Tesla Q2 2026 earnings call
Questions on ElonsFAQ asked in this interview (13)
Transcript
5:57Travis AxelrodGood 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, Vivav Tineja and a number of other executives.
6:11Travis AxelrodOur Q2 results were announced at about 3pm 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.
6:22Travis AxelrodThese 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.
6:35Travis AxelrodDuring 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.
6:44Travis AxelrodBefore we jump into Q and A, Elon has some opening remarks. Elon,
6:49Elon Muskthank you. So yeah, it's been a great quarter. We achieved a 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.
7:03Elon MuskSo 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.
7:24Elon MuskThey're coming into our stores in the US and saying they want the full self driving and 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.
7:49Elon MuskSo yeah, it's looking very good on that front. The energy business is also growing incredibly fast and I think will be crucial for the scale up of artificial intelligence data centers.
8:06Elon MuskWe'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 that we're investing in will yield incredible returns.
8:27Elon MuskReally the best capex returns that we've ever seen and just Tesla team has performed incredibly well. The Slabcap has started production and we also have started production and a ramping in.
8:46Elon MuskWell we will soon start production with Optimus, we have started production with the Tesla semi truck, we will soon start production with Megapack 3. We've started production with the lithium refinery, the Cathode refinery.
9:01Elon MuskWe also have, we're Scaling up battery cell productions, battery cell production, and we're also preparing to do a massive solar panel. Like solar cells and panel production. 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.
9:33Elon MuskSo we're working on what we believe is the most ambitious build out of advanced infrastructure manufacturing capacity ever in history. It's big deal. So 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.
9:58Elon MuskAlthough there are I think 30 to 40,000 automotive deaths per year in the United States alone. Most of those do not generate any press or, you know, you never really read about almost any of those.
10:13Elon MuskBut if we injure even one person, it will be worldwide headline news and regulators will immediately clamp down on our activities. And we don't want to injure anyone. So 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 pest.
10:40Elon MuskSo that's really the constraint is 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.
11:00Elon MuskSo if you just follow the Tesla account on X, you're. But we'll keep you informed as we scale to new cities. We've opened up in a number of cities in Florida and in Texas and obviously in the Bay Area.
11:17Elon MuskSo we'll continue to scale, I think very, very rapidly with it looks like more than 10% a week in terms of miles driven. So it's a very high cost compound growth rate.
11:35Elon MuskSo 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.
11:46Elon MuskIt's one of the, one of the hardest things to solve to make a, an autonomous humanoid robot that can do tasks that you said if you simply ask it to do something or show it a video, it can do the task without any programming.
12:03Elon MuskLike no one's, 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 also be very reliable and have long wear and tear like meaning it needs to be out in the field and not break down.
12:27Elon MuskOtherwise you've got sort of a 70 kilogram robot that just flopped over and you've got to carry it out like a body. You know, it doesn't have wheels
12:38Analystand
12:39Elon Muskwe don't want optimists to go haywire. So.
12:46Elon MuskIt's a lot of work to scale, to get the design weight and to scale production. And I really want to emphasize here that the production scaling challenge is very substantial.
13:00Elon MuskThis is going to be the hardest product to scale manufacturing that we've ever made at Tesla, because everything on the robot is new and the difficulty of scaling the production ramp is proportionate to the nearness of the parts in the robot.
13:18Elon MuskAnd at least with electric cars, the non electric powertrain portions of the cars had an existing supply chain. So you could go to existing suppliers for wheels and side mirrors and windshield glass and that kind of thing, body panels.
13:36Elon MuskBut with Optimus there is no supply chain. So we've had to build up a supply chain in its entirety or in house. The production and we actually announced a tremendous amount.
13:50Elon MuskThe Optimus production line that we're building out in Fremont in place of what used to be the model SX production looks incredible. I mean it's quite stunning to see.
14:05Elon MuskSo I just want to make sure to calibrate people correctly. It's will follow the sort of normal S curve of manufacturing of a manufacturing ramp, but the initial portion of the X curve will be quite flat and long because of the newness of the parts in the robot.
14:30AnalystSo
14:33Elon Muskyou'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.
