Hey, everyone. We're going to get started with the meeting now. Hi. All right. Welcome to Tesla's special stockholder meeting to consider the acquisition of SolarCity. We're very glad that you could be here today with us. My name's Todd Maron, I'm the General Counsel and Corporate Secretary of Tesla. Following the formal part of the meeting, we're going to have a Q&A session with Elon, our CEO and Chairman. Before we get started, I'd also like to introduce some important people who are here today. We have many of our board of directors in the front row here. We have our CFO, Jason Wheeler. We have our President of Global Sales and Service, Jon McNeill. I see our head of HR, Arnnon Geshuri. Our VP of IR, Jeff Evanson, is here. We're all real glad that you could join us today. There's two parts to today's meeting.
The first, the formal part of the meeting, which will be pretty brief, will be to discuss and vote on the acquisition of SolarCity. We'll then have the Q&A session with Elon, and he'll be answering the questions that you submitted before the meeting today. Let's get started by calling this special meeting to order. Please refer to the agenda and rules of the meeting that were provided to you today. In the interest of respecting the time of all stockholders present, we ask that you help us run a smooth process by following those rules. The time is now 1:02 P.M., and I'm going to declare that the polls are now open. We've already received, over the past few weeks, proxies from the vast majority of our shareholders, meaning that most all of the votes were already submitted before the meeting.
As I mentioned previously, if you wish to submit a ballot or change your vote, you can do so by handing your ballot to Christina Vico, who's right over there, and she can help you with that. She's our Inspector of Elections for the special meeting. Our board of directors has appointed her as a representative of Broadridge Financial Solutions to serve in that behalf. She has signed an oath to serve as the inspector. Broadridge has certified that on or about October 13th, 2016, the proxy materials were mailed or provided to all shareholders of record as of September 23, 2016. We have a majority of the outstanding shares entitled to vote represented at the meeting, so I declare that there's a quorum present and that we may proceed with the business of the meeting. We're conducting the meeting in accordance with Tesla's bylaws and applicable law.
The items on the agenda are as follows. Proposal 1, the proposal to adopt the merger agreement among Tesla, SolarCity, and a wholly-owned subsidiary of Tesla, as a result of which SolarCity will become a wholly-owned subsidiary of Tesla, and to approve the transactions contemplated by the merger agreement, including the merger and issuance of shares of Tesla common stock to SolarCity stockholders in connection with the merger. Proposal 2 is the proposal to adjourn the special meeting if necessary or appropriate to solicit additional proxies. Tesla's board has recommended that our shareholders vote for each of the proposals. Now I'm going to ask if there's anyone in the audience that needs to have some proxies submitted. Now is the time to do it before we close the polls. Can you raise your hand if you have a proxy that you need to submit to Ms. Vico?
I see one hand over there. We'll come by and grab them. Anyone left? One over here. Put your hand high up if you need it. Okay. Thank you. For the record, the time is now 1:05, and I declare that the polls are now closed. I'm pleased to say that based on the proxies that we've previously received, our shareholders have overwhelmingly approved each proposal. Yeah. There will be a final report given by the Inspector of Elections, but based on the proxies we've received so far, Tesla's acquisition of SolarCity received the approval of more than 85% of the unaffiliated votes cast at the meeting. Thank you to all of our shareholders for your support. We can't tell you how much we appreciate it. We will formally announce the voting results on an 8-K that we'll file with the SEC.
That concludes the official portion of today's meeting, which I now declare to be adjourned. Next up will be the Q&A with Elon. During the Q&A, he 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 and the S-4 that we filed with the SEC. Those forward-looking statements represent our views as of today, should not be relied on after, and we disclaim any obligation to update them after today. With that, please welcome Elon Musk.
Hello, everyone. Yeah, I'd like to thank all of the unaffiliated shareholders that voted in favor of the transaction by an overwhelming margin. I think your faith will be rewarded. It's really going to be some amazing stuff that comes out. In fact, I was just earlier today meeting with the SolarCity engineering team, and I don't want to perhaps commit to this yet, but it's looking quite promising that a Solar Roof will actually cost less than a normal roof before you even take the value of electricity into account. The basic proposition would be, would you like a roof that looks better than a normal roof, lasts twice as long, costs less, and by the way, generates electricity? It's like, why would you get anything else? Maybe there's a reason. I'm not sure why.
Anyways, that's really looking really promising, and I think there's even room for improvement beyond there. Very excited about where things are going to go with the Solar Roof integrated with the Powerwall and obviously with electric cars. With that, let's go to questions. The questions I think should appear on the screen. Or maybe not. Maybe we'll have to read them or something. Okay. Thanks. Yeah. Okay. Apparently, there's a new political landscape. I'm not sure what people are referring to, but yeah, something. One of the biggest misunderstandings about Tesla, and somewhat counterintuitive, is the degree to which Tesla is reliant upon incentives or subsidies. Ironically, if all incentives and subsidies were removed for Tesla's competitive position would increase, not decrease. This is a really fundamental misunderstanding.
