Tesla, Inc.

Good afternoon, everyone, and welcome to Tesla's third quarter 2025 Q&A webcast. My name is Travis Axelrod, head of investor relations, and I'm joined today by Elon Musk, Vebav Taneja, and a number of other executives. Our Q3 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. We urge shareholders to read our definitive proxy statement, which contains important information about the matters we voted on at the 2025 Annual Meeting. 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 has some opening remarks. Elon?

Thank you. We're at a critical inflection point for Tesla and our strategy going forward as we bring AI into the real world. I think it's important to emphasize that Tesla really is the leader in real world AI. No one can do what we can do with real world AI. I have pretty good insight into AI in general, I think that Tesla has the highest intelligence density of any AI out there in the car. And that is only going to get better. And really just at the beginning of scaling quite massively, full self-driving and robo-taxi and fundamentally changing the nature of transport. I think people just don't quite appreciate the degree to which this will take off. Honestly, it's going to be like a shockwave. because the cars are all out there there are millions of cars out there that with a software update become full self-driving cars and we're making a couple million a year and in fact with the advent of with with what we see now as as a clarity on achieving full self-driving unsupervised full self-driving i should say um i feel confident in expanding tesla's production um so that is that is our intent to expand uh as quickly as we can uh our future production um so i was i was ready to do that until we had clarity on on uh achieving uh unsupervised full self-driving. But at this point, I feel like we've got clarity, and it makes sense to expand production as fast as we reasonably can. We're also making huge impact on the energy sector with battery storage. So with both the Powerwall and especially with the Megapack, we are dramatically improving the ability to generate more energy from the grid. Let me sort of talk a little bit about that, which is, if you look at total US energy capability, for example, there's roughly a terawatt of continuous power available in the US, but the average usage over a 24-hour cycle is only half a terawatt because of the Big difference between day and night usage. If you buffer the energy with batteries, you can effectively double the energy output of the United States just with batteries building no incremental power plants. And it's very difficult to build power plants. So they take a long time. There's a lot of permitting. And it's not an industry that's used to moving fast. So we see the potential there for Tesla battery packs to... greatly improve the energy output per year for any given grid, US or otherwise. We're also on the cusp of something really tremendous with Optimus, which I think is likely to be or has potential to be the biggest product of all time. And it's a difficult project. And it's worth noting that it's not like it's just automatic. I'm unaware of any robot program by Ford or GM or, you know, by US sort of car companies. People like, I think, maybe think of Tesla as a car company. We mostly make cars and battery packs. But it's not just like an obvious fall off a log thing to make Optimus, but we do have the ingredients. of real world ai and exceptional electrical mechanical engineering capabilities and the ability to scale production which i don't think anyone else has all of those ingredients um so uh yeah with with version 14 of the uh of self-driving which people you can see the reactions of people online. They're quite amazed. Actually, anyone in the U.S. can get version 14 if they just go and select, I want the advanced software in their car. So if you're listening right now and you'd like to try it out, just go in settings and say, I want the advanced software, and you will get version 14. And yeah, so on the mega pack front we we unveiled mega block mega pack three um we also have exciting plans for mega pack four mega pack four will incorporate a lot of the um a lot of what is normally in a substation uh and be able to output uh at uh probably 35 kilovolts uh directly so this this greatly improves our ability to deploy Megapack because it's not dependent on building a substation of 335 kV for Megapack 4. So that'll be next. That's the engineering priority for Megapack. And we look forward to unveiling Optimus V3, probably in Q1. I think it'll be ready for... to show off, and that I think is going to be quite remarkable. It won't even seem like a robot. It'll seem like a person in a robot suit, which is kind of how we started off with Optimus. But it'll seem so real that you'll need to poke it, I think, to believe that it's actually a robot. And obviously, the real world intelligence we've developed for the car, most of that transfers to Optimus. So it's a very good starting point. In conclusion, we're excited about the updated mission of Tesla, which is sustainable abundance. So going beyond sustainable energy to say sustainable abundance is the mission, where We believe with Optimus and self-driving that you can actually create a world where there is no poverty, where everyone has access to the finest medical care. Optimus will be an incredible surgeon, for example. And imagine if everyone had access to an incredible surgeon. Of course, we need to make sure Optimus is safe and everything, but I do think we're headed for a world of sustainable abundance, and I'm excited to work with the Tesla team to make that happen.

Great. Thank you very much, Elon. Vebab also has some opening remarks.

