Tesla, Inc. (TSLA)

AGM 2016

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May 31, 2016

Thanks for your patience. Welcome to Tesla's 2016 Annual Meeting of Stockholders. My name is Todd Marin. I'm Tesla's General Counsel. We're going to have the formal part of the meeting. And then after that's done, I'll be introducing our CEO, Elon Musk, up onto the stage with some other Tesla guests. And they'll be doing a presentation that I think you guys are going to enjoy. In the meantime, I want to invite, I want to recognize some special people who are here, our Board of Directors, who's up in the front row. We also have our CTO, JB Straubel, with us. We have our CFO, Jason Wheeler, with us. We have our Lead Design Executive, Franz von Holzhausen up in the front row, and a lot of other Tesla team members here. So I want to recognize all of them. We also have from our independent auditors, PricewaterhouseCoopers, Larry Westfall and Nino Sarkis in the back there. So, for the meeting today, there's going to be 2 parts. 1st, in the formal part, we're going to cover the 3 items that stockholders have been asked to vote on today. And then after the voting, we'll turn to the presentation. So let's get started by calling, the Annual Stockholder Meeting to order. The polls are now open. And as I mentioned before the start of this meeting, if you wish to submit a ballot, you can or to change your vote, you can find Lisa Brenton, Our representative from Computershare, our Inspector of Elections over in the corner. We have a majority of the outstanding shares represented at the meeting. So there's a quorum present and we may proceed with the meeting. The meeting is conducted in accordance with Tesla's bylaws And the items on the agenda are as follows: Number 1, to elect 2 Class 3 directors, Brad Buss and Ira Aaron Price, 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, 2016. Tesla's Board has recommended that our stockholders vote for each of the Director nominees and for the ratification of the appointment of our independent accounting firm. Finally, we have received a stockholder proposal as described in our proxy statement. Our Board has recommended that our stockholders vote against this stockholder proposal. The stockholder proposal is proposed by James McRitchie. And I understand that Mr. McRitchie's designee Jing Zhao is here to present the proposal. Mr. Zhao, can you please identify yourself? You can come forward and you have 3 minutes to present your proposal, Mr. Zhao. Thank you very much. Hello, shareholders, Provost Sui, Supermajority Board Sponsored by James McRitchie, resolved shareholders' request that our Board take the steps necessary so that each voting requirement in our charter and by laws not cause for a greater than simple majority vote be eliminated and replaced by a requirement for majority of the vote cast for and against applicable proposals or a simple majority in compliance with applicable laws. If necessary, this means the closest standard to a majority of the votes cast for and against such proposals consistent with applicable laws. Shareowners are willing to pay a premium for shares of corporations that have excellent corporate governance, Super majority voting requirements, the target of this proposal have been found to be 1 of 6 entrenching mechanism not negatively related to company performance according to what matters in corporate governance by Lucine Shareholders, but opposed by Status Que Management. This proposal topics won 74% to 88% Support at Weir Holder, Alcor, Waste Management, Goldman Sachs, Fast Energy, My great year and versus this proposal may obtain a substantial vote at our 2016 Annual Meeting because shareholders gave this topic 42% support at our 2014 Annual Meeting, The first time that Tesla shareholders had an opportunity to vote on these topics, this 42% support represent a Substantial majority of the votes from Tesla's non insider shareholder. Please vote for this proposal, super Thank you, Mr. Zhao. I'd like to remind everyone that our Board has prepared a statement in opposition to the stockholder proposal and that's been in our proxy statement. At this time, are there any proxies remaining in the audience that have not been submitted? If so, now is the time. Raise your hand if we could have Lisa or others come by and pick up Anyone else? Went over there. Okay. Anyone else? Going once. No. Okay. All right. The polls are now closed. We will formally announce the results of the vote within 4 business days, of today's vote on Form 8 ks filed with the SEC. That concludes the official business of today's meeting, which is now adjourned. I now welcome you to stay for Elon's presentation, we will leave time at the end for questions to be answered. During the course of our presentation today, we may discuss our business outlook and make other forward looking statements. Such statements or 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 our CEO, Elon Musk and also JB Straubel, our CTO. So, everyone, welcome to the shareholders' meeting. And I'll start off this by Just thanking everyone for believing in Tesla and putting your money and your faith in the company. We're always super appreciative of that. And the only reason that Tesla is live at all is because of people like yourself and the customers that took a chance on buying a new product from a new company. So thank you. So, Lucille, what we're going to do today, which is a little different from what we've done in the past, is just go through So starting from the beginning and adding coming to present day and then talking about the future, which I think people know like little bits and pieces about. But I think it's important to explore the history and the motivations and the decisions along the way so that people understand, like, What is Tesla all about? What does Tesla mean? Like why are we doing these things? And The decisions of the past inform the decisions and motivations of the future. And people have, I think by now I've heard quite a bit about the Master Plan blog that I wrote sort of a decade ago. I actually wrote it more than a decade ago, but it got in 2006 and it was always the plan from the beginning because it's the only plan that I thought had any chance of success, which is to start off with a low volume car that would have a high price because we didn't have the economies of scale and we had no idea what we were doing. Like, how the hell do you build a car? No idea. It's got wheels. It's got a body as murder. All sorts of other things that we don't know about. So being basically completely clueless, we had to do something that was simple And we knew it would be expensive because we didn't have economies of scale like and we couldn't even a lot of times even get suppliers to even call us back. Like, you're who? What? Never heard of you buy. Like, that was the usual response from suppliers. And so we had to start off with something that was straightforward and that was going to be expensive in low volume. And then step 2 was to have a lower price, higher volume car. And then step 3 was to sort of finally get to something that was high volume and affordable, which is the Model 3 that we unveiled just recently, just a few months ago. And then, of course, there will be many more vehicles and models from Tesla in the future. But the Tesla master plan is really just kind of like a very limited perspective on Tesla. And it's really, I think, worth going into a more detailed look at the history and the decisions and motivations. And most importantly, I think I really want people to understand Like the decisions we've made along the way, we've like really always tried to do the right thing. Like we really care about that. And When we make mistakes, it's just because we're being foolish or stupid or whatever. But it's really always made with the right motivations. And It's never meant to be sort of something that we don't we say the things that we believe even when So we're going to do a look into the history of Tesla. And I'd like to welcome JB to the cofounder JB today. And just we're going to bring in a number of people that were at Tesla from the very beginning, Kind of just to tell anecdotes and stories. And this may go on for a while. So if you find yourself like So this may have gone for a while. And then we're going to have a Q and A and try to get to all the substantive Q and A stuff and go as long as people really want to go. So looking into the long and somewhat sort of soap opera like history of Tesla. I mean, there are many episodes of the soap opera. It's like a multi season situation. So really, even this history is To sum, it's really glossing over a lot of things. But I think we'll still give people a really good sense for how things started out, what led from one thing to the next, why do we do this versus that, and just understand really like what happened because there's a lot out there that some of it's correct, some of it's false, some of it's quite patchy. But I think hearing it from the people on the ground At the time, it's really helpful. So the way things really started out was with the AC Propulsion T0. So AC Propulsion is a little company in Southern California that deserves a huge amount of credit and doesn't get enough credit. So we really want to give them just a ton of credit for the concept of In fact, my first ride in an electric vehicle was in a car that Alan Cocconi, who was the principal engineer and one of the founders of AC Propulsion Built. And I was back in college still at the time. But that's part of what convinced me that EVs had such an amazing potential and so much such an amazing future. And I think, as Elon said, they deserve a lot of credit for having laid the technology foundation very early on for what this next generation of EVs could actually do. Yes, exactly. So, the AC Propulsion T0 was lithium ion powered electric car using cylindrical cells. It actually started off with it being lead acid and then upgraded it to lithium ion sales early in 2003. I think it's early 2003, approximately then. And the specs for the T0 were very similar to the specs for the Roadster. It had a roughly 2 or 50 mile range, sort of a roughly 4 seconds 0 to 60 time and a lot of the specs were quite similar to the Roadster that we that where we commercialized it. It did have some drawbacks like it did not have a roof or doors or any safety systems. The airbags. Or airbags. And the battery was air cooled instead of liquid cooled, so it would overheat very quickly. So it was certainly not something that you could sell to the general public. And also the production cost of a tZERO was, I think basically like $300,000 or $400,000 look really, really high. But the basic concept and capabilities were demonstrated by AC Propulsion well before Tesla was created. So I'd just like to I think I'd just give them a round of applause for that. So I mean, like I said, there's a ton of credit and don't get enough. And in fact, in 2003, JB and I had lunch in basically in L. A. Taking El Segundo. And at the lunch, we sort of ended up talking about EVs. And actually, it was I'm not sure how the launch exactly was set up, but I think I was trying to get you to invest in an electric airplane. Yes. Electric airplanes, how intriguing. Still dying to do that. So The lunch that we had in 2003 was really ultimately what led to Tesla as it is today. And in that lunch, I mentioned to JB that, yes, I've been interested in electric cars since I was a teenager and thought that was really the what cars should be from a fundamental physics standpoint. I guess super obvious from a physics standpoint that electric cars are the right way to go. And I obviously believe that very strongly. And in the future, we will look back at the era of gasoline cars in the same way they will look back on steam engines. Like it's it was interesting. It was a quaint it's quaint, it's interesting, but it was sort of like a phase. And then really electric is the way. And I'd actually originally come out to Silicon Valley to do a PhD at Stanford in advanced energy storage technologies for electric vehicles with the idea of potentially focusing on ultra capacitors with high energy density as a potential solution and then ended up putting that on hold to start an Internet company, Zip 2, and then co found another one, PayPal. And then finally, after all that coming kind of like, okay, time to get back to electric vehicles. So sort of circle back to that. And JB, I think, had sort of Maybe a slightly less circuitous path. But you were doing like Rosen Motors? Yes. I was trying to build hybrid electric cars with gas turbines and a flywheel, which was kind of an ill fated idea. But batteries weren't as good as they were at this point. Turns out containing a flywheel in a moving car is not a very good idea. Tricky. But But even more recently than that, I had started spending more time experimenting and understanding lithium ion batteries, which were sort of brand new in the early 2000s. You know, they were just coming on the scene for laptops and other electronic devices. And, I had gotten to know AC Propulsion. I had coming out of school, followed them for a long time and actually thought about going to work there, but It seemed like a little bit of a shaky enterprise. But they were doing some amazing work and really interesting learnings with lithium ion batteries. So I was spending quite a bit of time trying to figure out how could we adapt lithium ion technology into a much larger pack to take vehicles long, long distances. Yes. And it kind of makes sense. Like when GM did the EV1 initially with lead acid batteries, it had a range of about 60 miles. Lithium ion has 4 times the energy density, these days more than 4 times the energy density of lead acid. And so Basically, if you just replace the battery pack, you go from a 60 mile range to maybe a 2 40 mile range. So really, like The basic math was pretty obvious. But despite it being fairly obvious, nobody was doing electric cars. In fact, At the time, in sort of 2,003, 2004 time frame, electric cars have gotten sort of a really bad reputation. And the industry the auto industry had concluded that electric cars were a waste of time and basically couldn't make a compelling electric car. And even if you did make like a great electric car, People wouldn't buy it because they love gasoline so much. So like okay. So the So I got the base at JV's recommendation, a test ride in AC Propulsion's T0 in 2003. And I was like, wow, this is awesome. And I tried my hardest to convince AC Propulsion to commercialize the tZERO. I mean, I tried I can be pretty persistent about these things. And I was like, guys, you've got You've got to show the world that this is like real and prove to the industry that they're wrong about electric cars. So I was hounding like Dan and Al like, guys, come on, come on, just commercialize the tZERO. And it's like, okay, look, if you want to commercialize tZERO, can you at least make one for me? I'm like, no, they don't want to do that. Okay. Can you convert my current car to EV now? Okay. Then finally, it was like, okay, look guys, if you're sure You don't want to commercialize you don't want to do a commercial version of an electric sports car. Do you mind if I do that? And they're like, no, that's cool. Yes, we're cool with that. So my initial plan was just basically to just get together with JV and say, hey, JV, let's form a company and essentially commercialize the tZERO concept and create an electric sports car. And then the AC Propulsion guy said, well, there's some other groups that are also interested in doing the same thing. Why don't you team up with them? And so that's when we teamed up with Martin, Mark and Ian and created Tesla. And so that's sort of kind of how it happened. But I think it is important to emphasize like when we created Tesla, it wasn't from the standpoint of like, hey, this is a great way to make money. I was like, when I told my friends about this, they're like, you're Crazy. How much money do you plan to lose? Not will you lose money. How much money are you planning to lose? It was a pretty crazy idea. I was just trying to convince all my friends to join and come and work at the company. And even some people that were building electric cars cars were at that time. Everything was focused on the Internet and no hardware companies, nothing even remotely like building a whole car. Yes. I mean, basically, like in 2004, the idea of starting a car company was considered extremely stupid. And then the idea of creating an electric car company was like stupidity squared. It's like, wow, that's dumb. Okay. And so the I'm a big believer in like don't ask investors to invest If their money, if you're not prepared to invest your money, I really believe in like the opposite philosophy of other people's money. It's like it just doesn't seem right to me that if you ask other people to invest that you shouldn't also invest. And my opinion the success of Tesla at that point was so low. I thought maybe optimistically, we had a 10% chance of success. So, I actually put Essentially, 99% or thereabouts of the Series A was money that I made from PayPal. And just because I'd rather lose my money than any of my friends' money or investors' money, I thought, wow, this is really probably not going to work. And if I lose money, it's at the end of the world. And so the beginning investment was really just all me not from the standpoint of like, oh, this is a great way to make money, but just actually I didn't want to have it on my conscience that other people had invested and then I'd lost their money. And if they'd asked me What my opinion on the likely success was, I would say, very low. So, yes. And even most of the early employees had of a similar mentality. I think we knew that it was going to be incredibly risky and the odds were against us. But, you know, everyone believed in the mission so much and they believed and the possibility of the technology and the change that we could create, that it's worth taking the risk. Even if it was 10%, if you can make this much positive good in the world, Why not take that 10% shot? Yes, exactly. So yes, I think we pretty much all thought, well, this is probably going to fail, but it's worth a shot. And because the big car companies had abandoned electric vehicles, we're like it's like, man, if the big car companies don't do electric vehicles. And then the only option is for a start up to do electric vehicles. And even though The historical track record for automotive startups in the United States is extremely bad. Like I mean, if you look at say today, the only 2 American car companies in history that have not gone bankrupt are Ford and Tesla, Sorry, I'm just getting like the get moving sign from the back. Anyway, like I said, this one's going to go long and I totally won't be offended if you want to leave Because we're going to cover a lot of ground. So if you have other obligations or it's like getting tedious, please I feel a little bit obligated. So that was like the beginning of it. And like I said, we felt we had to create a startup car company because the big car companies had all abandoned