Tesla Q1 2018 earnings call (2018)
Questions on ElonsFAQ asked in this interview (12)
Transcript
0:01OperatorGood day ladies and gentlemen and welcome to the Tesla Q1 2018 financial results and Q and A and webcast call. At this time, all participants are in a listen only mode.
0:13OperatorLater we will conduct a question and answer session and instructions will follow at that time. If anyone should require assistance during the conference, please press Star then zero on your touchtone telephone.
0:24OperatorAs a reminder, this conference may be recorded. I would now like to introduce your host for today's call, Mr. Martin Vieja, Senior Director of Investor Relations. Sir, you may begin.
0:36Martin ViechaThank you Sheree and good afternoon everyone. Welcome to Tesla's first quarter 2018 Q&A webcast. I'm joined today by Elon Musk, JB Straubel, Deepak Ahuja and Doug Field. Our Q1 results were announced at about 1pm Pacific Time in the update letter we published at the same link as this webcast.
0:56Martin ViechaDuring this call we will discuss our business outlook and make forward looking statements. These comments are based on our predictions and expectations. As of today, actual events or results could differ materially due to a number of risks and uncertainties, including those mentioned in our most recent filings with the sec.
1:15Martin ViechaDuring the question and answer portion of today's call, please limit yourself to one question and one follow up. Please press star one now. If you would like to join the question queue.
1:27Martin ViechaBefore jumping into Q and A, Elon has some opening remarks. Elon,
1:34Otherhi.
1:36Elon MuskI think our letter says most of it, but I think we're going to spend extra time on Q and A and try to answer as many questions as possible.
1:49Elon MuskI think we should be able to answer. So we're going to go as long as there are good questions to answer.
1:58Elon MuskThe thing I'm most excited about is the rapid increase in output we've got just in the last 24 hours at Gigafactory, we managed to achieve a sustained rate of over 3000 packs per day.
2:19Elon MuskSorry, per week and actually reach the peak hour. If extrapolated outward would be a rate of over 5000 cars per week. Obviously you can take a peak hour and assume every peak is every hour is as good as the peak.
2:35Elon MuskBut if you can achieve it even once in an hour, then with continued refinement of the system and improved operational uptime of the machinery, it means that you can achieve that sustained rate with more refinement.
2:53Elon MuskSo you spend essentially a month or two improving the operational uptime and the system as a whole will be able to do well over 5,000. I think. I mean, what's interesting is that at least in the case of pack production.
3:11Elon MuskWe were able to do this with minimal capex. And I think in general, our understanding of production is improving dramatically, exponentially, in fact. And we are seeing ways to achieve improved volume with dramatically less capex by simplifying the production line, by really engaging all of our associates, no matter how junior, in improving the way that parts are made.
3:53Elon MuskIt's amazing how everybody's got good ideas, just needs to solicit those ideas and implement them,
4:03Elon MuskAnd then making ongoing design improvements so that when we discover that something is not well designed for manufacturing, that we would very quickly change that part design and introduce that into the flow.
4:20Elon MuskOne of the things we've also found is that there's some things that are very well suited to manual operation and some things that are very well suited to automated operation.
4:32Elon MuskAnd the two should not be confused. So I should be clear that the vast majority of the test production system is automated. However, as I mentioned in a tweet a few months ago, we did go too far on the automation front and automated some pretty silly things.
4:55Elon MuskOne example would be we had this. This is sort of ironically foolish. We had these fiberglass mats on the top of the battery pack. They're basically like fiberglass. They're basically fluff.
5:16Elon MuskSo we try to automate the placement and bonding of fluff to the top of the battery pack, which is ridiculous. So we had Flufferbot, which was really an incredibly difficult machine to make work.
5:33Elon MuskMachines are not good at picking up pieces of fluff. Human hands are way better at doing that. And so we had a super complicated
5:44Othermachine
5:46Elon Muskusing a vision system to try to put a piece of fluff on the battery pack. Then one of the questions asked was, do we actually need that? So we tested a car with and without and found that there was no change in the noise volume in the cabin.
6:03Elon MuskSo we actually had a part that was unnecessary, that was forced. Line kept breaking down because flufferbot would frequently just fail to pick up the fluff or put it in like a random location.
6:19Elon MuskSo that was one of the silliest things I found. We were also, and this still remains to be fixed, but in a lot of cases. But we were over generalizing the design.
6:37Elon MuskSo, for example, the current battery pack has a port for the front drive units, which we then put a blanking plate, a sealed blanking plate on. So essentially we punch a hole in it, then put a blanking plate over the hole and do that for all rear drive unit cars, which is kind of crazy.
6:57Elon MuskWe've added cost, we've added A manufacturing step, we've added a failure mode
7:03Otherand
7:05Elon Muskfor something that is unnecessary. So that is something that's an example of something that's changed. So the result is we've had a radical improvement in production. Battery pack production went from taking seven hours to make a pack three weeks ago to under 70 minutes now.
7:32Elon MuskSo just show that really radical improvements are indeed possible. We also saw enormous improvement in Zone 4 of module production. This I should point out, is a fully automated zone and we're able to also achieve a sustained rate of 3,000 vehicles a week.
7:57Elon MuskSo we're actually slightly ahead in factory module and pack production than expected. And with some work at the Fremont vehicle plant, primarily in the general assembly area, I'm confident we will very soon exceed the 3,000 mark in pre mines.
8:21Elon MuskSo we're already there in the body shop which is also almost entirely automated, where we weld up the body, they were already capable of over 3,000 cars a week.
8:37Elon MuskAnd then general assembly with some improvements which will include reduction, I should say temporary reduction in automation in a few places, then we should be over 3,000. So basically I'm feeling really good about the Tesla production ramp Model three and I'm very proud of the work the team has done.
9:00Elon MuskIt's been an amazing amount of hard work and sacrifice by some very talented people to achieve this outcome. It's worth noting the you see a chart in the Model 3 market share versus competitors in Mid sized premium sedans.
9:26Elon MuskWe are almost the best selling sedan in the United States in this category and as of April and we will certainly be there in May and that's something really odd.
9:44Elon MuskI mean be there in May and then, and then really be there later this year, like third in the third quarter. It will. I think there's a good chance Model three gets maybe close to majority market share of mid sized premium sedans.
10:06Elon Musk30 to 40% seems likely and maybe a majority market share later this year. This is coming from a standing start against a lot of established brands who have far more sales outlets than we do.
10:24Elon MuskSo this is very encouraging.
10:36Elon MuskOh, and yeah, as the letter says, I'm feeling quite confident about achieving GAAP net income and positive cash flow in Q3. This is not, you know, obviously a certainty, but it does appear quite likely in my view.
