AGM 2014

Jun 3, 2014

Good morning, everyone. Good morning. Welcome to Tesla's 2014 Annual Shareholder Meeting. We're really glad that you could be here with us today. My name is Todd Marin. I'm Tesla's Deputy General Counsel. Momentarily, we'll be welcoming Elon Musk, our Co Founder, CEO and Chairman to the stage. I would now like to introduce our Board, who's sitting up in the front. We also have our CFO, Deepak Ahuja and our Vice President of Investor Relations, Jeff Evanson. We also have representatives here from our independent auditor, PricewaterhouseCoopers. There are 2 parts to today's meeting. First, we'll have the formal part of the meeting. It will cover the 5 items that the company has asked the stockholders to vote on today. After the voting, Yvonne will provide a brief overview of the company and we'll have a question and answer session. I'll begin by calling Tesla's Annual Stockholder Meeting officially to order. I ask that you refer to the agenda and rules of the meeting that you received earlier today. I declare that the polls are now open. As I mentioned earlier, if you wish to submit a ballot to vote Or if you wish to change your vote, please pick 1 up at the table and hand it to our Inspector of Elections, Lisa Brenton, who is in the back. Lisa has taken and signed an oath as Inspector of Election, and that will be filed with the minutes of today's meeting. Computershare has certified that starting on April 24, 2014, the proxy materials or a notice of Internet availability of the proxy materials were mailed or provided to all stockholders of record as of April 10, 2014. Copies of these proxy materials and related certificates will be attached Good morning to the minutes of today's meeting as well. We have our majority of the outstanding shares represented at the meeting today, so I declare that there is a quorum present and we may proceed with the meeting. We're conducting the meeting in accordance with Tesla's bylaws. The 5 items on the agenda today are as follows: First, to elect 2 Class 1 directors, Elon Musk and Steve Jurvetson, to serve for a term of 3 years or until their respective successors are duly elected and qualified. 2nd, to hold a non binding vote to approve on an advisory basis Our 2013 executive compensation program. 3rd, to approve an amendment and restatement of Tesla's 2010 Equity Incentive Plan To specify certain performance goals for and limits on awards that may be granted under the plan. 4th, To ratify the appointment of PricewaterhouseCoopers as Tesla's independent auditors for the fiscal year ending December 31, 2013, Tesla's Board has recommended that our stockholders vote for each of the director nominees and for each of these four items. Finally, we've received a stockholder proposal today regarding supermajority voting provisions in our governing documents. Our Board has recommended that our stockholders vote against the stockholder proposal. The stockholder proposal is going to be presented today by James McRitchie, And I understand that Mr. McRitchie is here and he's ready to present his proposal. So Mr. McRitchie, if you can step to the microphone, we'll give you a couple of minutes here. Thank you. Thank you very much. First, I want to say that I'm excited to be a share owner of Tesla. Our company has shown that combating climate change can be more exciting than contributing to it. That's the best car ever tested by Consumer Reports. And with the recently announced EPA power plant reductions, Our cars will be even cleaner. Tesla is a great company, but even great companies can be improved. I'd like our corporate governance standards to someday match our engineering standards. That's why I propose to eliminate Tesla's super majority voting requirements. I'm not and I think that doing so will help us to attract more institutional shareowners. I'm not alone in my opposition to super majority requirements. Many see them as an impediment to good governance. For example, the Council of Institutional Investors, Whose members have over $3,000,000,000,000 in invested assets includes the following in their policies on corporate governance Concerning voting requirements, a majority vote of common shares outstanding should be sufficient to amend company bylaws Or to take other action that requires or receives a shareowner vote, super majority votes should not be required. Thank you. And I ask for your aye vote. Thank you, Mr. McRitchie. I would like to remind our stockholders that Tesla's Board Has prepared a statement in opposition to Mr. McRitchie's statement, and that's found in our proxy statement. They've again recommended that you vote against that proposal. Before we finish the meeting, the formal part of the meeting, I would just ask, are there any proxies remaining in the audience that have not been submitted? So if you could please find Lisa or Lisa, if you could come gather the remaining proxies, we'll just wait for them to be handed in. Thank you. We will attempt to calculate the at least the unofficial tally and announce that at the end of the meeting as well, but we'll just wait for the rest of the votes to be handed in. Just one more over here. Over here. Anyone else? One more over here. Okay, I don't see any more hands up. I declared that the polls are now closed. As I said, we will announce the unofficial results later in the meeting, and we will formally announce the official results of the voting With the filing on an 8 ks form with the SEC within 4 business days of today's meeting. Now that the formal part of today's meeting is adjourned, I welcome you to stay for Elon's presentation. We'll also leave time at the end for your questions. When you ask your questions, I would ask that you limit them to One question. You try to keep them focused on the business of the company and that you keep them brief so that everyone can have a turn. If you have something to say on the agenda, you may not something away from the agenda. Is it on the agenda? Okay, go ahead. It's the microphone, it's Don. I wanted to comment on the stock option kind of Plan, first, I could not understand what the changes were that is from the old plan to the new one. 2nd, I think that it's important that it's recognized when we vote in favor of this That 100% of the stock in this company will be diluted by 100% in 25 years because it authorizes 4% per year A stock to be issued under that plan. Warren Buffett said with Coca Cola, it's outrageous. So I object to the accelerated compensation plan. Of course, Under having already taken all the proxies, comments with respect to those notion are irrelevant. That doesn't seem right in the operation of the meeting as well. Thank you. Obviously, we have prepared a proxy statement