AGM 2015

Jun 9, 2015

Good afternoon and welcome to Tesla's 2015 Annual Stockholder Meeting. We're real glad that you could be here today. There's going to be 2 parts of this meeting. After the formal legal part of the meeting, we'll introduce our Chairman and CEO, Elon Musk up to the stage. And for now I'd also like to introduce several important members who are with us today. Our Board is in the front row, if you guys can leave. We also have we also have our CFO, Deepak Ahuja here today and our Vice President of Investor Relations, Jeff Evanson is here. I think I saw our CTO, JB Straubel around as well, you might see him. We also have from our independent auditors, PricewaterhouseCoopers, we have Larry Westfall and Nino Sarkis here. And we can now get started. After the voting, Elon will be on the stage, as I mentioned, to provide a brief overview of the company and he'll answer your questions. But for now, let's get started by calling the meeting to order. Please refer to the agenda and the rules that you received when you walked in today. In the interest of respecting the time of all the stockholders who are present, we ask that you help us run a smooth process by following those rules, in particular, those relating to the stockholder questions and comments. I declare that the polls are now open. As I mentioned before at the start of the meeting, if you wish to submit a ballot to vote your shares or change your prior vote, you can pick one up from Lisa Grenton, our Inspector of Elections, who's in the back and you can drop it back with her as well. Lisa, can you wave your hand again in case you've moved? There she is. Tesla's Board of Directors has appointed Lisa as our official Inspector of Elections and then she will file the minutes of today's meeting. Computershare has certified that starting on April 22, 2015, the proxy materials are a notice Internet availability of the proxy materials were mailed or provided to all stockholders of record as of April 15, 2015. Copies of these proxy materials and related certificates will be attached to the minutes of the meeting today. We have a majority of the outstanding shares represented at the meeting, so I declare that there is a quorum present and that we may proceed with the business of the meeting. We're conducting the meeting in accordance with Tesla's bylaws. The items on the agenda are as follows. Number 1, to elect 2 Class 2 directors, Antonio Gracias and Kimbal Musk, to serve for a term of 3 years or until their respective successors are duly elected and qualified. Number 2, to ratify the appointment of PricewaterhouseCoopers as Tesla's independent registered public accounting firm for the fiscal year ending December 31, 2015. Tesla's Board has recommended that our stockholders vote for each of the director nominees and for the ratification of the appointment of our accounting firm. Finally, we received 2 stockholder proposals as described in our proxy statement. Our Board has recommended that our stockholder vote against each of these proposals. The first stockholder proposal is proposed by Mr. Mark Peters, who's here today. And Mr. Peters, please, if you'd like to go to the microphone and present your proposal. Get your microphone. Fellow shareholders, Board members and Mr. Musk, thank you for your time. Despite tremendous odds, Tesla has created a brand that is changing the course of history. And as both shareholders and owners, we are very, very pleased. We have logged many thousands of miles in our Model Ss and had yet another one on order. Our planet faces unprecedented risks due to the dumping of greenhouse gases in our atmosphere and oceans, Mr. Musk had accurately called this the dumbest experiment ever and we concur 100%. We feel it's morally irresponsible to run-in a planetary scale experiment on our 1 and only planet. Mr. Musk has previously used a lifeboat metaphor to describe this situation and I'll go ahead and borrow it here. We're in light boat earth with water up to our kneecaps and rising. Tesla has invented an awesome bailing bucket, but upwards of 90% of those buckets are having holes drilled in them. So every time they're used water pours back into our lifeboat. Let me explain how this directly applies to the proposal number 3. I suspect that the vast majority of our customers and even our shareholders have no idea the greatest source of greenhouse gases it's actually animal agriculture producing more greenhouse gases than all transportation combined as the UN reported back in 2006. Bill Gates noted a more recent analysis in 2013, estimating that livestock produces nearly 51% of the world's greenhouse gases, 51%. Tesla exists to create sustainable transport, and which is why this is inconsistent to offer leather. Tesla does not offer a leather equivalent or a full leather interior. And it goes even further by blocking a half dozen must have options if one does not order of leather, thus effectively forcing our customers into the non environmentally friendly interior. Exacerbating this logic conflict is the fact that competing luxury brands have been using environmentally friendly leather like materials for years. All to rave reviews by the non profit consumer reports as all in proposition 3, Tesla is an intelligent data driven company. We encourage Tesla to apply its principles to the interiors of our cars. By using leather, Tesla is promoting the animal agriculture industry. The industry is doing the most damage to lifeboat earth. This is in direct conflict with Tesla's goal of reducing greenhouse gases and frankly it is untesla. My 3 minutes are almost up. Mr. Musk, you and the other Board members were sent a DVD copy of a documentary called Cowspiracy. It has over 20 pages of source links over on cowspiracy.com/facts. 20 pages. I have brought another 7 copies for the Board and we'll seriously hope that the environmental black hole at Tesla can be fixed. We and the future occupants of Lifeboat Earth, truly trust you will make the right choices going forward. Thank you. Thank you, Mr. Peters. Thank you, Mr. Peters. The other shareholder proposal that we have today will be presented by Elizabeth Farrell Peters. You now have 3 minutes as well if you want to step to the microphone. Good afternoon, fellow shareholders, Mr. Musk and Board members. Thank you for your time. Our first Tesla purchase was in 2013 and since the moment we acquired our car, our enthusiasm has been bursting at the seams. So much so that some of my patients have given me the nickname Tess. And our friends are extremely concerned that my husband and I have been infected with a severe and incurable case of Tesla it is. My first Tesla was an anniversary gift and it was fully vegan. I was quite pleased that Tesla had accommodated the request, but later found out that my husband had to go through extreme measures to get a fully vegan Tesla. I was very surprised by this because I thought Tesla was such an environmentally aware company. Please allow me to share the reality of animal agriculture. I grew up on a farm, a veal farm. I know firsthand the grim existence the animals endure. I experienced the ammonia stench of untreated waste, the extreme confinement