Tesla, Inc.

Good afternoon, everyone, and welcome to Tesla's third quarter 2023 Q&A webcast. My name is Martin Vieka, VP of Investor Relations, and I'm joined today by Elon Musk, Abha Taneja, and a number of other executives. Our Q3 results were announced at about 3 p.m. Central Time in the update that we published at the same length 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 the Q&A, Elon has some opening remarks. Elon? Thank you, Martin.

So just a Q3 recap. Our last quarter was impacted by downtime for global factory upgrades that will help us reduce cost per vehicle, as well as increase production. We remain focused on three main objectives, which is the cost reduction of our products, investments in artificial intelligence, and other growth projects like Optimus, and continued pre-cash flow generation. Regarding vehicle cost, our team was able to reduce the cost per vehicle further in Q3, despite headwinds from factory idle costs and ramp-up of new factories. And we believe there's still meaningful room for improvement there. Regarding autopilot and AI, our vehicle's now driven over half a billion miles with FSD beta, full self-driving beta, and that number is growing rapidly. We recently completed a 10,000 GPU cluster of H100s, we think probably bringing it into operation faster than anyone's ever brought that much compute per unit time into production since training is the fundamental limiting factor on progress with full self-driving and vehicle autonomy. We're also seeing significant promise with FSD version 12. This is the end-to-end AI, where it's photon count in, controls out. Really, you can think of it as there's just a large bitstream coming in and a tiny bitstream going out, compressing reality into a very small set of outputs, which is actually kind of how humans work. The vast majority of human data input is optics from our eyes. And so we are, like the car, photons in, controls out, with neural nets, just neural nets in the middle. So interesting to think about that. We will continue to invest significantly in AI development, as this is really the massive game changer. And, I mean, success in this regard in the long term I think has the potential to make Tesla the most valuable company in the world by far. If you have fully autonomous cars at scale and fully autonomous humanoid robots that are truly useful, it's not clear what the limit is. Regarding energy storage, we deployed four gigawatt hours of energy of storage products in Q3. And as this business grows, the energy vision is becoming our highest margin business. Energy and service now contribute over half a billion dollars to quarterly profit. The Cybertruck, I know a lot of people are excited about the Cybertruck. I am too. I've driven the car. It's an amazing product. I do want to emphasize that there will be enormous challenges in reaching volume production with the Cybertruck and then in making a Cybertruck cash flow positive. This is simply normal for when you've got a product with a lot of new technology or any brand new vehicle program, but especially one that is as different and advanced as the cyber truck, uh, you will have problems proportionate to how many new things you're trying to solve at scale. So I just want to emphasize that while I think this is potentially our best product ever, uh, and I think it is our best product ever. Um, it is going to be require immense work to reach volume production and be capital positive at a price that people can afford. Um, Often people do not understand what is truly hard. That's why I say prototypes are easy, production is hard. People think it's the idea or you make a prototype, you design a car. And it's not as though designing a car is just anyone can do it. It does require taste. It does require effort to design a prototype. But the difficulty of going from a prototype to volume production is like 10,000% harder to get to flying production than to make the prototype in the first place. And then it is even harder than that to reach positive cash flow. That is why there have not been new car startups that have been successful for 100 years, far from Tesla. So, you know, I just want to temper expectations for Cybertruck. It's a great product, but financially it will take a year to 18 months before it is a significant positive cash flow contributor. I wish there was some way for that to be different, but that's my best guess. The demand is off the charts. We have over a million people who have reserved the car. So it's not a demand issue, but we have to make it. And we need to make it at a price that people can afford. Insanely difficult things. In conclusion, we continue to focus on ramping production while maintaining positive cash flow. And we continue to target and expect to have around 1.8 million vehicle deliveries. as stated earlier this year um the tesla ai team is i think one of the world's best and i think it is actually by far the world's best when it comes to real world ai um i'll say that again tesla has the best real world ai team on earth period um and it's getting better um And lastly, I wanted to thank all of our employees who are making a lot of extra effort during uncertain times. Thank you very much for your hard work and the impact that you're making.

Thank you very much, Ilan. And our CFO Wybuff had some opening remarks as well.