with The Board's recommendation on the equity incentive plan that addresses many of those issues. If anyone wants to refer to the proxy, they certainly may. Going back to Ilan's presentation just briefly, during the course of his remarks, we may discuss our business outlook and make other forward looking statements. Such statements are predictions based on our current expectations. Actual events or results could differ materially due to a number of risks and uncertainties, including those disclosed in our most recent Form 10 Q filed with the SEC. Such forward looking statements represent our views as of today, Should not be relied on thereafter, and we may disclaim any obligation to update them after today. So with that, please welcome Elon Musk. All right. Welcome everyone and as always thanks for being an investor. So we'll do Just a few slides and then go into questions. So let's see, this is a complicated device, which has 2 buttons. Blah, blah, blah. Something, something. So it's been a great year. We've sorry, I'll speak closer to the mic. It's been a great year. We've Produced and sold a lot of cars. We're now at 344 miles 1,000,000 miles driven. And So pleased to say sort of touch wood that no one has received A serious permanent injury in a Tesla ever and all those miles driven. I mean that is certainly one of our proudest accomplishments. And there have been some pretty crazy crashes, I should say, as well. We've had a guy in fact, things that I wasn't sure that really it would Worked out so well. I mean, there was a guy that drove through 2 concrete walls at 110 miles an hour. There was I always say, well, I think the car is really safe unless you drive it off a cliff, and then somebody drove it off a cliff. Fine. So that's looking good. We've got 126 Locations around the world from China to Norway, service centers, Lots of superchargers. We're actually trying to accelerate the rollout of superchargers even more. In fact, by the end of this year, Probably a double that number of superchargers. So there's a huge number of supercharger locations in process. And Tesla, we have to come up with the sort of the whole solution. So you have a really great driving experience all the way from when you think about buying the car to Receiving it, driving it, servicing the whole works and then of course charging it. So I think it's important when you create a product to think of like well, at a high level, what is someone trying to achieve? And obviously with car, it's they need to go from one place to another. And so we want That whole experience to be as positive as possible. And we really want people to love their car. And in fact, my goal is that people like the Model S more than their house. I think that is actually the case in some situations. And there just aren't that many products That really give people joy and would like to be one of those products. And I'm pretty excited about some of the Software that's coming out later this year that will be provided to all Model S owners. That's really going to personalize the car a lot more. I mean, it's ranging from the highly functional to the Not that much more, like there's the you'll be able to name your car And it will show up in the mobile app as that name. So I found her too and it's Old Faithful. And there's going to be a lot of sort of customization where the car kind of learns your behavior and it just automatically adjusts What you want, so things like traffic based directions and Calendar integration and anticipating where you're going, alerting you if there's traffic along the way and an alternate route maybe better and that kind of thing. So expect to have that rolling out fairly soon. So, yes, I mentioned the Navigation enhancements, in particular traffic, traffic optimized directions I think is really important. So What we're doing is similar to maybe what you've experienced with Waze where you have the cars operating collaboratively as a network Sort of a crowd sourced intelligence as to the traffic information. So as The number of model SS in a neighborhood increases, the quality of the traffic will actually improve quite considerably. And we're also bringing in Data source, multiple other data sources, so it's like something like 20,000,000 other data sources, but with priority given to the Model S as a data source. So Places like the Bay Area Peninsula should be pretty great or West LA and but as the Tesla's increased that that's going to get better and better. Yes. And then we've also introduced a number of hardware improvements Over the past year, a lot of subtle things, but there are important number of areas like power folding mirrors, the parking sensors And then of course the sort of under body shields, which I mean aren't really necessary, but sort of It's really helpful to know that you can drive over a concrete block and be okay. So sales have been pretty good And still, obviously, room for improvement, but a good start. And We've really been production limited, as I think most people know, with the biggest constraint Being supply of the battery cells and that constraint is sort of gradually alleviated over the course of this year and then next. So we expect to steadily ramp up production. In some cases, there'll be important step changes, significant step changes in the Number of costs that we can produce and we'll be going into more markets as well. So this is kind of where we started out. Obviously, not in a good place with respect to gross margin, But then ultimately ending up in with a pretty good gross margin per car sold. And we do expect steady improvement in the gross margin despite what I think is likely to occur, we're seeing to some degree occur, which is That the number of options or the value of the options that people are picking for the car is slightly reducing because of Basically affordability. So we expect to see a slight decrease from people spending on the order of $100,000 a car Maybe $95,000 a car, which is still quite a lot. And Yes. So we've expanded to some very significant markets recently. I was sorry, I'll talk about it. I was over in China and We have very good reception there. There's a lot of interest in the car. So we're making dramatic investment or significant investments in Service centers and superchargers in China in order to meet the demand. In fact, our biggest constraint really is how fast can we Open service centers and install superchargers and make sure any local charging issues are solved. With each market, there are idiosyncratic issues around charging that relate to building codes, to the way that the electricity grid works And these can be quite difficult to solve. And we had some challenges, example, in Norway, which is a