Tesla, Inc. (TSLA)

AGM 2013

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Jun 4, 2013

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, so 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 Stellins from PricewaterhouseCoopers is here today. PricewaterhouseCoopers, as you probably know, is Tesla's independent auditor. There are two parts of today's meeting. 1st, we'll do the formal part and then and we'll cover 2 items that shareholders have been asked to vote on. Following completion of this, Ilan will provide a brief overview of the company. So 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 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 17 this year, the proxy materials or a notice of Internet availability, the proxy materials was provided or mailed to shareholders as of record of April 10, 2013. Copies of these proxy materials and related certificates will be attached to today's meeting. At least I think there's some more people right in the center. We have a majority of outstanding shares represented in this meeting, so 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 2 items on the agenda. They are first to elect 2 Class III directors, Brad and Ira, to serve for 3 year terms or until their respective successors are duly elected and qualified. And number 2, to ratify the appointment of PricewaterhouseCoopers as our independent registered public accounting forum for the year ended twelvethirty onethirteen. Anybody else need a balance? 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 2 people in the far back. So 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. Any additional balance? Lisa, do we have all the ballots? Thank you. As a point of clarification, Going into the meeting today, we had a 90% quorum that had already voted online. But we do appreciate your attendance and voting. Thank you. So 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 1 of these 2 stationary microphones. And please note, we do have a full house here. So if you can keep your Questions brief and to the point. We're going to try to adjourn around 4 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. And with that, please help me welcome Mr. Elon Musk. All right. Well, thanks everyone for coming and I'd like to thank you all for being shareholders in the company and for having the Sort of the faith to invest in Tesla. As always, I mean, 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. So this has been a great year. I think things have really gone pretty well. And I mean obviously it's a testament to the hard work of a lot of people at Tesla who put in crazy hours To achieve that, so I'd like to say just mention all of their efforts To get here because it was extremely difficult. And also there are many people that thought that Tesla would fail. Many of them unwisely chose to short our stock. I presume So those people are not here today. So yes, so I'll go right into the presentation. Forward looking, just that now. So yes, so The Model S is really a great car. We told people it would be a great car and it is. And that's been objectively confirmed by MotorTrend, who declared it to be card of the year, Automobile Magazine and then recently consumer reports actually gave the Model S the highest rating they've ever given to any car of any kind like I said ever. And they did give a 99 once before to Alexis about 6 years ago. But this is the only other car to get 99 in fact the only American car ever to get 99. And it should further be noted that the way that Consumer Reports works is that they buy a car at random. So they buy car at random, we don't know which car it is and then they drive the car for months and in every conceivable way. And amazingly they never broke down once. They must have been very lucky. So As people probably were, there were some not every bit of press was positive. There were A few things, a few articles there that weren't positive, but by and large it's been very positive. And so the reason we didn't get 100, Not to quibble. Was because the 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 so that was the reason we didn't get 100. So I'm wondering if we If we address those issues, whether that 100 is possible, I actually don't know. I've not asked them, But we will try to address those issues. So it's worth noting that we were the top selling electric car in Q1. In fact, if you add up All electric car revenue, we actually sold our revenue at Tesla was greater than all electric cars sold in the United States. So if you add up the No, obviously, I think what that means is we definitely need to try to bring a lower cost car to market. So hopefully in about 3 or 4 years we'll be able to do that. But it was a good quarter and certainly I mean good by any measure. And I think we've got a good foundation for success in the future. We've got we've developed a solid base of intellectual property. And even though I'm not the biggest fan of patents, we do have a lot of patents. And we've able to build up significant brands. There's a lot of awareness of Tesla. And that awareness is somewhat polarized. People tend to love us or hate us but they rarely are indifferent. But we have a lot of mindshare and that I think is valuable. We've got some great partners with Daimler, Toyota and Panasonic. In fact Daimler is here. Appreciate Daimler's support over the years. And then we've got the potential for a lot of future growth on the Model S platform, which because the Model X will be built on the Model S platform and then we potentially do some other products on that platform. And then 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. And that really has been my goal since the start of Tesla and I'm really looking forward to bringing that to market eventually. And then obviously we've got a great management team And we're in the I think in a solid position from a cash standpoint. So 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. And there could be sort of some natural disasters in some part of the world or a supplier that goes bankrupt something like that. 