All Right now. YouTube Crash! Thank you Foreign, Hello hello! We're here for a little bit of a specialty show and no, it doesn't have anything to do with the fact that I absolutely crushed the stair stepper. sprinted back to my place, took a shower just to be able to do this in between the market clothes and Tesla's Q2 2023 earnings call. So if you're seeing what's going on with the market, it was an absolutely absolutely hectic day and as of now Tesla is slightly green.

It is up 64 cents relative to where we close. But don't forget today we had an intraday high above 299 and now that Tesla's trading at 292. obviously we're more than seven dollars off of that now. As we're waiting for Elon and the team and everyone to start talking I didn't want to give you a little bit of a preview of the other earnings going on.

United reported they crushed it up 2.55 also known as 1.4 dollars and then if you look at Netflix it's down five percent AKA 25 even though the report was pretty good. and I also want to talk a little bit about IBM but hey folks, hope you're having a good one. Hope you had a good trading day. I myself didn't trade horribly, didn't blow up my account, but I definitely could have traded better.

so I don't know I usually I let myself decompress a little bit after the market closes, and then I like to go back and review my trades review. Everything going on and I mean already today? Like looking at how things played out, I could tell exactly where I made some glaring issues, clearing mistakes, glaring missteps. But the one thing that I do have if you were able to catch the wrap-up stream of the day, it's the fact that I cut down my wrist by more than 50 at the end of the day just because I didn't feel like it was necessarily worth carrying that risk. So granted, it as of now, it does look like I'm going to take some sort of hit in the morning, but uh, far less of a hit than I would have if I decided to obviously YOLO the full portfolio so just wanted to throw that out there.

But our boy Elon should be going live pretty pretty soon. pretty soon. Pretty soon pretty soon. I think he actually I was just looking up some other stuff about Tesla I thought he like retweeted it right here 4 30 PM central time all right.

let me save this. throw that over there and then I do want to give you this I Thought it was a nice recap that they tweeted blah blah blah blah blah this one Q2 Shareholder update Highlights in Q2 We produce a record number of vehicles thanks to ongoing ramps of our new factories and strong performance of Shanghai and Fremont Cyber Shark Equipment installation at Giga Texas is in progress with deliveries remaining on track to start later this year. Yield of our in-house 4680 4680 cell production lines continues to increase. We're also building capacity for cathode production and Lithium refining in the US S-e-x-y market share is growing globally and those are just the models of their vehicles.

Model Y was the best-selling vehicle of any kind in the first half of the year in Europe Thank you to our European owners! Autonomy at scale is achieved by extremely large real world data set Neural Net training vehicle Hardware vehicle software all of which we developed in-house Recently we started production of Jojo our training computer, which is expected to make Neural net training faster and cheaper. So those are the highlights. Obviously, we're going to be getting into more details I have my notebook right here I'm going to be writing down all the important things They should be going live shortly though. Let me all right starting in a minute, minute and a half.

So I have that ready. Let's get the volume up. Maybe it's best actually. let me see.

Maybe I'll overlay it onto the maybe. If I could take this and then overlay it, that might be best. So let me see if I could do a quick screen capture of this right? Uh, window capture ad Source new. Let's get what I need right? We did that.

We did that all right. Let me just clean this up all right. Let me grab all that for you for right now. we'll throw this down in the corner, make it a bit bigger, and then that should fit nicely with where we're going nicely with where we're going.

Maybe that actually looks best, All right. And I'll bring this up just so we could all see what all the hubbub is about. There's me. there's the chart.

there's the video when it gets started. I Think we're ready to rock and roll. I Think we're ready to rock and roll. Oh I See some people commenting on Carvana? Yeah, it is still going.

Check out this Carvana if this ever loads. It's going to take forever because it's probably loading in numbers. it's never had to look at before. Carvana is still going.

and yes, I do eventually believe it has a really tough fall, but no reason to bet against it. Now all all all of the momentum and Direction and just excitement is to the upside. So I missed it and I think it's available. Straight to the upside: I Think it's a viable trait to the downside, but no way am I going in now when it's just showing nothing but strength.

It gained 40.2 percent today and then after hours, it's already up another 8.6 another 8.6 So gonna be nuts. Is this starting? Audio Only Conference. So we actually might not need this at all up. Hang on, let me kill the audio for you.

So I don't get Dmca? poor Netflix Poor poor Netflix Are they starting? Nope, not yet. I Will oop everyone and welcome to Tesla Second Quarter 2023 Q A webcast my name is Martin Vehicle I'm VP of Investor relations and I'm joined today by Elon Musk Secretary Kirkhorn and a number of other executives. Our due to results were announced at about 3 pm. Central Time in the update deck we publish at the same language this webcast.

During this call, we will discuss our business Outlook and make forward-looking statements. These comments are based on our predictions and expectations as of today, Actual events or results could differ materially due to a number of reasons uncertainties including those mentioned in our most recent filings with the SEC. During the question and answer portion of today's call, please limit yourself to one question and one follow-up Please use the raise hand button to join the question queue. But before we jump into the Q A Elon has some opening remarks Elon thank you Martin So just a Q2 recap in Q2 We achieved record vehicle production and deliveries and record revenue of about 25 billion dollars in a single quarter and Model Y became the best-selling vehicle of any kind uh, globally in Q1 surpassing the lights, the likes of Corolla and Golf.

so it was the number one vehicle of any kind including vehicles uh that are at a seller car lower price. this is I Think an incredible achievement by the Tesla team and just a huge thank you to our customers for their support. Um so and this came in spite of high interest rates and a lot of macro uncertainty. Um and nonetheless, uh, we managed to achieve operating margin of about 10 percent.

Um, we continue to Target uh 1.8 million vehicle deliveries this year. although we expect that Q3 production uh will be a little bit down because we've got summer shutdowns to for a lot of factory upgrades. So um so just probably a slight decrease in production Q3 Um before sort of global Factory upgrades Um, markets and knowledge is gonna just drive volume through the ceiling. next level.

