Q1 2024 Tesla Inc Earnings Call - Q&A
My name is Martin Birk, VP of Investor Relations and I'm joined today by Elon Musk pay Boston Asia in a number of other executives.
Our Q1 results were announced at about three P. M Central time in the update deck, we published at the same link as these webcast.
During this call we will discuss our business outlook and make forward looking statements. These comments are based on our predictions and expectations as of today.
Actual events and results could differ materially due to a number of risks and uncertainties, including those mentioned in our most recent filings with the SEC.
During the question and answer portion of today's call. Please limit yourself to one question and one follow up please.
Please use the race and button.
To join the question queue.
But before we jump into Q&A Elon has some opening remarks Elon.
Elon: Thanks Martin.
Elon: So to recap in Q1, we navigated several unforeseen challenges as well as the ramp of the updated model three in Fremont.
Elon: There was.
Elon: We all have seen the EV adoption rate globally is under pressure and a lot of our other auto manufacturers are pulling back on ebs and pursuing plug in hybrids instead.
Elon: We believe this is not the right strategy and electric vehicles will ultimately dominate the market.
Elon: Sure.
Elon: Despite these challenges the tell the team did a great job executing and executing in a tough environment.
Elon: And energy storage deployments Omega pack in particular reached an all time high in Q1, leading to record profitability for the energy business.
Elon: That looks likely to continue to increase.
Quarters and years ahead.
Elon: It will increase when we actually know that it will.
Elon: So.
Elon: So significantly faster than the core business.
Elon: We expect it.
Elon: We also continued to expand our.
Elon: AI training capacity in Q1 more than doubling our training compute sequentially.
Elon: In terms of the new product roadmap, there's been a lot of talk about our upcoming vehicle line.
In the past several weeks.
Elon: We've updated our future vehicle lineup to accelerate the launch of new models Ed.
Elon: Previously mentioned started production in the second half of 2025, so we expect it to be more like the early 2025, if not late this year.
Elon: These new vehicles, including more affordable models.
Elon: <unk> aspects of the next generation platform as well as aspects of our current platforms and we'll be able to be produced on the same manufacturing lines as our current vehicle lineup.
Elon: So it's not contingent on any new factory or massive new production line.
Elon: There'll be made.
Elon: On our current production lines much more efficiently.
Elon: And we think this should allow us to get to.
Elon: Over 3 million vehicles.
Elon: Of capacity and realize the full extent.
Elon: Regarding SSD version 12.
Elon: Which is the pure AI based.
Hi, Silke.
Elon: Self driving people if you haven't experienced this I strongly urge you to try it out it's profound.
Martin Viecha: Q&A webcast. My name is Martin Viecha, VP of Investor Relations, and I'm joined today by Elon Musk, Vaibhav Taneja, and a number of other executives. Our Q1 results were announced at about 3 p.m. Central Time in the update deck we published at the same link as this webcast.
And the rate of improvement is rapid.
Elon: So.
We've now turned that on for.
Elon: Uh huh.
Elon: All cars with the.
Elon: Cameras.
Martin Viecha: During this call, we will discuss our business outlook and make forward-looking statements. These comments are based on our predictions and expectations as of today. Actual events and results could differ materially due to a number of risks and uncertainties, including those mentioned in our most recent filings with the SEC. During the question and answer portion of today's call, please limit yourself to one question and one follow-up. Please use the raise hand button to join the question queue.
And first computer.
Elon: Everything from hardware three on.
Elon: In North America, So it's been pushed out to thank Brian $1 8 million vehicles.
Elon: And we're seeing about half of people use it so far.
Elon: That percentage is increasing with each passing week.
Elon: So we now have over 300 billion miles that have been driven with FSD 12.
Elon: Since the launch of full self driving supervised full self driving.
Martin Viecha: But before we jump into Q&A, Elon has some opening remarks. Elon: Thanks, Martin.
Elon: It's become very clear that the vision based approach with end to end neural networks is the right solution for scale of autonomy.
Elon R. Musk: So to recap, in Q1, we navigated several unforeseen challenges, as well as the ramp for the updated Model 3 in Fremont. There were, as people have seen, the EV adoption rate globally is under pressure, and a lot of other auto manufacturers are pulling back on EVs and pursuing plug-in hybrids instead. We believe this is not the right strategy, and electric vehicles will ultimately dominate the market. Despite these challenges, the Tesla team did a great job executing it in a tough environment. Energy storage deployments, the MegaPak in particular, reached an all-time high in Q1, leading to record profitability for the energy business.
Elon: How humans.
Elon: Right.
Elon: Our entire road network is designed for biological neural nets and ice so naturally cameras.
Elon: Digital neural nets are the solution to our current road system.
Elon: To make it more accessible we've reduced the subscription price to $99 a month, so it's easy to try out.
Elon: And.
Elon: As we've announced we will be showcasing our purpose built.
Elon: Robo taxi or cyber cap in August.
Elon: Yes.
Elon: Regarding.
Elon: Regarding add compute.
Elon: Over the past few months, we've been actively working on expanding Tesla's core AI infrastructure for.
Elon R. Musk: And that it looks likely to continue to increase in the quarters and years ahead. It will increase, and we actually know that it will. So significantly faster than the car business, as we expected. We also continue to expand our AI training capacity in Q1, more than doubling our training compute capacity sequentially. In terms of the new product roadmap, there's been a lot of talk about our upcoming vehicle line over the past several weeks.
Elon: For a while there we were training constrained and our progress we are at this point.
Elon: No longer training constrained and so we're making rapid progress.
Elon: We've installed and commission, bringing they're actually working.
Elon: <unk> 5800.
Elon: Computers.
Elon: Abuse diffuse wrong, where they need a new wood.
Elon: I always feel like.
Elon: <unk>, when I say, GPU, because gpus that Gee central graphics and Geographics.
Elon R. Musk: We've updated our future vehicle lineup to accelerate the launch of new models ahead of our previously mentioned start of production in the second half of 2025. So we expect it to be more like early 2025, if not late this year. These new vehicles, including more affordable models, will use aspects of the next generation platform, as well as aspects of our current platforms, and will be able to be produced on the same manufacturing lines as our current vehicle lineup. So it's not contingent on any new factory or massive new production line that will be made on our current production lines much more efficiently. Um, and we think this should allow us to get to it.
Okay.
Elon: Roughly 35.
Elon: Hundreds of proactive.
Elon: We expect that to be probably.
Elon: 85000, or thereabouts by the end of this year.
Elon: And training just for training.
Elon: We are making sure that we're being as efficient as possible in our training, it's not just about the number of <unk>.
Elon: Each one hundreds but.
Elon: How efficiently they are used.
Elon: So in conclusion, we're super excited about autonomy roadmap think it should be obvious to anyone who is driving up <unk> 12, and a tested.
Elon: It was only a matter of time before we see the reliability of humans.
Elon: Not much time at that.
Elon R. Musk: Over 3 million vehicles of capacity when realized to the full extent. Regarding FSD version 12, which is the pure AI-based... self-driving people that if you haven't experienced this, I strongly urge you to try it out. It's profound, and the rate of improvement is rapid.
Elon: And.
Elon: And we're really headed for an electric vehicle.
Elon: And autonomous future.
Elon: And.
Elon: I'll go back to something I said several years ago.
Elon: In the future.
Elon: Hi.
Elon: Gasoline.
Elon: Gasoline cars that are not autonomous will be like riding a horse I'm using a flip phone.
And that will become very obvious in hindsight.
Elon R. Musk: So we've now turned that on for all cars with the cameras and inference computer, everything from hardware three on. Unknown Speaker, The Epoch Times, The Economist, The Economist, The Economist, The Economist, So we now have over 300 billion miles that have been driven with the FSD-V12. And since the launch of full self-driving, supervised full self-driving, it's become very clear that the vision-based approach with end-to-end neural networks is the right solution for scalable autonomy.
We continue to make the necessary investments that will drive growth and profits with tests in the future and I wanted to thank the Tesla team for incredible execution. During this period and look forward to everything that we have planned ahead.
Speaker Change: Thanks, Thank you very much and a buyback of some comments as well thanks.
Speaker Change: It's important to acknowledge what Elon said.
Speaker Change: From our auto business perspective, we did see a seasonal decline in revenues quarter over quarter and that was primarily because of seasonality.
Speaker Change: On the macroeconomic environment.
The reasons, which Ivan had mentioned earlier auto margins declined from $18 nine to 18, 5%.
Elon R. Musk: And that's really how humans drive. Our entire road network is designed for biological neural nets and eyes. So naturally, cameras and digital neural nets are the solution to our current road system. To make it more accessible, we've reduced the subscription price to $99 a month, so it's easy to try out.
Speaker Change: Excluding the impact of cyber truck the impact of pricing actions was largely offset by reductions in per unit cost and then as that and the recognition of revenue from autopilot feature.
Speaker Change: When it comes in the U S that previously did not have that functionality.
Speaker Change: Additionally.
While we did experience higher cost due to the ramp of model three in three months and disruptions in Berlin.
Elon R. Musk: As we've announced, we'll be showcasing our purpose-built robo-taxi or cyber cab in August. Yeah, regarding AI compute, over the past few months, we've been actively working on expanding Tesla's core AI infrastructure. For a while there, we were training constrained in our progress.
Costs were largely offset by cost reduction initiatives.
Speaker Change: In fact, if you exclude cyber truck and three three model T them cost the revenue from Auto Park auto margins improved slightly.
Speaker Change: Currently a normalized model y cost per Waco, and Austin, and Portland are already very close to that of Fremont.
Speaker Change: On a related to reduce cost without sacrificing on quality was due to the amazing efforts of the team in executing tesla's relentless pursuit of efficiency across the business.
Elon R. Musk: We are, at this point, no longer training constrained, and so we're making rapid progress. We've installed and commissioned, meaning they're actually working, 35,000 H100 computers. GPU is the wrong word; they need a new word. I always feel like a wince when I say GPU, because it's not a GPU, it's G-Sensor Graphics.
Speaker Change: We've also witnessed that.
Speaker Change: As other Oems are pulling back on their investments in EV, Dennis increasing appetite for credits and that means a steady stream of revenue for us obviously seeing others pulled back from you is not the future. We want we would prefer that the whole industry event all of them.
Elon R. Musk: But anyway, roughly 35,800 are active. And we expect that to be probably 85,000 or thereabouts by the end of this year, and training just for training. We are making sure that we're being as efficient as possible in our training. It's not just about the number of... H100 is good. How efficient is their use?
On the demand front.
Speaker Change: Undertaken a variety of initiatives, including Lord lowering the price of both the purchase and prescription options for FSD launching extremely attractive leasing, especially for the model three in the U S for $2 99, a month and offering attractive financing options in certain markets, we believe that our maintenance activities.
Speaker Change: Attractive financing will go a long way in expanding our eat and driving demand for our products.
Elon R. Musk: So, in conclusion, we're super excited about our autonomy roadmap. I think it should be obvious to anyone who's driving version 12 and a Tesla that it is only a matter of time before we exceed the reliability of humans, and not a long time at that. And we're really headed for an electric vehicle. An autonomous future. I'll go back to something I said several years ago, that in the future.
Speaker Change: On the energy business continues to make meaningful progress with margins, reaching a record of 24, 6%.
Speaker Change: Spectra energy storage deployments for 2024 to grow.
75% higher from 'twenty to 'twenty three.
Speaker Change: Accordingly, this as big as us will begin contributing significantly to our overall profitability.
Speaker Change: Not that there is a bit of lumpiness in our storage departments due to a variety of factors that are outside of our control so deployments may fluctuate quarter over quarter.
Elon R. Musk: Gasoline cars that are not autonomous will be like riding a horse and using a flip phone, and that will become very obvious in hindsight. We continue to make the necessary investments that will drive growth and profits for Tesla in the future. And I want to thank the Tesla team for incredible execution during this period and look forward to everything that we have planned ahead. Thanks. Thank you very much.
Speaker Change: On the operating expense front, we saw a sequential increase from our.
Initiatives.
Speaker Change: Continued investment in future projects marketing and other activities.
We had negative free cash flow of $2 5 billion in the first quarter. The primary driver of this was an increase in inventory from a mismatch between built in deliveries I've discussed before and our elevated spend on capex across various initiatives, including yet complete we expect the inventory build to reverse in the second quarter and.