Thanks, Thomas. Q3 was a special quarter at multiple levels. We set new records not just for deliveries and deployments, but also around a range of financial metrics from total revenues, energy gross profit, energy margins, to free cash flow. This was the result of continued confidence of our customers in our products and the relentless efforts by the Tesla team. The strength in deliveries was attributed to strong performance across all regions. Greater China and APAC were up sequentially 33% and 29% respectively. North America was up 28% while EMEA was up 25%. The pace in deliveries was the function of continued excitement around the new Model Y. We had previously talked about 2025 being the year of the Y and have since delivered on that promise with the new Model Y released in Q1, followed by Model Y long wheelbase, and performance, and more recently, Standard Y in North America and EMEA. We're now operating our Robotaxi in two markets, Austin and most Bay Area cities. We've already expanded our coverage area in Austin three times since the initial launch and are on pace to continue expanding further. Unlike our competitors, our Robotaxi fleet blends in the markets we operate in since they don't have extra sensor sets, or peripherals which make them stick out. This is an underappreciated aspect of our current vehicle offerings, which are all designed for autonomous driving. We feel that as people experience the supervised FSD at scale, the demand for our vehicles, like Elon said, would increase significantly. On the FSD adaption front, we've continued to see decent progress, However, note that total paid FSD customer base is still small, around 12% of our current fleet. We're working with regulators in places like China and EMEA to obtain approval so that we can get FSD in those regions as well. Now, covering a little bit on the financial side, automotive revenues increased 29% sequentially in line with the growth in deliveries. While regulatory credits declined sequentially, we entered into new contracts and continued delivery on previously entered contracts. Our automotive margins, excluding credits, increased marginally from 15% to 15.4, which was attributed to improvements in material cost and better fixed cost absorption due to higher volumes. The energy storage business continued to deliver with record deployments, gross profit, and margins. As discussed before, this business has a bigger impact from tariffs as measured by percentage of COGS. Since currently all sales procured are from China while we're still working on other alternatives. However, as the ramp of mega factory Shanghai is happening, this is helping us avoid tariffs because we are using this factory to supply the non-US demand. Like Elon said, you know, grid scale storage The only way we can get to electricity fastest is by using storage. The other thing to keep in mind is we are seeing headwinds in this business given the increase in competition and tariffs. The total tariff impacts for Q3 for both businesses was in excess of 400 million, generally split evenly between them. Services and other demonstrated a marked improvement sequentially. This was a function of improvements primarily in our insurance and service center businesses. Note that while small, our robo-taxi costs are included within services along with our other businesses like paid supercharging, used car, parts and merchandise sales, etc. Our operating expenses increased sequentially. The largest increase included in restructuring and other related to certain actions undertaken to reduce costs and improve efficiency to convergence of our AI chip design efforts. Additionally, we incurred legal expenses related to proceedings in certain legal cases, as well as incremental costs incurred in preparation for a shareholder meeting. Such costs are recorded within SG&A. Further, our employee-related spend is increasing, especially in R&D, as we have recently granted various performance-based equity awards to employees working on AI initiatives, and therefore such spend will continue to increase going forward. Our other income decreased sequentially, primarily from mark-to-market adjustments on BTC holdings, which was a much smaller gain of $80 million in Q3 versus $284 million in Q2. with the rest of the movement attributable to FX movements in the quarter. Our free cash flow for the quarter was approximately $4 billion, which was yet another record. Our total cash and investments at the end of the quarter were over $41 billion. On the CapEx front, while we are expecting to be around $9 billion for the current year, we're projecting the numbers to increase substantially in 2026 as we prepare the company for the next phase of growth in terms of not just our existing businesses, but our bets around AI initiatives, including Optimus. In conclusion, note that bringing AI into real world is hard, but we have never shied away from doing what is hard. We are extremely excited about the future and are laying down the foundation, the benefits of which will be realized over years to come. I would like to end by thanking the Tesla team, our customers, our investors, and support us for the continued belief in us.

Thank you very much, Vaibhav. Now let's go to investor questions. From say.com, the first question is, what are the latest Robotaxi metrics, fleet size, cumulative miles, rides completed, intervention rates, and when will safety drivers be removed? What are the obstacles still preventing unsupervised FSD from being deployed to customer vehicles?

I'll start off with that and then Shaq can elaborate. But we are expecting to have no safety drivers in at least large parts of Austin by the end of this year. So within a few months, we expect to have no safety drivers at all, at least in parts of Austin. We're obviously being very cautious about the deployment. So our goal is to be actually paranoid about deployment because obviously even one accident will be front page headline news worldwide. So, um, it's better for us to take a cautious approach here. Um, but we do expect to have no, no safe drivers in the car, um, in Austin, uh, within a few months. I think that's perhaps the most important, uh, data point. And then we, we do expect to be, uh, operating a robo taxi in, uh, I think about, uh, eight to 10 metro areas by the end of the year. It depends on various regulatory approvals. But you can actually, I think most of our regulatory applications are online. You can kind of see them because they're public information. But we expect to be operating in Nevada and Florida and Arizona by the end of the year. Ashok?

