Tesla Q4 and full year 2024 Financial Results and Q&A Webcast
01:07:23 Share

Hey, I'm Ryan Reynolds. Recently, I asked Mint Mobile's legal team if big wireless companies are allowed to raise prices due to inflation. They said yes. And then when I asked if raising prices technically violates those onerous two-year contracts, they said, what the f*** are you talking about, you insane Hollywood a**hole?

So to recap, we're cutting the price of Mint Unlimited from $30 a month to just $15 a month. Give it a try at mintmobile.com slash switch. $45 upfront payment equivalent to $15 per month. New customers on first three-month plan only. Taxes and fees extra. Speeds lower above 40 gigabytes per details.

This episode is brought to you by Indeed. When your computer breaks, you don't wait for it to magically start working again. You fix the problem. So why wait to hire the people your company desperately needs? Use Indeed's sponsored jobs to hire top talent fast. And even better, you only pay for results. There's no need to wait. Speed up your hiring with a $75 sponsored job credit at indeed.com slash podcast. Terms and conditions apply.

The PC gave us computing power at home, the internet connected us, and mobile let us do it pretty much anywhere. Now generative AI lets us communicate with technology in our own language, using our own senses. But figuring it all out when you're living through it is a totally different story. Welcome to Leading the Shift.

a new podcast for Microsoft Azure. I'm your host, Susan Etlinger. In each episode, leaders will share what they're learning to help you navigate all this change with confidence. Please join us. Listen and subscribe wherever you get your podcasts. Hey, everybody. Welcome back to the Elon Musk Podcast. This is a show where we discuss the critical crossroads that shape SpaceX, Tesla, X, The Boring Company, and Neuralink. I'm your host, Will Walden.

- Good afternoon, everyone, and welcome to Tesla's fourth quarter 2024 Q&A webcast. My name is Travis Axelrod, the head of Investor Relations here at Tesla, and I am joined today by Elon Musk and Vipav Dinesh and a number of other executives. Our Q4 results were announced at about 3:00 PM Central time in the update deck we published at the same length 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 follow-up. Please use the raise hand button to join the question queue. Before we jump into Q&A, Elon has some opening remarks. Elon? Thank you. So in summary, in Q4, we set a record and delivered vehicles at an annualized rate of nearly 2 million a year.

So congratulations to the Tesla team on excellent work, achieving record production and deliveries. Model Y was the best-selling vehicle of any kind for 2024. That's worth noting. Not just the best electric vehicle, the best vehicle of any kind on Earth, number one, was Model Y. We're staying focused on maximizing volumes and obviously doubling down more, I don't know what,

Really, I was going to say doubling down on autonomy, but really it's like autonomy is like 10x-ing, frankly. Doubling is not even enough. We made many critical investments in 2024 in manufacturing AI and robotics that will bear immense fruit in the future. Immense. Like it's, in fact, to such a scale that it is difficult to comprehend.

And I've said this before and I'll stand by it. I see a path, I'm not saying it's an easy path, but I see a path to Tesla being the most valuable company in the world by far, not even close, like maybe several times more than, I mean, there is a path where Tesla is worth more than the next top five companies combined. There's a path to that. I mean, I think it's like an incredibly, it's like a difficult path, but it is an achievable path.

And that is overwhelmingly due to autonomous vehicles and autonomous humanoid robots. So our focus is actually building towards that. And that's what we're laying the groundwork for that in 2024. We'll continue to lay the groundwork for that in 2025. More than lay the groundwork, actually, we'll be building the structure, we're building the manufacturing lines

And I'd like setting up for what I think will be an epic 2026 and a ridiculous 27 and 28. Ridiculously good. That is my prediction. As yet, very few people understand the value of full self-driving and our ability to monetize the fleet.

You know, some of these things I've said for quite a long time, and I know people have said, well, you know, Elon's the boy who cried wolf like several times. But I'm telling you, there's a damn wolf this time. And you can drive it. In fact, it can drive you. It's a self-driving wolf. Yeah.

For a lot of people, their experience of Tesla autonomy is like, if it's even a year old, if it's even two years old, it's like meeting someone when they're like a toddler and thinking that they're going to be a toddler forever. But obviously they're not going to be a toddler forever, they grow up. But if their last experience was like, oh, FSD was a toddler, it's like, well, it's grown up now. Have you seen it? It's like walks and talks. And

That's really what we've got. And it's difficult for people to understand this because human intuition is linear as opposed to what we're seeing is exponential progress. So that's why my number one recommendation for anyone who doubts is simply try it. Have you tried it? When's the last time you tried it? And the only people who are skeptical, the only people who are skeptical are those who have not tried it.

So, you know, a passenger car typically has only about 10 hours of utility per week out of 168, a very small percentage. Once that car is autonomous, my rough estimate is that it is in use for at least a third of the hours of the week, so call it 50, maybe 55 hours of the week. And it can be useful both

car delivery and people delivery. So even let's say people are asleep, but you can deliver packages in the middle of the night or resupply restaurants or whatever the case may be, whatever people need at all hours of the day or night. That same asset, the thing that these things that already exist with no incremental cost change, just a software update, now have five times or more the utility that they currently have.

I think this will be the largest asset value increase in human history. Maybe there's something bigger, but I just don't know what it is. And so people who look in the rearview mirror are looking for past precedent, except I don't think there is one. But the reality of autonomy is upon us. And I repeat my advice, try driving the car or let it drive you.