11:03Elon MuskWe are going to conduct sort of a reorganization, restructuring of the company this
11:11Othermonth
11:13Elon Muskand make sure we're well set up to achieve that goal. And in particular the number of sort of third party contracting companies that we're using has really gotten out of control.
11:28Elon MuskSo we're going to scrub the barnacles on that front. It's pretty crazy. We've got barnacles on barnacles, so there's going to be a lot of barnacle removal. All right guys, want to make any comments?
11:48Martin ViechaThank you. Elon Shuri. Let's go to the first question.
11:51OperatorThank you. Ladies and gentlemen, if you have a question at this time, please press the star then one key on your touchtone telephone. We ask that you please limit yourself to one question and one follow up question.
12:02OperatorYou may then return to the queue. If your question has been answered or you wish to remove yourself from the queue, please press the pound key to prevent any background noise.
12:11OperatorWe ask that you please place your line on mute once your question has been stated. Our first question comes from Brian Johnson with Barclays.
12:20AnalystYes, good afternoon. Want to talk a little bit about some of the. First of all, if we talk about the 3,000 sort of all related to the production ramp, if we talk about the 5,000 per week run rate, is that assuming 724 or at what point do you think you've yet to sort of five day two shift operation?
12:46Elon MuskWell, first of all, I think a five day two shift operation is a ridiculous way to operate because that would be a very poor use of capex. Nor is it the way that we have operated in for most of Tesla.
12:59Elon MuskSo the module production, cell module and battery pack production and powertrain production have always operated on a 24, 7 basis. And the exception has been general assembly which is operated on typically two to three shifts, sort of a five to six day 20 hour shift and paint which is operated on kind of a six day basis.
13:37OtherSo
13:39Elon MuskI think it just makes sense to operate the whole company on the same basis. But a majority of Tesla's always operated. A majority of Tesla production has operated on 24, 7 basis since we started production.
13:51JB StraubelYeah, I mean this is JB. I can chime in. As Elon said, it really makes great use of the capex and the lines and that's why we did it starting way back with the baby beginning of S.
14:00JB StraubelBut aligning everything to the same shift schedule makes it so much more efficient because we don't have the seesaw of inventory, interline inventory between the different shops.
14:12OtherExactly.
14:13Elon MuskOne of the key things to improving capital efficiency of the system is reducing work in process. And if you don't have, if the ships are not aligned then you have to build up inventory in kind of a storage warehouse and then.
14:28Elon MuskRight, yeah. So it's pretty foolish to actually Operate on a five day, two shift thing anyway. Yeah, but it's. This is sort of the. We're using the chip fab approach to capital efficiency.
14:45Elon MuskSo it's called aws. It's not out on web service. We're not sure what it's called. But like there's something called alternate work, whatever. Alternate work week. Yeah, I think we're cool.
14:58Elon MuskLike people work like three long days and then four long days alternately, something like that.
15:03OtherSo multiple crews rather than just using overtime on weekends.
15:06Elon MuskYeah, yeah, exactly.
15:07Galileo Russell (HyperChange)Right.
15:08AnalystSo it seems like just doing the
15:09Elon Muskmath, it's not like one person working 24 hours a day, seven days a week. There are like four or five shifts.
15:19AnalystYeah. So if I just do the math, that would seem at 5,000 to get you to attack time of two minutes. And I go back to some of the prior conversations.
15:28AnalystI mean that's my understanding is best in class is sort of 50 seconds to a minute. And I thought the whole going faster than Grandma Walker was actually targeted at blowing past that.
15:40AnalystIt sounds like you're sort of 2x the tak time of other factories.
15:51Elon MuskThe number you're referring to is actually the job vehicles per minute. Yeah, yeah, yeah. It's general assembly number, not other stuff. But
16:04JB Straubelyou may have also not taken into account, you know, so called OEE or the actual actual uptime of the line, which tends to make the TAK time a little faster than the perfect calculation.
16:18Elon MuskIf they say it takes a minute, they don't mean it's like over a seven day, 24 hour work week. We could also just say sure we did. Our peak pack production today was 32 packs in an hour.
16:32Elon MuskSo we're under two minutes of packaging and rising from there.
16:37AnalystYeah.
16:37JB StraubelAnd as Elon alluded, the numbers go up rapidly as we go to the sub assemblies that are in higher unit quantity per car.
16:44Elon MuskYeah.
16:45JB StraubelSo 4x per module. And then we have smaller sub assemblies still that are factors of 10 or 20 even higher than that.
16:53Elon MuskYeah. That said, I do believe that the path to manufacturing efficiency is velocity. Velocity and density. And that is absolutely what we'll be working on rather than just trying to spend billions of dollars on duplicating a factory.
17:15Elon MuskIf two companies are competing and one has to double its capex in order to double production and the other one can with minor capex can just speed up the line by double.
17:27Elon MuskThat's a game over.
17:30OtherRight.
17:30AnalystBut in the meantime, the lines can. I think what you're saying some start some stops to get to the 5,000 per week.
17:38Elon MuskYeah. You can't, like, you can't have like zero maintenance time and zero, you know, like you have to do equipment upgrades, you have to do, you know, ongoing maintenance.
17:49Elon MuskSo you can't just have it be upgraded. Be great 24 7. Okay, thanks.
17:56OperatorThank you. Our next question comes from Rod Laske with Deutsche Bank.
18:03AnalystHi everybody. Just wanted to follow along on that line of questions. So to the extent that you're adding humans in certain automated processes, can you just help us interpret the extent to which these changes affect the economics on model 3?
18:20AnalystAnd to the extent that you've done some competitive analysis,
18:27Elon Muskall of these efforts
18:28Analystin the Tesla production system, how do you stack up competitively against other OEMs in terms of labor hours per vehicle
18:35Elon Muskor depreciation per vehicle? Well, I'll say a few things and then I have. Deepak can elaborate.
18:48OtherSo
18:51Elon Muskthe thing that I've noticed is if you have a really complicated machine, like the Fluffbot that I was talking about earlier, in order to keep it operating, you have to have a ton of maintenance engineering.
19:06Elon MuskSo you have like basically pretty expensive or maintenance engineers that have to maintain the thing and fix it like basically seven days a week, 24 hours a day. The cost of a maintenance engineer may not be incorporated directly into or fully incorporated directly into gross margin, but it is nonetheless a cost that far exceeds the labor cost of simply placing the fluff on the battery pack, which as it turns out was unnecessary.
19:40Elon MuskSo I think actually I do not see this having a mature long term impact in our costs. I actually see most likely our costs will decrease. Fully considered costs of producing the vehicles will decrease by getting rid of production stations that are really poorly suited to robotics because of the very expensive cost of robot technicians.
20:13OtherRon, we are very capex efficient overall. Let me just start from that point. And if we look at our depreciation cost on a per unit basis at steady run rate of 5000 or so cars per week, we are in my mind, well below a lot of our, maybe most of our competitors.
