Tesla, Inc.

Good afternoon, everyone, and welcome to Tesla's first quarter 2025 Q&A webcast. My name is Travis Axelrod, Head of Investor Relations, and I'm joined today by Elon Musk, Dev Atanesh, and a number of other executives. Our Q1 results were announced at about 3 p.m. Central Time in the update deck, the publish of 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 to a number due to a number of risks and uncertainties, including those mentioned in our most recent violence 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. Before we jump into Q&A, Elon will be providing an update. Elon.

Hello everyone. Well, it's never a dull moment these days. Well, thanks for sure. Every day is going to be exciting. As some people know, there's been some blowback for the time that I've been spending in government with the Department of Government Efficiency, or DOGE. I think the work that we're doing there is actually very important for trying to rein in the insane deficit that is leading our country, the United States, to destruction. And the DOGE team has made a lot of progress in addressing waste and fraud. The natural blowback from that is those who were receiving the wasteful dollars and the fortunate dollars will try to attack me and those team and anything associated with me. So then I'm really left with two choices. Should we just let the waste and fraud continue? And I was continuing at it to to grow at a really unsustainable pace that was bankrupting country. or to fight the waste and fraud and try to get the country back on the right track. And I believe the right thing to do is to fight the waste and fraud and get the country back on the right track and working together with President Trump and his administration. Because if the ship of America goes down, we all go down with it, including Tesla and everyone else. So I think this is critical work. Now, the protests that you'll see out there, they're very organized. They're paid for. They're obviously not going to admit that the reason that they're protesting is because they're receiving fraudulent money or that they're the recipients of wasteful largesse. But they're going to come up with some other reason. But that is the real reason for the protests, the actual reason. is that those receiving the waste and fraud wish to continue receiving it. That is the real thing that's going on here, obviously. So now that said, I do think there's, you know, the large slug of work necessary to get the voting team in place and working in the government to get the financial house in order is mostly done. And I think starting probably in next month, May, my time allocation to those will drop significantly. I'll have to continue doing it for I think probably the remainder of the president's term, just to make sure that the waste and fraud that we stopped does not come roaring back. Which will do if if it has the chance. So. So I think I'll continue to spend. A day or two per week on government matters for as long as the president would like me to do so and as long as it is useful. But starting next month, I'll be allocating far more of my time to Tesla. And now that the major work of establishing the Department of Government Efficiency is done. So at Tesla, we've gone through many, many a crisis over the years. And actually been through many near-death experiences. I think we probably were on the ragged edge of death at least maybe a dozen times. It's been so many times. This is not one of those times. We're not on the ragged edge of death, not even close. But there are some challenges, and I expect that this year will be, there'll probably be some unexpected bumps this year. But I remain extremely optimistic about the future of the company. The future of the company is fundamentally based on. Large scale autonomous cars. And and large scale in large volume, vast numbers of autonomous humanoid robots. So. The. The value of a company that makes truly useful autonomous humanoid robots and autonomous useful vehicles at scale at low cost, which is what Tesla is going to do, is staggering. I continue to believe that Tesla, with excellent execution, will be the most valuable company in the world by far. That's an important if. We must execute well. But if we do execute well, I think Tesla will be the most valuable company in the world by far. It may be as valuable as the next five companies combined. But there'll be a few bumps along the road before that happens. I said, I think, on the last earnings call that you know, we'll start to see the prosperity of autonomy take effect in a material way around the middle of next year. We still expect to be selling fully autonomous rides in June in Austin, as we've been saying for now several months. So that does continue. But the real question from a financial standpoint is when does it really become material and affect the bottom line of the company and start to be a fundamental part of the... When does it move the financial needle in a significant way? That's probably around the middle of next year, second half of next year. And then once it does start to move the financial needle in a significant way, it will really go exponential from there. So that's I'd encourage people to look beyond like the, you know, some sort of bumps and potholes of the road immediately ahead of us, but lift your gaze to the bright shining, you know, sort of down on a hill, I don't know, some Reagan-esque imagery. And that's where we're headed. And not too distant future, like I said, and the next year, technically. So let's see. With respect to supply chain risk, something that Tesla has been working on for several years is to localize supply chains. This actually makes sense from a cost standpoint, from a and from a logistics risk standpoint, is to have the supply chains be at least located on the continent in which the car is built. And so we are, I think, the least affected car company with respect to tariffs, at least in most respects. I mean, it remains to be seen. Now, tariffs are still Yeah, tough on a company when margins are still low. But we do have localized supply chains in both America, Europe, and China. So that puts us in a stronger position than any of our competitors. And undoubtedly, I'm going to get a lot of questions about tariffs, and I just want to emphasize that the tariff decision is entirely up to the president of the United States. I will weigh in with my advice with the president, which he will listen to my advice, but then it's up to him, of course, to make his decision. I've been on the record many times saying that I believe Lower tariffs are generally a good idea for prosperity, but this decision is fundamentally up to the elected representative of the people being the president of the United States. So, you know, I'll continue to advocate for lower tariffs rather than higher tariffs, but that's all I can do. So now let me walk you through why I'm so excited about the future of Tesla. So first of all, autonomy. The team and I are laser focused on bringing Robotaxi to Austin in June. Unsupervised autonomy will first be solved for the Model Y in Austin and then actually should parse out the terms robotic taxi or robotaxi and just generally like what's the cyber cab because we've got a product called the cyber cab and then but any Tesla, which could be an S3X or Y that is autonomous, is a robotic taxi or robotaxi. It's very confusing. So the vast majority of the Tesla fleet that we've made is capable of being a robotaxi or robotic taxi. And as we're going from, once we can make, the system work where you can have paid rides fully autonomously with no one in the car in one city, that is a very scalable thing for us to go broadly within whatever jurisdiction allows us to operate. So because what we're solving for is a general solution to autonomy, not a city-specific solution for autonomy, Once we make it work in a few cities, we can basically make it work in all cities in that. In that. Legal jurisdiction. So if it's once we can make it based to work in a few cities in America, we can make work anywhere in America. Once we commit work in a few cities in China, we can work anywhere in China, likewise in Europe. Limited only by regulatory approvals. So. This is the advantage of having a generalized solution using artificial intelligence and an AI chip that tells the design specifically for this purpose, as opposed to very expensive sensors and high precision maps of a particular neighborhood where that neighborhood may change or often changes, and then the cost stops working. So we have a general solution instead of a specific solution. Yeah. And. We got optimist making good progress and optimist. We expect to have. Thousands of optimist robots working in Tesla factories by the end of this year. Doing useful work. And. we expect to scale Optimus up faster than any product, I think, in history to get to millions of units per year as soon as possible. I think I feel confident in getting to a million units per year in less than five years, maybe four years. So, yeah. 2030, I feel confident in predicting a million Optimus units per year. It might be 2029. So, let's see, with respect to energy, our energy business is doing very well. The Megapack enables utility companies to output far more total energy than would otherwise be the case. When you think of the the energy capability of a grid, it's much more than a total energy output per year. If the power plants could operate at peak power for all 24 hours, as opposed to being at half hour, sometimes a quarter power at night, then you could double the energy output of existing power plants. But in order to do that, you need to buffer the energy so that you can charge up something like a battery pack at night and then discharge into the grid during the day. So this is a massive unlock on total energy output of any given grid over the course of a year. And utility companies are beginning to realize this and are buying our mega packs at scale. So at this point, a gigawatt class battery is quite a common thing. So we have many orders in the hopper for gigawatt and beyond batteries. And we expect the energy, the stationary energy storage business to scale ultimately to terawatts per year. So very, very good numbers. Now, Q1, you know, first quarters of a year are usually pretty tricky. It's usually the worst quarter of the year because people don't want to go buy a car in the middle of winter during a blizzard. So we picked Q1 as a good quarter to do a cutover to the new version of the Model Y. And we changed production Of the world's best selling cars with remembering the Model Y is the best selling car of any kind on Earth. Uh, with a 1.1 billion unit per year output of a single model. And we did this changeover at the same time in factories all across the world. So congratulations to the Tesla team on an amazing job in pulling off what is a very difficult transition. Um? So yeah, it's a it's really That was very impressive work. So. Yeah. In conclusion, while there are many near term headwinds for us in the broader industry, the future for Tesla is brighter than ever. The value of the company is delivering sustainable abundance with our affordable AI powered robots. So. This this spray that I like this phrase Sustainable abundance for all. If you say like, what's the ideal future that you can imagine? That's what you'd want. You'd want abundance for all in a way that's sustainable. It's good for the environment. Basically, this is the happy future. If you say, what's the happiest future you can imagine? One which is, that would be a future where there's sustainable abundance for all. Closest thing to heaven we can get on earth, basically. So thank you again to the TESOL team for all their efforts at this challenging time. I look forward to continuing to lead the team to great success in the future.

