Tesla (TSLA) Q3 FY26 Earnings Call Transcript

Unidentified speaker00:00

Yeah.

Travis Axelrod00:45

Good afternoon, everyone, and welcome to Tesla's third quarter 2026 Q&A webcast. My name is Travis Axelrod, head of investor relations and I'm joined today by Elon Musk, Vaibhav Taneja, and a number of other executives.

Travis Axelrod00:50

Our Q3 results

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Were announced

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At about 3 PM

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Central Time

Travis Axelrod01:13

In the update deck

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We published

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At the same

Travis Axelrod01:42

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.

Travis Axelrod01:48

During the

Elon Musk01:56

Thank you. So the and I'd like to give a big congratulations to all team making it happen. Demand growing rapidly for

Elon Musk02:01

And that you can buy

Elon Musk03:11

And and to be clear, we are producing cars and very an additional market for wide approval it's hard to predict but maybe you know within a few months but i would be surprised if it takes longer than q1 but obviously that's not a time frame we control but we do anticipate being fully approved in throughout europe um and many other countries um we also began production of the Tesla semi truck in Q3 and did the new roaster demo which was I think one of the most exciting events I mean arguably the coolest demo of any product ever and that's a testament to amazing work by the Tesla and SpaceX teams so we've also been like laying the groundwork for a lot more manufacturing capacity the we're I think aiming for 5 million vehicles a year by approximately 2030 and I think we've got a good shot of achieving that goal.

Prepared remarks

Elon Musk06:29

And yeah so and energy demand is is very strong we're actually almost sold out of all mega packs for 2027 and we're ramping production as quickly as possible to meet demand uh we also expect uh gross margins on that to increase meaningfully so um in a nutshell after many years of sort of grind and things being fairly flat i think we're now headed for a lot of fun and significant growth um regarding a robo taxi we're seeing the robo taxi miles driven or fully autonomous miles driven scale exponentially meaning scaling very rapidly and it would be hard to overstate this point it really is an extremely fast week over week growth in autonomous miles and I don't think there's any company in the world that can match our scale with autonomous vehicles as we continue to ramp the Cyber Cyber cab fleet in Austin for example has grown by a factor of 10 since launch about a month ago the and the cumulative mileage is is really when I look at the weekly chart it's wow I mean it looks like a you know rocket going to orbit basically it's very growing very fast and if I recommend if you want to try it out you know come into Austin and you'll see cyber cabs in use at scale in Austin as I think a lot of people saw with the Austin city limits concert recently so so the so this is really going to a very good place and regarding Optimus we we've started like what I'd call early production on our high volume line in Fremont now I I want to elaborate on this point because the and I've said this before that the growth of Optimus it's an S curve but the initial part of the S curve is as a shallow slope and is somewhat bumpy because it is such a radically new product so that you know the way to think about it is there's like 10,000 things that have to go right for production of the robot and it'll move as fast as the slowest least lucky of the 10,000 but we do have the you know the vast majority of a million unit per line production line landed in Fremont right now but I would expect that it takes us probably at least a year maybe a little longer to get to that annualized rate to get to 20,000 units a week so this is just a fundamentally because there's you know there's still parts of the design that are changing

Elon Musk06:37

Like a lot of people ask me about Optimus that's why I think I've gotta kind of sort of belabor this point

Elon Musk06:55

Because people aren't don't sort of understand like new technology that well or volume production of complex new hardware that well it sort of seems like well can't you just make a whole bunch of these things immediately and send them out and it's like no you've gotta

Elon Musk07:31

Basically build entire gigantic global supply chain and have domestically a very very big factory and everything's gotta work and there's still some things we need to tweak about the design because you need to deliver a robot that is safe and reliable and has long duration so it can't like wear out after a month and there's still quite a lot of work to do with regard to the AI and the robot for it to be truly useful for open ended tasks

Elon Musk08:08

But if but like I said if I would expect that the AI the you know the electromechanical design and the reliability and duration usage duration like the usage life of the robot I expect these I do expect these issues to be solved around the end of next year so that that's the time to expect when we're delivering Optimus to companies outside of Tesla

Elon Musk08:16

And I remain convinced that Optimus will be the biggest product on Earth

Elon Musk08:34

And humanoids humanoid robots in general will be the biggest product on Earth so so it's Optimus a very big deal but we should I don't want to temper expectations that we still have a lot to get through and it's about a year or so that will take us to get through all that stuff

Elon Musk08:45

But as to the best of my knowledge, there is no one that is even close to Tesla with respect to a general purpose humanoid robot.

