Good afternoon, everyone, and welcome to Tesla Motors' 2013 Annual Meeting of Shareholders. We are very glad you could join us today. We have a full house, thank you very much for coming. My name is Phil Rothenberg, Associate General Counsel of Tesla. I'd like to first introduce Tesla's Co-founder, CEO, and Chairman, Elon Musk. Let me also introduce some other people here from Tesla. We have our Board of Directors sitting right up here, as well as our CFO, Deepak. In addition, Steve Stellini from PricewaterhouseCoopers is here today. PricewaterhouseCoopers, as you probably know, is Tesla's independent auditor. There are two parts of today's meeting. First, we'll do the formal part, and we'll cover two items that shareholders have been asked to vote on. Following completion of this, Elon will provide a brief overview of the company. Let's get started by calling the meeting to order.
Before we begin the formal agenda, I'd like to announce that the polls are now open. If you haven't voted by proxy or if you'd like to change your vote, please do so now. If you'd like a ballot, please raise your hand, and either Lisa or Jan will come by your seats and give you a ballot and allow you to vote. Please keep your hands raised while they come by. While we're doing that, I'd like to discuss with you a couple of things. First, the rules of the meeting are on the agenda that was passed out today, and we'll follow those. Tesla Motors' Board of Directors has appointed Lisa Brenton of Computershare to serve as our Inspector of Election for this year's meeting. Lisa has taken and signed an oath as an Inspector of Election.
This document will be filed today with the minutes of the meeting. Computershare has certified that starting on April 17th of this year, the proxy materials or a notice of internet availability of the proxy materials was provided or mailed to shareholders as of record of April 10th, 2013. Copies of these proxy materials and related certificates will be attached to today's meeting. Lisa, I think there are some more people right in the center. We have a majority of outstanding shares represented in this meeting, I declare that a quorum is present, and we may proceed with the business of the meeting. We're conducting the meeting in accordance with the company's bylaws. Today, we have two items on the agenda. They are, first, to elect two Class III directors, Brad and Ira, to serve for three-year terms or until their respective successors are duly elected and qualified.
Number 2, to ratify the appointment of PricewaterhouseCoopers as our independent registered public accounting firm for the year ended 12/31/2013. Anybody else need a ballot? Jan, I think there's one more gentleman in the center right there. There's a person in the far back. Lisa, there's a person, well, actually two people in the far back. Once you've voted on your ballot, if you need to, if you could raise your hand again, and Lisa or Jan will come by and pick up your ballots. Any additional ballots out there? There's a couple on this side. If you could hold them up high, we'll grab them quickly. Any additional ballots? Lisa, do we have all the ballots? Thank you. The polls are now closed. All measures have passed.
That concludes the official business. As a point of clarification going into the meeting today, we had a 90% quorum that had already voted online. We do appreciate your attendance and voting. Thank you. That concludes the official business of the day. I now declare that the formal part of today's meeting is hereby adjourned. I now welcome you to stay for Elon's presentation. We'll leave time at the end for questions and answers regarding Tesla. If you do have a question or answer, I ask that you line up behind one of these two stationary microphones. Please note, we do have a full house here, so if you could keep your questions brief and to the point. We're going to try to adjourn around 4:00 P.M., and there might be a lot of people with questions.
During the course of Elon's presentation, we may discuss our business outlook and make other forward-looking statements. Such statements are predictions based upon management's current expectations. Actual results or events 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 and should not be relied upon thereafter. We also disclaim any obligation to update these forward-looking statements. With that, please help me welcome Mr. Elon Musk.
All right. Well, thanks, everyone, for coming. I'd like to thank you all for being shareholders in the company and for having the faith to invest in Tesla. As always, we try to work really hard to build shareholder value over time and build a great company, and really deserve the faith that you've placed in Tesla. This has been a great year. Things have really gone pretty well. Obviously, it's a testament to the hard work of a lot of people at Tesla who put in crazy hours to achieve that. I'd like to say, just mention all of their efforts to get here, because it was extremely difficult. Also, there were many people that thought that Tesla would fail. Many of them unwisely chose to short our stock. I presume those people are not here today. Yeah.
I'll go right into the presentation. Blah, blah. Forward-looking this, that, and the other. The Model S is really a great car. We told people it would be a great car, and it is. That's been objectively confirmed by MotorTrend, who declared it to be Car of the Year, Automobile Magazine, and then recently, Consumer Reports, that actually gave the Model S the highest rating they've ever given to any car of any kind, like I said, ever. They did give a 99 once before to a Lexus about six years ago. This is the only other car to get 99. In fact, the only American car ever to get 99. That's Yeah. It should further be noted that the way that Consumer Reports works is that they buy a car at random.
They buy a car at random, we don't know which car it is, and then they drive the car for months, and in every conceivable way. Amazingly, they never broke down once. They must have been very lucky. As people probably are aware, not every bit of press was positive. There were a few things, a few articles there that weren't positive. By and large, it's been very positive. The reason we didn't get 100, not to quibble, was because Consumer Reports said there was a question around the availability of rapid charging and the ability to travel freely wherever you want. In fact, that was the reason we didn't get 100. I'm wondering, if we address those issues, whether that 100 is possible. I actually don't know. I've not asked them. We will try to address those issues.
It's worth noting that we were the top-selling electric car in the first quarter. In fact, if you add up all electric car revenue, our revenue at Tesla was greater than all electric cars sold in the United States. If you add up the Yeah. Obviously, I think what that means is we definitely need to try to bring a lower-cost car to market. Hopefully, in about three or four years, we'll be able to do that. It was a good quarter, and certainly, good by any measure. I think we've got a good foundation for success in the future. We've developed a solid base of intellectual property. Even though I'm not the biggest fan of patents, we do have a lot of patents. We've been able to build up a significant brand, so there's a lot of awareness of Tesla.
