AGM 2012

Jun 6, 2012

Welcome to Tesla Motors 2012 Annual Meeting. Very much appreciate everyone joining us today. I know some of you have traveled for a long distance. We're very much glad to have you here with us today. I'm Eric Whitaker, Tesla's General Counsel and Secretary. I'd like to get started by calling the annual meeting to order had to introduce our Co Founder, CEO and Chief Product Architect, Elon Musk. We also have a number of executives with us in the audience Deepak Ahuja, our Chief Financial Officer Jeff Evenson, our Head of Investor Relations Javed John, who's Head of Technical IT. We've got the members of our Board here today like Steve Jurvinson, Ira Ehrenpreis. I see Kimbal Musk and Antonio Gracias coming in as well. So thanks, everyone, for joining. I'd also like to introduce Steve Sullins of PricewaterhouseCoopers, who is our lead auditor here with us today. There are 2 parts to today's meeting. 1st, we will conduct a formal part of the meeting where we will cover the 2 items that stockholders have been asked to vote upon. Then Elon will provide a brief overview of the company, followed by a question and answer period. Before we turn to the formal agenda, I'd like to announce that the polls are now open. If you haven't voted or would like to change your vote, please do so now. Please raise your hand and a ballot will be brought to you by Computershare who's sitting over here. While we collect those ballots, I would like to ask that everyone review the rules of the meeting that were provided at the entrance. During the question and answer session, if you would like to ask a question, please raise your hand and wait until you are recognized. Please identify yourself as a stockholder or as a representative of a stockholder, then go ahead and ask your question. Thank you very much for your cooperation. We appreciate it. Our meeting today will follow the agenda provided to you. Tesla's Board of Directors has appointed Lisa Brenton of Computershare Investor Services to serve as our Inspector of Election for this year's Annual Meeting and Lisa is handing out the ballots right now. Lisa has taken and signed an oath as Inspector of Election. This document will be filed with the minutes of today's meeting. Computershare Investor Services has certified that starting on April 13, 2012, the proxy materials or a notice of availability of the proxy materials were mailed to all shareholders of record as of April 9, 2012. Copies of these proxy materials and related certificates will be attached to the minutes of today's meeting. I've also been advised by the Inspector of Elections that we have a majority of the outstanding shares represented here at the meeting today. So I declare that there is a quorum present and we may proceed with the business of the meeting. We are conducting the meeting in accordance with the company's bylaws. We have two items on the agenda. They are first to elect the 2 Class II Directors, Antonio Gracias and Kimball Musk, to serve for a term of 3 years or until their respective successors are duly elected and qualified. And second, to ratify the appointment of PricewaterhouseCoopers LLP as Tesla's independent registered public accounting firm for the fiscal year ended December 31, 2012. Are there any proxies remaining in the audience that have not been submitted? I know some of you asked for a ballot, so like to get those turned in. All the ballots have been turned in. Are there any others? One more here and over there. Lisa, you have them all? Great. Thank you very much. The polls are now closed and all the measures have passed. That concludes the official business of today's meeting. I declare that the formal part of today's meeting is hereby adjourned. Now welcome you to stay for Elon's presentation. And during the course of this presentation, we may discuss our business outlook and make forward looking statements. Such statements are only predictions based on management's current expectations. Actual events or results could differ materially due to a number of risks and uncertainties, including those mentioned on our most recent 10 Q filed with the SEC. Such forward looking statements represent our views only as of today and should not be relied upon after today. We also disclaim any obligation to update these forward looking statements. And with that, I give you what you all really been waiting for, Mr. Elon Musk. Is right before you. Thanks for coming. And so Something I believe in doing at every shareholder meeting is saying thank you for being a shareholder. I really appreciate your faith in Tesla. And Yes, we will not disappoint you. So we're really excited to announce that we've delivered the first two production cars, one to the first to Steve Trevinson, who's sitting right there, and there's cars outside, And then my car on Saturday. So Steve got his on Friday, and I got mine on Saturday, And which essentially means we've satisfied all of the regulatory requirements and the car is completely able to be sold as a normal production car. The reason the first two cars are going to Steve and myself is so that we can spend a few weeks just going through the in detail and experiencing any tiny issues ourselves before regular customers