We continue to operate our fleet in Austin without anyone in the driver's seat, and we have covered more than a quarter million miles with that. And then in the Bay Area, where we still have a person in the driver's seat, because of the regulations, we crossed more than a million miles. And we continue to see that the fleet, the robotics fleet, works really well. Customers are really happy, and there's no notable issues. On the customer side, customers have used FSD supervised for a total of 6 billion miles as of yesterday. So that's like a big milestone. And overall, the safety continues to be very good. And as Elon mentioned, we are on track to remove the person from inside the car altogether, starting with Austin.

Great. The next question is, What is the demand and backlog for Megapack, Powerwall, solar, or energy storage systems? With the current AI boom, is Tesla planning to supply power to other hyperscalers?

Thanks. Demand for Megapack and Powerwall continues to be really strong into next year. We received very strong positive customer feedback on our MegaBlock product, which will begin shipping next year out of Houston. And we're seeing remarkable growth in the demand for AI and data center applications as hyperscalers and utilities have seen the versatility of the Megapack product to increase reliability and receive and relieve grid constraints, as Ilana was talking about. We've also seen a surge in residential solar demand in the U.S. due to policy changes, which we expect to continue into the first half of 2026 as we introduce the new solar lease product. And we also began production of our Tesla residential solar panel in our Buffalo factory, and we will be shipping that to customers starting Q1. The panel has industry leading aesthetics and shape performance and demonstrates our continued commitment to US manufacturing.

Great, thank you, Mike. Unfortunately, the next question is related to future products. This is not the appropriate venue to cover that, so we're going to have to skip it. The question after that is, What are the present challenges in bringing Optimist to market considering app control software, engineering hardware, training general mobility models, training task-specific models, training voice models, implementing manufacturing, and establishing supply chains?

Yeah, I mean, bringing Optimist to market is an incredibly difficult task, to be clear. It's not like some walk in the park. at some point, I mean, at this actually technically Optimus can walk in the park right now. Um, and we do have Optimus robots that walk around our offices, uh, at our engineering headquarters in Palo Alto, California, uh, basically 24 hours a day, seven days a week. Um, so any visitors that come by, you actually, um, you can, you can stop to stop one of the Optimus robots and, uh, ask it to take you somewhere. And it'll literally take you to that meeting room or that location in the building. Um, So, um, I don't want to downplay the difficulty of optimists. It's a, it's an incredibly difficult thing, especially it's difficult to create a, um, a hand that is as dexterous and capable as the human hand, which is an incredible, the human hand is an incredible thing. Um, that the more you study the human hand, the more incredible you realize the human hand is and, and why you need five, you know, four fingers in the thumb. Why the, why the fingers have certain degrees of move of freedom, um, why the various muscles are of different strengths, the fingers are of different lengths, and it turns out actually that those are all there for a reason. And so making the hand and forearm, because most of the actuator, just like the human hand, the muscles that control your hand are actually primarily in your forearm. The optimus hand and forearm is an incredibly difficult engineering challenge um it's i'd say it's more difficult than the rest of from an electromechanical standpoint the forearm and hand are it's more difficult than the entire rest of the robot um so but really in order to have a useful generalized robot you you do need this you do need an incredible hand and and you need the real world ai um And you need to be able to scale up that production to have it be relevant, because it's not relevant if it's just a few hundred robots. So you need to be able to make Optimus robots at volumes comparable to vehicles, if not significantly higher. So if you're trying to make a million or something per year, trying to make a million Optimus robots per year, that manufacturing challenge is immense, considering that the supply chain doesn't exist. So with cars, you've got an existing supply chain. With computers, you've got an existing supply chain. With a human or a robot, there is no supply chain. So in order to manufacture that, Tesla actually has to be very vertically integrated and manufacture very deep into the supply chain, manufacture the parts internally. There just is no supply chain. Um, so, uh, this is, this is the kind of thing where I'm like, if I put myself in the position of a startup trying to make an off a humanoid robot, I'm like, I don't know how to do it without, um, an, an immense amount of manufacturing technology. Um, so that's, that's why I think like Tesla's in some almost a unique, I think, I think unique position when you consider manufacturing technology, scaling, um, real world AI. and a truly dexterous hand. Those are generally the things that are missing when you read about other robots, that they just don't have those three things. So I think we can achieve all those things, those three things, with an immense amount of work. And that is the game plan. You know, like my fundamental concern with regard to how much voting control I have in Tesla is if I go ahead and build this enormous robot army, can I just be ousted at some point in the future? That's my biggest concern. That is really the only thing I'm trying to address with this. So it's called compensation, but it's not like I'm going to go expend the money. It's just, you know, if we build this robot army, do I have at least a strong influence over that robot on me? Not control, but a strong influence. That's what it comes down to in a nutshell. Like I don't feel comfortable building that robot on me if I don't have at least a strong influence.