Elon Musk09:27

Regarding the tariff ab the Austin Austin based research fab is progressing quickly we'll begin commissioning machinery in the first half next year and hopefully things go well we'll make our first test chip just to see if we can make any chip at all around May or June so that's a pretty exciting and then we're our aspiration is to be making some kind of useful chip at volume around Q3 of 2028 so

Elon Musk09:57

And as I said publicly on X the tariff I think will be the most valuable building in the world and will probably have an economic value that's that was placed in the top 20 of countries so it's a an epic project and this will be an incredibly important asset if not a necessary asset in order to scale especially Optimus

Elon Musk10:05

As we can address bottlenecks in semiconductors whether it's memory packaging logic or whatever the case may be

Elon Musk10:16

With regard to a potential merger with SpaceX I think I said everything that should be said yesterday tap dancing through a minefield there

Elon Musk10:21

And yeah that's it

Elon Musk10:36

In conclusion we're super excited about our autonomy and robotics roadmap there's a lot of incredibly awesome stuff coming and I'd like to once again thank the Tesla team for their strong execution and all of our supporters for joining us on this journey

Travis Axelrod10:41

Great. Thanks very much, Elon. and Vaibhav has opening remarks as well. Vaibhav?

Vaibhav Taneja11:02

Thanks Travis. Uh we continued our progress on a lot of fronts in Q3 uh Elon already covered a lot of them additionally which I like to add is we also started deliveries of mega packs with our in-house LFP LFP batteries and for the first time two consecutive quarters of vehicle deliveries of over 480k.

Vaibhav Taneja11:17

On the automotive business we exited the quarter with our highest backlog in four years with deliveries constrained primarily by production. we are therefore focused on increasing production at all our factories to meet this growing demand.

Vaibhav Taneja11:47

While we are actively working to increase production it does take some time to get every aspect dialed in from supply chain to manufacturing to delivery logistics. The Model Y continued to outperform in the quarter and set delivery records in several key markets based on the preliminary data which we've gathered we believe that it was the number one selling BEV in Europe and the number one selling passenger car in South Korea.

Vaibhav Taneja12:25

We also set new record in key markets including Australia, Japan and Taiwan. As Elon said, FSD continues to be the key driver for demand. In Q3, over 75% of deliveries in North America included a sign up for paid FSD subscription at the time of delivery which is approximately 20% higher than Q2. Overall the FSD attached rate continued to improve reaching over 1.7 million paid customers globally of which for the first time 50% is based on subscriptions.

Vaibhav Taneja12:43

Given the strength of FSD in the US we are taking you know extra steps to sell certain cars in Europe with some benefits to try and get more fleet out there before broader FSD approval is obtained.

Vaibhav Taneja12:58

On automotive margins excluding credits increased sequentially from 16.3% to 18.1%. The improvement in margins is driven by a higher mix of deliveries in APAC.

Vaibhav Taneja13:11

While commodity price increases and interest rate changes continue to add to our costs and create further headwinds, we have adjusted the vehicle financing programs to partially offset for such costs.

Vaibhav Taneja13:57

On the energy business you know we had our second best quarter of deployments of 13.7 gigawatt hour of energy storage energy gross margins improved from 20.4% to 33.1% the sequential margin improvement is primarily attributed to tariff refunds recognized in the quarter and warranty true downs resulting from alignment with our vendor on certain cell related costs to be reimbursed by them as Elon said the business is witnessing extreme demand from data centers and we are doing our best to increase production and accordingly we'll see you know improvements in ASP and further improvements in margins as we move forward.

Vaibhav Taneja14:07

Services and other margins improved sequentially from 14.1% to 15.9% an all time high.

Vaibhav Taneja14:24

This was the result of strength across service across several of the businesses in services and other including supercharging and insurance. The robo taxi business which is part of services and others continue to grow with the launch of cyber cab rides in Austin.

Vaibhav Taneja14:40

A cumulative unsupervised miles 8x in the quarter as we had weekly double digit growth throughout the quarter. we're taking all the learnings from our Austin expansion to help us prepare for broader Cybercap launch in other markets.

Vaibhav Taneja15:21

Our priority is progressing the density and expansion of the network through vehicles that provide the best experience like the Cybercap we will also continue to augment the fleet with other variants over time to address the terrestrial transportation needs for of the total population i like to stress that you know what we are trying to do is literally take over every part of terrestrial transportation not just getting people we're starting with getting people from one place to the other but we want to basically own this transportation of any kind on earth

Vaibhav Taneja15:47

We are in a huge investment cycle to set us up for the future therefore as previously guided operating expenses continue to increase sequentially. Most of the increase came from significant research and development related activities including SI development costs such as depreciation from additional compute chip development and pre-production ramp costs for new products like the Optimus Mega Pack 3 and Semi Truck.

Vaibhav Taneja15:55

This trend of growing OPEX would continue till we commercialize these new products.

Vaibhav Taneja16:06

Net income was impacted from a mark to market reduction of our SpaceX holdings of 142 million which was offset by a Bitcoin mark to market gain of approximately 290 million.

Vaibhav Taneja16:20

We continued our efforts to manage cash efficiently and responsibly. we ended the quarter with positive free cash flow of over 1.5 billion and an overall cash and investment balance of over 45 billion.

Vaibhav Taneja16:33

We're revising our capex guidance to be approximately 20 billion for the current year as a result of managing our capital deployment efficiently and plan to fund it primarily from our cash flows from operations.