of the baby calves and the merciless way they are shipped to their death. This is the unfortunate truth of Agribusiness. Nearly all animals used as commodities and used for their parts are treated this way. There is no reverence for life or compassion for the sentient beings that they are. Mr. Musk, at last year's USC graduation, you spoke of first principles. You said boil things down to the most fundamental truths you can imagine and reason up from there. And this is a good way to figure out if something really makes sense or if it's just what everybody else is doing. Let's apply that same test to Tesla. Tesla has two choices. Tesla can continue to fill cars with the skins of sentient beings that suffer unspeakable horror, while adding massive amounts of greenhouse gases to the air according to the UN and other sources. This is a fundamental truth of using animal skins or Tesla can adopt one of the many full leather interiors used by Mercedes Benz, Lexus, BMW, Infinity and others that are cruelty free have wonderful reviews, last a long time, come in multiple colors and have and involve far less greenhouse gases. We don't want to plug other brands, But we visited luxury various brands, dealerships and found that seats with faux leather alternatives were simply outstanding. They are even available with heating and cooling functions. In light of the facts, how can Tesla remain attached to the first choice? Sometimes awareness is the first step to making a difference. Mr. Musk, given the potential risk to our planet, please review the facts and stop forcing the ordering of leather. Please adopt environmentally friendly interiors. Our planet does not have decades to spare. Thank you. Thank you, Ms. Peters. As a reminder, the Board has prepared its position in response to each of those proposals and those are set forth in the proxy in the joint statement. As we wrap up, are there any proxies that need to be submitted? Lisa Brenton again is in the corner. Anyone wants to raise their hand, if they need someone to pick it up, this would be the time to do it. Anyone from Tesla can come and help pick up the ballots that would be great. Thank you. One back there. Anyone else? Okay. Well, with that, I declare that the we've got one more over here. So without one exception, I declare that the polls are now closed. Tesla will formally announce the results of the voting by filing a current report on Form 8 ks with the Securities and Exchange Commission within 4 business days of today's meeting. That concludes the official business of today's meeting. I now welcome you to stay for Elon's presentation. We will also leave time at the end for questions and answers with Elon. During the course of Elon's presentation, you may discuss our business outlook and make other forward looking statements. Such statements are predictions based on our current expectations. Actual events or results could differ materially due to a number of risks and uncertainties, including those disclosed in our most recent Form 10 Q filed with the SEC. Such forward looking statements represent our views as of today, should not be relied on thereafter, and we disclaim any obligation to update them after today. With that, please welcome Mr. Elon Musk. Welcome everyone to the Annual Shareholders Meeting. So I think we've got a great year to recap for you and then We'll talk a little bit about the upcoming year and then there's some product related announcements to be made, which I think we're pretty excited about. All right. So you may be familiar with this car. So things have been growing quite quickly as shown by this year graph. And it's really quite steep growth for a company that's building a complex product that's with a several 1,000 unique parts And there's hundreds of suppliers from all around the world. So it's quite tricky to sort of to grow at that pace, but we've been able to grow at I think a pretty decent pace for a car company. It's like really unprecedented for a car company to grow at to have this level of percentage growth. We're going to try to maintain it for as long as possible, but it seems as I've said before, it seems likely that we'll be able to maintain a roughly 50% average growth rates per year for several years to come. Now it wouldn't necessarily be 50% every But 30% I think on average is actually I think quite achievable target. And then this year we introduced the dual motor all wheel drive and I think actually I'll have to I think in introducing it, we probably didn't do an ideal job of explaining that dual motor meant all wheel drive. So, I mean, there are 2 motors and they're connected to the 4 wheels, but That connection was not clear for a lot of potential customers. So And our fault really because we should always call it really the all wheel drive Model S. And it's really it's the best all wheel drive architecture that's ever been done because of the fact that there are 2 motors And we can dynamically shift the torque front to rear at the millisecond level. So whereas a traditional all wheel drive has a single motor that has a mechanical axle that's essentially done. It doesn't have any intelligence and it has a lot of latency and it can't react differently because we've got 2 motors, it can immediately react to traction at the front, traction at the rear and the reaction speed of electric motor is so fast the car almost feels like it's standing still to the control sequence in the motors. So it's actually able to achieve a level of all wheel drive handling that no car has been able to achieve yet. So we're really excited about this and moreover it provides drive unit redundancy. So it's like having a twin engine plane. If one motor goes down, you can actually still drive on the other motor. So this is particularly if you're sort of stuck, you could potentially be stuck somewhere. Having those that dual motor capability is like having a twin engine plane and such that you can still drive even if one if something happens to 1 drive unit. So having that I think is a pretty cool Capability. And certainly this has increased our addressable market quite significantly because there's a lot of people who only will buy an all wheel drive car. It also helps to retire a lot of risk with the Model X, since the Model X will be using the same drivetrain. We also introduced Autopilot initially starting with the hardware suite And now we're gradually updating the software. So the current Autopilot Version 1 hardware consists of forward radar, a camera, board camera and 360 degree ultrasonics that go out to about 5 meters or roughly 16 feet around the car. So that allows us to do what we call sort of highway autopilot as well as some cool features like auto park and being able to summon the car on private property. I'm actually just I'm testing the latest version of Autopilot every week. In fact, I have typically 2 or 3 builds per week that I'm testing in my car. We're making gradual progress towards what I'd say is a releasable But it is quite a tricky thing and we want to make sure that our testing is exhausted before we release the software. But if we keep making progress I think we may be able to get it out to early