Tesla Q4 and full year 2025 earnings call (2026)
Questions on ElonsFAQ asked in this interview (2)
Transcript
5:03Travis AxelrodGood afternoon everyone and welcome to Tesla's fourth quarter 2025 Q&A webcast. My name is Travis Axelrod, Head of Investor Relations and I'm joined today by Elon Musk, Vaibhav Taneja and a number of other executives.
5:17Travis AxelrodOur Q4 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.
5:29Travis 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.
5:43Travis 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.
5:53Travis AxelrodBefore we jump into Q and A, Elon has some opening remarks. Elon.
5:57Elon MuskThanks Travis. So we've updated the Tesla mission to amazing abundance. And this is, this is intended, intended to send a message of optimism about the future. I think we're most likely headed to an exciting, amazing era of abundance.
6:18Elon MuskAnd I think with the advent, with the continued growth of AI and robotics, I think we actually are headed to a future of universal high income. Not universal basic income, but universal high income.
6:33Elon MuskI mean, there's going to be a lot of change along the way, but that is what I see as the most likely outcome. So I think that's it makes sense to update Tesla's mission to reflect that goal.
6:50Elon MuskAnd obviously along that way we're going to keep improving safety, driving down the cost of goods and, and getting people access to anything they need without compromise, and still making sure that the environment is great, nature is great, and people can have whatever they want, which seems like probably the best future.
7:10Elon MuskI'm open to other ideas, but it sounds like if you could say what is the best future you could possibly imagine? I guess it would be that everyone can have whatever they want, including amazing medical care, but we still keep the beauty of nature and Earth.
7:28Elon MuskI think that's probably the best outcome and we're seeing obviously the first steps along that way this year for Tesla. First major steps. As we increase vehicle autonomy and begin to produce Optimus robots at scale.
7:49Elon MuskWe're making very, very big investments. So this is going to be a very big capex year. As Bhaivel we'll get into that is deliberate because we're making big investments for an epic future.
8:02Elon MuskSo I think all these investments make a lot of sense. We'll continue to make sure that when we do spend capital, it is spent very efficiently. But it's a lot of things,
8:14Analystyou
8:15Elon Muskknow, major investments in batteries and the entire supply chain of batteries. So we're also going to be significant manufacturers of solar cells and we're making massive investments in AI chips.
8:33Elon MuskSo. But I think these all make a ton of strategic sense. And, and then I guess I have like one, I guess like it's not exactly, it's not exactly bad news, but it's a,
8:55Elon MuskIt's time to basically bring the Model S and X programs to an end with an honorable discharge because we're really moving into a future that is based on autonomy.
9:10Elon MuskAnd so if you're interested in buying a Model S and X, now would be the time to order it because we expect to wind down S and X production next quarter and basically start production of Model S and X next quarter.
9:28Elon MuskWe'll obviously continue to support the Model S and X programs for as long as people have the vehicles. But we're going to take the Model S next production space in our Fremont factory and convert that into an Optimus factory which will, with the long term goal of having a million units a year of Optimus robots in the current SX space in Fremont.
9:55Elon MuskSo that is slightly sad. But, but it's, but it is, it is, it is time to bring the Essex programs to, to an end and Shift. Shift, really it's, it's part of our overall shift to an autonomous future.
10:15Elon MuskAs my profile picture on, on X said for a few months there, the future is autonomous.
10:26Elon MuskAnd so let's see, with respect to full self driving and robo taxi people obviously following with very close attention the progress of FSE and you can experience it for yourself if you've got a Tesla.
10:41Elon MuskYou notice with every software update the car gets better and better at autonomy. And, and we're, you know, we were able to do our first rides with no safety monitor in the car in Austin.
11:01Elon MuskThese are paid rides. So these are just sort of randomly selected paid rides with no safety monitor. And, and I think maybe as of maybe yesterday or so, we actually don't, we don't even have a chase car or anything like that.
11:19Elon MuskSo these are just cars with no people in them and no one's following the car in Austin. So we obviously are being very cautious about this because we want to have no injuries or serious accidents along the way.
11:35Elon MuskSo I think it makes sense to be very cautious. But you'll see the amount of autonomy increase dramatically I think every month essentially so,
11:51Elon MuskAnd then there will also be an opportunity, something we've talked about for a long time, for existing owners of Teslas to add or subtract their cost to the fleet.
12:03Elon MuskKind of like how Airbnb works, where you can add or subtract your house to the Airbnb inventory. And I think probably the value of the, that the Tesla, the sort of partial people adding or subtracting the cost to Tesla autonomous fleet is probably a little underweighted.
12:26Elon MuskUnderweighted by a lot of people because we've got millions of cars with AI for that can do this. So that it might potentially, I think it will provide an opportunity for a lot of customers to earn more by lending their car to the fleet than their lease cost to Tesla.
12:53Elon MuskYeah, which is kind of like
12:58Analystin
12:58Elon Muskthat scenario, you basically get paid to own a Tesla. It's quite a good scenario. And we expect to have fully autonomous vehicles in.
13:14Elon MuskProbably, I don't know, somewhere between a quarter and half of the United States by the end of the year, pending regulatory approval. A big factor would be if there's some kind of federal preemption for autonomous vehicles.
13:31Elon MuskIn the absence of that, you kind of have to go on a city by city or state by state basis. But nonetheless, even if it is city by city, state by state, we expect to be in, I don't know, dozens of cities, dozens of major cities by the end of the year.