electric vehicles. They run the third down. And General Motors was in the process of recalling their EV1s and then taking them to a junkyard and crushing them so that nobody could ever use them again, which I thought was just a terrible tragedy. And people wanted their EV1 so badly that They were so sad about it that they held a candlelit vigil at the junkyard where the cars were crashed. Like, who holds a candlelit vigil for a product ever? It's a GM product. I mean, So like I don't know what kind of wake up call you need to say like maybe you shouldn't end that program. But if people are holding cattle to Vittle like it's like someone's about to be executed, then you should really say, wow, maybe we should not cancel that program. Anyway, but that was like the situation. Gasoline was super cheap, dollars 2 per gallon gasoline. Anyway, so just like it was definitely not from the standpoint of like, Oh, this is going to be a great investment and a way to make money. It was just like Terrible investment and we're probably going to die. So anyway, so we Nonetheless, we got going. And the first thing we did was to create the sort of Tesla test mule, which was to take a Lotus lease, So and then highly modify it to add the Tesla battery pack and the AC propulsion drivetrain. And this is, I think, a point that may be helpful to entrepreneurs out there that are creating companies. The reality is that like the creation of Tesla was based on 2 fundamentally false premises That turned out to be, in retrospect, staggeringly dumb. So one was that we'd be able to use a Lotus lease, a sort of slightly modified Lotus lease, add an electric powertrain using AC propulsion technology and then be done. And that would work. And in reality, when you convert a car to electric and you want to make it something that passes all of the federal safety standards and all the legalities necessary for a rental car, you actually have you invalidate all of the crash tests And the battery pack ended up being too big to fit in the car, so we had to stretch the chassis. And we couldn't use the air conditioning system because that was previously run off of the engine power. So we need to have a new AC system, new wiring harness, all new suspension, all new brakes. All new suspension, all new brakes because the car was 30% heavier. The body was all different. In the end, only about maybe 6% or 7% of the Tesla Roadster had parts in common with any other car period. So it ended up actually being much worse than if we simply designed an electric car from scratch. It's like if you have a particular house that you want to house in mind that you want to build, instead of building that house from a fresh start, you take some existing house and then you end up modifying everything except one wall in the basement. You're like, okay, That's actually much more expensive and harder to do than if you just design it and build it right from the beginning. And then the AC Propulsion technology, while great for a prototype, actually ended up Not being producible. It wasn't reliable. It wasn't producible. And it wasn't consistent. And it would break down all the time. So, I don't know if this is Dan. Yes. I mean, it was pretty amazing. The motor controller, the brain, the computer that actually controlled the motor was 100% analog. I mean, it was this unbelievable invention. I mean, it's genius engineering to actually make it run at all, but it wasn't something we could reproduce. So among the sort of difficult engineering tasks we took on in the very early days, one was the battery pack, re architecting the whole battery pack, making it liquid cooled, making it safe. Yes. The liquid cool thing was really important because the AC Propulsion battery pack, even though it used cylindrical lithium ion cells, because it was air cooled, it would very quickly overheat And it was highly susceptible to thermal runaway events. So if one cell went into thermal runaway, It would domino to the rest of the cells. Yes. And it was also packaged in the doors, which was not a very good place to package the battery pack. Yeah. It's like, oh, how do I get out? Oh, I can't. It's on fire. It was either side of the car. So, re architecting the entire battery pack, making it liquid cooled. And it's still amazing to me how much of the if you look at that first mule and put it next to a final Roadster. They were phenomenally similar, actually. It was a very innovative time when we came up with these kind of concepts and architectures that made it work. But one of the big things were the electronics in that brain to control the motor. And we had to start from scratch. New Zealand said it would have been more efficient than the car. Did actually do that on the electronics. And some of the key engineers are here still that did that work. Drew Baglino Is one of the folks do you want to ask Drew? Yes, Drew. Why don't you come up? Maybe you want to share a couple of quick anecdotes or stories about some of those early motor control days? Sure. This has been 12 years, by the way. It's been a long time. It's like basically part of like the founding team in the company. Thank you, Elon. Yes, just over 10 years for me now. So I'm on the time scale pretty early on here. But yes, Jamie mentioned Alan Cocconi. Alan Cocconi actually, We tried to figure out what some of the circuits did and we would simulate them and be like, oh, this is what it does. And then 3 months later, we'd be like, no, that's what it does. So it was kind of a Learning by doing, but we needed to get out of this ghost in the machine world where we were with the analog PEM. So we said, okay, about a team of 5 engineers, Let's start from 0. Let's start with today's technology, digital motor control using DSPs. And we went out and and set to do it as a parallel path. So we wouldn't disturb the rest of the validation because we had to go through crash tests, we had to go through performance tests, We had to run on rough roads for hours with cars that worked. But that didn't deter our determination. So In like 3 months, we went from the first schematic to a driving car. And I actually remember that first day, when we went out driving and we brought JV along. And it was my first 4 second 0 to 60 experience. And I had never experienced anything like that. My prior car was like 80 horsepower Civic or something like that. And it actually held together and it was an amazing 4 seconds. And that certainly Hooked me on electric and I haven't looked the other way ever since. But after that, we decided to take this car for somewhat of a range drive. So We drove through over to Mountain View to Google, actually went right by here with 1 of these digital motor control prototype cars. Colin was in the car. He's back there in the audience. Colin, anything you want to come up and say? And I remember I was staring at the waveforms and we were like, oh, maybe we've got a loose ground or something. And sure enough, like somewhere coming back to Redwood City, We actually had to pull over. And I remember JB, we were all like peeling back the top of the PEM cover. We had this like portable screwdriver just for this sort of Exactly use case. We've probed inside. We got we figured out it was a loose ground, fixed it, drove back and we were like wheeling in, eking into the Bing garage with absolutely no power left. That's Saint Carlos, the Bing garage. Oh, yeah, yeah. The Bing garage. Super tiny Super tiny little garage. And we almost had to wheel it in, but it actually got in on its own power and then kaput, it was done. And actually at that point in time, we JB mentioned the motor control, but we actually were doing the charge control digital as well, all redone because it was analog before and really unreliable and finicky, when connected to like generators or long high impedance lines and things. So, but we hadn't solved the charge control digital for low battery SoC yet. And so we were like, Oh, no, we need to charge the car. Like, and it was actually doing this it had this problem. It was a bug at the time. It doing this, like, self destruct thing where it was running. It was running the compressor to cool the battery. Full disclosure, sort of. Yeah, exactly. Even though it was the end of the state of charge, it didn't make any sense. We're like, We got to get it on charge. So, we ended up unplugging the compressor cable and charging it, back feeding through like the DC connection of the compressor. But it was a very successful drive, all said. And digital became the plan of record. I flew out to Heathl with some other folks from the team to retrofit all the EPs with Heffel is Lotus. That's Lotus' headquarters in England. Yes. So, flew out there. We retrofitted everything to a full digital. And then we started developing digital traction control, all the pedal feel that everybody still has in their cars today. That all came together for Roadster back then. And it was a ton of fun. Yes. In fact, I remember like in the early days giving a test drive to Larry Page and Sergey Brin, who have known for a long time. And there was some like bug in the system and And damn it, like the car would only go 10 miles an hour. It's like, look, I swear, guys, it goes way faster than this. But they were kind enough to put a little investment into the company nonetheless, despite the world's worst demo. Yes, that's the digital motor control story. It was a team of like 5 engineers and we worked in this tiny little power cube for 3 months and got to the bottom of that problem and solved it. And we still build on the leverage of that technology today with all the cars that we have on the Red. It was pretty amazing what we could do with small teams and pretty tiny budgets. When we had this incredible focus, every single thing was just solve this problem or else. And that was another thing we learned, right? You can't just take AC Propulsion Technology and expect it to work. So we really wanted to get the heart of the machine, the of the car into our IPR code, and this was an opportunity to do that. Yes. I mean so essentially, when I say like the company was found on 2 false premises. One was that you could easily modify an existing gasoline sports car to be electric, totally false. And the other was that we would be able to use the AC Propulsion technology that we'd licensed for a production vehicle, also totally false. They've done some great technology that worked well on prototype cars, but basically did not work at all well for a production vehicle. So Anyway, but I think the lesson here for people thinking about creating companies and Is that even though even if your company starts off with based on things that are completely untrue That you don't know about. What really matters is adapting is recognizing the mistakes and adapting quickly and kind of fixing the sort of the false premises upon which the company was founded. That's what really matters for people that are thinking about creating companies. You've got to adapt quickly, acknowledge and recognize your mistakes. And the sooner you do that, the better. So Hello. My name is Colette Bridgeman. I'm employee number 9 at Tesla. So I will be coming up on 12 years in July. So a lot of this history as well as seeing Elon JB's history is my history. I'm super proud to be here. So back to what Elon was saying is the company founded On an idea that didn't come to fruition, when I was interviewed, I was told that this company would be 35 people. They had a 3 year business plan. We wanted to commercialize electric vehicles, which Sounded brilliant to me being the only non engineer at the company for the 1st year, and that we would outsource everything. So as you guys can All turned out to be true, of course. Yes. I mean like Yes. So from what you guys know about Tesla, obviously, that business plan took a complete 180 the first two years. We're so vertically integrated from the top down. But just goes back to saying, when you start a business plan and you think that the company is going to be one thing and what it ends up becoming 13 years later is something totally different. But I think at the core of all of it is a company full of passionate people that are mission driven. And when you stand behind a mission, I think want to take a moment to say thank you to these 2 who've been such an inspiration. And to all my fellow employees, we have some lots of oldies out here, that Drew, every time I look at Drew, I just think about those weekends that they would work in their little lab and I would have to come in and pick up the paper airplanes from the ceiling and all over the floor, because there's a little bit of like a frat house back then. But Super fun. And we've got dozens and dozens of stories about how this mule came to life and how we all got here. And It's DNA that runs the company to this day. So thank you. Thanks, Colette. I mean, Colette's made a huge contribution over the company for the company over many years. So thank you for everything you've done. So then yes, so building the roads to test fuel, and you've heard a lot about that. Then we needed to get to an actual roaster prototype that was sort of along that was more of the production design. And so then we redid redesigned the body. I was basically The Chief Designer of the body, so if you like it or don't like it, for Roaster Version 1 and 1.5, That's basically me. And Like my two favorite cars were McLaren F1 and the Porsche 911. So there's sort of elements of that in the design. I don't think I'm a good designer, by the way. But we're going to get to Frans, who is a really good designer. And actually, it's relatively easy to design a sports car that looks good because proportions naturally lend itself to excitement and beauty. And it's incredibly hard to make a sedan that looks good. That's a whole different level. And this picture in 2006 was actually from our Roadster launch event. So, this was a really pivotal event in the company's history. It was the time when we went out of stealth mode. Before this, nobody had ever heard of Tesla. We had never had a single media article. We've never taken any customer deposits. We had no customers. We had no sales team, actually. Nobody had heard of the company. They thought Tesla was like was a rock band. Or if you're a scientist, like if you're a scientist, Nikola Tesla, of course. But for in the public like, oh, you mean the Rock Band? Okay. By the way, those guys are awesome. They've been huge supporters all the way along and they never bugged us about the fact that we can like use their name and everything. So, yes, Rock on Tesla event. But this event was awesome. I mean, this was we had 2 prototypes built at this time. So we had that yellow mule that we started out with and then we built 2 working prototypes for this event. There was a red car and a black car. And, we had this kind of concept at the time to do an event where we'd give customers test drives and then we'd start taking reservations and do it all at some giant big party, maybe at an airport. And this sort of formula became something we started to repeat and it kind of became the Tesla DNA a little bit of how we would do product launches and start getting customers closer to the product. This was at the Santa Monica Airport, yes, basically in L. A. It was just it was awesome because we got we went from 0 to having all these customers, 100 of them, We thought it was massive numbers, 100 of them. And we really thought that was crazy that like 100 people would buy our car. We had the names like we're like, we got 100 people by our car. That's amazing. There was actually a projector and we'd type in everybody's name and put it on the wall, because we thought there'd be like 10, but yes, it filled up. So anyway, it was pretty amazing. Even though the cars were basically Just hardly holding together. I mean, those two cars were basically destroyed by the end of the night. That was our most of our durability testing. And We even we had to drive them behind a curtain and actually pump ice water through parts of the powertrain in order to keep it from overheating so we could keep going with more test drives. So nobody knew this at the time. And it was amazing, though. I mean, we left that event with demand being 10 times what we expected And a whole ton of engineering challenges to go solve, but we knew for sure that people wanted this car in numbers that nobody else expected they did. Yes, Exactly. It was a hugely energizing event because we had no idea whether people would like we thought maybe nobody will buy the car except for like friends and family or something. But we got like total strangers bought the car, which is like, wow, that's really Wow. Okay. It was a long road. It was such a long road. Much longer than I think we ever expected. From 2006, showing off 2 cars that could do a few test drives at an airport through to when we actually would need to deliver those hundreds of cars we had sold. 100. Holy mackerel. Jesus. We have like an army of cars here. I'm looking like we're going to be able to deliver 4 cars to the sales team. This is frightening. What's going on here is The team has been doing a little bit of rework today. Remember I was talking to you earlier about the vehicle that had the noise? The 5 car industry, so we're swapping in a new one right now. Let's not even wait for the analysis. Just put a new power trade in, table it for analysis, and let's get it out there. Right now, we're facing an issue, which is that sort of a crisis of confidence among our customers. Yes. I mean if anybody's interested, I think there's a great movie by Chris Payne, who did a well known documentary called Who Killed the Electric Car? He did a follow-up documentary called Revenge of the Electric Car and ended up following 4 car companies, one of which was us. And so he actually the movie actually follows what was the most difficult time for Tesla in its history and like multiple near death experiences. So I'd really recommend want to give a shout out to Chris Payne, who's just an awesome, awesome dude. And it's like if you're curious about like the You're seeing like the early history of Tesla. The revenge of the electric car is a great movie To watch and get a sense for things. We had so many since, as I said, we had no idea how to build a car, We had so many huge challenges with the Roadster. Like one of the biggest was that the transmission didn't work. And we'd actually contracted with 3 different companies to build the transmission because it was originally going to be a 2 speed transmission because the motor from AC Propulsion motor design from AC Propulsion required a 2 speed transmission in order to achieve the specs that we promised for the Roadster. So you could not achieve The 0 to 60 time, you can either achieve the 0 to 60 time or the top speed, but not both unless you had a 2 speed transmission for electric car. And the problem is that electric car transmission is really different from a gasoline car transmission because the RPM is much higher, The torque transfer is much higher. And so when we'd work with these quite well known companies building transmissions, The transmissions all broke because they just couldn't take the