Latest / Elon Musk Podcast / Tesla Q3 2022 Financial Results and Q&A Webcast

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Tesla Q3 2022 Financial Results and Q&A Webcast · Elon Musk Podcast

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mountaintops or sea floors. Yeah.
1:03
Rupture and everyone and welcome to Teslas.
1:05
Third quarter 2022, QA Web cast. And if he's marked, Invicta, BT
1:09
of investor relations. And I'm joined today by Elon
1:11
Musk Zachary, Kirk horn, and a number of other Executives.
1:16
For Q3 results were announced at about 3 p.m. central Time in the
1:19
update that we published at the same length.
1:21
As this webcast, bring the coal, we will discuss our business
1:24
Outlook and they forward-looking statements.
1:27
These comments are based on our predictions and expectations as
1:29
of today, actual events or results to differ materially.
1:32
Early due to a number of risks and uncertainties, including
1:36
those mentioned in our most recent filings with the SEC,
1:39
during the Q&A session, portion of today's call, please limit
1:43
yourself to one question and one follow-up.
1:45
Please use the raise hand button to join the question queue.
1:49
But before we jump into Q&A, he'll has some opening remarks.
1:52
They won't take your body. So just to do a cute 3 Reaper
1:56
recap 23, was another record quarter on funding levels, are
2:02
we We had our industry-leading operating margin reach, 17% and
2:07
our free cash flow. Surpassed 3 billion in Q3 and
2:10
approach. Nine billion dollars in the past
2:12
12 months, as I factorize Ram. We're looking forward to a
2:16
record-breaking Cube Q4 so it really, you know, knock on wood,
2:21
it looks. Looks like we'll have an epic
2:24
and end of year. So if you force looking
2:26
extremely good, I want to brush grab Digger, Berlin achieved,
2:31
another Milestone of 2000, cause men are weak grip tight, with
2:36
very good quality and it's ramping rapidly.
2:42
The Holston will get taxes, should reach this Milestone very
2:45
soon. And just yesterday, we could be
2:50
extrapolated yesterday's full great.
2:52
It would be 2,000. Our production 4680 cells has
2:57
traveled, and Q3 compared to the previous quarter.
3:00
We are finally gaining rapid traction on the 4680 cell and
3:07
its output is growing rapidly. And we're expected to start
3:12
incorporating and cause and having it be a significant
3:15
portion of our production here in Texas in the coming months.
3:22
We also have our second generation of manufacturing
3:25
equipment. Foreseeable 4680 cells in Texas,
3:28
which continues to show great progress on Claire, original
3:30
palette, wind very much the Fremont Factory team.
3:34
Once again reached record production in Q3 and we intend
3:38
to keep raising production in Fremont.
3:42
Running on autopilot, at the end of September, we hosted our
3:47
second day, I day, and try out the first prototype of our
3:51
Oculus robot. The latest updates on dojo train
3:55
computer. And wide range of improvements
4:00
of will self-driving software. Vehicles.
4:03
Have now driven nearly 60 miles and pulls up right in beta mode.
4:06
And this number continues to grow exponentially.
4:11
I'll go with that. A idea was to push recruiting,
4:15
and we've seen a massive influx of world-class artificial
4:20
intelligence, a junior scientist resume.
4:25
So it generated tremendous amount of interest from some of
4:28
the best AI researchers in the world.
4:30
I can emphasize the importance of this enough because that he
4:33
finally has become clear to the smallest AI.
4:39
Technologist in the world. That Tesla is lung very best.
4:46
So, and at this, this quarter, we expect to go to wide release
4:53
of will self-driving beta in North America.
4:56
So anyone who has ordered but also private vehicles are
5:02
driving will have access to the FST beta program.
5:05
The sphere probably about a month from now.
5:10
I'm saying you cut knew anyone who buys a car and purchase this
5:14
person, the poolside private option will immediately have
5:17
that available to them. So the safety that we're seeing,
5:22
when the cars in epistemic is actually significantly greater
5:25
than just a mistake, you were seeing then what, when it is
5:28
launched, which is the key threshold for going to a white
5:31
beta. Let's see, with respect to
5:36
demand, get up. We've got a lot of questions
5:39
about my recent weeks. I can't emphasize enough.
5:44
We have excellent demand for Q4 and we expect to sell every car
5:51
that we make for us. As far as future as we can see.
5:56
The the factories are running at full speed and we're delivering
5:59
every coordinate and keeping operating margin strong.
6:05
Whistle a very small percentage of the total Vehicles.
6:09
The road, all the two billion cars and trucks on the road, but
6:13
we only have about three volume. So provide a long way to go to
6:17
even reach one percent of the global Fleet.
6:26
Based on what people are based on many things.
6:33
But certainly questions, like to get on Twitter about BuyBacks
6:38
and I think every one of our board members has gotten
6:41
questions about 5x. The we debated the buyback idea,
6:47
success with what level board, generally thinks that it makes
6:53
sense. Sense to buy back.
6:55
We want to work through the right process to do it by back
7:01
but it is certainly possible for us to do.
7:04
They buy back on the order of five ten billion dollars that
7:09
even in a downside scenario of next year.
7:12
Even give lecture is is very difficult year for still have
7:17
the ability to do a ten billion dollar my back.
7:22
This is obviously pending Board review and approval.
7:28
So it's likely that we'll do some some mean provider.
7:36
But a conclusion, well the market teams will run the short
7:40
term. It's very important to focus on
7:42
the long term. I can't emphasize this enough
7:47
with investors and I think long, long time investors obviously
7:52
recognizes with with Tesla We have your sort of local ups and
7:57
downs, but long-term trend has been extremely good.