That awareness is somewhat polarized. People tend to love us or hate us, but they rarely are indifferent. We have a lot of mind share, and that, I think, is valuable. We've got some great partners with Daimler, Toyota, and Panasonic. In fact, Daimler's here. I appreciate Daimler's support over the years. We've got the potential for a lot of future growth on the Model S platform because the Model X will be built on the Model S platform. We could potentially do some other products on that platform. We'll develop, in the longer term, a lower cost platform, higher volume, and try to produce a car that's about half the cost of the Model S. A little bit smaller. That really has been my goal since the start of Tesla.
I'm really looking forward to bringing that to market eventually. Obviously, we've got a great management team, and we're in, I think, a solid position from a cash standpoint. With the last financing round, we raised more money than we think we need because we wanted to give people a high level of confidence about Tesla, so that if there's a short-term supply interruption, like let's say there was a big earthquake in California, we sometimes have those. Yeah, touch wood. There could be sort of some natural disaster in some part of the world, or a supplier that goes bankrupt, or something like that. I thought it was really important to have sufficient cash to be able to last through some difficulty like that and not be sort of flying at treetop level.
Even if your airplane is working well, flying at treetop level is a little dodgy. I think having that cash balance gives us a lot of risk assurance. We're seeing continued strong demand for the Model S, with demand in North America somewhere in the 15,000 unit range. It's a little above 15,000 units a year in North America, and that's continuing into Q2. We think we're going to have a pretty good Q2 that's comparable to Q1 on a unit volume basis. Roughly the same. Going into Q3, we'll have obviously some incremental demand from Europe because we'll start shipping cars. They'll get on a boat in late June, start arriving in Europe in July. Obviously, we think we'll have pretty good demand in Europe as well. In the fourth quarter, we'll start shipping to Asia.
If things go really well, assuming that they don't take a turn for the bad, then it would be reasonable to extrapolate the U.S. demand by roughly a factor of three. Again, this is speculative, so I'm not saying it will be the case, but I think it's, in my opinion, likely that we'd see demand of at least, say, 40,000 units worldwide if the U.S. demand is 15, and maybe better than that. What we're seeing is that I actually think it's going to be more like 40, but we're saying 30 here. Anyway. What we're finding is that Tesla owners are really our best salespeople. When the cars get delivered in market, the owners will show other people the car and give test drives and that kind of thing.
Very often, when I meet someone who owns a Model S, one of the first things they tell me is how many other Model S's they've sold. I think that's really great. It means that there's sort of a viral growth component to sales. The more cars that we've delivered in a particular area, the better our sales tend to be. That's a good sign. We're expanding our store and gallery presence quite a bit. By the end of this year, we'll have increased our stores and galleries by 50%. Going from roughly 34 to 50. You can sort of see the map there. Quite a significant expansion on the store and gallery front. It's actually an even bigger expansion on the service center side.
What we're seeing is one of the biggest impediments to people purchasing the car is not actually whether there's a store or a gallery near them, but they just want to know, can their car be serviced? Is there a service center in their city or, if it's a large metropolitan area, in their region of the metropolitan area? In places like the Bay Area or L.A., you need to have multiple service centers because sometimes it can take longer to drive from one side of L.A. to the other than it can be to fly to San Francisco. We really need to do something about that 405. We've got to get the service centers out there. Our service center count will almost double by the end of the year.
Like I said, that's a factor not just in being able to service existing customers, but as a reason for new customers to buy. I should say something a little bit about the service center expansion. I think there's actually a lot of opportunity in the middle of the country, and we're going to see a lot of our service center expansion in that area. I think sometimes people underestimate the real demand in the middle of the country. I think it's actually quite a bit higher than most people would think. Yeah. Tesla developed this Supercharging technology, which is the most advanced charging technology in the world. This is something that allows you to make a brief stop at one of our Tesla Supercharger stations, charge your car up very quickly, and be on your way.
Something that's unique about the Supercharger is that it's free. It's not just free now, it's free forever. The number of Tesla Supercharging stations is increasing dramatically. By the end of next month, we will have tripled the number of stations since the beginning of the year. Within 6 months, we will have covered most of the major metro areas in North America. A year from now, we will have covered 80% of the North American population, and within 2 years, over 98%. By buying a Tesla, you essentially have free long-distance travel throughout the country forever. We're also improving the Supercharging technology itself to cut the charge time in half. Previously, people were spending upwards of 40, 45 minutes with the Supercharging technology. Now a stop will only take you about 20 to 22 minutes.
Tesla Supercharging system will allow you to do the ultimate road trip. You can travel across the country and just pack some food, stay with friends, and leave your wallet at home. Yeah. One of the things we're using the capital that we raised for is to increase the expansion of the Supercharging stations. We're going to have triple the Supercharging stations, as I mentioned, within about a month or two from the beginning of the year. By the end of this year, you'll be able to travel from L.A. to New York, just using the Supercharging network. In fact, I'm planning to do a road trip with my kids from L.A. to New York at the end of the year, which should be an adventure. It's kind of like those Chevy Chase movies. It could prove challenging.
I think it'll be fun, and about 20 years ago, time's getting on, when I was in college, I actually drove my car with my brother, I drove from L.A. to Philadelphia. We kind of did a tour where we went from L.A. to. Well, actually started from the Bay Area, then Bay Area, L.A., then Vegas, then Grand Canyon, through the Four Corners, over Wolf Pass in Colorado, and then up through Wyoming, South Dakota, saw Mount Rushmore. Drove across the Badlands to Chicago. Went to the Sears Tower, and then drove to Philadelphia and saw the Liberty Bell. We're going to do that again with my kids at the end of the year. Make sure the Supercharging system is working well. I think it's going to be pretty cool to be able to do that.
I think this is a key answer to the whole question of can you drive for long distances with an electric car? We're going to show firsthand that you can. Something that didn't get quite as much attention in the announcement, because most of the media focused on the geographic expansion of the Supercharger network. The technology itself improved quite a bit. We went from a 90-kilowatt max charge rate to 120 kilowatts. We're able to improve the point at which the charge tapers off. Because with the lithium-ion battery pack, you always have to be careful as you get towards a full state of charge. You can't go at the same rate. You have to slow things down. Kind of like filling a cup.