14:50Elon MuskOptimus 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. So. And Optimus is designed to have full human dexterity.
15:05Elon MuskSo a hand that has the same level of dexterity, if not higher than a human hand, and the human hand is an incredible, incredible thing. The more you study the human hand, the more amazing you realize how amazing hands are.
15:18Elon MuskIt's more than just opposable thumbs. I mean the nuances of how human hands work are amazing as the closer you look, the more amazed you are. And Optimus will have that capability, you'll have human and then superhuman dexterity.
15:40Elon MuskSo it's really going to be quite something. Let's see Terrafab, you know the Terafab. We expect to announce the location soon 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.
16:04Elon MuskBecause 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.
16:14Elon MuskBut I do think Terrafab is going
16:15Analystto be
16:18Elon Muskan amazing initiative and a necessary one, 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 for in order to scale Optimus.
16:45AnalystSo
16:47Elon Muskanyway, like I said, we'll leave that to its own announcement. 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 and then logic, memory and packaging and chip testing all under one roof.
17:12Elon MuskSo 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.
17:24Elon MuskSo this is really going to be super helpful as we try some exciting, adventurous, high risk, high payoff bets on AI chips. They focus, like I said, on primarily on Optimus.
17:42Elon MuskLike how do we make Optimus as useful as possible? Then we have like 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 in the same way that you drive a car.
18:00Elon MuskSo for the car with it's sort of pixels in or photons in and controls out, the same thing is true for Optimus digital optimists. It's photons in, controls out.
18:12Elon MuskSo 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.
18:28Elon MuskSo the self driving computer where the Tesla, the very low cost Tesla AI 4 computer can handle all of the sort of short term tasks they're doing real time video control of the screen, of the computer.
18:45Elon MuskSo it's not like screenshots type of thing, it's real time video and high frame rate. And digital optimist will be important obviously for physical optimists because physical Optimus needs to be able to operate computers.
19:02Elon MuskIt'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. So that's looking promising.
19:13Elon MuskAnd this is in partnership with SpaceX. SpaceX is broad, sort of the big model that is kind of like the. The manager of Digital Optimus and kind of tells Digital Optimist what to do, provides it with a series of tasks, and then Digital Optimist goes and does those tasks.
19:42Elon MuskWe're also building out a Megapod design that has Tesla AI for computers with x86. So pairing x86 computer with the Tesla AI 4 computer in a box. It's got this Digital Optimus in a box and in a Megapod, kind of like the Megapack packaging.
20:13Elon MuskAnd so we put just a Large number of AI4/x86 combos in a giant box, essentially. And these boxes can be placed anywhere in the country or outside the country.
20:33Elon MuskAnd this allows us to scale AI compute using disaggregated electricity production. So there's lots of places all around the world, including in our superchargers. I think we've got something like 7 gigawatts of power at our Superchargers and growing.
20:53Elon MuskAnd we can place megapods at many of these superchargers and have distributed power for AI. So I think that that could be quite a big deal. So, in conclusion, we're super excited about our autonomy and robotics roadmap.
21:12Elon MuskThere's so much awesome stuff coming. It's like I said, hard to squeeze into an earnings call, but we'll have a lot of product announcements and this is going to be a great year for Tesla.
21:26Elon MuskI think one of our best years ever. 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 Australia.
21:40Elon MuskThank you.
21:42AnalystGreat.
21:42Travis AxelrodThanks so much, Elon. And now Vaibhav has some opening remarks.
21:46Vaibhav TanejaThanks, 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.
22:07Vaibhav TanejaAdditionally, 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.
22:24Vaibhav TanejaWe 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.
22:40Vaibhav TanejaThis 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.
22:56Vaibhav TanejaLike Elon mentioned, one of the key factors for vehicle demand has been fsd. Our sales data suggests one of the main reasons are coming and looking at the car is because of FSD.
23:12Vaibhav TanejaIn Q2 we had in North America about 55% of our deliveries had FSD subscription at the time of delivery enabled Overall FSD attached rates continue to improve, reaching nearly 1.5 million paid customers globally of which 55% is upfront purchases and the remaining 45% is subscriptions.