Um wow and uh and our future Robo Taxi products um dedicated Robo Taxi products Uh, we think have like quasi infinite demand. Um so uh, we're the way we're going to manufacture. Um, the robotaxi is is also itself a revolution and so it's revolutionary design made in a revolutionary way. It'll be by by far the highest height units per hour of any vehicle production ever.

Um, so very excited about that. Um, with respect to autopilot and dojo, in order to build autonomy, we also need to train our neural net with the data from millions of vehicles. Uh, with the more I mean this has been proven over and over again, the more training data you have, the better the results. Um and Um I mean there are times where we see basically, uh, in a neural net.

Uh, basically it's sort of at a million training examples, it barely works at 2 million, It's it slightly works. at three million. It's like wow, Okay, we're seeing something. but I think it's like 10 million training examples.

It's It's like it becomes incredible. Um, so uh, you just there's just there's just no substitute for a massive amount of data. And obviously Tesla has more vehicles on the road um that are collecting this data then all other companies combined by I think maybe even an order of magnitude. So I think we might.

we might have 90 of all or a very big number. Um, so uh, you know the success in AI Endeavors is a function of talent. uh uh, sort of unique data and Computing resources. Um, and and we, um, have outstanding capabilities in all three arenas.

Um, and I really just don't know how anyone anyone could do what we're doing, even if they had our software and had our computer if they did not have the the training data. So um, speaking of which, our training computer is designed to significantly reduce the cost of neural net training. Um, it is designed to it's it's so optimized for the kind of information which is a video training. Um, you know we just see that the needful neural net training okay things is is just enormous.

So I think having having we we expect to use both Nvidia and Dojo to be clear, Um, but there's there's um, we just see a demand for really, uh, vast training resources. Um, and uh, we think we may reach in-house neural net neural net training capability of uh, 100 Exoplus by the end of next year. So um, so today, over 300 million miles have been driven using FSD Beta. That 300 million mile number is going to seem very small very quickly.

right? right? It'll soon be billions of miles, then tens of billions of miles. Um, and um, that FSD will go from being bad as good as a human too than being vastly better than a human. We see a clear path to a full self-driving being uh, 10 times safer than the average human driver. So um, and between autopilot Dojo computer um, our inference Hardware in the car which we calls sort of Hardware three four, you know, but it's really dedicated.

It's it's a high efficiency inference computer that's in the car and our Optimus robot um translated failure at The Cutting Edge of uh AI opened with Rochester We continue to build uh, release candidates of the Cyber truck. Um, on our final production line in Austin I'm actually here in Austin at the Gigafactory. Um, this is the first truck that we're aware of that will have four-door was over a six foot bed and will fit into a 20-foot garage. So it's it's a it's sort of biggest on the outside but it's even bigger on the inside so it's uh I Think that's a one of one of the elements of good design is it should feel bigger on the inside than it looks on the outside.

And this is this is no small car, but we we really cared about the exterior dimensions of the Cyber truck down for the last millimeter. Um, so it's just we're trying to get right in the middle of the Goldilocks zone not too big, not too small, um and and then really maximize the utility of the volume and we can't wait to start delivering it later this year. Oh, some other highlights: our Global supercharging Network uh now stands at over 50 000 or roughly roughly 50 000 connectors and over 5 000 locations. Um, as I think a lot of people are aware.

um uh, the Tesla starting the Tesla charging standard uh which we made open source and it's now called the North American charging standard. Uh, we're we're deeply honored that uh Ford GM Mercedes uh and many other oems, uh, have signed up to use our connector and gain access to our charging. Network Um, Uh, You know we we strongly believe in helping other companies to uh, accelerate the EV Revolution and um, just trying to do the right thing in general so that's difficult there. Um, then um, it's something I think I I Want to emphasize uh, like very very strongly.

This is a very important point is that. um Tesla uh, just as with the North American charging standard, although we're not licensed in that case, not licensing, we're just making it available. But but we are, um, very open to licensing our full self-driving software and Hardware to other car companies. Um, and we are already in discussions with Uh, only just early discussions with a major OEM about using a Tesla FST Um, so uh, we're not trying to keep this to ourselves, we're more than happy to to license it to others.

And lastly, our new bumping a little bit. Um, now. in conclusion: Uh, we continue to focus on making as many calls as we can while maintaining healthy financials. Our artificial intelligence development is obviously entering a new era, and um, we're incredibly excited about what's to come.

Our other businesses such as Mega Pack, supercharging, service, and whatnot all started to become a meaningful contributor to overall profitability. Uh, this quarter? Um, and uh. Then lastly, I'd just like to, uh, profusely thank all of our employees who are making a lot of extra effort during uncertain times. Uh, thank you very much for your hard work and the impact you're making.

Thank you very much! Elon and I think Zach has some opening remarks as well. Yeah, thanks. Martin Um. as Elon mentioned, Q2 was another record quarter of production and deliveries as well as records and profit for energy and Services and other businesses.

Congratulations again to the Tesla team on the continued progress as we navigate through a period of economic uncertainty Rising interest rates, volatility and consumer confidence and Regulatory change I Want to comment on our financial approach First, the single most important priority is to ensure We are continuing to invest heavily in the core technologies that will drive the long-term value of the business. This include increasing spending on AI related Technologies such as full self-driving Optimus and Dojo as well as new products such as Cyber Truck or Next Generation platform in the semi, as evidenced by the continued growth in our R D spend. This also includes continuing our investments in capacity expansion not only in our vehicle factories, but also our supercharging network service, internal applications, and Battery processes as we continue with meaningful Capital expenditures to lay this foundation for the future. Second, we continue to work towards our goals of maximizing volumes on both our vehicle and energy business, but most importantly, doing so in a way that generates the capital to continue our pace of R D and capital.

