Live: Tesla Q2 Earnings Call 2025 (TSLA)

0:03 head of investor relations and I'm joined today by Elon Musk, Bean, and a number of other executives. Our Q2 results were announced at about 3 p.m. Central time in the update deck be published at the same link as 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 risks and 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 followup. Please use the raise hand button to join the question queue. Before we jump into Q&A, Elon has some opening remarks. Elon. >> Uh, thanks Travis.

0:49 >> Uh, so we've had a very exciting quarter. uh the we're able to successfully launch robo taxi so providing our first drives with no one in p driver p driver p driver p driver p driver p driver p driver p driver p driver p driver seat um with paying customers in Austin um and as uh some may have noted we've already expanded our service area in Austin um it's uh bigger and longer and um and it's it's going to get even bigger and longer the we were expecting to um really greatly increase the uh motion service area um to well in excess of what competitors doing. And uh that's hopefully in a week or so, kill weeks. >> Yeah, couple weeks.

1:35 >> A couple weeks or so. Um and uh and and and we're we're getting the regulatory permission uh to launch in the Bay Area uh Nevada uh Arizona and a number of and Florida and a number of other places. So as as we uh get the approvals and we prove out safety then we will be uh launching autonomous ride hailing in most of the country and I think we'll probably uh have autonomous right hailing in probably half half the population of the US by the end of the year that's that's at least our goal subject to regulatory approvals. Um I I I think we'll

2:21 technically be able to do it. So assuming we get regulatory approvals, it's probably addressing half the population of the US by the end of the year. Um but we we we are being very cautious. We don't want to take any chances and so uh we're going to yeah go cautiously. But uh it it the service areas and the number of vehicles in in operation will increase at at a hyper exponential rate. Um so um you know some other notable things Model Y and June became the bestselling car in Turkey, Netherlands, Switzerland and Austria. Uh it is I believe the bestselling car of any kind in the world

3:07 still. um and um auton autonomy is a is a big factor there. So even without even even absent even even without supervised even even with just supervised self self-driving it's it's a huge uh selling point um and it's worth noting that we do not actually yet have approval for supervised FSD uh in in Europe. So our sales in Europe uh we think will improve significantly once we are able to give customers the same experience that they have in the US. This is this is I think a very important point to convey. Um and we've been

3:53 working with main country regulator which is the Netherlands and uh I think we're close to getting approval with the Netherlands then it's going to go to the EU. It's quite a you know Kafka-esque in fact Kafka had no idea that something like EU could exist. I beyond Kafka challenges with bureaucracy but it will we will get the approvals. Um and I I think we'll get uh you know some people in Europe will have experience similar to that of the US. uh in most of Europe, you know, this year hopefully at least partially uh in this quarter. Um and then we also have some

4:38 reg regulatory regulatory challenges in China which we're hoping to unblock shortly uh where we because we also cannot provide uh supervised FSD in China currently um but we hope to unblock that soon. That's also those that's another major it really is the single biggest demand driver. Um and then within the US uh as as we are get confident about uh safety in in different uh geographic areas the we'll um uh loosen up on how uh much somebody has to be laser focused have their eyes laser focused on the road. um you know is that that's that's

5:23 been a common complaint. Um in fact it it does create an odd odd safety issue where people will sometimes disengage uh autopilot uh then then do something change the radio or maybe look at the phone drive with her knee and then re-engage autopilot which obviously is is less safe than simply keeping autopilot on. Uh so anyway, we're get that that that experience will will improve in in the next several weeks. The the because of our focus on Austin with though in the driver's seat, the production release of autopilot is actually several months behind what

6:09 people experience on a robo tax in Austin. Um so now now we have the the robot tags that was launched will be provide adding back those elements uh so that there will be a step change improvements in the u autopilot experience for people outside of Boston. So this this is really as you can tell this is very much sort of autonomy is is the story. um like we need the we need the physical product without which you cannot have autonomy but once you have the physical product you need the the autonomy is what amplifies the value to stratospheric levels um also launched the Tesla diner which has

6:54 been a huge hit that actually got worldwide attention which is unusual for a diner diners don't typically get uh you know headline news around earth Um, but this is a pretty special diner and if you're in the LA area, it's worth visiting. It's sort of a shiny beacon of hope in in an otherwise sort of bleak urban landscape, frankly. So, really quite quite a lovely experience. Great job by the Tesla team there. Um, on the full self-driving front, just continue talking about that. Um we have um we're continuing to make uh significant improvements just with

7:39 the software. So uh the we're expecting to increase the parameter count actually at this point uh I think we think we can probably 10x the almost 10x the power parameter. >> Yeah roughly roughly 10x the parameter count. So um this is this is actually a very tricky thing to do. Um because you if you as you increase the parameter count you get you get choked on memory bandwidth. Uh but we currently think we can 10x the parameter count uh from what people are currently experiencing. That's that's so not not just a 4x

8:26 actually 10x increase in parameter count. Um and um yeah so so this still a lot of improvement on the existing hardware to to happen. Uh energy is growing really well despite headwinds from tariffs and various supply chain challenges. Um the mega pack is expanding capacity quickly and uh and we have upgrades to the mega pack that will make it even better and we had record powerful deployments gain in Q2. So I I think battery batteries are going to just going to be a massive thing. uh that the scale of batteries battery

9:13 demand is I think not that many people appreciate just how gigantic the scale of battery demand is. The way the way to think about it is that the US sustained power output for the US grid um is around 1 terowatt but average usage is less than half a terowatt. Uh if you add batteries to the mix, you can run the power plants 24/7 at full capacity, thus doubling, more than doubling the energy output per year of the United States just with batteries. But that's again um big deal. It's a really big deal.

