Q2 2026 Tesla Inc Earnings Call

July 22, 2026

Speaker #1: Good afternoon, everyone, and welcome to Tesla's second quarter 2026 Q&A webcast. My name is Travis Axelrod, Head of Investor Relations, and I'm joined today by Elon Musk.

Travis Axelrod: Good afternoon, everyone, and welcome to Tesla's Q2 2026 Q&A webcast. My name is Travis Axelrod, Head of Investor Relations, and I am joined today by Elon Musk, Vaibhav Taneja, and a number of other executives. Our Q2 results were announced at about 3:00 PM Central Time in the update deck we published at the same link as this webcast. During this call, we will discuss our business outlook and make forward-looking statements. These comments are based on our predictions and expectations as of today. Actual events or results could differ materially due to a number of risks and uncertainties, including those mentioned in our most recent filings with the SEC. 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. Before we jump into Q&A, Elon has some opening remarks.

Speaker #1: Vaibhav Taneja, and a number of other executives. Our Q2 results were announced at about 3:00 p.m. Central Time in the update deck we published at the same link as this webcast.

Speaker #1: 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.

Speaker #1: Actual events or results could differ materially due to a number of risks and uncertainties, including those mentioned in our most recent filings with the SEC.

Speaker #1: During the Q&A portion of today's call, please limit yourself to one question and one follow-up. Please use the raise hand button to join the Q&A.

Travis Axelrod: 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. Before we jump into Q&A, Elon has some opening remarks. Elon?

Speaker #1: Before we jump into Q&A, Elon has some opening remarks. Elon?

Travis Axelrod: Elon?

Speaker #2: Thank you. So, yeah, it's been a great quarter. We achieved record Q2 deliveries. Model Y, I believe, is now—I think it's the best-selling car of any kind in the world and is setting records across the board.

Elon Musk: Thank you. It's been a great quarter. We achieved record Q2 deliveries. Model Y is the best-selling car of any kind in the world and is setting records across the board. Its popularity is increasing tremendously. We're seeing in locations that have FSD approved, we're seeing a very high take rate of FSD. For a lot of people, they're actually buying Tesla Full Self-Driving with a car attached, as opposed to a car with FSD. They're coming into our stores, in the US, telling me they want the Full Self-Driving with whatever car it comes with, essentially. Clearly this is a significant demand driver. As we get approval for FSD in different countries, I think we'll see a similar uptick in demand. It's looking very good on that front.

Speaker #2: So its popularity is increasing tremendously. And we're seeing, in locations that have FSD approved, we're seeing a very high take rate of FSD. And in fact, I think for a lot of people, they're actually buying Tesla Full Self-Driving with a car attached, as opposed to a car with FSD.

Elon Musk: They're coming into our stores, in the US, telling me they want the Full Self-Driving with whatever car it comes with, essentially. Clearly this is a significant demand driver. As we get approval for FSD in different countries, I think we'll see a similar uptick in demand. It's looking very good on that front.

Speaker #2: They're coming into our stores in the US and they want the Full Self-Driving, with whatever car it comes with, essentially. So clearly, this is a significant demand driver, and as we get approval for FSD in different countries, I think we'll see a similar uptick in demand.

Speaker #2: So yeah, it's looking very good on that front. The energy business is also growing incredibly fast, and I think we'll be crucial for the scale-up of artificial intelligence data centers.

Elon Musk: The energy business is also growing incredibly fast and I think will be crucial for the scale-up of artificial intelligence data centers. We're investing a lot in growing the core business and really preparing for the future. This is a massive CapEx year. I'm confident that all the things that we're investing in will yield incredible returns. Really maybe the best CapEx returns that we've ever seen. The Tesla team has performed incredibly well. The Cybertruck has started production. We will soon start production with Optimus. We have started production with the Tesla Semi truck. We'll soon start production with Megapack 3. We've started production with the lithium refinery, the cathode refinery. We're scaling up battery cell production, and we're also preparing to do a massive solar panel, solar cells and panel production.

Speaker #2: We're investing a lot in growing the core business and really preparing for the future. So this is a massive capex year, but I'm confident that all the things we're investing in are what will yield incredible returns.

Speaker #2: Really, I think the best capex returns that we've ever seen. And the Tesla team has performed incredibly well, the side cab has started production, and we also have started production and are ramping in, well, we will soon start production with Optimus, we have started production with the Tesla semi-truck, we will soon start production with Mega Pack 3, we've started production with the lithium refinery, the cathode refinery, we also have, we're scaling up battery cell productions for battery cell production, and we're also preparing to do a massive solar panel like solar cells and panel production.

Elon Musk: The Tesla team has performed incredibly well. The Cybertruck has started production. We will soon start production with Optimus. We have started production with the Tesla Semi truck. We'll soon start production with Megapack 3. We've started production with the lithium refinery, the cathode refinery.

Elon Musk: We're scaling up battery cell production, and we're also preparing to do a massive solar panel, solar cells and panel production. This is going all the way from silicon refinement to producing the solar cell, and then deployment of solar, because there's going to be tremendous need for electricity in the future due to electrification of transport and AI, obviously. We're working on what we believe is the most ambitious build-out of advanced infrastructure and manufacturing capacity ever in history. It's big. With Robotaxi, our goals are very ambitious for Robotaxi, but we do need to be cautious about causing any accidents or causing any harm to anyone. Although there are, I think, 30,000 to 40,000 automotive deaths per year in the United States alone, most of those do not generate any press.

Speaker #2: Actually, this is going all the way from silicon refinement to producing the solar cell, and then deployment of solar, because there's going to be tremendous need for electricity in the future due to electrification of transport, and AI, obviously.

Elon Musk: This is going all the way from silicon refinement to producing the solar cell, and then deployment of solar, because there's going to be tremendous need for electricity in the future due to electrification of transport and AI, obviously. We're working on what we believe is the most ambitious build-out of advanced infrastructure and manufacturing capacity ever in history. It's big. With Robotaxi, our goals are very ambitious for Robotaxi, but we do need to be cautious about causing any accidents or causing any harm to anyone. Although there are, I think, 30,000 to 40,000 automotive deaths per year in the United States alone, most of those do not generate any press. You never really read about almost any of those. If we injure even one person, it'll be worldwide headline news, and regulators will immediately clamp down on our activities.

Speaker #2: So we're working on what we believe is the most ambitious build-out of advanced infrastructure manufacturing capacity ever in history. It's a big deal. So with Robotaxi, our goal is very ambitious for Robotaxi, but we do need to be cautious about causing any accidents or causing any harm to anyone, although there are, I think, 30,000 to 40,000 automotive deaths per year in the United States alone.

Speaker #2: Most of those do not generate any press, or, you know, you don't really read about almost any of those. But if we injure even one person, it will be worldwide headline news.

Elon Musk: You never really read about almost any of those. If we injure even one person, it'll be worldwide headline news, and regulators will immediately clamp down on our activities. We don't want to injure anyone. We're going as fast as humanly possible in scaling Robotaxi. While trying to ensure that we do not harm anyone at all, and ideally do not even run over a pet. That's really the constraint is we want to go as fast as possible with Robotaxi without harm to anyone. We're providing live updates for Robotaxi launch as we open up in the city. We immediately post that on X.

Speaker #2: And regulators will immediately clamp down on our activities. So—and we don't want to injure anyone. So we're going as fast as humanly possible in scaling robotaxi, but while trying to ensure that we do not harm anyone at all, and ideally do not even run over a pet.

Elon Musk: We don't want to injure anyone. We're going as fast as humanly possible in scaling Robotaxi. While trying to ensure that we do not harm anyone at all, and ideally do not even run over a pet. That's really the constraint is we want to go as fast as possible with Robotaxi without harm to anyone. We're providing live updates for Robotaxi launch as we open up in the city. We immediately post that on X. If you just follow the Tesla account on X, we'll keep you informed as we scale to new cities. We're opening up in a number of cities in Florida and in Texas, and obviously in the Bay Area. We'll continue to scale, I think, very rapidly. It looks like more than 10% a week in terms of miles driven.

Speaker #2: So that's really the constraint, is we're—we want to grow as fast as possible with Robotaxi, without harm to anyone. And we're providing live updates for Robotaxi launch. As we open up in the city, we immediately post that on X, so if you just follow the Tesla account on X, we'll keep you informed as we scale to new cities.

Elon Musk: If you just follow the Tesla account on X, we'll keep you informed as we scale to new cities. We're opening up in a number of cities in Florida and in Texas, and obviously in the Bay Area. We'll continue to scale, I think, very rapidly. It looks like more than 10% a week in terms of miles driven.

Speaker #2: We've opened up a number of cities in Florida and in Texas, and obviously in the Bay Area. So we'll continue to scale, I think, very, very rapidly, with what looks like more than 10% a week in terms of miles driven.

Speaker #2: So it's a very high compound growth rate. So let's see, Optimus—you know, as you've heard me say before, I think Optimus will be the biggest product ever, but it is a very complex problem to solve.

Elon Musk: It's a very high compound growth rate. Let's see, Optimus. As you've heard me say before, I think Optimus will be the biggest product ever. It is a very complex problem to solve. It's one of the hardest things to solve, to make an autonomous humanoid robot that can do tasks that if you simply ask it to do something or show it a video, it can do the task without any programming. No one's ever achieved this. There are many challenges in the electromechanical design of the robot to achieve sufficient dexterity and reliance, and also to be very reliable and have long wear and tear. Meaning it needs to be out in the field and not break down. Otherwise, you've got a 70-kilogram robot that just flopped over, and you've got to carry it out like a body. There's no wheels.

Speaker #2: It's one of the hardest things to solve—to make an autonomous humanoid robot that can do tasks that, if you simply ask it to do something, or show it a video, it can do the task without any programming.

Speaker #2: Like, no one's ever achieved this. And you've got there are many challenges in the electromechanical design of the robot, to achieve sufficient dexterity, and reliance, and also to be very reliable, and have a long wear and tear, like meaning it needs to be out in the field and not break down, otherwise you've got sort of a 70-kilogram robot that just flopped over and you've got to carry it like a carry it out like a buddy, you know, it's on our wheels.

Elon Musk: No one's ever achieved this. There are many challenges in the electromechanical design of the robot to achieve sufficient dexterity and reliance, and also to be very reliable and have long wear and tear. Meaning it needs to be out in the field and not break down. Otherwise, you've got a 70-kilogram robot that just flopped over, and you've got to carry it out like a body. There's no wheels.

Speaker #2: So, and we don't want Optimus to go haywire. So it's a lot of work to get the design right and to scale production.

Elon Musk: We don't want Optimus to go haywire. It's a lot of work to scale, to get the design right and to scale production. I really want to emphasize here that the production scaling challenge is very substantial. This is going to be the hardest product to scale manufacturing that we've ever made at Tesla, because everything on the robot is new. The difficulty of scaling the production ramp is proportionate to the newness of the parts in the robot. At least with electric cars, the non-electric powertrain portions of the cars had an existing supply chain. You could go to existing suppliers for wheels and side mirrors and windshield glass and that kind of thing, body panels. With Optimus, there is no supply chain. We've had to build up a supply chain in its entirety, or in-house the production.

Speaker #2: And I really want to emphasize here that the production scaling challenge is very substantial. This is going to be the hardest product to scale manufacturing that we've ever made at Tesla, because everything on the robot is new.

Speaker #2: And the difficulty of scaling the production ramp is proportionate to the newness of the parts in the robot. And, you know, at least with electric cars, the non-electric powertrain portions of the cars had an existing supply chain.

Speaker #2: So you could go to existing suppliers for wheels and side mirrors and windshield glass and that kind of thing, body panels. And with Optimus, there is no supply chain.

Elon Musk: You could go to existing suppliers for wheels and side mirrors and windshield glass and that kind of thing, body panels. With Optimus, there is no supply chain. We've had to build up a supply chain in its entirety, or in-house the production.

Speaker #2: So we've had to build up a supply chain in its entirety, or in-house the production, and we actually in-house a tremendous amount. The Optimus production line that we're building out in Fremont, in place of what used to be a Model S/X production, looks incredible.

Elon Musk: We actually in-house a tremendous amount. The Optimus production line that we're building out in Fremont in place of where used to be the Model S, X production, it looks incredible. It's quite stunning to see. I just want to make sure to calibrate people correctly. Optimus will follow the sort of normal S-curve of a manufacturing ramp. The initial portion of the S-curve will be quite flat and long because of the newness of the parts in the robot. You've probably seen lots of impressive demonstrations of robots on the internet. Those demonstrations you're seeing are pre-programmed or remote controlled. There is no humanoid robot that is actually able to do generalized tasks.