torque transfer and the RPM. And the first roasters that we delivered, which were about a year later, actually still had the bad transmission that our suppliers had delivered us, but we locked it in 2nd gear. So the acceleration was actually not very good, but at least you could up to highway speed. And then we actually had to end up we ended up replacing the drive unit for all of the Roadster Version 1 cars, because they basically Well, it didn't work. I mean, it actually forced kind of a key invention. I mean, we essentially re engineered the power electronics and the motor in order to get rid of the gearbox. That was the trade off that we made in that very early generation. And once we had done that, it was clearly better in basically every single metric. Was lighter, it was more efficient, it was cheaper, fewer parts. So, it was definitely the right way to go, but we just weren't ready when we started production. So, we had to Catch up after the fact. Yes, exactly. So in fact, I remember the conversation that JB and I had flying back from our gearbox supplier. And that was like, man, it's like JB, we are I'm really screwed. I think it was the 3rd gearbox supplier. The 3rd gearbox supplier, like, this we are screwed. Now we know that if we redesign the motor, we can do this with a single speed transmission that doesn't require a clutch, which is like order of magnitude easier to do than one that does have a clutch and has to transfer has to shift gears at very high torque and very high RPM. Because essentially, if you have a single speed, then it's just an it's not really A gearbox, it's just an RPM reducer. So but it required us moving away from the AC Propulsion Motor design. So, we had to redesign the motor, redesign the power electronics that powered the motor. But it was actually easier and faster for us to do that than to try to make the 2 speed transmission work. Well, it required twice as much torque from the electric motor. Exactly. So, it was a pretty big redesign. Yes. So, that's why, I mean, in the end, we didn't use really any of the AC Propulsion technology, you and they did a great job with the prototype. Everything had to be redesigned. And so this is just a minor taste of the Roadster challenges. There's many more. And of course, we received huge amounts of support Yes. I mean, like with support like this, I mean, how could you not be energized to solve the solution and figure out the solution? It was crazy. I mean, even our friends were sitting there reading all of these death watches. And our customers were like, Do you want to buy a car? Well, it's like I was reading about this death watch thing. And this was before we'd actually delivered to the customers that had bought the car. So, that was a difficult thing when they're reading about the company that's about to die, They just bought a car from. Yes, exactly. So, I mean, there was quite a bit of schadenfreude in the media who were sort of like we had the temerity to try to create a car company. It's like who do these arrogant jokes think they are that they can create a car company They're just going to die. And there were like multiple blogs maintaining a Tesla death watch. It really pumps you up. Anyway, just that we managed to make the first Roasted deliveries in 2 1,008. I got and the rule of Tesla is whoever puts down the deposit for the car first It gets best their order in line. So I put down first deposit for Roadster 1. And it got delivered, I think, like February or so of 2,008. Now frankly, this car, although it technically passed all the regulatory requirements for a street legal car, was completely unsafe and broke down all the time. And that didn't work really. But I was stuck in 2nd year. And it was all hand built. Like really the production wasn't working. There were so many issues that we had to redesign the whole production process. From 2,008 through 2,009, we had to do a complete reboot of the design of the car, The technology and most of our suppliers had to be changed out in the span of 2 years. Yes. We actually started building I mean, for Colette's story, we started building most of the powertrain overseas because we had this slightly misguided idea that everything must be cheaper and better if built in Asia. So we started building battery packs actually in Thailand In a not with a contract manufacturer who I mean, they were well intentioned, but had no idea how to build battery packs. Actually, it was a barbecue manufacturer. It was a barbecue manufacturer. Here's Bob and Q, maybe. But they were neighbors or friends of one of the other engineering leaders. And we built motors in Taiwan, batteries in Thailand. We had this crazy supply chain and not surprisingly, it was really hard to get good quality product at the rate we needed from these suppliers. So in that timeframe, that 2,008 to 2,009, We had to do some amazing things, moving those factories, taking control of them, moving them back to California and then resetting them up completely because what we had done in Thailand was utterly inappropriate for what we would do here. And Maybe Jason, Jason, do you want to just say a few words? Like Jason was one of the key guys that really made it happen in transitioning The battery pack in particular from a contract manufacturer. Thanks, guys. So I mean, I remember having a conversation with Jason. It's like Jason, Dude, we are doomed if we do not in source the battery pack because we have a supplier in Thailand that is great at making barbecues but not making battery packs. And the supply chain is so long that it would take 6 months from when the cells were built to when the battery pack was done and in a car. And so that means we would have to make the capital the cost of that supply chain was gigantic because we'd have to pay for that whole all of that inventory in process. And then inevitably, there would be mistakes made in the design or the fabrication of the battery pack and we'd have 6 months' worth of battery packs that didn't work. So this was like sort of doom on a stick. And it's like, man, even though Like the idea of like manufacturing in San Carlos is kind of mad. It was less mad than outsourcing to a situation that definitely didn't work. So I was like, Jason, we have like basically months to in source this operation so that we can iterate rapidly on the battery pack design, iron out our issues and tighten the supply chain. Yes. It was well, I started in May of 2005. And it was funny when my friends asked me what I was doing. I would say, well, I can't say much, but this is kind of the gist of like, does that have any chance of working? I'm like, no, of course not. But I'm doing it. It's going to be great. And in late 2005, after having made 2 prototype batteries of very different designs, We started work on our 3rd and also simultaneously decided that we're going to make it in Thailand. And so we were simultaneously designing in true Tesla fashion, simultaneously designing the thing and building the factory out in Thailand. The Centimeters, like you said, I think, Elon, was extremely well intentioned, but Just absolutely no experience. The building was open to the air. And so you would literally have animal droppings on the product. And that's when we're like, all right, we got to have a building, man, come on. Roofs are important. So after 2 years of spending, I spent personally 50% of 2 years there. A bunch of people in this room spent as much, if not more time there getting the thing running. And like you said also, the lag, like we would show up in Thailand with I don't know if you guys know what a Pelican case is, but It's this awesome plastic suitcase and we'd show up with 7 of them at the airport and these guys would just look at us. What are you guys doing? And we learned that the term tools of trade is kind of a hot button to just go, all right, all right, go, go, go, because trying to get tools and parts. Anyway, we brought it back in January of 2,008. We packed up 7 shipping containers and We reassembled that factory in San Carlos at that Bing Street warehouse that Drew was talking about. We reassembled it in about 5.5 months. And that's where the battery that went in your car came from. And by the way, just for those that don't know the Bay Area, San Carlos is like basically in the Bay Area. It's Like 10 miles up the road. Just 10 miles up the road. So, manufacturing things in the peninsula is like considered super mad. Yes. And this was kind of our it was really early like telltale vertical integration is the way to go. And Some would argue we might have over centered in some areas in that area, but really, we had control now. We had all the engineers right there. We didn't have batteries on the water, not only from Thailand to England, but then cars on the water from England Yes. To hear, that's what I mean by the 6 month supply chain. So it would be like we would only find out if there was an issue with either design or the manufacturing of the battery pack 6 months after it was built. So you can imagine the insanity of having some built in design or manufacturing floor and have 6 months' worth of inventory that all has that floor. Yes, some of the same people that we were working with Building the factory in Thailand, we would do missions to Hethel, to the U. K, to the Lotus factory, again, with these Pelican cases full of glue and popsicle sticks and mixers. And we would do these retrofits of, I think the record was like 15 batteries in 2.5 weeks, where we disassembled the whole thing, did the retrofit, assembled it. The Lotus guys thought we were insane, which Yeah, they did. They had a point. So, yes, that's a really quick story kind of about bringing that bringing it home, 7 months Reassembling the motor as well. Yes. We did the same with the motor years later. So just like congratulations to you and your team on making that happen. That was like an amazing feat. And I think that taught us a really key lesson that is still incredibly relevant today, which is a lot of the technology and the intellectual property was in how we actually make the products. And I think that's underappreciated by a lot of people. But no one knew how to make these battery packs. So Jason and his team and a lot of the engineering team were inventing to manufacture the thing that we had designed. And that ended up being actually more complicated in a lot of ways to do it at rates and at high quality. And I think we've learned that appreciation pretty early and that's helped us immensely to be able to scale Model S later and eventually Model 3. In fact, and that sort of Porsche had is the what I'm going to talk about at the end if anyone is still around, which is the realization of how important it is to build the machine that builds the machine and how much harder it is to build the manufacturing system that builds the product than it is to create the product in the 1st place. I mean, you can create a demo version of a product or like a few cars worth of a product with a small team in maybe 3 to 6 months. But to create the to build the machine that builds the machine, it takes at least 100 to 1000x more resources and difficulty. And it's just not something I really I would say only fully came to that realization maybe even just 2 or 3 months ago. It's a bit I'll talk about that at the end. And just how important that is and how I think very few people Really appreciate how important that is and how important manufacturing and supply chain is and how I think that, that's actually the main problem to be solved. But I'll talk about that at the end. So then the first retail store opened up. This was in L. A. On Santa Monica Boulevard. It was formerly, I think, a kid's furniture store. And this is really this is like a controversial decision at Tesla. In fact, like the original business plan Tesla for using the sort of the regular sort of order dealer network and that kind of thing. But I was really adamant That like we need to improve the buying experience. Like just I don't know anyone who loves the current car buying experience of And usually, when people tend to view buying a car as equivalent to going to the dentist and maybe the dentist is better, but it's just never something people look forward to. And so we thought, well, look, if we're going to make a new car company, we want to we don't want to inherit the negativity or sort of the bad elements of how it's been done in the past. We want to fix the we want to do it right. And we want to make sure that people love coming to buy a car. They look forward to it. And like the most important thing I said to the Tesla retail team is like, Look, the number one thing is that when someone comes in our store, whether or not they buy a car, the most important thing is They look forward to coming back to the store. That's it. Just like that's their goal. Make sure that when people visit our store, They look forward to coming again. That's it. Like, don't try to sell them something that they don't need. Don't try to sell. Don't sell. Just like your goal is just to communicate and make people feel good. And we've got a lot of opposition from the order dealers, as you might imagine. We're not happy campers about this approach. But anyway, we felt like, hey, man, this is we want people to love it, Love buying a Tesla from all the way from like the initial buying experience to the seat of the car ownership, the post sales service experience. It's really sort of about like you want people to fall in love. Like you want them Just love it. So we thought we had to do it for that reason. We weren't sure if this made sense from an economic standpoint or whether it was kind of service poorly or well. We just knew that we didn't want to replicate the negative experience that people have had that most people have in buying a car. So anyway, we have the 1st retail store established in L. A. And then shortly thereafter, another one in the Bay Area in Menlo Park. And Yes. In fact, this is where I first met Frans van Holzhausen So, yes, if I knew history then, I don't know if I'd be standing up there. So as I mentioned, like the Basically, the I was like the Chief Designer for Tesla, for the Roadster. But I sort of fully realized like, man, there's definitely people who can do this way better than I can. And so but then I tried at first to outsource The design of the Model S to a few different companies, that was a whole saga in and of itself. And that really didn't work out. So it's like, man, I actually knew that I couldn't do a great job of designing the Model S because designing a 4 door sedan that's beautiful is incredibly hard. And designing a sports car that's beautiful is relatively easy because the proportions lend itself so well to Beauty, but a sedan's proportions do not. So, asked around and was sold, like this guy, Franz, who is really great. I don't know if he's like going to be willing to jump, but he's really great and you should go talk to him. And then I think think it was the first meeting we had was actually at the opening party for the Tesla store. And it was a good party. So I think one thing tells us good like we throw good parties, okay? And I was like, Okay, great. This is like this is going to feel real good. And Franz and I so I spent like a large portion of Just talking to Frans at our first store opening party. And we really hit it off. So we've really been like friends ever since. It's been a great honor working with you. Yes, likewise. I think in my first conversations with I had spent 16 years already in the auto industry. I was in the early days of Tesla, I was driving an EV1 around because I work for General Motors. And I was experiencing range anxiety in Los Angeles, experiencing the plugging in and having the neighbors come and unplug me in the middle of the night and then not being able to get to work the next day, All those things that were kind of the trouble side of electric vehicles, but kind of there's an moment when just experienced the acceleration and even in EV1, which was heavy and not nearly like a Roadster. But that moment kind of always sat in my mind. I went to Mazda afterwards and continued to try to get somehow this green initiative going. But then when I met Elon and his real drive changing the world and really changing the automotive industry to be much better, I realized that There is no automotive manufacturer out there that really will do this in earnest and put their money down and not have it be an R and D project. Was always going to be an R and D project for them. And it was always going to be like, okay, our main kind of appetite is for internal combustion engines. But This electric thing or this hybrid thing, we'll dabble in it and see where it goes. But talking to Elon and then Subsequent to the party, I went to SpaceX, where I saw actually kind of the proof and a little bit of the genius behind it and the ability to, okay, if this guy can really get rockets into space, then this car thing is Although, I should say, technically although at that time, we hadn't quite Technically, at that point, we had actually not succeeded in getting to orbit. That is true. You could see the determination and the drive. And I think that's where I realized that the drive and the character was there. And for me to kind of jump ship and against the like my inner circle of friends and family telling me like, you are crazy to leave your career behind and go do this. But I realized that it was really the future in a future way and that these guys were going to do it. And shame on me for not jumping on board. So Yes. And I think like just super randomly like the In designing the SpaceX logo and name and And then the Tesla logo name, I'd worked with a couple of graphic designers that randomly knew France. And they like they said, They gave me like the thumbs up. One of my best friends is dating the girl who's working on It's kind of a small I think it was like Kimberly, I think. Yes. So like Kimberly was like gave a good endorsement of me. And yes, in fact, if you see sort of slight similarities between the Tesla Tesla name, the SpaceX name, it's sort of there's the reason for that because it was sort of done by some of the same team. And yes, anyway, so Frans joined basically mid I think you started mid-two 1008. Yes, around August 2008, Dan. We had talked several times about designing a sedan for for Tesla. And of course, this thing needed to carry 7 people. Well, I said that was my fault. No, no, no. But thinking like, okay, I'm going to put my kids in here. So it's like 1 in the front, so we need 2 rear facing seats, okay? This is going to This will be a good challenge. Yes. I think it was like quite a difficult set of requirements. And we didn't really we didn't even have the money for a design studio. So the design studio in the beginning just was just a corner of the SpaceX Rocket Factory. So we always just put a tent? Yes. We pitched a tent in like my first day, we put up the tent and that became the design studio. We had, I think, a couple of contract guys and we started in earnest. One of the first things we did was drive a forklift through a Fisker model, dump it in the dumpster. And we that was basically the