Good afternoon, everyone and welcome to Tesla’s Third Quarter 2022 Q&A Webcast. My name is Martin Viecha, VP of Investor Relations and I am joined today by Elon Musk, Zachary Kirkhorn and a number of other executives. Our Q3 results were announced at about 3:00 p.m. Central Time in the update deck we published at the same link as this webcast. During the call, we will discuss our business outlook and make forward-looking statements. These comments are based on our predictions and expectations as of today. Actual events or results could differ materially due to a number of risks and uncertainties, including those mentioned in our most recent filings with the SEC. During the Q&A session portion of today’s call, please limit yourself to one question and one follow-up. Please use the raise hand button to join the question queue. But before we jump into Q&A, Elon has some opening remarks. Elon?

Thank you, Martin. To recap Q3, it was another record quarter on many levels. Our industry-leading operating margin reached 17%, and our free cash flow exceeded $3 billion in Q3, approaching $9 billion over the past 12 months. As our factories ramp up, we anticipate a record-breaking Q4. It looks like we’re heading toward an exceptional end of the year, with Q4 appearing very promising. On the production front, Giga Berlin has reached a milestone of producing 2,000 cars in a week with excellent quality and is ramping up quickly. Giga Austin is expected to hit this milestone shortly. In fact, based on yesterday's production rate, it should also reach 2,000 soon. Our production of 4680 cells has tripled compared to the previous quarter in Q3, and we're gaining momentum on 4680 cell output, which we expect to start incorporating into vehicles in Texas in the coming months. Our second generation of manufacturing equipment for 4680 cells in Texas is showing great progress along with our original pilot line in Fremont. The Fremont factory team set a new record for production in Q3, and we plan to keep increasing production there. Regarding Autopilot, at the end of September, we hosted our second AI Day where we showcased the first prototype of our Optimus robot and released updates on our training computer and enhancements to our full self-driving software. Our vehicles have nearly driven 60 million miles in full self-driving Beta mode, and this number is growing rapidly. The goal of AI Day was recruitment, and we've seen a significant number of applications from top artificial intelligence engineers and scientists. It's clear to leading AI technologists that Tesla is among the best. This quarter, we plan to initiate a broad release of full self-driving Beta in North America; anyone who has ordered full self-driving will gain access to the FSD Beta program in about a month. Additionally, anyone purchasing a car with the full self-driving option will have immediate access. The safety observed while in FSD mode is significantly higher than when it’s not engaged, which is crucial for our wide Beta release. Regarding demand, we've received many inquiries about it lately. I can't stress enough that we have strong demand for Q4, and we aim to sell every car we produce for the foreseeable future. Our factories are operating at full capacity, and we are delivering every vehicle we produce while maintaining robust operating margins. We still represent a small fraction of the total vehicles on the road—out of 2 billion cars and trucks, we have about 3.5 million. We have a long way to go to even reach 1% of the global fleet. Regarding buybacks, I’ve received numerous questions about this, and so have our Board members. We've had extensive discussions about buybacks at the Board level. The consensus is that it makes sense, and we are looking to find the appropriate process for implementing it. It's certainly possible for us to execute a buyback in the range of $5 billion to $10 billion, even in a challenging year. This is pending Board review and approval, but it's likely we'll undertake a significant buyback. In conclusion, while market discussions often focus on short-term issues, it's crucial to keep an eye on the long-term prospects. I want to highlight this for investors, as long-term investors have undoubtedly recognized it with Tesla. We experience fluctuations, but the long-term trend has been exceptionally positive. A few years back, I mentioned on an earnings call that I believed Tesla could surpass Apple's market cap, which was then the highest in the market at around $700 billion. I noted that this required remarkable execution and some luck, and we achieved that as Tesla's market cap surpassed Apple's. I now believe we have the potential to significantly exceed Apple’s current market cap and possibly combine it with that of Saudi Aramco. Achieving this won't be easy; it will demand a lot of effort, innovative new products, expansion management, and some luck. However, for the first time, I see a feasible way for Tesla to be roughly double the value of Saudi Aramco. We have an incredible product lineup, arguably the most exciting among any company globally. We're in the final stages for Cybertruck and making excellent progress with the robotaxi platform design. In terms of battery production, we’re striving to reach 1,000 gigawatt hours a year in the United States, working rapidly on vertical integration and refining processes. The future is incredibly exciting and unprecedented. None of this would be possible without our outstanding team at Tesla. I want to recognize all of our factory employees, engineers, executives, and the entire Tesla team. Thank you all for making this happen.

