Tesla Q2 2024 earnings call (2024)
Questions on ElonsFAQ asked in this interview (18)
Transcript
4:21Travis AxelrodGood afternoon everyone and welcome to Tesla's second quarter 2024 Q&A webcast. My name is Travis Axelrod, Head of Investor Relations and I'm joined today by Elon Musk, Devop Tineja and a number of other executives.
4:34Travis 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.
4:46Travis 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.
4:59Travis 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.
5:09Travis AxelrodBefore we jump into Q and A, Elon has some opening remarks.
5:12Elon MuskElon thank you. So to recap, we saw a large adoption acceleration of EVs and then a bit of a hangover as others struggle to make compelling EVs. So there have been quite a few competing electric vehicles that have entered the market and mostly they have not done well, but they have discounted their EVs very substantially which has made it but more difficult for Tesla.
5:40Elon MuskWe don't see this as a long term issue, but really as fairly short term and we still firmly believe that EVs are best for customers and that the world is headed for fully electrified transport, not just of cars but also aircraft and boats.
6:04Elon MuskDespite many challenges, the Tesla team did a great job executing and we did achieve record quarterly revenues. Energy storage deployments reached an all time high in Q2, leading to record profits for the energy business and we're investing in many future projects including AI training and inference and great deal of infrastructure to support future products.
6:30Elon MuskWe won't get too much into the product roadmap here because that is reserved for product announcement events, but we are on track to develop to deliver a more affordable model in the first half of next year.
6:46Elon MuskBy far the biggest differentiator for Tesla is autonomy. In addition to that we have scale economies and we're the most efficient electric vehicle producer in the world.
6:59Tesla ExecutiveSo
7:02Elon Muskis this.
7:03Travis AxelrodAnyway,
7:06Elon Muskwhile others are pursuing different parts of the AI robotics stack, we are pursuing all of them. This allows for better cost control, more scale, quicker time to market and a superior product, applying not just to autonomous vehicles, but to autonomous humanoid robots like Optimus.
7:24Elon MuskRegarding full self driving and Robo taxi, we've made a lot of progress with full self driving in Q2 and with version 12.5 beginning rollout, we think customers will experience a step change improvement in how well supervised full self driving works.
7:44Elon MuskVersion 12.5 has five times the parameters of 12.4. And we'll finally merge the highway and city stacks. So the highway stack is still at this point is pretty old.
7:59Elon MuskSo often the issues people encounter are on the highway. But with 12.5 we finally merged the two stacks. I still find that most people actually don't know how good the system is and I would encourage anyone to understand the system better to simply try it out and let the car drive you around.
8:25Elon MuskOne of the things we're going to be doing just to make sure people actually understand the capabilities of the car is when delivering a new car and when picking up a car for service, to just show people how to use it and just drive them around the block.
8:43Elon MuskOnce people use the paddle, they tend to continue using it. So it's very compelling. And then this I think will be a massive demand driver. Even unsupervised full self driving will be a massive demand driver.
9:03Elon MuskAnd as we increase the miles between intervention, it will transition from supervised full self driving to unsupervised full self driving. And we can unlock massive potential. In V3, we postponed the sort of Robotaxi or the product unveil by a couple months where it's shifted to 1010, so 10 October and this is because I wanted to make some important changes that I think would improve the vehicle, the sort of the robo taxi, the thing, that thing that we're the main thing that we're going to show and we're also going to show off a couple of other things.
9:53Elon MuskSo moving back, moving it back a few months allowed us to improve the the Robotaxi as well as add in a couple other things for the product unveil.
10:12Elon MuskWe're also nearing completion of the south expansion of Giga Texas which will house our largest training cluster to date. This will be an incremental 50,000 H1 hundreds plus 20,000 of our hardware for all AI5 Tesla AI computer with Optimus.
10:32Elon MuskOptimus is already performing tasks in our factory and we expect to have Optimus production version one and limited production starting early next year. This will be for Tesla consumption,
10:53Travis Axelrodjust
10:53Elon Muskbetter for us to iron out the issues ourselves. But we expect to have several thousand Optimus robots produced and doing useful things by the end of next year in the Tesla factories and then in 2026 ramping up production quite a bit.
11:12Elon MuskAnd at that point we'll be providing Optimus robots to outside customers. That'll be production version 2 of Optimus for the energy business. This is growing faster than anything else.
11:28Elon MuskThis is. We are really demand constrained rather than production constrained. So we're ramping up production in our US factory as well as building megabac factory in China. That should roughly double our output, maybe triple potentially.
11:52Elon MuskSo in conclusion, we're super excited about the progress across the board. We're changing the energy system, how people move around, how people approach the economy. The undertaking is massive, but I think the future is incredibly bright.
12:10Elon MuskYou know, I really just can't emphasize just the importance of autonomy for the vehicle side and for Optimus. Although the numbers sound crazy, I think Tesla producing app volume with unsupervised msd, essentially enabling the fleet to operate like a giant autonomous fleet.
12:41Elon MuskAnd it takes the valuation, I think to some pretty crazy number. Ark Invest thinks on the order of $5 trillion. I think they're probably not wrong. And long term Optimus I think is achieves evaluation several times that number.
13:01Elon MuskI want to thank the Tesla team for strong execution and looking forward to exciting years ahead. Great.
13:09Travis AxelrodThank you very much Elon and Fed. Bob has opening remarks as well.