Great. Thank you very much, Elon. Before we move on, Veblav has some opening remarks as well.

Thanks, Elon. As Elon mentioned in Q1, we achieved something which has never been undertaken in the automotive industry of updating all our factories for the best selling car in the world all at the same time. And this is, people don't understand, this was not a small feat. We're not aware of anybody else being able to do the best selling car all at once within a quarter and that too hitting all the timelines which we had established at the beginning. So big kudos to the team for making this happen. Additionally, we also hit a record gross profit for energy storage business in the quarter. Now, getting back into the business, there's been a lot of speculation as to the reasons for decline of our vehicle deliveries in the first quarter. We had previously guided that we will be updating all factories, and this will lead to several weeks of lost production, which did happen as planned. The ripple effect of the change is not having enough new Model Y available in most markets for people to see and experience till the last few weeks of the quarter. Additionally, the negative impact of vandalism and unwarranted hostility towards our brand and our people had an impact in certain markets. Despite this, we were able to sell out legacy Model Y in US, China, and a few other markets within the world. And again, just so people understand, we were producing the legacy Model Y till middle to end of February. And we switched over and we were able to still sell out within that period. So again, big achievement by all the people at Tesla to make it happen. We have a very extremely competitive vehicle lineup, which with most vehicles going through a recent update, And add to that advances in FSD, you have a personal chauffeur which can take you almost anywhere under supervision. There are numerous stories shared by customers ranging from how it has improved their daily commute, to providing mobility to customers with disabilities, to giving older customers the ability to travel comfortably and independently. Not only is FSD supervised safer than a human driver, but it is also improving the lives of individuals who experience it. And again, this is something you have to experience, and anybody who has experienced just knows it. And we've been doing a lot lately to try and get those stories out, at least on X, so that people can see how other people have benefited from this. Now, coming into some of the financial stuff, Auto margins declined sequentially, primarily due to the reduction in the total number of deliveries, lower fixed cost absorption due to factory changeovers, and lower regulatory credit revenues offset by a slight increase in pricing due to the launch of new Model Y, despite incentives which we had to sell legacy Model Y. Our energy storage business, like I said before, has achieved yet another milestone of highest gross profit in a quarter. This was despite sequential decline in deployments. The importance of this business, as Elon mentioned, is pretty profound, especially in this environment, because in order for a grid to work properly with the demands from AI and all this, you need some more stability. And this is by far the simplest and best solution which we are aware of, which can help do this. And we've also developed certain unique solutions to help our customers to achieve this. Additionally, you know, on the Powerwall side, we've been selling the new Powerwall 3 and, you know, it's been received with very good reception from customers and to the extent that we are currently supply constrained. On services and other margins, they were slightly down sequentially, primarily because of the pressure on our use card business and insurance business. Note that we continued our journey to improve profitability in our services and collision business through better labor productivity. As previously discussed, our operating expenses continued to increase sequentially, primarily due to our AI-related initiatives, including Optimus, and also cost of development for vehicle programs including cybercaps, SEMA, and cheaper models. These expenses flow through R&D. We believe even in the current environment, it is the right strategy in making investments in these areas to position us for the long term. These increases were offset by decreases in SG&A from changes in our vehicle airflow program. Other income reduced significantly on a sequential basis. The primary reason was Bitcoin mark-to-market loss in Q1 versus gain in Q4, resulting in a $472 million drop. The remainder of the change is because of FX reimbursement. With the adoption of the new mark-to-market standard for Bitcoin, we expect increased volatility in other income in addition to the FX reputability. I know tariffs is the hottest topic which people talk about, and it has various impacts to our business. As Elon mentioned, you know, on the vehicle business, we've been on this journey of regionalization for years. Specifically in the U.S., Model Y has been rated the most American model made car on Cars.com leading America index three years in a row. This is part of all the work which the team has been doing over the years. And to the extent that today, you know, if you look at our vehicle lineup in the U.S., we're about approximately, on a weighted average basis, 85% USMCA compliant. So, like Elon said, this definitely gives us a bigger edge as compared to our other OEMs in terms of managing the tariffs. But we're not immune because When the Section 232 auto tariffs become effective in May, which includes Canada and Mexico, and Canada and Mexico has been part of our regionalization strategy, they will have an impact on profitability. And I know research modeling on this impact has been up about a couple of thousand, which is pretty much in line with what we've been forecasting. The impact of tariffs on the energy business will be outsized we source LFP battery cells from China. We're in the process of commissioning equipment for the local manufacturing of LFP battery cells in the US. However, the equipment which we have can only service a fraction of our total installed capacity at Latrobe. We've also been working on securing additional supply chain from non-China based suppliers, but it will take time. Also note that, you know, Respecting all the impact on U.S. from tariffs on the energy business, we do have Megafactory China, which just started operations at Q1, and that should take care of our business outside of U.S. There's also an important impact of tariffs on our capital investments. I know this is going to sound counterintuitive, since in order to launch manufacturing or expand lines, We have to bring equipment from outside to use because there is not that much capacity in the U.S. And the current trade environment, you know, such equipment being brought in is subjective.

