AGM 2018

Jun 5, 2018

Hey, everyone. Welcome to Tesla's 2018 Annual Meeting of Stockholders. We're glad you could join us today. My name is Todd Marin, and I am Tesla's General Counsel and Corporate Secretary. Following the formal part of the meeting, I'll be introducing Tesla's Co Founder, CEO and Chairman, Elon Musk to the stage. In addition, I'd also like to introduce several other people we have here from Tesla today. In the front row, we have our Board of Directors. We have our CEO, Deepak Ahuja and Martin Viecha from our Investor Relations team. We also have several other members of our management team. We have Larry Westall and David Humphries from PwC, Tesla's independent auditor. There are going to be 2 parts to today's meeting. First, the formal part of the meeting, also known as the very boring part. That will cover the 4 items that stockholders have been asked to vote on today. After the voting, Elon will answer questions about Tesla, both from those that were submitted on Twitter before this meeting and from those in attendance today. Okay. Let's get started by calling the Annual Meeting of Stockholders to order. Please refer to the agenda and rules of the meeting that were provided to you today. The time is now 2:36 p. M. And I declare that the polls are now open. We have already received over the past weeks voting proxies from our stockholders, meaning that almost all of the votes that will be counted were already submitted before this meeting. However, as I mentioned earlier, if you wish to submit a ballot to vote your shares or change your prior vote, you can do so today by picking up a ballot at the table in the corner and handing it to Lisa Brenton from Computershare. Lisa, if you could just raise your hand one more time, there she is. Tesla's Board of Directors has appointed Lisa of Computershare to serve as the Inspector of Election for this meeting. Lisa has taken and signed an oath as Inspector of Election. Computershare is certified that starting on April 26, 2018, the proxy materials or a notice of Internet availability of the proxy materials were mailed or provided to all Tesla stockholders of record as of April 12, 2018. We have a majority of the outstanding shares represented today, So I declare that there is a quorum present and that we may proceed with the meeting. The items on the agenda are as follows: number 1, the election of 3 Class 2 Directors, Antonio Gracias, James Murdoch and Kimball Musk, to serve for a term of 3 years or until their respective successors are duly elected and qualified Number 2, to ratify the appointment of PricewaterhouseCoopers as Tesla's independent registered public accounting firm for the fiscal year ending December 31, 2018. Tesla's Board has recommended that our stockholders vote for each of the Director nominees and for the ratification of the appointment of our accounting firm. I know we have one stockholder today who would like to make a brief comment on the Director proposal, and now would be the time to do so. Thank you, Phil. Thank you, Todd. My name is Steve Diamond. I represent the CTW Investment Group shareholders in Tesla, who work with UJIDS sponsored pension funds, which are also shareholders in Tesla. For several years, we have engaged With Tesla about our corporate governance concerns, we want to see Tesla succeed in providing energy efficient transportation and generating sustainable, high skill, high wage industrial employment. But the current Board is an obstacle, Not an aid to these goals. We urge shareholders to vote no to the reelection of Mr. Gracias, Mr. Musk and Mr. Murdoch. We do not think these individuals are a credible, independent voice for shareholders. Their lack of significant auto industry experience and human capital management experience are only their most obvious deficits. We are also concerned about whether these highly paid directors can help the CEO focus on solving the serious financial, Production and labor relations problems now facing Tesla. Before we vote today, We believe it is important that each of these candidates personally explain to us how they can contribute to finding solutions to these problems. Thank you. Thanks. Obviously, we've put forward a different presentation in our proxy, and the Board recommends that the shareholders vote for the election of each of the Directors. We also received 2 stockholder proposals as described in our proxy statement. The First proposal is to require that the Chair of the Board of Directors be an independent Director. Our Board has recommended that our stockholders vote against this stockholder proposal. That proposal is proposed by Mr. Jing Zhao, who is here to present this proposal today. Mr. Zhao? Is that okay? Hi, good afternoon. There's no need to repeat the contents of The proposal, and I think you can read it. I don't want to spend too much time. And I just want to point it out. First, the opposition statement number is a little misleading. In fact, Only 49% S and P 500 combined CEO and Chairman's lawyers. And the second, as just actually as a gentleman pointed out, our Board is not fully independent. For example, our lead director is now fully independent and some Board members are now independent. So combined these factors And the other factors are listed in my proposal. It's time for us to change course To have an independent Chairman. Thank you very much. Okay. Thanks. Finally, we received one last stockholder proposal regarding proxy access, which is also described in our proxy statement, our Board has recommended that our stockholders vote against that proposal as well. This proposal is being presented by Mr. James McRitchie. Go ahead, Mr. McRitchie. Tesla is shooting for the moon and beyond and we love it. But shouldn't we have a little insurance? A cost benefit analysis by CFA Institute Found proxy access would benefit both the markets and corporate boardrooms with little cost or disruption, Raising U. S. Market capitalization by $140,000,000,000 In other words, a vote in favor of this proposal is likely to raise the value of our stock. 