23:36Vaibhav TanejaWe expect that the bulk of the growth in FSG monetization will come from subscriptions as we remove the purchase option. In most markets, automotive margins excluding regulatory credits declined sequentially from 19.2% to 16.3%.
23:56Vaibhav TanejaAs 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.
24:17Vaibhav TanejaThis demonstrated 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 cost.
24:31Vaibhav TanejaNote that interest rate subvention costs are recognized as upfront as revenue offset. So as interest rates have risen this year, the cost of subvention has risen along with them which had a negative impact on automotive margins.
24:49Vaibhav TanejaAs we have previously noted, energy business is inherently lumpy. Deployments are tied to customer timelines and largely out of our control. In Q2 we deployed 13.5 GWh of energy storage, a 53% sequential increase and the second largest quarter for energy business.
25:10Vaibhav TanejaDespite 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.
25:30Vaibhav TanejaAlso, 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 is coming down amidst growing competition.
25:45Vaibhav TanejaLong 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 and we are doing our best to build based on both existing demand and future demand.
26:01Vaibhav TanejaWe 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.
26:28Vaibhav TanejaWhile 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 us.
26:44Vaibhav TanejaWe 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 cybercap and other AI initiatives as well as appreciation for an additional compute that we brought online.
27:17Vaibhav TanejaAdditionally, 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 and D, to continue to grow in 2026 and beyond.
27:34Vaibhav TanejaNet 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.
27:50Vaibhav TanejaAs previously guided, our free cash flow ended up being negative for the quarter. Most of the reason for the IT going negative is because CAPEX more than doubled sequentially and we expect it to increase further in the second half of 2026.
28:07Vaibhav TanejaWe 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 expansions we'll do for other manufacturing for automotive.
28:35Vaibhav TanejaIn 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.
28:48Vaibhav TanejaWe 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. The path to amazing abundance is ever challenging and requires making bold bets.
29:02Vaibhav TanejaOur progress will be nonlinear. The future is going to be great 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.
29:21Travis AxelrodThanks so much Rabb as everyone on the call may have Noticed we've covered several of the sei.com questions already in opening remarks, including Optimus Production, Terrafab and Digital Optimus.
29:33Travis AxelrodAshok is joining us today, our VP of AI, and he's going to cover questions related to Robotaxi.
29:38Ashok ElluswamyAshok, thank you Travis. Many of the questions on sai.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.
29:52Ashok ElluswamyFirst 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.
30:12Ashok ElluswamyWe 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.
30:24Ashok ElluswamyZero 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. Here we show that such is not true.
30:39Ashok ElluswamyYou 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.
30:58Ashok ElluswamyWe 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.
31:17Ashok ElluswamyI 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.
31:31Ashok ElluswamyThe 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.
31:43Ashok ElluswamyTowards 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 at the Frontier AI development here at Tesla.
31:58Ashok ElluswamyThe 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 had planned roughly about seven major improvement tracks and they're all happening in parallel.
32:17Ashok ElluswamyThe 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. As we continue to complete our work on V15, we will see that the car is going to be ridiculously safe and capable.
32:35Ashok ElluswamyWe are 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.
32:55Ashok ElluswamyFinally, regarding the Cybercap, first of all, it's a phenomenal product. Anyone who writes 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.
33:09Ashok ElluswamyThe same V15 models that power Model Y and other platforms will also work on. Cyber gaps in conclusion, Robotaxi growth so far has been literally exponential while keeping an impeccable safety record.
33:23Ashok ElluswamyOur technology bets are paying off, helping us sustain exponential growth for the foreseeable future. And the cybercap is going to be awesome.
33:33Travis AxelrodThat'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?
33:40Ashok ElluswamyYep, 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.
34:03Ashok ElluswamyThis opens up the entire world to provide data for training optimists. Just like fsd, we have access to a broad fleet of humans giving us data from all of the workers at our factory.
34:15Ashok ElluswamyOptimists 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.
34:34Ashok ElluswamyThis 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.
34:46Ashok ElluswamyThe 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 task themselves will be invaluable and help us close any minor form factor gaps that may exist between the bot and the humans.