beginning of kind of clean slate, start over, do it the Tesla way. Yes. Kind of jettison the past a bit. Yes, exactly. So, we just started really from the beginning when Frans joined designing the Model S from scratch. And One of the things that was obviously very important was to design a car that is meant to be an electric car as opposed to a gasoline car that has been repurposed for an electric car. So the fundamental design, coupled with the engineering, We really need to design it for electric powertrain battery. And so it couldn't really be Timmy, on the internals, derivative of gasoline car because it doesn't work, it sort of would be the equivalent of a horseless carriage. Like you don't want a horse's carriage, you want a car. And yes, we weren't really trying to follow any We weren't something we're trying to copy or emulate any other car designs. It really was just we need to make we need to design a car that's meant to be an electric car That looks great and achieves the functionality that we're aiming for. And it was just a tiny team doing the Model S design in a tent in the corner of the SpaceX factory. Yes. And it's amazing to think about where the car is today from its kind of little humble beginnings. So yes, thanks for getting us started. Yes. Thanks, Johnny. So yes, and then going on to 2,009. So the and just backtracking slightly. So in 2,008, we were really still trying to figure out how not to die. And one of the things was that I thought would really help is if we had strategic partner, like one of the big hard companies to be a strategic partner. And so In October 2008, actually, I think it was, I stopped over in Germany in Stuttgart and met with Doctor. Weber, who is the Head of R&D for Daimler and said like, look, we'd love to figure out how to work with Daimler. Is there anything that you guys need on the electric vehicle front? Is there anything we could do? And he said, well, they want to make an electric smart car, but they don't have a good source for the battery and powertrain. So, it's like, okay, okay, this sounds like maybe we can help here. And he said that, well, there's a Dyna team, senior Dyna team that's planning to visit Silicon Valley and meet with a bunch of companies in January it was like January 10 or something like that of 2,009. I was like, okay, so we got 3 months, okay. And he said that he would ask them to meet with Tesla and kind of make their assessment. So I was like, okay, wow. So then immediately as soon as I left that meeting, I called JV and said, JV, we have 3 months to make a working electric smart car. David was like, what are you talking about? And it's like, okay, there's some challenges here because the smart car was not actually available in the United States. Couldn't even get one. You couldn't get one. They weren't shipping in the U. S. Did you want to tell it? Yes, sure. This was a kind of ridiculous, crazy story. I mean, meanwhile, of course, we were all hard at work trying to make the Roadsters actually work in Seattle productions. It's not like we didn't have stuff on our plate. This was quite a non sequitur. And, yes, so 3 months, we put together a rough plan on how we could even possibly achieve this. And first of all, we had to get a car physically and the only place we could figure out to get one this fast was in Mexico. So, literally, the next day, we sent an engineer to Mexico with about $20,000 in cash to go and try and it was legal, I mean, sort of, sort of, legal to purchase a smart car and he drove it all the way back to San Carlos. And I think the day after that, we tore the entire propulsion system out of it and started designing a custom battery pack from scratch. We had ideas on how we had done the Roadster pack, of course, but that didn't fit in this car. It was way too big. So, a very tiny team, small SWAT team of engineers, prototyped and architected a one off battery pack, a lithium ion battery pack that could fit into the smart car. And I did make things slightly more difficult because I said like, look, You got to put the pound train and the battery pack in the car and it needs to look unmodified. Couldn't touch the passenger compartment. Yes, exactly. Just like put it in the trunk like just have a big battery pack sitting there in the trunk or something. It needs to look like it's a normal smart car. So, the battery was a big challenge. We had to reinvent this brand new battery pack in a couple of months and build it. Then on the drivetrain, we had to figure out how to adapt a Roadster motor and power electronics system and charging system into the back of the smart car in this tiny volume. And amazingly, we were able to repackage that whole thing. That team didn't sleep a whole lot in those couple of months and it was also through the holidays, which was great. Thanksgiving, Christmas, and everything. But everybody was having the time of their lives. It was super, super fun. We were in a little teeny garage in San Carlos, trying to make this smart car electric. And one of the things we realized pretty early on is that this was going to be the fastest smart car had ever been made. This was amazing. It had all the torque would have all the torque of a Roadster It was so fast, you could do wheelies in the parking lot. Yes, it was anybody that got in that car exited just with a huge smile on their face. They just absolutely loved it. So, that car basically led up to the meeting where we met with all the Daimler engineering leaders and executives. Exactly. Let me tell you about how the meeting went like. So the Daimler sort of scenery sort of engineering team shows up. And I mean, it was clear when they entered the building, they were like not excited about meeting with some like American car startup, whatever. So they've like been told that they need to do this. And they were like, well, this is obviously going to be a waste of their time. And they're quite brumpy actually. And we started off with a PowerPoint presentation, and they really didn't like the PowerPoint presentation. And like so I said, you know what, why don't we skip the PowerPoint presentation? Would you like a test drive? And I'm like, what are you talking about? What are you going to test drive? I'm like, yes, we made one. I'm like, Made one? What do you mean? Yes, we made one. So it's just outside. Do you want to drive it? And they're like, sure. So then they went out and test drove the insane performance Smart car. As JB was saying, it's like basically you can't exit that without a grin on your face. So we went from being a bit grumpy and be like, Holy cow, this is awesome. And we actually out of that meeting, it got our first development contract with Daimler to create an electric smart car. And that was Really, I think if we hadn't done that, Tesla would have died because the Daimler partnership gave us credibility that a major OEM was willing to work with us. And they also they paid us for the development program, which is really helpful from a revenue standpoint. And then most importantly is that when Tesla kind of was running out of money around May 2009 And I had no money left. I'd like given all of the money that I had remaining to Tesla. I didn't even own a house. I was like And I had to borrow money from friends to pay rent. So I was like, man, I am out of resources. So I was like, we need I just don't even have any more money to invest. So then we need to seek outside investment. And this is early 2009. And just to sort of paint the picture, General Motors and Chrysler were going bankrupt at the time. The idea of investing in an electric car startup was not popular. I remember talking to investors and they would be angry that we even called them. But thankfully, Daimler did invest. And then they invested $50,000,000 in May of 2009, which was a lifesaver. So I just really like to just say thanks and give a hand to Daimler for that, I would say. So I mean, without that investment, Tesla would have been it would have been game over. So they invested, thankfully, and that gave us the resources that we needed to get the company to moderately healthy position and actually get us to the point where we could build Roadsters without losing money on every car. So the our ROASes that we delivered were significantly negative gross margin until about basically, total Q4 of 2009. Because we had to redesign similar to the car, we had to change out suppliers. And so actually, every roast that we sold before, like I say, the second half of twenty nineteen actually cost more money than We earned this revenue and it cost to build. But by late 2009, we finally redesigned the car and changed that up. Most of our suppliers and we're able to generate positive margin on the car And then we had positive margin on the Daimler development contract. So the combination of those two factors got us to a reasonably healthy position, but we would never have gotten there without the Daimler investment. And I think this is important because a lot of people think that Tesla was like bailed out by the federal government or something like that. This is not true. We were bailed out by Daimler, not by the government. So they're the ones who deserve the credit here. We wouldn't be around Tesla wouldn't be around if they hadn't helped out. In fact, we still have an ongoing program with Daimler for an electric B class. And we're I think there's a great bunch of guys. Yes, I mean, it's worth saying that that first smart program led to what became a pretty thriving powertrain business for Tesla in those intermediate years. We made a lot of profit, as Elon was saying, and did some great engineering work for Daimler, building a production smart EV and then also a production EV A class and today the B class, which is still shipping. And those programs also taught us a huge amount. Being a supplier to Daimler was not terribly pleasant sometimes, but it also trained us in quality and it trained us in some of the systems that they had used for 100 years. So, we got to really accelerate up the learning curve in building some of these very complex systems and how they validated them and how they made them last for 100 of 1000 of miles. Absolutely. So, I think we just want to Express a huge word of appreciation for Daimler and help with Tesla. Without which, we would just not be around. So I think sort of getting to the DOE loan, which a lot of people are aware of, And it's like some people out there who sort of constantly beat Tesla over the head with this like DOE loan thing. And it's important to appreciate what this program was about, which was it was actually a program that was signed into law during the Bush administration. Although, yes, it wasn't it was executed during the Obama administration, but it was signed into law during the Bush administration. And it was a program that was intended to accelerate the development of And one of the prerequisites for being in this program was demonstrating that you're a growing concern, which is why this program was inaccessible to GM and Chrysler because they were bankrupt. So the but unfortunately, in the media, this got confused with the there was the order bailout and then there was the Energy Efficiency Loan Program, which really got conflated but are actually completely different programs. And the first money that Tesla got from the DOE loan program was actually only in March of 2010. And the way the loan program worked was that There were a whole bunch of milestones and of technical milestones and product development milestones that We could only invoice for the milestones after they've been accomplished and then Pricewaterhouse would audit the financials and then we would send a request for to draw down the loan in little bits and pieces. So it would usually take maybe 2 to 3 months after we'd actually spent the money to receive any of the loan proceeds. So again, this is like really fundamentally different from what happened in the auto bailout, although a lot of people sort of think it's the same thing. And the timing that we received we started receiving DOE loan money was after Tesla was out of the danger zone. So if Tesla had actually needed the DOE loan, when we were actually when we were in dire straits, we would have been doomed. So by 2010, Tesla was actually in sort of a moderately healthy position and the DOE Energy Efficiency Program was meant to serve as a catalyst for the acceleration of energy efficient vehicles. And that was its purpose. So I guess people tend to Sometimes, say it's what's it was either completely necessary or completely unnecessary, and neither of those are true. The fundamental purpose and I think the DOE did a great job of implementing it to that end. The fundamental purpose of the DOE loan was to accelerate the advent of sustainable transport. And so we and it's very important to note that Tesla could have raised money from alternate sources. So this was not we could have raised money from an equity standpoint or from a debt standpoint outside of DOE loan program. But DOE loan program was there. Our competitors were using it. So Ford, for example, got $5,000,000,000 or $6,000,000,000 from this program. Nissan got $1,600,000,000 Tesla for the Model S program got $380,000,000 and then $100,000,000 for a powertrain factory to supply other companies. Fisker, I think, got 500 they got more than we did, 500 or 600. And So I mean of the names that you've heard of, Tesla actually got by far the least and I think did quite a lot with those proceeds. But it's important like this was definitely helpful and served a catalytic purpose, which was the intent of the program, But it was not a case of sort of being as some of the cases of being sort of being propped out by the government or something that was fundamentally necessary for Tesla to exist. It was helpful in catalytic but not fundamental. The Daimler investment a year earlier was fundamental, but not the deal we learned. I think something most people always seem to overlook was it was a loan. It wasn't a grant. So, I mean, this is obvious, perhaps in the name, but we have to pay it back. And that was very different than the Daimler investment, which was an equity investment in the company. So, this is something where we had to start planning on how we would pay that back and prove that we would pay it back with interest over the expected period of time before we even could get the loan. Yes. So I just want to make sure it's sort of real precise. Tesla is certainly grateful for this and it was very helpful, it was not necessary it was not fundamentally necessary. Then going on to the IPO, So the IPO process was Certainly, interesting roadshow. There's Deepak who did an amazing job On the road show. But it was funny, I mean, we meet with potential investors. Tesla is a company that tends to inspire either love or hate. People are rarely indifferent. Like if you say like, well, how do you feel about Colgate? I'm like, it's okay. But With Tesla, it's like either it's like you guys suck or you're great or like, Yay. So it's like it tends to be Very much love it or hate it. And so in the IPO roadshow, we'd sometimes meet with investors who would tell us just how we were and that this is a waste of money and how dare we even take their time. And they would meet with some that are like, Yes, you guys, this is great. We're all in. We have like some great, great investors like Fidelity, who, Despite all sort of the negative news and stuff, it's been like a stalwart supporter of Tesla through the years. And so in a similar way like that was the IPO. And yes, that was an arduous IPO. But we managed to raise get Tesla public and just sort of clean up the capital structure and raise a bunch of money from the public markets. And shortly after that, we became one of the most shorted stocks on the NASDAQ. For quite a while there, we were trading places as the most shortest stock on the stock market. I think we're trading places with Skullcandy, Travelzoo and Coinstar. For who would be the most shorted? Okay. So anyway, then sort of The next big thing, well, this is I mean, also in 2010 and kind of time wise approximately the same time as the IPO, is that we met with Toyota. And Akio Toyoda actually came by and Good breakfast at my house. And he was sort of really interested in working with innovative technology companies. And so we thought, well, what are the ways that we could potentially work together? And we came up with 3 things. 1 was to do sort of a joint EV program to do the new electric RAV4. The other was buying the Fremont factory, the former Newmie facility because Toyota had said to shut down the Numi facility. And it's understandable because it was half owned by GM, half owned by Toyota. And It was half owned by like the portion like the what was considered the bad portion of GM. GM got into 2 pieces. 