2 of our Directors hold no stock in our company. Why do they have such little confidence? Proxy Advisor Institutional Shareholder Services considers 3 of our directors to be not to be independent. Whatever you think of our current Board, isn't it good to have just a little insurance? In the time of crisis, and I don't just mean Our ongoing production crisis. We could place 2 nominees on the proxy without going through an expensive proxy contest. Based on my proposal, any group putting forth nominees would have to have held 1,500,000,000 in Tesla stock continuously for 3 years. Between 2015 2017 And a total of 2 0 6 proxy access proposals were voted. Average support exceeded 53%. More than 60% of S and P 500 companies have adopted proxy access. In its statement of opposition, The Board points to a lack of safeguards, such as the ability of investors to use proxy access, even if they have lent out shares, Hold a short position or intend a change of control. However, this proposal simply offers advice to the Board Subject to a 500 word limit, the Board is free to adopt proxy access by law that includes restrictions on the use of proxy access, just as every other adopting company has done. Furthermore, the ability to include A Director nominee in the company's proxy does not guarantee election. Even if a special interest shareholder Were it to be placed on the ballot, that nominee would still need to win broad support to be elected. Keep in mind that current officers and directors, who presumably would vote against any such nominee, own nearly 25% of outstanding shares. No shareholder nominee would win without the support of our largest investors such as Fidelity, T. Rowe Price, Baillie Gifford, Tencent, Vanguard and BlackRock. Vote for proxy access, item number 4. Vote for insurance. Thank you. Okay. Thank you, Mr. McRitchie. Before we conclude, are there any proxies remaining in the audience that have not been submitted, this would be the time. I see one here. Keep them up high, and we'll have people come by and grab them from you. Anyone else? 1 up here. Last call? Okay. All right. I declare that the polls are now closed. Based on the proxies that we received before the meeting, I can announce that our shareholders approved the recommendations of the Tesla Board of Directors on all 4 agenda items, and they did so by a wide margin. Each the items passed in line with the recommendations by more than a super majority vote. We will formally announce the results of the voting by filing a Form 8 K, within 4 business days of today's meeting. That concludes the official business of today's meeting, also known as the boring part, which is now adjourned. I welcome you to now stay for the Q and A session and Elon's presentation. In addition to taking questions from the audience, Elon will answer questions that you have and that you submitted on Twitter before the meeting. During the course of the Q and A session, we may discuss our business outlook can make other forward looking statements. Such statements are predictions based on our current expectations. Actual events or results could differ materially due to a number of risks and uncertainties, including those disclosed in our most recent Form 10 Q filed with the SEC. Such forward looking statements represent our views as of today, should not be relied on thereafter, and we disclaim any obligation to update them after today. With that, please welcome Elon Musk. Welcome. Welcome. Welcome. I love you guys too. All right. I think we've got quite a lot of good news to talk about and look I'm just Really proud of the Tesla team for accomplishing so much against incredible headwinds. And I'd just like to express a note of appreciation For all of our customers who bought our cars, thank you for buying our product. We're doing everything we can to make it as good as possible, as fast as possible. Yes. I think this is going to sound maybe a little cheesy, but at Tesla, We brought our cars with love, like we really care. I think a lot of other companies, they're both by like the The marketing department and the finance department, and there's no soul. So, like we're not perfect, but we put our heart and soul into the product we really care. And the dedication of the Tesla team has been incredible. I think people have They've really been working incredibly hard to make the cards. It's very difficult to become A mass manufacturing car company, no one has succeeded in doing this in a very long time in the United States. And even the ones that have Only Ford is the only one that hasn't gone bankrupt. So it's super difficult. So in fact, yes, in the history of the American auto industry, it's always worth bearing in mind that only 2 have not gone bankrupt, and that's Ford and Tesla. So it's insanely hard just staying alive. So I just want to be clear, it's really difficult. And we've had people at Tesla who've Sort of worked like 60 days straight. And we had like basically forced them to go home, like you got to go home, man. You're going You got to keel over and then you start back in. It's hard to work. You're like, damn it, we said go home. So but the net result is despite a lot of difficulties, all lines All parts of the Model 3 production system have demonstrated a 500 car per day capability or a 3,500 car per week Okay, buddy. So and then we just did a big set of upgrades and we're spooling out the production lines again. And I think it's more it's quite likely that we will achieve a 5,000 car a week by the end of this month. It's like this is like, I'll tell you, the most excruciating, hellish several months I've Maybe I've ever had and a lot of other people at Tesla, but I think we're getting there. The we're doing well on market share. The blue line is the Tesla Model 3. We just became in May the best selling midsized premiums in the United States of any kind. So that's of any kind. So not just so it's getting all that internal combustion engine cars, not just Battery or hybrid or anything like that. And that's despite the fact that we still offer only one version of the car. We don't all wheel drive is coming out next month. And then we'll have the lower cost, The shorter range battery low cost car at around the end of this year is when we're expecting to do it. So We also made huge progress in the reliability of the car. So in the beginning, it was a bit bumpy. And now as deliveries have risen, the quality and reliability of the car has improved dramatically. So it's improved by a factor of maybe $0.04 or $0.05 since solder production, and we're working on making that even better. Employee safety is a big deal for us. It's always tougher to achieve safety when you're Building a new manufacturing line. So if you've got a manufacturing line that's in steady state, then you've got an opportunity to Iron out the processes and make it a lot easier to build the car. As you're figuring things out, It takes a while to get there. So thus far in 2018, our average industries our injuries per We're posting our 6% below the industry average, which is great because last year we're a little bit above and now we're a little bit below and then And that trend is continuing downward. So, I think we've got a shot at being maybe half The injuries per person of the auto industry, and That's the goal we're striving for is to be half in injuries per person. It's when you're building cars and you've got a huge number of people, it's It's impossible to be 0. We wish it could be 0. But we think being twice as good as the average in Industry is a very achievable number and that's what we're working hard