Q2 2025 Tesla Inc Earnings Call
good afternoon everyone and welcome to Tesla's, second quarter 2025 Q&A with
Travis Axelrod: My name is Travis Axelrod head to investor relations, and I'm joined today by Elon Musk about to na in a number of other executives.
Travis Axelrod: Our Q2 results were announced at about 3 p.m. central Time in the update deck, the published at the same link as this webcast,
Travis Axelrod: 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.
Travis Axelrod: Actual events or results could differ materially due to a number of risks and uncertainties including those within our most recent filings with the SEC.
During the question and answer portion of today's call, please limit yourself to 1 question and what follow-up
Travis Axelrod: Please use the raise hand button to join the question queue.
Travis Axelrod: Before we jump into the Q&A, Elon has some opening remarks.
Travis Axelrod: Uh, so we've got the very exciting quarter, uh the we're able to successfully launch a robot taxi, so providing our first drives with no 1 in the Privacy. Um,
Travis Axelrod: With paying customers and Austin. Um, and as the some may have noted that we've already expanded our service area in Austin.
Travis Axelrod: Um, it's a bigger and longer.
and um, yeah it's it's going to get even bigger and longer but the we were expecting to um really
Travis Axelrod: Greatly increase the uh motion service area.
Travis Axelrod: Uh, to well in excess of what competitors doing and uh, that's hopefully in a week or so, 2 weeks. Yeah, a couple of weeks, but a couple weeks or so, um,
Travis Axelrod: and uh,
Travis Axelrod: And and we're we're we're getting the regulatory permission uh to launch in the Bay Area. Uh Nevada.
Travis Axelrod: Arizona and a number of them and Florida, a number of other places. So as as we, uh, get the approvals and we improve our safety, then we will be launching
Travis Axelrod: To autonomous right hailing in most of the country, really. And I think we'll probably uh, have autonomous right handling? And
bug have
Travis Axelrod: have the population of the US by the end of the year. That's that's at least our goal.
Travis Axelrod: Subject to regulatory approvals.
Travis Axelrod: um, I I I think
Will technically be able to do it. So I'm assuming we get regulatory approvals. It's probably addressing half the population of the US, I needed the year. Um,
Travis Axelrod: We we we are being very cautious. We don't want to take any chances.
and so,
we're, we're gonna
Travis Axelrod: Yeah. Go go cautiously but
Travis Axelrod: But it's the service areas and the number of vehicles in, in operation will increase at at a hyper exponential rate.
Travis Axelrod: Um,
Travis Axelrod: so,
Travis Axelrod: Uh, again, some other notable things model, Y and June. We became the best selling car in Turkey, Netherlands, Switzerland and Austria. Uh, it is
I believe the best selling car of any kind in the world still.
uh, and um,
Travis Axelrod: Autonomy is a is a big factor there. So even with that,
Travis Axelrod: if you even absent, even without supervised,
Travis Axelrod: Uh, selling point, um, and it's worth noting that we do not actually yet have approval.
Travis Axelrod: for supervised FSD uh, in in Europe where we so our sales in Europe,
Travis Axelrod: uh, we think
Travis Axelrod: Will improve significantly once we are able to give customers the same experience, but they have in the US.
Travis Axelrod: This is, maybe this is, I think a very important point to convey. Um,
Travis Axelrod: and we've been working with, um,
Travis Axelrod: Main country, regulator, which is the Netherlands.
Travis Axelrod: And uh, I think we're close to getting approval with deslandes, then it's going to go to the EU. It's quite a
Travis Axelrod: You know, cough to ask in fact, Copa had no idea that's something that you just beyond Congress that challenges with bureaucracy, but it will, we will get the approvals. Um, and I I think we'll get
Travis Axelrod: You know, some people in Europe will have an experience, some of us have the US, uh, in most of Europe.
Travis Axelrod: Yeah, this year, hopefully at least partly uh, in this quarter.
Travis Axelrod: Um and then we also have some regular regulatory regulatory challenges in China which we're hoping to unblock shortly. Uh where we because we we also cannot provide.
Uh, supervisor in China currently um, a real to unblock that suit. And that's also those, that's another major it's really is the single biggest demand Drive.
Travis Axelrod: and then within the US, uh, as, as we are get confident about, uh, safety and and different, uh,
Geographic areas, the we will.
um,
Travis Axelrod: uh, loosen up on how
Uh, much somebody has to be laser focused to have the eyes laser focused on the road. Um, you know, because that's, that's been a common complaint. Um, in fact, it it does create open odd odd. Safety issue, where people will sometimes disengage autopilot, uh, then then do something change the radio or
Travis Axelrod: Maybe look at the phone drive with her knee and then re-engage with a pilot which obviously is not. It's less safe than simply keeping autopilot on
Travis Axelrod: so anyway,
get that, that that experience will will improve in in the next several weeks. The the because of our focus on awesome.
Travis Axelrod: With no 1 in the Privacy, the production release of autopilot is actually several months behind what people experience on a robot text in Boston. Um, so now we have the the robot tags in Austin launched will be provide adding back those elements. Uh, so that there will be um, a step change Improvement in the uh, the autopilot experience for people outside of Austin.
Travis Axelrod: This, this is really.
Travis Axelrod: As you can tell, this is very much sort of a autonomy is, is the story. Um, like we need to, we need the physical product without which you cannot have autonomy. But once you have a physical product, you need the, the autonomy is what amplifies the value to stratospheric levels.
Travis Axelrod: um,
Travis Axelrod: Google set launched, the Tesla Dino, which has been a huge hit.
Travis Axelrod: We actually got worldwide attention which is unusual for our data. That is don't typically get uh
Travis Axelrod: That headline news around Earth. Um,
Travis Axelrod: But if this is a pretty special Dino and if you're in the LA area, it's worth visiting.