Thank you very much. And Zach has some opening remarks as well.

Yes. Thanks, Martin. Just to continue on Elon’s theme, I just want to thank and congratulate the Tesla team for achieving record vehicle deliveries, production and storage deployments in the third quarter. On automotive profitability, our GAAP operating margin was 17.2% with automotive gross margin at 27.9%. Operating margin is one of our best yet, with improvements in operating leverage. However, Austin and Berlin ramp costs weighed on our margins, particularly if you compare it to Q1. Removing regulatory credits and Austin and Berlin, our operating margins would have been our strongest yet and auto gross margin would have been nearly 30%. Note that while small and growing, each car we build in Austin and Berlin is contributing positively to profitability. We also continue to experience margin headwinds associated with macroeconomic conditions, as we’ve discussed at length on prior calls. In particular, raw materials, logistics and foreign exchange was a big part of this past quarter. On energy profitability, we achieved our strongest gross profit yet for this business, driven primarily by record volumes of our Megapack and Powerwall products. Our free cash flows were also a record despite an increase in cars in transit at the end of the quarter, which has a negative impact on working capital. Specifically on cars in transit, as noted in our press release on October 2nd, we’ve started to experience limits on outbound logistics capacity which we didn’t anticipate. This issue is particularly present for ships from Shanghai to Europe and local trucking within certain parts of the U.S. and Europe. Our historical operating pattern of batch building by delivery region leads to extreme concentrations of outbound logistics needs in the final weeks of each quarter. Just to put this in perspective, roughly two-thirds of our Q3 deliveries occurred in September and one-third in the final two weeks. As a result, we’ve begun to smooth the regional builds throughout the quarter to reduce our peak needs for outbound logistics. We expect this to simplify our operations, reduce costs and improve the experience of our customers. As we look ahead, our plans show that we’re on track for 50% annual growth in production this year, although we are tracking supply chain risks which are beyond our control. On the delivery side, we do expect to be just under 50% growth due to an increase in the cars in transit at the end of the year, as noted, just above. This means that, again, you should expect a gap between production and deliveries in Q4, and those cars in transit will be delivered shortly to their customers upon arrival to their destination in Q1. Austin and Berlin ramp costs will continue to weigh on margins, although we expect the impact to be less than what we saw in Q3. And as Elon mentioned, we are continuing to build as many cars as possible while also maintaining strong operating margins. Thank you.

Thank you very much. And let’s go first to the shareholder questions. The first shareholder question is, given the stringent battery content and assembly requirements for consumer tax credit eligibility under the Inflation Reduction Act, can you speak to Tesla’s ability to meet those thresholds in each of 2023, 2024 and 2025 through your existing and planned supply chain?

Well, yes, I mean, I think just at a high level, I’d say, we do expect to fully meet the IRA’s requirements. Do you want to add?

Yes. We view that passing of the Inflation Reduction Act as a significant boost towards accelerating automation, while also scaling the battery supply chain at large in the United States. We expect Treasury to publish detailed guidance by the end of the year. Until such time, it’s difficult to fully determine the eligibility criteria, but we believe Tesla is very well positioned to capture a significant share of that for solar storage and also electric vehicles.

Yes, we are going to accelerate our efforts to reach 1,000 gigawatt hours a year of production in the U.S. with a vertically integrated approach as quickly as possible.

Thank you. Let’s go to the next question. The next question is, what updates can you offer on the backlog and the recent order intake trends, especially outside of the U.S. and especially in China?

China is definitely facing adverse effects from a recession of sorts, largely driven by the property market. Europe is experiencing its own recession due to energy issues. However, North America is in fairly good health, despite the Fed raising interest rates more than necessary; I believe they will eventually recognize this and lower rates again. Demand is slightly higher than it would usually be. As I mentioned earlier, we are extremely confident about a strong Q4, and we expect to continue growing our vehicle production and sales deliveries by an average of 50% per year for the foreseeable future.

Thank you.

I should mention that we aim to grow production by 50% each year, but we are working to stabilize deliveries and avoid the crazy surge at the end of each quarter. We are facing a fundamental challenge due to a lack of transportation resources; we simply don't have enough boats, trains, or car carriers to handle the increasing demand. Therefore, we need to spread out car deliveries throughout the quarter, as there aren't enough transport options available to move them efficiently.