13:53Elon MuskWith respect to energy, the Tesla energy team is done incredible work and the growth rate on that is continuing to be very strong and we're building more manufacturing capacity and expect that energy will have very high growth for really as far into the future as we can imagine.
14:19Elon MuskThe solar opportunity is underestimated. We think the, the best way to add significant capability to the grid is or not to the grid. Let's say it's powering AI data centers is solar and batteries on Earth and solar in space.
14:37Elon MuskSo that's why we're going to work towards getting 100 gigawatts a year of solar cell production, integrating across the entire supply chain from raw materials all the way to finished solar panels.
14:57Elon MuskMaybe a bit more about Optimus. We'll probably unveil Optimus 3 in a few months. And I think it's going to be quite surprising to people. It's an incredibly capable robot.
15:17Elon MuskAnd as I mentioned, we are replacing the SX line in Fremont with a million unit per year line of Optimus. Now, because it is a completely new supply chain, it's just there's really nothing from the existing supply chain that exists in Optimus.
15:41Elon MuskEverything is designed from physics first principles. So that means the normal S curve of manufacturing ramp will be longer for Optimus than it is for products that have at least some portion of an existing supply chain.
16:00Elon MuskLike when everything's new, the production rate will be proportionate to the least lucky, least confident part of the entire supply chain. And if there's 10,000 things that need to go right, it only takes one to be slow to lag that.
16:20Elon MuskSo it will be sort of a stretched out S curve. But I'm confident that we'll get to a million units a year in Fremont of Optimus 3. And this Optimus 3 really will be a general purpose robot that can learn by observing human behavior.
16:40Elon MuskSo you can like demonstrate a task or literally verbally describe a task or show it a task, even show it a video and it will be able to do that task.
16:50Elon MuskSo it's a, it's going to be a very capable robot. I think long term Optimus will have a very significant impact on the US gdp. Like it will actually move the needle on US GDP significantly.
17:10Elon MuskSo in conclusion, you know, there's still obviously many who doubt our ambitions for creating amazing abundance, but we're confident it can be done and that we're making the right moves technologically to ensure that it does.
17:29Elon MuskAnd Tesla's obviously never been a company to shy away from solving some of the hardest problems. I think that's kind of how you build value in a company, is you solve hard problems.
17:42Elon MuskIt's like I don't know how you create value by solving easy problems. So there's a lot of hard problems that the Tesla team is going to solve. But it's an incredibly talented, hard working team and I'd like to thank actually everyone at Tesla for their incredible hard work and it's an honor to work with such a talented group.
18:04Elon MuskSo thank you to everyone who is supporting this mission. The future is more exciting than you can imagine.
18:11Travis AxelrodFantastic. Thank you so much Elon. And next we have some remarks from Vebov.
18:17AnalystGo ahead.
18:18Vaibhav Taneja (CFO)Thanks Travis. So Q4 25 was an interesting quarter in a couple of respects. On the autos Front, while in Q3 we saw a surge in US demand before the IRA consumer credit cliff, pulling in some demand from Q4.
18:34Vaibhav Taneja (CFO)In other parts of the world we saw increase in demand leading to record deliveries in smaller countries like Malaysia, Norway, Poland, Saudi Arabia and Taiwan, while continued strength in the rest of APAC and EMEA.
18:48Vaibhav Taneja (CFO)We therefore ended 2025 with a bigger backlog than in recent years. Note that none of these countries have the latest version of FSD supervised available yet. On the storage front we hit yet another record in terms of deployments.
19:04Vaibhav Taneja (CFO)I would like to thank our customers and Tesla in continuing this momentum. On the automotive margins front, automotive margins excluding credits improved sequentially from 15.4 to to 17.9%. The automotive gross profit was flat sequentially despite 16% lower deliveries primarily due to regional mix as we had proportionately more deliveries in APAC and EMEA.
19:34Vaibhav Taneja (CFO)As we look to 2026 with the progress that has been made with autonomy, our focus is on ramping production at all our factories. Our biggest constraint globally continues to be on the battery pack front.
19:47Vaibhav Taneja (CFO)While our teams have been creative in trying to resolve the situation by now putting 4,680 cells in non structural packs, we continue to iterate improving things from here on.
19:58Vaibhav Taneja (CFO)FSD adoption continued to improve in the quarter reaching nearly 1.1 million paid customers globally. Of these, nearly 70% were upfront purchases. It is important to note that that beginning this quarter we are transitioning fully to a subscription based model for fsd.
20:19Vaibhav Taneja (CFO)Therefore, net additions to this figure will primarily be via subscription model and in the short term will impact automotive margins. On the energy front, we achieved yet another record in terms of gross profit for the quarter and ended the year with nearly 12.8 billion in revenue, a 26.6% year over year growth.
20:45Vaibhav Taneja (CFO)This was the result of high deployments in all regions and continued strength in demand for both Megapack and Powerwall. As we look at 2026, our backlog remains strong, well diversified globally and we expect increasing deployments with the launch of MegaPack 3 and MegaBlock.
21:04Vaibhav Taneja (CFO)However, we expect margin compression from the increased low cost competition impacts to market from policy uncertainty and the cost of tariffs, services and others. Margin declined from 10.5% to 8.8% primarily from higher employee related costs for service centers.
21:25Vaibhav Taneja (CFO)As we start preparing for the ramp in activity from the growth in the fleet size, we did see a momentum in margin. We did see an improvement in margin from our supercharging business which is included within services and hour.
21:40Vaibhav Taneja (CFO)Additionally, note that our robotaxi business related costs, while not material are also included within this. Given that we're still in the early phase of our fleet deployment and are still doing a lot of validation testing, the revenue and cost per mine metrics are not meaningful to discuss at the moment.