to achieve. It's worth noting that when the injuries The vast majority of the injuries are repetitive stress injuries, so like back strain or wrist strain, but by far the most common thing. So and the way to address that is with better tooling and fixtures And rotating people through different roles. So they're not always doing the same action. And it's also borrowing through the same action over and over again. So, Mig, we're making good progress on that. And it's also worth noting even our current injury rate It's half that of what it was when Toyota and GM were operating the plant. So that is often lost in a lot of the media articles. So if we achieve our goal, we'll be a quarter of the injuries of when it was new me. So this is a very I really want to emphasize this is a super important thing to me because we obviously owe a great debt to The people who are building a car, I really care about this issue. And as supercharger expansion is Doing really well. We're almost over 10,000 superchargers worldwide. And our goal is to that you'll be able to go almost anywhere on earth using the Tesla Supercharger system. We're very excited about the next generation supercharger that is it's mostly finished in design and will Going to production hopefully around the end of this year. So the supercharger generation 3 will be quite a dramatic improvement. But we want to save that announcement for when it deploys, which is hopefully later this year. And then once we have that So, we've managed to do now a gigawatt hour of energy storage Deployment worldwide. This is all the way through from the reign of Ramses II of Egypt through today, which is a very impressive period of time. And in less than a year from now, we will do another gigawatt. So That's it's pretty massive, yes. So the rate of yes, the rate of stationary storage deployment is going to grow exponentially. I mean, it's really I think For many years to come, the each incremental year will be about as much as all of the preceding years, Which is a crazy, crazy growth rate. And it's also a sort of production Limited thing. We would actually be able to do more if we could produce more. And we are producing a lot of batteries. So, in fact, next quarter at the Gigafactory, we expect to make more battery capacity than All other EVs combined worldwide, including China. So I mean, this is a really crazy amount of batteries. It's this one factory is making we make more than all the other factories on earth. Like really deserving that Gigafactory sort of title. It's really, really nutty. We're going to try to have like maybe where things get calmed down a bit like have more tours available for GIGA because It's like epic. Yes. It's like a 2 at least 2 hours to walk just to walk through all of the parts of Giga at this point. Just to walk through everything, it Take 2 hours. Like if you don't pause a lot. It's like good exercise. So that's, yes, pretty well. We have our first we actually have a bunch of Non Tesla employee solar roof customers. And the response has been very positive That whole roof is solar, and it just looks normal. In fact, it looks better than the roof that was there. So I have and I have it On a house that I the little house across the road that you see owned by Gene Wilder, it's sort of like a Willy Wonka house. I was like trying to figure out how to have that go solar with that kind of ruining the Jane Wilder aesthetic, which is I really like, actually. So, but I was able to put these on the on Jim Wilder's old house and it still looks It looked like it still has the same character, which is great. And it's we're spending a lot of time just validating The solar roof because they need to last at least 30 years, ideally longer. And there's only so much Accelerated life testing that you can do on a roof. So before we can deploy it to a large number Of houses, we need to make sure that all elements of the roof are going to last for at least 3 decades, ideally sort of Half a century or more. But this is going to be a very big product. And it's also going to grow exponentially. Yes. I think you kind of want to have a thing where if you look around the neighborhood, Adding solar actually made the neighborhood improve the aesthetics and feel of the neighborhood. I think that's a really big deal. We are not far from Q3. And I'm actually my CFO and General Counsel, like you have to watch what words you use in these situations. But I think we it's really looking Like we are going to have positive GAAP net income next quarter and as well as positive cash flow in Q3 and Q4. And we, as I've said before, do not expect to need to raise any incremental debt or equity. Hey, we've got some exciting products in the works. The Model Y is really going to be something super special. We're aiming to Unveiled Model Y approximately March next year and then go into production about Maybe around 2 years from now. Maybe a little less than 2 years, but basically first half of twenty twenty for production Model Y. Something similar for Semi and Roadster. So these products are shaping up. I think Semi and Roadster are actually going to be even better than what was unveiled. We've figured out ways to improve the range and overall functionality of the semi, In particular, the Roadster, we what I unveiled with the Roadster was the base model performance. It's going to have a SpaceX option package. It's crazy. And I think it's important for us to share with the Roadster That an electric vehicle can outperform a gasoline car in every way. So that because gasoline costs will have sort of a halo effect. And I think if we can show an electric car can outperform gasoline car in every way, then we sort of get rid of that halo effect of gasoline cars. And I think that's quite a powerful thing perceptually for the general public. So these are just some questions that we got on Twitter. I guess some really insightful questions on Twitter as well as some strange ones. But Yes. So one of the first questions is in for Model 3 production line, As I said before, we're really going to focus on manufacturing technology for Tesla. And we've Made a lot of mistakes with Model 3 production that but we recognize those mistakes and we're confident we know how to address them. In fact, we are addressing them. And long term, I think the biggest competitive strength of Tesla is going to be manufacturing. This is sort of counterintuitive, but it is going to be quite dramatic, I think. The approach to automation that we've taken, I think in some cases it's worked, in some cases it's not. But it's clear that there are Some elements of production, which are really well suited to people doing it and some parts of production that are really well suited to robotics. And one of the biggest mistakes we made was trying to automate things that are super easy for a