Great, thank you. We've already covered Robotaxi expansion. Unfortunately, the question after that is another future product question, so we're going to have to skip that. Um, the next one though is, can you update us on the $16.5 billion Samsung chip deal in Taylor? Given the importance of semiconductors to autonomy and Tesla's AI driven future, what gives you confidence Samsung can fulfill AI six at Tesla's timelines and achieve relatively better yields and costs versus TS TSMC.

Okay. So I'm going to, I'm going to give quite a long answer to this question. Cause it's cause, uh, I have to unpack this question and then, and then answer the unpacked version. Um, So first of all, I have nothing but great things to say about Samsung. They're an amazing company. And Samsung, it is worth noting, does manufacture our AI4 computer and does a great job doing that. So now with the AI5, and here's, I need to make a point of clarification relative to some comments I've made publicly before, which is we're actually going to focus both TSMC and Samsung initially on AI5. So the AI5 chip design by Tesla is, I think it's an amazing design. I've spent almost every weekend for the last few months with the chip design team working on AI-5. And I don't hand out praise easily, but I have to say that I think the Tesla chip team is really designing an incredible chip here. This is, by some metrics, the AI-5 chip will be 40 times better than the AI-4 chip. Not 40%, 40 times. Because we have a detailed understanding of the entire software and hardware stack. So we're designing the hardware to address all of the pain points in software. So I don't think there really isn't anyone that's doing this, I think the entire stack, all the way through real world, calibrating against the real world where you've got cars and robots in real world. We know what the chip needs to do and we know what, Just as importantly, we know what the chip doesn't need to do. To give you some examples here, with the AI5, we deleted the legacy GPU or the traditional GPU, which is in AI4. But AI5 does not have... We just deleted the legacy GPU because it basically is a GPU. So we also deleted the image signal processor. And this is like a long list of deletions that are very important. As a result of these deletions, we can actually fit AI5 in a half reticle with good margin for the traces from the memory to the, the, the trip, the Tesla trip accelerators, um, the arm, the arm CPU course, um, and, um, and the PCI X, uh, sort of, uh, the PCI blocks. So, uh, this, this is a beautiful chip. Um, I've poured so much life energy into this show personally, and I'm confident this is going to be a winner next level. So it makes sense to have both Samsung and TSMC focus on AI5. So technically, the Samsung FAB has slightly more advanced equipment than the TSMC FAB. These will both be made in the US. smc in arizona samsung in texas um and uh but but it's uh it we're gonna make starting off just to be confident of having our our goal explicit goal is to have an oversupply of ai5 chips um because if we if we have too many f5 chips for the cars and and robots we can always put them in the data center So we already use AI4 for training in our data center. So we use a combination of AI4 and NVIDIA hardware. So we're not about to replace NVIDIA, to be clear, but we do use both in combination, AI4 and NVIDIA hardware. And the AI5 access production we can always put in our data centers. Yeah, NVIDIA keeps improving. The challenge that they have is that they've got to satisfy a lot of requirements from a lot of customers, but Tesla only has to satisfy requirements from one customer, that's Tesla. That makes the design job radically easier and means we can delete a lot of complexity from the chip. I can't emphasize how important this is. So when you look at the various logic blocks in the chip, as you increase the number of logic blocks, you also increase the interconnections between the logic blocks. So you can think of it like there's just highways. How many highways do you need to connect the various parts of the chip? And especially if you're not sure how much data is going to go between each logic block on the chip, then you kind of end up having giant highways going all over the place. It becomes an almost impossibly difficult design problem. And NVIDIA has done an amazing job of dealing with almost an impossibly difficult set of requirements. But in our case, we're going for radical simplicity. And the net effect is that I think AI5 will be the best performance per watt, maybe by a factor of two or three, and the best performance per dollar for AI maybe by a factor of 10. So, you know, that's, you know, we'll have to, the proof's in the pudding. So obviously we need to actually get this chip made and made at scale. But that's what it looks like.

Great. Thank you, Elon. We've already covered unsupervised FSD. So the next question is, instead of trying to replace hardware three with hardware four, why not give an equal incentive to trade in for a new vehicle?

Yeah, we've not completely given up on hardware 3. However, over the last year, we've offered the customers the option to transfer FSD to their new vehicle, which at times we've been running some promotions. If they got FSD, they can get better preferential rates. So we've been definitely taking care of this, but we do want to solve autonomy first And then we'll come back with a way to take care of these customers. These customers are very important. They were the early adapters. For what it's worth, my daily commuter is a hardware three car, which I use FSD on a daily basis. So we will definitely take care of you guys.

Great.

Thank you. In addition, once the V14 release series is fully done, we are planning on working on a V14 Lite version for hardware three. probably expected in Q2 next year.

Awesome. Thanks, Ashok. Alrighty. Our final question from Say is, how long until we see self-driving Tesla semi-trucks? And could you see this technology replacing trains?