highest sales per capita in the world, but they've got a unique electricity grid. And It took us several months to get to a good solution there. So in markets that we're opening up right now, we're actually intentionally Slowing down the introduction until we're certain that the service that there will be good servicing and good charging capability, Because we don't want to have people to have a negative experience. And then in terms of right hand drive markets, I'm headed to London this weekend to hand over the first right hand drive cars and then we'll be going into Pan Australia, Hong Kong and a number of other markets later this year. The Gigafactory, I think people I know what our situation is there. We are getting quite advanced in the planning for the Gigafactory. Overall, I'm quite optimistic about the potential cost reduction and the cost per unit of energy. I think we're targeting a minimum of 30% reduction and I think that's probably conservative at this point. I think we can probably do Better than that with the Gigafactory. And I feel also really good about our partnership with Panasonic. We have daily meetings with Panasonic and then every week there's sort of a more comprehensive meeting and Panasonic at first wasn't sure about whether these cost reductions could be achieved, but I think they are now convinced they can. Of course, there's Model X. So I should say that the production version of the Model X actually looks different from this. It looks better. One of the things that drives me crazy about cars is that Very often you'll see kind of a show car or a demo car and then the production version is some much worse version of that. And at Tesla, whenever we show a car as a demonstration item, the production car will always be better than what people sold. And now sometimes that takes a lot of effort and it's very difficult. That certainly is the case with Model X. But we have two choices, which is either produce an amazing car that I think is going to blow people away Oil produced a pretty good car and we want to have amazing cars that just blow people away. So In the case of the Model X, that's just taken a bit longer than we would have liked. In particular, getting the Falcon Wing door right is extremely difficult. And then things that you maybe wouldn't expect are also very difficult like the 2nd row seats Are quite a challenge because what we're aiming for with the Model X is that when you open the Falcon Wing door, you have The 2nd row seats are essentially framed and we want that to be to feel like a work of art, like if you open up The door, it should just be this amazing experience. I mean, it's and This may sound a bit silly, but it should just be like, And then the seat, I mean it's just a seat, but we want the seat to be like feel like a work of art, like something you could have in a museum. Anyway, that's what we're going for with the Model X and it's bloody hard. And of course it will have dual motor all wheel drive and we expect to start to reach volume production in the Q2 next year. And then Tesla has always been the grand strategy of Tesla has always been a 3 step process where step 1 was Low volume, high priced car with the Roadster, then we've got mid volume, mid to high priced car with the Model S and then Generation 3 being the high volume, lower cost car. And with Gen 3, With our 3rd car, we're expecting that to be about a $35,000 car with a range in excess of 200 miles. But I should say that $35,000 may not sound all that affordable, but when you consider the savings from use of electricity versus gasoline In the U. S. That translates effectively to like a gasoline car of about maybe $28,000 or in Europe, a gasoline car of about $22,000 to $24,000 So actually the affordability of it is should be quite high and very optimistic about that And we're going to try to make that 3rd generation car happen as soon as we possibly can. Obviously, the Gigafactory is a precursor to The creation of that car or the volume production of that car, so we're going to make sure that the Gigafactory and the Tooling and development of the Gen 3 car move in sync to Market release and hopefully sort of the late 2016 timeframe. Then we completed our coast to coast connection with the superchargers. So you can travel to from LA to New York via and It admittedly secured its route. And actually, I don't think we did a good job of explaining to the media like, well, why is this weird route that way? And It's because it was originally the route that I was going to take my family on a road trip. And then They are taking us a bit longer to complete the route because of sort of heavy icing conditions in the winter. And then by the time it was completed, The kids were in school and it would have been difficult to take them off for a week. So we just had a Tesla team do a cross country Trip and then a bunch of customers did it. Actually, I think a customer did it before we did it. We set sort of Guinness Book a world record For the fastest trip from LA to New York in an electric car. And then of course, By the end of this year, we'll have pulled out a bunch of more routes, you'll be able to go in a much more direct manner to New York or from, So LA to Florida, of course, you can go up and down the East and West coasts. And so you'll see that map sort of Mostly filled in by the end of this year and then something similar for Europe and we'll be making good progress I think in China and other parts of the world On supercharger front. All right, so questions? So I think we're going to so if the players who have questions could line up the microphones and I'll just go from one to the other. Hi. My name is Benjamin. And since the deal with Toyota had actually fallen through and they no longer Batteries and actually want to switch over to hydrogen fuel cells. I wanted to get your opinion on now that gas is going to be going off and you're going Competing with infrastructure for hydrogen fuel cells and electric charging stations, what is your outlook on that Like the competition between the emerging the reemerging of hydrogen fuel cells in the talks between the car companies and such? Yes. So first of all, I should say, it talks to trade, it didn't really fall through. It's just we're sort of coming to the end of the Electric Rav4 program and Toyota was interested in doing Sort of a high volume deal for better facts and powertrains, but we're just not in a position to be able to supply them. So we just until we alleviate the cell supply constraint, it's not really possible for us to do a high volume deal. So what we agreed with Toyota to do was to just sort of put things on hold for now and circle back maybe in a year or 2 once we alleviate The