20:36OtherWe're below $2,000 per unit depreciation cost. And then overall, clearly there is some impact, as we have indicated in the letter, from the additional labor we've added. But it's temporary and our expectation fully is a lot of this labor will come out once we stabilize production and then figure out smart ways of automating where it makes sense.
21:05AnalystOkay, thanks for that. And just secondly, your comments in your letter on the advances in batteries were interesting. Could you give us some insight into how we can translate that into cost per kilowatt hour or some metric in terms of the gains that you're making.
21:26OtherThat's something, I mean, every data, every data point, Rod, that we look at internally suggests that we are best in class, but we don't.
21:35Elon MuskThere's not a class. Yes, we're the best. Sorry, best in a class of one.
21:41OtherYeah, yeah.
21:43JB StraubelI think directionally, Rod, you know, it's helpful to understand the different commodities and the trends that we're pursuing in the batteries. You know, being on a path to reduce cobalt usage, for instance, has been something we've been working on for literally several years now.
22:01JB StraubelAnd this has been extremely helpful in the overall cost per kilowatt hour, you know, especially, you know, with recent commodity price movements. So I think, you know, we can't really be quantitative, but that directionally is a pretty good trend.
22:16Elon MuskYeah, we think we can get the cobalt almost nothing. Okay, great.
22:26AnalystThank you.
22:27Martin ViechaThank you very much. Let's have the next question, please.
22:30OperatorThank you. Our next question comes from Adam Jonas with Morgan Stanley.
22:36AnalystThanks, Elon. So you repeatedly said, I think in recent weeks that you do not need to issue equity capital at Tesla. And I think many investors on this call would say it's better to raise capital when you don't need to.
22:48AnalystSo I guess.
22:49OtherFirst question.
22:51AnalystYeah, you may not need to, but do you want to?
22:53Elon MuskNo, don't want to. I specifically don't want to.
22:59AnalystPerfect. Okay. My follow up, Elon, is your cars produce really a large amount of data and SpaceX gets into the satellite broadband business next year. Some are SpaceX,
23:18Elon MuskNot next year, but it's probably three years.
23:21AnalystOkay, three years. Thank you for that. Some argue that SpaceX could offer Tesla a resilient cyber secure pipe for this precious vehicle data and a potential competitive advantage. So, Elon, isn't bandwidth an obvious domain for collaboration between Tesla and SpaceX one day?
23:40Elon MuskI mean, it might be. There's lots of interesting things you could do. Car's got a lot of computing power and it's connected, you know, to cell networks and WI fi and everything.
23:51Elon MuskWe could certainly connect it to a LEO Internet constellation. I haven't even thought about it, but probably there is.
24:05AnalystThanks.
24:06OtherCool.
24:07Martin ViechaThank you. Let's go to the next question, please.
24:09OperatorThank you. Our next question comes from David Tamborino with Goldman Sachs.
24:15AnalystGreat, thanks for taking our questions. Elon, you talked about the downtime on the Model 3. You're going to take two planned periods this quarter. One has already occurred, the other is going to occur later in the quarter.
24:26AnalystWhat specifically have you addressed in Fremont so far. And what are you planning to address
24:32Elon Muska little bit later?
24:33AnalystAnd are those alone kind of remaining bottlenecks for you to get to the 5k within the Fremont plant?
24:42OtherWell,
24:44Elon Muskthe Tesla production system at this point is vast, so. And we literally have the two biggest factories on earth between the Gigafactory and Fremont. Gigasol, slightly smaller than Fremont, I think.
25:04Elon MuskWell, maybe just, yeah, slightly smaller footprint, but it'll soon be bigger than Fremont and Fremont's like the second biggest building of any kind by footprint. So it's just like this.
25:15Elon MuskIt is a vast. The full answer to that question is a complex one. The I feel very confident about our ability to get to 5k very soon. Sustained rate at Giga getting to essentially getting to 5,000 battery packs and motors
25:41Analystand
25:43Elon Muskpower inverters and chargers and that kind of thing, which is all down to a Giga by the end of next month.
25:52OtherAnd
25:54Elon Muskbody production, no problem. General assembly is probably our biggest risk and I'm going to be focusing on that a lot in the next coming month. And then a paint shop is maybe the second biggest risk after General Assembly.
26:20Elon MuskThese are all quite manageable. It's not like huge brain surgery to get these things right. It's a lot of work. Like I said, it's just a lot of time and hard work.
26:35Elon MuskBut it's very doable. And yeah, it's really quite straightforward. impediment here. In many cases, we've seen huge gains through software, software that's in the car, software that controls the automation and connects to our central system.
26:56Elon MuskSo in many cases it's not even hardware upgrades that create substantial increases in velocity. Yeah, exactly. Doug makes a good point here,
27:07Otherand
27:07Elon MuskI think that is that the product, the production, a really great production system is primarily a software problem. And there's no one in the order industry that is remotely as good as Tesla at software, as Tesla.
27:29Elon MuskI mean, Tesla is way better at software than any other car company. So if it is, what I'm saying is true that the biggest challenge in a production system is software in a good position.
27:46AnalystOkay, maybe taking my next question in a different direction. What is your timeline for launching the Model Y and have you begun to spend for this or that only begin to start hitting the P and L from an R and D and a capex perspective in 2019?
28:01Elon MuskIt will only start to become significant in 2019.
28:05AnalystOkay, so all of the CAPEX spend for this year is associated with Fremont Model 3 Gigafactory.
28:12Elon MuskNo, no, please take me literally. I said it only becomes significant next year. It's not zero right now, but it's not. It's not. It's not a big number, but it's not a big number relative to our revenue.
28:27OtherAnd in the early days of product development anyway, there's not much capex. Capex comes much later as you have committed to equipment and equipment still starts to come in house.
28:36Elon MuskYeah. Although it is remarkable, although the amount of money spent in the beginning is really quite low at the beginning of the development program. Decisions made at the beginning of development program have massive implications for future capex.
28:51Elon MuskSo it is better to spend a bit more time making the right design
28:55Martin Viechadecisions
28:58Elon Muskand really thinking through the producibility of product before racing ahead with capex decisions. There's no question we could have made the Model 3 much easier to produce than we have Model Y.
29:16Elon MuskI think Model Y is going to be a manufacturing revolution. It will be, I think, incredible from a manufacturing standpoint because we do not want to go through this pain again.
29:36Martin ViechaThank you very much. Let's go to the next question.
29:38OperatorThank you. Our next question comes from Romit Shah with Nomura Incident.
29:44AnalystYeah, I just wanted to clarify the gross margin comments related to Model three that you put in the letter. You said a couple things. You said over the medium term, Model 3 gross margins would be below the target of 25%.
30:02AnalystYou also said that in Q3, in Q4, that those gross margins would be highly positive. So I'm just trying to understand what's possible for Model 3 gross margins by the end of the year.