Travis Axelrod: It's sort of.
Travis Axelrod: a shiny Beacon of Hope, and
Travis Axelrod: And otherwise sort of weak, Urban landscape, frankly.
Travis Axelrod: So really, quite quite a lovely spirit. It's a great job. I didn't because it's even there.
Travis Axelrod: um,
Travis Axelrod: On the full stop driving front continue to worry about that.
Travis Axelrod: Um, we have um, we're continuing to make uh, significant improvements just with the site, right? So, uh,
Travis Axelrod: The.
Travis Axelrod: We're expecting to increase the parameter count.
Travis Axelrod: Actually, at this point.
Travis Axelrod: uh,
to what I think. We think we can probably 10x the almost 10x the power from. Yeah, roughly 10x the 3000 account. So
um,
Travis Axelrod: this is, this is actually a very tricky thing to do. Um,
Because you you as you increase the parameter account, you get you get choked on memory bandwidth.
Travis Axelrod: Uh, but we currently think we can 10x the parameter count.
Talk to the experiencing.
Travis Axelrod: That's that's so not not. Not just the Forex actually 10x increased in private account.
Travis Axelrod: Um,
Travis Axelrod: and um,
Travis Axelrod: Yeah, so so a lot of improvement on the existing Hardware to happen.
Uh, energy is growing really well.
Travis Axelrod: Despite Edwards from tariffs and it's very supply chain charges.
Travis Axelrod: Um,
The very pack is Hispanic capacity quickly and uh how do we have upgrades? The negative impact that will make it even better?
Travis Axelrod: And we had record power of all deployments gaining Q2.
So I I think battery batteries are going to just going to be a massive thing.
Travis Axelrod: that that the scale of batteries battery demand is, I think
Travis Axelrod: Not that many people appreciate just how gigantic the scale of battery demand is.
Travis Axelrod: The way the way you think about it is that the US sustained power output for the US grid, um, is around 1 to 1.
Travis Axelrod: But average usage.
Travis Axelrod: Is less than half a terawatt.
Travis Axelrod: If you add batteries to the mix, you can run the power plants 24/7 at full capacity.
Travis Axelrod: That's doubling more than doubling.
Travis Axelrod: The energy output per year of the United States.
Travis Axelrod: Just with batteries.
Travis Axelrod: But that's again.
Um, big deal, it's a really big deal.
Optimus, uh,
Travis Axelrod: so, we're
Travis Axelrod: Revolving The Optimist design.
Travis Axelrod: and really getting Optimus to the point where it is,
Travis Axelrod: A phenomenal design.
So, an optimistic version to right now, sort of 2 and a half.
Travis Axelrod: Optimus 3 is.
Travis Axelrod: Is an Exquisite design in my opinion. And um,
Travis Axelrod: Would be an incredible. As I've said, many times before I predicted, it will be the biggest product ever. Um,
Travis Axelrod: It's a very hard problem to solve.
Travis Axelrod: You have to design.
Travis Axelrod: at every part of it from physics, first principles, there's nothing that's off the shelf that actually works so you can just find every motor gearbox
Travis Axelrod: Power Electronics, control Electronics, sensors.
Travis Axelrod: The, the mechanical elements.
Travis Axelrod: Mostly got to train The Optimist.
Travis Axelrod: To.
Travis Axelrod: Use its lens and in sensors with a neural net.
But we'll be.
Travis Axelrod: Applying the same techniques, we will apply for a car which is essentially a 4-wheel robot. And Optimus is a robot with owns and legs.
So that the same principles that apply to optimising.
Travis Axelrod: AI inference are the car applied to Optimist because they're both really robots in different forms.
Travis Axelrod: Um, and and Tesla. It, it is important to
Travis Axelrod: Note that Tesla is by far the best in the world at real world. AI
Travis Axelrod: Like like a Clear Proof point with for that. Would be if you compare it to Tesla the way we've got.
Travis Axelrod: You know, the car is best doing with gun knows how many sensors.
And yet isn't Google good at AI.
Travis Axelrod: Yes, but they're not good at real world, AI best part. They have
Travis Axelrod: Tesla is actually much better than Google by far and any much better than anyone at real world data.
Travis Axelrod: And and I and by far Tesla has the the best inference efficiency.
Travis Axelrod: Uh, like they got keep bigger bar for AI is, what is the intelligence per gigabyte?
Travis Axelrod: People know about parameters, blah, blah, blah, the Uber, I think we're still about stop talking about parameters and talk about gigabytes. Because what the parameters? You can have 4 bit parameters, 8, bit, parameters, 16 bit parameters?
Travis Axelrod: but the actual constraints in the hardware are
Travis Axelrod: how many gigabytes of RAM and how many gigabytes per second? Can you transfer from Ram? Therefore, it is not a parameter constraint this it is a
Is a bike constraint.
Travis Axelrod: And Tesla has the highest intelligence density of any AI by far.
Have a lot of insight into this with with XI XI is.
Travis Axelrod: you know, rock is the smartest AI overall, but it's a
Travis Axelrod: Rock for is a giant Beast.
There's the terabyte level. Um,
Travis Axelrod: and,
so, it's kind of a
Tesla has the best intelligence and intelligence density will be a very big deal in the future. It is now
Travis Axelrod: um, so
Travis Axelrod: With, with Optimus 3.
Which is really the right design. It's like, it doesn't have at this point. There's no, no significant significant flaws with The Optimist 3 design.
But it it we are going to retool a bunch of things. So it's
Travis Axelrod: And it'll probably be.
Travis Axelrod: Prototypes of Optimus 3 into this year.
Travis Axelrod: And then scale production next year.