Vaibhav Taneja17:33

Additionally, during the quarter we secured capacity to borrow up to 30 billion to support the expected growth in capex our confidence in the cash generation capacity of our business and the investments we are making drove our belief to secure shorter term financing we don't plan to make any draws under any of the new facilities in this calendar year the money that we received from our from the tariff refunds is being reinvested to expand production capacity in the US I like to stress on this that you know we like to do a lot of hardcore real grunt work to get production facilities up and running and so you know our capex for the next few years would continue to expand as we add more Robo Taxi fleet we expand our production capacity for Optimus install manufacturing capacity for solar purchase additional SI compute infrastructure and build a semiconductor fab.

Vaibhav Taneja18:03

This strategy will position the company for the next era of growth and disrupt many existing markets while creating new ones this is by far the most exciting time to be at Tesla the foundation being laid around autonomy robotics and energy is setting us up for an extremely bright future I would like to end by thanking the Tesla team our customers investors and suppliers for the confidence in us on this journey

Travis Axelrod18:20

Fantastic. Thank you, Vaibhav. Now we're to go to questions from Say.com. The first question is, how does the Cybercab fleet scale past Austin and what's the regulatory path outside Texas given NHTSA's open safe review?

Travis Axelrod18:22

Ashok, did you want to take that?

Ashok Elluswamy18:40

Yeah, I'll start here. First of all, we launched Cybercap this quarter, which is very exciting. We achieved that by mostly learning from data from the other vehicle platforms, for example, Model Y, Model 3, etc., all of the data helped make the Cybercap without requiring a ridiculous amount of vehicles to produce the data. the data.

Ashok Elluswamy19:05

Um so we are seeing very good scaling uh in terms of cyber cybercabs AI capabilities uh we launched in Austin but that's only because you know we had some caps and we want to swarm Austin with cyber cabs everywhere uh but there's no fundamental reason that we are limited to Austin in fact uh next month we'll be launching in Dallas and then the same software just scaled to lots of other cities along with the Model Y robo taxis

Travis Axelrod19:23

Great. Thanks very much. Uh the next question is, what are your thoughts on crowdsourcing training data for Optimus versus your internal Optimus Academy approach? Is data currently the primary bottleneck? I think you covered this quite a bit, but any other color there?

Elon Musk19:39

Mostly talked about this already but it's not crowdsourcing is is is not the issue for Optimus there's a lot of things we have to get right about the AI architecture

Elon Musk20:17

that's we're still working on we're making good progress but that that needs to be sorted out and really in order for Optimus to get the training data we need, we actually need to make a lot of Optimus. So we need to make I think on the order of 10 or 20,000 bots and then have them do self play and we're building out an Optimus Academy where Optimus can practice doing a very wide range of tasks and then we can use that data in sort of a flywheel to make it better and better at these various tasks.

Elon Musk20:57

The you know a big difference with Optimus versus the cars is we don't have this vast fleet of cars from which we can gather training data so with Optimus we have to bootstrap it by making the robots and having them do self play which is really how a human learns to navigate the world you know it's that's you can see this when you have a toddler or and they grow up and they initially are sort of wobbly and they don't know how to do things and they eventually they you know they learn to wipe their own ass which is a big milestone

Elon Musk21:19

As anyone who's had kids knows and then they learn to read and do all sorts of things and be able to do do these things and they learn this by playing and we actually need Optimus to play at scale in order to have it be really good at tasks in the real world and Ashok you may want to add to that.

Ashok Elluswamy21:39

Yeah, like I mentioned, Elon, for the car, we actually have the data from the cars embodiment itself. But for Optimus, there's no exoskeleton for humans to get into and like make Optimus into a puppet or something like that. Like we have to learn Optimus has to learn by watching other people do tasks initially and then start practicing the task yourself.

Ashok Elluswamy22:06

For example, For example, you can imagine for example if you're watching a soccer game just because you're watching it doesn't mean you'll be good at soccer yourself you gotta like start practicing and get good at the game and learn from the bot's own experience and we are setting up this huge reinforcement learning cycle with initial base training done from humans to bootstrap and then put it on Optimus and do a lot of self play both in simulation and in the real world to learn on the embodiment of Optimus itself.

Ashok Elluswamy22:10

I think we're pretty close to having very good results in this big loop.

Elon Musk23:06

Yeah, I think we may be ready to release like an Optimus video in a month or so I want to make sure that like when we release this video that it's not like a canned demo that you know like when you see these robot humanoid robot demonstrations some of them look very impressive but they're not really using any kind of advanced AI or SI I mean they're like pre-programmed deterministic tasks and if you actually try to use that humanoid robot in the real world you would have a lot of trouble it wouldn't work basically so I want to release a video that's where it's Optimus doing things that that are not pre-programmed and I think that's that that would be it's maybe a month or two for that to have a demo that you can believe what you see type of thing