access customers which is sort of our public beta program around the end of this month. So that should be pretty cool. We also introduced the Dual motor 70 kilowatt hour car and the goal here was to provide an all in package that offered great value for money. So all inclusive was all wheel drive, supercharging, Autopilot, apart from the convenience features, navigation and so forth and it was intended to provide a fact Even if you bought the base car with no options, you would still have a great product. That was the goal with the 780 D. And that's been very well received by customers and we're seeing sort of upwards of a third of customers choose the 70D. So this is sort of interesting in terms of looking at the North American market share of We're actually the number one seller. So we're really excited by this because if we can take this level of success And extend it around the world. There's really a lot of potential for sales growth for the company. And I think even in North America while we are strong on the West Coast and in the South, we are not that strong in the Northeast. So there's really a lot of potential in the U. S. Northeast And within Canada broadly and we're also going to be opening up in Mexico later this year. So, yes, probably be North American. So I think there's potential there to grow things. And yes, so this is I think a good indication and as we bring out new models in the Model X and the SUV category obviously and then more affordable cars, this bodes well for being able to replicate this level of share for Tesla in other product segments. So with the Model X, the long awaited Model X, So we're expecting to begin our first deliveries in probably about 3 or 4 months. And as with the software, I'm looking at the latest iteration of the Model X every week and it really is it's turning out to be a really great car. I think the Model X may arguably be a better SUV but then the Model S is a sedan. So that I think is really exciting. We want to make sure obviously that some of the key features of the Model X particularly the belt mowing door and the way that the second row seats are done And a few other things that people aren't aware of are done just right and provide true functionality and a true value improvement and versus just sort of feeling gimmicky. It's got to be a genuine improvement in utility and aesthetics I think for it to be right. So getting those final nuances right for the Model X is what we're focused on right now. But we're really in the short strokes with getting this to market. Superchargers have really grown rapidly, I mean, it's sort of like kelp on steroids here. When we launched the Model S in just 3 years ago, there were no superchargers anywhere. In fact, we didn't even tell people there was such a thing as a supercharger. People for the 1st 6 months of the car bought the car not even knowing that there was they were going to be superchargers. And we'd actually put a high voltage DC bypass in the car, people didn't even know was there. So we opened the first superchargers I think early in 2013, so it's only been like 2 years. And now you can travel almost anywhere in the U. S. Using the supercharger network. And then going to next year, that's next year. So you can see that that's from 0 to that in 3 years and a similar level of density is going to be the case for Europe as well as Asia and eventually you'll be able to go anywhere in the world using the supercharged network. And we're planning on some further upgrades to the supercharger system. We've just introduced an upgrade which is a liquid cooled cable Which means that the cable can be really thin. In fact, we have the first working version of that here at the Mountain View Super location, so you can try it out for yourself. It has caused some customers to be quite puzzled that they're plugging in a supercharger with this tiny cord And I thought something was wrong, but that's actually just our next generation cord because if the cord is liquid cooled, you can actually make very, very thin and supple. So instead of trying to wrestle sort of a good sized snake into the car, it's this Then supple cord, it's really, really great. And it also has the potential for increased power of the supercharger long term. And then recently we announced the official creation of Tesla Energy with the Powerwall and Powerpack And being available in 2 sort of configurations, one as kind of a backup UPS Capability and then the other as a daily cycler. There was a bit of confusion in the press because they would conflate sometimes the backup functionality, the UPS functionality with the daily cycler functionality, but Then there are really 2 different things. The daily cycler is sort of more about economics or getting off the grid completely Whereas the backup UPS is just there to ensure that your house has power if there's ever a power outage. But And we did get obviously a fair bit of feedback on the Powerwall. A lot of it was positive and some of it was not so positive. But we actually took some of that some of the negative feedback to heart and I'm very happy to announce that we've dramatically increased the power capability of the Powerwall. So it's actually going to go From having a 2 kilowatt steady, 3.3 kilowatt peak To a 7 kilowatt power, 5 kilowatts steady, prices unchanged. So it basically will more than double the power output of the power pack And the price is going to stay the same. We're also prioritizing delivery of the Powerwall to people that have a solar installation, SolarCity, any solar installation that's compatible. So SolarCity is, of course, I mean, preferred, if you like the best. But basically, we're going to prioritize delivery of the Powerwall to people that have an existing solar installation or are getting a solar installation because the solar installation comes with an AC to DC inverter, which means you don't need to buy an additional AC DC inverter for the Powerwall and because that cost is already there with your solar system. And we're also going to be prioritizing delivery Powerwall to partners that minimize the cost to the end user. So the net result is we're expecting people to be able to purchase and install the Powerwall for about $4,000 So basically $3,500 for the Powerwall with the increased power capability and then bigger $500 of installation, labor and cost, that's the expectation. So I think that dramatically improves the capability of the Powerwall and improves the and reduces the effective cost of the end user. So I think the value for money is dramatically better with what we're with the changes that we're going to make. And of course, there's the power pack which has been very well received By the utility industry. We have opened up a new Castings and Machining Center in Lathrop which is basically near Stockton, it's out in the Central Valley. So we're going to be doing a lot of machining and casting, a lot of foundry work and producing a lot of parts that will go into the Model S and that will be done In the Central Valley. So that allows us to expand our vehicle capacity in Fremont and allocate more space for vehicle final assembly. We also installed a new stamping