Investments This requires a strong focus on per unit cogs reductions in each of our key businesses, as well as working Capital Improvements on raw materials, work in process, inventory, and customer AR all of which progressed appropriately in Q2. If we look specifically at our Automotive business, our gross margin showed a modest reduction and remain healthy despite action taken to further improve vehicle affordability. Early in the quarter, we recognize we realize per unit cost improvements in nearly every category including material costing Commodities manufacturing costs and Logistics while also continuing to rapidly increase the build rate in our Austin and Berlin factories. Back to Green for our energy business, we improved margins and gross profits driven by cost reductions and deal economics particularly with Mega Pack as a reminder, storage volumes are typically volatile sequentially based on the types of projects and their specific Revenue recognition milestones as we look forward to the rest of the year.

I Want to reiterate Elon's comments on Q3 volumes driven by plan down times for factory upgrades. These upgrades will also carry some amount of factor idle cost. however, we are working to minimize as much as possible. It's also important to keep in mind the uncertainty in the macro environment which can impact our execution positively or negatively in the near term.

Regardless, we continue to remain Dynamic with a focus on fundamental efficiency and a long-term Outlook Congratulations again to everybody on a great quarter! Thank you very much! Zach And let's go to Invest Your questions. Now the first. the first question on licensing FSD We've already answered, so let's go to the second one. The second question is what is the status of 4680 cells? How far are you from the specs you laid out on battery day? When do you expect to achieve what you laid out on Battery Day? Yeah, First, I'll just start with a little bit of a production update.

So in Texas 4680 cell production increased 80 Q2 over Q1 and the team surpassed 10 million production sales produced here in Texas. So congrats to the team for that. Their focus on yield reduced our scrap bill by 40 quarter over quarter and that resulted in a 25 reduction in cell cogs. Um, here in Texas we're preparing to launch our Cyber Truck Cell, which is 10 higher energy density than current production.

Uh, that was accomplished through process and mechanical design optimization. As we scale cyber cell production through the end of the year and early. Next, we should be in a comfortable place on cost per cell um against our battery energy density targets. The Cyber cell is at our expectations on a like for like electrochemistry basis.

We're yet to integrate silicon or in-house cathode production both reviewed on battery Day which do bring significant further energy density and cost improvements, but that is a topic for another day. Um. Lastly, it is important to remember that most of what we focused on at Battery Day was the Tesla engineered 4680 production system and the improvements we stroke to achieve on equipment Factory Density Capital cost and utility cost reduction all of which we are realizing in our Texas scale up to date. thank you very much.

The next question is can you talk more to the upcoming Tesla Energy Products and how your thinking has evolved on the revenue model Given Tesla's AI capabilities, how do you see the long-term mix between Hardware margin and recurring software margin from Auto bidder. As this segment accelerates, we can't comment on future product roadmap, but I can provide a quick energy. Q2 Update: Mega Pack continues to show strong demand globally, with Lathrop ramping successfully to meet our contracted projects in 2023. As stated, last quarter, mega pack margins are in a reasonable place in line with our target market vehicle Target margins.

The second final assembly line at Lathrop is progressing on schedule, eventually doubling Lathrop capacity ahead of our full Factory ramp uh in 2024. we have several exciting large projects in construction or nearing completion, including The KES project in Hawaii, the River Arena project in Australia, several projects in California and one here at Gigafactory Texas that I toured today. Actually, we want to thank our customers utilities and grid operators for trusting us with these projects. On the Automator question, we continue to grow Auto bidder contracts and wholesale markets like Australia Texas UK and California with over six gigawatt hours under Tesla's dispatch.

Next year in the UK, our project performed best in the industry. in Q2 Automator does have software margins and is an enabler for hardware sales, but it's a relatively small contributor to revenues. Given how much deployment growth on the Mega Pack, our side is occurring, it's important to remember that these large projects these large capital projects have lifetimes in 20 years of recurring revenues on an annualized basis relative to upfront. Capex are small.

On the residential side. We have some fun things happening. We recently surpassed a half million power walls installed Uh, just this week we were launching Charge on Solar, which allows Tesla Powerwall and vehicle customers to charge their vehicles using their excess solar and drive only on the sunshine that hits their roof. Yesterday we began paying customers in Texas for participating in our virtual power plant to provide great support to Ercot.

We expect these credits to lower our median customers annual bill by Third and to increase these credits over time as Ercot expands. Market Access Interesting, and today we are expanding Tesla Electric enrollment to new Model 3 owners in Texas followed by all Texas vehicle customers over the rest of the quarter. Unfortunately, and somewhat similar to Tesla Insurance bringing Tesla electric and VPP capabilities to our customers requires working through a fractured regulatory environment on a jurisdiction by jurisdiction basis. In the long run, the value of Residential Energy software and Hardware will be driven by the level of Market access that Utilities Market operators and Regulators permit for power Wall is eligible to provide.

the full stack of. Energy Services Like peaker capacity and system buffering such as in Australia, we can more than double the value of ownership relative to a typical system today. thank you very much. The next question is could you quantify the benefits to cogs per unit from the IRA battery manufacturing incentives and secondly, battery raw material declines year to date.

All right I Can take that. um on the first part of the question for Ira manufacturing incentives. We provided previous guidance that we expect these to be for the course of this year in the range of 150 million to 250 million per quarter. We are staying within that boundary as we guided previously, so that was the case in Q2 as well.

I will note and I think we've mentioned this before that this includes a 50 50 sharing of credits for qualified sells from our long-term battery partner. Panasonic On the commodity side, We Are continuing to see improvements there. As we've discussed previously, Lithium is the most notable Improvement so far I think I Commented on this on the last call because typically we see this coming about a quarter before it actually is realized in our financials. and also just as a reminder, we're not fully exposed to the price of Lithium.