experience them. I think it's really important to thoroughly test your own product and be extremely tough on it before giving it to general customers. So I actually spent most of Saturday Sunday just The Tesla team going over every detail of the product, going through the interior, exterior, everything. And Most of the issues I mean, there are hundreds of issues identified, but and most of these, I think hardly anyone would notice. But we want to have a product that even if you were a complete perfectionist and you were looking in all sorts of places that people never really look that it's right. It's in those places too, that there's not some little corner or little tucked away a place that isn't right. We want every aspect of that car to be as perfect as possible. So things have gone really well on achieving the benchmarks that we're looking for. So in terms of safety, our goal was to achieve a 5 star crash rating, which we believe we've done. In fact, if there were a 6 star, I think we would get a 6 star. It doesn't we're kind of saturated on the ratings. And the reason for that is if you break down crashes into different categories, you have Front crash, which is responsible for the super majority of all fatal collisions of frontal impacts. We have a real advantage because we don't have this huge steel engine block in the front. As a result, We have a much longer crumple zone. So it's crumple zone that's 2 to 3 times longer than it would be in a normal sedan. Because sometimes people think, oh, I've got this big engine in front of me, And that's protecting me. Well, not really, because in a really high speed impact, you've got to have a certain compression. And at some point, that engine is going to go through your chest. So that's not good. And so having that longer distance is really important for high speed impacts. And it's perhaps not well appreciated, but it's really important. It's like if you were to jump out of a 5 story window, do you want to jump into a shallow pool or a deep one? That's basically what it amounts to. And for most cars, it's like jumping agree what it amounts to. And for most cars, it's like jumping into a kiddie pool, but in our case, much, much deeper. And then with respect To the side impacts, we've designed a really strong structure to go along the side. It's kind of have an extruded lattice structure. And if you look at the side sill of the Model S, you'll see it's a little wider than a normal And that's to resist the side impacts. And so we have the lowest side pole intrusion of any according to the regulations. So the regulations will say, for example, that you have to if you do a side pole test, it's got to be at this location. But the problem is that that allows companies to game the system and say, Okay, we're going to strengthen it just at that location. So we did those tests, but then we said, Okay, what is the location. Let's do a side pole crash at that location and make sure that is good, too. So Really good on side pull. And then for rear collisions, Because we have a 3rd row seat, I want to be really careful about that. And I'll have my kids and then my friends' kids will be in there. And the regulations around rear collisions are really quite low. And for other cars with a 3rd road situation, they're typically designed to Full rear impact at around 30 to 35 miles an hour. And we actually are designing to have an impact at over 50 miles an hour through highway speed and being able to absorb that impact on only half of the car. As you can imagine yourself, if you're sort of stuck on the side of a highway or something and a car hits, it's not going to be a full it's not going to hit you full on. It's going to hit you on half of the rear and you want to be able to resist that impact and drive into the crumple zone of the impacting car to ensure that if there's anyone in the 3rd row or in the 2nd row, that they are protected as much as possible. And so we did all those tests effectively, at a crash energy level, about 4 or 5 times greater than what the regulations allow, which is quite a tricky thing have to do, but we're able to get that done. And then the roll cage of the car is also designed to be able to handle are about 4 times the mass of the car if you roll over. So the car can really just tumble and you don't get a collapse of the roof structure. And those are that really encompasses the safety side of things. Apologies if that was a little bit laborious, but I thought it was worth making that explanation because if you look at it one car to the next, you can't really tell. It's not super obvious that one is better. But this is really, I think, by far the safest car on the road. And then in terms of reliability, we're doing Extensive testing where before the significant customers have the car we've put millions of miles On the car effectively, with accelerated live testing, we've got what we call all these shake and bake systems where The car is literally being shaken heavily. And it's in a chamber that is being cycled to Extremely low temperatures and high temperatures. It's going through salt fog. It's going through really everything to make sure that under Any circumstances, the worst situations you can imagine, the