sales price constraint, because otherwise we're simply just moving one car from, say, Tesla to Toyota and it's just it's not really accomplishing anything. So That's why we're so gung ho on the Gigafactory is we've got to get that done in order to ensure that there's enough lithium ion supply in the world. As you'll probably know, I'm not the biggest fan of fuel cells. I usually call them full cells. Good. And I mean, I think like a good rule of thumb for any storage technology would be to sort of Say, well, let's consider some very high value situations where electric energy storage has is Extremely important and gives a product a great advantage. You can save, well, let's think of like cell phones, like a cell phone that lasts longer is a Key strategic advantage. Gee, nobody is using fuel cells there. Okay, well, that's something really expensive. How about a $200,000,000 satellite? Wow, nobody is using the pool cells there either. Okay, case closed. Thank you. Okay. Hello. My remarks are for you, Mr. Dask And also for Doctor. Jerome Guillen. And just to remind you that in the developed countries, We have a lot of women who would like to buy Teslas, but they need to be a little bit more women favored. Those of us who have sufficient Buying power are generally not the younger, but the sort of older generation and we're not as tall as the men As the younger generation, so we have a little bit of difficulty getting to the pedals and also Being higher on the seats. Okay. So my remarks to you, Mr. Bresca and Doctor. Gui Yan, who is like the godfather of the Model S, Is to make it a little bit more friendly to the women, because After all, we are a majority. And finally, I would like to say that whoever has a car, They should say yum when they approach the car and the Teslas are definitely yum, yum, yum. Thank you. Well, thank you. Good point. Thank you. I should say we are with the Model X, we're certainly paying more attention to The needs of women in the Model X and I think you're right, we probably got a little too guy centric on the S. So we're hoping to correct that with the X. Hello, Mr. Musk. My name is Russell Kinsella, and I'm a satisfied shareholder. My question today is actually about the non trivial matter of the merchandise Tesla sells in its stores, which also function more or less as a uniform for the Tesla product specialists. I just wanted to know if there was any consideration to improve or update these as a way to bring them in line with the Tesla brand? Thank you. Yes, good point indeed that we are planning to do that. Yes, thank you. You're right. You're right. Satish Shimusa from LA. I have a question about the Model X and as you ramp up and obviously There's battery issues, I mean supply issues and I'm sure there's more demand than supply. Are you going to be able to ramp up or are you planning to ramp up even from the initial target that you had for The 2015 year and the years after and will it come with the optional upgradeable seats? So we're going to try to ensure that vehicle production matches the availability of Battery cells. And obviously, we have some external dependencies on that front, but we're going to try to Ramp up as fast as we possibly can. So I think at some point we will probably hit some Customer demand limit, but we're going to ramp up as rapidly as we can ramp up production and see what that limit ends up being. But Simple for us to say with certainty what it is, but we're going to try our best to increase our production And then see what the demand limit is. On the seats front, I have to admit that Historically, our seats have not been the best and we are planning on offering an upgraded seat later this year That will be both sportier and more comfortable and will be offered as a retrofit as well. So if you want to upgrade your prior car, you can do that. In the meantime, we actually have made a number of subtle improvements to the seat comfort In terms of improving the foam, the type of foam that's on the seat And we kind of over sprung the seat, so it's a little too tight in terms of the springs under the seat, so it Causes the seat to crown slightly and so we fixed that. And then the lumbar support is slightly too forward, So we've also fixed that. So all of those changes are going into the seats, most of them are already done. The loan bus, what I think is about a month away. And they make quite a substantial difference to the company, even the base seat. Yes, sorry, seats have been like a thing. Hi. Thank you. Hello, Mr. Musk. Just a quick question. With regards to Gen 3 or maybe not, from what I understand, Tesla has abandoned the trademark for Model E. I got a funny story on that front. Yes. So apart from an apparent desire to break the world's greatest combo, what motivated this decision? I just kind of want to get a sense of the thinking there. Yes. So let me tell you our sort of very deep thought process On branding here, so we have the S and the X and then a friend asked me at a party, hey, what are you going to call a 3rd generation I was like, well, we've got the S and the X, we might as well make it the E. And then it kind of stuck even though we're just kidding. And then just to sort of add to it, we also just And but I guess, things are pretty dry in the trademark world. So nobody picked up on that. And anyway, then Ford gave us a call and said they were going to sue us for using Model E. And we're like, okay, like Ford's killing Saks. I mean that's terrible. That's going to end up on Twitter. So they were like, okay, fine, we won't use the Model E. And so now we were thinking like, well, Maybe there's something else we can use. So we're trying a few other ones and the trademarks are in process, The applications are in process, so I can't say what they are. But I think we've got something that might be a good might work out pretty well. Hi, Roy Filipos, Philosopher and entrepreneur from Philadelphia, Tesla shareholder. 