Thank you. The next question is, do you still expect 50% annualized growth for the foreseeable future? Is this also true specifically for the Chinese domestic market? Do you expect to need to cut vehicle prices or offer incentives in any market to sustain a demand, or has demand remained stable, or is it even rising? There are three questions there.

We want to focus on the overall possibilities ahead. To our knowledge, we believe that Tesla will keep increasing deliveries and revenue at a compound annual growth rate of 50% or more. There may be some years with slightly lower growth, but also years with significantly higher growth. In our long-term planning, we anticipate potential annual growth rates exceeding 50%.

Thank you. The next question is, 'Can you tell us more about the product future roadmap beyond new models and FSD, and especially for the interior and powertrain of existing vehicle models?

Yes. We could, but who wants? Sorry, guys, we can’t jump on future product announcement.

Committed to continuing...

Yes, we are clearly committed to continuous growth. At Tesla, we have always focused on continuous improvement. So when friends ask me when they should buy a car, I tell them to do it now because we are always enhancing our vehicles.

There’s always the latest Tesla.

Yes, there’s still the latest Tesla. Every now and again, we do have some big technology upgrades, like Plaid. By the way, I think the Plaid Model S and X are the best cars on earth. There’s nothing even close, in my opinion. Just try one. Epic.

Thank you. The next question is, 'We keep hearing of dire energy crisis in Germany this winter. What are Tesla’s plans to combat power cuts? And will there be any delays in ramp-up in production from Giga Berlin because of this?'

Yes, I can take that. I think two points on this question. The first is just that based upon everything that we know, we don’t see this as a large risk to the Company. Even if production did go down for a period of time, this is on near term, it doesn’t have any impact on the long term of the Company.

But we have no indication that we will need to reduce our production in Germany.

No. And we put in place backup plans, and we’re working through the supply chain as well. Nearly all of our suppliers are prepared as well. So, we’ll see how this plays out, but it’s not something that we’re terribly worried about.

Thank you. And the next question is, 'How is production planning going for the Cybertruck? What is the initial Phase 1 production target? When can we expect an update on pricing and final design?'

As Elon mentioned earlier, we are preparing the facilities at Giga Texas for the Cybertruck. We remain on schedule to begin early production in the middle of next year. We have initiated our data builds for all of the battery body in existing...

When should I drop my beta?

In a few weeks. That’s going well, and we continue ramping up through the end of next year and into 2023.

Great. Yes, the car is going to be incredible and truly exceptional. That is going to be a standout success. Sorry for the delay, but there were a few obstacles, like severe global supply chain shortages from FedEx, which are beyond our control.

Right. Thank you.

Certainly. We will be delivering our first production Tesla Semis to Pepsi on December 1st, and I will be there in person. We will also begin increasing production of the Tesla Semi, which is a maximum low heavy truck, classified as a Class A truck.

No sacrifice to cargo capacity.

Yes, it's very important to note that there is no sacrifice to cargo capacity and the truck has a 500-mile range, even with the cargo. To clarify, that’s 500 miles on level ground with the cargo. It’s a long-range truck capable of carrying heavy loads. Many people assume it's impossible to create a long-range heavy-duty Class A truck. When I ask them about their assumptions regarding weight and efficiency, they often respond with vague answers and mention hydrogen as a solution. However, that's not the right approach; we need specific numbers. Hydrogen is not necessary for a heavy truck. We will be steadily increasing Semi production throughout next year, and as most are aware, it typically takes about a year to ramp up production. We're currently aiming for a production target of about 50,000 units for the Tesla Semi in North America in 2024, with plans to expand beyond North America later. These trucks will be priced significantly higher than passenger vehicles. Therefore, even with a few thousand heavy trucks of this kind, the value would far exceed that of several Model Ys.

Thank you. The next question is, what is the progress of the 4680 cell ramp? And what factors determine whether vehicles get 2170s versus 4680 cells? And how will that change in the next year?

Yes, ramp is going well, as Elon said. Total output is up 3x quarter-over-quarter, and production is tracking to exceed 1,000 car cells per week this quarter, as we said last quarter. Our focus is now shifting from 100% ramp to cost and further expanding production capacity in North America, as Elon also mentioned. On the 2170 versus 4680, in our factories, we really attempt to minimize factory complexity and product changeover while still making sure we get enough new product into the field to learn how it is performing. And that sort of mix is going to shift as 4680 scales here and the overall factory ramp proceeds in Texas.