person to do, but super hard for a robot to do. And when you see it, it looks super dumb. You're like, wow, why do we do that? So and then as you so it sort of makes sense to have start off with initial production line, which is has a relative bias Towards people and then you automate the parts of the production system that are the most Painful and difficult for people to do, so particularly ones that result in repetitive stress injuries or mechanically difficult. That's really a much better approach. And that's what we're going to do for Draenor Factories 1 and 2. It's a much more sensible way to do things. Let's see. Well, let me actually have the Tesla some of the Tesla executive team come up. Guys, do you want to come up and hang out? So JB, do you want to talk about the battery cost stuff? Sure. So it's difficult for us to talk about specific Cost numbers, that's always a difficult topic, but we are still very confident that we have the best price and performance of anything out there in the world. If there's something better, I don't know about it. And we've looked as hard as we possibly can. We try and talk to every single battery startup, Every lab, every large manufacturer, we get quotes from them. We test cells from them. So if there's something better, we're all ears. We'd love to find it, but we haven't found it yet. So generally, yes, we're still pretty confident about that same direction. Yes. I mean, We think at the sale level, probably we can do better than $100 per kilowatt hour maybe later this year Depending upon what on commodity prices, if commodity prices are roughly where they are today, then we'll probably do better than $100 kilowatt hour at the cell level. And then with further improvements to the cell chemistry and the production process and more vertical integration on the cell side, For example, integrating the production of cathode and anode materials at the Gigafactory and then And approved design of the module and pack. We think long term, we can get below $100 kilowatt hour at the pack level, which is really the key figure of merit for a car. But long term meaning definitely less than 2 years. That's Tesla long term. Anything I mean, Yes. Yes. We think we've come up with some pretty cool breakthroughs on this front On energy density and cost of the battery pack and yes, I think it's going to be pretty great. As far as I can see When will the Gigafactory be completely built? I think we'll keep building on the Gigafactory for at least 4 or 5 years. It will be by far the biggest building in the world. It's not that far from being the biggest building in the world already. And Based on the plans that we know, it might be twice as big as the next Building the world. Hence, the interesting tour. So it's yes. Yes. It's about a third down right now. And yes, so it's really, Really, really enormous. And I think it's going quite well. There will be more Gigafactories in the future. We're close to announcing a combined vehicle and battery factory. So future Gigafactories will include Vehicle and battery pack and powertrain as a single integrated unit. And we're close to announcing Something in China that I don't know, Roman, do you want to talk about that? I mean, we don't want to make an announcement. Exactly. Maybe just talk about like the preamble or something. So Robin is Head of Worldwide Sales for Tesla. Thanks, Elon. I didn't expect to talk about this. So we're incredibly excited to to build 1st Tesla Gigafactory outside of the U. S. In China. Specifically, it's going to be in Shanghai. And we have been holding discussions with the government, various governments in China, Really great discussions, great partners. We really look forward to working with them in the years to come. This is going to be the next generation of Tesla factory. We are super excited. The stuff that we are going to be put in there And the cars that we're going to be building in that factory is going to be incredible. So we're going to announce something Really, all the details really, really soon. So I won't tell more, but this is enough. All right. Thank you. Particularly as we try to make cars more and more affordable, it's going to be important to localize production to at least the content level. And so having Gigafactory and vehicle factory in North America, 1 in China and then one in Europe will be that's sort of the those are the obvious Three places for vehicle and battery Gigafactories. So probably if things go quite a plan, we'll probably be announcing details of The China Gigafactory as soon as next month and then Europe Gigafactory maybe end of this year, It's kind of depending on how the we need to figure out where to put it exactly. So but probably towards the end of this year for the Europe Gigafactory. And ultimately, we expect probably there's 10 or 12 worldwide. So I have some Questions on the Tesla Semi. We are going to do another revision of the Tesla Semi design Because we've learned a lot, and we think we can actually make it even better than what was unveiled and really have a range that is Way beyond what people think or most people in the industry think is possible. And we want to it's definitely going to be A semi that works in Europe and in North America and China and the rest of the world. I hope you're right convinced that that Yes. One major factory in the works and then another one in the works later this year. Yes. Do you want to talk about sales? Yes. We've talked about this a few times, but Tesla will absolutely recycle and we do recycle all of our spent cells, modules and battery packs. So the discussion about this waste is sort of ending up in landfills is not correct. We would not do that. These are valuable materials In addition to it's just the right thing to do. So we have current partner companies on every major continent where we have cars operating that we work with to do this today. And in addition, we're developing internally more processes. We're doing R and D on how we can improve this recycling process to get more of the active materials back. And ultimately, what we want is a closed loop right at the Gigafactories that reuses the same recycled materials. This isn't impossible. We see a pathway to do it. But that's where we're headed with this. And Today, we're on the way to do that. It's definitely something that will be a huge benefit in the long term to cost In terms of the comparability of Model 3 including insurance costs, We're working with insurance companies and on some internal activities, but we're really confident of getting The cost of insurance for Model 3 to be at least 20% to 30% lower than say a BMW 3 Series or equivalent mid Hi, Sedan. So the safety is definitely better. And then We're working on the repair costs. We made a lot of progress on that front. But bottom line is that The insurance