Our supply chain team has done a terrific job in partnership with another a bunch of other companies to put in place some long-term and great agreements here, but we do have some exposure that moves up and down. We're also seeing benefits in aluminum and steel, which I think is great Uh, not as large as the Lithium impacts, but they contribute nonetheless. So if we add up the total impact of this in Q2 relative to Prior quarter, it's about the same size and magnitude as the IRA benefits that we also received. Um, you know, just to put this in context.

Um, you know, as you look at cogs per unit sequentially from Q1 to Q2 I think there's there's two things to keep in mind there. The first is that our SX mix for deliveries increased quite a bit from Q1 to Q2. So as you think about fundamental cost reductions, uh, it's important to adjust for that. And then secondly, you know, as we continue to work on reducing our Austin and Berlin costs which, uh, we did quite a bit of that from Q1 to Q2, you know these factories are still a slightly above model y production costs elsewhere.

And in the quarter, our mix of Austin and Berlin related builds increased. And so, um, that's something to consider as you model out the impact on from Q1 to Q2 in terms of cogs per unit. Um, I Do want to ask Karen if there's anything else on the commodity side or just more generally you want to add here. Yeah, as you mentioned, Zach We've naturally been a little bit hedged from the looking position because the the long-term contracts we have in place, but we have seen reduction in pricing across the board for all Commodities that specifically go into batteries such as Nickel, Cobalt and graphite.

and the reductions in pricing translate into thousands of dollars. Look at it from a per vehicle impact. Uh, we're taking advantage of the historically low commodity pricing in certain areas to kind of extend some of those fixed price contracts uh through the end of the decade. Uh, so it's a Playbook that will continue to kind of go back to Um as we look to the Future thank you.

The next question on FSD Have you considered allowing FSD transferability as a lever to allow existing customers to upgrade to a new Tesla instead of being locked into an existing car due to the price of FSD Uh yeah, this is a question we get asked a lot. Um, so we're excited to announce that uh before Q3 we will be allowing transfer of FSD This is a one-time amnesty. So um, it needs to be. You need to take advantage of it in Q3 But um, or at least place the order in Q3 within within reasonable delivery time frames.

Um, so um yeah yeah you yeah. I Hope this makes people happy, but we're not gonna do is this one time thing right? The next question? When will you? When will we give more information about the Cyber truck orders, estimated delivery schedules, pricing, and specifications? Um, the demand is is so far off the hook you can't even see the hook. Um, so that's really not an issue. Uh, I do want to emphasize that the Cyber truck has a lot of new technology in it.

like a line. Um, it doesn't look like it. It doesn't look like you know any other vehicle because it is not like any other vehicle. So um at the and the production ramp will move as fast as the slowest and least likely elements of the of the entire supply chain and an eternal production.

So um, you know I wouldn't expect, You know it. I I Hope it's smooth. You know we're certainly better at production ramps. You know we've got a lot of experience with the production ramps, but you know it.

It's our first first order approximation is there's like 10 000 unique parts and processes and um in a that you're in the Cyber truck and if any one of it'll go as fast as the least lucky you know, least well executed element of the ten thousand. So um, always critical to predict the the ramp initially. but um I think we'll be making them in high volume next year. Um, and we will be uh, delivering the the car this year.

Thank you! Wow! The next question is critics of Giga casting? Uh, contented. That process makes Vehicles harder and more costly to repair, essentially pushing costs onto the customer. Can you share some details about the initial repair experience with gigacast vehicles? That must be why everyone's copying us. Yeah, uh, thanks a lot.

This is Lars Um and Martin that? that's like simply not true. There's a misconception that traditional bodies are easy to repair, but they are made of multiple materials in multiple joining methods. Spot Wells and revits have to be drilled out, panels and structural adhesive have to be chiseled out. Dried adhesive has to be removed.

stamp links, cut, blah blah blah. It's a crazy Patchwork quilt. Yeah, and so putting that back together means time and money. Using an example of replacing a rear cast rail on a Model y Um to do that versus like what we replaced it with from the model 3, it's 10 10 times cheaper and three times faster to do it with the cast rail.

My design team works with our Collision Repair team. Since we're closed loop on this with insurance and we designed specific Parts That'll make it easier and faster to repair. We have an incentive to do that because we have our own insurance and our own body shops. We expect that we'll continue to do this and collision repair will continue to become cheaper and faster over time.

And we already meet this available to all body shops. There are tester Body Shop Training Yeah, closing the loop on collision repair and factoring that into design is a big deal. It's crucial I Don't think anyone else can do it with that ecosystem that we have. So yeah, and we are actually able to change the details of the casting with inserts.

Um, and when we actually do that all the time? Um, so because the answer is actually wear out and uh, needs to be replaced anyway so we can actually make design changes to the inserts and tweak the castings to. Um. but the the cast? basically cast. Uh.

video front body is lighter, cheaper, better noise, vibrational harshness. much easier to manufacture. It's better in every way. Um, and that's why so many other car companies are copying us because probably there's another well.

they personally put out a lot of pressure releases about it. Um I Think it's basically going to be how all cars are made in the future. Thank you. Next question: How many Optimus Bots have been made and when will they be able to start performing useful tasks? 10 million? Um, yeah.

I think I Think we're around five or six? Well, it's like you know there's an Rook 10 I Guess yeah, how many are working and what phase? But um, it's a sort of, you know I um, like there's more more every month. Um, there's a lot of interesting things. A lot of interesting things about the optimal spot. Um, uh.

we found that there are actually no suppliers that can produce the actuators. There's no. there are no off-the-shelf actuators that work well for a humanoid robot at any price. Certainly not compelling.

Yes, not not A. It's not a hearing robot that can do stuff that you know. The things that a human could do. Um, so we've actually had to design our own actuators uh that integrate the motor of the Power Electronics the controller, um, the sensors and um, really every one of them is Custom Design Um so uh.