press line in Fremont and this is going to be have greater automation And it's going to be great for particularly for the Model X stampings. And we're bringing up the new SX body production line, which has Also a lot more automation, greater flexibility and we should be able to do at least within the body line about 3 times more than we're able to do in the current body line. So it's not the whole factory but at least for this element of vehicle production we will have approximately a 3x increase in capability. We also have a new pain center. This is quite a huge sort of capital cost for us. And the new pain center is actually set up to be able to do 10,000 cars a week. So this Pain center is intended to be able to match the production level that includes the Model 3. We can produce all of the we can paint all of the cars at the basically 500,000 unit per year level with this paint shop and to best of our knowledge this is going to be the most advanced paint shop in the world. And then the Gigafactory, we're making good progress with the Gigafactory. There's a lot of people bloggers online and so forth that we'll take photos and videos and drone videos of the Gigafactory. So it's pretty easy to monitor the progress. Search the Internet. And we've made quite good progress here. We expect to have Phase 1 both And operating and producing battery packs by the middle of next year. With that, I think it's been a really great year. I'm very proud of the Tesla team for everything that they've accomplished. There's often a lot of attention on me, but really it's a huge team effort. So I just want to say I'm incredibly proud of the Testa team for everything they've accomplished over this period of time. And there's one final thing I want to announce is that our CFO, Deepak Khujja. Deepak, are you So Deepak is actually going to be retiring later this year And I wanted to just calling up on stage and sort of personally thank Deepak for doing an incredible job over the last guess 7 years it's been through hell and high water and staying So comment steady through some incredibly difficult times and yes, just thank you very much for everything you've done. Deepak is going to be staying on through for as long as it takes to find someone to find a new CFO and then we'll be working with the new CFO to make the transition, so it should be very smooth process. But I wanted to just bring Deepak up on stage and just personally thank you for everything you've done for the company. He's done an amazing job. Thank you. Well, this makes it even more emotional. Firstly, Ynon, thank you very much. It's been an honor working for you. I have discovered more potential in myself Than I could have imagined. And the credit goes to you for that. It's been quite a remarkable journey for me of self discovery as well as Very fast, we're going to coaster ride. Probably akin to what we will experience in the hyperloop When that comes to reality. And so as you can imagine leaving Making that decision to leave Tesla has been really hard for me. It's akin to letting go of your own baby is how I look at it because I've been in Tesla since 2,008 when we had we started with a lot of passion, a lot of a vision to go change the world, but limited resources and we had to fight the battles to get there. So it's been much harder than I thought it would be to be here and make that decision, but it's the right one for me at this point to go check off a few things on my bucket list and pursue a few other life goals that I have. I'm actually quite speechless and I'm going to just again, thank you everybody and I'll miss this incredible passion of our customers and our shareholders and the incredible Tesla team. Thanks again. And with that, So let's open it up to questions. Okay. If we could have people queue up behind the microphones, we'll take your questions in the order that they come. We'll alternate between sides of the room and obviously remember the rules that our Hello. Ann Blankenship, shareholder. And my question really is, do you have any questions for us? I mean, we're always having questions at you, but would you is there anything you would like to ask us about the future or how Tesla plays into what we want from the future? Sure. What do you think I mean, what do you think we should be prioritizing? Well, actually, what I'm thinking more of is like Tesla is about the future. And I think it's about what we want from the future and like what we were talking about today with the vegan interiors. I think that really resonated with me and it shows what people want from the future. I guess they want a company that it's like really focused on looking ahead, like not just the car, but looking at the future of the future. And I think that's what Tesla shareholders are. That's what our mindset is. And so I just want some feedback from you, essentially just like brain candy, like when we leave here today, what would you like us to think about in terms of the future? Sure. Well, I mean our goal at Tesla is pretty straightforward. It's really to accelerate the advent of sustainable energy and particularly sustainable transport. So in order for humanity to have a good future or for life on earth really to have a good future, we have to figure out how to make that future sustainable, meaning not have crazy amounts of CO2 in the atmosphere and ultimately get into a situation of hydrocarbon scarcity, which would be economically disastrous. So That's what we're focused on. That's our primary goal is accelerate the advent of sustainable transport and then with the batteries help sustain I hope the advance of sustainable energy production. So yes, I think anything that furthers that goal, we'd love to hear about. I mean for sure making the cars compelling, making it more affordable, Same thing with the energy storage products, those are key things. So if there's ways for us to make the car better or the battery We would love to hear about those. Hello, Mr. Musk. During the Tesla Energy announcement, you indicated that the Gigafactory would be like a product and that you would continue to improve on it and open up the designs. But as you've also noted, there's a need for multiple Gigafactories. So I was wondering if there's any indication that Tesla would accept orders for Gigafactory or be looking to build more sooner rather than later? Thank you. Well, we got to build 1 first. So our focus right now is just making sure that we build Gigafactory Version 1 correctly and that's going to be quite a difficult challenge over the next few years. We will have the first part of it active next year, but then we want to try to get to full production in roughly 3 years, maybe a little roughly 3 or 4 years. So that's going to be quite a challenge and I think once we get to that point, we're going to actually before we get to that point, we want to figure out where to put say Gigafactory 23, but I don't think we should until we feel we've got a GigaFactory 1, we don't want to spread our energy over multiple efforts. Yes. Thank you. This is Barry Briscoe. I'm a shareholder of Model S and Roadster owner. I was very excited with your presentation on Tesla Energy, a specific