cost total cost of ownership of the Model 3 should be significantly better than any other mid priced premium sedan. So, Yes. There will be we will definitely offer a $35,000 version of the Model 3. And I think probably at the end of this year is where we should be able to make the smaller battery pack and then get into Volume production of 35 ks version in Q1 next year. So that's definitely We will definitely honor that obligation, and we would do so right now if it was physically possible. Yes. We're going to in probably next month offer a free trial for people to try out Autopilot and see how well it works. We're also making rapid progress on Autopilot technology. So the there's a new version of Autopilot that's rolling out, I think, this week, which I think is quite a significant improvement. And I think the what you'll see is that the reliability and capability of Water pallet will increase exponentially over the next 6 to 12 months. It's really the improvements are very, very rapid. The length of time to wait for a Model 3, if you're ordering 1 now, will vary quite a bit depending what part of the world you're in and what configuration? So if for the existing configuration, if you were to order now in the U. S, you Probably would be waiting, I'm guessing about 3 or 4 months. If you on the other hand, if you want the right hand drive version, You're probably waiting for over a year because we need to build the right hand drive version and ship it to other countries and homologate the car for other countries. So the rate is anywhere from 3 to 15 months approximately. But for current configuration ordered now, it's Maybe about 3 or 4 months. This is actually quite a complicated answer. There are many Lines to the Model 3. In some places, it's there are several lines. In some places, there are there's just one line. And it kind of depends on what the capacity of that line is. So for general assembly, which is like putting the parts together at the end, We currently have 2 lines and are constructing a 3rd. The 3rd line is, I think dramatically better than lines 1 and 2. We started construction on that third line About 2 weeks ago, and we're already putting the 1st car through that line. So it's really crazy fast. And that's part of what gives me confidence about the 5 ks per week for Model 3. Currently, the biggest constraint on Output is General Assembly. And I would probably get to 5,000 a week with The current 2 general assembly lines, but with the third one, I'm highly confident that we can exceed 5,000 units per week. In the Model 3 test drives, we should build off of Model 3 test drives starting the end of this month. And I think we should have them in almost all stores in North America by the end of next month. We're rapidly expanding service centers. I think by Year over year, we'll probably see a doubling of service center capacity for Tesla. And we're making major progress on the body shop front. We're also It was quite a big deal. We're creating Tesla body shop repair locations And we should have by the end of this month, at least the top 10 metro areas in the U. S. Being able to be serviced by a Tesla body shop. This will be a dramatic improvement in the cost and time of flighty repair. In fact, we think we might be able to do for a lot of them like same day body repair, Which is yes. It's definitely possible. So I think we want to aim for There'll be some number of body repairs to be same day, whereas if we go to a third party's best case, it's about a week. In some cases, it's several weeks. So this is pretty exciting actually. We're basically just taking our biggest service centers, adding in an annex for body repair And then pre stocking the parts, so you don't have to wait for parts to come from the factory. Not yet. But yes, March next year, I think we'll have something very exciting to show. All right. So let's take some questions from the audience. I think it's face to face, line up at the mics and Go for it. Hi, Lon. Matthew. I wanted to ask, Is there going to be a time perhaps in the next year and Tesla is going to produce compact and or subcompact vehicles, Such a huge segment, and it seems like that would be necessary to fulfill the Master Plan Part 2 mandate. Yes. I think we'll do a compact Car in less than 5 years. Yes. All right. Hey, Yvonne. Yes, great progress. You mentioned Autopilot progress as well. So when do you expect like fully enhanced Autopilot functionality like Following navigation switching freeways within the 6 month time frame? I was just testing that last night at about 1 a. I think we might be able to release something in a couple of months that can do that. We've been pursuing 2 paths, one really complicated path that I think isn't working that great and then a simple path that I think will work pretty well. I mean, I was able to drive last night, go from highway on ramp to highway off ramp Using the simplified version of the control system. And I think with some further effort, We can get that out in the next couple of months. Yes. Is this on? There we go. So, as far as TESOLINK is concerned with the Model 3 and to what degree of certainty, will there be a consumer or a fleet lease option within the next 3 years on the Model 3. Is that something that you guys already have in the plans, in the works? Or is there room for ancillary business? We do we will offer leasing on Model 3, but Probably end of this year or early next, because it does have a slight impact on the capital usage of Tesla. In terms of fleet stuff, I think we yes, I think people can certainly buy a lot of Model 3s and then operate them as a fleet Like people do for Model Ss and Xs for taxis. Yes, I think we're so maybe happy to support that. Yes. Kind of a simple follow-up to that, just kind of the understood thing. If I purchase a whole fleet and then Tesla comes in and says, all right, we're going to start leasing direct to the consumer or having a commercial option that might not work out so well for me. But that's why I'm asking. Is it anything commercial happening that you have in the works in the next 2 years even? Well, we don't really think right now, we're just super focused on Ramping up manufacturing of Model 3 and making sure people can get their cars because they've been waiting for a couple of years. And we're not really thinking much about incremental demand generation because As it is even getting to 5 ks cars per week, we would it would take us almost 2 years to Produce enough cars to satisfy those that have put down $1,000 deposit. So yes, we just kind of ramped to 5 ks and then Next year, ramp to 10 ks a week and get the right hand drive version done and homologate the car for Europe and Asia. And yes, and then we'll think about other things once we've done all those things. Thank you. Hi. Glyn Shotwell of SpaceX mentioned that