Tesla, Inc.

And I'm joined today by Elon Musk, Zachary Kirkhorn, and a number of other executives. Our Q2 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.

Thank you Martin. So just as a as a Q2 recap, Q2 was a unique quarter for Tesla due to a prolonged shutdown of our Shanghai factory. But in spite of all these challenges, it was one of the strongest quarters in our history. Most importantly, in June, we achieved production records in both Fremont and Shanghai. And as a result, we have the potential for a record-breaking second half of the year. I do want to emphasize this is obviously subject to force majeure, things outside of our control. The past few years have been quite a few force majeures. And it's been kind of supply chain hell for several years. Credit to our awesome Tesla supply chain team for overcoming insanely difficult challenges. And a huge thanks to the Tesla Shanghai factory team who sacrificed a lot to get the factory back up and running in June and achieve a record output. So also making good progress with production ramp with Berlin. We achieved an important milestone of 1,000 cars a week in June, and we're expecting our Giga Texas to exceed the 1,000 vehicle per week milestone hopefully in the next few months. Yeah, to be clear, we're currently making the cars with the 2170 cells, and Drew Baglino will address some of the 4680 questions later in this call. But it is worth emphasizing that we have enough 2170 cells to satisfy oil vehicle production for the remainder of the year. So we're not dependent on 4680. 4680 will be important next year, but it is not important this year. That said, we haven't sold the second generation of manufacturing equipment for 4680 cells in Texas. And even at our established factories like Fremont and Shanghai, we continue to expand capacity. Regarding autopilot, we have now deployed FSD Beta with CityStreet's driving capability to over 100,000 owners. They're very happy with the capabilities of the system and will continue to improve it every week. We've now driven over 35 million miles with FSD beta. That's more autonomous miles than any company we're aware of. I think probably more than, it might be more than all other companies combined. And that mileage is growing exponentially. With regard to manufacturing and technology, about five or six years ago, we said we wanted to become the best manufacturer in the world. And that is somewhat counterintuitively to some people, what will actually be, I think, our strongest competitive advantage. We're super pro-manufacturing here at Tesla. And in general, we want to encourage other companies to be super pro-manufacturing. And in general, I think it is a very important thing to do. We need to make stuff and make it efficiently. And that's manufacturing. So we've made a lot of advancements in manufacturing processes. As we now show in the shareholder deck, thanks to the large castings, we make the world's largest castings. We reduced body welding robot count by 70% per unit of capacity in Austin and Berlin. So that's, you know, call it roughly a body shop that is roughly three times smaller than would normally be the case. And I should say it's also lighter, cheaper, and has superior noise vibration and harshness. So it's good on every level. But this journey is not over. We'll bring another level of simplicity and manufacturing improvements with Cybertruck and future products that we're Not quite ready to talk about now, but I think will be very exciting to unveil in the future. Our safety team also introduced a feature that tension seatbelts if the vision system detects imminent collision, which has never been done before. So you can imagine that if you have a seatbelt that only tensions upon impact, you have very little time to tension the seatbelt. If you've got to be, the car is literally got to be crunching. to trigger the seatbelt tensioner. But because we have vision, we can actually see that a collision is about to occur with 100% probability before it actually happens. And so we can tension the seatbelts and we can even adjust the airbag deployment because we can see, not just feel. This is a fundamental safety advantage that Teslas are now able to offer. And then this is also an over-the-air update. So this is something that will be in place in all cars that have at least AP3 hardware. In conclusion, we exited Q2 with a stronger production rate than ever before. Our team continues to focus on Cybertruck production readiness and some future platform design. We are still expecting to be in production with the Cybertruck in the middle of next year. And we're very excited about that product. I think it might actually be our best product ever. Let's see. And FSD beta is on track to be released for all of North American customers before the end of this year. And hopefully, if we get regulatory approval, we'll also be releasing it hopefully in Europe and some other parts of the world. We're hosting our AI Day in a few months. I think people will be amazed at what we're able to show off in AI Day. So basically, there's a tremendous amount to look forward to in the second half of this year. And I want to thank all of our employees and suppliers for their super hard work during these challenging times. Super appreciate it. Thank you.

Thank you very much.

And Zach has some opening remarks as well. Yeah, thanks, Martin. I want to start by congratulating the Tesla team on excellent execution during the second quarter. Although our production volume reduced sequentially due to COVID-related shutdowns in Shanghai, we made substantial progress in nearly every area of the business, and in particular, our global vehicle production rate as we exited the quarter. Our Fremont factory, supported by our Reno team, reached new production records. The Shanghai factory resumed full production, and our new factories in Austin and Berlin are progressing well through their initial ramps. Additionally, our energy business achieved record gross profit with the highest solar volumes in many years. I want to personally thank the entire Tesla team, as I know many of you are listening. You've embodied a remarkable and relentless pursuit of excellence in support of our mission. I also want to thank our suppliers for their support during another complicated quarter. On GAAP automotive gross margin, it declined sequentially to 27.9%. Temporary decline in Shanghai production volume meaningfully impacted margins. including idle capacity and factory restart costs, and also had implications on the mix of regional deliveries. Additionally, as discussed on previous calls, we are working through the ramp inefficiencies of our new factories, which are progressing well, but have had an impact on margin as those factories come online. While we continue to see a benefit from higher pricing flowing through, which experienced some foreign exchange related headwinds, Our cost structure continues to experience cost increases from inflation, commodities, and logistics. The energy business progressed well in Q2, aided by alternate solar supply coming online and progress on unit economics. Our storage business remains component constrained on both Powerwall and Megapack, which we hope will alleviate to some extent in the second half of the year. We are greatly appreciative of the patience and flexibility shown by our customers while we work through these challenges. Within operating expenses, Austin and Berlin related startup costs have gone down as these factories have moved into production and their costs are now reflected in automotive cogs. Additionally, we converted a majority of our Bitcoin holdings to fiat for a realized gain offset by impairment charges on the remainder of our holdings, netting a $106 million cost to the P&L included within restructuring and other. We also incurred restructuring charges related to targeted staffing reductions.

Yeah, actually, it should be mentioned that the reason we sold a bunch of our Bitcoin holdings was that we were uncertain as to when the COVID lockdowns in China would alleviate. So it was important for us to maximize our cash position, given the uncertainty of the COVID lockdowns in China. We are certainly open to increasing our Bitcoin holdings in future. So this should not be taken as some verdict on Bitcoin. It's just that we were concerned about overall liquidity for the company given COVID shutdowns in China. And we have not sold any of our Dogecoin.