And try to scale Optimus production as fast as it's humanly possible to, to do so, trying to get to a million units a year as quickly as possible.
Travis Axelrod: Do you think we can get there in less than 5 years?
Travis Axelrod: I guess.
Travis Axelrod: That, that's the reason why aspiration is reminding units here.
Travis Axelrod: 5 years, seems like I could imagine you will Target
um,
But it it conclusion. Uh so far 2025 has been very exciting year. A lot of major milestones.
Travis Axelrod: Uh, We've made clear product demos for progress in autonomy. That's a, a lot of a service that we were not achieved, but it's worth noting that the
Travis Axelrod: We have done what we said. We're going to do.
Always on time.
Travis Axelrod: But we get it done.
Travis Axelrod: And on the series.
Travis Axelrod: I was sitting there with egg on their face.
Travis Axelrod: so,
Speaker Change: Great, great. Great progress by itself. Team.
um,
And I, I do think if Tesla continues to execute well with people autonomy.
And, and the human right robot. What time is it? It it will be the most valuable company in the world.
Speaker Change: It's a lot of execution between here and there, it doesn't just happen.
Speaker Change: provided we
Speaker Change: Actually very well.
Speaker Change: Um,
I think Tesla has a shot at being most valuable company in the world.
Anyway, obviously I'm assuming the optimistic about future of the company. Um,
Speaker Change: Best way to predict the future is to make it happen and we're making it happen here with Tesla team.
Speaker Change: so I just like to say, thanks to all of us supporters,
Speaker Change: And I think we're good. Yeah, incredibly exciting future.
Speaker Change: Great, thank you very much. And that box has a big marks as well.
Speaker Change: Service. As in mentioned, Q2 was an interesting quarter. In a few respects, we started ramping up the production of the new model, Y at all our factories.
Speaker Change: We rolled out our Uber taxi service in Austin and delivered a car completely. All obviously, from directly from the factory to the customer's home.
Speaker Change: It is a seminal point.
Speaker Change: Get to this thing. I mean, it took a lot of effort and I really want to thank everybody at Tesla to make this happen. It wasn't the reason thing to do, but we did it.
Speaker Change: It took time, but we've just begun the next phase for the company.
Speaker Change: The 1 big bill has a lot of changes that would affect our business in the near term. The first among those changes is the repeal of the IRA EV credit of 7,500 by the end of this quarter.
Given the appropriate change. We have limited supply of vehicles, in the US test quarter, as we have already within lead times to Auto Parts to build cars.
Speaker Change: We've rolled out all our plan incentives already and will start paying them back as we start to sell.
Speaker Change: If you are in the US and looking to buy a car place it on. Now, as we may not be able to guarantee delivery orders, placed in the later part of August and Beyond
Speaker Change: It will also make changes to certain emissions standards but reducing the amount of penalty to zero.
Speaker Change: This in turn will have an impact on the new sales of regulatory credits to other events. And in terms of will lead to lower rates,
Speaker Change: While we now plan our business around such sales, it will number US, impact our total revenue is going forward.
Speaker Change: On the automotive product portfolio. The entire lineup is updated globally. We're seeing an increase in the number of test drives.
Speaker Change: Last plan in the first half of 25, I was given a focus on building and delivering as many vehicles as possible in the US before the EV credit expires and the additional complexity of ramping, a new product that I have to happen next, quarter slower than initially expected.
Speaker Change: 1 thing, which is grossly under appreciated in Elon talked about it is that all our vehicles in the lineup are capable of a Down
This is by far the biggest differentiator between us and the competition.
Speaker Change: Our workers stop safety standards as is, but with FSD they are, and will continue to set a new standard for safety within regular transportation.
Speaker Change: We published our, uh, Vehicle Safety report earlier today and you can see a car on SLT is 10x safer than the car lock office.
Speaker Change: We've started seeing an uptick in SLG adoption in North America and recent months, which is a very promising trend.
Speaker Change: And just to give you perspective, you know, since the launch of uh since we have moved to version 12 of FSD we've seen the adoption rates, really increase.
Speaker Change: It started seeing the upon the automated gravity, uh front uh despite reduction in regulatory Revenue.
Speaker Change: And the auto, the total Automotive increased by 19% sequentially. Even the total delivery is only improved 14%
Speaker Change: This was primarily due to an improved, is ASP is because of the new model y.
This has been improving margin sequentially as well.
Along with improvements and high cost fixed cost absorption, despite an increase in cost from Terrace.
Speaker Change: We started seeing the impact of terrorism on behalf sequentially. The cost of terrorists increase around 300 million with approximately 2/3 of that impact in automotive invest in energy.
Speaker Change: Given the latency in manufacturing and sales. The full impacts will come through in the following quarters and so forth will increase in the near.
What we're doing our best to manage these impacts. We are in an unpredictable environment for the tire flat.
Speaker Change: The margins for the energy generation and storage businesses include sequentially while deployment reduced primarily due to the ramp off power. Deployments that high margins.
Speaker Change: You were able to achieve our highest cost profit for the business yet.
Speaker Change: Note that the overall deployments will continue to vary quarter to quarter.
Speaker Change: I think you know, covered this that you know industrial store will make a difference in this drive towards Ai and data center growth.
Speaker Change: The energy requirements are increasing at a rapid scale AS application as a applications are very energy hungry.
The quickest path to scale up, energy is deployed.
Speaker Change: This is something that our customers have started realizing and destroyed this business, having the largest impacts of tires. We're seeing customers willing to accept some of the tests impacts.
Speaker Change: The big Bill.
Speaker Change: has certain adverse impacts even for the energy business moves notably on the residential storage business due to the early expiration of consumer credits by the end of the year,
Speaker Change: The challenges of the storage business. Therefore remain both some will and some tests and we're doing our best to try and manage through this, but it will.