Production of the 4680 is increasing rapidly and it's progressing well. We believe it will be a significant component in the future.

Production of 4680 is ramping up exponentially and it’s progressing well. We are considering this as a significant component for the future.

Yes. Our goal is to strive towards 1,000 gigawatt hours a year of annualized production in the United States alone by Tesla, not including additional measures which will be on top of that.

We need to get 300 to 400 terawatt hours to accomplish our goal.

Yes, there’s roughly 300,000 to 400,000 gigawatt hours or 300 to 400 terawatt hours needed to transition to sustainable energy for both stationary and vehicles.

So when you’re like one tower assembling a lot, well, a lot of terawatt hours to go by.

Yes. On the cathode side, we believe it will primarily consist of iron, which can scale to very high tonnage, along with some nickel. The exact percentages are challenging to determine, but there will likely be twice as much iron in the cathodes as other materials, possibly even more. Additionally, there's the potential inclusion of manganese as a wildcard.

We are actively pursuing iron supplies in North America, and we can discuss this further at a later date.

Thank you. The next question was on the Semi truck, which we already addressed. So I’m going to skip to the next one. Can you talk about how Tesla could adjust if we were to enter a prolonged recession, including new product prioritization, investment flexibility, new factory versus factory expansion, service support infrastructure, productivity cost measures and demand stimulation alternatives?

Well, to be frank, we’re very pedal to the metal come rain or shine. So, we are not reducing our production in a meaningful way, recession or not recession.

It’s the 1% point come in.

Yes, exactly. I believe the public is becoming aware that everyone is shifting towards electric vehicles, and it's unwise to purchase a new gasoline car now, as its residual value will likely be very low. I think we are in a strong position. While I wouldn't say it's entirely recession-proof, it is certainly resilient since many people have decided to move away from gasoline cars to electric ones. Additionally, transitioning to sustainable energy requires solar and wind power along with stationary battery packs to ensure a constant power supply, as wind energy is intermittent. We anticipate the energy storage business, particularly stationary storage, will grow significantly, around 150% to 200% annually, outpacing the growth of car sales by a large margin.

Just to add before you jump in, Martin. Just to echo Elon’s point, I mean, I think where our cash balance is, what our forecasted cash generation is, where our margins are as a company, I mean we can withstand quite a lot of downside before we would have to dig into our capital plans, Supercharger expansion, product lineup. So, the business has done quite well over the last handful of quarters. And this is a real opportunity, I think, for the Company to press forward, in the most aggressive way, as Elon has mentioned.

Yes. And we try to model out like, let’s say, 2023 is a brutal recession year. Even then, we generate meaningful cash. Once you get out of that…

Great. Thank you very much. And let’s go to the last investor question, which is the progression from Tesla’s first platform with S and X to the second platform with 3 and Y, led to a 50% reduction in cost of goods sold. When do you see Tesla’s third platform being released? And what level of cost of goods sold reduction could you achieve?

We don't want to specify exact dates, but this is the main focus for our new vehicle development team. So far, we've completed the engineering for the Cybertruck and the Semi. Our current work is on the next-generation vehicle, which will likely be priced similarly to the Model 3 and Model Y platform. It will be smaller, but I believe it will surpass the production numbers of all our other vehicles combined. We will apply everything we've learned from the Model S, Model X, Model 3, Model Y, Cybertruck, and Semi to this platform. As you mentioned to us previously, we are targeting a two-for-one approach, aiming to achieve that 50% production number again. Essentially, we’re working to produce two vehicles using the same effort it currently takes to manufacture one Model 3.

Yes. Effort costs.

Yes…

Half the loss, half the past, half the factory floor space.

We’re twice the output, and we believe this can be achieved. I want to mention that, looking at the very challenging path ahead which requires extraordinary execution, a tremendous amount of effort, and a bit of luck to reach a level comparable to Tesla, Apple, and Saudi Aramco combined, I was not including Optimus.

Thank you. Let’s go to analyst questions next. The first question comes from Adam Jonas from Morgan Stanley. Adam, go ahead and unmute.

Great. Can you hear me?

Yes.

Yes.

So Elon, would you consider vertically integrating into mining? That’s my first question.