Yeah. So I guess I'll start with that in terms of the semi-production plan and schedule. So the factory is going on schedule. We've completed the building and are installing the equipment now. We've got our fleet of validation trucks driving on the road. We'll have larger builds towards the end of this year, and then our first online builds in the first part of next year, ramping into the Q2 timing with real volume coming in the back half of the year. So that's going quite well, and that's the first step to obviously getting autonomous trucks on the road. In terms of trains, they're really great for long point-to-point deliveries. They're super efficient, but know that last mile the load unload uh can be better served for in shorter distances with autonomous semis and that would be great and so we do expect that to probably shift in as we you know really as elon said change the way transportation is considered um and so we're looking forward to that timeline and ashok i know you uh can can take the full self-driving part currently the team is like super focused on uh solving for passenger vehicle autonomy that said the same technology will

quite easily to the Summitrack once we have a little bit of data from the Summitracks.

Great. And now we will move over to analyst questions. The first question comes from Emmanuel at Wolf. Emmanuel, please go ahead and unmute yourself.

Great. Thanks so much. Hi, everybody. So, Ilan, you talked about expanding production of vehicles as fast as possible now that you have confidence in the unsupervised autonomy. How should we think about that in the context of your existing capacity of 3 million units? Is that where you're hoping to get volume to? What sort of timeline are we talking about? And would this require some level of boosting or incentivizing demand? Like would this basically be prioritizing volume over near-term profitability, given the longer-term opportunity?

Well, our capacity isn't quite 3 million, but it will be 3 million at some point. Aspirationally, it could be 3 million within, we could probably hit an annualized rate of 3 million within 24 months, I think, maybe less than 24 months. Bearing in mind there's an entire supply chain, like a vast supply chain, that's got to also move in tandem with that. So we're going to expand production as fast as we can and as fast as our suppliers can keep up with it. And then we're going to think about where do we build incremental factories beyond that. The single biggest expansion in production will be the CyberCab, which starts production in Q2 next year. That's really a vehicle that's optimized for full autonomy. It, in fact, does not have a steering wheel or pedals and is really an engineering optimization on minimizing cost per mile, like fully considered cost per mile of operation. So that's, you know, for the economy, For our other vehicles, they still have a little bit of the horseless carriage thing going on where, obviously, if you've got steering wheels and pedals and you're designing a car that people might want to go very fast acceleration and tight cornering, like high performance cars, then you're going to design a different car than one that is optimized for a comfortable ride but doesn't expect to go past 85 or 90 miles an hour. and it's just aiming for a gentle ride the whole time. That's what CyberCap is. Do I think we'll sacrifice margins? I don't think so. I think the demand will be pretty nutty. Here's the killer app, really, what it comes down to is, can you text while you're in the car? And if you tell someone, yes, the car is now so good, You can be on your phone and text the entire time while you're in the car. Anyone who can buy the car will buy the car. End of story. Um, so, um, that's what everybody wants to do. In fact, not everyone wants to, they do do that. And that's why, in fact, the reason you've seen like there's been an uptick in accidents, uh, pretty much worldwide is because people are texting and driving. Um, so, uh, autopilot actually dramatically improves the safety here. Um, because if somebody is looking down at their phone, they're not driving very well. Um, so that's, that's really the game changer. At this point, I feel 100% confident that we can solve unsupervised full self-driving at a safety level much greater than human. We've released 14.1. We've got technology roadmap that's i think pretty amazing we'll be adding reasoning to the car uh our weld simulator for sim for reinforcement learning is is pretty incredible like our like our when you see it that the tesla reality simulator um it's you can't tell if a screen the video that's generated by the tesla reality simulator and the actual video looks exactly the same um So that allows us to have a very powerful reinforcement learning loop to further improve the Tesla AI. We're going to be increasing the parameter count by an order of magnitude. That's not in 14.1. There are also a number of other improvements to the AI just that are quite radical. So it's... this car will feel like it is a living creature. That's how good the AI will get with the AI for computer with this before AI five. And then, and then AI five, like I said, is by some metrics, 40, 40 times better. Um, let's just say safely, it's a 10 X improvement. Um, so it might almost be too much intelligence for a car. I do wonder like how much intelligence should you have in a car? It might get bored. Um, actually, um, And then one of the things I thought like, well, if we got all these cars that maybe are bored, well, while they're, while they're sort of, if they are bored, we could actually have a giant distributed in inference fleet and say like, well, if they're not actively driving, let's just have a giant distributed inference fleet. Um, you know, at some point, if you've got like tens of millions of cars in the fleet, or maybe at some point, a hundred million cars in the fleet, um, and, um, let's say they had. At that point, I don't know, a kilowatt of high-performance inference capability, that's 100 gigawatts of inference distributed with cooling and power conversion taken care of. So that seems like a pretty significant asset.

Great. Thanks, Elon. The next question comes from Adam from Morgan Stanley. Adam, please feel free to unmute yourself. Adam, go ahead and ask your question. Seems like we might be having some audio issues with Adam, so we'll come back to you. The next question will then come from Dan from Barclays.