Speaker Change: We will see shifts in demand and profitability.
Speaker Change: The margins for our service and other businesses, improves sequentially, primarily due to higher profits, from supercharging and Improvement in insurance and Service Center profitability.
Speaker Change: operating expenses also grew sequentially as we continue our investment, in AI projects, including additional expenses related to employee related costs,
Including High stock risk, compensation and depreciation for AI compute.
Speaker Change: Our operating expenses, especially R&D.
Speaker Change: Related spend will continue to grow. We Believe even in the current environment, it is the right strategy to keep making investments in these areas to position us for the long term.
Speaker Change: Other income groups sequentially primarily from The Mark to Market adjustment on bitcoin Holdings.
Speaker Change: Which was 284 million gain in K2, while being 125 million loss in K1. Just wanted to remind people that
Speaker Change: this would keep creating volatility based on the Bitcoin price.
Speaker Change: So, did our cat-backs?
Speaker Change: Resulting in 146 million of free cash flow.
Speaker Change: We continue to make investments in various aspects of manufacturing like Fabrica.
Semi lines and other manufacturing span and the expansion of our AI initiatives.
Speaker Change: Our latest expect expectations of the year. In terms of capex, is in excess of 9 billion.
Speaker Change: To summarize, we have non challenges in our business due to the negative impacts of the bill and terrorists. However, the Investments that we have made, for AI Robotics and our lead and energy sets us up for a bright future.
I would like to thank the whole Tesla team for customers by investors and supporters for their continued. Belief in US.
Great, thank you very much. Bye. All right. So now we're going to move on to state.com questions.
Speaker Change: The first question is, can you give us some insight? How rabo taxes have been performing so far? And what rate? You expect to expand in terms of vehicles, geofence cities and supervisors.
Speaker Change: Yeah, the robotics has been doing great so far. Now since customers really love the experience. Um,
Speaker Change: Like super smooth, uh, very safe and like just a great experience overall uh and we already did the first day of expansion of Austin and we'll continue to expand in Austin uh to probably more than 10x our current operating region.
Speaker Change: We're also testing in lot of other cities as uh, you know, mentioned um, the next thing to expand would be in the San Francisco Bay Area. Uh we are working with the government to get approval here uh and in the meanwhile, launch the service with the person in the driver's seat. Just to expedite. And while we wait for regulatory approval,
Speaker Change: We also testing a lot of other cities in the US including Florida. Nevada, Nevada, Etc.
Great, thank you very much. Sure. Um, the next question is what are the key Technical and Regulatory hurdles silver mating for unsupervised FSD to be available for personal. Use, can you provide a timeline?
Speaker Change: First with me getting there. Um,
Speaker Change: I think it's it'll be available.
Speaker Change: For in supervised personal use uh by the end of this year in certain geographies.
Speaker Change: uh, we're just being very careful about it, so,
Speaker Change: This is not something which we don't do.
Speaker Change: Make sure that everything is safe before.
Yeah, we're just being extremely paranoid. Yes.
Speaker Change: um but I I would be I'm I'm confident that by the end of this year within um a number of cities in the US we will, will it be available to
Speaker Change: end users like,
Speaker Change: Yeah, yeah, but what I suppose is the same. Yeah, Hardware. In India, Austin robotics has some customer vehicles and they can deliver a car autonomously from the factory to a customer. This 1 Works. Yes. Uh, and every Tesla manufacturer in the US and in Europe, autonomously drives itself from the end of time to the Loading Docks and it so it's just a software update.
Speaker Change: Yeah.
I think we'll be we'll end up delivering cars in the great horse in the area.
Speaker Change: And the Bay Area by default from the factory by the end of this year.
Speaker Change: Like a call will deliver itself.
Speaker Change: to your
To where you are unless you say you don't want that.
Speaker Change: Reciprocal. Yes, great. Thank you guys.
This question is what specific Factory tasks is Optimus currently performing. And what is the expected timeline for scaling production to enable external sales?
Speaker Change: How does Tesla Envision Optimus contributing to revenue the next 2 to 3 years?
Uh, yeah. So
Speaker Change: The Optimist Optimist 3 design. As I mentioned earlier, is I think finally the right design to work further optimizations. But there are no any of fundamental changes to that. I need over the Optimus 3D design. It has all the degrees of freedom that really want. Um, what I need
Speaker Change: so, it's
It will have prototypes of that, and I don't know 3 or 3 months and then sub tooling and production.
Mostly start production on that. You can get it for next year, the production round simple. So it's going to predict the yes, code of a production round.
Could be because of unexpected.
Supply chain interruptions or mistakes made internally.
Speaker Change: um, especially using it to predict
Speaker Change: um,
Speaker Change: sort of the, the, the end of the, of the S curve, or, or late in the Esco, then the beginning of the Esco,
Speaker Change: and the beginning of the Esco of, of the production around is, in any case, not really material for Revenue purposes,
Speaker Change: um, the uh, the beginning of the S code, the
Speaker Change: You're usually not, usually you always negative co-sponsors.
Speaker Change: Your debugging and a lot of issues.
Speaker Change: Um,
Speaker Change: that's why I like it's it's I feel like fairly confident in predicting things or at least medium confident in predicting where we are at 5 years. But I it's hard to predict where we are in a year or 2 years.
Speaker Change: Um,
Speaker Change: so,
That's why I think 5 years.
Speaker Change: I think we could be at the
Speaker Change: uh,
Speaker Change: I'd be surprised if at the end of 5 years,
you know, 60 months from now, if 3009
Speaker Change: Roughly making a 100,000 Optimus robots in month and 60 months, I would be shocked.