8:01
And several years ago. I said I think I do things
8:07
aren't as cool that I thought it was possible for Tesla, be worth
8:13
more than Apple, which was then the highest What cab company I
8:17
think on the market and I will time it was around seven hundred
8:21
billion dollars. And I said a required incredible
8:28
executions and we some luck, and we didn't even intend to achieve
8:33
that because the went, in fact, our past Apple's market except
8:39
time. and I now, drop the opinion that We can far exceed,
8:52
Apple's current market cap at cat attacked.
8:57
I see a potential path for Tesla to be worth more than Apple and
9:02
Saudi aramco, combined. so, Now, that doesn't mean it will
9:09
happen, or or that'll be easy. In fact, in the group will be
9:15
very difficult to require a lot of work, some, very creative,
9:19
new products, Gratis expansion, and always the luck. but for the
9:28
first time I am seeing Hiii, see a way for Tesla to be.
9:38
But let's say roughly twice the value of Saudi aramco.
9:44
I think that's, I haven't haven't quite seen that yet.
9:48
I mean, this is the first time I've actually seen that
9:51
potential. so, We have an incredible product portfolio.
9:59
I think we've got the most exciting product portfolio of
10:02
any company on Earth. So what she thought about some,
10:05
which you haven't We're in the final.
10:13
Lap for cyber truck, building subtract line here at Giga.
10:20
Texas was too. and, Make a lot of progress in the robo.
10:27
Taxi platform design. and, Banana with, with respect to.
10:40
Batteries, we're moving as fast as possible to have.
10:47
Your to achieve 1000 megawatt hours in your production
10:50
capacity in the United States. Protocol in a great.
10:57
The anode cathode. But the in refining.
11:03
Removing a top speed to to do that.
11:08
So it's incredibly exciting future and really an
11:14
unprecedented future. But none of this would be
11:19
possible without the incredible team that we have here in Tesla.
11:25
So I'd like to give a huge shout out to all of our Factory
11:28
employees and shares detectives and the whole Tesla team you
11:33
guys rock. You're the ones they can happen.
11:38
Thank you. I think you're going.
11:42
Thank you very much and Zack is the opening romantic role.
11:46
Yeah. Thanks Martin.
11:48
Just to continue on, Ilan steam. I just want to thank and
11:51
congratulate the Tesla team for achieving record vehicle,
11:54
deliveries production and storage deployments in the third
11:57
quarter on Automotive. Profitability are Gap.
12:01
Operating margin was 17.2% with Automotive gross margin at 27.9%
12:08
operating margin is one of our best yet with improvements and
12:11
operating leverage. However, Austin in Berlin ramp
12:14
Causeway Donner. Margins, particularly, if you
12:17
compared to q1 removing regulatory credits, and Austin,
12:21
and Berlin, or operating margins, would have been our
12:24
strongest yet and auto gross margin would have been nearly 30
12:27
percent. Note that while small and
12:30
growing each car. We built in Austin and Berlin is
12:32
contributing positively to profitability.
12:35
We also continue to experience margin, headwinds associated
12:38
with macroeconomic conditions, as we've discussed at length on
12:42
prior calls. In particular, raw materials
12:45
Logistics in foreign exchange was a big part of this past
12:48
quarter. on energy profitability, we achieved our
12:52
strongest gross profit yet for this business driven primarily
12:55
by record volumes of our mega pack and Farwell products Our
13:00
free cash flows were also a record despite an increase in
13:03
cars and Transit at the end of the quarter, which has a
13:06
negative impact on working capital.
13:09
Specifically on cars and Transit.
13:11
As noted in our press release on October 2nd, we've started to
13:14
experience limits on outbound Logistics capacity which we
13:18
didn't anticipate. This issue is particularly
13:21
present for ships from Shanghai to Europe and local trucking
13:24
with in certain parts of the US and Europe.
13:28
Our historical operating pattern of batch building by delivery
13:31
region leads to extreme concentrations of outbound
13:33
Logistics needs in the final weeks of each quarter.
13:37
Just to put this in perspective, roughly two-thirds of our Q3
13:41
deliveries occurred in September.
13:43
And one third in the final two weeks, as a result, we've begun
13:47
to smooth, the regional builds throughout the quarter to reduce
13:49
our Peak needs for outbound Logistics.
13:52
We expect this to simplify our operations, reduce costs and
13:56
improve the experience of our MERS.
13:59
As we look ahead, our plans show that we're on track for the
14:02
fifty percent annual growth in production this year, although
14:06
we are tracking supply chain risks, which are beyond our
14:09
control. On the delivery side.
14:12
We do expect to be just under 50% growth due to an increase in
14:16
the cars in transit. At the end of the year.
14:18
As noted just above this means that again, you should expect a
14:22
gap between production and deliveries and Q4, and those
14:25
cars in transit will be delivered shortly to their
14:28
customers. Upon arrival to their
14:29
destination and q1. Austin in Berlin ramp costs,
14:33
will continue to weigh on margins.
14:35
Although we expect the impact to be less than what we saw in Q3
14:39
and is Elon mentioned. We are continuing to build as
14:41
many cars as possible while also maintaining strong operating
14:44
margins. Thank you.
14:46
Thank you very much and let's go first through the shareholder
14:49
questions. The first shareholder.
14:51
Question is, given the stringent battery content and assembly
14:54
requirements for consumer tax. Credit eligibility, under the
14:57
pollution reduction Act these speak with Tesla's ability, to
15:01
me, those thresholds in each of 2023, 2024 and 2025 with your
15:06
existing and planned supply chain.
