something that's important with with training, it's much like a human.
Martin Viecha: But more effort you put into training the less effort you need and in firms.
Martin Viecha: So just like a personally a few Q training the subjects.
Martin Viecha: 10000 hours.
Martin Viecha: The the less mental effort. It takes to do something if you remember when you first started to drive how much.
Martin Viecha: Your mental capacity it took the drivers get refocused completely.
Martin Viecha: Completely on driving then after you've been driving for many years.
Martin Viecha: It only takes a little bit of your mind to drive and you can think about other things and still drive safely.
Martin Viecha: <unk>.
Martin Viecha: So the more training to do the more efficiencies at the first level. So we do need a lot of training.
Martin Viecha:
Martin Viecha: And.
Martin Viecha: And where is it.
Martin Viecha: Pursuing the dual path of Nvidia and Toyota.
Martin Viecha:
Martin Viecha: But I would think of dojo as well.
A long shot.
Okay.
Martin Viecha: It's a long shot with taking because the payoff is potentially very high.
Martin Viecha: But it's not something.
Martin Viecha: That is a high probabilities.
Martin Viecha: Sure thing at all.
Martin Viecha: It's.
Martin Viecha: High risk high payoff program.
Martin Viecha:
Martin Viecha: But the returns are is working and it is it is during training jobs.
Martin Viecha: So and we're scaling it up.
Martin Viecha: And we have plans for a total of $1 five totaled $2 three and whatnot.
Martin Viecha: So you know.
Martin Viecha: I think it's Scott potential.
Martin Viecha:
Martin Viecha: But I can't emphasize enough high risk high payoffs.
Martin Viecha: So.
Martin Viecha: I think it still makes sense given the.
Martin Viecha: Even even if it's low.
Martin Viecha: Probably of success.
Okay.
I'm belaboring subject.
Martin Viecha: It's a very interesting program.
Martin Viecha: Yeah.
Martin Viecha: It has the potential for.
Martin Viecha: Put something special.
Martin Viecha: There's also our inference hardware in the car so we.
Martin Viecha: We're known.
What's called hardware for but it's actually version two of <unk>.
Martin Viecha: But tesla designed.
Martin Viecha: Inference chip.
Martin Viecha:
Martin Viecha: And we're about to complete design of.
So the terminology, but confusing.
Martin Viecha: We're about to complete the design of hardware five which is actually version three of the Tesla design chip because b.
Martin Viecha: Version, one was mobile App version, two with Nvidia and then version three with Vista with Tesla.
Martin Viecha: So.
Martin Viecha: And we're making gigantic improvements.
Martin Viecha: For.
Martin Viecha: One for.
Martin Viecha: From hardware three to four to five.
Martin Viecha:
Martin Viecha: I mean, there's a potentially interesting play.
Martin Viecha:
Martin Viecha: Where.
Martin Viecha: When cars are not in use in the future.
Martin Viecha: That's the.
Martin Viecha: And car computer.
Martin Viecha: Can do.
Martin Viecha: Generalized AI tests.
Martin Viecha: Can run a sort of.
Speaker Change: <unk>, four or three or something like that.
Speaker Change: You know if you've got tens of millions of vehicles out there.
Martin Viecha: Even in a robo taxi scenario whether in heavy years.
Martin Viecha: Maybe there is 50 out of 168 hours peso leaves.
Well over 100 hours.
Martin Viecha: Okay.
Martin Viecha: Time available of compute hours.
It's like it's possible.
With the right architectural decisions.
Martin Viecha: That Tesla may in the future have.
Martin Viecha: Compute and everyone else combined.
Martin Viecha: Thank you and the next question comes from Colin Langan from Wells Fargo.
Martin Viecha: Oh, great. Thanks for taking my questions.
Martin Viecha: As we're thinking about going into 2024.
Martin Viecha: Press release talks about having 36000 or slightly above in Q4.
Colin Langan: And in the comments as it relates to talk about approaching the natural limits and it sounds like you're continuing to try to win all of that away, but that's sort of implies there's not much left. In addition, you have the hourly wage increase I guess I'll add to that into next year and I thought you said raw material costs or kind of or that benefit is sort of almost sleep played out so is there a.
Colin Langan: The opportunity to continue to go below the 36 or should we kind of be modeling that it kind of stays at this level into 'twenty four.
Colin Langan: We are definitely aware of the costume cases, which are coming through because of the wage increases.
Colin Langan: Like I said.
Colin Langan: We keep looking at other cost opportunities and try and figure out where else can we cut down. So there is definitely more opportunity to bring down costs further.
Colin Langan: One specifically guide to a number which we will try and get too, but there's definitely more opportunities yes, we.
Colin Langan: We're chasing we're chasing lots of cost opportunities on the fact that still for 2024.
North of eight figures.
Colin Langan: Yeah.
Colin Langan: And just in my organization and Lars has got a bunch and then from a commodities perspective, it's such a long lead.
Lars Smith: Cycle time through the whole material supply chain that even with what we've already seen to this point, but there's more to come on come out of these reductions.
Colin Langan: Some tail tailwind if.
Colin Langan: That's what I mean in the aluminum and steel.
Colin Langan: And battery materials.
It Boggles my mind to think that if we make a 1% improvement in cost that's $1 billion.
Yeah. So it's like on average if we reduce the cause.
Colin Langan: By one penny.
Colin Langan: Billions of dollars.
Colin Langan: What.
Colin Langan: And when we started off.
Colin Langan: It wasn't that long ago.
Colin Langan: Only making like 10 cars a week.
Colin Langan: And.
Colin Langan: Yeah.
Colin Langan: [laughter] Oh.
Colin Langan: Where does it lead ultimately.
With good execution like I said.
Colin Langan: So that's not a it's not a slam dunk, but.
Colin Langan: With you know if we execute very well I think.
Colin Langan: It sounds like could be the most valuable company.
Colin Langan: Thank you Colin do you have a follow up question, yes, just a quick follow up on the commentary you mentioned the taxes would go to the S&P 500 level I think you've been trending slightly below 10% S&P I think it's typically 25% ish.
Colin Langan: Is that kind of should we expect that to jump right up next year when we're modeling next year.
Colin Langan: Or would it be a gradual change over the next few years and any cash impact from that tax change as well that we should think considering.
Colin Langan: Yeah. So there is no impact on cash taxes from a from the release of the valuation allowance, which I spoke about.
Colin Langan: What it does is it's how you account for taxes on your book on your books. So it's basically an accounting change.
You know there are certain jurisdictions, because we had enough.
Colin Langan: Oils et cetera, when we didn't have to accrue taxes.
Colin Langan: The valuation allowance has been released and we recognize different tax assets on the books.
Colin Langan: That means no toxic immediately goes up.
Colin Langan: Okay.
Colin Langan: That's all the time, we have for today. Thank you so much for all of your questions and we'll speak to you again in three months. Thank you bye bye. Thank you.
Colin Langan: [music].
Colin Langan: Okay.