If you want to fill it up to the brim, you've got to get sort of slow as you get to the top. We're able to improve the technology so the taper point is much later. Compared to initial road tests where people use the Supercharger network, it'll actually be about a halving of the charge time relative to what people's prior experience was. Yeah. We'd expect the typical stop time to be 20 to 25 minutes, maybe half an hour. Also the Supercharging, if you want to know where the next nearest Supercharger is, you can just tap the lightning bolt on the nav screen of the Model S, it'll automatically route you to the nearest Supercharger. That's updated dynamically in real-time, so as a new Supercharger becomes available, that's updated immediately.
With the improvements to the navigation software, you'll be able to just input any destination in North America, and the car will automatically route you to that destination in the best possible way using the Superchargers. You don't even have to think about it. It'll figure out the optimal route for the speed of your journey, and you can obviously adjust it accordingly. It'll say, "Okay, this is the best way to go to complete your journey in the shortest possible time." I think it should work. We just want it to be like you don't even need to think about it. You literally just type it, or you verbally state where you're going or type it in, and the car just figures out everything else.
For the year, as mentioned in the quarterly earnings call, we expect the total deliveries to be a little over 21,000 this year, and with a gross margin excluding ZEV credits or Zero Emission Vehicle credits of 25%. Yeah, I said 50 stores, roughly, well, a little more service centers than that. We're continuing to make progress on the Model X. With the Model X, the goal is to try to address the minivan market as well as the portion of the SUV market that is not addressed by the Model S. The Model S does address some of the SUV market because it can do five adult plus two kids seating, and it's got the trunk in the front.
The Model S is good for occasional seven-person trips, if you've got more frequent trips than that or you want more room, or you want to have a higher seating position, the Model X is the path to go there. There are two significant innovations with the Model X. One is the double-hinge gull-wing, or what we call Falcon Wing door, which is able to have a very big opening without the door arcing out far. Because of that double hinge, it can go up and over instead of arcing out and hitting the car next to you or hitting your garage roof. We're taking a bit of a chance with this door because it's something that people haven't seen before, and will people be comfortable with it? It's hard to say. I think it's going to be pretty awesome.
We're taking great care to ensure that it's safe for people, there's going to be a pinch strip. Even if you stick your finger in, or if your kid sticks his finger in at the last second, the door won't squash the finger because it's got a pinch strip. The door's got proximity sensors, it won't hit anything. It'll stop a few inches before hitting anything. You don't have to worry about hitting the roof of your garage or anything like that. It just automatically senses proximity and stops. What that door enables is you can step directly to the third row. Having direct third-row access, even if you've got child seats in the second row, is very important. Normally, you really can't get to that third row if you've got kid seats in the second row.
You can actually stand up in the second row. I can actually stand up in the second row. If you're under about six foot three, six foot four, you can actually stand up in the second row, which is great. Say you want to put your kid into a child seat. Instead of having to cantilever yourself, sort of reach in like that, you can actually just step into the car and put your kid down. That's a lot easier than trying to cantilever a kid over into a baby seat or child seat. The other key thing here is the world's first dual motor all-wheel drive in a production car. There'll be a second motor in the front that will allow for intelligent all-wheel drive.
It'll dynamically shift torque front to rear, it's able to do that at the millisecond level. To the car, if you're at the millisecond level, the car looks almost stationary, because at every thousandth of a second, it's readjusting the torque from front to rear. If you were to go over an oil slick or some ice or something, the car would instantly shift torque to whichever wheels can handle the torque, and then shift them back as you move over that slippery patch, as opposed to having a mechanical linkage, which has a lot of inertia and latency, effectively. The bottom line is it should give the best all-wheel drive experience. Sort of this feeling like digital and analog.
Because the battery pack is in the floor pan, you have a very low center of gravity, which is unusual for an SUV-type of vehicle. It should have the lowest center of gravity of any SUV, and as a result, extremely good handling. We want to try to have something which has got the handling of a sports car that also looks great but has more functionality than a minivan. That's what we're aiming for with the Model X. We're aiming to have the initial vehicles hit the market, or get in customers' hands, at the end of next year. In terms of some general product elements here, I've talked a lot about this, but just in summary, thus far this year, we've introduced the 60 kilowatt-hour version. We've completed development of the European version, which has the three-phase charging capability.
We're working on the Asia-Pacific version. There's a China-specific one and one for the rest of Asia. We're working hard on the Model X, on right-hand drive, and on all-wheel drive. In the 2016 and 2017, and probably end of 2016, I would say, is the third-generation vehicle or the vehicle that's, in a lot of ways, a smaller version of the Model S at about half the price. All right, let's jump into Q&A.
All right, everyone, if you could come and join us at the standing mics. Just queue up here and we'll take your questions, please.
Hi. Hello. We live on a cul-de-sac and as the houses are turning over, there are more and more young children. Are there any plans to add noise to the motor?
There is this question of having the Model S make a noise. Obviously, the challenge there is to avoid noise pollution at the same time. We're in discussions with Yeah. Definitely, there's two schools of thought on this. I think the sensible, I think, ideal thing long term is to have proximity sensors that direct a pleasant-sounding noise in the direction of where somebody's walking. Therefore, it's the least amount of noise, and it's not annoying, and it's only going to where it needs to go. That's what I think is the right long-term solution. It'll take a bit of work to get there, but I think that's hopefully where things will end up.
Mr. Musk, my name is Rick Smoke. I am a shareholder, and I note that two members of the board of directors resigned last year.
They did?
Were they asked to resign, or do you have any inclination as to why they resigned, and their specific expertises, and whether they've been replaced or need to be replaced?
Well, actually, one of them was simply Daimler changing their board membership. That was due to the retirement of the responsibilities of the Daimler board member. Daimler, maybe Mr. Kohler over there, he could give a better explanation. That essentially was due to the retirement of the Daimler board member within Daimler. Daimler then appointed somebody else.
Right.