The expense of bringing it in from China right now.

Exactly. And the reality is that China has the basic one which has the most capacity to provide this thing. Our CapEx guidance, inclusive of model tariffs, even with the optimization we have tried to do, it is forecasted to be still in excess of $10 billion this year. We're still evaluating what more to do on this side. To summarize, we have near-term challenges in our business due to tariffs and value match. We think our strategy of providing the best product at a competitive price is going to be a winner, and this is the reason we're still focused on bringing cheaper models to market soon. but start-off production is still planned for June. Additionally, the advancement in FSD-related features, including pilot Robotaxi launch in Austin later this year, should help create a new era of demand. I would like to thank everyone at Tesla and our customers.

Fantastic. Thank you very much, Vipav. Now we will move on to investor questions. We will start with questions from say.com. First question is, what are the highest risk items on the critical path to RoboTaxi launch and scaling?

And is that Shouk? Yeah, we've got a Shouk on line.

Sure. Well, just to talk by the, just to disambiguate the cybercap from RoboTaxi once again. So the when will the Teslas? Because the Teslas that will be fully autonomous in June in Austin are probably model wise. So that is currently on track to be able to do paid rides fully autonomously in Austin in June. And And then to be in many other cities in the US by the end of this year. It's very difficult to predict the exact ramp sort of week by week and month by month, except that it will ramp up very quickly. So it's going to be like some, basically an S curve where it's very difficult to predict the intermediate slope of the S curve, but you kind of know where the S curve is going to end up, which is the vast majority of the Tesla fleet being autonomous. So that's why I feel confident in predicting large-scale autonomy around the middle of next year, certainly the second half of next year, meaning I predict that there will be millions of Teslas operating fully autonomously in the second half of next year. But it just it just seemed increasingly likely that there will be. A localized. Parameter set of sort of. You know that that that. If especially for. places that have, say, very snowy weather, like, say, if you're in the northeast or something like this, you can think of it, it's kind of like a human. Like, you know, if you, you could be a very good driver in California, but are you going to be also a good driver in a blizzard in Manhattan? You're not going to be as good. So there is actually some value in, you can still drive, but your probability of an accident is higher. So there's, it's increasingly obvious that there's some value to having a localized set of parameters for different regions and localities. But I'll put that in the nice to have category. It's not the required category. Really, the car is just very much like a human. It's digital neural nets. and cameras and humans operate with biological neural nets and eyes. And so the same strengths and weaknesses will be present. Or, you know, a digital neural net and cameras versus a biological neural net and eyes. Ashok, if you'd like to elaborate on that.

Speaking to the location-specific models, we still have a generalized approach, and you can see that from deployment of FSD supervised in China, with this very minimal data that's China-specific, the models generalize quite well to completely different driving styles. That just shows that the AI-based solution that we have is the right one, uh because you know if you have gone down the previous uh rule-based solutions or like more hard-coded hd map-based solutions it will have taken like many many years to get china to work you can see those in the videos that people post online themselves so the generalized solution that we are Pursuing is the right one that's going to scale well. And you can think of this like location specific parameters that you don't need to ask a mixture of experts. And if you're sort of like familiar with the AI models and grok and others, they all use this mixture of experts to sort of like specialize the parameters to specific tasks while still being general. This makes the. the model use limited amount of compute to solve for the diversity of tasks that it has to solve. In terms of addressing the question that asked for what are the critical things that need to get right, one thing I would like to note is validation. Self-driving is a long-tail problem where there can be a lot of edge cases that only happen very, very rarely. Currently, we are driving around in Austin using our QA fleet, but then it's super rare to get interventions that are critical for a vortex operation. And so you can go many days without getting a single intervention. So you can't easily know whether you are improving or regressing in your capacity. And we need to build out sophisticated simulations, including neural network-based video generation. That's all happening in the background to make sure that we deliver a safe product and we are able to measure our safety, even though we can't just exceed by driving around the block or something like that.

In very basic terms, if we're seeing an accident, every 10,000 miles, well, then you have to drive 10,000 miles on average before you get an accident or an intervention. So it's like, hmm, okay. I mean, we must be really, we must be very worked out by the sheer number of Teslas doing circuits in Austin right now. We're like, well, it's going to look pretty bizarre. Some people are chasing us away. Yeah. There's just always a convoy of Teslas going all over to Austin in circles. I just can't emphasize this enough. In order to figure out these long-tail things, if it's one in 10,000, let's say it's one in 20,000 miles or one in 30, the average person drives 10,000 miles in a year. Try to compress that test cycle into a matter of you know, a few months, that means you need a lot of cars, doing a lot of driving in order to compress that award to do in a matter of a month, what would normally take someone a year.