We still have it. We still have our Dogecoin. Despite these challenges, we were still able to achieve one of our strongest operating margins of 14.6%. Our free cash flows were impacted by working capital related to the Shanghai factory shutdown. However, we expect this will show as a benefit in Q3 as our working capital related cash flows restabilize. As we look ahead, and as Elon mentioned, we are positioned for a record-breaking second half of the year. We're quite excited about this. A couple of things to keep in mind as we progress. Austin and Berlin ramp inefficiencies will continue to lay on our margins for the balance of the year. However, the impact should reduce as we increase ramp. Second, as we've mentioned before, we expect to continue to see recognized global pricing to increase as our backlog flows through. However, macroeconomic related cost increases will also continue to be part of our story. And finally, despite losing More builds in Q3 than expected. We're still pushing to reach 50% growth this year. This target has become more difficult, but it remains possible with strong execution. And as Elon mentioned, no more force majeure events for the balance of the year.

A lot of force majeure in the last several years. That's for sure.

Thank you.

Thank you very much. And now let's go to the questions from investors. The first question is, Chinese EV manufacturers seem to be doing a better job than their Western competitors, excluding Tesla, at innovating in software and design. How can Tesla make sure the company is staying ahead of those manufacturers, both within China and outside of China?

Well, right now, the best Chinese EV manufacturer is Tesla China. We're actually doing the best thanks to our incredible team in China. But I have a lot of respect for the Chinese car manufacturers and EV manufacturers in particular. I think they will be a force to be reckoned with worldwide. They're smart and they're hardworking. And I think anyone who is not in any company that's not as competitive as them will obviously suffer a market share decline. So I would say we have a lot of respect for the car companies in China, and then their capabilities. Yeah.

Thank you. The next question is, when will Tesla have a unified vector space for both static and moving object network? Will this be a V11 or later version? If the latter, can you explain what makes it a difficult problem in layman terms?

Okay. This answer will be understood by point zero, 01% of the audience, I think. Most people don't know what a unified subfactor space would actually mean. It essentially would be if you can take, if instead of knitting together static and dynamic objects in C++, if they could be knit together at the neural net level, then you don't need to reconcile them within C++ heuristics. that is an architecturally better way to... That's the most desirable outcome. I think it's probably not necessary to achieve full self-driving, but it would be a slight improvement in the efficiency of the self-driving. And it's certainly something we want to get to. The sort of nirvana situation is you have surround video auto-labeling of all static and dynamic objects, and you have then surround video inference with spatial memory as well. I mean, I think we're almost certainly there before the end of the year. Yeah. I'm not sure how many people would understand that. Sounds good. I should say also, we are also confident of improving the frame rate. As we delete some of the legacy neural nets, we think we might be able to get the frame rate of all eight cameras, maybe up to 36 FPS, which is actually a lot of frames, considering it's eight cameras, but certainly comfortably above 24 frames, which is basically the frame rate of movies.

Thank you. The next question is, Elon recently tweeted about lowering prices once inflation cools down. Can you elaborate on what do you mean by cooling down and how aggressively the company will lower prices More broadly, how do you think about the auto pricing long term?

Yeah, so since we have this, there's a quite a long wait when somebody orders our car. It's OK, it's like 6 months. In some cases it could be up to a year. We have to anticipate what the probable inflation rate is over that period of time. So. That's that's what we're trying to do. If we see indications that the inflation rate is declining, then we would not need to increase our car prices. It's possible that there could be a slight decrease in car prices, but this is fundamentally dependent on macroeconomic inflation. It's not something we control. If I were to guess, and I wouldn't take this with a grain of salt, I think inflation is will decline towards the end of this year. We're certainly seeing prices of commodities trending lower. Yeah, but take it with a grain of salt. This is making economic prognostication is fraught with error. I don't know if you guys want to if you want to say anything about

Yeah, we're certainly seeing, I mean, it's kind of a whole spectrum on the battery metal side, for example, the price of lithium has really shot up. We used to be $11 a kilogram to more than $80 a kilogram. But you know, it's not every situation is that bad. So it's kind of a spectrum.

Carbon steel, aluminum, up to smoke. Carbon steel and aluminum has started trending down. we will see the benefits of it's only probably later part of this year or early next year.

Yeah, but I think that's just like for most commodities, we're seeing a downward trend towards the end of this year or next year. Some commodities, the processing of lithium is insane. I'd like to once again urge entrepreneurs to enter the lithium refining business. The mining is relatively easy. The refining is much harder. So the lithium is actually a very common. It's very like lithium pretty much everywhere. But you have to refine the lithium into battery grade lithium carbonate and lithium hydroxide. which has the extremely high purity. So it is basically like minting money right now. There's like software margins in lithium processing right now. So I would really like to encourage, once again, entrepreneurs to enter the lithium refining business. You can't lose. It's licensed to print money.

Thank you. The next question is, you made the right economic call before most on inflation when you diversified into Bitcoin. It has since shown it's not much of a hedge in the real world test in the last few months. How do you think about it as an asset over long term, and what do you need to see to change your view?

Well, Tesla's goal is to accelerate the advance of sustainable energy. You know, we're we're not really cryptocurrency is a a sideshow to the sideshow. So, you know, we're not a. Cryptocurrency is something we think about a lot. We think a lot about scaling production and accelerating the advent of sustainable energy, which the record heat waves around Earth serve to emphasize the urgency of that transition. So that is what we're trying to do, is make electric vehicles and solar and stationary storage battery packs. But the three pillars of a sustainable energy future, which is like solar and wind for energy generation, stationary battery packs for storage of the solar and wind energy because of its intermittency, and then electric vehicles, the third pillar. And if those three things are solved, we have a sustainable future for civilization. And the fundamental good of Tesla and the reason we're doing this, certainly my primary motivation here is to have the day of sustainable energy come sooner. That's our goal. We're neither here nor there on cryptocurrency.

Thank you. The next question, 4680. Elon noted that 4680 plus structural pack is not yet optimized. Can you please share the general path of 4680 and structural packs in terms of cost efficiencies and compared to the traditional 2170 pack? Will cost improvements be mostly due to scale or do we need to solve some technical issues? Do you want to do the architecture?

Yeah. So structural pack where we get dual use of the battery or the cells as structure and as energy storage, in the same way that an aircraft gets dual use of the wing as a fuel tank and as a wing, is, I think, unequivocally, from a physics standpoint, the superior architecture. It's the A architecture. Now, because it is new, we'll start off getting, I don't know, aspirationally a C within an A architecture. But the potential is there for it to get... radically better and then unequivocally better than a battery pack, which is carried like a sack of potatoes.