And then of course we'll be using the same inference Hardware as the car. uh so uh, you know. And but we are in designing oh well production. So they're not just cut out lighter, tighter, more and more capable than any any other actuators that that were aware of that exist in the world.

Uh, there's also actually um, manufacturable. um so we should be able to make them in volume. Um, the the first. uh Optimist that is that will have all of the Tesla designed actuators sort of production candidate actuators.

um, it integrated and and walking should be around November ish. Um so and then we'll we'll start wrapping up after that. Um, you know, in terms of when will it be able to do some useful things like we'll first be trying this out on our own factories and just proving out this utility. But I I think I think we'll be able to have it do something useful in our factories sometime next year? I would be yeah.

I'm pretty pretty confident of that. Um, so yeah. and it's going well. So uh.

another cool thing about Optimus is that you know there's just in the Us alone. There are two million amputees. Um, and um I was just talking to the neural link team and um, by combining a neural link uh, implant and a robotic armor leg for someone that has has had their arms on molecular or all arms and legs amputated, we believe we can give, um, you're basically a cyborg body that is incredibly capable. Um Six Million Dollar Man In real life, don't want to cost six million dollars.

sixty thousand dollar man. this sounds impressive, but it's it'll actually you know. so so that that actually could be a really I think would be incredible To you know, potentially help millions of people around the world. Um, and uh.

and and give them you know, a bummer like that is uh, as good, maybe long term better than a mileage going. thank you. Uh, the next question is, um, how has the order intake trended relatively to production levels during Q2 and how is it trended in the quarter to date period? Conceptually, how does Tesla decide? when is it appropriate to reduce prices or add other sales incentives to increase demand? I Guess demand is roughly tracked production. So which is what we aim for is is a we look at you know? so it's something that we have that really? I Think no other car maker has is that we have real-time demand and real-time production.

Like so seven days a week? Um, you know I get an email Auto generated email. It shows output from all factories and orders globally. So it's like a real-time thing on the pulse of Earth Uh, basically. Um, and and we would? you know we're just we're just post according to what the murder of the public is.

Um, you know, by buying a new car is a it's a big decision for the vast majority of people. So you know anytime there's economic uncertainty, people generally pause on your car buying at least to see to see what happens. Um, and um, you know. And then obviously another challenge is the the interest rate environment.

Um, as the interest rates rise. Uh, the affordability of anything brought with debt decreases. Um, so effectively increasing the price of the car. So when interest rates rise dramatically, we actually have to reduce the price of the car because the the interest payments increase the price of the car.

So and and this is at least up until recently was that I Believe the sharpest interest rate rise in history? Um, so we had to do something about that. Um, and if somebody's got a crystal ball for the global economy I Really appreciate it. If I could borrow that crystal ball. Um, yeah, exactly.

Damn yeah. it should be not on. Twitter Um, so uh I mean one day it seems like the world economy is falling apart and the next day everything's fine. I I don't know what the hell is going on? Um I wish I did um so I mean that's why that's why I say like yeah I always you know I I you know on Twitter I posted like you know, just really advising because I I you know I care a lot about the the the the sort of the small shareholders especially the ones that are stuck stuck with us through through thick and thin I Love you guys and uh so oh yeah.

um we can't control these macro shocks you know or the the manic depressive nature of the stock market. So that's why I I recommend against margin loans. Um in times that are turbulent, you know if times are not that turbulent actually a mods alone can be a smart move within reason. Um, but but we're in I would call it turbulent times um I I like I have very high confidence confidence in the long-term value of Tesla like I I see a really you know see a path to a 10x increase in the value of the company? Maybe a 10x? um and uh, but the where things go along the way, the trials and tribulations and the mood of the mood of the markets.

What's he trying to say here? Um, this doesn't uh sound the best. The old adage of Buy and Hold is is right you know. um for investment advice I say like identify a company as products you love, um see if they you know. Does it seem like they'll continue to make good products or great products? Buy that stock and hold it.

That's it. But I You will win. The reason companies exist is to make goods and services. ideally great business services.

They don't exist for any other reason they shouldn't So that's why you should buy us off of a company that makes green products and has a great future. By the way, it's Common Sense actually um and um and then and then generally if you see if you provide, you're confident about what that company's products or services are. When the market panics, buy and when the market is, you know, overly exuberant. Yeah, it can sell I'm not recommending yourself, but um, dude, this is getting awkward.

You're like take the mic away. Milo sell High um uh, you know Warren Buffett actually I think has a saying I'm paraphrasing him. but you know a publicly traded company is like um, it's like imagine you're living in your house and some a crazy manic depressive guy. It comes and stands at the Uh outside your house and yells property prices at you.

Um, you know. so it ends at different price every day, but the house is still the same house. So this is the stock market. Yeah, you're gonna really credit that to Warren Buffett Thank you.

Let's go to the next question. uh with the emphasis of price cuts to drive volume growth eating into Automotive gross margin can investors expect to see Automotive gross margin and stabilize or even rise due to efficiencies outpacing the cuts? And if so, when oh man, where's that crystal ball again? If I may it's like look the short term um variances in in gross margin and profitability really are minor relative to the long-term picture. um Autonomy. Um will make all of these numbers look silly I'd recommend looking at ARC Invest I think their analysis is uh, very good.

It's the best you know um I mean and and generally from twit or like if either Finance people on Twitter follow their accounts, they're great. Um, so um, where you'll get the best? Uh, best info um thin twitch I Heard it here. First, you know I strongly believe Tesla is an epic long-term investment. Um, and don't swear when you know things go up and down.

In fact, if the market panics by um, if the Market's a little too exuberant sell at the time, but but just generally like I feel a confident you know we will deliver a long term but can't control short-term So and and these the the autonomy is is really where it's at least I fully agree with you. Um is is what I said in my opening remarks. which is you know, regenerating enough money to continue to invest and you know the portfolio of products and technologies that the technical teams are investing in right now. Um, this is intense.