1 was called Liquidation Motors. So half of Numi was owned by Liquidation Motors, half by Toyota. And it just sort of didn't make sense Toyota to kind of be in that kind of a partnership. So they decided to shut down the NUI plant. And we said, well, this is kind of huge for it's a huge plan for Tesla, but and we don't have much money, but we'd be interested in buying that. And that was one part of the deal. And then the other was like, we're just making investments at the IPO. So I said that sounds cool. We'll make a $50,000,000 investment at the IPO, which was actually really helpful to us when we were doing the roadshow because would ask us how we're going to compete against big car companies and say like we said like, look, we've got the Daimler partnership and Toyota is investing at the IPO. So it's like Those are good signs. These three parts of the deal were independent of each other. So It would be either all three could work out or none of the 3 could work out. So there was no they weren't tied together. They were just sort of 3 things that we thought Would be good. So again, I'd like to thank Toyota for their support. And They were a huge help to Tesla. So thank you, Toyota. And then the Model S beta, So we finally produced a Model S that was close to the production design We're very close really. And we unveiled that to the public and it was quite well received. We had a lot of people who put down deposits on the car and that gave us like a big boost of confidence. It's like, wow, people really like the car. It looks like we'll be able to sell enough to pay for the cost of the factory and everything. And yes, so that was thank you for everyone for making for those that made those early purchase orders for the Model S. And Again, without you, we wouldn't be around. So yes. It wasn't quite as exciting as the Roadster launch event, but It was close. There was definitely some serious drama at this, at that 1st Model S customer ride event that we had at Fremont. And Yes, I definitely remember a few crazy stories. I think at least one point, we had one car completely die with some huge firmware problem. And The thing we've done at all these launch events is we have a kind of a control center in the back somewhere hidden away with a bunch of engineers that can watch the cars via their wireless connection. And I remember this car that basically had a problem. Well, we opened all the doors and the trunk and the hood and everything and put it on display And meanwhile, the engineers rewrote some of the motor control code in that car to ignore the sensors that had gone wrong and were the problem. So we put it into this kind of limp mode And then, you know, got in and sort of very carefully drove it away at about 10 miles per hour. And, it was great. You know, nobody ever knew there was problem. We drove it back to the shop. And ultimately, it was like one bad temperature sensor that had shorted out and caused this problem. But I think it was really amazing that we could what we could do with this new software capability, because the Model S was the first this was the first we had that ability to send new software to the car. So, it was kind of foreshadowing, I think, how important this has become for the entire production fleet, even on that very first day when we were giving the first rides to customers. Yes. So that was a big milestone for the company, delivering the first production Model Ss from the Fremont factory, where at the time, we were occupying just a tiny corner. And yes, I think that was definitely One of the most trifle experiences in the history of Tesla. It was a pretty awesome event. Everyone was just I mean, it's really everyone worked so hard for that time. And I think the whole company was there. I mean, every single person, production employees, engineers, sales, everybody crammed in because they were so proud to deliver those first few cars. So we'll go a little faster through some of these later years because I think like these later years are better chronicled in the press whereas the early years like never existed. So that's kind of like lost in the mist of time. So we built the supercharger network, which we hadn't actually told anyone about. So when people did the first reservations to Model S, they had no idea that we were going to create the supercharger network. But we built into every car a high voltage DC bypass direct to the pack that would enable high speed charging. And this is critical to solving the long distance travel problem. And we're certainly hoping that some other company or companies would create high speed could be high speed charging networks, but nobody did. So, we're like, okay, well, we better do it. So, yes, it was pretty crazy. I mean, we literally had teams of a few interns that we were sending out to different travel rest stops and trying to have them figure out where the good places to put these superchargers would be. In terms of Greg, because they don't know what's impossible. So it's like, yes, I understood. It's great. And Harris Ranch was actually one of our very first supercharged stations out on Highway 5. And I just remember the craziest conversations trying to convince these ranchers from the Central Valley on how this supercharged station was possibly going to work. There were no cars yet. They'd never seen a Model S. They didn't believe an EV could even get there, let alone charge fast. And It was fairly amazing how this all grew only 4 years ago. We were kind of amazed that they worked actually. We were like, hey, wow, it worked. That's cool. Most of the time. So, yes, they ended up being fundamental to really just answering the question of like, Can I drive my car long distances? And what it really comes down to is freedom. Like when you're buying a car, you're really buying freedom to go where you want to go. And if you're constrained, if you're tethered to your charge location, you don't have the freedom. So Supercharged is really about making freedom giving you the freedom that you want when you buy a car and making it real easy and convenient to go wherever you want. And then head off the day we learned. And so I mean, it's worth noting that Tesla was the first company to pay off of so all the automotive companies had either gotten direct government grants or they have been in the loan program. Tesla was the 1st company to pay off The deal we learned, and in fact, we had to pay there's a prepayment penalty and we actually because You had to pay the interest plus a penalty for prepayment because the normal loan would have been paid off over an additional 10 years. And in this case, so we paid it off 10 years early and just paid the penalty because we just wanted to I don't know, it just felt like morally the right thing to do. So that's why we did it. Model S. What's been achieved here for the first time is to create an electric car that truly is the best car of any kind. So that was a big milestone effort for Tesla, winning essentially getting kind of best car in the world of any kind, not just electric. And MotorTrend told us that it was the first time that the judges had actually been unanimous in a decision. So then we actually had to manufacture these things. And it's just it's worth dwelling on just how big a leap it was to go from making the Roadster to making Model S. In the case of the Roadster, our production our annual production was maybe $500,000,000 or $600,000,000 a year. And Lotus made the body and chassis And we made the powertrain a battery. And then we did final installation of the powertrain and battery in the car and then delivered it to customers. So we're really for Roadster, we were basically doing like half the car and it was a much simpler car at very low volume. So we went from around 500 cars a year where we did half the problem to 20,000 cars a year for a much more complicated car where we did the whole thing. And this was a very steep learning curve and very intense. And yes, I'd just like to congratulate everyone at Tesla and the production team that made it happen and did what A lot of people in the industry consider it impossible, many late nights and weekends. So thanks, guys. And something that we did, I think, at that time that was a bit unique is we had really all hands on deck. It wasn't that there was a factory operating smoothly somewhere and we just sort of sent them a car design ready to go. The entire engineering team, even some of the support teams, everyone was in the factory making those lines run. We had engineering leaders that were actually doing operations for months at a time to try and get that moving faster. And I think That cross learning ended up saving us a huge amount of hassle, and it was something that we'll hope to reuse in the future. Yes. It was definitely a touch sliding there. We were basically there 7 days a week, all hours of the night, just trying to figure out how to make a car. And But we managed to sort of achieve the target, but it was a huge amount of sacrifice by everyone. And then the Gigafactory. So we're thinking about like, How do we go from Model S at 20,000 units here, which is now sort of approximately 50,000 units here? With the Model X, almost 100,000 units a year. But we wanted to execute But the goal from the beginning, which was to make a high volume affordable electric car. And if you just do the basic math and say, okay, how many batteries do you need to do that? And if you have 500,000 cars a year and an average at level of 70, then you need 35 gigawatt hours. And that's just for the car. And then if you do, As we later talked about, stationary storage, then you need additional capacity on top of that. So now this would be this is quite challenging because the total worldwide production of lithium ion batteries of all kinds for phones, laptops, Power drills, cars, everything was only 30 gigawatt hours. So like, okay, this math does not work. Obviously, we are not going to get every factory on earth to just do our stuff. And even if they did, there still wouldn't be enough. It's like we got to build a factory here because like nobody is going to otherwise, if we don't build it, We don't know how to solve this issue. Yes. And it was also a chance to reinvent the way that batteries had been built. Up until this point, basically, all lithium ion factories were more or less run by consumer electronics companies. They were built in consumer electronics volumes and sort of with those methods. And we sort of had this idea that we could vertically integrate this much more and get a lot of inefficiency out of that process, moving the upstream materials and sort of raw material processing very close where the cells were made and then moving the battery pack and module production right next to where the cells were made on the other side. So, doing all that, have a pathway to reduce the cost of the battery way faster than anyone expected. And ultimately, that's what makes the high volume of cars accessible at a price point that people can actually afford. Yes. And it's worth noting like some of these people think like Tesla is just using commodity Look, cylindrical cells meant for laptops, but this is actually not true. The standard laptop cell does not work Well, for electric car, it has the same external form factor, but the internals are quite different from what would be used in a laptop. But just to have this look the same from the outside. And actually during the Gigafactory, we wanted to reconsider even the external dimensions. And The first principle is analysis of what would be most optimal and concluded that we need to go to from an 18 millimeter diameter to a 20 millimeter diameter from a 65 millimeter height to a 70 millimeter height. And so that's the equipment that's really that's being installed in the Gigafactory and that's the cell phone factor we think is probably optimal. And this is establishing the Gig factor, this is where we first really started to think hard about the importance of building the machine that makes the machine. So how do we rethink cell production, battery module production, battery pack production and production in general on a physics first principles basis to achieve the best possible outcome because we had to do that out of necessity for the Gigafactory. And then as I'll talk about later, we're going to do that for the whole car. And just like the initial expectations for Gigafactory were about 35 gigawatt hours at the cell level and 50 gigawatt hours at the pack level. So we thought we would internally produce most of the cells but still draw upon factories in other parts of the world to make up for the rest of the cell volumes so we could get to a 50 gigawatt hour level at the module and for modules and packs. And that incremental listen, to get to 500,000 cars a year, you only need 35 gigawatt hours, but the other 15 gigawatt hours was meant for Stationary storage. And as we've gotten deeper and deeper into the Gigafactory design So as we've gotten more and more into the Gig factory design, Again, so like my favorite thing is to think about things from a physics first principle standpoint. I think that's sort of The best way to think critically about, particularly a technical subject, we've actually found that we can I mean, theoretically, do probably 3 times our initial estimate in the same form factor as the Gigafactory? So I'm not saying that we will do 3 times. But within that form factor, the Within what you see there, which is sort of trying to be slightly romantic about it, which is like It's designed sort of like a diamond and aligned with True North. And within that form factor, In principle, we could actually do trouble the volume that we initially expected. So, yes, we're going to have the Gigafactory party, opening party. Well, it's actually bigger factory has been open for a while, but the party will be happening in July. And so we're doing good parties. So I think you're going to enjoy coming. And there's the dual motor all wheel drive And this is why I sort of infamously tweeted out That is time to bring up the D and something else. That honestly was an innocent tweet. But when I read the Twitter comments, I realized this could be misinterpreted. I'm just glad I didn't tweet out time to bring out the D and the A. So we don't really have a big marketing agency off somewhere for bringing this stuff out of this actually. This is stream of consciousness. It's like a 2 or 3 minute discussion in the office and off goes the tweets. Exactly. So we introduced dual motor all wheel drive, and it's the first time there's been dual motor all wheel drive in a car, which actually gives it fundamentally better handling characteristics than a single motor with a mechanically attached longtunnel axle because it essentially gives you digital control over the front and rear torque at the millisecond level. So it's from an architectural standpoint fundamentally better in traction than a single motor that's connected mechanically. Yes. This is kind of the ultimate refinement of that digital motor control Drew talked about very early I think there's an awesome example of a dual motor Model S. I was accelerating a snowmobile in Norway, 0 to 60. The traction was that good just because every single wheel was doing the exact maximum it could. So that was So I mean in order to solve the sustainable energy problem broadly, there are really three elements that are needed. Need to have sustainable transport, essentially electric transport. You need to have sustainable energy generation in the form of solar, wind, geothermal, hydro. And but then the 3rd critical ingredient is stationary storage because obviously, the sun only shines during the day and wind is intermittent. And so in order to solve the sustainable energy problem, you really need to have you need to be able to buffer the energy in a stationary battery pack. And but that combination of factors, obviously, I'm a big believer in solar, But wind and the other things are also going to be big contributors. If you have electric cars, stationary battery packs and solar power, you can completely solve the world's energy problems in a sustainable way. And so that's really what we wanted to convey with the launch of Tesla Energy and Powerwall and Powerpack Version 1. And this business is growing well. We're making those products actually at the Gigafactory today. They've been being built out there since December last year. And that little video ended with sort of a hypothetical drawing of a 50 Megawatt hour field of power packs. And we're actually starting construction on a site that's almost identical to that in Hawaii in just a few weeks. So, that's not it's not just an animation anymore. That site is going to be powering a reasonable percentage of the peak load of the island of Kauai. And it's baseload solar energy. So it's providing that solar energy actually well into the night, way after the sun has set. And it's so exciting because it's actually cheaper than the fossil energy, the fossil fueled energy that they would otherwise have to buy. So as soon as we get that installation up and running, it's an example, a case point that we can just continue to scale anywhere that it has that economic payback. So it's pretty exciting. We're really increasingly excited about the potential for Tesla Energy. And we think Previously, I'd said that the battery pack allocation would be roughly 2 thirds vehicle, 1 third stationary storage. I'm actually at this point, I think it's probably going to be closer to even. So the because the interesting thing about the Powerwall and the Powerpack is that they scale on a global basis a lot faster than cars do. Because when you have cars, you've got to deal with the regulatory regime in a wide range of countries. And most countries have like a very specialized regulatory regime. And you're dealing with entrenched competitors and it's quite a difficult battle. Whereas for stationary storage, there's really No one's really at least yet doing it right. And The regulations are much more consistent from country to country. And the scaling so the scaling potential is going to be quite a lot more than in cars, I think the rate of growth is going to be several times that of The car side of Tesla. And the Model X deliveries. All right. This program has been challenging. And I think I particularly need to sort of fault myself here for, As I've said before, a bit of hubris in putting too much technology all at once into a product. And in retrospect, the right thing to do with the Model X would have been to take a lot of the really awesome, cool things but kind of table them for a future version. So if I go in back the clock, I would say like, look, we've got these great ideas, the things that I want to really implement and that other people want to really implement. But The smart move actually would have been to table those for Version 2 and Version 3 and so forth of Model X instead of piling them all into Version 1. So this is definitely a case of sort of getting overconfident and whatnot. And In particular, the software that controls the Model X and the operation of the doors has been incredibly difficult to refine. And getting the complex set of sensors to work well has been incredibly difficult to refine. And I think we're almost there in making the doors useful. And actually, it's a software problem. It's figuring out how do you interpret all the information from the sensors? What should you remember? What shouldn't you remember? How should you open the door in different circumstances if you're in a low ceiling or a narrow situation? If a sensor is giving erroneous feedback, when is the right time to ignore the sensor? I mean, this has been like a very digging ourselves out of the hole has been quite hard. But I think with the software release that's going out shortly and then another one that's going out maybe in a month or so, I think Finally, we'll be at the point where the doors are better than normal doors as opposed to worse. So I think anyone is considering buying a Model X, if you order a Model X Now or soon, trust me, you will love the doors because the software will actually be right. And so it's I'm pretty excited about where that's going to be. So yes, we're going to the So thank you to everyone who's placed an order for the Model S and put down the deposit. I'm really confident that you're going to love the car when you get it. It's going to be amazing. And yes, the Model 3, the as soon as people wonder about like the presentations that I make or Tesla makes. And The Model 3, 1 was the first time we actually rehearsed for one day. So if they seem a little off the cuff sometimes, it's because they are. We're like trying to make Our efforts are focused on making the cars as good as possible and solving problems and presentations and whatnot tend to be a lower priority than actually making the products good. Yes. And I mean, this is a car we're all just incredibly excited about. For many I think many people at Tesla, even those who have been there all the way from the beginning, this is the car we've wanted to build since the company was founded. And we often get this criticism that we're in business to make expensive electric cars for wealthy people, it's absolutely not the case. This is not why we started the company. And the Model 3 is the ability to realize all these innovations and improvements and learnings we've made along the way into a product that people can actually a large number of people can afford. Exactly. Of course, in order for us to produce the Model 3, we're