So yeah, and we've gained the perspective through putting our first structural pack in production that that it is actually the architecture. Yeah, like before we did that, it was a hypothesis that was backed with a got a lot of modeling and first principles analysis, but now we've actually built in more confident in that assertion.

Yeah, exactly. So the structural pack, even the C and the A architecture is beating the non-structural pack. And so over time, it will, with further refinement, be substantially superior to a car that is carrying a battery pack as though it is cargo. And this, like I said, it's very, very much very analogous to the early days of aviation where fuel tanks were initially carried like cargo until they realized that actually you should get dual use of the fuel tank as a wing and as a fuel tank. And that makes the planes lighter and better. And that's the same is true of electric vehicles.

And on cost improvements, are they due to scale or about solving technical issues? Both. Yeah, it's always both.

Yeah, I mean, really, the two things that improve costs are economies of scale and tech and, and, and corporate and core technology.

So I think technical issues, they're not the right technical issues, like technology to the optimal design, right? Like you always start with some access. Some people might call it fat, but that's not really what you think it is. Initially, it's that you don't know how lean you can get it until you've done it a couple times.

Yeah, I mean, there's there's some platonic ideal of the perfect product, where the atom is, you have exactly the right atoms, and they're in exactly the right position. And you asymptotically approach this platonic ideal. And but it takes a lot of effort over time to figure out actually what is what what is the platonic ideal and, and then to actually you know, gradually approach that.

Yeah. I mean, you might need to create a new alloy, then you need to figure out how to cast it. Then you need to ramp the casting machine of the new alloy, as an example. We've done it for rotors. We've done it for the casting.

So like, yeah, it does take time. Constant improvement is something we're used to here. And it's something like we've done with our vehicles and our designs since the beginning. I mean, even, you know, you know, we were talking a couple of weeks ago, like the first version of the front casting that we made that went into the early vehicles is like model, I mean, model S days. No, no. I'm talking about like our first model wise. Oh yeah. We've, since we've ordered more dyes, cause we need more dyes for more production. We've saved like four or five kilos of mass just in dye iteration. And that's something we do at Tesla, like quite regularly. Um, and we'll continue to do so. Like we're not happy with a scene, like maybe we're at a C plus now. Cause we gotta keep going to get a B minus, uh, on the rear casting.

But this will transfer for improvement with the casting. So the casting is already way better than, you know, the rear body casting is already way better than the way it was done in the past, where you've got, you know, 120 different parts that are welded together or bonded together with different alloys. And then you have to put sealant in between all the various parts. for water ingress and noise. So we're already way better than that with current casting, but there's still a lot of opportunities to reduce the mass of the casting and also extend the casting to include more parts, as well as adapt the rest of the vehicle for the fact that there's a casting.

I was going to say the same thing. We're not just evaluating the pack and isolation either. It's the pack plus the body, the integration. Do we have mass in the right places? Do we have the cost in the right places and only just the right amount? I think we've gone through one iteration. We're doing another one with Cybertruck. We're taking the learnings and doing the next version, hopefully, is the B plus in the A architecture. That's certainly the target.

Thank you. The next question is, how do you feel the progress of FSD is going and does Andrej Karpathy's leaving have any significant impact on timelines or potential progress?

Well, since Andrej was writing all the code by himself, you know, naturally things would come to a grinding halt. And so irony. Andrej is awesome and we have tremendous respect for Andrej. He wants to contribute more to core AI at an academic level and get back to coding individually. But we've got a team of about 120 people in our software AI group that are extremely talented. And I think we will have I'm highly confident we will solve full self-driving, and it still seems to be this year. I know people always say that, but it does seem as though we're converging on solving full self-driving this year.

Thank you. The next question is, how is the 4680 RAM going, and is GigaTexas producing cells yet?

Yeah, so we are making progress on 4680, but right now, as Elon mentioned, we are leveraging supplier cells, which we have in sufficient quantity to ramp Texas and Berlin. We expect to ramp total 4680 production to exceed 1K per week by the end of the year, hopefully before, well before. In Q2 at Cato, we fully automated powder conveyance for the dry anode electrode tool there, unlocking major increases in production and improvements in yields, Since March, because of that, Cato output has grown 35% month over month each month since, and yields throughout the factory are already at targets in most areas and trending in that direction and a few others. We did feed learnings from Fremont cell impact lines to Texas and Berlin. They aren't a carbon copy. Cell design was revved to unlock higher performance and manufacturing simplicity. Manufacturing lines were further integrated, and we in-sourced additional content. For these reasons, there are some new ramp challenges to overcome in Texas and Berlin. Specific to Texas, last quarter, cell equipment was fully installed and commissioned, and we produced our first commissioning car sets of cells through the end of the line. Our target for Texas is to begin production this quarter and aim for Texas to be capable of exceeding Cato weekly output for the end of this year.

Thank you very much. The next question is on 4680 as well, but I think Drew has covered everything that was in the next question. So the following question is, with regards to the ramp of production in Austin and Berlin, how is the situation with regards to supply of semiconductors, battery cells and other components? How about cost inflation impacting profitability of these other plants?

I can take that. Tesla procures about 1,600 unique pieces of silicon from 43 semiconductor companies. So with a portfolio of that size, there are always challenges. Things are more stable on the latest generation chips. We still see some tightness in the older generation semiconductors, especially in the analog and mixed signal space. But we have a line of sight to solve for the volumes being contemplated for both Austin and Berlin. And on the cell front, like Elon mentioned, we have a comfortable margin thanks to record output from our partners. and have line of sight that matches the planned output from both factories. We've grown cell production significantly on a 12-month rolling basis and have long-term contracts with all our partners for key battery metals. So we don't see any major problems for the components, of course, barring unforeseen COVID-related shutdowns.

Just to add on the profitability part of the question, Q2 was our largest increase yet over the last handful of quarters on inflation and commodity-related increases to our cards. You know, it's fairly evenly spread across the factories given, you know, common suppliers or common issues that impact the broad supply chain. So, you know, I think I had mentioned before that we had been seeing increases over the course of last year. It ticked up in Q1 and then it ticked up again that the rate of increase was more in Q2. So as we look through to the end of the year, what we're seeing is we don't think the inflation-related increases in Q3 will be as big as Q2. But as Elon had mentioned, there's uncertainty on pricing here. And we don't have full exposure, as Karin had just mentioned, on every component of cost because we do have some contracts in place, but there are some spot buys as well and some contracts being renegotiated. So, you know, we're managing it with pricing and in partnership with our suppliers, but it does continue to be something that is impacting our financials.

Thank you very much. And the last question is, when will the Cybertruck be officially available?

We're hoping to start luring them in the middle of next year.