10:01 Optimus. Uh, so we're evolving to opt Optimus design and really getting Optimus to the point where it is a phenomenal design. So Optimus version two right now sort of two and a half. Optimus 3 is uh is an exquisite design in my opinion and um will be an incred as I've said many times before I predict it it will be the biggest product ever. Um it's a very hard problem to solve. You have to design every part of it from physics first principles. There's nothing that's off the shelf that actually works. So you've

10:46 got to design every motor gearbox, power electronics, control electronics, sensors, the mechanical elements. Um we've also got to train Optimus to you use its limbs and its sensors with a neural net. But we'll be applying the same techniques that we've applied for a car, which is essentially a four-wheel robot, and Optimus is a robot with arms and legs. So, the same principles that apply to optimizing AI inference are the car apply to Optimus because they're both really robots in different forms. Um and and Tesla it it is important to

11:34 note that Tesla is by far the best in the world at real world AI like like a clear proof point for that would be if you compare it say Tesla to Whimo Whimo's got you know the car is bestoned with god knows how many sensors and yet isn't Google good at AI yes but they're not good at real world AI thus far they have Tesla is actually much better than able by far than any much better than anyone at real world AI and and I and by far Tesla has the the best inference efficiency. uh like I think a key figure of merit for AI is what is the intelligence per gigabyte and people talk about parameters blah

12:21 blah blah but I think what talk about stop talking about parameters and talk about gigabytes because with the parameters you can have four bit parameters 8 bit parameters 16 bit parameters but the actual constraints in the hardware are uh how many gigabytes of RAM and how many gigabytes per second can you transfer from RAM therefore it is not a parameter constraint There's it is a there's a bite constraint and uh Tesla has the highest intelligence density of any AI by farm and I have a lot of insight into this with with XAI. XAI is, you know, Grock is the smartest AI overall, but it's a, you know, Grock 4 is a giant beast. Um,

13:07 you know, sort of at the terabyte level. Um and uh so kind of a important to note Tesla has the best intelligence density and intelligence density will be a very big deal in the future. It is now um so with with Optimus 3 which is really the right design. It's like it doesn't have at this point there's no no significant flaws with the Optimus 3 design. Um but it it we are going to retool a bunch of things. So it's probably prototypes of Optimus 3 end of this year

13:54 and then scale production next year. Going to try to scale Optimus production as fast as it's humanly possible to to do so. Try to get to a million units a year. as quickly as possible. We think we can get there in less than 5 years. That's my sort of I guess um that that's a reasonable aspiration is a million units a year five years. It seems like an achievable target. Um so in conclusion uh so far 2025 has been

14:40 very exciting year a lot of major milestones. Uh we've made clear pro demonstraable progress in autonomy that uh a lot of nerves said we would not achieve but it's worth noting that the we have done what we said we were going to do doesn't mean we're always on time. uh but we get it done and our naysayers are sitting there with egg on their face. So great great great progress by the Tesla team. Um, yeah, I do think if Tesla continues to execute well with vehicle autonomy

15:25 and and humanoid robot autonomy, it it will be the most valuable company in the world. It's a lot of execution between here and there. It doesn't just happen, but provided we execute very well. Um, I think Tesla has a shot at being the most valuable company in the world. Anyway, obviously I'm extremely optimistic about future of the company. Um, best way to predict the future is to make it happen and we're making it happen here with Tesla team. So, I just like to say thanks to all of our supporters and I think we're got yeah an incredibly exciting future.

16:11 Great. >> Thank you very much, Elon. Uh, and FedEl has very much remarks as well. >> Travis, as Elon mentioned, Q2 was an interesting quarter in a few respects. We started ramping up the production of the new Model Y at all our factories. We rolled out our robot taxi service in Austin and delivered a car completely autonomously from directly from the factory to the customer's home. It is a seinal point to to get to this thing. I mean, it took a lot of effort and I really want to thank everybody at Tesla to make this happen. It wasn't an easy thing to do, but we did it. It took time, but we've just begun the next phase for the company.

16:57 The one big bill has a lot of changes that would affect our business in the near term. The first among those changes is the repeal of the IRA EV credit of 7,500 by the end of this quarter. Given the abrupt change, we have limited supply of vehicles in the US this quarter as we have already with the lead times to order parts to build cars. We've rolled out all our planned incentives already and will start pairing them back as we start to sell. If you're in the US and looking to buy a car, place your order now as we may not be able to guarantee delivery for orders placed in the later part of August and beyond. The will also made changes to certain emission standards by reducing the amount of penalty to zero. This in

17:43 turn will have an impact on the new sales of regulatory credits to other OEMs and in turn will lead to lower revenues. While we never plan our business around such sales, it will nonetheless impact our total revenues going forward. On the automotive product portfolio, the entire lineup is updated globally. We are seeing an increase in the number of test drives. We started the production of the lower cost model as planned in the first half of 25. However, given our focus on building and delivering as many vehicles as possible in the US before the EV credit expires and the additional complexity of ramping a new product, the ramp will happen next quarter slower than initially expected.

18:30 One thing which is appreciated and Elon talked about it is that all our vehicles in the lineup are capable of autonom. This is by far the biggest differentiator between us and the competition. Our vehicles stop safety standard as is but with FSD they are and will continue to set a new standard for safety within vehicular transportation. We published our uh vehicle safety report earlier today and you can see a car on FSD is 10x safer than the car not on FSD. We've started seeing an uptick in FSD adoption in North America in recent months which is a very promising trend. And just to give you perspective, you

19:16 know, since the launch of uh since we went moved to version 12 of FSD, we've seen the adoption rates really increase. We've started seeing the on the automotive revenue uh front uh despite reduction in regulator revenue and the auto the total automotive revenue increased by 19% sequentially even though total deliveries only improved 14%. This was primarily due to an improved ASPS because of the new model Y. This helped in improving margin sequentially as well along with improved mix and higher cost fixed cost absorption despite an increase in cost from tariffs.

20:03 We started seeing the impact of tariffs in our P&L. Sequentially the cost of tariffs increased around 300 million with approximately 2/3 of that impact in automotive and rest in energy. However, given the latency in manufacturing and sales, the full impacts will come through in the following quarters and so costs will increase in the near term. While we're doing our best to manage these impacts, we are in an unpredictable environment on the tariff front. The margins for the energy generation and storage businesses improved sequentially while deployment reduced primarily due to the ramp of power deployments at high margins. We were able to achieve our highest gross profit for the business yet.