Speaker Change: All right. Thank you very much.
Speaker Change: Next question is, can you provide an update on the development and production timeline for Tesla's, more affordable models? How will these models Balance cost reduction with profitability, and what impact do you expect on demand and occur in economic climate?
Speaker Change: All right, I think by about did a good job of answering this question in this opening remarks. As we said, we started production in June and we're ramping your quality builds and things around the corner and given the that we started in North America and that you know, the um
Speaker Change: Our goal is to maximize production with Ira for pending Q3. We're going to keep pushing hard on our current models to avoid complexity.
Speaker Change: Unfortunately, that rolls away, we'll be running within more formal models available for everyone in Q4.
Speaker Change: Um, and you know, the goal of those products was not to negatively impact revenue or or gross margin but just to make a a car that everyone loves and wants at a more affordable price.
Great. Thank you. L
Speaker Change: Uh, the next question is, can you talk about the benefits of Tesla investing in xai? This is not the Forum to discuss this topic. I mean, I it if, if there is something which we need to discuss, we'll discuss it separately.
Speaker Change: I think obviously, you know, we're publicly traded company, shareholders are welcome to put forward, any shareholder proposals that they'd like, I'm recently encouraged that? Um, and, uh, and then have shareholders vote. And while act in accordance with the shareholder wishes,
Speaker Change: Great, thank you very much.
Speaker Change: The next question is, can you tell us a little bit more about what goes on in the Tesla Design Studio?
Speaker Change: Uh,
Speaker Change: You want me to take that 1? Um we kind of generally say that um what happens in the studio stays in the studio um and that you know, earnings calls are not the place to disclose new products stuff. But we're, you know, we're working to
Make sure that we have an exciting future for for our Tesla and our, um, and the product lineup.
Speaker Change: Yeah, there's a lot of exciting things happening in the design studio. It's it's not like static.
Speaker Change: um,
Speaker Change: And really what's going to happen over the next. Several years is the fundamental transformation of the company. From a pre- autonomy, world to a post autonomy.
and uh,
I'm working on a new master plan to articulate that.
Speaker Change: As a team. And, uh,
Speaker Change: You know, there there there will, there will be there are some teething pains, as you as you transition from a pre pre-, autonomy to post autonomy well. But
Speaker Change: I think the the Future Vision for Tesla is incredibly exciting.
Speaker Change: Uh, and will profoundly change the world in a good way.
Speaker Change: You sound like, sort of 5 or whatever, but I I think what, let's just say, if we execute on that plan, effectively, which is you have to actually do that. Um,
Tesla will be the voice backable company in the world by far.
Speaker Change: Great. Thank you.
Speaker Change: Next question, uh, is actually duplicate on on supervised FSD for customer vehicles and skip that.
Speaker Change: And after that is, are there any news for Hardware 3 users getting retrofits or upgrades? Will they get hardware for or some future version of Hardware 5?
Speaker Change: What we need to do with the hot battery cars. I mean, the like I said, the focus is for us to get unsupervised out.
Speaker Change: And then we'll go back and see what more work. We need to do.
Speaker Change: Great. Next question is, can you give an update on dojo and could xai be a customer for dojo?
Um, those are 2.
Speaker Change: um,
we expect to have Dojo to operating in scale sometime next year. Um,
with scale being
Speaker Change: somewhere around 100K 8100 equivalents.
Speaker Change: um,
Speaker Change: and um,
Speaker Change: and then AI 5, which is really
Speaker Change: Spectacular to I don't use those words.
Speaker Change: likely spectacularly to
Speaker Change: Uh, the ar5 truck will be, hopefully be combined production around the end of next year.
Speaker Change: And that has a lot of potential.
Um,
Speaker Change: I think, you know, thinking about Dojo 3D and the ai6 in first chip
it seems like intuitively we want to try to find convergence there where it's
Speaker Change: Basically the same chip.
Speaker Change: um,
but is used what we used to say 2 of them.
In a car or an optimist.
Uh, and and maybe a larger number on a on a board.
5 12 on a board, something like that. If you want iban with communication, between the chips at a
Speaker Change: 47.
That's sort of seems like intuitively the sensible way to go.
Speaker Change: Great.
Speaker Change: Um, the next, uh, step questions, uh, have all actually been covered. So we'll we'll end with that. How will the BBB elimination of tax credits for solar projects? Affect your sales pipeline for mega pack?
Speaker Change: Yeah, our our sales pipeline is is quite Diversified across customers and market segments. So, we are heavily weighted in mega pack projects that are paid with solar.
And as we talked about, in the opening remarks, we're seeing storage quickly being recognized for its ability to unlock great efficiency, and how quickly it can be deployed to help the grid.
Speaker Change: Uh additionally although the recent bill was not favorable towards solar we. We believe solar projects will still get built because the energy is necessary.
The projects are well developed and they're ready for execution and there's really no Alternatives in the near term giving gas turbine, lead times and pricing.
Speaker Change: We also continue to see growth in the data center segment and in Standalone storage projects providing capacity to the Grid in several markets across the US.
Speaker Change: Um overall, we're forecasting a very strong second, half of the year, as we increase the supply chains.
Speaker Change: And lastly, we we continue to invest heavily in US, manufacturing to mitigate policy and tariff impacts expecting our first lfp cell manufacturing facility to be online by the end of the year and launching our third Mega Factory near Houston and 2026.
Speaker Change: Great. Thank you, Mike. Uh we will now be moving to analyst questions. Uh, the first question comes from a manual Rosner at Wolf research, the manual. Uh please feel free to unmute yourself whenever you're ready.
Great. Thank you so much. Can you hear me?
Speaker Change: Yep.