It's intense in terms of investment. It's intense in terms of potential, right? Frankly, I Think it's ridiculous that we have positive, free cash flow in a capital intensive business while investing massive amounts of money, new technology that is super hard, and vertical integration. It's not even just like new products, but also Yeah We actually make our shit. but I'm sorry.

Um, and so at least from my perspective, what matters is continuing to generate the cash to invest. Um, you know that means continuing to be hyper focused on your term. Cost reduction is everything we do in near-term cost production provides Capital to reinvest. Um, hyper focused on working Capital Management of which we've made quite a bit of progress there.

On the raw materials and whip side of that, we've been very focused on accounts receivables as well to ensure that we can continue to reinvest reinvest the cash. Um, you know that this is what we're focused on. Yeah, and you know, so there's you know, a set of this that we control. You know, we have a pipeline of cost reductions.

Uh, we are getting Tailwinds in the commodity space right now. As Kern mentioned, that's helpful. Um, variability around average selling prices. You know.

goes back to Elon's point. Uh, we don't control interest rates. We don't control macro consumer sentiment. Um, but we have an obligation to be responsive to that to ensure that we're matching supply and demand and keeping things balanced.

And so this is how we're managing the next handful of quarters. Um, you know soon enough, these quarters will be behind us. They won't be part of the present value of future cash flows of the business. and so we want to make sure we keep that view and make sure that the long term they're sounding pessimists exactly the way that we want it to be.

All right, thank you very much. And now let's go to analyst questions. Uh, the first question comes from Dan Levi from Barclays Then feel free to unmute yourself. Great, Uh, good evening, Thank you.

Um, I Wanted to start first with uh here at person Ai and Dojo it's pretty clear it sounds like you're accelerating your focus. Can you, um, maybe provide us with a sense of what the process is of refining a product? Is it more machines And maybe you could give us a sense of um, you know, when the the payout starts to when you start to see the payout and what the resource outlay is. You know what should we expect on the Opex front as a result of this? sorry are you saying how much are we going to spend on dojo or yeah, yes, Um, well, we're not going to be open loop on our Dojo expenditure. So um, but I mean I think we? we will be spending you know, totally north of a billion over the next year on on through the internet.

Make sure it's well over a billion dollars in Dojo Um and uh Mark it's getting rocked. Yeah so I mean we've got a truly staggering amount of video data to do training on and this is another thing I don't like into in order to copy us, you also need to spend billions of dollars on on training. compute I mean it's like and it's It's also hard to you know you need the data and you need the training computer. It's like they think all things needed to actually achieve this at scale toward generalized solution for autonomy is it's this is one of the hottest problems ever.

You know you see a lot of AI companies doing you know, Llms, and and and whatnot I Don't think if they're so great, why can't they make yourself a great driving car because it's harder. that's why. um so but I do think that's as I said I think there's some, you know great great AI companies out there. but um, but but this fundamentally the the about the the Staggering amount of data we've got to process.

we've got to be process somehow and custom silicon is the best way to do that. Um, so that that's what Dojo is designed to do is is uh, you know, optimize for for video training. Um, it's not optimized for L Ms it's optimized for video training. Um with the with with video training.

Um, you have a a much higher ratio of compute to memory bandwidth so you know whereas El Angelo tend to be Memory band was choked. Um, so that's uh, that's it I mean um, but like I said, we're also we have some. we're using a lot of Nvidia hardware and we continue to you. you know we'll actually take the video hard risk as fast as in video will deliver it to us.

Uh, Tremendous, tremendous respect for Uh Jensen and Nvidia Um, they've done an incredible job. Um, and um, and frankly I don't know I If I if they could deliver us enough Gpus, we we might not need your dojo, but they can't So because they got so many customers, um, uh, they've been kind enough to you know, long on video. Nonetheless, prioritize them about our GPU orders. Um, but um, yeah, that the sheer magnitude of video training because like I said, we're not trying to just get as good as human we want to get to.

You know, hence better than humans. maybe 100 times better than human. Um, right now I believe there's something on the order of a million Automotive deaths per year and um, and then if you say permanent, uh, serious injuries I think it's probably closer to 10 million per year. Um, and um, you know, so it matters.

If you, If you're you know you're twice as good as you put as here. like everything. 100 000 deaths, um and a million severe permanent injuries. So it's like okay, we'll probably be 100 times better.

So there's really many accounts. it's a March and and we want to achieve that's perfect. uh safety as possible. Um and uh to ask truly everything and computer needed for that.

So and then I Just you know I Do think this this other applications on the market huh? We just desperately need it for video training correct? Just just to add to what Elon mentioned. So you know the numbers that he mentioned are um, you know between R D spend and capital spend and you know this is moving quickly. Um, you know. And so we provide a three-year outlook on our Capital expense.

We are considering uh, these these expenses in that Outlook Um and as that moves up and down, we'll continue to update our guidance in the queue. Yeah, I want to say the the the fundamental rate limiter on the progress of full self-driving is training, but that's if if we had more training compute we would get it done faster. So interesting. That's it.

That's it. And it's just difficult to predict how quickly yeah we can execute on it great. Thank you. Um, just as as a follow-up um I Recognize, you know there there's a incredible macro uncertainty right now, but you're sticking with your um, your term, your volume Target 50 kager.

Um, as we just think about sort of in the in the year ahead, you know Cybertron is going to be some contribution. Um, you know there's going to be some help from further EV penetration growth. but uh, to what extent are you willing to sacrifice on pricing to keep that 50 volume keger intact? Um, or you know, are you thinking differently about margins versus your prior commentary of willing to sacrifice on margins to get more share? It's not about getting more share, it's just that. um, you can think of every car that we that we sell or produce that that that has a full autonomy capability.

um, as uh, actually something that in the future may be worth as much as five times what it is today. Um, because you know average passion is a big Pastor vehicle is doing like maybe 10 hours of driving a week. You know, one if it's sort of one. If let's say it's one and a half hours a day.