2 years ago, I was here asking you about monolith sales, and you had mentioned to me 8,000 was a breakeven unit and it seemed like now much more better things have occurred, which is good, good for all Tesla shareholders. A question today is that you had mentioned that you're planning to step down from Tesla as a CEO at one point. Can you talk more about that and as well as who would you want to be the CEO of the company after you do step down from that position? Thank you. Well, nobody is CEO of a company forever. I mean, eventually, they carry you out. So in my case, I mean, it is quite difficult, I'd say, being the CEO of 2 companies. And it was never my intention to be I tried to actually not be CEO quite hard and eventually it was sort of it was either that or the company wasn't going to make it. So at least I have to give it a try. So what I've committed to is to be CEO of the company through volume production of The 3rd generation car, so that's somewhere in the, I don't know, 4 or 5 year timeframe. And then I have to see how things are going at that point and whether it's If it's sort of manageable to do that on a personal level Without getting burnt out essentially, then I'll keep doing it otherwise I'll probably have to find someone else. But we've got a lot of time to sort that out. So you're talking maybe a few years then pretty much when the volume production car comes? I think I was yes, certainly the CEO for Like say 4 or 5 years and then it's sort of TBD after that. But yes, but that's the commitment I made To people at Tesla and also to investors is that I'm going to make sure that we execute through the High volume affordable car at a minimum and then we will evaluate at that point. Okay. Just a quick follow-up. I've been asking to speak to you now for 2 years To talk to you to tell you that I'm also a super genius like yourself. Okay. I'm not sorry. I'm sorry, I'm one, but all right. No, I'm sorry, I'm not I'm just saying to serious this is to all benefit of Tesla shareholders in the world. I am a capitalist like yourself. I am also level 2 stage. I've been waiting for 10 years now for someone to give me a second look, a full second look. And if they did, they see a very vast line in front of them. So I'm asking you today, can you give me a second look? Okay. I mean, I'm not sure what I would like to come on board as Vice Chairman of Tesla. Well, we don't really have a Vice Chairman's spot, but Yes, I mean, I think that's, I don't think I have to say no, I'm sorry. I'm sorry, I can also apply for future CEO position, but at least I would like to come on the Board of Directors. I apologize. Is it to the benefit of Telstra shareholders? I think we need to move on to another question. My apologies. I apologize. Thank you for your time. Hello, Mr. Musk. I know that your long term goal is rather than just to sell Teslas, but to accelerate the Electric vehicle market around the world and it seems like no one's really matching what we're doing at Tesla with the supercharger network far as rapid charging and battery swapping of high energy batteries, I was wondering would it to advance the long term goal, much long term goal, Would it ever make sense to open this supercharger or a similar charger, maybe a junior charger station To other manufacturers maybe on a subscription basis or to work with them to make their cars compatible as well, Since it seems like no one else just wants to put in the effort to make anything close to the supercharger in terms of capacity? Yeah. So the intent of the superchargers is not to create some sort of walled garden or anything. We're actually happy to have other manufacturers use the superchargers. They just need To create electric cars that can accept the energy level or the power level of a supercharger. So superchargers, the current generation of superchargers Put out 135 kilowatts and we're planning to go up from there, but there's no other electric car that can accept anything close to 35 kilowatts. We're more than happy to have other manufacturers do this and I've said this probably on a few occasions. No one's approached us and said, well, they'd like to use it. We were happy to have them do so. They would just have to contribute To the capital cost, like so figure out like, okay, what percentage of the time are their cars using the supercharger network and then they can make a Contribution proportionate to their customer usage of the supercharger network. We're very open to such a thing. Thank you. Mr. Musk, I'm from Los Angeles and I would like to buy a rally jacket of the Team that went to New York. Okay. And you don't sell it. All right. Well, like we said. Following the comment of somebody else about redesigning the Tesla Accessories that that be an accessory. Certainly most of the people who were there with me watching the guys get started. Well, how do we get that? It's not available. But the real issue I am raising today is The superchargers are unique and placed individually. How about putting them on a metal platform On a flatbed and dropping them in place and it's done, instead of all the construction you do, cookie cutter prefab. I invite you to think about it. It may cut cost and speed in delivery. Okay. Thanks. Hi, Mr. Musk. I'm Ben Clark. I'm a huge fan, happy Around the world and kind of regularly answering these questions and talking to the public is huge benefit to a lot of current and future engineers and innovators and entrepreneurs. I've heard you talk a lot about your desire to accelerate the advent of electric vehicles. I get the sense that you'd be Dreamly happy if all the major competitors came out tomorrow and announced long range electric vehicles that had great styling and performance and low cost. Even to the point that I think you would feel personally satisfied if Tesla Motors was put out of business by all these great electric vehicles driving around. Well, Yes. Sorry about that. At least having satisfied your goal of bringing it out. The automotive market is big. I'm sure there's certainly room for many companies. So I'm just kind of curious, how do you balance your desire to bring the advent of electric vehicles and wanting your competitors to have these Great vehicles that are benefiting the world with your kind of fiduciary responsibility of maximizing shareholder value. And if you can give any examples kind How you make those trade offs and what future decisions you might anticipate? Yes, it's a good question. I mean, It is surprising that there hasn't been more activity from other car companies to make serious electric vehicles. I mean, thus far what we've seen is really the number of electric cars they make is the minimum required to satisfy regulations. And then when those regulations are ordered down, then they reduce or eliminate the electric vehicle program. So it's It's surprising and I still really was hoping that Other car companies would engage in more serious electric car programs. And I'm trying to think of ways to help that along That would be a good outcome. I mean, I don't think their success is necessarily to Tesla's detriment, Because ultimately we need all electric cars to all cars to go electric. And the car market is enormous. I mean there's 100,000,000 new cars made A year and there's an existing fleet of roughly 2,000,000,000 cars. So even if all cars We're electric. Immediately, all new cars produced, it would take 20 years to replace the fleet. And if you look at the sort of P and A number of cars that Tesla