Elon Musk24:31

And then there's another milestone that's I think important we want to get to which is to integrate our the Tesla AI 5 chip into Optimus which if things go according to plan will be in approximately April of next year and that that's a giant improvement in capability with an order of magnitude more sort of more operations per second like it's an order of magnitude more compute AI 5 versus AI 4 and that will help Optimus a lot because the degrees of freedom that a humanoid robot has to deal with are far greater than what a car has to deal with so it is a bit of a struggle to squeeze the you know everything needed to operate with all the degrees of freedom of Optimus and the wide range of tasks you know can you think of like a humanoid robot is going to do like a thousand times more things than a car would do some very big number basically so so I think the additional compute of AI 5 will make a big difference and that comes in hopefully in volume around April of next year and that's why I think like all the pieces like the refinements in the electromechanical dexterity making sure Optimus can operate for long periods of time without wearing out

Elon Musk24:47

You know, getting the AI software right, and the AI5 chip integrated, all of these things kind of come together that's why I think about a year from now is when it's something that would be that that you could ship to customers.

Elon Musk24:55

And it would also be reaching scale in production. So that's probably the right time to think about

Elon Musk25:06

And in terms of the initial customers for Optimus I think probably would be things that are industrial applications at first

Elon Musk25:25

Things that are like dangerous repetitive tasks things that people really don't want to do so and that that you want done basically 24 7 so like around the clock stuff that's going to be the highest value for Optimus in the beginning

Elon Musk25:47

As we scale production of course it would be something that people can buy you know for their home but the initial high value use will be the highest value use I think will be kind of heavy industry dangerous tasks or things that may cause repetitive stress injuries and that need you want done

Elon Musk25:52

24 7 so that that's yeah the way to think about it

Travis Axelrod26:01

Great. Thank you guys. The next question is very similar. It's about Optimus scaling. So we can go past that one.

Travis Axelrod26:02

Answered that one basically.

Travis Axelrod26:11

And the next question is when can we anticipate FSD unsupervised in customer cars? Ashok, did you want to kick that off?

Ashok Elluswamy26:24

Yeah, like I mentioned earlier, the software for cyber cabs and Model Y is the same. Like and pretty soon we'll be able to release the same software as part of the V15 release to customers um so in

Ashok Elluswamy26:43

The only additional requirement is make sure that you know for example the customer model wise can be part of the geo fences and the fleet management that Tesla has for it to be fully autonomous. We suspect somewhere around Q2 next year is when we can turn on some of the first customer vehicles to be part of the robo taxi fleet.

Travis Axelrod26:57

Great. Thank you, Ashok. The next question is, when will the Cybercab be available for customer purchase slash ownership? Lars, did you want to kick this one off? off?

Lars Moravy27:31

Sure. Thanks, Travis. I think it builds a little bit on what Ashok just said, but in short, we're trying to get cyber cabs to customers by the end of this year, 2026. Obviously, we're producing them in Austin, Texas, but all of those are currently going to our own internal robo taxi fleet, and as Tesla grows we'll mainly deliver fully designed autonomous vehicles to our customers and cyber cab will be the first and so as we start small this year and we learn about all the things Ashok mentioned about delivery and ownership and fleet management of autonomous vehicles in customer hands we'll continue to scale that Elon I don't know if there's anything you want to add to that

Elon Musk28:00

Um no I mean Cybercap is primarily going to be something that is um offered as like transport as a service um you know whereas our other cars would be more um you know the cars that you'd want to own like the three and the Y and whatnot and Roadster obviously but you know the vast majority of the Cybercap stuff will be essentially Tesla owned and transport as a service

Travis Axelrod28:16

Great. Thanks, guys. The next two questions are quite similar. Around unit economic costs. The first one is on per paid robo taxi mile and the second one is cost per Optimus unit.

Travis Axelrod28:25

Um and we already covered what are the first customer paying customer looks like so VT did you want to get into the unit economics question here

Vaibhav Taneja29:38

Yeah so on the Robo side you know the main geographies where we are operating we're already seeing utilization improving and you know week by week as Elon was talking about we look at the miles and how many paid rides are happening so are we at our goal of 30 cents today no but do we see a path to get to that very yes we do and it's all about scaling operations and what you'll see over the next few uh months is that we'll today Cybercap which is the primary robo taxi product is available only in Austin but we do plan to bring it out in some other cities before the end of this year and you know as we add more cyber cabs you know we are also learning from the operational experience of managing a fleet pick up and drop off you know cleaning all those things so all those costs are being dialed in and that's why like I said before we definitely see a path to get to our 30 cent target

Travis Axelrod29:41

And then did you want to cover the Optimus cost?

Vaibhav Taneja30:08

Yeah, I mean, I think Optimus cost internally we are tracking pretty well in terms of how the design has matured but it would be a little too early to say that we have got there because like Elon was saying we're still making a lot of design iterations the good thing is you know when you look at it from a cost perspective we're trending closer to where we would say our cyber cap costs would end up being

Vaibhav Taneja30:11

Yeah.

Travis Axelrod30:40

Great. Thank you very much, Vaibhav. The next question is when do you we kind of already answered this when do you anticipate Optimus will be generating revenue so we covered that in the prior question the next one is mapping for FSD continues to be a problem the three biggest issues are recognizing proper speed limits parking and typical routes I understand you use various third party maps but why not use your own maps?