car never lets you down. So if you're in the middle If it's midnight in a Norwegian winter or it's the hottest day in Death Valley, the car still works and worked well. And then, obviously, we want it to be beautiful, and that speaks for itself. And we're going to continue to tweak small elements of the aesthetics because Although it's a great car, we want it to be as perfect as possible, so we're going to continue to refine just little elements here and there. And it's very economical. So this is perhaps important because although we've set the Model S to be at a price point which is comparable to other premium sedans, That doesn't take into account the cost savings to be gained from using electricity versus gasoline. So the Model S costs about a tenth as much to run as if you bought gasoline, Roughly on that quarter. Anyway, move on a little bit. So you're seeing body parts being stamped So what this is perhaps helping to illustrate is that at Tesla, we're really creating 2 machines. 1 is the Model S itself But I should say that the 2 work hand in hand Because in order to create a product with revolutionary technology, you need to have a revolutionary factory to create that thing because it's not made in the way that other things are made. I mean, there's similarities in course paint being one of them. But this is the only all aluminum car made in North America. And the way that we the way the car is architected with the battery pack and the floor pan and the motor and transmission of power electronics coaxial with the rear There's no other car that's like that in the world. So what you saw at the end there was the test track for the Model S. So we actually test every car over a wide range of road conditions before it is given So we don't do statistical testing. We do literal testing where every car is tested. Our aspiration It's not to have a low defect rate. It is to have no defect rate. And so Interest in the car has been good, particularly given that most of well, very few people have actually test driven the car. I mean, only a handful of people within the company have test driven the car. So the order so far without a test drive, some people have had an opportunity to ride in a Model S or and certainly see it up But the demand has been strong despite the unavailability of test drives. And once people do experienced test drive in the Model S. I think it will exceed their expectations. It's just That's the Tesla team handing over the first car. So we're going to hand over our first ten cars in 3 weeks. And this will be our first sort of handover of a bunch of cars from people that are not Tesla insiders. So we're going to hand over 10 cars and do a big ride event on 22nd 23rd. I'm really excited by how our stores are going. We keep evolving the store design and technology. So there's effectively like a new store version that keeps getting iterated and upgraded, led by George Blankenship. I think he's doing a really great job on are revolutionizing the auto buying and ownership experience because that's one of the things we wanted to do at Tesla was if we're going to create a new car company, well, let's try to fix all the things that are wrong with buying and owning a car. And one of the things that's the experience of learning about a car and acquiring it and owning it is usually not are positive one. And it's rare that buying a car ranks as somebody's top retail experience, but we want that to be the case. And I think we're making great strides in that direction. Later this month well, later in I guess from June. So in about 3 in a few weeks, we'll be opening our store in Santa Monica on the Third Street Promenade. This will be the latest in store technology. And I think that's if you would like to go and see that, if you're in L. A, that's worth seeing. Our Santana Row store also is very close to that in experience. Plan to upgrade and expand the Santa Monica store experience as well. So you'll see a continued evolution are in our store technology, if you will. And it really is kind of store technology. The overarching goal for the stores is, if you see a Tesla store in a mall, you should be magnetically drawn to that store. Even if you don't own a car, it should just be you want to go in and feel welcome and really like being there. And our goal may sound somewhat counterintuitive, but We never want to sell a car in the store. It sounds like, well, why would you not want to do that? Well, if you're being sold something, It's like somebody's to me, it feels like somebody's pulling the wool out of your eyes. It's sort of you want to learn about something. You want to experienced something, but you don't want to be sold. And that's the best way want to own a product. And if somebody knows that going into Tesla's store, they're not going to be hounded and it's going to be a pleasant experience, You're not going to have any compunction about going in. So that's the goal there. On the EV powertrain side, we're very proud of our relationship with our 2 partners, Mercedes and Toyota. We announced a little about a month or so ago that we'll be doing a full powertrain deal with Mercedes. So we'll be doing a battery pack motor transmission inverter and everything fought for