Uh, thanks. Um, so Elan. Um, are you able to share any kpis with us, in terms of, uh, the robo taxi business? Um, how many vehicles are you operating? Uh, miles driven autonomously or the number of safety critical intervention? Um, just curious, you know how the roll out is it. It generally is going in the in any sort of like targets that you could share, uh, more broadly.
Speaker Change: Chuck Jonathan. Yeah, we have, uh, you know, more than 7,000 miles operating in, uh, Austin area. It's a, you know, just because Services New we have, um,
Speaker Change: A handful of vehicles. Uh, right now. But then we are trying to expand the service uh, in terms of both the area and also the number of vehicles, both in Austin and other locations. Uh, so far, you know the uh,
Speaker Change: The Techno notable safety critical incidents there, you know, sometimes we have our own, um, restrictions as to, for example, we are resting towards speed limit to 40 miles per hour, roads, um, and if the vehicle wants to go on like higher speeds, we can stop the vehicle. But those are a lot of convenience and opposed to, uh, safe for critical nature. Um, so for the service has been really well received, uh, and we continue to expand on it.
Speaker Change: Great. And then
Speaker Change: Economic point of view longer term. You've previously talked about working to drive down the cost per mile on the robo, taxis maybe towards 30 or 40 cents per mile over time. Uh, now that your service is live. How should we think about the main Milestones to getting there?
Speaker Change: Yeah. Well the the Cyber cam is which is really
optimized for
Speaker Change: autonomy. Um,
Speaker Change: That that I think is got uh it's probably sub 30 Cent per mile potential over time, maybe 25.
um,
Speaker Change: you know, it's really
Speaker Change: you like if you design a car from scratch to to be um, a
Speaker Change: Cost optimized.
Speaker Change: Robotic, taxi like cyber cap.
Speaker Change: Um,
Speaker Change: You know, you like, for example, we're we're not trying to make it you know corner like a like incredibly well like a model 3 would you know or Model S or even model y like it's got more more, you know, model all all of our all of our cars that are driven by people are super fun to drive. They're got incredible acceleration, uh, you know, to incredible cornering capability. Um, but I don't we we're we're confident that very few people in a cyber cap want to be hurtling around
Speaker Change: um,
Speaker Change: So you know, so we were, we produced the the top end speed which means we can use more efficient tires.
Speaker Change: Uh, we don't need as much acceleration. We don't need as much.
Speaker Change: um,
Speaker Change: You know.
Speaker Change: Take breaks to sort of we want stopping distance but we we're not expecting it to be heavily used. It's it's it's a gentle ride essentially, if you you design it for a gentle ride.
Speaker Change: and, and then you
Speaker Change: Uh, you have a, a much more optimized optimized design Point. Um, so that that's why it seems probably we achieve that.
Speaker Change: Especially like Optum Optimus is, you know, so serving you cleaning out the car and make doing maintenance and stuff. Um,
and um you you know what doing automatic charging
Speaker Change: so it I think it's going to
Speaker Change: the actual cost for a mile of cyber cab will be very low.
Speaker Change: The cost per mile of our existing fee, will be higher, but still very competitive.
Speaker Change: so,
Yeah, maybe some number of 50 cents. I'm just guessing
Speaker Change: um,
Speaker Change: yeah, so this this really uh, tells row tactic people go from Tiny to gigantic back into operations,
Speaker Change: In quite a short period of time.
Speaker Change: Like, my guess is as it has a material impact on our financials or around the end of next year.
Okay, thank you very much. Uh, the next question comes from Adam at Morgan Stanley. Adam, please unmute yourself.
Uh great, hello everybody. Um, so Elon as Tesla moves
Adam: Into this next phase of physical AI autonomous humanoids. Robo taxes Etc. World changing civilizational species species. Changing technology with dual purpose. Are you comfortable moving Tesla in this direction while only having a 13% stake in the economy and sorry in the company? Is that sustainable or
Adam: Does do you still insist that something needs to happen? Given you know, your current lack of control and the types of Technologies you're getting into
Adam: Yeah, that that, that is a, a major concern for me, as I've mentioned in the past and I hope that is addressed at the upcoming shareholders meeting. Um, but uh, yeah, it is a big deal.
Adam: Like, you know, I want to find that I've got like, so a little control that I can easily be ousted by activist shareholders after having both, you know, these this Army of humanoid robots, um,
Adam: I think that as I mentioned before, I think
Adam: my control over Tesla should be it and after ensure that it goes in a good direction but not so much control that I can't be thrown out if I go crazy.
Speaker Change: Okay, Elon, Don, you're not going to go crazy. We, we, we, we we trust you. Um, well, you can stay a little crazy, a little crazy is okay. Uh Elon though, um, we understand the the board of directors.
Speaker Change: Get a firsthand view of uh Optimus like that. Uh and as the second half of this year, too soon to have an AI day because it seems like everybody else in the world's doing it and this Talent war is getting freaking crazy. And um I I don't I know you've mentioned for recruiting purposes. Uh this is a very important thing that you've done. I think people have have you have copied you on this and I'm wondering if this is, if this year's too early for that, thanks Elon.
Speaker Change: Yes, it's bit of a tough thing because like when we do an AI day we find that some of our members are literally done a frame by frame examination of our slides and everything we say and then copy those. Um so you know
Speaker Change: say like, how what's the, the trade-off, which, which does help with recruiting, but then,
Speaker Change: Competitors look very closely and copy us.
Um,
Speaker Change: I mean that said we should probably I mean, I guess we could consider the shareholder.
Speaker Change: we need to be sort of, in
A we can do we can maybe go into depth.
Speaker Change: some, some amount of debt that the I know shareholder meeting, um, with respect to Optimist and
Speaker Change: AI, I'm done.
