Tesla, Inc.

Good afternoon, everyone, and welcome to Tesla's fourth quarter 2021 Q&A webcast. My name is Martin Vieja, Senior Director of Investor Relations, and I'm joined today by Elon Musk, Zachary Kirkhorn, and a number of other executives. Our Q4 results were announced at about 3 p.m. Central Time in the update deck we published at the same link as this webcast. During this call, we will discuss our business outlook and make forward-looking statements. These comments are based on our predictions and expectations as of today. Actual events or results could differ materially due to a number of risks and uncertainties, including those mentioned in our most recent filings with the SEC. During the question and answer portion of today's call, please limit yourself to one question and one follow-up. Please use the raise hand button to join the question queue. But before we jump into Q&A, Elon has some opening remarks. Elon? Thanks, Martin.

So just to recap 2021, It was a breakthrough year for Tesla and for electric vehicles in general. And while we battled and everyone did with supply chain challenges through the year, we managed to grow our volumes by nearly 90% last year. This level of growth didn't happen by coincidence. It was a result of ingenuity and hard work across multiple teams throughout the company. Additionally, we reached the highest operating margin in the industry in the last widely reported quarter at over 14% gap operating margin. Lastly, thanks to $5.5 billion of gap net income in 2021, our accumulated profitability since the inception of the company became positive, which I think makes us a real company at this point. This is a critical milestone for the company. So after an exceptional year, we shift our focus to the future. Texas and Berlin. So we've begun production at both Texas and Berlin. We started that last quarter. But that's not the most important thing. We focus more on when to get to volume production and when can we deliver cars to customers. But I think it is worth noting that we, and as the internet has observed, we've been making quite a few cars in Texas and Berlin. So in Boston and Berlin. So in Texas, we're building the Model Ys with the structural battery pack and the 4680 cells, and we will start delivering after final certification of the vehicle, which should be fairly soon. Capacity expansion will continue through maximizing output of each factory and building new factories in new locations in the future, although we're not ready to announce any new locations on this call, but but we will through 2022 look at new locations and probably be able to announce new locations towards the end of this year, I expect. So in 2022, supply chain will continue to be the fundamental limiter of output across all factories. So the the chip shortage, while better than last year, is still still an issue. Um, and, uh, yeah, so that's, there are, there are multiple supply chain challenges. Um, and, um, last year was difficult to predict and hopefully this year will be smooth sailing, but you know, I'm not sure what to do for an encore to 2021, 2020. Um, nonetheless, we, we, we do expect, uh, significant growth in 2022 over 2021. you know, comfortably above 50% growth in 2022. Full self-driving. So over time, we think full self-driving will become the most important source of profitability for Tesla. I mean, actually, if you run the numbers on robo-taxis, it's kind of nutty. It's nutty good from a financial standpoint. And I think we are completely confident at this point that it will be achieved. And my personal guess is that we will achieve full self driving this year. Yeah, with data safety level significantly greater than a person. It, you know, the cars in the fleet essentially becoming self-driving by a software update. I think might might end up being the the biggest increase in asset value. Of any asset class in history. We shall see. It will also have a profound impact on improving safety and on accelerating the world towards sustainable energy. through vastly better asset utilization. Let's see. So on the product roadmap front, there's quite a lot to talk about. I'm not going to go through every sort of thing that we're working on because I think a lot of them deserve product launches of their own as opposed to a few minutes on an earnings call. So I'll talk kind of at a high level. Yeah, mostly at a high level. The fundamental focus of Tesla this year is scaling output. So both last year and this year, if we were to introduce new vehicles, Our total vehicle output would decrease. This is a very important point that I think people do not, a lot of people do not understand. So last year we spent a lot of engineering and management resources solving supply chain issues, rewriting code, changing out chips, reducing the number of chips we need. That was chip drama central. And that was not the only supply chain issue. So there was just hundreds of things. And As a result, we were able to grow. Almost 90% while. I believe almost every other manufacturer contracted last year. So. That's a good result. But if we had introduced, say, a new car last year, we would. A total vehicle output would still would have been the same because of the constraints, the chips constraints particularly. So if we'd actually introduced an additional product, That would that would then require a bunch of attention and resources on that increased complexity of the additional product, resulting in fewer vehicles actually being delivered. And the same is true of this year. So. So we will not be introducing new vehicle models this year would not make any sense because we will still be post-constrained. We will, however, do a lot of engineering and tooling and whatnot to create those vehicles as the Cybertruck, Semi, Roadster, Optimus. And I'd be ready to bring those to production hopefully next year. That is most likely. But like I said, it is dependent on. Are we able to produce more cars or fewer cars? So. In terms of priority. Of products, I think the. I think actually the most important. Product development we're doing this year is is actually the Optimus humanoid robot. This, I think, has the potential to be more significant than the vehicle business over time. If you think about the economy, the foundation of the economy is labor. Capital equipment is distilled labor. So what happens if you don't actually have a labor shortage? I'm not sure what an economy even means at that point. That's what Optimus is about. So, very important. Let's see. Drew, do you want to talk about the 4680 program? Sure. Or is this the right time?

Sean? Yeah, sure. So throughout 2021, we focused on growing cell supply alongside our in-house 4680 effort to provide us flexibility and insurance as we attempt to grow as fast as possible. As we sit today, sales from suppliers actually sort of exceeds our other factory limiting constraints that you mentioned, Elon, in 2022. Or to say differently, 4680 cells are not a constraint to our 2022 volume plans based on the information we have. But we are making meaningful progress up the ramp curve in Cato. We're building 4680 structural packs every day, which are being assembled into vehicles in Texas. I was driving one yesterday and the day before. And we believe our first 4680 vehicles will be delivered this quarter. Our focus on the cell, the pack, and the vehicles here is driving yield quality and cost to ensure we're ready for larger volumes this year as we ramp and next year. And the 4680 and PAC tool installations here at Keiko Austin are progressing well with some areas producing first parts. And the internet has also noticed that. Yeah, I was touring the factory, the cell factory here. I'm super pumped. It's like a really exciting accomplishment for us to bring everything into one awesome factory here in Texas.