So now it works very well in the US, but of course it will over time work just as well everywhere else. Yeah. So we're working hard to grow our annual volumes. Our constraint this year, our current constraint is battery packs this year, but we're working on addressing that constraint. And I think we will make progress in addressing that constraint. And then

things are really going to go ballistic next year and really ballistic in '27 and '28. So, yeah. So a bit more on full self-driving. Our Q4 vehicle safety report shows continued year-over-year improvement in safety for vehicles. So the safety numbers, if somebody has supervised full self-driving turned on or not, the safety differences are gigantic. So, yeah.

And people have seen the immense improvement with version 13 and with incremental versions in version 13. And then version 14 is going to be yet another step beyond that that is very significant. We launched the Cortex training cluster at Gigafactory Austin, which was a significant contributor to FSD advancement. And we continue to invest in training infrastructure out of Texas headquarters.

So the training needs for Optimus humanoid robot are probably at least ultimately 10x what's needed for the car, at least to get to the full range of useful roles. You can say like, how many different roles are there for a humanoid robot versus a car? A humanoid robot has probably, well, a thousand times more uses and more complex things than

in a car, that doesn't mean the training scales by a thousand, but it's probably, you know, 10 X. Now you can do this progressively. So it doesn't mean like hotels are going to spend like $500 billion in training compute because we obviously train the optimists to do enough tasks to match the output of optimist robots. And obviously the cost of training is dropping dramatically with time. So,

But it is one of those things where I think long-term optimists will be... Optimists has the potential to be north of $10 trillion in revenue. It's really bananas. So you can obviously afford a lot of training compute in that situation. In fact, even $500 billion of training compute in that situation would be quite a good deal. Yeah. The future is going to be incredibly different from the past, that's for sure. We live at this unbelievable inflection point in human history. So...

Yeah, so the proof is in the pudding. So we're going to be launching unsupervised full self-driving as a paid service in Austin in June. So, you know, I've talked with the team, we feel confident in being able to do an initial launch of unsupervised, no one in the car, full self-driving in Austin in June. We already have

Tesla's operating autonomously, unsupervised, full-style driving at our factory in Fremont, and will soon be doing that at our factory in Texas. So thousands of cars every day are driving with no one in them at our Fremont factory in California. They will soon be doing that in Austin and then elsewhere in the world for the rest of our factories, which is pretty cool. And the cars aren't just

driving to exactly the same spot because obviously it all went and collided at the same spot. The cars are actually programmed with what lane they need to park into to be picked up for delivery. So they drive from the factory end of line to their destination parking spot and that could be picked up for delivery to customers.

And they're doing this reliably every day, thousands of times a day. It's pretty cool. Like I said, the Teslas will be in the wild, there's no one in them, in June in Austin. So what I'm saying is this is not some far-off mythical situation. It's literally five, six months away, five months away, kind of thing.

And while we're stepping into putting our toe in the water gently at first, just to make sure everything's cool, our solution is a generalized AI solution. It does not require high precision maps of a locality.

So we just want to be cautious. It's not that it doesn't work beyond Austin. In fact, it does. We just want to be put a toe in the water, make sure everything is okay. Then, you know, put a few more toes in the water, then put a foot in the water with safety of the general public as and those in the car as our top priority. With regard to Optimist, obviously, I'm making, you know, these

revenue predictions predictions that sound absolutely insane i realize that um but but they are i think they will prove to be accurate um yeah um yeah now with optimus there's a lot of uncertainty on the exact timing because it's not like a train arriving at the station for optimus we are designing the train and the station and in real time while also bullying the tracks

And so they're like, why didn't the train arrive exactly at 12:05? And we're literally designing the train and the tracks in the station in real time while it was just like, how can we predict this thing with absolute precision? It's impossible. The normal internal plan calls for roughly 10,000 Optimus robots to be built this year. Will we succeed in building 10,000 exactly by the end of December this year?

Probably not. But will we succeed in making several thousand? Yes, I think we will. Flex your business with an American Express Business Gold Card. You'll earn four times membership rewards points on your top two eligible spending categories, like transit and electronics, each month on up to $150K in combined purchases per year. Plus...

You can now earn three times membership rewards points on flights and prepaid hotels booked on AmexTravel.com. Terms and points cap apply. Learn more at AmericanExpress.com slash business dash gold. Amex Business Gold, built for business by American Express. Will those several thousand optimists be doing useful things by the end of the year? Yes, I'm confident they will do useful things. Those optimists in use at the Tesla factories,

production design one will inform how would we change for production design two, which we expect to launch next year. And our goal is to ramp optimist production faster than maybe anything's ever been ramped. Meaning like aspirationally an order of magnitude ramp per year. Now, if we aspire to an order of magnitude ramp per year, perhaps we only end up with a half order of magnitude per year, but that's the kind of growth that we're talking about.

It doesn't take very many years before we're making 100 million of these things a year. If you go up by, let's say a factor, by five X per year. - Insane. - Insane. Not 50%, 500%. So, these are big growth numbers. But we do need to, this is an entirely new supply chain, this is entirely new technology. There's nothing off the shelf to use.