makes, we're at 22,500 last year, Maybe we'll do sort of 35% this year. It's a big percentage increase, but it's a very tiny percentage of the overall market. We've got a long way to go just to get next to the decimal point in terms of market share, like one-zero over. So, Yes, I mean, I'm contemplating doing something fairly significant on that front, which should be kind of controversial with respect to Tesla's patents and but I want to I would probably want to write something so I can Articulate it properly and explain the reasoning for the decision. Okay. Yes, thanks. Hello. My name is David. I'm a shareholder. I have a question relating to batteries. How concerned are you about a new battery chemistry such as a dual carbon battery? And how quickly could this Gigafactory be retooled To make this new battery. It's Rare that a day goes by when there's not some new battery chemistry that is announced. But I should give people a good filter for assessing any new battery Chemistry in terms of its potential. The key metric is energy density, so energy per unit mass or volume. This is different from power density. Power density is the rate at which you can extract energy. Energy is like the total amount you have in there. Energy defines your range and power defines your acceleration and charge rate. The problem with something like the dual carbon approach is that the energy density is very low. It's only about maybe 20% Of our current cell energy density. Now the power density is very high, you can charge it quickly. But that's we don't have a constraint on power. The Model S really has a lot of power. So Range and really the cost per unit energy, those are the 2 things that are important. Now something like the dual carbon is actually Okay, in terms of the cost per unit energy, but it really fails hard on the energy density. There are potential breakthroughs out there, but we have yet to see one to see even a single example In our lab of a cell working at the laboratory level that is better than the one that we have or the ones that we expect to come out with. And so my response always when I hear about electrochemical breakthroughs is, please send us a sample cell. That usually well, that always has resulted in nothing happening. Thank you. Hi, Mr. Marks. I'm Kevin Wang. My question is related to Model X and Generation 3rd. And speaking of the other Manufacturing activity. Recently I attend the BMW I3 test ride event and since I have been Greatly spoiled by Model S. I wouldn't walk away as an ice cream buyer. But however, that's one thing impressed me very much is that the Tremendous interest from the consumer showing up. So it's kind of a tent event and they're running the test drive all day long and then 100 people kind of sign up. So it just come to me that if Tesla has the model E or Y ready, they'll be selling like hot cake. And looking in your roadmap, Model X still have the priority. So I wonder, Is it that it takes this much time for you to learn how to build general relations, sir, or is that Any of the resource constrained like battery, just wondering if you could share some of the rationale in terms of priority? Yes, I mean, the thing That's important is to have a compelling mass market car. So I mean I drove the I3 and it's not bad, but it's the range is very short. It's okay in other respects, but it's just It will be hard to say for most people that you could replace your gasoline car with an I3. I'm not impressed by I3 at all. I'm saying that if you have the Model E ready, You could take over the market. Sure. So the issue there is in order for us to create a compelling mass market car, we need A lot of battery production and it needs to be at affordable enough price that it doesn't cause It doesn't destroy the affordability of the car. So that's why the Gigafactory is vital for Getting to that level of volume and for reducing the cost via massive economies of scale And vertical integration. Now there will be, I should say, technological innovations in the cell as well as The sort of monster economies of scale, what we're trying to do is dial everything to the maximum To get to that affordable compelling, let's recall, compelling meaning it's got to be long range As soon as possible, the soonest we can figure out how to do that is through the late 2016 timeframe. So that's what we're aiming for. We could obviously produce a car like the i3 or maybe probably better than i3 right now, But it just wouldn't be great. It would be okay and it wouldn't really wouldn't be amazing. One quick follow-up, so that leads to the Gigafactory. And as I understand you right now you choose 2 states simultaneously, so at what timeframe you will go with the Final state. Yes. So we're probably going to do 2 or maybe 3 states, all the way to Creating a foundation and completing the plans and getting approvals and everything. I think it might actually be 3 states that we do it in. So I would expect that we do a down select for Gigafactory 1 before the end of the year. Thank you. I would just like to re ask my question of how quickly could that new battery chemistry composition, How quickly could the Gigafactory be retooled for that new battery composition? It would be fairly straightforward for us to change the Anode or cathode composition. Okay, thank you. Yes. In fact, we expect to evolve the anode and cathode. It's not merely What if that happens, we expect that to happen. Hi, Mr. Musk. My name is Bob Ashmore. I'm a shareholder. I'm a Roadster owner and a Model S owner. And I have a question about if you're planning on any upgrades or enhancements To the Roadster and if not when I can expect another Roadster type vehicle? So yes, we are planning on, I think, a fairly exciting upgrade to the Roadster. I'm hoping we can get it done later this year. I did say it would be this year and Yes. I'm trying to sort of I mean, yes, we'll get it done this year. There'll be a cool thing by Adstrol. Adstrol to back. We said we do it, we're going to do it. So we're going to do something cool with Roads Before the end of this year. And in terms of a next generation Roadster, it's that's probably, I don't know, 5 years away. Tesla reservation holder, for the past year, I've been day trading your stock and I've Finally saved enough money to purchase a T85 fully loaded and I'm taking delivery in July. One of my concerns for the long term is that S and P has downgraded your stock to a junk rating to B minus. Technically our debt, not our stock, Yes. Well, yes, it's a jump rating as a debt, but they've said that the stock is not worth Long term investment. And I could care less because I'm still making money. But at the same time, Do you see that well, I mean, my main question