And I would just also add that, you know, if you haven't looked at those videos coming out of China,

Oh, yeah, those videos are amazing.

Yeah, they're putting it to real test. I mean, they're taking it to dark roads.

Frankly, I think the Chinese consumer might be the most dramatic consumer. Actually, customers in China are awesome. They have a lot of fun with the cars. I saw one guy take a Tesla on a narrow dirt road across a mountain, and I'm like,

still a very brave person and this is driving along on the road with no barriers wherever he makes a mistake he's going to plunge to his doom but it worked great thank you and if if the question was on cybercap itself we're in b sample validation now yeah yeah we should ask that question too yeah we have uh our first uh like big builds coming at the end of this quarter um within q2 and then you know in the coming months we start to large scale um you know installation of all the equipment in giga texas with you know still on schedule for production next year yeah and i just want to also clarify because i think people don't understand they think that there's no new building being built and where is cybercap going oh it's in the game it's kind of the same factory yeah yeah it's

It's happening and people don't know. It's just happening upstairs and along the lines while we're still building the Model Ys and Cybertrucks every day.

Yeah, it's worth noting that the Tesla Gigafactory in Austin is three times the size of the Pentagon. Including the Garden. Yeah, including the Ground Zero Garden. So, you know, because of the Pentagon, like, this building used to look big.

But then he moved. Great. Thank you very much. The next question is, when will FSD unsupervised be available for personal use on personally owned cars?

Before the end of this year. Not necessarily. Within the US, like we do want to test. At Tesla, we're absolutely hardcore about safety. We go to great lengths to make the safest car in the world. and have the lowest accidents per mile. And so and look, if you slide last, so we want to be very careful. So it's so everyone we're trying to meet to be definitively safer than manual driving. So it's not enough that it just be as safe. It needs to be meaningfully safer than if it's cars manually driven. So. And we want to confirm that there's not something. we just want to be cautious with rollout we don't want to jump in at the deep end with an army so um but that said i think we we should people should we should be able to have have it work in several several studies later this year for it for personal use um so you so you know the acid test being you should be able to can you go can you go to sleep in your car and wake up at your destination. And I'm confident that will be available in many cities in the US by the end of this year.

Great. Thank you very much. The next question is, is Tesla still on track for releasing more affordable models this year? Or will you be focusing on simplified versions to enhance affordability similar to the rear wheel drive Cybertruck?

Yeah, we're still planning to release models this year. As with all launches, we're working through like the last minute issues that pop up. We're knocking them down one by one. At this point, I would say that ramp maybe might be a little slower than we had hoped initially, but there's nothing, you know, just kind of given that turmoil that exists in the industry right now. But there's nothing that's blocking us from starting production within the timeline we laid out in the opening remarks. And I will say it's important to emphasize that, as we've said all along, the full utilization of our factories is the primary goal for these new products. And so flexibility of what we can do within the form factor and you know the design of it is really limited to what we can do on our existing lines rather than building new ones. But we've been targeting the low cost of ownership. Monthly payment is the biggest differentiator for our vehicles, and that's why we're focused on bringing these new models with the lowest price to the market within the constraints I just highlighted.

Great, thank you very much. The next question is, does Tesla see RoboTaxi as a winner-take-most market? And as you approach the Austin launch, how do you expect to compare against Waymo's offering, especially regarding pricing, geofencing, and regulatory flexibility? Well, okay.

The issue with Waymo's car is it costs way more money. RoboShot. What a bummer. But that is the issue. You know, the cost is very expensive, made in low volume. Teslas are, you know, I don't know, probably cost a quarter or 20% of what a Waymo costs and made in very high volume. So. You know, ironically, we're the ones that made the bet that a pure AI solution with cameras and audio, the car actually will listen for sirens and that kind of thing, is the right move. And Waymo decided that an expensive sensor suite was the way to go, even though Google's very good at AI. So I'm wondering. And it is worth noting that Tesla is both an incredible AI software team and AI hardware chip design team. from scratch, from nothing. It didn't require anyone. We just built it. So, yeah, it's really... I mean, I don't see anyone being able to compete with Tesla at present. I'm sure that'll change eventually. But at least as far as I'm aware, Tesla will have, I don't know, 99% market share or something ridiculous. That 90 something percent, at least, I don't know. Some of them might change, but if we have millions of cars deployed next year, and unless others have millions of cars deployed, unless we're blocked by regulatory situations, it won't be long. I mean, in a few years, we'll have 10 million Autonomous cars on the roads then. Yeah. And and counting.

And the the other thing which people forget is like we're not just developing the software solution. We're also manufacturing the cars. Yeah, and like you know what? Like Waymo has, they're taking cars and then trying to pay my money. We don't do that. So that definitely gives us a big leg up. And like Elon said, we already have a big existing fleet, which hopefully with the software update could become autonomous.

With the software update, it will become autonomous. To be clear, the Model Ys that we're talking about in being autonomous in August and June, are the Model Ys we make currently. There's no change to it.

I think people don't appreciate that the car which they can buy today The car that they have. Or the car they have is capable of these kind of things.

In fact, it does drive autonomously from the factory to the end of line. Every car.

Yeah. The model-wise, everything.

Right. Exactly. It is important to use... It's doing... Useful work fully autonomously at the factories. As I was mentioning, the cars drive themselves from end of line to where they're supposed to be picked up by a truck to be taken to a customer. And I'm confident also that later this year, the first Model Y will drive itself all the way to the customer. So from our factory in Austin and I went in here in Fremont, California, I'm confident that from both factories, we'll be able to drive directly to a customer from the factory.

Cool delivery.

Yeah. Literally goes from the end of line and drives itself to your house.

It's important to note, in the factories, we don't have dedicated lanes or anything. People are coming in and out every day, trucks delivering supplies, parts, construction, you know. And people can film it.