Travis Axelrod30:48

Authorized trusted or and verified Tesla owners to provide the input. Ashok did you want to kick off here?

Ashok Elluswamy31:39

Yep yeah you're totally right that we shouldn't be depending on external people's maps so we are building our own maps but not like the same way as one more maps we are building a entirely new architecture with essentially AI based mapping and navigation it's going to be super awesome it's going to be integrated with voice you can like talk to it ask for different routes it's going to learn your personalized preferences plus also the fleet preferences uh the collective intelligence of all the cars are going to flow into making the maps and navigation be super cool um we'll start we'll you'll see uh the start and end of trips already use this technology uh pretty soon as part of the V15 release uh and over the next several months it's just going to take over all of the navigation functions parking destination handling uh and just we'll know you better than you know yourself in some regard for uh the driving task and I handle it fully.

Travis Axelrod31:56

Great. Thank you, Ashok. And then our last question is what is the current production rate at your for existing factories do you anticipate building new ones? Lars did you want to kick that off?

Lars Moravy32:51

Yeah sure I think Vaibhav kind of touched a little bit on this in his opening remarks and our I'll say our factories are operating at record rates this quarter and of course we can only build at the rate of the least lucky process or component and Vaibhav mentioned that we are actively managing all the aspects of production you know as we've spoken in our past calls we've made strategic investments globally to increase rates of our current factories over the last year plus and you know this quarter we are starting to see that and we expect that to continue in coming quarters as those investments come to fruition i mean beyond that we've also are working to ramp cyber cab obviously in giga Texas and we applied for proper permits to expand the factories in Berlin and as also Elon mentioned we just started our new semi factory in Reno so in short we are building new factories yes and we're aiming to hit that 5 million goal by 2030 as Elon said. said

Travis Axelrod33:10

Great. Thank you very much. That's it for the say.com questions. Now we will be going to analyst questions. As a reminder, as Elon said, we will not be addressing any questions today on a potential merger with SpaceX.

Questions and answers

Operator33:18

With that, the first question comes from Tom from RBC. Tom, please unmute yourself when you're ready.

Tom Narayan33:37

Yeah, thanks for taking the question. It's on FSD. So the attach rate, I think according to my math is like 30 to 40% North America on a paid basis. It's becoming a flywheel as you said for more car sales and the attach rate exceeds other automakers subscription based autonomy by a lot.

Tom Narayan33:58

I guess in a weird way could you guys be a victim of your own success and seeing other car makers noting the success and trying to aggressively come up with similar L2 plus you know type products maybe partnering with Nvidia or Qualcomm and if that happens could that be deflationary for FSD pricing?

Elon Musk34:18

I think people take this thing very simply that you know you can ease if the software can be solved it's there it's not because I mean I'll let Ashok get into it but basically it's a very hard problem

Elon Musk34:20

Super hard problem.

Ashok Elluswamy34:54

Yeah, it's easy to get to the first 90% and make like a cool looking demo but when you get in the long tail of this problem it's so long that people don't realize anyone with their sane mind should not attempt to solve this problem it's like so difficult uh and so long tail uh and especially to get to a safety point where you can drive safely for millions of miles with uh no injuries and so on that's going to be extremely hard as we release unsupervised FSD to the broader customer fleet it's just going to be i don't think anyone can like match it in several years

Ashok Elluswamy35:50

And one other thing which i'll say if it wasn't clear that you know when especially in our showrooms here in the US customers are now coming in and saying can we get into an FSD drive they're not asking for three Y or Cybertruck they're saying can we get an FSD drive and that is become the key driver because what it does is it actually opens up a lot more flexibility for different parts of the population wherein they had issues driving conveniently before now they're getting their freedom back by being able to use FSD and a lot of folks are just like I mean it's a game changer I mean if you haven't tried it I keep saying it every time if you do it you won't be able to go back to driving any other car

Tom Narayan35:53

I get it.

Travis Axelrod35:54

Tom, did you have a follow-up?

Tom Narayan36:19

Yeah. Um follow-up is similar to that question um on China I mean there it seems like autonomy is is like table stakes um is it is is it the same kind of answer on this question one that you know they're not going to be able those car makers aren't going to be able to develop a similar product that you guys have had on FSD or do you see there that being definitely a different pricing dynamic?