Speaker #2: It's quite stunning to see. So I just want to make sure to calibrate people correctly. Optimus will follow the sort of normal S-curve of manufacturing, of a manufacturing ramp, but the initial portion of the S-curve will be quite flat and long, because of the newness of the parts in the robot.

Speaker #2: So, you've probably seen lots of impressive demonstrations of robots on the internet, but those demonstrations you're seeing are pre-programmed or remote-controlled. So, there is no humanoid robot that is actually able to do generalized tasks. Optimus will be the first one that is capable of doing that.

Elon Musk: You've probably seen lots of impressive demonstrations of robots on the internet. Those demonstrations you're seeing are pre-programmed or remote controlled. There is no humanoid robot that is actually able to do generalized tasks.

Elon Musk: Optimus will be the first one that is capable of doing that, where it's not just a demo, it's genuinely useful in day-to-day life. An Optimus is designed to have full human dexterity. A hand that has the same level of dexterity, if not higher, than a human hand. The human hand is an incredible thing. The more you study the human hand, the more you realize how amazing hands are. It's more than just opposable thumbs. I mean, the nuances of how human hands work are amazing. The closer you look, the more amazed you are. Optimus will have that capability. It will have human and then superhuman dexterity. It's really going to be quite something. Let's see, Terafab. With Terafab, we expect to announce a location soon, and provide more details about our plans in that regard.

Speaker #2: Where it's not just a demo, it's genuinely useful in day-to-day life. Optimus is designed to have full human dexterity—a hand that has the same level of dexterity, if not higher, than a human hand.

Speaker #2: And a human hand is an incredible, incredible thing. The more you study the human hand, the more you realize how amazing hands are.

Speaker #2: It's more than just opposable thumbs. I mean, the nuances of how human hands work are amazing. The closer you look, the more amazed you are.

Elon Musk: I mean, the nuances of how human hands work are amazing. The closer you look, the more amazed you are. Optimus will have that capability. It will have human and then superhuman dexterity. It's really going to be quite something.

Speaker #2: And Optimus will have that capability—will have human and then superhuman dexterity—so it's really going to be quite something. Let's see, Terrafab—you know, the Terrafab—we expect to announce the location soon.

Elon Musk: Let's see, Terafab. With Terafab, we expect to announce a location soon, and provide more details about our plans in that regard. We'll leave that to the product launch announcement rather than try to squeeze it into an earnings call. I think this is a very big announcement and deserves to have its own day in the spotlight and not be squeezed into an earnings call. I do think Terafab is going to be an amazing initiative and a necessary one, and one without which we will be constrained in our ability to scale Optimus production because we simply won't have enough AI chips. It's crucial to solve that, and we'll have to solve memory, logic, and packaging in order to scale Optimus.

Speaker #2: And provide more details about our plans in that regard, which we'll leave that to the product sort of the launch announcement rather than try to squeeze it into an earnings call, because I think this is a this is a very big announcement and it deserves to have its own sort of day in the spotlight and not be sort of squeezed into an earnings call.

Elon Musk: We'll leave that to the product launch announcement rather than try to squeeze it into an earnings call. I think this is a very big announcement and deserves to have its own day in the spotlight and not be squeezed into an earnings call. I do think Terafab is going to be an amazing initiative and a necessary one, and one without which we will be constrained in our ability to scale Optimus production because we simply won't have enough AI chips. It's crucial to solve that, and we'll have to solve memory, logic, and packaging in order to scale Optimus. If anyone likes it, we'll leave that to its own announcement. We've placed equipment orders for our development fab in Austin.

Speaker #2: But I do think TerraFab is going to be an amazing initiative, and a necessary one, and one without which we will be constrained in our ability to scale Optimus production because we simply won't have enough AI chips. So it's crucial to solve that, and we'll have to solve memory, logic, and packaging in order to scale Optimus. So, anyway, like I said, we'll leave that to its own announcement.

Elon Musk: If anyone likes it, we'll leave that to its own announcement. We've placed equipment orders for our development fab in Austin. That development fab, I think, is pretty cool because it's intended to have lithography mask production, and then logic, memory, and packaging, and chip testing all under one roof. You can have a very fast iterative cycle, and try out new chip designs very quickly and see if they work. I don't think such a building exists anywhere on Earth. This is really going to be super helpful as we try some exciting, adventurous, high-risk, high-payoff bets on AI chips.

Speaker #2: We've placed equipment orders for our development fab in Austin, and that development fab, I think, is pretty cool because it's intended to have lithography mask production, as well as logic, memory, and packaging, and chip testing all under one roof.

Elon Musk: That development fab, I think, is pretty cool because it's intended to have lithography mask production, and then logic, memory, and packaging, and chip testing all under one roof. You can have a very fast iterative cycle, and try out new chip designs very quickly and see if they work. I don't think such a building exists anywhere on Earth. This is really going to be super helpful as we try some exciting, adventurous, high-risk, high-payoff bets on AI chips. The focus, like I said, on primarily Optimus. How do we make Optimus as useful as possible? We have Digital Optimus, which is basically driving a computer screen. I guess you could call it computer use or something like that, but driving a computer screen the same way you drive a car. For the car, it's pixels in or photons in, and controls out.

Speaker #2: So you can have a very fast, iterative cycle and try out new chip designs very quickly to see if they work. I don't think such a building exists anywhere on Earth.

Speaker #2: So this is really going to be super helpful as we try some exciting, high-risk, high-payoff bets on AI chips. It's focused, like I said, primarily on Optimus.

Elon Musk: The focus, like I said, on primarily Optimus. How do we make Optimus as useful as possible? We have Digital Optimus, which is basically driving a computer screen. I guess you could call it computer use or something like that, but driving a computer screen the same way you drive a car. For the car, it's pixels in or photons in, and controls out.

Speaker #2: Like, how do we make Optimus as useful as possible? Then we have, like, digital Optimus, which is basically driving a computer screen—I guess you could call it a computer user or something like that—but driving a computer screen in the same way that you drive a car.

Speaker #2: So for the car, it's sort of pixels in—or photons in—and controls out. The same thing is true for Optimus, digital Optimus. It's photons in, controls out.

Elon Musk: The same thing is true for Optimus and Digital Optimus. It's photons in, controls out. We feel confident we can adapt the same Tesla AI technology that we developed for self-driving cars to have a self-driving computer screen or a self-driving computer, essentially. A self-driving computer where the Tesla, the very low cost Tesla AI full computer can handle all of the sort of short-term tasks. They're doing real-time video control of the screen of the computer. It's not like screenshots type of thing, it's real-time video at high frame rate. Digital Optimus will be important obviously for physical Optimus because physical Optimus needs to be able to operate computers. It can't come up to a touch screen and not know what to do. It's got to have a generalized touch screen and computer use capability. That's looking promising.

Speaker #2: So we feel confident we can adapt the same Tesla AI technology that we developed for self-driving cars to have a self-driving computer screen, or self-driving computer, essentially.

Speaker #2: The self-driving computer—or the Tesla, the very low-cost Tesla AI4 computer—can handle all of the sort of short-term tasks, doing real-time video control of the screen of the computer.

Speaker #2: So it's not like a screenshot-type of thing. It's real-time video and high frame rate. And this is going to be important for digital Optimus, obviously, but also for physical Optimus, because physical Optimus needs to be able to operate computers.

Elon Musk: Digital Optimus will be important obviously for physical Optimus because physical Optimus needs to be able to operate computers. It can't come up to a touch screen and not know what to do. It's got to have a generalized touch screen and computer use capability. That's looking promising.

Speaker #2: It's like it can't come up to a touchscreen and not know what to do. It's got to have a generalized touchscreen and computer use capability.

Speaker #2: So that's looking promising. Again, this is in partnership with SpaceX. SpaceX's Grok, so the big model that is kind of like the manager of Digital Optimus and kind of tells Digital Optimus what to do, provides it with a series of tasks, and then Digital Optimus goes and does those tasks.

Elon Musk: This is in partnership with SpaceX's Grok. The big model that is kind of the manager of Digital Optimus and tells Digital Optimus what to do. It provides it with a series of tasks, and then Digital Optimus goes and does those tasks. We are also building out a Megapod design that has Tesla AI full computers with x86. It is a pairing an x86 computer with a Tesla AI full computer in a box. It has this Digital Optimus in a box, and in a Megapod, kind of like the Megapack packaging. Where we put just a large number of AI full plus x86 combos in a giant box, essentially. These boxes can be placed anywhere in the country or outside the country. This allows us to scale AI compute using disaggregated electricity production. We do.

Speaker #2: We're also building out a megapod design that has Tesla AI for computers with x86. It's pairing an x86 computer with the Tesla AI for computer in a box, and it's kind of just digital Optimus in a box.

Speaker #2: And in a megapod, you know, kind of like the Megapack packaging, and so where we put just a large number of AI4 plus x86 combos in a giant box, essentially.

Elon Musk: Where we put just a large number of AI full plus x86 combos in a giant box, essentially. These boxes can be placed anywhere in the country or outside the country. This allows us to scale AI compute using disaggregated electricity production. We do.

Speaker #2: And these boxes can be placed anywhere in the country or outside the country. This allows us to scale AI compute using disaggregated electricity production.

Speaker #2: So because there are lots of places all around the world, including at our Superchargers—I think we've got something like 7 gigawatts of power at our Superchargers, and growing.

Elon Musk: Because there is lots of places all around the world, including at our Superchargers. I think we have got something like 7 gigawatts of power at our Superchargers and growing. We can place Megapods at many of these Superchargers and have distributed power for AI. I think that could be quite a big deal. In conclusion, we are super excited about our autonomy and robotics roadmap. There is so much awesome stuff coming. It is like I said, hard to squeeze into an earnings call. We will have a lot of product announcements. This is going to be, I think, a great year for Tesla, I think one of our best years ever. Then I think next year will be even better. In conclusion, I want to thank the Tesla team for their excellent execution and all of our supporters for joining us on this journey. Thank you.

Speaker #2: And we can place Megapacks at many of these Superchargers and have distributed power for AI. So I think that could be quite a big deal.

Speaker #2: So, in conclusion, we're super excited about our autonomy and robotics roadmap. There's so much awesome stuff coming. It's, like I said, hard to squeeze into an earnings call.

Elon Musk: It is like I said, hard to squeeze into an earnings call. We will have a lot of product announcements. This is going to be, I think, a great year for Tesla, I think one of our best years ever. Then I think next year will be even better. In conclusion, I want to thank the Tesla team for their excellent execution and all of our supporters for joining us on this journey. Thank you.

Speaker #2: But we'll have a lot of product announcements. And this is going to be a great year for Tesla, I think—one of our best years ever.

Speaker #2: And then I think next year will be even better. So, in conclusion, I want to thank the Tesla team for their excellent execution, and all of our supporters for joining us in this earnings call.

Speaker #2: Thank you.

Speaker #1: Great. Thanks so much, Elon. And now Vaibhav has some opening remarks.

Travis Axelrod: Great. Thanks so much, Elon. Now Vaibhav has some opening remarks.

Speaker #3: Thanks, Travis. So, Q2 continued the trend that we saw at the end of Q1: a resurgence in demand for vehicles across the globe. We achieved record Q2 deliveries globally, with sequential growth across the Americas, APAC, and EMEA of 60%, 27%, and 12%, respectively.

Vaibhav Taneja: Thanks, Travis. Q2 continued the trend that we saw at the end of Q1, a resurgence in demand for our vehicles across the globe. We achieved record Q2 deliveries globally with sequential growth across the Americas, APAC, and EMEA of 60%, 27%, and 12% respectively. Additionally, Model Y set records in several key markets, including the Netherlands, Australia and New Zealand. The efforts of the Tesla team to create compelling products at a reasonable price with the capability of autonomous driving are coming to fruition. We exited Q2 with our largest order backlog since 2023. We are therefore focused on increasing production at all our factories to meet this growing demand. Production growth will be limited by our supply chain. This includes not just batteries, but also electronic components.

Speaker #3: Additionally, Model Y set records in several key markets, including the Netherlands, Australia, and New Zealand. The efforts of the Tesla team to create compelling products at a reasonable price, with the capability of autonomous driving, are coming to fruition.

Speaker #3: We exited Q2 with our largest order backlog since 2023. We are therefore focused on increasing production at all our factories to meet this growing demand.