We tried desperately with Optimus to use any existing motors, any actuators, sensors. Nothing worked for a humanoid robot at any price. We had to design everything from physics first principles to work for a humanoid robot and with the most sophisticated hand that has ever been made before by far. And Optimus will be able to play the piano.

and be able to thread a needle. I mean, this is the level of precision no one has been able to achieve. And so it's really something special. So yeah, so in my prediction, long-term Mr. Optimist will be overwhelmingly the value of the company. Regarding energy, back to us.

that was the elon can you come back here for a minute okay back to us uh energy storage is a big deal um and will become it's already super important will become incredibly important in the future and and it is something that enables far greater energy output to the grid than is currently possible um because the grid the grids are

the vast majority of the grid has no energy storage capability. So they have to design the power plants for very high peaks and assuming that there's no energy storage. Once you have grid energy storage and home-based energy storage, the actual total energy output per year of the grid is dramatically greater than people think. Maybe it's at least double. This will drive the demand of stationary

uh battery packs and even especially the grid scale ones to insane basically as much demand as we could possibly make um so um we have our second factory which is in shanghai that's starting operation and we're building a third factory so we're trying to ramp output of the stationary battery storage as quickly as possible now there is a challenge here where we have to be careful to

that we're not robbing for one pocket to take to another pocket because for a given gigawatt hours per year of the cell output, does it go into stationary applications or mobile applications? It can't go both into both. So we have to make that trade off. Yeah. But overall, the demand for total gigawatt hours of batteries, whether mobile or stationary, that will grow

to in in a very very big way over time um so in conclusion uh 2025 really is a pivotal year for tesla and i and when people look back on 2025 and the launch of unsupervised full self-driving um true real world ai that that actually works yeah i think they may have gone into the biggest year in tesla history maybe even bigger than our first car

the roadster or or the model s or the model three or model y that in fact i think it probably will be viewed 25 as maybe the most important year in tesla's history um there is no company in the world that is as good at real world ai as tesla i don't even know if he's in second place like you say like who's in second place for real world ai i would need a very big telescope to see them that's how far behind they are all right

Great. Thank you very much, Elon. And Vybav has some opening remarks as well. Yeah, I'll talk about things on Earth. As Elon mentioned, in Q4, we set records at vehicle deliveries and energy storage deployments in an uncertain macro environment. We were able to grow auto and energy storage volumes both sequentially and on a year-on-year basis. For this, I would like to thank the efforts of everyone at Tesla to make this a reality and our customers who helped us achieve this feat.

Coming into the fourth quarter, our focus was to reduce inventory levels in the automotive business. And we accomplished that by ending the quarter with the lowest finished inventory in the last two years.

This was a result of offering not only attractive financing options, but also other discounts and programs which impacted ASPs. While we saw volume growth in almost all regions that we operate in, we hit a new record for deliveries in the Greater China Market. This is an encouraging trend since we grew volume in a highly competitive BME market.

On the automotive margin front, we saw a quarter over quarter decline primarily due to lower ASPs and due to the recognition of FSD-related revenue in Q3 from feature releases. Our journey on cost reduction continues, and we were able to get our overall cost per car down below $35,000, driven primarily by material costs.

This was despite increased depreciation and other costs as we prepare for the transition to the new model Y, for which we recently started taking orders in all markets. All our factors will start producing the new model Y next month. While we feel confident in our team's abilities to ramp production quickly, know that it is an unprecedented change and we are not aware of anybody else

taking the best-selling car on the planet and updating all factors at the same time. This changeover will result in several weeks of lost production in the quarter. As a result, margins will be impacted due to idle capacity and other ramp-related costs, as is common in any launch, but will be overcome as production is ramped.

We'll be introducing several new products throughout 2025. We are still on track to launch a more affordable model in the first half of 2025. We will continue to expand our lineup from there. On a dollar-for-dollar basis, we believe we have the most compelling lineup today compared to the industry, and it will continue to get better from here.

As always, all our products come with the best software in the industry, autonomy features, and capable of full autonomy in the future. And despite the premium experience, the total cost of ownership is close to mass market, less premium competitors. Energy storage deployments reached an all-time high in Q4 and resulted in but declined sequentially. This was a result of higher demand

Growth came from Megapack and Powerwall. Both businesses continue to be supply constrained and like Elon mentioned, we're trying to ramp up production with Megafactory Shanghai coming online this quarter onwards. While quarterly deployments will likely continue to fluctuate sequentially, we expect at least 50% growth in deployments year over year in 2025.

Cross-profit and margins in the service and other business was up year over year, but declined subsequently. This was the result of higher service center costs and lower profit from used car business. The businesses within service and other primarily support our new car business, especially through their impact on total cost of ownership. Therefore, while we manage them to be positive on a gap basis, we do not expect similar margins as the rest of the business.

There's a lot of uncertainty around tariffs. Over the years, we've tried to localize our supply chain in every market, but we are still really reliant on parts from across the world for all our businesses. Therefore, the imposition of tariffs, which is very likely, and any other supercarcity will have an impact on our business and profitability.

Our operating expenses grew both year-over-year and sequentially. The biggest driver of the increase was R&D as we continue to invest in AI-related initiatives. The remaining increase came from growth in our sales capabilities and marketing efforts from referral program. For 2025, we expect operating expenses to increase to support our growth initiatives.