By the way, you can see this from the road. Like, it's uncovered. Exactly. In this video, people take videos online. And anyone who wants to go see it can just drive past our remod factory and see the autonomous cars driving themselves. And they drive themselves and they put themselves in the exact right spot to be picked up. Yeah, the logistics yard is right there in the open. Yeah. We don't move it again to another plane. But they go to a specific spot. Yeah. Yeah. So that's just a routine, like everyday thing.

Great. Thank you very much. The next question is, can you please provide an update on the unboxed method and how that is progressed?

Sure. It's progressing. Absolutely. As I mentioned just a minute ago, it is the basis for our CyberCat manufacturing process. It's really what we changed in order to allow the low cost of production and also get the super high levels of automation. Really, levels of automation that are sort of unheard of in the vehicle manufacturing scale. This is not something that when you see it be produced, you'll think of in terms of like, wow, that's how a car has been built for 100 years. It's really something we've changed. In the past year, we've been focusing on a lot of key development areas, like marrying these large sub-assemblies together, in a precise way, in an accurate way. We've also de-risked things like corrosion of uncoated aluminum structures, you know, the ceiling across the seams of the vehicle, and when you marry and assemble components. And we've even done early crash testing and we've proven that, like, you know, it's going to be just as safe as a real car build. And so, like, as I, you know, with all that combined, we kind of go into the builds that we have at the end of this quarter for the Sabercat product, and that's the next real big test of full-scale you know, integration of the unbox process. And yeah, that's kind of where we are. So you'll see them in testing on the test roads in a couple of months.

Yeah. Although the line won't be upset at this rate. Initially. Initially. This is a revolutionary production system. I'm not sure what the right word is. Unboxing sounds like something like when you get your phone. Yeah, you open it up. Yeah, you have like a pleasant experience when you take your phone out of the box, which of course is nice, but this is much more revolutionary than that. This is a profound reimagining of how to make cars in the first place. No car is made like this anywhere in the world. The factory is the product as much as the car is the product. So. It's really just the first principles approach to manufacturing. That will ultimately allow us, I think, to try to think I'm confident ultimately and allow us to achieve a cycle time, meaning. In a unit every five seconds or less. Of a single line.

And we want to incorporate some of these for testing into our existing production lines as well.

This is something I've been thinking about for a long time. It's not a crazy thing. A car every five seconds may sound like it's coming out like bullets, but actually it's coming out at walking speed. It's like a meter a second. A meter a second. We're still far away from caring about the aerodynamic drag of the manufacturing line. You know, because you're still at three miles an hour. You know, every five seconds sounds crazy, but it's three miles an hour. So, yeah, you can run away from it, basically. But that's still by far the fastest line on Earth. You know, I mean, it's like. Half hour, half hour. What's like the best thing? I don't know if it's like about Shanghai. And that's us? 33 seconds. We're the fastest, right? I think so. We think we're the fastest at 33 seconds in our Shanghai factory, but this would be, you know, six times faster or seven times faster. So, um, Yeah, I mean, it'll be slower than that at first, but the point is that when you fully optimize the design and operation of the next generation factory that we're building right now, a five second cycle time or less is, the design is capable of it. When you go through a radical new architecture, you go from being in A, I mean, I'd say probably China in particular is an A-plus on a moderately, you know, an advanced but still traditional car production system. They're really doing about as good as possible to do in a conventional scenario. So trying to get much below, you know, sort of below like 30 seconds would be extremely difficult. And you start getting into sort of impossible where you just, you have to be faster than a human could possibly move. So then the autonomous line, it really just needs to be robots moving really fast. And that's where you get to some five seconds. But we'll start off with getting a C in, instead of an A getting a C in a new architecture, But then the potential is there over time to move that up to an A-plus within an A-plus architecture.

Great, thank you very much. The next question is, how is Tesla positioning itself to flexibly adapt to global economic risks in the form of tariffs, political biases, etc.?

As Elon said, you know, we've been a pricing team for a while. We continue to mitigate global economic risks like tariffs and political biases by regionalizing parts supply near its factories in North America, Berlin and Shanghai. For example, in North America, our high volume vehicle programs have over 85% North America content and Shanghai vehicles have over 95% local content. Berlin has similar levels of regionalization as North America when you exclude the battery and we are working on regionalizing the battery as well. This is a pre-pandemic strategy that we accelerated post pandemic through supply diversification, dual sourcing, vertical integration, advanced analytics, and local partnerships to ensure supply chain resilience and production stability. Having said that, we are not 100% insulated, and these tariffs are higher on our low volume platforms than the high volume ones.

Yeah. In fact, there's no more vertically integrated car company than Tesla. I mean, we're taking most vertically integrated car companies since Henry Ford back in the day when they were doing mining iron and stuff and growing rubber trees. We're not growing rubber trees and mining iron yet, but we have a lithium refinery in South Texas, and it's the biggest lithium refinery outside of China, I think. Is that right? Yeah, I think so. But it's output potential would be the biggest. And we've got space to expand it if we need to build more. Right. And then we've got the cathode refinery in Austin next to the gigafactory. We're going to figure out what to do about the anode. It's an ongoing subject of discussion. The best of all possible ways would be figuring out how to have no anode. best part being no part. That's the dream of the lithium batteries to be anode, not have an anode. But either way, we better have the anode, the cathode, and the lithium, and the electrolytes, and the separator to make a cell. But, you know, there's no other car company that is building lithium refineries and cathode refineries we're ridiculously vertically integrated. And that's our best position to protect against supply chain disruptions. Laurie, do you want to talk about progress?

Yeah, certainly for in-house cells, we've multi-sourced every component. We have every path coming from at least two different countries, which is... We started this, the supply chain team and the engineering team worked together on this for the last couple of years to put that together. It's not something we did in a couple of months. This is years of work. So we're in a good position to take advantage of that. And the insourcing of lithium and cathode, they're the two most critical parts of the battery. That's right in our backyard, and we're totally insulated from oil. I think it's been operations. They need to be in operation. We also make our own cells, by the way.

So cell production, you make the anode, the cathode, the lithium, the electrolyte separator, the can, and then you got to put all that together in the cell factory. And there are entire companies that all they do is produce cells, but they don't do the other stuff, the refined lithium or the cathode or, you know. So our cell production is going quite well, and I think we're currently sort of the lowest cost per kilowatt hour in the US.