Speaker Change: Sort of that action chip stuff perhaps. Um,
Speaker Change: yeah, Tesla's also really underrated in terms of AI chip design um as well as AI software um
so,
Like there's still not a chip that we would that that exists that we would prefer to put in our car.
Speaker Change: That is NIH of that that we would prefer to put in the car over our own
Speaker Change: and even though it's been now after several years,
Speaker Change: And we're confident that the A5 chip will be.
Speaker Change: A profound game changer.
Speaker Change: In fact, it it it's so it's so powerful that we'll have to Nerf it or to some degree for markets outside of the US because it it slows way past the export restrictions. So, unless the export restrictions change, we actually will have to know if
Speaker Change: our AI 5 shows below that's kind of weird. Hopefully those hopefully we keep, you know, raising the bar on export restrictions, otherwise it gets a bit silly.
Speaker Change: Um,
Speaker Change: but we'll have a bunch of Optimus from on stage.
At the shareholder meeting.
Speaker Change: Um,
Speaker Change: The Optimist lab is cool to see it. Looks like it looks like the set of Westworld
Um, we could robots in various stages.
Speaker Change: Some of them are
Speaker Change: You know, in various stages of repair.
Speaker Change: Like I don't know. Some some combination of like the tattooing junkyard and the and West walls it's what it looks like. It's very cool.
Speaker Change: and Optimus is,
Speaker Change: Walking around the office here in Polo.
So, just 247 is just walking around like, it's
Speaker Change: More, I think. And we saw, we saw Optimus like
You know, that tells a diner. So we park 1,
Speaker Change: yeah, so it's we'll go from a world where robots are rear to where
they're so common that you don't even look up.
Speaker Change: Great. Thank you so much. Uh, the next question comes from Edison at Deutsche Bank, please unmute yourself.
And simply go ahead and unmute yourself.
Speaker Change: Brightwell Edison figures that out. We will go to the next question, which is going to come from Dan Levy at Barkley's. Um, Dan, please go ahead and unmute yourself.
Dan Levy: Great. Uh, thank you, uh, Yan. You've talked about the opportunity to put, uh, non-tesla owned Vehicles, into the robo taxi Network. You should talk about the gating factors to enabling that and what timeline we should expect on. Personally owned vehicles in the robot, taxi Network,
Dan Levy: We haven't really thought hard about that. Um,
Dan Levy: But we need to make sure it works when the vehicles are fully under our control.
Dan Levy: um, and uh,
Dan Levy: Yes, kind of 1 step at a time here. We don't want to jump the gun.
Dan Levy: As I said we're being paranoid about safety. So,
Dan Levy: um,
it says, like,
Dan Levy: but I, I, I guess, uh,
Dan Levy: I guess it, like next year is
Dan Levy: I say confidently next year, I'm not sure when next year, but confidently next year,
Speaker Change: Test complete.
I mean, 1 thing to keep in mind is that we will have some criteria because like even when you put your car in a Uber or Lyft speed,
Speaker Change: they go through a whole checklist process of making sure things are working. Second Airbnb rooms. Yes, bad news. Yeah, so we will do something like that. Elevating possible. Yes.
Because we want like Elon said, we are we want to be better on security.
Assets. All things like, tread on the tire can have an impact on safety. So, that's why we would want to do some proper validation before we let other cars come in.
Speaker Change: And you can follow up. Yes, thank you. Um, could you just unpack the different costs associated with scaling, the robot taxi business, and how you think about funding those costs? All right, so the cash flow is in the auto business sufficient to fund it and if not what other funding sources, do you think you could use, you know, would you just fund it off the balance sheet?
Speaker Change: Well, as soon as there is, a clear cash flow stream associated with any, any product. Uh, you can definitely Finance it.
Speaker Change: And in the interim.
We will use our balance sheet but like once we get to a certain scale in terms of recurring revenues, like Elon said, we could get into our easily and kind of transaction to try and get funding.
Speaker Change: Great.
Thanks so much and we will now move on to Mark um, from Goldman Sachs Mark. Please uh feel free to unmute yourself.
Speaker Change: Uh yes uh good afternoon. Thank you very much for taking the questions. With the FSD trials, that Tesla has been offering to Consumers and the attention on self-driving. More generally, are you able to comment more specifically on what you're seeing with FSD subscription Trends and take rates, uh, and help us better understand how large FSD Revenue may be currently
Speaker Change: so we definitely like I I mentioned that my, in my opening, the box uh since we've launched version 12 of FSD in North America,
Speaker Change: Is definitely seeing a marked improvement in the FSD adoption.
Speaker Change: And this the other thing which we had also done last year is we did bring down the pricing and we've made, uh, subscription, much more affordable. So we have seen uh,
Speaker Change: You know, 25% increase since that time.
Speaker Change: So, which is encouraging Trend. But honestly, we we've just started the story around explaining the benefits of ability with, uh, like I said before we released our Vehicle Safety about
Speaker Change: Even if you don't believe in this uh anything else.
Speaker Change: A car on FSD being 10x safer, should be a motivator. Plus, the other thing is people don't realize even at $99 a month. It's like you getting a personal show for for almost $3.33 a day.
Speaker Change: And this is by far, the biggest game changer.
Speaker Change: which,
I know we've been talking about it because part of it is we live in these head, but
Speaker Change: Yeah, I think most people still don't know. Yeah the best of our people don't know it exists and
It's still like half of Tesla owners who could use it.
Speaker Change: Haven't tried it. Even once they don't actually
Speaker Change: this is something we want to educate them on.
Speaker Change: So we've got a when they come in for service. Uh we'll reach out to them, send them like videos of how to make it work. Um,
Speaker Change: And uh much much. It's so it's such a shocking thing. They don't they don't think a car is capable of this.