Tesla Automobiles might use in some way the StarLink Satellite Network, I was wondering if you might elaborate on that opportunity and when that might take place? It's possible. I think it probably will be so I think it's more meant for Like fixed terrestrial, homes and businesses and that kind of thing. For mobile, It might be possible to use the StarLink system effectively if you had a repeater, ground based repeater system. The StarLink user terminal is about the size of a sort of small to medium sized pizza. So I'm not sure you'd want to put that on the roof of the Tesla. I mean, maybe, but I think probably just using most likely we'll continue to use just Wi Fi and the cellular network. Most likely. Hello. My name is Steven Singleton. And my question is, How is Tesla engaging regarding virtual power stations with governments and territories and countries that may have weak power infrastructures, to provide clean energy to more of the world citizens. Yes. I think we'll have more to say about that when we announce the generation 3 of the superchargers Because that we'll be doing much more of an integrated solar battery system with the superchargers. So today, only a few of the Supercharger systems have solar and battery systems, but long term, we want to have almost all of them have that. And the nice thing Is that if you've got like a solar powered kind of like a solar powered carport area and Tesla batteries, Then even if the grid you don't even need to be connected to the grid. So it's sort of like even proof against like a zombie apocalypse that should still work, As long as there's always on tune near the supercharger, I suppose. But yes, so it will be able to work anywhere even if there's not good power infrastructure. He's also asking about like networking power wells together. Okay. And for like a virtual power plant, if that's kind of what you also were alluding We do have a really cool project in Australia, where we're actually networking together up to 50,000 individual homes with power walls. So each one of those homes has its own battery. It can still serve as like a backup power source if the utility totally goes out, if there's a storm. But when things are working normally, all those houses can talk together, and then we can talk to the utility and treat them as sort of one big distributed power plant. So that's a really cool project that has benefits across the whole grid for the homeowners, for a lot of people. And we're building that out right now, We'll probably be expanding that same model. We have a small demo in the U. S, and we'll be expanding it worldwide. And we're also doing quite a lot in Puerto Rico. I think we have I think Tesla has more battery projects and solar projects in Puerto Rico than everyone else combined. So it's we're making a big difference there, doing our best to, and I think there's potential for kind of a virtual grid in Puerto Rico as well, rather than rebuilding a legacy Sort of oil and gas based energy generation system. Elon, I also think boring, boneheaded questions are not cool. So hopefully, this is A little more interesting. I've had a Model S since 2012, best purchase ever. Thank you. You guys nailed design, nailed performance. The one thing I always get from Friends and family, because I do the drive down to LA a lot, is the supercharging time. I know you mentioned you guys are working on Supercharger 3. I assume it's going to be a bit faster. Just curious, do you guys see room for kind of orders of magnitude improvement in charging time? Or are we kind of reaching a plateau with current battery chemistry and technology? I wouldn't say that there's an order of magnitude improvement, but I think a factor of 3 or 4 is possible. Now the it won't be applicable to all battery chemistries. So 2012 chemistry can't take the charge rate of Current chemistry. But and we wish it could, but we just had to make much improvements to increase the charge rates. The key, I think, figure of merit is that the ratio of drive time to charge time should be at least on the order of like 6 to 1, if not 8 to 1 or 10 to 1. At the point at which you're driving, say, 10 times as much as you're charging, Then the natural sort of human need to take a break, unless you have an enormous bladder, is So to speak on Paramount, if you start a road trip at, say, 9 a. M, typically by around noon, you want to stop, You hit the restroom, grab a bite to eat, grab a coffee and if you want to get back to your car and have it be ready to go. So that's where the like if you say that that's like maybe half an hour, that's kind of like the minimum threshold for the car to be ready to go when you come back from a break. And then once you get to the point where it's say, 10 to 1 where maybe it's only 15, 20 minutes, Yes. So you're on the road 15 minutes. Then the car is ready to go away before you're ready to go. And for some of the long distance, like if you get, say, A Model S 100D, you can drive nonstop from L. A. To San Francisco if you drive carefully. That's a long drive. So and we think there's potential there's certainly opportunity for range improvements Down the road where we'll be able to offer cars with ranges in excess of 400 miles. Thanks. Hi. My name is Doctor. Katherine Van Eckert, and I'm with People For the Ethical Treatment of Animals. I have a question regarding your use of leather in your Gear shifter and steering wheel. Gear shifter. I guess, I don't think Has anything steering wheel maybe this or It's still there. Okay. Stereo is still there. But professor? Are you still using leather in some of your components? So we do in Model S, X and 3 currently. We have the only leather is on the steering wheel rim. And people have asked and kind of off menu, we do replace that for people that are need a fully vegan car. Sure. So our concern is that we're obviously facing an environmental crisis and animal agriculture, as we all know, is one of the main contributors, particularly leather production. We're really pleased to see that you have introduced non leather seating options. And that's a really fantastic step towards your goal of sustainability. We would really like you to take The next step and eliminate all leather components. Yes. I think S, X and III, they're we may be the first Vehicles in production to kind of go non leather and at least in all of our seating in our trim, and we're actively working on We just want to make sure that the experience is as good, if not better. Sure. Yes, just to add to that. So there are some existing premium Vegan leather suppliers, Ultra Suede and Alcantara, if I'm pronouncing it correctly, they're used by other luxury cars like Ferrari? So yes, we would really like to see Tesla step up as well. Yes. We'll definitely be offering sort of As Brian said, technically, we don't say it on the