20:50 Note that the overall deployments will continue to vary quarter to quarter. I think Elon covered this that you know industrial storage will make a difference in this drive towards AI and data center growth. The energy requirements are increasing at a rapid scale as application as AI applications are very energy hungry. The quickest path to scale up energy is deploying storage. This is something that our customers have started realizing and despite this business having the largest impacts from tariffs, we're seeing customers willing to accept some of the tariff impacts. The big bill has certain adverse impacts even for the energy business most notably on the

21:35 residential storage business due to the early expiration of consumer credits by the end of this year. The challenges of the storage business therefore remain both from the bill and from the tariffs and we're doing our best to try and manage through this but it will we will see shifts in demand and profitability. The margins for our service and other businesses improved sequentially primarily due to higher profits from supercharging and improvement in insurance and service center profitability. Operating expenses also grew sequentially as we continued our investment in AI projects including additional expenses related to employee related cost

22:20 including higher stockbased compensation and depreciation for AI compute. Our operating expenses especially R&D related spend will continue to grow. We believe even in the current environment it is the right strategy to keep making investments in these areas to position us for the long term. Other income grew sequentially primarily from the marktomarket adjustment on Bitcoin holdings which was 284 million gain in K2 while being 125 million loss in K1. Just want to remind people that this would keep creating volatility based on the Bitcoin price. While other while operating cash flows increased sequentially, so did our capex

23:08 resulting in 146 million of free cash flow. We continue to make investments in various aspects of manufacturing like the cyber cap, semi lines and other manufacturing spend and the expansion of our AI initiatives. Our latest expectation for the year in terms of capex is in excess of 9 billion. To summarize, we have near-term challenges in our business due to the negative impacts of the bill and tariffs. However, the investments that we have made for AI robotics and our lead in energy sets us up for a bright future. I would like to thank the whole Tesla team, our customers, our investors and supporters for their continued belief in us.

23:55 >> Great. Thank you very much. Uh so now we're going to move on to say.com questions. The first question is can you give us some insight how robo taxis have been performing so far and what rate you expect to expand in terms of vehicles, geoence, cities and supervisors? Yeah, Robot XC has been doing great so far in Austin. Customers really love the experience. Um, like super smooth, uh, very safe and like just a great experience overall. Uh, and we already did a first wave of expansion in Austin and we'll continue to expand in Austin uh, to probably more than 10x our current operating region. We're also testing in a lot of other cities as uh, Elon mentioned. Um the next thing to expand would be in the San Francisco Bay area. Uh we are working

24:41 with the government to get approval here. Uh and in the meanwhile launch a service with the person in the driver's seat just to expedite and while we wait for regulatory approval. Uh we're also testing a lot of other cities in the US uh including Florida, Nevada etc. >> Great. Uh thank you very much Shook. Um the next question is what are the key technical and regulatory hurdles still remaining for unsupervised FSD to be available for personal use? Can you provide a timeline? >> We're certainly getting there. Um I think it's it'll be available for

25:27 supervised personal use uh by the end of this year in certain geographies. uh we're just being very careful about it. So >> this is not something which we want to rush. No, >> we want to make sure that everything is safe before we maintain or available broadly. >> Yeah, we're just being extremely paranoid. >> Yes. Um but I I would be I'm I'm confident that by the end of this year within um a number of cities in the US we we will it'll be available to um end users like >> Yeah. >> Yeah. And for what was the same AI hardware in the Austin robot taxi vehicles as some customer vehicles and we did deliver a car autonomously from the factory to a customer.

26:13 >> Yes. uh and every Tesla manufacturer in the US and in Europe autonomously drives itself from the end of line to the uh loading docks and it so it's just a software update. >> Yeah, I think we'll be we'll end up delivering cars in the greater area and the Bay Area by default from the factory by the end of this year. like a car will deliver itself to your to where you are unless you say you don't want that. >> That would be super cool. Yeah. >> Great. Thank you guys. Uh the next question is what specific factory tasks is Optimus currently performing and what is the expected timeline for scaling production to enable external sales? How does Tesla envision Optimus contributing to revenue the next two to three years?

27:02 Uh yeah so the Optimus Optimus 3 design as I mentioned earlier is I think finally the right design. There'll be further optimizations but there are no I think no fundamental changes to that are needed for the Optimus 3 design. It has all the degrees of freedom that you really want um or need. Uh so it's you know we'll have prototypes of that in I don't know three or three months and it start to production. We'll simply start production on that in the beginning of next year. the production ramp. It's difficult. It's always difficult to predict the the scope of your production ramp. Um when something has got an entire when everything is new because the rate of

27:47 production will move as fast as the least lucky and least competent uh element of the entire supply chain as well as in internal processes. So the more new stuff that is in in a product, the slower the the ramp could be because of unexpected uh supply chain interruptions or mistakes made internally. Um it's much easier to predict um sort of the the the end of the of the scurve or or late in the scope than the beginning of the scope. And the beginning of the scope of of the production ramp is in any case not really material for revenue purposes. um the uh the beginning of the escop you're usually not usually you always

28:33 negative post launch and then you're debugging a lot of issues. So um that's why like it's it's I feel like fairly confident predicting things or at least medium confident in predicting where we are in five years but I it's hard to predict where we are in a year or two years. Um so that's why I think 5 years I think we could be at the uh let me put this I'll be surprised if at the end of 5 years you know 60 months from now if we are not roughly making 100,000 Optimus robots a month in 60 months I would be shocked.