Vaibhav Taneja: And Vaibhav has some comments as well. Thanks. You know, it's important to acknowledge what Elon said, from our auto business perspective, we did see a seasonal decline in revenues, quarter over quarter. And that was primarily because of seasonality, a certain macroeconomic environment, and the other reasons which Elon had mentioned earlier. Auto margins declined from 18.9% to 18.5%, excluding the impact of Cybertruck.
Speaker Change: Free cash flow to return to positive again.
Speaker Change: As we prepare the company for the next phase of growth, we have to make the hard but necessary decision to reduce our head count by over 10%.
Speaker Change: Moving.
Unexpected to be well in excess of one one.
Speaker Change: Excess of $1 billion on an annual run rate basis.
Speaker Change: We are also getting hyper focus on capex efficiency and utilizing our installed capacity in a more efficient manner.
Vaibhav Taneja: The impact of pricing actions was largely offset by reductions in per unit costs and the recognition of revenue from the autopark feature for certain vehicles in the U.S. that previously did not have that functionality. Additionally, while we did experience higher costs due to the ramp-up of Model 3 in Fremont and disruptions in Berlin, these costs were largely offset by cost-reduction initiatives. In fact, if we exclude Cybertruck and Fremont Model 3 ramp costs, the revenue from auto parts, and Auto margins improved slightly.
Speaker Change: The savings from these initiatives, including our cost reductions will help.
Speaker Change: Help improve our overall profitability and ultimately enable us to increase the scale of our investments in AI.
Speaker Change: In conclusion.
Speaker Change: The future is extremely bright.
Speaker Change: And the journey to get there why is challenging will be extremely rewarding once again I would like to thank the whole Tesla team for delivering great results.
Vaibhav Taneja: Currently, normalized Model Y costs per vehicle in Austin and Berlin are already very close to that of Fremont. Our ability to reduce costs without sacrificing quality was due to the amazing efforts of the team in executing Tesla's relentless pursuit of efficiency across the business. We've also witnessed that as other OEMs are pulling back on their investments in EVs, there is an increasing appetite for credits, and that means a steady stream of revenue for us.
Speaker Change: And we can open it up to Q&A. Thank you, Okay, let's start with Investor Q&A. The first question is what is the status of 46 80, what is the current output.
Speaker Change: Sure.
Speaker Change: 46, 80 production increase about 18% to 20% over from Q4, reaching greater than one day, a week for cyber truck, which is about seven gigawatt hours per year as we posted Opex. We expect to stay ahead of the cyber truck ramp with the cell production.
Throughout Q2, as we ramp the third of four lines in phase one.
Speaker Change: While maintaining multiple weeks of some inventory to make sure. We're ahead of the ramp.
Vaibhav Taneja: Obviously, seeing others pull back from EV is not the future we want. We would prefer if the whole industry went all in. On the demand front, we have undertaken a variety of initiatives, including lowering the price of both the purchase and subscription options for FSD, launching extremely attractive leasing specials for the Model 3 in the U.S. for $299 a month, and offering attractive financing options in certain markets.
Because we're writing colleagues continues to drop rapidly week over week, driven by yield improvements throughout the lines and production volume increases so.
Speaker Change: Our goal and we expect to do this it's a beat supplier cost of nickel based cell spending in here.
Speaker Change: Thank you.
Speaker Change: Second question is on Optimists. So what is the current status of Optimus Party currently performing any factory tasks. When do you expect to start mass production.
Vaibhav Taneja: We believe that our awareness activities paired with attractive financing will go a long way in expanding our reach and driving demand for our products. Meanwhile, our energy business continues to make meaningful progress, with margins reaching a record of 24.6%. We expect the energy storage deployments for 2024 to grow at least 75% higher from 2023, and accordingly, this business will begin contributing significantly to our overall profitability. Note that there is a bit of lumpiness in our storage deployments due to a variety of factors that are outside of our control, so deployments may fluctuate quarter over quarter. On the operating expense front, we saw a sequential increase in our AI initiatives. Continued investment in future projects, marketing, and other activities. We had a negative free cash flow of $2.5 billion in the first quarter.
Speaker Change: We.
Speaker Change: Are able to do simple factory tasks.
Speaker Change: I should say factory tests in the lab.
Speaker Change: The.
In terms of actually we do it we do think we will have optimists.
Speaker Change: Limited production in the factory natural factory itself doing useful tasks before the end of this year.
Speaker Change: So.
Speaker Change: And then.
Speaker Change: Okay.
Speaker Change: I think we may be able to sell it externally by the end of next year.
Speaker Change: These just just guesses.
Speaker Change: As I've said before I think.
Speaker Change: Optimus will be.
Speaker Change: More valuable and everything else combined.
Speaker Change: Because if you've got a sentient humanoid robots.
Speaker Change: That is able to navigate rehab and <unk>.
Speaker Change: Two tasks.
Vaibhav Taneja: The primary driver of this was an increase in inventory from a mismatch between bills and deliveries, as discussed before, and our elevated spend on CapEx across various initiatives, including AI compute. We expect the inventory bill to reverse in the second quarter and free cash flow to return to positive again. As we prepare the company for the next phase of growth, we have to make the hard but necessary decision to reduce our headcount by over 10%. The savings generated are expected to be well in excess of $1 billion on an annual basis.
Speaker Change: Requests.
Speaker Change: There is no meaningful limit to the size of the economy.
Speaker Change: So.
Speaker Change: That's what's going to happen.
Speaker Change: And I think Tesla is best positioned of any.
Speaker Change: <unk>.
Speaker Change: Humanoid robot makers to.
Speaker Change: Be able to reach volume production.
With <unk>.
Speaker Change: Efficient inference.
Speaker Change: The robot itself.
Speaker Change: I mean, this perhaps is a point that is worth.
Speaker Change: <unk>.
Speaker Change: Tablets, and <unk> AI and for insufficiency is vastly better than anyone any other company.
Martin Viecha: We are also getting hyper-focused on CapEx efficiency and utilizing our installed capacity in a more efficient manner. The savings from these initiatives, including our cost reductions, will help improve our overall profitability and ultimately enable us to increase the scale of our investments in AI. In conclusion, the future is extremely bright, and the journey to get there, while challenging, will be extremely rewarding. Once again, I would like to thank the whole Tesla team for delivering great results. And we can open it up to Q&A. Thank you. Okay, let's start with investor Q&A. The first question is, what is the status of 4680? What is the current output, Lars?
Speaker Change: No Theres no company, even close to the efficiency of Tesla.
Speaker Change: We've had to do that because we were constrained by the inference hardware in the car we didn't have a choice.
Speaker Change:
Speaker Change: But that will pay dividends in many ways.
Speaker Change: Thank you the.
Speaker Change: The third question is.
Speaker Change: What is the fuss current assessment of the pathway towards regulatory approval for unsupervised FSD in the U S and how should we think about the appropriate safety threshold compared to human drivers.
Speaker Change: I can start there are a handful of states that already have adopted autonomous vehicles.
Speaker Change: These states are paving the way for operations.
Speaker Change: The data for such operations guidance, a broader adoption of driverless vehicles. I think you show can talk a little bit about our safety methodology, but.
Lars: Sure. 4680 production increased about 18-20% from Q4, reaching greater than 1K a week for Cybertruck, which is about 7 gigawatt hours per year, as we posted on X. We expect to stay ahead of the Cybertruck ramp with cell production throughout Q2, as we ramp the third of four lines in Phase 1, while maintaining multiple weeks of cell inventory to make sure we're ahead of the ramp. Because we're ramping, COGS continues to drop rapidly week over week, driven by yield improvements throughout the lines and production volume increases. So our goal, and we expect to do this, is to beat supplier costs for nickel-based cells by the end of the year. Thank you. The second question is on Optimus.
Speaker Change: Back to these states and the work ongoing as well as the data that we're providing.
Speaker Change: Pedro ways for a broad based regulatory approval.
Speaker Change: In the U S at least and then other countries as well.
Speaker Change: Yes.
It's actually been pretty helpful that other autonomous car companies.
Speaker Change: And cutting a path through the regulatory jungle.
Speaker Change: But.
Speaker Change: So that's actually quite helpful.
Speaker Change:
Speaker Change: And they have obviously been operating in San Francisco for a while I think we got approval for city ballet.
Elon R. Musk: So what is the current status of Optimus? Are they currently performing any factory tasks? When do you expect to start mass production? They are able to do simple factory tasks, or at least, I should say, factory tasks in the lab. In terms of actually, we do think we will have optimists and limited production in the factory, in the actual factory itself doing useful tasks before the end of this year. So, and then
Speaker Change: So these these approvals happening rapidly I think okay.
Speaker Change: If you bought at scale.
Speaker Change: A statistically significant amount of data that shows conclusively that the autonomous car.
Speaker Change: <unk>, let's say.
Uh huh.
Speaker Change: Half the accident rate of human driven car and that's difficult to ignore because at that point.
Speaker Change: Nothing autonomy, it's killing people.
So.
I actually do not think that there will be.
Speaker Change: Second regulatory barriers.
Speaker Change: Provided there was conclusive data that the.
Speaker Change: Eponymous cars safer then.
Elon R. Musk: I think we may be able to sell it externally by the end of next year. Are these just guesses? As I've said before, I think Optimus will be more valuable than everything else combined because if you've got a sentient humanoid robot that is able to navigate reality and complete tasks after class, there is no meaningful limit to the size of the economy.
Speaker Change: The human driving car.
Speaker Change: It.
It might be this will be much like elevators.
Speaker Change: <unk> used to be operated by a guy with really switch.
Speaker Change: But sometimes like I would get tired or chronic or just.
Speaker Change: I'll, just make a mistake and sure somebody in half between flows.
Speaker Change: Now we just have we just get an elevator and press button, we don't think about it.
Speaker Change: In fact, just kind of weird if somebody standing there was really switch.
Speaker Change: That'll be how cars work.
Speaker Change: Can you just.
Speaker Change: Some of the car using your phone you got in it takes you to a destination you get out.
Elon R. Musk: That's what's going to happen, and I think Tesla's in the best position of any humanoid robot maker to be able to reach volume production. [inaudible] efficient inference on the robot itself. I mean, this perhaps is a point that is worth emphasizing.
Speaker Change: Hey, don't you think about it you don't even think about it.
Speaker Change: Just like an elevator.
Speaker Change: Can you talk to your floor.
Speaker Change: That's it don't think about how the elevators working or anything like that.
Speaker Change: And.
Speaker Change: Yes.
Something I should.
Speaker Change: Clarifies that Tesla will be.
Speaker Change: <unk> the fleet.
Speaker Change: So you can think of like how Tesla.
Elon R. Musk: Tesla's AI inference efficiency is vastly better than any other company. There's no company even close to the efficiency of Tesla. We've, we had to do that because we were constrained by the inference hardware in the car. We didn't have a choice.
Speaker Change: I think it sounds like some combination of Airbnb and Uber.
Speaker Change: That.
Speaker Change: There'll be some number of cars that Tesla owns itself and operates in the fleet there'll.
Speaker Change: There'll be some number of cars and then there'll be a bunch of cars were.
Speaker Change: They are owned by <unk>.
Unknown Speaker: But that will pay dividends in many ways. Thank you. The third question is, what is Tesla's current assessment of the pathway towards regulatory approval for unsupervised FSD in the US? And what should we think about the appropriate safety threshold compared to human drivers? I can start.
Speaker Change: And user but that.
Speaker Change: End user can add or subtract their card the fleet whenever they want and they can decide if they want to only led to coffee used by friends and family or only by <unk>.
Speaker Change: Five star users or by anyone.
Speaker Change: And any add anytime they could.
The car come back to them and be exclusively bears like an airbnb.
Unknown Speaker: There are a handful of states that have already adopted autonomous vehicle laws. These states are paving the way for operations, while the data for such operations guides a broader adoption of driverless vehicles. I think Ashok can talk a little bit about our safety methodology, but we expect that these states and the work ongoing, as well as the data that we're providing, will pave the way for broad-based regulatory approval in the U.S. at least and then other countries as well.
Speaker Change: Ran out your Guestroom.
Speaker Change: Or not anytime you want.
Speaker Change: So.
Speaker Change: Yeah.
Speaker Change: As our fleet grows.
Speaker Change: Million cars going to 9 million cars going on.
Speaker Change: Eventually tens of millions of cars.
Worldwide.
Speaker Change: With a <unk>.
Speaker Change: Constant feedback every time something goes wrong.
Speaker Change: That gets added to the training data.