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. I mean even if your airplane is working well, flying at treetop level is a little dodgy. So I think that having that cash balance gives us a lot of risk assurance. And 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 here in North America and that's continuing into Q2. So we think we're going to have a pretty good Q2 that's comparable to Q1 on a unit volume basis on the same roughly the same. And then 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. And so obviously, we think we'll have pretty good demand in Europe as well. And then in the Q4, we'll start shipping to Asia. So if things go Really well assuming that they don't sort of take a turn for the bad, then I mean it would be reasonable to extrapolate the U. S. Demand by roughly a factor of 3. So 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. And then what we're seeing is that Yes. So I think global actually 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. So when the cars get delivered in market, The owners will show other people a car and give test drives and that kind of thing. And 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. That's really great. And it means that there's sort of a viral growth component to sales. So the more cars that we've delivered in a particular area, the better our sales tend to be. So that's a good sign. We're expanding our store and gallery presence quite a bit. So by the end of this year, we'll have increased our stores and galleries by 50%, So going from roughly 34 to 50. And yes, you can sort of see the map there. So quite a Significant expansion on the store and gallery front. And then it's actually an even bigger expansion on the service center side. So what we're seeing is that 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 a car be serviced. I mean is there a service center in their city or if it's a large metropolitan area in their region of the metropolitan area, so in places like The Bay Area or LA, you need to have multiple service centers, because sometimes it can take longer to drive from one side of LA to the other than it can be to fly to San Francisco. Yeah, I really need to do something about that 4 or 5. Yeah. So we're going to get the service centers out there and so our service center Count will almost double by the end of the year. And 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 centric 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 center expansion in that area. And I think so as 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. 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 a car 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 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 So by buying a Tesla, you essentially have free long distance travel throughout the country forever. And we're also improving the supercharging technology itself to cut the charge time in half. So previously, people were spending upwards of 40, 45 minutes with the supercharging technology. Now, a stop will only take you 20 to 22 minutes. So Tesla's supercharging system will allow you to do the ultimate road trip. You can travel across the country and just pack So one of the things we're using the capital that we raised for Raise is to increase the expansion of the supercharging stations. So we're Going to have triple the supercharging stations as I mentioned within about a month or 2 from the beginning of the year. And by the end of this year, you'll be able to travel from LA to New York, just using the supercharging network. And in fact, I'm planning to do a road trip with my kids from LA to New York at the end of the year, which should be an adventure. And you know, it's kind of like the Chevy Chase movies. So it could prove challenging, But I think it will be fun. And when I about 20 years ago, time is getting on, but when I was in college, I actually drove my car with actually with my brother and I drove from LA to Philadelphia, but we did we kind of did A tour where we went from LA to we actually started from the Bay Area, LA then Vegas and then Grand Canyon through the four corners of Pass in Colorado and then up through Wyoming, South Dakota, saw Mount Rushmore then drove across the Badlands to Chicago went to the Sears Tower and then drove to Philadelphia, that's sort of Libertyville and so we kind of do that again with my kids at the end of the year, make sure the supercharging system is working well. And but I think it's going to be pretty cool to be able to do And I think this is a key answer to the whole question of can you drive for long distances With electric car, we're going to show firsthand that you can. And something that didn't get Quite as much attention in the announcement because most people or most media focused on The geographic expansion of the supercharger network, but the technology itself improved quite a bit. So we went from a 90 kilowatt max charge rate to 120 kilowatts, but we're able to improve the point at which the charge tapers off 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 got to get sort of slow as you get to the top. And But we're able to improve the technology so the taper point is much later. So compared to initial sort of road test that people where people use the supercharge network, it will actually be about a halving of the charge time relative to what people's prior experience was. And yes, so we'd expect the typical stop time to be 20 to 25 minutes, maybe half an hour. And 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 and it will automatically route you to the nearest supercharger. And that's updated dynamically in real time. So as a new supercharger becomes available That's already that's updated immediately. And then 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. So you