question about the Powerwall. You reiterated earlier today the 2 different models and I understand I assume one can in a residential installation combine both types of Powerwalls to a single inverter. The Powerwall software can manage those. But can the in an emergency situation like a grid blackout, Does the software only drawback out power from a 10 kilowatt hour model or would it ever in some circumstances draw from the 7 kilowatt hour? Well, combining them actually wouldn't be super, super great. It's going to be Yes, I mean, actually we could make the software do that, but it doesn't currently do that. It would treat them both it's simply going to treated if you had a 7 and a 10 like a 17 kilowatt hour system and depending upon what your draw is, it would currently I believe draw equally from both. Maybe JV should draw me on the stage to answer some of these questions. But I think it really depends on what the application is that you'd want to use it for. I Usually it tends to bifurcate quite clearly into either a backup uninterruptible power supply for the house or In the U. S. The daily cycling application is going to be fairly limited because the time of day charges are usually not substantially different. I mean, there are in a few places, but in most places in the U. S, So In terms of economics, it's going to make more sense to So anyway, like in terms of economics, it's going to make more sense to well, actually, basically, in most parts of the U. S, it doesn't make What SolarCity said which is most interpreted in the press was in most parts of the U. S. It doesn't make direct it doesn't make economic sense but purely economic to have a battery pack because in most places in the U. S. You can't arbitrage your time of day use. Now in many other countries you can. So in places like say Germany or Australia, the daily cycle pack makes does make great economic sense. But it's like an awesome thing even if you couldn't care less about renewable energy. In the U. S. You'd really have to care a lot about renewable energy Well, not a lot. You have to care about it more than economics in order to do the daily cycle thing. Then separately there's the uninterrupted power supply application which again was probably not a huge number of households that want that, But it is nice to know that if there's a big storm or earthquake or hurricane that you will have power And that's the application. So that's really when we're paying to have that capability. And then with the increased power capability of the Powerwall that I just talked about, you should be able to with a single 10 kilowatt hour pack with a peak power capability of 7 kilowatts be able to put everything in your house except air conditioning on that circuit. And then if you have a if you want to put air conditioning as well, you can have 2 of them because it would typically be about 14, 15 kilowatts And you can stack even more if you want. Maybe one thing also I think that gets forgotten is that the backup battery can also cycle quite a lot. It can cycle once a week for 10 years. So the cycling difference between the two is maybe a 4 or 5 to 1 difference, but people should never be afraid to actually use the backup version kind of in a hybrid application where you could be still cycling it quite often thousands of times. And also with the backup pack or the cycling pack, I mean it legitimately lets you use more of the solar energy that you generate at your house. Instead of exporting it to the grid, selling it essentially to utility and then having to buy it back, you're legitimately storing your own energy and then using own solar energy for your loads. Yes, I mean to be sort of precise, I mean the so called sort of low cycle thing would be like roughly 1200 cycles and the high cycle will be 5,000 cycles. So at 5,000 cycles, if you do a daily cycle, that's about 15 years. But even the 1201, that's it's 1 quarter, so you could do it you could conceivably do a daily cycle for maybe 3 or 4 years even with that. All right. So maybe like an overly comprehensive answer. And actually, it's probably worth also elaborating on the PowerPack, which we expect most of our activity to be with the PowerPack, not the PowerWall. So it's probably 80% maybe more than that of our total energy sales likely to be at the power pack level to utilities and to large customers. And that's where the economics are very compelling because there's an important difference between price and cost. The cost to the utilities of between day night is quite substantial because the power usage is often sort of a 2:one at least if not greater than 2 to 1, sometimes substantially greater than 2 to 1 between peak day usage and trough night usage. So there's no question that at the utility side, their cost of power generation has a big difference between day and night. That's a separate question from whether they are pricing that as such to the consumer. And since the cost is fundamentally there between day and night for utilities it's quite compelling to use The power pack and they can look at it from a levelized cost of energy standpoint and say well they could either get sort of upgrade an existing power plant or they could get a new power plant or they could get a battery pack. And they can look at it in a really simple way like that and the potential is there is noise. In fact, Even if renewables were not part of the picture, the power pack is independent of renewables, you can actually take probably something somewhere close to half of all the power plants in the world and turn them off if you have batteries. So actually this is sort of well appreciated. Yes. And the whole distribution system, all the wires, all the transformers, all the substations don't run anywhere near full utilization. So as you kind of optimize that whole system, you can get much more value. The utilities can get much more value out of the entire grid without having to build more wires or buy more transformers. It can just levelize the load across the whole system. And that all happens somewhat separately from renewable energy and it can happen in different locations. Exactly. And there's another key advantage of the lithium ion is that it's very compact. So it's in a very tight package as compared to some of the other battery solutions, which although they have a theoretically low cost per kilowatt hour, Well, it's theoretically low because they're actually quite high. But they're bulky. And being bulky is really difficult If you're a utility and you want to put and you want to add battery buffering to the grid And with the Tesla solution you can put that at the substation level. So you can take our Powerpacks and they're compact enough to fit in an existing substation. This is a very big deal because it means that they do not have to create a new substation Or expand the existing substation because in most neighborhoods in order for them to do that they would have to buy someone's house and level it And put in a new substation and then the neighbors do not like that. So Big pain in the butt factor. Whereas if you can put the batteries in the existing substation, it's very easy and it's a And even big corporate