35:05Ashok ElluswamyThis 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.
35:20Ashok ElluswamyOur AI strategy for Optimus is aligned with the same. It's the same end to end strategy that drives FSD pixels in, controls out. And just like fsd, we expect it to work broadly in fsd.
35:31Ashok ElluswamyYou know, you can get in the car, type in an address and then hit start. And this like, handles all of driving from park to park. And the same thing is going to be true for Optimus as well.
35:40Ashok ElluswamyYou're going to just ask it to do anything and then you just perform the entire task on its own without you having to do anything along the way. And it's the same team that produced FSD, you know, the V12, 13, 14 and now V15 software that now works on Optimus as well.
35:54Ashok ElluswamyHence I'm very confident that Optimus will be an extremely capable robot.
36:00Travis AxelrodGreat. Thank you so much, Ashok. So that covers the sei.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.
36:21Travis AxelrodTom, you're still on mute, so please unmute yourself and go ahead and ask your question.
36:35Travis AxelrodAll 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.
36:47Travis AxelrodSo, Andrew, as soon as you can, please unmute yourself and ask your question.
37:00AnalystCan you hear me?
37:01Elon MuskYes, we can.
37:02AnalystAwesome. 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, so you've had to mostly in source a lot of that yourself.
37:15AnalystI'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.
37:31Analystyou know, asking that in the context of, obviously, you know, you want to control your own destiny to some extent and ramp as quickly as possible, but from an investment cycle standpoint, you know, potentially more capital efficient to have some partners, you know, help you along the way.
37:44AnalystSo I'm just curious how you're thinking about that and some of the dialogue you've had with potentially some external suppliers.
37:58Travis AxelrodElon, you may be on mute right now.
38:00Elon MuskWe can't hear you. Sorry. Yeah, our supplies 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.
38:18Elon MuskYou 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 suitable AI compute for Optimus and Robotaxi.
38:37Elon MuskPanasonic has also invested many billions in increasing battery cell production. Okay, I'm a little under the weather here. I'm a bit ill, so I sound a little off. I'm kind of struggling with some.
38:53Elon MuskI'm a little bit ill today, so.
38:57Ashok ElluswamyYeah.
38:57Elon MuskBut our partners have been great and I'd like to thank them for their support and their investment and their hard work.
39:06AnalystGreat, thanks for that. And maybe just as a. So sorry, Andrew.
39:12Travis AxelrodWe're going to have Karn hop in here for additional color briefly.
39:15AnalystYeah, Just to add to Elon's point that, you know, the Samsung Fab, that's going to be pretty significantly dedicated to future projects. That's a massive investment, multi billion dollar.
39:25AnalystWe'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.
39:41AnalystAnd 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.
39:52AnalystYeah.
39:52Elon MuskAnd actually I'd also like to thank Micron for giving us memory allocation. They're going 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.
40:19AnalystGreat. Really appreciate that color. And maybe just my follow up on Robo Taxis. You guys gave a lot of great information in your prepared remarks. But, you know, there seems to be some evolving regulations at the state level potentially around sensor requirements.
40:36AnalystSo 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 overregulated.
40:47AnalystSo 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?
40:52Travis AxelrodAnd we've got Lars on the line. Lars, if you wouldn't mind covering this one, if you can.
40:59Lars MoravyYeah, sure, Travis. I mean, I think, you know, we talk about regulation, particularly in the US We've made a lot of headway and you know, just good initiatives from the federal government in terms of FMVSS rules moving towards, you know, acceptance and adoption of purely built AVs.
41:20Lars MoravyAnd 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.
41:31Lars MoravyI think ultimately, as the shoes 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, the public to, to adopt it.
41:44Lars MoravyYou know, I think, you know, the best regulations are those that provide companies and innovators with a goal or a task and allow us to figure out the solution.
41:56Lars MoravyAnd 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.
42:08Lars MoravyAnd I think a show played that out really clearly and that, that'll be the, the foundation of our expansion moving forward.
42:17AnalystGreat. Thanks for the questions.