13:12Vaibhav Taneja (CFO)Thanks. As Elon mentioned, the Tesla team rose to the occasion yet again and delivered on all fronts with some notable records. In addition to those records, we saw our automotive deliveries go sequentially.
13:25Vaibhav Taneja (CFO)I would like to thank the entire Tesla team for their efforts in delivering a great quarter. On the auto business front, affordability remains a top of mind for customers.
13:34Vaibhav Taneja (CFO)And in response in Q2 we offered attractive financing options to offset sustained high interest rates. These programs had an impact on revenue per unit in the quarter. These impacts will persist into Q3.
13:48Vaibhav Taneja (CFO)As we have already launched similar programs, we're now offering extremely competitive financing rates in most parts of the world. This is the best time to buy a Tesla. I mean, if you're waiting on the sidelines, come out and get your car.
14:04Vaibhav Taneja (CFO)We had a record quarter on regulatory credits revenues and as well on net auto margins remained flat sequentially. It is important to note that the demand for regulatory credits is dependent on other OEMs plans for the kind of vehicles they're manufacturing and selling, as well as changes in regulations.
14:24Vaibhav Taneja (CFO)We pride ourselves to be the the company with the most American made cars and are continuing our journey to further localize our supply chain, not just in the U.S.
14:34Vaibhav Taneja (CFO)but in Europe and China as well. For the respective factories. As always, our focus is on providing the most compelling products at a reasonable price. We have stepped up our efforts to provide more trims that have estimated range of more than 300 miles on single charge.
14:52Vaibhav Taneja (CFO)We believe this, along with the expansion of our supercharging network, is the right strategy to combat range anxiety. Since the revision of FSD pricing in North America, we've seen adoption rates increase meaningfully and expect this to be a driver of vehicle sales as the feature set improves further.
15:13Vaibhav Taneja (CFO)Cost per vehicle declined sequentially when we remove the impact of Cybertruck while we are experiencing material costs trending down. Note that there is latency on the cost side and such reductions would show up in the P and L when the vehicles built with these materials get delivered.
15:32Vaibhav Taneja (CFO)Additionally, as we get into the second half of the year, it is important to note that we are still ramping Cybertruck and Model 3 and are also getting impacted by varying amounts of tariffs on both raw materials and fidget goods while our teams are working feverishly to offset these.
15:48Vaibhav Taneja (CFO)Unfortunately, it may have an impact on the cost in the near term. We previously talked about the potential of the energy business and now feel excited that the foundation that was laid over time is bearing the expected results.
16:02Vaibhav Taneja (CFO)Energy storage deployments more than doubled with contribution not just from megapack but also powerwall, resulting in record revenues and profits for the energy business. Storage backlog is strong. As discussed before, deployments will fluctuate from period to period with some quarters seeing large increases others seeing a decline.
16:25Vaibhav Taneja (CFO)Recognition of storage gate of is dependent on a variety of factors including logistics, timing as we send units from a single factory to markets across the world, customer readiness and in case of EPC projects on construction activities moving on to the other parts of the business.
16:44Vaibhav Taneja (CFO)Service and other gross profits also improved sequentially from the improvement in service utilization and growth in our collision repair business. The impact of a recent reorg is reflected in restructuring other on the income statement just to level set.
17:01Vaibhav Taneja (CFO)This was about $622 million of charge which got recorded in the period and I want people to remember that we've called it out separately on the financials sequentially, our operating expenses excluding surcharges reduced despite an increase in spend for AI related activities and high legal and other costs.
17:22Vaibhav Taneja (CFO)On the CAPEX front, while we saw a sequential decline in Q2, we still expect the year to be over 10 billion in CapEx. As we increase our spend to bring a 50k GPU cluster online.
17:36Vaibhav Taneja (CFO)This new cluster will immensely increase our capabilities to scale FSD and other AI initiatives. We reverted to positive free cash flow of 1.3 billion in Q2 this was despite restructuring payments being made in the quarter and we ended the quarter with over 30 billion of cash and investments.
17:56Vaibhav Taneja (CFO)Once again, we've begun the journey towards the next phase for the company with the building blocks being placed. It will take some time, but will be a rewarding experience for everyone involved.
18:09Vaibhav Taneja (CFO)Once again, I would like to thank the entire Tesla team for their efforts.
18:14Travis AxelrodGreat, thank you very much. Now let's go to investor questions. The first question is what is the status on the roadster?
18:23Elon MuskWith respect to the roadster? We've completed most of the engineering and I think there's still some upgrades we want to make to it. But we expect to be in production with Royce for next year.
18:38Elon MuskGreat. It'll be something special, like a Hall of famer, I think. Fantastic.
18:45Travis AxelrodThe next question is about timing of robo taxi event, which we've already covered. Absolutely. We'll go to the next question. When do you expect the first robotaxi ride?
18:57Elon MuskI guess that's really just a question of when do I expect the first. When can we do unsupervised full self driving?
19:08Elon MuskIt's difficult. Obviously my predictions on this have been overly optimistic in the past. So I mean, based on the current trend, it seems as though we you should get miles between interventions
19:27Travis Axelrodto be
19:27Elon Muskhigh enough that it should be far enough in excess of humans that you could do unsupervised possibly by the end of this year. I would be shocked if we cannot do it next year.
19:39Elon MuskSo next year seems highly probable to me. Based on point simply plus the points of the curve of miles per intervention, that trend exceeds humans for sure next year.