29:22 All right, thank you very much. Next question is, can you provide an update on the development and production timeline for Tesla's more affordable models? How will these models balance cost reduction, profitability, and what impact do you expect on demand in the current economic climate? >> Well, I I think by did a good job of answering this question in his opening remarks. As we said, we started production in June and we're ramping, you know, quality builds and things around the quarter. And given that that we started in North America and that you know the um our goal is to maximize production with IRA cliff ending in Q3 we're going to keep pushing hard on our current models to avoid complexity. Then fortunately that rolls away we'll be running with the new more affordable models available for everyone in Q4. Um and you know the goal with those products was not to negatively impact

30:08 revenue or gross margin but just to make a a car that everyone loves and wants at a more affordable price. Great. Thank you Lars. Uh the next question is can you talk about the benefits of Tesla investing in XAI? >> This is not the forum to discuss this topic. I mean if if if there is something which we need to discuss we'll discuss it separately. >> I think obviously you know we're a publicly traded company. Shareholders are welcome to put forward any shareholder proposals that they'd like. I recently encouraged that. Um and uh and then have shareholders vote and we'll act in accordance with the shareholder wishes. >> Great. Thank you very much. The next

30:55 question is can you tell us a little bit more about what goes on in the Tesla design studio? >> I do you want me to take that one? Um we kind of generally say that um what happens in the studio stays in the studio. um and that you know earnings calls are not the place to disclose new product stuff but we're you know working to make sure that we have an exciting future for for Tesla and our in the product lineup. >> Yeah, there's a lot of exciting things happening in the design studio. It's it's not like static. Um and really what's going to happen over the next uh several years is a fundamental transformation of the company from a pre- autonomy wall to a post autonomy

31:44 And uh I'm working on a new master plan to articulate that Tesla team and uh you know there there will there will be there are some teething pains as you as you transition from a pre pre- autonomy to a post autonomy world but I think the the future vision for Tesla is incredibly exciting uh and will profoundly change the world in a good Okay, this may sound like sort of pip or whatever, but I I think if well, let's just say if we execute on that plan effectively, which is you have to actually do that. Um Tesla will be the most valuable company in the world by far.

32:29 >> Great. Thank you. The next question uh is actually duplicate on unsupervised FSD for customer vehicles. We'll skip that. Uh after that is are there any news for hardware 3 users getting retrofits or upgrades? Will they get hardware 4 or some future version of hardware 5? >> I mean what we want to do is we want to get unsupervised done on hardware 4 first. Once it's done then we will go back and look at what we need to do with the hardware three cars. I mean the like I said the focus is first to get unsupervised out and then we'll go back and see what more work we need to do. Yeah. >> Great. The next uh question is can you give an update on dojo and could XAI be

33:15 a customer for dojo? >> Um dojo 2 um we expect to have dojo 2 operating in scale sometime next year. um with scale being somewhere around 100k H100 equivalent. Um and um and then AI5 which is really a spectacular job. I don't use those words lightly. Spectacular job. Uh the AI5 chip will be hopefully be in volume production around the end of next year. that has a lot of potential.

34:02 Um I think you know thinking about Dojo 3 and the AI6 inference chip. Um it seems like intuitively we want to try to find convergence there where it's basically the same chip. um that is used where we where you use say two of them in a car or an Optimus uh and and maybe a larger number on a on a board like a 512 on a board or something like that if you want high bandwidth communication between the chips at a force surveying doing it burn surveying that sort of

34:48 seems like intuitively the sensible way to Great. Um, the next uh set of questions uh have all actually been covered. So, we'll we'll end with uh how will the BBB elimination of tax credits for solar projects affect your sales pipeline for me? >> Yeah, our our sales pipeline is is quite diversified across customers and market segments. So, we aren't heavily weighted in mega pack projects that are paired with solar. And as we talked about in the opening remarks, we're seeing storage quickly being recognized for its ability to unlock grid efficiency and how quickly it can be deployed to help the grid. Uh, additionally, although the recent bill was not favorable towards solar, we we believe solar projects will still get built because the energy is necessary,

35:34 the projects are welldeveloped and they're ready for execution, and there's really no alternatives in the near term given gas turbine lead times and pricing. We also continue to see growth in the data center segment and in standalone storage projects providing capacity to the grid in several markets across the US. Overall, we're forecasting a very strong second half of the year as we increase deployments. Uh and lastly, we we continue to invest heavily in US manufacturing to mitigate policy and tariff impacts, expecting our first LFP cell manufacturing facility to be online by the end of the year and launching our third mega factory near Houston in 2026. Great. Thank you, Mike. Uh, we will now be moving to analyst questions. Uh, the first question comes from Emanuel Rosner

36:21 at Wolf Research. Emanuel, uh, please feel free to unmute yourself whenever you're ready. >> Great. Thank you so much. Can you hear me? >> Yep. >> Uh, thanks. Um, so Elon, um, are you able to share any KPIs with us in terms of, uh, the robo taxi business? um how many vehicles are you operating uh miles driven autonomously or the number of safety critical intervention? Um just curious you know how the roll out is it generally is going and and any sort of like targets that you could share uh more broadly if you want to >> yeah we have uh you know more than 7,000 miles operating in uh Austin area it's uh you know just because service is new

37:07 we have um handful of vehicles uh right now but then we are trying to expand the service uh in terms of both the area and also the number of vehicles both in Austin and other locations. Uh so far you know the uh there's like no notable semicritical incidents there. You know sometimes we have our own um restrictions as to for example we restrict our speed limit to 40 miles per hour roads. Um and if the vehicle wants to go on like higher speed roads we can stop the vehicle but those are out of convenience opposed to uh safety critical nature. Um so for the service has been really well received uh and we continue to expand on it. Great. And then >> yeah, longer term from an economics

37:52 point of view, longer term, you've previously talked about working to drive down the cost per mile on robo taxis maybe towards 30 or 40 cents per mile over time. Uh now that your service is live, how should we think about the main milestones to getting there? >> Yeah. Well, the the the cyber cab is which is really uh optimized for autonomy. Um that that I think is got uh it's probably sub 30 cent per mile potential over time, maybe 25. Um, you know, it's it's really like if you design a car from scratch to to be um a

38:39 cost optimized robotic taxi like CyberCap, um, you know, you like for example, we're not trying to make it, you know, corn corner like a like incredibly well like a Model 3 would, you know, or Model S or even Model Y. like it's got Mar, you know, model all of our all of our cars that are driven by people are super fun to drive. They've got incredible acceleration. Uh, you know, the incredible cornering capability. Um, but I don't we we're confident that very few people in a cyber cap want to be huddling around. Um, so, you know, so we we've produced the the top end speed, which means we can use more efficient tires.