Ashok Elluswamy37:50

I mean at the beginning like definitely the leaf frog which we have in terms of this technology isn't there with any of the other Chinese OEMs today and you know we're like we're working very diligently to try and get broader I mean FSD approval in China it is hard but you know for certain cars we have been able to have FSD operating and whatever people have tried who whoever has tried it there they understand how much better it is as compared to any of the competition and in fact I don't know if you've seen this there have been some competitor CEOs who have come and done FSD drives here in the US and they themselves have been blown up as to what FSD is capable of doing so it is a similar answer and again we're not taking it lightly we're actively working with the regulators in China because I don't know if you saw this but we did release our we we've released our safety report on FSD before but we've also released our unsupervised or robo taxi safety report we just think this is the right way to get people into a safe environment because you know the amount of accidents which happen because of driver

Ashok Elluswamy38:02

Drivers not being alert and this is the only way we can ensure that there are less casualties in the world and any regulator who looks at the data it would be very hard for them to refute it

Operator38:13

Great thanks so much our next question comes from Emmanuel from Wolf Emmanuel please unmute yourself

Emmanuel Rosner38:16

Great,

Emmanuel Rosner38:43

Great thank you hi team um so on robo taxi you've talked about sustaining a double digit week over week growth in unsupervised miles i'm curious if there's a way you can triangulate that for us into revenue and maybe profitability of the robo taxi business if you sustain let's say 15% week over week growth in these miles you'll probably cross 10 million miles by the end of the year you know how many of those how many miles would you need to generate gross profit

Vaibhav Taneja38:55

I mean so I think Elon Elon talked about this a little bit at the beginning that you know

Vaibhav Taneja39:04

Using exponential math this would become a significant part of our revenue and profitability in 27

Vaibhav Taneja39:19

Yeah I would say it's like it's not like going to move the needle this quarter but yes but if you say like maybe I think it starts to become noticeable probably in Q2 and then and probably a big deal by Q3 or Q4 of next year

Vaibhav Taneja39:24

Exactly

Emmanuel Rosner39:44

Got it. And then if I think about in terms of you know fleet size so I think your cyber cab line capacity is listed at more than 125,000 units a year production just recently started how do you expect the ramp up curve to be on the cyber cab line?

Vaibhav Taneja40:23

I mean I'll kick it off but I'll also let Lars chime in but you know I would give kudos to the engineering team they have designed a product because not only do I talk to the engineers I also talk to the manufacturing guys they think this is one of the easiest product for them to scale in terms of manufacturing so scaling would not be that much of a challenge i think the key thing which we're trying to make sure is that we have all the regulatory approvals where we can start deploying the cyber cabs as fast as we can produce them and again Lars feel free to chime in

Lars Moravy40:34

Yeah, thanks, Vaibhav. Appreciate the accolades. The team definitely crushed it on the cyber cab design and manufacturing. Just to your point, we have 50% less parts than any other vehicle we've ever built. So that's 50% less things to go wrong.

Lars Moravy41:07

We've definitely been bursting cyber cab line to see how fast we can run it. I think the listed capacity is more of a you know rate at which we're capable of running today but the actual capacity of that vehicle is significant vehicle line is significantly higher right now we're building at the rate that the robo taxi service needs to be needs the vehicles and you know I'll say Ashok and I are at a bit of a race who's going to stay ahead he's got exponential growth coming on the miles you know month over month and we're going to look to meet that as well with the vehicle production

Operator41:19

Great. Thanks, guys. The next question is going to come from Andrew from Morgan Stanley. Andrew, please unmute yourself.

Andrew Percoco41:48

Great. Thanks so much for taking the question. So I want to start on your energy business. You know, you're clearly seeing a lot of demand on the energy storage or mega pack side and you've got some goals to bring on your own solar manufacturing but I was just hoping to get a little bit more insight in terms of how you're thinking about Tesla's role in enabling both distributed power but also distributed compute.

Andrew Percoco41:59

I think last quarter you alluded to a mega pod product so just hoping to get a little bit more insight in terms of you know what you're envisioning there and ultimately how big this could be for Tesla.

Elon Musk42:25

I think it's still early days on that front um we don't know the full extent of how you know what that'll how that'll unfold um I think we'll have a better sense for that probably in you know maybe in a Q1 or Q2 but it does have a lot of potential um it's just hard to say how much potential right now

Andrew Percoco43:02

Okay, understood. And then maybe just a follow-up on RoboTaxi. It does seem like you've kind of hit an inflection point here in Austin over the last month or so since you launched the Cyber cab. So would you generally say the bottlenecks at this point to growth are more regulatory driven as you think about expanding into new geographies and that you've kind of gotten through most of the hurdles on the software side just kind of curious how you would generally kind of categorize some of those growth hurdles in some of the incremental regions you're planning on scaling into over the next few months

Elon Musk43:16

I think the I mean there are still certain software challenges which we are still working through you know Ashok talked about it so maybe Ashok maybe

Ashok Elluswamy44:47

I guess yeah for example we had like initially at the robot taxi service from 6 AM to 9 PM and then we expanded 10 PM 11 PM now it's going to be pretty soon 2 AM so we're slowly expanding the availability of robo taxi and that is driven by the capability of the AI software and we just want to make sure that there's not a single safety incident that is our operating principle and even if that's the slightest possible risk at all we don't like take on that risk and so we are very risk averse in that sense as in we want zero injuries or anything bad happening and that is the driving principle and we will see that over the rest of this year we'll unlock 24 cross 7 operation go to higher speed roads and we think all of that is necessary to sort of scale and offer a great product to a lot of users um and that's why we wanted to both do the breadth first of doing multiple cities we did six we do six cities now we are also doing the depth of like having a lot of vehicles in a single city which is in Austin and we'll expand to more weather conditions day and night conditions highways and high speeds and all of that will be done hopefully by the end of this year at which point you will see a lot more scaling a lot more cities being covered by Robo Taxi so it's not purely regulatory or something like that it is a technology driven but we do see that that pretty quickly become regulatory perhaps in like Q1 Q2 time frames