Great. Thank you very much. And now let's go to analyst questions. The first question comes from Pierre Faragu from New Street Research.

After saving with customized car insurance from Liberty Mutual, I customize everything, like Marco's backpack.

Feel free to unmute yourself.

Hi, guys. Thanks a lot for taking my question. I'd like to ask a question on 4680 and the structural battery pack. And I'd love to understand where you stand on the technology and efficiency and energy density roadmap that you described at the battery day. So what I'm trying to understand is where do you stand on the architecture of the battery cell itself? How much silicon do you have in it? How much energy improvement have you achieved already so far? Sorry? Go ahead. And the reason why I'm asking that is because you have like very smart guys on Twitter who shared experience about trying to fully empty a Model Y from Texas, from Austin, and noticing behaviors and like recharging behaviors that suggested that maybe these cars had like very, very high mileage, very high range and were like artificially limited in range in software. So I'm just kind of trying to understand how much of an edge you're building at the moment with the 4680 and the structural battery pack on range?

Yeah, let me just try to provide like a super straightforward answer. Like, as Elon mentioned before, you know, our priority was really on simplicity and scale during the initial 4680 and structural battery ramp. So we weren't like putting all the bells and whistles in from day one, because if so, we would be sort of suffering under a string of series miracles that we would need to achieve to get going. But, you know, as we attain the manufacturing goals that we've stated, you know, hit the ramp that we need to hit next year, we are certainly planning to layer in new material technologies and higher range structural packs. Like we're not, we're not like holding back goodies for some,

rainy day or something like that. Yeah, maybe another way of putting it is that our focus right now is on the dozens of little issues that inhibit the production ramp of the 4680. Some of the more challenging ones have been feeding the anode and cathode material because we were using this revolutionary dry electrode process. When something's revolutionary, it's a lot of unknowns that have to be resolved. We're confident of resolving those unknowns, but it's very difficult. We're making rapid progress on that front. The first order of business is really get the basics right, get to high volume, and higher liability and. And then very rapidly iterate within that to enhance the energy density and reduce the cost of the cell. Yeah, totally great, yeah. OK, I said we're we are highly confident of a good outcome. It's the exact counterpoint of that is perhaps it is of some debate, but the outcome is not.

Yeah, and specific to the dry process, we made a major advance this past quarter in Cato that the team is really excited about, and congrats to the team for achieving that.

But I should also emphasize that it is not as though Tesla intends to displace our suppliers of battery cells. The Tesla battery cell production is in addition to what our suppliers can do, and we want our suppliers to grow their their battery output as fast as they possibly can, and that goes for the entire supply chain. The fundamental rate limiter for both transitioning to sustainable energy is how fast can you grow lithium-ion battery output per year. This is the fundamental rate limiter for transitioning to sustainability because you need the batteries for two of the pillars, of sustainability, the stationary storage and for vehicles. So, yeah.

Yeah, and I just want to stress that a lot of these, you know, higher energy density technologies are not necessarily scalable. I mean, most of them are not scalable from what I've seen. And so, like, focusing on them is a distraction from the mission. Like, it really is, how do we scale as fast as possible? And, you know, we're taking these risks that we've discussed at Battery Day, and our plan is as we de-risk them and they are successful, we want to bring them back to our partners so that they can go faster too, because that's all on the mission, right?

Like, how do we accelerate? People often ask me if there's some breakthrough needed in battery technology for the world to transition to sustainability. The answer is no. Even if there was zero technology breakthroughs, literally zero, from where the technology is right now, we could fully transition Earth to sustainable energy. The issue is very much the rate at which the entire supply chain, from mining to refining to cell production, how fast can that grow? It's growing fast, but the faster it grows, the faster we transition to a sustainable energy economy.

This is actually a great, exactly where my follow-up is. So, Elon, you always mention this 50% per annum sustainable growth target that you guys have. And so, my question here is, when we see the difficulty regarding commodities, raw materials, swinging prices, I'm kind of wondering, as you are planning for this 50% per annum growth, If we stand today over the next five to 10 years, how much of that do you feel you've secured through your work at entering into long-term contracts and things like that? And you were coding for entrepreneurs to go into the lithium business. And so does that mean you don't have enough lithium secured to grow 50% per annum over multiple years? And what's... How much of that is secure today, and how fast can you improve that, basically?

Well, I think it's very difficult to predict anything 10 years from now. I hope civilization is still around, frankly. I would count that as a win. It's not that fun. Yeah, exactly.

Every day.

You know, hopefully we haven't had World War III by then.

Before the Earth has burned up.

Yeah. So... You know, we do see constraints in refining of the materials necessary for lithium ion batteries. I do want to emphasize this is it is not due to a scarcity of the raw material. You know, in the case of lithium, lithium is one of the most common elements on Earth. It's pretty much everywhere. But refining of the lithium into ultra high purity battery grade lithium hydroxide and lithium carbonate is quite difficult and requires a massive amount of machinery. And it's a hard, hard thing to scale. It is also difficult to create the anode and cathode. You know, I think my guess is Maybe two-thirds of batteries will be iron phosphate or maybe iron phosphate with some manganese. And there's a ridiculous amount of iron on Earth. In fact, Earth is a little bit of trivia. It says, what is Earth made of more than anything else? Iron. Iron is the number one ingredient of Earth by mass. Number two is oxygen, which is wild. But yeah, oxygen is basically rust. We've stuck them together. We're a rust ball. That's almost two-thirds of Earth, I think, is rust. We are like a rusty ball bearing with a little bit of other stuff. But plenty of lithium. Anyway, there's not like a shortage of materials.

Yeah, but another thing on that LFP thing is it isn't just that there's more access to material that way. The actual refining process is less capital intensive to make a good LFP cathode. And so it's not just scalable on the resource side, it's scalable on the refining side. Absolutely.

To be clear, there's no fundamental barrier here. It's simply a rate question. At what rate can you scale production? I think we're seeing a very rapid increase in battery production and in the whole supply chain. If you were to say today, what are concerns a few years down the road, I would say one of the concerns is the machinery to refine the critical, critical ingredients of lithium ion cells. So the lithium itself and the and then the cathode, which I said, like we mostly iron phosphate, perhaps with some manganese. I think almost all stationary storage will be iron phosphate. And And then you really just need nickel chemistry for long range vehicles and like aircraft and that kind of thing.