don't have to think about it, it'll just take it and it'll figure out the optimal route for the speed of your journey and you can obviously adjust it accordingly, but It'll say, okay, this is the best way to go to complete your journey in the shortest possible time. So I think it should work. We just wanted to be like you don't even need to think about it. You literally just type or you state you verbally state where you're going or type it in And the car just figures out everything else. So for the year, as mentioned in some in the quarterly Earnings call, we expect the total deliveries to be a little over 21,000 this year. And With the gross margin excluding ZEV credits or 0 emission vehicle credits of 25%. And then yes, so 50 stores roughly, but a little more service centers than that. And then 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. And the Model S does address some of the SUV market because it can do 5 adult plus 2 kids seating and it's got the trunk in the front. But so Model S is good for occasional sort of 7 person trips, but for If you got more frequent trips now or you want more room than the or you want to sort of have a higher seating position, the Model X is the path to go there. And there are 2 significant innovations with the Model X. 1 is the double hinged gull wing or what we call falcon wing door, which is able to open have a very big opening without the door arching out far. So 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. And now we're taking a bit of a chance with this door because it's something 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. And we're taking great care to ensure that it's Safe for people, so there's going to be like a pinch strip. So even if you stick your finger in or if your kid sticks finger at the last second, The door won't squash the finger because it's got a pinch strip. And then the door has got proximity sensors, so it won't hit anything. It will stop a few inches before hitting anything. So you don't have to worry about hitting the roof of your garage or anything like that. It just automatically senses proximity and stops. And then what that door enables is you can step directly to the 3rd row. So having direct 3rd row access even if you've got child seats in the 2nd row is very important. Normally you really can't get to that 3rd row if you've got kids seats in the 2nd row. And then you can actually stand up in the 2nd row. So I can actually stand up in the 2nd row. So if you're under about 6 foot 3, 6 foot 4, you can actually stand up in the 2nd row, which is great. So if you want to say you've got 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. And that's a lot easier than trying to cantilever a kid over into a baby seat or child seat. And then the other key thing here is the world's first dual motor all wheel drive in a production car. So there will be a second motor in the front that will allow for intelligent all wheel drive. So it will dynamically shift torque front to rear and it's able to do that at the millisecond level. So To the car, if you're at the millisecond level, the car looks almost stationary because it's like that's at every 1 thousandth of a second It's readjusting the torque from front to rear. And so you can like if you were to go over like an oil slick or some ice or something, The car would instantly shift torque to whichever wheels can handle the torque, and then ship 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. So the bottom line is it should give the best all wheel drive experience. Some of it's been like digital and analog. And then because the battery pack is in the floor plan, you have a very low center of gravity, which is unusual for an SUV class or an SUV type of vehicle. So it should have the lowest center of gravity of any SUV and as a result Extremely good handling. So we want to try to have something which has got the handling of a sports car with that also looks great and has but has more functionality than a minivan. So that's what we're aiming for with the Model X. And we're aiming to have the initial vehicles hit the market or get in customers' hands at the end of next year. So 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 3 phase charging capability. And we're working on the Asia Pacific version. There's a Chinese Pacific one and then one for the rest of Asia. And we're working hard on the Model X on right hand drive and on all wheel drive. So and then in the 2016, 2017 and probably end of 2016, I would say is the 3rd generation vehicle or the vehicle that's a smaller in lot of ways a smaller version of the Model S at about half the price. All right. So let's jump into Q and 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. 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 adding 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 2 schools of thought on this. I think something that might I mean 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 is walking. So 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. We'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 Smoak. I am a shareholder. And I note that 2 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 There's 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 and that was due to the retirement or the retirement The responsibilities of the Daimler Board member, but then Daimler sort of named Mr. Kroger over there. He had passed gave a better explanation. But that's essentially was due to the retirement of the Daimler Board member within Daimler. And so Daimler then Appointed somebody else. Right. I'm not sure who the other person is you're referring to. Doctor. Koller and Al Taramaki. Oh, Adria. Yeah, so that the Abu Dhabi actually sold their stake in Tesla. Actually, What happened before that was the Abu Dhabi ownership of Tesla like maybe 7% of Tesla Transition from the Abu Dhabi Water and Electricity Authority to Taka, which is their kind of their investment