It is important to point out that the net income in Q4 was impacted by a 600 million mark-to-market benefit from Bitcoin due to the adoption of a new accounting standard for digital assets, whereby we will take mark-to-market adjustments to other income every reporting period going forward. Our free cash flow for the quarter was $2 billion, and despite CapEx's increase of over $2.4 billion in 2024, we were able to generate free cash flow of $3.6 billion for the year.

CapEx efficiency is something we are extremely focused on. While we have invested in AI-related initiatives, we have done so in a very targeted manner to utilize this spend to get immediate benefits. The build-out of Cortex

was accelerated because of the role, actually, how to accelerate the rollout of FSG v4 version 13. Accumulated AI-related capex, including infrastructure, so far has been approximately 5 billion. And for 2025, we expect our capex to be flat on a year-over-year basis.

In conclusion, like Elon said, 2025 is going to be a pivotal year for Tesla. There are a lot of investments which we've made and will continue to make in this coming year, which will set the pace for the next phase of growth. And it is something which now I'm getting out of the floor. It is going to be out of this world. And we just are putting the right foundation. And that's all I have. It's great.

Thank you very much, Vaibhav. Now we will move over to investor questions and we'll start with say.com. The first question is, is unsupervised FSD still planned to be released in Texas and California this year? What hurdles still exist to make that happen? You addressed the Texas piece, I think, already. So yeah, I'm confident that we will release unsupervised FSD in California this year as well. You know, yeah. In fact, I think we will

that most likely release unsupervised FSD in many regions of the country of the US by the end of this year. Like I said, we're just putting a toe in the water, then a few toes, then a foot, then leg, then make sure everything's cool. And we're looking for a safety level that is significantly above the average human driver. So it's not anywhere much safer, not like a little bit safer than human, way safer than human.

So the standard has to be very high because the moment there's any kind of accident with an autonomous car, this immediately gets worldwide headlines, even though about 40,000 people die every year in car accidents in the US, and most of them don't even get a mention anywhere. But if somebody scrapes a shin with an autonomous car, it's headline news. We all don't want that. Yeah.

So it's really from an exit. The only thing holding us back is an excessive caution. But people can certainly get a feel for how well the car would perform as unsupervised FSD by simply having a car, allowing a car to drive you around your city and see how many times did you have to intervene. Not where you wanted to intervene or were a little concerned, but how many times did you have to intervene for definite safety reasons? And you will find that that is currently very rare and over time almost never.

Great. Thank you very much. The next question is, are there any discussions with other auto companies about licensing FSD? Yes. What we're seeing is at this point significant interest from a number of major car companies about licensing Tesla full soft driving technology. What we've generally said is the best way to know what to do is take one of our cars apart,

And then you can see where the placement of the cameras are, what the thermal needs are of the Tesla AI inference computer. That's better than us sending some CAD drawings. And then we're only going to entertain situations where the volume would be very high. Otherwise, this is not worth the complexity. And we will not burden our engineering team with laborious discussions with

other engineering teams until we obviously have unsupervised full self-driving working throughout the United States. I think the interest level from other manufacturers to license FSD will be extremely high once it is obvious that unless you have FSD, you're dead. Great. Thank you very much. The next question is, is Optimus now mostly design locked for 2025 production?

Optimus is not design-logged. So when I say we're designing the train as it's going down, we're redesigning the train as it's going down the tracks while redesigning the tracks and the train stations. Yeah, it's rapidly evolving. It's rapidly evolving in a good direction. It's pretty damn amazing, actually. The team's doing a fantastic job. We really have, I think, by far the best team of...

humanoid robotics engineers in the world. And we also have all the other ingredients necessary, you know, because you need a great factory pack, you need great power electronics, you need great charging capability, you need great communications, great Wi-Fi and cellular connectivity. And of course you need real-world AI. And then the ability to scale that production to huge levels

So you have to design for manufacturing. The things that, I mean, really what other companies are missing is they're missing the real world AI and they're missing the ability to scale manufacturing to millions of units a year.

I think that is an underappreciated thing that industrialization and design is a whole different thing than making a design. Yeah, prototypes are trivial, basically. Prototypes are easy, production is hard. I've said that for many years. The problem is that there's like

those who have never been involved in production or manufacturing somehow think that once you come up with some eureka design that you magically can make a million units a year. And this is totally false. There needs to be some Hollywood story where they show actually the problem is manufacturing. I've never even heard of one. It just doesn't fit the narrative. The Hollywood thing is like some lone inventor in a garage goes eureka and suddenly it files a patent

and suddenly there's millions of units. Listen, guys, we're missing really 99% of the story. 1% is, you know, the old saying, a product is 1% inspiration, 99% perspiration.

The Hollywood Church is 1% inspiration and mine is, but forgets about the 99% perspiration of actually figuring out how to make that initial prototype manufacturable and then manufactured at high volume such that the product is reliable, low cost, consistent, doesn't break down all the time. And that is a hundred times harder at least than the prototype. Then you have to get it there, deliver it back. Yeah. Yeah. You're going to need all these regulations and there's a zillion regulators around the world. It's very difficult.

Great. Thank you. The next question is also Optimus related. When will Tesla start selling Optimus? I mean, what will the price be? Well, for this year, we expect to just close the loop with Optimus being used internally at Tesla.

