Hey, everyone. Welcome to Tesla's 2018 annual meeting of stockholders. We're glad you could join us today. My name is Todd Maron, 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 Westfall and David Humphries from PwC, Tesla's independent auditor. There are gonna be two parts to today's meeting. First, the formal part of the meeting, also known as the very boring part.
That will cover the four 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 few 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 26th, 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 12th, 2018.
We have a majority of the outstanding shares represented today, so I declare that there's a quorum present and that we may proceed with the meeting. The items on the agenda are as follows. Number one, the election of three Class II directors, Antonio Gracias, James Murdoch, and Kimbal Musk, to serve for a term of three years or until their respective successors are duly elected and qualified. Number two, to ratify the appointment of PricewaterhouseCoopers as Tesla's independent registered public accounting firm for the fiscal year ending December 31st, 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 union-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.
The current board is an obstacle, not an aid, to these goals. We urge shareholders to vote no to the re-election 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. The board recommends that the shareholders vote for the election of each of the directors. We also received two 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? Oh, hi. 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. I just want to point it out. First, the opposition statement is a little misleading. In fact, only 49% S&P 500 combined CEO and chairman's roles. The second, as just actually as a gentleman pointed out, our board is not fully independent.
For example, our lead director is not fully independent, and some board members are not independent. Combined these factors. The other factors that listed in my proposal, it's the time for our 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, and 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's shooting for the Moon and beyond, we love it. 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 billion. In other words, a vote in favor of this proposal is likely to raise the value of our stock. two of our directors hold no stock in our company.
Why do they have such little confidence? Proxy advisor Institutional Shareholder Services considers three of our directors 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, I don't just mean our ongoing production crisis, we could place two 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 $1.5 billion in Tesla stock continuously for three years. Between 2015 and 2017, a total of 206 proxy access proposals were voted. Average support exceeded 53%. More than 60% of S&P 500's 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 bylaw 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, quote, "special interest shareholder" were 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 four. 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? One up here. Last call. Okay. I declare that the polls are now closed. Based on the proxies that we've received before the meeting,
I can announce that our shareholders approved the recommendations of the Tesla board of directors on all four agenda items, and they did so by a wide margin. Each of 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 four 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&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&A session, we may discuss our business outlook and 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 forward to sharing that with you and then taking questions from the audience. Yeah, I'm just really proud of the Tesla team for accomplishing so much against incredible headwinds. 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. Yeah, I think, like, this is gonna sound maybe a little cheesy, but at Tesla, we build our cars with love. Like, we really care.
I think at a lot of other companies, they're built by, like, the marketing department and the finance department, and it's, there's no soul. You know. Like, we're not perfect, but, we pour our heart and soul into the product. We really care.
The dedication of the Tesla team has been incredible. People have, they've really been working incredibly hard to make the cars. 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's the only one that hasn't gone bankrupt. It's super difficult. In fact, yeah, in the history of the American auto industry, it's always worth bearing in mind that only two have not gone bankrupt, and that's Ford and Tesla.
It's insanely hard just staying alive. I just wanna be clear, it's really difficult. You know, we've had people at Tesla who've sort of worked, like, 60 days straight. We've, like, basically forced them to go home. Like, "You've gotta go home, man. You gotta keel over." And then you step back in to work. You're like, "Damn it, we said go home."
The net result is, despite a lot of difficulties, all lines, those, all parts of the Model 3 production system have demonstrated a 500 car per day capability or a 3,500 car per week capability. We just did a big set of upgrades, and we're spooling up the production lines again.
I think it's quite likely that we will achieve a 5,000 car a week by the end of this month.
It's like, whew. This is like, I'll tell you, the most excruciating, hellish, several months I've maybe ever had, and a lot of other people at Tesla. I think we're getting there. We're doing well on market share. The blue line is the Tesla Model 3. We just became, in May, the best-selling midsize premium sedan in the U.S. of any kind.
That's not, that's of any kind. Not just, it's getting all internal combustion engine cars, not just, you know, battery or hybrid or anything like that. That's despite the fact that we still offer only 1 version of the car. All-wheel drive is coming out next month. Then we'll have the lower cost, the shorter range battery, lower cost car, at around the end of this year, is when we're expecting to do it.
We also made huge progress in the reliability of the car. In the beginning, it was a bit bumpy. Now as deliveries have risen, we've the quality and reliability of the car has improved dramatically.