arm. And so The person that was representing Abu Dhabi Water and Electricity Authority then resigned. And There wasn't really and at some point after that, Tucker separately decided to sell their Tesla stake, I think at about $34 Maybe not wise. And I did urge them to not do that, but That they decided they want to do that anyway. So I think there's the forward's primary responsibility is to represent the interest of the shareholders. And So since they're not no longer a shareholder, it didn't make sense to have them have Board representation. Thank you. Hi, my name is Rahul Sanath and I'm a shareholder. And fantastic job on executing on all the milestones this year. I wanted to get a quick update On one more kind of goal you mentioned that a South Buy earlier. Are you having fun yet? I'm having a lot more fun these days. My year's resolution was actually to have more fun this year. And although the prior years were certainly ones of great achievements, They're very enjoyable in recollection But we're extremely stressful at the time. So I do think there's a steady improvement on the enjoyment factor. Thanks for asking. 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, you're doing a great job with your working capital management and like the only I'm worried about the whole cash flow. I'm not worried and you guys are doing a great job. Is your net working capital going to be real low relative to revenue despite the growth in revenue? No, I think we'll be in great shape from a cash standpoint. We have 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. So That gives us the ability to even if we basically suck at cash management, we'll do okay. But we don't want to suck, but even if we do, we'll still be okay. The other question, and then I don't mean to make this kind of comparison, but portion is 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. And as we build up more production capacity, we have to spend more on capital expenditures and we're also doing things like the supercharger network and stuff. So I would expect our capital expenditures to be a fair bit higher than Porsche for some time to come. That said, on a separate metric of gross margin, I do 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 3rd generation vehicle, which is primarily Cost optimization, I think we may the right move there maybe to actually it probably is in my opinion to aim for a smaller gross margin on Vehicle. On the other hand, we will have a much higher volume over which to divide fixed costs. So I mean, I think it's still going to be net profitable, but I would not try to I think strategically, I think I would Care more. I'd rather sell a car for less in that case than necessarily try to get the highest gross margin. Thank you. Yes. Hi, Mr. Mosk. My name is Kevin Wang. I'm a shareholder. Actually, first of all, was it is it your brother outside? I think I saw him earlier when I was outside. So I have three quick questions. First of all, you talk about the Model S owner are the best of people. So is there a plan for The incentive plan, if not, I have a suggestion. Actually, I'd like to hear a suggestion. But There currently isn't an incentive plan, although arguably there should be. But yes, so what do you suggest? I would suggest that for every car that an owner sell, Give 1 year free service. Okay. So first thing I did. All right. Okay. All right. Okay. Second question, and yes, I'm going to get my Model S On 18th. Okay. Okay. So I'm going to sell as hell. Thank you. So my second question is that you tweet about On the Twitter, you tweet about that actually it may take less time to charge Model S than filling a full tank of gas. So, is the recent announcement that it's 28 minute charge, that's it? Or is there even more? That is not it. I would say you should I mentioned that there will be an announcement on June 20, in fact not an announcement But a demonstration. Wow, okay. Now third question. Live demonstration. Okay. 3rd question, I also had my Model X reservation. And so about the Falcon Wing, Have you considered like if there's snow and rain and the ski on the roof things? Yes. The door will actually shield you from snow and rain. So you'll actually be okay on that front. And we do have water channels for the water to flow off the door and around the entrance. Now 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, but it shouldn't be too bad. I mean 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. And so 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. So we do need to have a good solution on that front. Okay, great. Thanks a lot. Thanks. Hi, Mr. Musk. Mark Olson, very happy shareholder and I appreciate you building such a A car on so many levels. Well, thanks for buying 1. And for I didn't buy 1. Oh. I couldn't buy 1. What? Not yet. Oh, Okay. But I appreciate you being a visionary too and trying to improve the world. And a lot of us are very ecology minded. Sure. But a lot of urban dwellers like me, We do not have garages. So 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? Well, we got to figure out some kind of good solution for that. So it's either going to have to be some kind of supercharging station or I mean 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. But 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 Model S frequently, you notice it when you switch Back to a gasoline car that is really annoying going to gas stations. And you realize just how much gas stations Suck, they're really horrible. So 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. So I think we want to definitely get the ability to charge the car, get that infrastructure in in cities And to agree that that isn't there provide some kind of supercharging solution that allows people to own the car in places like 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. Hi. My name is Josh Merrill and I'm a very proud shareholder. Do you buy a car? I wish, one day. Last