So you have to you have to show them and and and get them comfortable with turning it on and off. It's so true. But it's
Yeah. It's like saying you've got a, a cat that can sing and dance, but it just looks like an old cat.
Speaker Change: And you're like, you know, until you see the cats, sing a dance and talk, and like your assume is just a cat.
That's that's Tesla. See yes, our car is intelligent.
Speaker Change: And so, what we're going to do to elon's point, like we've been giving people free time to try and try and refresh, but we'll start giving more prompts.
Speaker Change: to say, okay this particular Drive try SSD so that I mean because
it's literally seeing is believing like Elon said, it's
Speaker Change: Thinking that same thing, I can.
Speaker Change: Great. Yeah.
Speaker Change: And the 25% comment was 25% increase in the penetration rate since we've seen the release of, of the 12 and B13 in North America. Great, thank you. Uh, Mark, did you have a follow-up question?
Yeah. Thanks. Travis. Tesla has historically, said it would use pricing as 1 tool to help Drive Auto vehicle growth. As long as free cash, flow estate positive, given the ability to monetize products like FSD, I'm curious how you're thinking about pricing from here, as potential tool to drive increased volumes, uh, given where you stand with FSD, as well. As the fact that the IRA purchase tax, credits are poised to go away in the US started in the fourth quarter. Uh, so so should we expect more meaningful price? Reductions? Given that monetization potential or do you envision price? Reductions be more limited, uh, compared to cost Downs given where free cash flow now stands. Thanks.
Speaker Change: Well we're we're in this like weird transition period um where we will lose a lot of incentives in the US except incentives actually in many other parts of the world. Um, but we will lose them in the US. Um, and uh, but we'll still look at at the relative early stages of autonomy.
Speaker Change: um,
On the other hand, autonomy is most advanced and most available from a regulatory standpoint in the US.
Speaker Change: So, uh,
Speaker Change: I mean, does that mean like we could have a few rough quarters.
Yeah, we probably could have a few rough quarters.
Speaker Change: Um,
Speaker Change: I'm not saying they will but we could, um,
Speaker Change: You know, Q4 q1.
Maybe Q2. But once you get to autonomy it's scale in the second half of half of next year. So certainly by the end of next year I think the
Speaker Change: I would be surprised if if Tesla's economics, um, are not very compelling.
Speaker Change: Great. The next question is going to come from Will from truist at will? Please feel free to unmute yourself when you're ready.
Great. Thanks so much for taking my questions. Um, uh, first, um, I'd like to ask for a little bit more detail about the lower cost model that you talked about. Having I think started uh, production in the first half but you said we'll ramp later at the last analyst day as I recall. Uh, you talked about
Speaker Change: Some aspects of this like 2 2/3 or 3/4 reduction, in silicon carbide and not using rare Earths in the um, in the motor and perhaps other cost Downs. You also have this unboxed architecture that I think you said would not be part of this sort of interim. Uh, approach, can you update us on what we should expect this thing to actually look like.
Speaker Change: Well, we won't get into the looks because look, the cat out of the back there. Dancing cats, I can tell you guys but I can, I can talk and sing and not. So that's the cool part.
Speaker Change: um,
Speaker Change: Uh, yeah. I mean, the the, the fundamentally the biggest obstacle remains that people just don't have. As long as people don't the, the, the desired by the car is very high. Just people don't have enough money in in the bank account to buy it. Literally, that is the issue. Not not a lack of Desire, but a lack of ability. So the more affordable where we can make the car, the better,
Speaker Change: um I think it's it's going to be it will be a very big deal when people can uh release their car to the fleet and have it earn money for them which I like I said, I'm
Speaker Change: I think I feel confident in saying that will happen next year in the US at least. And in the US where, where legally allowed
you know, appropriate disclaimers um,
Speaker Change: And that'll make the affordability dramatically. Greater
Just like, you know, you if you have an Airbnb and and you can rent out your your home when you're not there or rent out a guest room or guest house or something like that. Your the affordability of your home is much greater
Okay. Um trying another uh another topic then can, you know we we see all these wonderful developments at xai like grock and um you know obviously Tesla is trying to do quite a bit in AI. Elon how do you manage the division of efforts and recruiting and talent and capital? Um
Speaker Change: Between these 2 that that seem like there's a very high potential that they can affect compete.
Well well, they are doing different things here. Um,
Speaker Change: so,
Speaker Change: um,
Speaker Change: you know, the
XI is doing like, you know, terabyte scale.
Speaker Change: uh,
Speaker Change: models.
Speaker Change: so,
Speaker Change: once real world Ai and ones kind of, uh,
Speaker Change: I guess, uh a lot official super intelligence type thing.
Um,
Speaker Change: the, I mean, the really kind of the, the Genesis for XI was that there there were certain people who
Speaker Change: Some people would not join Tesla AI Engineers because they wanted to work on ASI. They would join Tesla. Um, and I was like, well maybe they'll join a new company. Um,
Speaker Change: And uh know I think the Tesla problem is extremely important, but not everyone agrees with me on that.
and so,
Speaker Change: Rather than have them join, you know, open AI or Google, or wherever some other company. It's like as well have
Speaker Change: Them create a company in that regard, right? Which is like which is like AI.
Um,
Speaker Change: so that's uh, you know, um,
Speaker Change: And and, you know, pick on make it make a decision. Do they want to work on?
Like super intelligence at data center or real world. AI can I they're both compelling problems, but
Speaker Change: some people want to work in 1, some want to work on the other, um,
Speaker Change: Great. And uh, unfortunately, uh, that is all the time we have today. Uh, thank you, everyone so much for your questions and we will see you next quarter.
Speaker Change: All right.