It's improved by a factor of maybe four or five since start of 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. 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.
Thus far in 2018, our average industries, our injuries per person are 6% below the industry average, which is great, because last year we were a little bit above. And now we're a little bit below, and that trend is continuing downward. I think we've got a shot at being maybe half the injuries per person of the auto industry. And, you know, that's, that's the goal we're striving for, is to be half the injuries per person. When you're building cars and you've got a huge number of people, it's impossible to be zero. We wish it could be zero.
We think being twice as good as the average in the auto 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. Like back strain or wrist strain are by far the most common thing. 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. It's also boring to do the same action over and over again. We're making good progress on that.
It's also worth noting, even our current injury rate is half that of what it was when Toyota and GM were operating the plant. That is often lost in a lot of the media articles. If we achieve our goal, we will be a quarter of the injuries of when it was NUMMI. What I really wanna emphasize, this is a super important thing to me because we owe a great debt to the people who built the car.
I really care about this issue. Supercharger expansion is going really well. We're almost over 10,000 Superchargers worldwide. You know, 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 mostly finished in design and will go into production hopefully around the end of this year. The Supercharger generation three will be a quite a dramatic improvement. We wanna save that announcement for when it deploys, which is hopefully later this year. Once we have that system in place, then we're gonna accelerate the Supercharger expansion even more.
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. In less than a year from now, we will do another gigawatt. That's It's pretty massive. Yeah.
The rate of stationary storage deployment is gonna grow exponentially. I mean, I think for many years to come, each incremental year will be about as much as all of the preceding years, which is a crazy growth rate. It's also a sort of a production-limited thing, where we would actually be able to do more if we could produce more. We are producing a lot of batteries.
In fact, next quarter at the Gigafactory, we expect to make more battery capacity than all other EVs combined worldwide, including China. I mean, this is a really crazy amount of batteries. This one factory is making, will make more than all the other factories on Earth.
Like, really deserving the Gigafactory sort of title. It's really, really nutty. We're gonna try to have like maybe when things get calmed down a bit, like, have more tours available for Giga because it's like epic. Yeah. It's like at least two hours to walk, just to walk through all of the parts of Giga at this point. Just to walk through everything, it takes two hours. Like, if you don't pause a lot. It's like good exercise. So that's, yeah, pretty well. We have our first early. We actually have a bunch of non-Tesla employee Solar Roof customers. 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. I have it on a house that I've, the little house across the road that used to be 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 without kinda ruining the Gene Wilder aesthetic, which I really like actually. I was able to put these on the Gene Wilder's old house, and it looked like it still has the same character, which is great.
We're spending a lot of time just validating the Solar Roof because they need to last at least 30 years, ideally longer. There's only so much accelerated life testing that you can do on a roof. Before we can deploy it to a large number of houses, we need to make sure that all elements of the roof are gonna last for at least three decades, and ideally sort of half a century or more. This is gonna be a very big product. It's also gonna grow exponentially.
I think you wanna have a thing where if you look around the neighborhood, that adding solar actually improved the aesthetics and feel of a neighborhood. I think that's a really big deal. We're not far from Q3. My CFO and General Counsel are like, "You have to watch what words you use in these situations." I think, you know, it's really looking like we are gonna have positive GAAP net income next quarter, as well as positive cash flow in Q3 and Q4. We, as I've said before, do not expect to need to raise any incremental debt or equity. We've got some exciting products in the works.
The Model Y is really gonna be something super special. We're aiming to unveil the Model Y, approximately March next year, and then go into production, about two, maybe around two years from now. Maybe a little less than two years, but basically, first half of 2020 for production of Model Y. Something similar for Semi and Roadster.
So these products are shaping up. I think the Semi and Roadster are actually gonna 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, what I unveiled with the Roadster was the base model performance. That's, it's gonna have a SpaceX option package. It's crazy.
I think it's important for us to show with the Roadster that an electric vehicle can outperform a gasoline car in every way, because gasoline cars still have sort of a halo effect. I think if we can show that an electric car can outperform a gasoline car in every way, then we sort of get rid of that halo effect of gasoline cars. I think that's quite a powerful thing perceptually for the general public. These are just some questions that we got on Twitter. We got some really insightful questions on Twitter as well as some strange ones.