Yeah, yeah. The other thing I was I would say is, you know, we are working with our suppliers to ramp their capability as quickly as possible. And it's not like we have a problem in the next year or two to specifically to your question. But when we look 10 years out, yeah, we need to do more to accelerate uh the growth um and that is why we are making our own investments like we are building a cathode facility here in texas this bill is going up you can see it in the flyovers um we're working on a lithium refining um activity as well ourselves because you know the best way to learn how to accelerate something is to do it yourself so these are the things we're doing um to move move it all forward yeah i mean if our suppliers don't solve these problems

then we will, yeah.

Thank you. The next question comes from Emmanuel Rosner from Deutsche Bank. Emmanuel, go ahead and unmute yourself.

Yeah, thank you so much. I have a question on your vehicle demand and then a quick follow up on supply. pressure in the order book or the pace of new order or any sort of like slowdown as a result of the pressures that the consumer is experiencing? Are you worried about it in light of your view of the risk to the economy that I think you expressed, Ilan?

Well, right now, our problem is very much production. So we have long leads on, as anyone can tell, if they order our car. It, you know, if you order a Model Y, it arrives sometime next year. So this is clearly not an issue for many months for us. Our problem is overwhelmingly that of production. So, yeah.

Okay. Maybe just two things to add, you know, specifically on your question, are we seeing a macroeconomic impact on our demand at Not that I can tell. Maybe a little, but maybe it's not material. The second thing, you know, to Elon's point about backlogs, we have a very long runway with very long, long lead times here. I mean, certainly the world is uncertain and we'll have to see where things go with commodity prices, how quickly we're ramping production, what the state of the world looks like at some point next year. But the demand is not something we spend really any time talking about.

Yeah, I think it's maybe just once again worth mentioning that there is a difference between value for money and fundamental affordability. Because sometimes people say, well, if you've got all this demand, why don't you just raise the price to some, you know, double the price or something? This is usually expressed by somebody who's rich. But even if you rail value for money to infinity, if consumers do not have enough money to buy it, even a product where the desirability is railed to infinity, they simply cannot buy it. So this is why you cannot just raise prices to some arbitrarily high level. Because you pass the affordability boundary and then demand falls off a cliff. So I do feel like we've raised our prices or raised our prices quite a few times. They're frankly at embarrassing levels. But we've also had a lot of supply chain and production shocks and we've got crazy inflation. So I'm hopeful this is not a promise or anything, but I'm hopeful that at some point we can reduce the prices a little bit.

Thank you. Yeah, my follow up was actually on the on the supply side. So it was very encouraging to see that you're quantifying your current installed capacity at basically already in excess of 1.9 million units installed currently. How quickly do you think that you can fill that capacity?

I mean, I think we've got a good chance of exiting this year at 40,000 vehicles a week.

Yeah. I mean, our internal plans are to have the capacity utilized by the end of the year. It takes time to ramp there. It'll be a challenge. There's a lot that needs to happen to get there. That's what we're working on.

Yeah, we've had many 30,000 car weeks already. So I think a 40,000 car week is within reach by the end of this year.

Shanghai and Fremont, as we said last month, were record production and they're really firing. It's a bad term. Doing really well. But then Austin and Berlin are coming on strong. Theoretically, they also had record quarters last quarter. And if we ramp them to the capacity shown in the deck, by the end of this year, we'll be at that rate.

There's always a lot of uncertainty. The production ramp looks like an S-curve. And that intermediate part of the S-curve is very difficult to break that with high certainty. But the end part of the S-curve, I think you can have a lot more certainty. And so that's why I'm confident we'll get to 5,000 cars a week. At you know, in in Austin and Berlin. By the end of this year or early next year and. Probably, but not certainly. 10,000 cars a week at both locations by the end of next year.

Thank you. The next question comes from Colin Rush from Oppenheimer. Colin, go ahead please.

Uh, thanks so much guys. You know, could you talk a little bit about, um, the pricing strategy around FSD and, and it, the, as you get closer to, you know, those full functionality rolling out and the increased cycle times, you know, how you see that evolving through the balance of this year and into 2023.

Yeah, we will, um, we will increase the price of FSD sometime later this year. Um, I think, you know, probably just before we go to wide beta, where wide beta is, anyone who wants to use the beta software with all the caveats associated with that can use it, then it would make sense to increase the price of FSD. The value of FSD is, I think, extremely high. not well understood by most people. It is basically currently ridiculously cheap, assuming FSD materializes, which it will.

Great. And then I started to belabor a little bit on this battery material side, but in terms of some of the suppliers and the contaminants, can you be a little bit more specific around some of the elements that you guys see in some of your supply chain that can prove troublesome on yields for the 4680s, particularly around lithium and potential contaminants in either hydroxide or the carbonates that you guys end up seeing real issues with as you move into production?

Yeah, I don't really think we have anything to comment on. Yeah, the purity specs of lithium on this call right now.

Yeah, contaminants for the 46-8 are not a factor. This is not an issue.

Okay, thank you very much. The next question comes from Tony Sakonagi from Bernstein. Tony, go ahead, please.

Yes, thank you for taking my question. I have two as well. um in response to the question around demand i think zach you said maybe a little and elon you said maybe some indication that you might see some pressure on demand and i'm wondering if that is really just speculation or whether there's any empirical data that you saw in the last month whether it be cancellations or orderly times that led you to make that comment. I think anecdotally, if you squint, the lead times have gotten a little lower over the last four months in both China and the U.S. That's really the only visibility investors have. So I'm wondering if you could maybe elaborate on whether that's really just your, you know, sort of anticipating there could be some impact because of high prices or whether there are Is something anecdotally or quantitatively that you could point to, please?

You know, I mean, I think we've said this now for many years and it is proven true. Tesla does not have a demand problem. We have a production problem. And we've almost always had it with, you know, very rare exception. It's always been a production problem. I think that will remain the case.

So there's a denominator and a numerator and like, If you increase production.

Yeah. Yeah, absolutely. As we increase production, more demand is needed, obviously.

Well, it's more just like you can't look at the backlog and state much about demand because we're doing a lot on the other side to change the production. We're trying to make the backlog lower, not longer.

Building factories and building more factories.

We don't want a long backlog. That's annoying. It'd be like go to a restaurant and you order a burger and you have to wait three hours. I'm like, that's annoying. Right.

want to get your burger right away same with the car so we want the lead times to reduce okay thank you now i i was just trying to follow up on on the fact that you both said that maybe you were seeing demand being impacted a little bit and that that was the spirit of the question um maybe we didn't have like like because we see daily uh orders

from around the world for our cars. It's actually, it is like a mood barometer of people's confidence in the economy. But one can't read too much into it because things can vary a great deal from one day to the next. Consumer sentiment is all over the map. So it's manic, manic depressive, frankly. But we have so much excess demand that it's really just not an issue for us. It might be an issue for some other companies, but it is not an issue for us.