For all the cells we purchase in North America.

Yeah, so we have the lowest cost per kilowatt hour, all things considered. So the Tesla cell is the most competitive cell. Yeah, for a kilowatt hour put into a car, if it's a Tesla cell, it's lower cost than if it's a supplier cell.

Yeah, and the plan this year is to really build off that base. Getting to lowest cost is the hardest challenge for so many. It's relatively easy to build a flashy product that does one thing well. to build something at high volume and low cost is super difficult. And we're kind of using that as a base to then build off and add performance in different areas for new products coming out.

Yeah. So.

Can I comment? Yeah. To Ilan's point, there's a lot of advantages for regionalization. You know, the most important thing is we're not trying to work in capital for six to eight weeks on the ocean. If there's a design change, then everything that's in transit basically has to be scrapped. Secondly, port disruptions as we start during COVID can be very expensive because slight disconnects can shut down production. So then your only option is costly air expedite. It also gives us resilience and supply chain. If one region is down, we can bridge with others. It's more work to set up in the beginning, but it's critical to have when the need arises. Having said that, it's unrealistic to zero 100% regionalization across the board for specialized areas such as semiconductors. In such cases, our team works very closely with our partners to ensure We have strategic banks in place and a disruption doesn't impact production while we step stand up the the regional manufacturing for that particular commodity.

And you know, I'll say like on the rest of the vehicle, like the one was talking about with sales, we're also heavily vertically integrated and important gets, you know, internally castings. We recycle those in melt centers. The same thing with plastics, but it doesn't mean we're not exposed. You know, we do have. Some areas where we use rare earth magnets and we've been working for years to find alternative sources and bring those up as well as we have our induction machines. And as we've mentioned in the past, we're working on ferrite levers for some time. So like, as Karin said, you know, with our heavy regionalization percentages, we're definitely like the lowest, you know, exposed to this, but we're not completely new in this bi-volt dimension. Great.

Is it similarly related on the battery side? Does Tesla still have a battery supply constraint as noted on the Q4 call? And does that change the tariffs?

So this is Karin. We've been working very hard to expand battery cell production in the U.S. both with vendors and what Bonnie mentioned earlier with the 4680 program. And we're also working on moving the upstream supply chain for battery cells to the United States for several years. And that strategy is really starting to pay off now. As it stands right now, we're not constrained on battery cell supply for vehicles. The recent tariffs do pose some challenges to Tesla Energy, like our CFO mentioned earlier, but it's something we've been anticipating and we should be able to resolve in a timely fashion. We actually have a plan to find a place where we're executing towards it. We also have some other sources coming online to supplement the shortfall, and then, of course, we have the LFV production that's happening in-house. We have a slight disconnect of aligning the right cells with the right path. So that's the little bit of a puzzle that we have to solve internally. But as far as cells go, there's no shortage.

Great. Thank you very much. The next question is, did Tesla experience any meaningful changes in order inflow rate in Q1 relating to all the rumors of brand damage?

So in Q1, As mentioned earlier, we took the best-selling car of the last two years and ramped up all four of our global factories. And in less than eight weeks, we've already gotten to the rate of our previous Model Ys, the factories. So just kudos again to the team for the great job there. And despite the economic strain and negative articles in California in Q1, Tesla remained the best-selling car, not just EV. And additionally, we had a record number of test drives globally in Q1 as well. So interest remains high. And so right now we continue to see, you know, good interest still on the vehicle.

Yeah, I mean, Tesla's brought me into sort of the macro demand for cars, you know, so when there is economic uncertainty, people generally want to pause on buying during a major capital purchase like a car. But, you know, as far as absence of macro issues, we don't see any reduction in demand.

Correct. And that's where we continue to focus on affordability. And it's a fundamental focus there.

Yeah. Fantastic. Thank you, guys. The next question is regarding the Tesla Optimus Pilot line. Could you confirm if it is currently operational? If so, what is the current production rate of Optimus bots per week? Additionally, how might the recent tariffs impact the scalability of this production line moving forward?

Optimus, I just want to emphasize Optimus is still very much a development program. It's not a large volume production. That's why this year we'll make a few. We do expect to make thousands of Optimus robots, but most of that production is going to be at the end of the year. So almost everything in Optimus is new. There's not like an existing supply chain for the motors, gearboxes, electronics, actuators, really anything in the, almost anything in the Optimus apart from the AI for Tesla, the Tesla AI computer, which is the same as the one in the car. So When you have a new complex manufactured product, it'll move as fast as the slowest and least lucky component in the entire thing. And as a first order approximation, there's like 10,000 unique things. So that's why anyone who tells you they can predict with precision the production ramp of the truly new product. doesn't know what they're talking about. It is definitely impossible. So you go through this like series of constraints where it's like this part's the limiting factor, now that part's the limiting factor, now this part's the limiting factor, and multiply that by a thousand, basically. And then the rate of the production rate is decided by how quickly you can solve each of those problems. Now, you know, Optimus was affected, you know, by the magnet issue from China, because the Optimus actuators in the arm do use permanent magnets. Now, Tesla as a whole does not need to use permanent magnets, but when something is volume constrained, like an arm of the robot, then you want to try to make the motors as small as possible, and then So we did design in permanent magnets for those motors and those were affected by the supply chain, you know, by basically China requiring an export license to send out any rare earth magnets. So we're working through that with China. Hopefully we'll get a license to use the rare earth magnets. China wants some assurances that these are not used for military purposes, which obviously they're not. They're just going into a humanoid robot. so it's not a weapon system um but that that is an example of a challenge there um but i'm confident we'll overcome these issues um and we'll by the end of this year have thousands of office robots great

Thank you very much. And the last question we already covered earlier, whether Robotaxi was still on track for this year. So with that, we can move on to analyst questions. The first question is going to come from Pierre at Newstreet. Pierre, please unmute yourself.