One of the first questions is, for Model 3 production line, As I said before, we're really gonna focus on manufacturing technology for Tesla. We've made a lot of mistakes with Model 3 production. We recognize those mistakes, and we're confident we know how to address them. In fact, we are addressing them. Long term, I think the biggest competitive strength of Tesla is gonna be manufacturing. This is sort of counterintuitive, but it's gonna be quite dramatic, I think. The approach to automation that we've taken, I think in some cases has worked, in some cases has not.
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. 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. When you see it looks super dumb. You're like, "Wow." "Why do we do that?" It sort of makes sense to start off with an initial production line which 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.
Particularly ones that result in repetitive stress injuries, or are mechanically difficult. That's really a much better approach. That's what we're gonna do for Gigafactories one and two. It's a much more sensible way to do things. Let's see. Let me actually have the Tesla executive team come up. Guys, you wanna come up and hang out? JB, do you wanna talk about the battery cost stuff?
Sure. You know, it's difficult for us to talk about specific cost numbers. That's always a difficult topic, but we're 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, you know, startup, every lab, every large manufacturer. We get quotes from them. We test cells from them. If there's something better, you know, we're all ears, we'd love to find it, but we haven't found it yet. Generally, yeah, we're still pretty confident about that same direction.
Yeah, I mean, we think at the cell level, probably we can do better than $100 kWh, maybe later this year, depending upon what, on commodity prices. If commodity prices are roughly where they are today, we'll probably do better than $100 kWh at the cell level.
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 nano materials at the Gigafactory, an improved design of the module and pack, we think long term, we can get below $100 kWh at the pack level, which is really the key figure of merit for a car.
Long term meaning definitely less than two years. That says the long term. Anything I mean, Yeah. Yeah, we think we've come up with some pretty cool breakthroughs on this front, on the energy density and cost of the battery pack and yeah. I think it's gonna be pretty great, as far as I can see. Yeah. When will the Gigafactory be completely built? I think we'll keep building on the Gigafactory for at least four or five 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.
Based on the plans that we know, it might be twice as big as the next building in the world. Hence the interesting tour. It's, yeah.
A third of it is done.
Yeah, it's about a third done right now. Yeah. It's really, really, really enormous. I think it's going quite well. There will be more Gigafactories in the future. Like we're close to announcing a combined vehicle and battery factory. Future Gigafactories will include vehicle and battery pack and powertrain as a single integrated unit. We're close to announcing something in China, that, I don't know, Robin, do you wanna talk about that? I mean, we don't wanna make an announcement. Exactly. Maybe just talk about, like the preamble or something. I don't know. Robin is the head of Worldwide Sales for Tesla.
Yeah. Thanks, Elon. I didn't expect to talk about this. We're incredibly excited to build first Tesla Gigafactory outside of the U.S. in China. Specifically, it's gonna be in Shanghai. 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 gonna be, you know, the next generation of Tesla factory. We're super excited. The stuff that we're gonna be putting there and the cars that we're gonna be building in that factory is gonna be incredible. We gonna announce something really, all the details really soon.
I won't tell more. This is enough.
All right. Thank you. Particularly as we try to make cars more and more affordable, it's gonna be important to localize production to at least the continent level. Having a Gigafactory, a vehicle factory in North America, one in China, one in Europe, those are the obvious three places for vehicle and battery Gigafactories.
Probably if things go according to plan, we'll probably be announcing details of the China Gigafactory as soon as next month. Europe Gigafactory, maybe end of this year, kinda depending on how, we need to figure out where to put it exactly. Probably towards the end of this year for the Europe Gigafactory.
Ultimately, we expect probably there's 10 or 12 worldwide. There's some questions on the Tesla Semi. We are gonna do another revision of the Tesla Semi design, 'cause we've learned a lot, and we think we can actually make it even better than what was unveiled. Really have a range that is way beyond what people think or most people in the industry think is possible.
It is definitely gonna be a semi that works in Europe and in North America and China and the rest of the world. If you wanna convince that that's one major factor in the works, then another one in the works later this year. Do you wanna talk about cells?
We've talked about this a few times, Tesla will absolutely recycle, and we do recycle all of our spent cells, modules, and battery packs. You know, the discussion about, you know, this waste is sort of ending up in landfills is not correct. You know, we would not do that. These are valuable materials, in addition to it's just the right thing to do.