Vaibhav Taneja: We are therefore focused on increasing production at all our factories to meet this growing demand. Production growth will be limited by our supply chain. This includes not just batteries, but also electronic components.

Speaker #3: Production growth will be limited by our supply chain. This includes not just batteries but also electronic components. We've been here before, and, like always, our Tesla team is working actively to unblock the obstacles ahead by securing strategic deals with suppliers.

Vaibhav Taneja: We've been here before, like always, our Tesla team is working actively to unblock the obstacles ahead by securing strategic deals with suppliers. Like Elon mentioned, one of the key factors for our vehicle demand has been FSD. Our sales data suggests one of the main reasons customers are coming and looking at the car is because of FSD. In Q2, we had, in North America, about 55% of our deliveries had FSD subscription at the time of delivery enabled. Overall, FSD attach rates continue to improve, reaching nearly 1.5 million paid customers globally, of which 55% is upfront purchases and the remaining 45% is subscriptions. We expect that the bulk of the growth in FSD monetization will come from subscriptions as we've removed the purchase option in most markets. Automotive margins, excluding regulatory credits, declined sequentially from 19.2% to 16.3%.

Speaker #3: Like Elon mentioned, one of the key factors for vehicle demand has been FSD, our sales data suggests. One of the main reasons customers come and look at the car is because of FSD.

Speaker #3: In Q2, we had in North America about 55% of our deliveries with FSD subscription enabled at the time of delivery. Overall, FSD attach rates continue to improve, reaching nearly 1.5 million paid customers globally, of which 55% are upfront purchases and the remaining 45% are subscriptions.

Speaker #3: We expect that the bulk of the growth in FSD monetization will come from subscriptions, as we've removed the purchase option in most markets. Automotive margins excluding regulatory credits declined sequentially from 19.2% to 16.3%. As a reminder, we had highlighted in Q1 that we had a $230 million benefit from warranty true-downs and some tariff relief, which did not repeat in Q2.

Vaibhav Taneja: Automotive margins, excluding regulatory credits, declined sequentially from 19.2% to 16.3%. As a reminder, we had highlighted in Q1 that we had a $230 million benefit from warranty true-downs and some tariff relief, which did not repeat in Q2. Controlling for the impact of those benefits from the prior quarter, our automotive gross margins, excluding credits, would have been approximately flat. This demonstrates the effective pricing and cost management done by the Tesla team as we continue to drive demand. Commodity price increases and interest rate changes all continue to add to our costs. Note that interest rate exemption costs are recognized upfront as revenue offset.

Vaibhav Taneja: As a reminder, we had highlighted in Q1 that we had a $230 million benefit from warranty true-downs and some tariff relief, which did not repeat in Q2. Controlling for the impact of those benefits from the prior quarter, our automotive gross margins, excluding credits, would have been approximately flat. This demonstrates the effective pricing and cost management done by the Tesla team as we continue to drive demand. Commodity price increases and interest rate changes all continue to add to our costs. Note that interest rate exemption costs are recognized upfront as revenue offset. As interest rates have risen this year, the cost of exemption has risen along with them, which had a negative impact on automotive margins. As we have previously noted, energy business is inherently lumpy. Deployments are tied to customer timelines and largely out of our control.

Speaker #3: Controlling for the impact of those benefits from the prior quarter, our automotive gross margins excluding credits would have been approximately flat. This demonstrates the effective pricing and cost management by the Tesla team as we continue to drive demand.

Speaker #3: Commodity price increases and interest rate changes all continue to add to our costs. Note that interest rate subvention costs are recognized upfront as a revenue offset.

Speaker #3: So as interest rates have risen this year, the cost of subvention has risen along with them, which has had a negative impact on automotive margins.

Vaibhav Taneja: As interest rates have risen this year, the cost of exemption has risen along with them, which had a negative impact on automotive margins. As we have previously noted, energy business is inherently lumpy. Deployments are tied to customer timelines and largely out of our control.

Speaker #3: As we have previously noted, energy businesses’ inherently lumpy deployments are tied to customer timelines and are largely out of our control. In Q2, we deployed 13.5 gigawatt-hours of energy storage, a 53% sequential increase and the second largest quarter for the energy business.

Vaibhav Taneja: In Q2, we deployed 13.5 GWh of energy storage, a 53% sequential increase, and the second-largest quarter for energy business. Despite this growth, energy gross margins declined from 39.5% to 20.4%. This margin decline was a result of several dynamics. First, there was a warranty true-up in the quarter of about $240 million related to certain vendor cell issues for our legacy deployments. Also, the tariff benefits we recognized in Q1 of more than $200 million did not repeat. Lastly, we had previously guided that ASPs for industrial storage is coming down amidst growing competition. Long-term, we believe the energy business should normalize at a gross margin rate in the mid to low 20% range.

Speaker #3: Despite this growth, energy gross margins declined from 39.5% to 20.4%. This margin decline was a result of several dynamics. First, there was a warranty true-up in the quarter of about $240 million related to certain vendor cell issues for our legacy deployments.

Speaker #3: Also, the tariff benefits we recognized in Q1 of more than $200 million did not repeat. And lastly, we had previously guided that ASPs for industrial storage are coming down amidst growing competition.

Speaker #3: Long term, we believe the energy business should normalize at a gross margin rate in the mid- to low-20% range. Our order backlog for this business is robust, and we are doing our best to build based on both existing demand and the future demand we expect from data center growth and overall electrification of the economy.

Vaibhav Taneja: Long-term, we believe the energy business should normalize at a gross margin rate in the mid to low 20% range. Our order backlog of this business is robust, we are doing our best to build based on both existing demand and future demand we expect from data center growth and overall electrification of the economy. Service and other margins improved sequentially from 9.2% to 14.1%, an all-time high. This was mainly driven by an uptick in volume and better cost management of our vehicle fleet that supports businesses such as used car, supercharging, service centers, and insurance. While marginal today, also included in this business are deliberate investments we are making in infrastructure that will help scale Robotaxi in the future. We continue to grow the Tesla Robotaxi fleet, have expanded to a total of seven markets in the US.

Vaibhav Taneja: Our order backlog of this business is robust, we are doing our best to build based on both existing demand and future demand we expect from data center growth and overall electrification of the economy. Service and other margins improved sequentially from 9.2% to 14.1%, an all-time high. This was mainly driven by an uptick in volume and better cost management of our vehicle fleet that supports businesses such as used car, supercharging, service centers, and insurance. While marginal today, also included in this business are deliberate investments we are making in infrastructure that will help scale Robotaxi in the future. We continue to grow the Tesla Robotaxi fleet, have expanded to a total of seven markets in the US. We expect the ramp of the fleet to accelerate throughout the year, along with expansion into new US markets. As previously guided, operating expenses increased sequentially.

Speaker #3: Service and other margins improved sequentially from 9.2% to 14.1%, an all-time high. This was mainly driven by an uptick in volume and better cost management of our vehicle fleet that supports businesses such as used car, Supercharging, service centers, and insurance.

Speaker #3: While marginal today, also included in this business are deliberate investments we are making in infrastructure that will help scale robotaxi in the future. We continue to grow the Tesla robotaxi fleet and have expanded to a total of seven markets in the U.S.

Speaker #3: We expect the ramp of the fleet to accelerate throughout the year, along with the expansion into new U.S. markets. As previously guided, operating expenses increased sequentially.

Vaibhav Taneja: We expect the ramp of the fleet to accelerate throughout the year, along with expansion into new US markets. As previously guided, operating expenses increased sequentially. The increase came primarily from significant research and development-related activities, including pre-production ramp costs for new products like the Semi Truck, Optimus, Cybercab, and other AI initiatives, as well as the appreciation for an additional compute that we brought online. Additionally, we had charges related to litigation expenses in the quarter. Note that we are in a big investment cycle and expect our operating expenses, largely driven by R&D, to continue to grow in 2026 and beyond. Net income was positively impacted by a mark-to-market gain of $1 billion on our SpaceX holdings, which was offset by losses on FX of approximately $300 million and on Bitcoin of about $100 million.

Speaker #3: The increase came primarily from significant research and development-related activities, including pre-production ramp costs for new products like the Semi truck, Optimus, Cybercab, and other AI initiatives.

Vaibhav Taneja: The increase came primarily from significant research and development-related activities, including pre-production ramp costs for new products like the Semi Truck, Optimus, Cybercab, and other AI initiatives, as well as the appreciation for an additional compute that we brought online. Additionally, we had charges related to litigation expenses in the quarter. Note that we are in a big investment cycle and expect our operating expenses, largely driven by R&D, to continue to grow in 2026 and beyond. Net income was positively impacted by a mark-to-market gain of $1 billion on our SpaceX holdings, which was offset by losses on FX of approximately $300 million and on Bitcoin of about $100 million. As previously guided, our free cash flow ended up being negative for the quarter.

Speaker #3: As well as depreciation for additional compute that we brought online. Additionally, we had charges related to litigation expenses in the quarter. Note that we are in a big investment cycle and expect our operating expenses, largely driven by R&D, to continue to grow in 2026 and beyond.

Speaker #3: Net income was positively impacted by a mark-to-market gain of $1 billion on our SpaceX holdings, which was offset by losses on FX of approximately $300 million and on Bitcoin of about $100 million.

Speaker #3: As previously guided, our free cash flow ended up being negative for the quarter. Most of the reason for it going negative is because CapEx more than doubled sequentially.

Vaibhav Taneja: As previously guided, our free cash flow ended up being negative for the quarter. Most of the reason for it going negative is because CapEx more than doubled sequentially, and we expect it to increase further in H2 2026. We continue to expect that CapEx for this year will be more than $25 billion. CapEx will grow for the next two or three years as we expand our Robotaxi fleet, expand our production capacity for Optimus, make investments for semiconductor fab, install solar manufacturing capacity and AI compute infrastructure, in addition to all the other expenses we'll do for other manufacturing for automotive. In addition to using our cash for such investments, we are being opportunistic in securing certain debt facilities that will give us the capacity to borrow up to $30 billion to help accelerate such investments.

Vaibhav Taneja: Most of the reason for it going negative is because CapEx more than doubled sequentially, and we expect it to increase further in H2 2026. We continue to expect that CapEx for this year will be more than $25 billion. CapEx will grow for the next two or three years as we expand our Robotaxi fleet, expand our production capacity for Optimus, make investments for semiconductor fab, install solar manufacturing capacity and AI compute infrastructure, in addition to all the other expenses we'll do for other manufacturing for automotive. In addition to using our cash for such investments, we are being opportunistic in securing certain debt facilities that will give us the capacity to borrow up to $30 billion to help accelerate such investments.

Speaker #3: And we expect it to increase further in the second half of 2026. We continue to expect that CapEx for this year will be more than $25 billion. CapEx will grow for the next two or three years as we expand our robotaxi fleet, expand our production capacity for Optimus, make investments for semiconductor fab, install solar manufacturing capacity, and AI compute infrastructure.

Speaker #3: In addition to all the other expenses we'll have for other automotive manufacturing, and in addition to using our cash for such investments, we are being opportunistic in securing certain debt facilities that will give us the capacity to borrow up to $30 billion to help accelerate such investments.

Speaker #3: We believe this is the right strategy to position the company for the next era, and we'll always make such investments in a very capital-efficient manner.

Vaibhav Taneja: We believe this is the right strategy to position the company for the next era. We'll always make such investments in a very capital-efficient manner. The path to amazing abundance is ever challenging and requires making bold bets. Our progress will be non-linear. The future is going to be great. We are ready to rise to the occasion. I would like to end by thanking the Tesla team, our customers, investors, and suppliers for their confidence in us on this journey.

Speaker #3: The path to amazing abundance is ever challenging and requires making bold bets. Our progress will be non-linear. The future is going to be great.

Vaibhav Taneja: The future is going to be great. We are ready to rise to the occasion. I would like to end by thanking the Tesla team, our customers, investors, and suppliers for their confidence in us on this journey.

Speaker #3: And we are ready to rise to the occasion. I would like to end by thanking the Tesla team, our customers, investors, and suppliers for their confidence in us on this journey.

Speaker #1: Thanks so much, Vaibhav. As everyone on the call may have noticed, we've covered several of the Say.com questions already in opening remarks, including Optimus production, Terrafab, and Digital Optimus.

Travis Axelrod: Thanks so much, Vaibhav. As everyone on the call may have noticed, we've covered several of the Say.com questions already in opening remarks, including Optimus production, Terafab, and Digital Optimus. Ashok is joining us today, our VP of AI. He's going to cover questions related to Robotaxi. Ashok?