year I asked you about self driving cars. This year my question is a little more practical. Cars in the category of Model S tend to have kind of the 6 year refresh cycle. Sales tend to peak around year and a half, 2 years in. Now 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 3 or 4 because 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 got a lot of complaints about the car not being in South Africa for example. So we want to make sure that the car is available worldwide wherever people want it. And that's going to take us at least 3 or 4 years to get that. So I'd expect Probably 4 years from now would be like the peak sales of the Model S. And then in terms of when there would be a significant redesign of the Model S, It is probably at the 6th or 7th year. And as is typical, we would do Sort of a mild refresh at the 3 or 4 year point. So typically in the halfway through the cycle, people would cut manufacturers will do Kind of a modest refresh. And I think we'll do something similar. Thank you. Hello, Mr. Musk, Mr. Mosk, Mr. Mosk, Mr. Mosk, shareholder. My question relates to the Mercedes B Class and all future possible Tesla powered car Don't wear the Tesla badge. It relates to the supercharger network. I was wondering if it's 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. Yes. So 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 have to be some cost sharing on that basis. And I really want it always to be the case that the supercharger is free once you've bought the car. So it wouldn't have 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 Fold it into the cost and you arrive and you just never have to deal with anything. So as long as other manufacturers Willing to take that same approach at Tesla, we're more than happy to share the network. It's not I've seen some articles like, Is it Tesla's intention to create sort of a walled garden or something like that? And 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 Agree on the right approach, it would never happen. So we have to just go out there and do it. And then people can Other manufacturers can join us or they could copy us or they can maybe think of something better. Good afternoon. My name is George Kranin. I'm a satisfied stockholder. The National Automobile Dealers Association and several state dealer associations Have basically declared war on Tesla and they are fighting in state legislatures and in the courts Yes. To try to hamstring our sales model. It's really terrible. Your projections that you showed us earlier for the growth of galleries and showrooms and service centers, Was that those projections tempered by the opposition from NADA and the like or Well, it is a the Order Dealers Association is definitely Creating some problems for us making it harder to get things done. I mean the fundamental problem is the order dealers Association or like I mean the order just keeps saying, oh, we should grant them a franchise. But then I ask, okay, can you give me some examples 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. I mean, in the last 90 years, when did it work? And there's no good examples. And So I feel like we have to do this directly. And 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. And unfortunately, the way that the Auto Deal Association is set up is that they make most of their profit on service. So this obviously would not be a good outcome. Now the challenge we face of course is that the Order dealers are very strong, have very influential at the state level among the legislatures. And I should point out very often this is not just it's not like some small mom and pop operation. It's giant order dealers that are the the big national order 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. And so but if you look at the opinion poll If you look at the opinion polls in any states or nationwide or anywhere, any opinion poll of Anywhere in any context as to whether people want direct sales, the answer is overwhelmingly yes. So in 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%. And in the case of the 86, there was a concerted attempt by the auto dealers to get everyone they could to We are about against it. And the store was 80% 86% in favor. So clearly, If democracy was working properly and the legislators were implementing the will of the people, Something else would be happening. And there would not be legislation trying to artificially restrict Direct sales, right now the Water Dealers Association is mean they're crowing about the fact that they were able to defeat us in Texas and that they're getting they're making so much progress in North Carolina and stopping us in Virginia. And it's like I think it's outrageous that they would crow about a version of democracy, that's just wrong. So I think Yes, I think they're making a big mistake. And I think what's actually going to happen is I think customers are going to lead a revolt on this front because I mean if I was in a customer's position I'd be Some organization was so happy about able to spend lots of money and promote democracy in a bad direction, I would fight really hard to sell that company's product. And I think that is what's going to happen. I'm Andre Crandall, and I'm a proud shareholder. When you make the 5th generation of the Tesla that will cost around $30,000 Will you still will it still be the same body shape as the Tesla S? So with the 3rd generation vehicle, we expect it to be in family with the Model S. So you'll see like a sort of strong family resemblance. So the short answer is yes. And so but with that 3rd 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. I mean it's we get lucky, Maybe we can incorporate some of the autopilot or self driving elements into that vehicle. But I don't know if we'll if that will If we'll be able to do that in time, but it could be something like that. Yes, but yes. Thank you. Hi, Mr. Musk. My name is Dorian Leger. 