Hi, good evening. Thank you for taking the question. Elon, I know that Tesla's really focused on with master plan for bringing AI into the physical world. And I think we've seen over the past, this willingness for Tesla to engage and go into new markets, new TAMs. So when you think about the growth prospects, how do we define the areas that are really within Tesla's core competency Versus where do you draw the line for markets or AI applications that are outside of Tesla's core competency?

Actually, I'm not sure what you mean by AI applications outside of Tesla's core competency. But we kind of. we didn't have any of these core competencies when we started, you know? Um, so it's like we had zero core competencies, total competency of zero actually. Um, so I mean, you can think of Tesla as like, I don't know, a dozen startups in one company. Um, you know, and, and, uh, I've initiated every one of those startups. So it's, uh, it wouldn't use to make battery packs, stationary battery packs, but now we're do. make them for the home, make them for utility scale with Powerwall Megapack. We've created the supercharger network globally. No one else has created a global supercharger network. In fact, our North American supercharger network is so good that basically every other manufacturer in North America has converted to our standard and uses the Tesla supercharger network. But if it was so easy, why don't they just do it? Um, and, uh, the chip design team, um, started that from scratch. The Tesla AI software team was started from scratch. Um, I literally just say, Hey, we're going to start this thing. I posted on Twitter now X, and then, you know, join us if you'd like to build it. Um, in fact, uh, Ashok was, I believe the first person I interviewed for the Tesla autopilot team, which we're now called Tesla AI software team. because it is the ad software team. So, you know, it's core competencies created while you wait. And, you know, optimists at scale, it is the infinite money glitch. It's like, this is a, it's difficult to express the magnitude of, like, if you've got something like that, Optimus, I think, could probably achieve 5x the productivity of a person per year because it can operate 24-7. It doesn't even need to charge. It can operate it tethered, so it's plugged in the whole time. That's why I call it, if you're true of sustainable abundance, where working will be optional. You know, there's a limit to how much AI can do in terms of enhancing the productivity of humans. But there is not really a limit to AI that is embodied. That's why I call it the infinite money glitch.

I mean, one thing which I'll further add is, I mean, people forget, like, our first iteration of Autopilot was 10 years back. So, you know, Elon had started this way back in the day.

We've got the tweets to prove it.

Exactly. And then even on the Optimus side, as much as people think, okay, this is a new thing, I still remember, was it four plus years back, we were in a finance meeting with Elon, and Elon said, hey, our car is a robot on wheels. And that's where we started developing. In fact, most of the engineering team, which is working on Optimus, has come from the vehicle side. And that's why, you know, when we talk about manufacturing process, we have the wherewithal because the same engineers who worked back in the day on drive units are working on actuators now. So that's where we can, if there is any company which can do it at scale, that is going to be us.

But we also have actually added a lot of new engineers as well to the team. So there's actually a lot of the credit for the Optimus engineering is actually also new engineers many of them that are just out of college actually yeah uh so uh the optimus engineering uh team is a very talented engineering team um i'd say like wow actually so um and uh you know the optimus reviews at this point are that there's the engineering review um and then there's the manufacturing review being done simultaneously um with an iterative loop between engineering design and and manufacturing because then we see we we design something and we say like oh man that's really difficult to make we need to change that design to make it easier to manufacture um so we've made radical improvements to the design of optimus while increasing the functionality but making it actually possible to manufacture like i'd say optimus 2 is almost impossible to manufacture frankly um but um To Bob's point, we've gone from a person in a robot outfit to what people have seen with Optimus 2.5, where it's doing kung fu. Optimus was at the Tron premiere doing kung fu out in the open with Jared Leto. Nobody was controlling it. It was just doing kung fu with Jared Leto. uh you know at the cron premiere um you can see the videos online um and um actually the funny thing is like a lot of people walked past it uh thinking it was uh just a person even though with optimus uh 2.5 you can see that it has uh you know a waist that's three inches wide that results in not a human um so uh but but the movements were so human-like that people didn't realize a lot of people didn't realize they were looking at a robot So, um, and what I'm saying is like Optimus three will be a giant improvement on that. Um, and made it scale. Um, but like I said, a very difficult thing. Um, yeah, the, the, the Optimus, uh, sort of injuring and manufacturing reviews. And there's the Friday night meeting with Optimus, which sometimes goes till midnight. Um, and then. My Saturday meeting is the Saturday afternoons with the AI5 chip design team. So those two things are crucial to the future of the company.

Dan, did you have a follow-up?

Yeah, just as a related question. Maybe you could just talk about to what extent are the AI efforts at Tesla and XAI complementary, or are they just different forms of AI? Maybe you could just help distinguish for the audience. Thank you.