We have current partner companies on every major continent where we have, you know, cars operating that we work with to do this today. In addition, we're developing internally more, you know, processes. We're doing R&D on how we can, you know, improve this recycling process to get more of the active materials back.
Ultimately, what we want is a closed loop right at the Gigafactories that reuses the same recycled materials. You know, this isn't impossible. We see a pathway to do it, but, you know, that's where we're headed with this. You know, today, we're on the way to do that. It's definitely something that'll be a huge benefit in the long term to cost as we're able to reprocess more materials instead of actually having to mine new materials.
In terms of repairability of Model 3, including insurance costs, we're working with insurance companies and on some internal activities. We're confident of getting the cost of insurance for Model 3 to be at least 20%-30% lower than, say, a BMW 3 Series or equivalent mid-sized sedans. The safety is definitely better, and then we're working on the repair costs.
We've made a lot of progress on that front. The bottom line is that the insurance cost or total cost of ownership of the Model 3 should be significantly better than any other mid-priced premium sedan. Yes. We will definitely offer a $35,000 version of the Model 3.
I think probably at the end of this year is when we should be able to make the smaller battery pack, and then get into kind of volume production of $35K version in Q1 next year. We will definitely honor that obligation, and we would do so right now if it was physically possible. Let's see. Yeah, we're gonna 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. There's a new version of Autopilot that's rolling out, I think, this week, which I think is quite a significant improvement.
I think what you'll see is that the reliability and capability of Autopilot will increase exponentially over the next 6- 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 one now, will vary quite a bit depending upon what part of the world you're in and what configuration. At the existing configuration, if you were to order now in the U.S., you probably would be waiting, I'm guessing about three or four months.
On the other hand, if you want the right-hand drive version, you're probably waiting 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. The wait is anywhere from 3-15 months, approximately. For current configuration ordered now, it's maybe about three or four months.
This is actually quite a complicated answer. There are many lines to the Model 3. In some cases, there are several lines. In some cases, there's just one line. It kind of depends on what the capacity of that line is.
For general assembly, which is like putting the parts together at the end, we currently have two lines and are constructing a 3rd. The 3rd line is, I think dramatically better than lines one and two. We started construction on that 3rd line about two weeks ago, we're already putting the 1st car through that line. It's really crazy fast.
That's part of what gives me confidence about the 5K per week for Model 3. Currently the biggest constraint on output is general assembly. I would probably get to 5,000 a week with the current two general assembly lines. With the 3rd one, I'm highly confident that we can exceed 5,000 units per week.
Model 3 test drives, we should be able to offer Model 3 test drives starting at the end of this month. 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 the end of next year- over- year, probably see a doubling of service center capacity for Tesla.
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. 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 body repair. In fact, we think we might be able to do for a lot of them, like same-day body repair, which is, you know, it's definitely possible. I think we want to aim for at least 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. This is very 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.
Yeah, March next year, I think we'll have something very exciting to show. All right, let's take some questions from the audience. I think it's best if you just line up at the mics and go for it.
Hi, Elon. I wanted to ask, is there gonna be a time, you know, perhaps in the next year, when 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 Two mandate.
Yeah, I think we'll do a compact car in less than five years. Yeah. All right.
Hey, Elon. Yeah, great progress. You mentioned Autopilot progress as well. When do you expect like fully enhanced Autopilot functionality, like following navigation, switching freeways, within the six-month timeframe?
I was just testing that last night at about 1:00 A.M. I think we might be able to release something in a couple of months that can do that. We've been pursuing two paths. One really complicated path that I think isn't working out great. 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. I think with some further effort, we can get that out in the next couple months.
Is this on? There we go. As far as Tesla 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 three 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 will offer leasing on Model 3, but probably end of this year or early next 'cause it does have a slight impact on the capital usage of Tesla. We, you know, in terms of fleet stuff, I think people can certainly buy a lot of Model 3s and then operate them as a fleet like people do for Model S's and X's for taxis. I think we're certainly be happy to support that.
I mean, as a, 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 gonna start leasing direct to the consumer," or having a commercial option, that might not work out so well for me. That, that's why I'm asking. Is it anything commercial happening that you have in the works in the next two 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 'cause they've been waiting for a couple years. And we're not really thinking much about incremental demand generation because as it is, even getting to 5K cars per week, it would take us almost two years to produce enough cars to satisfy those that have put down a $1,000 deposit.