We’ll do whatever we have to. Whatever the limiting factor is, we’ll do. We do not personally constrain ourselves. We don’t particularly integrate just for the hell of it. If there was a great supplier who’s better than us or we think actively is very good, or even where the economics of comparative advantage suggest that we should use that supplier, even if we could beat them, but we could use our resources to do something else that will be more productive, then we would in source in that case. But if we have to go mine, we will mine.

Okay. Thanks, Elon. My follow-up is 1 terawatt hour of manufacturing in the United States, vertically integrated. I guess, my question is, what would need to change with U.S. permitting laws to allow that? Kind of what would be your message to this administration or next? And do you think you could do a terawatt hour? What’s the going price of that? Can you do that for under $100 billion in the States? Thanks.

The message to the government is that there should be an expedited permitting process for anything critical to a sustainable energy future. We have had conversations with senior government leaders, including those in the White House and Congress. It doesn’t make sense to classify a coal mine and a lithium battery mine in the same category since coal is not relevant for the future, while lithium is. Additionally, extracting lithium can be done with minimal environmental disturbance, so it isn't an environmentally damaging process. Therefore, expedited permitting would be beneficial, essentially fast-tracking projects that are significant for both the environment and humanity, which seems logical. The response has been positive, and we hope to see progress on this. While we are not ready to discuss the financial specifics of achieving this in this earnings call, we are observing practical improvements as we redesign the entire supply chain and the components involved in battery cells. We are discovering significant efficiencies, leading us to believe that the capital required to reach this level of output will be much lower than expected.

Thank you very much. Let’s go to the next question from Colin Langan from Wells Fargo. Colin, go ahead and unmute.

Can you hear me now?

Yes, we can hear you.

Okay. Sorry about that. Any update on full self-driving? I think you mentioned a couple of quarters ago that it would be available by the end of the year. Is that still possible? Will it still be at Level 4 or Level 5? Are there any regulatory hurdles to consider?

We’re expecting to release the full self-driving software to anyone who orders the package by the end of this year. However, it will not have regulatory approval at that time. Nevertheless, the car will be able to take you from your home to your work, your friend’s house, and the grocery store without you needing to touch the wheel. So, it’s looking very good.

And it would mean like Level 4, Level 5 kind of traditional definition you’re talking about?

There’s a debate about the interventions needed per mile and potentially the safety interventions as well. We're not suggesting that it's ready for full autonomy yet, but you will hardly ever need to use the vehicle controls. For example, when I traveled from Brent's house to Giga Texas, I didn't touch any controls. There’s a longer process, referred to as the march of nines, regarding the level of reliability needed before we can confidently say the car can drive itself without anyone inside. This involves some subjectivity about how many nines are necessary. However, I believe we'll be close to having enough reliability to enable driverless operation by the end of this year, and without a doubt, I envision that happening next year. Additionally, we expect to provide updates next year to demonstrate to regulators that the car is significantly safer than an average human driver.

Got it. As a follow-up, you mentioned the IRA in your earlier comments. It seems like you believe you could secure all of it. My understanding is that the production credits and battery component credits for buyers seem very likely for your company. Is the sourcing aspect achievable? That seems like a significant challenge considering the requirement for sourcing a lot from the U.S.

Yes. We have a cross-functional team focusing closely on this matter. As you pointed out, the sourcing threshold rises each year. We are exploring all options and seeking clarification from Treasury. It's important to note that this is just a small part of the other credits. We do manufacture our modules in the U.S., so the reliance on domestic production is limited. We are confident that we will find a way forward as these incentives and thresholds continue to evolve annually.

Yes. We’ll meet those thresholds.

Thank you. The next question comes from Colin Rusch from Oppenheimer.

The operating leverage has been pretty impressive here. And I’m curious about areas where you could invest in an incremental way, whether it’s on the R&D side or on the sales side to accelerate growth or cost reduction, or should we be thinking about this level of spend on a go-forward basis and some significant operating leverage as you scale up from here?

Yes. I mean, our operating leverage has improved quite a bit. It’s the lowest this quarter, I think, ever, and by a decent amount, OpEx as a percentage of revenue. I mean, our forecast is that it will keep reducing. I mean, I think the way to think about it is our total amount of operating expenses will slowly tick up as the company grows. It’s very hard to keep it flat with the rapid growth of the Company, but it’s growing much slower. So some amount of growth there, but the top line of the business is growing so quickly. So, I think there continues to be enormous opportunity to improve the overhead efficiency of the business, and we’re seeing it.