15:11
Yeah, I mean I think just kind of on say we do expect to fully
15:15
meet the IRS requirements. Through it.
15:21
Yeah, we view the passing of the inflation reduction act as a
15:25
significant boost towards accelerating our nation.
15:27
Also scaling the battery supply chain at large in the United
15:29
States. Expect ready to publish detailed
15:32
guidance by the end of the year. Until such time.
15:34
It's difficult to fully determine the eligibility
15:36
criteria, but please believe Tesla's very well positioned to
15:39
capture a significant show that for solar storage and also
15:42
electric vehicles. Yeah, I'd like to work likes it
15:45
like said earlier, we're going to go basically pedal to the
15:47
metal as fast as humanly possible.
15:50
Get to 1,000 record gear. 10 hours a year of production in
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18:11
Thank you. Let's go to the next question.
18:14
The next question is, what updates can you offer on the
18:16
backlog? In the recent ordering?
18:18
Take Trends, especially outside of the US, and especially in
18:21
China. well, it's Does. This definitely, here China is
18:36
experiencing better verse of a reception of sorts, which is
18:42
property Market. If you drew my property Market,
18:44
mostly and Europe has reception, so it's driven by energy.
18:52
The u.s. actually is pretty going off track as a pretty good
18:56
health. Look at that is Raising interest
19:00
rates fall and they should but I think they'll eventually realize
19:03
that And bring back down again. So yeah, the band is a little
19:10
harder than it would otherwise be.
19:12
But as I said earlier, we are extremely confident of the great
19:19
Q4 and we anticipate continuing to grow our Vehicle production
19:29
sales of Liberties by on average 50% a year as far into the
19:34
future. As we can see.
19:38
Thank you, actually. I should say very production by
19:43
50% every year because deliveries were trying to smooth
19:46
out the deliveries and not have this crazy delivery way that the
19:50
end of every quarter. So in fact we were just
19:53
fundamentally run out of. They weren't enough boats or
19:56
weren't enough trains. They weren't enough car
19:58
carriers. You actually support the wave.
20:01
Has it got too big so we whether we like it or not we actually
20:05
have to smooth out the Livery of cars.
20:08
Tape recorder because there just aren't enough, Transportation
20:14
being objects to move them around.
20:20
Thank you. Next question is, do you still
20:22
expect 50 percent annualized growth for the dispersed able
20:26
future. Is this also true specifically
20:29
put a Chinese domestic Market do you expect to need to cut the
20:33
vehicle prices or offer incentives in any markets?
20:36
As a standard demand or has theme and remain stable?
20:40
Or is it even Rising? But a few questions there.
20:47
Like I said, we want to sort of focus on High level on
20:52
everything is possible. Here we go.
20:55
So that's our knowledge. We believe that test will
20:58
continue to grow the reason Revenue production at a 50% or
21:06
greater compound annual growth rate might occasionally be a
21:11
year that is a little less and then some years will be a be a
21:14
little more or a lot more. It's some of our out your
21:20
planning. We see potential annual growth
21:23
rates that are in excessive deceptive.
21:29
Thank you. The next question is can you
21:31
tell us more about the product feature roadmap be on new models
21:34
and officially and especially for interior and powertrain of
21:37
existing vehicle models. We could but we want sorry guys.
21:46
We can't wait. We can't like jumping out on
21:48
future product and also committed to continuous
21:51
Improvement. Yeah.
21:52
We also continue hit yet first. Ask me like what should I my
22:11
car? I'm like now because we just
22:14
keep improving the cars. Always the coolest.
22:17
Excellent. Yeah.
22:17
But still there's total. I don't really.
22:22
Yeah. So when you you know every now
22:24
and again, we do have some big technology upgrade like plaid by
22:29
the way, I think that. That model S Max.
22:32
I'm just the best cars on earth best visit.
22:35
There's not even close. You might be Just try one Epic.
22:43
Thank you at the next question is we keep hearing of dire
22:48
energy crisis in Germany, this winter but aren't this lesson
22:51
plans to come combat, power cuts, and will there be any
22:54
delays in ramp-up in production from bigger building because of
22:57
this. Yeah, I can take it, I think two
23:03
points on this question. The first is that based upon
23:09
everything that we know we don't see this as a large risk to the
23:12
company. Even if production dump did go
23:16
down for a period of time, this is all near-term.
23:18
It doesn't have any impact on the long-term of the company,
23:20
but we don't we're not stupid, we have no indication whatsoever
23:23
and that we will have to cut our production of German and we put
23:26
in place back up plans and we're working through the supply chain
23:29
as well, nearly all of Suppliers are prepared as well.
23:32
So we'll see how this plays out, but it's not something that
23:35
we're terribly worried about. Thank you.
23:40
The next question is, how is production planning going for
23:42
the Cyber truck? What is the initial Phase 1
23:44
production Target. When can we expect an update on
23:47
pricing and final design? I mean we, as Ian said earlier,
23:55
we be unproductive. So these preparations here in
23:58
Giga, Texas for cyber truck. We're still on track to enter
24:03
early production. The middle of next year we
24:05
started our beta builds of all of the battery battery in
24:10
existing Arts. When can I drop my Beta as an
24:13
emotion? I volunteer a few weeks.
24:31
Sorry, it took a longer than expected.
24:33
But, you know, there were a few things I got in the way, like,
24:35
insane. Global Supply Chain shortages a
24:38
things. Yeah, sure.