42:20Travis AxelrodThanks so much. We're 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, so we're going to have to send you back into the queue.
42:38Travis AxelrodNext is Alex from Bank of America. Alex, as soon as you can, please unmute yourself.
42:46Ashok ElluswamyHey, thanks.
42:48AnalystThanks for the questions here. Just a few follow ups on Robo Taxi actually. I guess what milestone should investors be watching from here that would cause you to accelerate your fleet scaling or market deployments?
43:02AnalystYou know, is it the further safety validation like a miles driven 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?
43:21AnalystThanks.
43:26Elon MuskYeah, we 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.
43:37Elon MuskSo this is. But 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 aspect our ability to service the demand.
43:53Elon MuskAnd so obviously there's no, you can just go vertical in that situation. So it's really just about going through and what we call the march of nines of reliability, where you need like, like, like how many nines of reliability do you need to scale?
44:09Elon MuskIdeally, you want 99.9999999, you know, percent reliable. And so that's the, it's just the march nines of reliability. Z. I think the only thing really constraining our growth in Robotaxi.
44:31Travis AxelrodGreat, great, thanks, Elon. The next question is going to come from Colin at Wells Fargo. Colin, please unmute yourself when you're ready.
44:43AnalystOh, great. Thanks for taking my questions. There's been a lot of chatter about SpaceX and Tesla combining in some way. I mean, a lot of collaboration already today. I mean, Elon, do you see synergies
44:56Vaibhav Tanejaeventually from combining the companies?
44:59AnalystDoes that make sense for me from
45:00Elon Muskyour perspective over time? Well, I mean, as you can tell from all the many collaborations on so many fronts with SpaceX and there's a lot, there's more and more overlap, especially with Terrafab, that's really going to be a gigantic project.
45:24Elon MuskBut obviously we can't talk about, you know, combining companies, that kind of thing on an. It's got to be done with the appropriate process. And with that I'll turn it over to Brandon, our general counsel.
45:36AnalystNo, thanks, Elon. And that's exactly right. We continue to benefit from our relationship with SpaceX and we've had, they've been a great partner and we have numerous beneficial transactions with them.
45:46AnalystAnd 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.
45:58Elon MuskYeah, there's many other things too. Obviously you've got Grok in the car and so and Groq helping drive Digital Optimus. You've also got Starlink being integrated into the cybercap and Sonic will be integrated into all of our vehicles, at least for markets that Starlink is active.
46:23Elon MuskBecause for a robotaxi situation you need to have, you know, coverage everywhere. And there are many, many, many places even in Silicon Valley where the cellular coverage is, is a terrible or sometimes non existent, which is surprising for Silicon Valley.
46:40AnalystBut,
46:42Elon Muskbut I don't want to drive to work those first 10, 15 minutes. I can't actually do any calls because the cellular connectivity is so bad. So we can't have Robotaxis getting stuck in these Bermuda Triangles of lack of cellular connectivity.
46:59Elon MuskSo Starlink with its ability to do connectivity anywhere is actually quite important. So we don't have Robotaxis missing in action. And then obviously if people are sitting in the car, they're going to want to do high productivity stuff.
47:16Elon MuskOr entertainment. And 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.
47:32Elon MuskAnd there's many other situations.
47:36Vaibhav TanejaYeah, I mean, I would say think of it like Ashok was mentioning about Cybercap. Right. That the experience is great in a world when you don't have to focus on driving.
47:48Vaibhav TanejaYou 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 cybercap design, it has a big screen and you know, we've started doing Cybercap rights in our factory in Austin.
48:06Vaibhav TanejaAnd when you go through that experience, you. I mean, soon customers would be able to do it in not too distant future and then you'll understand why that connectivity becomes so important.
48:18Travis AxelrodGreat. And then, Colin, do you have a follow up?
48:21AnalystYeah, just. If I follow up on Robotaxi, you know, if I look at the launches, it's been, you've been adding cities, but the number of units is still, you
48:31Elon Muskknow, it looks like, based on media
48:32Analystreports, sort of in the dozens as opposed to hundreds. 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.
48:49AnalystWhat sort is the roadblock to start adding more vehicles on the ground?