Mercedes. And this is going to be at a reasonably high volume level. So this is sort of a real production program as opposed to with the Mercedes deal. And then Toyota with the RAV4, that's just about to come out. End. This is Phil at the sort of proof of concept stage, kind of seeing how things go. So we're hoping in the future that, that will transition to more of a mainstream high volume situation on the Rav4 side as well. And I think if this goes well, that's what should occur. So next, we're going to take Model S throughout the world. So we're starting off, obviously, in the U. S. But in about 6 months, we'll be delivering Model S cars in Europe and Japan and a number of other places in the world. So we're finishing the what's needed to homologate or essentially certify the Model S for sale in these different markets. We also expect to hopefully go to China next year and start selling there. We're going to deploy our supercharger network. And I'm not going to talk much about this. We're being deliberately coy. But when we do the unveiling of the first Supercharger and people see what our supercharger network is going to look like and just how awesome it is, It's going to blow your mind. It's going to be like, oh, this is cool. It's like, Yes. You have to have all the pieces in place for the crystal to glow, if that reference makes any sense. The light bulb, when people see the supercharger system unveiled and everything we're going to do there, It will finally make sense to a lot of people, not just those who have been enthusiastic about Electropavicles for a long time, but it's going to make sense to the broader population. They're like, okay, now I finally get it. And then we've got Model X. So we're continuing to develop on a Model And then we'll have our 3rd generation vehicle development that will follow Model X, and that will be sort of a high volume thing added an order of magnitude greater production than the Model S or the Model X. So if you think of the Model S as being comparable to, say, a 5 Series BMW, Then the model then the 3rd generation will be, say, comparable to a 3 Series BMW. And of course, next year, Profitability and positive cash flow. That would be nice. Around the middle of next year is when we'll do the right hand drive, which will be important for certain markets like the U. K. And Japan. In Japan, you can sell left hand drive as well as right hand drive, but it's mostly right hand drive. And we're going to continue So With the Model X, which obviously we unveiled earlier this year, our goal was to really be as innovative as possible on the SUV and minivan addressing the SUV and Minivan market. So I think the Model S, it's the Model S has so much functionality. It has so much cargo space. It has the ability to carry 5 adults and 2 kids. That, in effect, the Model S spans both the Sedan market and part of the SUV market. With the Model X, it will address the remainder of the SUV market and the minivan market. So with those two products, we're essentially going to cover 3 major segments. And in fact, the Model X will have more functionality than any minivan, a bigger door opening, more usable cargo space, and all in a form factor that is about the same wheelbase, but actually slightly shorter than an Audi Q7. So it's not we haven't achieved that functionality just by making a super huge car. I think one of the signs of good design of a car is that it's bigger on the inside than it looks on the outside. Conversely, a sign of a bad design would be it's a huge car, but its utility on the inside is limited. And it will be the 1st dual motor all wheel drive where it's got a motor in the front and a motor in the back. So it actually has incredible performance as a result of that and it can actually beat the Porsche 911 Carrera in 0 to 60. It's 0 to 64.4 seconds versus a 0 to 64.6 seconds for Porsche 911 Carrera. So I think it'll be you ever had a light and this guy with a Porsche is thinking he's a stud, put a dent in his ego with your SUV. And Yes. So I really love the dual motor thing. And also as a result of having a motor in the front and motor in the back, we can dynamically adjust torque within milliseconds to effectively get the best road holding of any all wheel drive ever. So this is simply in a different league In terms of road holding capability relative to other all wheel drive vehicles, which are simply mechanically connected, and you don't have the reaction Well, first of all, it's just a dumb mechanical connection. So it's not smart like this would be. And You can't do that fast adjustment front to rear. And then just intrinsically, an electric motor is much more precise than a gasoline engine. There's a reason like surgical instruments are not powered by a gasoline engine. Or A laser printer would seem odd if it was powered by a gasoline engine. If you want high precision, you need an electric motor. And we had a really great response from customers on this. So this just shows The basic Tesla master plan, which has been there which I put in place in pretty much day 1, which is to do high price, low volume vehicle, which is the Roadster, go to mid price, mid volume, which is the Model S and Model X. And then The 3rd step will be to