Elon R. Musk: Yeah. It's actually been pretty helpful that other autonomous car companies have been cutting a path through the regulatory jungle. But the which is, so that's actually quite helpful. And they have obviously been operating in San Francisco for a while. I think they got approval for the city of LA.
Speaker Change: And you get this training flywheel happening.
Speaker Change: And the same way that Google search.
Speaker Change: Firewall, it's very difficult to compete with Google because.
Speaker Change: People are constantly doing searches.
Speaker Change: And google's getting that feedback loop.
Speaker Change: It's the same with Tesla.
Speaker Change: But at a scale that is.
Elon R. Musk: So these approvals are happening rapidly. I think if you've got at scale, a statistically significant amount of data that shows conclusively that the autonomous car has, let's say, half the accident rate of a human-driven car. I think that's difficult to ignore because at that point, stopping autonomy means killing people. So, I actually do not think that there will be significant regulatory barriers, provided there is conclusive data that the autonomous car is safer than a human-driven car.
Speaker Change: Maybe difficult to comprehend.
Speaker Change: But ultimately be tens of millions.
Speaker Change: I think theres also some potential here for an AWS element.
Speaker Change: Down the road, where if we've got.
Speaker Change: Very powerful inference.
Speaker Change: No because <unk> got a hardware three within the cars, but now all cars are being made with hardware for hardware five is pretty much designed and.
Speaker Change: Should it be in cars hopefully towards the end of next year.
Speaker Change: And.
Elon R. Musk: And in my view, this will be much like elevators. Elevators used to be operated by a guy with a relay switch. But sometimes that guy would get tired or drunk or just make a mistake and share somebody in half between flows.
Speaker Change: There's a potential to.
Speaker Change: To run when the car is not moving.
Speaker Change: Actually run distributed insurance.
Speaker Change: So.
Kind of like AWS, but distributed in firms like it takes a lot of competitors to train.
Elon R. Musk: So now we just have to, we just get in an elevator and press a button; we don't even think about it. In fact, it's kind of weird if somebody's standing there with a relay switch. That'll be how cars work. You just, get in a car, use your phone, you get in, it takes you to a destination, and you get out. Hey, don't even think about it. You shouldn't even think about it. Just like an elevator. It takes you to your floor.
Speaker Change: The AI model, but.
Many orders of magnitude less compute to run it.
Speaker Change: So.
Speaker Change: If you can.
Speaker Change: Imagine the future paths, where there is a fleet of $100 million Tesla's.
Speaker Change: And on average they've got like maybe a kilowatt of inference compute.
Speaker Change: 100, Gigawatts of insurance computer disk.
Speaker Change: Mr vehicle around the world.
Elon R. Musk: That's it. Don't think about how the elevator is working or anything like that, and I'm assuming I should clarify that Tesla will be operating the fleet. So you can think of Tesla like some combination of Airbnb and Uber, meaning that, You know, there'll be some number of cars that Tesla owns and operates in the fleet. There'll be some number of cars, and then there'll be a bunch of cars where they're owned by the end user, but that (inaudible] or not, anytime you want.
Speaker Change: It's pretty hard to put together 100 gigawatts of.
Speaker Change: AI compute.
Speaker Change: And even in an autonomous.
Speaker Change: Future, whether the cars, perhaps used instead of a used 10 hours a week is used 50 hours a week.
Speaker Change: So that leaves over 100 hours, a week, where the acquired firms computer could be doing something else.
Speaker Change: And it seems like it would be a waste not to use it.
Speaker Change: Akshay do you want to chime in on the payer process 60, yes.
Speaker Change: Yourself.
Got it anything with safety.
Akshay: In any given week, we trained 100 something on our networks.
Akshay: Can't produce controller curious Barbara type of car they pay them to the millions of chips.
Akshay: Already allocated from our users and our own QA select critical events like someone's dumping aten try and tolerant like other critical events that we have gathered a database or many many years and good evening to all of them to make sure that we are net improving 50 nonprofit mission systems, but also to be clear.
Akshay: And test it and close to fashion.
Elon R. Musk: So, As our fleet grows, we have 7 million cars going to, 9 million cars going to, you know, eventually tens of millions of cars worldwide, with a constant feedback loop every time something goes wrong. That gets added to the training data, and you get this training flywheel happening. In the same way that Google search has this sort of flywheel, it's very difficult to compete with Google because people are constantly doing searches and clicking, and Google's getting that feedback loop.
Akshay: All of this.
Akshay: That would be <unk>.
Akshay: Hundreds of them in different cities in San Francisco, Los Angeles, Austin York Alright.
Akshay: They are also driving this beautiful minds and we had an estimate of one of the critical events are the net improvement compared to the previous weeks.
And then once we have confidence.
The ability of a net improvement then we are shipping to.
Akshay: Early users like 2000 employees initially that they would like it to build they will give feedback on making thats an improvement.
Akshay: New issuance that we did not captured in our own QA process and only after all of this is about the data then we go to external customers and even when we have like.
Elon R. Musk: It's the same with Tesla, but at a scale that is, um, maybe difficult to comprehend but ultimately every tens of millions. I think there's also some potential here for an AWS element down the road when we've got very powerful inference. You know, because we've got hardware three in the cars, but now all cars are being made with hardware four. Hardware five is pretty much designed and should be in CARS hopefully towards the end of next year, and there's a potential to have it run when the car is not moving to actually run distributed inference. So, kind of like AWS but distributed inference, like it takes a lot of computers to train an AI model but many orders of magnitude less computing power to run it.
Akshay: Dashboards monitoring every critical even that's happening in the fleet heartened by the criticality of it.
Akshay: So we are having a constant on the bids quantity in the 50 improvement along the way and then any payments that you don't want to get the data back added for the training and that improves the model in the next cycle. So if you add this constant feedback loop all issues access evaluations and then there's been some debate.
Akshay: The new vitamin architecture, all of this is automatically improving without.
Akshay: Adding much engineering intervention in the sense that.
Akshay: People engineers don't have to be creative in how the courtyard garden, it's mostly the earning on its own based on data.
Akshay: So you see that it can be failure like this is how a person shows is how you drive this introduction or something like that and get the data back we added for the neural network and advance from that change it automatically insert some engineers, saying that hole.
Akshay: You must look at the steering wheel, but this is my assumption.
Akshay: Harding President Michelle if everything is newer networks, it's pretty soft is probably stick to that.
Elon R. Musk: So, if you can imagine a future where there are a fleet of 100 million Teslas, and on average, they've got like maybe a kilowatt of inference compute. That's 100 gigawatts of inference compute, distributed all around the world. It's pretty hard to put together 100 gigawatts of, [inaudible] and even in an autonomous future where the car is perhaps used, instead of being used 10 hours a week, 50 hours a week.
Akshay: Probably its distribution.
Based on the new data that it's getting.
Akshay: Yes.
Akshay: We do have some insight into how good I think things will be unlike let's say three or four months because we have advanced models that are far more capable than what is in the car.
Akshay: But.
Akshay: Have some issues with them that we need to fix so there like Dolby.
Akshay: It will be a step change improvement and the capabilities of the car, but it will have some quirks that are that.
Akshay: That needs to be addressed.
Elon R. Musk: That still leaves over 100 hours a week where the car and computer could be doing something else, and it seems like it would be a waste not to use them. Ashu, do you want to chime in on the air process and safety?
Akshay: In order to release it.
Akshay: What we're saying we have to be very careful in what we're going to be the fleet.
Akshay: Two customers in general.
Akshay: So.
Akshay: So.
Akshay: I can say $12, four and $12 five which are really could arguably even be version 13 gross or 14.
Ashok: Yeah, we have multiple tiers of validating safety. In any given week, we train hundreds of neural networks that can produce different trajectories for how to drive the car. We then replay them through the millions of trips that we have already collected from our users and our own QA.
Akshay: Because it's pretty close to total retraining the neural nets.
Akshay: In each case.
Akshay: Substantially different.
So we have.
Ashok: Those are like critical events, you know, like someone jumping out in front or like other critical events that we have gathered a database on over many, many years. And we run through all of them to make sure that we are net improving safety. And above it, we have simulation systems that also try to recreate this and test this in a close fashion. And some of this is, We give it to our own QA drivers. We have hundreds of them in different cities, in San Francisco, Los Angeles, Austin, New York, a lot of different locations.
Akshay: Good insight into where the.
Akshay: Where the models.
How well the call performed.
Akshay: And say three or four months.
Akshay: Most people in the AG I Wonder if you can maybe talk about model is getting started includes a modern sites.
Akshay: And then corresponding gains in performance, but we have also figured out getting.
Akshay: Operating loss and other access in addition to the modern ice scaling Mccann also have data scanning. Your can you give the amount of data you use a training at our network and that also gives us.
Ashok: They are also driving this and collecting real-world miles, and we have an estimate of what the critical events are. Are they a net improvement compared to the previous week's builds?
Akshay: Gains and.
And you can also scale up by training compute containers for much longer and got more Gpus are more dojo nordson that also gifts.
Ashok: And once we have confidence that the build is a net improvement, then we start shipping to early users, like 2,000 employees initially, that they would like to get the build. They will give feedback on if it's an improvement or indicate some new issues that we did not capture in our own QA process. And only after all of this is validated, then do we go to external customers. And even when we go external, we have live dashboards monitoring every critical event that's happening in the fleet, sorted by the criticality of it.
Akshay: Performance and then you can also have architectures scaling value content better architectures.
Akshay: While at the same one for computer property.
Akshay: Combination of monetize getting data skating training compute scaling and the architectures kidding.
We can basically like okay. If the country is getting based on this at this ratio as we can.
Akshay: It's hard to predict future performance, obviously, it takes time to do experiments because it takes two.
These are train it takes cubic's iconic tens of millions of video clips and process all of them.
Ashok: So we are having a constant pulse on the build quality and safety improvement along the way. And then any failures like Elon alluded to, you'd get the data back, add it to the training, and that improves the model in the next cycle.
But you can estimate what its going to be the future of progress based on the trends that we've seen in the past and Thats generally held true.
Ashok: So we have this constant feedback loop of issues, fixes, evaluations, and then rinse and repeat. And especially with the new V12 architecture, all of this is automatically improving without requiring much engineering intervention in the sense that people, engineers don't have to be creative in how they code the algorithms. It's mostly learning on its own based on data. So you see that, okay, the failure, or like this is how a person shows this, how you drive this intersection or something like that.
Akshay: Based on our past data.
Speaker Change: Okay. Thank you very much I'll go to the next question, which is can we get an official announcement of the timeline for the $25000 vehicle.
Speaker Change: I think we mentioned in the opening.
Speaker Change: Remarks, but.
Speaker Change: As he mentioned, we're updating our future vehicle lineup to accelerate the launch of our low cost vehicles and more capex efficient way.
Speaker Change: That's our mission.
Speaker Change: The most affordable cars to customers as fast as possible.
Ashok: They get the data back, we add it to the neural network, and it learns from that training data automatically instead of some engineers saying that, oh, here, you must rotate the steering wheel by this much or something like that. There's no hard inference conditions. Everything is a neural network. It's very soft.
Speaker Change: These new vehicles, we built on our existing lines and open capacity.
Speaker Change: That's the major shifts to utilize our capacity with marginal capex before we go.
Speaker Change: Capex, Yes, we will talk about this more on oversight.
Elon R. Musk: It's probabilistic, so it will adjust its probability distribution based on the new data that it's getting. Yeah. And we do have some insight into how good things will be in, let's say, three or four months because we have advanced models that are far more capable than what is in the car but have some issues with them that we need to fix. So they're like, there will be a step change improvement in the capabilities of the car, but it'll have some quirks that need to be addressed in order to release it.
Speaker Change: So.
Speaker Change: But really the way to think of Tesla is almost entirely in terms of solving autonomy and being able to turn on that autonomy for a gigantic fleet.
It might be the biggest asset value appreciation in history when that happens when you can do unsupervised wholesale traffic.
Speaker Change: Yes.
Speaker Change: Yes.
Speaker Change: Yes.
Speaker Change: That'll be that'll be 7 million cars.
Speaker Change: In a year or so.
Elon R. Musk: As Ashok was saying, we have to be very careful in what we release to the fleet or to customers in general. I'm so, So like, if we look at say 12.4 and 12.5, which could really arguably even be version 13 and version 14. Because it's pretty close to a total retraining of the neural nets, and in each case, or substantially different.
And then $10 million and then.
Speaker Change: Eventually.
Speaker Change: Talking about tens of millions of cars.