Yeah, we need to kind of ramp to 5K and then next year ramp to 10K a week and get the right-hand drive version done and homologate the car for Europe and Asia. You know, then we'll think about other things once we've done all those things.
Thank you.
Thank you.
Hi. Gwynne 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. The Starlink thing is 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. But the Starlink user terminal is about the size of a sort of small to medium-sized pizza.
I'm not sure you'd wanna put that on the roof of the you know, of a Tesla. I mean, maybe, but I think probably just using most likely we'll continue to use just Wi-Fi and the cellular network. Yeah. Most likely. Yeah.
Hello.
Hi.
My name is Steven Singleton. My question is, how is Tesla engaging regarding virtual power stations with governments and territories in countries that may have weak power infrastructures to provide clean energy to more of the world's citizens?
Yeah. I think we'll have a lot more to say about that when we announce the generation three of the Superchargers. That we'll be doing much more of an integrated solar battery system with the Superchargers. To date, only a few of the Supercharger systems have solar and battery systems. Long term, we wanna have almost all of them have that.
The nice thing is that if you've got like a solar powered, kind of like a solar powered car port area and Tesla batteries, then even if the grid, you don't even need to be connected to the grid. It's sort of like even, you know, proof against like a zombie apocalypse. It should still work. As long as the zombies aren't too near the Supercharger, I suppose.
Yeah. It'll be able to work anywhere, even if there's not good power infrastructure.
I think he's also asking about, like, networking Powerwalls together.
Oh, okay.
For like a virtual power plant, if that's kind of what you also were alluding to, you know, we do have a really cool project in Australia, where we're actually networking together up to 50,000 individual homes with Powerwalls. Each one of those homes has its own battery. It can still serve as like a, you know, backup power source if the utility totally goes out, if there's a storm.
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. That's a really cool project that has benefits across the whole grid, for the homeowners, for a lot of people. You know, we're building that out right now, and we'll probably be expanding that same model.
We have a small demo in the U.S., and we'll be expanding it worldwide.
We're also doing, again, quite a lot in Puerto Rico. I think Tesla has more battery projects and solar projects in Puerto Rico than everyone else combined. 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, you know, sort of oil and gas-based, energy generation system.
Hey, 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.
Oh, thank you.
You guys nailed design, nailed performance. The one thing I always get from friends and family, 'cause I do the drive down to L.A. a lot, is the Supercharging time. I know you mentioned you guys are working on Supercharger V3 . I assume it's gonna be a bit faster. Just curious, do you guys see room for kind of orders of magnitude improvement in charging time, or are we kinda 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 three or four is possible. It won't be applicable to all battery chemistries. 2012 chemistry can't take the charge rate of current chemistry. Wish it could, but we're just have to make a bunch of improvements to increase the charge rate. The key, I think for your metric is that the ratio of drive time to charge time should be at least on the order of like 6- 1, if not 10, 8- 1 or 10- 1.
At the point at which you're driving, say, 10x as much as you're charging, then the natural sort of human need to take a break, unless you have an enormous bladder, starts becoming paramount. I mean, if you start a road trip at, say, 9:00 A.M., typically by around noon, you wanna stop, you know, hit the restroom, grab a bite to eat, grab a coffee, and you wanna get back to your car and have it be ready to go.
That's where the if, like, if you say that that's like maybe half an hour, that's kinda like the minimum threshold for the car to be ready to go when you come back from a break.
Then once you get to the point where it's, say, 10- 1, where maybe it's only 15, 20 minutes, yeah, something on the order of 15 minutes, then the car is ready to go way before you're ready to go. 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. We think there's, you know, certainly opportunity for range improvements down the road where we'll, you know, be able to offer cars with ranges in excess of 400 miles. Thanks.
Hi, my name's Dr. Katherine van Ekert, 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?
Yeah.
Uh, I,
Really?
Our gear shifter I don't think has anything. Steering wheel maybe does.
Steering wheel.
Okay, steering wheel still does. Wait, Franz.
Are you still using leather in some of your components?
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 need a fully vegan car.
Sure. Our concern is that, you know, 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.
Yeah. You know, I think S, X, and 3, they're, we may be the first vehicles in production to kind of go non-leather, and at least in all of our seating and our trim, and we're actively working on replacing the steering wheel as well. We just wanna make sure that the experience is as good, if not better.