Yeah, there are different forms of AI. So the XAI, so Grok is like a giant model. that you could not possibly squeeze Grok onto a car. That's for sure. It is a giant piece of a model. With Grok, it's trying to solve for artificial general intelligence with a massive amount of AI training compute and inference compute. So, for example, Grok 5 will actually only run effectively on a GB300. That's how much of a beast that Grok 5 is. So, whereas Tesla's models are, I don't know, maybe about less than 10% the size, maybe closer to 5% the size of Grok. So, yeah, they're really coming at the problem from very different angles. XAN and Grok are competing with Google Gemini and OpenAI, ChatGPT, and that kind of thing. Some of it is complementary. For example, for Grok voice, being able to interact with Grok in the car is cool. For Optimus, voice recognition and voice generation So that's that's helpful there, but they are coming at it from kind of opposite ends of the spectrum.

Alrighty, Adam, let's give it another try. When you're ready, please unmute yourself for the next question. Alrighty, unfortunately still having audio issues, so we're going to move on to Walt from LightShed. Walt, please go ahead and unmute yourself.

Did you hear me now? Yes. Perfect, thank you. Just getting back to Austin, if you can remove the safety driver at year end, is the limitation in the Bay Area just regulatory or is it kind of the market by market learning process? And I guess similarly in the eight to 10 markets that you mentioned to get added, Is the decision there to put a safety attendant in the passenger seat or the safety driver in, is that your step-by-step process to opening up a market, or is it really just the regulation in the individual market?

Well, I think even if the regulators weren't making us do it, we'd still do that as the right, cautious approach to a new market. So just to make sure that we're being paranoid about safety uh i think it makes sense to have a sort of uh sort of either safety driver or safety occupant in the car um when we first go to new markets to just to confirm that there's not something we're missing um because all it takes is like one in ten thousand trips to go wrong and and you've got you've got an issue so um it's just to make sure like is there some about a city like a very difficult intersection or, I don't know, something that's an unexpected challenge in a city for that one in 10,000 situation. So I think we probably could just let it loose in these cities, but we don't want to take a chance. And like, you know, what we're talking about here is, you know, maybe three months of safety driver in a new Metro to confirm that it's good. And then I would take the safety driver off that, that kind of thing.

Okay. And then on, on FSD 14, it has a different feel than 13. And it's also, I think a little different than what it feels like in Austin. Are you, is it basically deaf different development paths path that you're doing in terms of the robo taxi stuff versus what you're dropping to the early adopters. And when you, and when you push these new builds, Is it that you're looking for notable improvements in intervention rates, or is that largely solved and it's more about adding the functionality, like the parking, the drive modes, or just the overall comfort?

The first priority when we release a major new software architecture for autopilot is safety. So it starts off with safety, obviously safety prioritized, and then we solve comfort thereafter, which is why I don't recommend people take the initial version. That's why I say most people should wait until 14.2 before they actually download version 14, because by 14.2, we'll have addressed many of the comfort issues. The priority is very much safety first, and then thereafter, the comfort issues. That's why most people are like, it'll be safe, but jerky. Um, and, uh, we just need time to kind of smooth the rough edges, um, and soulful comfort in addition to safety with a, with a major news, uh, autopilot architecture, uh, change. Um, but, uh, it, it really is, uh, I mean, I, I know what the, you know, the roadmap is for the Tesla real world AI and, and, uh, very granular data detail. Obviously Ashok is leading that, um, And I spent a lot of time with the team going in excruciating detail here on what we're doing to improve the real-world AI. And like I said, this car is going to feel like it is a living creature. And that's with AI 4 before even AI 5.

Yeah, the roadmap is super exhilarating. We're waiting so much to release all the stuff we are working on. In terms of what we ship to customers versus Robotaxi, it's mostly the same. Obviously, customers have some more features. They can choose whether the car wants to park in a spot or drive here or something like that, which is not super relevant for Robotaxi. But there's only a few minor changes like those ones. But the majority of the algorithms and architecture and everything is the same between those two platforms.

Yeah. But as I mentioned earlier, we'll be adding reasoning to, um, I don't know, is that like reasoning in like 14.3, maybe 14.4, something like that.

Um, yeah.

So with reasoning, it's literally going to think about which parking spot to pick, uh, at this. So it's going to say, this is the entrance, but actually probably there's not a parking spot right at the entrance. If it's a full, you know, if the, if the parking lot is fairly full, the probability of an open parking spot right at the entrance is very low. Um, but actually what it'll simply do is drop you off at the entrance of the store and then go find a parking spot. Um, but it's, it's going to get very smart about figuring out a parking spot. It's going to spot, figure out it's going to spot empty spots much better than human. It's got 360 degree vision. Um, and it's going to, yeah. Yeah. Like I said, just, it's going to re use reasoning to solve things.