Speaker Change: I don't know eventually.
Speaker Change: Okay.
Speaker Change: <unk>.
Speaker Change: Thank you for putting in the decades, several tens of millions of cars.
Speaker Change: Thank you. The next question is what is the progress on <unk>.
Cyber truck brands.
Speaker Change: I can take that one too so we're trying to hit one week.
Speaker Change: Just a couple of weeks ago.
Speaker Change: What's happened in the first four to five months since we saw late last year of course volume production. That's what matters, that's what drives costs and soft costs are dropping but the ramp still faces a lot of challenges with so many new technologies, some supplier limitations et cetera, and we will continue to ramp this year, just focusing on cost efficiency.
Elon R. Musk: So we have good insight into how well the call will perform in, say, three or four months. Yeah, and some sort of scaling loss. People in the AI community generally talk about model scaling loss, where they increase the model size a lot, and then they have corresponding gains in performance.
Speaker Change: Quality.
Speaker Change: Okay. Thank you.
Speaker Change: The next question have any of the legacy automakers contact with Tesla about possibly licensing FSD in the future.
Unknown Speaker: But we have also figured out scaling loss on other axes. In addition to the model size scaling, we can also have data scaling. You can increase the amount of data you use to train the neural network, and that also gives similar gains.
Speaker Change: We are in conversations with one major automaker regarding licensing FSP.
Speaker Change: Thank you.
Speaker Change: The next question is about the robotics and <unk> already talked about that so we'll have to wait till August.
Unknown Speaker: And you can also scale it by training compute. You can train it for much longer and get more GPUs or more dojo nodes, and that also gives better performance. And you can also have architecture scaling, where you come up with better architectures that, for the same amount of compute, produce better results. So a combination of model size scaling, data scaling, training compute scaling, and architecture scaling, we can basically extrapolate.
Speaker Change: The following question is about the next generation of vehicle, we already talked about that.
Speaker Change: So let's go through the semi what is the timeline for scaling semi.
Speaker Change: I think sure.
Speaker Change:
Speaker Change: So we're finalizing the engineering of a semi to enable like a super cost effective high volume production with our learnings from our fleet and pilot or pilot fleet and Pepsi sleep.
Unknown Speaker: Okay, if the country is scaling based on this ratio, we can predict future performance. Obviously, it takes time to do the experiments because it takes a few weeks to train. It takes a few weeks to collect tens of millions of video clips and process all of them.
Speaker Change: Which we are expanding this year marginally.
Unknown Speaker: But you can estimate what future progress is based on the trends that we have seen in the past. And that's generally held true based on past data. Okay, thank you very much.
Speaker Change: In parallel as we showed in the shareholders that we have started construction on the factory in Reno.
Speaker Change: Our first vehicles are planned for late 2025 with external customers starting in 2026.
Speaker Change: Okay couple more questions. So.
Martin Viecha: Let's go to the next question, which is, can we get an official announcement of the timeline for the $25,000 vehicle? I think Elon mentioned it in the opening remarks, but as you mentioned, we're updating our future vehicle lineup to accelerate the launch of our low-cost vehicles in a more CapEx efficient way. That's our mission, to get the most affordable cars to customers as fast as possible. These new vehicles are built on our existing lines in open capacity, and that's a major shift, to utilize all our capacity with marginal CapEx before we go spend high CapEx to do anything. Yeah, we'll talk about this more on August 8th.
Speaker Change: Our favorites can we make FSA transfer program permanents on dielectric these fully delivered with level of autonomy.
Speaker Change: Okay next question.
Speaker Change: What is the gating.
Speaker Change: What is getting the production ramp at <unk>, where do you see the Mega Bank run rate at the end of the year.
Hi.
Speaker Change: Yes, <unk> is ramping as planned we have our second Gi line, allowing us to increase our exit rate through 20 gigawatt hours per year to at the start of this year. It's a 40 gigawatt hours per year by the end of the year.
Speaker Change: That lines commissions.
Speaker Change: Theres really nothing limiting the ramp.
Speaker Change: Given the longer sales cycles for these large projects. We typically have order visibility 12 to 24 months prior to ship dates so we're able to plan the.
Elon R. Musk: So, really, the way to think of Tesla is almost entirely in terms of solving autonomy and being able to turn on that autonomy for a gigantic fleet. And I think it might be the biggest asset value appreciation in history when that thing happens, when you can do unsupervised full self-driving. 5 million cars? Yeah. A little less. [inaudible] You know, it'll be 7 million in Congress. Unknown Speaker. Unknown Speaker, and then 10 million and then, you know, eventually, we're talking about tens of millions of cars. I'm not officially asleep. Unknown Speaker 0, Thank you.
Speaker Change: The build plan several quarters in advance.
Speaker Change: So this allows us to ramp the factory to align with the business and order growth.
Speaker Change: Lastly, we'd like to thank our customers globally for their trust and Tesla as a partner for these incredible projects.
Speaker Change: Okay. Thank you very much let's go to analyst questions. The first question comes from Toni <unk> from Bernstein Toni. Please go ahead and on mute.
Toni: Thank you for taking the question.
I was just wondering if you could elaborate a little bit more on kind of the new vehicles that you talked.
Unknown Speaker: Yeah, within the decades, several tens of millions of cars. Thank you. The next question is, what is the progress on Cybertruck rams? I can take that one, too.
Toni: <unk> talked about today are these tweaks on existing models, giving that theyre going to be running on.
Unknown Speaker: Cybertruck hit 1k a week just a couple weeks ago. This happened in the first four to five months since we SOPed late last year. Of course, volume production is what matters. That's what drives costs. And so our costs are dropping, but the ramp still faces a lot of challenges with so many new technologies, some supplier limitations, et cetera. And we'll continue to ramp this year, just focusing on cost efficiency and quality. Okay, thank you.
Toni: The same lines or these new models and how should we think about them in the context of like the model three Highland update.
Toni: These models be like relative to that and given the quick timeframe model III Highland. This required a lot of work and a lot of retooling maybe you can help put that all in context. Thank you and I have a follow up please.
Speaker Change: I think we've said all we will on that front.
Unknown Speaker: The next question is, have any of the legacy automakers contacted Tesla about possibly licensing FSD in the future? We're in conversations with one major automaker regarding FSD licensing. Thank you.
Speaker Change: So what's your follow up.
Speaker Change: It's more personal one for you Ilan, which is that youre, leading many important companies right now maybe you can just talk about.
Ilan: Hard as that in terms of your interests and do you expect to lessen your involvement with Tesla at any point over the next three years.
Unknown Speaker: The next question is about the robo-taxi unveil. Elon has already talked about that, so we'll have to wait till August. The following question is about the next generation vehicle. We've already talked about that. So let's go to the semi.
Ilan: Oh.
Ilan: That's what constitutes the majority of my.
Unknown Speaker: What is the timeline for scaling Semi? So we're finalizing the engineering of the Semi to enable super cost-effective, high-volume production with our learnings from our pilot fleet and Pepsi's fleet, which we're expanding this year marginally. In parallel, as we showed in the shareholders deck, we have started construction on the factory in Reno.
Ilan: What time.
And our work.
Ilan: Pretty much every day of the week, it's rare for me to take Sunday afternoon afternoon.
Ilan: So.
Ilan: Ah.
Ilan: Make sure Tesla is quite prosperous and it is.
Ilan: Thank you this transfer center will be very much so in the future.
Ilan: Okay. Thank you, let's go to Adam Jonas from Morgan Stanley.
Unknown Speaker: Our first vehicles are planned for late 2025, with external customers starting in 2026. Okay, couple more questions. So, our favorite, can we make the FSD transfer permanent until FSD is fully delivered with level 5 autonomy? Okay, next question. What is getting the production ramp at Lathrop? Where do you see the megabit run rate at the end of the year, Mike?
Please go ahead go ahead on mute.
Adam Michael Jonas: Okay great.
Adam Michael Jonas: Your line.
Adam Michael Jonas: You and your team on volume I expect that 2024 growth rate, notably lower than that achieved in 2023, but what's your team's degree of confidence on growth above zero percent or in other words does that statement leave room for potentially lower sales year on year.
Speaker Change: No I think we will have higher sales was driven last year.
Mike: Yes. Yeah, Lathrop is ramping up as planned. We have our second GA line allowing us to increase our output rate from 20 gigawatt hours per year at the start of this year to 40 gigawatt hours per year by the end of the year. [inaudible] Lastly, we'd like to thank our customers globally for their trust in Tesla as a partner for these incredible projects. Okay, thank you very much. Let's go to the analysis questions. The first question comes from Tony Sakonagi of Bernstein.
Speaker Change: Okay, My follow up Elon on future product.
Speaker Change: You had nailed execution, assuming that you are now execution on your next Gen <unk>.
Super vehicles more aggressive giga castings, I don't want to say, one piece, but getting closer to a one piece structural pack unbox 300 mile range $25000 price point, putting aside robo taxi those features.
Speaker Change: Unique to you how long would it take your best Chinese competitors.
Speaker Change: Copy of cheaper and better.
Speaker Change: Vehicle that you could offer a couple of years from now how long would it take your best Chinese competitors to copy that.
Speaker Change: Thanks.
Tony Sakonagi: Tony, please go ahead and unmute. Thank you for taking the question. I was just wondering if you could elaborate a little bit more on the kind of the new vehicles that you talked about today. Are these like tweaks on existing models, given that they're going to be running on the same lines? Or are these like new models?
Speaker Change: I mean I don't know.
Speaker Change: What our competitors can do except.
We have done relatively better than they have.
Speaker Change: If you look at the drop in our competitors in China sales versus our drop in sales our drop was less than theirs.
We're doing well.
Speaker Change: But.
Speaker Change: Ed.
I think Kathy.
Speaker Change: So it really should be thought of as an AI robotics company.
Elon R. Musk: And how should we think about them, you know, in the context of the Model 3 Highland update? What will these models be like relative to that? And given the quick time frame, you know, Model 3 Highland has required a lot of work and a lot of retooling. Maybe you can help put that all in context. Thank you.
Speaker Change: A few value test.
Speaker Change: It's just like an auto company.
Speaker Change: Just have to fundamentally it's just the wrong framework and it will come to you. If you asked the wrong question.
Speaker Change: And the right answer is impossible.
Speaker Change: So.
Speaker Change: I mean, if somebody doesn't believe Telus is going to solve autonomy I think they should not be an investor in the company.
Elon R. Musk: I think we've said all we will on that front. So, what's your follow-up? It's a more personal one for you, Elon, which is that you're leading many important companies right now. Maybe you can just talk about where your heart is in terms of your interests and whether you expect to lessen your involvement with Tesla at any point over the next three years? Well, That constitutes the majority of my work time, and I work pretty much every day of the week. It's rare for me to take a Sunday afternoon off.
Speaker Change: Guidance.
Speaker Change: But we will and we are.
Speaker Change: And then you have a car that goes from.
Speaker Change: 10 hours of use a week like an hour and a half a day probably 50.
Speaker Change: But of course the same.
Speaker Change: I think that's the key thing to remember right, especially if you look at FSD supervised.
Speaker Change: It didn't believe in autonomy.
This should give you the view that this is coming it's actually getting better day by day.
Yes.
Speaker Change: Not try it.
Speaker Change: MSG.
Speaker Change: <unk> three.
Speaker Change: And like I said $12 four is going to be.
Elon R. Musk: So I've got to make sure Tesla is Corporate Prosperity, and it is. I think it is prosperous, and it will be very much so in the future. Okay, thank you. Let's go to Adam Jonas from Morgan Stanley. Adam, please go ahead. Go ahead on mute.
Speaker Change: Significantly better than $12 5 billion.
Speaker Change: And we have visibility into those things then you really don't understand what's going on.
Speaker Change: It's possible yes.
Speaker Change: The way we can just look at just as a car company because we would just have a car. We currently have more than coming from you because the cost can be autonomous and like I said its happening.
Adam Michael Jonas: Okay, great. Hey, Elon. So you and your team, on volume, expect a 2024 growth rate notably lower than that achieved in 2023. But what's your team's degree of confidence on growth above 0%? Or in other words, does that statement leave room for potentially lower sales year on year? No, I think we'll have higher sales this year than last year. Okay, my follow-up question to Elon on future products. If you had nailed execution, assuming that you nailed execution on your next gen, cheaper vehicles, you know, more aggressive giga castings, I don't want to say one piece, but I'm getting closer to one piece. Structural Pack, Unboxed, 300 mile range, $25,000 price point. Putting aside RoboTaxi, those features are unique to you?