30:15AnalystCould we get to a number that's close to 20%?
30:22OtherWhat I'd say is that progressively each quarter we will be getting better. And yes, the answer is yeah. And it will come down to what other economics come into play, from currencies to commodities and how much more cost we take out from labor.
30:46OtherSo I don't want to give you a specific number, but will be close to it.
30:51Elon MuskIt's like. Yeah, exactly. It's. Yeah, exactly. Very, very close to 20%. Could be slightly low, could be slightly above.
30:59AnalystOkay, fair enough. And then, Elon, can I just ask
31:03Elon Muskyou about going a little further forward than say, Q4? We're very confident of a 25% gross margin.
31:10OtherI'm also clarifying that. Yeah, we feel very good about that for next year.
31:13Elon Musk25% is definitely what we expect.
31:17AnalystSo when you say medium term, you're talking 2018.
31:21Elon MuskYeah, exactly. That's why it's important to clarify what These things mean Q4 is when we expect to be on or about 20% then, but by the middle of next year, 25% gross margin should be where we are.
31:41Elon MuskAnd then we'll obviously try to get to the high twenties by the end of next year.
31:48AnalystOkay. As a follow up, could you just comment on Jim Keller's departure? Highly respected chip architect. What does it say, if anything, about the development of Tesla's custom silicon and autopilot?
32:03AnalystThank you.
32:06Elon MuskWell, Jim's a great guy and there's sort of a dream he wanted to pursue for a long time, which is to kind of redesign how server architecture works. It's not something that I find all that interesting, but it's something that Jim, it's been a sort of personal dream of Jim's to do, and that's why he went to Intel.
32:30Elon MuskThe Tesla, the actual design of the Tesla hardware is primarily by Pete Bannon, though I should be clear. Like the lead designer of that is Pete Bannon, who is still with Tesla.
32:52Elon MuskAnd then of course, Andre Karpathy is head of our AI team. So we don't plan to hire a replacement for Jim's position.
33:04Martin ViechaThank you very much. Let's go to the next question.
33:06OperatorThank you. Our next question comes from Tony Sakonagi with Bernstein.
33:12AnalystYes, thank you. I just wanted to follow up on the previous question and the gross margin targets. I think you had said last quarter that once you got to 5,000 units, you felt that you could get to 25% gross margins on Model 3.
33:30AnalystSo that feels like at least a six or nine month delay relative to what you thought a quarter ago. And I'm trying to understand what the key drivers are.
33:43AnalystIs it really the labor for capital substitution? I don't think currency sequentially has changed much. I understand it can be a headwind, but I think relative to when you made those statements, it hasn't changed.
33:57AnalystSo perhaps you can help us understand what has changed in terms of the gross margin ramp for Model 3 relative to what you thought before. And I have a follow up, please.
34:10OtherYeah, it's along the lines of what we said in the letter. If we look at the combination of the recently imposed tariffs, Section 232 and countervailing duties, plus commodity price increases, as well as the weaker dollar, that is adding significant material cost.
34:30OtherAnd then temporarily we're using more labor. So when you combine those two, that's what led to our guidance. And certainly the material, the labor cost piece we will address and that will come out.
34:42Elon MuskYeah, but I mean, we're talking about a 3 to 5% difference. So, like, and it's something that we'll solve like within three or six months later. It's not like, it's like some.
34:53Elon MuskLet me make a final case out of it.
34:56AnalystOkay. And then separately, what, if anything, are you taking out in terms of your lower capex projection for this year and specifically in spending less than 3 billion, where does that take you in terms of both battery and production capacity for the Model 3?
35:32OtherYeah, so we're just being much more smarter in many cases. As Elon said, we are not just spending money on automation. We are first looking at the problem, simplifying it, and that's helped us reduce our CapEx on Model 3.
35:49OtherAnd then we are also being critical about how we grow our infrastructure
35:55Analystand
35:57Otherline it up with our growth in our business. So we feel that these are the right decisions and there is still room for us to reduce it further if we wish to.
36:05OtherSo we are leaving ourselves some discretion here to go spend money where needed.
36:12AnalystAnd so where specifically will you be
36:14Elon Muskin terms of capital requirements?
36:18Martin ViechaNext.
36:20OtherBoring.
36:20Elon MuskBonehead questions are not cool. Next.
36:23OperatorThank you. Our next question comes from Joseph Spack with RBC Capital Markets.
36:30AnalystThank you. The first question is related to the Model 3 reservations. And I was just wondering if you could give us a gauge as maybe some of the impact that the news has had, like, of the reservations that actually opened and made available to configure.
36:47AnalystCan you let us know, like, what percentage have actually taken a step to configure?
37:06Elon MuskWe're going to go to YouTube. Sorry, these questions are so dry, they're killing me.
37:15OperatorThank you. Our next question is from Galileo Russell with hyperchange.
37:21Galileo Russell (HyperChange)Hey, great quarter. Thanks for having me on the call to represent retail investors. I was wondering, with Waymo's plans to launch an autonomous taxi service in limited markets this year, if you could give us an update on the Tesla network and any details surrounding the launch date or geographic rollout.
37:36AnalystThanks.
37:39Martin ViechaSure.
37:40Elon MuskSo, I mean, that's. Thank you for an interesting question. The launching goal, where things are obviously evolving towards, is a shared electric autonomy model. So in order for this to obviously for the whole sort of system to work, you know, you need all the pieces in place.
38:05Elon MuskYou have full autonomy level four or five, whatever you want to call it,
38:12Otherand
38:14Elon Muska lot of cars on the road and then build the software infrastructure behind that to enable shared autonomy. So to enable people to share their cars and be able to offer their cars as effectively kind of a Robo Lyft or Robo Uber, you Know, sort of like combination of like, I guess, Uber Lyft and Airbnb type of thing where you can own your car and have 100% usage of autonomous electric car.
38:47Elon MuskYou can say it's available generally to anyone who wants to use it. When you're not using it, you can recall it at will. You can restrict usage to only friends and family or only users who are five star.
39:02Elon MuskThis is the obvious thing that's going to happen. In order for that to be in place, we have to obviously sell full autonomy. We're making really good progress on that front.
39:16Elon MuskI believe that the current production of the vehicles that we're currently producing are capable of full autonomy
39:29Otherwith.
39:29Elon MuskThe only thing that would really be like, might be needed or maybe is probably needed is a computer upgrade to have more processing power for the Vision neural net.
39:42Elon MuskBut that's a plug in replacement thing that can be done quite easily. So I think we're really well positioned and building the foundation for a, you know, having millions, ultimately tens of millions of shared autonomous electric vehicles which you can, like I said, decide not to share if you don't want to.
40:09Elon MuskAnd then it plays.