48:55Ashok ElluswamyThe reason we have been expanding across different cities instead of just doubling down a single city, is that we want to make sure that our stack is very general one.
49:02Ashok ElluswamyIt is a general one. We just want to both prove to ourselves and to other folks that it is working across a lot of different cities without too much effort per city.
49:12Ashok ElluswamyAnd 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. That's why it's hard for others to comprehend in terms of like miles versus the vehicles.
49:24Ashok ElluswamySince these vehicles operating the Robotaxi fleet drive basically continuously, as opposed to human drivers who use vehicles for maybe a couple 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.
49:43Ashok ElluswamyAnd that's why we are tracking the amount of unsupervised miles or just the number of vehicles or something like that. And we want to be operating in a very efficient fleet.
49:50Ashok ElluswamySo 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.
49:58Vaibhav TanejaYeah. And just to add further to this, I'm like, what? 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.
50:08Vaibhav TanejaAnd there are things not just on the software front, on the operation 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.
50:31Elon MuskYeah. One of the things for CyberCap should be noted is because it is a new vehicle chassis, we need. We need to accumulate driving data that is specific to the cybercap before we can put a lot of them on the road.
50:45Elon MuskSo unlike say, model three model.
50:47AnalystYeah.
50:48Elon MuskAnd our other vehicles, where we've got a lot of vehicles on the road, millions of vehicles on the road, we. We don't have that for subcap. So we actually have to accumulate miles with side caps that are retrofitted with steering wheels and acceleration braking pedals, that kind of thing, to calibrate to the center cap chassis.
51:15Elon MuskSo you'll see as we are confident about that, the number of cybercaps in cities will increase dramatically.
51:27AnalystGreat.
51:28Travis AxelrodOur next question.
51:30Elon MuskOh, yeah, go ahead, Lars.
51:31Lars MoravyIf I can just add, like, one thought here. The other reason I just want to point out is, you know, transportation, like TCO transportation, regulatory situations are different city by city, state by state is not a federal, you know, framework to do that.
51:47Lars MoravyAnd 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 and we're satisfying, you know, all of the requests of each individual city and, you know, in every way we can.
51:59Lars MoravySo we have to expand, you know, to each city to meet those requirements, and we'll continue to do so. And so all of what Ashok and Vaibhav and Ashok said will.
52:09Lars MoravyWill follow up with the Skilling.
52:11Travis AxelrodThanks, Lars. The next question is coming from Walt from LightShed. Walt, please unmute yourself.
52:18Elon MuskThanks.
52:19AnalystJust a quick follow up for that Lars comment. I mean, the NHTSA administrator, Jonathan Morrison
52:24Elon Muskwas just on cnbc.
52:25AnalystYou know, he already, you know, he's trying to get rid of the pedal and said. I forget his exact term, but seemed like he wanted to get rid of the steering wheel.
52:32AnalystIt seemed like that would be a gating factor. But is there other things that you need at the Federal level to really
52:39Elon Muskkind of unlock your ability to ramp cybercab.
52:46Lars MoravyThe short answer is no.
52:48Elon MuskI mean, I think we have a
52:49Lars Moravygreat relationship with NHTSA and Administrator Morrison especially. And 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.
53:07Lars MoravySo, you know, we've been open and honest with them for the last couple 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.
53:22Elon MuskGot it.
53:23AnalystAnd then just Elon, 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?
53:34AnalystCan these things, can the cyber cabs become remote hotspots for starlink mobile? And then similarly roadmap question on the semi, you know, when do you anticipate
53:46Elon Musklooking at autonomy for the semi?
53:48AnalystBecause 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.
53:56Elon MuskYeah, absolutely. As you allude to, there is a really serious shortage of truckers. So there just aren't enough people who around here who want to drive trucks which are crucial for transport throughout America.
54:14Elon MuskSo an autonomous semi is actually going to be very important to address the shortage of truck drivers and obviously will be great 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 use this Tesla semi.
54:44Elon MuskYou know, since the units, 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.