critically dependent on revenue that we receive for people that buy the Model S and the Model X. So it's really important to bear in mind like The thing that is enabling the Model 3 to exist is fundamentally the people that are buying the Model S and the X today and historically. And I also want to emphasize that people sometimes like wonder, well, Should I buy a Model S or a Model 3? And the Model S is always going to be our technology leader, the Model S and the X. They're going to be our technology leader. And the reason for the S and X being the technology leader is because when you create new technology, before you've had time to refine the design and achieve economies of scale, whatever that technology is, it's going to be expensive. So, Oren, like the reason S and X will have the S and X the technology in the S and X will precede the 3 It's not because we're trying to intentionally withhold it from the 3, but rather because it's fundamentally more expensive when you have new technology until you can do multiple design iterations and achieve economies of scale. So those that buy a Model S and X should know They actually will be buying the most advanced car, and they will effectively be paying for that technology to then make its way to the Model 3. And Yes. So that's the so that's the so that's true like onshore is like is S or X better sorry, is the Model S or the Model 3 Better. The Model S is definitely better. It's going to have a leading edge technology and all that. And then over time, that Technology will make itself to the Model 3. So yes, we really Appreciate those that are buying the S and X and enabling us to make the Model 3 and subsequent vehicles. Just a quick slide on Tesla Finances. We spent a lot of time on this, but one of the criticisms we received, particularly from certain quarters, is like Tesla is basically just getting all these government subsidies and that's the reason we're alive. And it's this is just not true. So you can see that basically the money received from government relative to revenue and investments and where it goes down in 2013, That's Tesla paying back the DOE loan. So the actual amount of money that Tesla has gotten from the government is a very tiny amount relative to what Relative so what we've gotten from the government is a relatively tiny amount relative to The forward button works. So the amount that Tesla has actually received from the government is really quite small and only a tiny proportion of what Tesla has received from investors and from selling vehicles. So it's really you can see that basically the gray is kind of the money from government, And you need to net that out against the fact that the loan was repaid in 2013. So it's really quite, quite small. Now this doesn't include incentives that consume Like if we don't have that equipment, Nevada doesn't still pay us money. So it's like it's a no lose proposition for Nevada. And that's why I wrote a blog titled The House Always Wins, Okay. Nevada is very familiar with the house. So just so I think it's really important to clear that up. And I particularly wanted to spend time on this because obviously we're in an election year. And so what happens in an election year is like particularly Tesla gets sort of made into a political football and kicked around quite a bit. Yes. I mean, the last one, there were 3 presidential debates. Of the 3 presidential debates, Mitt Romney attacked us in 2 out of 3 by name. Like that's a lot of time to spend on a little company. And I don't think he came up with that attack by himself. That was not Somebody made him do somebody asked him to do that. And I don't somebody with not good motivations. So we actually call this like a loser. It's like, okay. So like Tesla is like a loser of a company or something. And I mean, you got the object right but not the subject. And then In terms of the Tesla fleet, a lot of people question, Is Tesla going to be able to make 500,000 cars a year? That's such a big jump from where we are right now. We're hoping to sort of be at an annualized rate of somewhere between 80,000 to 100,000 cars a year by the end of this year. And so how do we do go from there to 500,000 cars a year? And that's where I think it's important to just Point out like we've made much bigger leaps than this in the past, going from 500 or 600 Roasters a year to where we made half the car to the Model S where we made 20,000 cars and we made the whole car And it was a much more complicated car. And you can see essentially going from Yes. The sort of In terms of fleet, going from 110,000 or going from, let's say, 5 years ago where we had or 2010 where we had roughly 1500 cars total to 5 years later with 110,000 cars. That's a pretty big leap. So I think it's certainly going to be a challenge with the Model 3. It's going to be hard. And but it's I think we've shown that the Tesla team is really dedicated and that it's something we can make happen. And then particularly with Thinking about the mistakes we've made in the past, where we've sort of overcomplicated products like Model X. And if We're really making sure that we don't do that with the Model 3 and that we have a tight interaction loop between manufacturing and engineering and design, so that we design a car that is easy to make and that If there are cool features, it's great. We'll table those to Version 2, Version 3, Version 4. I think it's worth making another point because sometimes people ask me like When should I buy like a Model S or a Model X? It's like, are you going to make an improved version? I'm like, of course. So I mean, if we're always going to keep improving the product. And so if somebody wants to wait until Model S R X stops improving, well, you're going to be waiting forever because we're going to keep improving the product every year, sometimes every 6 to 9 months. So I think generally, the right time to buy a car is always now. And then Depending upon how much you like new technology, then buy a new card at whatever that period is that you think makes sense? So yes, just talking about the future. I think the most important point I want to make is that What I referred to earlier that we've realized that the true problem, The true difficulty and where the greatest potential is, is building the machine that makes the machine, in other words, building the factory And really thinking of the factory like a product, not sort of a hodgepodge of things that are bought where the machines are kind of bought from a catalog. But actually, just like we do with the car, We're going to try to create a car by ordering a bunch of things off the catalog. We design the car the way it should be And then we make either we or with working with suppliers make all of those individual components. There's almost nothing in a Model S that's in any other car. And I think the same approach is the right approach to take when building the machine maker, the factory. I actually think that the potential for improvement in the machine that makes the machine is a factor of 10 greater than the potential on the car side. I think maybe more than a factor of 10. I really come to appreciate that over the last 2, 3 months in particular when I've sort of just been on the production floor all the time and sort of seeing things running production personally At a detailed level, I don't even have a desk or an office anymore. I just basically I'm just basically standing in the production floor and occasionally meeting in a conference room. And And it's like, wow. I do my favorite thing, which is apply physics first principles. It's like the best tool possible. And it's like, wow, when you think of a production facility on a fundamental level, for a given size of factory, the output is going to be volume times density times velocity. So let's sort of look at our factory and say, okay, what is the density of useful to non useful volume. It's crazy low. It's like 2% or 3%. If you look at volumetrically, not just on a planar level, but volumetrically, it's literally 2% or 3%. When you say CAR to non CAR ratio volumetric ratio, like wow, okay, that seems like a lot of room for improvement. And then you said like velocity. What is a reasonable expectation for the exit velocity of vehicles from the factory? And of course, you may think that, say, some of these advanced car factories around the world are very good at making cars And they may make a car every 25 seconds. That sounds fast. But actually, if you say, well, The length of the car plus some buffer space is approximately 5 meters. And so it's taking 25 seconds to move 5 meters. Okay. That's 0.2 meters per second. Basically, You're not much faster than a tortoise at that point. And so it's like, wow, that really doesn't seem That doesn't seem fast. Like how can these factories like a slow sort of Slow walk would be approximately or slow to medium walk would be 1 meter per second. And a fast walk would be 1.5 meters per second. And the best car factories in the world are doing 0.2. Like, it seems like you should be able to have cars exit at least walking speed. This doesn't seem so crazy. And then the density improvement, like there may be as much as an order of magnitude improvement in density possible as well going from maybe 2% or 3% to 20% or 30% of volumetric density being Optimal. And like you also think of it like the design of a modern system on a chip or a computer. And if you look at, say, the clump complexity of the board and you see how close together the line traces are and how focused things are on clock speed and data transfer from RAM to, say, solid state disk or the internal CPU cache, It's like, wow, this is crazy potential for improvement here. I think at least in order of magnitude potential for improvement on production. And so with less like significantly less engineering effort, we can make dramatic improvements to the machine that makes the machine. I think this is I think I mean, I think like probably a lot of people will not believe us about this. But I'm absolutely confident that this can be accomplished. Yes. There are opportunities we're finding all over the place. And as you start shift some of the design resources that have been improving motor technology in power electronics or batteries are working so hard to try and find tenths of a percent of efficiency gain or performance gain on those different systems. And when they start to go and look at the factory, they Oh, my gosh, this is crazy. We can find, as you were saying, easily tens of percent or 20, in some cases 100 of percent efficiency gain that we're sort of unheard of in terms of what you could do in the design world. So the impact there is pretty phenomenal and quite close at hand. Yes. So we're basically design a factory like you design an advanced computer. And in fact, I think you engineers that are used to doing that and have them work on this. And I found that like once you sort of explained this to A 1st grade engineer, the light bulb goes on, they're like, wow. As JB was saying, like they spend huge amounts of effort trying to get a fraction of a percent of improvement on the product itself. But actually, that same amount of effort will yield an order of magnitude greater result if you focus on building the machine that builds the machine. And it's just that a lot of engineers don't realize that this is possible. They think that there's like a wall. They're basically operating according to these invisible walls. And so we just need We're in the process of just going through, it's like explaining those walls don't exist. And I think it's going to be pretty amazing. So just thank you to Everyone who's a shareholder and to our customers and the Tesla team, and my apologies for the long story. All right, everybody. I can give you the instructions for the Q and A and the endurance to stick around. And just before that, we want to bring in some of the Just the some of the longest standing Tesla employees. Hey, guys, can you come up on stage? So these are just people that have been with the company for on the order of a decade. And just All right, guys. I just want to say thanks for the many late nights and weekends and intense effort along the way, and it's been an honor working with you. All right. So, we'll jump right into Q and A. Okay. I'd like to give the instructions for the Q and A. It like most of you know how this works. We queue up behind the mic stands on both sides of the room. We'll take as many questions as we all have endurance to answer or hear the answers to. And I ask you to state your name And please restrict yourselves to one question, so we can be respectful of everybody in the line. Okay? Okay. I'm Mark Peters. One question and one suggestion. Real quick, we need to sell a lot of Teslas, obviously between now and Model 3 arrival. And my wife and I are doing our part. We're on our 4th and 5th Model Ss. And our 3rd one's with my brother. So we're keeping it all in the family and trying to fill the world with Teslas. To all of our friends and family and neighbors and everyone we meet, it seems like there is a remarkably large percentage of people that don't have A clue about climate change, greenhouse gases completely off their radar. And I'm wondering if, especially because you mentioned this Merchants of Doubt DVD and the documentary of the book as well. If maybe we can maybe get licenses for a clip or something at the galleries or maybe on the website just because so much of the population that could buy our cars simply doesn't know the moral kind of imperative to save the planet and why it matters. And if we can't get the license, Send out a team to interview some of the principals that were in the DVD, just to get more people, lining up to keep Fremont running 7 days a week, 3 shifts a day, whatever it takes to fill the world up with Teslas. Thank you. Yes, it's It's a great suggestion. It's a good point. I mean, we're pretty close to the issue. So for us, it seems like really obvious. But I think just having something that You're explaining to people who aren't exposed to the level of detail that we are and maybe just like a little video Like thing you put forward or something like that, just to sort of explain it. And I think it's super straightforward. But there is a lot of misinformation out there. And as the threat of EVs becomes more and more significant to The oil industry, obviously, they step up the propaganda campaign. And that's to be expected. So it's really important to fight hard to counter the propaganda. So we'll do I think that's a great suggestion. We'll do it. Sure. Fire away. Go ahead. I wanted to let you know that we have some suggestions that we don't want to make public in regards to the product itself and the customer service experience. I got a package for all the board members as well. All right. Thank you. We will take it. Thank you, Mr. Muscat, my name is Skip Dailey from Northern Nevada. I work for the Labor's Union. I'm here as a shareholder representative. So Mr. Muscat, I'll later here address the Board from the Northern Nevada Bill and Trades Council, outlining concerns over labor review, safety violations and the unfair use of immigrant in and out of state workers, which has caused over 300 Workers to stop work at the mega factory. Additionally, in light of the reasons Sorry, please try to keep the questions fairly short Yes. Just And one at a time. And I can't hear what you're saying. Okay. I'll try to speak up. In addition additionally, in light of the recent case where An H2B visa worker was exploited and seriously injured at the Fairfield facility and the many documented safety violations at the Nevada site due to, in large part, to the bottom feeder practices to hire workers from staffing agencies This is not a question, this is a statement. What is your question? Eddy. Eddy. Okay. My question Thank you for giving me my 2 minutes here. Will you agree to hire and allow an unfettered investigator investigation of these outside an independent auditor to protect our investments. The safety issues, you just talked about a metric building the factory and build the factory. There's a way to build the factory as well and I don't think you're using more sufficient model. And I'd like you to put your thoughts to that, so we can get a better product out there. Okay. Yes. I mean, I think it's like a real important principle to bear in mind here. Like, If Tesla's fundamental optimization was, minimizing labor costs, why on earth would we have a factory in California or the Bay Area for that matter? We would do what every other car company has done and move vehicle production either to a different state or a different country. So it's obviously false on the face of it to make any assertion that Tesla is minimizing labor costs. It's obviously false. Maybe just to quickly comment on the Gigafactory piece I think you alluded to there. I mean, part of the agreement we made with the State of Nevada was that we would bring at least half of the construction in operations labor for the Gigafactory from in state in Nevada. And that's a commitment we've kept in every single reporting period, every single month of operations since we started several years And today, we're over 70% local in Nevada, and we do everything we can to hire people locally. At some point though, going higher reduces the speed of execution. We simply, in some cases, can't find enough of a certain discipline of worker. So, we need to trade that off, but we're well in excess of the commitments we made and that were agreed to by the state. Hi, my name is Heiden and I'm a shareholder. I got my 85D last July and since then it's gotten about 150,000 miles or so on it. And even with daily full recharging, we've only lost about 6% total battery capability and there's been no real maintenance cost except for like Four sets of tires. But so my question is Depends on which tires you are. It sounds like you have the high performance tires. No, 19. Really? Okay. Bottom miles maybe? Like regarding the free long distance travel and superchargers for life, how long do you intend to act on that? And then once the Model 3 comes out and there's upwards of 500,000,000 cars out there, how are you going to keep up with that? Right. I mean, to date, we wanted to make it really straightforward and easy. So That's why the superchargers are set up, at least today for people that have bought the car as free long distance for life. Obviously, that has fundamentally a cost. And so I think I mean, I don't want to make this some big news headline, but the obvious thing to do is to decouple that from the cost of the Model 3. So it will still be very cheap and far cheaper than gasoline to drive long distance with the Model 3, but it will not be free long distance for life unless you purchase that package. I wish we could. This is not but in order to achieve the economics, it has to be something like that. I want to just emphasize like what Tesla's motivation is, is to make electric transport as affordable as possible. That is what informs all of our actions. So if we do something and we charge for this, we charge for that, It is not because we want to make things more expensive. It's because we can't