39:25 uh we don't need as much acceleration. We don't need as much um you know fake brakes to sort of we want stopping distance, but we we're not expecting it to be heavily used. It's it's it's a gentle ride essentially if you you design it for a gentle ride and and then you uh you have a a much more optimist optimized design point. Um so that that's why it seems probably we could achieve that especially if optim Optimus is you know serving cleaning up the car and doing maintenance and stuff. Um and um it's you know doing automatic charging. So I think it's going to the actual cost

40:12 per mile of cyber cab will be be very low. the cost per mile of our existing fleet will be higher but still very competitive. So you know maybe some number of 50 cents under scarity. Um yeah so so this really uh tells road taxi fleet will go from tiny to gigantic in terms of operations um in pretty short period of time. like my guess is there's it has a material impact on our financials around the end of next year. >> Great. Thank you very much. Uh the next

40:57 question comes from Adam at Morgan Stanley. Adam, please unmute yourself. >> Uh great. Hello everybody. U so Elon, as Tesla moves into this next phase of physical AI, autonomous humanoids, robo taxes, etc. worldch changing civilizational species changing technology with dual purpose are you comfortable moving Tesla in this direction while only having a 13% stake in the economy sorry in the company is that sustainable or does do you still insist that something needs to happen given you know your current lack of control and the types of technologies you're getting into? Yeah, that that that is a a major

41:44 concern for me as I've mentioned in the past and I hope that is addressed at the upcoming shareholders meeting. Um but uh yeah, it is a big deal like you know I want to find that I've got like so little control that I can easily be ousted by activist shareholders after having bolts you know these this army of humanoid robots. Um, I think that, as I've mentioned before, I think my control over a Tesla should be it enough to ensure that it goes in a good direction, but not so much control that I can't be thrown out if I go crazy. >> Okay, Elon, you're not going to go crazy. We we we trust you. Um, >> well, >> you can stay a little crazy. A little crazy is okay. Uh, Elon, though, um, we

42:32 understand the board of directors of a major US investment bank recently toward optimist production. That's I don't know if you want to confirm that or not. It's just what we heard. That's cool. Um when do you think others will be able to get a firsthand view of uh optimists like that? Uh and is the second half of this year too soon to have an AI day? Because it seems like everybody else in the world's doing it and this talent war is getting freaking crazy. And um I I know I know you mentioned for recruiting purposes uh this is a very important thing that you've done. I think people have have you've have have copied you on this and I'm wondering if this is if this year's too early for that. Thanks Elen.

43:18 >> Yeah it's a bit of a tough thing because like when we're doing AI day we find that some of our competitors have literally done a frame by frame examination of our slides everything we say and then copy us. Um, so you know I say like how what's the the trade-off which does help with recruiting but then competitors look very closely and copy us. Um, I mean that said, we should probably I mean I guess we could consider the shareholder meeting to be sort of an we can do we can maybe go into depth some some amount of depth at the annual shareholder meeting um with respect to Optimus and AI and um sort of our chip chip stuff

44:06 perhaps. Um yeah uh Tesla is also really underrated in terms of AI chip design um as well as AI software. Um so like there's still not a chip that we would that that exists that we would prefer to put in our car that is an AI chip that that we would prefer to put in the car over our own. And even though it's been now out for several years, and we're confident that the AI5 chip will be a profound game changer. In fact, it it's so it's so powerful that we'll have to nerf it for to some degree for markets outside of the US

44:53 because it it blows way past the export restrictions. So unless the export restrictions change, we actually will have to nerf our AI5 ship, which is kind of weird. Hopefully those hopefully we keep, you know, raising the bar on export restrictions, otherwise it gets a bit silly. Um, but we'll have a bunch of Optimus robots on stage uh at the shareholder meeting. Um, the Optimus Lab is cool to see. It looks like it basically looks like the set of Westworld. Um you could robots in various stages some of them you know in various stages of prepare like I don't know some some combination of like the tattooing junkyard and the and westworld is what

45:40 it looks like it's very cool and and Optimus is walking around the office here in Palto so just 247 it's just walking around like and we saw Don't be so optimist like you know the Tesla diner. So we b one. Yeah. So it's we'll go from a world where robots are rare to where they're so common that you don't even look up. >> Great. Thank you so much. Uh the next question comes from Edison at Deutsche Bank. Edison, please unmute yourself. Edison, please go ahead and unmute

46:25 yourself. Right. While Edison figures that out, we will go to the next question, which is going to come from Dan Levi at uh Barclays. Um Dan, please go ahead and unmute yourself. >> Great. Uh thank you. Uh Elan, you've talked about the opportunity to put uh non-Tesla owned vehicles into the robo taxi network. just talk about the gating factors to enabling that and what timeline we should expect on personally owned vehicles in the robo taxi network. >> Uh I we haven't really thought hard about that. Um like we need to make sure it works when the vehicles are fully

47:12 under our control. Um and uh you know it's kind of one step at a time here. We don't want to jump the gun. As I said, we're being paranoid about safety. So, um, so it's like, but I I I guess, uh, I guess it like next year is I'd say confidently next year. I'm not sure when next year, but confidently next year people would be able to add or subtract their car to the Tesla fleet. I mean one thing to keep in mind is that we will have some criteria because like even when you put your car in a Uber or lift fleet they go through a whole checklist process of making sure things are working >> like Airbnb or bad.

47:59 >> Yeah. So we will do something like that >> kind of process. >> Yes. Because we want like Elon said we we want to be parallel about security. I mean assets small things like tread on the tire can have an impact on safety. So that's why we would want to do some proper validation before we let other cars come in. >> Dan, do you have a follow-up? >> Yes, thank you. Um could you just unpack the different costs associated with scaling the robo taxi business and how you think about funding those costs? Are the cash flows in the auto business sufficient to fund it? And if not, what other funding sources do you think you'd

48:44 use? You know, would you just fund it off the balance sheet? >> Well, as soon as there is a clear cash flow stream associated with any any product, uh you can debt finance it. And in the interim, >> I mean in the interim like we will use our balance sheet, but like once we get to a certain scale in terms of recurring revenues, >> like Elon said, we could get into a easily a kind of transaction to try and get funding. >> Great. Uh thanks so much. Uh we will now move on to Mark um from Goldman Sachs.