I'm not sure who the other person is you're referring to.
Dr. Kohler and Al Darmaki.
Oh, Al Darmaki. Oh. Yeah, Abu Dhabi actually sold their stake in Tesla. Actually, what happened before that was the Abu Dhabi ownership of Tesla, I think they own maybe 7% of Tesla, transitioned from the Abu Dhabi Water and Electricity Authority to TAQA, which is kind of their investment arm. The person that was representing the Abu Dhabi Water and Electricity Authority then resigned. At some point after that, TAQA separately decided to sell their Tesla stake, I think at about $34. Maybe not wise. I did urge them to not do that, they decided they wanted to do that anyway. I think the board's primary responsibility is to represent the interests of the shareholders. Since they're no longer a shareholder, it didn't make sense to have them have board representation.
All right. Thank you.
Hi, my name's Rahul Sinat, and I'm a shareholder. Fantastic job on executing on all the milestones this year. I wanted to get a quick update on one more goal you mentioned at South By earlier. Are you having fun yet?
I'm having a lot more fun these days. My New Year's resolution was actually to have more fun this year. Although the prior years were certainly ones of great achievement, they're very enjoyable in recollection. But were extremely stressful at the time. I do think there's a steady improvement on the enjoyment factor. Thanks for asking. All right.
Hi, Mr. Musk. I've got two questions. One is regarding working capital management. Do you expect receivables inventory, payables, and customer deposits to be roughly the same percentage of revenues going forward as they were in the March quarter, annualized? Look, but you're doing a great job.
Okay
with your working capital management
Okay
that's the only
Yeah
I'm worried about the whole cash flow. I'm not worried. You guys are doing a great job.
Yeah.
Is your net working capital going to be real low relative to revenue, despite the growth in revenue?
I think we'll be in great shape from a cash standpoint. Not that we want to be less cautious about our cash management, but we do have a lot of extra cash that we raised because of the last financing round. That gives us the ability to, even if we basically suck at cash management, we'll do okay. We don't want to suck, but even if we do, we'll still be okay.
The other question, I don't mean to make this kind of comparison, Porsche's operating margin is about 18%, and their CapEx as a percent of revenue is about 3%. When the company becomes big, do you see sort of metrics like that in those two categories?
Well, I think our CapEx is probably going to be higher because we're expanding more. As we build up more production capacity, we have to spend more on capital expenditures. We're also doing things like the Supercharger network and stuff. I would expect our capital expenditures to be a fair bit higher than Porsche for some time to come. That said, on the separate metric of gross margin, I think we can probably get close to maybe exceed Porsche's gross margin over time. It kind of depends, because I think for the Model S and Model X, we can probably meet or exceed Porsche's gross margin. For the third-generation vehicle, which is primarily a cost optimization, I think the right move there may be to actually, it probably is, in my opinion, to aim for a smaller gross margin on that vehicle.
On the other hand, we will have a much higher volume over which to divide fixed costs. I think it's still going to be net profitable, but I would not try to strategically, I'd rather sell a car for less in that case than necessarily try to get the highest gross margin.
Thank you.
Yeah.
Hi, Mr. Musk. My name is Kevin Wang. I'm a shareholder. Actually, first of all, is it your brother outside?
Of course. Right there.
Oh, right there. I think I saw him earlier when I was outside. I have three quick questions. First of all, you talk about the Model S owner are the best salespeople. Is there a plan for incentive plan? If not, I have a suggestion.
Actually, I'd like to hear a suggestion.
Okay.
There currently isn't an incentive plan, although arguably there should be. Yeah, what do you suggest?
I would suggest that for every car that an owner sell, give one year free service.
Okay. It's interesting idea. All right. Noted.
Okay.
All right.
Okay. Second question, yeah, I'm gonna get my Model S on the 18th.
Okay.
Okay. I'm gonna sell as hell.
Thank you.
My second question is that you tweet on the Twitter, you tweet about that actually it may take less time to charge Model S than filling a full tank of gas.
That's right
Is the recent announcement that it's 20-minute charge, that's it, or there's even more?
That is not it.
That's it?
That is not it. I would say.
Cool
I mentioned that there will be an announcement on June 20th. In fact, not an announcement, but a demonstration.
Wow, okay. Third question.
Live demonstration.
Okay. Third question.
Could go wrong
I have my Model X reservation. About the Falcon Wing, have you considered if there's snow and rain and the ski on the roof things?
Yeah. The door will actually shield you from snow and rain. You'll actually be okay on that front. We do have water channels for the water to flow off the door and around the entrance. Obviously, if you've got a lot of windy rain and that kind of thing, you're going to get a little bit of rain in the car. It shouldn't be too bad. It's also true that if you open a conventional car door, you're going to get some amount of wind and snow in if it's blowing hard. For skis, we have, I think, some innovative solutions for carrying skis. It certainly is going to be important to be able to carry skis because that's a car that people would often use to go to ski country. We do need to have a good solution on that front.
Okay, great. Thanks a lot.
All right. Thanks.
Hi, Mr. Musk. Mark Olsen, very happy shareholder. I appreciate you building such a fantastic car on so many levels.
Well, thanks for buying one.
I didn't buy one.
Oh.
I couldn't buy one.
What?
Not yet.
Oh, okay. Well, you should.
I appreciate you being a visionary, too.
Right
improve the world. I live in San Francisco, and a lot of us are very ecology-minded.
Sure.
A lot of urban dwellers like me, we do not have garages. Will there be a future Supercharging option in cities? Maybe by the time Gen 3 comes around, which would be more of a city-sized car, for parking on the street.
Will there be options for our demographic, or will we be out?
We've got to figure out some kind of good solution for that.
It's either going to have to be some kind of Supercharging station or hopefully cities put in the infrastructure for street-level charging, because I think that's the ideal thing because if you can just park where you'd normally park and plug it in, that's really convenient. Even if you have to go to a Supercharger and, say, wait 20 minutes or whatever the case may be, that's still way less convenient than just parking the car where you would normally park it and plugging it in. In fact, this is something that people, when they drive a Model S frequently, you notice it when you switch back to a gasoline car, that it's really annoying going to gas stations. You realize just how much gas stations suck. They're really horrible.