go to high volume, lower price, which will be our 3rd generation. So this year, we expect to do a little over 5,000 units, obviously have very tiny market share. And next year, about 20,000 units, which is still A tiny market share. I mean, bearing in mind that the total number of new vehicles sold every year in the world is around, Well, depending upon how you count it, 80,000,000 to as much as 90,000,000 units a year. And then in 2014, I will have the X out as well. It's still and those percentages are just as a percentage of the premium market. So still a small percentage, a lot of room and a lot of opportunity for growth in the future. It should be noted that our factory in Fremont has a capacity of somewhere on the order of 500,000 vehicles a year. So we've got a lot of growth have a lot of potential to use that asset and with very good capital efficiency achieved high production levels. And we remain confident of the 25% gross margin next year. That's my confidence level at this point. I think I feel very confident in committing to that number. And then operating margin sort of in about half that. Tony Mazepelli, shareholder, For our stock to achieve a somewhat normal price earning ratio, we're going to have to sell tens of 1,000 of units per year, several tens of thousands of units per year. So I would like to ask you about a key component of the car may or may not make that happen. And that's the battery. Lots of government labs, university labs, Lots of companies are working on battery technology to make the battery cheaper, charge faster or store more. And that's very good because that will help our cars take market share from the gasoline cars. What technologies Yes. For us shareholders, should we be watching? Do you know? Well, I think so from a Tesla standpoint, we do get exposed to a lot of the upcoming advancements in battery technology. And I have to say that there are few industries with more BS than the battery industry. It's quite remarkable. And the reason is because there are a lot of complicating factors with the factory. There's the gravimetric and volumetric energy density. There's the cost per kilowatt hour. There's the cycle life. There's the calendar life. There's safety. And sometimes you'll see an announcement that sounds really great and it's an improvement in one area, but really short changes the other areas, and I forget to mention that in the article. So just sort of putting all that aside, I think what's reasonable to expect in the future is roughly an 8% 10% improvement per year in the cost and energy density of the battery packs. And most of the time, it's not some hugely revolutionary change. It's an improvement in the anode, cathode, separator electrolytes. Those are really the things that drive it, particularly the cathode side, although now we're seeing some improvement at the anode side. So one of the things that's occurring is transitioning from A purely carbon anode to either a carbon silicon or silicon anode. I mean, I'm not sure how what the best way is to, say, invest in opportunities like that because where we from a Tesla standpoint, because we need such huge scale in terms of production, we tend to talk to are the cell producers and who have the scale to meet our needs and to sort of ask them what their how they see things evolving. And like if something looks good, let's say, at the lab level And it's meeting all the requirements at the lab level. It's at least 5 years before that gets to scale production. So we do have pretty good visibility, but we don't necessarily we can't say, oh, you should invest in such and such Company because we think that's good. But I can say with confidence that we will see something on the order of 10% improvement per year for the next several years, at least. That's not speculative. That's known. Have 3 questions. 1, for the buyer, what support will they get in a home charger system? And So let's see. I think we've got a few questions embedded there. I am a big fan of Solar Power, obviously, as Chairman of SolarCity helped create the company. And I think SolarCity is doing an awesome job. I'm not sure most people are aware of this, but SolarCity is the largest provider of solar power in the country and continuing to grow at a really good clip. And I really believe that solar will be the single biggest source of electricity production in the world in like certainly by the midpoint of the century and maybe even sooner. And I recommend getting solar power installed in your house. In most cases, installing solar power can be done with no money down and it will result in a reduction in your electricity costs. So it's kind of a no brainer. It's like If you have a house that could work for solar at all, you should get solar. It will cost you less, and you'll be doing good for the environment. There's going to be some interesting stuff with solar and the superchargers, but I don't want to jump the gun on that, but that's going to be exciting to see because I think Solar really helps short circuit this idea that electric cars are just gasoline cars with a long tailpipe. Sure, it's used electricity, but isn't that electricity produced by coal? And haven't we therefore not solved the problem but moved