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 test line consumers to Infrastructure that will need to change in the near future? Yes, actually we're going to upgrade the supercharging technology over time. So I mean even I mean we have relatively small deployment superchargers right now, but we're upgrading them from 90 kilowatt capability to 120 kilowatt. And then something I mentioned kind of as a side comment in the supercharger announcement is that we're also starting to do stationary storage. So we have stationary battery packs at the supercharging station. And then when you combine that with solar, you can actually charge the battery packs during the day with solar power through the week And kind of pull up energy in the stationary battery pack and then the cars can use that at will. And that unlocks even more Power potential in the future we could potentially go above 120 kilowatts. And Yes. And without necessarily having to lose the investment in the hardware infrastructure that's there, So it's more additive than replacing stuff. And the long term goal, As I mentioned the Supercharger announcement was that even if there's like a zombie apocalypse or something very, very popular in movies and TV shows that even if like civilization crumbled or something like that the Tesla supercharging stations would still be functional. Thank you. All right. Hi, Mr. Musk. I'm Vicente Silvira. I'm a Model S owner. I bought my shares after buying the car. The car is so great. So my question is that clearly you've done a fantastic job at going through the startup phase and Surprising all the initial risks and what do you see as the main risks for Tesla and for your stated goal of electrifying transportation between Now in achieving that goal. Sorry, electrifying transport, sorry. Yes. So my question was, what do you see as the greatest risk ahead of you 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. I might say hypothetically one could build the Model S for half the price that it's currently costs. I think we would see extremely widespread adoption of the Model S. And then the other thing that has to be solved is long distance travel. So if those two things can be solved, I think it's That's it. That's what's needed for there to be a huge tipping point in the direction of electric cars. So 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. And that's why like the first cell phones were so expensive and had quite limited capability, but with successive generations that kept getting better. And we're trying to make that happen in a much shorter period of time than it occurred with cell phones. And I think it's more of a challenging problem. So it takes an enormous amount of engineering effort, but that's 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 mean, I'm hopeful that we'll be there in 3 or 4 years. And if that turns out to be the case, then I think that would be a really, really great thing. Thank you. Hi, my name is Simon. I'm a happy shareholder. I wish I would have bought more shares. Except my shares. My question is for the 3rd gen. I've heard the battery is one of the most expensive components and I want to know if new technology has to come out in order to get it to the $30,000 to $40,000 price range or something else to get it down there? Yes, there's definitely a significant improvement in technology needed to have A compelling affordable electric car. So 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. And so we're working with Companies like Panasonic and others on new cell electrochemistry That's really optimized for automotive use. And I mean, I'd say I feel pretty optimistic that So we can get there without any Merkel's occurring. And 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 which I have some familiarity, which is ultracapacitors Essentially a capacitor based architecture, there's nothing that exists Today that has the energy density that's in production. So sometimes you'll see things that are announced like there was a fast charging of like a cell phone or something. And 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. But I'm increasingly optimistic that there will be a breakthrough on the energy density front, But it's not anything that people are publicly aware of. Thank you. Good afternoon, Mr. Musk. My name is Marjorie Zimmerman. I'm a delighted shareholder and hopefully soon a car owner I would like to ask about the power content of the super Charger stations, how the power will be generated for those? Will that be the same throughout or will it be vary by location? I'm also wondering about how the company will cover the cost of the network long term. And another little side question. I will confess I currently drive a Prius which has a solar panel on the roof, which I love. And I wondered if there's any projected future intent to include Solar integrated into the car itself? Sure. Absolutely. Thanks. The plan is for almost all supercharging stations to have solar power, so to have essentially create a solar carport over all of the parking bays where the supercharging occurs. And sometimes I've seen people do kind of back of the envelope where they say, oh, you can't generate the amount of power that you need from that service area. But the thing that they're not taking into account is that For most of the time those bays most of the week those bays are actually empty or mostly empty, but the supercharging bays really fill up On kind of like a Friday afternoon and evening and on a Sunday because that's when people tend to do long distance travel. So we actually Try to size the supercharging the number of supercharging bays, the number of connectors and supercharging hardware For peak usage, which occurs quite rarely or certainly isn't intended So it could 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 for at least during peak times. But we're working to expand that as fast as possible. So the intent is to Generate more energy from solar