40:10Galileo Russell (HyperChange)And specifically on the timing, on the timing, though, do you have any details about or when we could even expect to learn more about the timing of this service?
40:22OtherWell,
40:25Elon Muskthe hardest thing to predict about the timing is regulatory approval. The thing that's tricky with autonomous vehicles is that autonomy doesn't reduce the accident rate or fatality rate to zero, it improves it substantially.
40:46Elon MuskBut the, the reality is that even though we think autonomy, even the current autonomy, reduces the probability of a death by 50%, which would be incredible because it's like, if applied broadly, there's over a million, I think 1.2 million automotive deaths per year.
41:12Elon MuskAnd how many do you read about? Basically none of them, however. But if it's an autonomous situation, it's headline news. And the media fails to mention that actually they shouldn't really be writing the story.
41:29Elon MuskThey should be writing a story about how autonomous cars are really safe. But that's not the story that people
41:35JB Straubelwant to click on.
41:36Elon MuskSo they write inflammatory headlines that are fundamentally misleading to the, to the readers. It's really outrageous. And this would be true even if electric cars were, sorry, autonomous cars were 10 times safer.
41:52Elon MuskSo that instead of a million deaths, you had 100,000 deaths, there's still going to be people who will still sue and say, hey, you're responsible for the death here.
42:04Elon MuskIt's like, well, the 90% of people who didn't die are not suing. You know, they're still alive, they just don't know it. So we got to deal with that.
42:15Elon MuskAnd then obviously regulators respond to public pressure and the press. So if the press is hounding the regulators and the public is laboring on the misapprehension that autonomy is less safe because of misleading press, then this is where I find things to the challenge of predicting it to be very difficult.
42:41OtherAnd
42:45Elon Muskyeah, it's really incredibly irresponsible
42:50Otherof
42:51Elon Muskany journalist with integrity to write an article that would lead people to believe that Tesla autonomy is less safe because people might actually turn it off and then die.
43:05Elon MuskSo, anyway, I'm really upset by this.
43:10Galileo Russell (HyperChange)Yeah, really interesting answer. Thank you.
43:14Elon MuskI can say from a technical standpoint, I think we'll probably be ready by the end of next year.
43:25Galileo Russell (HyperChange)Awesome. And then one more quick thing on production capacity and speed of the Fremont line, because this is something you mention a lot, it seems. And in the last quarterly conference call, you mentioned the max capacity with 700,000 cars for Fremont or somewhere around there.
43:39Galileo Russell (HyperChange)And that was SX and 3. And so we recently got a report from Reuters saying that Model Y production would start in November 2019 at Fremont. And so I'm just kind of curious with the semi and the Model Y launching next year, like, where are you actually planning on assembling these vehicles?
43:57Elon MuskThe Reuters report is based on nothing. Like, I didn't know where that came from. We will not be starting production model wide at the end of next year. I would say it's probably closer to 24 months from now.
44:14Elon MuskSo 2020 is a more likely prospect for Model Y. Early 2020. And the production location for Model Y has not been decided. We're really crowded here at Fremont. I don't know where we put the Model Y production.
44:32Elon MuskSo it's difficult to imagine that we could not fit the Model Y production at Fremont. We are jammed to the gills here. So one thing I know for sure is not here.
44:46Elon MuskIt is crazy packed. And we're. Yeah. So.
44:55Elon MuskWe're trying to figure out what the optimal location is for Model Y production, but it's not here.
44:59OtherNot here.
44:59Elon MuskFremont.
45:01AnalystOkay.
45:02Galileo Russell (HyperChange)And I'm not an expert in battery pack technology, but it seems that a lot of people are speculating that the specs for the semi truck, even I believe the CEO of Daimler said it breaks the laws of physics.
45:14Galileo Russell (HyperChange)So I'm wondering, is this just a linear?
45:15Elon MuskI don't know much about physics. I know him.
45:19Galileo Russell (HyperChange)Yeah.
45:20Elon MuskI'd be happy to engage in a physics discussion with him, I actually studied physics in college.
45:29AnalystSo yeah.
45:29Galileo Russell (HyperChange)My question is, is that just a linear improvement in your battery technology or is there some sort of new breakthrough or different platform that the semi and roadster are going to be built on?
45:42Elon MuskLike even if we didn't, I mean, even if we didn't improve our battery technology at all, we could achieve a 500 mile range truck at all. We're going to do better than 500 miles.
45:53JB StraubelYeah. This is JB. I think the key point is it doesn't require some dramatic breakthrough. So there's a fundamental misunderstanding, I think, of what the, the current technology in our existing products can actually do.
46:07JB StraubelAnd maybe that's just the misunderstanding of the current status of the technology versus others in the industry. That could be where some of that's coming from. If they're benchmarking the best battery pack they can buy from a supplier and then mapping that what the semi could do, it doesn't solve.
46:27JB StraubelI think that that's maybe where some of it's coming from. But we basically have what we need in house and understand how to do those specs today. Or better, as Elam said, we could
46:38Elon Muskdo a 500 mile range semi today. I think the actual production unit will be above 600 mile range.
46:47AnalystAwesome.
46:48Galileo Russell (HyperChange)Great stuff. So I'm also wondering, are you guys going to let Porsche beat you to market with a 350 kilowatt hour supercharger?
46:54Elon MuskBecause I know you've mentioned V3 questions are not boring.
47:00Galileo Russell (HyperChange)Yeah, I can keep going.
47:02Elon MuskYeah, it's cool.
47:03Galileo Russell (HyperChange)Yeah.
47:03Elon MuskSo this is way more interesting.
47:05Galileo Russell (HyperChange)The 350 kilowatt charger from Porsche like they mentioned, they're rolling that out. On the last call. JB seemed to indicate that you guys were sort of going to keep the status quo with your supercharger technology.
47:16Galileo Russell (HyperChange)But Elon, I know you mentioned that there is a V3 supercharger. So I'm just trying to get some clarity on whether you will be improving your supercharger technology or not.
47:24Galileo Russell (HyperChange)And if there is a V3,
47:27Martin Viechaoh,
47:27Elon Muskwe're definitely going to be improving our supercharged technology. The thing about a 350 kilowatt charger is it doesn't actually make a ton of sense unless you've got a monster back to battery pack or have a crazy high C rate, in which case your energy density is going to be poor.
47:45Elon MuskSo it's kind of cockamamie. Yeah, we think maybe 200 on a per cart.
47:53Martin ViechaAlso, I don't know if they meant
47:53Elon Musk350k kilowatts for a single car that's really pretty, you're going to frag the battery pack if you do that. You cannot charge a high energy battery pack at that rate, unless it's a very high kilowatt hour battery pack.
48:12Elon MuskSo something along the. Yeah, I think, I don't know, JB, like couple hundred, 200, 250 maybe.