On average, that's 10 hours a week. um, ish. um uh, if you've got an autonomous operate autonomously and um, and and USB use in some either either dedicated autonomous or partially autonomous like like Airbnb Like some maybe sometimes you allow your cards to use by others. Yeah, sometimes you want to use it exclusively.

just like you know, air being, you know Bueno team room in your house? Um, not. Bueno You know that the value is just tremendous. Uh, so I think it's sort of it would be I think it makes it does make sense to sacrifice margins in favor of making more Vehicles Because we think in the not too distant future they will have have a dramatic valuation increase I Think the Tesla Fleet value increase at the point of which we can upload full self. You know, full self-driving and it's approved by Regulators Um will be the single biggest uh step change in asset value maybe in history.

Thank you. Let's go to the next analyst. The question comes from Emmanuel Rosner from Deutsche Bank Oh, thank you very much. Um, two questions for me as well.

First following up on on the Autonomy. So you know before you start launching these dedicated Robo taxi vehicles on unexisting vehicles, you're improving FSD You know, incrementally um, what is your latest targeted timing to uh, essentially release a non-beta version or an eyes off version that would trigger much higher take rates and would Tesla benefit from lowering the price of FSD Um, Well, obviously I you know, as people have sort of made fun of me and perhaps the you know quite fairly have made fun of me, my predictions about achieving full Stop driving um, have been optimistic in the past. Um, the the reason they've been optimistic is what it tends to look like is the Um we'll make rapid progress with a new version of of FSD but but then um, it will curve over logarithmically So so first, like logarithmic curve looks like you know, just sort of Fairly straight upward line diagonally up. Uh, and so if you extrapolate that it then you you have a great thing.

But then because it's actually logarithmic, it curves over and then they've been a series of stacked logarithmic curves now. yeah, um I know I don't know the the the boy who cried FSB Um, but I I man I I think I think we'll be better than human by the end of this year. Um, that's not to say we're approved by Regulators um and and I'm saying that and that would be in the U.S Uh, because we've got to focus on one market first. but I think we'll be better than human by the end of this year.

I've been wrong in the past. I may be wrong this time and that for the price of FSD. So the weird thing is, the price of FSD is actually very low. but uh, it's not High Um, when you go back to what a singular, the value of the car increases dramatically.

Uh, if it is actually autonomous. um, you know we have fifteen thousand dollars is actually a low price, not a high price. Um, and um, Now we will offer you know FSD as a sort of monthly subscription. although like most people don't know that.

Um, so you don't have to go with the 15 000 thing. but I think yeah yeah the the obviously. if the car is worth several times its original price, fifteen thousand dollars is actually a low price for FST Thank you and the next question comes from William Stein from truest uh William go ahead and mute great uh, thank you very much. uh for taking my question.

um uh I'd like to ask about, uh, that, stick on this AI topic um, uh, we read you know with great interest the developments uh in dojo today and you've spoken about FSD uh but you've also Elon you've started this x dot AI uh company. And you know, for investors that think that there might be quite a bit of value in the AI uh features and products of Tesla it might be concerning to see you, you know, pursuing another Endeavor where AI is the focus. So can you talk about how x dot AI might overlap? Might um, perhaps compete with Tesla or in other ways, perhaps it it, uh, enhances the value of of what Tesla does. Thanks very much.

Yeah. I think we'll actually enhance the value of Tesla Um, they're they're really just, uh, some, um, some of the world's best AI engineers and scientists that were willing to join a startup, but they were not willing to join a large, sort of relatively established company like like Tesla So I was like, that's actually how it got started I was interviewing a few people and they're like no, we want to do a startup I was like and that's all I I couldn't convince them to join uh Tesla so so I was like okay well you know better to start up that um that I run that's been then they go work somewhere else. um that's kind of the Genesis of xai. um and XI is is focused on eight sort of AGI uh yeah um so it's uh, but I'd like to I think there will be some uh value that Xai brings to Tesla Um, you know also some of the best for the very best people in the world.

they really just want to work on interest interesting problems. So if you take say you know our Material Science group you know really what convinced the Charlie Coleman to leave Apple we're very happy um um and both at both Yes, what we think is the best Material Science group in the world um was that he got to work at both Tesla and SpaceX he he wasn't willing to leave Apple if it was just Tesla but he was willing to do it was Tesla and SpaceX. So sometimes you get the best talent in the world. That's the kind of thing you know you need to do and that actually has been very beneficial to Tesla.

So if you know if I could squeeze one more mundane question in um I I wonder if you think you can hit the 1.8 million unit number with current pricing? Or do you anticipate, uh, needing to, uh, continue to lower prices because it seems like they've stabilized. The trends have stabilized in the last, uh, maybe a month and a half. Should we expect a sort of continued decreases or or more stabilization for the rest of the year? Sure, you know we have. We have, uh, uh, sort of restarted the referral program which I think will be quite effective.

Um, but yeah, you know, As as Zach was saying earlier, um, we don't control the macro in our conditions. So if interest rates continue to rise, that reduces the affordability of cars. Um, you know. And and for a lot of people, they're really trying to balance like just you know, barely break, and even, uh, every month.

In fact, if you look at the rise in credit card debt, they are in fact not breaking even every month a credit card debt is is fucking uh, scary. Um, so you know we're like we're just don't control macro conditions. Uh, if medical condition is stable I think prices will be stable and if they're not stable then you know we we would have to lower prices. Yeah, thank you.