Operator44:58

Great thanks guys the next question is going to come from Edison from Deutsche Bank Edison please unmute yourself

Unidentified speaker45:20

Great thank you for taking our questions first want to ask about tariff I know Elon you mentioned that you had an aspirational goal of 2Q28 do you have a sense on how much capital needs to be invested to get there and also what kind of milestones we should be on the lookout for on the way there

Elon Musk45:55

Um well it's going to be some pretty significant capital um you know it's certainly in the tens of billions um for tariff um although we gotta figure out like what the sort of relative split is between SpaceX and Tesla in terms of who pays for what at Tarifab but it's not going to be less than tens of billions in capital equipment

Elon Musk46:08

You know up through early 2028 and then it will it'll be a lot more it'll probably be north of 100 billion long term

Vaibhav Taneja46:26

Yeah, and I'll just add, you know, the first set of equipment for the fab which Tesla is building we've actually already placed most of the orders and that's why when Elon was talking about middle of next year that is from the first fab which

Elon Musk46:27

The research fab

Elon Musk46:28

Research fab

Elon Musk46:33

Yeah, that's we're just figuring out how to work the equipment type of thing

Elon Musk46:35

Yeah

Elon Musk46:44

Um but real production would be um late 28 which is lightning fast by fab standards

Unidentified speaker47:10

Understood and then just a quick follow up on Optimus I I know you mentioned that we could see a video soon there's quite a bit of progress but you're still making some refinements I guess just generally speaking where do you see most of the design changes still happening going forward is it still the hand that's an issue anything you can call out there

Elon Musk47:16

Yeah, it's mostly most of the difficulty, I mean, why don't you answer this question?

Lars Moravy47:27

So hand is one of the most challenging hardware areas actually

Lars Moravy47:33

Most of the

Lars Moravy47:45

Mechanical system I would say is relatively high confidence meaning like that it has converged to something that works decently well

Lars Moravy47:48

The hand is

Lars Moravy47:55

More complicated than actuators for the locomotion system for example

Lars Moravy48:05

Also there are some bespoke gears that are carrying a lot of burden for consumption and for reliability

Lars Moravy48:12

That we are developing still Yeah these would be the most

Elon Musk50:19

Yeah it's mostly the hand and just the kind of the fine tuning of the hand design and the fingers especially just it's a hard problem because you know humans have self-care like our you know our hands repair our body repairs itself but robots don't so you have to and our you know fingers are kind of squishy and have lots of sensors in our skin it's hard to make a hand that is hand lots of wear and tear but it's still squishy enough to pick up delicate objects and has all the sensors and doesn't damage the sensors when you know do repeated actions and there's a lot of like little things that you realize actually what an incredible thing the human hand is at the end of the day um so it's mostly from electromechanical standpoint the hands there are other things that are improving as well throughout the robot but that's the main thing and then um as i mentioned upgrading the intelligence the onboard intelligence of the robot with AI 5 which is a big step change in intelligence that will help a lot with the capabilities of Optimus so you know I've said before that like you know humanoid robots biggest product on Earth and but it's and its usefulness will be you know it's a rough approximation a multiple of the electromechanical dexterity the AI software and the AI chip hardware and all three of those things are improving exponentially I think we use that word a lot but and the value is you know roughly those three things multiplied by each other and Optimus robots will build the future Optimus robots so you have a recursive function so you when you have a recursive multiplicative exponential things will really grow extremely fast they may start from a small base but they're going to grow to crazy levels I mean I think at some point there will be more humanoid robots on Earth than there are humans

Operator50:31

Great. Thanks so much. The next question comes from Alex from Bank of America. Alex please unmute yourself.

Alexander Perry50:48

Hi, thanks for taking our questions here. Um I guess just first on robo taxi so it looks like for robo taxi you're pricing lower than competitor ride share and other robo taxi players at most markets

Alexander Perry50:55

Is that the plan to do longer term to take market share given some of your structural cost advantages?