19:56Elon MuskSo yeah,
20:00Travis Axelrodthank you very much. Our third question is the Cybertruck is an iconic product that wows everyone who sees it. Do you have plans to expand the cyber vehicle lineup to a cyber SUV or cyber van?
20:13Elon MuskI think we want to limit product announcements to when we have a special specific product announcement event rather than earnings calls.
20:22Travis AxelrodGreat, thank you. Our next question is what is the Current status of 4680 Battery cell production and how is the ramp up progressing?
20:31Tesla Executive4680 production ranked strongly in Q2, delivering 51% more sales than Q1 while reducing COG significantly. We currently produce more than 1400 cyber trucks of 4680 cells per week. And we'll continue to ramp output as we drive costs down further towards the cost parity target we set for the
20:49Elon Muskend of the year.
20:50Tesla ExecutiveWe built our first validation cybertruck with dry cathode process made on our mass production equipment, which is A huge technical milestone and we're super proud of that. We're on track for production launch with dry cathode in Q4 and this will enable cell costs to be significantly below available alternatives, which was the original goal of the 4680 program.
21:14Travis AxelrodGreat, thank you very much. The next question is any update on Dojo?
21:21Elon MuskYeah. So Dojo, I should preface this by saying I'm incredibly impressed by Nvidia's execution and the capability of their hardware. And what we are seeing is that the demand for Nvidia hardware is so high that it's often difficult to get the GPUs.
21:46Travis AxelrodAnd
21:49Elon Muskthere just seems this. I guess I'm quite concerned about actually being able to get state of the art Nvidia GPUs when we want them. And I think this therefore requires that we put a lot more effort on Dojo in order to have.
22:09Elon MuskIn order to ensure that we've got the training capability that we need. So we are going to double down on Dojo and we do see a path to being competitive with Nvidia with, with Dojo.
22:23Elon MuskAnd I think we kind of have no choice because the demand for Nvidia is so high and it's obviously their obligation essentially to raise the price of GPUs to whatever the market will bear, which is very high.
22:44Elon MuskSo I think we've really got to make Dojo work and we will.
22:51Vaibhav Taneja (CFO)Great.
22:53Travis AxelrodThe next question is what type of accessories will be offered with Optimus?
23:02Elon MuskThere's. Optimus is intended to be a generalized humanoid robot with a lot of intelligence. So it's like saying what kind of accessories would be offered with a human. It's really intended to be able to be backwards compatible with human tasks.
23:20Elon MuskSo it would use any accessories that a human would use. Yeah. Thank you.
23:31Travis AxelrodThe next question is, do you feel you're cheating people out of the joys of owning a Tesla by not advertising?
23:39Elon MuskWe're doing some advertising. So yeah, I'll say something.
23:45Vaibhav Taneja (CFO)You know, fundamental belief is that we need to be providing the best products at a reasonable price to the consumers. Just to give you a fact, in US alone in Q2, over 2/3 of our sales were to deliveries were to people who had never owned a Tesla before and which is encouraging.
24:03Vaibhav Taneja (CFO)We've spent money on advertising and other awareness programs and we have adjusted our strategy. We're not saying no to advertising, but this is a dynamic play and we know that we have not exhausted all our options and therefore plan to keep adjusting in the later half of this year as well.
24:23Travis AxelrodGreat, thank you very much. The next question is on energy growth, which we already covered in opening remarks. So we'll move on to the next one. What is the updated timeline for Giga Mexico and what will be the primary vehicles produced initially?
24:37Elon MuskWell, we currently are paused on Giga Mexico. I think we need to see just where things stand after the election. Trump has said that you put heavy tariffs on vehicles produced in Mexico, so it doesn't make sense to invest a lot in Mexico if that is going to be the case.
25:00Elon MuskSo we kind of need to see where things play out politically. However, we are increasing capacity at our existing factories quite significantly. And I should say that the Cyber Taxi or Robotaxi will be will be produced here at our headquarters at Giga Texas.
25:24Travis AxelrodAll right, thank you.
25:25Elon MuskSorry. And as will Optimus towards the end of next year for optimus production version 2. The high volume version of Optimus will also be produced here in Texas.
25:38Travis AxelrodGreat, thank you. Just a couple more. Is Tesla still in talks with an OEM to license FSD?
25:46Elon MuskThere are a few major OEMs that have expressed interest in licensing Tesla full stop driving and I suspect there will be more over time, but we can't comment on the details of those discussions.
26:03Travis AxelrodAll right, thank you. And the last one, Any updates on investing in XAI and integrating GROK into Tesla software?
26:11Elon MuskI should say that Tesla is learning quite a bit from xai. It's been actually helpful in advancing full self driving and in building up the new Tesla data center.
26:24Elon MuskWith reviving investing in xai, I think we'd need to have a shareholder approval of any such investment, but I'm certainly supportive of that if shareholders are. But I think we need to vote on that.
26:38Elon MuskAnd I think that there are opportunities to integrate Groq into Tesla software. Yes.
26:48Travis AxelrodAll right, thank you very much. And now we will move on to analyst questions. The first question comes from Will Stein from Truist. Will, please go ahead and unmute yourself.
26:58Elon MuskGreat.
26:58AnalystThanks so much for taking my question. And this relates a little bit to the last one that was asked. Elon, I share your strong enthusiasm about AI and I recognize Tesla's opportunity to do some great things with the technology.