We do believe there should be incentives and government incentives for electric vehicles, but we believe that they should be there for the good of the industry and to accelerate the advent of sustainable transport, not because Tesla needs them. Let me explain what I mean by this. The incentives either don't scale or they're disadvantageous. If you take the zero-emission vehicle credit, where you get a nominal value of $5,000 per credit, and let's say you might get, say, two of those per vehicle or three. Two would be worth $10,000 face value. Tesla can only sell them to other car companies for about $0.50 on the dollar. Because the ZEV mandate is very weak, we only get $0.50 on the dollar disadvantage of EV incentives, not the other way around.
There's also the $7,500 federal tax credit, that stops at a cumulative quarter of a million vehicles. It's essentially irrelevant for any high-volume program. As soon as we start making half a million or a million vehicles per year, that 250,000 cumulative will long ago have run out. It's impossible to scale electric vehicles and have the incentive be relevant. Ironically in California, they put an income cap on the $2,500 incentive, many of our customers don't even qualify for the $2,500 incentive because of the income cap, which I think is really quite destructive and doesn't make any sense to me because we're the only car company left in California. It's like Tesla is the biggest manufacturer in California. I don't understand why the legislature would do such a thing. That's ultimately to the detriment of its own state.
Anyway, these things are puzzling. If you look internationally, in China, which is the world's biggest car market, we currently pay 25% import duty, and we have no access to incentives because our car is not locally made. The net effect is that our car costs 40% more than a locally made vehicle. If we made the vehicle locally, there'd be a 40% difference. Not only do we not have access to incentives, we have a huge penalty. Looking at other parts of the world, Germany put a EUR 60,000 cap on the incentives, conveniently just below the cost of a Tesla in Europe or just above it. Yeah, just below it. Essentially, it's very difficult for us to get access to any incentives from Germany. Denmark did the same thing. France is considering doing the same thing.
The great irony is that if all the incentives just went to zero, Tesla's competitive position would immediately improve quite significantly. We don't think that that's a good thing for the world, but it would be a good thing for Tesla. Yeah, I think that's a pretty important thing to consider. Let's say the new president did erase all incentives, that Tesla's competitive position would just be better. That's actually what would happen. "Who owns the technology for the new Solar Roof?" Technology is Well, it's owned by us. Sorry. Yeah, this was almost entirely developed by Tesla and SolarCity. Well, mostly by SolarCity, some by Tesla. We may or may not use a film from 3M, but the use of the film in a particular application that we're talking about was something that we came up with.
Call it, I don't know, 90% plus of the technology is owned by a combined company. Sort of partially answered this question. We expect to start doing the Solar Roofs in volume, summer next year. We'll roll out, there's 4 main types, if you saw the rollout, and we'll roll them out one at a time. We'll start off, probably in 3-month intervals, start with the one that appears to be the most popular, and then roll each new variant out roughly on 3-month cycles from summer next year. The cost will obviously vary according to the size of the house and the difficulty of the installation.
The important thing is that the apples to apples comparison compared to a regular roof, we're confident will be at least at, and we believe slightly below the cost of a regular roof, and then electricity is just a bonus. Well, we have to touch on this question more than a few times. We're trying to make an integrated product. You have an integrated Solar Roof with a Powerwall and an electric car. You just go into a Tesla store, just say, "Yes," it just happens. It all works. It's seamless, and you love it. Thoughts on new competitors. Well, it's certainly encouraging to see other car makers do electric cars.
I am a little concerned about the pace and volume of what they're doing since they seem to be mostly aiming to just target whatever the incentive threshold is, and then not really do serious volume beyond that. As I said a moment ago, the incentives don't scale with volume, so the major manufacturers are not, from what we see, maybe with the exception of what Volkswagen says they're going to do, none of the competitors are planning to do serious volume in electric vehicles yet. That they're just sized to stay within the volume constraints of the incentives. I think like the Chevrolet Bolt with a B, they're aiming for 20,000-30,000 cars a year. Really, a car like that should be 300,000-500,000 per year for it to really make a difference. I'm not sure I understand this question.
Model 3, from the beginning, we said free charging is not included in the Model 3, or free unlimited charging is not included. Free long distance is, but not free local. It becomes really unwieldy for people to use the gas station approach for electric cars. Electric cars should really be charged where you charge your phone, you just need to solve the long-distance problem, which is what the Supercharger stations will do. Already answered. All right. I can maybe take a few quick questions from the audience. Sure.
With the Solar Roofs, does each tile have solar in each tile? Because you may have shaded areas of the roof. Is there a cost difference between, or how are your engineers going to recommend a roof be installed based on shade?
Sure. The question is, will each tile have a solar cell behind it or will some not? The answer is, some will not, but it's important that they aesthetically look the same, so that you do not see a patchy roof. It has to be aesthetically consistent, but it will not make sense to put solar cells on every portion of the roof because some portions are heavily shaded, as you're pointing out. Yeah. It just needs to be aesthetically consistent.