it somewhere else? It's like, no, we have to solve sustainable power generation as well. Solar is the best way to do that, in my opinion. And So if we have sustainable power generation and sustainable power consumption, then we really have solved the problem. And that's something we want to make clear, and I think the supercharger system will help illustrate that. George Kranin, a stockholder. Two part question. First part is, are you going to strap a couple of Falcons together and send one of those to the Space Station? And part 2, a recent op ed piece in automotive news indicate held a position that increasing CAFE standards are discouraging mainline auto manufacturers from investing in electric powertrains Because the technology payback is in improving internal combustion. From the customer's point of view, when cars get an average of 54.5 miles per Alan, is the urgency in the general public's mind for buying an electric car diminished? Are the EPA fuel standards, CAFE standards going to discourage perhaps Electric car sales. No, I think improving The average corporate average fuel economy for carmakers actually does help send them in the direction of sustainable transport. I think it's actually okay if what they do as a large part of that solution is improve the efficiency of the gasoline powered cars. But ultimately, in order to meet the really high CAFE standards that are scheduled to come into effect Later this decade, they will have to go to electric cars or at least plug in hybrids or something like that. So I think it's overall a good thing. I'm not sure it's But I don't think it's the best way to achieve the goal. I think the best way to achieve the goal of, say, reducing Carbon emissions is to tax carbon emissions. Just as one taxes, say, cigarettes or alcohol, I really feel quite strongly that Since the federal government needs to raise taxes, it makes sense to weight those taxes on what Likely is bad for us versus stuff that's good. Like it would be silly to in food to have really high taxes on bread and none on cigarettes. People are like, oh, that would be dumb. Well, that's how it is with fuel. We have really low taxes on the stuff that's bad for us, which is like coal and oil and all that. And then we've got We have negative taxes on those, I should point out. The level of subsidies and tax breaks that exist for Oil, gas and coal are enormous. In fact, just mind bogglingly huge. So it's not just that there's not tax, there's a negative tax. There's a subsidy effectively. And that makes it harder for the sustainable stuff to compete. And there are some subsidies on the sustainable stuff, but it's nothing compared to the gargantuan ones that are there for oil, gas call and that have been there for a long time, unfortunately. So anyway, I really think there ought to be attacks according to that which is going to harm us. And in fact, I mean, there really are a lot of parallels between Smoking. How smoking was perceived, say, 40 or 50 years ago, where you actually had these ads were claiming that cigarettes were good for your health, like pregnant women and ads and things like that. And then All these scientists were saying, well, we think there may be a link between lung cancer and smoking. And then there would be all these counter studies funded by the tobacco companies that curiously found that there was no link. And then over time, that evidence mounted more and more, and eventually, it became overwhelmingly obvious that smoking is bad for your health. And yet what we're doing here with carbon emissions from oil, coal and gas is we're smoking the planet. So It doesn't seem we've lent our lesson there. Doug McKenzie, a shareholder. And first, just congratulations on the amazing things that you've done with Tesla and with SpaceX. Just amazing. So thank you. I think last year you mentioned There was a swap out of the battery in the Model S and that could be done. I've been telling people, I think I've noticed in under a minute potentially. So could you In terms of the Model S, I intentionally architect the Model S to have a battery pack in the floor plan that can be swapped out in under a minute. And I think we're going to show something interesting in that regard. So got to keep a few cards in the vest there. But I think there'll be something exciting to see in that regard. Yes. So, well, first, congratulations on getting the Model S out the door a month early. That's an incredible achievement. I'm very excited to drive a Model S. I'm equally excited for the Model S to drive me. What are your thoughts on a self driving Tesla? So I think the whole self driving thing is pretty cool. And that is something that I'd like Tesla to implement. And we have a fairly close relationship with a number of people at Google. And I think it would be really, really great to implement the first production self driving car at Tesla. Or another way to think about it is a super smart active safety system. So the car is always taking care of you and preventing an accident. So it's yes, that's another way to characterize it. Sometimes you say self driving, people are like, oh, the car's going to go nuts. But actually a better way to think about it maybe is to say this is the