27:11AnalystBut there are some concerns I have about Tesla's commercialization and that's what I'd like to ask about. Specifically, there were some news stories through the quarter that indicated that you redirected some AI compute systems that were destined for Tesla instead to xai.
27:30AnalystOr perhaps it was to X, I'm not sure. And similarly, a few quarters ago, if you recall I asked about your ability to hire engineers in this area and you noted that there was a great desire for some of these engineers to work on projects that you were involved with.
27:49AnalystBut some of them weren't at Tesla. They were instead at xai or perhaps even X again.
27:54Elon MuskSo the question is, when it comes
27:56Analystto your Capital Investments, your AI R&D, your AI engineers, how do you make allocation decisions among these various ventures? And how do you make Tesla owners comfortable really benefits them?
28:14AnalystThank you.
28:16Elon MuskYeah, I mean, I think you're referring to a very like an old article regarding GPUs, like that's like six, six or seven months old. Tesla simply had no place to turn them on.
28:30Elon MuskSo it would have been a waste of Tesla capital because we would just have to order H1 hundreds and have no place to turn them on. So it was just.
28:40Elon MuskThere was, this wasn't a let's pick Xai of a Tesla. There was no. The Tesla data centers were full. There was no place to actually put them. We've been working 247 to complete the south extension on the Tesla big factory here in Texas.
29:02Elon MuskThat south extension is what will house the 50,000 H100s. And we're beginning to move the H100 server acts into place there. But we really needed, we needed that to be complete.
29:20Elon MuskPhysically you can't just order, compute, order GPUs and turn them on. But no, you need a data center. It's not possible. So I want to be clear, that
29:32Vaibhav Taneja (CFO)was
29:35Elon Muskin Tesla's interest, not contrary to Tesla's interest. This Tesla is no good to have GPUs that I can't turn on. The split second that south extension is able to take GPUs, which is really just this week.
29:52Elon MuskWe are moving GPUs in there and we'll bring them online. With regard to xai,
30:03Tesla Executivethere are people
30:03Elon Muskthat only want to work on AGI. So what I was finding was that we're trying to recruit people to Tesla. They were only interested in working on AGI, not Tesla specific problems.
30:21Elon MuskAnd they once thought they do a startup. So it was a case of either they go to a startup or
30:31Vaibhav Taneja (CFO)and
30:32Elon MuskI'm involved or they do a startup and I'm not involved. Those are the two choices. This wasn't, oh, they would come to Tesla. They were not going to come to Tesla under any circumstances.
30:46Elon MuskSo yeah,
30:53Vaibhav Taneja (CFO)yeah, I mean I would even add that, you know, air is a broad spectrum and there are a lot of things which you know we are focused on full self driving as Tesla and also Optimus, but there's the other spectrum of AI which we're not working on and that's the kind of work which other, other companies are trying to do in this case xai.
31:17Vaibhav Taneja (CFO)So you have to keep that in mind that it's a broad spectrum, it's not just one specific thing.
31:24Elon MuskYeah, once again I want me just repeat myself here. I tried to recruit them to Tesla including to say like you can work on AGI if you want and they refused.
31:35Elon MuskOnly then was XAI graded.
31:38AnalystI really appreciate that clarification. If I can ask one follow up, it relates to the new vehicles that you're planning to introduce next year. I understand this is not the venue for product announcements, but when we think about the focus, I've heard on the one hand that the focus is on cost reduction.
31:59AnalystOn the other hand you also said that the Roadster would come out. Should we expect other maybe more limited variants like similar to the cars that you make today but with, you know, some changes or improvements or different,
32:18Travis Axelrodsome
32:18Analystother variability in the form factors? Should we expect that to be a significant part of the strategy in the next year or two?
32:27Elon MuskI don't want to get into details of product announcements and we have to be careful of the Osborne effect here. So you know, if you start announcing some great thing, it affects our near term sales.
32:43Elon MuskWe're going to make great products in the future just like we have in the past. And a story.
32:53AnalystGreat.
32:54Travis AxelrodThe next question comes from Ben Callow from Baird. Ben, please go ahead and unmute yourself.
33:01AnalystHi, thanks for taking my question. When we think about revenue contribution and with energy growing so quickly and optimists on the come, how do we think about the overall segments longer term?
33:13AnalystAnd then do you think that auto revenue will fall below 50% of your overall revenue? And then my follow up is just on the last call you talked about distributed compute on your new hardware.
33:27AnalystCould you just update us and talk a little bit more about that, the timeline for it and how you would reward customers for letting you use their, their compute power in their cars.
33:36Elon MuskThanks. Yeah, I mean as I've said a few times, I, I think the long term value of Optimus will exceed that of everything else that Tesla combined. So it's simply just something.
33:51Elon MuskConsider the usefulness utility of a humanoid robot that can do pretty much anything you ask of it. I think everyone on Earth is going to want 1. There's 8 billion people on Earth, so that's 8 billion right there.
34:08Elon MuskThen You've got all of the industrial uses, which is probably at least as much if not way more so. I suspect that the long term demand for general purpose humanoid robots is in excess of 20 billion units and tails, that has the most advanced human robot in the world and is also very good at manufacturing, which these other companies are not.
34:40Elon MuskAnd we've got a lot of experience with the most experience with the world leaders in real world AI. So we have all of the ingredients. I think we're unique in having all of the ingredients necessary for large scale high utility generalized humanoid robots.