Okay, thank you. Elon, I'm just wondering a question for you. Tesla's obviously changed dramatically in the last three years from near life or death to a company with consistent cash flow and industry leading margins. I'm wondering if you can comment on your personal role in the company and whether you see that changing in terms of your role, your commitment and time spent at the company over the next, uh, three or four years. I think you said a few calls ago you wouldn't be on calls unless there was something unusual and you've been on every call since then. I'm wondering how you think about that.

There have been a lot of unusual things, let's face it. So I'm just wondering about that. Basically, if there's only good news, I won't be on the call. But if you have a tough situation like COVID shutdowns in China, then I think, you know, I'll be on the call, you know, relatively speaking, there's bad news. And if all we have is good news, then I won't be on the call. So, but I'm committed to the long term. I mean, I'll, you know, work at Tesla as long as I can usefully advance the cause of sustainability and autonomy.

Fantastic, thank you very much. The next question comes from William Stein. Please go ahead and unmute yourself.

Great, thank you very much for taking my question. Elon in the past you've given some assessment as to. the likelihood that you can achieve success in some of the more interesting AI-oriented efforts, not only FSD, but also Dojo and Optimus. Perhaps you can give an updated view on those.

Well, I don't want to steal thunder from AI Day. So I think we'll have some exciting news on AI Day that I think will be further ahead than probably most people think. But I'd love to answer you, but I think we'll leave that excitement for AI Day.

Okay, and perhaps a follow-up if I can. We've heard a lot from others and certainly to some degree from you all about the shortages in semiconductors in particular. We have seen some big, important customers of that type of product decide to sort of, you know, leverage the ecosystems that exist to make some of their own in those categories. I'm wondering to what degree you're doing that outside of Dojo in terms of the, you know, I guess on the inference side, you're certainly doing that in the car, but what about sort of the more mundane areas like microcontrollers and the like? Is there any internal effort to... to improve supply chain and maybe improve other performance aspects?

Well, there's a lot we've done. We've been working with our suppliers a lot. We don't currently intend to make chips ourselves. We don't think there will be a need to make chips, but we have been working closely with a number of suppliers. I actually just met with one of our key supplier CEOs right before this call. We had a great meeting. They're going to make major investments in some of the critical chips and components that we need in the car. So I'd actually like to take a moment to thank our key suppliers once again for supporting us through difficult times. And they really went above and beyond to support us. So to all our suppliers out there, thanks very much.

Yeah, and I guess just maybe we don't talk about it very often, but we do have a lot of custom silicon in the vehicle already. Microcontrollers, yes, some. Battery management, yes, some. Power electronics, yes, some. So we try to go after where there's actually a technical advantage. And in the future, I think we're going to look at where there's a supplier advantage.

Even now where there's supply chain issues with our tier ones and tier twos, you know, Karn and Roshan get into it with us on the engineering side and we find solutions, whether it's alternative chips or, you know, changing, uh, the entire structure of the stack to make it work. I think that's an advantage we have that many other OEs just simply cannot. I think Tesla is as much a software company as it is a hardware company.

One of the ways that we've been able to address supply chain issues on the chip front is by rewriting our software to be able to use different chips, or in some cases, achieve dual use of a single chip, which is even better. And actually, quite frankly, the chip shortage served as a forcing function for us to reduce the number of chips in the car. It's simplified. Yeah, it turns out we had more chips than we needed. But it's a testament to our software team that we're able to roll a new chip into the car and write a whole new batch of software for that chip without interrupting production.

Yeah. And our goal is as we mature and scale the platforms to, you know, integrate more functionality into fewer chips. Like that is the way that it's gone with laptops and phones. It's going that way in cars. And we're trying to do that wherever it makes sense to do it. Yeah. As quickly as we can.

From a supply chain standpoint, do we? What do you think about the chips and whatnot?

Yeah, I think, I mean, from a high level, you know, instead of designing and building our own microcontrollers, we're partnering with key partners that understand the architectural requirements and, you know, they'll take the specs and design something for us. We've done that, to your point, Drew, in the battery sensing space. We've got some application-specific ICs. But, yeah, integrating, reducing the number of components, it's a supply, it makes the supply chain easier, but it also makes the reliability of the end product better. because there's less failure points. So that's always been the mantra.

Sometimes we also go at the wafer level and try to consume less to achieve the same functionality. So that's something also that we've been looking at in some of the constrained modules that we've faced in the last six months.

That's good. Fantastic. Well, thank you very much. I appreciate all of your questions. Unfortunately, this is all the time we have this quarter, and we will speak to you again in three months' time. Thank you very much and goodbye.

All right. Hey, everybody. Stick around here for some commentary on that. Just give me one second to make sure everything's working okay. And let me know in the chat if you guys can hear me all right. Just want to make sure we did have an issue with this one. So I just want to make sure that's working okay.