Uh, let's go to Colin Rush from Oppenheimer Thanks so much guys! You know, as you're building out dojo and implementing what truly is going to be a highly complex set of software, can you speak to the maturity of the operating system and how much soft Outsource software you're expecting to use in that system? Um, this is a custom software stack So, but it is uh, designed. uh, such that you can run up at the high at a high level. uh Pi torch and Jacks Um, so uh. But then here, we have to customize it to actually run on a custom silicon.

Um, so this the software stack is uh, a combination of Open Source software and then and that Tesla software. Uh, all the way to the bare silicon, which is the case for the inference computer in the car. Um, okay, thanks so much. That's super helpful.

And then can you speak to how you're managing some of the geopolitical risks relative to Your Capacity expansion. Um, you know, Obviously, as you guys continue to grow at this rate, you're going to be putting some folks out of business and you know there's going to be some impacts around Regional economy. So just want to understand how you're thinking about that in terms of some of your capex plans and and how you're managing some of those relationships with uh, with different countries and regions. This is a period of unusual geopolitical risk.

Um, so I think we're the best we can do is you know, have factories and um, many parts of the world such that if things get difficult in one part of the world we um we you know we can still keep keep things going in the rest of the world. Thank you. The next question comes from Mark Delaney from Goldman Sachs Mark Delaney Uh, thank you very much for taking the question. Tesla has been making progress reducing cost and did so again last quarter.

Can you give an update on when you think Automotive cogs per vehicle could be under the historical thirty six thousand dollars per vehicle level and what are the key puts and takes to get there that was this is I think it was asked this in the past. This is very difficult to forecast. You know there's a series of costs that we manage. Um, there's here is a cost in which we don't control and so you know, particularly on the commodity side.

Why does this guy say he doesn't want to be there? It's just hard to say yeah. We saw very inflationary like strong inflationary pressures for a while last year. Um, and and now, which obviously makes it very difficult to reduce cogs. And you know Now we're seeing what seemed to be deflationary pressures.

Certainly deflationary. Uh, depletion is a pressure. Um, but we're seeing. um, you know, commodity prices dropped dropping as uh, as was mentioned.

Uh, you know, uh as Karen mentioned a moment ago. Um, and uh, I I think I mean what do you think I mean that basically the trains seem to be deflationary at the commodity level? Definitely, there's that. And then there's also the the human economics improve as volumes grow. That's the other thing we're seeing as we're becoming a bigger and bigger part of a lot of suppliers.

the economies just get uh come into play. There's equipment depreciation that comes into play. equipment that was positioned five to seven years ago that used to be a part of the Peace Prize that's completely amortized. So we'll see uh, situations where peace price comes down because that equipment contribution has gone away and then just we continue to have this mentality of continuous Improvement uh in terms of Labor reducing labor, improving automation uh, and and just continue to get better at what we do.

So we have seen uh I think every quarter we have seen an improvement. Of course the Commodities spiked up and down. Just in general, the trend is towards being more efficient you know and and totally agree. Never listen.

Prices weren't absolutely insane there for a while. Yeah, and they're recovering now. Cobalt Said a third of what it used to be. Yeah, yeah, and you know we're still early in the ramps.

Uh, well, not early in the ramp, but early in the cost down curve of Austin and Berlin Yeah, so it takes time to work the cost out. At first it's a focus on ramp. Um, ramp brings costs. Yeah, and then once that stabilizes, we can divert bandwidth to cost reduction.

And so um, also in Berlin saw quite a decent amount of cost reduction on a fundamental basis from Q1 to Q2 Will continue to do that work. That would be helpful. Uh, and so we're just going to keep chipping away at it. Yeah, packaging is a big big element to that.

Yeah, Logistics too Logistics is normalizing, which is great. utilization something that a team has been very focused on. Yeah, I'm reading some of the like yeah, it's underappreciated. Yes, the whole thing goes like you know if I was in one with tactics was the one with Logistics Yeah, and we've made tremendous improvements in cost and all fronts because we have done uh, down to pre-pandemic experiment cost levels now and our goal is to go further down.

Okay, yeah. so when we look at our progress from Q1 to Q2 on cost, the way that we look at internally and normalize for the impacts of makeshift with Austin and Berlin being a higher percentage of our mix normalized, for Snx being a higher percentage of our mix in Q2 versus Q1 Uh, the sequential cost reduction, it might be the largest we've had in a while. So anything is. It's great work on behalf of the Tesla team and we just got to keep it up.

Yeah, to get game of pennies, it's like Game of Thrones But pennies? Mark Do you have a follow-up question? I Think you're muted? Yep, Yeah, Thank you uh very much for all the details on that. Um, you know I mean we could put a finer point on the downtime impact that you, uh, both you spoke about in your prepared comments uh, in terms of production impact and then also to what extent there's a margin impact from those Uh, Factory upgrades that you're planning in this quarter? Thank you. Yeah, the the downtime. Um, you know we don't know exactly the number of cars impacted because you know kind of the way that we go into downtime windows for upgrades is, you know we set aside a period of time, but then the team is challenged to go as quickly as possible so that we can get the factories up and running again and minimize that.

Um, so it's not. It's not profound reduction and you know, hopefully it's quite small. I Think we're getting too much into Louise here I mean like we're asking for a level of precision that is not possible to answer. So let's move on.

Yeah I think this is awesome. Okay, so uh, we'll speak to you all in the next three months. Thank you very much thank you! Well the Market's not looking good and um I have a lot of calls. So very happy I cut down my risk at the end of the day.

but dude I wish I went full port against this whole thing. We are gonna up and open up very poorly now. We have seen days in the past where we open up poorly. and by the end of the day we're actually pushing higher than we were the previous day.

That's theoretically possible so with that in mind, we have to wait for tomorrow. Don't sweat it, tonight the market will be there at 9 30 in the morning. Let's see how it all ends up actually playing out. That's what I have for you now.

I'll catch you later Have a good evening. Peace out Foreign.