figure out how to make it less expensive. That's all. It also just sort of pains us to see people misvaluing their time at supercharged stations So often? Yes. You know, it is far more convenient and faster for you overall to charge at home or at work. It takes one second to plug in. You don't have to go to a separate location and wait for the car to be there. And time and time again, we see people that drive to a supercharged station, sit in their car, wait there for 20, 30 minutes and then drive to a different destination. And if they do the math and the value of their time, it makes no sense. Yes. I think part of it is just people used to a paradigm where they go to a gas station to fill up and that's just normal. So then they get an electric car and it's like, oh, I need to go to the supercharging station to fill up because that's what's normal. But actually, the best thing to do with an electric car is to charge your car where you charge your phone. Like would you really take your phone to a gas station? Like no? So I think a lot of it is just people kind of they're used to an old way of doing things and they kind of do it by default. But as JB was saying, Like driving to a supercharger and in order to like maybe get $5 worth of electricity and spending half an hour for your time, like you're maybe barely at minimum wage. So it's actually not it's just not the best thing for people, but they kind of do it out of habit. Hi. My name is Emmett Peppers. I'm a long term investor and product enthusiast. I have an S and a signature X. By the way, Stephen Bainbridge at your San Rafael service center has been excellent in taking care of a few minor kinks with the X. My question for you is, Given your hints at vertical takeoff and landing electric plane at that point, do you think that As a long term investor, I'm thinking 10 years maybe later, I don't know. But do you think as a long term investor that Tesla would explore Designing and producing such a machine or would that be more of a SpaceX project? And I think we're getting a little off topic here. Okay. Well, I'm a long term investor. I'm just trying to get 10 years plus out and what could happen? Well, I mean, I think Nobody is more keen on doing like electric aircraft than me or JB. And but we need to stay focused on like the primary mission of electric cars. And the energy density of batteries is not yet ideal for aircraft. We need to still to make more progress on for the energy density of batteries, so the gravimetric energy density before aircraft really start to become compelling relative to kerosene fueled aircraft or Petroleum based aircraft. But it's not out of the question that Tesla would do electric aircraft in the future. Our goal is to accelerate the advent of sustainable transport. So That goal has been there from the founding of the company and that's what is going to remain true for the future. Sustainable Energy, yes. My name is Elizabeth Farrell Peters, And I want to thank you, Mr. Musk, and acknowledge you for creating an environmentally friendly interior that's comfortable, beautiful and soft. The ultra white interior is a moral and ethical option that aligns perfectly with Tesla's sustainability goals. My question is, when can we expect this interior in other colors and be available in all models of Tesla hopefully soon? We Generally, sort of try to minimize comments on future products, except that I think I mean, I kind of agree with the general sentiment and that it should be available for all colors. I agree. Hi, I'm Amina. So you seem to be a very important part of this company. And I was wondering what your strategy is for ensuring your personal mental clarity and long term health and security, like yoga or goji berries? I'm probably not engaging in a set of actions likely to maximize my lifespan. Yes. I don't know. I do think At this time, I'm in all the history of Tesla, this is the most excited I've actually been about the future of the company. I think that sort of excitement is just a powerful driver and makes me want to get up in the morning and come to work. I think it's incredibly important that you have an environment in general where people look forward to coming to work because it's just so much easier to work hard if you love what you're doing. And stuff I was saying about building the machine that builds the machine, I'm just really fired up about that. I think it's one of those things where so much more is possible than people realize. And so I think it's going to be really going to positively surprise people there. I'm really excited about Spending time on that and JV is and the rest of the team are. So I think, yes, I'm feeling pretty fired up actually. Thanks for asking. Elon, my name is Bill Chamberlain. I recall 4 years ago, you said that, the new owners of Model S would not be disappointed. I can tell you that, I am so not disappointed in my signature Model S that it now has a twin in my garage. So now we have somewhere between 100 to 160 kilowatt hours of storage sitting in the garage. I'd like to buy a power wall, But that only has 7 kilowatt hours of storage. And I'm wondering whether there can't be at some point a connection so that you could charge the power wall and keep it keep the house secure for a lot longer than few hours that the power wall would currently Take care of. Do you mean connect the car to the Yes. And maybe if this isn't possible for the current cars, I guess I would just say that I think it would be a useful thing to do for the future because I think then people will both have an incentive to buy a Powerwall since they have the car or if they have the Powerwall, they'll see that they should be buying a Tesla, so that they can have that extended energy use? Yes, it's definitely something we've discussed internally and we've talked about that. And One of the main missions for the Powerwall is to cycle very often, every single day. And a benefit that's really helpful is to be able to provide backup power in an outage. But that really isn't the only reason we would create the product. And when you connect your car to your house, you're mainly solving or improving the backup power situation. It's not something where you buy a Model S and park it in the garage and never drive it, obviously. That's part of why we didn't focus that much on that particular problem. And also the characteristics of the batteries in the car make it such that if you wanted to do that, that very repeated cycling, it's not really designed for it. So the Powerwall is dedicated in its design to cycle daily and to do that for 10 plus years. The car is designed to cycle essentially weekly. Right. So order of magnitude difference. It's something that intuitively makes sense. And actually, in the very early days of the Roaster prototypes, you could do that. You could actually power it could send power both ways. And then for reasons that J. B. Mentioned, we decided like That's probably not a good thing. And it's also tricky because if it's unexpected back driving of power from the car, it can create electrocution risks and do things that people aren't expecting. And so then you get into a separate regulatory regime where you now The car is driving power into the house. And this gets very complicated, particularly as you go to different jurisdictions and different permitting environments. So we think and then of course, if you want to be able to use your car and your house at the same time. And so If power goes away from the house when you drive, then probably the rest of your family will be upset about that. So I think it really is kind of a 3 part problem of sustainable power generation, storage and car. My name is Aaron McCall Stanley. I work in the Presidio or as I like to refer to it, Starfleet. And I was going to ask about planes and spaceships and the battery power you were going to do for that. But instead, since I'm a cook, the gentleman that asked about the coming to fill up at your stations and you saw a higher value of their time somewhere else. Seeing this room full of people, obviously, we all seem to value coming here and meeting you and meeting the other people that are invested in this Adventure. Don't you think it would behoove you to have a destination of the Supercharger stations with a restaurant or something to engage them while they're charging. Well, we actually have a whole program we call Denation chargers. It's well named. And these are basically AC chargers that we install at hotels or restaurants or other points of interest, parks, museums, things like that. And we actually have more of those now than we do supercharged connections. They don't get publicized as much, but you can find them on the Find Us page on our website. And it's phenomenally useful if you're taking a road trip using chargers to get somewhere and then you want to decide where do you stop at the end of your road trip so you can charge and have your car plugged in even when you're at your hotel or wherever it is you're going. So that we designed those 2 systems to work in tangent in parallel with each other so that they could have a synergy. And we really want to try to get to everyone's questions. So if I ask you to try to state the question quickly. And we definitely want to try to get to as many people as possible. I've reduced this from about 2 minutes to 80 seconds. Okay, great. Thanks. My name is Ron Freund. I'm the Vice President of the Social Equity Group, which is a socially responsible investment firm in the Bay Area. By the way, we had no idea how popular you are. When you came in, I thought for sure maybe is that Steph Curry behind him? Anyway, we own shares of Tesla, and we also share the vision of sustainability that the company represents. We're very concerned about the upcoming election. Yeah. It's definitely going to be yeah. We're going to get beaten up. 1 of the candidates is committed to the fossil. Yes. And we want to I'd like to get your comments on the implications of that. And secondly, We would like to further in the interest of transparency, if you'd be willing to post on your website, What your political contributions policy is and whether you could disclose the contributions and make the take away shine some solar light on that subject. Thank you. Sure. Well, I mean, actually, all my contributions are public. You can actually Google them right now. And I don't support any super PACs or anything because I believe that's Sorry? The company doesn't really make contributions. I think there's no material contributions made by the company. There are contributions made by individuals of the company but not by the company itself. And all of that is a matter of public record. So, yes, it's one Google search away. And I think I should point out like so many people conflate my contributions with Tesla when they're actually related to SpaceX. So political contributions, I basically make virtually 0 As far as political contributions for Tesla, I do make political contributions for SpaceX because The way the system works is SpaceX is fighting the big defense contractors. The big defense contractors make 20 times the political donations That me and the people of SpaceX do, literally 20 times. But if you just take Boeing and Lockheed where we're just space SpaceX competes against them for launch contracts. And what those contributions just do is they just get us a conversation with legislators. Yes, that's all. And if political contributions were really what made the difference, then SpaceX would have no hope. No hope. And thank goodness they don't. My name is Steve Kastner. I am an IPO investor and owner of Roadster 33 delivered in October of 2,008. So I appreciate the early history that you were talking about. Thank you. And my apologies for the challenges you probably encountered in that time. Actually, it's been pretty good. But I wanted to ask about Roadster 3.0. So you've talked about this on a couple of occasions over the past few years. And the question really is, Will there be anything more than the battery increased capacity battery done? The original proposal was that there would be A demo drive to Los Angeles showing how it would go 400 miles. Oh, yes, we did that. Well, it hasn't really been We didn't I guess we didn't publicize it enough. But yes, We drove the roads. Right. Sorry. But there was going to be additional changes beyond the battery, some possibly aerodynamic changes, tires and other things. We haven't heard any more about that. So I'd like to know whether there will be more. And the batteries seem to be trickling out very slowly. So I have put my money down, but I can't really get any information about how long in the future it might be before I get one. Well, I guess I can talk to the battery rate question first. We have a pretty limited production capacity. This is using some very old Roadster equipment, some of that same equipment Jason alluded to in the morning or a little bit earlier. And we can right now build a few battery packs a week, something like 3, 4, 5 ish battery packs a week, or I shouldn't say retrofit, because we take back the old battery pack and then we retrofit it completely into a new battery pack. And I'm sorry, we don't have more information that's gotten to you. I can follow-up on that. But it shouldn't take that long. It should perhaps on the order of maybe a few months of wait time for someone in queue now to get that retrofit done. And The tires we have the tires, right? The tires, we did find a new set of tires, but we've been working on finding the right set of trade offs. Some people certainly still want great handling as well as efficiency. And we have a few options, but we haven't really publicized that very dramatically. And the number of people that have been interested in some of these upgrades has been a little bit lower. But I can follow-up with you separately and see if those tires are something that Would be of interest to you? Yes. I think the main thing is the battery pack makes a huge difference. And yes, we were able to drive all the way from the barrier to LA on a single charge with Roadster. And I guess we didn't publicize it enough, but I think that's a pretty cool milestone. Hi. My name is Danielle Quilisi, and I have a Future design question, which you're not going to be thrilled about, but I want to ask anyway. And I'm not ungrateful because I love all the designs you've ever done, but I'm wondering if there's Any demand that you're hearing about for something between like a Roadster to Suzanne, a convertible sedan, 2 cramped back seats, Anything like that? I mean, it's always tricky for us to comment on future product roadmaps, Except to say that in the future, you can expect a wide range of vehicles from Tesla. Hi. My name is Emile Gilliam. And my wife, Eliza, and I recently participated in the fun run-in support of veterans through the factory, and that was an Awesome and very illuminating experience. So first of all, thank you all for allowing that to happen. Now my question is, will there be enough Is there enough lithium supply in the world to enable you to build everything that you ambitions you want to build in the next few years at an affordable price? I mean, the nice thing about lithium is it's extremely abundant on Earth. I mean, lithium is the 3rd most common element in the universe. And the reason we don't have just free hydrogen available is because it's bound up in water. And then the reason we don't have a lot of helium is because it floats away. But lithium does not float away. And so there's lithium in salt form virtually everywhere. And so there is definitely no supply issues with lithium. But to Get to the nuances of the question, which you're probably aiming for, which is like in the time frame available, like in the next year or 2 years, Will there be lithium in the form that Tesla needs, which is lithium hydroxide, at a price that is reasonable and does not materially affect the cost of the Model 3. I didn't see that one coming. The I mean, it's exactly right. I mean, we need to make sure that we have the risk extraction and processing capacity, But it's not that much different than lining up other supply chain elements or components even for the car. It just has a little bit longer lead time. And Tesla spent a lot of time working with all the different lithium companies, all the way from tiny startups up to the sort of large name lithium companies all around the world. And we're working with them to figure out what are the most economical and efficient ways to either have them invest or perhaps even have us be involved to make sure that they're investing in the right timeline to have the capacity ready when we need it. And we're So finding ways to potentially even reduce the cost here below what people have done in the past because a little bit like with batteries in the Gigafactory, Lithium is not a mature market. It's not traded on the London Metal Exchange. It's subject to a lot of speculation right now. And There's kind of lithium booms that happen in different parts of the world. This does not relate to the actual cost of production of lithium. That is relatively stable. And as Elon said, there's a lot of it. So once we can appropriately invest In the extraction, refining, processing, the price of lithium is quite low and quite stable. It's also worth mentioning that Although something is called lithium ion, the actual percentage of lithium in a lithium ion cell is approximately 2%. So I mean technically, our cells should be called nickel. Nickel graphite. Yes, exactly. Nickel graphite because The primary constituent in the cathode is or in the cell as a whole is nickel. And then On the anode side, it's graphite with silicon oxide. So and then there's a little bit of lithium in there, but it's kind of like the it's like the salt on the salad. It's really not the it's a Small percentage of the mass. It's still important to avoid supply constraints and to make sure that the tails doesn't wipe the dog on cost. But it's the main determinants of the cost of the sale are the price of nickel in the form that we need it and There's a little bit of cobalt and some aluminum and then the cost of the synthetic graphite with the silicon oxide coating. Hi. My name is Jason Chang. I own one share of Tesla. And, first, I want to say I love you. So I had a question on climate change, but I can't ask it. But I'm told to ask, How big do you think the Tesla Energy Company or part of the company can be? That's a great question. I mean obviously, at this point, it is highly speculative. So I mean I tried to bracket my answers with the appropriate level of uncertainty. So in this case, I'm bracketing it with a high degree of uncertainty. But my gut feel is that from a revenue standpoint that Tesla Energy and Tesla vehicles, long term end up being roughly similar in revenue. Sheldon Kaye, hi. I recently bought my car in for service on a minor issue and the appointment was scheduled a month prior. And it turned out that a day later, they hadn't even looked at the car. So the question is, is there a reliability problem with the cars? And what was with the bad service Experience, I mean. Sorry, is this with an S or an X