Speaker #1: Ashok is joining us today, our VP of AI, and he's going to cover questions related to Robotaxi. Ashok?

Speaker #2: Thank you, Travis. Many of the questions on Say.com relate to robotaxi deployment and scaling, so we thought we'd provide a comprehensive view of where we are now and where we are going in the future.

Ashok Elluswamy: Thank you, Travis. Many of the questions on say.com relate to Robotaxi deployment and scaling, so we thought we'd provide a comprehensive view of where we are now and where we are going in the future. First of all, I'd like to state that the Robotaxi program has been operating extremely well. Especially in terms of safety, the program has had an impeccable safety record. We have driven more than 380,000 miles of unsupervised Robotaxi, now across six cities in two different states. We have had zero notable incidents. Any reports have been of other actors impacting us when we were stationary. Again, I like to emphasize how safe the operation has been so far. Zero notable incidents over 380,000 miles. Historically, the so-called experts have always claimed that you need LiDARs, radars, HD maps, and the entire kitchen sink to drive safely.

Speaker #2: First of all, I'd like to state that the robotaxi program has been operating extremely well. Especially in terms of safety, the program has had an impeccable safety record.

Speaker #2: We have driven more than 380,000 robotaxis now across six cities in two different states. We have had zero notable incidents. Any reports have been of other actors impacting us when we were stationary.

Ashok Elluswamy: Any reports have been of other actors impacting us when we were stationary. Again, I like to emphasize how safe the operation has been so far. Zero notable incidents over 380,000 miles. Historically, the so-called experts have always claimed that you need LiDARs, radars, HD maps, and the entire kitchen sink to drive safely.

Speaker #2: Again, I'd like to emphasize how safe the operation has been so far. Zero notable incidents over 380,000 miles. Historically, the so-called experts have always claimed that you need LiDARs, radars, HD maps, and the entire kitchen sink to drive safely.

Speaker #2: Here we show that such is not true. You can have safe, comfortable, and affordable autonomy with just cameras. This record should be a huge validation of Tesla's entire AI approach.

Ashok Elluswamy: Here we show that such is not true. You can have safe, comfortable, and affordable autonomy with just cameras. This record should be a huge validation of Tesla's entire AI approach. Second, I'd like to discuss scaling. We started the Robotaxi program roughly a year ago in Austin. We had safety monitors in the passenger seats of the cars back then. Around the end of last year, we had the first fully unsupervised Robotaxis in Austin. Since the beginning of this year, we have grown at double-digit growth rates to the number of unsupervised miles that the fleet drives every week. I repeat, we have grown at such a high compounding rate on a week-over-week basis over the last several months. Not only that, we expect to continue growing at such a large rate through the rest of this year.

Speaker #2: Second, I'd like to discuss scaling. We started the robotaxi program roughly a year ago in Austin. We had safety monitors in the passenger seats of the cars back then.

Ashok Elluswamy: We had safety monitors in the passenger seats of the cars back then. Around the end of last year, we had the first fully unsupervised Robotaxis in Austin. Since the beginning of this year, we have grown at double-digit growth rates to the number of unsupervised miles that the fleet drives every week. I repeat, we have grown at such a high compounding rate on a week-over-week basis over the last several months. Not only that, we expect to continue growing at such a large rate through the rest of this year.

Speaker #2: Around the end of last year, we had the first fully unsupervised robotaxis in Austin. Since the beginning of this year, we have grown at double-digit growth rates in the number of unsupervised miles that the fleet drives every week.

Speaker #2: I repeat, we have grown at such a high compounding rate on a week-over-week basis over the last several months. Not only that, we expect to continue growing at such a large rate through the rest of this year.

Speaker #2: The other thing to note is that, for expanding to new cities, it has been relatively less effort on our front. We expect that the time to launch in a new city will continue to trend toward zero.

Ashok Elluswamy: The other thing to note is that for expanding to new cities, it has been relatively less effort on our front. We expect that the time to launch to a new city will continue to trend towards zero, towards an end where we operate in entire states as a whole instead of going by city by city. Such growth was only possible because we have a world-class engineering team on the frontier AI development here at Tesla. The currently operating Robotaxi fleet is already running early versions of the V15 FSD software that we had referred to in the past. For V15, we have planned roughly about seven major improvement tracks, and they're all happening in parallel. The early V15 builds that are running on Robotaxi have already 40% of those tracks merged together, and that's what's running in the fleet right now.

Speaker #2: Towards an end where we operate in entire states as a whole, instead of going city by city. Such growth was only possible because we have a world-class engineering team at the frontier of AI development here at Tesla.

Speaker #2: The currently operating robotaxi fleet is already running early versions of the V15 FSD software that we had referred to in the past.

Speaker #2: For V15, we had planned roughly seven major improvement tracks, and they're all happening in parallel. The early V15 builds that are running on Robotaxi have already 40% of those tracks merged together, and that's what's running in the fleet right now.

Speaker #2: As we continue to complete our work on V15, we will see that the car is going to be ridiculously safe and capable. We're already seeing internal signs that all of these bets that we have made for technology improvements are all continuing to are all starting to work and we expect that the payoff will be huge and that's what is going to help us sustain the same growth rate through the rest of this year and so on.

Ashok Elluswamy: As we continue to complete our work on V15, we will see that the car is going to be ridiculously safe and capable. We are already seeing internal signs that all of these bets that we have made for technology improvements are all starting to work, and we expect that the payoff will be huge, and that's what is going to help us sustain the same growth rate through the rest of this year and so on. Finally, regarding the Cybercab, first of all, it's a phenomenal product. Anyone who rides in it instantly falls in love with the experience. We have aligned our manufacturing targets to roughly match the projected growth rate of the unsupervised miles. The same V15 models that power the Model Y and other platforms will also work on Cybercabs.

Speaker #2: Finally, regarding the Cybercab, first of all, it's a phenomenal product. Anyone who rides in it instantly falls in love with the experience. We have aligned our manufacturing targets to roughly match the projected growth rate of unsupervised miles.

Speaker #2: The same V15 models that power Model Y and other platforms will also work on Cybercabs. In conclusion, Robotaxi growth so far has been literally exponential, while keeping an impeccable safety record.

Ashok Elluswamy: In conclusion, Robotaxi growth so far has been literally exponential while keeping an impeccable safety record. Our technology bets are paying off, helping us sustain the exponential growth for the foreseeable future, and the Cybercab is going to be awesome.

Speaker #2: Our technology bets are paying off, helping us sustain the exponential growth for the foreseeable future, and the Cybercab is going to be awesome.

Speaker #1: That's great. Thanks so much, Ashok. And there was one remaining question on data collection for Optimus training. Would you mind covering that as well?

Travis Axelrod: That's great. Thanks so much, Ashok. There was one remaining question on data collection for Optimus training. Would you mind covering that as well?

Speaker #2: Yes, definitely. Regarding Optimus, especially Gen 3, Optimus has been designed not just to match the appearance of human beings, but also the functionality and dexterity of humans.

Ashok Elluswamy: Yeah, definitely. Regarding Optimus, especially Gen-3, Optimus has been designed to not just match the appearance of human beings, but also the functionality and dexterity of humans. One of the main reasons for this approach is that having the human form factor and function allows us to learn from humans on how to perform a wide variety of tasks. This opens up the entire world to provide data for training Optimus. Just like FSD, we have access to a broad fleet of humans giving us data from all of the workers at our factory. Optimus can learn quite a bit from observing them perform their tasks at the factories. We also have a dedicated data collection team who can provide relatively small amount, but of very high-quality demonstrations to do the post-training of these models.

Speaker #2: One of the main reasons for this approach is that having the human form factor and function allows us to learn from humans on how to perform a wide variety of tasks.

Speaker #2: This opens up the entire world to provide data for training Optimus. Just like FSD, we have access to a broad fleet of humans, giving us data from all of the workers at our factory.

Speaker #2: Optimus can learn quite a bit from observing them perform their tasks at the factories. We also have a dedicated data collection team who can provide a relatively small amount, but of very high quality, demonstrations to do the post-training of these models.

Ashok Elluswamy: We also have a dedicated data collection team who can provide relatively small amount, but of very high-quality demonstrations to do the post-training of these models. This is all on top of any training we can do off of the entire internet of data that shows demonstrations of people doing various tasks, both in industrial settings and home settings. The second flywheel is when we have a large number of Optimus robots practicing their tasks in what we call the Optimus Academy. The data from the bots experiencing the tasks themselves will be invaluable and help us close any minor form factor gaps that may exist between the bot and the humans. This is also when the reinforcement learning loop kicks in, where the bot initially attempts some tasks, fails sometimes, learns from both the successes and failures of those tasks, and eventually learns to master those tasks at perhaps a superhuman level.

Speaker #2: This is all on top of any training we can do off of the entire internet of data that shows demonstrations of people doing various tasks, both in industrial settings and home settings.

Ashok Elluswamy: This is all on top of any training we can do off of the entire internet of data that shows demonstrations of people doing various tasks, both in industrial settings and home settings. The second flywheel is when we have a large number of Optimus robots practicing their tasks in what we call the Optimus Academy. The data from the bots experiencing the tasks themselves will be invaluable and help us close any minor form factor gaps that may exist between the bot and the humans. This is also when the reinforcement learning loop kicks in, where the bot initially attempts some tasks, fails sometimes, learns from both the successes and failures of those tasks, and eventually learns to master those tasks at perhaps a superhuman level. Our AI strategy for Optimus is aligned the same. It's the same end-to-end strategy that drives FSD, pixels in, controls out.

Speaker #2: The second flywheel is when we have a large number of Optimus robots practicing their tasks in what we call the Optimus Academy. The data from the bots experiencing the tasks themselves will be invaluable and help us close any minor form factor gaps that may exist between the bot and the humans.

Speaker #2: This is also when the reinforcement learning loop kicks in, where the bot initially attempts some task, fails sometimes, learns from both the successes and failures of those tasks, and eventually learns to master those tasks—perhaps even at a superhuman level.

Speaker #2: Our AI strategy for Optimus is aligned with the same end-to-end strategy that drives FSD—pixels in, controls out. And just like FSD, we expect it to work broadly.

Ashok Elluswamy: Our AI strategy for Optimus is aligned the same. It's the same end-to-end strategy that drives FSD, pixels in, controls out. Just like FSD, we expect it to work broadly. In FSD, you can get in the car, type in an address, and then hit start, and it just handles all of driving from park to park. The same thing is going to be true for Optimus as well.

Ashok Elluswamy: Just like FSD, we expect it to work broadly. In FSD, you can get in the car, type in an address, and then hit start, and it just handles all of driving from park to park. The same thing is going to be true for Optimus as well. You're going to just ask it to do anything, and then it should just perform the entire task on its own without you having to do anything along the way. It's the same team that produced the FSD, the V12, 13, 14, and now V15 software that now works on Optimus as well. Hence, I'm very confident that Optimus will be an extremely capable robot.

Speaker #2: In FSD, you know, you can get in the car, type in an address, and then hit start, and it handles all of driving from park to park.

Speaker #2: And the same thing is going to be true for Optimus as well. You're going to just ask it to do anything, and then it'll just perform the entire task on its own without you having to do anything along the way.

Ashok Elluswamy: You're going to just ask it to do anything, and then it should just perform the entire task on its own without you having to do anything along the way. It's the same team that produced the FSD, the V12, 13, 14, and now V15 software that now works on Optimus as well. Hence, I'm very confident that Optimus will be an extremely capable robot.

Speaker #2: And it's the same team that produced FSD—you know, the V12, V13, V14, and now V15 software—that now works on Optimus as well.

Speaker #2: Hence, I'm very confident that Optimus will be an extremely capable robot.

Speaker #1: Great. Thank you so much, Ashok. That covers the Say.com questions. Now, we will move over to analyst questions. The first question comes from Tom from RBC.

Travis Axelrod: Great. Thank you so much, Ashok. That covers the say.com questions. Now we will move over to analyst questions. The first question comes from Tom from RBC. Tom, please feel free to unmute yourself when you're ready. Tom, you're still on mute, so please unmute yourself and go ahead and ask your question. All right. We're not getting any audio from Tom at the moment, so we will try to move on to Andrew, and we'll add Tom back to the queue to come in next. Andrew, as soon as you can, please unmute yourself and ask your question.

Speaker #1: Tom, please feel free to unmute yourself when you're ready. Tom, you're still on mute, so please unmute yourself and go ahead and ask your question.