22:00Vaibhav Taneja (CFO)Then on total gross margin front we ended the quarter with over 20.1%, something which we haven't achieved over the last two years. This improvement came despite the impact of lower fixed cost absorption and the impact of tariffs which were in excess of 500 million in Q4.
22:20Vaibhav Taneja (CFO)Operating expenses increased sequentially primarily from increased stock based compensation for employees and as we started recording charges for one Operation Maestro under our 2025 CA Performance Award that was deemed to be probable over the Watt term.
22:39Vaibhav Taneja (CFO)Additionally, our spend on AI related initiatives and new products like Cybercap, Semi Optimus and Megapack et cetera continues to be at elevated levels and we expect this trend to continue for the full year.
22:54Vaibhav Taneja (CFO)2026. Net income was negatively impacted from mark to market charges on a Bitcoin holding which depreciated 23% as compared to the last quarter and the impact of unfavorable impact of FX primarily from our large intercompany borrowings.
23:13Vaibhav Taneja (CFO)On the free cash flow front we ended up at 1.4 billion. You know we did end up capex being slightly below our previous guidance of 9 billion. But like as Elon already mentioned, this year is going to be a huge investment year from a CAPEX perspective and at the moment we are expecting that CAPEX would be in excess of 20 billion.
23:38Vaibhav Taneja (CFO)You know we'll be paying for six factories, namely the refinery, LFP factory, Cybercap, Semi, a new Mega factory, the Optimus factory. On top of it we'll also be spending money for building our AI compute infrastructure and we'll continue investing in our existing factories to build more capacity and then you know also the related infrastructure along with it.
24:06Vaibhav Taneja (CFO)And we'll also further expand our fleet of Robotaxi and Optimus. While this may seem a lot, we believe this is the right strategy to position the company for the next era and we'll make such investments as Enon mentioned, in a very capital efficient manner.
24:23Vaibhav Taneja (CFO)Note that this does not include potential investments in solar cell manufacturing or our tarafab as we're still in early phase and we plan to provide an update in future quarters.
24:37Vaibhav Taneja (CFO)We're starting not the next chapter but a new book on the progression of this company. 2026 year would be when all of this began. While at times it feels daunting, it is going to be the most exciting change in Tesla's history and we could not have even dreamed of embarking on this journey without the support of our customers and our investors.
25:02Vaibhav Taneja (CFO)Thanks for again showing the confidence in us and let's get ready for a future of amazing abundance. Thanks.
25:09AnalystGreat.
25:10Travis AxelrodThank you very much Vabov. Now we're going to head over to investor questions. As always we will start with questions from sei.com? the first question is, today there are approximately 90 million cars sold globally each year.
25:25Travis AxelrodDoes Tesla have a view based on its robo taxi ambition, what this number will be in five or 10 years? And how does this impact Tesla's EV strategy to have more models?
25:35Tesla ExecutiveYeah, thanks, Travis. As Elon said, the future is autonomous and obviously autonomy and cybercab are going to change the global market size and mix quite significantly. I think that's quite obvious.
25:45Tesla ExecutiveYou know, general transportation is going to be better served by autonomy as it will be safer and cheaper. And over 90% of vehicle miles traveled are with two or less passengers now, which is why we designed Cybercad that way.
25:56Tesla ExecutiveIn this new autonomous market, we at Tesla have the advantage of efficiency, cost and manufacturing at scale that really no one else has. And we've built that over the last decades and we believe that that segment that we are creating will grow millions year over year.
26:10Elon MuskYeah,
26:15Elon MuskJust to add to what Lars said there, the it's with the point that Lars made, which is that 90% of miles driven are with one or two passengers or one or two occupants essentially is a very important one because that implies that the Cyber cab, which is a dedicated, you know, two seater or dedicated robo taxi, it's all confusing with the terms robo taxi and cybercap.
26:44Elon MuskSorry about the confusion, but. And in fact, in some states we're not allowed to use the word cab or taxi, so it's going to get even more strange. It's going to be like cyber vehicle or something.
26:55Elon MuskCybercar. But the cyber cab, which is a specific vehicle model that we're making, does not have a steering wheel or pedals. So this is clearly, you know, there's no, you know, there's no fallback mechanism here.
27:11Elon MuskIt's like this car either drives itself or it does not drive. And we expect to start production in April. As always, it's an S curve of the production rate is an S curve.
27:24Elon MuskSo starts off very slowly and then grows exponentially. Then you hit the linear and then ultimately, you know, asymptotes at whatever your target volume is. So. But we would expect over time to make far more cybercaps than all of our other vehicles combined.
27:47Elon MuskGiven that 90% of distance driven or distance being distance traveled. Exactly. No longer driving is one or two people. I think it's like 80% is just one. So it would mean that long term cybercab would make several times more cyber cabs per year than all of our other vehicles combined.
28:20Travis AxelrodGreat, thank you so much. The next question, a bit related. Are there still plans to launch new models to address different price segments and vehicle types which could materially expand the TAM for Tesla?
28:34Tesla ExecutiveYeah. To further on what we were just talking about, we've launched our least expensive models ever over the last few months and are continuing to expand those models globally.
28:44Tesla ExecutiveAnd over the last decade, we have continually brought down the cost of our vehicles without sacrificing range, performance or premiumness. And we'll continue to do that, as Vybob said, investing in our factories.
28:53Tesla ExecutiveBut these are all trade offs of where we spend our time and money. And to Elon's point just now, with Cybercap coming, we are aiming to bring that Tesla premium ride experience to our largest market yet.