35:03Elon MuskThat's why, you know, my rough estimate long term is in accordance with the ARK Invest analysis of, you know, market cap of on the order of 5 trillion for maybe more for autonomous transport, and it's several times that number for general purpose humanoid robots.
35:27Elon MuskI mean, at that point I'm not sure what money even means. But in the benign AI scenario we are headed for an age of abundance where there was no shortage of goods and services.
35:43Elon MuskAnyone can have pretty much anything they want. So it's a very wild future we're
35:49Analystheaded for
35:52Travis Axelrodon the distributed compute.
35:54Elon MuskYeah, distributed compute. That seems like a pretty obvious thing to do. I think where the distributed compute becomes interesting is with our next generation Tesla AI chip, which is hardware 5, or what we're calling AI 5, which is from, from the standpoint of an inferno capability comparable to a B200 and embedded V200.
36:27Elon MuskAnd we're aiming to have that in production at the end of next year and scale production in 26. So it just seems like if you've got, even if you've got autonomous vehicles that are operating for 50 or 60 hours a week, there's 168 hours in a week.
36:48Elon MuskSo you have somewhere above, I think 100.
36:57Elon MuskNeural net computing. I think we need a better word than GPU because GPU means graphics plus and neural network. So there's a high rouse plus per week of AI compute, AI inverse compute from the fleet, from the vehicles, and probably some percentage from the humanoid robots that it would make sense to do distributed inference.
37:19Elon MuskAnd if you could, if there's a fleet of some point 100 million vehicles with AI5 and beyond, because you have AI6 and 7 and whatnot, and there may be billions of humanoid robots, that is just a staggering amount of inference compute that could be used for general purpose computing, it doesn't have to be used for the humanoid robot or for the car.
37:47Elon MuskSo I think that's a pretty obvious thing to say. What's more useful than Having to do nothing.
37:59Travis AxelrodAll right, thank you. The next question comes from Alex Potter from Piper. Alex, please go ahead and unmute yourself.
38:07AnalystPerfect, thanks. Wanted to ask a question on FSD licensing. You mentioned that in passing previously. Was just wondering if you can elaborate maybe on the mechanics of how that would work.
38:20AnalystI guess presumably this would not be some sort of simple plug and play proposition. Presumably an OEM would, I don't know, several years to develop its own vehicle platform that's based on fsd.
38:33AnalystI imagine they would need to adopt Tesla's electrical architecture, compute, sensor, stack. So correct me if I'm sort of misunderstanding this, but if you had a cooperative agreement of some kind with another oem, then presumably it would take you several years before you'd be able to recognize licensing revenue from that agreement.
38:51AnalystDoes that the right way to think about that?
38:55Tesla Executive (Energy)Yes.
38:56Elon MuskThe OEMs do not move fast. There's not really a sensor suite, it's just cameras. But they would have to integrate our AI computer and have cameras with a 360 degree view.
39:10Elon MuskAnd at least the gateway, like what talks to the Internet and communicates with the Tesla system. You need kind of a gateway computer too. So it's really gateway computer with the cellular and WiFi connectivity, the Tesla AI computer and seven cameras, or enough cameras to get a 360 degree view.
39:34Elon MuskBut this will. Given the speed at which the order industry moves, it would be several years before you see this in volume.
39:45AnalystOkay, good. That's more or less what I expected. So then the follow up here is if you did sign an FSD licensing agreement with another automaker, when do you think you would disclose that?
39:58AnalystWould you do it right when you sign the agreement or only after that multiple years has passed and the vehicle is ready to be rolled out?
40:07Elon MuskI think it depends on the oem. I guess would be happy either way.
40:16Vaibhav Taneja (CFO)Yeah, it depends on, you know, what kind of arrangement we enter into. A lot of those things are we're not ironed those out yet. So we'll make that determination as and when we get to that point.
40:31Elon MuskAnd the kind of deals that are obviously relevant are only if, you know, some OEM is going through this in a million cars a year or something significant, because not if it's like 10,000 or 100,000 quiets a year.
40:44Elon MuskWe could just make that ourselves.
40:48Travis AxelrodAll right, thank you. The next question comes from Dan Levi from Barclays. Dan, please go ahead and unmute yourself.
40:56AnalystHi, good evening. Thanks for taking the questions. First, wanted to start with a question on Shanghai. You've leveraged Shanghai as, as an export center really do its low cost and that makes sense.
41:11AnalystMaybe you can just give us a sense of how the strategy changes, if at all, given the implementation of tariffs in Europe. Also to what extent your import of batteries from China into the us how that might change given the tariffs.
41:30AnalystThank you.
41:32Vaibhav Taneja (CFO)Yeah, I think I covered some part of it in my opening remarks. But just to give you a little bit more just on the tariff side, the European authorities did sample certain other OEMs in the first round to establish the tariffs for cars being imported from China into Europe.
41:51Vaibhav Taneja (CFO)While we were not picked up in our individual examination in the first round, they did pick us up in the second round. They visited our factory, we worked with them, provided them all the information.
42:04Vaibhav Taneja (CFO)You know, as a result we are adjusting our import strategy out of China into Europe. But and you know, one other thing to Note is in Q2 itself, we started building right hand model Y's out of Berlin and we also delivered it in Ukraine.
42:23Vaibhav Taneja (CFO)And you know, we're adjusting as needed but you know, we will keep adjust. We're still importing Model 3s into Europe out of Shanghai and you know, we are still evaluating what is the best alternate to manage all this.