Yes. Look, we are currently in a good position because we’re investing in everything possible and still generating cash. So, I guess it’s a pretty good place to be.

Yes. I mean, how many R&D programs are we running in parallel right now?

People don’t even know old R&D stuff for that. There are some of it, but a bunch of it.

I also don’t think cash is a good gauge of how much R&D you’re doing.

No, it's not like engineers are generic. Spending $5 billion or $10 billion doesn’t mean that your actual R&D and useful product output will be in proportion to that. It's simply not true. Engineers don't come off an assembly line like cookies.

Until we get optimistic.

Get optimistic. Don’t change things. What matters is where the most brilliant people are working. Tesla and SpaceX are two companies where the smartest engineers want to work.

I mean, like we don’t have to spend billions of dollars to invest in the future and invent the future. Engineers are also cost conscious. And we don’t just burn the money out the window when we’re trying to do R&D. I wouldn’t stop looking at like R&D as a cash investment for...

I believe that one nickel of Tesla is essentially priceless. Even if you had a similar number of shares, they wouldn't be able to achieve what one nickel of Tesla can. You can't compensate for that with volume.

Okay. Thank you very much. Let’s go to the next question from George at Canaccord.

I think, at your Annual Shareholders’ event, where Elon mentioned that the prices of many of the materials used in your production have started to come off the boil. If that continues, does that give you an opportunity to adjust prices globally after several increases? Thanks.

We are closely monitoring prices. It's easy for anyone to find the future prices of copper or steel with a simple Google search. It's evident that commodity prices are significantly declining moving forward. However, in the electric vehicle sector, battery-grade lithium remains extremely costly. Thus, we are experiencing a mix of decreasing and increasing prices.

Yes. I would say quarter-over-quarter, aluminum has stopped anywhere between 17% to 20% at the same time on the battery side.

And cost of shipping has come down tremendously. Like last year, the cost of a container on the spot market from Shanghai got as high as $20,000. And now it’s $3,500, $3,600. It’s that kind of reality. We’re seeing deflation in a lot of commodities with a few exceptions, as Elon mentioned on batteries.

There’s more deflation than inflation.

Definitely.

And again, this is publicly available information. Anyone could just Google it. And I think Cathie Wood at Ark Invest is making this point over and over again, to the Fed and the Fed is not listening because they’re looking at the rearview mirror instead of looking out the front windshield.

Yes. Just to add a little bit more context. So, commodity increases were the highest in Q3 that we’ve seen over the last two years. And so, when indexes change, it does take time before they fully reflect.

Yes. There’s latency.

Yes. There’s latency.

That’s why I say that the Fed’s decisions make sense if you’re looking out through the rearview mirror, but not if you look out the windshield. And actually we’ve got front windshield.

Yes. Based on what we know so far, Q3 saw the highest peak in commodity prices, and we hope it remains the peak and begins to decline. There is a small amount of production costs from steel and aluminum that will impact our Q4 cost structure, but it's less than 10% of the total increases we've experienced to date. We are optimistic about potential cost reductions, reflected in the indexes, over time. However, I want to manage expectations by stating that we shouldn't anticipate a significant drop in costs in Q4, with any potential reductions likely occurring as we move into next year.

Yes. We’ll probably see some cost reduction in 2023. I’ll be surprised if we did not.

And just as a follow-up, this is for Elon. With your pending acquisition of Twitter and your stakes in SpaceX and Neuralink and Tesla, how much would the combined companies benefit from operating under a single superstructure, if at all, like a Google Alphabet?

I'm unsure about the extent of the overlap. It's not insignificant, but I think we may be reaching. I'm not particularly concerned about it. My role is more focused on engineering, manufacturing, and technology. I work on designing and developing products. We're not approaching this with an investment portfolio mindset. Therefore, I don't see any clear opportunities to combine them under a single structure at this moment. I'm enthusiastic about the situation with Twitter, as it has been underperforming for a significant time but holds tremendous potential. While it's true that I and other investors may be overpaying for Twitter right now, I believe its long-term potential is far greater than its current valuation.

Let’s go to the next question from Pierre Ferragu from New Street Research.

Can you hear me, guys?

Yes, we can hear you now.

Great. I’d like to get another update on the 4680 batteries, Drew. When we last discussed it, there were questions about scaling up manufacturing and some issues that needed to be resolved. Is it accurate to say that you are now at scale, and that it’s primarily a logistics matter to expand further? That’s my first question. My second question relates to the innovation, cost reduction, and efficiency improvements that you discussed on battery day. Where do we stand at this point, and how long will it take to realize the full potential you outlined then?