I'm putting that all inside the computer that has a four. is the actual challenge. That's what the team is working on. Because obviously, you can do reasoning on the server. That takes forever. But then in the car, you need to make real-time decisions. So putting all that into the computer that's in the car, that's the challenge.

Yeah, that's why I say I have a pretty good understanding of AI, the giant model level with Grok and with Tesla. And I'm confident in saying that Tesla AI has the highest intelligence density. When you look at the intelligence per gigabyte, I think Tesla AI is probably an order of magnitude better than anyone else. And it doesn't have any choice because that AI has got to fit in the AI4 computer. But the discipline of having that level of AI intelligence density will pay great dividends when you go to something that has an order of magnitude more capability like AI5. Now you have that same intelligence density, but you've got 10 times more capability in the computer.

Great. The next question will come from Colin at Oppenheimer. Colin, please unmute yourself when you're ready. Colin, go ahead and unmute yourself, please.

Thanks so much, guys. I appreciate you bringing up the challenges of hand dexterity and humanoids, along with the complexity of the supply chain and the vertical integration you guys are pursuing. I'm just trying to harmonize the timeline for the start of production next year with the current state of the supply chain and what sounds like a fair amount of work remaining on the dexterity before you can really freeze the hardware design and start to scale up production.

Well, the hardware design will not actually be frozen even through start of production. There'll be continued iteration because a bunch of the things that you discover are very difficult to make. You only find that pretty late in the game. So we'll be doing rolling changes for the Optimus design even after start of production. But I do think that the new hand is an incredible piece of engineering and know that's well like i said we'll have um a production intent prototype uh ready to show off in you know q1 probably february or march um and then we're uh yeah we're going to be building a you know million unit optimus production line um you know hopefully with the production start towards the end of next year um But that production ramp will take a while to get to an annualized rate of a million because it's going to move as fast as the slowest, dumbest, least lucky thing out of 10,000 unique items. But it will get to a million units. And then ultimately, we'll do Optimus 4. That'll be 10 million units. Optimus 5, maybe. 50 to 100 million units. I mean, it's really pretty nutty. Yeah.

All righty. That is, unfortunately, all the time we have for Q&A today. Before we conclude, though, Vebav has some closing remarks.

Thanks, Travis. I want to take the time to talk about an extremely important vote, which is being held on November 6th. The meeting will shape the future of Tesla, and we are asking you for as our shareholders to support Elon's leadership through the two compensation proposals and the re-election of Ira, Kathleen, and Joe to the board. Note that it is a team sport, and here at Tesla, the board is an integral part of the winning team. Shareholders are at the center of everything we do at Tesla, and a special committee has laid out a compensation package. Like Elon said, we don't even want to call it a compensation package.

Yeah, the point is that there needs to be enough voting control to give a strong influence, but not so much that I can't be fired if I go insane. But, you know, and I think that sort of number is in the mid-20s approximately. As a company that has already gone public, there's no... We've investigated every possible way to... How do you achieve increased voting control without... know um is there some way to have like a super voting stock but there really isn't there is no way to have a super voting stock after you've gone public um but for example uh google uh meta um you know many other companies have this um but they they had it before they went public and so it sort of gets i guess grandfathered in um tesla does not have that um so It's just, like I said, I just don't feel comfortable building a robot army here and not, and then, uh, you know, being ousted because of some asinine, uh, recommendations from ISS and glass Lewis who have no frigging clue. I mean, those guys are corporate terrorists and, and the problem. Yeah. So let me like explain like the core problem here is that, uh, so many of the index funds, um, the passive funds vote along the lines. of whatever Glass-Lewis and ISS recommend. Now, they have made many terrible recommendations in the past, that if those recommendations have been followed, would have been extremely destructive to the future of the company. But if you've got passive funds that essentially defer responsibility for the vote to Glass-Lewis and ISS, then you can have extremely disastrous consequences for a publicly traded company if too much of the publicly traded company is controlled by index funds. It's de facto controlled by Glass-Lewis and ISS. This is a fundamental problem for corporate governance, because they're not voting along the lines that are actually good for shareholders. That's the big issue. I mean, that's what it comes down to. ISS, Glass-Lewis, corporate terrorism.

Yeah, and I would say, you know, the special committee did an amazing job in constructing this plan for the benefit of the shareholders. There's nothing which gets passed on until the time shareholders make substantial returns. So that's why, you know, in the end, I would say I would urge you to not only vote on the plan, but also vote on all the three directors because of their exceptional knowledge and experience. And literally, we at Tesla work with these directors day in, day out. I mean, there is not even a single day that one of the directors I haven't spoken to or one of my colleagues hasn't spoken to. And even the directors out here are not just reading out of PowerPoint presentations. They're actually working with us day in, day out. So again, I just urge you guys as shareholders to vote along the board's recommendation. Thank you, guys.

Great. Thank you, Vibhav. We appreciate everyone's questions today. We look forward to talking to you next quarter. Thank you very much and goodbye.