It's kind of hard to convince people, until they have that experience of having a car and then finding that they have to do this annoying thing, which is to go to a gas station, just how valuable it is to charge your car where you normally park it. I think we want to definitely get the ability to charge the car, get that infrastructure in cities, and to the degree that that isn't there, provide some kind of Supercharging solution that allows people to own the car in places like San Francisco or Manhattan or London. It's a relatively small percentage of total customers, but nonetheless, we do need to address it long term.
Thank you.
All right.
Hi, my name is Josh Merrill, and I'm a very proud shareholder. Last year-
Will you buy a car?
Oh, I wish. One day. Last year, I asked you about self-driving cars. This year, my question's a little more practical. Cars in the category of Model S tend to have this six-year refresh cycle. Sales tend
Yeah
to peak around year and a half, two years in. The Model S is a very different car. What's its life cycle? What's the life cycle of the Model S, and where could sales peak?
Well, in our case, because we don't have an existing service and sales infrastructure, I think the peak sales of the Model S will probably be in year three or four. It's going to take us a while to fully build out sales and service in North America, Asia, and Europe, as well as get the Model S to South America. We get a lot of complaints about the car not being in South Africa, for example. We want to make sure that the car is available worldwide, wherever people want it. That's going to take us at least three or four years to get that. I'd expect probably four years from now would be the peak sales of the Model S.
In terms of when there would be a significant redesign of the Model S, it is probably at the sixth or seventh year. As is typical, we would do sort of a mild refresh at the three or four-year point. Typically in halfway through the cycle, manufacturers will do a modest refresh, and I think we'll do something similar.
Thank you.
All right.
Hello, Mr. Musk.
Hey.
Wesley Kinsella, shareholder. My question relates to the Mercedes B-Class and all future possible Tesla-powered cars that don't wear the Tesla badge. It relates to the Supercharger network. I was wondering if it was opened up to those vehicles as a way of getting consumers to demand that if they are going to buy an EV, it will be Tesla-powered. Thank you.
Sure. Yeah, at Tesla, we're really open to other manufacturers wanting to use the Supercharger network. We'd have to ask for some compensation because effectively the cost of the Supercharger network is built into the price of the car, so there'd have to be some cost-sharing on that basis. I really want it to always to be the case that the Supercharger is free once you've bought the car, so we don't want to have this sort of pay every time you arrive thing. I think it's just so much easier if you just build it into the cost and you arrive, and you just never have to deal with anything. As long as another manufacturer's willing to take that same approach, at Tesla, we're more than happy to share the network.
I've seen some articles like, oh, is it Tesla's intention to create sort of a walled garden or something like that? That is not at all the case. This is not some nefarious marketing ploy. It is simply that we need to have high-speed charging in order to have convenient long-distance travel, and if we were to wait around for everyone to agree on the right approach, it would never happen. We have to just go out there and do it, and then other manufacturers can join us, or they could copy us, or maybe they could think of something better. Yeah.
Thank you.
All right.
Good afternoon. My name is George Crane. I'm a satisfied stockholder. The National Automobile Dealers Association and several state dealer associations have basically declared war on Tesla, they are fighting in state legislatures and in the courts-
Yeah
to try to hamstring our sales model.
It's really terrible. Yeah.
Your projections that you showed us earlier for the growth of galleries and showrooms and service centers, are those projections tempered by the opposition from NADA and the like, or-
Well, the Auto Dealer Association is definitely creating some problems for us, making it harder to get things done. The fundamental problem is the Auto Dealer Association, the auto dealers keep saying, "Oh, we should grant them a franchise," but then I ask, "Okay, can you give me some examples of companies that have granted franchise, like startup companies, where that's turned out to be successful?" It's like, didn't work for Fisker. Didn't work for Coda. Well, let's see. In the last 90 years, where did it work? There's no good examples. I feel like we have to do this directly. Also, our philosophy with respect to service is not to make a profit on service. I think that it's terrible to make a profit on service.
Unfortunately, the way that the Auto Dealer Association is set up is that they make most of their profit on service. This obviously would not be a good outcome. The challenge we face, of course, is that the auto dealers are very influential at the state level among the legislatures. I should point out very often, this is not like some small mom-and-pop operation. It's the giant auto dealers, the big national auto dealers, that are the biggest challenge here. Sometimes people think, oh, we're fighting some sort of small auto dealers in the state. No, we're fighting the giant ones that have the big money to spend, not the little ones. If you look at the opinion polls in any state or nationwide or anywhere, any opinion poll anywhere, in any context, as to whether people want direct sales, the answer is overwhelmingly yes.
North Carolina or Texas, obviously in California or nationwide, the percentage of people in favor of allowing Tesla to do direct sales varies from a low of 86% to 99%. In the case of the 86%, there was a concerted attempt by the auto dealers to get everyone they could to possibly vote against us. It still was 86% in favor. Clearly, if democracy was working properly and the legislators were implementing the will of the people, something else would be happening. There would not be legislation trying to artificially restrict direct sales. Right now, the Auto Dealers Association, they're crowing about the fact that they were able to defeat us in Texas and that they're making so much progress in North Carolina and stopping us in Virginia. I think it's outrageous that they would crow about a perversion of democracy. That's just wrong.
I think they're making a big mistake. I think what's actually going to happen is, customers are going to lead a revolt on this front because if I was in a customer's position, I would be like, if some organization was so happy about being able to spend lots of money and pervert democracy in a bad direction, I would fight really hard to sell that company's product. I think that is what's going to happen.
I'm Andre Crandall, and I'm a proud shareholder.
Thank you.
When you make the fifth generation of the Tesla that will cost around $30,000, will it still be the same body shape as the Model S?