29:02Tesla ExecutiveThat could be five or ten times our current levels of production. This new autonomous market, you have to start thinking about us as moving to providing transportation as a service more than the total addressable market for the purchased vehicles alone.
29:16Tesla ExecutiveAnd of course we do have plans to have robo taxis in various shapes and sizes, but obviously CyberCap will be the grand majority of that volume.
29:24Elon MuskYeah, the vast majority of, of miles traveled will be autonomous in the future. You know, I would say probably less than, less than, I'm just guessing, but probably less than 5% of miles driven will be where somebody is actually driving the car themselves in the future.
29:40Elon MuskMaybe as low as 1%.
29:44AnalystGreat.
29:45Travis AxelrodThe next question is, historically Tesla has spoken about gross margin per model. Are there standalone gross margin targets for the current models excluding the benefits for FSD sales?
29:57Vaibhav Taneja (CFO)You know, we've talked about this with the previous two questions, but transportation as we know is changing and I think we cannot keep applying the same framework from a car sales model to the future.
30:10Vaibhav Taneja (CFO)What we are trying to do. So it has to be looked at it more holistically in Autonomy. Software will be the driver for growth from now on. And as we aim to maximize the global feed, we have been laser focused on cogs from our side to make sure, because that is something which we manage.
30:29Vaibhav Taneja (CFO)So we will keep focusing on that. But I think we, we need to look at it from a different dimension.
30:36Elon MuskYeah, like this Cybercab. The whole design of Cyber Cab was to optimize the fully considered cost per mile of autonomous driving. And it's a different design problem than if you're trying to design cars for people who will be driving versus being driven.
30:59Elon MuskSo cybercab is, like I said, super optimized for minimum cost per mile and also for a much higher duty cycle. So it would expect cybercav to be used, you know, probably 50 or 60 hours a week instead of the 10 or 11 hours a week that a driven vehicle is used.
31:23Elon MuskSo, you know, typically people might drive to their car for an hour and a half a day on average. So it's like 10 hours per week out of 168.
31:33Elon MuskBut I think an autonomous vehicle is likely to be used probably five times as often, which means that you need to design the vehicle for a much more wear and tear per unit of time and much more resilience.
31:49Elon MuskIt's more like a commercial truck. That's continuous operation or close to continuous operation is how you design an autonomous vehicle. And we will have larger vehicles than the cybercap in the future that are designed for full autonomy.
32:11Elon MuskAnd we've actually shown pictures of this and in fact have shown prototypes. So this is not exactly a secret. In fact, we've given people rights in them. So, you know, we're not keeping this hiding this light under a bushel here.
32:26Elon MuskYou know, it's like we're literally saying what we're going to do and have said what we're going to do for a while. So, you know, I think long term we would really.
32:37Elon MuskThe only vehicles that we'll make will be autonomous vehicles, with the exception of the next generation Roadster, which we're hoping to debut in April. Hopefully it's going to be something out of this world.
32:56Travis AxelrodFantastic. The next question we unfortunately have to skip because it's not related to Tesla and we would like to remind folks who use the same platform to please focus these questions on Tesla.
33:11Travis AxelrodSo with that in mind, we're going to move on to the next question, which is what is the current bottleneck to increased robotaxi deployment and personal use? Unsupervised fsd?
33:22Travis AxelrodThe safety and performance of the most recent models. Is it the safety and performance of the most recent models or is it people to monitor the robotaxis in car or remotely?
33:32Travis AxelrodOr is there some other blocker? I don't know, Shoak, if you want to kick off on this one.
33:39Tesla ExecutiveYeah, we have scaled the robotaxi service that's available to customers over the last year in order to just learn these scaling problems without having to wait for unsupervised. Basically like two, two goals.
33:52Tesla ExecutiveOne is like learn as much as possible from the fleet with the safety monitors and secondly, we laser focused with engineering team to solve the unsupervised FSD problem. I think we did both.
34:03Tesla ExecutiveLike by the end of last year we, you know, we had a Long tail of issues that we were able to churn through. And then in the last couple of weeks, we have started our unsupervised Robotaxi service to public customers in Austin.
34:17Tesla ExecutiveI think some customers took trikes last week and also service continues today without any rear car or something like that. Separately, we did scale the fleet size in the Bay Area and in Austin.
34:27Tesla ExecutiveAnd through that we learned issues with charging and other issues that we would have seen once we sort of scale the unsupervised fleet. So both are happening in parallel.
34:38Tesla ExecutiveA variant of the software that's used for the Robotaxi service was shipped to customers with V14 and customers saw a huge jump in performance, like a lot of, you know, happy feedback from customers.
34:51Tesla ExecutiveSo. And since then, we have improved the software significantly as well. And customers will continue to see with their own software releases that the software is so good that, you know, they're like screaming to remove the driver monitoring software because they're bored inside the car too much.
35:09Tesla ExecutiveAdding to that a little bit with what Ashok said about learning about our charging and service needs. You know, we're using our vast network of charging and service centers that really only Tesla has in this space to jumpstart our infrastructure build out needs to get ahead of Robotaxi autonomous vehicle demand.
35:23Tesla ExecutiveAnd we expect that because of this network, we are the only company capable of scaling at the rate of that is needed for the tsunami of autonomy that is coming.
35:31Elon MuskYeah,
35:34Analystgreat.
35:35Travis AxelrodMoving on to the next question. After the unveil of the cybertruck, Elon stated that if it didn't sell well, Tesla would build a more conventional looking pickup. How practical would it be to create this new design on the cybertruck architecture?