customers, they like plug and play. Like if it's a low headache, super easy, Order it, install it, it just works. They love it just as much as consumers do. Ilan, as you probably hear every day, thank you so much for all the amazing things you have done and are doing. My name is Salim. I live in Albuquerque, New Mexico. If I may respectfully submit a plea that when the time comes for you to think of installing a second Gigafactory. As opposed to the states you are considering as candidates, you could become part of the hearts and history of New Mexico also. Sure. Well, we had certainly Alba Cook It's one of the finalists, so that would be a strong contender. Some of the other states, there are lots of things going for them. For New Mexico, if you did this, you could be what Microsoft and Boeing did. So I hope you will consider that. We'll definitely consider it. Thank you. Thank you for letting me speak. Of course, absolutely. My name is Haydn Sonad. I'm a shareholder and I'm finishing up tomorrow down in LA. And one of the really things I've noticed about the majority of Tesla is that they're really not being utilized too often. They mostly just sit around with just like they just mostly sit around. So what I've been able to do due to some pretty fortunate investments, I've been able to order an 85D and what I really hope to do with this car is use it to its full potential. And I'm going to be doing this by I'm going to be creating a constant loop of this car with constant people filled in it and it's going to be going between Culver City and Las Vegas. I call it a test loop. And by doing this, I assume can save around 40 tonnes of carbon dioxide emissions into the air every month by these cars. So my question is mainly about thank you. So my question is about autopilot in Version 7. I want to know that if I do lend out the car for people to drive it from LA to Vegas, if autopilot will be good enough to really ensure their safe travels over the road and on the highways specifically. And also I want to know if you're planning on linking the sensors in current Teslas to other cars in the road? And then lastly, I want to know if you are going to be open sourcing the hardware and software for autopilot like you did with the electric designs. Yes. So the autopilot at least version 1 of autopilot, the expectation is that someone is paying attention to the road and is ready to take over if there is an issue. It's really intended in the same way that autopilot for an aircraft works where autopilot for an aircraft alleviates pilot workload, but the pilot is still expected to pay attention and so you can't like turn on the water pilot and go to sleep. And that is certainly true of the autopilot that we'll have. In the long term, we'll have I mean several years from now, there will be a failed operational autopilot with redundant sensors And everything that's needed for someone to actually literally go to sleep and wake up at their destination. But this is an extremely difficult engineering project. And it means you have to take care of all of the corner cases and there are many corner cases. The real question for Autopilot is not can you is it going to work, is it going to work, but how of reliability. And how much safer does it need to be than a person driving before the autopilot can take control with no attention from a person. So I mean I think probably we want Autopilot to be at least statistically 10 times safer than a person before we would suggest that So Autopilot version 1 it's really intended as a load alleviation for the driver and something that sort of just it makes it easier to drive, but not one where you can not pay attention. And then as far as vehicle to vehicle communication, there is a little bit of that that will be done in terms of figuring out say traffic data like traffic speed data so we can do better navigation over time. So we can say okay how faster Model S is going on this road and that gives us the ability to give better navigation to users. But it's hard to imagine much more than that because there's such a small number of Model S on the road and the vast majority of other cars are not Model S. So you'd only be communicating so much sporadically. Yes, so and did you have a Are you going to be open sourcing the autopilot software and hardware? In general, we don't open source our software because we're little hesitant about potential vulnerability exploits. So We use an open source operating system, I think it sort of runs on Linux, but we don't open source the application code. Also you mentioned something about a beta for the Autopilot, how does someone get into become a beta tester for Autopilot? You have to be on the early access program. Thank you, Mr. Masters. My name is Aveli Hindley. I'm a shareholder. I'm an owner as well of the Model S. First of all, on behalf of the Bay Area Model S Owners, I want to say a big thank you for the Mountain View Supercharger that just opened this afternoon. My question specifically has to do with the auto steer portion of The autopilot, I think it's the most anticipated aspect of Version 1.0. Could you shed a little bit of light on the Time line for that, are you getting some resistance from the government? Is there some hurdles or is it something that is coming for sure Approximately when? Yes, I'm actually testing several of those of the order stair functionality every week. And so there's we make sort of improvements most weeks it gets And it's a bit tricky because when you do the This is a very difficult thing to take of steering and we have to also consider like what happens if there's a hardware problem, some hardware system fails in the vehicle or there's a CAN bus communication error or just the debugging of a huge range of issues is very difficult. And we currently only have a forward camera and a forward radar and the ultrasonics. So there's not there's a limited amount of redundancy on the sensor front. So I mean for forward collision we have the radar and the camera to provide some level of redundancy and the ultrasonics but there's only one computer. In fact there's a whole bunch of computers in series that are doing this, if any one of those computers fails then the Autosterve functionality would fail. But that being said, I mean I'm cautiously optimistic that we'll have order to your functionality out to early access customers By the end of this month. Fantastic. Yes. That's wonderful. Yes. And there is no issue with the government that we have to worry about? There is no issue with the government because importantly this is not an application of responsibility for CIRRI. It is simply meant as a driver The driver assistance feature. So like I said, it's basically it's a lot like what a pilot for aircraft where A pilot still has responsibility for flying the plane but being able to engage autopilot just reduces the pilot's workload substantially. You want to take? I just wanted to give you that time advisory. All right. We'll probably take another maybe 4 questions or so. Yes, thanks. Great. Hi, Yvonne. My name is Stephanie Downs and I'm with People For the Ethical Treatment of Animals. We're a shareholder of Tesla's. And I