Speaker #1: All right. We're not getting any audio from Tom at the moment, so we will try to move on to Andrew, and we'll add Tom back to the queue to come in next.

Speaker #1: So, Andrew, as soon as you can, please unmute yourself and ask your question. Yes, we can.

[Analyst] (Morgan Stanley): Hey, can you hear me?

[Analyst]: Hey, can you hear me?

Travis Axelrod: Yes, we can.

Speaker #3: Awesome. Thanks so much for taking the question. So maybe just to start out on Optimus—Elon, you mentioned that, you know, there's really no supply chain today for Optimus.

[Analyst] (Morgan Stanley): Awesome. Thanks so much for taking the question. Maybe just to start out on Optimus. Elon, you mentioned that there's really no supply chain today for Optimus. You've had to mostly in-source a lot of that yourself. I'm just curious, as you've gone through this exercise, are you seeing any suppliers willing to invest alongside you to set up domestic manufacturing to potentially help you scale more quickly in the US? Asking that in the context of, obviously, you want to control your own destiny to some extent and ramp as quickly as possible, but from an investment cycle standpoint, potentially more capital efficient to have some partners help you along the way. I'm just curious how you're thinking about that and some of the dialogue you've had with potentially some external suppliers.

[Analyst]: Awesome. Thanks so much for taking the question. Maybe just to start out on Optimus. Elon, you mentioned that there's really no supply chain today for Optimus. You've had to mostly in-source a lot of that yourself. I'm just curious, as you've gone through this exercise, are you seeing any suppliers willing to invest alongside you to set up domestic manufacturing to potentially help you scale more quickly in the US? Asking that in the context of, obviously, you want to control your own destiny to some extent and ramp as quickly as possible, but from an investment cycle standpoint, potentially more capital efficient to have some partners help you along the way. I'm just curious how you're thinking about that and some of the dialogue you've had with potentially some external suppliers.

Speaker #3: You've had to mostly insource a lot of that yourself. I'm just curious, as you've gone through this exercise, are you seeing any suppliers willing to, you know, invest alongside you to set up domestic manufacturing to potentially help you scale more quickly in the U.S.?

Speaker #3: You know, asking that in the context of, obviously, you want to control your own destiny to some extent and ramp as quickly as possible, but from an investment cycle standpoint, it may be potentially more capital-efficient to have some partners help you along the way.

Speaker #3: So, I'm just curious how you're thinking about that, and some of the dialogue you've had with potentially some external suppliers.

Speaker #1: Elon, you may be on mute right now. We can't hear you.

Travis Axelrod: Elon, you may be on mute right now. We can't hear you.

Speaker #4: Sorry, yeah. Our suppliers have been have been great and they've made they have made and are making tremendous investments. In support of Optimus and Robotaxi and whatnot.

Elon Musk: Sorry. Our suppliers have been great, and they have made and are making tremendous investments in support of Optimus and Robotaxi and whatnot. Samsung and TSMC in particular are building fast, TSMC in Arizona and Samsung in Texas, and putting in tens of billions of dollars for suitable AI compute for Optimus and Robotaxi. Panasonic has also invested many billions in increasing battery cell production. Pardon me. I'm a little under the weather here. I'm a bit ill, so if I sound a little off, I'm a little bit ill today. Our partners have been great, and I'd like to thank them for their support and their investment and their hard work.

Speaker #4: You know, Samsung and TSMC in particular are building fabs—TSMC in Arizona and Samsung in Texas—and putting in tens of billions of dollars for physical AI compute, for Optimus and Robotaxi.

Speaker #4: Panasonic has also invested many billions in increasing battery cell production. I'm a little under the weather here, a bit ill, so I sound a little off. I'm kind of struggling with some—I'm a little bit ill today.

Elon Musk: Pardon me. I'm a little under the weather here. I'm a bit ill, so if I sound a little off, I'm a little bit ill today. Our partners have been great, and I'd like to thank them for their support and their investment and their hard work.

Speaker #4: So, yeah, our partners have been great, and I'd like to thank them for their support, their investment, and their hard work.

Speaker #3: Great, thanks for that. And maybe just as a...

[Analyst] (Morgan Stanley): Great. Thanks for that. Maybe just as a follow-up-

[Analyst]: Great. Thanks for that. Maybe just as a follow-up-

Speaker #1: So sorry, Andrew. We're going to have Karen hop in here for additional color, briefly.

Travis Axelrod: Oh, sorry, Andrew. We're going to have Karn hop in here for additional color briefly.

Speaker #5: Yeah, just to add to Elon's point, you know, the Samsung fab is going to be pretty significantly dedicated to future projects. That's a massive investment, multi-billion dollar.

Karn Budhiraj: Yeah. Just to add to Elon's point, the Samsung fab that's going to be pretty significantly dedicated to future projects, that's a massive investment, multi-billion dollar. We're seeing the same level of investment going to memory and also new specific-metal injection molded parts, flexible printed circuits, and all sorts of nonlinear technologies that are more based for the robot as opposed to the traditional vehicle supply chain we've had. In certain cases where we don't find a great partner, we've never hesitated from insourcing it, and we have a very capable manufacturing engineering team and a design team that helps us scale those things.

Speaker #5: We're seeing the same level of investment going to memory, and also new specific metal injection molded parts, flexible printed circuits, and all sorts of, not new technologies, that are, you know, more based for the robot as opposed to the traditional vehicle supply chain we've had.

Karn Budhiraj: metal injection molded parts, flexible printed circuits, and all sorts of nonlinear technologies that are more based for the robot as opposed to the traditional vehicle supply chain we've had. In certain cases where we don't find a great partner, we've never hesitated from insourcing it, and we have a very capable manufacturing engineering team and a design team that helps us scale those things.

Speaker #5: And in certain cases where we don't find a great partner, we've never hesitated to insource it. We have a very capable manufacturing engineering team and a design team that help us scale those things.

Speaker #4: Yeah. And actually, I'd also like to thank Micron for giving us memory allocation. They've had to make some very tough decisions on memory allocation.

Elon Musk: Yeah. I'd also like to thank Micron for giving us the memory allocation. They've got to make some very tough decisions on memory allocation, and we really appreciate Micron making room for Tesla in the years to come and giving us actually a very significant allocation on reasonable terms given the pretty insane pricing of memory these days.

Speaker #4: And we really appreciate Micron making room for Tesla in the years to come and giving us actually a very significant allocation on reasonable terms, given the pretty insane pricing of memory these days.

Speaker #3: Great, we really appreciate that color. And maybe just my follow-up on Robotaxis—you guys gave a lot of great information in your prepared remarks.

[Analyst] (Morgan Stanley): Great. Really appreciate that color. Maybe just my follow-up on Robotaxis. You guys gave a lot of great information in your prepared remarks, there seems to be some evolving regulations at the state level, potentially around sensor requirements. I'm just curious, as you think about your own rollout, what do you want to see or what do you need to see from regulators to make sure that, obviously some regulation might be good, you don't want it to be over-regulated. What are you expecting to see? What do you want to see to make sure that this is done in a proper way?

[Analyst]: Great. Really appreciate that color. Maybe just my follow-up on Robotaxis. You guys gave a lot of great information in your prepared remarks, there seems to be some evolving regulations at the state level, potentially around sensor requirements. I'm just curious, as you think about your own rollout, what do you want to see or what do you need to see from regulators to make sure that, obviously some regulation might be good, you don't want it to be over-regulated. What are you expecting to see? What do you want to see to make sure that this is done in a proper way?

Speaker #3: But, you know, there seem to be some evolving regulations at the state level, potentially around sensor requirements. So I'm just curious, as you think about your own rollout, what do you want to see or what do you need to see from regulators to make sure that, you know, obviously some regulation might be good, but you don't want it to be over-regulated.

Speaker #3: So, what are you expecting to see? What do you want to see to make sure that this is, you know, done in a proper way?

Speaker #1: And we've got Lars on the line. Lars, if you wouldn't mind covering this one, if you can.

Travis Axelrod: We've got Lars on the line. Lars, if you wouldn't mind covering this one, if you can.

Speaker #6: Yeah, sure, Travis. I mean, I think, you know, when we talk about regulation, particularly in the US, we've made a lot of headway—you know, just good initiatives from the federal government in terms of FMVSS rules.

Lars Moravy: Yeah, sure, Travis. I think, when we talk about regulation, particularly in the US, we've made a lot of headway. Just good initiatives from the federal government in terms of FMVSS rules, moving towards acceptance and adoption of purely built AVs, and I really appreciate the support from NHTSA on that. When it comes to a state-to-state level, obviously the stuff in New Jersey is a little bit disheartening. I think ultimately, as Ashok said in his opening remarks, we really focus on the performance of the vehicle, and ultimately, that's what's going to drive regulators and the public to adopt it. I think the best regulations are those that provide companies and innovators with a goal or a task and allow us to figure out the solution. When we see regulations that provide a solution before identifying the problem, we really don't appreciate those.

Speaker #6: Moving towards, you know, acceptance and adoption of purely built AVs, and I really appreciate the support from NHTSA on that. When it comes to, like, a state-to-state level, obviously the stuff in New Jersey, you know, is a little bit disheartening.

Speaker #6: I think ultimately, as was said in the opening remarks, we really focus on the performance of the vehicle, and ultimately that's what's going to drive regulators and the public to adopt it.

Speaker #6: You know, I think the best regulations are those that provide companies and innovators with a goal or a task and allow us to figure out the solution.

Speaker #6: And when we see regulations that provide a solution before identifying the problem, we really don't, you know, appreciate those. But as Tesla always has and will continue to do, we'll let our performance speak for itself, and I think the show played that out really clearly. That will be the foundation of our expansion moving forward.

Lars Moravy: When we see regulations that provide a solution before identifying the problem, we really don't appreciate those. As Tesla always has and will continue to do, we'll let our performance speak for itself. I think Ashok played that out really clearly, and that'll be the foundation of our expansion moving forward.

Lars Moravy: As Tesla always has and will continue to do, we'll let our performance speak for itself. I think Ashok played that out really clearly, and that'll be the foundation of our expansion moving forward.

Speaker #3: Great. Thanks for the questions.

[Analyst] (Morgan Stanley): Great. Thanks for the questions.

[Analyst]: Great. Thanks for the questions.

Speaker #1: Thanks so much. We're going to try Tom again. From RBC—Tom, can you unmute and try to speak, please? Unfortunately, Tom, we see you unmuted, but we're not hearing you.

Travis Axelrod: Thanks so much. We're going to try Tom again from RBC. Tom, can you unmute and try to speak, please? Unfortunately, Tom, we see you unmuted, but we're not hearing you. We're going to have to send you back into the queue. Next is Alex from Bank of America. Alex, as soon as you can, please unmute yourself.

Speaker #1: So, we're going to have to send you back into the queue. Next is Alex from Bank of America. Alex, as soon as you can, please unmute yourself.

Speaker #7: Hey, thanks. Thanks for the questions here. Just a few follow-ups on Robotaxi, actually. I guess, what milestone should investors be watching from here that would cause you to accelerate your fleet scaling or market deployments?

[Analyst] (Bank of America): Hey, thanks for the questions here. Just a few follow-ups on robotaxi, actually. I guess, what milestones should investors be watching from here that would cause you to accelerate your fleet scaling or market deployments? Is it the further safety validation, like a miles driven per incident or something else? Would you ever consider third-party distribution partnerships, such as with rideshare providers, to increase utilization? Is the plan for now to keep robotaxi fully vertically integrated? Thanks.

Speaker #7: You know, is it further safety validation, like a miles-tripped per incident or something else? And then, would you ever consider third-party distribution partnerships, such as with rideshare providers, to increase utilization? Or is the plan for now to keep Robotaxi fully vertically integrated?

Speaker #7: Thanks.

Speaker #5: Yeah. I mean, we

Elon Musk: Yeah. We expect to be vertically integrated with robotaxi as we are in the rest of our business. I don't think we're going to have any demand challenges with robotaxi. The economics will be so compelling that I think we will really have a lot more desire to use the service. I think demand will outstrip our ability to service the demand. Obviously, you can just go vertical in that situation. It's really just about going through what we call the march of nines of reliability. How many nines of reliability do you need to scale? Ideally, you want 99.999999% reliable. It's just the march of nines of reliability is the, I think, the only thing really constraining our growth in robotaxi.

Speaker #6: Expect to be vertically integrated with Robotaxi as we are in the rest of our business. So I don't think we're going to have any demand challenges with Robotaxi.