48:24JB StraubelYeah, I mean, that's definitely sort of power level that we've discussed and explored. And some of it also comes down to an optimization around utility versus cost and trade offs in the car itself.
48:37JB StraubelYou kind of hinted at that, Elon, but there is a trade off fundamentally between charge speed and essentially range or cost of battery. Yeah, and we look at that pretty carefully.
48:49JB StraubelWe understand the trade off and we could design cells in a pack that could charge at faster than 300, 400 kilowatts. But it's not a very useful trade off to the customer.
49:01Elon MuskMost people don't understand the difference between energy and power even really. Energy is essentially range and then power is kind of like your peak acceleration, basically the rate at which you consume energy.
49:16Elon MuskSo really it's more important to have. It's more important to have long range than it is to have a super fast charge time. And you can sort of think about this in the devices that you use.
49:35Elon MuskLike, would you rather have a cell phone that lasts two hours, but
49:41Otherit
49:42Elon Muskcould charge in five minutes or 10 minutes, let's say, but it only lasted two hours. Or you'd like a cell phone that lasts two days and maybe it takes an hour to charge.
49:55OperatorThank you.
49:59Elon MuskWe'll keep going until the questions on our slow. While they're interested.
50:03Galileo Russell (HyperChange)Yeah, I have a. I have a couple more for the superchargers. I know you guys are not trying to profit off of Tesla owners with that infrastructure, but will you ever open that up to other automakers and try and generate revenue from that system?
50:16Elon MuskWe've always said that this is not intended to be a walled garden. And we're happy to support other automakers and let them use our supercharger stations. They would just need to pay the share the costs proportionate to their vehicle usage.
50:34Elon MuskAnd they would need to be able to accept our charge rate and our connector or at least have an adapter to our connector. So this is something we're very open to.
50:44Elon MuskBut so far none of the other car makers have wanted to do this. But it's like not because of opposition from us. This is not a walled garden trying to make a moat.
50:55Elon MuskBullshit.
50:57Galileo Russell (HyperChange)Okay, and maybe could you clarify what's the strategy like? It seems like that would be a very strong moat to have this network you guys have been building globally for years.
51:04Galileo Russell (HyperChange)So you know, why open it up and why is that not a moat?
51:10Elon MuskSorry, can you repeat the question?
51:13Galileo Russell (HyperChange)I'm just wondering why that isn't a moat. Because, you know, as a long term investor, I feel like the charging infrastructure you guys have built would take years and millions of dollars for another brand to replicate.
51:23Galileo Russell (HyperChange)So I'm just curious about the strategic thinking behind opening that up versus keeping it closed.
51:29Elon MuskFirst of all, I think moats are lame. I mean they're like nice and sort of quaint vestigial way. But like if your only defense against like invading armies is a moat, you will not last long.
51:44Elon MuskWhat matters is the pace of innovation, that is the fundamental determination determinant of competitiveness. And for any given company, if the rate of innovation, let's say competitors, maybe they come up with something new every six years, we're maybe every two to three years.
52:07Elon MuskSo if our innovation is, let's say twice that of any given competitor, then it is. So this is true generally of companies in any industry. Whichever company has the highest rate of innovation, unless that company is actively killed by its competitors in some way that's nefarious or shoots itself in the foot, it will at some point exceed those competitors.
52:35Elon MuskLike this is obvious that this would occur with Amazon or Walmart because Walmart's render rate of innovation was negligible and Amazon's was very high. The outcome was obvious a long time ago.
52:50Galileo Russell (HyperChange)And in terms of the megacharger, I noticed you guys are going to be selling energy at a fixed price for those truck customers. So I'm wondering what the philosophy is there.
52:57Galileo Russell (HyperChange)Is it also you're going to operate that at cost and reduce that energy price, or are you thinking of that as a revenue stream for the company?
53:09JB StraubelWe haven't really talked about any of that and haven't finalized frankly any of that. We want to make sure that there's a very seamless and easy system to operate trucks wherever they need to go.
53:22JB StraubelAnd some customers may elect to work with us on the whole system or parts of it. But I think there's a lot of different ways that that can be solved.
53:33Elon MuskYeah, I mean for sure with commercial trucking, like a heavy duty semi economics are fundamental to that situation. They're not making decisions based on aesthetics or, you know, consumer related things.
53:53Elon MuskYou know, like we made out, we try to make out semi kind of cool and sexy just because we think that that's a good thing to do, not because it affects the buying decision of our customers in a meaningful way.
54:04Elon MuskIt doesn't really move the needle. I read this, like, laughable lawsuit recently from some company ironically called Nikola. It's like Nikola is suing Tesla. That's hilarious. Fate loves irony.
54:22Elon MuskBut they're like suing us because. Because the way the trucks look, which is absurd. Nobody's buying a semi truck because of the way it looks or because it's got like a wraparound windshield or whatever.
54:33Elon MuskPlease. So the economics are incredibly important. And so we have to make sure that the superchargers, or mega chargers, whatever we call them for the trucks are set up in a way that.
54:49Elon MuskThat have very low cost electricity.
54:53JB StraubelOne maybe slightly related point to that that I think is super exciting about this is, you know, the potential to link up renewable energy generation at a very fixed and also very affordable cost to power future trucking fleets.
55:08JB StraubelUltimately, that can give customers an incredibly deterministic cost per mile that will not change with the price of petroleum over decades. Which is really, really an interesting proposition for a trucking customer.
55:22JB StraubelAnd that's something that we're pretty excited about.
55:26Elon MuskYeah, exactly.
55:28Galileo Russell (HyperChange)I have one last one.
55:30Elon MuskIt's really worth emphasizing that if we're trucking companies, if the cost of Diesel goes up 50%, it just destroys their business. And we're with the sort of mega charger situation, combining, you know, basically having a solar battery powered mega charger.
55:49Elon MuskWe have. They have constant costs and we know what they are. Baked them in. And it's predictable. Yeah, it's very predictable. And lower cost per mile than a diesel truck at the front.
56:04Elon MuskBut fundamentally it's like, what is the cost per mile? A kilometer of cargo. And that drives the commercial trucking market. And you could have the ugliest truck in the world and still would be victorious.
56:21AnalystYeah.
56:21Galileo Russell (HyperChange)Building on that, do you have any thoughts on how the trucking market could change or potentially grow? If you guys are actually able to deliver on dramatic cost reductions, especially with things like platooning,
56:33Elon MuskI think it will take away quite a bit of revenue from railway because the reason rail is able to be competitive is that effectively just platooning with lots of rail cars and you need only a small crew to operate the train.
56:52Elon MuskHowever, trains don't go. Trains don't go everywhere. So you have to like, have a truck deliver things to the train rail spur and then picks up, pick it up, and then at the destination, a truck's going to pick it up from the rail spur over There.