is, what do you think is The best move for Tesla to make to add more value to the stock to make it more of a long term investment like it was maybe 2 years ago, because now The stock has been so volatile that the only way to really make money on it is to short sell day by day. And I'm even surprised to be here because on April I just happened to have a long position in the stock at the close of the day. Well, I mean with respect to S and P's rating, We expected they would probably do something like that because they're rating it from the perspective of a debt holder, which they For debt, I mean, the way debt is typically looked at is, it's as you look at a company's performance in the rearview mirror. So, Okay, well what's historic performance? How many consecutive quarters of profit has Tesla had? Oh, well, none. So on a GAAP basis, so therefore you get a bad credit rating. So it's certainly to be expected That we're going to bad credit rating from S and P just because they look backwards. The equity markets of course look forwards And say, well, what is the net present value of future cash flows? What is this company likely to do in the future? And obviously, We get a lot of support on that front from equity holders. And that's why we did a convertible debt offering Rather than a pure debt offering, because convertible debt is essentially a forward sale of equity, and so it's valued as an equity offering. As far as the long term future of Tesla, I mean, I'd say, I think there's a lot of potential for growth And the stock price in the long term. And the math is pretty straightforward. I mean, you sort of say, well, What would Tesla look like if it was producing $500,000 cars a year? What's the Your average sale price at that and what kind of gross margin would Tesla expect to have and that would define At least for the Fremont factory, what the net present value future cash flows would be, which should be quite a big number actually. And then if we have multiple factories around the world, then that would obviously get quite a bit bigger. So I mean, I think there's certainly the potential there for Tesla to be one of the most valuable companies in the world in the long term, I continue to point out Execution, of course, the much more difficult thing is to say, well, how will the stock market value us In the short to medium term, that is an impossible thing to say because the stock market is kind of a manic depressive, I mean, particularly with respect to Tesla. But I mean, the reason Tesla is a volatile is because so much of Tesla's value is a function of market confidence in our future execution. So if something happens that Diminishes or increases that, it has a highly leveraged effect on our current stock price. There's nothing we can do about that. I wish it was less volatile frankly, but that's sort of the way things are right now. So I'd say Tesla is a very good investment for the long term, but it's impossible to say what it is in the short term. Sure. And just one last remark, sorry. I was wondering if after I get my Tesla and after I drive around for a bit, you'd be willing to Come have lunch with me. Well, I appreciate the request. I'm quite time constrained. But I appreciate the request. Can I at least get an autograph after the meeting? All right, sure. Okay, thank you. Sorry to do this, but we're going pretty far over, so we're going to limit it to the last two questions, if that's okay. Okay. Thanks. Hi. I'm an 11 year old from Burlingame. And so I was I invested in Tesla last year as my first stock. And I was wondering if I could have a tour of the factory. Absolutely. Just talk to Tesla person afterwards, we'll make sure it happens. Okay. Thank you. Hi, Yvonne. I'm Dave Lee. I've been an active member at the Tesla Motors Club Investors Group and we have a lot of discussions about all things Tesla. And one of the questions is kind of like what's after Gen 3, because as you mentioned with 100,000,000 vehicles per year And also with this massive transformation going on to electric vehicles, the question is like is Gen 3 going to be enough To propel the world's transport to electric vehicles, or does there need to be like another cheaper vehicle that will compete Sub-thirty thousand, maybe less performance than a 3 Series competitor, but more like a Camry ish family sedan ish level That's super affordable. Of course, with battery costs, we're looking probably at 5 to 10 years out, that something like that would be possible. But can you share some of your thinking kind of on is that kind of is a sub-thirty thousand Vehicle in 5 to 10 years, some possibility, is that going to be using a Gen 3 platform or would that be a separate Gen 4 platform? Well, I think as a general rule, what Tesla is going to do is Whatever set of actions we think is most likely to accelerate the advent of sustainable transport. So Clearly that sort of Gen 3 car is kind of the Holy Grail. It's like the thing that's missing is because there are Affordable cars that aren't compelling, electric cars aren't compelling. There are there's a Model S, which I think is a compelling car, but it's Expensive. So we're really just missing that critical affordable compelling electric car. I That I think is going to have a huge impact on in terms of shifting humanity away from Burning fossil fuels. Beyond that, we will take whatever additional steps we can think of to Shift transportation to electric. So I think it would make sense therefore to go into trucks since they consume a lot of fuel and Probably into something lower cost than Gen 3, but it's hard to say. I think, but I think probably. So, yeah. Last quick question, what's the lab throat facility about? I couldn't find any information anywhere about that. Yes. So, We're actually expanding our activities in the sort of in the Stockton area, you know, Lathrop sort of a city near Stockton. The Greater Stockton, Lathrop area, we're setting up a lot of manufacturing activity To supply components to the Fremont factory. So as we expand production at Fremont and plan to get To the sort of 500,000 unit a year level, we have to move a bunch of manufacturing is done In Fremont to other factories, some of which are owned, some of which are suppliers because we can't be we can't produce at the 500,000 Unit level and be as vertically integrated as we are at Fremont. So we expect to do substantial expansion in the Lathrop Stockton area to Supply at the Fremont factory. Well, let's just do a couple of more questions. Maybe if you can say, well, if you think you've got a question that a lot of shareholders would really want to know the answer to, then I'd like to take your question. Are you highly confident that other shareholders