54:56Elon MuskIt makes sense for us to focus our efforts, our self driving efforts on our high volume vehicles. So model 3 and Y and solving self driving for and really getting to the point where it's generalized unsupervised self driving for those vehicles and cybercap.
55:19Elon MuskSo we expect to do get self driving working on the Tesla semi probably around the end of this year or early next year and but I just don't want it to be a distraction on the, you know, on the march of nines of, of self driving, of safety for self driving on three way in cybercap.
55:47Elon MuskThat's so the, it's taking a bit of a backseat for the next six months or so for time semi, but it will be, you know, it will definitely be a bit working next year and in time for the scale up to high production of Tesla semi for communications.
56:09Elon MuskYeah, I think there's an interesting angle
56:11Analystthere where
56:14Elon Muskyou could use the Starlink terminals that are in the Tesla cars as like 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.
56:42Elon MuskBut yeah, I mean this is a different subject, but obviously we could do that with the stationary solid terminals too.
56:50Travis AxelrodAll right, our next question is going to come from Will at Truist. Will, please unmute yourself.
56:58Elon MuskGreat.
56:59AnalystThanks 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.
57:09AnalystBut 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.
57:31AnalystYou have an option to design some, but have them made at, at third party fabs. You also have the option potentially to design and make them yourself. What, what should we think about your propensity to source these components in these different manners?
57:49Elon MuskYou're talking about making like microcontrollers and smoke, like the various computers that are in the car that operate, you know, like the steering system and the braking system.
58:03AnalystI'm talking about for Optimus, not for. Yeah,
58:10Elon MuskOptimus has a lot of really specialized power electronics and circuit boards. It's all Tesla design stuff. But it is fabricated by suppliers
58:24Analystfor
58:25Elon MuskOptimus 4, which will be built in Austin. That will be a much more vertically integrated supply system for Optimus 4. And that would, you know, we'd aim to have an order of magnitude more production of Optimus 4 than Optimus 3.
58:47Elon MuskSo sort of aspirationally 10 million units a year versus a million units a year of Optimus 3. But, but you know, with all the caveats there, which is insanely difficult to scale production.
59:01Elon MuskSo. And yeah, Optimus 4 will be much more vertically integrated. So probably doing a lot of the sort of PCV work in house with
59:11Analystthat as a follow up. Well, first maybe you could talk about the timing as to when that when Optimus for the, let's say, start production. But the actual thought I wanted to ask was the plan to upgrade hardware 3 to hardware 4 in order to be able to process.
59:35AnalystI Suppose it's version 15 of the and future versions of FSD. Is that still the plan to do hardware upgrades on the cars?
59:45Elon MuskI think it's going to make sense for, for to upgrade all cars with that are have less than hardware for almost any cars that have cameras basically because otherwise you're probably too many modifications.
1:00:00Elon MuskBut anything that's got sort of, that's set up for cameras it'll 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 AI board.
1:00:17Elon MuskSo it'll be either like we have an upgraded AI4 chip that's sort of a medium sort of Moderate improvement over AI4 probably reaches production around the middle of next year.
1:00:36Elon MuskAnd then there's also af5 which hopefully is in volume production around the middle of next year. AI5 will initially go into Optimus and actually making very good progress. So the Tesla chip team is really doing great work and making incredibly fast progress on AI5 and I'm very excited about the design of the Tesla AI6 chip.
1:01:01Elon MuskI 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.
1:01:16Elon MuskSo I think we got a things going really well on the chip front.
1:01:22AnalystYeah.
1:01:22Elon MuskAnd again I'd like to thank TSMC and Samsung and Micron for their support.
1:01:29Travis AxelrodGreat. We are coming up on the hour but we're gonna try to squeeze Dan in, so from Barclays. Dan, please mute yourself.
1:01:42AnalystGreat, 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 know you'll spend as much as you can, but you know, really efficiency seems like it's the gating factor.
1:02:00AnalystSo to what extent right now in this capex cycle cycle is your pace of CAPEX effectively capped simply because spending any more would be done in an inefficient manner?
1:02:11AnalystAnd to what extent is the pace of CAPEX really the primary determinant right now in unlocking different supply constraints that you have?