35:48Travis AxelrodAnd could it be conveniently built on the existing production lines?
35:54Tesla ExecutiveActually, in its segment, Cybertruck continues to be a leader and is selling more than any other electric truck out there while our competition continues to pull back. But to the question itself, from a line standpoint, we always design our lines to be super flexible.
36:07Tesla ExecutiveWe built 3 and Y on the same line. We built SNX on the same line. Still showing that we can do that. The Cybertruck line was designed in the same way and is one of our most fully ready for autonomy platforms.
36:20AnalystYeah.
36:22Elon MuskBut yeah, we will transition the cybertruck line to just a fully autonomous line. And there's obviously a market there for cargo delivery. Like you say, like localized cargo delivery within a city, within a few hundred miles, something like that.
36:39Elon MuskThere's a pretty, there's a lot of cargo that needs to move locally within a city. And an autonomous cybertruck could be very useful for that.
36:51Travis AxelrodGreat. Moving on to the next question regarding Optimus. Could you share the current number of units deployed in Tesla factories and actively performing production tasks? What specific roles or operations are they handling and how has their integration impacted factory efficiency or output?
37:09Elon MuskYeah, we're still very much at the early stages of, of Optimus. It's an R D still in the R D phase. So we have had Optimus do some basic tasks in the factory, but as we iterate on new versions of Optimus, we deprecate the old versions.
37:33Elon MuskAnd so I wouldn't say it's like it's not in usage and our factories in a material way. It's more so that the robot can learn. We wouldn't expect to have
37:52Tesla Executiveany kind
37:52Elon Muskof significant Optimus production volume until probably end of this year. Great.
38:01Tesla ExecutiveOptimus. Gen 3 is an awesome robot.
38:03Elon MuskThat is awesome.
38:05Tesla ExecutiveYeah, it's an awesome robot that minimizes any differences. It looks like a human. People could be easily confused that it's a human. And this helps our strategy for the AI too, because you can learn from how humans do these tasks.
38:19Tesla ExecutiveAnd it's very easy to teach the robot doing the same way as opposed to previous robots.
38:24Elon MuskYeah, I mean, I guess one thing I should say is there's a lot of news of various companies announcing layoffs and whatnot. But, you know, at our Tesla factory in Fremont, we actually expect to increase headcount over time and to significantly increase output from our factories.
38:47Elon MuskSo we don't have any layoff plans. We expect to actually increase headcount.
38:55AnalystGreat.
38:56Travis AxelrodThe next question, similar to the other autonomy questions, but slightly different, when is FSD going to be 100% unsupervised?
39:07Elon MuskWell, it is 100% unsupervised and FSC is 100% unsupervised. I mean, we obviously have cars operating with no one in them and no safety monitor and no follow car or anything like that.
39:18Elon MuskIn Austin right now for customers, we, you know, we're being just very cautious with the rollout.
39:26Tesla ExecutiveI mean,
39:28Elon Muskwith each successive version as we prove it out and we, we make sure that there are no sort of unique issues in particular cities because sometimes you get some very difficult intersection and it'll be an intersection where a lot of humans have accidents.
39:45Elon MuskBy the way, there's some pretty nutty intersections where a lot of humans make mistakes and have accidents in various cities. So we want to make sure that FSD can handle those unusual intersections like we take la, for example, where Wilshire and Santa Monica combined is like, there's about, I don't know, 20 traffic lights, and people are constantly having accidents there.
40:15Elon MuskSo you want to make sure that FSD can handle unique things in a particular city. So. And we're also just being paranoid about safety. But with each successful of fsd, we will reduce the amount of driver monitoring that's needed proportionate to the safety of the FSD build.
40:42AnalystGreat.
40:44Travis AxelrodAs it relates to Robotaxi, what has surprised you about the rollout so far? We've talked about what's constrained the fleet expansion to date, but it appears there are 200 vehicles based on public tracking.
40:56Travis AxelrodIs that something that we can confirm?
41:01Tesla ExecutiveI wouldn't say there's anything that really surprised us because we had a large fleet, we had all the metrics, so there was not sort of a surprise. It was just continued work to grind down on the long tail of issues, and that's what enabled us to launch the unsupervised service in Austin.
41:18Elon MuskYeah. And I mean, in terms of Robotaxi vehicles carrying paid customers, I think we're well over 500 at this point. Between the Bay Area and Austin.
41:35Tesla ExecutiveYeah. Varying amounts of vehicles depending on the load. But, yeah, you can have more vehicles doing peak times and then fewer vehicles in the off hours.
41:43AnalystYeah,
41:46Elon Muskthis will probably double every month type of thing. It's on an exponential curve.
41:53Vaibhav Taneja (CFO)I mean, one other thing, people forget that we've been deliberate on all this in the sense that we have the supporting infrastructure already being in place, whether it's service centers, charging.
42:05Vaibhav Taneja (CFO)Yes. We'll have to augment as the fleet grows, depending upon the density of where the demand is and whatnot. But it's not something like we just stumbled upon it and we're starting to.
42:18Vaibhav Taneja (CFO)We've been at it for years. Yes. Not every city is designed the same way. Same thing. Our infrastructure is also not the same in every city. But you have to give us credit that it's been a journey.
42:33Vaibhav Taneja (CFO)And like Lars said, if there's some company which can do it, we've already been at it, so we should be able to deliver much better.
42:43AnalystGreat.
42:44Travis AxelrodThe next question is about chase cars, which we already covered. So, moving on to the last question. Elon, you've been spending significant personal time on Tesla's chip design.