Because we obviously can easily use several thousand humanoid robots at Tesla for the most boring, annoying tasks in the factory. Like the tasks nobody wants to do, where we have to beg people to do this task. And then it's like,

Like the robot's totally happy to do the boring, dangerous, repetitive task that no humans want to do. And that's also actually some of the easiest use cases for us to have optimists do things like, you know,

like load the hopper, like for, you know, like say in body line, if you're like transporting, you know, pieces of sheet metal to the robot, which is really robot, the robot welding line for the body. And you just have to nonstop take things out of a, from one fixture to another fixture. And it's a very boring job.

that's the kind of thing that Optimus could do. The guy who runs around and dumps all the weld studs in the bins. Yeah, there's a ton of boring jobs, tedious jobs, dangerous, you know, some slightly dangerous jobs that are perfect for Optimus. So we expect to use Optimus for those tasks at our factories, and that'll help us closely for improvement this year. It's really with production version two,

which I think launches sometime next year. I'd like it to be the beginning of next year, but maybe it's more like the middle of next year. And then we have to just go with a production line that is designed for on the order of 10,000 units a month versus 1,000 units a month. So when you design a production line for 1,000 units a month,

it takes you a while to actually reach anywhere close to a thousand units a month. When you design, and for any given production output, it takes you a while to actually reach its potential. But the current line that we're designing is for roughly a thousand units a month of Optimus robots. The next line would be for 10,000 units a month. The line after that would be for 100,000 units a month. And I think probably with,

version two as a very rough guess, because there's so much uncertainty here, very rough guess that we start delivering Optimus robots to companies that are outside of Tesla in maybe the second half of next year, something like that. But this is such an exponential ramp that it'll go from no one's receiving humanoid robots to these things coming out like crazy. We can't build enough. We're always going to be in the we can't build enough situation.

demand will not be a problem even at a high price and then as i said like once we start once we're at a steady state of above a million units a year um i think the production you know i'm confident at a million years a year that the production cost of optimus will be less than 20 000. if you compare the complexity of optimus to the complexity of a car so just the total mass and complexity

of Optimus is much less than a car. So I would expect that at similar volumes to say the Model Y, which is over a million units here, that you'd see Optimus be, I don't know, half the cost or something like that. What the price of Optimus is, is a different matter. The price of Optimus will be set by the market demand.

Great. Thank you very much. The next question is, what is the status on mass production of the Tesla Semi and how will it impact revenue and scale?

I can say that one. So we just closed up the semi factory roof and walls last week in Reno. That has schedule, which is great with the weather in Reno. You never know what's going to happen, but we're prepping for mechanical installation of all the equipment in the coming months. The first builds of the high volume semi design will come late this year in 2025 and begin ramping early in 2026. But as we've said before, you know, the semi is a TCO no brainer. It gets really similar to the Optimus, you know,

set by how much people pay and then as the total cost of ownership, it's much, much cheaper than any other transportation you can have. So at that point, when we're at scale, it will meaningfully contribute to Tesla's revenue. My opinion is difficult to say how much. Nathan, you want to add anything? No. I mean, I do think the Tesla Semi, again, with autonomy, is going to be incredibly valuable.

you know, that we actually have a shortage of truck drivers in America. That's one of the limiting factors on transport. And, you know, and people are human, so they get tired and sometimes, you know, there's, you know, I have a lot of respect for truck drivers because it's a tough job.

But because it's a tough job, there's not that many people that want to do it. And there's actually fewer, I believe, if my understanding is correct, there are fewer people entering truck driving as a profession than are leaving it. Yes. So when you think, yeah, exactly. So when you consider, okay, there's more people leaving truck driving as a profession than entering it, well, we're going to have a real logistics problem as time goes by. So autonomy will be very important to meet that need. So like, yeah, it'll...

I don't know. It's a several billion a year opportunity, which I don't know in this context is that these days. Does several billion a year matter? I think it does. Not nothing. It's probably, you know, it's probably like a 10 billion a year thing. Yeah, it's a billion a month at some point probably. But it's, you know, all this is going to pale in comparison to Optimus. So...

Yeah, a billion a month is a lot, but it's going to be like 1% of all optimists or something. Great. Thank you very much. We already covered the next question in company remarks. So moving on, is it expected that Tesla will need to upgrade hardware 3 vehicles? And if so, what is the timeline and expected impact to Tesla's CapEx? I think they're referring to cost there. They're really asking the tough questions all day.

I guess we haven't stopped working on hardware 3 yet. We are still making software releases. We released the 1.6 release recently, which is like a baby V13, but it's a significant improvement compared to what they had previously. People are still finding ways to distill larger models into smaller models, so we don't give up on hardware 3. We're still working on it. Just the releases will trail the hardware 4 releases. Thanks, Shubh. Yeah. I think

The honest answer is that we're going to have to upgrade people's hardware 3 computer for those that are bored, bored, full self-driving. And that is the honest answer. And that's going to be painful and difficult, but we'll get it done. Now, I'm kind of glad that not that many people bought the FSD package. Thanks, Ilan. The next question, has Tesla given up on ramping their solar roof product? No, we're good.