best, smartest active safety system you can Our focus is just on making cars. If you want to buy cars and do with them what what you wish, you're welcome to do that. Alright. People are having a Right back here with the microphone just because we're webcasting, so it's easier if everyone can hear us well. Yes. Hi. Thank you. Hi. My name Roy Filipos, investor from Philadelphia. Nate. And as you know, there's a lot of concerned shareholders out there that we have a significant short position and as well as, you know, maybe they know something that we don't know. We're basically regarding profitability. It seems Tesla, can you assure Tesla is going to have 100, be 100% sure you're going to sell 20,000 cars by next year? Because it I could not hear the question. Okay. Elon, it's where we are in cash and can we really achieve the 20,000 unit next year? Yes, yes. I absolutely feel highly confident we'll achieve 20,000 units next year in excess of that. But what happens when it doesn't happen? When maybe you only sell 10,000, then if you only sell 10,000, then I mean our breakeven point is probably around 8,000. You'll be able to be cash flow positive with that number? Yes, right there. Yes. About 8000? Probably something in that order, yes. Okay. Thank you. Yes. And I mean obviously we've got over 10 work. Is it working? Hello. I'm Eric DeCarato. I'm a shareholder. With your talk about rethinking the entire version of the car company. I know that you said you're you're building the car to be of extreme high quality, but eventually with cars and the life of the the car, things do end up going wrong. And I know that right now you're handling service on a very personal relationship basis, you know, with a team coming over and helping to fix the car. But what happens with Gen 3 with past that when you have, you know, 50, 100,000 cars that all have all these different problems. People are getting into accidents and stuff. How do you plan on rethinking or scaling the service of the entire car company at that point? So our approach to service is that we want to have regional service centers that would cover a metropolitan area. Or in some cases, for a really big call area. I'd like to say the Bay Area, we might have 3 or 4 service stations. But the general approach is The theory with service is I want it to be, I call it invisible love. So the best kind of service is, First of all, for your car not to be serviced. So our goal is to absolutely minimize the service needs of the car in the 1st place. And this, I think we have an advantage relative to traditional cars because a lot of the dealers make most of their money with servicing. So I think the cars tend to be a little overserviced. And yes, so our goal is to make a car that's It's so reliable that it doesn't need to be serviced. And of course, we all cars come with 4 gs connectivity, so we can do over the air updates of software like you're used to getting on a phone or a computer. And we can also do remote diagnostics. So if the car is reporting a problem, then with the user's permission, if you give us permission, we can look at the car and determine what's wrong be able to pre position any spare parts so that I mean, in the ideal scenario, like if the car It doesn't need to be serviced. What would be great is, like, let's say, you took a car to work. You tell us the car is going to be at work At your office for the following period of time, we come pick up your car, bring it to our service center where the parts are pre positioned to be replaced, replace them, return the car before you need to go home for work so it was invisible to you. And you will love that. That's what Hoyt Invisible is. But that's think the good way to do it and that may sound, well, gee, isn't that expensive? No, it's not. If you look at, say, the way that Enterprise Rent A Car operates, It's a really efficient organization, and yet they pick you up and drop you off for your rental car. And that's a much better use of time have someone valet the car than for you personally to pick up and drop off the car. And then we can have a fewer number of service centers that are sort of located near And we can have economies of scale at the service center level. So I think it's both more efficient and a better experience for the customer. Reservationists. And my wife has been complaining about the time I spent on the Tesla Motors Club website since last summer when reserved. We happen to own a small business in Fremont, California of all places. My question is about leasing. Normally when we acquire vehicles, we lease because it is more tax advantageous for our business. And you need to move 20,000 vehicles next year. As you know, your competitors lease a large percentage of their vehicles. The question is what are your plans in regards to leasing in the United States? I know you have in Europe with Aethlon. What are the plans for U. S. Leasing? Yes. We're absolutely off the leasing for U. S. Customers. It will probably be starting next year. But we may be able to get something done this year, but it's not really necessary since we've got more than enough demand just from straight purchases to satisfy as many costs we can make this year. But starting next year, we will