power than the cars use in the course of the year. So you're net positive in solar power generation at each supercharging station. And now there are some supercharging stations which will be very far north, like we have some in Norway that will be Like right on the Arctic Circle. So obviously there's not going to be a lot of sun there in winter particularly, Start all the time. So what we want to do there for in terms of it is to buy sustainable power. So by Like say hydro power or something like that or geothermal. So we want to have the whole supercharger network be completely sustainably powered one way or another. So that's we're going to make that happen. And then for the car itself and then the ongoing cost The supercharger network, it's relatively it's not super expensive to keep it Going because there's that initial capital cost to establish something like super solar power, then if you're generating positive net power through the year then the power From the utility is negligible because you're only connecting basically for backup power or kind of a trickle charge power. So it's quite a low connection charge from the utility. And we pay either 0 rent or very tiny rent Because we're essentially just creating a solar carport over existing parking spaces at highway rest stops. So we're not Building any new parking structure is just we're kind of give we're getting priority, so Model Ss get priority. But it really isn't any infringement on the highway rest stop operator. In fact, it's a magnet for high end customers. So if you want more customers at your high risk top, then this is a good thing. So our power usage is low, our Rent is very low to 0. Then it's mostly a question of ongoing maintenance, which is It's a cost, but it's also not super high. So our ongoing cost for maintaining supercharger network, it is Way lower than any estimate that I've seen. People seem to be way overestimating the ongoing maintenance costs. It's mostly a capital cost of getting it established in the 1st place. And Then for the solar power on the car, it almost always makes sense. In fact, I'd say, yeah. The bridging on always makes sense to actually have the solar panel on your house or business because then it's always generating power, it's at the right angle, whereas if it's on a car, some of 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. But the cost per watt of that solar panel is a fair bit higher than if it was in a stationary application. So that's why we haven't really pushed that as an option in the near term. But I think it would be cool to have in the long term. So I think we'll maybe try to have that in the long term. All right. Great. Thank you. Elon, we're about 20 minutes over time. I don't know how you're holding up. I look at the queues here, we could go another hour or so. It feels like maybe another 10, 15 minutes and then We've got a meeting at 5. All right. What's the time now? Afternoon. Yes. I need to depart at 4:30, if I have a meeting at 5. So 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. And 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. So we 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 is doing. But generally, like when it's not as though I'm actually help answering going direct, but whenever People have proposed proposed that we give them an exclusive distributorship. They don't They generally don't agree that that should come with some sales commitment, which seems a bit silly. So like, okay, why would we do that? We'd only agreed 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. And is there a time line or any idea where? Well, 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. Thank you, Mr. Muska. My name is Eric Gross. I'd like to thank you on behalf of Today's shareholders like myself and also for potentially being 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 we're going to be being phased out of through the remainder of this year? And then 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 that 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. So We actually have worked with a few hotels to provide high powered wall connectors because generally a supercharger if it's going to be overnight. You can just do it with like a 2 40 volt kind of 40 amp connection or even a 20 amp connection is fine for overnight charging. So I think we need to expand that program, but we do do that to some degree. And sorry, what was the first part of your question? ZEV, absolutely. So ZEV, since we would expect we expect, yeah, Probably 2 thirds of our volume to be delivered outside the U. S. Which is not does not have the nozzievia credits outside the U. S. And only about half of our volume in the U. S. Is ZEV credits. That means only about roughly 1 sixth of our cars would have ZEV credits. Unfortunately, there's no program that we're aware of that is similar to the ZEV credit mandate. And In fact, the Zipcarimetic is mostly about was really instituted for local air quality reasons As opposed to sort of the CO2 global warming type of stuff, it was really because improve the quality of air that people breathe in LA and San Francisco and New York. Because people don't forget that like when you have a gasoline or diesel car, it's emitting really toxic gases. In fact, if you were to run, I mean, if you were to breathe too much of that, you'd die. So it's like you can't like Turn the car on and be in your garage for very long. So And 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. But unfortunately it's only about Half the U. S. Population no, half I think 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? My name is Pratik Ramanik. I'm a Shareholder and a sign of a very jubilant car owner. Great. Thanks. He spends about an hour after work on the screen With that in mind, in the next as the licensing deals go through, how do you propose in 5 to 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. And like there was some recent article about how I'm such a great marketer. And like I say the stupidest things that cannot possibly be true. My issue is that I don't have a filter, not that I have too much of a filter. So I think the real way that brand happens is if you make good products. And then people look at that product and say, wow, okay, if a company can make that product then maybe other things that that company makes will also be good. And that's what brand is. It's real simple. So when people look at the Model S if they like that then they'll say okay Maybe the Model X will be also be a good car and so we'll buy that too. That's brand. Not any more complicated than that I think. You. That's what I wanted to hear. Mr. Mosk, my name is Thomas Lowenberger. 