Speaker Change: Yes. This is all in addition to desktop shortening.
Speaker Change: Community is just increasing.
Speaker Change: By completing rapidly.
Speaker Change: Yes, I mean were putting the actual order an automobile.
Speaker Change: So.
Speaker Change: So sort of.
Speaker Change: Well.
Speaker Change: Sort of like tell us about future horse carriages, youre, making them like well actually it doesn't need a horse thats the whole point.
Speaker Change: Yes.
Elon R. Musk: How long would it take your best Chinese competitors to copy a cheaper and better vehicle that you could offer a couple years from now? How long would it take your Chinese competitors to copy that? Thanks.
Speaker Change: That's really the whole point.
Speaker Change: Okay. Thank you. The next question comes from Alex Potter from Piper Sandler.
Alex Potter: Alex. Please go ahead on mute.
Alex Potter: Great. Thanks, Yes.
Alex Potter: Yes, so couldnt agree more that thesis hinges completely on AI and the future of AI self driving.
Alex Potter: Neuro and that training all of these things in that context Elon you've spoken.
Alex Potter: About your desire to obtain 25% voting control of the company and I understand completely why that would be.
Speaker Change: So im not necessarily asking about that I am asking if you've come up with any mechanism by which you can ensure that youll obtained that level of voting control because if not then the core part of the thesis could potentially be at risk. So any additional commentary you might have on that topic.
Elon R. Musk: I mean, I don't know what our competitors could do except that we've done relatively better than they have. You know, if you look at the drop in our competitors' sales in China versus our drop in sales, our drop was less than theirs. So we're doing, we're doing well.
Speaker Change: Well I think no matter what.
Even if by that cannot by aliens tomorrow.
Elon R. Musk: But, you know, I think, you know, copyright said it best, like, really, we should be thought of as an AI robotics company. If you value Tesla as just like an order company, you just have to fundamentally change the framework. If you ask the wrong question, then the right answer is impossible.
Speaker Change: Sure.
Speaker Change: Tesla will solve autonomy, maybe a little slower, but it would solve autonomy for vehicles at least I don't know if it would one on with respect to Optimus or with respect to future products.
Speaker Change: But it would.
Speaker Change: Theres not momentum.
Speaker Change: Protested assault autonomy, even if I disappeared.
Speaker Change: For vehicles.
Speaker Change: Now, there's a whole rig a whole range of things, we can do in the future beyond that.
Elon R. Musk: I mean, if somebody doesn't believe Tesla is going to solve autonomy, I think they should not be an investor in the company. Like that, that is. But we will, and we are, and then you have a car that goes from 10 hours of use a week, like an hour and a half a day, to probably 50, but it costs the same. I think that's the key thing to remember. Like, especially if you look at FSD supervised, if you didn't believe in autonomy, this should give you a preview that this is coming. It's actually getting better day by day. Yeah, if you've not tried the FST 12.3.
Speaker Change: I'll be more reticent with respect to Optimus.
Speaker Change: We have.
Super sentient humanoid robots that can fully windows.
Speaker Change: You can't escape.
Speaker Change: Terminator level risk.
Speaker Change: Yes, it would be.
Speaker Change: Uncomfortable with.
Speaker Change: No.
Speaker Change: If there's not some meaningful level of influence over how that is deployed.
Speaker Change: And.
Speaker Change: Alright.
<unk>.
Speaker Change: Yes, sure shareholders have an opportunity to ratify or re ratify b.
Speaker Change: No.
Speaker Change: So sort of competition, because I can't say that.
Speaker Change: Thank you.
Speaker Change: The fact that they have an opportunity.
Elon R. Musk: And like I said, 12.4 is going to be significantly better than 12.5, even better than that. And we have visibility into those things. Then you really don't understand what's going on, if that's possible.
Speaker Change: Okay.
Speaker Change: Very good.
Speaker Change: And yes, we will see.
Speaker Change: The company generated positive cash flow, we can obviously buy back shares.
Speaker Change: Alright, Thats actually very helpful context. Thank you maybe one final question and I'll pass it on.
Elon R. Musk: Yeah, and that's why we can't just look at it as a car company, because a car company would just have a car. But here we have more than a car company, because the cars can be autonomous. And like I said, it's happening.
Speaker Change: Opex reductions.
Speaker Change: For quantifying the impact there.
Speaker Change: Be interested also in potentially more qualitative discussion of what the implications are for these head count reductions what are the.
Elon R. Musk: Yeah, this is all in addition to Tesla; the AI community is just like increasing and improving rapidly. Yeah, yeah, I mean, we're putting the actual auto in automobile. So, you know, so, you know, tell us about future horse carriages you're making. I'm like, well, actually, it doesn't need a horse.
Speaker Change: Types of activities that you are presumably sacrificing.
Speaker Change: As a result of parting ways with with these folks thanks very much.
Speaker Change: So.
Speaker Change: Like we said we've done these head count reductions across the board.
Speaker Change: As companies grow over time.
Elon R. Musk: That's the whole point. And that's really the whole point. Okay, thank you. The next question comes from Alex Potter on behalf of Piper Sandler.
Speaker Change: There are certain redundancies theres, some duplication of efforts, which happens in certain areas. So you need to go back and look at where we.
Alex Potter: Alex, please go ahead and unmute. Great, thanks. Yeah, so I couldn't agree more. The thesis hinges completely on AI, the future of AI, false self-driving, you know, neural net training, all of these things.
Speaker Change: All of these pockets or get rid of it. So we're basically going through that exercise and we're like hey, how do we how do we said this company's IDE for the next phase of growth.
Elon R. Musk: In that context, Elon, you've spoken about your desire to obtain 25% voting control of a company. And I understand completely why that would be. So I'm not necessarily asking about that. I'm asking if you've come up with any mechanism by which you can ensure that you'll obtain that level of voting control, because if not, then the core part of the thesis could potentially be at risk.
Speaker Change: And the way to think about it is.
Speaker Change: Any tree, which grows it needs pruning.
Speaker Change: This is the pruning exercise, which we went through.
Speaker Change: And.
Speaker Change: At the end of it will be much stronger and much more resilient to deal with the future because the future is really bright like I said in my opening remarks.
Speaker Change: We just have to get through this period and kept there.
Speaker Change: Yes, we're not.
Speaker Change: Giving up anything.
Elon R. Musk: Any additional commentary you might have on that topic? Well, I think no matter what Tesla, you know, even if I get kidnapped by aliens tomorrow, Tesla will solve autonomy, maybe a little slower, but it would solve autonomy for vehicles at least. I don't know if it would win with respect to Optimus or with respect to future products.
Speaker Change: That is significant that I'm aware of.
Speaker Change: So.
Speaker Change: So we've had a long period of prosperity from 2019 to now.
Speaker Change: So if a company sort of organizationally is 5% wrong per year that accumulates to.
Speaker Change: 25%, 30%.
Speaker Change: Inefficiency, we've made some corrections along the way, but it is time to reorganize the company.
Elon R. Musk: But it would, that does not momentum, or Tesla Dissolve Autonomy, even if I disappeared, for vehicles. Now there's a whole range of things we can do in the future. Beyond that, I'd be more reticent with respect to Optimus.
Speaker Change: The next phase of growth.
Speaker Change: And you really need to reorganize it just like a.
Speaker Change: No.
Speaker Change: Human when do we start off with one cell zygote.
Speaker Change: No blastocyst in.
Speaker Change: Or do you start growing arms and legs and briefly you have a tail.
Elon R. Musk: You know, if we have a Super Sentient Humanoid Robot that can fully reindoor itself, and you bet you can't escape, you know, we're talking Terminator-level risk, and yeah, I'd be uncomfortable with, you know, if there's not some meaningful level of influence over how that is deployed. [inaudible] If there are shareholders have an opportunity to ratify or re-ratify But that is a fact; they have an opportunity.
And.
Speaker Change: Yes, so rich you shut the tail the tail hopefully.
Speaker Change: And then Europe.
Speaker Change: Yeah.
Basically.
Speaker Change: You have to be.
Speaker Change: The organism.
A company is kind of like it.
The creature growing.
Speaker Change: If you don't reorganize it for different phases of growth.
Speaker Change: It will fail.
Speaker Change: You can't have the same organizational structure.
Sure.
Speaker Change: 10 cells versus 100 versus $1 million versus $1 billion two trillion.
Speaker Change: We're good.
Speaker Change: There are like around 35 trillion cells.
<unk>.
Speaker Change: So we feel like it feels like.
Elon R. Musk: Okay. Very good. And yeah, we'll see. If the company generates a lot of positive cash flow, we can obviously buy back shares.
Speaker Change: Like one person but.
But.
Speaker Change: Youre basically walking cell colony is roughly 35 trillion, depending on your body minutes.
Elon R. Musk: All right, that's actually all very helpful context. Thank you. Maybe one final question, and I'll pass it on.
Speaker Change: And about three times that number in Victoria.
Unknown Speaker: OpEx reductions. Thank you for quantifying the impact there. I'd also be interested in potentially a more qualitative discussion of what the implications are for these headcount reductions. What are the types of activities that you're presumably sacrificing as a result of parting ways with these folks? Thanks very much.
Speaker Change: So.
Speaker Change: You've got to reorganize.
Speaker Change: The company for a new phase of growth.
Speaker Change: To achieve that growth.
Speaker Change: Yeah.
Speaker Change: Thank you, let's go to Mark Delaney from Goldman Sachs. Martin. Please go ahead and on mute.
Mark Trevor Delaney: Yes. Good afternoon, thanks, very much for taking the question. The company had previously characterize potential FSD licensing discussions is in the early phase and some of the Oems had not really been believing in it can you elaborate on how much the licensing business opportunity. You mentioned today has progressed and is there anything tesla needs to ensure that the technology in terms of product milestones in order to be successful.
Unknown Speaker: So, you know, like we said, we've done these headcount reductions across the board. And, you know, as companies grow, over time, you have certain redundancies, there's some duplication of efforts which happens in certain areas. So you need to go back and look at where all these pockets are and get rid of them.
Mark Trevor Delaney: Reaching a licensing agreement in your deal.
Mark Trevor Delaney: But I think we just need to just needs to be obvious that.
Mark Trevor Delaney: Our approach is the right approach and I think it is.
Unknown Speaker: So we're basically going through that exercise where, and we're like, hey, how do we set this company right for the next phase of growth? And the way to think about it is, you know, any tree that grows needs pruning. This is the pruning exercise that we went through.
Mark Trevor Delaney: I think we have now with $12 three.
Mark Trevor Delaney: If you just have the car driving around it is obvious that.
Mark Trevor Delaney: Our solution with a relatively low cost.
Mark Trevor Delaney: <unk> computer and standard cameras.
Mark Trevor Delaney: Ken.
Mark Trevor Delaney: <unk> achieved self driving.
Mark Trevor Delaney: No <unk> no radar ultrasonics.
Unknown Speaker: And at the end of it, we'll be much stronger and much more resilient to deal with the future. Because the future is really bright, like I said in my opening remarks. We just have to get through this period and get there. Yet we're not, I'm giving up anything that's significant that I'm aware of.
Mark Trevor Delaney: Altra Sonics, nothing just heavy integration work for vehicle manufacturers.
Mark Trevor Delaney: So really just be a case of.
Yes.
Mark Trevor Delaney: Having them use the same cameras and it firms computer.
Mark Trevor Delaney: And licensing our software.
Mark Trevor Delaney: And but it's once it becomes obvious that if you don't have this new car nobody wants your car.
Unknown Speaker: So we've just had a long period of prosperity from 2019 to now. And, you know, so if a company sort of organizationally is 5% wrong per year, that accumulates to 25-30% of inefficiency. We've made some corrections along the way, but it is time to reorganize the company for the next phase of growth. And you really need to re-open it, just like a... You know, I'm a human when we start off as one cell and become a zygote. Blastocysts and other...
Speaker Change: Yes, it's a smart car.
Speaker Change: So remember that.
Speaker Change: Beckman Nokia was.
King of the Hill.
Speaker Change: Yes.
Jeff: This is Jeff crushing.
Jeff: And I still don't come out with a smartphone that was basically a bridge with limited functionality.
Jeff: And then.
Jeff: The iPhone and Android.
Jeff: But people still does not understand that all the phones are going to be that way, there's not going to be any footprints.
Jeff: There'll be a niche product or home phones.