With the third-generation vehicle, we expect it to be in family with the Model S. You'll see a sort of strong family resemblance. The short answer is yes. With that third generation, we want to try to think of some interesting things we can do that go beyond simply scaling down the Model S and scaling up volume. We haven't thought of anything really big right now. If we get lucky, maybe we can incorporate some of the Autopilot or self-driving elements into that vehicle, I don't know if we'll be able to do that in time. It could be something like that. Yeah. Thank you. All right.
Hi, Mr. Musk. My name is Dorian Ledger. I'm a small shareholder and a big fan. My question is about Supercharging stations. You mentioned that Supercharging technology is expected to advance. Is there any concern that with the rapid expansion of Supercharging stations across North America, we might be marrying Tesla and consumers to infrastructure that will need to change in the near future?
Yeah. Actually, we're going to upgrade the Supercharging technology over time. We have a relatively small deployment of Superchargers right now, but we're upgrading them from 90-kilowatt capability to 120 kilowatts. Something I mentioned kind of as a side comment in the Supercharger announcement is that we're also starting to do stationary storage. We have stationary battery packs at the Supercharging station. When you combine that with solar, you can actually charge the battery packs during the day with solar power, and through the week, and kind of build up energy in the stationary battery pack, and the cars can use that at will. That unlocks even more power potential. In the future, we could potentially go above 120 kilowatts, and yeah, without necessarily having to lose the investment in the hardware infrastructure that's there. It's more additive than replacing stuff.
The long-term goal, as I mentioned in the Supercharger announcement, was that even if there's like a zombie apocalypse or something, very popular in movies and TV shows, or even if civilization crumbled or something like that, the Tesla Supercharging stations would still be functional.
Thank you.
All right.
Hi, Mr. Musk. I'm Vicente Silvera. I'm a Model S owner. I bought my shares after buying the car.
Great
Because the car's so great. My question is, clearly you've done a fantastic job at going through the startup phase and surpassing all the initial risks. What do you see as the main risks for Tesla and for your stated goal of electrifying transportation between now and achieving that goal?
Sorry, electrifying transport, sorry.
Yeah. My question was, what do you see as the greatest risks ahead of you?
Okay
Between where you are and where you would really achieve your goal of electrifying transportation for all of us?
Sure. Well, I think the biggest single challenge for electric vehicles is affordability. Let's say hypothetically one could build the Model S for half the price that it currently costs. I think we would see extremely widespread adoption of the Model S. Then the other thing that has to be solved is long-distance travel. If those two things can be solved, I think that's it. That's what's needed for there to be a huge tipping point in the direction of electric cars. We're trying to advance that as fast as we can, and it does require a lot of engineering effort to design things for manufacturing. That's why the first cell phones were so expensive and had quite limited capability, but with successive generations, they kept getting better.
We're trying to make that happen in a much shorter period of time than it occurred with cell phones. I think it's a bit more of a challenging problem. It takes an enormous amount of engineering effort, but that engineering effort is really primarily aimed at improving the manufacturability and the affordability of the electric car and addressing the long-distance travel problem. I'm hopeful that we'll be there in three or four years. If that turns out to be the case, then I think that would be a really great thing.
Thank you.
All right.
Hi, my name is Simon. I'm a happy shareholder. I wish I would've bought more shares.
Thanks for buying shares.
My question is for the third-gen, I've heard the battery is one of the most expensive components. I want to know if new technology has to come out in order to get it to the $30,000-$40,000 price range or something else to get it down there.
Yeah. There's definitely a significant improvement in technology needed to have a compelling, affordable electric car. I think in order for it to be compelling, it has to have a useful range of at least 200 miles to be comparable to gasoline cars. We're working with companies like Panasonic and others on new cell electrochemistry that's really optimized for automotive use. I'd say I feel pretty optimistic that we can get there without any miracles occurring. The potential is there for breakthroughs in energy storage technology that go beyond what I'm highly confident will occur. In particular, we could see a breakthrough in an area in which I have some familiarity, which is ultracapacitors, or essentially a capacitor-based architecture. There's nothing that exists today that has the energy density that's in production.
Sometimes you'll see things that are announced, like there was fast charging of a cell phone or something. You can do very fast charging with a capacitor, but the range that you'll get or the energy density is still far too low. I'm increasingly optimistic that there will be a breakthrough on the energy density front. It's not anything that people are publicly aware of.
Thank you.
Okay.
Good afternoon, Mr. Musk. My name is Marjorie Zimmerman. I'm a delighted shareholder and hopefully soon a car owner, too. I would like to ask about the power content of the Supercharger stations, how the power will be generated for those. Will that be the same throughout, or will it be varied by location? I'm also wondering about how the company will cover the cost of the network long term. Another little side question, I will confess, I currently drive a Prius, which has a solar panel on the roof, which I love.
Sure.
I wondered if there's any projected future intent to include solar integrated into the car itself. Thank you.
Sure. Absolutely. Thanks. The plan is for almost all Supercharging stations to have solar power, so to essentially create a solar carport over all of the parking bays where the Supercharging occurs. Sometimes I've seen people do back of the envelope math where they say, "Oh, you can't generate the amount of power that you need from that surface area." The thing that they're not taking into account is that for most of the week, those bays are actually empty or mostly empty. The Supercharging bays really fill up on a Friday afternoon and evening and on a Sunday, because that's when people tend to do long-distance travel. We actually try to size the number of Supercharging bays, the number of connectors and Supercharging hardware for peak usage, which occurs quite rarely, or certainly is intended to occur quite rarely.
There are a few Supercharging stations where we need to really improve the number of bays very quickly, like the one in Gilroy. I would advise you to avoid Gilroy right now, at least during peak times. We're working to expand that as fast as possible. The intent is to generate more energy from solar power than the cars use in the course of a year. You're net positive in solar power generation at each Supercharging station. Now, there are some Supercharging stations which will be very far north. We have some in Norway that'll be right on the Arctic Circle. Obviously, there's not going to be a lot of sun there in winter, particularly. It's dark all the time. What we want to do there is to buy sustainable power, like, say, hydropower or something like that, or geothermal.