49:32 Uh Mark, please uh feel free to unmute yourself. >> Uh yes, good afternoon. Thank you very much for taking the questions. With the FSD trials that Tesla has been offering to consumers and the attention on self-driving more generally, are you able to comment more specifically on what you're seeing with FSD subscription trends and take rates uh and help us better understand how large FSD revenue may be currently? So we've definitely like I I mentioned at my in my opening remarks uh since we've launched version 12 of FSD in North America we've definitely seen a marked improvement in the f FSD adaption and the other thing which we had also done last year is we did bring down the pricing and we made uh subscription much

50:20 more affordable. So we have seen uh you know 45% increase since that time. So which is an encouraging trend but honestly we we've just started the story around explaining the benefits of FSD. We uh like I said before we released a vehicle safety report even if you don't believe in this uh anything else a car on FSD being 10x safer should be a motivator plus the other thing is people don't realize even at $99 a month it's like you getting a personal show for for almost $3.33 a day and this is by far

51:06 the biggest game changer which I know we've been talking about it because part of it is we live and breathe it, but >> most people still don't know. >> Yeah. >> The vast majority of people don't know it exists and it's still like half of Tesla owners who could use it haven't tried it even once. They they don't actually realize. Obviously, this is something we want to educate them on. So, we've got to, you know, when they come in for service, uh, we'll reach out to them, send them like videos of how to make it work. Um, and, uh, most it's so, it's such a shocking thing. They don't they don't think a car is capable of this. So, you have to you have to show them and and and get them comfortable

51:52 with turning it on and off. It's so trivial, but it's, you know, it's like saying you've got a a can that can sing and dance, but it just looks like an old can. And you're like, you know, until you see the cat sing a dance and talk, you're like, you assume it's just a cat. That's that's Tesla FD. Yes, >> our car is intelligent. >> And so what we're going to do to Elon's point, like we've been giving people free time to try and try FSD, but we'll start giving more prompts to say, okay, this particular drive, try FSD. So that I mean because it's literally seeing is believing like Elon said it's think of it like a cat. It looks like a normal cat but this cat can sing in ads.

52:38 >> Yeah. >> Same thing on >> great. Yeah. And the 25% comment was 25% increase in the penetration rate since we've seen the release of of B12 and B13 in North America. Great. Thank you. Uh Mark, did you have a follow-up question? >> Yeah, thanks Travis. Tesla has historically said it would use pricing as one tool to help drive auto vehicle growth as long as free cash flow stayed positive given the ability to monetize products like FSD. I'm curious how you're thinking about pricing from here as a potential tool to drive increased volumes uh given where you stand with FSD as well as the fact that the IRA purchase tax credits are poised to go away in the US starting in the fourth quarter. Uh so so should we expect more meaningful price reductions given that monetization potential or do you

53:23 envision price reductions being more limited uh compared to cost downs given where free cash flow now stands? Thanks. >> Well, we're we're in this like weird transition period um where we will lose a lot of incentives in the US. still have incentives actually in many other parts of the world. Um but realism in the US um and uh but we're still at the relative early stages of autonomy. Um on the other hand, autonomy is most advanced and most available from a regulatory standpoint in the US. So uh I mean does that mean like we could have a few rough quarters? Yeah, we probably could have a few rough quarters. Um, I'm not saying we will, but we could. Um, Q,

54:09 you know, Q4, Q1, maybe Q2, but once you get to autonomy at scale in the second half of half of next year, certainly by the end of next year, I think the I would be surprised if if Tesla's economics um are not very compelling. >> Great. The next question is going to come from Will from Truist. Uh Will, please uh feel free to unmute yourself when you're ready. >> Great. Thanks so much for taking my questions. Um uh first um I'd like to ask for a little bit more detail about the lower cost model that you talked about having I think started uh production in the first half, but you said we'll ramp later. at the last

54:55 analyst days as I recall uh you talked about some aspects of this like two twothirds or threequarters reduction in silken carbide and not using rare earths in the um in the motor and perhaps other cost downs. You also had this unboxed architecture that I think you said would not be part of this sort of interim uh approach. Can you update us on what we should expect this thing to actually look like? Well, we won't get into the looks because watch lift the cat out of the bag there. Dancing cat that can singly dance. But he can he can talk and sing and dance though. That's the cool part. Um uh yeah, I mean the the the fundamentally the biggest obstacle remains that people

55:40 just don't have some people don't the the desire to buy the car is very high just people don't have enough money in in their bank account to buy it. Literally that is the issue. not not a lack of desire, but a lack of ability. So, the more affordable we can make the car, the better. Um, I think it's it's going to be it will be a very big deal when people can uh release their car to the fleet and have it earn money for them, which I like I said, I'm think I feel confident in saying that'll happen next year in the US at least. And in in the US, we're we're legally allowed, you know, appropriate disclaimers. Um and uh and that'll make the affordability dramatically greater just like you know you could if you have an Airbnb and and you can rent out your

56:27 your home when you're not there or rent out a a guest room or guest house or something like that your the affordability of your home is much greater. >> Okay. Um trying another uh another topic then can you know we we see all these wonderful developments at XAI like Grock and um you know obviously Tesla's trying to do quite a bit in AI. Elon, how do you manage the division of efforts and recruiting and talent and capital um between these two that that seem like there's a very high potential that they could in fact compete? >> Well, well, they are doing different things here. Um so

57:14 um you know the XI is doing like you know terabyte scale uh models and multi-terab scale models um you know Tesla's 100 times smaller models. So one's real world AI and one's kind of uh I guess uh artificial super intelligence type thing. Um the I mean really kind of the the genesis for XAI was that there there were certain people who simply would not join Tesla AI engineers because they wanted to work on ASI. They would join Tesla. Um and I was like well maybe they'll join a new company. Um