24:40
What measures of ever was one? All right.
24:45
Thank you. Of course it says a semi
24:48
portion. So so we'll be handing over our
24:51
first production Tesla semis to Pepsi.
24:55
On some first, I'll be there in person and we will be begin.
25:00
Ramping up production of the Hessler semi, which is a Max
25:06
load. Heavy heavy heavy truck.
25:09
That's the Class 8 truck. That's a job.
25:11
No sacrifice, too. Cargo capacity and those are
25:14
pretty exact. If there's a very important or
25:15
sacrifice cargo capacity, 500 mile range not just be clear 500
25:22
miles with the cargo if our mouths with the car gone on
25:25
level ground. Yes, sir.
25:26
You know it's you know it's a long-range truck even with heavy
25:36
cargo and the number times people tell me.
25:39
No, you can't just impossible to make a long range.
25:45
Heavy-duty Class, 8 truck and then I asked, well, what are
25:49
your assumptions about what out kg and what else for Mile and
25:53
they look at me with a blank stare and it's a hydrogen.
25:58
I'm like no that's that's not an answer that as looking for
26:01
numbers. Thank you.
27:02
The next question is, what is the progress of the 4680 cell
27:05
RAM? And what factors?
27:07
Determine whether Vehicles get 2170 versus 4680 cells?
27:12
How will it change in the next year?
27:15
Yeah, ramp is going well, as the on said total output is up 3x
27:19
quarter over quarter and production distracting to exceed
27:22
1,000 car sets per week. This water as we said last
27:25
quarter, our focus is now shifting from 100% ramp to
27:30
college. Costs and further expanding
27:32
production capacity in North America.
27:35
As you also mentioned on the 2170 verse 46 80 in our
27:40
factories, we really attempt to minimize Factory complexity and
27:42
product change over while still making sure we get enough new
27:45
product into the field to learn how it is performing.
27:49
And that, that sort of mix is going to shift as 4680 scales
27:54
here and the overall Factory rent precedes in Texas.
27:59
But but basically in a nutshell, fortunately City gravity is
28:04
growing exponentially and it's going well groups looking good.
28:10
This, this this, yeah, it's gonna be a very major factor in
28:15
future. They're like this pack subject.
28:17
Yes, like I said, we're our goal is to strive towards a thousand
28:23
gigawatt hours a year of Anguish production in the United States.
28:27
Look. Including suppliers.
28:35
But as we're be on top of that, we need to get 300. 400,
28:37
terawatt-hours felt so accomplished.
28:40
Our goal, this is roughly to Treasure of to sustainable
28:44
energy. Power calculation, both
28:49
stationary and vehicles is 300 to 400 thousand gigawatt hours
28:57
or 3:00 to 4:00. so when you're like one tire when assembling a
29:03
lot, well, blonde terawatt hours to go, yeah, that's what's on
29:08
the cathode side, the main cap that we think probably be iron
29:15
and mostly ions is fine. Iron.
29:21
Can scale to very, very high tonnage.
29:23
And and then so some nickel, the exact percentages are hard to
29:27
figure out, but it's probably probably these twice as much
29:31
iron cathode. Is that gold big more and and
29:35
then this the manganese wild card as well.
29:43
And on that note we're pursuing aggressively North American Iron
29:48
cathode Surplus. Yeah, we can talk more about
29:52
that featured a? Yeah.
29:57
Thank you. The next question was on the
29:58
semi truck which we already addressed.
30:00
So I'm going to skip to the next one.
30:03
Can you talk about how Tesla could adjust?
30:06
If we were to enter a prolonged recession, including new product
30:09
prioritization investment, flexibility, new Factory versus
30:13
factoring extension service, support infrastructure
30:17
productivity cost measures and demand stimulus.
30:20
Mm stimulation of alternatives. Well, three Frank.
30:27
We're going pedal to the metal. Come rain or shine.
30:32
So we are not reducing our production enemies away
30:41
recession, or no recession. So it's the one percent point
30:46
you made. Yeah, we read.
30:47
Exactly. So that everyone, I think the
30:49
public at large realizes that the world's moving towards
30:51
electric vehicles and that it's foolish to actually buy a new
30:56
gasoline car at this point because the residual value of
30:58
that casting call is going to be very low. so, So I think we're
31:05
going to get a very good spot that I would say is
31:08
recession-proof but it's certainly recession resilient
31:14
because basically the Earth us with people, both have large
31:19
part, made the decision to move away from gasoline cars to
31:22
electric cars. And then in transitioning
31:29
because the generation to sustainable unique solar and
31:33
wind with the statutory battery pack to buffer, the, the the
31:38
power. So you have 24/7 power and close
31:40
the windows as well time in them.
31:41
So, under the tribal Tech. So that also is a week at where
31:46
we actually see that the energy storage business stationary
31:52
storage. Growing more like 150 to 200
31:57
percent a year. The much faster than cars by
32:02
lab. It's are just an before you jump
32:08
in Martin, just a coating on some point, I think, you know,
32:14
where our cash balances what are forecasted cash generation is
32:18
where our margins are as a company and we can withstand
32:23
quite a lot of downside before we would have to dig into our
32:27
Capital plans supercharger expansion product lineup.
32:31
So, you know, the business system probably well over the
32:34
last handful of quarters in. This is a real opportunity.
32:38
I think for the company to press forward the most aggressive way
32:41
as you want as mention. Yeah, we're trying to model out
32:44
like would save 2023 is a is a brutal recession year even then
32:51
we generate meaningful cash. That's what once you get out of
33:00
that fridge report on assets, insane.