Sorry, Mike. Oh, Mike, go ahead. Yeah. Oh, yeah, I can take it. Yeah, solar roof remains a core part of the residential product portfolio and still remains where it draws a lot of customer interest despite it being premium products. We've worked on multiple iterations of engineering to make the product easier to install and distribute by producing the SKU count. And, you know, more recently, rather than direct installation, we are focused on growth through our nationwide network of certified installers,

And many of those, they've been installing solar roof with us for many years. Yeah, that's actually turned out to be a much better way for the, like, it's just let the roof, just supply product to the roofing industry. And especially when somebody is getting a new roof anyway or building a house from scratch, obviously this is by far the most efficient time to put in a solar roof, as opposed to putting a solar roof on a house that, where the roof still has, you know, 20 years of life.

That's not economically sensible, but if it's a new house or the roof needs to be replaced anyway, then solar roof can make a lot of sense. And it is a premium product. It's like the Model S, Model X or something. It's a premium product. I think it looks really cool.

and your house i mean your house generates electricity and if you combine it with the tesla power wall battery then you can be self-sufficient so even if the grid turns off even if the grid turns off for several days your house still works and your roof looks awesome so it's like i recommend anyone who had you can afford it get the tesla solar roof and the power wall

your family's life might depend on it. And just in terms of convenience, you know, your kids are not going to yell at you because their computers don't work because the power went out and you can't charge your phone. First work. Actually happens. Yeah, you literally can't even call anyone because your phone's out of juice.

Thank you very much. The next question was covered in opening remarks, so we will skip that. And the last question from say.com, what technical breakthroughs will define V14 of FSD given that V13 already covered photon control? Well, we've been a hell of a lot further than photons to output. We've been in sort of the nothing but dance

a situation, nothing but neural nets from photons to controls for a while now, for just improving the neural nets. I guess we could get into some of the technical details to some degree. I have to say, I continue to be amazed by just how effective autoregressive transformers are at solving a wide range of problems. I mean, Ashok, is there anything you'd like to add there without giving away the sort of family secrets?

i mean except for things we put on x already um yeah so continue to scale the model size uh a lot um you know we scale a bunch in v13 but then there's still room to grow uh so we're going to continue to scale the model size we're going to increase the context length even more uh the memory is sort of like limited right now we want to increase the amount of memory uh also give to even minutes of uh context for driving

We're going to add audio and emergency vehicles better, add data of the tricky corner cases that we get from the entire fleet, any interventions or any kind of user intervention. We set that to the data, the dataset. Scaling in basically every access to training compute, dataset size, model size, model context, and also all the reinforcement and the objectives.

Great. All righty. With that, we will move over to analyst questions. So just as a reminder, you will need to unmute yourself to ask your question. The first question will be coming from Daniel Roska from Bernstein. Daniel, please go ahead and unmute yourself.

Hey, good evening everybody. It's Daniel from Bernstein. Elon, Tesla's share price clearly already includes quite few of the anticipated benefits you talked about today, yet realizing what you call kind of difficult but achievable will take some time. What are you pushing the Tesla executive team to do differently now to accelerate the innovation in order to realize the value you described for the company? Well, I mean, we're...

working on perfecting real world ai and making rapid progress week of a week if not month you know so the month of a month it's often week over week um i spent a lot of time with the tesla ai team and the tesla optimus team i mean i go where the problem is essentially like um not you know if something's this is you know unfortunately sometimes like

don't talk to Tesla executive and like, "Hey, we don't see you very often." I'm like, "That's because your stuff is working awesome. Your stuff is working really great." Unfortunately, I didn't see them very often because I go where the problem is. So, you know, what's the greatest challenge that lies ahead? So obviously there are many challenges with Optimus. It's a hard problem to solve. Many challenges with vehicle autonomy, but we're making rapid progress in both.

Okay. I mean, it sounds like you've got a conviction that the pieces you need are in place. If we kind of go 12 months down the line and we look back, and you had some of those, but maybe what are the kind of two or three KPIs that would tell you that you're on track and it's going the right way and the pieces you've put in place are the right pieces, right? That's kind of what I'm looking for. Or

other way around, where would it be most likely in your mind that you say, hey, I need to go back there and I need to change something to enable the team better? Well, I mean, I think the predictions that I'm making here are going to be pretty accurate.

you know and it's worth an extra sometimes people say oh elon's always late well actually no the problem is that the media reports on when i'm late but never reports when i'm early um so sure i'm optimistic but i'm not that optimistic um you know there are many cases in past where actually we've been early you know such as completion of the shanghai factory um or uh frankly the factory completion has generally been ahead of schedule not behind um so um

Yeah, so the, but I like I'm very confident we'll have released unsupervised self-driving fully autonomous Teslas in Austin and several other cities in America by the end of this year. That's probably everywhere in America next year, and everywhere in North America at least. I think in terms of next year, our constraints, I think it's likely to be just regulatory.

You know, like, like, like Europe really has, for example, Europe is a layer cake of regulations and bureaucracy, which that really needs to be addressed. You know, this is, you know, a joke like America innovates, Europe regulates. It's like, guys, there's too many reps on the field.

I mean, for example, for us just to release supervised full self-driving in Europe, even though it works really well, we have to go through a mountain of paperwork with the Netherlands, which is our primary regulatory authority. Then the Netherlands presents this to the EU in, I think, May. And there's like this big EU country committee.

we expect it to be approved at that time, but there's nothing we can do to make that May happen sooner. In fact, nobody seems to do it. I guess all the countries would have to somehow vote in some way to have it happen sooner than May, otherwise it wouldn't happen sooner than May. So then when is unsupervised FSD allowed in Europe? I'm like, May next year maybe? I don't know.

well, to find out when the EU's meeting again. Sometimes it's a 12-month cadence, sometimes a six-month cadence. Then in China, which is a gigantic market, we do have some challenges because they weren't, they currently allow us to transfer training video outside of China. And then the US government wouldn't let us do training in China. So we're in a bit of a bind there.