1:02:21Elon MuskYeah, it's a good question. I've actually, you know, my, what I've asked the team to do is like really we should be spending on capex as fast as we can, spend as fast as we can without it, without it being too wasteful.
1:02:38Elon MuskSo we're not trying to aim for like some extremely high efficient efficiency capital spend because that would slow things down. So it's trying to, it's a balance between like how much, you know, sort of capital efficiency versus time.
1:02:57Elon MuskSo 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.
1:03:09Elon MuskSo 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. I don't think there's ever been a company that's done this at the scale maybe proportionately back in when Henry Ford did the Model T or something like that.
1:03:32Elon MuskBut World War II when companies were making scale up weapons production. But I think probably this is the fastest industrial scale up since World War II in America.
1:03:49Vaibhav TanejaYeah. And I will just add a little bit on that. Basically if you look at it, you know, all our spend on capex is trying to do productive assets.
1:04:00Vaibhav TanejaRight. We're basically scaling factories. Whether it's Optimus, whether it's Cybercap, 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.
1:04:24Elon MuskYeah, very important. Yeah. This is underrated by the way. Please go ahead.
1:04:29Vaibhav TanejaYeah, Basically the amount of solar manufacturing which happens in the US we're just going to multiply it with an order of magnitude. And, and none of these things are easy.
1:04:44Vaibhav TanejaRight. Because what you have to do is in order to build a factory you have to start from ground zero. So just so you know, again I don't think we have shared this.
1:04:53Vaibhav TanejaWe end up being the general contractor for almost all our construction facilities because we are doing that much construction. And so going back to what Elon was saying, we're going at a very rapid scale.
1:05:07Vaibhav TanejaAnd yes, this means that we are doing a lot of things all at the same time. And that's why we just have to go as fast as we can humanly make things work in the real world.
1:05:22Elon MuskYeah. Our capex efficiency I think is off scale. Good.
1:05:29AnalystAlrighty.
1:05:29Travis AxelrodAnd then Dan. Yeah. Did you have a follow up that
1:05:31Elon Muskwe can wrap up with?
1:05:33AnalystYeah. Maybe just a quick question on energy storage, which is, you know, I think is a key topic here. Maybe you can just address, you know, to what extent is energy storage going to Be supply constrained for the foreseeable future.
1:05:47AnalystAnd 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.
1:05:59AnalystAddressing the quality of power issue for data centers, giving the sharp fluctuations in power use where you have an advantage given software power electronics. So just what is that demand curve right now between data centers versus just broader peak shaving for utilities?
1:06:17Elon MuskWell, it's still mostly it's not just peak shaving, but it's also grid balancing. So it's not just like the facts are on briefly but for balancing, for balancing power from wind generation and solar generation.
1:06:33Elon MuskBatteries are awesome. 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 is with solar panels and batteries.
1:06:51Elon MuskAnd you can just think of Earth like a giant satellite. There's far more power available from the sun than anything else by far. And we think power constraints are going to be, they really are a major issue for AI just turning on the AI computers.
1:07:09Elon MuskThe AI compute demand is so high that people having even the so called 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.
1:07:31Elon MuskYou can have during a training run the, the power consumption can drop by, you know, 70% for 100 milliseconds and you really need fast acting advanced power electronics to be able to smooth out these, these massive, the massive changes in power especially during the training runs.
1:07:56AnalystSo
1:07:58Elon Muskthat'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. But it will also be useful for being able to tap more power from the, the grid by you know, if you, if you tell utilities that they
1:08:21Analystcan,
1:08:23Elon Muskyou know, that they won't, 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 that for them to, to give you power.
1:08:42Elon MuskIn 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.
1:08:54Elon Muskbut the average power usage is only half a terawatt. 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 app for the United States just with batteries.
1:09:11Elon MuskSo really, we see demand for Megapack being very, very high in the future.
1:09:21Travis AxelrodAlrighty. That is all the time we have for today for Q and A. We appreciate everyone's questions and we look forward to talking to you next quarter. Thank you very much.
1:09:29Elon MuskThanks everyone.
1:09:37AnalystIt.