website, but you can actually have a Tesla that has 0 leather whatsoever, It's a little difficult because we do it in small quantities at the design studio. So it's challenging to do it at scale. But Model Y, for example, will not have any leather in it, including in the steering wheel, Even if it does have a steering wheel. Thank you. When do you expect significant battery advances to allow Tesla to pack twice as much Energy into each of the batteries without increasing the size or weight. Twice as much is tricky, but We can certainly see a path to about a 30 30% improvement, maybe a 40% improvement in energy in the same size battery pack. Like the best technology we Our confidence does work and it just it needs to be scaled up and made very reliable. But 30% to 40% is Definitely doable. Long term, probably double long term by other people's standards. From a Tesla standpoint, we think probably 2 to 3 years to get to about a 30% improvement in volumetric energy density. And Yes, maybe 6 years or something, 6 to 8 years to get to a doubling. It's highly dependent on making lithium for that really big jump, a lithium anode is the key. Just plating out pure lithium on the anode. I started a company called Tesla Tractions. Tesla traction is basically a gamification version of visiting Superchargers. And I know that you tweeted about this a while ago, saying that it was Good idea. And if you ever decide to go through with it, obviously, I do not want to be in a position of competition with you. So how could someone like me help the mission? And maybe we should interview Tesla. As I have folks right now is getting Through the critical stuff like especially the Model 3 production ramp and then just maybe out the production process to make The car affordable, getting the lower cost battery pack or small battery pack into production. So those are kind of critical fundamental things to really the survival of the company. And then we do kind of like the fun Unfamiliar things like but they add joy to the experience, maybe later this year. We're always like doing sort of fun, silly things in the car, like Easter eggs that there's like a lot of Easter eggs in the Model S and X and 3 that Quite funny. In fact, once they're discovered, they're put in the Easter egg box, which you can just tap the Tesla logo on the screen And then wait for about 30 seconds and it opens the extract box. Yes. All right. My name is Vance Gerber. I'm hooked into Tesla in multiple ways. Obviously, I'm a stockholder. I have a solar steady panel on my roof And also have a Model 3 reservation from March 31, 2016 ready for configuring. But I would really, really, really like to have an all wheel drive. Yes. Can you give an order of magnitude Guess that's too long. I'd have to wait for that. You should receive a configuration e mail maybe in the next week or so. Perfect. Yes. And we stopped production on oil drive. Actually, technically, we're starting on oil drive this month, And we expect to scale that up in July August and be in High volume production of all wheel drive by September for sure. So I have a tour planned for September, a 1 month tour. Any chance I can make it? Yes. We'll make sure you get your car. Thank you. Hi. I got my first Model S in 2013 and have an X and a 3 now. I love the product. I feel like I'll always be one of the first to try to try one of your new products. And I was just wondering, Is there any chance in the future that we'll be able to text commands to our car like, heat my car at this temperature, come pick me up, That type of stuff? We're going to keep enhancing the Tesla app on the phone. And to be able to Long term, just tap the summon button and your car will come find you wherever you are. And really wanted to Learn what you can change the temperature right now from the app, but we want the car to learn what you're most likely Would you like basically, if there was a great chauffeur in charge of the car, what would that person do Anticipating your needs and knowing what you'd want. So it's sort of like an intuitive trustee steed That just always knows where you want it, ideally. And then you can easily adjust that as needed. So You want to be as close like a mind meld with the car as possible. Hi. My name is Kevin. I have the Model S since 13. And my question is about Autopilot and the use of LIDAR. As we all know that Tesla probably is still the company alone that not using LIDAR, where all other vendors using it. So as autonomous driving is close to reality, I think inevitably there will be a showdown on which approach will be more superior. So what do you think? When that time will be? Well, I think lateral will be seen as What Lightout tends to drive companies to do is to go to a local maximum In terms of autopilot capability, autonomous driving capability, and Lido ends up being like somewhat of a crutch. It's helpful to get almost there, but if you rely on it, you will never get actually get there is my opinion. So you have to make vision Work extremely well in order to achieve true self driving. Once you've made Vision work extremely well, LiDAR is Really unnecessary. It's not really adding anything. We do have sophisticated Sonar, like ultrasonic sensors around the vehicle for near field. And we do have a forward radar system, Which is useful for detecting objects even in fog, sort of snow or rain, like low visibility conditions, Where you can't see what's going on. And that's also a case where LiDAR is ineffective because LiDAR is Active Photon Generator in the visible spectrum. This doesn't make sense to me because you have A massive amount of incoming photons in the visible spectrum normally. So if you're going to do active photon generation, The 400 to 700 nanometers is the wrong wavelength or on that order is wrong wavelength. You really want to be aiming for something that's around 4 millimeter wavelength because that is occlusion penetrating. We're 2 time Tesla Model S owners and also stockholders. A question about JB. Every SEC filing has always included JB as a key man, And he was suddenly dropped off in the Q1 filings, a little concerned about JV. Oh, really? I didn't know that. That was very accidental. Sorry. I didn't even know that was the case. And is there a path? I have no idea why. We just made it more generic. Yes, the intent was to make it more generic, the risk factor. There was no intended or unintended Application behind me. JB, we love you. We want you. Sorry. And one last one, which is the Tesla's energy storage business is still running double digit gross margins negative, it looks like, even though you've Managed to deliver a lot more megawatt hours. Can you talk about the pathway to getting a profit out of that business, please? Yes. Wirth, do you want to talk about that? Sure. Yes. Definitely, we expect our storage It's to turn