Unknown Speaker: Transcribed by https://otter.ai, a creature is growing, and if you don't reorganize it for different phases of growth, it will fail. You can't have the same organizational structure if you're, you know, 10 cells versus 100 versus a million versus a billion versus a trillion. You know, we're humans are like around 35 trillion. sales. It doesn't feel like it feels like it. Yeah, I feel like one person, but, you know, you're basically a walking cell colony of roughly 35 trillion cells, depending on your body mass, and about three times that number in bacteria.
Jeff: Yes, exactly because last time, you saw a whole bunch.
Jeff: Sure.
Speaker Change: Good afternoon, Jeff.
Jeff: Hey, no hotels in terms of the hotels the hotels hub.
Jeff: So.
Jeff: If you would understand all cars will need to be smart cars.
You will not sell the car will not nobody required.
Jeff: Once that becomes obvious I think.
Jeff: <unk>.
It becomes not.
Jeff: Optional becomes method of survival.
Jeff: This license it or nobody will buy your car.
Speaker Change: One other thing, which I'll add this.
And the conversations that you've had with some of these Oems I just want to also point out that did take a lot of time.
Speaker Change: Lifecycle.
Speaker Change: I'm talking about years before they will.
Speaker Change: Put it in their product it might we might have.
Speaker Change: Licensing deal earlier than that but it takes a while.
Speaker Change: The big difference between us and that mesh.
Unknown Speaker: So anyway, you've got to reorganize the company for a new phase of growth, or it will fail to achieve that growth. Thank you. Let's go to Mark Delaney from Goldman Sachs.
Speaker Change: Yes, I mean really.
Speaker Change: A deal signed now would result in.
Speaker Change: It's been a card probably three years.
Stephanie early yes.
Speaker Change: Yes, it looks like lightning.
Speaker Change: Sure.
Speaker Change: So eager Oems.
Mark Trevor Delaney: Mark, please go ahead and unmute yourself. Yes, good afternoon. Thanks very much for taking the question. The company previously characterized potential FSD licensing discussions as in the early phase, and some OEMs had not really been believing in it. Can you elaborate on how much the licensing business opportunity you mentioned today has progressed? And is there anything Tesla needs to achieve with the technology in terms of product milestones in order to be successful at reaching a licensing agreement, in your view?
Speaker Change: Yeah.
Speaker Change: So all.
Speaker Change: Alright.
Speaker Change: As far as if we do sign of the I think we're.
Speaker Change: Good chance, we do sign a deal this year.
Speaker Change: Maybe more than one.
Speaker Change: But yes, it would be probably three years before it's integrated with the card even though all you need is cameras and.
Speaker Change: Our advanced computer.
Speaker Change: So.
Speaker Change: It's not a massive design change.
Mark Trevor Delaney: But I think we just need to, it just needs to be obvious that our approach is the right approach. And I think it is. I think we're now with 12.3. If you just have the car drive you around, it is obvious that our solution with a relatively low cost, an Inference Computer, and standard cameras.
Speaker Change: And again just to clarify it's not work, which we have to do the work, which they have to do it yes.
Speaker Change: Alright.
Speaker Change: Yes, yes.
Speaker Change: Very helpful. Thank you my follow up was to better understand his approach to pricing going forward previously the company had said that the price reductions we are driving incremental demand with how affordable the cars have become especially for vehicles that have access to our a credit in some of the leasing offers that Tesla has in place do you still see meaningful incremental price reductions is making sense from here for the existing products.
Elon R. Musk: I can achieve self-driving. No LIDARs, no radars, no ultrasonics, nothing, just no heavy integration work for vehicle manufacturers. Yeah, so really, it just be a case of, you know, having them use the same cameras and inference computer and licensing our software, and but, but it's once obvious that if you don't have this in a car, nobody wants your car. Yeah, it's like it's a smart car. I mean, I just remember the fact when Nokia was king of the hill. Yeah, crushing.
Speaker Change: And can the company.
Immediately lower prices from here and also stay free cash flow positive on an annual basis with the current products out. Thanks.
Speaker Change: Yes.
Speaker Change: We can be free cash flow positive.
Speaker Change: Meaningfully.
Speaker Change: Yes.
Speaker Change: I think <unk> said it in his opening remarks like our cost down efforts.
Speaker Change: Basically we're offsetting the price is going to call like were trying to give it back to the customers.
Elon R. Musk: And then I slowly came out with a smartphone that was basically a brick with limited functionality, and then, you know, the iPhone and Android. But people still do not understand that all the phones are going to be that way. There's not going to be any flip, if they'll be a niche product or home. Yeah, no, even exactly. It was the last time you saw a whole book.
Speaker Change: Yes.
Speaker Change: And the date for any given company if you sell a great product at a great price.
Speaker Change: If you have a great product at a great price of sales will be excellent.
Speaker Change: That's true of any arena.
So over time, we do need to keep making sure that we are.
Speaker Change: It's a great product at a great price and Moreover, that that price is accessible people. So it's not you have to solve both the value for money and the fundamental affordability question.
Unknown Speaker: I don't know. I have no idea where it is. In a hotel.
Unknown Speaker: Yeah, the hotels have them. The people don't understand, all cars will need to be smart cars, or you will not sell, the car won't sell, nobody will buy them. Once that becomes obvious, I think... Licensing becomes not optional. It becomes a method of survival.
Speaker Change: Rental affordability question is sometimes overlooked.
Speaker Change: If somebody is earning 100 several hundred thousand dollars year. They don't think of a car from a fundamental affordability standpoint.
Speaker Change: Vast majority of people are living paycheck to paycheck. So it actually makes a difference.
Speaker Change: But the cost per month for lease where financing is $10 one way or the other.
Elon R. Musk: Yeah, so it's license it, or nobody will buy your car. I mean, one other thing which I'll add is, in the conversations that we've had with some of these OEMs, I just want to also point out that they take a lot of time in their product lifecycle. Yeah, they're talking about years before they will put it in their product. They might, we might have a licensing deal earlier than that, but it takes a while.
Speaker Change: So.
Speaker Change: It is important to keep improving the affordability.
Speaker Change: Okay.
Speaker Change: This is like making the price.
Speaker Change: Yes, exactly you can price more accessible the value for money better and to keep keep improving that over time, but also that may kick <expletive> closer because people want to be.
Speaker Change: Great product at a great price and in the.
Speaker Change: So.
Speaker Change: The standards for what constitutes a great product at a great price.
Speaker Change: Yes, Keith.
Unknown Speaker: So this is where the big difference between us and them is. But yeah, I mean, really, a deal signed now would result in, Transcribed by https://otter.ai So that'd be an eager OEM. Yeah. So, I wouldn't be surprised if we do sign a deal. I think we have a good chance we do sign a deal this year.
Speaker Change: Keep increasing so thats like you can't just be static you have to keep saying keep making the car better.
Speaker Change: Improving the prices, but improving the cost of production.
Speaker Change: And that's what we're doing and in fact like I said in my opening remarks also unlike the device. The updated model tree is a fantastic I don't think people fully understand that one of engineering effort, which has gone on longer than team have actually put radios expanding how much the car is different when it looks.
Elon R. Musk: Maybe more than one. But yeah, it would probably be three years before it's integrated with a car, even though all you need is cameras and a computer. So, it's not a massive design change. Yeah, and again, just to clarify, it's not the work which we have to do; it's the work which they have to do. Yeah, yeah, very helpful. Thank you.
Speaker Change: And feels different not only looks and feels different we've added so much value to it but you can lease it for like <unk> 199, a month okay.
Speaker Change: Without gas.
Speaker Change: Yes.
Speaker Change: Alright. The next question comes from George from Canaccord, George Please go on mute.
Unknown Speaker: My follow-up was to better understand Tesla's approach to pricing going forward. Previously, the company had said that the price reductions were driving incremental demand, but how affordable the cars have become, especially for vehicles that have access to IRA credit and some of the leasing offers that Tesla has in place. Do you still see meaningful incremental price reductions as making sense from here for the existing products? And can the company meaningfully lower prices from here and also stay free capital positive on an annual basis with the current products? Thanks.
George: Hi, thank.
George: For taking my question.
George: First could you. Please help us understand maybe some of the timing of launching FSD.
George: Additional geographies, including maybe clarifying your recent comment about China. Thank you.
George: You mean like in your markets, Yes, we are but there are a bunch of months, where we don't currently sell cars.
George: But we should be.
George: Southern Carson.
George: We'll see some acceleration of that.
George: And FSC in new markets, yes, so the thing about the.
George: So all of the.
George: And to add neural net based autonomy is that just like a human it actually works.
Unknown Speaker: Yeah, I think we can be recapital positive meaningfully. Yeah. I think Vaibhav said it in his opening remarks, like our cost-down efforts, we basically were offsetting the price cut. That's not even our goal.
George: Pretty well without modification and.
George: Almost any market.
George: So we plan on.
Unknown Speaker: Like we're trying to give it back to the customer. Yeah, I mean, at the end of the day, for any given company, if you sell a great product at a great price, Unknown Speaker, The Huffington Post, The Huffington Post, The Huffington Post, The Huffington Post, The Huffington Post, The Huffington Post, The Huffington Post, The Huffington Post, The Huffington If somebody is earning several hundred thousand dollars a year, they don't think of a car from a fundamental affordability standpoint. But the vast majority of people are living paycheck to paycheck.
George: With the approval of the regulators releasing it as is.
George: Supervised autonomy system.
George: In any market that looked at.
George: Where we can get regulatory approval for that which we think concludes China.
George: So.
George: Yes.
George: Just like a human you can go rent a car in a foreign country and you can drive pretty well.
Honestly, if youre if you live in a country, you will drive better and so.
George: We'll make the car drive better.
George: And these other countries with country specific training.
George: But it can drive quite well almost everywhere.
George: Basically driving at basically the same everywhere.
George: Further the traffic light orders that and.
George: And understands that it shouldn't have things no matter.
George: Exactly.
The.
George: Looking at the funnel and in China, you Shouldnt crossover a solid line lane change.
<unk> recommendation.
<unk>.
George: Okay.
George: Yes, you could find heavily if you do that.
George: Like do somewhat options, but it's mostly smaller reductions not like the entire change are stacked or something like that.
George: Yes.
George: Hey, George do you have a follow up yet so.
George: My follow up has to do with the first quarter deliveries and I'm curious as to whether or not you feel that supply constraints that you mentioned throughout the release impacted the results and maybe you can can you help us quantify that and is that why you have some confidence in unit growth in 2024.
Unknown Speaker: So it actually makes a difference if the cost per month for lease or financing is $10 one way or the other. It is important to keep improving affordability, and to keep this as a like making the price Transcribed by https://otter.ai, The standards for what constitutes a great product at a great price. And that's what we're doing. Yeah. And in fact, like I said in my opening remarks, the revised and updated Model 3 is a fantastic car.
George: Yes.
Unknown Speaker: I don't think people fully understand that amount of engineering effort which has gone into it, and Lars and the team have actually put out videos explaining how much the car is different when it looks and feels different. Not only does it look and feel different, we've added so much value to it, but you can leave it for as low as $299 a month. Yeah, without guests.
George: Yes.
George: You did cover this.
George: In the opening remarks to Q1 had a lot of different things which are happening.
George: Seasonality was a big one.
George: <unk>.
George: Question from the macroeconomic environment.
George: We had.
At our factory, we had let's see attacks.
George: We're ramping model three we're ramping model subscriber trunk all of these things.
George: Happening I mean, it almost feels like a culmination of all of those activities in a constrained period.
George: Yeah. All right, the next question comes from George from Canaccord. George, please go on mute.
George: And that gives us that confidence that hey.
Unknown Speaker: Hi, thank you for taking my question. First, can you please help us understand some of the timing of launching FSD and additional geographies, including maybe clarifying your recent comment about China? Thank you.
George: We don't expect these things to recur, yes, we think Q2 will be a lot better.
George: Okay.
George: Just one thing after another.
George: It's crazy yes.
George: Exactly.
If you got cars that are sitting on ships, obviously cannot be delivered to people.
George: And if you've got it.
Unknown Speaker: I mean, like new markets. Yeah, we are. There are a bunch of markets where we don't currently sell cars that we should be, Sean Carson. We'll see some acceleration of that. And FSD in new markets? Yeah, so the thing about end-to-end neural net-based autonomy is that just like a human, it actually works pretty well without modification in almost any market. So we plan on, with the approval of the regulators, releasing it as a supervised autonomy system in any market where we can get regulatory approval for that, which we think includes China, and so. Yes, it's just like a human. You can go rent a car in a foreign country, and you can drive pretty well. Obviously, if you're living in the country, you'll drive better.