33:05
Thank you very much. And let's go to the last
33:08
investor question, which is the progression from Tesla's first
33:11
platform, with SM x to the second platform with 3 and Y.
33:15
Let the 50% reduction in cost of goods sold.
33:18
But do you see this Tesla's third platform being released
33:22
and what level of cost of goods sold reduction?
33:25
Could you achieve We don't talk exact exact dates, but this is a
33:33
being the primary focus of our new vehicle development team.
33:38
Obviously, what we're at this point, we've done the
33:41
engineering for cyber trucks and percent my and Though well it's
33:47
obviously guess what are working on, which is just next
33:51
Generation vehicle which will be about the cost.
33:57
If we put your wife back home it'll be smaller if there but it
34:04
will certainly become certainly exceed the production, all our
34:10
other vehicles combined, I mean, obviously, we're going to take
34:17
everything, we learned some sx3, why secretary and seminyak
34:21
poured into that platform. But we as you've said to us many
34:24
times when a two-for-one Target. So yeah, you know, that requires
34:28
a trying to get to that 50% number again, but it does that
34:32
acceptance. It's like going to take two.
34:35
That's exactly what loves frogs before Congress.
34:39
How can we make new cars for the amount of effort that we counter
34:45
takes us to make? One bottle, three.
34:48
The effort costs for families with children.
34:51
All those things that's a loss, that's the past, that's the for
34:55
factory floor space. The choice, the output and we do
35:00
believe this can be done by the way.
35:04
I should mention that. When I said that, probably, that
35:09
I see a path, you ain't extreme, different difficult, path, and
35:13
curl execution, required, massive amount of hard work and
35:16
some luck to get to where Tesla is worth as much as apple and
35:22
Saudi aramco combined. I wasn't including Optimus.
35:35
Thank you. Let's go to Analyse questions.
35:38
Next the first question comes from Adam Jones from Morgan
35:41
Stanley. That I'm go, go ahead and unmute
35:45
gray. Can you hear me?
35:46
Yep. Yep.
35:48
So, he Lon, would you consider vertically integrating into
35:51
mining? That's my first question.
35:54
I will do whatever. We have to whatever the limiting
35:58
factor is still. Do we have which we do not
36:02
artificially constraining ourselves.
36:05
We don't put it the Innovative just for the hell of a
36:07
critically integrating. Like, if there, if there was a
36:09
great supplier, who's better than us?
36:11
Or we can correct these very good or even where that you can
36:14
Comics are comparative advantage.
36:16
Suggest that we should use this fire even if we could beat them
36:18
but we could use our resources. Do something else that we more
36:21
productive, then then then we then we want in source that
36:25
case, but but if we have, if we have to go mine, We will mind.
36:36
Okay, thanks Eli. My follow-up is, you know, one
36:38
terawatt, hour of manufacturing in the United States, vertically
36:43
integrated. Guess my question is, what would
36:46
need to change with us, permitting laws to allow that
36:50
kind of? What would be your message to
36:51
this Administration or next and do you think you could do a
36:55
terawatt hour? What's the going price of that?
36:57
Can you do that for under 100 million bucks in the states?
37:00
Thanks. I think that the message to the
37:06
government would be that there should be.
37:07
I should say we've actually had conversations with a number of
37:12
senior, government leaders, White House, Congress, and
37:16
whatnot. And, and was the suggestion that
37:21
we have is that there should be an expedited permitting process
37:25
for anything, which is critical to a sustainable energy future.
37:28
So it doesn't make sense to put like a coal mine and And they,
37:34
you know, sustainable energy naturally like lithium my mine
37:39
in the same category. You know, Cole does not have a
37:43
future of lithium does. And by the way, you can attract
37:45
with him, with with, almost no disturbance, back to the local
37:51
environment. So, It's not like some ugly
37:57
nasty mind situation. so, I would recommend expedited
38:05
permitting would really be helpful.
38:11
Basically yeah, FastTrack environmentally you think it
38:16
sounds fast, track things that are born for the environment and
38:19
communities who sort of that seems logical and the
38:24
reception's been positive. So we'll see if something
38:27
happens. But with that our program is
38:32
called we're not ready to go into Financial details of the
38:36
what it would take to get there, but what we are seeing is,
38:43
Radical Improvement as we redesign.
38:47
The the whole supply chain and all of the elements that go into
38:51
a bathroom, sell this thing. We're figuring out.
38:59
Dramatic efficiencies. And I think will never result of
39:07
which will be at the Capitol required to achieve that their
39:13
build output will be much less what people think.
39:19
Thank you very much. Let's go to the next question.
39:21
From calling lion from Wells Fargo, killing go ahead and
39:25
unmute the link. Can you click on mute hear me
39:37
now? Yeah we can hear you.
39:38
Okay, sorry about that. Any update on full self-driving?
39:42
I think you had said a couple quarters ago would be available
39:44
by the end of the year. Is that still possible?
39:47
Is it would it still be like a level 4, level 5 you're talking
39:50
about and are there any sort of regulatory hurdles you have to
39:53
think about? As I said earlier, we're
39:58
expecting to release the full self-driving software to anyone
40:03
who orders the package, putting on this year, it's a separate.
40:09
Matter is who is willing have regulatory approval.
40:12
It won't have regulatory approval at that time, but The
40:20
put the call will be able to take you from your home, to your
40:23
work, your friend's house to the grocery store.
40:30
That you touching wheel. So, it's looking very good.
40:36
And they would mean like level four level five kind of
40:39
traditional definition you're talking about.