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So just give me one second. Let's make sure. All good? Excellent. Okay, so quite a few interesting things in that call. Actually, let me go back and we'll kind of look at the notes together. I think one of the first interesting things were some of their comments about Texas and 4680s. So they were talking about how the ramp was going, and they said that they hope to hit 1,000 per week in Texas, hopefully in the next few months. So that definitely conflicts with what we had kind of heard, there had been a rumor that Tesla's already at like, you know, a couple thousand or 5,000 or whatever in one week. Maybe that was a peak rate for a short period of time, whatever. It seems like that is definitely significantly different from, you know, where Tesla's actually at with Texas. So I think a lot of people are going to have to take, you know, at least on the more bullish side, are going to have to take their forecast for Texas down. It sounded like maybe there was a little bit of a hangup in 4680s where maybe they're, i don't know if they're like pausing production of that right now um or maybe they're just like not scaling up quite yet at texas uh though they did mention that they just started producing those uh you know vehicle ready cells in texas at the end of last quarter uh it just i'll have to go back and listen to that because it sounded a little bit like oh yeah we're bringing in 2170s and that's what it's going to be for now uh but maybe i just misinterpreted that a little bit But I think, you know, later in the call, they addressed that well and said, like, all this should be expected. I think Tesla's kind of softening that a little bit because they definitely originally had aspirations to be at a much higher production rate on 4680s by now. You know, initially, they didn't bring in 2170. uh capacity with texas i know that was originally i know that in q1 that had been delayed uh coming out of shanghai but if tesla had expected the 4680 ramp to be going like it currently is they would have been doing that earlier so um although tesla gives good reasons for why it is happening it's you know don't don't mistake that for them being necessarily happy with where the progress is or it being where they'd expected it to be so i think those are some of the comments there in the initial call again elon said it well it's not a matter of if the outcome gets achieved it's a matter of when it's it's more of a calendar thing rather than a will this happen type of thing that's often the case uh with tesla so you know hedge expectations down for the timeline but it is good to see that they're still feeling very confident drew mentioned that in q1 or maybe it's q2 then i think q2 they had made a breakthrough or significant progress on the dry battery electrode so there is good things happening with 4680s it's just i think a little bit slower than what we would have hoped and what tesla would have hoped Um, and I think with bringing in that new equipment for the 2170s for Texas, uh, it, it seemed like from some of that reporting that maybe that was ramping up super, super quickly, but, uh, with their comments here about hoping to hit a thousand per week within a few months, uh, that's, that's a pretty long timeline, uh, for, you know, where things are at right now, uh, for Texas. I think that's, it's just going to take them some time to get that really up and running. So, um, Um, my forecast for Texas, I'm probably gonna, I had increased those based on some of those reports that we'd had. I'll probably have to bring those back down. It sounds like Berlin, uh, going a little bit better. You know, we, we know Berlin right now shut down to, um, you know, increase production capacity. Um, uh cybertruck i don't know why that was ever asked as a question elon said mid next year no news on that um talked about the safety stuff before in the earnings recap which by the way is on the channel if you didn't see that we've talked about all the financials and stuff in that video so i'm going to focus on the call stuff here um One of the big questions coming out of the earnings report letter was what was driving costs to a place where there was such a significant decline in auto gross margins from Q1, where Tesla was still ramping some factories, things like that. Zach said a few things. So as we had alluded to, there was some shifting between the R&D line where some costs were being counted there, both in Q4 and Q1, related to Austin and Berlin, that now that those factories are starting to sell vehicles, that's shifting over more into the cost of goods sold line. So that's definitely a major factor. But he did also note that this is the steepest increase that they have seen due to inflation related things, rising commodities costs, logistics, whatever else. That was the most significant increase that they have seen here in Q2 or back in Q2. So he did say that they do expect further increases in Q3, but a less steep increase. And we should still see average selling prices continue to rise. So what Q3 will come down to then, since we don't have the shutdown related costs that Zach also mentioned, like you've got a lot of different factors there. But because we don't have those shutdown-related costs for Q3, margins should rise from here based on the comments that Zach had made. He did hedge it a little bit, saying, obviously, we can't be sure. A lot of factors. But it sounded to me like they're confident that margins will improve for Q3, which is good to know. bitcoin we got some clarity on that so that actually matched pretty closely to what we had calculated um i think i'd had like 115 million at the end of that 10 minutes that it took us to figure that out could have just waited for this but uh good to know on the bitcoin um interesting comment from elon talking about how they they needed to sell you know or they wanted to sell the bitcoin due to liquidity concerns um I don't know. I'll have to look into that a little bit more. Tesla was free cashflow positive after that sale. So, you know, obviously their working capital is going to drive things a little bit lower in the middle of the quarter than where the quarter ends up. And just as the, especially with everything happening in June. Um, so it seemed like probably towards the end of May, uh, you know, mid end of May, Tesla sold that just to open up some liquidity, which was part of the purpose of, of having in the first place.