significantly positive. And our goal is to have the same level of gross margin as the automotive business. And as our volumes scale and as We have more Powerwalls out there and our manufacturing efficiencies come in. We definitely expect that you will see a big change and a positive trend in that Every quarter into 2019? Yes. Yes. We're aiming for us essentially about the same gross margin level as in the cars, which is 20% to 30% gross margin for all of the energy products. It's necessarily during the as you ramp up production, It ends up being it's negative just as it was for Model 3 and Model S and X. But probably Later this year or certainly early next, we should be in the 20% to 30% gross margin level for Energy Storage. Hi. Thanks for a shot on the conference call, by the way. And my question was just surrounding as a long term investor, I hate to say this, but I feel like My trust in Tesla's time lines sort of eroded a little bit with the Model 3 ramp. So should I keep discounting things on Elon time? Or are you guys Have you learned anything about this? I think I do have like an issue with time. It's like Yes. It's been true since and my brother is here. I was like I have a condition. My brother, Isu, like when we were catching the bus to school, he would lie to me about the time. And you always always say it's like or some say it's like earlier than it actually was and then I get there slightly after that And then we'd actually be able to catch the bus. So this is something I'm trying to get better at. I'm sort of naturally optimistic person, which would not have probably done cars or rockets if I was not. But so I'm trying to recalibrate these estimates. Yes. Try to recalibrate as much as possible. Yes. I mean, I'll probably put some sandbag on future dates. That's probably wise. But I kind of stay with say when I think it can occur, but then I'm typically optimistic about these things. But maybe less hopefully less optimistic over time. So yes. It pretty much always happens, but Not exactly on the time frame. Elon, we have we're about 15 minutes over 1 hour. Do you want to take maybe a couple more? Yes. Maybe A couple more questions from you, Sai. Okay. Hello, Mr. Musk. My name is Alex Perez. I really like your jacket today. And so it kind of got me thinking, has Tesla ever thought about going into the motorcycle business? Yes. I actually used to ride motorcycles when I was a kid and I used to bike dirt biking for Like 8 years or something. And then they had a road bike In slide 2017, it was almost killed by a truck. So we're not going to do motorcycles. Hi, Mr. Musk. My name is Sonia and my mom has a Model My dad has a Model S and I have one chair. So I've noticed that whenever my mom is like Kind of going a little bit too fast, so like approaching a car at a stop sign, the Tesla beeps pretty loudly to kind of warn Hey, you're going to hit that. I was wondering like are you guys thinking about developing mode where like drivers could choose to turn it on and then if a Tesla detected that it was approaching something It would like gradually slow down a little bit. So best case scenario, if the driver takes control, it doesn't really matter. Worst case scenario and they crash, it decelerates, So it's not as bad? It does actually have there's automatic emergency braking. And I think what you're saying is like instead of like last minute kind of dramatic Slowdown, maybe slow down sooner, but less dramatically. And that is something that We'll occur with the latest versions of Autopilot. So we'll it will Decreased speed proportionate to the confidence level. We want to do that in a way that's not annoying to people, like the car isn't Slowing down a lot. But so it's really delicate balance Between not annoying people, so they want to turn it off, but also being safe. For Autopilot, I think the improvements are going to be really quite dramatic in the over the next several months. Yes. The system is intended to Change speed proportionate to its confidence in going forward. But in order to do so, we had to improve the The specification of the Autopilot neural net and the heuristics that go with it. So it just didn't annoy the hell out of people. Because there are many times where the car things have slowed down, but actually not really. And that would just drive people crazy. So I do think what you're getting at is something that you'll see play out with the versions of Autopilot that are deploying later this year, including the one that's coming out this week. Hi, guys. I just wanted to personally thank Elon, JB, Franz, Deepak, good to have you back. Tim, Emily, Vinny, Andrew, The people at Tesla who I don't know by name, the proud owner of an early 2012 Model S, very different than Model 3 that my dad He's only got his first new car. He's pretty perplexed and amazed by it. I actually drove that from New Jersey to Richmond, probably could have skipped Supercharging entirely, charged the car for, I think it was maybe about 20 minutes and continued the trip. And the car was actually Telling me that I was ready to go before I was done eating the sandwich that I picked up. Cool. I just wanted to ask a quick question. Is there a possibility to get a business This is a card for the guy to your left because I wanted to tell him about a company. This man has been working on disruptive technology That you're already indirectly using and wanted an opportunity to speak with you about it further. Thanks. All right. Thanks. Yes. We'll certainly take the business card and we're just looking to investigate interesting opportunities to improve the car. If you One thing I think we haven't been good at educating people on is that the Model S and X, but especially the Model S, Has improved very dramatically from 2012. So we're arguably on Version 3 or 4 of the Model S right now. So It's really a gigantic improvement in Model S today versus Model S of 2012 when you first started production. I really encourage anyone who's got an early model as to test drive the current version. I think you'll be blown away by how much it's improved. All right. I think that might be the last question. All right. I will soon be driving around in Model 3. I'm curious to you mentioned earlier that during production, it's people first and automation later slowly. What kind of considerations prompted to do otherwise when you started the Model 3 production? Can you talk about that? I think we're just overconfident about the degree of automation that was possible. And we did rely quite a bit on Tier 1 manufacturing automation integrators. And A couple of those things really didn't work out at all. And now we're really going to internalize All Tier 1 manufacturing systems at Tesla. So we'll have a lot of suppliers, but they'll be at the Tier 2 and Tier 3 level. All right. Thanks very much for coming.