40:43
Well, this was a debate us, like what's the board of the
40:47
interventions? Mi got all those nasty
40:51
interventions per mile, like we're not saying that that's,
40:56
that's quite ready to have no one behind the wheel.
41:01
It's just that there. Will you almost never have to
41:05
touch the control of vehicle controls So like, when I came to
41:13
Giga Texas, a from friend's house, I never touched any of
41:20
the controls away. And then and then it's there is
41:27
a longer process of like the called, the march of nines of
41:30
like, how many nines reliability do you need before?
41:33
You can really be comfortable saying that the cock drive with
41:39
no one in it. and, That's some subjectivity is.
41:48
How many nights you need butt. Well, I think we'll be pretty
41:53
close too. Having enough lines that you
41:59
have no one in the car by the end of this year and certainly
42:02
with that could without question that's why we're in my life.
42:07
That's you. It will also have enough data
42:10
next year to be able to assure to Regulators that the car is
42:17
saying that much of an average human.
42:26
It just as a follow-up, you mentioned in a prior questions
42:29
about Ira. I mean, it sounded like you
42:31
thought you could get, can you get all of it?
42:33
I mean, because my interpretation is like the
42:35
production credits battery component, credits.
42:37
For buyers seems very likely for you guys is the sourcing part of
42:41
the possible that that seems like a pretty tough hurdle.
42:44
Given how much has to be sourced from the US?
42:52
We have a cross-functional team that's looking very closely.
42:55
At as you mentioned, the sourcing threshold increases by
42:58
the you. So we're looking at all options
43:01
and also getting some clarification from treasury.
43:04
That's it's important to say. That's only a fraction of the
43:06
other credits. We do manufacture ourselves in
43:09
the u.s. we manufacture the modules in the u.s., so that's
43:12
pretty freaking player. So yes, we feel confident that
43:17
we'll have a path as these. Senators, as a threshold sort of
43:21
increases by the yeah. What will will meet those
43:24
thresholds? Thank you.
43:29
The next question comes from calling, Rush from Oppenheimer
43:32
going. Please go ahead and unmute
43:34
yourself. Thanks so much guys.
43:37
You know, the operating leverage has been pretty impressive here.
43:39
And I'm curious about areas where you could, you know,
43:44
invest in an incremental way. Whether it's on the R&D side or
43:46
on the sales side to accelerate growth or cost reduction, or
43:50
should we be thinking about this?
43:52
This level spend on a go-forward basis and some significant
43:55
operating leverage as you scale up from here.
44:00
I mean, our operating leverage has improved quite a bit.
44:02
It's the lowest this quarter I think, ever and by decent amount
44:08
Our office is a percentage of Revenue.
44:10
I mean our forecast is that it will keep reducing.
44:12
I mean I think the way to think about it is our total amount of
44:16
operating expenses will slowly take a as the company grows,
44:20
it's very hard to keep it flat with the rapid growth of the
44:22
company, but it's going much slower.
44:25
So some amount of growth there, but the top line of the business
44:27
is growing so quickly, so, I think there continues to be an
44:33
enormous opportunity to improve the overhead efficiency of a
44:35
business and we're seeing it. Yeah.
44:41
All right, great castles. I'll take the rest of that
44:42
offline. At least for now quite quite
44:54
nice. Good position of we're investing
44:57
in everything we can think of to possibly invest in and we're
45:02
still Journey cash the because it gets pretty good place to be.
45:08
I mean how many are in D programs are running in parallel
45:10
right now. So lots you know we won't even
45:14
know old, are you? So if we do have, you know, so
45:16
there are so good bunch of the yeah.
45:19
So, we did also don't think cash is, it is a good gauge of how
45:22
much our into your know, it isn't.
45:24
It gets like this like, it's not like, it's like they're not
45:28
generic resources like, oh you if you spend, you know, 5
45:34
million or ten million that will like that.
45:37
That your actual are D. Orbitals useful product ship
45:41
should will be proportional to that.
45:42
It's just not true. It is yours aren't on coming up
45:46
some assembly line like, you know, like cookies or something.
45:49
So we got Optimus can, obviously don't change things.
45:53
What about is this? Where are the most brilliant
45:56
people working? And it also Remains The Peasant
46:01
SpaceX or two companies were smartest Engineers 101.
46:07
I mean like we don't have to spend billions of dollars to to
46:10
you know invest in the future and invent the future Engineers
46:12
are also called conscience and we do so just burn the money out
46:16
the window. When we're trying to do our deep
46:18
sigh, I would stop looking at like, aren T, as a cash
46:21
investment 400. I'd like one Nikola Tesla is
46:24
probably worth an infinite number of dollars above engine
46:29
of what you can have, like a Almost a number of Engineers and
46:36
they would not be able to what one Nikola Tesla could do.
46:40
You can't make it up in volume. Okay, thank you very much.
46:47
Let's go to the next question. From George at can Accords.
46:55
George playing good afternoon, and thanks for taking my
46:58
question. I think it was at your annual
47:01
shareholders, that the prices of many of the materials used in
47:05
your production of started to come off.
47:07
The boil that continues is that give you an opportunity to
47:11
adjust prices globally after several increases.
47:15
Thanks. We're looking at the prices of
47:20
house prices closely. I mean, honestly, anyone can
47:24
just Google what the price of, you know, if you put usual price
47:28
of copper or steals, be a source like one Google search way, and
47:33
everyone can see that the collector of oddities look on a
47:36
go-forward basis are dropping a line, but it electric vehicles
47:46
things like Battery great, lithium Austell, crazy
47:50
expensive. So we've got to make sure things
47:53
were prices. Dropping and think your prices
47:55
are increasing. Yeah, yeah yeah.