Sure. Yeah, just to add to that, there are some existing premium vegan leather suppliers, Ultrasuede and Alcantara, if I'm pronouncing it correctly. They're used by other luxury cars like Ferrari. Yeah, we would really like to see Tesla step up as well.
Yeah, we'll definitely be offering sort of, as Franz says, technically, we don't say it on the website, but you can actually have a Tesla that has zero leather whatsoever, including on the steering wheel. 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. We can certainly see a path to about a 30% improvement, maybe a 40% improvement in energy in the same size battery pack. Like, the best technology we are confident does work, and it just, it needs to be scaled up and made very reliable. 30%-40% is definitely doable. Long-term, probably double. Long-term by other people's standards.
From Tesla's standpoint, we think probably 2-3 years to get to about a 30% improvement in volumetric energy density and, yeah, maybe six years or something, 6-8 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. All right.
I started a company called Tesla Tractions. Tesla Tractions is basically a gamification version of visiting Superchargers. I know that you tweeted about this a while ago, saying that it was a good idea. If you ever decide to go through with it, obviously, I do not wanna be in a position of competition with you. How could someone like me help the mission?
Maybe we should integrate Tesla. We're, you know, as I said, folks right now is getting through the critical stuff like especially the Model 3 production ramp, and then smoothing out the production process to make the car affordable, getting the lower cost battery pack or smaller battery pack into production. Those are kind of critical, fundamental things to really the survival of the company. We can do kind of like the fun frivolous things like put the Android to the experience maybe later this year.
Like, we always like doing sort of fun silly things in the car, like, you know, the Easter eggs that, you know, there's like a lot of Easter eggs in the Model S and Model X and Model 3 that are quite fun. 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 Easter egg box. Yeah. All right.
My name is Ross Gerber. I'm hooked into Tesla in multiple ways. Obviously, I'm a stockholder. I have a solar SolarCity panel on my roof, and also have a Model 3 reservation from March 31st, 2016 ready for configuring. I would really, really, really like to have an all-wheel drive.
Oh, yeah.
Can you give an order of magnitude guess as to how long I'd have to wait for that?
You should receive a configuration email maybe in the next week or so.
Perfect.
Yeah.
How about.
We start production on all-wheel drive. Actually, technically, we're starting our production on all-wheel drive this month. We expect to scale that up in that, in July and August and be in high volume production of all-wheel drive by September for sure.
I have a tour planned for September. A one-month tour.
All right, we'll make sure you get your car.
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 one of your new products. 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 to this temperature," "Come pick me up," you know, that type of stuff?
We're gonna keep enhancing the Tesla app on the phone. To be able to, you know, long term just tap the Summon button and your car will come find you wherever you are. You can change the temperature right now from the app. We want the car to learn what you most likely would do. 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? It's sort of like an intuitive trusty steed that just always knows what you want, ideally. You can easily adjust that as needed.
you want it be as close to like a mind meld with the car as possible. Yeah.
Oh, hi. My name is Kevin. I have the Model S since 2013. My question is about Autopilot and the use of lidar. As we all know that Tesla probably is the company alone that not using lidar, where all other vendors using it. As autonomous driving is close to reality, I think inevitably there will be a showdown on which approach will be more superior.
What do you think when that time will be?
I think lidar will be seen as what lidar tends to drive companies to do is to go to a local maximum in terms of Autopilot capability, autonomous driving capability. Lidar ends up being like somewhat of a crutch. It's helpful to get almost there, but if you rely on it, you will never actually get there, is my opinion. 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, 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 an 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 gonna do active photon generation, 400-700 nanometers is the wrong wavelength, or on that order. It's wrong wavelength. You really wanna be aiming for something that's around 4 mm wavelength, because that is occlusion penetrating.
We're two-time Tesla Model S owners and also stockholders. Question about JB. Every SEC filing has always included JB as a key man, and he was suddenly dropped off in the Q1 filings, so a little concerned about JB.
Oh, really? I didn't know that.
And- And, uh,
That was maybe accidental. Sorry.
And,
I didn't even know that was the case.
Is there a path?
I have no idea why.
We just made it more generic.
Oh.
Yeah, the intent was to make it more generic, the risk factor. There was no intended or unintended implication behind it. JB, we love you. We want you.