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So, anyway, with some of the things in working capital, I'm sure Tesla had a lot of parts that built up throughout the quarter that they couldn't actually end up shipping. That's why cash flow is a little bit lower. Zach noting that that should restabilize in Q3, which, you know, would be expected. They mentioned a few times they're quite excited by the second half. We've talked about that. I think we're all very excited for that too. They're still pushing to hit 50% growth this year. So even though it sounds like the Texas ramp is going to be a little bit slower than what I think a lot of people are modeling for, at least here in Q3. Um, they are still targeting that. So when we last gone through the math on that, I believe that's about 840,000 for the rest of the year, um, which would get them to that 40% or that 50% growth. I think that's 1.4 million vehicles, uh, just going off the top of my head here. But, uh, to do that, I think Tesla needs, you know, let's say like 380,000 in Q3 and then, you know, 460,000 in Q4 or something like that would, would get them, uh, to their goal. All right. So investor questions up here had as usual, some good questions there. Um, Or I guess that was Anil's question, so the investor questions. Not sure that there's a whole lot. Elon's still confident in FSD. I thought his answer about Andre was pretty funny. I was texting someone this morning, and aside from the joke part that Elon had, that's obviously the expected answer. Lithium stuff we've heard about. Crypto is a side show. Inflation, we've talked about that stuff. structural pack and batteries so i think probably the you know the big thing there was you know a lot of people have been wondering if there's some some big buffer in the vehicles uh we've talked quite a bit about this for the initial version of the 4680 vehicles what's going on there um Drew basically saying, you know, we don't have any special things hiding there that we're going to unlock was basically his point. I'm sure he's aware of all that speculation. So we should just take it as it is what it is. And Tesla still has a lot of room to be able to improve on that over time. same thing even you know we're what two years into castings now and they're still talking about how there's a lot of room for improvement on that but it was good to see that they said that the 4680s and the structural pack even here sort of like day one are already you know i don't remember the word that they used but superior or more optimal to the older architecture uh with the 2170s so fsd elon continuing to be continuing to be confident um For 4680s, Drew said that they expect to exceed in Texas a rate of production that would allow for 1,000 vehicles per week by the end of the year. He said hopefully well before. 35% month-over-month increases each month since March for Cato Road. So that's a really good growth rate if they can maintain that. Usually Tesla's vehicle deliveries, I think, tend to grow around like 15% per quarter just to kind of give some context on that. Uh, so if you're going at 35% per quarter, obviously you're starting at a really small base, but that would allow Tesla to catch up, um, if they're able to maintain the, you know, that sort of a rate of progress. And then you bring in Texas and, you know, if you're doing 35% at Cato and you can do that at Texas too, it just, um, makes that growth rate or obviously grow faster from Texas, uh, as that would be a lower base can even drive that growth rate up. So equipment fully installed, commissioned for sales. Talked about that. Awesome Berlin ramp supply. Semiconductor stuff. Q2 cost. Cybertruck. Battery stuff. I think there was kind of one more thing in here that I really wanted to emphasize. Hopefully I'll come across in my notes here. couple of analysts asking about demand like you're going to ask a company with a year-long backlog about demand probably not the most important question at this point in time So installed capacity, this is kind of what I want to talk about, I think. Installed capacity. So on the deck, Deutsche Bank was saying that was 1.9 million. I haven't added that up, but, you know, you can do the quick math on that. I think it's like 600,000 from Fremont. Shanghai was 750,000. And then another 500,000 from Berlin and Texas. So between those two or between those four on their deck, I think that's like, you know, what, 1850 or, you know, 1,850,000. right around that 1.9 million. But what Tesla says on the deck is 750,000 for Shanghai. We know that that's going to go to a million basically in the next two weeks with the upgrades that Tesla is doing. So they're continuing to just understate Shanghai capacity. They've been doing that forever. Until this quarter, it had said $450,000, and now it's all of a sudden up to $750,000, even though it's been producing in excess of that previous installed capacity listed rate. So anyway, what they're saying is a good chance at $40,000 by the end of the year, which would be basically over a $2 million vehicle per year run rate. uh heading into next year and if we think about that uh that should set them up for you know very clear path to 50 growth uh in 2023 even at you know a relatively low like low rate of progress within the year of 2023 because if you come in this year and you're at 1.4 million roughly would be 50 growth for this year tesla says they're still targeting that uh so you'd be at you know 2.1 As long as my mental math is not off on that. You only need 2.1 next year to get to that 50% growth. And if you're exiting this year at $2 million a year, you should be very much on track to be able to accomplish that. Um, obviously that's contingent a little bit on Berlin and Austin getting to that 5,000 per week. Elon's still saying they're targeting that for the end of the year. Um, which would, you know, that would be tremendous progress, especially for Texas based on their comments. Uh, I'd probably wouldn't expect that from Texas, but you know, at least hopefully Berlin can, can get to that level. FSD price increase. So that will be coming unsurprisingly, as Elon said, if, you know, every time we see or oftentimes when we see big milestones from FSD, Tesla will raise the prices. You know, it makes sense if Elon is feeling confident, that's. The unified vector space and what he was saying, like sort of the nirvana state would be managing it through that, using auto-labeling, using Dojo. I don't remember if he specifically called out Dojo there, but all the things that Tesla has talked about implementing specifically at AI Day last year. Elon feels like those things are going to be on track to be implemented by the end of this year, and I think that's why he's so confident in this. It's nice to see him acknowledge that other people don't really buy into that. I think the belief of that is very low, for good reason. A lot of these timelines have been missed, but Elon continuing to remain confident in that, which... isn't necessarily a sign to me that it's going to happen Elon has been optimistic on these timelines many many times but it shows that he's still confident in the path um and just like we talked about 46 ADs the the calendar date where it happens is unclear but Elon is obviously extremely confident that it will happen so it's it's a tough problem you know Who knows if it will, that's a little bit trickier than I think what they're doing with engineering and 4680 structural pack, et cetera. But I think it's at least good to see sort of that reiteration from Elon for what it's worth. Uh, orders, yeah, nothing, nothing interesting there. Dojo and Optimus, similar stuff, doesn't want to spoil AI Day, which will be end of September. Um, and yeah, that kind of brings us to the end. So, in terms of just, like, the initial reaction to the letter and just kind of, like, summing all of this stuff up, I think there's... there's good progress happening at Tesla and it's happening a little bit slower than what we, or what Tesla would hope for. Obviously a lot of that has been impacted by all these ridiculous macroeconomic challenges, but what Tesla is reiterating here, they started off the call with this. They talked about it in the middle of the call. Zach mentioned this stuff. Drew mentioned this stuff. Elon mentioned this stuff. They're excited for where they're at and where things are going for the second half of the year. Um, I mean, that's, that's, that's pretty much what we've been talking about since January, right? Uh, excited for Q3, uh, And now we're here, and hopefully things are better. They had some positive comments to say about, you know, materials pricing, things starting to come down in some areas. Lithium potentially being an exception, though. It looks like that has peaked if you look at some of the spot prices. Still a very high level, but a lot of other things coming down. So that should be a benefit. It might not necessarily hit Tesla like that. Again, Zach mentioned that costs are continuing to rise, most likely in Q3. There's delay with contracts. You can't just look at spot pricing or anything like that. It's not quite that simple. But it's good to see some of those things coming down. Elon said that he does expect inflation will come down by the end of the year. So I think there's a lot of things to feel good about here as we head through Q3 into the second half of the year. What I was most disappointed for from the report was Tesla's automotive gross margin X credits. Obviously, I'd forecast a much higher level. And like we said earlier, you know, the thing... There are a lot of different factors in Q2 that drove that down from where it was in Q1, particularly shifting costs from R&D into the COGS line. I think that's probably about half the impact. I think you split up the rest of the other half by the production shutdown in China and then the... Costs of materials increases, logistics increases, things like that. So based on Zach's comments, that's my best guess, my best feel for how these things are splitting up, which if you look going forward then of that decline that you saw, maybe... A fourth of that starts to come out from Austin and Berlin as those ramp up. Or maybe even a half of that. Maybe it's sort of like a fourth and then a fourth as we go through the next couple of quarters to kind of work back towards that 30% gross margin level. And then obviously Shanghai, that just comes out immediately because that is up and running and should be up and running in Q3. Obviously, we'll have to wait and see if anything... else happens there with any further shutdowns, but that'll improve. And then commodities and logistics continuing to increase, but hopefully increasing at a lower rate than what the average selling prices are. So putting all that together, you have sort of like those three major factors impacting Q2's margins. One of them goes away, and the other two start to diminish in Q3. So we should, again, return in Q3 to... certainly margin growth from where Q2 is and hopefully clawing back, working back towards that 30% gross margin. If I had to just like guess right now, I'd guess somewhere around like 28 and a half for Q3 is where things would end up. But obviously, you know, it's very early for an estimate like that. from where where my forecasts are though i'm probably gonna gonna have to come down um although i don't want to be too premature with that so more things to consider there but um point being we should see progress in q3 from from where things are at right now uh bitcoin stuff we figured that all out so that's kind of washed and washed and good um And then, yeah, I think the biggest thing is, you know, pretty like we had said coming into this margins are key and then guidance on supply chain and production are key. And I think Tesla gave relatively strong positive commentary on the latter in terms of production. So I think, you know. all this, all this stuff that we just have gone through. I think that's the, that's the thing to kind of focus in on second half should be good. There's positive commentary coming from Tesla from a lot of the team members. Um, and yeah, like they said, there's a lot to be excited for here in the second half. So for me, that's kind of the biggest takeaway. Uh, from from what we're hearing here it's a different commentary than we've heard in q4 and q1 where it's you know more more hedged more cautious um certainly there's still some of that vocabulary in their comments but there's less of it like the trend is in a positive direction and that's exciting So with that, I think we'll wrap it up. Again, if you want to see my comments on the earnings letter and the financials, definitely check that video out. It is on the channel as well. But otherwise, we'll see you guys tomorrow for the July 21st episode of Tesla Daily. Thank you.