So like, whatever quandary. So what we were resolving then is by literally looking at videos of streets in China that are available on the internet to understand and then feeding that into our radio training so that publicly available video of street signs and traffic rules in China can be used for training

And then also putting it in a very accurate simulator. And so it will train using some for bus lanes in China. Like bus lanes in China, by the way, one of our biggest challenges in making FSD work in China is the bus lanes are very complicated.

And there's like literally like hours of the day that you're allowed to be there and not be there. And then if you accidentally go in that bus lane at the wrong time, you get an automatic ticket instantly. So it's kind of a big deal, bus lanes in China. So we put that into our simulator train on that. The car has to know what time of day it is, read the sign. Anyway, we'll get this solved.

I think we'll have unsupervised FSD in almost every market this year, limited simply by regulatory issues, not technical capability. And then unsupervised FSD in the US this year, in many cities, but nationwide next year. And hopefully we have unsupervised FSD in most countries by the end of next year.

That's my prediction with best data that I have right now. Great. Thank you very much. The next question will come from Adam Jonas at Morgan Stanley. Adam, please feel free to unmute yourself. Thanks, everybody. So, Elon, you've said in the past about LIDAR, for a reason, that LIDAR is a crutch, a fool's errand. I think you even told me once, even if it was free, you'd say you wouldn't use it. Do you still feel that way? Yes. Care to elaborate or just...

I have another question. Look, we even have a radar in the car and we turned it off. I got it. All right. So you're still, yeah, people think you're crazy, you know, but for not looking at life. Obviously humans drive without shooting lasers out of their eyes. I mean, unless you're Superman, you know, but like humans drive just with passive visual capabilities.

It was human-strived with eyes and a neural net and a brain neural net. So the digital equivalent of eyes and a brain are cameras and digital neural nets or AI. So the entire road system was designed for passive optical neural nets.

That's how the whole world system was not designed and what everyone is expecting. That's how we expect other cars to behave. So therefore, that is very obviously the solution for full self-driving as a generalized, but the generalized solution for full self-driving as opposed to the very specific neighborhood by neighborhood solution, which is very difficult to maintain, which is what our competitors are doing.

I got that. Yeah, yeah. I mean, LIDAR doesn't work in the fall, guys. LIDAR has a lot of issues. I don't have something like the SpaceX Dragon docks with the space station using LIDAR that a program that I've personally spearheaded. I don't have some fundamental bizarre dislike of LIDAR. It's simply the wrong solution for driving cars on roads.

Right. You understand how LiDAR works. I get it. We literally designed and built an R&R LiDAR. I oversaw the project, the engineering thing. It was my decision to use LiDAR on Dragon, and I oversaw that engineering project directly. So I'm like, we literally designed and made a LiDAR to dock with the space station. If I thought it was the right solution for cars, I would do that, but it isn't. All right. Just as a follow-up, at CES,

You said, I'm paraphrasing, that any AI will be able to do any cognitive task not involving atoms within the next three or four years. And that would imply, Elon, that before the end of President Trump's term in office, that AI would be moving pretty damn quickly into the physical world, into the world of photons and atoms. And I'm thinking, given your work with the administration, how confident are you that the U.S.

will have the manufacturing and the supply base to make good on your excitement about physical AI by the end of, by the latter of this decade. We seem pretty vulnerable right now. I've seen you tweeting about, or sorry, X saying, excuse me, Elon, about China, Freudian slip, about China having, like making more drones in a day than the U.S. makes in a year and all the entanglement of the supply. So what has to happen in the U.S. to make that possible? What's your message and

What can you do about it and what's relevant for Tesla shareholders? Thanks, Elon. Well, at Tesla, obviously, we think manufacturing is cool. SpaceX, we think manufacturing is cool. But in general, for talented Americans, they need to—beyond my companies, beyond me and my teams here, in general, we need to make manufacturing cool again in America.

you know like i honestly think people should move from like law and finance into manufacturing that's my honest opinion um we have too much this is both a compliment and a criticism we have too much talent in law and engineering law and finance in america and there should be more of that talent in manufacturing um so um yeah um i mean in terms of we're making sure that uh we can continue to manufacture our stuff

Even in the event of geopolitical tensions. Rising through very high levels. Great. Thank you very much. The next question will come from Pierre Faragoon at New Street. Pierre, please feel free to unmute yourself.

hey thanks guys for taking the question um so i have a question you know on uh deploying like robot taxes in in june in austin so that's great news and i was wondering if it means i can you know drive down to austin in june and try um and try uh unsupervised by myself with my car oh it's going to be more like your fleet testing it

it'll be our fleet testing it. That's our sort of toe in the water. You know, we'll be scrutinizing it very carefully to make sure it's not something we missed. But it will be, you know, autonomous ride hailing for money in Austin in June. And then as swiftly as possible, other cities in America. And I expect us to be operating, doing answer-advised

activity with our internal fleet in several cities by the end of the year. Then it's probably next year when people are able to add or subtract their car from the fleet. So, you know, kind of like Airbnb where you can sort of add or subtract your house or guest room. You know, you can say like add it to the Airbnb inventory or don't add it to the Airbnb inventory.