have a question concerning your use of leather in your car interiors, as an innovator, Tesla has changed the public perception of electric cars and you've shown the industry that sustainable technology can be cool. We've heard a lot today about the environmental destruction of animal agriculture. So I'm not going to mention any rest of that other than I'd like to mention that regardless of anyone's dietary choices, in the actual production of leather, which requires that cow again has to be converted into a material that will not rot. It has to be treated with massive amounts of toxic chemicals, including formaldehyde, cyanide and coal tar derivatives. So the same as not all electric cars are created equal, neither are all synthetic materials. And there are wonderful vegan, environmental friendly leathers that are currently being produced, some of which are even made from recycled bottles. So what I'd like to ask from you is these materials are available. And if we can connect Tesla with organizations that are producing these materials that are vegan, environmentally friendly, cost effective, would you at least consider them? Yes. Friendly, cost effective, would you at least consider them? Yes, absolutely. If you can give the kind of information to Jeff who's Right there, then we'll look into it. Thank you very much. Hello. My name is David. I'm a shareholder. I have a question for you. Thank you. I'm surprised more aren't wearing them. My question for you is, I'm a nurse, I don't get snow days, and I live in the northern part of the United States. The Model 3 is more in my budget. The Model 3 specifically, but future cars, are they going to be mostly or all of them Dual motor. I think for the Model 3, the standard The base version of Model 3 would be single motor, but it still had very good traction control. In fact, even before we were shipping the dual motor, our highest sales per capita in the world, just where we all we had was a rear motor, we're in Norway. And a single the person who as an individual who bought the most Model Ss, most of the Teslas, because we bought a bunch of buses before that, lived in Arabic, which is above the Arctic Circle. So it's real important to emphasize that even a rear wheel drive Tesla as long as it has the right tires, it has amazing traction on snow and ice. But I think in order to keep the car as affordable as possible, the standard version of the car would have a single motor, We would offer a dual motor as an option. Okay. Excellent. Thank you. Hi. My name is Bob Weiner. I'm a stockholder, also SolarCity stockholder. And going for the trifecta, my question I hope it's not inappropriate, but I'm curious if you have any thoughts about when you would take SpaceX public, particularly if you retrieve your rocket successfully the next try I hope. Sure. Well, because SpaceX's goals are very long term, certainly longer term than say the stock market typically. It's like the feedback cycle in the stock market tends to be quarterly and like maybe they can handle a few years max. But if you're talking about something really long term like trying to build a city on Mars And then you end up sacrificing profitability for a really long time in order to get there and build I think it would be not super loved by the public markets. So what I expect with SpaceX is that we'll probably go public once we have regular flights to Mars. I'll try to answer a few more questions. I know I'm supposed to have like a Board meeting after this. We'll go to 315, if you guys don't mind. All right. Hi, Satish Samuelson from LA. My question is on the Gigafactory. You said that by 2020 that you're going to have more or less 500 units produced, that was before you announced the Powerwall and Powerpack. Is that included in the calculation because you already supplied constrained with the demand. So even with the 1 of these, I think they'll create bigger demand. Have you calculated that or is it Lower demand in the power packs. Yes, the Gigafactory is as currently designed is intended to produce about gigawatt hours at the pack level and about 35 gigawatt hours at the cell level. So we'll be pulling in cells from other parts of the world as well. And that should allow for 500,000 cars to be produced per year have 15 gigawatt hours left over for stationary. The way it's looking, demand for stationary is higher than expected. So we are looking at potentially expanding the upward capability of the Gigafactory to meet the higher demand for stationary. Thank you. Hi, Elon. Thank you very much Supercharger here downstairs. I think it's not just for owners, it's actually for shareholders going to sell a lot of cars as people see that going in and out of Google and places like that. My questions are around safety. And one is Model S of course has a new bar for sedans. What should we expect for Model S because all the auto SUVs have like high center of gravity and rollover is a problem, those types of things, what should we expect there? The second question is, have you guys thought of as you log miles in autopilot and you have the statistics of lower accidents that I'm sure is going to come through, whether we're going to be able to get like lower insurance rates from Sorry, I missed the second question is as you log more out of autopilot miles or auto asset auto cars, Whether you're going to be able to use that or we can use that to get lower insurance rates for insurance companies? Yes. Yes, I think we should be able to I mean I think as we can show statistics on accidents and so forth, I think it should translate to lower insurance rates. And we'll have to work with insurance companies to make sure that they're properly factoring in the actual accident rate of the Model S and the X because our injury rate is substantially lower than I think maybe any car on the road. But certainly if it's not the lowest, it's certainly one of the lowest. And I forgot like an important announcement. At 2 p. M. Today, we did our 1,000,000,000 mile for Tesla. Sorry, how's Model X looking in terms of safety and rollover? Yes. So Model X, I think will have the lowest probability of injury of any sedan. The tests haven't been completed yet, but I think it's headed towards having the lowest probability of injury of any SUV. And certainly the low center of gravity with the battery pack in the floor plan is incredibly helpful because the role of susceptibility is extremely low. It's very difficult to get the Model X to roll over. And we've completed our internal almost all of our internal crash tests and it's shaping up to be 5 star in every category and every subcategory like the Model S. So, yes, in fact, I think probably safety is not something we emphasize enough about the Model S and the X because a lot of people sort of they'll hear 5 star and they think, okay, well, Aren't like most cars 5 Star, well that's actually not the case. Only about 1% of cars are 5 Star in every category and subcategory. So like if see 5 Star most of the time they sort of rounded up their GPA there. So it's only about 1% And then the actual calculation safety is a statistical figure Which you can access on the DoT website, but it's not something