42:54AnalystYeah.
42:55Travis AxelrodWhat was the forcing function behind this increased involvement? And do you think external chip sales will represent a significant portion of Tesla's valuation by the end of the decade?
43:07Elon MuskWell, I mean, I tend to spend time on whatever the most critical issue is for the company. And completing the AI 5 chip design and having it be a great chip is arguably the number one most critical thing to get done, which is why I'm spending more time on that than currently anything else at Tesla.
43:28Elon MuskSpend pretty much every Saturday on this and, and a chunk of every Tuesday. So it's like, you know, if I'm spending my Saturdays on something, it's, it's going to be something pretty important.
43:43Elon MuskI do think AI5 will be a very good chip and I feel quite confident about the design at this point. And then AI6, which will follow that, it'll be aspirationally would follow that in under a year will be yet another big leap beyond AI5.
44:04Elon MuskSo I feel pretty good about our chip strategy right now,
44:12Elon MuskBut in terms of selling it outside of Tesla, we first need to make sure we have enough chips for all of our vehicle production and all of our Optimus production.
44:22Elon MuskAnd, and then, and then we will actually use the AI5 chips in our data centers. We already use the AI4 chips in our data center. So when we do training, it's a combination of the AI 4 chips and Nvidia hardware primarily that we do training with.
44:41Elon MuskSo. But you say by the end of the decade, I mean, it's like things are changing so fast that it's hard to imagine like what happens at the end of the decade.
44:57Elon MuskI mean, we might, I mean the, when I, when I look ahead at say what, what's the limiting factor for Tesla growth if you go say three or four years out?
45:09Elon MuskI think it actually is chip production. Is there enough AI, enough AI logic and enough AI, enough memory, enough RAM for our volume? And right now I see that as being the thing that probably limits our growth in three or four years, which would imply that we're not selling chips outside of Tesla because we need them.
45:43Elon MuskAnd
45:46Tesla Executivein fact,
45:50Elon MuskI think it's going to make sense and this is definitely going to be sort of a controversial thing, but I think Tesla needs to build a tariff fab. I mentioned this at the meeting, but even when we look at the output of the best case output of all of our key suppliers, and I would say even beyond suppliers are like strategic partners like Samsung, TSMC and Micron.
46:23Elon MuskAnd we say like, what's the most you could possibly make? Then it's not enough. So I think in order to remove the constraint, the probable constraint in three or four years, we're going to have to build a Tesla Terafab, a very big fab that includes Logic, memory and packaging domestically.
46:54Elon MuskAnd that's actually also going to be very important to ensure that we are protected against any geopolitical risks. I think people may be underweighting the, some of the geopolitical risks that are going to be a major factor in a few years.
47:14Elon MuskSo now, you know, a lot of people like this will say like that's crazy. Travels are really hard. I'm like, yes, I know fabs are really hard. I don't think they're easy.
47:26Elon MuskBut
47:29Tesla Executivewe do hard things.
47:30Elon MuskWe do a lot of hard things. You know, we didn't used to have car factories that we didn't used to have battery cell factories or lithium refineries or megapack factories or all these other things.
47:44Elon MuskWe figured it out. So I think it's, I think if we don't do the Tesla Terafab, we're going to be limited by a supplier output of chips. And I think maybe memory is an even bigger limiter than AI logic.
48:08Elon MuskSo you know, for example, we have chip supply deals with TSMC in Arizona and Samsung in Texas, but currently there are no advanced memory fabs at scale in the United States.
48:24Elon MuskThere are zero, literally zero. Hopefully Micron will have something going in a few years because they are headquartered in Idaho where they make a lot of potato chips. But we need to make computer chips too.
48:43Elon MuskSo anyway, we're working with our strategic partners on the chipfront, memory and logic. But I think, I think we've got to also try our hand at building a large scale fab that integrates logic, memory and packaging.
49:06Elon MuskAnd if we don't do that, we're just going to be fundamentally limited by supply chain. Especially if there's some in a worst case geopolitical situation. It would be quite a severe situation.
49:17Elon MuskSo I think we, quite frankly it'd be crazy not to try out the tariff app. So yeah, great. We'll have a bigger announcement on this in the future. Awesome.
49:35Travis AxelrodWith that we're going to move on to analyst questions. The first analyst is Emmanuel from Wolf Research. Emanuel, please feel free to unmute yourself.
49:49Tesla ExecutiveGreat.
49:49AnalystThank you so much. It's Emmanuel Rosner from Wolff Research. My first question is on the, on the capex you signal a pretty large increase to over $20 billion for this year.
50:01AnalystWas hoping to better understand where the investments are going anyway to dimension for us which of the product line or technologies account for the bulk of the increase. And, and also do you view this as like one time in nature, 2026 or I guess how much of this is an ongoing level of high spending for a number of years and then just finally still on that with that level of spending you're going to be burning cash.
50:27AnalystHow should we think about cash balance or any other way to finance this?
50:33Vaibhav Taneja (CFO)Yeah. So Emmanuel, I tried to put this in my opening remarks too, but I'll try and go a little bit deeper. There's about six factories which we are starting production in this year.
50:48Vaibhav Taneja (CFO)So there's a lot of cash capex which is going into that. Then as we are trying to scale Optimus we need a lot more compute so we're putting more money towards compute as well for training and then we're also going to be spending money to expand the capacity at existing factories on top of it, you know, we're just keep in mind that we're not none of these numbers which I shared of 20 billion factors in anything to do with the solar fab or the semiconductor chip fabric.