are going to want it? Okay, let's take some general audience questions. So in that awesome Tesla shirt that you're wearing. There's Antonio right there. Do you want to answer that? So I'm not dumping my shares. I sold less than 25% of my fully diluted holdings of the stock. I love the stock and it's great companies do well long term. I do run an investment fund. So I have to create liquidity investment fund, that's where the money is going. But I'm a very long term shareholder I own over say 35% of position, I continue to own the stock. So, all right, look, we're going to give it like 10 minutes. So, let's go here. So, you and then you. Well, Tesla cars by far have the best range on the market. But for a lot of us, it's still not enough. And I'd like to offer you the Tahoe challenge. I live in South Lake Tahoe. Can you drive there in one stop? I come to the Bay Area quite often. And the challenge is getting up those 7,000 feet from sea level to where I live. So the challenge is a car that's affordable that can make the round trip from Tahoe to the Bay Area and back. Okay. Well, I think it will be a while before that can be done round trip, but I mean, we could produce a car that could do that right now, but the car would be really expensive and have a huge battery. So and probably wouldn't be that useful for most people, but you should expect to see a steady increase in range, the available range in the cars over time. So, go ahead. We'll try to make this super snappy and get through a bunch of questions. Hi, I'm Tesla's shareholder from Taiwan. Unfortunately, we can't buy the Tesla car in Taiwan now, but there are still many component suppliers of Tesla from Taiwan. And we all know you Tesla is working so hard to drive the cost down to produce lower price So that more and more people can afford. So that's why Tesla is trying to build a new production in China And getting cooperation with Foxconn too. So could you share more details about this? We are increasing our relationship with Foxconn and I think there's some very promising potential in collaboration with Foxconn. I mean Tesla will always be a manufacturing company. I think it's important to emphasize, but we do feel that with potential alliances Like Foxconn, we could potentially expand our production faster than would otherwise be the case. So right there, so at the mic, yes, Good morning. Do you want me to hold it? Okay. You kind of answered a little bit of this about the supply demand earlier, but it was mentioned that there was some Complaints in China about the length of time that it took the customers to receive the car. And as we expand worldwide, I was wondering What is the short term and long term goals that Tesla has to alleviate the issue? Yes. I mean what we're trying to do In China in particular, in all markets is to build out our service and charging infrastructure as fast as possible. I wish we could figure out how to do it faster, but we're going at full tilt and my instructions to the team are To spend money as fast as possible without being wasteful. So there's no budget, there's no arbitrary restriction, we're trying to go as fast as we possibly can. So, yes, that little I mean, I think we're going pretty fast as compared to most car companies. But it's yes, we're going at top speed. The only kind of Creative solutions, so like a more short term solutions like operating like incentives or telling them a little bit, this is the wait Time or how to kind of pacify them a little bit? Demand is not our issue. Yes. Sorry, go ahead. Occupying Mars, fantastic. Oh, sorry. And then we'll go sorry, I didn't realize you had the mic Thanks, Elon, for what you're doing for us both here and in space. My question is maybe next to EVs, the next transformational thing for cars are autopilot, Self driving type technologies, you mentioned that you're investing in that. Can you give us an update where you are? So I think we're making some really good progress on the Autopilot side. And I'm confident that In less than a year, you'll be able to go from highway on ramp to highway exit without touching any controls. You mentioned that the 3rd generation will be more like a mass production and the low cost vehicle car. I think Nissan Leaf already have something like that around like 20 ks. So I'm just wondering in the low cost and mass production area, what's the competitive advantage of And how are you going to pitching that market? Well, I think the issue is with LEAP is that the range is quite low. And so it's not all that competitive compared to gasoline cars of a similar price point, Unless you have just very short range needs, the key is to have a long range Affordable car. And I'm hopeful that Tesla will be competitive in that regard. I think we will be and hopefully Nissan and many other companies Are making such cars as well. And if they do so before Tesla, I say more power to them. So I'm a Model X reservation holder, 6,715. Do you think that it's possible to see my car like around July Next year? And the other question is on the milliamp hour rating. The current, I think, is 3,100 That's being used, is there any chance we're going to see a bump up in that for in time for Model X to like around 4,000, it's kind of red somewhere? I'm not sure what you mean by that, but do you mean the The milliamp ratings for each individual cell? Oh. About 3,100 I think? There are a lot of constraints on the power output of the system that are not just driven at the cell level. So, I mean, right now it's yes, it's sort of more the current collectors and the like the main contractors and fuses and that kind of thing. So we'd have to upgrade the powertrain more generally to have a significant power output improvement. All right, so Okay, last question. Sorry. My name is Anne Blankenship, and I'm a mad sports car enthusiast. And I'd like to know, is there any possibility that Tesla might Participate in the Dakar rally because a Model X careening down the dunes of Akike would be your money Well, I do think that's an awesome race. We have no plans to be involved in any racing activity in the At least the short to medium term. Really our focus is on developing new products and increasing production and all of the kind of racing stuff is about And until we start hitting demand constraints instead of production constraints, it makes sense for us to focus on production. Thank you. Just a quick final announcement before we leave, but thank you Everyone for attending today, just wanted to let you know that for those who are interested, the unofficial result is that the result of all the resolutions were in line with how the Board recommended. So we thank you for attending and hope to see you next year. Thanks a lot.