58:00 and uh now I think the Tesla problem is extremely important but not everyone agrees with me on that. And so rather than have them join you know OpenAI or Google or some other company it's like may as well have them create a company in that regard for it which is which is X AI. Um so that's uh you know um and and you know people can make it make a decision do they want to work on it's like super intelligence at data center or real world AI kind of they're both compelling problems but some people want to work on one and some want to work on the other um yeah

58:47 >> great and uh unfortunately That is all the time we have today. Uh thank you everyone so much for your questions and we will see you next quarter. All right. Hey everybody, give me uh one second here. Pause that music there. Tesla wrapping up and we'll just go through some takeaways. Um let me So let me know if the sound is working. Okay. Hopefully looks like it should be. Make sure we got everything set up here. Um, yeah, it looks like I don't know. The stock I think was maybe slightly up, maybe slightly down prior to the call. Looks like we're down about four and a half% now. Um, not sure if there was

59:34 anything super in particular that caused that. It seemed like kind of a steady drop throughout the call. I don't know if it was one comment in particular. If anyone feels like it was, let me know. Um, we'll we'll look back through the notes as well, but I don't know. I didn't I didn't think it was a bad call by any means. I think there was a lot of exciting stuff in there. I think anytime there's sort of management acknowledgement that there could be some rough quarters in the future, that tends to make the market a little bit nervous. Uh, usually company management for like broadly speaking here, most companies is going to paint things as like optimistically as possible. And not to say that Tesla's not trying to do that or not even unintentionally doing that um themselves, but I also think Tesla is

1:00:21 probably some people will find this maybe ironic, but I do think Tesla is more direct about some of the negatives. Um maybe not in every single situation, but um situations like this where Elon is specifically saying like, "Oh, there might be some tough quarters here in Q4, Q1 in particular." I mean, we were talking about that earlier today, right? It's it shouldn't be surprising to anyone. that's very forecastable, especially when you understand the EV credit is going away. So, I don't mind the acknowledgement of that. I think it's, you know, totally, again, something to be expected. Um, but again, as we talked about earlier today, what's most important is making sure that the business is at a level that it can continue to support the investments that Tesla is making and what they want their future to be. uh that is what

1:01:06 shareholders are owning the shares for is that future potential of the business and people that are good with that direction. I think there's uh a lot in this call to be excited about. Uh and the less exciting parts of it I think are things that are pretty well known or pretty well understood in terms of just some of the challenges that Tesla is working through. uh as we're really in between growth phases and a transition phase right now uh as Elon talked about. But on the sort of what Tesla is becoming side, I think there's a lot to be excited about and I think Elon started off the call saying, you know, we're going to go go back here um and just go through some of the notes here. Just making sure again that the audio is

1:01:51 good. Looks like it is. Um, so yeah, expecting to greatly increase the sort of surface area. I think I probably wrote surface on accident there, but service area uh to well in access of what competitors are doing. We talked a little bit about that earlier today with uh Whimo quickly following up with Tesla's expansion. I talked a little bit about how maybe that's Whimo's expansion isn't quite as meaningful because uh they're also partnering with Uber. So, they don't need to really make sure that that entire area is well covered because they have that fallback of Uber drivers to rely on. Um, versus Tesla, it's just that's the robo taxi service area. If you are in one part of it and you call for the vehicle, it needs to come get you. It doesn't have a choice to send an Uber driver. Um, so as Tesla expands

1:02:39 that service area, I think that is extremely meaningful. um maybe not in this first iteration, but certainly I think at some point they mentioned here something to the degree of maybe like 10 times that service area is I think that was more of like their ultimate goal. Um but just the the fact that they anticipate this happening very quickly is is important. I think Elon said in here maybe even the next week or certainly in the next couple of weeks, let's see if I can find that note. Uh that they would be expanding that service area in Austin. So I think that's encouraging. I think the portion of the discussion around the sort of focus of FSD really being on

1:03:25 that service area in Austin and this robo taxi rollout and things like that. I think Tesla seems very happy with that performance. And I think as they've said previously, the things that are driving that performance are not really making their way into the production software yet that people have are able to use. Version 13.12.9 I think we're on right now. Um, but once these things do make it into those vehicles, it should be hopefully quite another step forward like we have seen really all the last major releases from Tesla. I think version 11 to version 12 was a huge step change. I think version 12 to version 13 was a huge step change and now we've been on version 13 for a long time and there's good reason to believe even if you set aside robo taxi and what Tesla's accomplished there I think

1:04:11 there's good reason to believe with the amount of time that Tesla has had and the amount of resources that Tesla has put forth here I think there's good reason to believe that we'll see another major step forward with FSD with whatever the next release is and it's already so good that it's I mean Elon was saying months ago and people would kind of like make fun of him for saying this that it's like hard to tell which version is better because the interventions are becoming so rare. That is my lived experience with my vehicle. So when we start to talk about even taking steps forward from there, it's getting to the point where it's almost going to be difficult for customers to notice because it is so good. But Tesla at a high level has very good awareness of what that is going to look like when it's something that is deployed in

1:04:56 vehicles that are driving a billion miles a quarter. Then you ve get very good data showing that improvement and probably most importantly getting to that point where all right these interventions are becoming so rare that we're comfortable with both you know a robo taxi initial launch here uh and then expanding that in other areas and then eventually you know just basically rolling it out to the entire fleet anywhere that regulators will allow it and we're on that path right and there's a lot of positive signs uh pointing towards that path continuing. So, that's sort of the biggest thing that I'm looking for in this call because that's the future of Tesla. Um, and I think there was many positives about that

1:05:42 future that were covered uh on the call. Specifically here, this note that I've got up that the 10 times parameter count, I think is important. Tesla with the version 13 software, they put that in an upcoming release they would have four times the parameter count. So, it sounds like not only are they confident in that, but they're confident that they can even continue to take that another step further. Um, getting up to 10 times the parameter count with the current hardware. And then that's just the current hardware pretty quickly. We're going to be moving into AI 5 uh hardware, which has I don't know, since I've been driving version 13, it's like, yep, this is amazing. I don't see any reason why another hardware iteration like couldn't pretty easily get this done. Um, with