that they like to promote, but it's there. And at least last time I checked the Model S actually had the lowest probability of injury of any car ever tested. This is extremely important And not well appreciated. So that you can't be there isn't a safer car. So it's really if you care about safety yourself and your family and friends this is the best choice. Keith Lambert, shareholder. On the announcement of the Powerwall, there was a mention about the 0 emission vehicle credits and the question was unanswered. And it relates to the swap done in Harris Ranch and the ability to make an appointment or get a to make the appointment so you can do this well. And as far as the expansion of the superchargers, what is the lifetime of Pre charging per vehicle and is what is the accounting for when you sell a car? So, yes, we have basically the LA to San Francisco pack swap capability in place and I believe all more or less owners in the sort of California area have been invited at this point to try it out. What we're seeing is just a very low take rate for the PACSOLOP station. So we did an initial round of invitations where we did basically like 200 invitations and I think there were a total of 4 or 5 people that wanted to do that and they all did it just once. So like okay, it's clearly not very popular. And then we said, okay, let's expand that invitation to all customers and but I would expect that sample that initial sample group is that all customers roughly behave like that initial sample group. It's just people don't care about PACSWA. The superchargers are fast enough that if you do if you're driving from LA to San Francisco and you start a trip at 9 am, by the time you get to say noon, you want to stop and you want to stretch your legs, hit the restroom, grab a bite to eat, And by that time the car is charged and ready to go and it's free. So it's like why would you do the pack swap. It doesn't make much sense. But we built the pack swap into the car because we weren't sure if people would want to choose the PAC swap or not. We thought people would prefer supercharging, but we weren't sure. So that's why we bought PAC swap capability in. And based on what we're seeing here, it's unlikely to be something that's worth expanding in the future unless something changes. For the superchargers, as we said in the initial press release. The superchargers are free. It's basically free long distance for life, forever. So Freelancers Forever is what the superchargers are providing. Now there are a few people who are like quite aggressively using it for local supercharging. And we will sort of send them just a reminder note that it's cool to do this occasionally, but it's meant to be a long distance thing. But it is free long distance forever And it's basically built into the cost of the car. And based on what we're seeing in terms of the economics, it looks quite supportable. And of course we've gone super fast with the superchargers. So the most of the superchargers do not yet have solar and a battery backup, but over time we're going to put solar over every supercharger where it's possible to do so or if it's not possible to do so make sure that we're purchasing power that is generated in a renewable manner So the entire supercharged network is powered by Sunlight. My name is Ilya Sutskovic, shareholder. I'd like you to say a few words about the autopilot specifically when it will become a fully when what is do you expect the timeline for when the autopilot will be a full go to sleep in the car solution given the rate in which you see it's developed and given what you know about and how quickly regulation and loss can change to accommodate that? Well, I think from a technical feasibility standpoint, I mean, I think it will be technically possible in 3 years. So I think we'll I suspect we'll be able to achieve that in about 3 years. Now it will take some period of time after that for regulators to accept that it's okay to just go to sleep in the car. So I would imagine it's something like a couple of years, maybe 3 years, anywhere from 1 to 3 years, I don't really know because it's not really something I control. After it's shown to work and we can compile a great deal of evidence statistically to compare what the computer would have done versus person over billions of miles and we can show with high within a very high confidence interval that it's cool for the computer to drive you home. So yes, technically likely in 3 years, 1 to 3 years after that before regulators approve it but again that's but it's not something in my control and might vary by country and by state within various countries. But that's the rough timing. That's my best guess right now. But it is interesting like what I found with both narrow and deep AI is that with each passing year my estimate for when it happens gets closer. This is both interesting and alarming. I guess exciting and alarming. Hi, my name is Kelvin Yoke and I'm a shareholder. I'm also a member of the IEEE Microwave Symposium, which takes place in San Francisco next year. One of our main missions is to encourage young engineers and university students to get involved with engineering. So we've been seeing recently is that kind of a drop off in interest among diverse groups as well as women in engineering, which starts around middle school range. So I was wondering if you could comment on any activities that Tesla is participating in or conducting in terms of helping education and inspiring young people to get involved with engineering. Well, I mean we do cool products that require engineering. So hopefully that's a reason like you will think, oh, I think maybe they'd like to work for Tesla. Tesla is kind of an engineering centric company, so maybe that would encourage us to do engineering. But it is super important that Tesla stay focused on the goal of accelerating the advent of Transport and sustainable energy. There are a lot of things that we could do that would be all these awesome social goods But if we divide our energies over many social goods we risk accomplishing none of them. So we've got to stay focused on this fundamental growth that we're trying to achieve as the primary thing. And then once we sort of are over the hump, in particular once we have like a mass market affordable electric car that's great. And I think we can start to try to do other things but we really need to stay focused on that goal for now. Are you presently participating in the university related research or involving institutions of learning in your product development? Yes, we have relations with a number of universities and a number of research groups, particularly as it relates to improving battery cell chemistry. So, I'd certainly encourage groups that are making advancements in any technology that improves cars, electric cars or autonomous driving to get in touch with Tesla and see if there's something some way to work together. I would also like to thank you and invite you to speak at our conference next year. Thank you. All right. Thanks. I think we'll do the like the last question. What was that, the last question? You've gone well over the time you'd like. So you're late for your