Hey, guys, can you hear me? Yeah. That's great. I'm super excited to hear Robotaxi and Optimus becoming the very tangible future for Tesla. But I have actually a question on the legacy, not the legacy, but the current auto business. And when I look back at the ramp of Model 3 a few years ago, I really saw it as being the iPhone of cars, a new product, completely reinvented, very different user experience, vastly superior, impossible to too much for traditional competitors. And for the iPhone, it resulted in the high end of the smartphone market quadrupling in size and actually Apple taking 60% market share. And so when you look at the Model 3 and the Model Y today, I think they are still really vastly superior to any other cars. And I wonder why they've taken about 15% of their addressable market and not more, actually. So another way to put it is, why are there so many people still buying BMWs and Mercedes knowing that the Model 3 and the Model Y are out there and available? And I wonder if you're trying to solve that riddle internally, if you understand why What are these auto buyers who are not buying a Model 3 or a Model Y missing? If you have ideas of things you could do to address that, maybe there is enormous value left on the table there. That's what I'm wondering these days.

The reality is that in the future, most people are not going to buy cars. So it's kind of, you know, one could sort of say, look, if you want to continue with your phone metaphor, I mean, you can remember the days of the flip phones when there was, you know, 100 different flip phone designs. And I would, you know, the mistake that Lump Manufacturers made was to try to make up many different variants of a flip phone, which was a mistake. They should have made the iPhone. So. Because obviously everyone's going to want a smartphone, but in the beginning of the when. You know the iPhone came out. I was like, well, I can't believe these guys are not. Reacting as though. This this is death. But they didn't. They they kept making librarians and flip phones. Nokia Nokia, I think at one point was the most valuable company in the world or close to it. But they kept making flip phones. You know, trying to find another Mark McNeish movie. Somebody wants a phone of a different style. Maybe this different color or whatever it is. Nope, they just want. A super intelligent phone. I can do everything. Just one. So. I said this many I said this many years ago. In the future, in the not too distant future, buying a gasoline car that is not autonomous will be like riding a horse while using a flip phone. Some people still do it, but it's rare.

Great. Thank you. The next question comes from Emmanuel Rosner at Wolf. Emmanuel, please unmute yourself.

Great. Thanks for taking my question. So Ilan, the public version of the FSD software still has a decent amount of, I guess, intermittent human interventions that are required. So what's still required for the software on your end to get to a level where it doesn't need to be supervised? And I'm asking that in the context of obviously the June launch being in the next couple of months, what still needs to happen?

And we are working on a number of items too. Yeah. I mean, we are aware of the interventions that are happening in the public bus, and that's why we are hardcore burning it down and really just picking some initial launch city helps us focus on like solving all the issues that you'd face here. For example, like this focusing on Austin, we're not like solving all the issues that customers in Boston or somewhere else might face. And then here we just like a big list of all the issues, just burn it down. And that's what the team is working on along with other sort of like redundancy issues. For example, if, One of the computers goes down, right down the customer fleet, it would throw the red hands and ask you to take over, but we don't want that kind of situation. You're solving both the reliability issues of the autonomy software and also the reliability issues of the system software together for Austin.

We just worked through a long tale of unusual interventions. And these are really very, like I was saying earlier, intervention every 10,000 miles. I mean, that's a lot of driving you've got to do to even find one case within Athens.

Yeah, and some interventions are happening due to systematic missing functionality. For example, for handling emergency vehicles correctly, you don't need to consume audio as an input, but then the customer-facing versions don't have audio input, but the version that's going to be in Austin will have audio input and so on.

Okay, but would you have like remote operators, for example?

I mean, every now and then if a car gets stuck or something, someone will like, you know, unblock it. But it's just because we are a bit conservative and tend towards more safety than even if we get stuck every now and then, we do have remote support. But it's not going to be required for safe operation. If anything, it's just required for more availability.

Anyway, it's only a couple months away, so you can just save for yourself in a couple months in Austin.

Great. Our next question comes from Edison at Deutsche Bank. Edison, please unmute yourself.

Hi, thank you very much for the question. So I want to ask about the Optimus supply chain going forward. You mentioned very fast ramp up What do you envision that supply chain looking like? Is it going to require many more suppliers to be in the US now because of the tariffs? How does one kind of think about what needs to happen there?

I have to see how things settle out. I don't know yet. I mean, so some things we're doing as we already talked about, We've already taken steps to localize our supply chain. We're more localized than any other manufacturer. And we have a lot of things on our way to increase the localization to reduce supply chain risk associated with geopolitical uncertainty. Did you have a follow-up?

Yeah. I wanted to come back actually to the robo-taxi then. do you have a sense on and how how many cars or how how big the scale will be initially and how that might ramp up i know you're targeting you know millions of vehicles in the second half kind of of next year but initially at launch how many vehicles would be reasonable and is it going to be as simple as if one goes to austin let's say in late june or july you'll be able to to request yeah um

We're still debating the exact number to start off on day one, but it's, I don't know, maybe 10 or 20 vehicles on day one. And watch it carefully. They scale it up rapidly after that. So, you know, we want to make sure that you're paying very close attention the first time this happens. But yeah, you'll be able to end of June or July, just go to Washington and order a Tesla or autonomous driver.

Great. The next question comes from George at Canaccord.

Hi. Thank you for taking my question. It has to do with FSD pricing. Can we envision when you launch unsupervised FSD that there could be sort of a multi-tiered pricing approach to unsupervised versus supervised similar to what you did with autopilot versus FSD in the past? Thank you.

I mean, this is something which we've been thinking about. I mean, just so you know, for people who have been trying FSD and who've been using FSD, they think even the current pricing is too cheap because for 99 bucks, you're basically getting a personal show.

Yeah. I mean, we do need to give people more time to, if they want to look at, like a key break point is, can you read your text messages or not?

Yes.

Can you write a text message or not? Because obviously people are doing this, by the way, with unautonomous cars all the time. And if you just go for a drive down the highway and you'll see people texting while driving, you know, doing 80 miles an hour.

Putting on makeup on the same time.

Yeah. Putting on makeup, doing their hair with the mirror down and texting and driving at 80 miles an hour. This is a common occurrence. so um people eating lunch you know you name it um shaving you know um so uh anyway but right now the car is very consistent that you pay attention to the road um so which reduces the value somewhat um because it's very rigorous about you paying attention to the road And we'll gradually lighten up on that with, you know, every few weeks or every month. We'll relax that a little bit, so you can be more and more able to do things you want to do and not have the car to manage your reach and attention. So that value, it'll really be profound when you can basically do whatever you want. including sleep. And then that $99 is going to seem like the best $99 you've ever spent in your life. And George, do you have a follow-up?