Speaker #6: So, the economics will be so compelling that I think we will really have a lot more desire to use the service than, you know, like—I think demand will outlast our ability to service the demand.

Speaker #6: And so obviously, you just—there's no—you can just go vertical in that situation. So it's really just about going through what we call the 'march of nines' of reliability, where you need—like, how many nines of reliability do you need to scale?

Elon Musk: It's really just about going through what we call the march of nines of reliability. How many nines of reliability do you need to scale? Ideally, you want 99.999999% reliable. It's just the march of nines of reliability is the, I think, the only thing really constraining our growth in robotaxi.

Speaker #6: Ideally, you want 99.999999 percent reliability. And so that's—it's just the march of nines of reliability, basically. I think the only thing really constraining our growth in Robotaxi...

Speaker #1: Great, thanks, Elon. The next question is going to come from Colin at Wells Fargo. Colin, please unmute yourself when you're ready.

Travis Axelrod: Great. Thanks, Elon. The next question is going to come from Colin at Wells Fargo. Colin, please unmute yourself when you're ready.

Speaker #7: Oh, great. Thanks for taking my questions. There's been a lot of chatter about SpaceX and Tesla combining in some way. I mean, there's a lot of collaboration already today.

[Analyst] (Wells Fargo): Great. Thanks for taking my questions. There has been a lot of chatter about SpaceX and Tesla combining in some way. A lot of collaboration already today. Elon, do you see synergies eventually from combining the companies? Does that make sense for me from your perspective over time?

Speaker #7: I mean, Elon, do you see synergies eventually from combining the companies? And does that make sense from your perspective over time?

Speaker #6: Well, I mean, as you can tell from the many collaborations on so many fronts with SpaceX, there's more and more overlap.

Elon Musk: Well, as you can tell from all the many collaborations on so many fronts with SpaceX, there is more and more overlap. Especially with Terafab, that is really going to be a gigantic project. Obviously, we can not talk about combining companies and that kind of thing on earnings calls. It has got to be done with the appropriate process. With that, I will turn it over to Brandon, our General Counsel.

Speaker #6: Especially with Terrafab, that's really going to be you know, a gigantic project. So but obviously, you know, we can't talk about, you know, combining companies and that kind of thing on an earnings call.

Speaker #6: It's got to be done with the appropriate process. And with that, I'll turn it over to Brandon, our General Counsel.

Speaker #3: Yeah. No, thanks, Elon. And that's exactly right. We continue to benefit from our relationship with SpaceX, and they've been a great partner. We have numerous beneficial transactions with them.

Brandon Ehrhart: Yeah. No, thanks, Elon. That is exactly right. We continue to benefit from our relationship with SpaceX, and they have been a great partner, and we have numerous beneficial transactions with them. Earlier this year, we deepened our relationship through an investment and a framework agreement. This will allow us to continue to work with them on projects that Elon mentioned, like Terafab and Digital Optimus.

Speaker #3: And earlier this year, we deepened our relationship through an investment and a framework agreement. This will allow us to continue to work with them on projects that Elon mentioned, like Terrafab and DigitalOptics.

Speaker #6: Yeah, and there's many other things, too. Obviously, you've got Grok in the car, and Grok helping—yeah, drive DigitalOptics. You've also got Starlink being integrated into the Cybercab, and Starlink will be integrated into all of our vehicles, at least for markets where Starlink is active.

Elon Musk: Yeah. There's many other things too. Obviously, you've got Grok in the car. Grok helping drive Digital Optimus. You also got Starlink being integrated into the Cybercab, and Starlink will be integrated into full autopilot vehicles, at least for markets that Starlink is active. Because for a Robotaxi situation, you need to have coverage everywhere. There are many places, even in Silicon Valley, where the cellular coverage is terrible or sometimes nonexistent, which is surprising for Silicon Valley. I know when I drive to work, for the first 10, 15 minutes, I can't actually do any calls because the cellular connectivity is so bad. We can't have Robotaxis getting stuck in these Bermuda Triangles of lack of cellular connectivity. Starlink, with its ability to do connectivity anywhere, is actually quite important, so we don't have Robotaxis missing in action.

Speaker #6: Because for a Robotaxi situation, you need to have, you know, coverage everywhere. There are many, many places, even in Silicon Valley, where the cellular coverage is terrible or sometimes nonexistent, which is surprising for Silicon Valley.

Elon Musk: There are many places, even in Silicon Valley, where the cellular coverage is terrible or sometimes nonexistent, which is surprising for Silicon Valley. I know when I drive to work, for the first 10, 15 minutes, I can't actually do any calls because the cellular connectivity is so bad. We can't have Robotaxis getting stuck in these Bermuda Triangles of lack of cellular connectivity. Starlink, with its ability to do connectivity anywhere, is actually quite important, so we don't have Robotaxis missing in action.

Speaker #6: But I know when I drive to work, for the first 10 or 15 minutes, I can't actually do any calls because the cellular connectivity is so bad.

Speaker #6: So, we can't have Robotaxis getting stuck in these, like, Bermuda triangles of lack of cellular connectivity. So, Starlink, with its ability to provide connectivity anywhere, is actually quite important.

Speaker #6: So we don't have, you know, Robotaxis missing in action. And then, obviously, if people are sitting in the car, they're going to want to do high-productivity stuff or want entertainment.

Elon Musk: Obviously, if people are sitting in the car, they're going to want to do high productivity stuff or watch entertainment. With Starlink, you can watch 4K live sports in the car and with very low cost per gigabyte of data. That's really not feasible via the cellular system. There's many other situations.

Speaker #6: And with Starlink, you can watch, you know, 4K live sports in the car, and with very low cost per gigabyte of data, as that's really not feasible via the cellular system.

Speaker #6: And there's many—I hear there's many other situations.

Speaker #7: Yeah. I mean, I would say, think of it like Ashok was mentioning about Cybercab, right? That the experience is great. In a world where you don't have to focus on driving, you have all the time in the car to do—whether it's a conference call, watch a movie, or anything.

Vaibhav Taneja: Yeah. I would say, think of it like Ashok was mentioning about Cybercab, that the experience is great. In a world when you don't have to focus on driving, you have all the time in the car to do whether it's a conference call, watch a movie or anything. That's why if you look at the Cybercab design, it has a big screen. We've started doing Cybercab rides in our factory in Austin. When you go through that experience, soon customers will be able to do it in not too distant future, and then you'll understand why that connectivity becomes so important.

Speaker #7: That's why, if you look at the Cybercab design, it has a big screen. And, you know, we've started doing Cybercab rides in our factory in Austin.

Speaker #7: And when you go through that experience, you—I mean, soon customers will be able to do it in the not-too-distant future. And then you'll understand why that connectivity becomes so important.

Speaker #1: Great. And then, Colin, did you have a follow-up?

Brandon Ehrhart: Great. Colin, do you have a follow-up?

Travis Axelrod: Great. Colin, do you have a follow-up?

Speaker #7: Yeah. Just to follow up on Robotaxi—you know, if I look at the launches, you've been adding cities, but the number of units is still, you know, it looks like based on media reports, sort of in the dozens as opposed to hundreds.

[Analyst] (Wells Fargo): just if I follow up on Robotaxi. If I look at the launches, you've been adding cities, the number of units is still, looks like based on media reports, sort of in the dozens as opposed to hundreds. Why not just scale up Austin or one or two cities before adding cities, and what do you need to get that higher volume numbers in a major city? What is the roadblock to start adding more vehicles on the ground?

Speaker #7: You know, why not just sort of scale up Austin or one or two cities before adding cities? And, sort of, what do you need to sort of get that, you know, higher volume numbers in a major city?

Speaker #7: What, sort of, is the roadblock to adding more vehicles on the ground?

Speaker #2: Yeah. The reason we have been expanding across different cities instead of just doubling down on a single city is that we want to make sure that our stack is a very general one.

Ashok Elluswamy: The reason we have been expanding across different cities instead of just doubling down on a single city is that we want to make sure that our stack is a very general one. It is a general one. We just want to prove to ourselves and to other folks that it is working across a lot of different cities without too much effort per city. That's what we see internally. As Elon mentioned earlier, the growth rate has been literally exponential. Just it's in the early part of the exponential. That's why it's hard for others to comprehend. In terms of miles versus vehicles, since these vehicles operating the Robotaxi fleet drive basically continuously, as opposed to human drivers who use vehicles for maybe a couple of hours a day or something like that.

Speaker #2: It is a general one. We just want to, you know, both prove to ourselves and to other folks that it is working across a lot of different cities without too much effort per city.

Speaker #2: And that's what we see internally. And then, as Elon mentioned earlier, the growth rate has been literally exponential—just, it's in the early part of the exponential.

Speaker #2: That's why it's hard for others to comprehend. In terms of miles versus the vehicles, since these vehicles operating the Robotaxi fleet drive basically continuously, as opposed to human drivers whose vehicles are used for maybe a couple hours a day or something like that.

Ashok Elluswamy: That's why it's hard for others to comprehend. In terms of miles versus vehicles, since these vehicles operating the Robotaxi fleet drive basically continuously, as opposed to human drivers who use vehicles for maybe a couple of hours a day or something like that. These vehicles are in mostly continuous operation, which means that even for a few vehicles, you can get a lot of miles out of them. That's why we are tracking the amount of unsupervised miles or just the number of vehicles or something like that. We want to be operating in a very efficient fleet, so all of the work that goes into the efficiency makes it even more so that we get a lot of miles per vehicle available in the fleet.

Speaker #2: These vehicles are mostly in continuous operation, which means that even with just a few vehicles, you can get a lot of miles out of them. And that's why we are tracking the amount of unsupervised miles, or just the number of vehicles, or something like that.

Ashok Elluswamy: These vehicles are in mostly continuous operation, which means that even for a few vehicles, you can get a lot of miles out of them. That's why we are tracking the amount of unsupervised miles or just the number of vehicles or something like that. We want to be operating in a very efficient fleet, so all of the work that goes into the efficiency makes it even more so that we get a lot of miles per vehicle available in the fleet.

Speaker #2: And we want to be operating in a very efficient fleet. So all of the work that goes into the efficiency makes it even more so that we get a lot of miles per vehicle available in the fleet.

Speaker #7: Yeah, and just to add further to this, I’m like, when you think of it, we’re trying to scale this, and we’re trying to make sure that there are different kinks which would be there.

Vaibhav Taneja: Just to add further to this. Think of it, we're trying to scale this, and we're trying to make sure that there are different kinks which would be there, and there are things not just on the software front, on the operations front, which we're also trying to tackle. That's why we're trying to have a broader footprint to try and make sure before we go really high in terms of deployment, that we are able to sort these things out in a smaller fleet in a controlled manner.

Speaker #7: And there are things not just on the software front, on the operations front, which we're also trying to tackle. So that's why we're trying to have a broader footprint, to try and make sure before we go really high in terms of deployment, that we are able to sort these things out in a smaller fleet in a controlled manner.

Speaker #6: Yeah, one of the things for Cybercab that should be noted is, because this is a new vehicle chassis, we need to accumulate driving data that is specific to the Cybercab before we can put a lot of them on the road.

Elon Musk: Yeah. One of the things for Cybercab that should be noted is because this is a new vehicle chassis, we need to accumulate driving data that is specific to the Cybercab before we can put a lot of them on the road. Unlike, say, Model 3 and Model Y and our other vehicles where we've got a lot of vehicles on the road, millions of vehicles on the road, we don't have that for Cybercab, we actually have to accumulate miles with Cybercabs that are retrofitted with steering wheels and acceleration braking pedals, that kind of thing, to calibrate to the Cybercab chassis. You'll see, as we feel confident about that, the number of Cybercabs in cities will increase dramatically.

Speaker #6: So, unlike, say, Model 3 and Model Y, and our other vehicles, where we've got a lot of vehicles on the road—millions of vehicles on the road—we don't have that for Cybercab.

Speaker #6: So we actually have to accumulate miles with Cybercabs that are retrofitted with steering wheels and brakes, you know, acceleration and braking pedals, that kind of thing.

Speaker #6: To calibrate to the Cybercab chassis. So, you'll see as we become confident about that, the number of Cybercabs in cities will increase dramatically.

Speaker #1: Great. Our next question is—oh, yeah, go ahead, Lars.

Travis Axelrod: Great. Our next question is from. Oh, yeah, go ahead, Lars.

Speaker #3: If I can just add one thought here. The other reason I want to point out is, you know, transport—like TCO, transportation regulatory situations are different city by city.