42:43Vaibhav Taneja (CFO)Just on the examination by the European authorities, like I said, we cooperated with them well. We are confident that we should get a better rate than what they have imposed for now.
42:57Vaibhav Taneja (CFO)But this is literally evolving and we are adjusting as fast as we can with this. I would also add that because of this you've seen the impact that Berlin is doing.
43:14Vaibhav Taneja (CFO)More imports into places like Taiwan as well as, you know, UK I just mentioned. So it will keep changing and we will keep adapting as we go about it.
43:31AnalystThanks. Yeah, thank you.
43:34Vaibhav Taneja (CFO)As a follow up, I wanted to
43:35Analystask about the Robotaxi strategy and specifically the shareholder deck here notes that the release is going to be. One of the gating factors is regulatory approval. So maybe you could help us understand, you know, which regulations specifically are the ones that we should be looking for.
43:58AnalystIs it fmvss? That's standard. And then, you know, to what extent does the strategy shift you've done with fsd? More of a nationwide no boundary approach. Is the robotaxi approach, one that's more geofence, so to speak, and is more driven by a state by state approach?
44:22Elon MuskI mean our solution is a generalized solution like what everybody else has. If you see like Waymo and whatnot, they have a very localized solution that requires high density mapping.
44:33Elon MuskIt's not, it's quite fragile. So you know, their ability to expand rapidly is limited. You know, our solution is a general solution that works anywhere. It would even work on a different Earth.
44:51Elon MuskSo if you rendered a new Earth, it would work on a new Earth. So there's capability, I think in our experience, once we demonstrate that something is safe enough or significantly safer than human, we find that regulators are supportive of deployment of that capability.
45:13Elon MuskIt's difficult to argue with if you've got a large number of, if you've got billions of miles that show that in future unsupervised FSD is safer than human, what regulator could really stand in the way of that?
45:31Elon MuskThey're morally obligated to approve. So I don't think regulatory approval will be a limiting factor. I should also say that, you know, the self driving capabilities that are deployed outside of North America are far behind that in North America.
45:55Tesla ExecutiveSo
45:58Elon Muskwith version 12.5 and maybe a 12.6, but pretty soon we will ask for regulatory approval of the Tesla supervised FSD in Europe, China and other countries. And I think we're likely to receive that before the end of the year.
46:26Travis AxelrodThank you.
46:27Elon MuskThis will be a helpful demand driver in those regions.
46:30Travis AxelrodUps.
46:32Elon MuskThank you,
46:35Tesla ExecutiveTravis. In terms of, like, you know, as Elon said, in terms of regulatory approval, you know, the vehicles are governed by FBSS in the US which is NHTSA, which is the same across all 50 states.
46:47Tesla ExecutiveThe world rules are the same across all 50 states. So creating a generalized solution gives us the best opportunity to deploy in all 50 states. Reasonably, of course, there are state and even local municipal level regulations that may apply to, you know, being a transportation company or deploying taxis.
47:08Tesla ExecutiveBut you know, as far as getting the vehicle on the road, that's, that's all federal and that's very much in
47:12Elon Muskline with what Elon was just suggesting about the data and the vehicle itself.
47:18Tesla ExecutiveAnd to add to the technology point, the end to end network basically makes no assumption about the location. Like you could add data from different countries and it just like perform equally well.
47:28Tesla ExecutiveThere's like almost close to zero US specific code in there. It's all just the data that comes
47:35Elon Muskfrom the U.S. yeah, to that end
47:38Tesla Executiveof the show it gets like, you know, we can go as humans to other countries and drive with some reasonable amount of assessment in those countries. And that's how you design the FSC software.
47:50Elon MuskYeah, exactly. Great.
47:54Travis AxelrodThanks guys. The next question comes from George from canaccord. George, please go ahead and unmute yourself.
48:02AnalystHi everyone. Thank you for taking my questions. Maybe just to expand on the Regulatory question for a second, and I could be comparing apples and oranges, but GM canceled their pedal less, wheel less vehicle.
48:16AnalystAnd according to the company this morning, their decision was driven by uncertainty about the regulatory environment. And from what we understand, and again, maybe I'm wrong here, but the robotaxi that has been shown, at least in images of the public, is also pedal less and wheel less.
48:32AnalystIs there a different regulatory concern? Just if you deploy a vehicle like that, that doesn't have pedal pedals or a wheel, and that may that be different from just regular FSD on a traditional Tesla vehicle.
48:44AnalystThank you.
48:45Elon MuskWell, obviously the real reason that they cancel it because GM can't make it work, not because of regulators. They're blaming regulators. That's misleading of them to do so because Waymo is doing just fine in those markets.
49:01Elon MuskSo it's just that the technology is not far
49:08Analystright. And maybe just as a follow up, I think you mentioned that FSD take rates were up materially after you reduced the price. Is there any way you can help us quantify what that means?
49:21Elon MuskExactly, thank you.
49:22Vaibhav Taneja (CFO)Yeah, I mean, you know, we've shared that how that we've seen a meaningful increase. I don't want to get into specific because we started from a low base, but we are seeing encouraging results.
49:39Vaibhav Taneja (CFO)And the key thing here is like Elon said, you need to experience it because words can't describe it till the time we actually use it. And that's why we are trying to make sure that every time a car is getting delivered, people are being showed how this thing is working.