Sorry, 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?
Yeah. Do you want to talk about that?
Sure. Yeah, definitely we expect our storage business to turn significantly positive. Our goal is to have the same level of gross margin as the automotive business. As our volume scale and as we have more Powerwalls out there, and our manufacturing efficiencies come in, we definitely expect that you'll see a big change and a positive trend in that every quarter into 2019.
Yeah. We're aiming for essentially about the same gross margin level as in the cars, which is sort of a 20%-30% gross margin for all of the energy products. It's necessarily as you ramp up production, it ends up being negative just as it was for Model 3, and Model S and X. I probably later this year or certainly early next, we should be in the 20%-30% gross margin level for energy storage.
Hi. Thanks for your shot on the conference call, by the way. My question was just surrounding as a long-term investor, I hate to say this, but I feel like my trust in Tesla's timelines sort of eroded a little bit with the Model 3 ramp. Should I keep discounting things on Elon time, or have you learned anything about this?
I think I do have an issue with time. Yeah. It's been true since and my brother's here. I have a condition. My brother used to, when we were catching the bus to school, he would lie to me about the time. He would always say Or sometimes says, earlier than it actually was, and then I'd get there slightly after that and then we'd actually be able to catch the bus. I, you know, this is something I'm trying to get better at. I'm sort of naturally optimistic person, which I would not have probably done cars or rockets if I was not. I'm trying to recalibrate these estimates. Yeah.
Try to recalibrate as much as possible. Yeah. 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 hopefully less optimistic over time. Yeah. Like, it pretty much always happens, but not exactly on the timeframe.
Hey, Elon, we have, we're about 15 minutes over one hour. Do you wanna take maybe a couple more?
Yeah, maybe a couple more questions from each side.
Okay.
Sure.
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?
Yeah. I actually used to ride motorcycles when I was a kid, and I was dirt, like, dirt biking for, I don't know, like eight years or something. I had a road bike until I was 17 and was almost killed by a truck. We're not gonna do motorcycles.
Hi, Mr. Musk. My name is Sonia. My mom has a Model 3. My dad has a Model S. I have one chair. I've noticed that whenever my mom is kind of going a little bit too fast to approaching a car at a stop sign, the Tesla beeps pretty loudly to kind of warn, "Hey, you're gonna hit that." I was wondering, are you guys thinking about developing a mode where drivers could choose to turn it on?
If a Tesla detected that it was approaching something quickly or was going to crash, it would gradually slow down a little bit. Best case scenario, if the driver takes control, it doesn't really matter. Worst case scenario, they crash, it decelerates, it's not as bad.
It does actually have, there's automatic emergency braking. I think what you're saying is, like, instead of, like, last minute kind of dramatic slowdown, maybe slowdown sooner but less dramatically. That is something that will occur with the latest versions of Autopilot. It will decrease speed proportionate to the confidence level.
Yeah, we wanna do that in a way that's not annoying to people, like the car isn't slowing down a lot. It's really a delicate balance between not annoying people, so they wanna turn it off, but also being safe. For Autopilot, I think the improvements are gonna be really quite dramatic over the next several months.
The system is intended to change speed proportionate to its confidence in going forward. In order to do so, we had to improve the sophistication of the Autopilot neural net and the heuristics that go with it, so it just didn't annoy the hell out of people. There are many times where the car thinks it should slow down, but actually not really.
That would just drive people crazy. 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. Thanks.
Hi, guys. I just wanted to personally thank Elon, JB, Franz, Deepak, good to have you back, Tim, Emily, Vinnie, Andrew, the people at Tesla who I don't know by name. The proud owner of an early 2012 Model S. Very different than the Model 3 that my dad recently 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. Continued the trip. 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 card for the guy to your left? Because I wanted to tell him about a company this man's 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. Yeah, we'll certainly take a business card, always looking to investigate interesting opportunities to improve the car. 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. We're arguably on version three or four of the Model S right now.
It's really a gigantic improvement in Model S today versus Model S of 2012 when we first started production. I really encourage anyone who's got an early Model S 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. 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. We did rely quite a bit on tier 1 manufacturing automation integrators. A couple of those things really didn't work out at all. Now we're really going to internalize all Tier one manufacturing systems at Tesla. We'll have a lot of suppliers, but they'll be at the tier two and tier three level. All right. Thanks very much for coming.