George: Excess demand for sure.
George: Model, three and model Y in one market, but you don't have it there.
It's a quite a logistics.
George: Extremely complex logistics situation.
George: So.
George: I would say also the.
George: We did over complicate the sales process.
George: Just in the past week or so.
George: Greatly simplified.
George: So the.
George: Yes.
George: Became far too complex to buyer Tesla, whereas it should just be you can buy the card.
George: Under a minute.
George: Okay.
George: So we're getting back to that you can buy potentially in under a minute.
George: Face.
George: From what was quite complex.
George: Okay. Thank you, let's go to Colin Rusch from Oppenheimer.
George: Colin.
Colin William Rusch: Go ahead please.
Colin William Rusch: Thanks, so much guys.
Unknown Speaker: And so we, you know, we'll make the car drive better in these other countries with country-specific training. But it can drive quite well almost everywhere. The basics of driving are basically the same everywhere.
Colin William Rusch: The pursuit of Tesla really as a leader in AI for the physical world and.
Colin William Rusch: And your comments around distributed insurance can you talk about what that approach is unlocking beyond what's happening in the vehicle right now.
Unknown Speaker: Like my car is a car, the traffic light, the road is the road. Yeah, and it understands that it shouldn't hit things no matter where it is. There are some road rules that you need to follow. In China, you shouldn't cross over a solid line for a lane change. U.S. is the recommendation, I think.
Joanna.
Colin William Rusch: Again I mentioned.
Joanna: Even with a full robo taxi, that's probably going to be used on 50 hours. So that's my I guess like a third of the hours do we yes, it could be more or less within suddenly going to be some our slab for charging and cleaning and maintenance in that.
Unknown Speaker: China, yeah, you get fined heavily if you do that. We have to do some adaptations, but mostly smaller adaptations, not like an entire change of stack or something like that. Yeah. Hey, George, do you have a follow-up? Yep. So my follow-up has to do with the first quarter deliveries. And I'm curious as to whether or not you feel that the supply constraints that you mentioned throughout the release impacted the results. And if you can, can you help us quantify that?
Joanna: Well it can do a lot of other workloads, even right now we are seeing for example, the Salem companies have distinct batch for a close by the Senate much of documents and those are untrue pretty large neural networks.
Speaker Change: Thanks, Laura.
Speaker Change: Compared to chunk through those workloads.
Speaker Change: Now that we have already paid for the compute and these cars it might be wise to use them and not let them be I'd be like buying a non op expense emission any anything that would be I think we don't want that if wanted to use the computer as much as possible plus like basically 100% of the time to make use of it.
Unknown Speaker: And is that why you have some confidence in unit growth in 2024? Yeah, I think we covered this a little bit in the opening remarks too. You know, Q1 had a lot of different things which were happening. Seasonality was a big one, and continued pressure from the macroeconomic environment.
Speaker Change: I think it's analogous to Amazon Web services, where.
Speaker Change: People didn't expect that AWS would be.
Speaker Change: Valuable part of Amazon when it started out as a bookstore.
Speaker Change: So.
Speaker Change: That was on Nobody's radar.
Unknown Speaker: We had Attacks at our factory, we had Red Sea attacks, we're ramping Model 3, we're ramping Cybertruck. All these things are happening. I mean, it almost feels like a culmination of all those activities in a constrained period. And that gives us that confidence that, hey, we don't expect these things to record.
Speaker Change: They found that they had excess compute because the computing needs.
Speaker Change: Spike.
Speaker Change: So extreme levels for brief periods of the year and then they had Idaho compute for the rest of the year. So then what should they do with the pull that excess compute for the rest of the year.
Speaker Change: That's kind of.
Yes monetize so.
It seems like kind of a no brainer to say, okay got it.
Unknown Speaker: Yeah, we think Q2 will be a lot better. Yeah. It's just one thing after another. Crazy. Like, yeah, exactly. It's just, if you've got cars that are sitting on ships, they obviously cannot be delivered to people.
And then tens of millions of vehicles out there.
Speaker Change: Where the computers are idle most of the time.
Speaker Change: That we might as well.
Speaker Change: We'll have them do something useful.
Speaker Change: Yes exactly.
Speaker Change: And then.
Speaker Change: If you get to the $100 million vehicle level, which I think we will at some point get too.
Unknown Speaker: And if you've got, you know, excess demand for one for Unknown Speaker, The Huffington Post, The Huffington Post, The Huffington Post, The Huffington Post, You know, I'd also say we did overcomplicate the sales process, which we've just, in the past week or so, have greatly simplified. So the, It became far too complex to buy a Tesla, whereas it should just be that you can buy the car in under a minute. So we're getting back to the you can buy a Tesla in under a minute interface from what was quite complex. Okay, thank you. Let's go to Colin Rusch from Oppenheimer. Colin, go ahead and unmute yourself, please.
Speaker Change: <unk>.
Speaker Change: And you have quite a kilowatt of usable compute.
Speaker Change: And maybe your own hardware six or seven by that time.
Speaker Change: Then you really.
It could have on the order of 100, gigawatts of usable computer, which which might be more than anyone.
Speaker Change: Any company.
Speaker Change: I'm wondering any company.
Speaker Change: That property because it takes a lot of intelligence provided the car anyway.
Speaker Change: And it's not driving the car you just put this in place and starting to use it.
Speaker Change: Scientific problems like your human Alright.
Speaker Change: Yes.
Speaker Change: Good morning linked model deploying workloads to this.
Speaker Change: Nodes.
Speaker Change: Yes.
Speaker Change: And unlike laptops cellphones it is totally out of control so it's easier to.
Speaker Change: Mr Yu with different protocols different nodes as opposed to asking them uses for permission on their own cell phones would be very tedious.
Colin William Rusch: Thanks so much, guys. Given, you know, the pursuit of Tesla really is the leader in AI for the physical world, and your comments around distributed inference, can you talk about what that approach is unlocking beyond what's happening in the vehicle right now? Do you want to say something?
Speaker Change: Youre just draining the battery on.
The battery cells.
Speaker Change: I would like technically I suppose like Apple would have the most amount of distributed compute but but you can't use it because you can't get the you can't just run the phone in full power in the battery.
Speaker Change: So.
Whereas for the car.
Speaker Change: Even if you are a kilowatt.
Speaker Change: Well the first computer.
Unknown Speaker: Yeah, you know, mentioned like the car, even when it's a full robot, actually, that's probably going to be used for 50 hours a week, if that's my guess, like a third of the hours per week. Yeah, it could be more or less, but then there's certainly going to be some hours left for charging and cleaning and maintenance. In that world, it can do a lot of other workloads. Even right now, we are seeing, for example, these LLM companies have these big batch workloads, where they send a bunch of documents, and those are run through pretty large neural networks.
Speaker Change: Crazy architectural firm.
Speaker Change: If youre going to.
Speaker Change: After 60 kilowatt hour pack.
Speaker Change: Not a big deal.
Speaker Change: To run furniture plugged in with you plugged in or not plugged in and not like them.
Speaker Change: You could run for 10 hours and use 10 kilowatt hours.
Speaker Change: Kilowatt of compute correct.
Speaker Change: Yeah.
<unk> liquid cooled thermal management.
Thats for data science sort of generic exactly this distributed power generation.
Speaker Change: Distributed access to power and distributed cooling.
And it's really painful.
Speaker Change: I mean, that's distributed power and cooling people underestimate that motto monthly visitors.
Speaker Change: And our Capex is shattered by the inter well yes.
Speaker Change: Now a chunk and they've got a small profit out of it.
Unknown Speaker: That's why I think it's analogous to Amazon Web Services, where, you know, people didn't expect that AWS would be the most valuable part of Amazon when it started out as a bookstore. So that was on nobody's radar.
Thanks, very much guys and just as my follow up is a little bit more mundane looking at the 46 80 ramp can you talk about how close you are to target yields and when you might start to accelerate incremental capacity expansions on on that.
Unknown Speaker: But they found that they had excess compute because the compute needs would spike to extreme levels for brief periods of the year, and then they had idle compute for the rest of the year. So then what should they do with all that excess compute for the rest of the year? That's kind of it. Yeah, monetize it.
Speaker Change: On that technology.
Speaker Change: Okay.
Yes.
Speaker Change: We're making good progress on that.
Speaker Change: But.
Speaker Change: I don't think I don't think it's super important or at least near term.
Speaker Change: As far as said, we think it will be.
Unknown Speaker: So, it seems like kind of a no brainer to say okay, we've got millions and then tens of millions of vehicles out there where the computers are idle most of the time, so we might as well have them do something useful. I mean, if you get to the hundred million vehicle level, which I think we will at some point get to, then, and you've got a kilowatt of usable compute, and maybe your own hardware six or seven by that time, then you really, I think you'd have on the order of 100 gigawatts of usable compute, which might be more than anyone, more than any company, probably more than any company. Yeah, Because it takes a lot of intelligence to drive a car anyway.
Speaker Change: The competitiveness of suppliers by the end of this year.
Speaker Change: And then we will continue to improve.
Speaker Change: Yes, I think it's important to note.
Speaker Change: The ramp right now is relevant to the cyber truck ramp yeah. So Mike we're not going to just randomly build 40 to 60 days.
Speaker Change: Have a place to put them.
Speaker Change: And so we're going to make sure we're prudent about that but we also have a lot of investments with all ourselves suppliers and vendors are great partners.
Speaker Change: Great development work with us in one of the advancements in technology and chemistry towards.
Speaker Change: They're also putting into their selves.
Speaker Change: Yes, I mean, a big part of the policy.
Speaker Change: Hello doing internal sales was a hedge against.
Speaker Change: What would happen is that suppliers because for a while there it was very difficult because every big carmaker put in massive battery orders and so the prices the price per kilowatt hour of battery lithium batteries.
Unknown Speaker: And when it's not driving the car, you just put the intelligence to other uses, solving scientific problems or answering dumb questions. We've already learned a lot about deploying workloads to these compute nodes. Yeah. And unlike laptops and our cell phones, it is totally under Tesla's control. So it's easier to distribute the work product across different nodes as opposed to, you know, asking users for permission on their own cell phones, which is very tedious.
Speaker Change: So crazy numbers to crazy levels bonkers.
Speaker Change: Bonkers, so like Okay, we've got to have some hedge here.
Speaker Change: The.
Speaker Change: Deal with.
Speaker Change: Cost per kilowatt hour numbers that would double.
Speaker Change: What we anticipated.
Unknown Speaker: Well, you just drain the battery on the phone. Yeah, exactly. The battery is also not needed.
Speaker Change: If we have an internal.
<unk> production.
Speaker Change: Then.
Speaker Change: We have that.
Speaker Change: Hedge against demand.
Unknown Speaker: So like, technically, I suppose Apple would have the most amount of distributed compute, but you can't use it because you can't just run the phone at full power and drain the battery. Yeah. Um, so, but whereas for the car, even if you're a kilowatt Transcribed by https://otter.ai, You know, if you've got a up to your 60 kilowatt hour pack, it's still not a big deal. Transcribed by https://otter.ai. That was really good.
Speaker Change: Demand shocks.
Speaker Change: Our cement.
Speaker Change: That's really the way to think about it it's not like we want to take on.
Speaker Change: A whole bunch of problems that just for the hell of it.
Speaker Change: We did this whole program in order to.
Speaker Change: The address.
Speaker Change: Stupid Crazy increase in cost per kilowatt hour from our suppliers Judah gigantic orders placed by every carmaker on us.
Speaker Change: Okay. Thanks.
Speaker Change: And the last question comes from Ben <unk> from Baird.
Speaker Change: Tim.
Ben: And then on mute.
Ben: And Youre still muted.
Ben: Once again, we are just like two <unk>.
Ben: Strongly recommend that anyone who is I guess thinking about the Tesla stock should really drive FSD 12, three it really you can't it's impossible to understand the company. If you do not do this.
Unknown Speaker: Yeah, I mean, that distributed power and cooling, people underestimate that it costs a lot of money. Yeah. And the CapEx is shared by the entire world. Sort of everyone owns a small chunk, and they get a small profit out of it.
Ben: Alright so.
Speaker Change: Since then he is not on mute let's try.
Unknown Speaker: Yeah. Thanks so much, guys. And my follow-up is a little bit more mundane.