or? S. I can't I mean, obviously, sort of when we have 120,000 or 130,000 vehicles in the field, there are going to be some cases where The actions are suboptimal with respect to service. I mean, it is worth noting in terms of The Consumer Reports surveys on how do people feel about Tesla Service, Tesla Service consistently ranks number 1 by far. No, that doesn't mean it's far from perfect and there's obviously a lot of room for improvement. But I mean, I think we're somewhere in the mid- to high 80s or 90s on people's sort of happiness with Tesla service, but that still leaves, let's say, 10% of people that are unhappy. And particularly in recent months, the burden on the Tesla service team has been very high because of the introduction of the Model X. And that has that's absorbed a lot of resources on the service side. Now I think in the months ahead, as we've solved a huge number of issues with the Model X, The burden of the Model X on the Tesla service team will be dramatically reduced, which should translate to a significant improvement in Hi. My name is Chris Voiewitz, shareholder and Model S owner. A multitude of groups now are performing research and development on autonomous driving technologies, Tesla included. This technology is relatively bleeding edge stuff, and I surmise that many of the companies keep some of their or all of their research Private is trade secret. Now, I have no issues with this when it comes to convenience or luxury. In this context, consumer driven competition seems appropriate enough for advancing the industry forward. But when it comes to autonomous driving safety, technical merits and flaws are difficult for the average consumer to assess they're highly technical engineers, both before and after the purchase. If you never get in a serious accident, I mean, like, how can you give it less than 5 stars there? So this is quite long. Yes. Yes. We can't have long questions or we will not be able to I will skip to the end. Okay. I am curious as to if the industry promotes the cross pollination of safety research and autonomous driving, or if there's some sort of issues with, like, people want to keep this stuff secret as a trade advantage. And I'm I have no insight in this, and I want to know if it's something I need to worry about or not. I don't know. I mean, from a Tesla standpoint, we've offered to share all of our autonomous driving data with the Department of Transport. And on a statistical basis, like we don't have any issue with them sharing it with other manufacturers. Obviously, we're very sensitive about that on individual car basis. But on a statistical basis, that's an offer we've already made to the The Department of Transport. So yes, we want to be helpful. And just I think I'm Already quite late for the Board meeting that was supposed to follow this. So I think we can probably take maybe 2 or 3 questions more from each side, and then we'll have to call it a day. Thank you. Hey, my name is Russ. I wanted to know when you expect the first lithium ion batteries to come off the line start to finish at the Gigafactory? So, yes, you want to take that? Sure. Later this year. That's the very quick answer. Yes, we're already building the Tesla Energy Packs out there, as I mentioned. And the first lithium ion cells will come off the production lines the first production lines at the end of this year, Being built all the way through into modules and packs. Yes. I mean, actually, like the most impressive machinery at the Gigafactory is the cell production machinery, but that machinery is proprietary to Panasonic. And Those machines are incredible, like wow. It's just that we can't put that on the normal tour. So I mean, we've actually worked closely with Panasonic on the production system and Again, playing physics first principles, so saying what is the actual potential in density and volume to improve the production rate of cells with a given set of equipment. And it's, I would say, Highly confident, if not I mean, I'm never completely confident about something, but I'm as close to completely confident as I can be that this will by far be the best cell production in the world, by far. Hello. My name is Gerard Dumuk. Firefighters throughout the Bay Area train regularly in vehicle extrication. In recent years with more testers on the road, it's inevitable that I may be called upon to extricate a victim from one of their vehicles. Myself and many peers have not yet been trained or offered information as to how to extricate people that's safe for both the victim and the rescuer. Is this information in training exist? How can I get a hold of it? Can I start the process? I need to train the general. I think we do actually have a section of our website with the first responder like information. In a nutshell, it's actually pretty straightforward. The most important thing for first not to do is don't hack a hole in the battery pack. This is like this is The cells have the both the fuel and oxidizer is present in the cell. So If you hack and the battery pack shell is designed for thermal containment. So if you Normally, what you might do to douse a fire is to hack a hole in something and then douse it with water or a foam to get rid of the so it can no longer access oxygen in the atmosphere. But because the oxygen if the oxidizer and fuel are together in a cell, that actually that doesn't work. And any penetration of the battery pack actually then allows the flames to escape in a direction that is undesirable. There are both in vents in the battery pack that automatically vent hot gases down into the side on the bottom of the battery pack. So that's probably the single most important thing is don't hack the hole in the battery pack. And then also The rate at which the thermal runaway occurs is very slow compared to gasoline. Gasoline can be like super big fire immediately, whereas the cells, it's real slow. I mean, like you'll be like, man, this is boring. So the rate at which the fire propagates is very low. And there's also multiple firewalls between the Passenger compartment and the battery pack. So even if there's a hole in the battery pack, it's very difficult for that to then get to the passenger compartment. That's really the main thing is just don't worry about the cars. Get the people out. You actually have probably well, you have way more time than a gasoline car. And except in very rare circumstances, even when there's been a high speed accident that's caused, like very high speed, like 100 mile an hour type stuff that's caused thermal runaway in the back and the battery went to the thermal runaway, the passenger compartment was untouched. So even if they've been unconscious, they would be okay. Hi, Elon and JB. My wife and I traveled here from Minnesota to be here today. I had a question about Tesla offering an Uber like service. If someone like Uber were to set up a driverless sharing fleet, you think they'd have to buy all the cars themselves, charge them themselves, in service of themselves, whereas Tesla might be able to use a consumer owned might be able to use customer owned cars and some kind of revenue sharing model with the customer. Tesla wouldn't have to deal with charging or cleaning the cars and wouldn't have to store them when they're not in use. And you would think, this would have a broader reach because cars would instantly be spread out across the country right in people's garages. It seems like Tesla could provide a better service without having to deploy a ton of capital. What advantages do you think Tesla might have if they pursued something like this? Well, I think that's an Interesting, insightful question. We've hinted about our long term thinking along those lines a few times in the past. But Right now, we're really just focused on making the autonomous technology helpful to customers and making cars safer. So that's really where all of our attention the Autopilot teams are as today is just heads down making sure that we really deliver value to the customers today. And primarily, that's coming And safety and convenience for the owner. Absolutely. And it's worth I mean, this is sort of inevitable, but you see every now and again like some article about how autopilot caused an accident or was didn't prevent an accident. But the important thing to appreciate is like Autonomy doesn't mean there are no accidents. It just means there are fewer accidents than if it was in manual mode. And I mean, that's really the important thing. As long as the probability of injury has decreased, even if there are still injuries, Although actually not aware of any injuries that have actually been caused by autopilot. As long as it is on a probabilistic basis safer and lives are saved and injuries are reduced, it is still better to introduce functionality. And I mean the data we see is very promising and very positive in the direction of improved autonomy. So just take like maybe Just maybe 2 more from each side. And well, the Board's been waiting for an hour. If you've got something real important, we can do it maybe. But Just bear in mind like yes. The board has been waiting for an hour and then we have an all hands meeting back at Tesla that's waiting for about the same period of time or will be delayed by the same period of time. I wish there was infinite time. People sometimes assume that we have like My name is Jonathan Kimon. There's this new research at UCI that says that if you rub The nanowires on the lithium batteries with more propylene carbonate, you can increase the shelf life by 100 volts. Yes. That's not true. Yes. The amount of BS that's in batteries is ridiculous. You basically believe maybe 1% of what you read about batteries. Yes, maybe 1%. Mr. Musk, my name Christina Reiss, and I have a question about destination charging. I'm from the Midwest, where we don't have a ton of the destination chargers yet. My in laws are farmers, so we're driving 2 little toddlers to lots of rural areas. And so I wondered, selfishly, if you would ever think it'd be possible to allow destinations to have the option to charge people to get their electricity in order to incentivize more places to participate. I was thinking maybe they could set a rate, just reasonable fee that would motivate them to get involved. I would think that a destination like a McDonald's, we've passed lots of them to visit the in laws, that they'd be less likely to offer charging if the $0.50 worth of electricity that the customer gets could be the entire profit McDonald's would make, say, off that customer's meal? Yes. I think we don't have any issue with somebody offering destination charging and asking people to pay for it. That's totally cool. We have no rule that prevents that. So if somebody wants to get high power wall connector and charge people to use it. That's fine with us. No problem. In some cases, today, they're in parking lots that cost money to park in the lot. So actually, the parking space is usually more valuable than the electricity? Yes. True. Exactly. Like if you're in Yes. Like a lot of malls, it's actually your per hour parking charge is greater than the electricity. So, it's growing like crazy. I mean, basically, we're shipping out 100 of those destination chargers 100 per month for sure. And it's something we're kind of the rate limiter right now. So even if we had more people coming to us, I'm not sure that we'd accelerate that much. All right. Super quick questions. How's it going? I drive a solar powered pickup truck. It's fantastic. Is that something you're considering with panels on the vehicle? We aren't currently doing that because we think the most efficient place to put solar panels is on the roof where they can constantly charge. It's fine to put them on the car, But actually, then if you're parking in a garage or beneath trees and so forth, it's like the fundamental economics Very much favor fixed rooftop installation. I apologize for Being short in my answers, but I will try to get through everyone that's in line right now. But short questions, short answers. It's the only way I can do it. And like I said, Our Board meeting is going to be quite significantly impacted by this. Jeff Frane, software engineer. So my question is, Thinking about being sustainable energy, we see the car tipping with Tesla moving to electric vehicles. What do you see next? Do you see planes are probably at 5% but maybe ships And train, sorry. We're going to focus on road transport For several years, and we may go beyond that in the future. But focus is incredibly important. If you have a certain amount of resources, to the degree that you diffuse your focus, you impede your ability to execute. Sorry. Next. My name is Dali from AT and T Public Relations. I'm a stockholder of Tesla. And it's my American dream to own a Tesla motor. If I cannot have a Tesla motor, can I have Well, actually, we sell Tesla apparel at our stores? Yes. And in fact, one of the things It's obviously a sort of backbone item, but I really want to do a lot more with Tesla Apparel and Accessories In the stores. I didn't realize it would be that popular, but yes. All right. Thank you. Hi, my name is Brett Chamberlain. I live in Fremont, California. Question is, the Fremont factory, as you ramped 500,000 cars 2018, maybe $1,000,000 in 2020. What do you see that meaning to the City of Fremont in terms of the growth overall As vendors who supply to you move in, what does it mean for Fremont's growth? Well, I think it's going to be very good for Fremont. Yes, I'm not sure how to quantify it, but it's going to be, I think, incredibly good because As you're alluding to, like what a lot of people don't appreciate is that it's not just what Tesla does, but it's all of our suppliers that co locate nearby. So, with the Gigafactory, for example, we talk about roughly 6,500 jobs that we expect to directly have at the Gigafactory. But nearby suppliers will probably have at least as many employees as that, maybe more. So the knock on effects are really, I think very significant. And this is why states and communities lobby quite hard to have things like which has the vehicle factory and the Gigafactory, it's because they genuinely do I mean they're incredibly helpful to the community. Really waiting for that the rapid transport. There's like a is it a BART thing or is it The BART station, which there's BART station right next to the Fremont factory, which I think will be really helpful for improving road congestion and making it easy for employees to get to the factory and get home and that kind of thing, that's going to be really helpful. And we've got the train railhead that we want to make more use of. And So, I think it's going to be really great for Fremont and also for the greater Reno region. I have a Bill Fu's A very negative question. Ben, I don't want to go there. Is there a place I can get an answer to my question that has more to do with Solar City And it does right there. Well, I mean, I'd recommend the Silver City Annual Air Showers meeting. I'm sorry? I went there last year. Okay. And I got lied to. Oh, okay. Solar City owes me $30,000 I went to Tesla. I got solar city to come out to put no, it's not to put solar panels on my barn. The employee stole my carbon fiber titanium bicycles. I'm sorry. I don't run SolarCity, so I cannot answer Solastry questions for you. I mean I have only awareness that I think if it's related to solar, then we need to move on. My apologies. Next? Yes. My name is Bob Bynum. I live in Fremont, 2.5 miles from the plant. I've had my Tesla about Almost a year, I've got 20,000 miles on it. My question is, how can I get some ideas to the design team? I've various ideas on how to that I'd like to incorporate into the Tesla. Well, I mean, I think, I mean, it's the Tesla Motors Club Forum and there's various forums online. There's the Tesla forums. We do try to read those and try to gather feedback. I would recommend So bringing those ideas up, either on the Tesla forums or the Tesmos Club or related forums. And there are people that try to read those and see, okay, What is something that is getting a lot of interest from a large number of people? Because obviously, we had a big number of suggestions, but we're trying to We need to filter those for what is going to have the biggest impact on people. That's what I'd recommend. Peter Joseph, I work with Citizens Climate Lobby. Thrilled that you came to COP 21 in Paris. I heard your talk at the Sorbonne, Calling for a carbon tax. And there's no question that that would help you and SolarCity greatly. What do you think is the best strategy to get the U. S. Congress to pass such a tax? Well, yes, I think The thing that I think is maybe conceptually important for people to bear in mind is that every Gasoline or diesel car that's going down the road has a de facto subsidy on it. This is like people sometimes don't appreciate that. Whenever something is burning fossil fuels, it has a de facto subsidy. It's a subsidy of the public good. They're spending the carbon capacity of the oceans and atmosphere, not to mention the sulfur and nitrous oxide that are emitted, as it turns out, in greater quantities than Regulators were told. And so everything that burns fossil fuels has a de facto Subsidy. In order to address that, you need to fixed the pricing error in the economy. So it's Economics 101. You have an unpriced externality. So only real way to address unpriced sectionality is for the those who set the rules, in other words, the government, to correct the pricing error in the economy. Now in terms of the best way to address that, I think the thing that will be most palatable is a revenue neutral carbon tax. So that just as we differentially tax things that are bad for us compared to things that are good. So we might tax and should we tax cigarettes and alcohol a lot more than we Tax fruits and vegetables. Well, of course. And yet, ironically, we have the opposite situation going on in transport For the most part. So basically, those that are producing toxic commissions are doing so for free. It would be like having like no tax on cigarettes and alcohol. Well, that would make no sense. So I think the powerful thing would be to say, look, the total tax burden will not change, we are going to differentially tax the things that 98% of or basically the entire scientific community thinks are bad. And we'll tax those things more and other things less. But that seems like But then that hopefully makes it less of a partisan issue because we're not increasing the size of government. We're simply adjusting What gets taxed versus not? And I think it's just common sense that you want to tax things that where the overwhelming scientific opinion is that it's probably bad. Like why would I mean, the counterpoint to that makes no sense. So, I think that's the thing that's important. And I think there's an opportunity to do it and To change the tax structure in a way that maybe is maybe at least slightly to moderately helpful to low income groups. I mean, the ideal thing from a progressive standpoint would be to lower sales taxes because those are quite regressive and then increased carbon taxes. So that's I think the most logical and reasonable thing to do.