Elon Musk: If I can just add one thought here. The other reason I just want to point out is.

Lars Moravy: If I can just add one thought here. The other reason I just want to point out is. TCO transportation regulatory situations are different city by city, state by state. There's not a federal framework to do that. The reason we're expanding city by city is to make sure that we're meeting all of those one at a time, and we're satisfying all of the requests of each individual city and everywhere we can. We have to expand to each city to meet those requirements, and we'll continue to do so until all of what Ashok and Vaibhav and Ashok said, we'll follow up the scaling.

Lars Moravy: TCO transportation regulatory situations are different city by city, state by state. There's not a federal framework to do that. The reason we're expanding city by city is to make sure that we're meeting all of those one at a time, and we're satisfying all of the requests of each individual city and everywhere we can. We have to expand to each city to meet those requirements, and we'll continue to do so until all of what Ashok and Vaibhav and Ashok said, we'll follow up the scaling.

Speaker #3: State by state is not federal, you know, framework to do that. And so, like, the reason we're expanding city by city is to make sure that we're meeting all of those one at a time.

Speaker #3: And we're satisfying, you know, all of the requests of each individual city and, you know, in every way we can. So we have to expand, you know, to each city to meet those requirements.

Speaker #3: And we'll continue to do so, and all of what Ashok and Vaibhav, and Ashok said, will follow with the scaling.

Speaker #1: Thanks, Lars. The next question is coming from Walt from LightShed. Walt, please unmute yourself.

Travis Axelrod: Thanks, Lars. The next question is coming from Walt from LightShed. Walt, please unmute yourself.

Speaker #4: Thanks. It's just a quick follow-up on that Lars comment. I mean, the NIST Administrator Jonathan Morrison was just on CNBC. You know, he already—he's trying to get rid of the pedal, and said—I forget his exact term, but it seemed like he wanted to get rid of the steering wheel.

[Analyst] (LightShed): Thanks. It's just a quick follow-up for that Lars comment. The NHTSA Administrator, Jonathan Morrison, was just on CNBC. He already is trying to get rid of the pedal and said, I forget his exact term, but it seemed like he wanted to get rid of the steering wheel. It seemed like that would be a gating factor. Is there other things that you need at the federal level to really unlock your ability to ramp Cybercab?

Speaker #4: It seemed like that would be a gating factor. But are there other things that you need at the federal level to really kind of unlock your ability to ramp Cybercab?

Speaker #3: I mean, the short answer is no. I think we have a great relationship with NIST and, you know, the administrator, Morrison especially.

Lars Moravy: The short answer is no. I think we have a great relationship with NHTSA and Administrator Morrison especially. I think they're just following through with what the public wants and the world knows is coming, and they're trying to stay ahead of it and make sure that they're doing the right things in place. We've been open and honest with them for the last couple of years about what our plans were and what we're doing, and I don't want to say we're in lockstep, but I feel like we have a partner there, and we're working together on it.

Speaker #3: And you know, I think they're just following through with what the public wants, and the world knows is coming. And they're trying to stay ahead of it and make sure that, you know, they're doing the right things in place.

Speaker #3: So, you know, we've been open and honest with them for the last couple of years about what our plans were and what we're doing.

Speaker #3: And you know, I don't want to say we're in lockstep, but, you know, I feel like we have a partner there, and we're working together on it.

Speaker #4: Got it. And then just, Elon, there's kind of a roadmap question, I guess. Starlink, obviously, is integrated in Cybercab, and you guys just talked about the connectivity for watching movies.

[Analyst] (LightShed): Got it. Then just, Elon, it's kind of a roadmap question, I guess. Starlink obviously is integrated in Cybercab, and you guys just talked about the connectivity for watching movies, but what about the flip side of that? Can the Cybercabs become remote hotspots for Starlink Mobile? Then similarly, roadmap question on the Semi, when do you anticipate looking at autonomy for the Semi? Because that seems like a pretty sizable market as well in terms of autonomous trucking and the need for it given what's going on in our country right now.

Speaker #4: But what about the flip side of that? Can the Cybercabs become remote hotspots for Starlink mobile? And then, similarly, a roadmap question on the Semi.

Speaker #4: You know, when do you anticipate looking at autonomy for the Semi? Because that seems like a pretty sizable market as well, in terms of autonomous trucking.

Speaker #4: And the need for it, given what's going on in our country right now.

Speaker #6: Yeah, absolutely. As you alluded to, there is a really serious shortage of truckers. There just aren't enough people around who want to drive trucks, which are crucial for transport throughout America.

Elon Musk: Yeah, absolutely. As you allude to, there is a really serious shortage of truckers. There just aren't enough people around who want to drive trucks, which are crucial for transport throughout America. An autonomous Semi is actually going to be very important to address the shortage of truck drivers. Obviously, will be great for improving safety and making it easier on truck drivers to have a self-driving Semi is going to dramatically improve safety and comfort for truck drivers that use the Tesla Semi. Since the total number of units of the Tesla Semi is still low and will continue to be a very small percentage even by the end of this year of our total vehicle fleet, it makes sense for us to focus our self-driving efforts on our high-volume vehicles.

Speaker #6: So, an autonomous semi is actually going to be very important to address the shortage of truck drivers. And, obviously, we'll be grateful for improving safety and, you know, making it easier on truck drivers. To have a self-driving semi is going to, yeah, I think, dramatically improve safety and comfort for truck drivers that, you know, yeah, use this as a semi.

Speaker #6: You know, since the total number of units of the Tesla Semi is still low, and will continue to be a very small percentage—even by the end of this year—of our total vehicle fleet.

Speaker #6: It makes sense for us to focus our self-driving efforts on our high-volume vehicles—so, Model 3 and Model Y—and solving self-driving, and really getting, you know, to the point where it's generalized onto advanced self-driving for those vehicles.

Elon Musk: Model 3 and Y, and solving self-driving for, and really getting to the point where it's generalized, unbiased self-driving for those vehicles in Cybercab. We expect to get self-driving working on the Tesla Semi probably around the end of this year or early next year. I just don't want it to be a distraction on the march of nines of safety for self-driving on 3Y and Cybercab. It's taking a bit of a backseat for the next six months or so for autonomous Semi. It will definitely be a big working next year and in time for the scale-up to high production of the Tesla Semi.

Speaker #6: And Cybercab. So we expect to get self-driving working on the Tesla semi probably around the end of this year or early next year. And I just don't want it to be a distraction on the you know, on the march of 9th of self-driving of safety for self-driving on 3, Y, and Cybercab.

Speaker #6: That's taking a bit of a backseat for the next six months or so for autonomous Semi. But it will, you know, it will definitely be a big focus next year and in time for the scale up to high production of Tesla Semi.

Elon Musk: For communications, yeah, I think there's an interesting angle there where you could use the Starlink terminals that are in the Tesla cars as sort of cell towers, I suppose, or connectivity towers, basically for providing relays on the ground to cell phones and to anyone who would like Wi-Fi, basically. Yeah, this is a different subject, but obviously we could do that with the stationary Starlink terminals too.

Speaker #6: For communications, yeah, I think there's an interesting angle there where you could use the Starlink terminals that are in the Tesla cars as, like, sort of cell towers, I suppose—connectivity towers, basically—for providing relays on the ground to cell phones and to anyone who would like Wi-Fi, basically.

Speaker #6: But yeah, I mean, it's a different subject, but obviously one could do that with the stationary Starlink terminals, too.

Speaker #1: All right. Our next question is going to come from Will at Truist. Will, please unmute yourself.

Travis Axelrod: All right. Our next question is going to come from Will at Truist. Will, please unmute yourself.

[Analyst] (Truist): Great. Thanks so much for taking my question. Elon, you teased us a little bit about sort of the supply chain relative to Optimus, highlighting how difficult it's going to be, but we'd be really interested to understand what your propensity is to manufacture Semis for this yourself. When we think about microprocessors, microcontrollers, actuators, and other semiconductors that are going to be used, it occurs to me that you have many that are commercially available. You have an option to design some but have them made at third-party fabs. You also have the option potentially to design and make them yourself. What should we think about your propensity to source these components in these different manners?

Speaker #5: Great. Thanks so much for taking my question. Elon, you teased us a little bit about the supply chain relative to Optimus, highlighting how difficult it's going to be.

Speaker #5: But we'd be really interested to understand what your propensity is to manufacture semis for this yourself. When we think about microprocessors, microcontrollers, actuators, and other semiconductors that are going to be used, it occurs to me that you have many that are commercially available.

Speaker #5: You have an option to design some, but have them made at third-party fabs. You also have the option, potentially, to design and make them yourself.

[Analyst] (Truist): You have an option to design some but have them made at third-party fabs. You also have the option potentially to design and make them yourself. What should we think about your propensity to source these components in these different manners?

Speaker #5: What should we think about your propensity to source these components in these different manners?

Speaker #6: You're talking about making, like, microcontrollers and the various computers that are in the car that operate, you know, like the steering system and the braking system and that kind of thing.

Elon Musk: You're talking about making microcontrollers and the various computers that are in the car that operate the steering system and the braking system and all that kind of-

Speaker #5: No, I'm talking about for Optimus, not for—

[Analyst] (Truist): No. I'm talking about for Optimus, not for-

Speaker #6: Yeah. Optimus has a lot of really specialized power electronics and circuit boards. It's all Tesla design stuff, but it is fabricated by suppliers. For Optimus 4, which will be built in Austin, that will be a much more vertically integrated supply system for Optimus 4.

Elon Musk: Yeah. Optimus has a lot of really specialized power electronics and circuit boards. It's all Tesla design stuff, but it is fabricated by suppliers. For Optimus 4, which will be built in Austin, that will be a much more vertically integrated supply system for Optimus 4. That would end having an order of magnitude more production of Optimus 4 than Optimus 3. Sort of aspirationally 10 million units a year versus 1 million units a year of Optimus 3. With all the caveats there, which is insanely difficult to scale production. Yeah, Optimus 4 will be much more vertically integrated, so probably doing a lot of the sort of PCB work in-house for that.

Speaker #6: And that would, you know, we'd aim to have on the order of 9 to 2—more production of Optimus 4 than Optimus 3. So, sort of aspirationally, 10 million units a year versus a million units a year of Optimus 3.

Elon Musk: Sort of aspirationally 10 million units a year versus 1 million units a year of Optimus 3. With all the caveats there, which is insanely difficult to scale production. Yeah, Optimus 4 will be much more vertically integrated, so probably doing a lot of the sort of PCB work in-house for that.

Speaker #6: But you know, with all the caveats there, which is, it's insanely difficult to scale production, so, and yeah, Optimus 4 will be much more vertically integrated.

Speaker #6: So we're probably doing a lot of the sort of PCV work in-house for that.

Speaker #5: As a follow-up, well, first maybe you could talk about the timing as to when that when Optimus 4 should be should, let's say, start production but the actual follow-up I wanted to ask was the plan to upgrade hardware 3 to hardware 4 in order to be able to process, I suppose it's version 15 of the and future versions of FSD.

[Analyst] (Truist): Well, first maybe you can talk about the timing as to when Optimus 4 should, let's say, start production. The actual thought that I wanted to ask was the plan to upgrade Hardware 3 to Hardware 4 in order to be able to process, I suppose it's Version 15 and future versions of FSD. Is that still the plan to do hardware upgrades on the cars?

Speaker #5: Is that still the plan to do hardware upgrades on the cars?

Speaker #6: I think it's going to make sense to upgrade all cars that are less than Hardware 4, almost any cars that have cameras basically, because otherwise you're probably tuning modifications.

Elon Musk: I think it's going to make sense to upgrade all cars that have less than Hardware 4, any cars that have cameras, basically, because otherwise it would be probably too many modifications. Anything that's got sort of, that's set up for cameras, it'll be financially sensible at some point to upgrade them. I think we'd want to upgrade them to the next generation of acceleration AI board. It'll be either, we have an upgraded AI full chip that's sort of a moderate improvement over AI full, probably would reach its production around the middle of next year. There's also AI5, which hopefully is in line production around the middle of next year. AI5 will initially go into Optimus, and actually making very good progress. The Tesla chip team is really doing great work and making incredibly fast progress on the AI5.

Speaker #6: But anything that's, sort of, that's set up for cameras, it will be financially sensible at some point to upgrade them. But I think we'd want to upgrade them to the next generation of, you know, like next-generation AI boards.

Speaker #6: So it would be either, like, we haven't upgraded AI 4—that's a sort of medium, sort of moderate improvement over AI 4—probably reaches production around the middle of next year.