offer leasing options. Absolutely. Yes. And I I think actually leasing, we may see an even greater proportion of our cars being leased than normal gasoline cars because the best way to really understand the The operational cost advantage of an electric car is if you lease it because then you could see the lease cost plus your electricity cost and your servicing cost and you're like, wow, it costs so much less to operate because electricity is so much more efficient. And the servicing is tiny. You don't have any oil changes or tune ups or filter changes. And so you can look at your monthly your total monthly cost of operating a car, and then it's a much more obvious advantage relative to operating a gasoline car. And you can see the economic difference is quite substantial. So I actually think, as with solar, where most the vast majority of solar projects that we do are leases, I We may see a really high percentage of electric cars be leases because it so obviously illustrates the economic advantage. Jeff, we have time for 2 or 3 more questions. Anton Wallman, shareholder right here in town. Quick question On the charging interface, about a month ago, almost all automakers came together and announced a Joint standard for ACDC charging. I know you have your own and this might not be important for say the first twenty 1,000,000, 40000 pick a number of cars, but over the longer run to drive mass market deployment, might it not be just little bit awkward to be the only guy who is not on board with I mean, of all the ways in which you can differentiate, this might not be the preferred item. System is very intelligent, highly adaptive. So it'll adapt to any input current and voltage you can feed it. And the adapters For the various standards around the world, because it's not quite consistent, come with the car. So, when you buy the car. You'll be able to charge that car anywhere you want. For the actual connector that goes into the car, we did design our own Because the standard just isn't good enough. So we're forced to either have have a highly compromised connector in the car or have 2, one which is big and bulky and ugly, or in addition to our one, which is small and compact and beautiful. I just couldn't do it on the big, ugly one that sucks. So can do it. But we do have an adapter. And so you'll it's not as though you'll And the adapter itself is a smaller and adapters can be made. And you can just carry that in the trunk and have access to charging infrastructure anywhere. But another key factor is just the power. I wanted to have something that could have a huge amount of power, something on the order of almost 100 kilowatts of input energy. And that's far beyond what any standard exists. There's no standard for a connector of that size. And even the ones that are, say, half that capability are gigantic are bulky and uncomfortable. So we have a connector that is dialed down to the limits of what physics can really achieve, which is great. And Yes. So that we kind of needed to do that. Yes, I wish we could adhere to the standard, But unfortunately, the standard is not good. And we will not compromise the product to adhere to a standard that's not good. Mike Garutt, shareholder. The collapse of Solyndra was a big shock. We know a lot of that was competition from China. But I'm more concerned, do you see any pushback or pullback from the government Well, I think the government's support of green energy It's okay. I mean, I think it should be better. I really think I mean, I think if we were to truly think long term, it should be much greater than what it is Yes. Or in other way, I like the word sustainable energy because then it makes it really obvious. It's like Why are we massively subsidizing nonrenewable energy, unsustainable energy at the expense of sustainable energy? By definition, unsustainable is going to run out. And then we run this dangerous experiment of seeing how much CO2 can be put in the atmosphere before there's a massive catastrophic disaster. The outcome of that experiment could be, oh, gee, you can put a huge amount of CO2 in the atmosphere, and it's Okay. That's one of the outcomes. The other outcome is it's not Okay. It just seems like Bad idea to run that experiment, but people seem to want to run it. So I think what's likely to occur is that as the evidence mounts that unsustainable energy is bad, even a complete fool can't ignore it, then that's when we'll see have quite a dramatic shift in favor of sustainable energy. I just hope it's not too late. Hi. When people think of this company, they think of leading edge electric cars. But as you showed in the presentation briefly, there's another part of it, which is The manufacturing. And I am so happy that the U. S. Still can make something that is not only competitive, but is leading edge. And I really think that should be emphasized more as much as the cars itself That's really important not just for the company but for the whole country. I'd also like to get a tour of the factory too if that's possible. We'll be having a bunch of factory tours. I think on 23rd And actually, at various points throughout the year, we'll be offering opportunities for customers to get test drives and tour the factory.