We want to have the whole Supercharger network be completely sustainably powered one way or another. We're going to make that happen. The ongoing cost of the Supercharger network, it's not super expensive to keep it going because there's that initial capital cost to establish something like solar power. If you're generating positive net power through the year, the power bill from the utility is negligible because you're only connecting basically for backup power or a trickle charge power. It's quite a low connection charge from the utility. We pay either zero rent or very tiny rent because we're essentially just creating a solar carport over existing parking spaces at highway rest stops. We're not building any new parking structure. We're getting priority, Model S's get priority, it really isn't any infringement on the highway rest stop operator.
In fact, it's a magnet for high-end customers. If you want more customers at your highway rest stop, this is a good thing. Our power usage is low, our rent is very low to zero. It's mostly a question of ongoing maintenance, it's a cost, it's also not super high. Our ongoing cost for maintaining the Supercharging network is way lower than any estimate that I've seen. People seem to be way overestimating the ongoing maintenance cost. It's mostly a capital cost of getting it established in the first place. For the solar power on the car, it almost always makes sense, in fact, I'd say verging on always makes sense to actually have the solar panel on your house or business, it's always generating power. It's at the right angle.
Whereas if it's on a car, sometimes that car can be parked in a parking garage or something like that. It's still cool, I think, to have a solar panel on the car, the cost per watt of that solar panel is a fair bit higher than if it was in a stationary application. That's why we haven't really pushed that as an option in the near term. I think it would be cool to have in the long term, I think we'll maybe try to have that in the long term. All right. Great. Thank you. Thanks.
Elon, we're about 20 minutes over time. I don't know how you're holding up. If I look at the queues here, we could go another hour or so.
Okay, let's go maybe another 10, 15 minutes. Pardon me? Oh, we've got a meeting at 5:00. All right. What's the time now? Not here. Yeah. I need to depart at 4:30 if I have a meeting at 5:00. As long as I depart at 4:30, that's cool.
Hello, Mr. Musk. I'm Moises Kasab. I'm a very big fan and very happy shareholder. I was wondering if there's any plans to have more presence in emerging markets like Mexico once Gen 3 rolls out, and if you're going to be keeping the direct-to-consumer model, since many companies like Apple that have very successful direct-to-consumer models are not selling direct to consumers in countries like Mexico.
Well, we definitely want to sell Tesla cars in Mexico and other countries. You should expect that we'll do that. I think the most likely outcome is we would go direct. I can't speak to what Apple's doing. Generally, it's not as though I'm actually hellbent on going direct, but whenever people have proposed that we give them an exclusive distributorship, they generally don't agree that that should come with some sales commitment. Which seems a bit silly. Okay, why would we do that? We'd only agree to an exclusive distributorship if there was a commitment to a certain sales volume. Otherwise, we've potentially cut ourselves off from the ability to sell cars in that region.
Is there a timeline or any idea where
I think we'll probably expand beyond North America, the EU, and China, and Japan sometime next year. Probably middle of next year or something like that.
Thanks.
All right.
Thank you, Mr. Musk. My name is Eric Gross. I'd like to thank you on behalf of today's shareholders like myself, and also for potentially leaving a much better planet for future generations. Two quick questions. Might there be any recoupment of revenue from ZEV credits or something like that in moving into Europe and Asia that would replace those credits that you apparently believe were going to be being phased out of through the remainder of this year? The second question I had was, might there be anything in the works to partner up with corporate entities in the hospitality industry, whereby we might put the solar stations at those places? They would make great overnight places to stop and charge your Tesla, and it would be a win for them and a win for Tesla.
Sure. We actually have worked with a few hotels to provide high-powered wall connectors, because you don't really need a Supercharger if it's going to be overnight. You can just do it with a 240 volt, 40 amp connection, or even a 20 amp connection is fine for overnight charging. I think we need to expand that program, but we do that to some degree. Sorry, what was the first part of your question?
ZEV.
ZEV. Sorry, ZEV. Absolutely. ZEV, since we expect probably two-thirds of our volume to be delivered outside the U.S., which does not have the ZEV credits outside the U.S., and only about half of our volume in the U.S. is ZEV credits, that means only about roughly one-sixth of our cars would have ZEV credits. Unfortunately, there's no program that we're aware of that is similar to the ZEV credits mandate. In fact, the ZEV credit mandate was really instituted for local air quality reasons as opposed to the CO2 global warming type of stuff. It was really to improve the quality of air that people breathe in L.A., and San Francisco, and New York. People sometimes forget that when you have a gasoline or diesel car, it's emitting really toxic gases.
In fact, if you were to breathe too much of that, you would die. It's like you can't turn the car on and be in your garage for very long. Obviously, while that effect is dilutive in a kind of an open setting, it still actually negatively affects people's health, and that's actually the reason that the ZEV credits were instituted quite some time ago. Unfortunately, it's only about half the U.S. population. I think it's 14 or 16 states or something like that covering about half the U.S. population, and I don't see that getting replaced in any way. All right.
My name's Pradeep Manik. I'm a shareholder and a son of a very jubilant car owner.
Great. Thanks.
He spends about an hour after work on the screen browsing the web. With that in mind, as the licensing deals go through, how do you propose in 5-7 years from now continuing to maintain and build the Tesla brand image in order to keep sales up over time?
I'm actually not the hugest believer in brand, or in marketing for that matter. There was some recent article about how I'm such a great marketer, I say the stupidest things. That can't possibly be true. My issue is that I don't have a filter, not that I have too much of a filter. I think the real way that brand happens is if you make good products, then people look at that product and say, "Well, okay, if the company can make that product, then maybe other things that that company makes will also be good." That's what brand is. It's real simple. When people look at the Model S, if they like that, then they'll say, "Okay, well, maybe the Model X will also be a good car, we'll buy that too." That's brand.
Not any more complicated than that, I think.
Thank you. That's what I wanted to hear.
All right.