you know, if you're traveling for a month, you can, or whatever the case may be, you can let other people use your house. And then you can, anyway, so that's probably next year because we want to just make sure we've ironed out any kinks. And a lot of it is, it's not like we're not splitting the atom here. It's just a bunch of work that needs to be done to make sure the whole thing works efficiently, that people can order the car. It comes,

It's the right spot, does exactly the right thing. All the payment systems work, the billing works. Yeah. - Okay. But then like, so my follow up question would be, I have a Tesla, I have FSD and I have to keep my eyes on the road all the time. It's super boring because I don't really need to intervene anymore.

And the really annoying thing is that I can't just check my emails. And so are you working also on introducing, you know, like a kind of like free and supervised where I could be eyes off and, and.

I would be able to check my email and we just need to, with a five second notice, have to go back and keep an eye on what's happening. Is that something you're working on as well? Because it feels so close with this setting that I wonder if it's something we could expect for this year. It's a very selfish question I ask for myself, to be honest. Yes. We need to be very confident that the probability of injury is low before we allow people to check the...

check their email and text messages. In fact, right now we're in this perverse situation which you may have encountered yourself where people will actually go to manual driving to check their text messages so the computer doesn't yell at them and then put it back on autonomous mode

once they've checked their text messages, which is obviously less safe, significantly less safe, significantly less safe than just letting people check their texts once in a while without the computer yelling at them. But we just want to be cautious about the advent of that. We're in this sort of, you know, neither here nor there, but just for, I mean, I think it's not for many months longer.

but yeah we're in this perverse situation where people will turn the car off autopilot so the computer doesn't yell at them check the text messages while while steering the car with their knee and not looking out the window and like like elon said right if you have any problems with the system and when people are not looking that is a dangerous and that's what we're trying to avoid it's the capability is

getting there but it's not fully there that's why he was using the term of tipping a toe in the water then getting comfortable thank you anyway it's it's not far off um but we wouldn't want to prove to ourselves prove to ourselves and obviously prove to regulators that the car is unequivocally safer um in autonomous mode than than not um and that's we're not far off so this is

like low single digit months to the safety aspect we did publish our safe uh vehicle safety report today and then key forward is one crash for every 5.9 million miles driven compared to a crash every 700 000 miles without all the pilot right so we're getting to the point where it's in order of magnitude yeah it's like 8.5 tons that's what's just about there yeah it's amazing

Great. Alrighty. And our last question will be coming from Dan Levi at Barclays. Dan, feel free to unmute yourself. Great. Good evening. Thank you for taking the questions. Elon, you've talked about the need for proliferation of sustainable transport in the past as part of a broader push to sustainable energy. I know we've heard a lot about President Trump's plans to reverse the EV mandate, and I think there's a view that

given regulation is a driver of EV uptake, this could slow EV uptake in the US. So what would be your view on the right policy in the US, given your comments in the past of the need to push for sustainable transport?

At this point, I think that sustainable transport is inevitable. I'm highly confident that all transport will be autonomous electric, including aircraft, and that it simply can't be stopped any more than one could have stopped the advent of the external combustion engine, the steam engine, or one could have stopped the advent of the internal combustion engine

Like, even if you've been the biggest force advocate on Earth, you're like, "Forces of the way, not these newfangled car automobiles." You can't stop the advent of the automobile. It's going to happen. And you can't stop the advent of electric cars. It's going to happen. The only thing holding back electric cars was range, and that is a solved problem.

And then as a follow-up, in the past, Ilan, you had made a comment that you'd be willing to sell cars at effectively no margin to get the cars out there. And there's a comment in the release today of the rate of acceleration of Atomi efforts does impact volume growth. So perhaps you could just talk about with your efforts on FSD,

how we should think about your desire to put more vehicles out in the market to take advantage of your tech advances. So I'm not sure I understand the question. We have a lot of cars. We've got millions of cars out there. So is your question, Dan, that how do we marry our future growth aspects with FSD? Go ahead and unmute yourself, Dan.

Yeah, more so just how much more aggressively you would be willing to sell your cars versus in light of your improvements on FSD. Well, right now the constraint we're trying to solve is battery production as opposed to demand. So there are

And now Q1, we've got this massive factory retooling for the new Model Y, for example, that obviously has a short-term impact on output. But the problem we're wrestling with, in fact, we're talking-- the executive team and I were talking about just before this call was we've got to figure out how to increase total gigawatt hours of battery production this year one way or another. That's the constraint on our output.

Great. Alrighty. And with that, I think we are all done for today. So thanks everyone so much for all of your questions. We look forward to talking to you next quarter. Thank you very much and goodbye.

Hey, thank you so much for listening today. I really do appreciate your support. If you could take a second and hit this subscribe or the follow button on whatever podcast platform that you're listening on right now, I greatly appreciate it. It helps out the show tremendously and you'll never miss an episode. And each episode is about 10 minutes or less to get you caught up quickly. And please, if you want to support the show even more, go to patreon.com slash stage zero.

And please take care of yourselves and each other. And I'll see you tomorrow.