57:08Elon MuskSo you still have trucks plus train plus transfer. So I think platooning of trucks will quite dramatically affect the rail industry in a negative way.
57:24Galileo Russell (HyperChange)Okay, last one.
57:25AnalystI promise.
57:25Galileo Russell (HyperChange)On Tesla Energy, I assume that you guys are basically supply constrained, not demand constrained on that side of the business. So I'm wondering how you're prioritizing residential versus utility scale and in particular how is this successful project in South Australia sort of changed the industry's perception of what batteries can do.
57:47Elon MuskYeah, yeah, I think it's had quite a profound effect. South Australia took a chance on doing the world's biggest battery and it's worked out really well. If you read the articles, it's worked out far beyond their expectations because the battery's able to respond at the millisecond level far faster than any hydrocarbon plant.
58:11Elon MuskAnd so it's value in grid stabilization was much greater actually than even a gas turbine plant, which can only respond quite fast. So it's kind of like if you get on Tesla and you have that instant acceleration, it feels like you're like a mind meld with a car.
58:31Elon MuskIt's just like the car is you. And that same rapid response is true of the battery pack. So the customers that the utilities that we've worked with thus far really love the battery pack and I feel confident that we'll be able to announce a deal at the gigawatt hour scale within a matter of months.
59:00Elon MuskSo 1000 megawatt hours. 1000 megawatt hours for.
59:06JB StraubelYeah, maybe just the first part of your question. Also, it is absolutely accurate that we are still, there's more than enough demand and we are still building out of our demand backlog and actually increasing it slightly.
59:23JB StraubelAnd we're trying to do our best to prioritize customers between residential powerwall and utility and commercial. You know, I'd say our longer term strategy is to shift a little bit of our focus and really catch up on our powerwall demand backlog, which is quite.
59:44JB StraubelIt's too long right now. We know people are waiting too long. So that's, I think that's generally the direction we're trying to take that. But you know, Model three has taken a lot of focus in the last few quarters and that trend is going to be reversing in the second half of the year.
1:00:02JB StraubelAwesome.
1:00:03Galileo Russell (HyperChange)Thank you guys so much. Really appreciate the time. Keep up the awesome work.
1:00:07Elon MuskVery welcome. Thanks for the great questions.
1:00:11Martin ViechaLet's go to the next question, please.
1:00:12OperatorThank you. Our next question comes from Phil LeBeau with CNBC.
1:00:17Galileo Russell (HyperChange)Hi, Elon.
1:00:18AnalystQuestion on The Tesla Semi. Can you give us some perspective in terms of how many reservations you guys have now and where you guys are in the plan for developing it and rolling out the first model?
1:00:34Elon MuskMy apologies, sorry, we're just discussing something internally. Could you repeat that question with the Tesla Semi?
1:00:39AnalystHow many reservations do you guys now have approximately and where are you in the process as far as the development and the rollout of the first model in terms of timeline, when you guys expect that to happen, et cetera?
1:00:55Elon MuskI actually don't know how many reservations we have for the semi. About 2000.
1:00:59OtherOkay.
1:01:00Elon MuskI mean we haven't really tried to sell the Semi. It's not like there's like an ongoing sales effort. So you know, sales orders are for the Semi are like opportunistic really, companies approaching us, you know, it's just not something we really think about much.
1:01:19Elon MuskOur focus is on the Model 3. We need to get that to about 5,000 a week at a good margin. We need to become profitable company. That is a good criticism that has been leveled at Tesla.
1:01:35Elon MuskAn accurate one is high time we became profitable. And you know, and the truth is like you're not a real company until. Until you are, frankly. So that's our focus right now.
1:01:51Elon MuskAnd we've got an awesome product roadmap. The Tesla Semi is one of those things.
1:02:01OtherAnd
1:02:03Elon MuskI think we've got a really good idea for the Model Y is going to be amazing, really excited about that. Tesla Pickup is going to be great. You know, so the product roadmap, I mean we have like way more cool things than we know what to do.
1:02:26Elon MuskLike the idea is idea generation far exceeds the ability to execute it. So we just need to stay focused and not divide our attention on too many problems products at one time.
1:02:37AnalystAnd a follow up when given the fact that you're already packed to the gills in Fremont. When will you make a decision regarding a second manufacturing facility?
1:02:49Elon MuskSo that's probably later this year. It has to be later this year. So I'm not sure of the exact time, but I don't know, maybe next
1:02:57Otherquarter,
1:02:59Elon Muskbut not later than fourth quarter Model Y. And then we also expect to announce the location of a Tesla gigafactory in China soon.
1:03:14AnalystAnd will that second factory, when you announce it, will it be in North America or is that going to be in China?
1:03:21Elon MuskWell, I just said it's in China.
1:03:23AnalystSo the gigafactory is there, but the second manufacturing plant will be in China.
1:03:26Elon MuskOh, I mean, yeah. So sorry. In the future all gigafactories will include vehicle production. So right now we've got vehicle production and battery production. Like battery production and motor and power electronics and charger production are at Giga.
1:03:50Elon MuskAnd we've got our Fremont car factory. But future gigafactories will all incorporate vehicle production.
1:03:58OtherGot it.
1:03:59AnalystThank you.
1:04:06Elon MuskWe're appreciative of the fact that the government of China has announced that they will be allowing full ownership of manufacturing facilities in China. Which lets express a word of appreciation the Chinese government in that regard.
1:04:25Elon MuskRobin, is there anything that you'd like to say or anything. We are in good discussion with the government, so announce something when we read.
1:04:33OtherOkay,
1:04:36Elon Muskso Robin Rain's here with me. Robin is managing worldwide sales for Tesla right now. He was born and raised in China when the Physics Olympiad.
1:04:54OtherI'm sorry. Cool.
1:04:55Elon MuskAnyway, but we will talk more about, I think the next earnings call or next. We'll have a lot more to say about that in the future.
1:05:11OperatorOur next question comes from James Albertine with Consumer Edge.
1:05:18OtherAnd if I can be brief, I wanted to ask, you know, given the coverage that you've received, you know, as it relates to these high profile accidents, you know, one of the things we like most about your company is you have the most miles tested and continue to test daily.
1:05:33OtherFrom an autopilot perspective, can you give us any color from what you're seeing in your data as it relates to the confidence that your consumers have in the autopilot functionality, whether they've used it more or less frequently in their existing vehicles or whether they've opted to purchase the functionality more or less in lieu of these accidents?
1:05:53OtherBecause we're really trying to get a sense of consumer sort of the ability, the likelihood of consumers to adopt this technology over time. So this would be very helpful.
1:06:05OperatorThanks.
1:06:07Elon MuskWe do see a steady increase in the number of percentage of miles driven with using autopilot. So as we roll out more functionality, as we make it better, we see a steady increase.