My follow-up is about geographic expansion. Just maybe discuss additional markets. There's been some news around India recently that you could launch this year and next. Thank you.

So, yeah, I mean, we've been working on getting into India. India is a very hot market. And especially the current, and I don't want to talk just about tariffs, but the current tariff structure within India is that any car which we send in is subject to 70% tariff, also like a 30% luxury tax on it. So the same car which we're sending is like 100% more expensive than what it is. So that creates a lot of anxiety is like, you know, people feel, okay, they're paying too much for the car. And by the way, we're not getting the money. The local government is getting the money. And that's why we've been very careful trying to figure out when is the right time. Like I said, we are working on it. It would be a great market to enter because India has a big middle class, which we would want to tap in. And that is the market which we want to be in. But again, these kind of things create a little bit of tension which we're trying to work around.

Great, thank you so much. The next question comes from Adam Jonas at Morgan Stanley.

Go ahead Adam.

We can't hear you, Adam, so maybe we'll put you back in the queue and we'll move to Colin Langan from Wells Fargo while Adam figures out his audio. Colin, please unmute yourself.

Oh, great. Do you hear me? Yes. Oh, great. You know, you're still sticking with the vision-only approach. A lot of autonomous people still have a lot of concerns about, you know, sun glare, fog, and dust. Any color on how you anticipate on getting around those issues? Because my understanding, it kind of blinds the camera when you get glare and stuff.

Actually, it does not blind the camera. We use an approach which is direct photon count. So when you see a processed image, so the image that goes from the sort of photon counter So the silicon photon counter that goes through a digital signal processor or image signal processor. That's that's normally what happens, and then that then the image that you see looks all washed out because if it's you point the camera at the sun it. The post processing of the photon counting. Washes things out. It actually adds noise. So. Part of the breakthrough that we made some time ago was to go with direct photon counting and bypass the image signal processor. And that and then you can drive pretty much straight at the sun and you can also see in what appears to be the blackest of night. And and then here in fog we can see as well as people can probably better, In fact, they're probably slightly better than people, but than the average person anyway. And.

Yeah. So the camera is able to see when there's direct glare on it. Yeah. OK. And then just there are obviously media reports the other day that the affordable model was delayed. Doesn't sound like that's correct. Those reports also talked about it being more of a cheaper version of the Model Y? Any color on what we should expect? Is it a cheaper version of Model Y or is it actually going to be a design change with it?

So I think Lars already covered it in answering one of the say.com questions. The real thing which we are trying to focus on is affordability. And using our existing lines, there's always limitations when you're using existing lines as to how many different form factors can you Big two. So that's the way I would say you should think about it. And I don't know if Lars, anything more to add?

Yeah, I think I said this before in other calls. Like, you know, with the recent upgrades to the Model 3 and the worldwide platforms, we made some pretty great cars at pretty great prices. And we added a bunch of features and things like that. I think it's easy to consider that, you know, moving forward, Tesla doesn't make bad cars. And we always make, you know, our intent is not to make a car that is any worse than any car we've ever produced in the past. And so

the models that come out in the next months will will be built on our lines and will resemble and form and shape the cars we currently make and you know the key is that they'll be affordable and you'll be able to buy one great uh we might have time for one last question adam we'll try your audio again um you want to try to unmute yourself adam all right unfortunately still not working um There you go.

Sorry, guys. Technology. Go ahead, Alan. Yeah, hi. In the February 28th Joe Rogan interview, Elon, you advocated for a ramp in tariffs to give people time to adjust. Otherwise, you said the system would break and bad things would happen. So are things breaking yet? And if the tariffs as announced remain in place, when would things start breaking?

Well, at the risk of stating the obvious, I'm not, I'm not, I mean, I'm, I'm one of many advisors to the president. I'm not the president. So, um, and, uh, but I, you know, I've made my opinion clear to the president and, um, that, uh, you know, and, and other people made their opinion clear to the president. He is there, he listened, he talks to many people and he makes his decision. And, um, You know, I'm hopeful that the President will observe whether my predictions are more accurate than the predictions of others, and perhaps weigh my advice differently in the future. We shall see. But, you know, I'm an advocate of, you know, predictable tariff structures, and generally I'm an advocate for, you know, free trade and lower tariffs. Now, one does need to take a look at where, you know, if some country is doing something predatory with tariffs or is providing extreme support for, if a government is providing extreme financial support for a particular industry, then you have to do something to counteract that. So, but I think that that's on a case-by-case basis strategically. But, you know, the president is the elected representative of the people and is fully within his rights to do what he would like to do.

Okay, Elon. I respect that. Just as a follow-up, and thanks again, between China and the United States, who, in your opinion, is further ahead on the development of physical AI, specifically on humanoids?

uh and and also drones i'd be interested in and is it even close and kind of how i i yeah seriously well i think you know the answer uh i mean yeah you know a friend of mine nabal made this you know posted on x i reposted it um i think a prophetic statement which is any country that cannot manufacture its own drones is doomed to be the vassal state of any country that can. And we can't, America cannot currently manufacture its own drones. But that's it, Ken. Unfortunately. So China, I believe, manufactures about 70% of all drones. And if you look at the total supply chain, China has almost 100% of drones have a supply chain dependency on China. So China is in a very strong position. And, you know, here in America, we need to shift more of our people and resources to manufacturing because this is, you know, I have a lot of respect for China because I think China is amazing, actually. But the United States should not have such a severe dependency on China for drones and be unable to make them unless China gives us the parts, which is currently the situation. With respect to humanoid robots, I don't think there's any company in any country that can match Tesla. Tesla and SpaceX are number one. So. And then now I'm a little concerned that. And on the leaderboard. Ranks two through 10 will be Chinese companies. But I'm confident that rank one will be Tesla.

Great. Well, I think that's unfortunately all the time we have for today. We appreciate all your questions and look forward to talking to you next quarter. Thank you very much and goodbye.