49:54Vaibhav Taneja (CFO)Because when you see it working, you realize how great it is. I mean, just to give you one example. So again, there's a bias example, but I have more than 20 mile commute into the factory almost every day.
50:09Vaibhav Taneja (CFO)I have zero interventions on the latest stack and the car just literally drives me over. And especially with the latest version, wherein, you know, we're also tracking your eye movement, the same is almost not there as long as you're not wearing sunglasses.
50:27Elon MuskWell, we're fixing the sunglasses. It's coming soon. So you will be able to drive. It will be able to have sunglasses on and have the car drive. So but you know, there's a certain number of times I've talked with smart people who like live in New York or maybe downtown Boston and don't ever drive and then are asking me about FSD and I'm like, you can just get a car and fly it
50:57Travis Axelrodand
50:58Elon Muskif you're not doing that, you have no idea what's Going on. Thank you.
51:05Travis AxelrodThe next question comes from Pierre from New Street. Pierre, please unmute yourself.
51:15AnalystHey guys, thank you for taking my question. So it's on Robotaxi again and I completely get it that with a universal solution we will get like regulatory approval. We get there eventually clicking up miles and compute, et cetera.
51:32AnalystAnd my question is more how you think about deployments, because I'm still like, I'm thinking once you have a car that can drive everywhere, that can replace me, it can replace a taxi.
51:47AnalystBut then to do the ride hailing service, you need a certain scale and that means a lot of cars on the road. And so you need an infrastructure to just maintain the cars, take care of them, et cetera.
52:01AnalystAnd so my question is, are you already working on that? Do you have already an idea of what like your plan to deploy looks like and is that like a Tesla only plan, or are you looking at partners, local platform partners, global partners, to do that?
52:19AnalystAnd I'll have a quick follow up.
52:22Elon MuskThis would just be the Tesla network. You just literally open the Tesla app and summon a car and, and we send a car to pick you up and take you somewhere and you can.
52:34Tesla ExecutiveOur.
52:35Elon MuskWe'll have a fleet that's on the order of 7 million that are capable of autonomy. Soon, you know, in the years to come It'll be over 10 million, then over 20 million.
52:47Elon MuskThis is immense scale. And the car is able to operate 24 7, unlike the human driver. So the capability to like, if there's this basically instant scale with a software engine.
53:07Elon MuskAnd now this is for a customer owned fleet. So you think of that as being a bit like Airbnb, like you can choose to allow your car to be used by the fleet or cancel that and bring it back.
53:23Elon MuskYou'll be used by the fleet all the time, can be used by the fleet some of the time. And then Tesla would take, would share in the revenue with the customer.
53:34Elon MuskBut you can think of the giant fleet of Tesla vehicles as like a giant sort of Airbnb equivalent fleet, Airbnb on wheels. I mean, then, you know, in addition, we would make some number of cars for Tesla that would just be owned by Tesla and be that as the fleet.
53:54Elon MuskI guess that would be a bit more like Uber. But this, this would all be a Tesla network. And there's an important clause we've put in every Tesla purchase, which is that the Tesla vehicles can only be used in the Tesla fleet.
54:12Elon MuskThey cannot be used by a third party for autonomy.
54:18AnalystOkay, and do you think that scale is like progressively. So you can start in a city with just a handful of cars and you, you grow the number of cars over time or do you think there is like a critical mass you need to get to to be able to offer like a service that is of competitive quality compared to what like the, like Uber would be typically delivering already?
54:42Elon MuskI guess I'm not conveying this correctly. The entire Tesla fleet basically becomes active. Now this is obviously, maybe there's some number of people who don't want their car to earn money, but I think most people will.
54:59Elon MuskIt's instant scale. Thank you.
55:04Travis AxelrodOur next question comes from Colin from Oppenheimer. Colin, please unmute yourself.
55:18Elon MuskSorry about that, guys.
55:19AnalystI've got two questions around energy storage. With the tight supply and the stationary storage. Can you talk about your pricing strategy and how you're thinking about saturation and given geographies, given that, you know, some of these larger systems are starting to shift wholesale power markets in a pretty meaningful way quickly.
55:38Vaibhav Taneja (CFO)So yeah, I mean, you know, we are working with a large set of players in the market and you know, our pipeline is actually pretty long and there's actually a very, there's actually long end in terms of where you enter into a contract where delivery started starts happening.
56:00Vaibhav Taneja (CFO)And so far we have good pricing leverage. And I'll Mike chime in on this too.
56:08Tesla Executive (Energy)Yeah, I mean there's a lot of competition from Chinese OEMs, just like there
56:11Elon Muskis in the vehicle space.
56:12Tesla Executive (Energy)So we're in close contact with our customers and making sure that we're remaining competitive in where they're needing to be competitive to, to secure contracts to sell power and energy in the markets.
56:24Tesla Executive (Energy)We had a really strong contracting quarter and continue to build our backlog for 2025 and 2026. So we feel pretty good about where we are in the market. We realize that competition is strong, but we have a pretty strong value proposition with offering a fully integrated product with our own power electronics and site level controls.
56:44Vaibhav Taneja (CFO)Again, the aspect which people do not fully understand is that there's also a whole software stack which comes with our Megapack.
56:54Elon MuskRight.
56:55Vaibhav Taneja (CFO)And that is a unique proposition which we have, which is only available to us and we're using it with other stuff too. But that gives us a much, much more of an edge as compared to the competition.