1:06:21Elon MuskYou know, I think it's something for Carsquared with autopilot, something on the order
1:06:25Operatorof
1:06:28Elon Muska third of highway miles, maybe closer, maybe a half in some cases are in some regions are on autopilot. But then of course when there's like negative news in the press, then that dips.
1:06:41Elon MuskAnd then I was like, okay, this is not good because people are reading things in the press that cause them to use autopilot less and then that makes it dangerous for our customers and that's not cool.
1:06:52Elon MuskThat's why I get upset. And, and then we'd get accused of blaming the victim. I was like, look, we're not blaming the victim here, but it is important that people not be under the wrong impression.
1:07:06Elon MuskThe statistics are unequivocal that autopilot improves safety. No question. In fact, one thing I was going to mention, almost forgot to mention, is that we'll be publishing our safety statistics on a quarterly basis.
1:07:23OtherWonderful.
1:07:24Elon MuskSo people know exactly what autopilot safety is. Is it getting better or is it getting worse? And it's like one of the common misimpressions is that when there is, say, a serious accident on autopilot, people for some reason think that, or some of the articles think that it's because.
1:07:48Elon MuskBecause the driver thought the car was fully autonomous and wasn't and we somehow misled them into thinking it was fully autonomous. It is the opposite case. When there is a serious accident, it is almost always, in fact, maybe always the case that it is an experienced user.
1:08:11Elon MuskAnd the issue is what more wanted complacency. Like, they get too used to it. That tends to be more of an issue. It's not a lack of understanding of what autopilot can do, is actually thinking they know more about autopilot than they do.
1:08:30Elon MuskLike, quite a significant understanding of it, but less than they realize.
1:08:36OtherJust to clarify, Elon, so you've had two accidents spaced out pretty far. You've had dips during those periods when the accidents explained. But to clarify your comments, you are increasing.
1:08:44OtherYou're seeing increasing usage and you've weathered those dips.
1:08:48Elon MuskBased on where we are today, that is correct.
1:08:51OtherWonderful. Thank you so much.
1:08:53Elon MuskThank you.
1:08:55OperatorThank you. Our next question comes from Ben Callow with Baird.
1:09:00OtherHey, Elon. So I remember the Baird story. I don't know if it was fake news or not when you hung up on him about your battery costs. And I don't want to ask a mundane question, but I think it's important because one of your stakeholders or shareholders right now, and so far we've had a couple push outs in production.
1:09:21OtherAnd is there a way that you can update us when you get to that 3,000 number or 4,000 number per week? I mean, you're active on Twitter. Can you just let us know?
1:09:32OtherBecause we're going to have a big vacuum here and there's a lot of news flow out there that makes volatility into the stock. It makes it hard for people to own, even though you have a lot of believers out there.
1:09:43OtherAnd so even though we're beating my opinion right now, I think it's very important to get those kind of updates. And so that's, I think that's my question.
1:09:51Elon MuskCan you give us an update when
1:09:53Otheryou get to 3,000, 4,000 per week on the Model 3?
1:09:59Elon MuskYeah, actually Tesla is such a leaky server of information that I think the news will leak pretty quickly. And also people track registrations very closely. So at most any information that we provide would be a week or two in advance of what will become public knowledge just due to vehicle registrations and shipments that attract very carefully.
1:10:27Elon MuskSo really the problem is people get too focused on what's happening in the space of a few weeks or a few months. It's an old maxim of investing. You should not be focused on short term things, you should be focused on long term things.
1:10:50Elon MuskWe have no interest in satisfying the desires of day traders like couldn't care less. Please sell our stock and don't buy it.
1:10:58OtherI completely understand your frustration and I'm frustrated too on how biologic we are right now. They also say that, you know, great years are made out of quarters and great decades are made out of years.
1:11:12OtherSo everyone's short term focus in some ways and volatility has a way of shaking people out even that are strong and want to be there. And so anything you can do to help in the near term on that I think is helpful for the stock.
1:11:29Elon MuskThat's it. I mean, I think that if people are concerned about volatility, they should definitely not buy our stock. I am not here to convince you to buy our stock.
1:11:38Elon MuskDo not buy it if volatility is scary. There you go.
1:11:45Martin ViechaOkay, and let's go to our last question now.
1:11:49OperatorThank you. Our last question comes from Alex Potter with Piper Jaffrey.
1:11:55Galileo Russell (HyperChange)Hi guys, Thanks a lot.
1:11:57Elon MuskNot sure if this is going to
1:11:58Galileo Russell (HyperChange)be a hard question to answer.
1:12:00Elon MuskYou mentioned Model 3 market share versus the 3 series and others in that segment. To what extent do you think Model 3 is, I guess changing the denominator, making that segment larger as a class versus what it used to be?
1:12:21Elon MuskI think it will probably increase the total number of sedans purchased.
1:12:27OtherYeah,
1:12:30Elon Muskyeah, I think so. So you think you're pulling, you know what, ex Accord buyers and Camry buyers into that class? Yeah, we know this because of the trade ins.
1:12:45Elon MuskSo we see quite a wide range of cars including so people that are trading in the cars, they're not necessarily owners of a C class or an Audi A4 or 3 series.
1:12:58OtherWe saw signs of it.
1:12:59Elon MuskEven with Model S. You're with Model
1:13:00OtherS, So with Model 3 it's going to be even more prominent.
1:13:05Elon MuskYeah, yeah. Exactly. And I think also once we get to the shared autonomy ride hailing thing, which could be as soon as the end of next year, but that's when it's technically ready.
1:13:24Elon MuskBut then not long after that, I would expect some jurisdictions to give regulatory approval. The effective cost of ownership of a Model 3 or Tesla drops dramatically because you can share that car with others.
1:13:40Elon MuskOkay, very interesting.
1:13:42Galileo Russell (HyperChange)Last one. You mentioned earlier.
1:13:45Elon MuskYou think the Model Y production is going to be a true sort of production revolution.
1:13:52OtherIf you had to do the Model
1:13:53Elon Musk3 over again, there are some things that you would have changed and you hope to incorporate those learnings into the Model Y. What specifically would you do or what specifically plan to do?
1:14:04Elon MuskWell, I think let's save that for another time. We'll talk about that when we unveil the Model Y. But it's really going to be dramatically better.
1:14:23Elon MuskThe design and production system, I think, really will be next level.
1:14:29OtherOkay,
1:14:31Elon Muskyeah, sounds good.
1:14:33OtherThank you.
1:14:34Elon MuskAll right, thanks a lot. Thanks, everyone. Appreciate the good questions.
1:14:38Martin ViechaOkay, these are unfortunately all the time we have, so thank you very much and speak to you now next quarter.
1:14:43OperatorThank you very much and goodbye, ladies and gentlemen. Thank you for participating in today's conference. This does conclude the program. You may all disconnect and have a wonderful day.