51:33Vaibhav Taneja (CFO)Those would be, as Elon mentioned, would come later on. And you think your second part of your question was is this one off or would we expect more? I think we're getting into this investment phase because we have big aspirations and when you look at it, some of these aspirations are, I call them as infrastructure play.
51:59Vaibhav Taneja (CFO)Especially if you have to do a chip fab and we have to do a cell manufacturing fab, those are infrastructure plays and that funding takes a little bit longer and you would be in an investment cycle for a little bit longer initially.
52:19Vaibhav Taneja (CFO)Third part of your question was how are we going to fund it initially? Obviously we have over 44 billion of cash and investments on the books so we'll use our internal resources.
52:30Vaibhav Taneja (CFO)But there are ways where we can fund it, especially when we look at the robo taxi fleet. Because anytime you have a consistent stream of cash flow, you can go and get money from the banks.
52:46Vaibhav Taneja (CFO)And we have had conversations with banks about it and that is something how we're going to do it. And then on the infrastructure play side. Yeah, like I said, we don't have a number yet.
53:00Vaibhav Taneja (CFO)But given that it's an infrastructure play, it's a longer tail. We will have to look at a little bit more in terms of how we fund it, whether it's through more debt or other means.
53:17AnalystGreat.
53:19Travis AxelrodOur next question comes from Andrew from Morgan Stanley. Andrew, please feel free to unmute yourself.
53:26AnalystGreat. Thanks so much for taking the question. I just want to start on the XAI investment that you guys announced today. You know, you talked about there being some collaboration, you know, between the companies.
53:39AnalystSo I'm just hoping to get more, more information or if you're hoping that you could shed more light on what that looks like and maybe how the work XAI is doing can be leveraged at Tesla and vice versa.
53:51Vaibhav Taneja (CFO)Yeah. I mean, if you looked at the disclosure which we also put in there, we do talk about this is literally furtherance of our Master Plan 4. And even today, if you look at Tesla vehicles, we are using GROQ in there.
54:09Vaibhav Taneja (CFO)And as we look at things, whether we can do it ourselves, yes, there are a lot of things which we can do ourselves, but if there are things which XAI can help accelerate our progress, then why should we not do that?
54:24Vaibhav Taneja (CFO)And that is the reason why we've gone ahead with such an investment. Because this is part of the strategic initiative. Because as it is, if you remember, I talked about how many things which we are doing ourselves, if there are ways and means, we can find efficient ways for others to help us.
54:46Vaibhav Taneja (CFO)And XAI literally fits into that mold. So that's why we went ahead with it.
54:53Elon MuskWe just had like a lot of investors ask us to do this. There was like a lot of investor, tens of shareholders said like, we should invest in xai.
55:05Elon MuskSo that's like we're just doing what shareholders would like, ask us to do pretty much. But GROK will be very helpful in say, maximizing the efficiency of the management of a large autonomous fleet.
55:21Elon MuskSo, I mean, if you've got an autonomous fleet that's in the future, 10 million vehicles or tens of millions of vehicles, then optimizing the efficient use of that fleet GROCK will be, I think, way better than any heuristic solution or sort of manually managed solution.
55:41Elon MuskAnd if you say managing say a large team of Optimus robots to build a factory or build a refinery, you know, and say a rare hypothetic, like a, this is a hypothetical example, a rare earth or refinery, which we do desperately need in America, then you say, well, like what's going to organize the Optimus robots to build that ore refinery that would, you know, you need kind of need a, an orchestra conductor.
56:15Elon MuskAnd so then GROK would be kind of the orchestra conductor for the Optimus robots to build the. Hypothetically. It might not be hypothetical in the future. I'm just saying it's not currently on our plans.
56:27Elon MuskBut, you know, we do, we do need a lot more or refining capacity in the US so then what's going to manage, let's say 1000 Optimus robots to.
56:54Travis AxelrodYou're on mute right now. So I'm not sure if you're Trying to ask a follow up question.
57:03Travis AxelrodReady? We're going to move on to the next question which is coming from Dan Levi at Barclays.
57:14Travis AxelrodDan, please feel free.
57:16AnalystGreat, great, thank you. Elon, you talked about some of the constraints on memory. Given the very tight supply. Are there any near term constraints on procuring memory? And if there are, to what extent could you look at modifying the functionality in the vehicle similar to what you did in 21 when we saw shortages on MCUs?
57:39AnalystAnd maybe how are you thinking about bridging in the next few years?
57:44Elon MuskWell, the Tesla AI is very compute efficient and very memory efficient. So I think one of the metrics one should consider for any given AI model is the intelligence per gigabyte, especially when you're constrained on ram having an AI that has very high intelligence density per gigabyte.
58:08Elon MuskSo you can say for a given number of gigabytes, how much functionality can you get out of it? I actually think Tesla is ahead of the rest of the world in, in intelligence density of AI by
58:21Travis Axelrodan order
58:21Elon Muskof magnitude or more like it's. This is going to sound like a pretty bold statement, but I kind of
58:26Analystknow
58:29Elon Muskwhat the intelligence efficiency of the big models are like, Gronk and a bunch of the other models and it tells us AI is like in terms of its memory efficiency, more than an order of magnitude better.
58:46Elon MuskSo.
58:51Elon MuskThat puts us in a pretty good position actually for scaling. And we actually do think that there's, we do have a solution for logic and memory for let's say the next roughly three years.
59:10Elon MuskBut if you start going beyond three years and we look at the scaling plans and how many fabs are getting built, and especially if you factor in geopolitical uncertainty, you know, there's always, there's always risk that maybe the, those chips don't arrive, that people were expecting to arrive.