1:06:30 with just the rate of progress that we've seen from Tesla and how much progress hardware 4 unlocked. And I think we're still in not maybe the early stages of hardware 4, but certainly not at the end point of progress for hardware 4 either. So, um, yeah, I think the next two years are are very exciting in terms of just what Tesla's able to do with autonomy. I think the last year has been very exciting with what Tesla's been able to do with autonomy. I think that's the reason that the stock is still around a trillion dollar market cap is because we have seen that progress. Even though, you know, it's been slow, it's been many years coming, it is happening. uh and it is going to continue happening and probably in hindsight will seem like it happened pretty quickly here. Uh that's sort of my expectation over the next 12 to to 18

1:07:17 months. So from that perspective, which again I think that's like, you know, Tesla shareholder perspective, maybe not traders, which that can influence the day-to-day movement a lot, but I think for long-term Tesla investors, there's a lot to be looking forward to and a lot of real tangible progress being made um on those really important parts of the future of the business. Uh, but yeah, there might be a rough rough Q4 when that EV tax credit sort of goes away. And hopefully that'll be stemmed a little bit by the launch of this more affordable model, which it sounds like Elon said looks like the Model Y. Um, which is probably a good thing to just sort of like loosely let out there so people can align their expectations accordingly. Uh, I don't know, maybe that's part of the reaction here that be a little bit surprised by that. But um hopefully that is and I

1:08:05 think the timing of that will be well well timed with the EV tax credit going away. Hopefully that can sort of fill that gap. But it's going to put ASP pressure on especially if it is something that is pretty similar to the Model Y. Um that's going to put pressure on actual Model Y sales uh probably pretty significantly. So um let's see. FSD being a huge selling point. uh these comments I don't know that I fully agreed with or understood. Um yes, I do think FSD is a huge selling point. It's it would be difficult for me to buy a non-Tesla vehicle because I would miss FSD extremely significantly. Uh so for me, yes, it's a huge selling point, but also at the same time like the take rate

1:08:50 is low. So people are obviously buying Teslas for many other reasons, and I think there's tons of good reasons um there as well. Um, so they're acknowledging that it's a huge selling point. They're acknowledging that like not a lot of people fully understand it. It's like, man, let's just put these things together, right? And maybe do some advertising. I know it's Tesla's like hydrophobic to advertising. um replace hydro with whatever advertising would be in that vernacular, but it's uh it just seems like a pretty obvious solution at least to try. At least to try. Like let's throw a Super Bowl ad on showing FSD. Maybe just the risk is very low. It's like $5 million or something like that. I don't

1:09:35 know. It's inconsequential to the scale of Tesla's business to try advertising in a more significant way. And I wish that they would just sort of like get over that hump. Um, I mean, Starlink advertises, so maybe not in the most traditional ways, and I know Tesla's done like a little bit of it, but I would like to just see them try something more aggressive just to see what happens. Um, I understand the hesitancy. It's sort of a slippery slope to hop on, but this seems like a perfect situation where, hey, there's low awareness and we have resources to be able to raise that awareness. Maybe we couple those things. All right. So, anyway, I've talked about that many times. It's that's fine. Um, all right. I feel like I'm getting off track on on the notes here, but uh let's

1:10:22 see. Yeah. So, well in excess of what competitors are doing in terms of the service area hopefully in a week or so. I think Ashok said a couple of weeks. Um, so, you know, sometime this quarter we should see another expansion again from Tesla. I hope that we'll continue to I wish someone would ask about the safety rider specifically. Um the problem is that people ask like five questions. When whenever you ask multiple questions, Tesla doesn't answer them all. Like they're they're going to pick one, either the one that they want to answer, the one that they mind answering the least or just the last one in the sequence. That's what's going to get answered. So people really just need to learn to ask one very specific question that they want the answer to.

1:11:08 Um, like can you tell us when the safety riot like when the safety rider is going to be removed? Just do that and then ask your follow-up. Um, I wish that that would have been the case, but I don't think that we have that answer yet. Uh Tesla may not have that answer yet either. So it's it's a little bit tongue and cheek, but um I'm sure that they want to remove it as soon as they can. But it's more of a like does does that actual decision really unlock anything for Tesla? Not really. It's more of a sign an external sign that Tesla has achieved certain milestones. Um, so it, you know, it'll happen when it happens and and I don't know that Tesla knows exactly when that will be at this moment. Uh, good to see

1:11:53 that they are having discussions it sounds like with the Bay Area, with Nevada, with Florida, with Florida, with Arizona. Sounds like other places as well. Um, and it I think Elon said that they expect to be able to then launch Robot Saxi before the end of the year, which is, you know, we're like five or six months now. uh that's not a lot of time to be potentially launching in uh whatever maybe five or six different uh jurisdictions. So I think that's also extremely exciting going back to just like things that are positive from from this earnings call. I definitely count that in there. I think this is actually more optimistic than what we heard earlier this year, which is a pretty notable change. I think Tesla was originally indicating really just kind of Austin and Bay Area and then like

1:12:41 maybe some other locations. It sounds like now we're getting more specifics in terms of those uh and seemingly some more optimism about about the timeline. Um which is both of those things are very encouraging as you get closer to that actual timeline coming to uh to be current. So yeah, I think that's exciting. Probably half the US population by the end of the year. like that's not I don't think that's the expectation. Um, I don't think really anyone even I mean the most bullish people probably expect like 100% worldwide coverage by the end of the year. But in terms of just like the spectrum of participants, I don't think there's there's many people that and I don't Tesla sets lofty goals. So this will probably happen later than what they are targeting, but even then I

1:13:27 don't think that people quite appreciate or realize or recognize that sort of scale and when Tesla is really targeting to be able to do that. Um, I think it's easy to look at Austin and right now just kind of write it off of like, yeah, there's a safety rider. There's limited like the public can't access it. Um, there's a smaller, you know, small service area relative to half the world's half the US population. It's it's easy to diminish right now, but the ability to diminish it will be lost extremely quickly if Tesla scales anywhere close to what they are targeting to what they expect. The the ability to criticize it very very very

1:14:14 quickly goes away. So that's we're sort

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