Elon Musk51:13

Yeah, I mean, remember, in when you comparing you're comparing us with ride share which has a driver in there and we don't. Plus we are manufacturing the car ourselves so our cost basis overall is different and

Elon Musk51:26

I I think I said it in my opening remarks and I'll say it again just don't want to be too repetitive but basically our goal is to take over any kind of transportation

Elon Musk51:52

I mean I think we like unless we're stopped by governments which is certainly a possibility like if they're trying to protect a domestic industry I think Tesla will end up doing a majority of all passenger miles on Earth in any country where it is allowed to operate freely and you can come back and look at this prediction but I feel confident about this prediction

Alexander Perry52:38

Really helpful. And then just my follow up question I guess just on the key metric here so unsupervised miles driven so you know I think it grew at a high teens weekly growth rate since late July is is it still the expectation you'll continue to grow that at double digit weekly rate through the balance of the year and then what is really enabling that type of growth it seems like you definitely hit a comfort level in scaling much more rapidly you know how much of that is cyber cab how much of that is better safety validation with the latest version of FSD and then just on fleet composition do you expect cyber cab to represent you know majority of the robo taxi fleet over time

Elon Musk52:50

Yes, we will continue the scaling for the foreseeable future.

Elon Musk52:56

We don't see any hurdles along the way

Elon Musk53:04

Obviously there's work required but we do see a clear path towards

Elon Musk53:11

Scaling to millions of vehicles over the next several months this is

Elon Musk53:18

Happening due to like primarily the technology investments we have made over the several years and also in V15

Elon Musk53:34

The of all that work of like you know developing end to end neural networks learning from humans and so on all of that is paying off so that's what you're seeing that you're seeing the result of many years of work it didn't just like happen in the last several months

Elon Musk53:41

Yeah and the same technology should scale to millions of vehicles across all over like wherever we are allowed to operate

Operator53:53

Great. Our next question is going to come from Pierre from New Street. Pierre, please unmute yourself.

Pierre Ferragu54:56

Thanks for taking the question guys. I just want to come back like I'm very really fascinated by 75% of like US cars sitting with FSD and the interesting thing that if you look at the cars they probably generate on sale like seven about $7,000 of gross profit but then of course FSD generates more than $1,000 a year and so it does it makes like a minimal minimum impact on numbers in the quarters the car is sold but over the lifetime of the car it probably at least doubles the profit per car and so the place where I'm going want to get to is am I looking at it the right way and are you at some point going to disclose for us like the annual recurring revenues that FSD represents and I did my own math and I'm thinking it's probably now approaching a billion dollars of is that the right order of magnitude?

Vaibhav Taneja55:14

Yeah, I think uh you're uh the numbers which you shared is are correct and uh you know as it scales further we will start sharing more metrics around FSD not just the revenue but also other key metrics around it

Pierre Ferragu55:38

Okay. And as a quick follow-up, do you have like a good sense already and can you tell us about like the retention rate like do um how many people like three or six months down the line stick to the monthly subscription and if you see a percentage of drivers falling off

Vaibhav Taneja56:19

Yeah i mean you know like i said we will share more metrics around churn rates and whatnot but the reason we're not doing it at this stage is there are a lot of things which we're doing especially with new countries being added then we offer free trials and one thing which i'd also like to make sure it's clear when I say in North America that more than that 75% attach rate at the time of delivery this is like every car which we're delivering comes with a month of free FSD subscription and still people are signing up

Vaibhav Taneja56:24

Even though they have that free available.

Operator56:33

Great um our next question is going to come from Colin at Oppenheimer Colin please unmute yourself

Colin Langan56:43

Thanks so much much guys you know Elon can you talk about the strategy around ramping up

Colin Langan56:49

Production

Colin Langan56:55

A little bit to start training even

Colin Langan57:01

If the hands aren't

Colin Langan57:07

Fully baked with

Colin Langan57:13

With the final design

Colin Langan57:22

It seems like there's a lot that you could end up doing in terms of the training cycle and maturing some of the simulation technology even without perfected hands

Elon Musk57:28

Well that's what we're doing is we're building robots that products

Elon Musk57:46

So that's always like the factory massive supply chain and the engineering simultaneously with the AI software. So all these things are happening simultaneously.

Elon Musk57:53

And we're going as fast as humanly possible here.

Elon Musk58:08

I I don't think anyone's going to have and in fact, I'd be stunned if anyone has a robot that is remotely competitive with Optimus when we go when we start delivering it to customers which is likely to be towards the end of next year

Vaibhav Taneja58:29

Yeah, and you should know that, you know, not only the Fremont factory, we've also started constructing a factory here in Austin, which would be able to do a lot more robots as compared to the Fremont one. So going back to what Elon was saying, we're doing whatever we can. We're not stopping. We're just going at the fastest pace as we can.

Elon Musk58:35

Yeah. We're definitely, we're definitely, as I say in Vegas, betting on the come.

Colin Langan59:01

Awesome and then you know in terms of the semi-caps um you know capacity availability can you talk about how you're in that you know with the suppliers you know obviously seeing some deposits get put down on equipment and getting deliveries moving forward is a net positive on Terrafab but are there some more aggressive things that you can do to start getting ready for the larger ramp now and how should we think about that flowing through the capex budget

Vaibhav Taneja59:22

it's not a massive impact right now I think our capex is actually it's actually ending up being a little lower than we anticipated um but it will start become more meaningful next year and then that noticeable like in the tens of billions in 28.

Travis Axelrod59:38

All right, um we are coming up on time here um we appreciate everyone's questions and we look forward to talking to you next quarter thank you very much and goodbye