48:07
Aside. The cost of shipping is come
48:10
down tremendously. Yeah.
48:11
Like last year the cost of a container on the spot Market
48:14
from Tron guy got as high as 20,000 dollars.
48:16
Well now it's 30. 5:30 6:00 back to reality saying deflation and
48:22
a lot of Commodities with few exceptions as action on
48:24
batteries. This is more deflation that than
48:27
inflation definitely it again, this is publicly available
48:30
information, anyone could just grow it.
48:33
And I think Cathy wood at our confesses to make this point
48:38
over and over again to the fed and who the FED is not listening
48:43
because it looking at the rearview mirror instead of
48:45
looking out the front windshield.
48:48
Yeah, just had a little bit more context.
48:52
So, you know, a commodity increases were the highest in Q3
48:58
that we've seen over the last two years.
49:00
And so, you know, when index is change, it does take time before
49:03
they flew Parkway controls. Yeah, there's latency is why I
49:07
say, if that makes sense, if you're looking up through pain,
49:12
through regular humor, but not if you look up front, windshield
49:17
and visual gunpoint. Aren't you?
49:20
Yeah, and so, what? At least of what we know so far.
49:22
So, Peak on the commodity side into three, I say Pika.
49:26
Hopefully States the peak. Hopefully, it starts to come
49:29
down. You know, that there is a small
49:32
amount of reduction that we were seeing going into our queue for
49:35
cost structure from steel and aluminum primarily, but it's
49:40
less than 10% of the total increases we've seen so far.
49:44
So we're optimistic here, based upon what we're seeing on the
49:47
indexes for some Of our cost structure that this will start
49:51
to come in over time, but I just want to set expectations that
49:54
there's not some, some windfall of cost reduction in this space
49:58
coming in Q4, it may be some as we go into next year.
50:02
We'll probably see some Cost reduction in 2023.
50:09
I'll be surprised if we're done. And just as a follow-up, this is
50:14
for along with your pending acquisition of Twitter and your
50:17
steaks and you know, and SpaceX and neural link and Tesla.
50:21
How much would the combined companies benefit from operating
50:25
under a single superstructure? If at all But it's not clear to
50:33
me what the overlap is. It's not zero but it's I think
50:38
we're reaching. I'm not worried about that about
50:41
it. I'm not an investor.
50:44
I am an engineer and manufacture a person and technologists.
50:50
So You know, I actually work and design and develop products,
50:56
that's what I do. So it's not a doctor, have have
51:01
a short portfolio. So obviously Investments already
51:05
So I don't know, I don't see an obvious sort of word worked with
51:11
some good combined, under an umbrella at least right now.
51:17
So, I'm excited about the Twitter situation because I also
51:24
another part incredibly well, and I think it's a its massive
51:29
that been sort of languished for a long time, but as incredible
51:38
potential, Although obviously myself in the other investors
51:45
are obviously overpaying for Twitter.
51:48
Right now, the long-term potential for Twitter in my view
51:53
is order of magnitude greater than this car value.
52:01
Thank you. Let's go through the next
52:02
question, from here, for a goo. From you Street research.
52:09
Here. Go ahead.
52:09
Please unmute Yes. Can you hear me, guys?
52:18
So here now great. I'd love to to have another date
52:24
on 4680 drouin. So last time we talked about it,
52:31
there were worse question, it was questioned about like, you
52:34
know, scaling out with manufacturing and that there
52:36
were still a few things to get right?
52:39
Is it fair to say that? Now you are at scale and it's
52:42
just a question of logistics to, to get bigger.
52:46
So, That's question. Number one.
52:47
And then question number two on the kind of like Innovation and
52:52
cost reduction and efficiency improvements kind of path that
52:59
you described as a battery. They you know, well that are we
53:05
today and how much time is it going to take to, to the river?
53:08
You know, all the potential you you outline then Well, I'll take
53:17
the second question. First at boundary day.
53:19
We showed a timeline out to 2026 for all of the ideas.
53:23
We had proposed and had shared with with, with everybody then,
53:28
and you have to surprise, I think we'll do better than that.
53:33
Yeah, I'm going to put up, but just think that's the rough.
53:36
Just giving you all, you know, like it's on that order.
53:39
It's not like a month. It's not six months.
53:41
It's years and we are Executing on all of those different ideas.
53:49
Pretty aggressively in parallel with the op X that some people
53:54
think isn't enough, but we're getting it done.
53:57
I mean, I'm not turning down the O's, you know, know.
54:01
Yeah, exactly. So yeah, yeah, yeah, or great
54:03
talents. Like, we find awesome two years,
54:05
we bring them into the company and people shouldn't believe we
54:08
are turning people away. Yeah.
54:09
Obviously it's a hard problem but we're solving and I think
54:14
Here, we still feel confident that 4680 will be.
54:17
Yes, the most competitive veteran selling well, and it's
54:20
the whole system around it, right?
54:22
It's not necessarily the specific form factor, it's the
54:24
attention to detail on how to bring costs out of the
54:27
manufacturing process. But our move processing steps.
54:30
And we'll all the way down from the mine to the cell.
54:35
Yeah, exactly. Running steps along the way.
54:37
Yeah. And, you know, for those who
54:40
watch their YouTube videos, like our on-site cathode, Lily is
54:43
coming together. Really excited about that which
54:46
is a part of the plan that we discussed on battery day.