Do you have a schedule for the Model 3 third reveal?
Today is not the time for that announcement. It's probably, I don't know, beginning of spring or something like that, yeah. Three or four months from now. I'm sorry. I'm just going to take maybe three or four more questions. Yeah, just over there.
my question is.
yeah.
do you defer to discuss the incentives with Tesla, but there's the incentive issue with SolarCity and with the ITC passing away, and also maybe some additional subsidies for oil and solar.
the price differential that would depend on the product to go down, is that going to be compensated for?
The question was, what about the incentives for solar? There is currently a 30% investment tax credit. Although the efficiency with which that tax credit is applied really diminishes its true value to, I think, maybe a 15%-20% true value because of the complexity of how it's set up. It is important to note that, obviously, oil and gas and many other things, farming subsidies are gigantic. When somebody's complaining about subsidies, why are they complaining about what Tesla receives if we're number 150 on the list, you have to really question their motivations. If they're really about subsidies, what about the top 10? It's not really about subsidies. That's not really what they're attacking. Stripper oil wells get something like a 25% tax credit. I don't know why we're giving a 25% tax credit to stripper oil wells. That's crazy.
With no time limit, by the way. There's the whole scam where oil companies can do zero-cost leases in foreign countries, and just pay taxes, and then not pay taxes in the U.S. This is one of the biggest scams ever. No lease is truly zero value, if you go zero to very low value on the lease, pretend that you're getting taxed instead, then you don't pay taxes in the U.S. It's a really giant subsidy. Going back to what I was saying a moment ago, assuming it pans out that we're able to do a Solar Roof for less than a normal roof before you even take into account the value of the electricity, assuming that pans out, well, subsidies don't really matter.
Have you analyzed the labor cost of installing the roof in that number?
Yes.
That's a big component.
Yes, that includes the labor cost of the roof. Yeah, absolutely. Turns out the roofing supply chain is incredibly inefficient. It's been a long time since people really looked at that. When was the last time anyone here had a conversation about a roof? It's rare. Roofing has just not gotten a lot of love. Looking at just the supply chain efficiency and going to a high-strength glass instead of a concrete or ceramic tile, the glass weighs maybe a third to a quarter, sometimes even a fifth as much as a regular ceramic or concrete tile. Most of the cost of the tiles is actually transport. The logistics costs are huge, and they tend to be quite fragile, so the in-process breakage of the ceramic and concrete tiles is very high. You have a lot of breakage, very high transport costs.
The density is not very good. They're typically quite thick. The whole supply chain from where they're made to where they're finally installed is really inefficient. Just by kind of cleaning all that up, there are huge gains, it turns out. Okay, just maybe two more questions. Sure.
Is the actual solar component in the roof tiles novel at all, or is that something that's been around for a while? Just trying to wrap my head around how all the materials can be so cheap.
Yeah. It uses a very high-efficiency cell, or will be using a very high-efficiency cell. The cell efficiency would be in the low to mid-20s, kind of a 22%-24% efficient at the cell level. Then it's laminated to decorative high-strength glass. Then you've got to be clever about how you connect all those cells together and what the back plane looks like. Honestly, in looking at this, it's like, I don't know why anyone's not doing it. It's not that crazy hard. Beats me. Okay, at the back there. Sure.
I'm most concerned with getting rid of the fossil fuel industry. PG&E forward slash solar choice for $0.03 more per your kilowatt-hour will give you solar energy from solar farms in Northern California. It keeps our economy in California strong.
Sure
You can do it today.
All right. Sounds great.
I know that maybe you want to put roofs on. Our roof wouldn't take solar panels.
Well, actually
Even the roof. It's got too many gables, and it has trees.
I'm not sure that that carries
can switch over. It's just if we get rid of the fossil fuel industry, then electric cars and SolarCity will do better.
Sure. Agreed. All right, one last question. Sure. Go ahead.
Well, the question I have is a friend had a problem with Tesla with getting repairs. It's taking three and a half months to only have.
All right. That's not the subject matter.
With the louvers in the tiles, have you guys taken into account the sun angle? Obviously, in the summertime, it's higher up. In the wintertime, it's lower. Does that get factored in at all?
Yes.
Try and make sure that it captures the most throughout the whole year?
It is. Yeah. It turns out, the actual sun energy you get when it's really low on the horizon is tiny. Excluding that low-angle energy has very little effect.
It kind of focuses on the tiles.
Yeah, then in the way that the microstructure, the way it's arranged, you can actually get internal reflections. As the photon comes in, instead of bouncing right out, it can actually bounce around inside and kick down an electron, which is photovoltaics. It turns out that the benefit offsets the efficiency hit to some degree. It looks like it's probably going to be close to even, plus or minus a few %. All right. Thank you, everyone. Thank you.