Hi, Mr. Musk. My name is Tommy Gloppenberger. I would like to ask you whether you already mentioned supercapacitors, I would like to ask you whether you plan to combine batteries and supercapacitors in order to combine energy and power density in modules.
Yeah, that's a good question. Actually, in the beginning with Tesla, when we were designing the architecture, the energy storage architecture, I kept pushing for just exactly that, to say, "Shouldn't we have an ultracapacitor combined with a battery pack?" What we found was that if you have a big enough battery pack, you are not power limited. Capacitors are sort of good for power, battery's good for energy, even though you have a relatively poor power-to-energy ratio with a battery pack, when it's a big enough battery pack, it doesn't really matter. That's what we found.
Hi, I'm Lance Dunn. I'm a shareholder, I'm a Roadster owner, a future Model X owner.
See, power of brand right there.
My question is, how much does it cost to build one of these Supercharging stations, and why isn't it compatible for Roadster owners? Okay.
Yeah, sure.
My next question is, I put down 40,000 for the Model X instead of the 5,000-
Thank you
At that time, if I would've invested it in Tesla stock- Okay. I missed out on about $100,000.
Right.
Okay? Is there any way you can offer us shares- to compensate for that time? My 40,000's still gonna be 40,000.
Yeah, that's a tricky one. For the Supercharging stations, the reason that they don't support the Roadster is because in order to charge at a really high rate, what we built into the Model S was the ability to have a high voltage DC bypass direct to the pack. Now that involves some complicated electronics and some very big junction boxes and relays, because it's so much power that's moving through there. Through the same charge port, the car can actually either send AC power through the onboard chargers to the battery pack or send DC power direct to the battery pack. With the Roadster, we do not have a high power DC bypass. All current goes through the onboard charger, and so it can only take AC. The Roadster's not really intended as a long distance vehicle.
I love the Roadster, three hours in a Roadster is a long time. I think I mentioned the cost of the Supercharging stations is about $150,000 without solar, maybe $300,000 with solar on average. Some of them are more, some of them a little bit less. Yeah.
Thank you.
Thank you.
We only want 1,000 shares.
Seems like a good deal.
Good afternoon, Mr. Musk. My name is Cassius Jones, and I'm a shareholder. My question relates more broadly to the electric vehicle market. It's currently in a pretty nascent stage. As it matures, how do you see the competitive dynamics changing? I'm specifically interested in how you might balance your personal goal to see electric vehicle transportation flourish, while also doing your duties as the Tesla CEO and maximizing shareholder value.
Yeah, that's a tricky one. I actually think that the goals are reasonably well-aligned to bring electric cars en masse to the public, building shareholder value. At least, I think they're aligned in the long term. They may be not aligned in the short term maybe. I think the reason they're aligned is because in order for Tesla to make lots of electric cars and come out with new products. We have to generate more cash than we spend and generate enough more cash that we can afford to do future product developments. That means that we are going to have to be profitable, essentially, and certainly generate a lot of additional cash flow from existing products in order to pay for the development of future products. I think it's reasonably well-aligned.
Like I said, at least in terms of long-term shareholder value maximization, there are obviously things we could do which would have a short-term effect on the stock price, I think those would ultimately be disadvantageous in the long term.
Okay. I think we're going to have to have just this be the last question.
Sorry. Yeah.
Those waiting in line, please see me afterwards to try to help you out. Go ahead, please.
Thank you. My name is Alex Navasad. I am a shareholder. In fact, I quit my job in October. Thanks to Tesla, I'm still employed.
Wow
happily.
Okay.
I'm able to do what I want. Thank you. First, I'm here to represent Nashville, Tennessee, and like you said, I think the middle of the country has a lot of customers. I'm particularly from Franklin, which has a lot of affluent customers who are environmentally conscious.
Yeah.
I looked at roadmap. There is not any time soon to bring service center. Here I'm just to plead that please bring a service center and a store as soon as possible. I think it'd be really great for Tesla.
Yeah, I actually totally agree with that. The service center rollout that I mentioned was actually only applying to the next 6 months. Next year, we're going to have a lot more service centers and, like I said, I actually think there's a lot of potential in the middle of the country for Tesla sales. Much greater than people think if they just looked at Mercedes-Benz sale, or BMW or Audi or something like that. We're definitely going to take rapid action on that front. That's why we haven't published the service center opening schedule, but that's something that's going to change. On the website, we'll publish when we expect service centers to open, so people have some sense if they were to order a car for delivery in a certain time frame, that there'll be a service center available by that time.
Okay. This was just by the way. Well, first, if you need somebody to help, I'd love to help open a service center there.
Thanks.
Also, my main question is, I'm a motorcyclist and I love motorcycles, yet I don't like the noise pollution that associate a lot with the loud cars. My question to you is, Tesla planning to bring motorcycles? I think an electric motorcycle would be great, also regardless of your answer to that is, this is really insane, I've seen your interview where you said you went to Netscape once.
Yeah.
To be in their building just to get a job. I want to say I really want to work with you.
I was not successful, by the way.
I know. Just really want to work with you and is there any chance-
Okay
I can get five minutes of your time to explain? I have some ideas for a motorcycle and other products. Also a question, are you planning to bring a motorcycle as part of Tesla right now?
Well, I think it's very important for a company to focus. Right now, we're focused on the Model S and then, after that, the Model X. There is a company called Brammo that I think makes electric motorcycles, and I think some other companies as well that are doing electric motorcycles. There are electric motorcycles for sale, just not from Tesla. Yeah. As far as working at Tesla, I would certainly recommend applying through the website.
Done that.
I do support sort of hiring counterintuitive people who aren't necessarily from the car business or something like that. Yeah. Trying to figure out how to do this.
Thank you.
Yeah. What was your name again? Sorry.
Alex Navasad.
Okay.
I'm software engineer by specialty.
Okay.
I've been 10 years in software engineering, but I've done project management and other things and just I want to change the world.
I got it.
I'm just very passionate.
All right. Well, submit your info to the website. I'll ask human resources to take a close look.
Thank you.
All right.
Thank you.