Speaker #6: And then there's also AI5, which, hopefully, is in volume production around the middle of next year. AI5 will initially go into Optimus.

Speaker #6: And we're actually making very good progress, so the Tesla chip team is really doing great work and making incredibly fast progress on AI 5. And I'm very excited about the design of the Tesla AI 6 chip.

Elon Musk: The Tesla chip team is really doing great work and making incredibly fast progress on the AI5. I'm very excited about the design of the Tesla AI6 chip. I think it's going to be the best edge computing chip in the world. If somebody's got a better one, I'd like to meet that person and shake their hand, because the AI6 chip is just so good. I think things are going really well on the chip front. Yeah, again, I'd like to thank our TSMC, Samsung, and Micron for their support.

Elon Musk: I'm very excited about the design of the Tesla AI6 chip. I think it's going to be the best edge computing chip in the world. If somebody's got a better one, I'd like to meet that person and shake their hand, because the AI6 chip is just so good. I think things are going really well on the chip front. Yeah, again, I'd like to thank our TSMC, Samsung, and Micron for their support.

Speaker #6: I think it's going to be the best edge computing chip in the world. And if somebody's got a better one, I'd like to meet that person and shake their hand, because the AI6 chip is just so good.

Speaker #6: So I think we've got a—I think it's going really well on the chip front. Yeah. And again, I'd like to thank TSMC, Samsung, and Micron for their support.

Speaker #1: Great. We are coming up on the hour, but we're going to try to squeeze Dan in. So, from Barclays, Dan, please unmute yourself.

Travis Axelrod: Great. We are coming up on the hour, but we're going to try to squeeze Dan in from Barclays. Dan, please unmute yourself.

Speaker #3: Great, thank you. Appreciate it. I'd like to ask about the pace and path of CapEx. Elon, in the past, you've said that you'll spend as much as you can, but really, efficiency seems like it's the gating factor.

[Analyst] (Barclays): Great. Thank you. Appreciate it. I'd like to ask about the pace and path of CapEx. Elon, in the past, you've said that you'll spend as much as you can, but really efficiency seems like it's the gating factor. To what extent right now in this CapEx cycle is your pace of CapEx effectively capped simply because spending any more would be done in an inefficient manner? To what extent is the pace of CapEx really the primary determinant right now in unlocking the different supply constraints that you have?

Speaker #3: To what extent, right now in this CapEx cycle, is your pace of CapEx effectively capped simply because spending any more would be done in an inefficient manner?

Speaker #3: And to what extent is the pace of CapEx really the primary determinant right now in unlocking different supply constraints that you have?

Speaker #6: Yeah, it's a good question. I've actually, you know, what I've asked the Tesla team to do is, like, really, we should be spending on CapEx as fast as we can, as fast as we can, without it being too wasteful.

Elon Musk: Yeah, it's a good question. What I've asked the team to do is really we should be spending on CapEx as fast as we can without it being too wasteful. We're not trying to aim for some extremely high efficiency capital spend because that would slow things down. It's a balance between capital efficiency versus time. It's okay to be a little less capital efficient if we get things done sooner, because that's actually going to be the higher NPV outcome for the company. Overall, I'm pretty happy with how things are going. We're doing an incredible amount of construction and production growth in so many different arenas simultaneously. I don't think there's ever been a company that's done this at this scale.

Speaker #6: So we're not trying to aim for like some extremely high efficient efficiency capital spend because that would slow things down. So it's kind of it's a balance between like how much you know, sort of capital efficiency versus time.

Speaker #6: So, if we can be, it's okay to be a little less capital efficient if we get things done sooner, because that's actually going to be the higher NPV outcome for the company.

Speaker #6: So overall, I'm pretty happy with how things are going. I mean, we're doing an incredible amount of construction and production growth in so many different arenas simultaneously.

Elon Musk: Overall, I'm pretty happy with how things are going. We're doing an incredible amount of construction and production growth in so many different arenas simultaneously. I don't think there's ever been a company that's done this at this scale.

Speaker #6: I don't think there's ever been a company that's done this at this scale. You know, maybe proportionately, back when Henry Ford did the Model T or something like that.

Elon Musk: Maybe proportionately back when Henry Ford did the Model T or something like that, at World War II when companies were making Tesla sort of scale weapons production. I think probably this is the fastest industrial scale-up since World War II in America.

Speaker #6: But, or World War II, when you know, companies had to sort of scale up weapons production. But I think probably this is the fastest industrial scale-up.

Speaker #6: Since World War II in America.

Speaker #2: Yeah, and I'll just add a little bit to that. Basically, if you look at it, all our spend on CapEx is aimed at creating productive assets.

Vaibhav Taneja: Yeah, I will just add a little bit on that. Basically, if you look at it All our spend on CapEx is trying to do productive assets, right? We're basically scaling factories, whether it's Optimus, whether it's Cybercab, whether it's LFP factory, which went into operation earlier this year, or the Semi factory, or even putting in a semiconductor fab in there. As well as we are trying to get a lot of solar manufacturing in the US. In fact, our plan.

Speaker #2: Right. We're basically scaling factories—whether it's Optimus, whether it's Cybercab, whether it's the LFP factory, which went into operation earlier this year, or the Semi factory, or even putting in a semiconductor fab in there—as well as, you know, we are trying to get a lot of solar manufacturing in the US.

Speaker #2: In fact, yeah.

Elon Musk: Very important. This is underrated, by the way.

Speaker #6: This is underrated, by the way. Please, go ahead.

Vaibhav Taneja: Yeah.

Elon Musk: Please go ahead.

Speaker #2: Yeah, yeah. Basically, you know, the amount of solar manufacturing which happens in the US, we're just going to multiply it by an order of magnitude.

Vaibhav Taneja: Yeah.

Elon Musk: Vaibhav.

Vaibhav Taneja: Basically, the amount of solar manufacturing which happens in the US, we're just going to multiply it with an order of magnitude. None of these things are easy, right? Because what you have to do is, in order to build a factory, you have to start from ground zero. Just so you know, again, I don't think we have shared this, we end up being the general contractor for almost all our construction facilities because we are doing that much construction.

Speaker #2: And none of these things are easy, right? Because what you have to do is, in order to build a factory, you have to start from ground zero.

Speaker #2: So just so you know, again, I don't think we have shared this: we end up being the general contractor for almost all our construction facilities because we are doing that much construction.

Speaker #2: And so, going back to what Elon was saying, we're operating at a very rapid scale. And yes, you know, this means that we are doing a lot of things all at the same time.

Elon Musk: Yeah.

Vaibhav Taneja: Going back to what Elon was saying, we're growing at a very rapid scale. Yes, this means that we are doing a lot of things all at the same time. That's why we just have to go as fast as we can, humanly possible, make things work in the real world.

Speaker #2: And that's why, you know, we just have to go as fast as we can humanly make things work in the real world.

Speaker #6: Yeah. Our CapEx efficiency, I think, is off-scale good.

Elon Musk: Yeah. Our CapEx efficiency, I think, is off-scale good.

Speaker #1: Alright. And then, Dan, did you have a follow-up that we can wrap up with?

Travis Axelrod: All righty. Then Dan, yeah, did you have a follow-up that we can wrap up with?

Speaker #3: Yeah, maybe just a quick question on energy storage, which, you know, I think is a key topic here. Maybe you can just address—to what extent is energy storage going to be supply constrained for the foreseeable future?

[Analyst] (Barclays): Yeah, maybe just a quick question on energy storage, which I think is a key topic here. Maybe you can just address to what extent is energy storage going to be supply constrained for the foreseeable future? Then just to what extent are the deployments right now the typical peak shaving that you'd see at utilities versus you've talked about in some of your materials for battery storage, addressing the quality of power issue for data centers, giving the sharp fluctuations in power use.

Speaker #3: And then, just to what extent are the deployments right now the typical peak shaving that you'd see at utilities, versus—you've talked about in some of your materials, you know, for battery storage—addressing the quality of power issue for data centers, given the sharp fluctuations in power use, where you have an advantage given software or power electronics.

Elon Musk: Yeah

[Analyst] (Barclays): where you have an advantage given software or power electronics. Just what is that demand curve right now between data centers versus just broader peak shaving for utilities?

Speaker #3: So just what does that demand curve look like right now between a data center versus just broader peak shaving for utilities?

Speaker #6: Well, it's still mostly—not just peak shaving, but it's also grid balancing. So it's not just like the packs are on briefly, but for balancing power from wind generation and solar generation, batteries are awesome.

Elon Musk: Well, it's still mostly, it's not just peak shaving, but it's also grid balancing. It's not just like the packs are on briefly, but for balancing power from wind generation and solar generation, batteries are awesome. The solar battery combination will be how the vast majority of energy in the world is produced in the future. That's really, of course, how all of the Starlink satellites are powered, is with solar panels and batteries. You can just think of Earth like a giant satellite. There's far more power available from the sun than anything else by far. We think power constraints are going to be, they already are a major issue for AI, just turning on the AI computers.

Speaker #6: I mean, the solar-battery combination will be how the vast majority of energy in the world is produced in the future. That’s already, of course, how all of the Starlink satellites are powered—with solar panels and batteries.

Speaker #6: So as you can just think of us like a giant satellite. There's this formal power available from the sun, more than anything else by far.

Speaker #6: And we think power constraints are going to be—they already are—a major issue for AI. You know, just turning on the AI computers.

Elon Musk: We think power constraints are going to be, they already are a major issue for AI, just turning on the AI computers. The AI compute demand is so high that even the hyperscalers are having trouble turning on their AI compute and finding the power and then smoothing the power especially for the training runs where the power cycles dramatically in a very short period of time. You can have, during a training run, the power consumption can drop by 70% for 100 milliseconds. You really need fast-acting advanced power electronics to be able to smooth out these massive changes in power, especially during their training runs. That's why SpaceX has bought so many Megapacks for the data centers. It's actually mostly for smoothing out the power for the training runs.

Speaker #6: The AI compute demand is so high that people having even the you know, the hyperscalers are having trouble turning on their AI compute. And finding the power and then smoothing the power with you know, especially for the training runs where the power cycles dramatically in a very short period of time, you can have during a training run the power consumption can drop by you know, 70% for 100 milliseconds.

Elon Musk: The AI compute demand is so high that even the hyperscalers are having trouble turning on their AI compute and finding the power and then smoothing the power especially for the training runs where the power cycles dramatically in a very short period of time. You can have, during a training run, the power consumption can drop by 70% for 100 milliseconds. You really need fast-acting advanced power electronics to be able to smooth out these massive changes in power, especially during their training runs. That's why SpaceX has bought so many Megapacks for the data centers. It's actually mostly for smoothing out the power for the training runs.

Speaker #6: And you really need mass-acting advanced power electronics to be able to smooth out these massive, massive changes in power, especially during the training runs.

Speaker #6: So that's why SpaceX has bought so many Megapacks—for the data centers. It's actually mostly for smoothing out the power for the training runs.

Speaker #6: But it will also be useful for being able to tap more power from the grid by, you know, if you tell utilities that they can, you know, that they will not need to supply power during the, you know, the worst hours or the worst days of the year because the batteries can handle it, then that makes it much easier for them to give you power.

Elon Musk: It will also be useful for being able to tap more power from the grid by if you tell utilities that they will not need to supply power during the worst hours or the worst days of the year because the batteries can handle it, then that makes it much easier for them to give you power. In fact, probably the best way to scale total energy production in the United States is simply using batteries because there's, I think, around 1.2 or 1.3 terawatts of power production in the US, but the average power usage is only half a terawatt. You've got two and a half times as much power generation as the average usage. That means you could potentially double the energy output of the United States just with batteries. Really we see demand for Megapack being very, very high in the future.

Speaker #6: In fact, I mean, probably the best way to scale total energy production in the United States is simply using batteries. Because there's, I think, around 1.2 or 1.3 terawatts of power production in the U.S., but the average power usage is only half a terawatt.

Speaker #6: So you've got two and a half times as much power generation as the average usage. That means you could potentially double the energy output of the United States, just with batteries.

Speaker #6: So really, we see demand for Megapack being very, very high in the future.

Speaker #1: Alright, that is all the time we have for today for Q&A. We appreciate everyone's questions, and we look forward to talking to you next quarter.

Travis Axelrod: All righty. That is all the time we have for today for Q&A. We appreciate everyone's questions, and we look forward to talking to you next quarter. Thank you very much.

Speaker #1: Thank you very much.

Elon Musk: Sure. Thanks, everyone.

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