Well, I’ll take the second question first. At Battery Day, we showed a timeline out to 2026 for all of the ideas we had proposed and had shared with everybody then.

Yes, I’d be surprised. I think we’ll do better than that.

Yes. Just to clarify, it's a long-term process, spanning years rather than months. We are actively pursuing all these various ideas simultaneously, even though some believe our operational expenditures are insufficient. Nevertheless, we are making progress.

I mean, it’s a challenging situation, but we’re addressing it. And I think we still feel confident that the 4680 will be the most competitive battery cell in the world.

It’s the whole system around it, right? It’s not necessarily a specific form factor. It’s the attention to detail on how to bring costs out of the manufacturing process or remove processing steps.

And all the way down from the mine to the cell.

Yes, exactly.

Many steps along the way.

Yes. And for those who watched the YouTube videos, like our on-site cathode facilities coming together, I’m really excited about that, which is a part of the plan that we discussed on Battery Day.

Yes. We’re also building lithium refinery.

In Corpus Christi, we are truly investing in our initiatives discussed on Battery Day. Regarding the technical challenges and scaling of the 4680 battery production, it's important to acknowledge that ramping up is never straightforward. Even when nearing completion, significant hurdles remain. You're correct about yields and final cycle times being crucial. While logistics haven't been a primary focus, they may become an issue as we scale to hundreds of gigawatt hours across various locations in the U.S. I won't claim we face no challenges, but we've made substantial progress in lowering technical risks across many areas. We've seen considerable improvements in cycle times and yields. Walking through Texas, as Martin did yesterday, one can truly observe the rapid advancements we've made. Transitioning from our Fremont factory to Texas has led to numerous simplifications that enhance our ramp speed. This is just one of several lines we operate in Texas, so the improvements are not limited to one factory but multiply due to both simplicity and scale. We are very optimistic about the direction we are heading.

Yes. I believe that once we are fully integrated, we still see a path to maintain approximately $70 per kilowatt hour cell, before any incentives.

Before incentive.

Before incentive.

Thank you. And the next question comes from Toni Sacconaghi from Bernstein.

I wanted to inquire about the 4680 cells and their current deployment status. Are they included in the Semis scheduled for delivery on December 1st? Are they present in the Model Ys being produced in Austin? Additionally, do you expect the 4680 cells to be a limiting factor for the Cybertruck ramp later this year? How do you prioritize the use of 4680 cells among the Semi, Cybertruck, and potentially the Model Y in 2023? I have a follow-up question as well.

Okay. The Semi doesn’t use 4680s. Yes. We are making Model Ys. Some of the Model Ys coming out of Giga Texas are 4680. And I think, Drew, the car you drive around is 4680 Model Y?

Yes. 10,000 miles.

10,000 miles. Pretty good.

No problems yet.

Yes. Structural pack. Yes, our production of 4680 batteries is increasing rapidly. However, it's important to remember that there are many highly competitive companies focused solely on manufacturing battery cells. This is just one aspect of Tesla's business.

No, there aren’t challenges still ahead that we have not yet surpassed. No doubt.

We don’t anticipate this being anything like Cybertruck or anything else.

Okay. Thank you. And the last question comes from William Stein from Truist.

I guess, I’ll go at one that I asked last time, Elon, which is your expectation for the likelihood of commercial success in each of the three major AI endeavors. FSD, sort of as imagined without a driver, the training computer and, of course, Optimus.

We expect to achieve full self-driving autonomy, and I think we are very close to that. However, we still need to demonstrate this to regulators and obtain the necessary approvals, which are beyond our control. For those who are using full self-driving cars with the Beta version, the rate of improvement is evident, and you can see that we are almost there. We are likely on track to reach that full autonomy. Regarding Optimus, I believe the chances of it being a successful product are very high, potentially 100% given enough time. As for Dojo, the main question is whether we can compete with NVIDIA GPUs, especially as they continue to improve. The results are still uncertain, and we may know more next year. However, we believe that the design of Dojo is the right one to succeed, and its success will depend on how effectively we execute within that framework.

Thank you very much. I think, unfortunately, it’s all the time that we have today. So, thank you so much for your great questions, and look forward to talking to you in about three months from now. Thank you, and have a good day.

Thanks, everyone.