54:49
Yeah. Were building with a refinery in
54:53
Corpus Christi so we're making, you know, putting our money
55:01
where our mouths are and all the various efforts that we
55:03
discussed on battery day on the technical challenges in rent.
55:06
And, and the ramp question, which is your first question of
55:09
where 2680 book? No ramp is ever easy.
55:11
Even at the end, when you're 80, To the end like it's still very
55:15
challenging to get to the end and that that sort of cleaning
55:18
out of yields the final cycle time, you know, to achieve
55:22
Target, you mentioned Logistics. It's not something that we're
55:28
specifically focused on I guess, but eventually could be a
55:31
problem as we're talking about hundreds of gigawatt hours at
55:34
different sites across the United States.
55:37
But but I would never sit here and say we have no challenges
55:40
remaining, but, but we've made a lot of progress.
55:43
Reducing technical risk. In many areas cycle times have
55:46
dramatically improved field is dramatically improved.
55:50
And the, you know, just just walking the line here in Texas,
55:53
you know, like Martin was walking it yesterday, made some
55:55
comments to me. You really see the acceleration
55:58
around you and we've made a ton of simplifications moving from
56:03
the Fremont Factory to Texas and it it's called me to play in
56:06
speed of R A and and of course, that's that's on, that's on one
56:11
line of many here in Texas. So it's It's not like Factory to
56:14
factory is. It's a multiplication of both
56:17
Simplicity and scale so yeah we're excited about where it's
56:20
headed. Yeah, I think your once once we
56:23
are fully integrated, I think we still do.
56:28
See a path to pull a roughly $70 per kilowatt hour.
56:33
So so Terry dolls were gonna wear.
56:35
So, yeah. Before any intent to the point
56:39
before I sent you. Thank you.
56:43
And the next question comes from Tony.
56:44
Second argue from Bernstein, Tony, go ahead and unmute
56:48
yourself please. Yes, thank you.
56:51
I just wanted to follow up on the 4680 cells and where we are
56:57
seeing them deployed today. So are those in the semis that
57:02
are being delivered on December 1st?
57:04
Are we seeing them in model wise?
57:07
They're being produced out of Austin and is, do you anticipate
57:13
4680 being a gating factor for cyber truck ramp later this
57:19
year? Year.
57:19
And how do you balance the need for 4680 across semi cyber truck
57:24
and potentially model, Y in 2023 and I have a follow-up plays.
57:30
Well. Okay, a semi doesn't use 46 80s.
57:36
Yes, we are making model wise. So monetized we are big in.
57:45
Texas are 4680 and I think through the car you drive around
57:50
is 40 60 80. Yep.
57:52
Wonder why thousand miles to those miles and it's pretty
57:54
good. No problem.
57:55
Yeah. Yeah.
57:56
Structural pack. Special fact.
57:58
Yes. So And yeah I mean our output
58:04
4680 is growing exponentially so but it's worth bearing in mind
58:10
that there are entire highly competitive companies that are
58:14
very smart that all they do is make battery cells.
58:18
This is, this is simply one segment of Tesla.
58:24
Yeah. So, So this sort of total will
58:29
conform know. There's there there aren't
58:32
there. Challenges, still ahead that we
58:34
had not yet surpassed No Doubt. We don't anticipate this being
58:40
any limiting tactical cyber truck or anything else.
58:45
Okay, thank you. And the last question comes from
58:47
William Stein from truest. Go ahead and unmute yourself,
58:51
please. Great.
58:54
Thanks for taking my question. I guess I'll go at one that I
58:57
asked last time along, which is your expectation for the
59:02
likelihood of commercial success in each of the three major AI
59:05
Endeavors you know FSD in you know sort of as imagined without
59:12
a driver that training computer and of course optimist I will
59:19
cheer for self-driving, full-time ey+, that occurring is
59:24
100%. And I think, I think we'll, you
59:31
know, we're almost there. And then of course we got to
59:34
prove it to regulators and get the regulatory approvals, which
59:37
is outside of our control. but, Bring anyone who's drunk,
59:46
driving force of drop, who's as the Pulsar crying baby in the
59:49
car can see the rate of improvement.
59:52
They collected, you just experience for yourself that we
59:55
are, in fact, getting there. In fact, we're almost are there.
1:00:00
And so Eric probably achieving that one percent.
1:00:06
The. Optimus probably of that being a
1:00:10
successful product. I think also extremely high.
1:00:17
Because if you give enough time on her percent dojo, this may be
1:00:22
more of a question mark around Dojo of what can we be
1:00:25
competitive with? Nvidia, gpus, even as somebody
1:00:30
continues to rapidly evolve their gpus, the swords that the
1:00:35
jury's out on dojo. There's a team thinks they can
1:00:39
outperform and video for your own and training. it's the
1:00:46
jury's out will probably know I'm not next year, if that's if
1:00:52
that's true or not but we think we think we'll probably we think
1:00:56
its octet this is the architecture of Dojo as It's
1:01:01
right. I'll connect you to win.
1:01:05
Depends on how well, we execute the net architecture.
1:01:12
Thank you very much. I think, unfortunately, sold the
1:01:15
time that we have today, so thank you so much for your great
1:01:17
questions and look forward to talking to you in about three
1:01:20
months from now. Thank you and have a good day.
1:01:23
Bye Sarah. Thank you very much.
1:01:13
I think, unfortunately, sold the time that we have today, so
1:01:16
thank you so much for your great questions and look forward to
1:01:19
talking to you in about three months from now.
1:01:22
Thank you and have a good day. Bye Sarah.