59:30Elon MuskSo that's, that's why I think we, we need to have more RAP capacity in the US just in case chips don't stop arriving for any reason. This is really existential for Tesla because Optimus is completely useless without an AI chip.
59:51Elon MuskIt's not like at least the cars. We can put steering wheels and pedals in or retrofit them if need be. But Optimus is just a mannequin without, you know, it's like the Tin man or whatever from the wizard of Oz.
1:00:05Elon MuskBut even worse, at least the Tin man could walk. Optimists won't even be able to just sit there without an ahf. So we've got a good solution for a significant Scale through, you know, for the next roughly three years.
1:00:20Elon MuskBeyond that we will be supplier limited. And so we've got to figure out some game plan to not not be supplier limited. Great.
1:00:33Travis AxelrodOur next question is going to come from George at Canaccord. George, please feel free to unmute yourself.
1:00:40Vaibhav Taneja (CFO)Hi everyone, thank you for taking my, my question. So, you know, there's been a surge of startups, particularly from China, entering the humanoid market and wondering what the long term competitive advantages that keep Tesla ahead are and how, based on what you've seen, will Optimus fundamentally differ from these competitors?
1:01:00AnalystThank you.
1:01:04Elon MuskWell, I do think that the by far the biggest competition for humanoid robots will be for China. China is incredibly good at scaling manufacturing, actually quite good at AI, as you can see from the open source or not the ops, but the sort of, I guess some of them are open actually.
1:01:25Elon MuskBut basically the models that China is distributing for free are actually quite good and they keep getting better. So China is very good at AI, very good at manufacturing and will definitely be the toughest competition for Tesla.
1:01:42Elon MuskTo the best of our knowledge, we don't see any significant competitors outside of
1:01:47Tesla ExecutiveChina,
1:01:50Elon Muskbut China will definitely be tough competition. There's no two ways about it. So I always think people sort of outside of China kind of underestimate China. China's NASCAR next level.
1:02:09Elon MuskSo I guess we're going to build. We think Optimus will be much more capable than any robot that we are aware of under development in China. So we think we'll be ahead in terms of the real world intelligence, the electromechanical dexterity, especially the hand design, which is by far the hottest thing in the robot.
1:02:42Elon MuskIn fact, I say there's really three hard things about humanoid robots. Building an incredible hand that has the same degrees of freedom and dexterity as a human hand is an incredibly difficult engineering challenge.
1:03:01Elon MuskThen there's the real world AI and scaling production. Those are the three hardest problems by far for humanoid robots. I think Tesla is the only company that actually has all three of those components.
1:03:23Elon MuskGreat.
1:03:24Travis AxelrodAnd our last question is going to come from Colin at Oppenheimer. Colin, please feel free to unmute yourself.
1:03:32AnalystThanks so much because you talked a lot about the capex spend, but this is incredibly ambitious technology development program that you're talking about. Can you talk a little bit about the R and D spend and how you're thinking about the synergies of the different components, particularly on the hardware side.
1:03:49AnalystIf you think about batteries into chips into memory and the efficiency of the system and what sort of advantages you Think you'll end up getting out of some of these purpose built devices that you'll end up integrating into multiple end markets?
1:04:07Elon MuskWell, really all we're trying to do is make sure that we can scale to very high volume with autonomous vehicles, with human robots, and that we address geopolitical risk, which I think there's so many companies out there that are asleep with the switch with regard to geopolitical risk, or they just have their head in the sand and hope nothing bad will happen.
1:04:43Elon MuskI'm way more paranoid than that. I always think of Andy Grove's famous statement, only the paranoid survive. Why did he come up with that statement at Intel? Hmm, I think so.
1:04:59Elon MuskI think there's a lot of wisdom in that statement. So we're going to be paranoid and make sure that we can continue to build batteries and robots and AI chips no matter what happens.
1:05:17Elon MuskAnd companies that don't do that, a bunch of them will cease to exist.
1:05:23Vaibhav Taneja (CFO)I mean, remember, all this comes out of necessity. It's not that we want to do it, it's just we have no choice.
1:05:30Elon MuskYeah, I mean, we built the most advanced lithium refinery in the world, by the way. It's not just like our lithium refinery in Corpus Christi is not just a copy of what others have done.
1:05:40Elon MuskIt's an entirely new process that is fundamentally more efficient and more advanced than anything else in the world. The same is true of our cathode refinery here in Austin.
1:05:50Elon MuskAnd we wish others would build this. Can other people please, for the love of God, help the name of all that is holy and others please build this stuff.
1:06:02Tesla ExecutiveIt's not the first time you built.
1:06:03Travis AxelrodExactly.
1:06:04Vaibhav Taneja (CFO)I mean, this is not the first time you've said something like this, like,
1:06:08Elon Muskwhy do we have to build these things? Why can others not also, please can someone ask for these things? I mean, this is very hard to build these things.
1:06:19Elon MuskWe build them out of desperation, not because nobody else is building lithium refineries and cathode refineries, we're pretty much not just the largest, but also the only lithium refinery and cathode refinery in America.
1:06:35Elon MuskSo. Yeah. So we're making moves to make sure that no matter what happens, Tesla will prosper. Great.
1:06:50Travis AxelrodUnfortunately, that's all the time we have for Q and A today. We really appreciate everyone's questions and we look forward to talking to you next quarter. Thank you very much and goodbye.
1:07:00Elon MuskCool.
1:07:05AnalystSam.