57:08Elon MuskYeah, we find customers that they can sort of put together a hodgepodge solution and then sometimes they'll pick that solution and then that doesn't work and then they come back to us.
57:21Tesla Executive (Energy)Yeah, we're not really seeing saturation like on a global scale, there's little pockets of saturation in different markets, but we're more seeing that there's markets opening up given demand on the grid just continues to increase more than anyone expects.
57:37Tesla Executive (Energy)So that just opens up markets really across the world in different pockets.
57:43Vaibhav Taneja (CFO)Yeah, I mean just, just even on the AI computer side. Right. These, these GPUs are really powerful, really. And the amount of, you know, new pipeline which we're getting for people for data center backup and things like that is increasing at a pretty large scale.
58:03Elon MuskYeah, thanks too much.
58:04AnalystAnd then the follow up here is, let me run the 4680 process technology, you know, and the roll process, you know, you, there's some news around your equipment suppliers.
58:14Elon MuskYou know, can you talk about how
58:15Analystfar along you are in potentially qualifying an incremental supplier around some of those critical process technology steps?
58:25Tesla ExecutiveYeah, I can talk about that. You know, as you're probably referring to the lawsuit that we have with one of our suppliers. Look, I don't think this is going to affect our ability to roll out 4680.
58:38Tesla ExecutiveWe have very strong IP position in the technology and the majority of the equipment that we use is in house designed and some of it's in house build. And so we can take our IP stack and have someone else build it
59:00Elon Muskif we, if we need to.
59:01Tesla ExecutiveSo that's not really a concern right now.
59:05Elon MuskYeah, I think people don't understand just how much demand there will be for grid storage. They really just like the people I think are underestating this demand by probably orders magnitude.
59:18Elon MuskSo the actual energy, total energy output of say the US grid is if the power plants can operate at steady state, is at least two to three times the amount of energy it currently produces.
59:36Elon MuskBecause there are huge gaps. There's a huge difference in the, from peak to trough in terms of energy or power generation. So in order for a grid to not have blackouts, it must be able to support the load at the worst minute of the worst day of the year, the coldest or hottest day, which means that for the rest of time, the rest of the year, it's got massive excess power generation capability.
1:00:04Elon MuskBut it has no way to store that energy. Once you add battery packs, you can now run the power plants at steady state. Steady state means that basically any given grid anywhere in the world can produce in terms of cumulative energy in the course of the year, at least twice what it is currently producing.
1:00:27Elon MuskIn some cases maybe three times.
1:00:32Travis AxelrodAll right, thank you Vinay.
1:00:34Elon MuskVery profound thing.
1:00:41Travis AxelrodThank You, Elon, the next question comes from Colin Langen from Wells Fargo. Colin, please unmute yourself.
1:00:48AnalystOh, great. Thanks for.
1:00:51Vaibhav Taneja (CFO)Thanks for taking my questions.
1:00:55Elon MuskDo you hear me?
1:00:56AnalystYeah, sorry.
1:01:00Vaibhav Taneja (CFO)I guess I'm going to ask.
1:01:01AnalystIf Trump wins, there's a higher chance that IRA could get cut, I think. Elon, you had commented online that Tesla doesn't survive on EV subsidies. But wouldn't Tesla lose a lot of support if IRA goes away?
1:01:15AnalystI think model 3 and Y get IRA help for customers and I think your batteries get production tax credits.
1:01:21Vaibhav Taneja (CFO)So just what can you clarify?
1:01:23AnalystIf IRA ends, would it be a negative year profitability in the near term? Why might it not be a negative? And then any framing of the current support you get IRA related.
1:01:43Elon MuskI guess that there would be like some impact, but I think it would be devastating for our competitors. But. And it would hurt Tesla slightly. But long term probably actually helps.
1:01:57Elon MuskTesla would be my guess.
1:02:05Elon MuskBut, and I've said this before on X calls, the value of Tesla overwhelmingly is autonomy. These other things are in the noise relative to autonomy. So I recommend anyone who doesn't believe that Tesla will solve vehicle autonomy should not hold Tesla stock.
1:02:27Elon MuskThey should sell their Tesla stock. If you believe Tesla will solve Autonomy, you should buy Tesla stock. And all these other questions are in the noise.
1:02:41Vaibhav Taneja (CFO)Yeah, I mean, I'll ask this just to clarify a few things that at the end of the day when we are looking at our business, we've always been looking at it, whether or not ILA is there.
1:02:54Vaibhav Taneja (CFO)And we want our business to grow healthy without having any, you know, subsidies coming in, whichever way you look at it. And that's the way we have always modeled everything.
1:03:07Vaibhav Taneja (CFO)And that is the way internally also, even when we're looking at battery costs, yes, there are manufacturing credits, which we get, but we always drive ourselves to say, okay, what if there is no IRA benefit?
1:03:20Vaibhav Taneja (CFO)And how did we operate in that kind of an environment? Like Elon said, we definitely have a big advantage as compared to our competition on that front. We've delivered it and you can see it in the numbers over the years.
1:03:35Vaibhav Taneja (CFO)So there is. You cannot ignore the fundamental sides of the business. And then on top of it, once you add autonomy to it, like Elon said, it becomes millionaires to even think about the short term.
1:03:53Travis AxelrodOkay, I think that's unfortunately all the time we have for today. We appreciate all of your questions. We look forward to talking to you next quarter. Thank you very much and goodbye.
1:04:03Elon MuskThanks.
1:04:16Elon MuskI've had this vision.