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? Yes, that's a good question. Actually, That was 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. But what we found was that if you have a big enough battery pack, You are not power limited. And capacitors are sort of good for power, battery is good for energy. But and so even though you have A relatively poor power to energy ratio with a battery pack. When it's big enough battery pack doesn't really matter. So that's what we found. Hi, I'm Lance Dunn. I'm a shareholder. I'm a Roadster owner and 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. And my next question is, I put down $40,000 for the Model X Instead of the $5,000 and at that time if I would have invested it in Tesla stock, okay, I missed out on about $100,000 Okay. So is there any way you can offer us shares to compensate for that time, My 40,000 is still going to be 40,000. Yeah, that's a tricky one. So For the supercharging stations, the reason that they don't support the Roadster It's 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. And the now that involves Some complicated electronics and some very big junction boxes and relays because there's so much power that's moving through there. So through the same charge port, the car can actually either send AC power through Through the onboard charges 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, it's all current goes through the onboard charger And so it can only take AC. And the Roadster is not really intended as a long distance vehicle. It's I love the Roadster, but 3 hours in a Roadster is a long time. So Yes. And then I think you mentioned the cost of the supercharging stations is about 150,000 Without solar or maybe 300 with solar, on average, some of them are more, some of them a little bit less. We only won 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? And I'm specifically interested in 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. Yes, that's a tricky one. I mean, I think I actually think that the goals are reasonably well aligned to bring electric cars en masse To the public and Bullying shareholder value, at least I think they're aligned in the long term. They may be not aligned in the short term maybe. But 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. So 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. So 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, but 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, yes. Those waiting in line, please see me afterwards to try to help you out. And so go ahead, please. My name is Alex Nolasad, and I am a shareholder. In fact, I quit my job in October. And thanks to Tesla, am still employed happily. Okay. I'm able to do what I want. So 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. Yes. I looked at roadmap. There is not Anytime soon to bring service center. So 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. Yes, I actually totally agree with that. The service center rollout was really just that I mentioned was actually only like applying to the next 6 months. So Next year we're going to have a lot more service centers and I said I really agree with 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 like Mercedes So or BMW or Audi or something like that. And so we're definitely going to take Rapid action on that front. And that's why we haven't published the service center kind of 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 that in a certain time frame that there will be a service center available by that time. Okay. This was just, by the way, my main question. Well, first, if you need somebody to help, I'd love to help open a service center there. Thanks. But also, my main question is, I'm a motorcyclist and I love motorcycles, Yes, I don't like the noise pollution that associate a lot with the loud cars. So my question to you is Tesla planning to bring motorcycles? I think an electric motorcycle would be great. But also regardless of the answer to that is, and this is really Insane. But I've seen your interview where you said you went to Netscape once, to their building just to get a job. So I want to say I really want to work with you. I was not successful, by the way. I know. But just really want to work with you. And Okay. Do you have any chance of your time to explain? I have some ideas on motorcycle and other products there. But 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. So 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. So there are electric motorcycles of sale just not from Tesla. And Yeah. So as far as working at Tesla, I would certainly recommend applying through the website. But I mean, I do support sort of hiring counterintuitive people who aren't necessarily from the car business or something like that. So, yes, Yes. What was your name again, sorry? Alex. Alex Novosat. Okay. And I'm software engineer by specialty. I've been 10 years in software engineering. But I do I've done project management and other things. I'm just I want to change the model. I got it. I'm just very passionate. All right. Well, submit your info to the website And I'll ask human resources to take a close look. Thank you. All right.