Unknown Speaker: Looking at the 4680 ramp, can you talk about how close you are to target yields and when you might start to accelerate incremental capacity expansions on that technology? You know. We're making good progress on that. I don't think it's super important for police in the airtime.
Speaker Change: <unk> from Wolfe research.
Speaker Change: Final question.
Unknown Attendee: Oh, okay.
Wolfe Research: Thanks, so much.
Speaker Change: I just.
Wolfe Research: During the Investor Day last year, you mentioned that auto Cogs per unit for the next Gen vehicle.
Wolfe Research: <unk> declined by 50% versus the current three and why I think that was implying something around $20000 of Cogs about a third of that was coming from the unbox manufacturing process, but I'm curious if you see an opportunity.
Unknown Speaker: As Lars said, we think it will exceed the competitiveness of suppliers by the end of this year, and then we'll continue to. Yeah, I mean, I think it's important to note also that the ramp right now is relevant to the Cybertruck ramp. Yeah. And so, we're not going to just randomly build 4680s unless we have a place to put them. And so we're going to, you know, make sure we're prudent about that. But we also have a lot of investments with all our own suppliers and vendors. They're great partners.
Wolfe Research: That the other some of the other some of the other drivers around powertrain cost reduction or material cost savings would those be largely transferable to some of the new products that youre that you are now talking about about introducing.
Speaker Change: Yes sure.
Speaker Change: Yes, I mean like.
Speaker Change: Unbox manufacturing method is certainly great revolutionary, but with that comes some risks because <unk>.
Speaker Change: New production lines, not but all of the subsystems redeveloped.
Speaker Change: There was about powertrains.
Unknown Speaker: And they, you know, have done great development work with us. And a lot of the advancements in technology and chemistry we found in 4680, they're also putting into themselves. Yeah, I mean, a big part of the 4680 Teslas doing internal sales was a hedge against what would happen without suppliers. Because for a while there, it was very difficult, because every big car maker put in massive battery orders. And so the prices, the price per kilowatt hour of battery for lithium ion batteries went to crazy numbers, crazy levels.
Speaker Change: Driving this battery improvements in manufacturing and automation thermal systems ceding the integration of interior components and reduction of Lv controllers, all of that is transferable and thats what were doing.
Speaker Change: Trying to get it into their products as fast as possible.
Speaker Change: Yes.
Speaker Change: Engineering work, we're not trying to just throw it away and put it in.
Coughing or going to take it and utilize it.
Speaker Change: Utilizing the best advantage of where the cars are making in the future.
Speaker Change: Okay great.
Speaker Change: And then just on that topic of 46 80 sales I know you mentioned it.
Unknown Speaker: Bonkers. Yeah, just bonkers. So, like, okay, we've got to have some hedge here to deal with cost per COVID hours numbers that were double what we anticipated. If we have an internal Cell Production, then we have that. That's really the way to think about it. It's not like we want to take on a whole bunch of problems just for the hell of it.
Speaker Change: Part of it more as like a hedge against.
Speaker Change: Against rising battery costs from other Oems, but.
Speaker Change: It seems even.
Speaker Change: Today.
Speaker Change: It seems like you would have a cost advantage against some of those other automakers I'm wondering given the.
Speaker Change: Rationalizing of your vehicle manufacturing plants that you are talking about now if there's an opportunity to maybe Todd.
Speaker Change: Convert the 46 80 sells in the cell dose the other automakers.
Speaker Change: Can you really generate an additional revenue stream just curious if you have any thoughts about that.
Unknown Speaker: We did this whole program in order to address the crazy increase in cost per kilowatt hour from our suppliers due to gigantic orders placed by every car maker on earth. Okay, thank you. And the last question comes from Ben Calo from Baird. Ben, go ahead and unmute, and you're still muted.
Speaker Change: Great what seems to be happening is that the unless I'm missing something the orders for <unk>.
Speaker Change: Batteries from other automakers have declined dramatically.
Speaker Change: So we are seeing.
Speaker Change: A much more competitive.
Prices for cells from suppliers.
Speaker Change: Okay.
Speaker Change: Dramatically more competitive than in the past.
Speaker Change: It is clear that.
Speaker Change: A lot of our suppliers have excess capacity.
Yes.
Elon R. Musk: Well, I once again would just like to strongly recommend that anyone who is, I guess, thinking about the Tesla stock should really drive FSD 12.3. It really is, it's impossible to understand the company if you do not do this. All right, so, since Benny's not unmuting, let's try Shreyas Patel from Wolf Research. Final question. Oh, hey. Thanks so much.
Speaker Change: In addition to what airlines. So this is kind of a way in addition to our U onset about 46, <unk> 46, 80 did for us from a supply chain perspective was help us understand the supply chain that's upstream of ourselves the price. So a lot of the deals that we had struck for $46 80, we can also supply those michelle's to our partners.
Speaker Change: Reducing the overall cost factor saslaw, so, we're basically inserting ourselves and the upstream supply chain by doing that so that's also been beneficial in reducing the overall pricing. In addition to the excess capacity that these suppliers have.
Speaker Change: Yes, I mean, this is going to wax and wane, obviously so.
Shreyas Patel: Just, you know, Elon, during Investor Day last year, you mentioned that auto cogs per unit for the next-gen vehicle would decline by 50% versus the current 3 and Y. I think that was implying something around $20,000 of cogs, and about a third of that was coming from the unboxed manufacturing process. But I'm curious if you see an opportunity that some of the other drivers around powertrain cost reduction or material cost savings could be largely transferable to some of the new products that you're now talking about introducing? Yeah, yeah, sure. I mean, in short, yes.
Speaker Change: There's going to be a boom and bust.
Speaker Change: In battery cell production.
Speaker Change: Where production exceed supply.
Speaker Change: And then supply exceeds production back and forth kind of like on a DRAM.
Speaker Change: DRAM or something.
Speaker Change: But.
Speaker Change: Yes, so it's like what is true today will not be true in the future.
There's going to be somewhat of a boom and bust cycle here.
And then there are additional complications by it.
Speaker Change: Governance initiatives.
Speaker Change: The inflation reduction act the IRI.
Elon R. Musk: I mean, like, the unboxing and manufacturing method is certainly great and revolutionary, but with it comes some risk because, you know, it's new production lines, not but all the subsystems we developed, whether it was power trains, battery drive units, battery improvements in manufacturing and automation, thermal systems, seating, integration of interior components, and reduction of LV controllers, all that's transferable. And that's what we're doing. [inaudible] Utilize it to the best advantage of the cars we make and the future cars we will make. Okay, great.
Speaker Change: George Sound like funny name for a clinical name.
Speaker Change: Is it like the Irish Republican Army.
Speaker Change: Internet Research agency from Russia independent retailers.
Exactly.
Speaker Change: Roth IRA.
Speaker Change: Horst vitamin situations.
Speaker Change: Yeah.
Speaker Change: <unk>.
Speaker Change: So, but it does it does.
Speaker Change: Complicate the incentive structure.
Speaker Change: So that.
Speaker Change: There is.
Speaker Change: <unk>.
Speaker Change: Does the stronger demand for cells that are produced in the U S than outside the U S.
Speaker Change: But then how long does that the IRA.
Last I don't know.
Unknown Speaker: And then just on that topic of 4680 cells, I know you mentioned it, you really thought of it more as like a hedge against, against, you know, rising battery costs from other OEMs. But it seems, you know, even today, it seems like you would have a cost advantage against some of those other automakers. And I'm wondering, you know, given the rationalizing of your vehicle manufacturing plans that you're talking about now, if there's an opportunity to maybe, you know, convert the 4680 cells and maybe sell those to other automakers and really generate an additional revenue stream. I'm just curious if you have any thoughts about that.
Speaker Change: Which is why it's important that we have both in rental sales and.
Speaker Change: So it's a hedge against all of those yes.
Speaker Change: Okay. Thank you very much that's all the time, we have today, but.
Speaker Change: But at the same time I would like to make.
Speaker Change: Short announcements and.
Speaker Change: I wanted to let the investment community to know that about a month ago.
I met up with Elon, and Baibakov announced that I'll be moving on from the world of Investor Relations.
Speaker Change: Ill be hanging around for another couple of months or so so feel free to reach out anytime.
But after the seven year sprint I'm going to be taking a break and spending some good quality time with my family.
Baibakov: And I wanted to say that the seven years have been the greatest privilege of my professional life I will never forget the memories from I started literally at the beginning of production Hal and just watching the company from the inside to see what it's become today.
Unknown Speaker: Great, what seems to be happening is that, unless I'm missing something, the orders for batteries from other watermakers have declined dramatically. So we're seeing much more competition. Prices for sales from suppliers are dramatically more competitive than in the past. It is clear that a lot of our suppliers have excess capacity. Yeah. In addition to what Elon said about 4680, what 4680 did for us from a supply chain perspective was help us understand the supply chain that's upstream of our cell suppliers.
Baibakov: And especially Super thankful to the people in this room and dozens of people outside of Israel.
Baibakov: For over the years.
Baibakov: The team's strength and team work at the slides unlike anything else I've seen in my career.
Speaker Change: Hello, and thank you very much for this opportunity.
Got back in 2017 thank.
Speaker Change: Thank you for seeking investor feedback and regularly and debating it with me.
Unknown Speaker: So a lot of the deals that we had struck for 4680, we can also supply those materials to our partners, reducing the overall cost back to Tesla. So we're basically inserting ourselves into the upstream supply chain by doing that.
Speaker Change: I mean, the reason I reached out to you is because I thought your analysis of Tulsa was the best that Ive seen thank you so yes.
Speaker Change: Yes, thank you for helping.
Helping tells we got to where it is today over seven years, it's been a pleasure working with you. Thank you so much and thank you for all the thousands of shareholders that.
Unknown Speaker: So that's also been beneficial in reducing overall pricing in addition to the excess capacity that these suppliers have. Yeah, now, I mean, this is going to wax and wane, obviously. So, you know, there's going to be a boom and bust in battery cell production. Yeah, where production exceeds supply, and then supply exceeds production, and back and forth kind of like on a DRAM or something, but I, Yeah, so it's like what is true today will not be true in the future.
Speaker Change: We have met over the years and walked around factories and love Dolby interactions, even with the even the tough ones.
Speaker Change: Yes, looking forward to the call. The next three months, but I'll be on the other side listening in thank you very much.
Speaker Change: Thanks.
Speaker Change: [music].
Unknown Speaker: There's going to be somewhat of a boom and bust cycle here. And then there are additional complications with government incentives like the Inflation Reduction Act, the IRA. Joe is found like a funny name for a comical name.
Elon R. Musk: Yeah. Is it like the Irish Republican army? The Internet Research Agency from Russia? Independent Retirement Camp. Yeah, exactly. Roth IRA. And there are like four Spider-Man situations, which I already win.
Unknown Speaker: So, but it does, it does, complicate the incentive structure so that there is perhaps a stronger demand for cells that are produced in the US than outside the US. But then how long is that, the IRA? Last, I don't know. That's why it's important that we have both Emmanuelle Sells and Linda Sells to hedge against all of this.
Unknown Speaker: Okay, thank you very much. That's all the time we have today. But at the same time, I would like to make a short announcement. I wanted to let the investment community know that about a month ago, I met up with Elon and Vaibhav and announced that I'll be moving on from the world of investor relations. I'll be around for another couple of months or so, so feel free to reach out at any time.
Martin Viecha: But after this seven-year sprint, I'm going to be taking a break and spending some quality time with my family. And I wanted to say that these seven years have been the greatest privilege of my professional life. I'll never forget the memories of...
Martin Viecha: I started literally at the beginning of production hell and just watched the company from the inside to see what it's become today. And I'm especially super thankful to the people in this room and dozens of people outside of this room that I've worked for over the years. I think the team strength and teamwork at Tesla is unlike anything else I've seen in my career. Elon, thank you very much for this opportunity that I got back in 2017.
Martin Viecha: Thank you for seeking investor feedback and regularly debating it with me. Yeah, well, the reason I reached out to you was because I thought your analysis of Tesla was the best that I'd seen. Thank you. So yeah, thank you for helping Tesla get to where it is today over seven years.
Martin Viecha: It's been a pleasure working with you. Thank you so much. And yeah, thank you to all the thousands of shareholders who we've met over the years and walked around factories and loved all the interactions, even the tough ones. And yeah, looking forward to the call in the next three months, but I'll be on the other side listening in. Thank you very much. Thanks.